<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For quarter ended September 29, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
------------ ------------
Commission file number 0-22716
BOLLINGER INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 75-2502577
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
222 W. AIRPORT FREEWAY, IRVING, TEXAS 75062
(Address of principal executive offices)
(Zip Code)
(972) 445-0386
(Registrant's telephone number, including area code)
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
----- -----
As of September 29, 1996, 4,000,210 shares of the registrant's common
stock, $0.01 par value per share, were outstanding.
1
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BOLLINGER INDUSTRIES, INC.
INDEX
<TABLE>
<CAPTION>
Page No.
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<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets -
September 29, 1996, and March 31, 1996 3
Consolidated Statements of Earnings -
Second Quarter and Year to Date September 29, 1996,
and September 30, 1995 4
Consolidated Statements of Cash Flows -
Six Month Periods Ended September 29, 1996, and
September 30, 1995
5
Notes to Consolidated Financial Statements 6 - 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8 - 9
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURES 12
INDEX TO EXHIBITS AND EXHIBITS 13
</TABLE>
2
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BOLLINGER INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
September 29, March 31,
1996 1996
------------- ------------
(unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash ................................................................... $ 397,569 $ 408,871
Accounts receivable
Trade, net of allowance for doubtful accounts ...................... 16,429,628 18,344,827
Other .............................................................. 370,949 229,735
Income Tax Refund ...................................................... 2,307,033 2,307,235
Inventories (Note C) ................................................... 28,351,274 30,112,934
Current assets of discontinued operations - net ........................ 634,518 1,601,954
Prepaid expenses ....................................................... 890,853 525,272
Deferred income taxes .................................................. 66,309 66,309
------------ ------------
Total current assets .................................... 49,448,133 53,597,137
PROPERTY PLANT AND EQUIPMENT .............................................. 1,790,072 2,015,282
Non current assets of discontinued operations ............................. 125,293 161,999
OTHER ASSETS
Goodwill and other intangibles - Net ................................... 1,773,962 1,233,482
Notes receivable and other assets ...................................... 1,418,313 1,373,003
------------ ------------
TOTAL ASSETS .............................................................. $ 54,555,773 $ 58,380,903
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt ..................................... $ 288,727 $ 78,026
Notes payable (Note D) ................................................ 19,428,707 22,605,549
Accounts payable - trade .............................................. 17,148,456 16,913,821
Federal income tax payable (Note E) ................................... -- 43,847
Other current liabilities ............................................. 1,873,855 1,674,046
Provision for restructuring of operations ............................. 2,738,603 3,960,000
------------ ------------
Total current liabilities ...................................... 41,478,348 45,275,289
LONG-TERM LIABILITIES
Long term debt, net of current portion ................................ 1,580,000 576,777
Deferred income taxes ................................................. 67,034 66,309
------------ ------------
Total long-term liabilities .................................... 1,647,034 643,086
------------ ------------
Total liabilities .............................................. 43,125,382 45,918,375
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock -- $.01 par value; 1,000,000 shares authorized;
none issued
Common stock -- $.01 par value; 8,000,000 shares authorized; issued and
outstanding 4,000,210 at September 29, 1996 and March 31,
1996 ............................................................. 40,001 40,001
Capital in excess of par .............................................. 15,323,059 15,323,059
Retained earnings (accumulated deficit) .............................. (3,932,669) (2,900,532)
------------ ------------
Total stockholders' equity ...................................... 11,430,391 12,462,528
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ............................ $ 54,555,773 $ 58,380,903
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
3
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BOLLINGER INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Thirteen Twenty-six
Week Period Three Months Week Period Six Month
Ended Ended Ended Period Ended
September 29, September 30, September 29, September 30,
1996 1995 1996 1995
------------ -------------- ------------ ------------
<S> <C> <C> <C> <C>
Net sales .......................................... $ 19,092,688 $ 21,488,910 $ 41,526,581 $ 34,250,508
Cost of goods sold ................................. 15,481,197 15,509,697 33,135,242 25,207,499
------------ ------------ ------------ ------------
Gross profit .................................. 3,611,491 5,979,213 8,391,339 9,043,009
Selling expenses ................................... 1,416,063 1,740,413 3,496,444 3,052,921
Distribution, general and
administrative expenses ........................ 2,635,066 2,804,605 5,459,000 5,303,398
------------ ------------ ------------ ------------
4,051,129 4,545,018 8,955,444 8,356,319
------------ ------------ ------------ ------------
Operating profit (loss) ....................... (439,638) 1,434,195 (564,105) 686,690
Other expense (income)
Interest expense .............................. 661,376 484,613 1,311,142 934,914
Interest income ............................... (26,904) (17,578) (36,417) (39,025)
Miscellaneous ................................. 3 (2,487) 3 (14,546)
------------ ------------ ------------ ------------
634,475 464,548 1,274,728 881,343
------------ ------------ ------------ ------------
Earnings (loss) before income taxes ............ (1,074,113) 969,647 (1,838,833) (194,653)
Income tax (expense) benefit (Note E) .............. 0 (329,681) 0 64,320
Earning (Loss) from Continuing
operations .................................. (1,074,113) 639,966 (1,838,833) (130,333)
------------ ------------ ------------ ------------
Gain on Disposal of Discontinued
Healthcare Operation ............................... 806,696 0 806,696 0
------------ ------------ ------------ ------------
(Loss) from discontinued Healthcare
operation net of income tax benefit ................ 0 (178,885) 0 (403,417)
------------ ------------ ------------ ------------
Net earnings (loss) .......................... $ (267,417) $ 461,081 $ (1,032,137) $ (533,750)
============ ============ ============ ============
Per share data earnings (loss) from
continuing operations ....................... $ (.27) $ .16 $ (.46) $ (.03)
============ ============ ============ ============
Net earnings (loss) ............................. $ (.07) $ .12 $ (.26) $ (.13)
============ ============ ============ ============
Weighted average common and common
equivalent shares outstanding............ $ 4,000,210 $ 3,950,496 $ 4,000,210 $ 3,972,129
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE> 5
BOLLINGER INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS
ENDED ENDED
SEPTEMBER 29, SEPTEMBER 30,
------------- -------------
1996 1995
------------- -------------
<S> <C> <C>
Cash flows from operating activities
Net earnings (loss) ............................................ $(1,032,137) $ (533,750)
Adjustments to reconcile net earnings (loss) to net cash
provided by (used in) operating activities
Depreciation and amortization .............................. 460,317 303,521
Changes in operating assets and liabilities
Trade accounts receivable ............................... 2,088,465 (1,299,075)
Other receivables ....................................... (141,214) (216,303)
Inventories ............................................. 1,460,210 (4,278,710)
Prepaid expenses ........................................ (365,581) 183,312
Notes receivable and other assets ....................... 14,248 21,418
Accounts payable - Trade ................................ 234,635 9,886,011
Federal income tax payable .............................. (43,645) (200,000)
Other current liabilities ............................... 199,809 (125,173)
Provision for restructuring of operations ............... (1,221,397) --
Provision for Doubtful Accounts ......................... (173,266) --
Provision for Obsolete Inventory ........................ 301,450 --
Current assets of discontinued operations ............... 967,436 --
----------- -----------
Net cash provided by (used in)
operating activities ................................. 2,749,330 3,741,251
Cash flows from investing activities
Purchases of property and equipment ............................. (58,468) (212,119)
Payments (advances made) on note receivable ..................... (142,100) 54,772
Non-current assets from discontinued operations ................. 36,706 --
Loan Origination Costs .......................................... (634,577) --
----------- -----------
Net cash provided by (used in)
investing activities ................................. (798,439) (157,347)
Cash flows from financing activities
Net proceeds from (payments on) note payable ................... (2,966,141) 1,067
Proceeds from (payments on) long-term debt ..................... 1,003,948 (3,396,331)
----------- -----------
Net cash provided by (used in) financing activities . (1,962,193) (3,395,264)
----------- -----------
Net increase (decrease) in cash ..................... (11,302) 188,640
Cash at beginning of period ......................................... 408,871 116,476
----------- -----------
Cash at end of period ............................................... $ 397,569 $ 305,116
=========== ============
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE> 6
BOLLINGER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - GENERAL
The consolidated interim financial statements include the accounts of
Bollinger Industries, Inc., its wholly owned subsidiaries and Bollinger
Industries, L.P., a partnership wholly owned by Bollinger's subsidiaries
(collectively the "Company").
The consolidated interim financial statements included herein have been
prepared by the Company pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote disclosure normally
included in financial statements prepared in accordance with generally accepted
accounting principals have been condensed or omitted pursuant to such rules and
regulations, although the Company believes that the disclosures are adequate to
make the information presented not misleading. It is suggested that these
financial statements be read in conjunction with the consolidated financial
statements and notes for the year ended March 31, 1996.
The Company has adopted a 13 week quarter ending on the Sunday nearest the
end of the calendar quarter for Fiscal 1997.
In the opinion of management, the unaudited interim consolidated financial
information of the Company contains all adjustments, consisting only of those
of a normal recurring nature, necessary to present fairly the Company's
financial position and the results of its operations and cash flows for the
periods presented. The results of operations for the periods presented are not
necessarily indicative of the results to be expected for the full year.
NOTE B - CONSOLIDATED STATEMENTS OF CASH FLOWS
Supplemental disclosures:
<TABLE>
<CAPTION>
Six Months Six Months
Ended Ended
September 29, September 30,
------------- -------------
1996 1995
------------- -------------
<S> <C> <C>
Interest paid $562,717 $352,051
Income taxes paid -- $200,000
</TABLE>
6
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BOLLINGER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
NOTE C - INVENTORIES
<TABLE>
<CAPTION>
September 29, March 31,
1996 1996
------------- ------------
<S> <C> <C>
Raw materials $ 9,291,726 $ 9,858,597
Work-in-process 288,516 305,777
Finished goods 21,451,579 23,117,280
Less reserve (1,668,217) (1,166,766)
------------ ------------
29,363,604 32,114,888
Less: Discontinued Operations - Net 1,012,330 2,001,954
------------ ------------
$ 28,351,274 $ 30,112,934
============ ============
</TABLE>
NOTE D - NOTES PAYABLE
The Company successfully refinanced its credit facility on August 16,
1996. Availability, pursuant to the credit line, is based on levels of eligible
accounts receivable and inventory to a maximum of $25 million. The interest is
currently 10% per annum on the outstanding balance.
NOTE E - INCOME TAXES
The Company's effective income tax rates for the six months ended
September 30, 1995, and 1996 respectively were 34% and 0%, based on utilization
of a tax loss carryforward.
NOTE F - DISPOSAL OF DISCONTINUED HEALTHCARE OPERATION
The Company concluded an asset sale for the orthopedic products portion of
its Healthcare business to Rehab Plus Therapeutic Products, Inc. (Rehab) in
August 1996. Rehab paid $1.7 million for the assets. The Company received a
promissory note for $293,547 and the balance in cash. The Company recorded a
gain on the sale of $806,696.
7
<PAGE> 8
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Company's Form
10-K and consolidated financial statements for the fiscal year ended March 31,
1996; the Company's Form 10Q for the quarter ended June 30, 1995 and June 30,
1996; and the consolidated financial statements and related notes, for the
quarter ended September 29, 1996, elsewhere in this report.
THIRTEEN WEEKS AND TWENTY-SIX WEEKS ENDED SEPTEMBER 29, 1996, COMPARED TO THE
THREE MONTH AND SIX MONTH PERIOD ENDED SEPTEMBER 30, 1995
The Company has adopted a 13 week quarter ending on the Sunday nearest the end
of the calendar quarter for Fiscal 1997. For ease of discussion the thirteen
week period ended September 29, 1996, and the three months ended September 30,
1995, will be referred to as "quarters". Following this same format, the
26-week period ended September 29, 1996, and the six months ended September 30,
1995, will be referred to as "six months" or "year to date". As fully disclosed
in the Company's annual report and Form 10-K for the year ended March 31, 1996,
the Company has embarked on a restructuring plan whereby it is focusing on its
name brand products, including trampolines, and greatly reducing its use of
celebrity endorsed products.
Consolidated net sales for the quarter ended September 29, 1996, decreased by
$2.4 million as compared to the quarter ended September 30, 1995, a decrease of
12%. Net sales for the six months ended September 30, 1996, increased by $7.3
million compared to the same period in 1995, an increase of 22%. The decrease
in net sales in the quarter resulted from softness in the Company's fitness
accessory products substantially offset by an increase in the sales of the
trampoline product line. In addition, the prior year included a non-recurring
sale of $1.8 million in the second quarter. Increased sales in the first six
months were due to a significant growth in trampoline shipments to the major
retail stores. The Company introduced trampolines to its fitness accessory
product line during May 1994 and has experienced healthy growth since that
time. The Company expects sales of trampolines to remain strong although it is
unlikely the growth will be maintained at the same rate in the future, since
many major mass merchandisers now carry the product line. In the first six
months of the current year, the Company successfully sold $2.9 million of
targeted inventory as part of the restructuring plan.
Gross profit for the quarter ended September 29, 1996, decreased $2.4 million
as compared to the quarter ended September 30, 1995, and decreased as a
percentage of net sales from 28% in 1995 to 19% in 1996 for the same period.
Gross profit for the six months ended September 29, 1996, decreased $.7 million
and decreased 4.9% as a percentage of net sales as compared to the six months
ended September 30, 1995. More than one third of the decline in the gross
margin percentage for the quarter and year to date was due to the non-recurring
sale of inventory, pursuant to the restructuring plan for $1.7 million and
$2.9 million, respectively, with no gross profit and the sale in the prior
year of $1.8 million that carried an unusually high gross profit of 40%.
Additionally, the gross profit percentage for trampolines is relatively lower
than for fitness accessory products. During the first and second quarters
of fiscal
8
<PAGE> 9
1997, trampoline net sales accounted for a higher proportion of the Company's
sales than during the comparable periods in the prior year. This change in
product mix accounts for most of the remaining decline of the gross profit
percentage.
Selling expenses for the quarter ended September 29, 1996, decreased by
$324,000 as compared to the quarter ended September 30, 1995, and decreased as
a percentage of net sales from 8.1% to 7.5%. The dollar decrease in selling
expense, as well as the percentage decrease was directly related to the
reduction in celebrity royalty expenses. Selling expenses for the six months
ended September 29, 1996, increased by $444,000 as compared to the first half
of 1995, and decreased as a percentage from 9.0% to 8.5%. The increase in cost
was directly related to higher net sales and higher commissions for the six
month period. The decrease as a percent of sales from 1995 to 1996 is related
to lower celebrity royalty expenses.
Distribution, general and administrative expenses for the quarter ended
September 29, 1996, decreased by $170,000 as compared to the quarter ended
September 30, 1995, but increased as a percentage of net sales from 13.1% in
1995 to 13.8% in 1996. Reductions in payroll, as well as other categories of
expense, led to the overall reduction in dollars. Distribution, general and
administrative expenses for the six months ended September 29, 1996, increased
$156,000 over the same period in the prior year. As a percentage, this category
of expenses improved from 15.4% of net sales in the prior year to 13.2% in the
current year. The increase in dollars is due to warehouse labor and legal
expenses in the first quarter that were successfully reduced in the second
quarter .
The Company sustained an operating loss of $440,000 for the quarter ended
September 29, 1996, as compared to an operating profit of $1,434,000 in the
same quarter last year. The gross margin erosion of $2.4 million is partially
offset by lower selling and distribution, general, and administrative expenses
for a net decrease of $1.9 million in operating income. Operating losses for
the six months ended September 1996 were $564,000 compared to operating income
of $687,000 in the previous year. Prior year results included operating income
of approximately $700,000 from a non-recurring sales.
Interest expense for the quarter ended September 29, 1996, was $661,000
compared to $485,000 the previous year, or an increase of $176,000. Interest
expense for the six months ended September 29, 1996, as $1,311,000 compared to
$935,000 the previous year. Both the quarter and the year to date increase are
due to a higher effective interest rate.
LIQUIDITY AND CAPITAL RESOURCES
To date, the Company's principal source of financing has been borrowings from
various financial institutions and its initial public offering. Net cash used
by operating activities for the six months ended September 29, 1996, was
$11,000 compared to cash provided by operating activities for the same period
in the prior year of $189,000. Cash generated from collection of receivables
and the reduction of inventory was used to pay down long term debt.
9
<PAGE> 10
The Company has successfully secured a revolving credit facility with a
financial institution providing a maximum line of credit of $25.0 million
through August 16, 1999, subject to borrowing base requirements and certain
covenants. Outstanding balances in the second quarter of fiscal 1997 bore
interest at an approximate rate of 10.5% compared to a rate of 8.75% for the
second quarter of fiscal 1996.
The Company's credit facility is secured by accounts receivable and inventory.
Accordingly, the Company's ability to utilize the credit facility is predicated
on future operating activity.
10
<PAGE> 11
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.46 Eleventh Amendment to Loan and Security Agreement
dated July 8, 1996, between Bollinger Industries, L.P.,
and NationsBank of Texas, N.A.
10.47 Loan and Security Agreement dated August 16, 1996 between
Bollinger Industries, Inc., Bollinger Industries, L.P. and
NBF, Inc. and Foothill Capital Corporation and related
schedules.
10.48 Collateral Assignment of Patents and Trademarks dated
August 16, 1996 between Bollinger Industries, L.P. and
Foothill Capital Corporation.
10.49 Subordination Agreement dated August 16, 1996 between
Glenn D. Bollinger, Bobby D. Bollinger, Dell Bollinger and
Foothill Capital Corporation.
10.50 Deed of Trust dated August 16, 1996 executed by Bollinger
Industries, L.P.
10.51 Asset Purchase Agreement dated August 29, 1996 between
Bollinger Industries L.P. and Rehab Plus Therapeutic
Products, Inc.
(b) No reports on Form 8-K were filed during the six month period ended
September 29, 1996.
11
<PAGE> 12
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.
BOLLINGER INDUSTRIES, INC.
Date: October 13, 1996 /s/ Glenn D. Bollinger
----------------------- ------------------------------------------
Glenn D. Bollinger
Chairman of the Board and
Chief Executive Officer
Date: October 13, 1996 /s/ John T. Pryor
----------------------- ------------------------------------------
John T. Pryor
Senior Vice President - Finance, Chief
Financial Officer, Treasurer and Secretary
Date: October 13, 1996 /s/ Floyd L. DePauw
----------------------- ------------------------------------------
Floyd L. DePauw
Controller and Chief Accounting Officer
12
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BOLLINGER INDUSTRIES, INC. AND SUBSIDIARIES
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibits Description
- -------- -----------
<S> <C>
2.01 Asset Purchase Agreement dated August 29, 1996 between
Bollinger Industries L.P. and Rehab Plus Therapeutic
Products, Inc.
10.46 Eleventh Amendment to Loan and Security Agreement dated
July 8, 1996, between Bollinger Industries, L.P., and
NationsBank of Texas, N.A.
10.47 Loan and Security Agreement dated August 16, 1996 between
Bollinger Industries, Inc., Bollinger Industries, L.P. and
NBF, Inc. and Foothill Capital Corporation and related
schedules.
10.48 Collateral Assignment of Patents and Trademarks dated
August 16, 1996 between Bollinger Industries, L.P. and
Foothill Capital Corporation.
10.49 Subordination Agreement dated August 16, 1996 between
Glenn D. Bollinger, Bobby D. Bollinger, Dell Bollinger and
Foothill Capital Corporation.
10.50 Deed of Trust dated August 16, 1996 executed by Bollinger
Industries, L.P.
11.1 Computation of Earnings per Share
27.1 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 2.01
ASSET PURCHASE AGREEMENT
This asset purchase agreement ("Agreement") is entered into by
Bollinger Industries L.P., a Texas limited partnership ("Seller"), and
Rehab Plus Therapeutic Products, Inc., a Texas corporation
("Purchaser"), (collectively the "Parties").
WHEREAS, Seller and Purchaser have reached an understanding with
respect to the sale by Seller and the purchase by Purchaser of certain
assets and business of Seller, as same are more particularly described
in this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations,
warranties, and covenants herein contained, the Parties agree as
follows.
1. DEFINITIONS. As used in this Agreement, the following terms
shall have the meanings indicated below:
(a) "Affiliate" shall mean, with respect to any individual,
partnership, limited liability company, corporation, unincorporated
organization or association, trust (including the trustees thereof in
their capacity as such) or other entity (collectively a "Person"), any
other Person which either directly or indirectly controls, is controlled
by or is under common control with the first Person. The current
Affiliates of Seller are set forth on EXHIBIT 1(A).
(b) "Assets" shall mean the Inventory, Equipment, Other Assets,
and Contract Rights.
(c) "Business" shall mean Seller's orthopedic division located
in Lubbock, Texas with its related business defined as industrial,
medical and rehabilitation products, but excluding from the foregoing
Seller's business related to its fitness line of products. The
foregoing definition of Business is intended to include the entire
business operations of such division and its related goodwill, including
but not limited to all tradenames and registered marks, copyrighted
materials, proprietary information, client lists, business plans and
information, etc., specific to such business division.
(d) "Closing" shall mean the closing of the sale and purchase of
assets contemplated in this Agreement, as same is more particularly
described in SECTION 7 of this Agreement.
(e) "Confidential Information" shall mean any information
concerning the businesses and affairs of Seller that is not already
generally available to the public.
(f) "Contract Deposit" shall mean the Fifty Thousand Dollars
($50,000) payable to Seller by check, which shall be subject to
collection, on execution of this Agreement by Purchaser,
-1-
<PAGE> 2
with such amount to be held in escrow as provided for in SECTION 8 and applied
to the Purchase Price as set forth in this Agreement.
(g) "Contract Rights" shall mean maintenance agreements, service
contracts, and warranties related to any of the Assets being purchased
under this Agreement as same are more particularly described in SECTION
3(I).
(h) "Effective Date" shall mean the date on which the Inventory
audit is conducted as provided for in SECTION 2(D), but possession of
the Assets and delivery of the Business to Purchaser shall not occur
until the Closing.
(i) "Equipment" shall mean the items of furniture, equipment and
other personal property utilized in the Business as more particularly
described on EXHIBIT 1(I) to this Agreement.
(j) "Inventory" shall mean the inventory, finished goods, raw
materials, work in process, packaging, parts, and supplies related to
the Business as more particularly described on EXHIBIT 1(J) to this
Agreement.
(k) "Liabilities" shall mean the liabilities and payables of
Seller that are specifically identified on EXHIBIT 1(K) to this
Agreement and as provided for in SECTION 14(E).
(l) "Other Assets" shall mean the trade show booth used in
connection with the Business and the art work, photography, plates, and
graphics used in connection with the Business for customer
presentations, trade shows, advertising, and customer brochures.
(m) "Prepaid Expenses" shall mean the prepaid material,
supplies, and inventory purchases and other expenses that have been
prepaid by Seller that are specifically identified on EXHIBIT 1(M) to
this Agreement.
(n) "Purchase Price" shall mean the total of the consideration
to be paid by Purchaser as set forth in SECTION 2(B).
2. SALE AND PURCHASE.
(a) PURCHASE AND SALE OF ASSETS. On and subject to the terms
and conditions of this Agreement and in reliance on the representations
and warranties of Seller and Purchaser contained in this Agreement,
Purchaser agrees to purchase from Seller, and Seller agrees to sell,
transfer, convey, and deliver to Purchaser, all of the Assets and the
Business as of the Effective Date for the Purchase Price.
(b) PURCHASE PRICE. The total consideration for the Business
and the Assets is One Million Six Hundred Fifty-Five Thousand Dollars
($1,655,000), subject to the following adjustments (the "Purchase
Price"):
-2-
<PAGE> 3
(1) increased, or decreased, by the amount the Inventory as
finally calculated by the Parties is greater, or less, than $375,000;
(2) increased, or decreased, by the amount the Equipment as
finally calculated by the Parties is greater, or less, than $50,000, but
with such calculation to be not less than $30,000 or more than $60,000;
and
(3) increased by the Prepaid Expenses as finally calculated
by the Parties.
(c) PAYMENT OF PURCHASE PRICE. The Purchase Price shall be paid
to Seller as follows:
(1) Purchaser's assumption of the Liabilities as of the
Closing;
(2) the delivery to Seller at the Closing of a promissory
note (the "Note"), a copy of which is attached as EXHIBIT 2(C)(2),
payable to Seller in the amount of Three Hundred Seventy-Five Thousand
Dollars ($375,000); and
(3) a cash payment to Seller of the balance of the Purchase
Price, with such cash payment to be made on or before September 3, 1996
by wire transfer and with such cash payment being reduced by the
Contract Deposit (which shall be released to Seller on the date of its
receipt of the wire transfer of funds).
(d) AUDIT OF INVENTORY. A physical audit of the Inventory shall
be taken on or before August 28, 1996 in accordance with mutually
agreeable audit procedures. For purposes of this audit, Seller and
Purchaser shall designate representatives to carry out the audit
procedures and arrive at a value for the Inventory. The value of the
Inventory shall be reasonably determined by the mutual agreement of
Seller and Purchaser, and such reasonable determination shall take into
account obsolete inventory items. After these determinations have been
made, EXHIBIT 1(J) shall be completed, initialed by the parties and
attached to this Agreement on or prior to the Closing.
(e) ALLOCATIONS OF PURCHASE PRICE. The Parties agree to
mutually agree upon an allocation of the Purchase Price to the Assets
and to complete EXHIBIT 2(E) with such allocation as so determined.
Seller and Purchaser further agree that (1) these allocations have been
made as provided in Section 1060 of the Internal Code of 1986 (the
"Code"), (2) each shall file Form 8594 (Asset Allocation Statement Under
Section 1060) on a timely basis for reporting the allocation, (3) the
filing shall be consistent with the allocations set forth on EXHIBIT
2(E), and (d) neither will take any position on its respective income
tax return that is inconsistent with the allocation.
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3. SELLER'S REPRESENTATIONS AND WARRANTIES. Seller represents and
warrants to Purchaser that the statements contained in this Section are
correct and complete as of the date of this Agreement and will be
correct and complete as of the Closing Date (as though made then and as
though the Closing Date were substituted for the date of this Agreement
throughout this Section, unless another date for such representation and
warranty is specifically set forth in this Agreement).
(a) ORGANIZATION OF SELLER. Seller is a limited partnership
duly organized and validly existing under the laws of Texas and such
other states or jurisdictions where the failure to so qualify would have
a material, adverse affect on the Business or the Assets.
(b) AUTHORIZATION OF TRANSACTION. Seller has full power and
authority to execute and deliver this Agreement and to perform its
obligations hereunder. Without limiting the generality of the foregoing,
the board of directors of the general partner of Seller have duly
authorized the execution, delivery, and performance of this Agreement by
Seller.
(c) NONCONTRAVENTION. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions contemplated
hereby, will (1) violate any statute, regulation, order, or other
restriction of any government, governmental agency, or court to which
Seller is subject or any provision of the limited partnership agreement
of Seller, or (2) cause a breach, default, or termination with regard to
the Contract Rights.
(d) BROKERS' FEES. Seller has no liability or obligation to pay
any fees or commissions to any broker, finder, or agent with respect to
the transactions contemplated by this Agreement for which Purchaser
could become liable or obligated.
(e) TITLE TO ASSETS. Seller has good and marketable title to,
or a valid leasehold interest in, the Assets, free and clear of all
liens, security interests, obligations, or encumbrances, other than
liens, liabilities, obligations, or encumbrances that will be satisfied
in full, or released, prior to or contemporaneous with the Closing,
except statutory tax liens that are not due and payable on or before the
Closing.
(f) FINANCIAL DATA. All financial data of Seller relating to
the Business previously supplied to Purchaser, and that supplied to
Purchaser prior to or at the Closing, have been prepared in accordance
with consistent accounting practices, and present fairly the results of
operations of the Business; provided, however, that, to the extent such
information includes profit and loss statements requested by Purchaser
with regard to Seller's prior operation of the Business, Seller
represents and warrants that such profit and loss statements were
prepared in good faith as excerpts from Seller's consolidated books and
records, and Seller
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makes only a good faith representation or warranty with regard to same.
(g) LEGAL COMPLIANCE. Seller has complied with all applicable
laws (including rules, regulations, codes, plans, injunctions,
judgments, orders, decrees, rulings, and charges thereunder) of federal,
state, local, and foreign governments (and all agencies thereof) with
regard to the Business and Assets, and no action, suit, proceeding,
hearing, investigation, charge, complaint, claim, demand, or notice has
been filed or commenced against Seller alleging any failure so to
comply.
(h) TAX MATTERS. Seller has filed, within the applicable time
period including extensions, all local, state, and federal income,
informational, franchise, sales, and other tax returns of any nature and
type that it is required to file, all such tax returns were correct and
complete in all respects, and all taxes, fees, penalties, interest, or
other expenses related thereto have been paid in full or appropriate
reserves have been made for same.
(i) CONTRACTS RIGHTS. Seller has delivered to Purchaser a
correct and complete copy of each written agreement, and associated
security filings if applicable, related to the Assets and the Business
that requires a payment, loan, advance, investment, capital expenditure,
ordinary expenditure, or other obligation (1) in excess of $300.00 per
month whether or not payable or properly accrued monthly, quarterly,
annually, or otherwise, and (2) extending more than six months after the
Effective Date. With respect to each such agreement delivered to
Purchaser: (1) the agreement is legal, valid, binding, enforceable, and
in full force and effect, (2) no event has occurred which with notice or
lapse of time would constitute a breach or default, or permit
termination, modification, or acceleration under the agreement, and (3)
no party has repudiated any provision of the agreement. A list of the
Contract Rights is set out on EXHIBIT 3(I).
(j) LITIGATION. With respect to Seller's operation of the
Business, Seller (1) is not subject to any outstanding injunction,
judgment, order, decree, ruling, or charge or (2) is not a party, or to
the knowledge of Seller's directors or officers threatened to be made a
party, to any action, suit, proceeding, hearing, or investigation of,
in, or before any court or quasi-judicial or administrative agency of
any federal, state, local, or foreign jurisdiction or before any
arbitrator.
