<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 March 31, 1999 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 March 31, 1999
Common stock, $1 par value 5,738,982
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<PAGE> 2
TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES
Form 10-Q
Quarter Ended March 31, 1999
TABLE OF CONTENTS
PART I -- FINANCIAL INFORMATION
Item Page No.
- ---- --------
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
- ----
6. Exhibits and Reports on Form 8-K 12
SIGNATURES 13
INDEX TO EXHIBITS 14
2
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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 Nine Months
Ended Ended
March 31 March 31
--------------------------- -----------------------------
1999 1998 1999 1998
---------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Gross sales, less discounts, returns and allowances $ 38,247 $ 32,970 $ 136,650 $ 100,658
Cost of goods sold 24,162 20,947 86,016 63,488
---------- ----------- ------------ ------------
Gross margin 14,085 12,023 50,634 37,170
Selling, general and administrative expenses 9,882 8,936 33,396 25,128
Depreciation and amortization 760 463 2,314 1,343
---------- ----------- ------------ ------------
Total operating expenses 10,642 9,399 35,710 26,471
---------- ----------- ------------ ------------
Operating income 3,443 2,624 14,924 10,699
Interest expense (716) (363) (2,304) (989)
Royalty, interest and other income 73 14 117 128
---------- ----------- ------------ ------------
Income before provision for income taxes 2,800 2,275 12,737 9,838
Provision for income taxes 1,085 891 4,960 3,791
---------- ----------- ------------ ------------
Net income $ 1,715 $ 1,384 $ 7,777 $ $6,047
========== =========== ============ ============
Earnings per common share $ 0.30 $ 0.25 $ 1.36 $ $ 1.09
========== =========== ============ ============
Earnings per common share - assuming dilution $ 0.29 $ 0.24 $ 1.34 $ $ 1.07
========== =========== ============ ============
Common shares outstanding 5,746 5,587 5,710 5,564
========== =========== ============ ============
Common shares outstanding - assuming dilution 5,835 5,716 5,799 5,662
========== =========== ============ ============
Cash dividends per common share None None None None
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated 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>
March 31, June 30,
1999 1998
------------- -------------
<S> <C> <C>
ASSETS (Unaudited)
Current assets:
Cash and cash equivalents $ 418 $ 283
Accounts receivable, net 31,651 27,565
Inventories:
Raw materials and work in process 7,306 8,648
Finished goods 43,556 39,355
Other current assets 2,415 2,329
------------- -------------
Total current assets 85,346 78,180
------------- -------------
Property and equipment, at cost 17,169 16,110
Accumulated depreciation (6,477) (5,355)
------------- -------------
Net property and equipment 10,692 10,755
------------- -------------
Other assets:
Goodwill, less amortization 10,528 10,489
Other assets, less amortization 8,662 8,596
------------- -------------
Total other assets 19,190 19,085
------------- -------------
TOTAL ASSETS $ 115,228 $ 108,020
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ -- $ 7,600
Accounts payable 3,149 6,789
Accrued expenses 5,307 7,457
------------- -------------
Total current liabilities 8,456 21,846
------------- -------------
Other liabilities:
Notes payable 46,700 35,000
Other noncurrent liabilities 283 333
------------- -------------
Total other liabilities 46,983 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,
5,738,982 shares and 5,616,724 shares issued and outstanding
as of March 31, 1999, and June 30, 1998, respectively 5,739 5,617
Additional paid-in capital 21,577 20,374
Retained earnings 32,473 24,850
------------- -------------
Total stockholders' equity 59,789 50,841
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 115,228 $ 108,020
============= =============
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated 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>
Nine Months Ended
March 31,
-------------------------
1999 1998
------------ -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 7,777 $ 6,047
Adjustments to reconcile net income to net cash provided by (used for)
operating activities:
Depreciation 1,276 828
Amortization 1,146 620
Other (82) (10)
Change in assets and liabilities:
Accounts receivable (4,188) (8,062)
Inventories (2,859) (1,540)
Other assets (90) (86)
Accounts payable (3,640) (1,672)
Accrued expenses (2,217) 920
------------ -----------
Net cash used for operating activities (2,877) (2,955)
------------ -----------
Cash flows from investing activities:
Purchases of property and equipment (2,413) (1,484)
------------ -----------
Net cash used for investing activities (2,413) (1,484)
------------ -----------
Cash flows from financing activities:
Exercise of employee stock options 222 222
Sale of stock to stock purchase program 1,103 819
Proceeds from borrowings 52,392 40,750
Payments under borrowings (48,292) (36,900)
------------ -----------
Net cash provided by financing activities 5,425 4,891
------------ -----------
Net increase (decrease) in cash and cash equivalents 135 452
Cash and cash equivalents at beginning of period 283 554
------------ -----------
Cash and cash equivalents at end of period $ 418 $ 1,006
============ ===========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 2,200 $ 822
Income taxes 3,344 4,094
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
5
<PAGE> 6
TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated 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 and nine month
periods ended March 31, 1999, 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 nine months ended March 31, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
Three Months Nine Months
Ended Ended
March 31 March 31
-------------------------- --------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net income $ 1,715 $ 1,384 $ 7,777 $ 6,047
Foreign currency translation adjustments 53 46 (154) (139)
----------- ----------- ----------- -----------
Comprehensive income $ 1,768 $ 1,430 $ 7,623 $ 5,908
=========== =========== =========== ===========
</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 Consolidated 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 April 30, 1999, the Company entered into a $40,000,000 unsecured
line of credit with another bank. Of this amount, $15,000,000, which expires on
May 14, 2001, is an uncommitted facility and bears interest at various rates
with short-term durations. The remaining $25,000,000, which expires May 14,
2001, is a committed facility which requires the maintenance of certain
financial covenants and the payment of a commitment fee of 1/4% on the unused
balance. The committed facility bears interest at negotiated rates. Each
facility may be used for borrowings or letters of credit. In conjunction with
the execution of this $40,000,000 unsecured line of credit, the outstanding
balance of the $35,000,000 unsecured line of credit with another bank was paid
and the agreement terminated. The total unsecured domestic bank credit line
capacity after the new line totaled $80,000,000.
7
<PAGE> 8
TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 4 - 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 Nine Months
Ended Ended
March 31 March 31
---------------------------- ----------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Numerator for basic and diluted earnings per share:
Net income $ 1,715 $ 1,384 $ 7,777 $ 6,047
============ ============ ============ ============
Denominator:
Weighted average shares outstanding 5,730 5,569 5,693 5,548
Contingently issuable shares 16 18 17 16
------------ ------------ ------------ ------------
Denominator for basic earnings per
share - weighted average shares 5,746 5,587 5,710 5,564
Effect of dilutive securities:
Employee stock options 75 114 76 86
Director stock options 14 15 13 12
------------ ------------ ------------ ------------
Dilutive potential common shares 89 129 89 98
Denominator for diluted earnings per
share - adjusted weighted - average
shares 5,835 5,716 5,799 5,662
============ ============ ============ ============
Basic earnings per share $ 0.30 $ 0.25 $ 1.36 $ 1.09
============ ============ ============ ============
Diluted earnings per share $ 0.29 $ 0.24 $ 1.34 $ 1.07
============ ============ ============ ============
</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 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), 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 NINE MONTHS ENDED MARCH 31, 1999 COMPARED TO THE THREE AND NINE MONTHS
ENDED MARCH 31, 1998
NET SALES
For the three month period ended March 31, 1999, net sales increased 16.0% to
$38,247,000 as compared to net sales of $32,970,000 for the same period last
year. For the nine month period ended March 31, 1999, net sales increased 35.8%
to $136,650,000 as compared to net sales of $100,658,000 for the same period
last year. The sales realized from our Amity/Rolfs products and Tiger
Accessories, Inc. acquisition contributed $8,498,000 and $34,397,000 to the
overall net sales increase for the three and nine-month periods ended March 31,
1999, respectively. For the three-month period ended March 31, 1999, net sales
from the core women's product categories had decreased as compared to the same
period last year due to lower current year replenishment order initiatives from
certain mass merchants. Additionally, during the same three-month period in the
prior year, the Company experienced unusually large initial order shipments of
women's accessories to certain mass merchants. The Company anticipates that this
third quarter decrease in new product offering shipments will be substantially
offset by the launch of a new wallet and handbag program at the mass merchant
level scheduled for the fourth quarter of fiscal 1999.
GROSS MARGINS
Gross margins for the three and nine months ended March 31, 1999 increased 0.3%
and 0.2%, respectively as compared to the same periods for the prior year. The
slight increases are the result of the higher department and specialty store
sales as compared to the same periods in the prior year. Additionally, the same
period in the prior year experienced higher initial order shipments of women's
accessories to certain mass merchants which were at lower gross margins than the
Company's historical gross margins.
OPERATING EXPENSES
Selling, general and administrative expenses as a percentage of net sales for
the three and nine months ended March 31, 1999 decreased 1.3% and 0.6%,
respectively as compared to the same periods of the prior year. The decrease was
attributable to higher than anticipated compensation expense related to the
Company's management bonus program during fiscal 1998.
Depreciation and amortization expenses increased 64.1% and 72.3% to $760,000 and
$2,314,000 for the three and nine months ended March 31, 1999, 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 Tiger
Accessories, Inc. acquisition and Amity/Rolfs tradename purchase 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 nine months ended March 31, 1999 increased
$353,000 and $1,315,000, 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. during the fourth quarter of fiscal 1998.
9
<PAGE> 10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
CONSOLIDATED FINANCIAL CONDITION AND RESULTS OF OPERATIONS
TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES
The effective tax rate for the nine months ended March 31, 1999 was
approximately 38.9% compared to approximately 38.5% for the same prior year
periods due to increased state income taxes.
Net income for the three-month period ended March 31, 1999 increased 23.9% to
$1,715,000 or $.29 per diluted share, compared to net income of $1,384,000 or
$.24 per diluted share, for the same three months last year. Net income for the
nine-month period ended March 31, 1999 increased 28.6% to $7,777,000 or $1.34
per diluted share, compared to net income of $6,047,000 or $1.07 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 $80,000,000, which can be used for
seasonal borrowings and letters of credit. The Company's borrowings under its
credit lines were $46,700,000 and $19,700,000 as of March 31, 1999 and 1998,
respectively.
See Note 3 for a discussion of certain amendments to these credit lines.
For the nine months ended March 31, 1999, the Company's operating activities
used cash of $2,877,000 compared to $2,955,000 for the same period last year.
The decrease was attributable to cash receipts collected from the increase in
second quarter of fiscal 1999 sales which were used to fund the purchase of
inventory during the three months ended March 31, 1999.
Capital expenditures were $2,413,000 for the nine months ended March 31, 1999.
The increase of $929,000 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 March 31, 1999 the Company had borrowings under its credit
lines of $46,700,000 bearing a weighted- average interest rate of 5.96%. 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 March 31,
1999, the receive and pay rates related to the interest rate swap were 6% 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 6. Exhibits and Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter ended March 31,
1999. The exhibits filed as a part of this report are listed below.
Exhibit No. Description
10.31 Revolving Credit and Uncommitted Line of Credit Agreement
between Tandy Brands Accessories, Inc. and Wells Fargo HSBC
Trade Bank, N.A. dated as of April 30, 1999.
10.32 Tandy Brands Accessories, Inc. Employees Investment Plan as
Amended and Restated Effective April 1, 1999.
27.1 Financial Data Schedule
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: May 14, 1999
13
<PAGE> 14
TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES
EXHIBIT INDEX
<TABLE>
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
10.31 Revolving Credit and
Uncommitted Line of Credit
Agreement between Tandy
Brands Accessories, Inc. and
Wells Fargo HSBC Trade
Bank, N.A., dated as of
April 30, 1999. N/A N/A N/A N/A
10.32 Tandy Brands Accessories, Inc.
Employees Investment Plan as
Amended and Restated
Effective April 1, 1999. 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 10.31
REVOLVING CREDIT AGREEMENT
BETWEEN
TANDY BRANDS ACCESSORIES, INC.
AS THE BORROWER
AND
WELLS FARGO HSBC TRADE BANK, N.A.
AS THE LENDER
APRIL 30, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION I
DEFINITION OF TERMS .................................................... 1
1.1 Definitions .................................................... 1
1.2 Accounting Terms ............................................... 10
1.3 Rules of Construction .......................................... 11
SECTION 2
THE REVOLVING CREDIT LOAN .............................................. 11
2.1 The Revolving Credit Loan and Revolving Credit Commitment ...... 11
2.2 This Section intentionally left blank .......................... 11
2.3 Notice of Borrowing ............................................ 11
2.4 Commitment Fees ................................................ 12
2.5 Revolving Credit Note and Note Payments ........................ 12
2.6 This Section intentionally left blank .......................... 12
2.7 Manner and Application of Payments ............................. 13
2.8 Interest Options ............................................... 13
2.9 Quotation of Rates ............................................. 13
2.10 Default Rate ................................................... 13
2.11 Interest Recapture ............................................. 13
2.12 Interest Calculations .......................................... 13
2.13 Selection of Interest Option ................................... 14
2.14 Rollovers and Conversions ...................................... 14
2.15 Booking Borrowings ............................................. 14
2.16 Special Provisions for Eurodollar Borrowings ................... 15
2.17 Taxes .......................................................... 17
SECTION 3
GUARANTEES ............................................................. 18
3.1 Guarantees ..................................................... 18
SECTION 4
CONDITIONS PRECEDENT ................................................... 18
4.1 Initial Advance ................................................ 18
4.2 All Advances ................................................... 18
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C>
SECTION 5
REPRESENTATIONS AND WARRANTIES .............................................. 18
5.1 Organization and Good Standing ....................................... 19
5.2 Authorization and Power .............................................. 19
5.3 No Conflicts or Consents ............................................. 19
5.4 Enforceable Obligations .............................................. 19
5.5 No Liens ............................................................. 19
5.6 Financial Condition................................................... 19
5.7 Full Disclosure ...................................................... 19
5.8 No Potential Default ................................................. 20
5.9 Material Agreements .................................................. 20
5.10 No Litigation ........................................................ 20
5.11 Use of Proceeds; Margin Stock ........................................ 20
5.12 Taxes ................................................................ 20
5.13 Principal Office, Etc. ............................................... 20
5.14 Compliance with Law .................................................. 20
5.15 Subsidiaries ......................................................... 21
5.16 Casualties ........................................................... 21
5.17 Corporate Name ....................................................... 21
5.18 Leases ............................................................... 21
5.19 ERISA ................................................................ 21
5.20 Labor Matters ........................................................ 21
5.21 Burdensome Contracts ................................................. 22
5.22 Representations and Warranties ....................................... 22
5.23 Survival of Representations and Warranties in All Material Respects .. 22
SECTION 6
AFFIRMATIVE COVENANTS ....................................................... 22
6.1 Financial Statements, Reports, and Documents ......................... 22
6.2 Payment of Taxes and Other Liabilities ............................... 23
6.3 Maintenance of Existence and Rights; Conduct of Business ............. 23
6.4 Notice of Default .................................................... 23
6.5 Other Notices ........................................................ 23
6.6 Operations and Properties............................................. 23
6.7 Books and Records; Access............................................. 24
6.8 Compliance with Law .................................................. 24
6.9 Insurance ............................................................ 24
6.10 Authorizations and Approvals ......................................... 24
6.11 Further Assurances ................................................... 24
6.12 Indemnity by Borrower ................................................ 24
6.13 After-Acquired Subsidiaries .......................................... 25
6.14 Year 2000 ............................................................ 25
</TABLE>
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<PAGE> 4
<TABLE>
<S> <C> <C>
SECTION 7
NEGATIVE COVENANTS .................................................................... 25
7.1 Negative Pledge ................................................................ 25
7.2 Negative Pledge Agreements ..................................................... 25
7.3 Certain Transactions ........................................................... 26
7.4 Limitation on Sale of Properties ............................................... 26
7.5 Liquidation, Mergers, Consolidations, and Dispositions of Substantial Assets ... 26
7.6 Lines of Business; Receivables Policy .......................................... 26
7.7 Guaranties ..................................................................... 26
7.8 Total Funded Indebtedness to EBITDA Ratio ...................................... 26
7.9 Fixed Charges Coverage ......................................................... 26
7.10 Inventory Turn Ratio ........................................................... 26
7.11 ERISA .......................................................................... 27
7.12 Fiscal Year .................................................................... 27
7.13 Loans and Advances To Foreign Subsidiaries ..................................... 27
SECTION 8
EVENTS OF DEFAULT ..................................................................... 27
8.1 Events of Default .............................................................. 27
8.2 Remedies Upon Event of Default ................................................. 28
8.3 Performance by Lender .......................................................... 29
SECTION 9
MISCELLANEOUS ......................................................................... 29
9.1 Accounting Reports ............................................................. 29
9.2 Waiver ......................................................................... 29
9.3 Payment of Expenses ............................................................ 29
9.4 Notices ........................................................................ 29
9.5 Governing Law .................................................................. 30
9.6 Choice of Forum; Consent to Service of Process and Jurisdiction ................ 30
9.7 Collection of Payments ......................................................... 30
9.8 Invalid Provisions ............................................................. 31
9.9 Maximum Interest Rate .......................................................... 31
9.10 Non-liability of Lender ........................................................ 32
9.11 Offset ......................................................................... 32
9.12 Successors and Assigns ......................................................... 32
9.13 Chapter 346 .................................................................... 32
9.14 Headings ....................................................................... 32
9.15 Survival ....................................................................... 32
9.16 Participations ................................................................. 32
9.17 No Third Party Beneficiary ..................................................... 32
9.18 Capital Adequacy ............................................................... 33
</TABLE>
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<PAGE> 5
<TABLE>
<S> <C> <C>
9.19 Multiple Counterparts...................................... 33
9.20 Entirety .................................................. 33
EXHIBIT A REVOLVING CREDIT NOTE ................................... 35
EXHIBIT B NOTICE OF BORROWING ..................................... 38
EXHIBIT C CLOSING DOCUMENTS ....................................... 40
EXHIBIT D SUBSIDIARIES--TANDY BRANDS ACCESSORIES, INC. ............ 41
EXHIBIT E GUARANTY AGREEMENT ...................................... 42
SCHEDULE 5.19 SCHEDULE OF ERISA PLANS ............................. 48
</TABLE>
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<PAGE> 6
REVOLVING CREDIT AGREEMENT
THIS REVOLVING CREDIT AGREEMENT is entered into as of the 30th day of April
1999 by and between TANDY BRANDS ACCESSORIES, INC., a Delaware corporation
("BORROWER"), and WELLS FARGO HSBC TRADE BANK, N.A., a national banking
association ("LENDER").
WITNESSETH:
WHEREAS, Borrower has requested that Lender provide Borrower with a
$25,000,000.00 revolving credit facility (the "REVOLVING CREDIT LOAN") to fund
general corporate purposes and working capital needs.
WHEREAS, Lender is willing to provide such facility 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 I
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 1 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 and 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.
<PAGE> 7
"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 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
COMMITMENT
-------------------------------------------------
Eurodollar Prime Rate Quoted Rate
Borrowings Borrowings Borrowings
---------- ---------- -----------
<S> <C> <C>
1.00% 0% 1.00%
</TABLE>
"BORROWING" means a Eurodollar Borrowing, a Prime Rate Borrowing or a Quote
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 fetters of credit, but
excluding interest expense not payable in cash, all as determined in accordance
with GAAP.
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<PAGE> 8
"CODE" means the Internal Revenue Code of 1986, as amended, and all
regulations promulgated and rulings issued thereunder.
"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.
"CONSOLIDATED COST OF GOODS SOLD" means the cost of goods sold as shown on
the consolidated financial statements of the Borrower and its Subsidiaries
determined cumulatively for the immediately preceding four (4) fiscal quarters
prepared as of such dates in accordance with GAAP.