(k) PRODUCT LIABILITY. Other than that for which Seller has
provided its indemnity under SECTION 11, there is no currently pending,
and Seller does not have any knowledge of any threatened, action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand
against Seller giving rise to any liability that arises out of any
injury to individuals or property as a result of the ownership,
possession, or use of any product
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<PAGE> 6
manufactured, sold, leased, or delivered by Seller in the course of its prior
operations of the Business.
(l) DISCLOSURE. The representations and warranties contained in this
Section do not contain any untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements and information
contained in this Section not misleading.
4. PURCHASER'S REPRESENTATIONS AND WARRANTIES. Purchaser
represents and warrants to Seller that the statements contained in this
Section are correct and complete as of the date of this Agreement and
will be correct and complete as of the Closing Date (as though made then
and as though the Closing Date were substituted for the date of this
Agreement throughout this Section, unless another date for such
representation and warranty is specifically set forth in this
Agreement).
(a) ORGANIZATION OF THE PURCHASER. Purchaser is duly organized,
validly existing, and in good standing under the laws of Texas and
authorized to conduct its business in such other jurisdictions as are
necessary for the consummation of this Agreement.
(b) AUTHORIZATION OF TRANSACTION. Purchaser has full power and
authority to execute and deliver this Agreement and to perform its
obligations hereunder. This Agreement constitutes the valid and legally
binding obligation of the Purchaser, enforceable in accordance with its
terms and conditions.
(c) NONCONTRAVENTION. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions contemplated
hereby, will (1) violate any statute, regulation, order, or other
restriction of any government, governmental agency, or court to which
Purchaser is subject or any provision of the charter or bylaws of
Purchaser, or (2) cause a breach, default, or acceleration of any
contracts or agreements by which it is bound.
(d) BROKERS' FEES. Purchaser has no liability or obligation to
pay any fees or commissions to any broker, finder, or agent with respect
to the transactions contemplated by this Agreement for which Seller
could become liable or obligated.
5. PRE-CLOSING COVENANTS. The Parties agree as follows with
respect to the period between the execution of this Agreement and the
Closing.
(a) GENERAL. Each of the Parties will use its reasonable best
efforts to take all action and to do all things necessary, proper, or
advisable in order to consummate and make effective the transactions
contemplated by this Agreement (including satisfaction, but not waiver,
of the closing conditions set forth in SECTION 6).
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(b) NOTICES AND CONSENTS. Seller will give any notices to third
parties (with copies of such notices furnished to Purchaser), and Seller
will use its best efforts to obtain any third party consents, that are
required to consummate the purchase and sale transaction. Each of the
Parties will give any notices to, make any filings with, and use its
best efforts to obtain any authorizations, consents, and approvals of
governments and governmental agencies required to consummate the
purchase and sale.
(c) OPERATION OF BUSINESS. Seller will not engage in any
practice, take any action, or enter into any transaction outside the
ordinary course of the Business.
(d) PRESERVATION OF BUSINESS. Seller will keep its business and
properties substantially intact, including its present operations,
physical facilities, working conditions, and relationships with lessors,
licensors, suppliers, customers, and employees.
(e) FULL ACCESS.
(1) Seller will permit representatives of Purchaser to have
full access at all reasonable times, and in a manner so as not to
interfere with the normal business operations of Seller, to all
premises, properties, personnel, books, records (including tax records),
contracts, and documents of or pertaining to Seller. Purchaser will
treat and hold as such any Confidential Information it receives from
Seller in the course of the reviews contemplated by this subsection,
will not use any of the Confidential Information except in connection
with this Agreement, and, if this Agreement is terminated for any reason
whatsoever, will return to Seller all tangible embodiments (and all
copies) of the Confidential Information which are in its possession.
(2) To the extent not inconsistent with the provisions under
subsection (1) above, the terms of the confidentiality agreement dated
August 5, 1996 and entered into by Bollinger Industries, Inc. and
Purchaser shall continue to apply until the Closing, and thereafter in
the event Closing does not occur, with Seller being substituted therein
for Bollinger Industries Inc.
(f) AUDIT OF ASSETS. A physical audit of the Inventory will be
conducted in accordance with the provisions of SECTION 2(d).
(g) NOTICE OF DEVELOPMENTS. Each Party will give prompt written
notice to the other Party of any material adverse development causing a
breach of any of its own representations and warranties in SECTION 3 and
SECTION 4. No disclosure by any Party pursuant to this subsection,
however, shall be deemed to amend or supplement any disclosures or
representations set forth in this Agreement or to prevent or cure any
misrepresentation, breach of
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<PAGE> 8
warranty, or breach of covenant, unless so mutually agreed by the Parties.
6. CONDITIONS TO OBLIGATION TO CLOSE.
(a) CONDITIONS TO OBLIGATION OF PURCHASER. The obligation of
Purchaser to consummate the transactions to be performed by it in
connection with the Closing is subject to satisfaction of the following
conditions, provided however, that Purchaser may waive any condition
specified in this subsection if it executes a writing so stating at or
prior to the Closing:
(1) the representations and warranties of Seller set forth
in SECTION 3 shall be true and correct in all material respects at and
as of the Closing Date;
(2) Seller shall have performed and complied with all its
covenants hereunder in all material respects through the Closing;
(3) Seller shall have procured all the third party consents
provided for in this Agreement;
(4) Purchaser shall have received an assignment of, or be
permitted to continue the use of, Seller's License Agreement with
Charles Kallassy covering the Universal Ankle Support under Patent
Application Serial No. 477,058 filed February 7, 1990;
(5) Purchaser shall be permitted, by separate agreement or
as otherwise determined by the Parties, to use the trademark
"Enlightened Rubber" in the same manner Seller is currently using same;
(6) Purchaser shall have received releases of any third
party liens that encumber the Assets and the Business, if any;
(7) no action, suit, or proceeding against the Seller shall
be pending or threatened before any court or quasi-judicial or
administrative agency of any federal, state, or foreign jurisdiction or
before any arbitrator wherein an unfavorable injunction, judgment,
order, decree, ruling, or charge would (1) prevent consummation of any
of the transactions contemplated by this Agreement, (2) cause any of the
statements to be rescinded following consummation, or (3) affect
adversely the right of Purchaser to own the Assets and to operate the
Business; and
(8) all actions to be taken by Seller in connection with
consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to
effect the transactions contemplated hereby will be reasonably
satisfactory in form and substance to Purchaser.
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<PAGE> 9
(b) CONDITIONS TO OBLIGATION OF SELLER. The obligation of
Seller to consummate the transactions to be performed by it in
connection with the Closing is subject to satisfaction of the following
conditions, provided however, that Seller may waive any condition
specified in this subsection if it executes a writing so stating at or
prior to the Closing:
(1) the representations and warranties set forth in SECTION
4 shall be true and correct in all material respects at and as of the
Closing Date;
(2) Purchaser shall have performed and complied with all its
covenants hereunder in all material respects through the Closing;
(3) no action, suit, or proceeding against Purchaser shall
be pending or threatened before any court or quasi-judicial or
administrative agency of any federal, state, local, or foreign
jurisdiction or before any arbitrator wherein an unfavorable injunction,
judgment, order, decree, ruling, or charge would (1) prevent
consummation of any of the transactions contemplated by this Agreement
or (2) cause any of the transactions contemplated by this Agreement to
be rescinded following consummation (and no such injunction, judgment,
order, decree, ruling, or charge shall be in effect);
(4) Seller shall have secured the consent of its primary
lender for the sale of the Assets and the Business and the release of
any liens held by such lender against the Assets and the Business; and
(5) all actions to be taken by Purchaser in connection with
consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to
effect the transactions contemplated hereby will be reasonably
satisfactory in form and substance to Seller.
7. THE CLOSING.
(a) DATE OF CLOSING. The Closing shall take place on or before
August 29, 1996 (the "Closing Date") at the offices of Seller, unless
the parties have mutually agreed in writing to extend such date on or
prior to August 29, 1996.
(b) ITEMS TO BE DELIVERED AT THE CLOSING.
(1) BY SELLER. At the Closing, Seller shall deliver to
Purchaser, at Seller's sole cost and expense, each of the following
items:
(A) A certificate of existence issued by the appropriate
state office and dated within fifteen (15) days of the Closing, and a
copy of the board of director consents approving this Agreement;
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<PAGE> 10
(B) Bill of Sale conveying title to all the Assets on a
form acceptable to the Parties; and
(C) Any and all other assignments of warranties,
contracts, etc. called for in this Agreement.
(2) BY PURCHASER. At the Closing, Purchaser shall deliver
to Seller each of the following items:
(A) A certificate of good standing issued by the
appropriate state office and dated within fifteen (15) days of the
Closing, and a copy of the board of director consents approving this
Agreement;
(B) the Note required under SECTION 2;
(C) a continuing guaranty of David L. Foster and Ronnie
Bilbo of the Note, with such guaranty to be in the form of EXHIBIT
7(B)(2)(C);
(D) such other instruments called for in this Agreement.
(c) CASH PAYMENT. The cash payment provided for under SECTION 2
shall be made to Seller on or before September 3, 1996, and the receipt
by Seller of such cash payment shall be a condition precedent to the
final closing and consummation of the sale and purchase contemplated by
this Agreement. If such cash payment is not received by Seller on or
before September 3, 1996 as provided for in SECTION 2, Purchaser shall
be deemed to be in default under this Agreement and, in addition to any
other remedies that Seller may have under this Agreement, Seller shall
be entitled to receive the Escrow Amount as provided for in the Escrow
Agreement and to immediately take possession of and assume full
ownership of the Assets and the Business.
b
(d) SALES AND TRANSFER TAXES. Following the Closing, Purchaser
shall pay when due all sales and transfer taxes, if any, payable in
connection with this Agreement and the conveyances, assignments,
transfers, and deliveries to be made to Purchaser under this Agreement.
8. CONTRACT DEPOSIT. Purchaser has paid Seller the sum of $50,000
cash as a deposit (the "Contract Deposit") with Purchaser's delivery to
Seller of this Agreement signed by Purchaser. The Contract Deposit
shall be held in escrow until the Closing or the termination of this
Agreement, with such escrow to be in the form attached as EXHIBIT 8. As
provided for in the Escrow Agreement, should the Closing fail to occur
due to the breach of this Agreement by Purchaser, Seller shall retain
the Contract Deposit as liquidated damages for such breach.
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<PAGE> 11
9. OTHER AGREEMENTS BY THE PARTIES.
(a) PRODUCT LIABILITY INSURANCE COVERAGE.
(1) Seller agrees that it will continue to maintain its
existing product liability insurance coverage on the following
conditions: (1) The insurance will cover Inventory that was manufactured
by Seller prior to the Effective Date; and (2) Seller shall have no
obligation to continue any of the foregoing coverage after one hundred
twenty (120) days following the Effective Date.
(2) Seller will use its reasonable efforts to secure "tail"
product liability insurance coverage for the Inventory, but Seller's
obligations in this regard shall be governed, based on Seller's
reasonable determination, by the cost, availability, and reasonable
business need of such coverage. The period of such "tail" coverage
shall be reasonably determined by Seller. If Seller elects to not
obtain such tail coverage, Seller shall notify Purchaser of such
decision.
(3) To the extent Seller is not required to carry product
liability insurance coverage under subsections (1) and (2) above,
Purchaser shall secure and keep in force product liability insurance
coverage for all of its operations after the Effective Date. On written
request by Seller, Purchaser shall provide Seller with evidence of such
coverage.
(b) EMPLOYEES OF SELLER.
(1) Purchaser may, in its sole discretion, hire Seller's
existing employees who are full-time employees located at the Lubbock,
Texas facility of the Business.
(2) If the transactions contemplated by this Agreement are
consummated and Purchaser extends an offer of employment to any of
Seller's employees on or prior to the Closing Date and Seller's employee
accepts such offer of employment from Purchaser, Seller agrees that it
will not solicit the employment of such former employee for a period of
three years after the Closing Date.
(c) PRODUCT WARRANTY AND RETURNS AFTER EFFECTIVE DATE.
Purchaser agrees to perform all warranty work related to the products
sold by Seller in Seller's Business operations prior to the Effective
Date and similarly agrees to accept all customer returns of products
sold by Seller in the Business prior to the Effective Date. Purchaser's
obligations under the foregoing shall apply to warranty work or product
returns that are less than $1,000 (based on the actual cost of such
warranty work or returned product) as determined on an occurrence by
occurrence basis. If a warranty claim equals or exceeds $1,000,
Purchaser shall immediately notify Seller of same and Seller shall
provide such warranty work at Seller's cost or Seller shall pay
Purchaser to provide such warranty work on a mutually agreeable basis.
If a
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product return equals or exceeds $1,000 and Purchaser replaces the product or
refunds the purchase price for same, Purchaser shall immediately notify Seller
of same and Seller shall reimburse Purchaser for the cost of the replacement
items or for the refunded purchase price.
(d) SELLER MANUFACTURING AFTER EFFECTIVE DATE. Seller agrees
that, for a period of thirty (30) days after the Closing Date, it will
supply Purchaser with manufactured goods similar to the Inventory. These
goods will be supplied to Purchaser on an order by order basis, with the
cost of same to Purchaser being Seller's standard manufacturing cost and
payable on terms as determined by Seller and Purchaser on an order by
order basis. Seller's obligations under this subsection shall be
limited to goods that can be reasonably manufactured with Seller's
equipment in Lubbock, Texas that remains after the Closing under this
Agreement.
(e) PURCHASER'S USE OF BOLLINGER NAME. The Parties acknowledge
that certain of the Inventory and/or Inventory packaging incorporates
trademarks, copyright works, or other similar rights owned or held by
Seller or an Affiliate of Seller and the rights to which are not being
transferred to Purchaser under this Agreement (the "BLP Rights"). The
Parties agree that Purchaser's sale of Inventory that incorporates the
BLP Rights after the Effective Date shall be permitted, but Purchaser
shall not be permitted to use the BLP Rights in any products that it
might manufacture and Purchaser's right to use the BLP Rights shall be
limited to selling the Inventory transferred under this Agreement that
utilizes the BLP Rights.
(f) SELLER TO SUPPLY PURCHASER WITH CERTAIN PRODUCTS. A part of
the Inventory is comprised of gloves that Seller has purchased through
supply agreements with third parties. Seller agrees to supply these
gloves to Purchaser after the Effective Date for such reasonable period
as needed for Purchaser to secure a supply source for the product. These
goods shall be provided to Purchaser only on the basis that same are
available to Seller and at Seller's actual cost and freight charges for
same.
10. AGREEMENT NOT TO COMPETE.
(a) TERM, GEOGRAPHICAL AREA, AND CONSIDERATION. In
consideration of the benefits to be received by Seller under this
Agreement and a material portion of the Purchase Price to be paid to
Seller, Seller agrees that, for a period of five (5) years after the
Effective Date, or such shorter period of time in the event Purchaser
discontinues its operation of the Business, neither Seller or its
Affiliates will enter into a business that is competitive with the
Business conducted by Seller prior to the Effective Date with the
Assets. The geographical area of the noncompetition provisions in this
Section shall be the United States. Purchaser and Seller agree that the
covenant not to
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<PAGE> 13
compete contained in this Section is a condition to Purchaser's entering into
this Agreement with Seller.
(b) PERSONS COVERED. This non-compete provision shall apply to
Seller and an Affiliate of Seller, and it shall include, but not be
limited to, participating in a competitive business as a shareholder,
joint venturer, limited or general partner, limited liability company
member, equity or debt owner, or in any other manner in which Seller or
a Seller Affiliate may participate or share in the profits or revenues
of the competitive business. Specifically excluded from this restriction
is participation by Seller or an Affiliate through the ownership of debt
or equity securities that are traded on an established securities
market, unless Seller or an Affiliate severally or in the aggregate own
more that 15% of the outstanding issue of such debt or equity security.
(c) COMPETITIVE BUSINESS. For purposes of this Section, a
competitive business shall mean the sale of the types of products
included in the Inventory to medical, industrial, and rehabilitation
distributors and wholesalers, but it shall not include Seller's sale of
such products to retailers (unless identified on EXHIBIT 10(C)) and as
fitness and athletic products.
(d) INDEPENDENT PROVISION. This covenant not to compete on the
part of Seller shall be construed as an agreement independent of any
other provision of this Agreement and the payment of the Purchase Price
provided for in SECTION 2, which shall constitute conditions precedent
to the enforceability of Seller's obligations under this Section. Except
as provided in the preceding sentence, the existence of any claim or
cause of action by Seller against Purchaser, whether predicated on this
Agreement or otherwise, shall constitute neither a defense to the
enforcement by the Purchaser of this covenant, nor a set-off or claimed
set-off against any remedies or benefits available or due to the
Purchaser pursuant to the terms of this Agreement.
(e) INJUNCTIVE AND EQUITABLE RELIEF. Seller agrees that a
breach or violation of this covenant not to compete by Seller or an
Affiliate shall entitle Purchaser, as a matter of right, to an
injunction, without the need for posting bond or other security, issued
by any court of competent jurisdiction which restrains any further or
continued violation of this covenant.
(f) DELAYS IN ENFORCEMENT. If Seller and/or an Affiliate
violates this covenant not to compete and Purchaser brings legal action
for injunctive or other relief, Purchaser shall not be deprived, as a
result of the time involved in obtaining the relief, of the benefit of
the full period of the restrictive covenant. For these purposes, the
five (5) year period, or shorter period if applicable, shall be
calculated as not including the period of time required for Purchaser to
petition for and be granted the relief sought.
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<PAGE> 14
(g) REASONABLENESS AND SCOPE. The parties to this Agreement agree that
this covenant is reasonable in both time and scope. However, if any
court shall determine that the duration or geographical limit of any
restriction contained in this covenant not to compete is unenforceable,
it is the intention and agreement of the Parties that the covenant shall
be deemed amended to the extent required to render it valid and
enforceable. Such amendment, if any, shall apply only with respect to
the operation of this covenant not to compete and the jurisdiction of
the court that has made the adjudication.
11. INDEMNIFICATION BY SELLER. Seller agrees to indemnify and hold
Purchaser harmless against, and will reimburse Purchaser on demand for,
any payment made by Purchaser in respect of the following items:
(a) LIABILITIES NOT ASSUMED. Any and all liabilities and
obligations of or claims against Seller not assumed by Purchaser under
the terms of this Agreement;
(b) DAMAGES. Any and all damage or deficiency resulting from
any misrepresentation, breach of warranty, or nonfulfillment of any covenant or
agreement on the part of Seller under this Agreement or from any
misrepresentation in, or omission from, any certificate or other instrument
furnished or to be furnished to Purchaser pursuant to this Agreement, or in
connection with the transactions contemplated hereby; and
(c) ACTIONS. Any and all actions, suits, proceedings, demands,
assessments, judgments, costs, and expenses incident to any of the
foregoing or incident to the operation of the Business prior to the
Effective Date.
In the event Purchaser receives notice of any claim against it
or Seller with respect to any of the foregoing, Purchaser shall promptly
notify Seller of same and Seller shall compromise or defend same, with
Seller further agreeing to inform Purchaser in writing from time to time
as is reasonable regarding the status of such claim.
12. INDEMNIFICATION BY PURCHASER. Purchaser agrees to indemnify and
hold Seller harmless against, and will reimburse Seller on demand for,
any payments made by Seller in respect of the following items:
(a) LIABILITIES ASSUMED. Any and all liabilities and
obligations of or claims against Seller that are assumed by Purchaser
under the terms of this Agreement, including but not limited to the
Liabilities;
(b) DAMAGES. Any and all damages or deficiencies resulting from
any misrepresentation, breach of warranty, or nonfulfillment of any
covenant or agreement on the part of
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<PAGE> 15
Purchaser under this Agreement or from any misrepresentation in connection with
the transaction contemplated hereby; and
(c) CLAIMS. Any and all actions, suits, proceedings, demands,
assessments, judgments, costs, and expenses incident to any of the
foregoing or incident to the operation of the Business after the
Effective Date.
In the event that Seller receives notice of any claim against it
or Purchaser with respect to any of the foregoing, Seller shall promptly
notify Purchaser of same and Purchaser shall compromise or defend same,
with Purchaser further agreeing to inform Seller in writing from time to
time as is reasonable regarding the status of such claim.
13. RISK OF LOSS. Until the Effective Date Seller shall bear the risk of
loss should there be damage to any of the Assets by fire or other
casualty. If, prior to the Effective Date, any of the Assets shall be
damaged to the extent that there are insufficient Assets remaining for
Purchaser to conduct the Business as previously conducted by Seller, or
the Assets have been damaged to an extent that prevents such operations,
then Seller shall give Purchaser written notice thereof within three (3)
business days after such damage or loss by Seller. Upon receipt of such
written notice Purchaser shall have five (5) business days in which to
elect in writing to: (1) terminate this Agreement and its obligations
under this Agreement; (2) require Seller to expend the insurance
proceeds, if any, which it receives to place the Assets in the working
order necessary to conduct the business operations of Seller that relate
to the Assets or the business operations for which Purchaser is
purchasing the Assets; or (3) require Seller to pay to Purchaser all
insurance proceeds payable by reason of such loss or damage and allow
Purchaser to conduct Asset repairs.
14. POST-CLOSING SETTLEMENTS.
(a) SETTLEMENT STATEMENT. Within fifteen (15) days after the Closing,
Seller shall prepare a settlement statement (the "Settlement Statement")
and make available to Purchaser all records necessary for Purchaser to
review and confirm the accuracy of the Settlement Statement. The
Settlement Statement shall set forth any changes to results of the
pre-closing audit of the Assets by the Parties that are found to be
necessary, and any changes with regard to the amounts determined for
Closing with regard to the proration of taxes and expenses related to
the Business and with regard to the Liabilities. Within five (5) days
after Purchaser's receipt of the Settlement Statement, Purchaser shall
deliver to Seller a written report which contains any changes which
Purchaser proposes to the Settlement Statement and any requests for
additional information Purchaser requests. Within five (5) days after
Seller's receipt of Purchaser's written report, Seller shall respond in
writing to Purchaser's written report. If the Purchaser and Seller
reach an agreement with respect to the payment due to either Purchaser
or Seller under the Settlement Statement, then any
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<PAGE> 16
amount owed shall be paid within five (5) days of such agreement. Amounts paid
after such five (5) days shall bear interest at the rate of fourteen percent
(14.0%) per annum.
(b) GOOD FAITH EFFORTS. Purchaser and Seller shall each use its
reasonable good faith efforts to agree with respect to any amounts due
pursuant to the Settlement Statement no later than thirty five (35) days
after the Closing. If an agreement has not been reached within thirty
five (35) days after the Closing, either party may seek to enforce any
rights it claims under this Agreement. In the event a party has used
its reasonable efforts to reach an agreement with respect to any amounts
due under the Settlement Statement and such party is successful in a
legal action for any amount due to it, the successful party shall be
entitled to reimbursement from the other party of all expenses and costs
related to the legal action and shall be entitled to interest at the
rate of fourteen percent (14.0%) per annum on the amount due. In such
event, the interest shall be calculated from thirty five (35) days after
the Closing.
(c) PRORATION OF TAXES. Any and all ad valorem and personal property
taxes on the Assets to be transferred under this Agreement shall be prorated to
the date of Closing based on the taxes for the immediately preceding tax
year.
(d) PRE-EFFECTIVE DATE RECEIVABLES. If Purchaser receives any funds
attributable to pre-Effective Date sales by Seller, such funds shall
belong to Seller, Purchaser shall hold same for the account of Seller,
and Purchaser shall remit same to Seller within ten (10) days of
Purchaser's receipt of same. Seller shall have access to the records of
Purchaser for purposes of verifying the foregoing.
(e) LIABILITIES. The amounts set forth on EXHIBIT 1(K) and attributable
to commissions owed to manufacturers representatives for sales prior to the
Effective date were calculated on the basis of Seller's records as of the date
set forth on EXHIBIT 1(K). To the extent a manufacturers representative
has commissions owed for sales for the period after the date set forth
on EXHIBIT 1(K) to the Effective Date, Seller agrees that such amounts
are obligations payable by Seller and are not assumed by Purchaser under
this Agreement as a part of the Liabilities.
(f) POST-EFFECTIVE DATE RECEIVABLES. If Seller receives any funds
attributable to post-Effective Date sales by Purchaser, such funds shall
belong to Purchaser, Seller shall hold same for the account of
Purchaser, and Seller shall remit same to Purchaser within ten (10) days
of Seller's receipt of same. Purchaser shall have access to the records
of Seller for purposes of verifying the foregoing.
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15. TERMINATION.
(a) TERMINATION OF AGREEMENT. The Parties may terminate this Agreement
only as provided below:
(1) Purchaser and Seller may terminate this Agreement by mutual
written consent at any time prior to the Closing. In such event, the Contract
Deposit shall be paid as the Parties mutually agree.
(2) Purchaser may terminate this Agreement by giving written notice
to Seller if the Closing shall not have occurred on or before the scheduled
Closing Date by reason of the failure of any condition precedent under SECTION
6(A) (unless the failure results primarily from Purchaser itself breaching any
representation, warranty, or covenant contained in this Agreement). In such
event, the Contract Deposit shall be returned to Purchaser, and the return of
same shall constitute Purchaser's liquidated damages under this Agreement.
(3) Seller may terminate this Agreement by giving written notice to
Purchaser at any time prior to the Closing if the Closing shall not have
occurred on or before the scheduled Closing Date by reason of the
failure of any condition precedent under SECTION 6(B) hereof (unless the
failure results primarily from Seller itself breaching any
representation, warranty, or covenant contained in this Agreement). In
such event, unless the event is as provided for under SECTION 6(B)(4) OR
(5), the Contract Deposit shall be retained by Seller and the retention
of same shall constitute Seller's liquidated damages under this
Agreement.
(b) EFFECT OF TERMINATION. If any Party terminates this Agreement
pursuant to this Section, all rights and obligations of the Parties
hereunder shall terminate and no Party shall have any liability to the
other for such termination; provided, however, that the confidentiality
provisions contained in SECTION 5(E) shall survive termination.
16. MISCELLANEOUS.
(a) RESOLUTION OF DISPUTES. For the resolution of any dispute
under this Agreement, the Parties agree to follow the procedures
outlined in this subsection.
(1) The Parties hereby acknowledge that they will first
attempt in good faith to resolve their disputes through direct
negotiation within thirty (30) days of the date either Party notifies
the other Party of the existence of a dispute. If a shorter time period
is indicated by the circumstances, the Parties agree that the time
period shall be reduced accordingly. This time period may be extended
by agreement, during which time neither Party shall institute legal
proceedings, unless the commencement of an action is necessary for
statute of limitations purposes.
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<PAGE> 18
(2) In the event the Parties are unable to resolve their
dispute through direct negotiations within the applicable time period,
either Party may notify the other Party of its decision to submit the
dispute to mediation, to which each Party hereby consents, which
mediation shall be handled in the following manner:
(A) The mediator shall be selected by mutual agreement
of the Parties. If agreement cannot be reached within twenty (20) days
of the notification, the Parties shall request the senior (by number of
years of continuous service) sitting civil district judge of Dallas
County, Texas, acting in his individual capacity, to appoint a suitable
mediator, and the appointment of same shall be binding upon the Parties.
(B) The cost of mediation shall be paid one-half by
Seller and one-half by Purchaser. In determining costs, the mediator
may take into account all legal and legal assistant costs, out-of-pocket
expenses, reasonable photocopy charges, long distance phone calls,
travel expenses, depositions, court reporters, and other similar costs
and expenses.
(C) In no event shall the demand for mediation be made
after the date when the initiation of legal or equitable proceedings
based on such claim, dispute, or other matter in question would
otherwise be barred by the applicable statute of limitations.
(b) NATURE AND SURVIVAL OF REPRESENTATIONS. The
representations, warranties, covenants, indemnities, and other
provisions of this Agreement shall survive for a period of two (2) years
after the Closing, EXCEPT to the extent a claim for indemnification or
breach of contract has previously been asserted by or against Seller or
Purchaser, as appropriate, and such claim remains unsettled on the
second anniversary of the Closing (in which case the representations and
warranties on which such claim is based shall terminate on the
resolution of such claim, except that no new claim may be asserted on
any representation or warranty that survives as a result of a disputed
pending claim), and EXCEPT to the extent a longer period is specifically
provided for under the noncompetition provisions of SECTION 10.
(c) PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. No Party shall
issue any press release or make any public announcement relating to the
subject matter of this Agreement without the prior written approval of
the other Party; provided, however, that Seller may make any public
disclosure it believes in good faith is required by applicable law or
any listing or trading agreement concerning its publicly-traded
securities.
(d) NO THIRD-PARTY BENEFICIARIES. This Agreement shall not
confer any rights or remedies upon any Person other than the Parties,
and the successors and assigns of the Parties as permitted by this
Agreement.
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<PAGE> 19
(e) ENTIRE AGREEMENT. It is expressly agreed by Seller and
Purchaser, as a material consideration for the execution of this
Agreement, that this Agreement is intended by the parties to be the
final, complete, and exclusive embodiment of their agreement regarding
the subject matter of this Agreement; that there are, and were, no oral
representations, warranties, understandings, stipulations, agreements,
or promises pertaining to this Agreement or any expressly mentioned
written documents that are not incorporated in writing in this
Agreement, and none shall be binding.
(f) SUCCESSION AND ASSIGNMENT. This Agreement shall be binding
upon and inure to the benefit of the Parties named herein and their
respective successors and permitted assigns. This Agreement may not be
assigned without the written consent of the other Party.
(g) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(h) HEADINGS. The section headings contained in this Agreement
are inserted for convenience only and shall not affect in any way the
meaning or interpretation of this Agreement.
(i) FORCE MAJEURE. Neither Purchaser nor Seller shall be
required to perform any term, condition, or covenant in this Agreement
so long as such performance is delayed or prevented by force majeure,
which shall mean acts of God, strikes, material or labor restrictions by
any governmental authority, civil riot, floods, and any other cause not
reasonably within the control of either Purchaser or Seller and that
either Purchaser or Seller, by the exercise of due diligence, is unable,
either wholly or in part, to prevent or overcome.
(j) NOTICES. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request,
demand, claim, or other communication hereunder shall be deemed duly
given (1) after two (2) business days if it is sent by registered or
certified mail, return receipt requested, postage prepaid, and addressed
to the intended recipient as set forth below, (2) immediately if it is
hand delivered during normal business hours to the addresses set forth
below, and (3) on receipt by the receiving party of a telecopy, with
proof of such receipt being required:
If to Seller: Mr. Glenn Bollinger
Bollinger Industries L.P.
222 West Airport Freeway
Irving, Texas 75062
Telecopy: 214-438-6242
Telephone: 214-445-0386(Metro)
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<PAGE> 20
With Copy To: Mr. George T. Johns
Tracy & Holland, L.L.P.
306 West Seventh Street, Suite 500
Fort Worth, Texas 76102
Telecopy: 817-332-3140
Telephone: 817-335-1050
If to Purchaser: Mr. David L. Foster
Rehab Plus Therapeutic Products, Inc.
6104 45th Street, Space D
Lubbock, Texas 79407
Telephone: 800-288-8059
Telecopy: 806-791-2288
With a copy to: Mr. H. Alan Carmichael
McCleskey, Harriger, Brazill & Graf, L.L.P.
5010 University Avenue
P. O. Box 6170
Lubbock, Texas 79493
Telephone: 806-796-7300
Telecopy: 806-796-7365
Any Party may change the address to which notices, requests,
demands, claims, and other communications hereunder are to be delivered
by giving the other Party notice in the manner herein set forth.
(k) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of Texas
without giving effect to any choice or conflict of law provision or rule
(whether of the State of Texas or any other jurisdiction) that would
cause the application of the laws of any jurisdiction other than the
State of Texas.
(l) AMENDMENTS AND WAIVERS. No amendment of any provision of
this Agreement shall be valid unless the same shall be in writing and
signed by Purchaser and Seller. No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder
or affect in any way any rights arising by virtue of any prior or
subsequent such occurrence.
(m) SEVERABILITY. Any term or provision of this Agreement that
is invalid or unenforceable in any situation in any jurisdiction shall
not affect the validity or enforceability of the remaining terms and
provisions hereof or the validity or enforceability of the offending
term or provision in any other situation or in any other jurisdiction.
(n) EXPENSES. Purchaser and Seller will bear its own costs and
expenses (including legal fees and expenses) incurred in
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<PAGE> 21
connection with this Agreement and the transactions contemplated hereby,
unless another provision for an expense or fee is specifically set forth in
this Agreement.
(o) GENERAL RULES OF CONSTRUCTION. This Agreement shall not be
strictly construed against either Purchaser or Seller. No remedy or
election given by any provision in this Agreement shall be deemed
exclusive unless so indicated, but each shall, wherever possible, be
cumulative with all other remedies in law or equity. The parties
acknowledge that each party (and its counsel, if any) has had the
opportunity to review and revise this Agreement and that the normal rule
of construction to the effect that any ambiguities are to be resolved
against the drafting party shall not be employed in the interpretation
of this Agreement or any amendments or exhibits thereto.
(p) INCORPORATION OF EXHIBITS. The Exhibits identified in this
Agreement are incorporated herein by reference and made a part hereof.
The Parties acknowledge that certain of the Exhibits referenced in this
Agreement have not been completed and attached at the time of the
Parties signing this Agreement. The Parties shall mutually agree to
these Exhibits on or before Closing and attach same to this Agreement
for the Closing. Any of such later determined Exhibits shall be deemed
to have been agreed to and attached hereto as of the signing of this
Agreement by the Parties.
(q) CROSS-COLLATERALIZATION. After the Closing:
(1) A default by Purchaser under either this Agreement or
the Note shall be deemed to be a default by Purchaser under both;
(2) A default by either guarantor under the Guaranty shall
be deemed to be a default by Purchaser under this Agreement and the
Note; and
(3) A default by Seller under this Agreement shall not be
deemed a reason for Purchaser's non-payment under the terms of the Note.
In the event of a default as provided for above in this
subsection, at the election of the non-defaulting Party, such default
shall be deemed to be a default under the other agreements as above
provided, whereupon such agreements shall, at non-defaulting Party's
election, terminate and the non-defaulting Party
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<PAGE> 22
shall be entitled to
recover from the defaulting Party any damages to which it is entitled.
The Parties have executed this Agreement on August 29, 1996.
PURCHASER: SELLER:
Rehab Plus Therapeutic Bollinger Industries L.P.
Products, Inc.
By /s/ RONNIE K. BILLO By: /s/ GLENN D. BOLLINGER
------------------------ -------------------------
Glenn D. Bollinger
Its President Chief Executive Officer of
--------------------- Bollinger Operating Corp., its
General Partner
EXHIBITS:
EXHIBIT 1(a) Seller Affiliates
EXHIBIT 1(i) Equipment
EXHIBIT 1(j) Inventory
EXHIBIT 1(k) Liabilities
EXHIBIT 1(m) Prepaid Expenses
EXHIBIT 2(c)(2) Note
EXHIBIT 2(e) Purchase Price Allocation
EXHIBIT 3(i) Contract Rights
EXHIBIT 7(b)(2)(C) Guaranty
EXHIBIT 8 Escrow Agreement
EXHIBIT 10(c) Noncompetition Customer List
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<PAGE> 1
EXHIBIT 10.46
NATIONSBANK
NATIONSBANK OF TEXAS, N.A.
- --------------------------------------------------------------------------------
ELEVENTH AMENDMENT
TO
LOAN AND SECURITY AGREEMENT
THIS ELEVENTH AMENDMENT TO LOAN AND SECURITY AGREEMENT (the "Amendment")
is dated effective as of August 15, 1996, and entered into by and between
NATIONSBANK OF TEXAS, N.A., a national banking association ("Lender") with
offices at 901 Main Street, 11th Floor, Dallas, Texas 75202, and BOLLINGER
INDUSTRIES, L.P., a Texas limited partnership ("Borrower") with offices at 222
Airport Freeway, Irving, Texas 75062.
WHEREAS, Lender and Borrower have entered into a Loan and Security
Agreement (THE "LOAN Agreement"), dated as of September 9, 1994;
WHEREAS, Lender and Borrower on October 28, 1994 have entered into a First
Amendment to Loan and Security Agreement (the "First Amendment"), which was
dated effective as of September 9, 1994;
WHEREAS, Lender and Borrower on December 8, 1994 have entered into a
Second Amendment to Loan and Security Agreement (the "Second Amendment");
WHEREAS, Lender and Borrower on March 3, 1995 have entered into a Third
Amendment to Loan and Security Agreement (the "Third Amendment"), which was
dated effective as of December 31, 1994;
WHEREAS, Lender and Borrower on may 15, 1995 have entered into a Fourth
Amendment to Loan and Security Agreement (the "Fourth Amendment"), which was
dated effective as of January 31, 1995;
WHEREAS, Lender and Borrower, effective on September 9, 1995, have entered
into a Fifth Amendment to Loan and Security Agreement (the "Fifth Amendment");
WHEREAS, Lender and Borrower, effective on December 29, 1995, have entered
into a Sixth Amendment to Loan and Security Agreement (the "Sixth Amendment");
WHEREAS, Lender and Borrower, effective on March 8, 1996, have entered
into a Seventh Amendment to Loan and Security Agreement (the "Seventh
Amendment");
WHEREAS, Lender and Borrower, effective on May 8, 1996, have entered into
an Eighth Amendment to Loan and Security Agreement (the "Eighth Amendment");
and
WHEREAS, Lender and Borrower, effective on May 17, 1996, have entered into
a Ninth Amendment to Loan and Security Agreement (the "Ninth Amendment"); and
WHEREAS, Lender and Borrower, effective on July 8, 1996, have entered into
a tenth Amendment to Loan and Security Agreement (the "Tenth Amendment") (the
loan agreement together with the First Amendment, the Second Amendment, the
Third Amendment, the Fourth Amendment, the Fifth Amendment, the Sixth
Amendment, the Seventh Amendment, the Eighth Amendment, the Ninth Amendment and
the Tenth Amendment shall hereinafter be referred to as the "Agreement"); and
<PAGE> 2
WHEREAS, Lender and Borrower desire to further amend the Agreement as
hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual conditions and agreements
set forth in the Agreement and this Amendment, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties, intending to be legally bound, hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 DEFINITIONS. Capitalized terms used in this Amendment, to the
extent not otherwise defined herein, shall have the same meanings as in the
Agreement, as amended hereby.
ARTICLE II
AMENDMENTS
Section 2.1 AMENDMENT TO DEFINITION OF CONTRACT TERM. Effective as of
the date hereof, the definition of "Contract Term" contained in Article I of
the Agreement is hereby amended and restated to read in its entirety as
follows:
"CONTRACT TERM" means the period beginning on the effective date
specified in the preamble of this Agreement and continuing through
September 15, 1998."
Section 2.2 AMENDMENT TO DEFINITION OF CREDIT LIMIT. Effective as of the
date hereof, the definition of "Credit Limit" contained in Article I of the
Agreement is hereby amended and restated to read in its entirety as follows:
"CREDIT LIMIT" means (a) on Paydown Date, the amount of
$2,000,000.00, thereafter reducing monthly by the amount of
required principal payments scheduled under Section 2.3.
Section 2.3. NEW DEFINITION: INTERCREDITOR AGREEMENT. Effective as of
the date hereof, a new definition hereby is added to in Article I of the
Agreement which shall read in its entirety as follows:
"INTERCREDITOR AGREEMENT" means an intercreditor agreement to be
executed and entered into among Lender, Borrower (and other owners
of the Collateral) and the Refinance Lender, effective on and after
the Paydown Date, pursuant to which Lender shall subordinate its
interest in the Collateral (but not including Lender's interest in
Borrower's real property comprising it corporate headquarters
location in Dallas County, Texas), provided, that all terms,
conditions and provisions of such intercreditor agreement shall be
in form and substance satisfactory to Lender, and any renewal,
extension, modification, amendment or restatement thereof.
2
<PAGE> 3
Section 2.4 AMENDMENT TO DEFINITION OF LOAN DOCUMENTS. The definition of
"Loan Documents" contained in Article I of the Agreement is hereby amended and
restated to read in its entirety as follows:
"LOAN DOCUMENTS" means this Agreement, the Revolving Note, the
First Amended and Restated Revolving Note - Overline, the Demand
Note, as modified, the First Amendment to Loan and Security
Agreement dated effective as of September 9, 1994, the Second
Amendment to Loan and Security Agreement dated as of December 8,
1994, the Third Amendment to Loan and Security Agreement dated
effective as of December 31, 1994, the Fourth Amendment to Loan and
Security Agreement dated effective as of January 31, 1995, the
Fifth Amendment to Loan and Security Agreement dated as of
September 9, 1995, the Sixth Amendment to Loan and Security
Agreement dated as of December 29, 1995, the Seventh Amendment to
Loan and Security Agreement dated as of March 8, 1996, the Eighth
Amendment to Loan and Security Agreement dated as of May 8, 1996,
the Ninth Amendment to Loan and Security Agreement dated as of May
17, 1996, the Tenth Amendment to Loan and Security Agreement dated
as of July 8, 1996, the Eleventh Amendment to Loan and Security
Agreement dated effective as of August 15, 1996, each Guaranty, the
Guaranty, executed by Glenn D. Bollinger in favor of Lender, the
Guaranty, executed by Bobby D. Bollinger in favor of Lender, the
NBF Security Agreement, the Security Agreement dated as of March 8,
1996, executed by BII to the Lender, the Deed of Trust, Security
Agreement, Assignment and Financing Statement dated as of May 8,
1996, relating to the Borrower's corporate headquarters, the
Intercreditor Agreement, and all other documents or agreements
executed in connection therewith, and also includes any and all
renewals, extensions, modifications or amendments of any of any of
the foregoing.
Section 2.5. NEW DEFINITION: PAYDOWN DATE. Effective as of the date
hereof, a new definition hereby is added to in Article I of the Agreement which
shall read in its entirety as follows:
"PAYDOWN DATE" means the date, on or about August 19, 1996, on
which Lender receives payment, via wire transfer or other collected
funds, in an amount sufficient to reduce the unpaid balance of the
Obligations to an amount not exceeding Two Million Dollars
($2,000,000.00)."
Section 2.6 AMENDMENT TO DEFINITION OF PERMITTED LIENS. Effective as of
the date hereof, the definition of "Permitted Liens" contained in Article I of
the Agreement is hereby amended to add a new subparagraph (x), immediately
following subparagraph (ix), as follows:
"(x) On and after the Paydown Date, security interests in favor of
the Refinance Lender, subject however, to the Intercreditor
Agreement."
Section 2.7. NEW DEFINITION: REFINANCE LENDER. Effective as of the date
hereof, a new definition hereby is added to in Article I of the Agreement which
shall read in its entirety as follows:
"REFINANCE LENDER" means Foothill Capital Corporation, as lender to
Borrower of funds the proceeds of which are used by Borrower on the
Paydown Date to effect payment to Lender in reduction of the
Obligations to an amount not exceeding Two Million Dollars
($2,000,000.00)."
3
<PAGE> 4
Section 2.8 AMENDMENT TO SECTION 2.2 OF THE AGREEMENT. Effective as of
the date hereof, SECTION 2.2 OF THE AGREEMENT HEREBY IS AMENDED TO ADD THE
FOLLOWING ADDITIONAL SENTENCE AS A NEW LAST SENTENCE THEREOF:
"NO LOANS MAY BE REQUESTED BY BORROWER ON AND FOLLOWING THE PAYDOWN
DATE."
Section 2.9 AMENDMENT TO SECTION 2.3 OF THE AGREEMENT. Effective as of
the date hereof, Section 2.3 of the Agreement hereby is amended to read in its
entirety as follows:
2.3 REPAYMENT AND LINE TERMINATION. The remaining balance of the
Obligations on the Paydown Date shall be payable as follows:
Twenty-five (25) consecutive monthly installment payments, each
payable on the fifteenth (15th) day of each calendar month, as
follows: (i) three (3) payments of $25,000.00 plus accrued
interest, payable on September 15, 1996 and continuing through
November 15, 1996, (ii) three (3) payments of $50,000.00 plus
accrued interest, payable on December 15, 1996 and continuing
through February 15, 1997, (iii) six (6) payments of $75,000,00
plus accrued interest, payable on March 15, 1997 and continuing
through August 15, 1997, (iv) twelve (12) payments of $100,000.00
plus accrued interest, payable on september 15, 1997 and continuing
through August 15, 1998, and (v) one final payment in the amount of
all remaining unpaid principal plus interest which shall be due and
payable on September 19, 1998. borrower acknowledges and agrees
that lender shall have no obligation to renew the obligations.
effective on the paydown date, the demand note will be amended and
restated, or otherwise modified and extended in form and substance
satisfactory to lender and borrower, to reflect the foregoing
payment terms.
Section 2.10 AMENDMENT OF SECTION 2.7 TO THE AGREEMENT. Section 2.7 of
the Agreement hereby is amended to add the following additional sentence as the
last sentence thereof:
"No letter of credit may be requested by Borrower or issued by
Lender on or after the Paydown Date."
Section 2.11 DELETION OF SECTION 2.10 TO THE AGREEMENT. Section 2.10 of
the Agreement hereby is amended in its entirety as follows:
2.10 UNUSED LINE FEE. DELETED.
Section 2.12 AMENDMENT OF SECTION 3.6 TO THE AGREEMENT. Section 3.6 of
the Agreement hereby is amended as follows:
a. In the first sentence thereof, the words "On each Day..." hereby
are amended to read "On or before the fifteenth (15) day of each calendar
month..."
b. An additional sentence hereby as added as the last sentence
thereof:
"In lieu of the form of Borrowing Base Report otherwise
previously furnished to Lender by Borrower, Borrower
may satisfy the foregoing requirements by timely
delivery to Lender of a copy of the borrowing base
report, or similar report, from time to time delivered
by Borrower to the Refinance Lender."
4
<PAGE> 5
<PAGE> 6
Section 2.13 AMENDMENT OF SECTION 3.8 TO THE AGREEMENT. Section 3.8 of
the Agreement hereby is amended and restated to read in its entirety as
follows:
3.8 RECEIVABLES; COLLECTIONS. On and after the Paydown Date, all
proceeds and collections of Receivables shall continue subject to
Lender's security interest, subject however, to the terms of the
Intercreditor Agreement. All such proceeds and collections shall
be handled as provided by the Intercreditor Agreement.
Section 2.14 DELETION OF SECTION 6.21 TO THE AGREEMENT. Section 6.21 of
the Agreement hereby is amended in its entirety as follows:
6.21 FINANCIAL COVENANTS. DELETED.
Section 2.15 AMENDMENT TO SECTION 6.25 OF THE AGREEMENT. Section 6.25 of
the Agreement is hereby amended and restated to read in its entirety as
follows:
SECTION 6.25 LIMITATION ON INDEBTEDNESS. Borrower will not be
obligated, directly or indirectly, for borrowed money or otherwise
under any promissory note, bond, indenture or similar instrument,
other than (i) in favor of lender, (ii) the indebtedness listed on
Exhibit 6.25 attached hereto and (iii) indebtedness to the
Refinance Lender as referenced in the Intercreditor Agreement.
Section 2.16 DELETION OF SECTION 6.33 TO THE AGREEMENT. Section 6.33 of
the Agreement hereby is amended in its entirety as follows:
6.33 TANGIBLE NET WORTH. DELETED.
Section 2.17 AMENDMENT TO SECTION 7.1 OF THE AGREEMENT. Section 7.1 of
the Agreement is hereby amended to add a new subparagraph (s), immediately
following subparagraph (r) thereof, which shall read in its entirety as
follows:
"(s) Any defined event of default under any instrument or
agreement now or hereafter existing between Borrower and/or NBF and
the Refinance Lender, or any other default or breach of any
obligation owing, or to be performed, by Borrower or NBF thereunder
or under any instrument or agreement in connection therewith."
ARTICLE III
RATIFICATIONS, REPRESENTATIONS AND WARRANTIES
Section 3.1 RATIFICATIONS. The terms and provisions set forth in this
Amendment shall modify and supersede all inconsistent terms and provisions set
forth in the Agreement and, except as expressly modified and superseded by this
Amendment, the terms and provisions of the Agreement, including, without
limitation, all financial covenants contained therein, are ratified and
confirmed and shall continue in full force and effect. Lender and Borrower
agree that the Agreement as amended hereby shall continue to be legal, valid,
binding and enforceable in accordance with its terms. In furtherance and not
in limitation of the provisions of this Section 3.1, Borrower hereby waives and
releases any and all claims or offsets against, or defenses to, the payment and
performance of the Obligations that Borrower may have at law, in equity or
otherwise, based on any and all actions or alleged actions, omissions or related
omissions of Lender or any
5
<PAGE> 7
of Lender's affiliates, directors, officers, employees, attorneys,
representatives or agents which have occurred on or prior to the date of
execution hereof, and Borrower hereby represents and warrants that no such
claims, offsets or defenses exist as of such date.
Section 3.2 REPRESENTATIONS AND WARRANTIES. Borrower, BII, BOC and NBF
each hereby represent and warrant to Lender that the execution, delivery and
performance of this Amendment and all other Loan Documents to which Borrower,
BII, BOC or NBF is or is to be a party hereunder (hereinafter referred to
collectively as the "LOAN DOCUMENTS") executed and/or delivered in connection
herewith, have been authorized by all requisite corporate or partnership
action, as applicable, on the part of Borrower, BII, BOC and NBF and will not
violate the Articles of Incorporation, Bylaws or Partnership Agreement of
Borrower, BII, BOC or NBF, as applicable. There has been no material adverse
change in the business, operations, financial condition, profits or prospects,
or in the Collateral, of Borrower or NBF, since March 31, 1996, except as
previously disclosed to Lender or publicly disclosed, and there has been no
change in the officers of Borrower or any Guarantor since March 31, 1996. The
Articles of Incorporation, Bylaws or Partnership Agreement, as applicable, of
the General Partner of Borrower and each Guarantor have not been altered,
amended, rescinded or revised since the last certification thereof to Lender.
Borrower, BII, BOC and NBF hereby jointly and severally represent and warrant
to Lender that (i) Borrower and NBF own all of the eligible accounts and
eligible inventory described on each borrowing base report previously or
hereafter delivered to Lender, (ii) BII conducts no operations and owns no
material assets other than the stock of BOC and BHC, (iii) BOC and BHC conduct
no operations other than the ownership of partnership interests in Borrower, of
which BOC is the sole General Partner and BHC is the sole limited partner, and
(iv) BOC and BHC own no material assets other than their respective partnership
interests in Borrower.
ARTICLE IV
CONDITIONS PRECEDENT
Section 4.1 CONDITIONS. The effectiveness of this Amendment is subject
to the satisfaction of the following conditions precedent (unless specifically
waived in writing by the Lender):
(a) Lender shall have received all of the following, each dated
(unless otherwise indicated) as of the date of this Amendment, in form
and substance satisfactory to Lender in its sole discretion:
(i) Secretary's Certificate. A Secretary's Certificate dated
as of even date with the date this Amendment is executed from the
General Partner of Borrower and each Guarantor certifying as to
corporate resolutions authorizing the execution and delivery of
this Amendment.
(ii) Amendment. This Amendment, duly executed.
(iii) Modification and Extension. A Modification and
Extension Agreement respecting Lender's existing deed of trust lien
evidenced by the certain deed of trust lien and interest as
evidenced by the certain Deed of Trust, Assignment, Security
Agreement and Financing Statement previously executed by the
Borrower for the benefit of the Lender covering Borrower's
headquarters property on Airport Freeway in Dallas County, Texas,
in form and substance satisfactory to Lender.
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<PAGE> 8
(iv) Opinions of Counsel to Borrower and Guarantors. An
opinion of counsel for Borrower and each Guarantor, respectively,
in form and substance reasonably satisfactory to Lender dated as of
even date with the date this Amendment is executed.
(v) Guaranties. The Borrower shall deliver to the Lender
continuing guaranties of the Obligations, executed by each of Glenn
D. Bollinger and Bobby D. Bollinger, in form and substance
satisfactory to the Lender.
(vi) Other Documents. Borrower shall have executed and
delivered such other documents and instruments as Lender may
reasonably require.
(vii) Legal and Professional Fees. Borrower shall have paid
all fees and expenses of Lender's accountants and legal counsel
incurred in connection with the Obligations and the Loan Documents,
including this Amendment, and the interpretation and enforcement
thereof.
(b) All partnership or corporate proceedings, as applicable, taken
in connection with the transactions contemplated by this Amendment and
all documents, instruments and other legal matters incident thereto shall
be reasonably satisfactory to Lender.
ARTICLE V
MISCELLANEOUS
Section 5.1 POST-CLOSING COVENANTS. The Borrower agrees to comply with
the following covenants, and any failure by the Borrower to comply with any of
the following covenants shall constitute an Event of Default under the
Agreement:
(a) Appraisal, Environmental Report, Title Policy. The Lender
shall obtain, at the Borrower's expense, an appraisal and a Phase I
environmental assessment of the Borrower's corporate headquarters
located at 222 West Airport Freeway, Irving, Texas, such appraisal
and such environmental report to be addressed to Lender, to be
satisfactory to Lender in form and substance, and to be prepared in
accordance with all applicable regulatory requirements. The Lender
shall order the appraisal, but the Borrower may order the
environmental report, subject to approval by the Lender. At
Lender's option, Lender will obtain, at the Borrower's expense, a
mortgagee's policy of title insurance, insuring the lien of the
certain Deed of Trust, Assignment, Security Agreement and Financing
Statement previously executed by the Borrower for the benefit of
the Lender covering the above referenced real property, with such
insurer and in such amount as is acceptable to Lender.
Section 5.2 NO WAIVER, RESERVATION OF RIGHTS. No failure on the part of
Lender to exercise and no delay in exercising, and no course of dealing with
respect to, any right, power or privilege under the Agreement or any other Loan
Document shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, power or privilege under the Agreement or any other Loan
Document preclude any other or further exercise thereof or the exercise of any
other right, power or privilege. Notwithstanding any failure by Lender to
insist on strict compliance by Borrower with the terms of the Agreement or any
other Loan Document in the past, or any forbearance by Lender in exercising its
rights and remedies under the Agreement and the other Loan Documents, including
any past waivers by Lender of Events of Default under the Agreement or any
other Loan Document, Lender will insist on strict compliance with the terms of
the Agreement and the other Loan Documents in the future. Any future failure
by Borrower to comply strictly
7
<PAGE> 9
with the terms of the Agreement and the other Loan Documents may result in the
Lender's pursuit of its rights and remedies existing by virtue of the Agreement
and the other Loan Documents or existing at law or in equity. Lender expressly
reserves the right to exercise any and all rights or remedies available to
Lender under the Loan Documents, at law or in equity, with respect to any
present or future Events of Default unless the same are waived in writing by
Lender. No failure on the part of Lender to exercise, or delay by Lender in
exercising, its rights and remedies under the Loan Documents shall constitute a
waiver of any existing or future Event of Default.
Section 5.3 NO EXTENSION OF MATURITY. Lender hereby notifies Borrower
that, notwithstanding any previous renewals or extensions of credit to
Borrower, Lender will not continue to make credit available to Borrower and
that the remaining balance of the Obligations shall be due and payable as
specified in Section 2.3 of the Agreement, as amended hereby.
Section 5.4 COLLATERAL; CONTINUING SECURITY. Borrower acknowledges that
Lender's continuing security interest in the Collateral continues as security
for the Obligations, provided, that on and after the Paydown Date (as defined
by the Agreement, as amended hereby), such security interest shall be subject
to the Intercreditor Agreement (as defined by the Agreement, as amended
hereby), and provided further, that in any event Lender shall keep and maintain
first, prior and exclusive its existing deed of trust lien and interest as
evidenced by the certain Deed of Trust, Assignment, Security Agreement and
Financing Statement previously executed by the Borrower for the benefit of the
Lender covering Borrower's headquarters property on Airport Freeway in Dallas
County, Texas.
Section 5.5 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties made in the Agreement or any other document or
documents relating thereto, including, without limitation, any Loan Document
furnished in connection with this Amendment, shall survive the execution and
delivery of this Amendment and the other Loan Documents, and no investigation
by Lender or any closing shall affect the representations and warranties or the
right of Lender to rely thereon.
Section 5.6 REFERENCE TO AGREEMENT. The Agreement, each of the Loan
Documents, and any and all other agreements, documents or instruments now or
hereafter executed and delivered pursuant to the terms hereof or pursuant to
the terms of the Agreement as amended hereby, are hereby amended so that any
reference therein to the Agreement shall mean a reference to the Agreement as
amended hereby.
Section 5.7 WAIVER OF JURY TRIAL. THE PARTIES HERETO AGREE THAT NEITHER
PARTY SHALL REQUEST A TRIAL BY JURY IN THE EVENT OF LITIGATION BETWEEN THEM
CONCERNING THE LOAN DOCUMENTS OR ANY CLAIMS OR TRANSACTIONS IN CONNECTION
THEREWITH, IN EITHER A STATE OR FEDERAL COURT, THE RIGHT TO TRIAL BY JURY BEING
EXPRESSLY WAIVED BY BOTH LENDER AND BORROWER. LENDER AND BORROWER EACH
ACKNOWLEDGES THAT SUCH WAIVER IS MADE WITH FULL KNOWLEDGE AND UNDERSTANDING OF
THE NATURE OF THE RIGHTS AND BENEFITS WAIVED HEREBY, AND WITH THE BENEFIT OF
ADVICE OF COUNSEL OF ITS CHOOSING.
Section 5.8 ARBITRATION. ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE
PARTIES HERETO INCLUDING BUT NOT LIMITED TO THOSE ARISING OUT OF OR RELATING TO
THIS AMENDMENT OR ANY RELATED AGREEMENTS OR INSTRUMENTS, INCLUDING ANY CLAIM
BASED ON OR ARISING FROM AN ALLEGED TORT, SHALL BE DETERMINED BY BINDING
ARBITRATION IN ACCORDANCE WITH THE FEDERAL ARBITRATION ACT (OR IF NOT
APPLICABLE, THE APPLICABLE STATE LAW), THE RULES OF PRACTICE AND PROCEDURE FOR
THE ARBITRATION OF COMMERCIAL DISPUTES OF ENDISPUTE, INC. (A/K/A
J.A.M.S./ENDISPUTE) ("J.A.M.S."), AND THE "SPECIAL RULES" SET FORTH BELOW. IN
THE
8
<PAGE> 10
EVENT OF ANY INCONSISTENCY, THE SPECIAL RULES SHALL CONTROL. JUDGMENT UPON
ANY ARBITRATION AWARD MAY BE ENTERED IN ANY COURT HAVING JURISDICTION. ANY
PARTY TO THIS AMENDMENT MAY BRING AN ACTION, INCLUDING A SUMMARY OR EXPEDITED
PROCEEDING, TO COMPEL ARBITRATION OF ANY CONTROVERSY OR CLAIM TO WHICH THIS
AMENDMENT APPLIES IN ANY COURT HAVING JURISDICTION OVER SUCH ACTION.
(a) Special Rules. THE ARBITRATION SHALL BE CONDUCTED IN THE CITY
OF THE BORROWER'S DOMICILE AT THE TIME OF THIS AMENDMENT'S EXECUTION AND
ADMINISTERED BY J.A.M.S. WHO WILL APPOINT AN ARBITRATOR; IF J.A.M.S. IS
UNABLE OR LEGALLY PRECLUDED FROM ADMINISTERING THE ARBITRATION, THEN THE
AMERICAN ARBITRATION ASSOCIATION WILL SERVE. ALL ARBITRATION HEARINGS
WILL BE COMMENCED WITHIN 90 DAYS OF THE DEMAND FOR ARBITRATION; FURTHER,
THE ARBITRATOR SHALL ONLY, UPON A SHOWING OF CAUSE, BE PERMITTED TO
EXTEND THE COMMENCEMENT OF SUCH HEARING FOR UP TO AN ADDITIONAL 60 DAYS.