"CONSOLIDATED INVENTORY" means as of any date the inventory which would be
reflected on a consolidated balance sheet of Borrower and its Subsidiaries
prepared as of such date in accordance with GAAP.
"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 Ge 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.
"DOLLAR" means lawful money of the United States of America.
"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
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<PAGE> 9
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 Note 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
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.
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<PAGE> 10
"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 each of the Subsidiaries of Borrower listed on Exhibit D
attached hereto 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.
"GUARANTY AGREEMENTS" means the Guaranty Agreements in the form of Exhibit
E attached hereto to be executed by each Guarantor whereby each of the
Guarantors guarantees on a joint and several basis the Obligations of Borrower
to Lender under this Agreement, the Note, the Line Letter, and the Master Note.
"HAZARDOUS MATERIALS" 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,
-5 -
<PAGE> 11
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 obligations 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, trade names, 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 Loan, then such
Interest Period shall end on the final maturity date of the Loan.
"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.
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<PAGE> 12
"LEGAL REQUIREMENT" means any federal, state, local, municipal, foreign,
international, multinational, 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.
"LINE LETTER" means the letter dated April 30, 1999 whereby Lender offers
Borrower an uncommitted line of credit up to a maximum of $15,000,000.00.
"LOAN" means the Revolving Credit Loan.
"LOAN DOCUMENTS" means this Agreement, the Note, the Guaranty Agreements
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.
"MASTER NOTE" means the promissory note issued by Borrower to Lender
pursuant to the Line Letter.
"MATERIAL ADVERSE CHANGE" 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 the
Guarantors 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 Chapter 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.
"NATIONSBANK CREDIT AGREEMENT" means the Revolving Credit and Term Loan
Agreement dated November 17, 1998 between Borrower and NationsBank, N.A. as may
be amended from time to time.
"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.
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<PAGE> 13
"NOTE" means the Revolving Credit Note in the form of Exhibit A attached
hereto.
"NOTICE OF BORROWING" means a notice in the form of Exhibit B attached
hereto.
"OBLIGATIONS" 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,
the Line Letter, the Master Note, or any other financial arrangements between
Borrower and Lender, 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
"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 Wells Fargo Bank, N.A. as its general reference rate of interest (which
rate of interest may not be the lowest rate charged by Wells Fargo Bank, N.A. 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,
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<PAGE> 14
(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.
"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 $25,000,000.00, 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
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<PAGE> 15
"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
$25,000,000.00, 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 feast 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.
"TERMINATION DATE" means the earliest of (a) May 14, 2001, (b) the date
that Lender's commitment to fund Advances hereunder is terminated pursuant to
Section 8.2, or (c) the date that Lender's commitment to fund Advances hereunder
is reduced to zero pursuant to Section 2. 1.
"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 Note, 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.
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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 es
otherwise provided herein, in the computation of time from a specified date to a
later specified date, the word "from" means "from and including" and words "to"
and "until" each mean "to but excluding."
SECTION 2
THE REVOLVING CREDIT 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 $25,000,000 at any one time outstanding (the "REVOLVING
CREDIT COMMITMENT"). Within the limits of this Section 2.1, during such period,
Borrower 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 This Section intentionally left blank.
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., Dallas, Texas time, on the date specified, Lender shall
make available to Borrower, at Lender's offices in Dallas, Texas, the amount of
a requested Advance under the Revolving Credit Commitment in immediately
available funds.
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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 June 30, 1999, and continuing regularly thereafter so long es the
Revolving Credit Commitment is in effect, and on the Termination Date.
(b) GENERALLY. Borrower acknowledges that the commitment fees payable
hereunder are bone 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 $25,000,000.00, 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 upon receipt of an invoice from Lender following the last
day of each calendar quarter during the term hereof, commencing June
30, 1999, with a final scheduled interest payment on all Borrowings
under the Revolving Credit Loan on the Termination Date. Accrued
Interest on each Quoted Rate Borrowing under the Revolving Credit Loan
shall be due and payable quarterly in the same manner as Prime Rate
Borrowings.
(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 This Section intentionally left blank.
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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 Dallas, Texas, not later then 12:00 noon, Dallas, 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 to accrued interest and then to
principal.
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, or (ii) the
Adjusted Eurodollar Rate or (iii) the Quoted Rate (in each case as designated by
Borrower in the Notice of Borrowing or deemed designated by Borrower), as the
case may be, plus (iv) the Applicable Margin, or (b) the Maximum Rate. Each
change in the Prime Rate and the Maximum 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 Note shall bear interest from the due date (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 the due date (stated or by
acceleration) the total interest paid or accrued is less than the interest that
would have accrued if the Contract Rate 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 Rate 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 Note.
2.12 INTEREST CALCULATIONS.
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(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 maybe. 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 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 fore 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 anew
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.
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.
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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.
(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.
(c) 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 Note, or its
obligations to make Eurodollar Borrowings; and the result of any of the
foregoing is to increase
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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 Note, 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 SUBSEQUENT 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 subsequent
Borrowings shall be Prime Rate Borrowings or Quoted Rate Borrowings. 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 or reasonable expense
sustained or incurred or to be sustained or incurred in liquidating or
redeploying 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
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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 Note.
2.17 TAXES.
(a) Any and all payments by Borrower hereunder or under the Note 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 Note 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").
(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.
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(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
GUARANTEES
3.1 GUARANTEES. Payment of the Obligations shall be guaranteed by each of
the Guarantors pursuant to the Guaranty Agreements to be executed by each
Guarantor and delivered to Lender pursuant to Section 4.1.
SECTION 4
CONDITIONS PRECEDENT
4.1 INITIAL ADVANCE. The obligations of Lender to make 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 C, each dated as of
the date of such initial Advance, and each in form and substance satisfactory to
Lender.
4.2 ALL ADVANCES. The obligations of Lender to make any Advance under this
Agreement (including 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 Change 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.
SECTION 5
REPRESENTATIONS AND WARRANTIES
To induce Lender to make the Loan hereunder, Borrower represents and
warrants to Lender that:
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5.1 ORGANIZATION AND GOOD STANDING. Each of Borrower and the Guarantors 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 assess 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 the Guarantors 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 December 31,
1998, which are true end 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
Change 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 Change. 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.
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<PAGE> 25
5.8 NO POTENTIAL DEFAULT. No event has occurred and is continuing which
constitutes a Potential Default or an Event of Default.
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 effect on the financial condition of
such Obligor.
5.11 USE OF PROCEEDS; MARGIN STOCK. The proceeds of the Loan 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 Loan
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 to Lender: (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.
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(b) Except as disclosed to Lender, (i) 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 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 cause a Material Adverse
Change.
5.17 CORPORATE NAME. Borrower, during the preceding five (5) years, has
not used any other corporate name or trade name.
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. Except as disclosed on Schedule 5.19 attached hereto,
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.
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5.21 BURDENSOME CONTRACTS. As of the date hereof, 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 Change.
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 Note and the making of the Loan, and any investigation at any
time made by or on behalf of Lender shall not diminish Lender's right to rely
thereon.
SECTION 6
AFFIRMATIVE COVENANTS
So long as Lender has any commitment to make Advances hereunder, and
until payment in full of Obligations, 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 fortyfive (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,
accompanied by a certification by the chief financial officer of the Borrower
that the Borrower is in compliance with each of the financial covenants set
forth in Sections 7.8, 7.9, and 7.10 of this Agreement;
(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 end 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
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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 end 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 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.
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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, end 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 cause
a Material Adverse Change.
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 "Indemnitees" 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 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 Indemnitees, with respect to or as a direct or
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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 Obligations
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 Obligations 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
Agreement in favor of Lender.
6.14 YEAR 2000. Borrower will perform all acts reasonably necessary to
ensure that (a) Borrower and any business in which Borrower holds a substantial
interest, and (b) all customers, suppliers and vendors that are material to
Borrower's business, become Year 2000 Compliant in a timely manner. Such acts
shall include, without limitation, performing a comprehensive review and
assessment of all of Borrower's systems and adopting a detailed plan, with
itemized budget, for the remediation, monitoring and testing of such systems. As
used in this Section, "Year 2000 Compliant" shall mean, in regard to any entity,
that all software, hardware, firmware, equipment, goods or systems utilized by
or material to the business operations or financial condition of such entity,
will properly perform date sensitive functions before, during and after the year
2000. Borrower shall, immediately upon request, provide to Lender such
certifications or other evidence of Borrower's compliance with the terms of this
Section as Lender may from time to time require.
SECTION 7
NEGATIVE COVENANTS
So long as Lender has any commitment to make Advances hereunder, and
until payment in full of the Obligations, 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.
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 NationsBank Credit Agreement)
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.
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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 Receivables.
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 Receivables, 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 Lender and NationsBank, N.A. pursuant to the NationsBank Credit Agreement.
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 3.0
to 1.0.
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 INVENTORY TURN RATIO. Borrower shall not permit the ratio of (a)
Consolidated Cost of Goods Sold to (b) Average Consolidated Inventory for the
four (4) fiscal quarters ending on the
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date of determination, as of the last date of each fiscal quarter of Borrower,
to be less than 1.5 to 1.0. "Average Consolidated Inventory" means the sum of
(i) the amount of Consolidated Inventory as of the last date of the most recent
fiscal quarter, plus (ii) the amount of Consolidated Inventory as of the last
date of each of the three (3) prior fiscal quarters, divided by four (4).
7.11 ERISA. Neither Borrower nor any ERISA Affiliate will create any
Plan.
7.12 FISCAL YEAR. Borrower shall not, and shall not permit any of its
Subsidiaries to, change its fiscal year or method of accounting.
7.13 LOANS AND ADVANCES TO FOREIGN SUBSIDIARIES. Borrower shall not
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 following events (herein collectively called "Events of Default") shall
occur and be continuing:
(a) Borrower shall fail to pay when due the Obligations 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
(c) 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) Borrower shall fail to pay on a timely basis any amount due to
Lender under the Line Letter or Master Note, or with respect to any transaction
contemplated under the Line Letter; or
(e) default shall occur in the payment of any other material
Indebtedness 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
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(f) 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
(g) 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
(h) 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
(i) 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 Obligations 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 Note to the contrary
notwithstanding; (c) reduce any claim to judgment; or (d) pursue and enforce any
of Lender's rights and remedies under the Loan Documents, including, without
limitation, a demand for payment from or enforcement action against the
Guarantors under the Guaranty Agreement, 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(g) or (h) shall occur, then the Obligations
shall thereupon become due and payable concurrently therewith, and Lender's
obligation to lend shall immediately terminate hereunder, without any further
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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 Dallas, Texas together with interest thereon
at the lesser of (a) the Contract Rate for Eurodollar Borrowing, plus three
percent (3%) 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.
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
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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. Dallas, 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 Note, 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
nonexclusive 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
Note, 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 brought in any such court has been brought
in any inconvenient forum.
9.7 COLLECTION OF PAYMENTS. Unless otherwise specified in any Loan
Document, other than this Agreement or the Note, all principal, interest and any
fees due to Lender by Borrower under this Agreement, the Note, the Line Letter,
the Master Note, or any note, will be paid by Lender having Wells Fargo Bank,
N.A. ("Wells Fargo") debit any of Borrower's accounts with Wells Fargo and
forwarding such amount debited to Lender, without presentment, protest, demand
for reimbursement or payment, notice of dishonor or any other notice whatsoever,
all of which are hereby expressly waived by Borrower. Such debit will be made at
the time principal, interest or any fee is due to Lender pursuant to this
Agreement, the Note, the Line Letter, the Master Note or any collateral document
or any note.
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<PAGE> 36
9.8 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.
9.9 MAXIMUM INTEREST RATE. It is the intention of the parties to comply
strictly with applicable usury laws. Accordingly, notwithstanding any provision
to the contrary in this Agreement, or in any contract, instrument or document
evidencing or securing the payment hereof or otherwise relating hereto (each, a
"Related Document"), in no event shall this Agreement or any Related Document
require the payment or permit the payment, taking, reserving, receiving,
collection or charging of any sums constituting interest under applicable laws
that exceed the maximum amount permitted by such laws, as the same may be
amended or modified from time to time (the "Maximum Rate"). If any such excess
interest is called for, contracted for, charged, taken, reserved or received in
connection with this Agreement or any Related Document, or in any communication
by Lender or any other person to Borrower or any other person, or in the event
that all or part of the principal or interest hereof or thereof shall be prepaid
or accelerated, so that under any of such circumstances or under any other
circumstance whatsoever the amount of interest contracted for, charged, taken,
reserved or received on the amount of principal actually outstanding from time
to time under this Agreement or Related Document shall exceed the Maximum Rate,
then in such event it is agreed that: (i) the provisions of this paragraph shall
govern and control; (ii) neither Borrower nor any other person or entity now or
hereafter liable for the payment of the Obligations under this Agreement or any
Related Document shall be obligated to pay the amount of such interest to the
extent it is in excess of the Maximum Rate; (iii) any such excess interest which
is or has been received by Lender shall be credited against the then unpaid
principal balance hereof or thereof, or if the Obligations or any Related
Document has been or would be paid in full by such credit, refunded to Borrower;
and (iv) the provisions of this Agreement and each Related Document, and any
other communication to Borrower, shall immediately be deemed reformed and such
excess interest reduced, without the necessity of executing any other document,
to the Maximum Rate. The right to accelerate the maturity of the Obligations or
any Related Document does not include the right to accelerate, collect or charge
unearned interest, but only such interest that has otherwise accrued as of the
date of acceleration. Without limiting the foregoing, all calculations of the
rate of interest contracted for, charged, taken, reserved or received in
connection with this Agreement and any Related Document which are made for the
purpose of determining whether such rate exceeds the Maximum Rate shall be made
to the extent permitted by applicable laws by amortizing, prorating, allocating
and spreading during the period of the full term of this Agreement or such
Related Document, including all prior and subsequent renewals and extensions
hereof or thereof, all interest at any time contracted for, charged, taken,
reserved or received by Lender. To the extent that Chapter 1D of Article 5069 of
the Texas Revised Civil Statutes is relevant to Lender for the purpose of
determining the Maximum Rate, Lender hereby elects to determine the applicable
rate ceiling under such Article by the weekly rate ceiling from time to time in
effect, subject to Lender's right subsequently to change such method in
accordance with applicable law, as the same may be amended or modified from time
to time. Borrower and Lender agree that Chapter 346 of the Texas Finance Code
(which regulates certain revolving credit loan accounts and revolving triparty
accounts) shall not apply to any revolving loan
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<PAGE> 37
accounts created under this Agreement or maintained in connection herewith. The
terms of this paragraph shall be deemed to be incorporated into each Related
Document.
9.10 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.
9.11 OFFSET. Borrower hereby grants to Lender the right of offset, to
secure repayment of the Obligations, 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.
9.12 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/hereunder. Lender reserves the right to sell all or a portion of
its interest in the Loan 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 Loan or any part thereof.
9.13 CHAPTER 346. Borrower and Lender hereby agree that, except for
Section 346.004 thereof, the provisions of Chapter 346 of the Texas Finance
Code, as amended (regulating certain revolving credit loans and revolving
tri-party accounts) shall not apply to the Loan Documents.
9.14 HEADINGS. Section headings are for convenience of reference only
and shall in no way affect the interpretation of this Agreement.
9.15 SURVIVAL. All representations and warranties made by Borrower
herein shall survive delivery of the Note and the making of the Loan.
9.16 PARTICIPATIONS. Lender shall have the right to enter into
participation agreements with other banks with respect to the Note, 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).
9.17 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
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<PAGE> 38
any property owned by Borrower, or (b) for debts or claims accruing to any such
Persons against Borrower.
9.18 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 9.18. A certificate of Lender claiming
compensation under this Section 9.18 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.
9.19 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.
9.20 ENTIRETY. THIS AGREEMENT, THE NOTE, AND THE OTHER LOAN DOCUMENTS
REFERRED TO HEREIN EMBODY THE FINAL, ENTIRE AGREEMENT AMONG THE PARTIES HERETO
AND SUPERSEDE ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS, AND
UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF
AND MAY NOT BE CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF THE PARTIES HERETO. THERE ARE NO
ORAL AGREEMENTS AMONG THE PARTIES HERETO. THE PROVISIONS OF THIS AGREEMENT AND
THE OTHER LOAN DOCUMENTS TO WHICH 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.
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<PAGE> 39
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.,
Arlington, Texas 76011 a Delaware corporation, as Borrower
Attn: Stan Ninemire
Telephone No: (817) 548-0090 By: /s/ STAN NINEMIRE
Telecopy No: (817) 548-1144 -----------------------------------------
Stan Ninemire, Chief Financial Officer
Address for Notice: and Senior Vice President
1445 Ross Avenue LENDER:
Suite 450
Dallas, TX 75202 WELLS FARGO HSBC TRADE BANK, N.A.,
Attn: June P. Hanson a national banking association, Lender
Telephone No.: (214) 777-4082
Telecopy No: (214) 220-2166 By: /s/ JUNE P. HANSON
-----------------------------------------
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<PAGE> 40
EXHIBIT A
REVOLVING CREDIT NOTE
$25,000,000.00 April 30, 1999
FOR VALUE RECEIVED, the undersigned TANDY BRANDS ACCESSORIES, INC., a
DELAWARE CORPORATION (the "COMPANY"), hereby unconditionally promises to pay to
the order of WELLS FARGO HSBC TRADE BANK, N.A. (the "BANK") the principal sum of
twenty-five million dollars ($25,000,000.00), 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 the Loan Agreement (as
hereinafter defined), 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
the Loan Agreement (as hereinafter defined). Payments of both principal and
interest herein shall be made in lawful money of the United States in
immediately available funds in the manner provided for in the Loan Agreement.
This Note has been executed and delivered pursuant to the terms of that
certain Revolving Credit Agreement (the "LOAN AGREEMENT") by and between Company
and Bank, dated as of April 30, 1999 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 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
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<PAGE> 41
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 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:
------------------------------------------
Stan Ninemire, Chief Financial Officer and
Senior Vice President
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<PAGE> 42
LOAN AND PAYMENT
TRANSACTION SCHEDULE
attached to and made a part of a Note
dated April 30, 1999, executed by
Tandy Brands Accessories, Inc.
<TABLE>
<CAPTION>
Unpaid Initials of
Amount of Amount of Principal Person
Amount of Amount of Principal Interest Balance of Making
Date Advance Principal Repaid Paid Note Notation
---- --------- --------- --------- --------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
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<PAGE> 43
EXHIBIT B
NOTICE OF BORROWING
1. SUBMISSION PURSUANT TO LOAN AGREEMENT. This Notice of Borrowing is
executed and delivered by Tandy Brands Accessories, Inc. ("BORROWER") to Wells
Fargo HSBC Trade Bank, N.A. ("LENDER") pursuant to the Revolving Credit
Agreement dated as of April 30, 1999, 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
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<PAGE> 44
(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
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<PAGE> 45
EXHIBIT C
CLOSING DOCUMENTS
1. Revolving Credit Agreement.
2. Revolving Credit Note.
3. Guaranty Agreement executed by each Guarantor.
4. Officer's Certificate certifying (a) the truth and accuracy of 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.
5. Officer's Certificates certifying (a) the truth and accuracy of all of the
representations and warranties contained in the Guaranty Agreement, (b) the
resolutions of each of Guarantors approving the execution, delivery, and
performance of the Guaranty Agreement delivered at closing and the
transactions contemplated therein, duly adopted by each of Guarantors'
Boards of Directors, (c) the names of the officers of each of the
Guarantors authorized to sign the Guaranty Agreement delivered at closing,
and (d) copies of the Articles of Incorporation of each of Guarantors, and
all amendments thereto, and copies of the Bylaws of each of Guarantors, and
all amendments thereto.
6. Certificates of existence and good standing for Borrower and its Guarantors
issued by the state of incorporation.