(b) Reservation of Rights. NOTHING IN THIS AMENDMENT SHALL BE
DEEMED TO (I) LIMIT THE APPLICABILITY OF ANY OTHERWISE APPLICABLE
STATUTES OF LIMITATION OR REPOSE AND ANY WAIVERS CONTAINED IN THIS
AMENDMENT; OR (II) BE A WAIVER BY THE LENDER OF THE PROTECTION AFFORDED
TO IT BY 12 U.S.C. SEC. 91 OR ANY SUBSTANTIALLY EQUIVALENT STATE LAW; OR
(III) LIMIT THE RIGHT OF THE LENDER HERETO (A) TO EXERCISE SELF HELP
REMEDIES SUCH AS (BUT NOT LIMITED TO) SETOFF, OR (B) TO FORECLOSE AGAINST
ANY REAL OR PERSONAL PROPERTY COLLATERAL, OR (C) TO OBTAIN FROM A COURT
PROVISIONAL OR ANCILLARY REMEDIES SUCH AS (BUT NOT LIMITED TO) INJUNCTIVE
RELIEF, WRIT OF POSSESSION OR THE APPOINTMENT OF A RECEIVER. THE LENDER
MAY EXERCISE SUCH SELF HELP RIGHTS, FORECLOSE UPON SUCH PROPERTY, OR
OBTAIN SUCH PROVISIONAL OR ANCILLARY REMEDIES BEFORE, DURING OR AFTER THE
PENDENCY OF ANY ARBITRATION PROCEEDING BROUGHT PURSUANT TO THIS
AMENDMENT. NEITHER THIS EXERCISE OF SELF HELP REMEDIES NOR THE
INSTITUTION OR MAINTENANCE OF AN ACTION FOR FORECLOSURE OR PROVISIONAL OR
ANCILLARY REMEDIES SHALL CONSTITUTE A WAIVER OF THE RIGHT OF ANY PARTY,
INCLUDING THE CLAIMANT IN ANY SUCH ACTION, TO ARBITRATE THE MERITS OF THE
CONTROVERSY OR CLAIM OCCASIONING RESORT TO SUCH REMEDIES.
No provision in the Loan Documents regarding waiver of trial by jury or
submission to jurisdiction and/or venue in any court is intended or shall be
construed to be in derogation of the provisions in any Loan Document for
arbitration of any controversy or claim.
Section 5.9 GOVERNING LAW. THIS AMENDMENT, AND ALL DOCUMENTS AND
INSTRUMENTS EXECUTED IN CONNECTION HEREWITH, SHALL BE GOVERNED BY AND CONSTRUED
ACCORDING TO THE LAWS OF THE STATE OF TEXAS, PROVIDED, THAT TO THE EXTENT
FEDERAL LAW WOULD ALLOW A HIGHER RATE OF INTEREST THAN WOULD BE ALLOWED BY THE
LAWS OF THE STATE OF TEXAS, THEN WITH RESPECT TO THE PROVISIONS OF ANY LAW
WHICH PURPORT TO LIMIT THE AMOUNT OF INTEREST THAT MAY BE CONTRACTED FOR,
CHARGED OR RECEIVED IN CONNECTION WITH ANY OF THE OBLIGATIONS, SUCH FEDERAL LAW
SHALL APPLY.
Section 5.10 PARTIES BOUND. This Amendment shall be binding upon and
inure to the benefit of Borrower and Lender, and their respective successors in
interest and assigns. Borrower may not assign any
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<PAGE> 11
right, power, duty, or obligation under this Amendment, or any document or
instrument executed in connection herewith, without the prior written consent
of Lender. Subject to any applicable rules, regulations or laws of
governmental authorities relating to the non-assignability of loans or other
assets of Lender, Lender may not assign any of its rights, powers, duties or
obligations under this Amendment, or any document or instrument executed in
connection herewith, without the prior written consent of Borrower. This
Amendment is intended for the benefit of Borrower and Lender, and their
respective successors in interest and assigns only, and may not be relied upon
by any other Person.
Section 5.11 CUMULATIVE RIGHTS. All rights and remedies of Lender under
the Loan Documents are cumulative, and are in addition to rights and remedies
available to Lender by law. Such rights and remedies may be exercised
concurrently or successively, at such times as Lender may determine in its
discretion. Borrower waives any right to require marshaling.
Section 5.12 SEVERABILITY. If any provision of this Amendment is held to
be illegal, invalid, or unenforceable under any present or future laws
effective during the Contract Term, such provisions shall be fully severable,
and this Amendment shall be construed and enforced as if such illegal, invalid,
or unenforceable provision had never comprised a part of this Amendment. In
such case, the remaining provisions of the Amendment shall remain in full force
and effect and shall not be affected thereby.
Section 5.13 MULTIPLE COUNTERPARTS. This Amendment may be executed
simultaneously in one or more multiple originals, each of which shall be deemed
an original, but all of which together shall constitute one and the same
Amendment.
Section 5.14 SURVIVAL. All covenants, agreements, representations, and
warranties made by Borrower herein shall survive the execution, delivery, and
closing of this Amendment, and all documents executed in connection herewith,
and shall not be affected by any investigation made by any party.
THIS WRITTEN AMENDMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, the parties have executed this Amendment on August 15,
1996 to be effective as of the effective date stated in the preamble.
"BORROWER"
BOLLINGER INDUSTRIES, L.P.,
A TEXAS LIMITED PARTNERSHIP
By: Bollinger Operating Corp.,
A Nevada corporation,
General Partner
By: /s/ GLENN D. BOLLINGER
-------------------------------------------
Name: Glenn D. Bollinger
Title: Chairman and Chief Executive Officer
10
<PAGE> 12
THE STATE OF TEXAS )
)
COUNTY OF TARRANT )
BEFORE ME, the undersigned authority, on this day personally appeared
Glenn D. Bollinger, Chairman and Chief Executive Officer of Bollinger Operating
Corp., the general partner of Bollinger Industries, L.P., known to me to be the
person and officer whose name is subscribed to the foregoing instrument, and
acknowledged to me that the same was the act of the said BOLLINGER INDUSTRIES,
L.P., a Texas limited partnership, and that he executed the same on behalf of
Bollinger Operating Corp. as the general partner of Bollinger Industries, L.P.,
as the act of such limited partnership for the purposes and consideration
therein expressed and in the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this the 19th day of August, 1996.
/s/ GEORGE T. JOHNS
--------------------------------------
NOTARY PUBLIC, STATE OF TEXAS
My Commission Expires:
11/04/99 GEORGE T. JOHNS
- ---------------------- --------------------------------------
(Printed Name of Notary)
[NOTARY SEAL]
11
<PAGE> 13
AGREED AND ACCEPTED on August 15, 1996 to be effective as of the effective
date stated in the preamble.
"LENDER"
NATIONSBANK OF TEXAS, N.A.
By: /s/ GREG NICHOLAS
-----------------------------------
Name: Greg Nicholas
Title: Vice President
THE STATE OF TEXAS )
)
COUNTY OF DALLAS )
BEFORE ME, the undersigned authority, on this day personally appeared Greg
Nicholas, Vice President, known to me to be the person and officer whose name
is subscribed to the foregoing instrument, and acknowledged to me that the same
was the act of the said NATIONSBANK OF TEXAS, N.A., a national banking
association, and that he executed the same as the act of such banking
association for the purposes and consideration therein expressed and in the
capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this the 15th day of August, 1996.
/s/ DONNA M. MALIZIA
-----------------------------------
NOTARY PUBLIC, STATE OF TEXAS
My Commission Expires:
11-09-98 Donna M. Malizia
- --------------------- -----------------------------------
(Printed Name of Notary)
[NOTARY SEAL]
12
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CONSENTS AND REAFFIRMATIONS
BOLLINGER INDUSTRIES, INC. ("BII"), BOLLINGER OPERATING CORP. AND NBF,
INC. ("NBF"), each jointly and severally hereby acknowledge the execution of,
and consent to, the terms and conditions of that certain Eleventh Amendment to
Loan and Security Agreement dated effective as of August __, 1996, between
Bollinger Industries, L.P. and NationsBank of Texas, N.A. ("LENDER") and (i)
reaffirms their respective obligations under those certain Guaranty By
Corporation (the "GUARANTIES") each dated as of September 9, 1994, made by the
undersigned in favor of the Lender, and acknowledge and agree that the
Guaranties remain in full force and effect and the Guaranties are hereby
ratified and confirmed; and (ii) NBF reaffirms its obligations under that
certain Security Agreement (the "NBF Security Agreement") dated as of September
9, 1994, made by NBF in favor of the Lender and acknowledges and agrees that
the NBF Security Agreement remains in full force and effect and the NBF
Security Agreement is hereby ratified and confirmed; and (iii ) BII reaffirms
its obligations under that certain Security Agreement (the "BII SECURITY
AGREEMENT") dated as of March 8, 1996, made by BII in favor of the Lender and
acknowledges and agrees that the BII Security Agreement remains in full force
and effect and the BII Security Agreement is hereby ratified and confirmed.
EXECUTED on August 15, 1996 to be effective as of the stated effective
date of such Eleventh Amendment.
GUARANTOR:
BOLLINGER INDUSTRIES, INC.
By: /s/ GLENN D. BOLLINGER
--------------------------------
Name: Glenn D. Bollinger
Title: Chairman and Chief Executive
Officer
GUARANTOR:
BOLLINGER OPERATING CORP.
By: /s/ GLENN D. BOLLINGER
--------------------------------
Name: Glenn D. Bollinger
Title: Chairman and Chief Executive
Officer
GUARANTOR:
NBF, INC.
By: /s/ GLENN D. BOLLINGER
--------------------------------
Name: Glenn D. Bollinger
Title: Vice Chairman
13
<PAGE> 15
THE STATE OF TEXAS )
)
COUNTY OF TARRANT )
BEFORE ME, the undersigned authority, on this day personally appeared
Glenn D. Bollinger, known to me to be the person and officer whose name is
subscribed to the foregoing instrument, and acknowledged to me that the same
was the act of said Bollinger Industries, Inc., and that he executed the same
for the purposes and consideration therein expressed.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this the 19th day of August, 1996.
/s/ GEORGE T. JOHNS
----------------------------------
NOTARY PUBLIC STATE OF TEXAS
My Commission Expires:
11/04/99
- ------------------------ GEORGE T. JOHNS
----------------------------------
(Printed Name of Notary)
[NOTARY SEAL]
THE STATE OF TEXAS )
)
COUNTY OF TARRANT )
BEFORE ME, the undersigned authority, on this day personally appeared
Glenn D. Bollinger, known to me to be the person and officer whose name is
subscribed to the foregoing instrument, and acknowledged to me that the same
was the act of said Bollinger Operating Corp., and that he executed the same
for the purposes and consideration therein expressed.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this the 19th day of August, 1996.
/s/ GEORGE T. JOHNS
----------------------------------
NOTARY PUBLIC STATE OF TEXAS
My Commission Expires:
11/04/99
- ------------------------ GEORGE T. JOHNS
----------------------------------
(Printed Name of Notary)
[NOTARY SEAL]
14
<PAGE> 16
THE STATE OF TEXAS )
)
COUNTY OF TARRANT )
BEFORE ME, the undersigned authority, on this day personally appeared
Glenn D. Bollinger, known to me to be the person and officer whose name is
subscribed to the foregoing instrument, and acknowledged to me that the same
was the act of said NBF, Inc., and that he executed the same for the purposes
and consideration therein expressed.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this the 19th day of August, 1996.
/s/ GEORGE T. JOHNS
----------------------------------
NOTARY PUBLIC STATE OF TEXAS
My Commission Expires:
11/04/99
- ------------------------ GEORGE T. JOHNS
----------------------------------
5 (Printed Name of Notary)
[NOTARY SEAL]
15
<PAGE> 17
[NATIONSBANK LOGO]
MODIFICATION AND EXTENSION AGREEMENT
The parties in this agreement ("Agreement") dated and effective as of
August 15, 1996 (the "Modification Date") are NationsBank of Texas, N.A.
("Lender"), Bollinger Industries, L.P. ("Borrower") and each other person who
executes this Agreement as provided herein. For good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
parties agree as follows:
1. BACKGROUND. Lender owns the promissory note dated September 9, 1994 made by
Borrower payable to the order of Lender in the principal face amount of
$25,000,000.00 with a stated final maturity date (including all prior renewals
or extensions, if any) of November 8, 1996, which promissory note it, as it may
have been renewed, extended, amended, or supplemented by one or more documents,
if any, dated before the Modification Date, herein called the "NOTE", and the
Note as modified by this Agreement is herein called the "MODIFIED NOTE". The
security for payment of the Note includes (without limitation), the Deed of
Trust, Assignment, Security Agreement and Financing Statement dated as of May
8, 1996 executed by Borrower as grantor (herein sometimes called "GRANTOR",
whether or not the same as Borrower), recorded in Volume 96107, Page 07017,
Deed Records of Dallas County, Texas, which is, as it may have been renewed,
extended, amended, or supplemented by one or more documents, if any, dated
before the Modification Date, herein called the "COLLATERAL DOCUMENT",
reference being here made to the Collateral Document and the recording thereof
for all purposes. The Collateral Document covers the real and personal property
(the "PROPERTY") therein described, subject to recorded partial releases, if
any, executed by Lender or a prior owner of the Note.
2. MODIFICATION, NOTE PRINCIPAL BORROWER ADVANCE LIMIT. Borrower and Lender
agree to extend the stated final maturity date of the Note (subject to
acceleration as provided in the Loan Documents) and to make certain other
changes, as specified below in this Agreement. The unpaid principal balance of
the Note as of the Modification Date is $2,000,000.00. The amount, if any, left
to advance under the Note as of the Modification Date is $-0-, and if that
amount was greater immediately prior to the Modification Date, this constitutes
an agreed reduction of that amount. The Note, the Collateral Document, this
Agreement, and any other document now or hereafter securing, guaranteeing or
executed in connection with the loan evidenced by the Note, as such documents
may have been or may be herein or hereafter renewed, extended, amended or
supplemented, are herein together called the "LOAN DOCUMENTS". Lender is
entitled to the benefits of the Loan Documents.
3. INTEREST RATE. Subject to the further provisions of this Section 3 and
Section 5 below, on and after the Modification Date the unpaid principal
balance of the Modified Note from day to day outstanding which is not past
due shall bear interest at a rate per annum equal to the lesser of (i) the
Maximum Rate (hereinafter defined) or (ii) the STATED RATE (defined below)
computed on the Annual Basis (hereinafter defined). The term "STATED RATE" as
used in this Agreement means the rate indicated by (a) below as applicable:
[ ] a fixed rate of _______% per annum; or
[x] a variable rate ("VARIABLE RATE") equal to:
[x] The Prime Rate of Lender ("Indicator") plus 3% per annum; or
[ ] The Business Rate of ("Indicator") plus __% per annum; or
[ ]
If a Variable Rate applies, then (i) the Stated Rate shall, unless otherwise
specified herein and subject to clause (ii) following, change with each change
in each Variable Rate as of the date of any such change, without notice,
subject always in limitation by the Maximum Rate; and (ii) if on any day the
Variable Rate shall exceed the maximum permitted by application of the Maximum
Rate in effect on that day, the Variable Rate shall be limited to, but shall
remain at and vary with, the maximum permitted by application of the Maximum
Rate on that day and on each day thereafter until the total amount of interest
accrued at the Variable Rate on the unpaid balance of the Modified Note equals
the total amount of interest which would have accrued if there were no
limitation by the Maximum Rate, or until the earlier payment in full of the
Modified Note.
NOTICE TO CONSUMERS UNDER TEXAS LAW, IF YOU CONSENT TO THIS AGREEMENT, YOU MAY
BE SUBJECT TO A FUTURE RATE AS HIGH AS 24 PERCENT PER YEAR. (NOTICE APPLICABLE
ONLY WHERE (I) A VARIABLE RATE APPLIES, (II) THE TEXAS CREDIT CODE ESTABLISHES
THE MAXIMUM RATE, AND (III) THE CREDIT IS EXTENDED PRIMARILY FOR PERSONAL,
FAMILY, OR HOUSEHOLD PURPOSES).
The "ANNUAL BASIS" referred to in this Agreement shall be (x as applicable, and
if neither box is checked, 365 applies):
[ ] 360; or [x] 360
If the Annual Basis is 365, the Stated Rate is divided by 365 to obtain a daily
interest rate, and the resulting daily rate is multiplied by the actual number
of days in the interest calculation period. If the Annual Basis is 360, the
Stated Rate is divided by 360 to obtain a daily interest rate, and the
resulting daily rate is multiplied by the actual number of days in the interest
calculation period. Interest on the Modified Note at the Stated Rate and the
Past Due Rate shall be calculated on the Annual Basis, but subject always to
limitation by the Maximum Rate and in no event shall any such computation
result in an amount of interest in excess of the Maximum Amount (hereinafter
defined). In any event, all interest at the Maximum Rate shall be computed on
the Annual Basis of 365 (366 in a leap year).
4. PAYMENT SCHEDULE AND MATURITY DATE. Borrower hereby promises to pay to the
order of Lender in lawful money of the United States of America in immediately
available funds at 901 Main Street, Dallas, Dallas County, Texas, the principal
balance of the Modified Note plus accrued interest thereon, as follows:
Principal and interest payments are due on the 15th day of each month beginning
on September 15, 1996, and continuing each month thereafter until maturity.
Payments are due as set forth below.
- On September 15, October 15 and November 15, 1996: $25,000.00 plus
accrued interest.
- On December 15, 1996, January 15 and February 15, 1997: $50,000.00
plus accrued interest.
- From March 15, through August 15, 1997: $75,000.00 plus accrued
interest.
- From September 15, 1997 through August 15, 1998: $100,000.00 plus
accrued interest.
On September 15, 1998, all outstanding principal and all accrued but unpaid
interest is due and payable.
5. ADDITIONAL PROVISIONS REGARDING INTEREST AND PAYMENTS; PAST DUE RATE. As
used in this Agreement, the term "BUSINESS BASE RATE" means the rate announced
or published from time to time by Indicator as its "business base rate" and the
term "PRIME RATE" means the rate announced or published from time to time by
Indicator as its "prime rate". Any such rate is a general reference rate of
interest, may not be related to any other rate, and may not be the lowest or
best rate actually charged by Indicator to any customer or a favored rate and
may not correspond with future increases or decreases in interest rates charged
by other lenders or market rates in general.
<PAGE> 18
If the Stated Rate is determined by reference to a rate established by
Indicator, and if Lender determines for any reason that Indicator, for a period
of 90 days or more, has discontinued the establishment of a "prime rate" or
"business base rate" or other Indicator's rate specified above as applicable,
as the case may be, then at Lender's election the Stated Rate shall be
determined, commencing thereafter with the date specified by Lender using the
prime rate of a "money center" national bank designated by Lender (plus the
applicable margin, if any, specified above), in lieu of such Indicator's rate,
and until the date specified by Lender if Lender makes the election, the Stated
Rate shall continue to be determined by reference to the last such rate
established by such Indicator.
The term "MAXIMUM RATE" as used in this Agreement means the maximum nonusurious
rate of interest per annum permitted by whichever of applicable United States
federal law or Texas law permits the higher interest rate, including to the
extent permitted by applicable law, any amendments thereof hereafter or any
new law hereafter coming into effect in the extent a higher Maximum Rate is
permitted thereby. To the extent, if any, that Chapter One ("CHAPTER ONE") of
Title 79, Texas Revised Civil Statutes, 1925, as amended (the "RECENT CREDIT
CODE") establishes the Maximum Rate, the Maximum Rate shall be the "indicated
rate ceiling" (as defined in Chapter One), and such rate shall fluctuate as
and to the extent provided by applicable law if a Variable Rate applies. The
Maximum Rate shall be applied by taking into account all amounts characterized
by applicable law as interest on the debt evidenced by the Modified Note, so
that the aggregate of all interest does not exceed the maximum nonusurious
amount permitted by applicable law (the "MAXIMUM AMOUNT"). Notwithstanding
anything contained herein to the contrary, if the loan evidenced by the Note
was made primarily for personal, family or household purposes, and the Note is
secured by a 1-4 family dwelling, any contractual limitation on the maximum
interest rate set out in the Note as required by law shall be applicable to the
Modified Note.
All payments made as scheduled on the Modified Note shall be applied, to the
extent thereof, first to accrued but unpaid interest and the balance to unpaid
principal. All voluntary prepayments on the Modified Note (if and as permitted
by the Note) shall be applied, to the extent thereof, first to accrued but
unpaid interest on the amount prepaid and the balance to the remaining principal
installments in inverse order of their maturity.
Any principal of, and to the extent permitted by applicable law any interest
on, the Modified Note which is not paid when due shall bear interest, from the
date due and payable until paid, payable on demand, at a rate per annum (the
"PAST DUE RATE") equal to the Maximum Rate, or if no such maximum nonusurious
rate is established by applicable law, then at the Stated Rate plus four
percent (4%) per annum; provided, however, if the Note is secured by a second
or subsequent lien on a 1-4 family dwelling, then interest shall accrue at the
Past Due Rate on any such past due amounts from time to time outstanding after
demand for payment in full has been made.
6. COSTS AND EXPENSES. To the extent not prohibited by applicable law, Borrower
shall in each instance within five (5) days after request by Lender pay, or
reimburse Lender for, all costs and expenses reasonably paid or incurred by
Lender from time to time to one or more third parties in connection with (i)
the preparation and acceptance of this Agreement, (ii) the evaluation of, and
protection of Lender's rights with respect to, the Property: and (iii) the
creation, perfection or realization upon the Liens or the exercise of Lender's
rights and remedies under the Loan Documents, such costs and expenses to
include, without limitation, attorney's fees, premiums for title policy
endorsements or for title policy(ies) if applicable, appraisal fees, fees and
expenses of environmental inspections and other professional services and
recording fees. Without limitation of the foregoing and to the extent not
prohibited by applicable law, Lender may at its option order and obtain at
Borrower's expense once in each calendar year an appraisal of The Property or
any part thereof by a third-party appraiser selected by Lender.
7. Obligor; BINDING EFFECT; CONSTRUCTION. The Modified Note is the joint and
several obligation of each party named Borrower herein. Borrower is sometimes
called an "Obligor" herein. If Grantor is other than Borrower and is a
signatory hereto, such party or parties are also herein called "Obligors," and
each such party consents to this Agreement and ratifies and confirms its
obligations under the Loan Documents, which obligations are not amended hereby
unless specifically enumerated herein, Lender not being required, before
enforcing the liability of any Obligor, to assert or exhaust its remedies
against any other Obligor or against the Property or any other security. All
provisions of the Note and the other Loan Documents remain in full force and
effect as therein written, except as expressly modified by this Agreement. To
the extent of any conflict between the Note (or any earlier modification of it)
and this Agreement, this Agreement shall control. If any Obligor is a
corporation, partnership or other legal entity, such party and the person(s)
signing for it represent and warrant to Lender that this Agreement has been
duly executed and delivered by such party's duly authorized representative(s).
This Agreement binds and benefits the parties hereto and their respective
heirs, beneficiaries, administrators, executors, receivers, trustees, successors
and assigns (provided, that no party but Lender may assign its rights hereunder
without Lender's prior written consent). As used herein, the masculine gender
includes each other gender and the singular number includes the plural, and
vice versa, unless the context otherwise requires, and the term "person" and
words importing persons shall include firms, associations, partnerships
(including limited partnerships), joint ventures, trusts, corporations and
other legal entities, including public or governmental bodies, agencies or
instrumentalities, as well as natural persons. Headings and titles used in this
Agreement are only for convenience and shall be disregarded in construing it.
The date or dates of the acknowledgments indicate the date(s) of execution of
this Agreement but execution is as of the Modification Date, and for purposes
of identification and reference the date of this Agreement in the Modification
Date. This Agreement may be executed in several identical counterparts all of
which shall constitute one and the same instrument. THIS AGREEMENT AND THE
OTHER LOAN DOCUMENTS, AS MODIFIED HEREBY, SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND APPLICABLE UNITED STATES
FEDERAL LAW.
8. LIENS. By this Agreement, all liens, security interests, assignments,
superior titles, rights, remedies, powers, equities and priorities securing the
Note (collectively, the "LIENS"), including but not limited to those under the
Collateral Document, are hereby ratified and confirmed as valid, subsisting and
continuing to secure the Modified Note. Nothing in this Agreement shall in any
manner diminish, impair or extinguish any of the Liens or the Loan Documents or
the debt evidenced by the Note or be construed as a novation in any respect. The
Liens are not waived.
9. CERTAIN WARRANTIES AND COVENANTS. Borrower warrants and represents to Lender
that the indebtedness evidenced by the Modified Note is subject to no credit,
charge claims, or right of affect or deduction of any kind whatsoever, and, to
the extent not prohibited by applicable law, Obligors release and discharge
Lender from any and all claims and causes of action, whether known or unknown
and whether now existing or hereafter arising, that have at any time been owned
or claimed, or that are hereafter owned or claimed, by Obligors or any of them
(other than claims for funds, if any, now on deposit with Lender), and that
arise out of any one or more circumstances or events that occurred prior to the
time of execution of this Agreement. The Loan Documents and the obligations
thereunder are ratified and acknowledged as valid, subsisting and enforceable,
subject to no offsets, claims or defenses. The execution of this Agreement by
Lender is not intended nor shall it be construed as an actual or implied waiver
of: (a) any default under any Loan Document; (b) any requirement under any Loan
Document except to the extent of the amendments specified in this Agreement; (c)
any right to demand payment or accelerate maturity contained in any Loss
Document; or (d) any rights Lender may have against any person not a party
hereto. It shall be a default under each of the Loan Documents, subject to the
applicable grace period (if any) under the Loan Documents, another Lender to
exercise any and all rights and remedies provided therein or at law or in equity
including but not limited to the right to declare the entire unpaid balance of
principal and accrued interest on the Modified Note to be immediately due and
payable fund upon such declaration the same shall be immediately due and
payable), if any Obligor fails to make payment, or to perform any covenant or
agreement, in this Agreement or if any statement, representation or warranty in
this Agreement is false, misleading or erroneous in any material respect. If
Borrower fails to comply with any of Borrower's obligations under the Loan
Documents, Lender may, without waiving the default, but shall never be obligated
to, perform or cause performance thereof at Borrower's Expense. All expenses
thus paid by Lender shall automatically and without notice become a part of the
obligations secured by the Collateral Document, shall be demand obligations of
Borrower to Lender and shall bear interest, from the date of Lender's payment
until repaid to Lender, payable on demand, at the Past Due Rate, and Lender (but
not Borrower or any other Obligor) shall be fully subrogated to the rights of
the person or entity receiving such payment. OBLIGORS ACKNOWLEDGE THAT LENDER
HAS NOT CONSIDERED OR AGREED, AND IS UNDER NO OBLIGATION, TO ??? THE MODIFIED
NOTE OR TO EXTEND THE MATURITY DATE OF THE MODIFIED NOTE BEYOND THAT STATED
ABOVE. Lender may assign the Modified Note or participation interests therein
and may disclose in confidence to prospective or actual assignees or
participants such financial and other information regarding Obligors, any
guarantors and the Property as Lender may deem necessary or advisable. Grantor
hereby represents and warrants that Grantor is the sole owner of the Property.
10. ENVIRONMENTAL MATTERS. Without limiting any rights of Lender under the Loan
Documents or applicable law: (a) each Obligor represents and warrants to Lender
that to the best of such Obligor's knowledge (i) the Property is free of any
substance ("HAZARDOUS MATERIAL") which could pose a hazard to the environment or
to the health or safety of persons on or about the Property or which is
classified as hazardous or toxic in or pursuant to any law or ??? relating to
health or the environment ("ENVIRONMENTAL REQUIREMENT"); (ii) there is no claims
or inquiry threatened, instituted or completed concerning the presence or
discharge of any Hazardous Material on, in, under, or about the Property (and
such Obligor will promptly advise Lender in writing as soon as such Obligor
first obtains knowledge of any such claim or inquiry heretofore or hereafter
occurring); (b) no Obligor will place or allow to remain any Hazardous Material,
on, in, under or about the Property or commit, permit or allow to continue any
violation of any Environmental Requirement by such Obligor or by or with respect
to the
<PAGE> 19
Property; and each Obligor agrees to idemnify and hold harmless Lender, and all
past, present and future trustees under the Collateral Document, and their
respective directors, officers, employees, agents and affiliates, from and
against any and all claims, damages, losses, costs, fines, penalties,
liabilities and expenses (including but not limited to attorneys' fees arising
in whole or in part from the presence of any Hazardous Material, on, in, under
or about the Property at any time prior to full and final release or
foreclosure or transfer in lieu of foreclosure of the Collateral Document,
regardless of the cause and regardless of when asserted, imposed, or incurred.
The foregoing provisions regarding environmental matters shall be cumulative of
all other obligations of Obligors and all other rights and remedies of Lender,
and the foregoing indemnities shall survive payment of the debt evidenced by
the Modified Note any foreclosure (or transfer in lieu thereof), any debtor
relief proceeding and the release or other termination of the Collateral
Documents.
11. CONTROLLING AGREEMENT. The portion intend to comply with applicable ?
laws. All existing and future agreements regarding the debt evidenced by the
Note are hereby limited and controlled by the provisions of this paragraph.
In no event (including but not limited to prepayment, default, demand for
payment or acceleration) shall the interest taken, received, contracted for,
charged or received under the Modified Note or otherwise exceed the Maximum
Amount, such document shall be automatically reformed and the interest payable
automatically reduced to the Maximum Amount, without necessity of execution of
any amendment or new document. If Lender ever receives interest in an amount
which apart from this provision would exceed the Maximum Amount, the excess
shall, without penalty, be applied to principal of the Modified Note in
inverse order of maturity of installments or be refunded to the payer if the
Modified Note is paid in full. Lender does not intend to charge or receive
accrued interest on acceleration. All interest paid or agreed to be paid shall
be spread throughout the full term (including extensions) of the debt so that
the amount of interest does not exceed the Maximum Amount.
By this Agreement all liens, security interest, assignments, superior titles,
rights, remedies, powers, ? and priorities securing or providing to Lender
recourse with respect to the Note (collectively, the "Liens"), including but
not limited to those under the Collateral Document, are hereby modified and
confirmed as valid, submitting and continuing to secure and provide to Lender
revenues with respect in the Modified Note. Nothing in this Agreement shall in
any manner diminish, impair or extinguish any of the Liens or the Lien
Documents or the debt evidenced by the Note or be construed as a ? ? in any
respect. The Liens are not waived.
12. ADDITIONAL PROVIDERS. (none, if left blank or stated "none").
This agreement and the Modified Note are subject to the terms and conditions of
that certain Eleventh Amendment to Loan and Security Agreement dated August 15,
1996, between Lender and Borrower.
13. NOTICE OF FINAL AGREEMENT. This agreement embodies the entire Agreement
and understanding between the parties with respect to modifications of
documents provided for herein and supersedes all prior conflicting or
inconsistent agreements, consents and understandings relating to such subject
matter. The following notice is applicable only if the original amount of the
Note was in excess of $30,000.00 and the Note was originally executed on or
after September 1, 1996.
THE LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY
NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES. EXECUTED to be effective as of the Modification Date.
Lender Borrower (and Grantor if Borrower
is Grantor):
NationsBank of Texas, N.A. Bollinger Industries, L.P.
By: /s/ GREG M. NICHOLAS By: Bollinger Operating Corp., itx
--------------------------- ----------------------------------------
general partner
Greg M. Nicholas
- ------------------------------ By: /s/ GLENN D. BOLLINGER
Name: ---------------------------------------
Glenn D. Bollinger
Vice President Chairman and Chief Executive Officer
- ------------------------------
Title:
Grantor (if different from or in addition
After recording, please return to Borrower)"
to Lender's address, as follows:
NationsBank of Texas, N.A. -----------------------------------------
901 Main Street -----------------------------------------
- ------------------------------
11th Floor
- ------------------------------
TXI-492-11-05
- ------------------------------
Dallas, Texas 75202
- ------------------------------
Attention: Saundra Hittle
- ------------------------------
<PAGE> 20
ACKNOWLEDGMENT
(Individual)
The State of Texas )
County of )
------------------------
)
This instrument was acknowledged before me on , 19 , by
--------------- ------
- -----------------------. --------------------------------------------
Notary Public in and for the State of Texas
My commission expires:
--------------------------------------------
The State of Texas )
County of )
-----------------------
)
This instrument was acknowledged before me on , 19 , by
---------------- ------
- -----------------------. --------------------------------------------
Notary Public in and for the State of Texas
My commission expires:
--------------------------------------------
ACKNOWLEDGMENT
(Partnership)
The State of Texas )
County of Tarrant )
---------------
)
This instrument was acknowledged before me on August 19, 1996, by
Glenn D. Bollinger, Chairman and CEO of Bollinger Operating Corp., the general
partners of Bollinger Industries, L.P., a Texas limited partnership.
/s/ GEORGE T. JOHNS
--------------------------------------------
Notary Public in and for the State of Texas
My commission expires:
--------------------------------------------
[NOTARY SEAL]
ACKNOWLEDGMENT
(Corporate)
The State of Texas )
County of )
-----------------------
)
This instrument was acknowledged before me on , 19 , by
---------------- ------
of
- ------------------------ --------------------------------------------------
a corporation, on behalf of said corporation.
-------------------
--------------------------------------------
Notary Public in and for the State of Texas
My commission expires:
--------------------------------------------
ACKNOWLEDGMENT
(Lender)
The State of Texas )
County of Dallas )
----------------
)
This instrument was acknowledged before me on August 19, 1996, by
Greg M. Nicholas, Vice President of NationsBank of Texas, N.A., a national
banking association, on behalf of said association.
/s/ DONNA M. MALIZIA
--------------------------------------------
Notary Public in and for the State of Texas
My commission expires:
[NOTARY SEAL]
11-09-98
--------------------------------------------
<PAGE> 1
================================================================================
LOAN AND SECURITY AGREEMENT
BY AND BETWEEN
BOLLINGER INDUSTRIES, INC., BOLLINGER INDUSTRIES, L.P.
AND NBF, INC.
AND
FOOTHILL CAPITAL CORPORATION
DATED AS OF AUGUST 16, 1996
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
1. DEFINITIONS AND CONSTRUCTION. . . . . . . . . . . . . . . . . . 1
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Accounting Terms . . . . . . . . . . . . . . . . . . . . 13
1.3 Code . . . . . . . . . . . . . . . . . . . . . . . . . . 13
1.4 Construction . . . . . . . . . . . . . . . . . . . . . . 13
1.5 Schedules and Exhibits . . . . . . . . . . . . . . . . . 13
2. LOAN AND TERMS OF PAYMENT . . . . . . . . . . . . . . . . . . . 14
2.1 Revolving Advances . . . . . . . . . . . . . . . . . . . 14
2.2 Letters of Credit and Letter of Credit Guarantees . . . 15
2.3 Overadvances . . . . . . . . . . . . . . . . . . . . . . 16
2.4 Interest: Rates, Payments, and Calculations . . . . . . 16
2.5 Crediting Payments; Application of Collections . . . . . 18
2.6 Statements of Obligations . . . . . . . . . . . . . . . 19
2.7 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3. CONDITIONS; TERM OF AGREEMENT . . . . . . . . . . . . . . . . . 20
3.1 Conditions Precedent to Initial Advance, L/C, or L/C
Guarantee . . . . . . . . . . . . . . . . . . . . . . . 20
3.2 Conditions Precedent to All Advances, L/Cs, or L/C
Guarantees . . . . . . . . . . . . . . . . . . . . . . . 21
3.3 Term; Automatic Renewal . . . . . . . . . . . . . . . . 22
3.4 Effect of Termination . . . . . . . . . . . . . . . . . 22
3.5 Early Termination by Borrower . . . . . . . . . . . . . 22
3.6 Termination Upon Event of Default . . . . . . . . . . . 22
4. CREATION OF SECURITY INTEREST . . . . . . . . . . . . . . . . . 23
4.1 Grant of Security Interest . . . . . . . . . . . . . . . 23
4.2 Negotiable Collateral . . . . . . . . . . . . . . . . . 23
4.3 Collection of Accounts, General Intangibles,
Negotiable Collateral . . . . . . . . . . . . . . . . . 23
4.4 Delivery of Additional Documentation Required . . . . . 23
4.5 Power of Attorney . . . . . . . . . . . . . . . . . . . 24
4.6 Right to Inspect . . . . . . . . . . . . . . . . . . . . 24
5. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . 24
5.1 No Prior Encumbrances . . . . . . . . . . . . . . . . . 24
5.2 Eligible Accounts . . . . . . . . . . . . . . . . . . . 24
5.3 Eligible Inventory . . . . . . . . . . . . . . . . . . . 25
5.4 Location of Inventory and Equipment . . . . . . . . . . 25
5.5 Inventory Records . . . . . . . . . . . . . . . . . . . 25
5.6 Location of Chief Executive Office; FEIN . . . . . . . . 25
5.7 Due Organization and Qualification; No Subsidiaries . . 25
5.8 Due Authorization; No Conflict . . . . . . . . . . . . . 25
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
5.9 Litigation . . . . . . . . . . . . . . . . . . . . . . . 25
5.10 No Material Adverse Change in Financial Condition . . . 26
5.11 Solvency . . . . . . . . . . . . . . . . . . . . . . . . 26
5.12 Employee Benefits . . . . . . . . . . . . . . . . . . . 26
5.13 Environmental Condition . . . . . . . . . . . . . . . . 27
5.14 Patents, Copyrights and Trademarks . . . . . . . . . . . 27
5.15 Material Agreements . . . . . . . . . . . . . . . . . . 27
5.16 Reliance by Foothill; Cumulative . . . . . . . . . . . . 27
6. AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . 27
6.1 Accounting System . . . . . . . . . . . . . . . . . . . 27
6.2 Collateral Reports . . . . . . . . . . . . . . . . . . . 28
6.3 Schedules of Accounts . . . . . . . . . . . . . . . . . 28
6.4 Financial Statements, Reports, Certificates . . . . . . 28
6.5 Tax Returns . . . . . . . . . . . . . . . . . . . . . . 29
6.6 Guarantor Reports . . . . . . . . . . . . . . . . . . . 29
6.7 Designation of Inventory . . . . . . . . . . . . . . . . 29
6.8 Returns . . . . . . . . . . . . . . . . . . . . . . . . 29
6.9 Title to Equipment . . . . . . . . . . . . . . . . . . . 30
6.10 Maintenance of Equipment . . . . . . . . . . . . . . . . 30
6.11 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.12 Insurance . . . . . . . . . . . . . . . . . . . . . . . 30
6.13 Financial Covenants . . . . . . . . . . . . . . . . . . 31
6.14 No Setoffs or Counterclaims . . . . . . . . . . . . . . 31
6.15 Location of Inventory and Equipment . . . . . . . . . . 31
6.16 Compliance with Laws . . . . . . . . . . . . . . . . . . 32
6.17 Employee Benefits . . . . . . . . . . . . . . . . . . . 32
6.18 Leases . . . . . . . . . . . . . . . . . . . . . . . . . 32
6.19 Material Agreements . . . . . . . . . . . . . . . . . . 33
7. NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . 33
7.1 Indebtedness . . . . . . . . . . . . . . . . . . . . . . 33
7.2 Liens . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.3 Restrictions on Fundamental Changes . . . . . . . . . . 34
7.4 Extraordinary Transactions and Disposal of Assets . . . 34
7.5 Change Name . . . . . . . . . . . . . . . . . . . . . . 34
7.6 Guarantee . . . . . . . . . . . . . . . . . . . . . . . 34
7.7 Restructure . . . . . . . . . . . . . . . . . . . . . . 34
7.8 Prepayments . . . . . . . . . . . . . . . . . . . . . . 34
7.9 Change of Control . . . . . . . . . . . . . . . . . . . 34
7.10 Capital Expenditures . . . . . . . . . . . . . . . . . . 34
7.11 Consignments . . . . . . . . . . . . . . . . . . . . . . 34
7.12 Distributions . . . . . . . . . . . . . . . . . . . . . 34
7.13 Accounting Methods . . . . . . . . . . . . . . . . . . . 35
7.14 Investments . . . . . . . . . . . . . . . . . . . . . . 35
7.15 Transactions with Affiliates . . . . . . . . . . . . . . 35
7.16 Suspension . . . . . . . . . . . . . . . . . . . . . . . 35
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
7.17 Compensation . . . . . . . . . . . . . . . . . . . . . . 35
7.18 Use of Proceeds . . . . . . . . . . . . . . . . . . . . 35
7.19 Change in Location of Chief Executive Office;
Inventory and Equipment with Bailees . . . . . . . . . . 35
8. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . 36
9. FOOTHILL'S RIGHTS AND REMEDIES . . . . . . . . . . . . . . . . . 38
9.1 Rights and Remedies . . . . . . . . . . . . . . . . . . 38
9.2 Remedies Cumulative . . . . . . . . . . . . . . . . . . 39
10. TAX AND EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . 40
11. WAIVERS; INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . 40
11.1 Demand; Protest; etc. . . . . . . . . . . . . . . . . . 40
11.2 Foothill's Liability for Collateral . . . . . . . . . . 40
11.3 Indemnification . . . . . . . . . . . . . . . . . . . . 40
11.4 Suretyship Waivers and Consents . . . . . . . . . . . . 41
12. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER . . . . . . . . . . . 46
14. DESTRUCTION OF BORROWER'S DOCUMENTS . . . . . . . . . . . . . . 46
15. GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . 46
15.1 Effectiveness . . . . . . . . . . . . . . . . . . . . . 46
15.2 Successors and Assigns . . . . . . . . . . . . . . . . . 46
15.3 Section Headings . . . . . . . . . . . . . . . . . . . . 47
15.4 Interpretation . . . . . . . . . . . . . . . . . . . . . 47
15.5 Severability of Provisions . . . . . . . . . . . . . . . 47
15.6 Amendments in Writing . . . . . . . . . . . . . . . . . 47
15.7 Counterparts; Telefacsimile Execution . . . . . . . . . 47
15.8 Revival and Reinstatement of Obligations . . . . . . . . 47
15.9 Integration . . . . . . . . . . . . . . . . . . . . . . 48
</TABLE>
iii
<PAGE> 5
INDEX OF SCHEDULES AND EXHIBITS
SCHEDULES
Schedule E-1 Locations of Eligible Inventory
Schedule P-1 Permitted Liens
Schedule R-1 Real Property
Schedule 5.7 Affiliates
Schedule 5.9 Litigation
Schedule 6.15 Locations of Inventory and Equipment
EXHIBITS
Exhibit 5.14 Patents, Copyrights and Trademarks
iv
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LOAN AND SECURITY AGREEMENT
This LOAN AND SECURITY AGREEMENT, is entered into as of August 16,
1996, between FOOTHILL CAPITAL CORPORATION, a California corporation
("Foothill"), with a place of business located at 11111 Santa Monica Boulevard,
Suite 1500, Los Angeles, California 90025-3333, and BOLLINGER INDUSTRIES, INC.,
a Delaware corporation ("Inc."), BOLLINGER INDUSTRIES, L.P., a Texas limited
partnership ("L.P.") and NBF, INC., a Georgia corporation ("ANBF"), jointly and
severally, (collectively "Borrower"), with their chief executive office located
at 222 West Airport Freeway, Irving, Texas 75062.
W I T N E S S E T H:
WHEREAS, Inc., L.P. and NBF are interrelated entities which,
collectively, constitute an integrated entity;
WHEREAS, the shareholders and directors of Inc. and NBF and the
partners of L.P. view the three entities as sufficiently dependent upon each
other and so interrelated, that any advances made by Foothill hereunder to one
of the constituent entities would benefit the other of the constituent entities
as a result of their consolidated operations and identity of interests, and
WHEREAS, Inc., L.P. and NBF have each requested that Foothill treat
them as co-borrowers hereunder, as a single, consolidated business enterprise,
jointly and severally responsible for the Obligations hereunder, so as to
permit advances to be allocated among the constituent entities as may be, from
time to time, in the best interest of the combined group; and
WHEREAS, Foothill is willing to proceed on the basis of treating all of
the borrowing entities as a single, consolidated business enterprise, and view
their operations on a consolidated basis as requested by Inc., L.P. and NBF;
and
WHEREAS, Foothill is willing to make such loans and provide such
financial accommodations on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual conditions and
agreements set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION.
1.1 DEFINITIONS. As used in this Agreement, the following terms
shall have the following definitions:
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"Account Debtor" means any Person who is or who may become
obligated under, with respect to, or on account of an Account.
"Accounts" means all currently existing and hereafter arising
accounts, contract rights, and all other forms of obligations owing to Borrower
arising out of the sale or lease of goods or the rendition of services by
Borrower, irrespective of whether earned by performance, and any and all credit
insurance, guaranties, or security therefor.
"Affiliate" means, as applied to any Person, any other Person
directly or indirectly controlling, controlled by, or under common control
with, that Person. For purposes of this definition, "control" as applied to any
Person means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of that Person, whether
through the ownership of voting securities, by contract, or otherwise.
"Agreement" means this Loan and Security Agreement and any
extensions, riders, supplements, notes, amendments, or modifications to or in
connection with this Loan and Security Agreement.
"Authorized Officer" means any officer, partner or officer of
any partner of Borrower.
"Average Unused Portion of Maximum Amount" means (a) the
Maximum Amount; less (b) the sum of: (i) the average Daily Balance of advances
made by Foothill under Section 2.1 that were outstanding during the immediately
preceding month, plus (ii) the average Daily Balance of the undrawn L/Cs and
L/C Guarantees issued by Foothill under Section 2.2 that were outstanding
during the immediately preceding month.
"Bankruptcy Code" means the United States Bankruptcy Code (11
U.S.C. Section 101 et seq.), as amended, and any successor statute.
"Borrower" has the meaning set forth in the preamble to this
Agreement.
"Borrower's Books" means all of Borrower's books and records
including: ledgers; records indicating, summarizing, or evidencing Borrowers
properties or assets (including the Collateral or the Real Property) or
liabilities; all information relating to Borrower's business operations or
financial condition; and all computer programs, disc or tape files, printouts,
runs, or other computer prepared information.
"Borrowing Base" has the meaning set forth in Section 2.1.
"Business Day" means any day which is not a Saturday, Sunday,
or other day on which national banks are authorized or required to close.
"Change of Control" shall be deemed to have occurred at such
time as a "person" or "group" (within the meaning of Sections 13(d) and
14(d)(2) of the Securities Exchange Act of 1934) becomes the "beneficial owner"
(as defined in Rule 13d-3 under the Securities Exchange Act of 1934), directly
or indirectly, of more than twenty-five percent
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(25%) of the total voting power of all classes of stock then outstanding or of
partnership interests of Borrower normally entitled to vote in the election of
directors or a vote of partners.
"Closing Date" means the date of the initial advance hereunder
or the date of the initial issuance of an L/C or an L/C Guaranty hereunder,
whichever occurs first.
"Code" means the California Uniform Commercial Code.
"Collateral" means each of the following: the Accounts;
Borrower's Books; the Equipment; the General Intangibles; the Inventory; the
Negotiable Collateral; the Real Property; any money, or other assets of
Borrower which now or hereafter come into the possession, custody, or control
of Foothill; and the proceeds and products, whether tangible or intangible, of
any of the foregoing including proceeds of insurance covering any or all of the
Collateral, and any and all Accounts, Borrower's Books, Equipment, General
Intangibles, Inventory, Negotiable Collateral, money, deposit accounts, or
other tangible or intangible property resulting from the sale, exchange,
collection, or other disposition of any of the foregoing, or any portion
thereof or interest therein, and the proceeds thereof.
"Consolidated Current Assets" means, as of any date of
determination, the aggregate amount of all current assets of Borrower and its
subsidiaries calculated on a consolidated basis that would, in accordance with
GAAP, be classified on a balance sheet as current assets.
"Consolidated Current Liabilities" means, as of any date of
determination, the aggregate amount of all current liabilities of Borrower and
its subsidiaries, calculated on a consolidated basis that would, in accordance
with GAAP, be classified on a balance sheet as current liabilities. For
purposes of this definition, all advances outstanding under this Agreement
shall be deemed to be current liabilities without regard to whether they would
be deemed to be so under GAAP.
"Corporate Guarantors" means Bollinger Operating Corp.,
Bollinger Holding Corp., Bollinger Sports, Inc., C.G. Products, Inc. and
Tarbox, Inc.
"Daily Balance" means the amount of an Obligation owed at the
end of a given day.
"Debtor" has the meaning set forth in Section 11.4.
"Dilution" means, as of the date of determination, the total
of all chargebacks, returns, advertising claims, discounts, contra accounts,
write-offs in favor of or held by Account Debtors and any other item that could
reduce or otherwise impair the full and timely collection of Accounts,
expressed as a percentage of cash collections plus dilutive items, determined
on a three (3) month rolling basis.
"Early Termination Premium" has the meaning set forth in
Section 3.5.
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"Eligible Accounts" means those Accounts created by Borrower
in the ordinary course of business that arise out of Borrower's sale of goods
or rendition of services, that strictly comply with all of Borrower's
representations and warranties to Foothill, and that are and at all times shall
continue to be acceptable to Foothill in all respects; provided, however, that
standards of eligibility may be fixed and revised from time to time by Foothill
in Foothill's reasonable credit judgment. Eligible Accounts shall not include
the following:
(a) Accounts with respect to which the Account Debtor has
failed to pay within one hundred twenty (120) days of invoice date or sixty
(60) days past due, Accounts with selling terms of more than seventy- five (75)
days (or, in the case of Sportsmart, Inc., and Service Merchandise, ninety (90)
days), and all Accounts owed by an Account Debtor that has failed to pay fifty
percent (50%) or more of its Accounts owed to Borrower within one hundred
twenty (120) days of invoice date;
(b) Accounts with respect to which the Account Debtor is
an officer, employee, Affiliate, or agent of Borrower;
(c) Accounts with respect to which goods are placed on
consignment, guaranteed sale, sale or return, sale on approval, bill and hold,
or other terms by reason of which the payment by the Account Debtor may be
conditional, except as otherwise approved by Foothill;
(d) Accounts with respect to which the Account Debtor is
not a resident of the United States or Canada, and which are not either (i)
covered by credit insurance in form and amount, and by an insurer, satisfactory
to Foothill, or (ii) supported by one or more letters of credit that are
assignable by their terms and have been delivered to Foothill in an amount, of
a tenor, and issued by a financial institution, acceptable to Foothill;
(e) Accounts with respect to which the Account Debtor is
the United States or any department, agency, or instrumentality of the United
States;
(f) Accounts with respect to which Borrower is or may
become liable to the Account Debtor for goods sold or services rendered by the
Account Debtor to Borrower;
(g) Accounts with respect to an Account Debtor whose
total obligations owing to Borrower exceed ten percent (10%) of all Eligible
Accounts (or, in the case of Service Merchandise and Dayton-Hudson, fifteen
percent (15%)), to the extent of the obligations owing by such Account Debtor
in excess of such percentage; provided, however, in the case of Wal-Mart or K-
Mart, such percentage shall be:
(i) From March 1 - September 30 (i) thirty percent (30%) of
each year as to each
(ii) From October 1 - February 28 (ii) seventy percent of each
year (70%) as to both combined
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(h) Accounts with respect to which the Account Debtor
disputes liability or makes any claim with respect thereto, or is subject to
any Insolvency Proceeding, or becomes insolvent, or goes out of business;
(i) Accounts the collection of which Foothill, in its
reasonable credit judgment, believes to be doubtful by reason of the Account
Debtor's financial condition;
(j) Accounts that are payable in other than United States
Dollars; and
(k) Accounts that represent progress payments or other
advance billings that are due prior to the completion of performance by
Borrower of the subject contract for goods or services.
"Eligible Inventory" means Inventory (net of reserves for
obsolescence and reserves for restructuring charges as determined in Foothill's
reasonable discretion) consisting of first quality finished goods held for sale
in the ordinary course of Borrower's business and raw materials for such
finished goods, that are located at Borrower's premises identified on Schedule
E-1, are acceptable to Foothill in all respects, and strictly comply with all
of Borrower's representations and warranties to Foothill. Eligible Inventory
shall not include slow moving or obsolete items, restrictive or custom items,
work-in-process, Pacer and Pro-tec Inventory, components that are not part of
finished goods, spare parts, packaging and shipping materials, supplies used or
consumed in Borrower's business, Inventory at any location other than those set
forth on Schedule E-1, Inventory subject to a security interest or lien in
favor of any third Person, bill and hold goods, Inventory that is not subject
to Foothill's perfected security interests, Inventory the sale of which by or
on behalf of Foothill may be restricted by any Person claiming a right or
interest in such Inventory (or any trademark, license, copyright, patent or
other right or interest relating to such Inventory), defective goods,
"seconds," and Inventory acquired on consignment. Eligible Inventory shall be
valued at the lower of Borrower's cost or market value; provided, however, that
standards of eligibility may be fixed and revised from time to time by Foothill
in Foothill's reasonable credit determination. All references to Eligible
Inventory, other than such references in Section 2.1(a), shall be deemed to
include Inventory In-Transit.
"Equipment" means all of Borrower's present and hereafter
acquired machinery, machine tools, motors, equipment, furniture, furnishings,
fixtures, vehicles (including motor vehicles and trailers), tools, parts, dies,
jigs, goods (other than consumer goods, farm products, or Inventory), wherever
located, and any interest of Borrower in any of the foregoing, and all
attachments, accessories, accessions, replacements, substitutions, additions,
and improvements to any of the foregoing, wherever located.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, or any predecessor, successor, or
superseding laws of the United States of America, together with all regulations
promulgated thereunder.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) which, within the meaning of Section 414 of the IRC, is: (i)
under common control with Borrower; (ii) treated, together with Borrower, as a
single employer; (iii) treated as a
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member of an affiliated service group of which Borrower is also treated as a
member; or (iv) is otherwise aggregated with the Borrower for purposes of the
employee benefits requirements listed in IRC Section 414(m)(4).
"ERISA Event" means any one or more of the following: (i) a
Reportable Event with respect to a Qualified Plan or a Multiemployer Plan; (ii)
a Prohibited Transaction with respect to any Plan; (iii) a complete or partial
withdrawal by Borrower or any ERISA Affiliate from a Multiemployer Plan; (iv)
the complete or partial withdrawal of Borrower or an ERISA Affiliate from a
Qualified Plan during a plan year in which it was, or was treated as, a
"substantial employer" as defined in Section 4001(a)(2) of ERISA; (v) a failure
to make full payment when due of all amounts which, under the provisions of any
Plan or applicable law, Borrower or any ERISA Affiliate is required to make;
(vi) the filing of a notice of intent to terminate, or the treatment of a plan
amendment as a termination, under Sections 4041 or 4041A of ERISA; (vii) an
event or condition which might reasonably be expected to constitute grounds
under Section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any Qualified Plan or Multiemployer Plan; (viii) the
imposition of any liability under Title IV of ERISA, other than PBGC premiums
due but not delinquent under Section 4007 of ERISA, upon Borrower or any ERISA
Affiliate; and (ix) a violation of the applicable requirements of Sections 404
or 405 of ERISA, or the exclusive benefit rule under Section 403(c) of ERISA,
by any fiduciary or disqualified person with respect to any Plan for which
Borrower or any ERISA Affiliate may be directly or indirectly liable.
"Event of Default" has the meaning set forth in Section 8.
"Excess Availability" means the amount, as of the date any
determination thereof is to be made, equal to:
(a) the lesser of (i) the Borrowing Base (based on the
applicable advance rates set forth in Section 2.1(a) hereof), subject to the
sublimits and availability reserves from time to time established by Foothill
hereunder, minus the sum of the aggregate amount of all undrawn or unreimbursed
L/Cs and L/C Guarantys (exclusive of Inventory L/Cs) together with the
Inventory L/C Reserve Amount and (ii) the Maximum Amount minus the aggregate
amount of all undrawn or unreimbursed L/C and L/C Guarantys (including
Inventory L/Cs); plus
(b) unrestricted cash of Borrower; minus
(c) the amount of all then outstanding and unpaid
Obligations.
"FEIN" means Federal Employer Identification Number.
"Foothill" has the meaning set forth in the preamble to this
Agreement.
"Foothill Expenses" means all: costs or expenses (including
taxes, photocopying, notarization, telecommunication and insurance premiums)
required to be paid by Borrower under any of the Loan Documents that are paid
or advanced by Foothill; documentation, filing, recording, publication,
appraisal (including periodic Collateral or Real
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Property appraisals), real estate survey, environmental audit, and search fees
assessed, paid, or incurred by Foothill in connection with Foothill's
transactions with Borrower; costs and expenses incurred by Foothill in the
disbursement of funds to Borrower (by wire transfer or otherwise); charges paid
or incurred by Foothill resulting from the dishonor of checks; costs and
expenses paid or incurred by Foothill to correct any default or enforce any
provision of the Loan Documents, or in gaining possession of, maintaining,
handling, preserving, storing, shipping, selling, preparing for sale, or
advertising to sell the Collateral or the Real Property, or any portion
thereof, irrespective of whether a sale is consummated; costs and expenses paid
or incurred by Foothill in examining Borrower's Books; costs and expenses of
third party claims or any other suit paid or incurred by Foothill in enforcing
or defending the Loan Documents; and Foothill's reasonable attorneys fees and
expenses incurred in advising, structuring, drafting, reviewing, administering,
amending, terminating, enforcing (including attorneys fees and expenses
incurred in connection with a "workout," a "restructuring," or an Insolvency
Proceeding concerning Borrower or any guarantor of the Obligations), defending,
or concerning the Loan Documents, irrespective of whether suit is brought.
"GAAP" means generally accepted accounting principles as in
effect from time to time in the United States, consistently applied.
"General Intangibles" means all of Borrower's present and
future general intangibles and other personal property (including contract
rights, rights arising under common law, statutes, or regulations, choses or
things in action, goodwill, patents, trade names, trademarks, servicemarks,
copyrights, blueprints, drawings, purchase orders, customer lists, monies due
or recoverable from pension funds, route lists, rights to payment and other
rights under any royalty or licensing agreements, infringements, claims,
computer programs, computer discs, computer tapes, literature, reports,
catalogs, deposit accounts, insurance premium rebates, tax refunds, and tax
refund claims), other than goods, Accounts, and Negotiable Collateral.
"Hazardous Materials" means all or any of the following: (a)
substances that are defined or listed in, or otherwise classified pursuant to,
any applicable laws or regulations as "hazardous substances," "hazardous
materials," "hazardous wastes," "toxic substances," or any other formulation
intended to define, list, or classify substances by reason of deleterious
properties such as ignitability, corrosivity, reactivity, carcinogenicity,
reproductive toxicity, or AEP toxicity"; (b) oil, petroleum, or petroleum
derived substances, natural gas, natural gas liquids, synthetic gas, drilling
fluids, produced waters, and other wastes associated with the exploration,
development, or production of crude oil, natural gas, or geothermal resources;
(c) any flammable substances or explosives or any radioactive materials; and
(d) asbestos in any form or electrical equipment which contains any oil or
dielectric fluid containing levels of polychlorinated biphenyls in excess of
fifty (50) parts per million.