7. Copies of the Articles of Incorporation of Borrower and its Guarantors, and
all amendments thereto, certified by the Secretary of State of the
applicable State of Incorporation.
8. Opinion from Borrower's counsel in form and substance acceptable to Lender.
9. Such other documents or information as may be reasonably required by
Lender.
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<PAGE> 46
EXHIBIT D
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 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%)
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<PAGE> 47
EXHIBIT E
GUARANTY AGREEMENT
THIS GUARANTY AGREEMENT (the "Guaranty") is executed as of April 30,
1999, by ___________________ ("GUARANTOR"), for the benefit of WELLS FARGO HSBC
TRADE BANK, N.A., a national banking association (together with its permitted
successors or assigns, "Lender").
WHEREAS, Tandy Brands Accessories, Inc., a Delaware corporation
("BORROWER") and Lender (including its permitted successors and assigns) have
entered into a Revolving Credit Agreement dated as of April __, 1999 (as
amended, modified, supplemented, or restated from time to time, the "CREDIT
AGREEMENT");
WHEREAS, provisions of the Credit Agreement permit Guarantor to
directly or indirectly receive proceeds of Borrowings made pursuant thereto; and
WHEREAS, this Guaranty is integral to the transactions contemplated by
the Loan Documents and is a condition precedent to Lender's obligations to
extend credit under the Loan Documents;
ACCORDINGLY, for adequate and sufficient consideration, the receipt and
adequacy of which are hereby acknowledged, Guarantor guarantees to Lender the
prompt payment of the Guaranteed Debt (defined below) at, and at all times
after, its maturity (by acceleration or otherwise) as follows:
1. DEFINITIONS. Terms defined in the Credit Agreement have the same
meanings when used, unless otherwise defined, in this Guaranty. As used in this
Guaranty:
BORROWER means Borrower, Borrower as a debtor-in-possession, and any
receiver, trustee, liquidator, conservator, custodian, or similar party
appointed for Borrower or for all or substantially all of Borrower's
assets under any Debtor Laws.
CREDIT AGREEMENT is defined in the recitals to this Guaranty.
GUARANTEED DEBT means, collectively, (a) the Obligations and (b) all
present and future costs, attorneys' fees, and expenses reasonably
incurred by Lender to enforce Borrower's, Guarantor's, or any other
obligor's payment of any of the Guaranteed Debt, including, without
limitation (to the extent lawful), all present and future amounts that
would become due but for the operation of Sections 502 or 506 or any
other provision of Title 11 of the United States Code and all present
and future accrued and unpaid interest (including, without limitation,
all post-maturity interest end any post-petition interest in any
proceeding under Debtor Relief Laws to which Borrower or Guarantor
becomes subject).
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<PAGE> 48
GUARANTOR is defined in the preamble to this Guaranty.
LENDER is defined in the preamble to this Guaranty.
LINE LETTER means the "Line Letter" as defined in the Credit
Agreement.
MASTER NOTE means the "Master Note" as defined in the Credit
Agreement.
LOAN DOCUMENTS means, collectively, the Credit Agreement and all
related "Loan Documents" (as such term is defined in the Credit
Agreement).
OBLIGATIONS means the "Obligations" as defined in the Credit
Agreement.
2. GUARANTY. This is an absolute, irrevocable, and continuing guaranty,
and the circumstance that at any time or from time to time the Guaranteed Debt
may be paid in full does not affect the obligation of Guarantor with respect to
the Guaranteed Debt incurred after that. This Guaranty remains in effect until
the Guaranteed Debt is fully paid and performed, all commitments to extend any
credit under the Loan Documents have terminated. Guarantor may not rescind or
revoke its obligations with respect to the Guaranteed Debt. Notwithstanding any
contrary provision, it is the intention of Guarantor and Lender, that the amount
of the Guaranteed Debt guaranteed by Guarantor by this Guaranty shall be in, but
not in excess of, the maximum amount permitted by fraudulent conveyance,
fraudulent transfer, or similar Laws applicable to Guarantor. Accordingly,
notwithstanding anything to the contrary contained in this Guaranty or any other
agreement or instrument executed in connection with the payment of any of the
Guaranteed Debt, the amount of the Guaranteed Debt guaranteed by Guarantor by
this Guaranty shall be limited to an aggregate amount equal to the largest
amount that would not render Guarantor's obligations hereunder subject to
avoidance under Section 548 of the United States Bankruptcy Code or any
comparable provision of any applicable state law.
3. CONSIDERATION. Guarantor represents and warrants that its liability
under this Guaranty may reasonably be expected to directly or indirectly benefit
it.
4. CUMULATIVE RIGHTS. If Guarantor becomes liable for any indebtedness
owing by Borrower to Lender, other than under this Guaranty, that liability may
not be in any manner impaired or effected by this Guaranty. The rights of Lender
under this Guaranty are cumulative of any and all other rights that Lender may
ever have against Guarantor. The exercise by Lender of any right under this
Guaranty or otherwise does not preclude the concurrent or subsequent exercise of
any other right.
5. PAYMENT UPON DEMAND. If Borrower does not pay all or part of the
Guaranteed Debt when due, Guarantor shall, on demand and without further notice
of dishonor and without any notice having been given to Guarantor previous to
that demand of either the acceptance by Lender of this Guaranty or the creation
or incurrence of any Guaranteed Debt, pay the amount of the Guaranteed Debt then
due and payable to Lender. It is not necessary for Lender, in order to enforce
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<PAGE> 49
payment by Guarantor, first or contemporaneously to institute suit or exhaust
remedies against Borrower or others liable on any Guaranteed Debt, including,
without limitation, any other Guarantors, or to enforce rights against any
collateral securing any Guaranteed Debt.
6. SUBROGATION AND CONTRIBUTION. Until payment in full of the
Guaranteed Debt and the TERMINATION of the obligation of Lender to extend credit
under the Loan Documents (a) Guarantor may not assert, enforce, or otherwise
exercise any right of subrogation to any of the rights or Liens of Lender or any
other beneficiary against Borrower or any other obligor on the Guaranteed Debt
or any collateral or other security or any right of recourse, reimbursement,
subrogation, contribution, indemnification, or similar right against Borrower or
any other obligor on any Guaranteed Debt or any guarantor of it, (b) Guarantor
defers all of the foregoing rights (whether they arise in equity, under
contract, by statute, under common law, or otherwise), and (c) Guarantor defers
the benefit of, and subordinates any right to participate in, any collateral or
other security given to Lender or any other beneficiary to secure payment of any
Guaranteed Debt.
7. NO RELEASE. Guarantor's obligations under this Guaranty may not be
released, diminished, or affected by the occurrence of any one or more of the
following events: (a) Any taking or accepting of any other security or assurance
for any Guaranteed Debt; (b) any release, surrender, exchange, subordination,
impairment, or loss of any collateral securing any Guaranteed Debt; (c) any full
or partial release of the liability of any other obligor on the Obligations,
except for any final release resulting from payment in full of such obligation;
(d) the modification of, or waiver of compliance with, any terms of any other
Loan Document, the Line Letter, or the Master Note; (e) the insolvency,
bankruptcy, or lack of corporate or partnership power of any other obligor at
any time liable for any Guaranteed Debt, whether now existing or occurring in
the future; (f) any renewal, extension, or rearrangement of any Guaranteed Debt
or any adjustment, indulgence, forbearance, or compromise that may be granted or
given by Lender to any other obligor on the Obligations; (g) any neglect, delay,
omission, failure, or refusal of Lender to take or prosecute any action in
connection with the Guaranteed Debt or to foreclose, take, or prosecute any
action in connection with any Loan Document, the Line Letter, or the Master
Note; (h) any failure of Lender to notify Guarantor of any renewal, extension,
or assignment of any Guaranteed Debt, or the release of any security or of any
other action taken or refrained from being taken by Lender against Borrower or
any new agreement between Lender and Borrower; it being understood that Lender
is not required to give Guarantor any notice of any kind under any circumstances
whatsoever with respect to or in connection with any Guaranteed Debt, other than
any notice required to be given to Guarantor by law or elsewhere in this
Guaranty; (i) the initiation of enforcement actions against any other Guarantor
or the collection of a portion of the Guaranteed Debt from any other Guarantor;
(j) the unenforceability of any Guaranteed Debt against any other obligor or any
security securing same because it exceeds the amount permitted by Law, the act
of creating it is ultra vires, the officers creating it exceeded their authority
or violated their fiduciary duties in connection with it, or otherwise; or (k)
any payment of the Obligations to Lender is held to constitute a preference
under any Debtor Relief Law or for any other reason Lender is required to refund
that payment or make payment to someone else (and in each such instance this
Guaranty will be reinstated in an amount equal to that payment).
-44-
<PAGE> 50
8. WAIVERS. To the maximum extent lawful, Guarantor waives all rights
by which it might be entitled to require suit on an accrued right of action in
respect of any Guaranteed Debt or require suit against Borrower or others,
whether arising under Section 34.02 of the Texas Business and Commerce Code, as
amended (regarding its right to require Lender to sue Borrower on accrued right
of action following its written notice to Lender), Section 17.001 of the Texas
Civil Practice and Remedies Code, as amended (allowing suit against it without
suit against Borrower, but precluding entry of judgment against it before entry
of judgment against Borrower), Rule 31 of the Texas Rules of Civil Procedure, as
amended (requiring Lender to join Borrower in any suit against it unless
judgment has been previously entered against Borrower), or otherwise.
9. LOAN DOCUMENTS. By execution hereof, Guarantor covenants and agrees
that certain representations, warranties, terms, covenants, and conditions set
forth in the Loan Documents are applicable to Guarantor and shall be imposed
upon Guarantor, and Guarantor reaffirms that each such representation and
warranty is true and correct and covenants and agrees to promptly and properly
perform, observe, and comply with each such term, covenant, or condition.
Moreover, Guarantor acknowledges and agrees that this Guaranty is subject to the
offset provisions of the Loan Documents in favor of Lender. In the event the
Credit Agreement ceases to remain in effect for any reason whatsoever during any
period when any part of the Guaranteed Debt remains unpaid, the terms,
covenants, and agreements incorporated herein by reference shall nevertheless
continue in full force and effect as obligations of Guarantor under this
Guaranty.
10. RELIANCE AND DUTY TO REMAIN INFORMED. Guarantor confirms that it
has executed and delivered this Guaranty after reviewing the terms and
conditions of the Loan Documents and such other information as it has deemed
appropriate in order to make its own credit analysis and decision to execute and
deliver this Guaranty. Guarantor confirms that it has made its own independent
investigation with respect to Borrower's creditworthiness and is not executing
and delivering/his Guaranty in reliance on any representation or warranty by
Lender as to that creditworthiness. Guarantor expressly assumes all
responsibilities to remain informed of the financial condition of Borrower and
any circumstances affecting Borrower's ability to perform under the Loan
Documents to which it is a party or any collateral securing any Guaranteed Debt.
11. NO REDUCTION. The Guaranteed Debt may not be reduced, discharged,
or released because or by reason of any existing or future offset, claim, or
defense (except for the defense of complete and final payment of the Guaranteed
Debt) of Borrower or any other obligor against Lender or against payment of the
Guaranteed Debt, whether that offset, claim, or defense arises in connection
with the Guaranteed Debt or otherwise. Those claims and defenses include,
without limitation, failure of consideration, breach of warranty, fraud,
bankruptcy, incapacity/infancy, statute of limitations, lender liability, accord
and satisfaction, usury, forged signatures, mistake, Impossibility, frustration
of purpose, and unconscionability.
12. INSOLVENCY OF GUARANTOR. Should Guarantor become insolvent, or
fail to pay Guarantor's debts generally as they become due, or voluntarily seek,
consent to, or acquiesce in, the benefit or benefits of any Debtor Laws (other
than as a creditor or claimant), or become a party to (or be made the subject
of) any proceeding provided for by any Debtor Relief Law (other than as a
-45-
<PAGE> 51
creditor or claimant) that could suspend or otherwise adversely affect the
rights of Lender granted hereunder, then, in any such event, the Guaranteed Debt
shall be, as among Guarantor and Lender, a fully matured, due, and payable
obligation of Guarantor to Lender (without regard to whether Borrower is then in
default under the Loan Documents or whether the Obligation, or any part thereof,
is then due and owing by Borrower to Lender), payable in full by Guarantor to
Lender upon demand, and the amount thereof so payable shall be the estimated
amount owing in respect of the contingent claim created hereunder.
13. LOAN DOCUMENT. This Guaranty is a Loan Document and is subject to
the applicable provisions of Sections 1 and 9 of the Credit Agreement,
including, without limitation, the provisions relating to GOVERNING LAW,
JURISDICTION, VENUE; SERVICE OF PROCESS, AND WAIVER OF JURY TRIAL, all of which
are incorporated into this Guaranty by reference the same as if set forth in
this Guaranty verbatim.
14. JOINT AND SEVERAL LIABILITY. Guarantor acknowledges that this
Guaranty is one of a number of Guaranty Agreements to be executed in favor of
Lender pursuant to Section 3 of the Credit Agreement. Guarantor further
acknowledges that its liability under this Guaranty is joint and several with
each of the other Guarantors executing Guaranty Agreements, that this Guaranty
Agreement covers the full amount of the Guaranteed Debt, and that this Guaranty
will not be affected in any manner by Lender's assertion of rights against any
other Guarantor for payment of the Guaranteed Debt.
15. COMMUNICATIONS. For purposes of Sections 9.4 of the Credit
Agreement, Guarantor's address and telecopy number are as set forth next to
Guarantor's signature on the signature page hereof
16. AMENDMENTS, ETC. No amendment, waiver, or discharge to or under
this Guaranty is valid unless it is in writing and is signed by the party
against whom it is sought to be enforced and is otherwise in conformity with the
requirements of Section 9.19 of the Credit Agreement.
17. PARTIES. This Guaranty benefits Lender, and its successors and
assigns and binds Guarantor and its successors and assigns. The rights of Lender
under this Guaranty may be transferred with any assignment of the Guaranteed
Debt. The Credit Agreement contains provisions governing assignments of the
Guaranteed Debt and of rights and obligations under this Guaranty.
[REMAINDER OF PAGE INTENTIONALLY BLANK
SIGNATURE PAGES FOLLOW.]
-46-
<PAGE> 52
EXECUTED as of April 30, 1999.
GUARANTOR:
----------------------------------
Address:
---------------
---------------
Telephone:
---------------
Facsimile: By:
--------------- ----------------------------
Title:
----------------------------
-47-
<PAGE> 53
SCHEDULE 5.19
SCHEDULE OF ERISA PLANS
TANDY BRANDS ACCESSORIES, INC.
EMPLOYEES INVESTMENT PLAN
TIGER ACCESSORIES, INC.
401(k) PLAN
-48-
<PAGE> 54
REVOLVING CREDIT NOTE
$25,000,000.00 April 30, 1999
FOR VALUE RECEIVED, the undersigned TANDY BRANDS ACCESSORIES, INC., a
Delaware corporation (the "COMPANY"), hereby unconditionally promises to pay to
the order of WELLS FARGO HSBC TRADE BANK, N.A. (the "BANK") the principal sum of
twenty-five million dollars ($25,000,000.00), 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 the Loan Agreement (as
hereinafter defined), 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
the Loan Agreement (as hereinafter defined). Payments of both principal and
interest herein shall be made in lawful money of the United States in
immediately available funds in the manner provided for in the Loan Agreement.
This Note has been executed and delivered pursuant to the terms of that
certain Revolving Credit Agreement (the "LOAN AGREEMENT") by and between Company
and Bank, dated as of April 30, 1999 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
attorney's fees and all other costs and expenses described in 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
<PAGE> 55
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 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
<PAGE> 56
[THE TRADE BANK LETTERHEAD]
April 30, 1999
Tandy Brands Accessories, Inc.
690 East Lamar Boulevard, Suite 200
Arlington, Texas 76011
Re: Uncommitted Line of Credit
Gentlemen:
Wells Fargo HSBC Trade Bank N.A. (the "Bank") is pleased to offer an
uncommitted $15,000,000.00 line of credit to Tandy Brands Accessories, Inc.
("TBA") upon the following terms and conditions:
Line of Credit: An uncommitted $15,000,000.00 line of credit line
(the "Line") which may be utilized at the
discretion of Bank. TBA may request under the Line
that Bank (a) make advances ("Advances"), (b)
issue standby letters of credit and commercial
letters of credit ("Letters of Credit") and (c)
create banker's acceptances ("Acceptances").
However, Bank shall have no obligation to make
Advances, issue Letters of Credit, or create
Acceptances under the Line. The aggregate amount
of (y) all undrawn amounts, and all amounts drawn
and not reimbursed under any Letters of Credit,
and (z) all outstanding Acceptances, shall be
counted against the Line and shall not be
available for Advances hereunder. Subject to the
terms and conditions of this letter (the "Line
Letter"), TBA may borrow, repay, and borrow
amounts made available hereunder by Bank.
Minimum Advance: $100,000.00 or any integral multiple of $25,000.00
in excess of such amount.
Maturity of Advances: Up to 90 days from the date of each Advance.
<PAGE> 57
Interest Rate: Rate to be determined following submission by TBA
of a request for an Advance. Interest will be
computed on the basis of actual days elapsed over
a 360 day year.
Request for Advances: TBA may request an Advance under the Line not
later than 12:00 noon Dallas, Texas time (i) on
the business day such Advance is requested to be
made if the maturity date of such requested
Advance is for no more than 29 days, or (ii) at
least two (2) business days prior or to the
business day such Advance is requested to be made
if the maturity date of such requested Advance is
for more than 29 days. The amount, interest rate
and maturity date of each Advance will be agreed
upon by Bank and TBA on or before such Advance is
made (failing which such Advance will not be
made), and such agreement shall be promptly
confirmed in writing by Bank to TBA, which
confirmation shall be conclusive in the Absence
of manifest error.
Availability Period: Advances may be requested from the date of
acceptance of this Line Letter by TBA to the date
either Bank or TBA, in their sole discretion,
terminates the Line. In no event may Advances be
made on or after May 14, 2001.
Promissory Note: Advances will be evidenced by a master revolving
promissory note (the "Note") in the form of
Exhibit A attached hereto. The terms of each
Advance will be recorded by Bank on the grid
attached to the Note, but the inaccuracy or the
failure of Bank to make any such recordation shall
not affect the obligations of TBA under the Note.
Payments Prior to Maturity: If TBA elects or is required (other than upon
demand by Bank) to repay all or any part of any
Advance prior to its agreed upon maturity, TBA
shall, at the request of Bank, pay to Bank such
amount as Bank determines, in its sole discretion,
is necessary to compensate Bank for any breakage
costs.
Repayment of Advances: Advances under the Line are payable on demand by
Bank, but if no demand is made, on the maturity
date of the particular Advance. All Advances made
hereunder must be repaid on or before May 14,
2001.
2
<PAGE> 58
Termination: Bank or TBA may, in their sole discretion,
terminate the Line upon 10 days prior business
days written notice. Upon termination, Bank may,
in its sole discretion, demand that any
outstanding Advances be repaid, with accrued
interest, on the effective date of termination.
The Line will be automatically terminated and the
indebtedness evidenced by the Note will
automatically become due and payable upon the
termination of the Revolving Credit Agreement
referred to below or the insolvency of TBA or the
commencement by or against (if not dismissed
within 60 days) TBA of any bankruptcy, insolvency,
moratorium or other debtor relief proceeding.
Letters of Credit and
Acceptances: If TBA elects to utilize the Line for Letters of
Credit or Acceptances, and Bank agrees to such
use, TBA must complete the appropriate Bank forms
for such instruments, and the fees and terms and
conditions relating to such instruments shall be
governed by the appropriate Bank form.