"Indebtedness" means: (a) all obligations of Borrower for
borrowed money; (b) all obligations of Borrower evidenced by bonds, debentures,
notes, or other similar instruments and all reimbursement or other obligations
of Borrower in respect of letters of credit, letter of credit guaranties,
bankers acceptances, interest rate swaps, controlled disbursement accounts, or
other financial products; (c) all obligations under capital leases; (d)
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all obligations or liabilities of others secured by a lien or security interest
on any property or asset of Borrower, irrespective of whether such obligation
or liability is assumed; and (e) any obligation of Borrower guaranteeing or
intended to guarantee (whether guaranteed, endorsed, co-made, discounted, or
sold with recourse to Borrower) any indebtedness, lease, dividend, letter of
credit, or other obligation of any other Person.
"Individual Guarantors" means Glenn Bollinger and Bobby
Bollinger.
"Insolvency Proceeding" means any proceeding commenced by or
against any Person under any provision of the Bankruptcy Code or under any
other bankruptcy or insolvency law, including assignments for the benefit of
creditors, formal or informal moratoria, compositions, extensions generally
with its creditors, or proceedings seeking reorganization, arrangement, or
other similar relief.
"In-Transit Inventory Reserve" means a reserve in an amount
acceptable to Foothill to cover the costs of freight, duty, customs and other
costs relating to the importation of inventory.
"Intercreditor Agreement" means the Intercreditor Agreement
among Borrower, Old Lender and Foothill, of even date.
"Inventory" means all present and future inventory in which
Borrower has any interest, including goods held for sale or lease or to be
furnished under a contract of service and all of Borrower's present and future
raw materials, work in process, finished goods, and packing and shipping
materials, wherever located, and any documents of title representing any of the
above.
"Inventory In-Transit" means all Inventory which is Eligible
Inventory however is in-transit for direct delivery to Borrower, Borrower holds
good legal title to Inventory, the Inventory is adequately insured for full
replacement value, and such Inventory are not located at a port of shipping for
more than thirty (30) days prior to shipment.
"Inventory L/C Reserve Amount" means the sum of (i) forty-
eight percent (48%) of the aggregate Inventory Letters of Credit plus (ii) an
amount sufficient to reserve for associated freight, duty, customs and other
related costs. The reserve amount of forty-eight percent (48%) would increase
by one percent (1.0%) per month, for seven months, effective on the first day
of each month commencing September 1, 1996.
"Inventory Letter of Credit" means a documentary L/C issued to
support the purchase by Borrower of Inventory prior to transit to a location
set forth on Schedule E-1, that satisfy the following conditions: (a) all draws
thereunder must require presentation of customary documentation (including, if
applicable, commercial invoices, packing list, certificate of origin, bill of
lading or airway bill, customs clearance documents, quota statement, inspection
certificate, beneficiaries statement, and bill of exchange, bills of lading,
dock warrants, dock receipts, warehouse receipts, or other documents of title)
in form and substance reasonably satisfactory to Foothill and reflecting the
passage to Borrower of title to
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Inventory conforming to Borrower's contract with the seller thereof, (b) the
Inventory covered by such L/C would, but for its not being located at a
location set forth on Schedule E-1, be Eligible Inventory, (c) the Inventory
shall be fully insured and (d) such L/C shall cease to be an "Inventory Letter
of Credit" at such time, if any, as the goods purchased thereunder become
Eligible Inventory.
"IRC" means the Internal Revenue Code of 1986, as amended, and
the regulations thereunder.
"L/C" has the meaning set forth in Section 2.2(a).
"L/C Guaranty" has the meaning set forth in Section 2.2(a).
"Loan Documents means this Agreement, the Lockbox Agreements,
the Mortgages, any other note or notes executed by Borrower and payable to
Foothill, and any other agreement entered into in connection with this
Agreement.
"Lockbox Account" shall mean the depositary account
established pursuant to the respective Lockbox Agreement.
"Lockbox Agreements" means those certain Lockbox Operating
Procedural Agreements and those certain Depository Account Agreements, in form
and substance satisfactory to Foothill, each of which is among Borrower,
Foothill, and one of the Lockbox Banks.
"Lockbox Banks" means Bank One Texas, N.A.
"Maximum Amount" means Twenty Five Million Dollars
($25,000,000); provided, upon Borrower's request and upon Foothill's receipt of
a participation commitment (in addition to the Ten Million Dollars
($10,000,000) commitment of Coast Business Credit) in form acceptable to
Foothill, the Maximum Amount shall be increased by the amount of such
additional participation commitment but, in no event, greater than Thirty
Million Dollars ($30,000,000).
"Maximum Foothill Amount" means that portion of the Maximum
Amount for which Foothill shall be responsible, exclusive of any
participations, with Participants, which amount is Fifteen Million Dollars
($15,000,000).
"Maximum Rate" means the maximum rate of interest permitted by
applicable law as the same exists from day to any during the term of this
Agreement, including, to the extent that Texas law as the same exists from day
to day during the term of this Agreement, including, to the extent that Texas
law may apply to the rights of the parties hereunder notwithstanding the choice
of California law contained in Section 13 hereof (and without any intent of the
parties to diminish or negate the intent or effect of the provisions of Section
13 hereof), the greatest of either (i) the "indicated rate ceiling" as defined
in Article 1.04, Title 79, Revised Civil Statutes of Texas (the "Act") with
said indicated rate ceiling being adjusted weekly as when permitted under the
Act, (ii) the "annual ceiling" or the "quarterly ceiling"
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from time to time in effect as referred to and defined in the Act, upon the
giving of notice by Foothill of its election to utilize the "annual ceiling" or
the "quarterly ceiling" to the extent permitted by the Act and with the effect
provided in Section (h)(1) of the Act, (iii) the rate permitted by any federal
law if such federal law applies or may be applied to this transaction and when
and for so long as the rate permitted thereunder is greater than that permitted
under clause (i) or clause (ii) hereof, or (iv) the maximum rate permitted by
law when and as the law changes to permit a greater maximum rate that stated in
clauses (i), (ii) or (iii) above.
"Mortgages" means one or more mortgages, deeds of trust, or
deeds to secure debt, executed by Borrower in favor of Foothill, the form and
substance of which shall be satisfactory to Foothill, that encumber the Real
Property and the related improvements thereto.
"Multiemployer Plan" means a multiemployer plan as defined in
Sections 3(37) or 4001(a)(3) of ERISA or Section 414 of the IRC in which
employees of Borrower or an ERISA Affiliate participate or to which Borrower or
any ERISA Affiliate contribute or are required to contribute.
"Negotiable Collateral" means all of Borrower's present and
future letters of credit, notes, drafts, instruments, certificated and
uncertificated securities (including the shares of stock of subsidiaries of
Borrower), documents, personal property leases (wherein Borrower is the
lessor), chattel paper, and Borrower's Books relating to any of the foregoing.
"Obligations" means all loans, advances, debts, principal,
interest (including any interest that, but for the provisions of the Bankruptcy
Code, would have accrued), contingent reimbursement obligations owing to
Foothill under any outstanding L/Cs or L/C Guarantees, premiums (including
Early Termination Premiums), the unpaid portion of the commitment fee,
liabilities (including all amounts charged to Borrower's loan account pursuant
to any agreement authorizing Foothill to charge Borrower's loan account),
obligations, fees, lease payments, guaranties, covenants, and duties owing by
Borrower to Foothill of any kind and description (whether pursuant to or
evidenced by the Loan Documents, by any note or other instrument or pursuant to
any other agreement between Foothill and Borrower, and irrespective of whether
for the payment of money), whether direct or indirect, absolute or contingent,
due or to become due, now existing or hereafter arising, and including any
debt, liability, or obligation owing from Borrower to others that Foothill may
have obtained by assignment or otherwise, and further including all interest
not paid when due and all Foothill Expenses that Borrower is required to pay or
reimburse by the Loan Documents, by law, or otherwise.
"Old Lender" means NationsBank Texas N.A.
"Overadvance" has the meaning set forth in Section 2.3.
"Participant" means any Person, other than Foothill, that has
committed to provide a portion of the financing contemplated herein.
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"Pay-Off Letter" means a letter, in form and substance
reasonably satisfactory to Foothill, from Old Lender respecting the amount
necessary to repay all but Two Million Dollars ($2,000,000) of the obligations
of Borrower owing to Old Lender and obtain a termination or release of all of
the security interests or liens existing in favor of Old Lender in and to the
properties or assets of Borrower.
"PBGC" means the Pension Benefit Guaranty Corporation as
defined in Title IV of ERISA, or any successor thereto.
"Permitted Liens" means: (a) liens and security interests
held by Foothill; (b) liens for unpaid taxes that are not yet due and payable;
(c) liens and security interests set forth on Schedule P- 1 attached hereto;
(d) purchase money security interests and liens of lessors under capital leases
to the extent that the acquisition or lease of the underlying asset was
permitted under Section 7.10, and so long as the security interest or lien only
secures the purchase price of the asset; (e) easements, rights of way,
reservations, covenants, conditions, restrictions, zoning variances, and other
similar encumbrances that do not materially interfere with the use or value of
the property subject thereto; (f) obligations and duties as lessee under any
lease existing on the date of this Agreement; (g) mechanics', materialmen's,
warehousemen's, or similar liens that arise by operation of law; and (h)
exceptions listed in the title insurance or commitment therefor to be delivered
by Borrower hereunder in respect of the Real Property; and (i) pledges or
deposits made in the ordinary course of business to secure non- delinquent
obligations (not in excess of $25,000) existing under statutory requirements
consisting of worker's compensation, unemployment insurance, and similar
legislation.
"Permitted Protest" means the right of Borrower to protest any
lien, tax, rental payment, or other charge, other than any such lien or charge
that secures the Obligations, provided (i) a reserve with respect to such
obligation is established on the books of Borrower in an amount that is
reasonably satisfactory to Foothill, (ii) any such protest is instituted and
diligently prosecuted by Borrower in good faith, and (iii) Foothill is
satisfied that, while any such protest is pending, there will be no impairment
of the enforceability, validity, or priority of any of the liens or security
interests of Foothill in and to the property or assets of Borrower.
"Person" means and includes natural persons, corporations,
limited partnerships, limited liability companies, general partnerships, joint
ventures, trusts, land trusts, business trusts, or other organizations,
irrespective of whether they are legal entities, and governments and agencies
and political subdivisions thereof.
"Plan" means an employee benefit plan (as defined in Section
3(3) of ERISA) which Borrower or any ERISA Affiliate sponsors or maintains or
to which Borrower or any ERISA Affiliate makes, is making, or is obligated to
make contributions, including any Multiemployer Plan or Qualified Plan.
"Prohibited Transaction" means any transaction described in
Section 406 of ERISA which is not exempt by reason of Section 408 of ERISA, and
any transaction
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described in Section 4975(c) of the IRC which is not exempt by reason of
Section 4975(c) of the IRC.
"Qualified Plan" means a pension plan (as defined in Section
3(2) of ERISA) intended to be tax-qualified under Section 401(a) of the IRC
which Borrower or any ERISA Affiliate sponsors, maintains, or to which any such
person makes, is making, or is obligated to make, contributions, or, in the
case of a multiple-employer plan (as described in Section 4064(a) of ERISA),
has made contributions at any time during the immediately preceding period
covering at least five (5) plan years, but excluding any Multiemployer Plan.
"Real Property" means the parcel or parcels of real property
and the related improvements thereto identified on Schedule R- 1, and any
parcels of real property hereafter acquired by Borrower.
"Reference Rate" means the highest of the variable rates of
interest, per annum, most recently announced by Norwest Bank Minnesota, N.A.,
or any successor to any of the foregoing institutions, as its "prime rate" or
"reference rate," as the case may be, irrespective of whether such announced
rate is the best rate available from such financial institution.
"Renewal Date" has the meaning set forth in Section 3.3.
"Reportable Event" means any event described in Section 4043
(other than Subsections (b)(7) and (b)(9)) of ERISA.
"Revolving Advances" has the meaning set forth in Section
2.1(a).
"Solvent" means, with respect to any Person on a particular
date, that on such date (a) at fair valuations, all of the properties and
assets of such Person are greater than the sum of the debts, including
contingent liabilities, of such Person, (b) the present fair salable value of
the properties and assets of such Person is not less than the amount that will
be required to pay the probable liability of such Person on its debts as they
become absolute and matured, (c) such Person is able to realize upon its
properties and assets and pay its debts and other liabilities, contingent
obligations and other commitments as they mature in the normal course of
business, (d) such Person does not intend to, and does not believe that it
will, incur debts beyond such Person's ability to pay as such debts mature, and
(e) such Person is not engaged in business or a transaction, and is not about
to engage in business or a transaction, for which such Person's properties and
assets would constitute unreasonably small capital after giving due
consideration to the prevailing practices in the industry in which such Person
is engaged. In computing the amount of contingent liabilities at any time, it
is intended that such liabilities will be computed at the amount that, in light
of all the facts and circumstances existing at such time, represents the amount
that reasonably can be expected to become an actual or matured liability.
"Subordinated Debt" means the Indebtedness of the Borrower
owed to each of Bobby Bollinger, Glenn Bollinger and Dell Bollinger
subordinated to the Obligations hereunder in accordance with the terms,
respectively, of the Subordination Agreement.
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"Subordination Agreement" means the Subordination Agreement of
even date among Bobby Bollinger, Glenn Bollinger and Dell Bollinger and
Foothill.
"Syndicated Amount" means that portion of the Maximum Amount
equal to the aggregate financing commitments (to the extent not breached or
terminated) of all Participants, which amount is presently Ten Million Dollars
($10,000,000).
"Tangible Net Worth" means, as of the date any determination
thereof is to be made, the difference of: (a) the sum of (i) Borrower's total
stockholder's or partner's equity (deficit); (ii) the Subordinated Debt
(exclusive of debt owed to Old Lender); and (iii) the minority interest in any
subsidiary shareholder's or partner's equity; minus (b) the sum of (i) all
intangible assets of Borrower; (ii) all of Borrower's prepaid expenses; and
(iii) all amounts due to Borrower from Affiliates; in each case, calculated on
a consolidated basis.
"Unfunded Benefit Liability" means the excess of a Plan's
benefit liabilities (as defined in Section 4001(a)(16) of ERISA) over the
current value of such Plan's assets, determined in accordance with the
assumptions used by the Plan's actuaries for funding the Plan pursuant to
Section 412 of the IRC for the applicable plan year.
"Voidable Transfer" has the meaning set forth in Section 15.8.
"Working Capital" means the result of subtracting Consolidated
Current Liabilities from Consolidated Current Assets.
1.2 ACCOUNTING TERMS. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP. When used herein,
the term "financial statements" shall include the notes and schedules thereto.
Whenever the term "Borrower" is used in respect of a financial covenant or a
related definition, it shall be understood to mean Borrower on a consolidated
basis unless the context clearly requires otherwise.
1.3 CODE. Any terms used in this Agreement that are defined in
the Code shall be construed and defined as set forth in the Code unless
otherwise defined herein.
1.4 CONSTRUCTION. Unless the context of this Agreement clearly
requires otherwise, references to the plural include the singular, references
to the singular include the plural, the term "including" is not limiting, and
the term "or" has, except where otherwise indicated, the inclusive meaning
represented by the phrase "and/or." The words "hereof," "herein," "hereby,"
"hereunder," and similar terms in this Agreement refer to this Agreement as a
whole and not to any particular provision of this Agreement. Section,
subsection, clause, schedule, and exhibit references are to this Agreement
unless otherwise specified. Any reference in this Agreement or in the Loan
Documents to this Agreement or any of the Loan Documents shall include all
alterations, amendments, changes, extensions, modifications, renewals,
replacements, substitutions, and supplements, thereto and thereof, as
applicable.
1.5 SCHEDULES AND EXHIBITS. All of the schedules and exhibits
attached to this Agreement shall be deemed incorporated herein by reference.
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2. LOAN AND TERMS OF PAYMENT.
2.1 REVOLVING ADVANCES.
(a) Subject to the terms and conditions of this
Agreement, Foothill agrees to make revolving advances to Borrower in an amount
at any one time outstanding not to exceed the Borrowing Base less: (i) the
undrawn or unreimbursed amount of L/Cs and L/C Guarantees outstanding hereunder
for all L/Cs and L/C Guarantees which are not Inventory Letters of Credit and
(ii) the Inventory L/C Reserve Amount regarding Inventory Letters of Credit.
For purposes of this Agreement, "Borrowing Base", as of any date of
determination, shall mean the sum of: (i) an amount equal to the lesser of: (y)
seventy-five percent (75%) of the amount of Eligible Accounts, and (z) an
amount equal to Borrower's collections with respect to Accounts for the
immediately preceding sixty (60) day period; provided, however, that the
foregoing initial advance rate of seventy-five percent (75%) shall be
subsequently reduced by one percentage point for each percentage point of
Dilution in excess of twelve percent (12%); and (ii) an amount equal to the
lowest of: (x) the sum of (a) fifty-two percent (52%) of the amount of Eligible
Inventory exclusive of Inventory In- Transit and (b) fifty-two percent (52%) of
Inventory In-Transit (provided, advances on Inventory In-Transit shall not
exceed Three Million Dollars ($3,000,000), valued at the lower of cost or
market value as determined by Foothill minus (c) the In-Transit Inventory
Reserve, (y) the amount of credit availability created by Section 2.1(a)(i)
above multiplied by one hundred thirty three percent (133%), and (z) Fifteen
Million Dollars ($15,000,000). The advance rate of fifty-two percent (52%)
against Eligible Inventory and Inventory In-Transit shall be reduced by one
percent (1%) per month for the seven months, effective on the first day of each
month commencing on September 1, 1996.
(b) Anything to the contrary in Section 2.1(a) above
notwithstanding, Foothill may reduce its advance rates based upon Eligible
Accounts or Eligible Inventory or establish availability reserves without
declaring an Event of Default if it determines, in its reasonable discretion,
that there is a material impairment of the prospect of repayment of all or any
portion of the Obligations or a material impairment of the value or priority of
Foothill's security interests in the Collateral.
(c) Foothill shall have no obligation to make Revolving
Advances hereunder to the extent they would cause the outstanding Obligations
to exceed the lesser of: (i) the Maximum Amount or (ii) the Maximum Foothill
Amount plus the Syndicated Amount.
(d) Foothill is authorized to make Revolving Advances
under this Agreement based upon telephonic or other instructions received from
anyone purporting to be an Authorized Officer of Borrower, or without
instructions if pursuant to Section 2.4(d). Borrower agrees to establish and
maintain a single designated deposit account for the purpose of receiving the
proceeds of the Revolving Advances requested by Borrower and made by Foothill
hereunder. Unless otherwise agreed by Foothill and Borrower, any Revolving
Advance requested by Borrower and made by Foothill hereunder shall be made to
such designated deposit account. Amounts borrowed pursuant to this Section 2.1
may be repaid
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and, subject to the terms and conditions of this Agreement, reborrowed at any
time during the term of this Agreement.
2.2 LETTERS OF CREDIT AND LETTER OF CREDIT GUARANTEES.
(a) Subject to the terms and conditions of this
Agreement, Foothill agrees to issue commercial or standby letters of credit for
the account of Borrower (each, an "L/C") or to issue standby letters of credit
or guarantees of payment (each such letter of credit or guaranty, an "L/C
Guaranty") with respect to commercial or standby letters of credit issued by
another Person for the account of Borrower in an aggregate face amount not to
exceed the lesser of: (i) the Borrowing Base less the sum of (A) the amount of
advances outstanding pursuant to Section 2.1, and (B) the undrawn and
unreimbursed amount of L/C's and L/C Guarantees for L/Cs and L/C Guarantees
which are not Inventory Letters of Credit and (C) the Inventory L/C Reserve
Amount regarding Inventory Letters of Credit and (ii) Four Million Dollars
($4,000,000). Borrower expressly understands and agrees that Foothill shall
have no obligation to arrange for the issuance by other financial institutions
of letters of credit that are to be the subject of L/C Guarantees. Borrower
and Foothill acknowledge and agree that certain of the letters of credit that
are to be the subject of L/C Guarantees may be outstanding on the Closing Date.
Each L/C and each letter of credit that is the subject of an L/C Guaranty shall
have an expiry date no later than sixty (60) days prior to the date on which
this Agreement is scheduled to terminate under Section 3.3 (without regard to
any potential renewal term) and all such L/Cs and letters of credit (and the
applicable L/C Guarantees) shall be in form and substance acceptable to
Foothill in its sole discretion. Foothill shall not have any obligation to
issue L/Cs or L/C Guarantees and Inventory Letters of Credit to the extent that
the face amount of all outstanding L/Cs and L/C Guarantees, plus the amount of
advances outstanding pursuant to Section 2.1, would exceed the lesser of: (y)
the Maximum Amount, or (z) the Maximum Foothill Amount plus the Syndicated
Amount. The L/Cs and the L/C Guarantees issued under this Section 2.2 shall be
used by Borrower, consistent with this Agreement, for its general working
capital purposes or to support its obligations with respect to workers'
compensation premiums or other similar obligations. If Foothill is obligated
to advance funds under an L/C or L/C Guaranty, the amount so advanced
immediately shall be deemed to be a Revolving Advance made by Foothill to
Borrower pursuant to Section 2.1 and, thereafter, shall bear interest at the
rates then applicable under Section 2.4.
(b) Borrower hereby agrees to indemnify, save, defend,
and hold Foothill harmless from any loss, cost, expense, or liability,
including payments made by Foothill, expenses, and reasonable attorneys fees
incurred by Foothill arising out of or in connection with any L/Cs or L/C
Guarantees. Borrower agrees to be bound by the issuing bank's regulations and
interpretations of any letters of credit guarantied by Foothill and opened to
or for Borrower's account or by Foothill's interpretations of any L/C issued by
Foothill to or for Borrower's account, even though this interpretation may be
different from Borrower's own, and Borrower understands and agrees that
Foothill shall not be liable for any error, negligence, or mistakes, whether of
omission or commission, in following Borrower's instructions or those contained
in the L/Cs or any modifications, amendments, or supplements thereto. Borrower
understands that the L/C Guarantees may require Foothill to indemnify the
issuing bank for certain costs or liabilities arising out of claims by Borrower
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against such issuing bank. Borrower hereby agrees to indemnify, save, defend,
and hold Foothill harmless with respect to any loss, cost, expense (including
attorneys fees), or liability incurred by Foothill under any L/C Guaranty as a
result of Foothill's indemnification of any such issuing bank.
(c) Borrower hereby authorizes and directs any bank that
issues a letter of credit guaranteed by Foothill to deliver to Foothill all
instruments, documents, and other writings and property received by the issuing
bank pursuant to such letter of credit, and to accept and rely upon Foothill's
instructions and agreements with respect to all matters arising in connection
with such letter of credit and the related application. Borrower may or may
not be the "applicant" or "account party" with respect to such letter of
credit.
(d) Any and all service charges, commissions, fees, and
costs as established from time to time by Foothill relating to the letters of
credit guaranteed by Foothill shall be considered Foothill Expenses for
purposes of this Agreement and immediately shall be reimbursable by Borrower to
Foothill. On the first day of each month, Borrower will pay Foothill a fee
equal to two percent (2%) per annum times the average Daily Balance of the L/Cs
and L/C Guarantees that were outstanding during the immediately preceding
month. Service charges, commissions, fees, and costs may be charged to
Borrower's loan account at the time the service is rendered or the cost is
incurred.
(e) Immediately upon the termination of this Agreement,
Borrower agrees to either: (i) provide cash collateral to be held by Foothill
in an amount equal to the maximum amount of Foothill's obligations under L/Cs
plus the maximum amount of Foothill's obligations to any Person under
outstanding L/C Guarantees, or (ii) cause to be delivered to Foothill releases
of all of Foothill's obligations under its outstanding L/Cs and L/C Guarantees.
At Foothill's discretion, any proceeds of Collateral received by Foothill after
the occurrence and during the continuation of an Event of Default may be held
as the cash collateral required by this Section 2.2(e).
2.3 OVERADVANCES. If, at any time or for any reason, the amount
of Obligations owed by Borrower to Foothill pursuant to Sections 2.1 and 2.2 is
greater than either the dollar or percentage limitations set forth in Sections
2.1 or 2.2 (an "Overadvance"), Borrower immediately shall pay to Foothill, in
cash, the amount of such excess to be used by Foothill first, to repay
non-contingent Obligations and, thereafter, to be held by Foothill as cash
collateral to secure Borrower's obligation to repay Foothill for all amounts
paid pursuant to L/Cs or L/C Guarantees.
2.4 INTEREST: RATES, PAYMENTS, AND CALCULATIONS.
(a) Interest Rate. (i) All Obligations, except for
undrawn L/Cs and L/C Guarantees shall bear interest, on the average Daily
Balance, at a per annum rate equal to the lesser of one and three-quarters
(1.75) percentage points above the Reference Rate or the Maximum Rate.
(b) Default Rate. (i) All Obligations, except for
undrawn L/Cs and L/C Guarantees shall bear interest, from and after the
occurrence and during the continuance of
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an Event of Default, at a per annum rate equal to the lesser of four and
three-quarters (4.75%) percentage points above the Reference Rate or the
Maximum Rate. (ii) From and after the occurrence and during the continuance of
an Event of Default, the fee provided in Section 2.2(d) shall be increased to a
fee equal to five percent (5%) per annum times the average Daily Balance of the
undrawn L/Cs and L/C Guarantees that were outstanding during the immediately
preceding month.
(c) Minimum Interest. In no event shall the rate of
interest chargeable hereunder be less than eight percent (8%) per annum.
(d) Payments. Interest hereunder shall be due and
payable, in arrears, on the first day of each month during the term hereof.
Borrower hereby authorizes Foothill, at its option, without prior notice to
Borrower, to charge such interest, all Foothill Expenses (as and when
incurred), and all installments or any other note or other Loan Document to
Borrower's loan account, which amounts thereafter shall accrue interest at the
rate then applicable hereunder. Any interest not paid when due shall be
compounded by becoming a part of the Obligations, and such interest shall
thereafter accrue interest at the rate then applicable hereunder.
(e) Computation. The Reference Rate as of the date of
this Agreement is eight and one-quarter percent (8.25%) per annum. In the event
the Reference Rate is changed from time to time hereafter, the applicable rate
of interest hereunder automatically and immediately shall be increased or
decreased by an amount equal to such change in the Reference Rate. All interest
and fees chargeable under the Loan Documents shall be computed on the basis of
a three hundred sixty (360) day year for the actual number of days elapsed.
(f) However, if at any time the applicable interest rate
shall exceed the Maximum Rate and thereafter the applicable interest rate shall
become less than the Maximum Rate, the rate of interest payable hereunder
shall, at the option of Foothill, be the Maximum Rate until the total interest
paid by Borrower equals the amount which would have been paid but for the
applicable interest rate having been in excess of the Maximum Rate. If at
maturity of final payment of the Obligations the total amount of interest paid
or accrued on the Obligations under the provisions of Sections 2.4(a) and (b)
is less than the total amount of interest which would have accrued if the
applicable interest rate had at all times been in effect, then Borrower to the
fullest extent permitted by law, shall pay to Lender an amount equal to the
difference between (a) the amount of interest which would have accrued on the
Obligations if the applicable interest rate had at all times been in effect,
and (b) the amount of interest accrued in accordance with the provisions of
Sections 2.4 (a) and (b).
(g) Interest Savings. It is the intention of the parties
hereto to conform strictly to all usury laws applicable to this transactions
contemplated hereby would be usurious under applicable law (including the laws
of the United States of America or any jurisdiction whose laws may be
mandatorily applicable notwithstanding the other provisions of the Agreement),
then, notwithstanding anything to the contrary in the Agreement or in any other
instrument or agreement entered into in connection herewith, it is agreed as
follows" (i) the aggregate of all consideration which constitutes interest
under applicable law that is
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contracted for, taken, reserved, charged, or received under this Agreement or
under any other instruments or agreements or otherwise in connection herewith
shall under no circumstances exceed the maximum amount allowed by such
applicable law, and any excess shall be credited on the principal amount of the
Obligations (or, if the principal amount of the Obligations shall have been
paid in full, refunded to Borrower); and (ii) in the event that the maturity of
the Obligations is accelerated for any reason under this Agreement or
otherwise, or in the event of any required or permitted prepayment, then such
consideration that constitutes interest under applicable law may never include
more than the maximum amount allowed by such applicable law, and excess
interest, if any, provided for in this Agreement or otherwise shall be
cancelled automatically as of the date of such acceleration or prepayment and,
if theretofore paid, shall be credited on the principal amount of the
Obligations (or, if the principal amount of the Obligations shall have been
repaid in full, refunded to Borrower). In determining whether or not the
interest paid or payable with respect to any indebtedness of Borrower to
Foothill, under any specific contingency, exceeds the Maximum Rate, Borrower
and Foothill shall, to the maximum extent permitted by applicable law, (i)
characterize any non-principal payment as an expense, fee, or premium rather
than as interest, (ii) exclude voluntary prepayments and the effects thereof,
(iii) amortize the applicable interest on the Obligations so that the actual
rate of interest on account of such indebtedness does not exceed the maximum
amount permitted by applicable law and/or (iv) allocate interest between
portions of such indebtedness, so that no such portion shall bear interest at a
rate greater than that permitted by applicable law.