Relationship to Revolving
Credit Agreement: Reference is made to the Revolving Credit
Agreement dated April 30,1999 between TBA and
Bank. Upon the making of any Advance, the issuance
of any Letter of Credit, or the creation of any
Acceptance under the Line, the terms and
conditions of such Revolving Credit Agreement
shall apply to such Advance, Letter of Credit or
Acceptance, as the case may be, except to the
extent inconsistent with the Line Letter in which
case the Line Letter will prevail.
Governing Law: Texas
Acknowledgment by TBA: TBA acknowledges its understanding that Bank is
under no obligation to make Advances, issue
Letters of Credit, or create Acceptances under the
Line, and, upon the request of TBA, Bank may, in
its sole discretion, decide whether or not to do
so. TBA further acknowledges that Bank may demand
repayment of Advances at any time and may
terminate the Line at any time as provided herein.
3
<PAGE> 59
THIS WRITTEN AGREEMENT, TOGETHER WITH THE NOTE AND THE REVOLVING CREDIT
AGREEMENT REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO ORAL AGREEMENTS BETWEEN THE PARTIES.
Very truly yours,
WELLS FARGO HSBC TRADE BANK N.A.
By: /s/ JUNE P. HANSON
------------------------------------------
Title:
---------------------------------------
Accepted and Agreed To:
TANDY BRANDS ACCESSORIES, INC.
By: /s/ STAN NINEMIRE
--------------------------------
Title:
-----------------------------
Date:
------------------------------
4
<PAGE> 60
EXHIBIT A
MASTER NOTE
$15,000,000.00 April 30,1999
For value received, TANDY BRANDS ACCESSORIES, INC., a Delaware
corporation (the "Borrower"), promises to pay to the order of WELLS FARGO HSBC
TRADE BANK N.A. (the "Bank") the unpaid principal amount of each advance made by
the Bank to the Borrower pursuant to the Line Letter referred to below ON DEMAND
or, if not theretofore demanded, on the maturity date therefor determined in
accordance with the Line Letter and set forth on the schedule attached to this
Note. The Borrower promises to pay interest on the unpaid principal amount of
each such advance ON DEMAND or, if not theretofore demanded, on such maturity
date and at the rate determined in accordance with the Line Letter and set forth
on the schedule attached to this Note. All such payments of principal and
interest shall be made in lawful money of the United States in immediately
available funds in the manner provided for in the Revolving Credit Agreement
dated April 30, 1999 between Borrower and Bank.
All advances made by the Bank, the respective interest rates applicable
thereto and maturities thereof and all repayments of the principal thereof shall
be recorded by the Bank on the schedule attached hereto, or on a continuation of
such schedule attached to and made apart hereof, provided that the inaccuracy
of, or the failure of the Bank to make, any such recordation shall not affect
the obligations of the Borrower hereunder.
This note is the Note referred to in the Line Letter dated as of April
30, 1999 between the Borrower and the Bank (as the same may be amended from time
to time) and, as such, is subject to the terms and conditions of such Line
Letter.
This Note shall be governed by and construed in accordance with the
laws of the State of Texas.
TANDY BRANDS ACCESSORIES, INC.
By:
------------------------------------------
Title:
---------------------------------------
<PAGE> 61
LOAN AND PAYMENT
TRANSACTION SCHEDULE
Attached to and Made a Part of Master Note
Dated April 30, 1999, Executed by
Tandy Brands Accessories, Inc.
<TABLE>
<CAPTION>
Amount Amount Unpaid Initials of
of of Principal Person
Amount of Maturity Interest Principal Interest Balance of Making
Date Advance Date Rate Repaid Paid Note Notation
---- --------- -------- -------- --------- -------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
-2-
<PAGE> 62
MASTER NOTE
$15,000,000.00 April 30, 1999
For value received, TANDY BRANDS ACCESSORIES, INC., a Delaware
corporation (the "Borrower"), promises to pay to the order of WELLS FARGO HSBC
TRADE BANK N.A. (the "Bank") the unpaid principal amount of each advance made by
the Bank to the Borrower pursuant to the Line Letter referred to below ON DEMAND
or, if not theretofore demanded, on the maturity date therefor determined in
accordance with the Line Letter and set forth on the schedule attached to this
Note. The Borrower promises to pay interest on the unpaid principal amount of
each such advance ON DEMAND or, if not theretofore demanded, on such maturity
date and at the rate determined in accordance with the Line Letter and set forth
on the schedule attached to this Note. All such payments of principal and
interest shall be made in lawful money of the United States in immediately
available funds in the manner provided for in the Revolving Credit Agreement
dated April 30, 1999 between Borrower and Bank.
All advances made by the Bank, the respective interest rates applicable
thereto and maturities thereof and all repayments of the principal thereof shall
be recorded by the Bank on the schedule attached hereto, or on a continuation of
such schedule attached to and made apart hereof, provided that the inaccuracy
of, or the failure of the Bank to make, any such recordation shall not affect
the obligations of the Borrower hereunder.
This note is the Note referred to Line Letter dated as of April 30,
1999 between the Borrower and the Bank (as the same in may be amended from time
to time) and, as such, is subject to the terms and conditions of such Line
Letter.
This Note shall be governed by and construed in accordance with the
laws of the State of Texas.
TANDY BRANDS ACCESSORIES, INC.
By: /s/ STAN NINEMIRE
-----------------------------------------
Title:
--------------------------------------
<PAGE> 63
LOAN AND PAYMENT
TRANSACTION SCHEDULE
Attached to and Made a Part of Master Note
Dated April 30, 1999, Executed by
Tandy Brands Accessories, Inc.
<TABLE>
<CAPTION>
Amount Amount Unpaid Initials of
of of Principal Person
Amount of Maturity Interest Principal Interest Balance of Making
Date Advance Date Rate Repaid Paid Note Notation
---- --------- -------- -------- --------- -------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
-2-
<PAGE> 1
EXHIBIT 10.32
TANDY BRANDS ACCESSORIES, INC.
EMPLOYEES INVESTMENT PLAN
AS AMENDED AND RESTATED
EFFECTIVE APRIL 1, 1999
<PAGE> 2
TANDY BRANDS ACCESSORIES, INC.
EMPLOYEES INVESTMENT PLAN
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I - NAME AND EFFECTIVE DATE ......................................................... 1
1.01 Name of Plan .................................................................. 1
1.02 Trust ......................................................................... 1
1.03 Trustee ....................................................................... 1
1.04 Trust Fund .................................................................... 1
1.05 Effective Date ................................................................ 2
1.06 Plan Year ..................................................................... 2
1.07 Inactive 401(k) Feature ....................................................... 2
ARTICLE II - ADMINISTRATION ................................................................. 2
2.01 Appointment of Administrative Committee ....................................... 2
2.02 Term of Office of Committee Members ........................................... 2
2.03 Powers and Duties ............................................................. 2
2.04 Organization and Operation of the Committee ................................... 3
2.05 Records and Reports ........................................................... 4
2.06 Indemnification ............................................................... 4
ARTICLE III - ELIGIBILITY ................................................................... 4
3.01 Conditions of Eligibility ..................................................... 4
3.02 Application for Participation ................................................. 4
3.03 Definition of Employee ........................................................ 5
3.04 Definition of Year of Service ................................................. 5
3.05 Break in Service - Participation .............................................. 8
ARTICLE IV - CONTRIBUTIONS .................................................................. 8
4.01 Participants' Contributions ................................................... 8
4.02 Collection and Payment of Participant's Contributions ......................... 9
4.03 Company Contributions ......................................................... 9
4.04 Insufficient Profits .......................................................... 9
4.05 Limitation on Annual Addition ................................................. 9
4.06 Annual Addition ............................................................... 10
4.07 Aggregation of Plans .......................................................... 10
4.08 Elimination of Excess Annual Additions ........................................ 11
4.09 Conclusiveness of Determination of Company Contributions....................... 13
4.10 Suspension of Contributions ................................................... 13
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
4.11 Non-forfeitability, Reversion and Diversion of Company Contributions........... 13
4.12 Defined Contribution Plan ..................................................... 14
4.13 Actual Contribution Percentage Test ........................................... 14
ARTICLE V - ALLOCATION AND VALUATION ........................................................ 17
5.01 Establishment of Participants' Accounts ....................................... 17
5.02 Allocation and Crediting of Participant Contributions ......................... 17
5.03 Allocation and Crediting of Company Contributions ............................. 17
5.04 Allocation and Crediting of Investment Experience ............................. 18
5.05 Valuation of the Trust Fund ................................................... 19
5.06 Notice to Participants of Account Balances .................................... 19
5.07 Good Faith Valuation Binding .................................................. 19
5.08 Errors and Omissions in Accounts .............................................. 19
ARTICLE VI - VESTING AND DISTRIBUTION OF BENEFITS ........................................... 19
6.01 General Provisions ............................................................ 19
6.02 Retirement .................................................................... 19
6.03 Valuation of Participant's Account ............................................ 20
6.04 Special Distributions of Participant's Account During Employment .............. 20
6.05 Manner and Media of Payment of Benefits ....................................... 21
6.06 Other Termination of Employment ............................................... 22
6.07 Distributions Under Domestic Relations Orders ................................. 22
6.08 Date of Payment ............................................................... 24
6.09 Commencement of Distributions ................................................. 24
6.10 Required Distributions ........................................................ 26
6.11 Beneficiary Designation ....................................................... 27
6.12 No Beneficiary Designation .................................................... 27
6.13 Exercise of Voting Rights and Tender Rights ................................... 27
6.14 Direct Rollover of Eligible Rollover Distributions ............................ 29
ARTICLE VII - TRUST AND TRUSTEE ............................................................. 29
7.01 Establishment and Acceptance of Trust ......................................... 29
7.02 Investment of the Trust Fund .................................................. 30
ARTICLE VIII - TOP HEAVY RULES .............................................................. 30
8.01 Minimum Employer Contribution ................................................. 30
8.02 Additional Contribution ....................................................... 30
8.03 Determination of Top Heavy Status ............................................. 31
8.04 Definitions ................................................................... 31
ARTICLE IX - AMENDMENT AND TERMINATION ...................................................... 32
9.01 Amendment ..................................................................... 32
9.02 Termination ................................................................... 32
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
ARTICLE X - MISCELLANEOUS.................................................................... 33
10.01 Notices and Forms ............................................................ 33
10.02 Plan Not an Employment Contract .............................................. 33
10.03 Prohibition Against Alienation ............................................... 33
10.04 Unclaimed Account Procedure .................................................. 33
10.05 Conflicting Claims ........................................................... 34
10.06 Multiple Copies .............................................................. 34
10.07 Gender and Number ............................................................ 34
10.08 Construction of Plan ......................................................... 35
10.09 Special Rules Relating to Veterans Re-Employment Rights under USERRA ......... 35
ARTICLE XI - ADOPTION OF THE PLAN BY AFFILIATED AND ASSOCIATED
COMPANIES AND RELATION TO OTHER PLANS ....................................................... 35
11.01 Method of Adoption ........................................................... 35
11.02 Receipt of Participants' Accounts from Other Plans ........................... 36
11.03 Receipt of Funds from Acquired Company's Plans ............................... 36
11.04 Merger or Consolidation....................................................... 36
ARTICLE XII - CLAIMS PROCEDURE .............................................................. 37
12.01 Claims Procedure ............................................................. 37
</TABLE>
iii
<PAGE> 5
TANDY BRANDS ACCESSORIES, INC.
EMPLOYEES INVESTMENT PLAN
PREAMBLE
WHEREAS, TANDY BRANDS ACCESSORIES, INC., a corporation formed under the
laws of the State of Delaware (the "Company") previously adopted a stock bonus
plan, effective as of January 1, 1991, which was spun off from the Tandy Brands
Employees Investment Plan maintained by The Bombay Company, Inc. (formerly Tandy
Brands, Inc.) when the Company became an independent, publicly traded
corporation (the "Prior Plan"); and
WHEREAS, the Company now desires to amend and restate the Prior Plan to
add an inactive cash or deferred feature (which may be activated by resolution
of the Board of Directors of the Company at a later date), to incorporate
amendments which have previously been made, and to modify provisions of the plan
to the extent necessary to comply with recent legislation, including the Small
Business Job Protection Act of 1996 and the Taxpayer Relief Act of 1997;
NOW, THEREFORE, in consideration of the premises and to carry out the
purposes and intent as set forth above, said Prior Plan is hereby restated,
retitled, and amended in its entirety, superseded and replaced by this separate,
restated Tandy Brands Accessories, Inc. Employees Investment Plan, effective
April 1, 1999, except as otherwise specifically noted herein. There will be no
gap or lapse in time or effect between such Plans and the existence of a
qualified Plan shall be continuous and uninterrupted.
The terms and conditions of this restated Tandy Brands Accessories,
Inc. Profit Sharing and 401(k) Plan are as follows:
ARTICLE I
NAME AND EFFECTIVE DATE
1.01 Name of Plan: The Plan herein created shall be known as the "Tandy
Accessories, Inc. Employees Investment Plan."
1.02 Trust: The trust established to hold and invest contributions made
under the Plan for the exclusive benefit of the Participants included in the
Plan from which the benefits will be distributed.
1.03 Trustee: The qualified and acting trustee or trustees under the
Trust, who shall be the fiduciary or fiduciaries designated to invest and manage
the Plan assets and to operate and administer the Trust Fund.
1.04 Trust Fund: All assets of whatsoever kind or nature held from time
to time by the Trustee in the Trust, without distinction as to income and
principal and without regard to source.
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1.05 Effective Date: This Plan shall be effective as of April 1, 1999,
unless otherwise set forth hereinafter.
1.06 Plan Year: The Plan Year shall be the twelve (12) month period
ending each June 30.
1.07 Inactive 401(k) Feature: The Plan is amended to add an inactive
salary reduction contribution feature under section 401(k) of the Internal
Revenue Code of 1986, as amended (the "Code"). The 401(k) feature may be
activated by resolution of the Board of Directors of the Company. At such time,
the Plan will be amended to include the specific provisions implementing the
401(k) feature, including provisions controlling salary deferral contributions,
discretionary matching contributions made by the Company on account of such
salary deferral contributions, nondiscrimination testing provisions, and such
other language or provisions as are required under section 401(k) or section
401(m) of the Code or integral thereto.
ARTICLE II
ADMINISTRATION
2.01 Appointment of Administrative Committee: The Company shall appoint
a committee to be known as the "Administrative Committee", hereinafter referred
to as the "Committee," to administer the Plan. This Committee shall consist of
three members who shall not necessarily be employees of the Company. The Company
shall advise the Trustee of the names of the members of the Committee, and the
Trustee shall be entitled to rely thereon until similarly advised of a change in
the membership of the Committee.
2.02 Term of Office of Committee Members: Each member of the Committee
shall hold office until his death, disability, resignation or removal from
office. Any member of the Committee may be removed by the Company at its
pleasure. Any Committee member may resign by delivering his written resignation
to the Company and to the Committee. Vacancies in the Committee arising from any
cause whatsoever shall be filled by the Company.
2.03 Powers and Duties: The Committee shall administer the Plan in
accordance with its terms, and shall have all powers necessary to carry out the
provisions of the Plan. Without limiting the generality of the foregoing, the
Committee shall have the following powers:
(a) To make and publish such rules and regulations as it may deem
necessary and to carry out the provisions of the Plan;
(b) To determine all questions arising in the administration,
interpretation and application of the Plan, including questions of
eligibility of Employees and of the status and rights of Participants,
beneficiaries and any other person hereunder;
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(c) To direct the investment and reinvestment of the Trust Fund
and the income therefrom, as more particularly specified hereinafter;
(d) To authorize all disbursements by the Trustee from the Trust
Fund;
(e) To decide any dispute arising hereunder;
(f) To construe the provisions of the Plan and to correct any
defects therein;
(g) To provide procedures for determination of claims for
benefits; and
(h) To take any and all further actions from time to time as the
Committee, in its sole and absolute discretion, shall deem necessary
for the proper administration of the Plan.
The Committee shall have full and absolute discretion in the exercise
of each and every aspect of its authority under this Plan, including, without
limitation, all of the rights, powers and authorities specified in this Section
2.03. The determination of the Committee as to any question arising hereunder
shall be conclusive and binding on all persons.
2.04 Organization and Operation of the Committee: The Committee shall
act by a majority of its members at the time in office and such action may be
taken either by a vote at a meeting or in writing without a meeting; however, a
Committee member shall not vote on any question relating specifically to
himself, but any necessary action regarding such Committee member shall be
decided by the remaining members of the Committee. In the event the remaining
members of the Committee are unable to agree upon the disposition of any such
questions, the Company shall appoint another person eligible for membership on
the Committee to serve as a temporary member for the purpose of reaching a
decision on the matter in issue. Such matters shall then be determined by a
majority of the Committee, including said temporary member.
The Committee may authorize any one or more of its members to execute
any document or documents on behalf of the Committee, in which event the
Committee shall notify the Trustee in writing of such action and the names of
its members so designated. The Trustee thereafter shall accept and rely upon any
document executed by such member or members as representing action by the
Committee until the Committee shall file with the Trustee a written revocation
of such designation.
The Committee may adopt such by-laws and regulations as it deems
desirable for the conduct of its affairs, and may appoint such accountants,
counsel, specialists, and other persons as it deems necessary or desirable in
connection with the administration of the Plan. Such accountants and counsel
may, but need not, be accountants and counsel for the Company. The Committee
shall be entitled to rely conclusively upon, and shall be fully protected in,
any action taken by it in good faith in relying upon any opinions or reports
which shall be furnished to it by any such accountant, counsel, or other
specialist.
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The Committee and the Trustee may by agreement in writing arrange for
the Committee to perform any of the Trustee's ministerial functions, including
but not limited to the maintenance of records of account of each Participant and
determination of value of each Participant's Account.
The Company may furnish the Committee with such clerical assistance on
a full or part time basis as shall from time to time be reasonable or desirable
to assist in the administration of the Plan, and shall pay all costs and
expenses, including Trustee's fees and expenses, incurred in the administration
of the Plan, save and except those costs and expenses, including attorneys'
fees, which are charged to the accounts of Participants by a court of competent
jurisdiction in any litigation in which the Plan or any of its fiduciaries are a
party.
2.05 Records and Reports: The Committee shall keep a record of all its
proceedings and acts, and shall keep all such books of account, records, and
other data as may be necessary for the proper administration of the Plan. The
Committee shall notify the Trustee and the Company of any action taken by the
Committee, and, when required, shall notify any other interested person or
persons. The Committee will specifically maintain separate records as to the
total Participants, contributions, the Company's contributions, and the total
value of each Participant's account. Within a reasonable period of time after
the end of each calendar quarter, the Committee shall notify each Participant of
his total account value which will include the Participant's contribution and
the Company's contribution.
2.06 Indemnification: The Company shall to the extent permitted by law,
indemnify each member of the Committee against any and all claims, losses,
damages, expenses, liabilities, including any amounts paid in settlement with
approval, arising from any action or failure to act that constitutes or is
alleged to constitute a breach of such person's responsibilities in connection
with the Plan under the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") or any other law, unless the same is judicially determined to
be due to the gross negligence, willful misconduct or willful failure to act of
such member. The Committee may, at its discretion, require the written approval
or disapproval of the Company prior to taking any action in any particular
matter made the subject of its responsibility hereunder.
ARTICLE III
ELIGIBILITY
3.01 Conditions of Eligibility: Any Employee on the Effective Date who
was a Participant in the Prior Plan shall continue to be a Participant in the
Plan. Any Employee who completes two (2) Years of Service with the Company,
subsequent to the Effective Date of this Plan, shall be eligible to participate
in the Plan as of the first payroll period following the completion of service
as above specified.
3.02 Application for Participation: In order to become a Participant
hereunder, each eligible Employee shall execute a written application, on a form
to be furnished by the Committee, wherein he shall evidence:
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(a) his intent to participate in the Plan;
(b) his consent to make Participant Contributions to the Trust
Fund in accordance with Article IV, Section 4.01(a) of this Plan; and
(c) his consent that such contributions be withheld by the Company
from his gross salary and wages at each pay period.
Once an employee has completed the necessary service for participation
in the Plan, he may file an application for participation at any time
thereafter. His participation in the Plan shall not become effective, however,
until the start of the next pay period after the application with his signature
is received by the Company.
3.03 Definition of Employee: "Employee" shall mean any individual
employed by the Company, including any U.S. citizen employed by any foreign
affiliated or associated company. As used above "Employee" shall also include,
without limitation, any salesman who is an Employee of the Company and
recognized as such for Social Security purposes. The term Employee shall not
include:
(a) An individual who is a nonresident alien who receives no
earned income from the Company which constitutes income from sources
within the United States;
(b) An individual who is a member of a collective bargaining unit,
unless the terms of the collective bargaining agreement between the
Company and the bargaining unit require that the individual be eligible
to participate in the Plan;
(c) An individual classified as an independent contractor or
leased employee under the Company's customary worker classification
procedures (whether or not such individual is actually an employee); or
(d) An individual employed by an employer that is affiliated or
associated with the Company, unless such employer has adopted the Plan
as a Participating Company pursuant to Section 11.01.
3.04 Definition of Year of Service: A Year of Service means an
Eligibility Computation Period during which the Employee has not less than one
thousand (1,000) Hours of Service.
(a) Employment Commencement Date: An Employee's Employment
Commencement Date is the first day for which the Employee is entitled
to be credited with an Hour of Service described in subsection (c)
below.
(b) Eligibility Computation Period: An Eligibility Computation
Period means a twelve (12) consecutive month period commencing on an
Employee's Employment
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Commencement Date, or any anniversary thereof, whether before or after the
Effective Date. In the case of an Employee who incurs one or more Breaks in
Service, the Eligibility Computation Period after the last such Break in Service
shall commence on the first day for which he is credited with an Hour of Service
after the last such Break in Service, and any anniversary thereof.
(c) Hour of Service: Each hour connected with a person's service,
either before or after the Effective Date, for an Employer and described in one
or more of the paragraphs (1) through (3) below, subject to the provisions of
paragraphs (4) and (5).
(1) Each hour for which such person is paid, or entitled to be
paid, for the performance of duties during the applicable period, shall
be an Hour of Service.
(2) Each hour for which such person is paid, or entitled to be
paid, by an Employer on account of a period of time during which such
person performs no duties, even if the employment relationship has
terminated, due to vacation, holiday, illness, incapacity, disability,
layoff, jury duty, military duty, or leave of absence, shall be an Hour
of Service. Notwithstanding the foregoing sentence,
(A) Not more than 501 hours shall be credited under this
paragraph (2) to such person on account of any single continuous
period during which he performs no duties;
(B) No hours shall be credited under this paragraph (2) on
account of hours for which such person is paid or entitled to be
paid under a plan maintained solely for the purpose of complying
with applicable workmen's compensation, unemployment compensation,
or disability insurance laws; and
(C) No hours shall be credited on account of a payment to
such person solely as reimbursement for medical or related
expenses incurred by such person.
Only for purposes of this paragraph (2), a payment shall be deemed
to be made by or due from the Employer directly, or indirectly through
a trust, fund, insurer, or other entity, to which the Employer
contributes or pay premiums, and regardless of whether such
contributions are for the benefit of particular employees or a group of
employees in the aggregate.
(3) With respect to periods either before or after the Effective
Date during which no duties were performed, each hour for which back
pay is awarded or agreed to by an Employer shall be an Hour of Service,
regardless of any mitigation of
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damages. However, any such hours with respect to periods described in
paragraph (2) shall be subject to all of the limitations set forth in
paragraph (2).
(4) Notwithstanding paragraphs (1) through (3) of this subsection
(c), no hour shall be credited more than once as an Hour of Service.
The number of hours credited for reasons other than the performance of
duties, and the crediting of Hours of Service to computation periods,
shall be determined in accordance with 29 C.F.R. Section 2530.200b-
2(b)-(c).
(5) Solely for purposes of determining whether the Employee incurs
a Break in Service under any provision of this Plan, the Committee
shall credit Hours of Service during an Employee's unpaid absence
period due to maternity or paternity leave. The Committee shall
consider an Employee on maternity or paternity leave if the Employee's
absence is due to the Employee's pregnancy, the birth of the Employee's
child, the placement with the Employee of an adopted child, or the care
of the Employee's child immediately following the child's birth or
placement. The Committee shall credit Hours of Service under this
paragraph on the basis of the number of Hours of Service the Employee
would receive if he were paid during the absence period or, if the
Committee cannot determine the number of Hours of Service the Employee
would receive, on the basis of eight (8) hours per days during the
absence period. The Committee shall credit only the number of Hours of
Service (up to 501 Hours of Service) necessary to prevent an Employee's
Break in Service. The Committee shall credit all Hours of Service
described in this paragraph to the computation period in which the
absence period begins, or, if the Employee does not need these Hours of
Service to prevent a Break in Service in the computation period in
which his absence period begins, the Committee shall credit these Hours
of Service to the immediately following computation period. The
Committee shall apply this paragraph for absence periods which begin in
Plan Years commencing after December 31, 1984.
(d) Exclusion From Break-in-Service: An Employee's service shall not be
deemed to be broken during such period as the Employee shall be:
(1) on military leave; or
(2) on other leave of absence authorized by the Company for
sickness, disability, or other circumstances, granted in accordance
with an established and uniformly applied Company policy; or
(3) laid off in Order to effect a temporary reduction in
personnel, provided such Employee shall be re-employed within three
hundred sixty-five (365) days after such layoff.
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(e) For purposes of this Section 3.04, the "Employer" shall mean
(1) the Company; (2) any other corporation that is a member of a
controlled group of corporations, within the meaning of section 414(b)
and (c) of the Code; (3) any member of an affiliated service group
under section 414(m) of the Code; and (4) any other entity required to
be aggregated under section 414(o) of the Code. Service credited under
the Prior Plan shall be included as service under the Plan. In
addition, service for an organization that has been acquired by Tandy
Brands Accessories, Inc., before it is so acquired, shall be treated as
service for the Employer. Any service for Tandy Brands, Inc. (now known
as The Bombay Company, Inc.) before January 1, 1991 shall be treated as
service for the Employer.
3.05 Break in Service-Participation: An Employee shall incur a "Break
in Service" if during any Eligibility Computation Period, as defined in Section
3.04(b), he does not complete more than five hundred (500) Hours of Service. An
Employee who incurs a "Break in Service" after completing one or more Years of
Service but before becoming eligible to participate in the Plan shall be
eligible to participate in the Plan after completing one additional Year of
Service after he becomes an Employee. A Participant whose employment terminates
and who is subsequently reemployed may reenter the Plan as a Participant by
complying with the procedure set forth in Section 3.02 hereof. In such event,
his participation in the Plan shall become effective as of the first pay period
following the date on which the application with his signature is received by
the Company.
ARTICLE IV
CONTRIBUTIONS
4.01 Participants' Contributions:
(a) Qualifying contributions. Each Participant shall contribute to
the Trust Fund under the Plan "qualifying contributions" in an amount
equal to five percent (5%) of his gross salary and wages. All
Participant Contributions are non-forfeitable and fully vested, being
held in trust for the account of the Participant or his beneficiary.
(b) Gross Salary and Wages. For purposes of this Plan, the term
"gross salary and wages" is defined as all compensation paid in cash,
including bonuses, which is includable in gross income as provided for
under section 414(s) of the Code and is subject to withholding on IRS
Form W-2, plus any payments to the Company's cafeteria plan under
section 125 of the Code. The term "gross salary and wages" specifically
does not include any contributions made under the Tandy Brands
Accessories Stock Purchase Program which are used to purchase stock for
a participating Employee and are included in such W-2 form as referred
to above. Effective for Plan Years beginning on or after January 1,
1989 and before January 1, 1994, "gross salary and wages" shall not
exceed $200,000, as adjusted by the Secretary of the Treasury for
increases in the cost of living at the time and in the manner set forth
in section 415(d) of the Code. Effective for Plan Years beginning on or
after January 1, 1994, "gross salary and wages" shall not exceed
$150,000, as adjusted by the
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Secretary of the Treasury for increases in the cost of living at the
time and in the manner set forth in section 401(a)(17)(B) of the Code.
On or before June 30,1997, in determining the gross salary and wages of
a Participant for purposes of this limitation, the rules of section
414(q)(6) of the code shall apply, except in applying such rules, the
term "family" shall include only the spouse of the Participant and any
lineal descendants of the Participant who have not attained age 19
before the close of the year. If, as a result of the application of
such rules, the adjusted limitation is exceeded, then the limitation
shall be prorated among the affected individuals in proportion to each
such individual's gross salary and wages as determined under this
Subsection (b) prior to the application of this limitation. On or after
July 1, 1997, the family aggregation rules required by section
414(q)(6) of the Code shall not apply.
4.02 Collection and Payment of Participant's Contributions: The Company
shall withhold and deduct on each regular pay day from each Participant's gross
salary and wages that percentage of same which constitutes such Participant's
Contributions to the Trust Fund, as set forth in Section 4.01 hereof. The
Company shall pay over to the Trustee all such contributions of Participants
within thirty (30) days following the calendar month in which such contributions
shall have been deducted and withheld. In the event a Participant withdraws from
the Plan, and his contributions for the calendar month preceding the time of his
withdrawal have been withheld from his gross salary and wages, but have not been
paid over the Trustee, then the Company shall refund to such withdrawing
Participant the amount of his contribution so withheld and not paid over to the
Trustee.
4.03 Company Contributions: Within thirty (30) days following each
calendar quarter, the Company shall contribute out of its current or accumulated
earnings and profits and pay over to the Trustee on behalf of each Participant,
in addition to the contributions described in subsection (a) of Section 4.01, an
amount calculated in accordance with Section 5.03, provided that in the case of
withdrawal from the Plan by a Participant within a calendar quarter, the Company
shall not be required to contribute to the Trust Fund under this Section 4.03 on
behalf of the withdrawing Participant for the calendar quarter in which such
withdrawal occurs.
4.04 Insufficient Profits: In the event the Company should not have
sufficient current earnings or profits or be operating at a loss currently and
thus be unable to pay its full contributions to the Plan, then such
contributions, if any, that it shall be able to make shall be allocated among
all Participants in proportion to the contributions that would be made on their
behalf in the absence of the limitation to current earnings or profits. For
purposes of this Section 4.04, current or accumulated earnings and profits shall
be determined as of the end of each Plan Year, in accordance with generally
accepted accounting principles but without regard to any deduction for
contributions to this Plan or any other qualified plan under section 401 (a) of
the Code.
4.05 Limitation on Annual Addition: The Plan Year shall be the
limitation year of this Plan for purposes of section 415 of the Code. The Annual
Addition to a Participant's Account for a Plan Year shall not exceed his Maximum
Annual Addition, which after December 31, 1983, shall be the lesser of:
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(a) Twenty-five percent (25%) of such Participant's Compensation
during the Plan Year; or
(b) $30,000.00 or beginning after January 1, 1988, such amount as
adjusted from time to time under section 415(c)(1) of the Code and
section 1.415-6(d) of the Treasury Regulations, and in effect for the
calendar year in which the Plan Year ends.
4.06 Annual Addition: For purposes of Section 4.05, the Annual
Additions are the sum of the following amounts allocated on behalf of a
Participant for a limitation year:
(a) All Company contributions;
(b) all forfeitures;
(c) all Participant nondeductible contributions (provided that the
Annual Additions for any limitation year beginning before January 1,
1987 shall not be recomputed to treat all Participant nondeductible
contributions as Annual Additions); and
(d) amounts allocated after March 31, 1984, to an individual
medical benefit account, as defined in section 415 (1)(2) of the Code
which is part of a pension or annuity plan maintained by the Employer,
and amounts derived from contributions paid or accrued after December
31, 1985, in taxable years ending after such date, which are
attributable to post-retirement medical benefits allocated to the
separate account of a key employee (as defined in section 419A(d)(3) of
the Code) under a welfare benefit plan (as defined in section 419(e) of
the Code) maintained by the Employer.
4.07 Aggregation of Plans: For purposes of determining a Participant's
Annual Addition under Section 4.06 and his Maximum Annual Addition under Section
4.05, the following special rules shall apply:
(a) "Company Contributions" shall include all Employer
contributions allocated to the Account of the Participant for the
limitation year in this and any other defined contribution plan
maintained by an Employer.
(b) "Participant Contributions" shall include all contributions
made by the Participant for the limitation year to this Plan and any
other defined contribution plan maintained by an Employer.
(c) "Compensation" shall mean the total of a Participant's earned
income, wages, salaries, and fees for personal services and other
amounts received for personal services actually rendered in the course
of employment with the Employer maintaining the Plan (including, but
not limited to, commissions paid salesmen, compensation for services on
the basis of a percentage of profits, commissions on insurance
premiums, tips, and bonuses and
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in the case of a Participant who is an Employee within the meaning of
section 401(c)(1) of the Code and the regulations thereunder, the
Participant's earned income as described in section 401(c)(2) of the
Code and the regulations thereunder), and excluding the following: (1)
Employer contributions to a Plan of deferred compensation which, before
application of limitations under section 415 of the Code, are not
included in the Employee's gross income for the taxable year in which
contributed or Employer contributions under a simplified employee
pension plan to the extent such contributions are not included in the
gross income of the Employee or any distributions from a plan of
deferred compensation regardless of whether such amounts are includable
in the gross income of the Employee when distributed, except any amount
received by the Employee pursuant to an unfunded, non-qualified plan to
the extent such amounts are includable in gross income of the Employee;
(2) amounts realized from the exercise of a non-qualified stock option
or when restricted stock (or property) held by the Employee becomes
either freely transferable or is no longer subject to a substantial
risk of forfeiture; (3) amounts realized from the sale, exchange or
other disposition of stock acquired under a qualified stock option; and
(4) other amounts which receive special tax benefits, such as premiums
for group term life insurance, but only to the extent the premiums are
included in the gross income of the Employee, or contributions made by
the Employer (whether or not under a salary reduction agreement)
towards the purchase of an annuity described in section 403(b) of the
Code (whether or not the amounts are actually excluded from gross
income of the Employee). For Plan Years beginning after June 30, 1989 a
Participant's Compensation shall be limited to $200,000.00 (unless
adjusted in the manner permitted under section 415(d) of the Code). For
limitation years beginning on or after July 1, 1998, Compensation shall
include any elective deferrals (as defined in section 402(g)(3) of the
Code) and any amount which is contributed or deferred by the Employer
at the election of the Employee and which is not includible in the
gross income of the Employee by reason of section 125 or section 457 of
the Code.
(d) "Employer" shall mean (1) the Company; (2) any other
corporation that is a member of a controlled group of corporations,
within the meaning of section 1563(a) of the Code, determined without
regard to section 1563(a)(4) or (e)(3)(C) of the Code and with the
phrase "more than 50 percent" substituted for the phrase "at least 80
percent" each place it appears in section 1563(a)(1), that includes the
Company; and (3) any other entity that is under common control, within
the meaning of sections 414(c), (m) or (o) of the Code with the
Company.
4.08 Elimination of Excess Annual Additions:
(a) In the event that the Annual Addition, as defined in Section
4.06, to a Participant's Account for a Plan Year would (but for this
Section 4.08) exceed his maximum Annual Addition for such Plan Year, as
defined in Section 4.05, then the amount of contributions to this Plan
on behalf of the Participant for the Plan Year credited to the
Participant's Account shall be reduced to the extent necessary to
prevent an excess Annual
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Addition. Such reduction shall be taken first from the Company
Contributions, and then from the Participant Contributions.
(b) If as a result of the allocation of forfeitures or a
reasonable error in estimating Compensation, contributions that have
been made to the Plan on behalf of a Participant are required by
Subsection (a) of this Section 4.08 to be reduced, then such
contributions and any earnings and gains attributable to them, shall be
treated as contributions on behalf of the Participant for the next Plan
Year, and to the extent necessary, for succeeding Plan Years.
(c) Notwithstanding anything in Subsection (b) of this Section
4.08, if the Participant is not an Employee at the end of any Plan
Year, then any excess contributions on his behalf that have not yet
been treated under Subsection (b) as contributions for any Plan Year
shall be held unallocated in a suspense account and allocated, and
reallocated as often as necessary to prevent any excess Annual
Additions, for the next Plan Year, to the Accounts of the Participants
in proportion to their Compensation for such Plan Year. Amounts so
allocated shall be treated as Company contributions, and shall be used
to reduce Company contributions otherwise required for the Plan Year
for which they are allocated, and succeeding Plan Years if necessary.
(d) If, after all allocations and reallocations required by
Subsection (c) of this Section 4.08 have been made, there remain
Company contributions in the suspense account under Subsection (c) that
cannot be allocated, then such contributions shall be allocated to a
suspense account under this Subsection (d). For the Plan Year following
such allocation to a suspense account such contributions shall be
released from such account and allocated on a first-in, first-out
basis, in accordance with Subsection (c) of this Section 4.08. No other
Company contribution that would result in an Annual Addition shall be
credited to an Account unless all Company contributions for prior Plan
Years have been released from the suspense account maintained under
this Subsection (d) and allocated in accordance with this Subsection
(d).
(e) Any suspense account held under Subsection (c) or (d) of this
Section 4.08 shall be valued in accordance with Section 5.04, as if
such suspense account were an Account of a Participant.
(f) Company contributions being held under Subsection (b) of this
Section 4.08 for later allocation to a Participant's Account shall be
treated as if such contributions were a part of an Account of the
Participant, but no such contributions or amounts held in suspense
accounts under Subsection (c) or (d) of this Section 4.08 shall, prior
to such later allocation, be distributed to Participants, former
Participants, or beneficiaries. Furthermore, except as otherwise
provided in this Subsection (f), such contribution amounts shall not be
deemed to be part of any Participant's Account.
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4.09 Conclusiveness of Determination of Company Contributions: Neither
the Trustee nor the Committee shall be under any duty to inquire into the
correctness of the amounts contributed and paid over to the Trustee by the
Company in accordance with this Article IV, nor shall the Trustee or the
Committee or any other person be under any duty to enforce the payment of the
contributions to be made; and the determination by the Company of its
contributions hereunder shall be final and conclusive upon all persons.
4.10 Suspension of Contributions: A Participant while in the employ of
the Company may suspend his contributions for a period of six (6) months by
filing with the Committee a written request at least two (2) weeks prior to the
date on which his suspension of contributions is to become effective. A
Participant on sick leave or leave of absence authorized by the Company, who,
though on such leave nevertheless receives a salary from the Company, may
likewise suspend his contributions for the term of such leave by filing a
written request with the Committee two (2) weeks prior to the date on which his
suspension is to become effective. Contributions by and on behalf of a
Participant shall be automatically suspended for any month during which he fails
to receive any salary from the Company. Contributions by and on behalf of a
Participant shall be automatically suspended as of the time any such Participant
may be laid off by the Company to effect a temporary reduction in personnel,
provided that if such Participant shall not have been re-employed within three
hundred sixty-five (365) days from the time he is laid off, then his employment
shall be deemed to have terminated and the amount of his vested Account shall be
paid over to him in accordance with Section 6.05. During such time as a
Participant's Contributions shall be suspended, the Company's Contributions
relating to such Participant's Contributions shall likewise be suspended. No
Participant shall be permitted to make up any suspended contributions, and no
additional suspension shall be permitted until after the expiration of at least
twelve (12) months following the end of the prior suspension period.