2.5 CREDITING PAYMENTS; APPLICATION OF COLLECTIONS. The receipt
of any wire transfer of funds, check, or other item of payment by Foothill
(whether from transfers to Foothill by the Lockbox Banks pursuant to the
Lockbox Agreements or otherwise) immediately shall be applied to provisionally
reduce the Obligations, but shall not be considered a payment on account unless
such wire transfer is of immediately available federal funds and is made to the
appropriate deposit account of Foothill or unless and until such check or other
item of payment is honored when presented for payment. From and after the
Closing Date, Foothill shall be entitled to charge Borrower for two (2)
Business Days of 'clearance' at the rate set forth in Section 2.4(a)(i) or
Section 2.4(b)(i), as applicable, on all collections, checks, wire transfers,
or other items of payment that are received by Foothill (regardless of whether
forwarded by the Lockbox Banks to Foothill, whether provisionally applied to
reduce the Obligations, or otherwise). This across-the-board two (2) Business
Day clearance charge on all receipts is acknowledged by the parties to
constitute an integral aspect of the pricing of Foothill's facility to
Borrower, and shall apply irrespective of the characterization of whether
receipts are owned by Borrower or Foothill, and irrespective of the level of
Borrowers Obligations to Foothill. Should any check or item of payment not be
honored when presented for payment, then Borrower shall be deemed not to have
made such payment, and interest shall be recalculated accordingly. Anything to
the contrary contained herein notwithstanding, any wire transfer, check, or
other item of payment shall be deemed received by Foothill only if it is
received into Foothill's Operating Account (as such account is identified in
the Lockbox Agreements) on or before 11:00 a.m. Los Angeles time. If any wire
transfer, check, or other item of payment is received into Foothills Operating
Account (as such account is identified in the Lockbox Agreements) after 11:00
a.m. Los Angeles time it shall be deemed to have been received by Foothill as
of the opening of business on the immediately following Business Day.
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2.6 STATEMENTS OF OBLIGATIONS. Foothill shall render monthly
statements to Borrower of the Obligations, including principal, interest, fees,
and including an itemization of all charges and expenses constituting Foothill
Expenses owing, and such statements shall be conclusively presumed to be
correct and accurate and constitute an account stated between Borrower and
Foothill unless, within sixty (60) days after receipt thereof by Borrower,
Borrower shall deliver to Foothill by registered or certified mail at its
address specified in Section 12, written objection thereto describing the error
or errors contained in any such statements.
2.7 FEES. Borrower shall pay to Foothill the following fees:
(a) Commitment Fee. A one time fee of Two Hundred Fifty
Thousand Dollars ($250,000) which has been earned in full and is due and
payable in twelve equal monthly installments commencing on the Closing Date and
continuing on the first day of each month thereafter until paid in full;
(b) Unused Line Fee. On the first day of each month
during the term of this Agreement, a fee in an amount equal to one-half of one
percent (2%) per annum times the Average Unused Portion of the Maximum Amount
(including on any increases in the Maximum Amount);
(c) Annual Facility Fee. On the Closing Date, a fee in
an amount equal to one percent (1%) of the Maximum Amount and on the first
anniversary of the Closing Date, a fee equal to one-half percent (2%) of the
Maximum Amount, such fee to be fully earned and payable on each such date;
(d) Financial Examination, Documentation, and Appraisal
Fees. Foothill's customary fee of Six Hundred Fifty Dollars ($650) per day per
examiner, plus out-of-pocket expenses for each financial analysis and
examination of Borrower performed by Foothill or its agents; Foothill's
customary appraisal fee of One Thousand Dollars ($1,500) per day per appraiser,
plus out-of-pocket expenses for each appraisal of the Collateral performed by
Foothill plus the cost of third party Inventory appraisals which will be
conducted no less frequently than annually; and, on each anniversary of the
Closing Date, Foothill's customary fee of One Thousand Hundred Dollars ($1,000)
per year for its loan documentation review; and
(e) Servicing Fee. On the first day of each month during
the term of this Agreement, and thereafter so long as any Obligations are
outstanding, a servicing fee in an amount equal to Three Thousand Five Hundred
Dollars ($3,500) per month.
(f) Other. Borrower has paid to Foothill a cost deposit
of Seventy-Five Thousand Dollars ($75,000), any unexpended excess of which (if
any) shall be applied to Borrower's Obligations.
(g) Line Increase Fee. If the Maximum Amount is
increased above Twenty-Five Million Dollars ($25,000,000), upon the date of
such increase Borrower shall pay a fee in an amount equal to one percent (1%)
of such increase.
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3. CONDITIONS; TERM OF AGREEMENT.
3.1 CONDITIONS PRECEDENT TO INITIAL ADVANCE, L/C, OR L/C
GUARANTEE. The obligation of Foothill to make the initial advance or to
provide the initial L/C or L/C Guarantee is subject to the fulfillment, to the
satisfaction of Foothill and its counsel, of each of the following conditions
on or before the Closing Date:
(a) the Closing Date shall occur on or before August 16,
1996;
(b) Old Lender shall have executed and delivered the
Pay-Off Letter and the Intercreditor Agreement, together with UCC termination
statements and other documentation evidencing the termination or a
subordination of its liens and security interests in and to the properties and
assets of Borrower in form and substance satisfactory to Foothill in its sole
discretion;
(c) Foothill shall have received searches reflecting the
filing of its financing statements and fixture filings;
(d) Foothill shall have received each of the following
documents, duly executed, and each such document shall be in full force and
effect:
i) the Lockbox Agreements;
ii) continuing guaranties from Individual
Guarantors;
iii) the Mortgages and title policies;
iv) continuing guaranties and security agreements
from Corporate Guarantors together with UCC filings and searches in form and
substance satisfactory to Lender;
(e) Foothill shall have received a certificate from the
Secretary of Borrower attesting to the resolutions of Borrower's Board of
Directors authorizing its execution and delivery of this Agreement and the
other Loan Documents to which Borrower is a party and authorizing specific
officers of Borrower to execute same;
(f) Foothill shall have received copies of Borrower's
Bylaws and Articles or Certificate of Incorporation, as amended, modified, or
supplemented to the Closing Date, certified by the Secretary of Borrower;
(g) Foothill shall have received a certificate of
corporate status with respect to Borrower, dated within ten (10) days of the
Closing Date, by the Secretary of State of the state of incorporation of
Borrower, which certificate shall indicate that Borrower is in good standing in
such state;
(h) Foothill shall have received certificates of
corporate status with respect to Borrower, each dated within fifteen (15) days
of the Closing Date, such certificates to be
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issued by the Secretary of State of the states in which its failure to be duly
qualified or licensed would have a material adverse effect on the financial
condition or properties and assets of Borrower, which certificates shall
indicate that Borrower is in good standing;
(i) Foothill shall have received the certified copies of
the policies of insurance, together with the endorsements thereto, as are
required by Section 6.12 hereof, the form and substance of which shall be
satisfactory to Foothill and its counsel;
(j) Foothill shall have received and recorded a deed of
trust on the Real Property together with a policy of title insurance insuring
the lien of such deed of trust;
(k) Foothill shall have received landlord waivers from
the lessors of the locations where the Inventory or Equipment is located;
(l) Foothill shall have received an opinion of Borrower's
counsel in form and substance satisfactory to Foothill in its sole discretion;
(m) Foothill shall have received satisfactory evidence
that all returns required to be filed by Borrower have been timely filed and
all taxes upon Borrower or its properties, assets, income and franchises
(including Real Property taxes and payroll taxes) have been paid prior to
delinquency, except such taxes that are the subject of a Permitted Protest;
(n) the Excess Availability as determined by Foothill on
the Closing Date after giving effect to the payoff to Old Lender shall not be
less than One Million Dollars ($1,000,000) after giving effect to the initial
advances under Sections 2.1 and 2.2 hereof and the payments of all fees and
expenses payable upon the consummation of the initial transactions contemplated
by this Agreement;
(o) all other documents and legal matters in connection
with the transactions contemplated by this Agreement shall have been delivered
or executed or recorded and shall be in form and substance satisfactory to
Foothill and its counsel; and
(p) Foothill shall have received satisfactory evidence
that Borrower's accounts payable have not materially increased in their average
days past due nor have materially deteriorated in any way since the date of
Foothill's last audit of such information.
3.2 CONDITIONS PRECEDENT TO ALL ADVANCES, L/CS, OR L/C GUARANTEES.
The following shall be conditions precedent to all advances, L/Cs, or L/C
Guarantees hereunder:
(a) the representations and warranties contained in this
Agreement and the other Loan Documents shall be true and correct in all
respects on and as of the date of such advance, L/C, or L/C Guaranty, as though
made on and as of such date (except to the extent that such representations and
warranties relate solely to an earlier date);
(b) no Event of Default or event which with the giving of
notice or passage of time would constitute an Event of Default shall have
occurred and be continuing on the
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date of such advance, L/C, or L/C Guaranty, nor shall either result from the
making thereof; and
(c) no injunction, writ, restraining order, or other
order of any nature prohibiting, directly or indirectly, the making of such
advance or the issuance of such L/C or L/C Guaranty shall have been issued and
remain in force by any governmental authority against Borrower, Foothill, or
any of their Affiliates.
3.3 TERM; AUTOMATIC RENEWAL. This Agreement shall become
effective upon the execution and delivery hereof by Borrower and Foothill and
shall continue in full force and effect for a term ending on the date (the
"Renewal Date") that is three (3) years from the Closing Date, unless sooner
terminated pursuant to the terms hereof. The foregoing notwithstanding,
Foothill shall have the right to terminate its obligations under this Agreement
immediately and without notice upon the occurrence and during the continuation
of an Event of Default.
3.4 EFFECT OF TERMINATION. On the date of termination, all
Obligations (including contingent reimbursement obligations under any
outstanding L/Cs or L/C Guarantees) immediately shall become due and payable
without notice or demand. No termination of this Agreement, however, shall
relieve or discharge Borrower of Borrower's duties, Obligations, or covenants
hereunder, and Foothill's continuing security interests in the Collateral and
the Real Property shall remain in effect until all Obligations have been fully
and finally discharged and Foothill's obligation to provide advances hereunder
is terminated.
3.5 EARLY TERMINATION BY BORROWER. The provisions of Section 3.3
that allow termination of this Agreement by Borrower only on the Renewal Date
notwithstanding, Borrower has the option, at any time upon ninety (90) days
prior written notice to Foothill, to terminate this Agreement by paying to
Foothill, in cash, the Obligations (including an amount equal to the full
amount of the L/Cs or L/C Guarantees), together with a premium (the "Early
Termination Premium") equal to:
<TABLE>
<CAPTION>
Year of this Agreement
During Which
Termination Occurred Percent of Maximum Amount
-------------------- -------------------------
<S> <C>
1st year 4.0%
2nd year 1.5%
3rd year 1.0%
</TABLE>
3.6 TERMINATION UPON EVENT OF DEFAULT. If Foothill terminates
this Agreement upon the occurrence of an Event of Default, in view of the
impracticability and extreme difficulty of ascertaining actual damages and by
mutual agreement of the parties as to a reasonable calculation of Foothill's
lost profits as a result thereof, Borrower shall pay to Foothill upon the
effective date of such termination, a premium in an amount equal to the Early
Termination Premium. The Early Termination Premium shall be presumed to be the
amount of damages sustained by Foothill as the result of the early termination
and Borrower
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agrees that it is reasonable under the circumstances currently existing. The
Early Termination Premium provided for in this Section 3.6 shall be deemed
included in the Obligations.
4. CREATION OF SECURITY INTEREST.
4.1 GRANT OF SECURITY INTEREST. Borrower hereby grants to
Foothill a continuing security interest in all currently existing and hereafter
acquired or arising Collateral in order to secure prompt repayment of any and
all Obligations and in order to secure prompt performance by Borrower of each
of its covenants and duties under the Loan Documents. Foothill's security
interests in the Collateral shall attach to all Collateral without further act
on the part of Foothill or Borrower. Anything contained in this Agreement or
any other Loan Document to the contrary notwithstanding, except for the sale of
Inventory to buyers in the ordinary course of business, Borrower has no
authority, express or implied, to dispose of any item or portion of the
Collateral or the Real Property.
4.2 NEGOTIABLE COLLATERAL. In the event that any Collateral,
including proceeds, is evidenced by or consists of Negotiable Collateral,
Borrower shall, immediately upon the request of Foothill, endorse and assign
such Negotiable Collateral to Foothill and deliver physical possession of such
Negotiable Collateral to Foothill.
4.3 COLLECTION OF ACCOUNTS, GENERAL INTANGIBLES, NEGOTIABLE
COLLATERAL. On or before the Closing Date, Foothill, Borrower, and the Lockbox
Banks shall enter into the Lockbox Agreements, in form and substance
satisfactory to Foothill in its sole discretion, pursuant to which all of
Borrower's cash receipts, checks, and other items of payment (including,
insurance proceeds, proceeds of cash sales, rental proceeds, and tax refunds)
will be forwarded to Foothill on a daily basis. At any time, Foothill or
Foothills designee may: (a) notify customers or Account Debtors of Borrower
that the Accounts, General Intangibles, or Negotiable Collateral have been
assigned to Foothill or that Foothill has a security interest therein; and (b)
collect the Accounts, General Intangibles, and Negotiable Collateral directly
and charge the collection costs and expenses to Borrower's loan account.
Borrower agrees that it will hold in trust for Foothill, as Foothills trustee,
any cash receipts, checks, and other items of payment (including, insurance
proceeds, proceeds of cash sales, rental proceeds, and tax refunds) that it
receives and immediately will deliver said cash receipts, checks, and other
items of payment to Foothill in their original form as received by Borrower.
4.4 DELIVERY OF ADDITIONAL DOCUMENTATION REQUIRED. At any time
upon the request of Foothill, Borrower shall execute and deliver to Foothill
all financing statements, continuation financing statements, fixture filings,
security agreements, chattel mortgages, pledges, assignments, endorsements of
certificates of title, applications for title, affidavits, reports, notices,
schedules of accounts, letters of authority, and all other documents that
Foothill may reasonably request, in form satisfactory to Foothill, to perfect
and continue perfected Foothill's security interests in the Collateral and the
Real Property, and in order to fully consummate all of the transactions
contemplated hereby and under the other the Loan Documents.
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<PAGE> 29
4.5 POWER OF ATTORNEY. Borrower hereby irrevocably makes,
constitutes, and appoints Foothill (and any of Foothill's officers, employees,
or agents designated by Foothill) as Borrower's true and lawful attorney, with
power to: (a) if Borrower refuses to, or fails timely to execute and deliver
any of the documents described in Section 4.4, sign the name of Borrower on any
of the documents described in Section 4.4; (b) at any time that an Event of
Default has occurred and is continuing or Foothill deems itself insecure (in
accordance with Section 1208 of the Code), sign Borrower's name on any invoice
or bill of lading relating to any Account, drafts against Account Debtors,
schedules and assignments of Accounts, verifications of Accounts, and notices
to Account Debtors; (c) send requests for verification of Accounts; (d) endorse
Borrower's name on any checks, notices, acceptances, money orders, drafts, or
other item of payment or security that may come into Foothill's possession; (e)
at any time that an Event of Default has occurred and is continuing or Foothill
deems itself insecure (in accordance with Section 1208 of the Code), notify the
post office authorities to change the address for delivery of Borrower's mail
to an address designated by Foothill, to receive and open all mail addressed to
Borrower, and to retain all mail relating to the Collateral and forward all
other mail to Borrower as soon as reasonably practicable; (f) at any time that
an Event of Default has occurred and is continuing or Foothill deems itself
insecure (in accordance with Section 1208 of the Code), make, settle, and
adjust all claims under Borrower's policies of insurance and make all
determinations and decisions with respect to such policies of insurance; and
(g) at any time that an Event of Default has occurred and is continuing or
Foothill deems itself insecure (in accordance with Section 1208 of the Code),
settle and adjust disputes and claims respecting the Accounts directly with
Account Debtors, for amounts and upon terms which Foothill determines to be
reasonable, and Foothill may cause to be executed and delivered any documents
and releases which Foothill determines to be necessary. The appointment of
Foothill as Borrower's attorney, and each and every one of Foothill's rights
and powers, being coupled with an interest, is irrevocable until all of the
Obligations have been fully and finally repaid and performed and Foothill's
obligation to extend credit hereunder is terminated.
4.6 RIGHT TO INSPECT. Foothill (through any of its officers,
employees, or agents) shall have the right, from time to time hereafter to
inspect Borrower's Books and to check, test, and appraise the Collateral or the
Real Property in order to verify Borrower's financial condition or the amount,
quality, value, condition of, or any other matter relating to, the Collateral
or the Real Property.
5. REPRESENTATIONS AND WARRANTIES.
Borrower represents and warrants to Foothill as follows:
5.1 NO PRIOR ENCUMBRANCES. Borrower has good and indefeasible
title to the Collateral and the Real Property, free and clear of liens, claims,
security interests, or encumbrances, except for Permitted Liens and those liens
fully satisfied and terminated upon the Closing Date.
5.2 ELIGIBLE ACCOUNTS. The Eligible Accounts are, at the time of
the creation thereof and as of each date on which Borrower includes them in a
Borrowing Base calculation or certification, bona fide existing obligations
created by the sale and delivery of
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<PAGE> 30
Inventory or the rendition of services to Account Debtors in the ordinary
course of Borrower's business, unconditionally owed to Borrower without
defenses, disputes, offsets, counterclaims, or rights of return or
cancellation. The property giving rise to such Eligible Accounts has been
delivered to the Account Debtor, or to the Account Debtor's agent for immediate
shipment to and unconditional acceptance by the Account Debtor. At the time of
the creation of an Eligible Account and as of each date on which Borrower
includes an Eligible Account in a Borrowing Base calculation or certification,
Borrower has not received notice of actual or imminent bankruptcy, insolvency,
or material impairment of the financial condition of any applicable Account
Debtor regarding such Eligible Account.
5.3 ELIGIBLE INVENTORY. All Eligible Inventory is now and at all
times hereafter shall be of good and merchantable quality, free from defects.
5.4 LOCATION OF INVENTORY AND EQUIPMENT. The Inventory and
Equipment are not stored with a bailee, warehouseman, or similar party (without
Foothill's prior written consent) and are located only at the locations
identified on Schedule 6.15 or otherwise permitted by Section 6.15.
5.5 INVENTORY RECORDS. Borrower now keeps, and hereafter at all
times shall keep, correct and accurate records itemizing and describing the
kind, type, quality, and quantity of the Inventory, and Borrower's cost
therefor.
5.6 LOCATION OF CHIEF EXECUTIVE OFFICE; FEIN. The chief executive
office of Borrower is located at the address indicated in the preamble to this
Agreement. Inc.'s FEIN is 75-2502577, L.P.'s FEIN is 75- 2502573 and NBF's
FEIN is 58-2110622.
5.7 DUE ORGANIZATION AND QUALIFICATION; NO SUBSIDIARIES. Borrower
is duly organized and existing and in good standing under the laws of the state
of its incorporation or certification, respectively, and is qualified and
licensed to do business in, and in good standing in, any state where the
failure to be so licensed or qualified could reasonably be expected to have a
material adverse effect on the business, operations, condition (financial or
otherwise), finances, or prospects of Borrower or on the value of the
Collateral or the Real Property to Foothill. Borrower has no subsidiaries
other than as described in Schedule 5.7.
5.8 DUE AUTHORIZATION; NO CONFLICT. The execution, delivery, and
performance of the Loan Documents are within Borrower's corporate powers, have
been duly authorized, and are not in conflict with nor constitute a breach of
any provision contained in Borrower's articles, certificate of incorporation,
by-laws, organizational documents, partnership agreements or certificate of
limited partnership, nor will they constitute an event of default under any
material agreement to which Borrower is a party or by which its properties or
assets may be bound.
5.9 LITIGATION. There are no actions or proceedings pending by or
against Borrower before any court or administrative agency and Borrower does
not have knowledge or belief of any pending, threatened, or imminent
litigation, governmental investigations, or claims, complaints, actions, or
prosecutions involving Borrower or any guarantor of the Obligations, except
for: (a) ongoing collection matters in which Borrower is the plaintiff;
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<PAGE> 31
(b) matters disclosed on Schedule 5.9; and (c) and matters arising after the
date hereof that, if decided adversely to Borrower, would not materially impair
the prospect of repayment of the Obligations or materially impair the value or
priority of Foothill's security interests in the Collateral or the Real
Property.
5.10 NO MATERIAL ADVERSE CHANGE IN FINANCIAL CONDITION. All
financial statements relating to Borrower or any Corporate Guarantor or
Individual Guarantor of the Obligations that have been delivered by Borrower to
Foothill have been prepared in accordance with GAAP, (except as to the
Individual Guarantors) and fairly present Borrower's (or such Corporate
Guarantor or Individual Guarantor) as applicable) financial condition as of the
date thereof and Borrower's results of operations for the period then ended.
There has not been a material adverse change in the financial condition of
Borrower (or such Corporate Guarantor or Individual Guarantor, as applicable)
since the date of the latest financial statements submitted to Foothill on or
before the Closing Date.
5.11 SOLVENCY. Borrower and each Corporate Guarantor is Solvent.
No transfer of property is being made by Borrower or any Corporate Guarantor
and no obligation is being incurred by Borrower or any Corporate Guarantor in
connection with the transactions contemplated by this Agreement or the other
Loan Documents with the intent to hinder, delay, or defraud either present or
future creditors of Borrower.
5.12 EMPLOYEE BENEFITS. Each Plan is in compliance in all material
respects with the applicable provisions of ERISA and the IRC. Each Qualified
Plan and Multiemployer Plan has been determined by the Internal Revenue Service
to qualify under Section 401 of the IRC, and the trusts created thereunder have
been determined to be exempt from tax under Section 501 of the IRC, and, to the
best knowledge of Borrower, nothing has occurred that would cause the loss of
such qualification or tax-exempt status. There are no outstanding liabilities
under Title IV of ERISA with respect to any Plan maintained or sponsored by
Borrower or any ERISA Affiliate, nor with respect to any Plan to which Borrower
or any ERISA Affiliate contributes or is obligated to contribute which could
reasonably be expected to have a material adverse effect on the financial
condition of Borrower. No Plan subject to Title IV of ERISA has any Unfunded
Benefit Liability which could reasonably be expected to have a material adverse
effect on the financial condition of Borrower. Neither Borrower nor any ERISA
Affiliate has transferred any Unfunded Benefit Liability to a person other than
Borrower or an ERISA Affiliate or has otherwise engaged in a transaction that
could be subject to Sections 4069 or 4212(c) of ERISA which could reasonably be
expected to have a material adverse effect on the financial condition of
Borrower. Neither Borrower nor any ERISA Affiliate has incurred nor reasonably
expects to incur (x) any liability (and no event has occurred which, with the
giving of notice under Section 4219 of ERISA, would result in such liability)
under Sections 4201 or 4243 of ERISA with respect to a Multiemployer Plan, or
(y) any liability under Title IV of ERISA (other than premiums due but not
delinquent under Section 4007 of ERISA) with respect to a Plan, which could, in
either event, reasonably be expected to have a material adverse effect on the
financial condition of Borrower. No application for a funding waiver or an
extension of any amortization period pursuant to Section 412 of the IRC has
been made with respect to any Plan. No ERISA Event has occurred or is
reasonably expected to occur with respect to any Plan which could reasonably be
expected to have a material adverse effect on the financial condition of
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<PAGE> 32
Borrower. Borrower and each ERISA Affiliate have complied in all material
respects with the notice and continuation coverage requirements of Section
4980B of the IRC.
5.13 ENVIRONMENTAL CONDITION. Except as disclosed in writing to
Foothill, none of Borrower's properties or assets has ever been used by
Borrower or, to the best of Borrower's knowledge, by previous owners or
operators in the disposal of, or to produce, store, handle, treat, release, or
transport, any Hazardous Materials. None of Borrower's properties or assets
has ever been designated or identified in any manner pursuant to any
environmental protection statute as a Hazardous Materials disposal site, or a
candidate for closure pursuant to any environmental protection statute. No
lien arising under any environmental protection statute has attached to any
revenues or to any real or personal property owned or operated by Borrower.
Borrower has not received a summons, citation, notice, or directive from the
Environmental Protection Agency or any other federal or state governmental
agency concerning any action or omission by Borrower resulting in the releasing
or disposing of Hazardous Materials into the environment.
5.14 PATENTS, COPYRIGHTS AND TRADEMARKS. Borrower has no
registered trademarks or copyrights and has not applied for or been issued any
patents by any governmental authority or instrumentality thereof other than
those listed on Exhibit 5.14.
5.15 MATERIAL AGREEMENTS. Each agreement that is material to the
Borrower, taken as a whole, is in full force and effect and no default or event
that, with the giving of notice, or the passage of time, would constitute a
default, has occurred and is continuing under any such agreement.
5.16 RELIANCE BY FOOTHILL; CUMULATIVE. Each warranty and
representation contained in this Agreement automatically shall be deemed
repeated (except to the extent such warranty or representation relates solely
to an earlier date) with each advance or issuance of an L/C or L/C Guaranty and
shall be conclusively presumed to have been relied on by Foothill regardless of
any investigation made or information possessed by Foothill. The warranties
and representations set forth herein shall be cumulative and in addition to any
and all other warranties and representations that Borrower now or hereafter
shall give, or cause to be given, to Foothill.
6. AFFIRMATIVE COVENANTS.
Borrower covenants and agrees that, so long as any credit hereunder
shall be available and until full and final payment of the Obligations, and
unless Foothill shall otherwise consent in writing, Borrower shall do all of
the following:
6.1 ACCOUNTING SYSTEM. Borrower shall maintain a standard and
modern system of accounting in accordance with GAAP with ledger and account
cards or computer tapes, discs, printouts, and records pertaining to the
Collateral which contain information as from time to time may be requested by
Foothill. Borrower also shall keep proper books of account showing all sales,
claims, and allowances on its Inventory.
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<PAGE> 33
6.2 COLLATERAL REPORTS. Borrower shall deliver to Foothill, no
later than the tenth (10th) day of each month during the term of this
Agreement, a detailed aging, by total, of the Accounts, a reconciliation
statement, and a summary aging, by vendor, of all accounts payable and any book
overdraft. Original sales invoices evidencing daily sales shall be mailed by
Borrower to each Account Debtor with, at Foothill's request, a copy to
Foothill, and, at Foothill's direction, the invoices shall indicate on their
face that the Account has been assigned to Foothill and that all payments are
to be made directly to Foothill. Borrower shall deliver to Foothill, as
Foothill may from time to time require, collection reports, sales journals,
invoices, original delivery receipts, customer's purchase orders, shipping
instructions, bills of lading, and other documentation respecting shipment
arrangements. Absent such a request by Foothill, copies of all such
documentation shall be held by Borrower as custodian for Foothill. In
addition, from time to time, Borrower shall deliver to Foothill such other and
additional information or documentation as Foothill may request.
6.3 SCHEDULES OF ACCOUNTS. With such regularity as Foothill shall
require, Borrower shall provide Foothill with schedules describing all
Accounts. Foothill's failure to request such schedules or Borrower's failure
to execute and deliver such schedules shall not affect or limit Foothill's
security interests or other rights in and to the Accounts.
6.4 FINANCIAL STATEMENTS, REPORTS, CERTIFICATES. Borrower agrees
to deliver to Foothill: (a) as soon as available, but in any event within
thirty (30) days after the end of each month during each of Borrower's fiscal
years, a company prepared balance sheet, income statement, and cash flow
statement covering Borrower's operations during such period; and (b) as soon as
available, but in any event within ninety (90) days after the end of each of
Borrower's fiscal years, financial statements of Borrower for each such fiscal
year, audited by independent certified public accountants reasonably acceptable
to Foothill and certified, without any qualifications, by such accountants to
have been prepared in accordance with GAAP, together with a certificate of such
accountants addressed to Foothill stating that such accountants do not have
knowledge of the existence of any event or condition constituting an Event of
Default, or that would, with the passage of time or the giving of notice,
constitute an Event of Default. Such audited financial statements shall
include a balance sheet, profit and loss statement, and cash flow statement,
and, if prepared, such accountants' letter to management. If Borrower is a
parent company of one or more subsidiaries, or Affiliates, or is a subsidiary
or Affiliate of another company, then, in addition to the financial statements
referred to above, Borrower agrees to deliver financial statements prepared on
a consolidating basis so as to present Borrower and each such related entity
separately, and on a consolidated basis.
Together with the above, Borrower and each Corporate Guarantor
also shall deliver to Foothill Borrower's Form 10-Q Quarterly Reports, Form
10-K Annual Reports, and Form 8-K Current Reports, and any other filings made
by Borrower with the Securities and Exchange Commission, if any, as soon as the
same are filed, or any other information that is provided by Borrower to its
shareholders or partners, and any other report reasonably requested by Foothill
relating to the Collateral, the Real Property, or the financial condition of
Borrower.
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Each month, together with the financial statements provided
pursuant to Section 6.4(a), Borrower shall deliver to Foothill a certificate
signed by its chief financial officer or individual responsible for the
financial affairs of Borrower to the effect that: (i) all reports, statements,
or computer prepared information of any kind or nature delivered or caused to
be delivered to Foothill hereunder have been prepared in accordance with GAAP
and fairly present the financial condition of Borrower; (ii) Borrower is in
timely compliance with all of its covenants and agreements hereunder; (iii) the
representations and warranties of Borrower contained in this Agreement and the
other Loan Documents are true and correct in all material respects on and as of
the date of such certificate, as though made on and as of such date (except to
the extent that such representations and warranties relate solely to an earlier
date); and (iv) on the date of delivery of such certificate to Foothill there
does not exist any condition or event that constitutes an Event of Default (or,
in each case, to the extent of any non-compliance, describing such
non-compliance as to which he or she may have knowledge and what action
Borrower has taken, is taking, or proposes to take with respect thereto).
Borrower shall have issued written instructions to its
independent certified public accountants authorizing them to communicate with
Foothill and to release to Foothill whatever financial information concerning
Borrower that Foothill may request. Borrower hereby irrevocably authorizes and
directs all auditors, accountants, or other third parties to deliver to
Foothill, at Borrower's expense, copies of Borrower's financial statements,
papers related thereto, and other accounting records of any nature in their
possession, and to disclose to Foothill any information they may have regarding
Borrower's business affairs and financial conditions.
6.5 TAX RETURNS. Borrower agrees to deliver to Foothill copies of
each of Borrower's future federal income tax returns, and any amendments
thereto, within thirty (30) days of the filing thereof with the Internal
Revenue Service.
6.6 GUARANTOR REPORTS. Borrower agrees to cause each Individual
Guarantor and Corporate Guarantor to deliver its annual financial statements at
the time when Borrower provides its audited financial statements to Foothill
and copies of all federal income tax returns as soon as the same are available
and in any event no later than thirty (30) days after the same are required to
be filed by law.