4.11 Non-forfeitability, Reversion and Diversion of Company
Contributions: A Participant's Account value is, at all times, one hundred
percent (100%) non-forfeitable. Company contributions and the Plan and Trust
shall be for the exclusive benefit of Participants and beneficiaries; and except
as provided in this Section 4.11, the Company shall have no right, title or
interest in or to the contributions made under the Plan, no part of the Trust
Fund shall revert to the Company, and no part of the Trust Fund, except any part
required to pay taxes and expenses, shall be diverted to purposes other than for
the exclusive benefit of Participants and their beneficiaries. However, all
Company contributions are made subject to the deductibility of contributions to
the Plan and to the qualification of the Plan under the Code. Amounts
contributed by the Company under the following circumstances will be returned to
the Company within one year of the indicated date:
(a) Mistake of fact - date of payment;
(b) Before denial of qualification - date of denial of
qualification;
(c) Before disallowance of deduction - date of disallowance of
deduction.
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In the case of amounts returnable under (a) or (c) above, earnings
attributable to the excess contribution shall not be returned to the Company,
but losses attributable thereto shall reduce the amount to be returned. In the
case of amounts returnable under (b) above, earnings, gains and losses for the
period of disqualification shall be reflected in the amounts returned to the
Company.
4.12 Defined Contribution Plan: A Defined Contribution Plan is hereby
defined as a retirement plan which provides for an individual account for each
Participant and for benefits based solely on the amount contributed to the
Participant's account, and any income expenses, gains and losses, and any
forfeitures of accounts of other Participants which the Committee may allocate
to such Participant's Account. The Committee shall treat all defined
contribution plans (whether or not terminated) maintained by the Employer as a
single plan.
4.13 Actual Contribution Percentage Test:
(a) Maximum Annual Allocation: For each Plan Year, the annual
allocation derived from Participant contributions and Company matching
contributions to a Participant's Account shall satisfy one of the
following tests:
(1) The actual contribution percentage for the Highly
Compensated Participants shall not be more than the actual
contribution percentage for the Nonhighly Compensated Participants
multiplied by 1.25; or
(2) The excess of the actual contribution percentage for the
Highly Compensated Participants over the actual contribution for
the Nonhighly Compensated Participants shall not be more than 2
percentage points. Additionally, the actual contribution
percentage for the Highly Compensated Participants shall not
exceed the actual contribution percentage for the Nonhighly
Compensated Participants multiplied by 2.
(b) Actual Contribution Percentage: For purposes of this Section
4.13, actual contribution percentage means with respect to the Highly
Compensated Participants and the Nonhighly Compensated Participants for
a Plan Year, the average of the ratios, calculated separately for each
Participant in such group, of the amount of Company Contributions and
Participant Contributions allocated respectively to each Participant
Account for such Plan Year, to such Participant's Compensation for such
Plan Year. For purposes of this Section, a Highly Compensated
Participant and a Nonhighly Compensated Participant shall include any
Employee eligible to participate in the Plan whether or not such
Employee actually participates.
Further, for purposes of determining the actual contribution
percentage of Highly Compensated Participants who are five percent (5%)
owners or top ten (10) highly compensated Employees, the Participant
Contributions, Company Contributions, and Compensation of such
Participants shall include the Participant's Contributions, Company
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Contributions, and Compensation of all the Participant's family members as
defined in section 414(q)(6)(B) of the Code. Family members, with respect to
highly compensated Employees who are five percent (5%) owners or top ten (10)
highly compensated Employees, shall be treated as separate Employees in
determining the actual contribution percentage for such Highly Compensated
Participants. For Plan Years beginning on or after July 1, 1997, the family
aggregation rules of section 414(q)(6) of the Code do not apply.
(c) Adjustment to Actual Contribution Percentage: In the event the
initial calculations made pursuant to this Section do not satisfy one
of the tests set forth in this Section, then the Trustee, shall on or
before the fifteenth (15) day of the third (3rd) month following the
end of the Plan Year, but in no event, later than the close of the
following Plan Year, return to each affected Highly Compensated
Participant, his portion of the excess aggregate contributions (and any
income allocable thereto) which shall be distributed to him until one
of the tests set forth in this Section is satisfied in accordance with
section 401 (m)(6)(c) of the Code. For purposes of any refund required
pursuant to this Section, Participant contributions and any Company
contributions shall be refunded on a pro rata basis.
Effective July 1, 1997, Participant Contributions and Company
Contributions included in the "highly compensated contribution
percentage" for a Participant whose contribution percentage is greater
than the permitted maximum shall automatically be revoked to the extent
necessary to comply with such contribution percentage test and the
amount of such contribution, to the extent revoked, shall constitute an
"excess aggregate contribution" to be distributed to such Participant
(with earnings thereon), no later than the last day of the Plan Year
following the Plan Year for which such contribution was made. Excess
aggregate contributions are allocated to the Highly Compensated
Participants with the largest amounts of Participant Contributions and
Company Contributions taken into account in calculating the
contribution percentage test for the Plan Year in which the excess
arose, beginning with the Highly Compensated Participant with the
largest amount of such Participant Contributions and Company
Contributions and continuing in descending order until all excess
aggregate contributions have been allocated. In the event there is a
loss allocable to an excess aggregate contribution, any distribution to
a Participant as required by this Section shall be no greater than the
lesser of (1) the value of the Participant's Account or (2) the
Participant's excess aggregate contribution for the Plan Year.
(d) Administrative Adjustments to Contribution Levels: If at any
time during a Plan Year the Committee in its sole discretion determines
that both of the tests set forth in this Section may not be met for
such Plan Year, then the Committee shall have the unilateral right
during the Plan Year to require prospective reductions for the balance
of such Plan Year, or part thereof, of the percentage of contributions
of Highly Compensated Participants. Such reductions shall be made to
the extent necessary to insure that one of the tests set forth in this
section shall be met for the Plan Year and shall be based on estimates
made from information made available to the Committee at any time
during the Plan Year. Prospective
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reductions shall be calculated in accordance with such
non-discriminatory procedures as the Committee shall select.
(e) Definitions: For purposes of this Section the following terms shall
have the following meanings:
(1) Highly Compensated Participant: Effective for the Plan Years
beginning on or after July 1, 1997, the term Highly Compensated
Participant shall mean any Participant who is a Highly Compensated
Employee as further defined herein.
A Highly Compensated Employee means any Employee who:
(A) was a 5 percent (5%) owner (as defined in section
416(i)(1) of the Code) of the Employer at any time during the
current or the preceding Plan Year; or
(B) for the preceding Plan Year (i) had compensation from
the Employer in excess of $80,000 (as adjusted by the Secretary
pursuant to section 415(d) of the Code, except that the base
period shall be the calendar quarter ending September 30, 1996),
and (ii) if the Employer elects the application of this clause for
such preceding Plan Year, was in the top-paid group of Employees
for such preceding Plan Year.
For these purposes, an Employee is in the top-paid group of Employees
for any Plan Year if such Employee is in the group consisting of the top twenty
percent (20%) of the Employees when ranked on the basis of compensation paid
during such Plan Year. The determination of who is a Highly Compensated
Employee, including the determinations of the number and identity of Employees
in the top-paid group will be made in accordance with section 414(q) of the Code
and the regulations thereunder.
For purposes of this Section, the term Compensation means compensation
as defined in Section 4.07(c).
In determining whether an Employee is a Highly Compensated Employee in
1997, this Section 4.13(e)(1) is treated as having been in effect in 1996.
Effective for Plan Years beginning on or after July 1, 1997, the family
aggregation rules required by section 414(q)(6) of the Code have been deleted
from the Plan. This section is subject to the plan amendment rules of section
1.401(a)4-5(a) of the Treasury Regulations.
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(2) Nonhighly Compensated Participant: The term Nonhighly
Compensated Participant shall mean any Participant or former
Participant who is not a Highly Compensated Participant.
(3) Former Participant: The term Former Participant means a
person who has been a Participant, but who ceases to be a Participant
for any reason. For purposes of this Section, a Former Participant
shall be treated as a Highly Compensated Participant if such Former
Participant was a Highly Compensated Participant when he separated from
service of the Employer or was a Highly Compensated Participant at the
time of attaining age 55.
ARTICLE V
ALLOCATION AND VALUATION
5.01 Establishment of Participants' Accounts:
The Committee shall establish and maintain, on behalf of each
Participant and beneficiary, an Account which shall be divided into segregated
subaccounts as the Committee shall deem appropriate or helpful. Each Account
shall be credited with contributions allocated to such Account and generally
shall be credited with income on investments derived from the assets of such
Accounts. Notwithstanding anything herein to the contrary, while contributions
may be allocated to a Participant's Account as of a particular date (as
specified in the Plan), such contributions shall actually be added to a
Participant's Account and shall be credited with investment experience only from
the date such contributions are received and credited to the Participant's
Account by the Trustee. Each Account of a Participant or beneficiary shall be
maintained until the value thereof has been distributed to or on behalf of such
Participant or beneficiary.
5.02 Allocation and Crediting of Participant Contributions:
As of each Valuation Date coinciding with or immediately following the
date on which Participant Contributions are received on behalf of a Participant,
such contributions shall be allocated and credited directly to the appropriate
Account or subaccount of such Participant.
For the purposes of this Plan (unless otherwise specifically defined),
the term "Valuation Date" shall mean each business day on which the Trustee (or
if more than one Trustee, the institutional Trustee) operates and is open for
business; provided, the value of an Account or the Trust Fund on a day other
than a business day shall be the value determined for the immediately preceding
business day.
5.03 Allocation and Crediting of Company Contributions: The Trustee, as
of the last day of each calendar quarter for which the Company shall make a
contribution, shall allocate to each Account an amount equal to one hundred
fifty percent (150%) of the dollar amount of the
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Participant Contributions of each such Participant during each such calendar
quarter. Should a Participant withdraw from the Plan within a calendar quarter,
then the Company shall not contribute any amount based on the Participant's
Contributions within such calendar quarter in which he withdraws and no part of
the Company's Contributions for a quarter shall be allocated to any Participant
who withdraws in such calendar quarter.
5.04 Allocation and Crediting of Investment Experience: As of each
Valuation Date, the Trustee shall determine the fair market value of the Trust
Fund which shall be the sum of the fair market values of the investment funds
established from time to time pursuant to Article VII ("Investment Funds"). The
Committee shall determine the amount of the Accounts as follows:
(a) Determination of Investment Experience: As of each
Valuation Date, the investment earnings (or losses) of each Investment
Fund shall be the amount by which the sum determined in (1) exceeds (or
is less than) the sum determined in (2), where (1) and (2) are as
follows:
(1) The sum of (A) the fair market value of such
Investment Fund as of such Valuation Date, plus (B) the amount
of distributions and withdrawals and any transfers to other
Investment Funds made since the immediately preceding
Valuation Date from amounts invested in the Investment Fund;
and
(2) The sum of (A) the fair market value of the
Investment Fund as of the immediately preceding Valuation
Date, plus (B) contributions deposited in and amounts
transferred to such Investment Fund since the immediately
preceding Valuation Date.
(b) Utilization of Investment Experience: To the extent
directed by the Committee, investment earnings initially may be used to
replace abandoned Accounts as provided in Section 10.04 or to pay Plan
expenses. As of each Valuation Date and prior to the allocations
described in Section 5.02 and Section 5.03, each Participant's Account
shall be allocated and credited with a portion of such remaining
earnings or debited with a portion of such losses of each Investment
Fund, as determined in accordance with subsection (a) hereof, in the
proportion that (1)(A) the amount credited to such Account that was
invested in such Investment Fund as of the immediately preceding
Valuation Date, minus (B) any distributions or withdrawals or transfers
to other Investment Funds which were made from such Account since such
preceding Valuation Date and on or before such current Valuation Date,
plus (C) any amounts transferred to such Investment Fund since the
immediately preceding Valuation Date bears to (2)(A) the total amount
invested in such Investment Fund by all Participants as of the
immediately preceding Valuation Date, minus (B) any distributions or
withdrawals or transfers to other Investment Funds which were made
since such preceding Valuation Date and on or before such current
Valuation Date, plus (C) any amounts transferred to such Investment
Fund since the immediately preceding Valuation Date.
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5.05 Valuation of the Trust Fund: As of each Valuation Date, the
Trustee shall determine the fair market value of each of the Investment Funds.
All costs and expenses incurred in connection with Plan investments and all
costs and expenses incurred in connection with the general administration of the
Plan and the Trust shall be allocated between the Investment Funds in the
proportion in which the amount invested in each Investment Fund bears to the
amount invested in all Investment Funds as of the appropriate Valuation Date;
provided, all costs and expenses directly identifiable to one Investment Fund
shall be allocated to that Investment Fund.
5.06 Notice to Participants of Account Balances: At least once for
each Plan Year, the Committee shall cause a written statement of a Participant's
Account balance to be distributed to the Participant.
5.07 Good Faith Valuation Binding: In determining the value of the
Trust Fund and the Accounts, the Trustee and the Committee shall exercise their
best judgment, and all such determinations of value (in the absence of bad
faith) shall be binding upon all Participants and Beneficiaries.
5.08 Errors and Omissions in Accounts: If an error or omission is
discovered in the Account of a Participant or Beneficiary, the Committee shall
cause appropriate, equitable adjustments to be made as of the Valuation Date as
soon as practicable following the discovery of such error or omission.
ARTICLE VI
VESTING AND DISTRIBUTION OF BENEFITS
6.01 General Provisions: Except as provided in Article IX hereof,
relating to the termination of this Trust, a Participant's Account in the Trust
Fund shall be deemed to vest immediately and shall be distributed as provided
herein. A Participant shall not forfeit any portion of his Account for any
reason or cause except as provided under Section 10.04.
6.02 Retirement: Any Participant who, while actively employed by the
Company, shall attain the age of 65 after the Effective Date of the Plan, shall
become eligible to retire on his 65th birthday, hereinafter referred to as
"Normal Retirement Age." However, such Participant may postpone his retirement
date, provided that any postponement beyond his 70th birthday shall require the
consent of the Company. In the event of such postponement, such Participant
shall continue to participate in the Plan in accordance with all the terms and
conditions specified herein. Upon a Participant's actual retirement date, such
Participant's Account shall become distributable, and his participation in the
Plan shall cease. The Committee in accordance with the provisions of Section
6.05 hereof shall direct the Trustee to distribute to such Participant the value
of his Account as determined under the provisions of Section 6.03 hereof.
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6.03 Valuation of Participant's Account: In the event of retirement,
termination of employment, or withdrawal or distribution from the Plan, the
value of the Account of a Participant shall be the amount credited to his
Account, determined as of the Valuation Date coincident with or immediately
preceding the date of distribution.
6.04 Special Distributions of Participant's Account During Employment:
(a) Financial Hardship: A Participant may withdraw all or such
portion of the value of his Account as may be required to satisfy
immediate and heavy financial needs of the Participant. A distribution
based upon financial hardship cannot exceed the amount required to meet
the immediate financial need created by the hardship and not reasonably
available from other resources of the Participant. As used herein, the
term "Financial Hardship" shall mean: (1) the inability of the
Participant to meet expenses incurred or assumed as the result of an
accident or illness to, or the death of a member of, his family; (2)
the need for funds for the purchase of a home by a Participant or
additions to or major alterations to a home already owned by him; or
(3) the need by a Participant for funds for college or graduate school
tuition fees or expenses for a son or daughter. A distribution as a
result of a Financial Hardship shall be made only upon the written
request of the Participant, properly documenting the existence of the
hardship and the amount required to be distributed to meet the
immediate need and not reasonably available from other resources of the
Participant. The Committee shall direct the Trustee to make the
distribution to the Participant in a lump-sum payment in cash, unless
in the written request for the distribution, the Participant requests
that it be in a form otherwise described in Section 6.05(c).
(b) Disability: If a Participant suffers a Disability, he may
upon his written request or that of his legal guardian or
representative receive a distribution of all or part of the value of
any or all of his Account. A Disability is a medically determinable
physical or mental impairment that, as determined by the Committee, is
of such permanence and degree that the Participant is, and for the
indefinite future will be, unable to perform substantial gainful
activity commensurate with his professional or other training,
education, and comparable to his then or prior services for the
Company. The Committee shall direct the Trustee to make the
distribution to the Participant in a lump-sum payment in cash, unless
in the written request for the distribution, the Participant, or his
legal guardian or representative, requests that it be in a form
otherwise described in Section 6.05.
(c) Attainment of Age 59 1/2: At any time after a Participant
attains the age of 59 1/2, he may upon his written request receive a
distribution of all or part of the value of any or all of his Account.
The Committee shall direct the Trustee to make the distribution to the
Participant in a lump sum in cash, unless in the Participant's written
request for the distribution, he requests that it be in a form
otherwise described in Section 6.05.
(d) Valuation of Account: The Distributions from a
Participant's Account shall be valued in accordance with the provisions
of Section 6.03.
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(e) Suspension of Contributions: In the event of a withdrawal
under this Section 6.04 which is less than one fourth (1/4) of the
value of the Participant's Account, then contributions by and an behalf
of a Participant shall be suspended for six (6) months. In the event of
a total withdrawal, the Participant shall be suspended from
participation in the Plan for twenty-four (24) months.
6.05 Manner and Media of Payment of Benefits: Upon a Participant's
retirement, death or his voluntary termination of employment, a Participant's
participation in the Plan shall cease effective as of his payroll termination
date. The Participant or Participant's beneficiary may file with the Committee a
written notice specifying one of the three (3) following methods of payment to
be used in distribution of such Participant's Account. The Committee shall then
direct the Trustee to distribute to such Participant or his beneficiary, as may
be appropriate, the value of his Account, pursuant to the method of payment
specified by the Participant. Provided, however, in the event there are
conflicting claims to a Participant's Account or in the event the Committee, for
any reason, shall be in doubt as to its right to direct payment for any amount
to any Participant, beneficiary, or beneficiaries, the Committee may direct the
Trustee to hold the Participant's Account, without liability for interest
thereon, other than adjustments to the value of such Account, valued in
accordance with the provisions of Section 6.03, until the rights thereto shall
have been judicially determined, or the Committee may direct the Trustee to pay
such Account value into a court of competent jurisdiction, such Account value to
be distributed by such court after a judicial determination of the rights
thereto. The three (3) alternative methods which may be used in payment of a
Participant's Account are:
(a) Lump-sum payment in cash;
(b) Payment in monthly installments over any designated period
of years, not to exceed ten (10) years, or, if shorter, the life
expectancy of the Participant, or the joint life expectancy of the
Participant and his designated beneficiary, with any unpaid balance at
the date of the Participant's death to be payable to the surviving
beneficiary designated by such Participant. The Committee shall direct
the Trustee, after conferring with the Participant, to
(1) Segregate the aggregate amount of such
Participant's Account into a special account, which special
account will receive full credit for all income earned by the
special account after it is segregated; or
(2) At the beginning of each quarter during the
installment period, segregate the amount of the Participant's
Account needed to make such installment payments during that
quarter. The Participant's Account in the Plan shall be
reduced by the payments to be made in such quarter. The
balance of the Participant's Account shall remain as a part of
the Trust Fund until the next quarterly withdrawal is made to
meet the subsequent installment payments; or
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(c) A combination lump-sum payment in cash and securities of
the Company. Company securities are defined as and include those
securities which qualify as "employer securities" under applicable
Internal Revenue Service regulations and rulings. The maximum number of
Company securities to be received by the Participant will be determined
as follows:
(1) Divide the total value of the corpus of the Plan
into the total value of each Company security owned by the
Plan. The date of valuation, herein, shall be the same date
used in determining the value of the Participant's Account
under Section 6.03;
(2) Each percentage ascertained in paragraph (1)
above is multiplied times the total value of the Participant's
Account, as ascertained under Section 6.03, resulting in the
maximum dollar value for each category of the Company
securities to which the Participant would be entitled;
(3) The dollar value for each security as ascertained
in paragraph (2) above is divided by the price of such Company
security as valued under Section 6.03, resulting in the number
of each Company security to be received;
(4) If the Participant desires a lesser number of
securities than provided for above, then a lesser number will
be distributed and the balance of the Participant's Account
will be paid in cash.
6.06 Other Termination of Employment: Upon termination of a
Participant's employment by the Company for reasons other than those set out in
Section 6.05, a Participant shall have the right to direct the Trustee to
distribute to the Participant the value of his Account (as determined in
accordance with Section 6.03 hereof) in a lump-sum payment in cash.
6.07 Distributions Under Domestic Relations Orders: Nothing contained
in this Plan shall prevent the Trustee, in accordance with the direction of the
Committee, from complying with the provisions of a qualified domestic relations
order. A qualified domestic relations order means any judgment, decree, or order
(including approval of a property settlement agreement) that (a) relates to the
provision of child support, alimony payments, or marital property rights to a
spouse, former spouse, child or other dependent of a Participant, (b) is made
pursuant to any state's domestic relations law, and (c) creates or recognizes
the existence of an alternate payee's right to, or assigns to an alternate payee
the right to receive all or a portion of the benefits payable with respect to a
Participant under the Plan. Such an order must clearly specify the name and
mailing address of the Participant and alternate payee(s). An alternate payee is
defined as a spouse, former spouse, child, or other dependent whom the domestic
relations order recognizes as having a right to benefits. The amount or
percentage of the Participant's benefits to be paid or the manner by which such
amount is to be determined must also be specified. A qualified order may not
require the Plan to provide any type or form of benefit or option not otherwise
provided under the Plan nor require a payment to an
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<PAGE> 27
alternate payee which is required to be paid to another alternate payee under
another qualified domestic relations order. It also may not require the Plan to
provide increased benefits. This Plan specifically permits distribution to an
alternate payee under a qualified domestic relations order at any time,
irrespective of whether the Participant has attained his earliest retirement age
(as defined under section 414(p) of the Code) under the Plan. A distribution to
an alternate payee prior to the Participant's attainment of earliest retirement
age is available only if (1) the order specifies distribution at that time or
permits an agreement between the Plan and the alternate payee to authorize an
earlier distribution; and (2) if the amount to which the alternate payee is
entitled under the Plan exceeds $5,000 (effective July 1, 1998), and the order
so requires, the alternate payee consents to any distribution occurring prior to
the Participant's attainment of earliest retirement age. Nothing in this section
6.07 gives a Participant a right to receive a distribution at a time not
otherwise permitted under the Plan.
The Committee shall establish reasonable procedures to determine the
qualified status of a domestic relations order. Upon receiving a domestic
relations order, the Committee promptly shall notify the Participant and any
alternate payee named in the order, in writing, of the receipt of the order and
the Plan's procedures for determining the qualified status of the order. Within
a reasonable period of time after receiving the domestic relations order, the
Committee shall determine the qualified status of the order and shall notify the
Participant and each alternate payee, in writing, of its determination. The
Committee shall provide notice under this paragraph by mailing to the
individual's address specified in the domestic relations order, or in a manner
consistent with Department of Labor regulations. The Committee may treat as
qualified any domestic relations order entered prior to January 1, 1985,
irrespective of whether it satisfied all the requirements described in section
414(p) of the Code.
If any portion of a Participant's Account is payable during the period
the Committee is making its determination of the qualified status of the
domestic relations order, the Committee shall direct the Trustee to segregate
the amounts payable in a separate account and to invest the segregated account
solely in fixed income investments. If the Committee determines the order is a
qualified domestic relations order within eighteen (18) months of receiving the
order, the Committee shall direct the Trustee to distribute the segregated
account in accordance with the order. If the Committee does not make its
determination of the qualified status of the order within eighteen (18) months
after receiving the order, the Committee shall direct the Trustee to distribute
the segregated account in the manner the Plan would distribute if the order did
not exist and shall apply the order prospectively if the Committee later
determines the order is a qualified domestic relations order.
To the extent it is not inconsistent with the provisions of the
qualified domestic relations order, the Committee may direct the Trustee to
invest any partitioned amount in a segregated subaccount or separate account and
to invest the account in federally insured, interest-bearing savings account(s)
or time deposit(s) (or a combination of both), or in other fixed income
investments. A segregated subaccount shall remain a part of the Trust, but it
alone shall share in any income it earns, and it alone shall bear any expense or
loss it incurs.
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The Trustee shall make any payments or distributions required under
this Section 6.07 by separate benefit checks or other separate distribution to
the alternate payee(s).
6.08 Date of Payment: The payments due to a Participant or beneficiary
under Article VI, shall be paid as soon as administratively practicable
following the effective date of the written notice, request or payroll
termination date, but in no event will be made later than forty-five (45) days
following the end of the calendar quarter next succeeding said request or
termination. Provided, however, in the event the Committee has received
conflicting claims to an Account, or if the Committee, for any reason, shall be
in doubt as to its right to direct payment of any amount to any Participant,
beneficiary or beneficiaries, the forty-five (45) day time limit for payment of
the Account shall not be applicable.
Notwithstanding the foregoing or any other provision in the Plan to the
contrary, if the present value of the Participant's accrued benefit exceeds
$5,000 (effective July 1, 1998), no distribution shall be made to the
Participant prior to his attaining Normal Retirement Age unless he consents to
such distribution. Such consent must be obtained in writing within the ninety
(90) day period ending on the annuity starting date. The annuity starting date
is the first day of the first period for which an amount is paid hereunder in
any form. The Committee shall notify the Participant of the right to defer any
distribution until he attains Normal Retirement Age. Such notification shall,
include a general description of the material features, and an explanation of
the relative values of, the optional forms of benefit available under the Plan
in a manner that would satisfy the notice requirements of section 417(a)(3) of
the Code, and shall be provided no less than thirty (30) days and no more than
ninety (90) days prior to the annuity starting date. Notwithstanding the
foregoing, the consent of the Participant shall not be required to the extent
that a distribution is required to satisfy section 415 of the Code. In addition,
upon termination of this Plan if the Plan does not then offer an annuity option,
the Participant's Account may, without the consent of the Participant, be
distributed to the Participant or transferred to another defined contribution
plan within the same controlled group, as defined in section 414(b) or (c) of
the Code.
Furthermore, if a distribution is one to which sections 401(a)(11)
and 417 of the Code do not apply, such distribution may commence less than
thirty (30) days after the notice required under section 1.411(a)-11(c) of
the Treasury Regulations is given, provided that: (a) the Committee clearly
informs the Participant that he has a right to a period of at least thirty (30)
days after receiving the notice to consider the decision of whether or not to
elect a distribution (and, if applicable, a particular distribution option), and
(b) the Participant, after receiving the notice, affirmatively elects a
distribution.
6.09 Commencement of Distributions: Unless otherwise elected in writing
by the Participant, payment of benefits other than death benefits hereunder must
commence not later than sixty (60) days after the end of the Plan Year
coinciding with or immediately following the later of the following events:
(a) The Participant's attainment of age 65;
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(b) The tenth anniversary of the year in which the Participant
commenced participation in the Plan; or
(c) The date the Participant terminates service with the
Employer.
Notwithstanding the foregoing, effective July 1, 1997, payment of
benefits must commence no later than the Participant's "required beginning
date," which is the first day of April of the calendar year following the later
of (1) the calendar year in which a Participant attains age 70 1/2 or (2) the
calendar year in which the Participant retires. The required beginning date for
a five percent (5%) owner (as described in section 416(i) of the Code) is the
first day of April of the calendar year following the calendar year in which the
Participant attains age 70 1/2.
Notwithstanding any provision herein to the contrary, any Participant
who attains age 70 1/2 in a calendar year after 1995 and prior to 1999, may
irrevocably elect, in the manner established by the Committee, by the first day
of April of the calendar year following the year in which the Participant
attains age 70 1/2 (or by December 31, 1997 in the case of a Participant who
attains age 70 1/2 in 1996) to defer distributions until the first day of April
of the calendar year following the calendar year in which the Participant
retires. If no such election is made, the Participant will begin receiving
distributions by the first day of April of the calendar year following the year
in which the Participant attains age 70 1/2 (or by December 31, 1997 in the case
of a Participant who attains age 70 1/2 in 1996). Furthermore, any Participant
who attains age 70 1/2 in a calendar year prior to 1996, may irrevocably elect,
in the manner established by the Committee, to stop distributions and recommence
distributions as of the first day of April of the calendar year following the
calendar year in which such Participant retires. In such event, there shall be
no new annuity starting date upon such recommencement. Finally, any Participant
who attains age 70 1/2 in a calendar year after 1998 shall have an affirmative
election to irrevocably commence distributions hereunder at any time thereafter,
in the manner established by the Committee, and in a method of payment set forth
in Section 6.05.
If a Participant's interest is to be distributed in other than a lump
sum, then the amount to be distributed each year must be at least an amount
equal to the quotient obtained by dividing the Participant's entire interest by
the life expectancy of the Participant or the joint life expectancy of the
Participant and his designated beneficiary. The minimum distribution shall be
computed by reference to the expected return multiples in Tables V and VI of
section 1.72-9 of the Treasury Regulations. For purposes of this computation, a
Participant's life expectancy, and that of his spouse, may not be recalculated.
Life expectancy or, if applicable, joint and last survivor expectancy, shall be
calculated using the attained age of the Participant and, if applicable, that of
his designated beneficiary as of the Participant's and, if applicable, the
designated beneficiary's birthday in the first calendar year for which a
distribution is required, reduced by one for each calendar year which has
elapsed since the date life expectancy was first calculated.
For calendar years beginning before January 1, 1989, if the
Participant's spouse is not the designated beneficiary, the method of
distribution selected must assure that at least fifty percent
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(50%) of the present value of the total amount available for distribution is
paid within the life expectancy of the Participant. For calendar years beginning
after December 31, 1988, the amount to be distributed each year, beginning with
distributions for the first calendar year for which a minimum distribution is
required, shall not be less than the quotient obtained by dividing the
Participant's benefit by the applicable life expectancy or, if the Participant's
spouse is not the designated beneficiary, by the lesser of the applicable life
expectancy or the applicable divisor determined from the table set forth in
Q&A-4 of section 1.401(a)(9)-2 of the Treasury Regulations; provided that
distributions after the death of the Participant shall be distributed using the
applicable life expectancy as the relevant divisor.
6.10 Required Distributions: If the distribution of a Participant's
interest has begun and the Participant dies before his entire interest has been
distributed to him, the remaining portion of such interest shall be distributed
at least as rapidly as under the method of distribution being used as of his
date of death. If a Participant dies before he has begun to receive any
distributions of his interest under the Plan, his death benefit shall be
distributed to his beneficiary no later than December 31 of the calendar year
containing the fifth anniversary of his death. The 5-year distribution
requirement shall not apply, however, to any portion of the deceased
Participant's interest that is payable to or for the benefit of a designated
beneficiary. In such event, such portion may be distributed over a period not
extending beyond the life expectancy of such designated beneficiary provided
such distribution begins not later than December 31 of the calendar year
immediately following the calendar year of the Participant's death. In the event
the Participant's surviving spouse is his designated beneficiary, the
requirement that distributions commence within one year of a Participant's death
shall not apply. Rather, such distribution will not be required to begin earlier
than the later of: (a) December 31 of the calendar year immediately following
the calendar year of the Participant's death and (b) December 31 of the calendar
year in which the deceased Participant would have attained age 70 1/2. If the
surviving spouse dies before the distributions to such spouse begin, then the
5-year distribution requirement shall apply as if the spouse were the
Participant. If the Participant has not elected a method of distribution prior
to his death, then the designated beneficiary must elect the method of
distribution no later than the earlier of (a) December 31 of the calendar year
in which distributions would be required to begin under the preceding provisions
of this paragraph, or (b) December 31 of the calendar year which contains the
fifth anniversary of the Participant's date of death. If the Participant has no
designated beneficiary, or if the designated beneficiary does not elect a method
of distribution, distribution of the Participant's entire interest must be
completed by December 31 of the calendar year containing the fifth anniversary
of the Participant's death. Distribution of a Participant's benefits is
considered to have begun, for purposes of this paragraph, on the Participant's
"required beginning date"; provided that if the Participant's designated
beneficiary is his surviving spouse, and such surviving spouse dies after the
Participant but before payments to such surviving spouse have begun, then
distribution of benefits is considered to have begun on the date distribution to
the surviving spouse is required to begin pursuant to the provisions of this
paragraph. For purposes of applying these rules in the event of the
Participant's death, the expected return multiples in Tables V and VI of section
1.72-9 of the Treasury Regulations shall be utilized. The life expectancy of a
surviving spouse may not be
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recalculated. Any amount paid to the child of the Participant will be treated as
if it had been paid to the surviving spouse if the amount becomes payable when
the child reaches the age of majority.
6.11 Beneficiary Designation: Any Participant may from time to time
designate, in writing, any person or persons, contingently or successively, to
whom the Trustee shall pay his Account value in the event of his death. A
Participant's beneficiary designation shall not be valid after December 31,
1984, unless the Participant's spouse consents to the beneficiary designation. A
Participant's beneficiary designation does not require spousal consent if the
Participant's spouse is the Participant's sole designated beneficiary. The
Committee shall prescribe the form for the written designation of beneficiary
and, upon the Participant's filing the form with the Committee, it effectively
shall revoke all designations filed prior to that date by the same Participant.
6.12 No Beneficiary Designation: If a Participant fails to name a
beneficiary in accordance with Section 6.11, or if the beneficiary named by a
Participant predeceases him or dies before complete distribution of the
Participant's Account value, then the Trustee shall pay the Participant's
Account value in one, or any combination, of the methods specified under Section
6.05 in the following order of priority to:
(a) The Participant's surviving spouse;
(b) The Participant's surviving children, including adopted
children, and surviving children of deceased children, per stirpes (by
right of representation);
(c) The Participant's surviving parents, in equal shares; or
(d) The legal representative of the estate of the last to die
of the Participant and his beneficiary.
6.13 Exercise of Voting Rights and Tender Rights: Notwithstanding
anything to the contrary in the Plan, the following provisions shall govern the
exercise of Voting Rights and Tender Rights with respect to shares of common
stock of the Company held in the Trust Fund:
(a) For purposes of this Section 6.13, the terms set forth
below shall have the following meanings:
"Allocable Shares" shall mean, with respect to a
Participant, the Participant's proportionate share of all
Company common stock held in the Trust Fund as of the
applicable Valuation Date.
"Tender Offer" shall mean any tender offer for, or
request or invitation for tenders of, shares of common stock
of the Company, whether the consideration proposed to be
exchanged for such shares is cash, the securities of any
person or any other form of property.
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"Tender Rights" shall mean any and all rights to
tender or exchange shares of common stock of the Company
pursuant to a Tender Offer.
"Voting Rights" shall mean any and all rights to vote
or consent with respect to shares of common stock of the
Company.
(b) The Trustee shall exercise Tender Rights with respect to a
Participant's Allocable Shares in accordance with timely written
instructions delivered by such Participant to the Trustee. Tender
Rights with respect to fractional Allocable Shares shall be exercised
on a combined basis in order to comply, to the extent possible, with
all timely written instructions received from Participants. If timely
written instructions are not received from a Participant, the Trustee
shall not exercise Tender Rights with respect to such Participant's
Allocable Shares.
(c) The Trustee shall exercise Voting Rights with respect to a
Participant's Allocable Shares in accordance with timely written
instructions delivered by such Participant to the Trustee. Voting
Rights with respect to fractional Allocable Shares shall be exercised
on a combined basis in order to comply, to the extent possible, with
all timely written instructions received from Participants. If timely
written instructions are not received from a Participant, the Trustee
shall exercise Voting Rights with respect to such Participant's
Allocable Shares in the same proportion as those shares of common stock
of the Company with respect to which timely written instructions were
received.
(d) The Trustee shall use its best efforts to ensure that
Participants are able to direct the exercise of Voting Rights and
Tender Rights on the basis of the same information, and in accordance
with substantially the same procedures, as are available to the holders
of shares of common stock of the Company. Without limiting the
generality of the foregoing, the Trustee shall take the following
actions:
(1) Give prior written notice to Participants of any
occasion upon which Voting Rights or Tender Rights may be
exercised;
(2) Transmit to Participants any written information
relating to the exercise of Voting Rights or Tender Rights
that is distributed by the management of the Company or any
other person;
(3) Request written instructions from Participants as
to the manner in which Voting Rights or Tender Rights should
be exercised; and
(4) Exercise Voting Rights or Tender Rights in
accordance with the written instructions delivered by
Participants to the Trustee.
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(e) The Trustee shall not disclose to the Company, and shall
maintain strict confidentiality with respect to, any information
regarding the exercise of Voting Rights or Tender Rights, including
without limitation information regarding the identity of any
Participant who exercises or fails to exercise such rights.
(f) Any cash proceeds received upon the consummation of a
Tender Offer shall be invested in such assets, other than common stock
of the Company, as the Committee shall, by written instructions to the
Trustee, select. Any other property received upon the consummation of a
Tender Offer shall be promptly liquidated by the Trustee and shall be
invested in such assets, other than common stock of the Company, as the
Committee shall, by written instructions to the Trustee, select.
6.14 Direct Rollover of Eligible Rollover Distributions: An individual
who is entitled to a benefit hereunder, the distribution of which would qualify
as an eligible rollover distribution (as defined in section 401(a)(31)(C) of
the Code) may, in lieu of receiving any payment or payments from the Plan,
direct the Trustee to transfer all or any portion of such payment or payments
directly to the trustee of one or more eligible retirement plans (as defined in
section 401(a)(31)(D) of the Code). Such election must be made on a form
provided by the Committee for that purpose and received by the Committee no
later than the date established by the Committee preceding the date on which the
distribution is to occur. Any election made pursuant to this Section 6.14 may be
revoked at any time prior to the date established by the Committee preceding the
date on which the distribution is to occur. If an individual who is so entitled
has not elected a direct rollover within the time and in the manner set forth
above, such distributee shall be deemed to have affirmatively waived a direct
rollover. A distributee who wishes to elect a direct rollover shall provide to
the Committee, within the time and in the manner prescribed by the Committee,
such information as the Committee shall reasonably request regarding the
eligible retirement plan or plans to which the payment or payments are to be
transferred. The Committee shall be entitled to rely on the information so
provided, and shall not be required to independently verify such information.
The Committee shall be entitled to delay the transfer of any payment or payments
pursuant to this Section 6.14 until it has received all of the information which
it has requested in accordance with this Section 6.14.
ARTICLE VII
TRUST AND TRUSTEE
7.01 Establishment and Acceptance of Trust: The Trustee shall receive
any contributions paid to it in cash, securities and such other property as
shall be acceptable to the said Trustee. The Trust Fund shall be held, managed
and administered in trust pursuant to the terms of this Plan and the terms of
the agreement with the Trustee establishing the Trust (the "Trust Agreement").
The terms of the Trust Agreement are hereby incorporated by reference and made a
part of this Plan.
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7.02 Investment of the Trust Fund: The Trustee shall invest all or
substantially all of the assets of the Trust Fund in common stock or other
securities of the Company, provided, however, that the Committee may, by
written instructions to the Trustee, direct it to purchase any other securities,
which the Committee, in its discretion may select. The Trustee may also invest
and reinvest all or any part of the assets of the Trust in any common,
collective, or commingled trust fund that is maintained by the Trustee or by any
other bank or other institution and that is available to employee plans
qualified under section 401(a) of the Code or to individual retirement accounts
that are exempt from tax under section 408(e) of the Code, or any successor
provisions to sections 401, 408, or 584, and during the period of time that an
investment through any such medium shall exist, to the extent of participation
of the Plan, the declaration of trust of such common, collective or commingled
trust fund shall constitute a part of this Plan. When so authorized by the
Committee, the Trustee may make purchases from, or sales to, other trusts of
which the Trustee also serves as trustee notwithstanding the provisions of
Article 7425B-13 of the Civil Statutes of the State of Texas. No transaction
shall be permitted under this Section 7.02 that would constitute a prohibited
transaction under section 4975(c) of the Code or section 406 of ERISA or that
would cause the Plan not to be qualified under section 401(a) of the Code.
ARTICLE VIII
TOP HEAVY RULES
8.01 Minimum Employer Contribution: If this Plan is top heavy in any
Plan Year beginning after December 31, 1983, the Plan guarantees a minimum
contribution (subject to the provisions of this Article VIII) of three percent
(3%) of Compensation for each Non-Key Employee who is a Participant employed by
the Company on the Valuation Date (June 30) of the Plan Year without regard to
Hours of Service completed during the Plan Year. However, if the contribution
rate for the Key Employee with the highest contribution rate is less than three
percent (3%) of his Compensation, the minimum contribution for Non-Key Employees
shall equal the highest contribution rate received by a Key Employee.
The contribution rate is the sum of Company contributions (not
including Company contributions to Social Security) and forfeitures allocated to
the Participant's Account for the Plan Year divided by his Compensation for the
Plan Year. For purposes of determining the minimum contribution, for Plan Years
beginning after December 31, 1984, the Committee shall consider contributions
made pursuant to a salary reduction agreement or similar arrangement as Company
contributions. To determine the contribution rate, the Committee shall consider
all qualified top heavy defined contribution plans maintained by the Company as
a single plan.
8.02 Additional Contribution: If the contribution rate for the Plan
Year with respect to a Non-Key Employee described in Section 8.01 is less than
the minimum contribution, the Company will increase its contribution for such
Employee to the extent necessary so his contribution rate for the Plan Year will
equal the guaranteed minimum contribution.
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8.03 Determination of Top Heavy Status: The Plan is top heavy for a
Plan Year if the top heavy ratio as of the Valuation Date exceeds sixty percent
(60%). The top heavy ratio is a fraction, the numerator of which is the sum of
the present value of Account values (also known as accrued benefit for purposes
of section 416 of the Code) for all Key Employees as of the Valuation Date, the
contributions due as of the Valuation Date, and distributions made within the
five (5) Plan Year period ending on the Valuation Date, and the denominator of
which is a similar sum determined for all Employees. The Committee shall
calculate the top heavy ratio by disregarding the Account value of any Non-Key
Employee who was formerly a Key Employee. For Plan Years beginning after
December 31, 1984, the Committee shall calculate the top heavy ratio by
disregarding the Account values (including distributions, if any, of the
Account) of an individual who has not performed services for the Company during
the five (5) Plan Year period ending on the Valuation Date. The Committee shall
calculate the top heavy ratio, including the extent to which it must take into
account distributions, rollovers and transfers, in accordance with section 416
of the Code and the regulations thereunder. This Plan, if it is part of a
Required Aggregation Group, is top heavy only if the top heavy ratio for the
Required Aggregation Group exceeds sixty percent (60%), making it a top heavy
group.
8.04 Definitions: For the purposes of this Article VIII:
(a) "Key Employee" shall mean, as of any Valuation Date, any
Employee or former Employee (or beneficiary of such Employee) who, at
any time during the Plan Year (which includes the Valuation Date) or
during the preceding four Plan Years, is an officer (having annual
Compensation in excess of fifty percent (50%) of the limitation under
section 415(b)(1)(A) of the Code in effect for any such Plan Years) of
the Company, one of the Employees having annual Compensation in excess
of the limitation under section 415(c)(1)(A) of the Code in effect for
any such Plan Years and owning one of the ten largest interests in the
Company, a more than five percent (5%) owner of the Company, or a more
than one percent (1%) owner of the Company who has annual Compensation
of more than $150,000.00.
(b) "Non-Key Employee" is an Employee who does not meet the
definition of Key Employee.
(c) "Compensation" for the purposes of this Article VIII shall
mean the first $200,000.00 (or, beginning January 1, 1988, such larger
amount as the Commissioner of Internal Revenue may prescribe) of
Compensation, as defined in Section 4.07(c) hereof.
(d) "Valuation Date" for the purposes of this Article VIII for
any Plan Year is June 30 of each Plan Year.
(e) "Required Aggregation Group" means (1) each qualified plan
of the Company in which at least one Key Employee participates; and (2)
any other qualified plan of the
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Company which enables a plan described in (1) to meet the requirements
of section 401(a)(4) or 410 of the Code.
ARTICLE IX
AMENDMENT AND TERMINATION
9.01 Amendment: The Company shall have the right at any time, and from
time to time: (a) to amend this Plan in such manner as it may deem necessary or
advisable in order to qualify this Plan and the Trust created hereby under the
applicable provisions of the Code, and any such amendment by its terms may be
retroactive; and (b) to amend this Plan in any other manner. However, except as
otherwise provided in Section 4.11, no such amendment shall authorize or permit
any part of the Trust Fund (other than such part as is required to pay taxes and
administration expenses) to be used for or diverted to purposes other than for
the exclusive benefit of the Participants or their beneficiaries or estates, or
shall cause or permit any portion of the Trust Fund to revert to or become the
property of the Company, and no such amendment which affects the rights, duties
or responsibilities of the Trustee may be made without the Trustee's written
consent. Furthermore, no amendment shall decrease a Participant's Account value
or eliminate an optional form of distribution with respect to a Participant with
an Account value at the date of the amendment, except to the extent permitted
under section 412(c)(8) of the Code. Any such amendment shall become effective
upon delivery of a written instrument, executed by order of the Company's Board
of Directors, to the Trustee and the endorsement of the Trustee of its written
consent thereto.
9.02 Termination: The Company has established the Plan in the
expectation and with the confidence that it will continue in effect
indefinitely. However, due to the vicissitudes of general economic and business
conditions which may affect the Company's ability to so continue the Plan, it
must, and does hereby, reserve the right to terminate the Plan in whole or in
part at any time. Such termination shall be effected by delivery to the Trustee
and the Committee of written notice of such action by the Company.
Upon termination or partial termination of the Plan, or upon complete
discontinuance of Company contributions, the Accounts of the Participants shall
be non-forfeitable. In the event of the termination within the meaning of such
term as used in Title IV of ERISA of the Plan, the assets of the Plan shall be
allocated to Participants or Beneficiaries and distributed in accordance with
the provisions of section 403(d)(1) of ERISA and any regulations promulgated
thereunder.
Upon the happening of any event, the enactment of any law, and issuance
of any rule, regulation, direction, command, demand, or order of any court,
administrative, regulative or other agency, or of any group, or organization, or
any individual on behalf of same, which in any way or manner, or to any extent
whatsoever, impairs or prevents the free exercise of the uncontrolled discretion
of the Board of Directors of the Company in connection with terminating this
Plan and
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the Trust hereby created, then and in any such event, such Plan and Trust shall
thereupon, ipso facto, be terminated.
ARTICLE X
MISCELLANEOUS
10.01 Notices and Forms: All notices, applications, designations, forms
and other communications required or provided for hereunder shall be in writing
and shall be executed at the time, and in the manner and form prescribed by the
Committee or by the Trustee, as the case may be, and if directed to the Company
or to the Committee shall be mailed by first class mail to the payroll office of
the Company and shall be deemed given when received, and if directed to the
Trustee, shall be mailed by first class mail to the payroll office of the
Company and delivered by the Company to the Trustee and shall be deemed to have
been given when received by the Trustee.
10.02 Plan Not an Employment Contract: The adoption and maintenance of
the Plan shall not be deemed to constitute a contract between the Company and
any Employee or Participant or to be a consideration for or an inducement to or
condition of employment of any person. Nothing herein contained shall be
construed to give any Employee or Participant the right to be retained in the
employment of the Company or to interfere with the right of the Company to
terminate the employment of an Employee or Participant at any time.
10.03 Prohibition Against Alienation: Except as otherwise provided in
this Plan and subject to section 414(p) of the Code relating to qualified
domestic relations orders, no Participant or beneficiary shall have any right to
withdraw, assign (either at law or in equity), pledge, transfer, appropriate,
encumber, commute, alienate, or anticipate his interest in the Trust, or any
payments to be made hereunder, and no benefits, payments, rights, or interest of
such a person under the Plan shall be in any way subject to any legal or
equitable process to levy or execute upon, charge, garnish or attach the same
for payment of any claim against such person, nor shall any such person have any
right of any kind whatsoever with respect to the Trust, or any estate or
interest therein, or with respect to any other property or rights, other than
the right to receive such distributions as are made out of the Trust, as and
when the same are or shall become due and payable under the terms of this Plan.
Any attempt to transfer, pledge or levy upon or otherwise alienate an interest
of a Participant or beneficiary shall be invalid.
10.04 Unclaimed Account Procedure: The Plan does not require either the
Trustee or the Committee to search for, or ascertain the whereabouts of any
Participant or beneficiary. The Committee, by certified or registered mail
addressed to his last known address of record with the Committee or the Company,
shall notify any Participant, or beneficiary, that he is entitled to a
distribution under this Plan, and the notice shall quote the provisions of this
section. If the Participant, or beneficiary, fails to claim his distributive
share or make his whereabouts known in writing to the Committee within six (6)
months from the date of mailing of the notice, or before the termination or
discontinuance of this Plan, whichever should first occur, the Committee shall
treat
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the Participant's or beneficiary's unclaimed payable benefits as forfeited and
shall reallocate the unclaimed payable benefits in the same manner as the
Company contribution for the Plan Year in which the forfeiture occurs.
If a Participant or beneficiary who has incurred a forfeiture of his
Account value under the provisions of the first paragraph of this Section 10.04
makes a claim, at any time, for his forfeited benefits, the Committee shall
restore the Participant's or beneficiary's forfeited benefits to the same dollar
amount as the dollar amount of the benefits forfeited, unadjusted for any gains
or losses occurring subsequent to the date of the forfeiture. The Committee
shall make the restoration during the Plan Year in which the Participant or
beneficiary makes the claim first from the amount, if any, of Participant
forfeitures the Committee otherwise would allocate for the Plan Year, then from
the amount, if any, of the Trust Fund's net income or gain for the Plan Year and
then from the amount, or additional amount, the Company shall contribute to
enable the Committee to make the required restoration. The Committee shall
direct the Trustee to distribute the Participant's or beneficiary's restored
benefit to him not later than sixty (60) days after the close of the calendar
quarter in which the Committee restores the forfeited benefit. The forfeiture
provisions of this Section 10.04 shall apply solely to the Participant's or to
the beneficiary's benefit derived from Company contributions.
10.05 Conflicting Claims: In the event that there are conflicting
claims to a Participant's Account or that the Committee shall, for any reason,
be in doubt as to its right to direct payment of any amount to any Participant,
beneficiary or beneficiaries, then the Committee may direct the Trustee to
retain such Account or amount without liability for any interest thereon, other
than adjustments to the value of such Account, valued in accordance with the
provisions of Section 6.03, until the rights thereto shall have been judicially
determined, or may direct the Trustee to pay such Account or amount into a court
of competent jurisdiction, to be distributed by such court after determining the
rights thereto. If either such action is taken, neither the Committee, the
Trustee nor the Company shall be under any further liability with respect to
such Account or amount to anyone whatsoever. Also, if the Trustee shall be in
doubt as to its right to pay any amount to any Participant, beneficiary or
beneficiaries, then the Trustee may retain such amount, without liability for
any interest thereto, other than adjustments to the value of such Account,
valued in accordance with the provisions of Section 6.03, until the rights
thereto have been judicially determined, or the Trustee may pay such amount into
a court of competent jurisdiction, in either of which events neither the
Trustee, the Committee, nor the Company shall be under any further liability
with respect to such amount to anyone whatsoever.
10.06 Multiple Copies: This Plan may be executed in any number of
counterparts, each of which shall be deemed an original.
10.07 Gender and Number: Wherever any words are used herein in the
masculine gender, they shall be construed as though they were also used in the
feminine gender, in all cases where they would so apply, and wherever any words
are used herein in the singular form, they shall be construed as though they
were also in the plural form, in all cases where they would so apply.
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10.08 Construction of Plan: This Plan shall be construed according to
the laws of the State of Texas, except as superseded by federal law, and in
accordance with ERISA and the Code, as amended from time to time.
10.09 Special Rules Relating to Veterans Re-Employment Rights under
USERRA: Notwithstanding any provision of this Plan to the contrary, effective as
of December 12, 1994, contributions, benefits and service credit with respect to
qualified military service will be provided in accordance with section 414(u) of
the Code.
ARTICLE XI
ADOPTION OF THE PLAN BY AFFILIATED AND ASSOCIATED
COMPANIES AND RELATION TO OTHER PLANS
11.01 Method of Adoption: Any affiliated or associated entity of the
Company by resolution of its board of directors, may adopt the Plan hereby
created, provided that in so doing it adopts and accepts all of the provisions
of this Plan as it exists at the time of such adoption. Both the written consent
of the Company and a resolution of the affiliated or associated entity adopting
the Plan shall be delivered to the Trustee and the effective date of adoption
shall be upon delivery of said instruments to the Trustee. From and after the
effective date when such affiliated or associated entity shall have become a
party to this Plan, it shall be known as a "Participating Company" and it shall,
for the purposes of this Plan, be included within the meaning of the word
"Company," subject, however, to the following provisions:
(a) The right and authority to select the Trustee and
successor trustee and to appoint the Committee shall be vested in and
exercisable solely by the Company.
(b) Separate accounts shall be maintained by the Trustee for
Participants from a Participating Company and such accounts shall
receive and be funded from contributions of those Participants and from
contributions from the particular Participating Company employing such
Participants.
(c) Separate records shall be maintained for the Accounts of
Participants of a Participating Company, but such Accounts shall be
administered by the Trustee and the Committee on the same basis as
those of the Participants of the Company.
(d) A Participating Company shall have the right at any time
to discontinue its participation hereunder and to terminate, as to
itself, this Plan and the Trust created hereunder, by delivering to the
Trustee written notice of such termination, accompanied by a certified
resolution of the board of directors of such Participating Company
authorizing termination, and such termination shall become effective
when notice is received by the Trustee. Upon discontinuance of
contributions or termination of the Trust, as to itself, by a
Participating Company, the Company may, in its sole and absolute
discretion, direct the
-35-
<PAGE> 40
Trustee to segregate the interests of such Participating Company,
represented by the amounts credited to the Accounts of Participants who
are employees of such Participating Company, as such Accounts are
constituted at the time of termination by such Participating Company,
as determined and directed by the Committee. The Accounts of such
Participants shall become wholly non-forfeitable as of the date of such
segregation by the Trustee. The Committee shall direct the Trustee to
distribute to such Participants the total value of their respective
Accounts in cash or in kind, provided that in the event the Trustee is
directed to make a distribution in kind, the assets so distributed
shall be valued at the time of such distribution. The Committee's
determination of fair market value shall be conclusive on all persons.
(e) Whenever an employee transfers from one Participating
Company to another, he shall be permitted to continue in this Plan.
Upon transfer, his Account shall be considered an Account of the latter
Participating Company and all subsequent Employee and Company
contributions paid in through the new employer.
11.02 Receipt of Participants' Accounts from Other Plans: The Company
may, in its sole and absolute discretion, permit the Trustee of this Plan to
accept transfer of Participant's accounts from the Trustees of other similarly
qualified employee savings or investment plans. Such transfers will be received
in the form of cash or other assets representing the value of the Participants'
Accounts as valued by the predecessor plan on the transfer date of the assets.
The cash or other assets received will be added to the Trust Fund of the Plan,
and accounted for appropriately.
11.03 Receipt of Funds from Acquired Company's Plans: The Company may,
in its sole and absolute discretion, permit the Trustee of this Plan to accept
transfers of Participants' accounts from plans of companies heretofore or
hereafter acquired by the Company, or any of its subsidiaries, provided that the
plan from which the transfer is made is qualified under the applicable
provisions of the Code.
11.04 Merger or Consolidation: In the case of any merger or
consolidation with or transfer of assets or liabilities to any other plans, each
Participant and beneficiary in the Plan must be entitled to receive a benefit
immediately after the merger, consolidation or transfer if such plan were then
terminated, which benefit it is equal to or greater than the benefit it he would
have been entitled to receive immediately before the merger, consolidation or
transfer if the Plan had been terminated.
-36-
<PAGE> 41
ARTICLE XII
CLAIMS PROCEDURE
12.01 Claims Procedure:
(a) It shall not be necessary for any person to file a claim
to receive a benefit to which he is entitled hereunder. However, any
person who believes that he is entitled to a benefit under the Plan
shall have the right to file with the Committee a written notice of
claim for such benefit. The Committee shall either grant or deny such
claim within ninety (90) days after its receipt of such written notice
of claim (or within such other period as may be mutually agreed to by
the parties), unless special circumstances require an extension of time
of up to an additional ninety (90) days for processing the claim and
appropriate notice of such extension is given; provided, however, that
any delay on the part of the Committee in arriving at a decision shall
not adversely affect benefits payable under a granted claim. A decrease
in the value of a Participant's Account, due to fair market value
depreciation during the processing of a claim shall not be deemed to be
an adverse effect attributable to Committee delay.
(b) In the case of a denied claim, the Committee shall provide
written notice claimant setting forth:
(1) The specific reason for such denial;
(2) Specific reference to the pertinent Plan
provisions on which the denial is based;
(3) A description of any additional material or
information necessary for the claimant to perfect the claim
and an explanation of why such material or information is
necessary; and
(4) An explanation of the Plan's claim review
procedure set forth in this Section 12.01.
(A) Any person who makes a claim that is
denied under Section 12.01 shall have the right, at
any time within sixty (60) days after the claimant
receives written notice of such denial, to appeal the
denial of his claim to the Committee for a full and
fair review. In the event of such appeal, the
Committee shall afford the claimant or his duly
authorized representative the opportunity:
(i) to review documents pertinent
to the claim;
-37-
<PAGE> 42
(ii) to submit issues and comments
in writing; and
(iii) to discuss such documents and
issues with the Committee.
(B) The final decision of the Committee
shall be made not later than sixty (60) days after
its receipt from the claimant of a request for
review, unless special circumstances, such as the
need to hold a hearing, require an extension of time
for processing, in which case a decision shall be
made as soon as possible but not later than one
hundred twenty (120) days after receipt of a request
for review. Such decision shall be made in writing,
shall include specific reasons for the decision,
written in a manner calculated to be understood by
the claimant, shall include specific references to
pertinent Plan provisions on which the decision is
based, and to the extent permitted by law shall be
final and binding on the claimant.
IN WITNESS WHEREOF, the Company has caused this Plan to be executed by
its duly appointed officer and its corporate seal to be hereunto affixed as of
the date first above written.
ATTEST: TANDY BRANDS ACCESSORIES, INC.
/s/ DARREL A. RICE By: /s/ J.S.B. JENKINS
- ----------------------------------- --------------------------------
Secretary Name: J.S.B. Jenkins
--------------------------
Title: President and CEO
-------------------------
-38-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM TANDY BRANDS
ACCESSORIES, INC.'S MARCH 31, 1999, FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FORM 10-Q FILINGS. DOLLARS ARE IN THOUSANDS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> MAR-31-1999
<CASH> 418
<SECURITIES> 0
<RECEIVABLES> 33,343
<ALLOWANCES> 1,692
<INVENTORY> 50,862
<CURRENT-ASSETS> 85,346
<PP&E> 17,169
<DEPRECIATION> 6,477
<TOTAL-ASSETS> 115,228
<CURRENT-LIABILITIES> 8,456
<BONDS> 46,700
0
0
<COMMON> 5,739
<OTHER-SE> 54,050
<TOTAL-LIABILITY-AND-EQUITY> 115,228
<SALES> 136,650
<TOTAL-REVENUES> 136,650
<CGS> 86,016
<TOTAL-COSTS> 86,016
<OTHER-EXPENSES> 2,314
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,304
<INCOME-PRETAX> 12,737
<INCOME-TAX> 4,960
<INCOME-CONTINUING> 7,777
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,777
<EPS-PRIMARY> 1.36
<EPS-DILUTED> 1.34
</TABLE>