6.7 DESIGNATION OF INVENTORY. Borrower shall now and from time to
time hereafter, but not less frequently than monthly, execute and deliver to
Foothill a designation of Inventory specifying Borrower's cost and the
wholesale market value of Borrower's raw materials, work in process, and
finished goods, and further specifying such other information as Foothill may
reasonably request.
6.8 RETURNS. Returns and allowances, if any, as between Borrower
and its Account Debtors shall be on the same basis and in accordance with the
usual customary practices of Borrower, as they exist at the time of the
execution and delivery of this Agreement. If, at a time when no Event of
Default has occurred and is continuing, any Account Debtor returns any
Inventory to Borrower, Borrower promptly shall determine the reason for such
return and, if Borrower accepts such return, issue a credit memorandum
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<PAGE> 35
(with a copy to be sent to Foothill) in the appropriate amount to such Account
Debtor. If, at a time when an Event of Default has occurred and is continuing,
any Account Debtor returns any Inventory to Borrower, Borrower promptly shall
determine the reason for such return and, if Foothill consents (which consent
shall not be unreasonably withheld), issue a credit memorandum (with a copy to
be sent to Foothill) in the appropriate amount to such Account Debtor. On a
daily basis, Borrower shall notify Foothill of all returns and recoveries and
of all disputes and claims.
6.9 TITLE TO EQUIPMENT. Upon Foothill's request, Borrower
immediately shall deliver to Foothill, properly endorsed, any and all evidences
of ownership of, certificates of title, or applications for title to any items
of Equipment.
6.10 MAINTENANCE OF EQUIPMENT. Borrower shall keep and maintain
the Equipment in good operating condition and repair (ordinary wear and tear
excepted), and make all necessary replacements thereto so that the value and
operating efficiency thereof shall at all times be maintained and preserved.
Borrower shall not permit any item of Equipment to become a fixture to real
estate or an accession to other property, and the Equipment is now and shall at
all times remain personal property.
6.11 TAXES. All assessments and taxes, whether real, personal, or
otherwise, due or payable by, or imposed, levied, or assessed against Borrower
or any of its property have been paid, and shall hereafter be paid in full,
before delinquency or before the expiration of any extension period. Borrower
shall make due and timely payment or deposit of all federal, state, and local
taxes, assessments, or contributions required of it by law, and will execute
and deliver to Foothill, on demand, appropriate certificates attesting to the
payment thereof or deposit with respect thereto. Borrower will make timely
payment or deposit of all tax payments and withholding taxes required of it by
applicable laws, including those laws concerning F.I.C.A., F.U.T.A., state
disability, and local, state, and federal income taxes, and will, upon request,
furnish Foothill with proof satisfactory to Foothill indicating that Borrower
has made such payments or deposits.
6.12 INSURANCE.
(a) Borrower, at its expense, shall keep the Collateral
and the Real Property insured against loss or damage by fire, theft, explosion,
sprinklers, and all other hazards and risks, and in such amounts, as are
ordinarily insured against by other owners in similar businesses. Borrower
also shall maintain business interruption, public liability, product liability,
and property damage insurance relating to Borrower's ownership and use of the
Collateral and the Real Property, as well as insurance against larceny,
embezzlement, and criminal misappropriation.
(b) All such policies of insurance shall be in such form,
with such companies, and in such amounts as may be reasonably satisfactory to
Foothill. All such policies of insurance (except those of public liability and
property damage) shall contain a 438BFU lender's loss payable endorsement, or
an equivalent endorsement in a form satisfactory to Foothill, showing Foothill
as sole loss payee thereof, and shall contain a waiver of warranties, and shall
specify that the insurer must give at least ten (10) days prior
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written notice to Foothill before canceling its policy for any reason.
Borrower shall deliver to Foothill certified copies of such policies of
insurance and evidence of the payment of all premiums therefor. All proceeds
payable under any such policy shall be payable to Foothill to be applied on
account of the Obligations.
6.13 FINANCIAL COVENANTS. Borrower shall maintain:
(a) Current Ratio. A ratio of Consolidated Current Assets
divided by Consolidated Current Liabilities of at least 1.05 to one (1.05:1.0),
measured on a fiscal quarter-end basis;
(b) Total Liabilities to Tangible Net Worth Ratio. A
ratio of Borrower's total liabilities divided by Tangible Net Worth measured on
a fiscal quarter-end basis of not more than:
<TABLE>
<CAPTION>
Date of Fiscal Quarter-End Ratio
-------------------------- -----
<S> <C>
9/30/96 4.75:1.0
12/31/96 4.50:1.0
3/31/97 4.0:1.0
6/30/97 4.0:1.0
9/30/97 4.0:1.0
12/31/97 (and thereafter) 3.75:1.0
</TABLE>
(c) Tangible Net Worth. Tangible Net Worth measured on a
fiscal quarter-end basis of at least:
<TABLE>
<CAPTION>
Date of Fiscal Quarter-End Tangible Net Worth
-------------------------- ------------------
<S> <C>
9/30/96 $ 9,300,000
12/31/96 $10,250,000
3/31/97 $10,250,000
6/30/97 $ 9,500,000
9/30/97 $ 9,500,000
12/31/97 $11,000,000
3/31/98 $11,000,000
6/30/98 $10,250,000
9/30/98 $10,250,000
12/31/98 (and thereafter) $11,000,000
</TABLE>
6.14 NO SETOFFS OR COUNTERCLAIMS. All payments hereunder and under
the other Loan Documents made by or on behalf of Borrower shall be made without
setoff or counterclaim and free and clear of, and without deduction or
withholding for or on account of, any federal, state, or local taxes.
6.15 LOCATION OF INVENTORY AND EQUIPMENT. Borrower shall keep the
Inventory and Equipment only at the locations identified on Schedule 6.15;
provided, however, that Borrower may amend Schedule 6.15 so long as such
amendment occurs by written notice to Foothill not less than thirty (30) days
prior to the date on which the Inventory or Equipment
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<PAGE> 37
is moved to such new location, so long as such new location is within the
continental United States, and so long as, at the time of such written
notification, Borrower provides any financing statements or fixture filings
necessary to perfect and continue perfected Foothill's security interests in
such assets and also provides to Foothill a landlord's waiver in form and
substance satisfactory to Foothill.
6.16 COMPLIANCE WITH LAWS. Borrower shall comply with the
requirements of all applicable laws, rules, regulations, and orders of any
governmental authority, including the Fair Labor Standards Act and the
Americans With Disabilities Act, other than laws, rules, regulations, and
orders the non-compliance with which, individually or in the aggregate, would
not have and could not reasonably be expected to have a material adverse effect
on the business, operations, condition (financial or otherwise), finances, or
prospects of Borrower or on the value of the Collateral and the Real Property
to Foothill.
6.17 EMPLOYEE BENEFITS.
(a) Borrower shall deliver to Foothill a written
statement by the chief financial officer of Borrower specifying the nature of
any of the following events and the actions which Borrower proposes to take
with respect thereto promptly, and in any event within ten (10) days of
becoming aware of any of them, and when known, any action taken or threatened
by the Internal Revenue Service, PBGC, Department of Labor, or other party with
respect thereto: (i) an ERISA Event with respect to any Plan; (ii) the
incurrence of an obligation to pay additional premium to the PBGC under Section
4006(a)(3)(E) of ERISA with respect to any Plan; and (iii) any lien on the
assets of Borrower arising in connection with any Plan.
(b) Borrower shall also promptly furnish to Foothill
copies prepared or received by Borrower or an ERISA Affiliate of: (i) at the
request of Foothill, each annual report (Internal Revenue Service Form 5500
series) and all accompanying schedules, actuarial reports, financial
information concerning the financial status of each Plan, and schedules showing
the amounts contributed to each Plan by or on behalf of Borrower or its ERISA
Affiliates for the most recent three (3) plan years; (ii) all notices of intent
to terminate or to have a trustee appointed to administer any Plan; (iii) all
written demands by the PBGC under Subtitle D of Title IV of ERISA; (iv) all
notices required to be sent to employees or to the PBGC under Section 302 of
ERISA or Section 412 of the IRC; (v) all written notices received with respect
to a Multiemployer Plan concerning (x) the imposition or amount of withdrawal
liability pursuant to Section 4202 of ERISA, (y) a termination described in
Section 4041A of ERISA, or (z) a reorganization or insolvency described in
Subtitle E of Title IV of ERISA; (vi) the adoption of any new Plan that is
subject to Title IV of ERISA or Section 412 of the IRC by Borrower or any ERISA
Affiliate; (vii) the adoption of any amendment to any Plan that is subject to
Title IV of ERISA or Section 412 of the IRC, if such amendment results in a
material increase in benefits or Unfunded Benefit Liability; or (viii) the
commencement of contributions by Borrower or any ERISA Affiliate to any Plan
that is subject to Title IV of ERISA or Section 412 of the IRC.
6.18 LEASES. Borrower shall pay when due all rents and other
amounts payable under any leases to which Borrower is a party or by which
Borrower's properties and assets
32
<PAGE> 38
are bound, unless such payments are the subject of a Permitted Protest. To the
extent that Borrower fails timely to make payment of such rents and other
amounts payable when due under its leases, Foothill shall be entitled, in its
discretion, and without the necessity of declaring an Event of Default, to
reserve an amount equal to such unpaid amounts from the loan availability
created under Section 2.1 hereof.
6.19 MATERIAL AGREEMENTS. Borrower shall duly observe and perform
all material terms and conditions of each agreement to which it is party and
that is material to Borrower, taken as a whole. Borrower shall promptly notify
Foothill of all material notices or communications in respect of any such
material agreement and provide Foothill with copies of the same.
7. NEGATIVE COVENANTS.
Borrower covenants and agrees that, so long as any credit hereunder
shall be available and until full and final payment of the Obligations,
Borrower will not do any of the following without Foothill's prior written
consent:
7.1 INDEBTEDNESS. Create, incur, assume, permit, guarantee, or
otherwise become or remain, directly or indirectly, liable with respect to any
Indebtedness, except:
(a) Indebtedness evidenced by this Agreement;
(b) Indebtedness set forth in the latest financial
statements of Borrower submitted to Foothill on or prior to the Closing Date;
(c) the Subordinated Debt;
(d) Indebtedness secured by Permitted Liens; and
(e) refinancings, renewals, or extensions of Indebtedness
permitted under clauses (b) and (c) of this Section 7.1 (and continuance or
renewal of any Permitted Liens associated therewith) so long as: (i) the terms
and conditions of such refinancings, renewals, or extensions do not materially
impair the prospects of repayment of the Obligations by Borrower, (ii) the net
cash proceeds of such refinancings, renewals, or extensions do not result in an
increase in the aggregate principal amount of the Indebtedness so refinanced,
renewed, or extended, (iii) such refinancings, renewals, refundings, or
extensions do not result in a shortening of the average weighted maturity of
the Indebtedness so refinanced, renewed, or extended, and (iv) to the extent
that Indebtedness that is refinanced was subordinated in right of payment to
the Obligations, then the subordination terms and conditions of the refinancing
Indebtedness must be at least as favorable to Foothill as those applicable to
the refinanced Indebtedness.
7.2 LIENS. Create, incur, assume, or permit to exist, directly or
indirectly, any lien on or with respect to any of its property or assets, of
any kind, whether now owned or hereafter acquired, or any income or profits
therefrom, except for Permitted Liens (including
33
<PAGE> 39
liens that are replacements of Permitted liens to the extent that the original
Indebtedness is refinanced under Section 7.1(d) and so long as the replacement
liens secure only those assets or property that secured the original
Indebtedness).
7.3 RESTRICTIONS ON FUNDAMENTAL CHANGES. Enter into any
acquisition, merger, consolidation, reorganization, or recapitalization, or
reclassify its capital stock, or liquidate, wind up, or dissolve itself (or
suffer any liquidation or dissolution), or convey, sell, assign, lease,
transfer, or otherwise dispose of, in one transaction or a series of
transactions, all or any substantial part of its business, property, or assets,
whether now owned or hereafter acquired, or acquire by purchase or otherwise
all or substantially all of the properties, assets, stock, partnership
interests, or other evidence of beneficial ownership of any Person.
7.4 EXTRAORDINARY TRANSACTIONS AND DISPOSAL OF ASSETS. Enter into
any transaction not in the ordinary and usual course of Borrower's business,
including the sale, lease, or other disposition of, moving, relocation, or
transfer, whether by sale or otherwise, of any of Borrower's properties or
assets (other than sales of Inventory to buyers in the ordinary course of
Borrower's business as currently conducted).
7.5 CHANGE NAME. Change Borrower's name, FEIN, business
structure, or identity, or add any new fictitious name.
7.6 GUARANTEE. Guarantee or otherwise become in any way liable
with respect to the obligations of any third Person except by endorsement of
instruments or items of payment for deposit to the account of Borrower or which
are transmitted or turned over to Foothill.
7.7 RESTRUCTURE. Make any change in Borrower's financial
structure, the principal nature of Borrower's business operations, or the date
of its fiscal year.
7.8 PREPAYMENTS. Except in connection with a refinancing
permitted by Section 7.1(d), prepay any Indebtedness owing to any third Person.
7.9 CHANGE OF CONTROL. Cause, permit, or suffer, directly or
indirectly, any Change of Control.
7.10 CAPITAL EXPENDITURES. Make any capital expenditure, or any
commitment therefor where the aggregate amount of such capital expenditures,
made or committed for in any fiscal year is in excess of Seven Hundred Fifty
Thousand Dollars ($750,000).
7.11 CONSIGNMENTS. Consign any Inventory or sell any Inventory on
bill and hold, sale or return, sale on approval, or other conditional terms of
sale, except as provided in Schedule 6.15.
7.12 DISTRIBUTIONS. Make any distribution or declare or pay any
dividends or partnership distributions (in cash or otherwise) on, or purchase,
acquire, redeem, or retire any of Borrower's capital stock, of any class, or
any partnership interest, whether now or hereafter outstanding.
34
<PAGE> 40
7.13 ACCOUNTING METHODS. Modify or change its method of accounting
or enter into, modify, or terminate any agreement currently existing, or at any
time hereafter entered into with any third party accounting firm or service
bureau for the preparation or storage of Borrower's accounting records without
said accounting firm or service bureau agreeing to provide Foothill information
regarding the Collateral and the Real Property or Borrower's financial
condition. Borrower waives the right to assert a confidential relationship, if
any, it may have with any accounting firm or service bureau in connection with
any information requested by Foothill pursuant to or in accordance with this
Agreement, and agrees that Foothill may contact directly any such accounting
firm or service bureau in order to obtain such information.
7.14 INVESTMENTS. Directly or indirectly make or acquire any
beneficial interest in (including stock, partnership interest, or other
securities of), or make any loan, advance, or capital contribution to, any
Person.
7.15 TRANSACTIONS WITH AFFILIATES. Directly or indirectly enter
into or permit to exist any material transaction with any Affiliate of Borrower
except for transactions that are in the ordinary course of Borrower's business,
upon fair and reasonable terms, that are fully disclosed to Foothill, and that
are no less favorable to Borrower than would be obtained in arm's length
transaction with a non-Affiliate.
7.16 SUSPENSION. Suspend or go out of a substantial portion of its
business.
7.17 COMPENSATION. Increase the annual fee or per-meeting fees
paid to directors during any year by more than fifteen percent (15%) over the
prior year; pay or accrue total cash compensation, during any year, to
executive officers (as defined in Borrower's Form 10-K) and senior management
employees in an aggregate amount in excess of one hundred fifteen percent
(115%) of that paid or accrued in the prior year.
7.18 USE OF PROCEEDS. Use the proceeds of the advances made
hereunder for any purpose other than: (a) on the Closing Date, to repay in
full the outstanding principal, accrued interest, and accrued fees and expenses
owing to Old Lender; (b) to pay transactional costs and expenses incurred in
connection with this Agreement; and (c) thereafter, consistent with the terms
and conditions hereof, for its lawful and permitted corporate purposes.
7.19 CHANGE IN LOCATION OF CHIEF EXECUTIVE OFFICE; INVENTORY AND
EQUIPMENT WITH BAILEES. Borrower covenants and agrees that it will not,
without thirty (30) days prior written notification to Foothill, relocate its
chief executive office to a new location and so long as, at the time of such
written notification, Borrower provides any financing statements or fixture
filings necessary to perfect and continue perfected Foothill's security
interests and also provides to Foothill a landlord's waiver in form and
substance satisfactory to Foothill. The Inventory and Equipment shall not at
any time now or hereafter be stored with a bailee, warehouseman, or similar
party without Foothill's prior written consent.
7.20 SUBORDINATED DEBT. Borrower shall not repay any Subordinated
Debt except to Dell Bollinger as provided in the Subordination Agreement with
respect to payments of principal to Dell Bollinger only and payments of
interest on Subordinated Debt.
35
<PAGE> 41
7.21 TAX LIEN. Borrower shall have sixty (60) days from the
Closing Date to satisfy and have released a Federal tax lien of Fifteen
Thousand Dollars ($15,000) and Foothill may reserve such amount from its
Revolving Advances.
8. EVENTS OF DEFAULT.
Any one or more of the following events shall constitute an event of
default (each, an "Event of Default") under this Agreement:
8.1 If Borrower fails to pay when due and payable or when declared
due and payable, any portion of the Obligations (whether of principal, interest
(including any interest which, but for the provisions of the Bankruptcy Code,
would have accrued on such amounts), fees and charges due Foothill,
reimbursement of Foothill Expenses, or other amounts constituting Obligations);
8.2 If Borrower fails or neglects to perform, keep, or observe any
term, provision, condition, covenant, or agreement contained in this Agreement,
in any of the Loan Documents, or in any other present or future agreement
between Borrower and Foothill;
8.3 If there is a material impairment of the prospect of repayment
of any portion of the Obligations owing to Foothill or a material impairment of
the value or priority of Foothill's security interests in the Collateral or the
Real Property;
8.4 If any material portion of Borrower's properties or assets is
attached, seized, subjected to a writ or distress warrant, or is levied upon,
or comes into the possession of any third Person;
8.5 If an Insolvency Proceeding is commenced by Borrower;
8.6 If an Insolvency Proceeding is commenced against Borrower and
any of the following events occur: (a) Borrower consents to the institution of
the Insolvency Proceeding against it; (b) the petition commencing the
Insolvency Proceeding is not timely controverted; (c) the petition commencing
the Insolvency Proceeding is not dismissed within forty-five (45) calendar days
of the date of the filing thereof; provided, however, that, during the pendency
of such period, Foothill shall be relieved of its obligation to make additional
advances or issue additional L/Cs or L/C Guarantees hereunder; (d) an interim
trustee is appointed to take possession of all or a substantial portion of the
properties or assets of, or to operate all or any substantial portion of the
business of' Borrower; or (e) an order for relief shall have been issued or
entered therein;
8.7 If Borrower is enjoined, restrained, or in any way prevented
by court order from continuing to conduct all or any material part of its
business affairs;
8.8 If a notice of lien, levy, or assessment is filed of record
with respect to any of Borrower's properties or assets by the United States
Government, or any department, agency, or instrumentality thereof, or by any
state, county, municipal, or governmental
36
<PAGE> 42
agency, or if any taxes or debts owing at any time hereafter to any one or more
of such entities becomes a lien, whether choate or otherwise, upon any of
Borrower's properties or assets and the same is not paid on the payment date
thereof;
8.9 If a judgment or other claim becomes a lien or encumbrance
upon any material portion of Borrower's properties or assets;
8.10 If there is a default in any material agreement to which
Borrower is a party with one or more third Persons resulting in a right by such
third Persons, irrespective of whether exercised, to accelerate the maturity of
Borrower's obligations thereunder;
8.11 If Borrower makes any payment on account of Indebtedness that
has been contractually subordinated in right of payment to the payment of the
Obligations, except to the extent such payment is permitted by the terms of the
subordination provisions applicable to such Indebtedness;
8.12 If any misstatement or misrepresentation exists now or
hereafter in any warranty, representation, statement, or report made to
Foothill by Borrower or any officer, employee, agent, or director of Borrower,
or if any such warranty or representation is withdrawn;
8.13 If the obligation of any Individual Guarantor or Corporate
Guarantor or other third Person under any Loan Document is limited or
terminated by operation of law or by the guarantor or other third Person
thereunder, or any such guarantor or other third Person becomes the subject of
an Insolvency Proceeding;
8.14 If (a) with respect to any Plan, there shall occur any of the
following which could reasonably be expected to have a material adverse effect
on the financial condition of Borrower: (i) the violation of any of the
provisions of ERISA; (ii) the loss by a Plan intended to be a Qualified Plan of
its qualification under Section 401(a) of the IRC; (iii) the incurrence of
liability under Title IV of ERISA; (iv) a failure to make full payment when due
of all amounts which, under the provisions of any Plan or applicable law,
Borrower or any ERISA Affiliate is required to make; (v) the filing of a notice
of intent to terminate a Plan under Sections 4041 or 4041A of ERISA; (vi) a
complete or partial withdrawal of Borrower or an ERISA Affiliate from any Plan;
(vii) the receipt of a notice by the plan administrator of a Plan that the PBGC
has instituted proceedings to terminate such Plan or appoint a trustee to
administer such Plan; (viii) a commencement or increase of contributions to, or
the adoption of or the amendment of, a Plan; and (ix) the assessment against
Borrower or any ERISA Affiliate of a tax under Section 4980B of the IRC; or (b)
the Unfunded Benefit Liability of all of the Plans of Borrower and its ERISA
Affiliates shall, in the aggregate, exceed Twenty Five Thousand Dollars
($25,000);
8.15 If any writing, document, aging, certificate or other evidence
of the Accounts or Inventory shall be materially incomplete, incorrect, or
misleading at the time the same is furnished to Foothill; or
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<PAGE> 43
9. FOOTHILL'S RIGHTS AND REMEDIES.
9.1 RIGHTS AND REMEDIES. Upon the occurrence, and during the
continuation, of an Event of Default Foothill may, at its election, without
notice of its election and without demand, do any one or more of the following,
all of which are authorized by Borrower:
(a) Declare all Obligations, whether evidenced by this
Agreement, by any of the other Loan Documents, or otherwise, immediately due
and payable;
(b) Cease advancing money or extending credit to or for
the benefit of Borrower under this Agreement, under any of the Loan Documents,
or under any other agreement between Borrower and Foothill;
(c) Terminate this Agreement and any of the other Loan
Documents as to any future liability or obligation of Foothill, but without
affecting Foothill's rights and security interests in the Collateral or the
Real Property and without affecting the Obligations;
(d) Settle or adjust disputes and claims directly with
Account Debtors for amounts and upon terms which Foothill considers advisable,
and in such cases, Foothill will credit Borrower's loan account with only the
net amounts received by Foothill in payment of such disputed Accounts after
deducting all Foothill Expenses incurred or expended in connection therewith;
(e) Cause Borrower to hold all returned Inventory in
trust for Foothill, segregate all returned Inventory from all other property of
Borrower or in Borrower's possession and conspicuously label said returned
Inventory as the property of Foothill;
(f) Without notice to or demand upon Borrower or any
guarantor, make such payments and do such acts as Foothill considers necessary
or reasonable to protect its security interests in the Collateral. Borrower
agrees to assemble the Collateral if Foothill so requires, and to make the
Collateral available to Foothill as Foothill may designate. Borrower
authorizes Foothill to enter the premises where the Collateral is located, to
take and maintain possession of the Collateral, or any part of it, and to pay,
purchase, contest, or compromise any encumbrance, charge, or lien that in
Foothill's determination appears to conflict with its security interests and to
pay all expenses incurred in connection therewith. With respect to any of
Borrower's owned premises, Borrower hereby grants Foothill a license to enter
into possession of such premises and to occupy the same, without charge, for up
to one hundred twenty (120) days in order to exercise any of Foothill's rights
or remedies provided herein, at law, in equity, or otherwise;
(g) Without notice to Borrower (such notice being
expressly waived), and without constituting a retention of any collateral in
satisfaction of an obligation (within the meaning of Section 9505 of the Code),
set off and apply to the Obligations any and all (i) balances and deposits of
Borrower held by Foothill (including any amounts received in the Lockbox
Accounts), or (ii) indebtedness at any time owing to or for the credit or the
account of Borrower held by Foothill;
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<PAGE> 44
(h) Hold, as cash collateral, any and all balances and
deposits of Borrower held by Foothill, and any amounts received in the Lockbox
Accounts, to secure the full and final repayment of all of the Obligations;
(i) Ship, reclaim, recover, store, finish, maintain,
repair, prepare for sale, advertise for sale, and sell (in the manner provided
for herein) the Collateral. Foothill is hereby granted a license or other
right to use, without charge, Borrower's labels, patents, copyrights, rights of
use of any name, trade secrets, trade names, trademarks, service marks, and
advertising matter, or any property of a similar nature, as it pertains to the
Collateral, in completing production of, advertising for sale, and selling any
Collateral and Borrower's rights under all licenses and all franchise
agreements shall inure to Foothill's benefit;
(j) Sell the Collateral at either a public or private
sale, or both, by way of one or more contracts or transactions, for cash or on
terms, in such manner and at such places (including Borrower's premises) as
Foothill determines is commercially reasonable. It is not necessary that the
Collateral be present at any such sale;
(k) Foothill shall give notice of the disposition of the
Collateral as follows:
(1) Foothill shall give Borrower and each holder
of a security interest in the Collateral who has filed with Foothill a written
request for notice, a notice in writing of the time and place of public sale,
or, if the sale is a private sale or some other disposition other than a public
sale is to be made of the Collateral, then the time on or after which the
private sale or other disposition is to be made;
(2) The notice shall be personally delivered or
mailed, postage prepaid, to Borrower as provided in Section 12, at least five
(5) days before the date fixed for the sale, or at least five (5) days before
the date on or after which the private sale or other disposition is to be made;
no notice needs to be given prior to the disposition of any portion of the
Collateral that is perishable or threatens to decline speedily in value or that
is of a type customarily sold on a recognized market. Notice to Persons other
than Borrower claiming an interest in the Collateral shall be sent to such
addresses as they have furnished to Foothill;
(3) If the sale is to be a public sale, Foothill
also shall give notice of the time and place by publishing a notice one time at
least five (5) days before the date of the sale in a newspaper of general
circulation in the county in which the sale is to be held;
(l) Foothill may credit bid and purchase at any public
sale; and
(m) Any deficiency that exists after disposition of the
Collateral as provided above will be paid immediately by Borrower. Any excess
will be returned, without interest and subject to the rights of third Persons,
by Foothill to Borrower.
9.2 REMEDIES CUMULATIVE. Foothill's rights and remedies under
this Agreement, the Loan Documents, and all other agreements shall be
cumulative. Foothill shall have all other rights and remedies not inconsistent
herewith as provided under the Code, by law, or
39
<PAGE> 45
in equity. No exercise by Foothill of one right or remedy shall be deemed an
election, and no waiver by Foothill of any Event of Default shall be deemed a
continuing waiver. No delay by Foothill shall constitute a waiver, election,
or acquiescence by it.
10. TAX AND EXPENSES.
If Borrower fails to pay any monies (whether taxes, rents, assessments,
insurance premiums, or otherwise) due to third Persons, or fails to make any
deposits or furnish any required proof of payment or deposit, all as required
under the terms of this Agreement, then, to the extent that Foothill determines
that such failure by Borrower could have a material adverse effect on
Foothill's interests in the Collateral or the Real Property, in its discretion
and without prior notice to Borrower, Foothill may do any or all of the
following: (a) make payment of the same or any part thereof; (b) set up such
reserves in Borrower's loan account as Foothill deems necessary to protect
Foothill from the exposure created by such failure; or (c) obtain and maintain
insurance policies of the type described in Section 6.12, and take any action
with respect to such policies as Foothill deems prudent. Any such amounts paid
by Foothill shall constitute Foothill Expenses. Any such payments made by
Foothill shall not constitute an agreement by Foothill to make similar payments
in the future or a waiver by Foothill of any Event of Default under this
Agreement. Foothill need not inquire as to, or contest the validity of, any
such expense, tax, security interest, encumbrance, or lien and the receipt of
the usual official notice for the payment thereof shall be conclusive evidence
that the same was validly due and owing.
11. WAIVERS; INDEMNIFICATION.
11.1 DEMAND; PROTEST; ETC. Except as otherwise provided in this
Agreement, Borrower waives demand, protest, notice of protest, notice of
default or dishonor, notice of payment and nonpayment, notice of any default,
nonpayment at maturity, release, compromise, settlement, extension, or renewal
of accounts, documents, instruments, chattel paper, and guarantees at any time
held by Foothill on which Borrower may in any way be liable.
11.2 FOOTHILL'S LIABILITY FOR COLLATERAL. So long as Foothill
complies with its obligations, if any, under Section 9207 of the Code, Foothill
shall not in any way or manner be liable or responsible for: (a) the
safekeeping of the Collateral; (b) any loss or damage thereto occurring or
arising in any manner or fashion from any cause; (c) any diminution in the
value thereof; or (d) any act or default of any carrier, warehouseman, bailee,
forwarding agency, or other Person. All risk of loss, damage, or destruction
of the Collateral shall be borne by Borrower.
11.3 INDEMNIFICATION. Except with respect to matters arising
solely from the gross negligence or wilfull misconduct of Foothill, Borrower
agrees to defend, indemnify, save, and hold Foothill and its officers,
employees, and agents harmless against: (a) all obligations, demands, claims,
and liabilities claimed or asserted by any other Person arising out of or
relating to the transactions contemplated by this Agreement or any other Loan
Document, and (b) all losses (including attorneys fees and disbursements) in
any way suffered, incurred,
40
<PAGE> 46
or paid by Foothill as a result of or in any way arising out of, following, or
consequential to the transactions contemplated by this Agreement or any other
Loan Document. This provision shall survive the termination of this Agreement.
11.4 SURETYSHIP WAIVERS AND CONSENTS. Inc., L.P. and NBF (for the
purposes of this Section 11.4, each a "Debtor") each acknowledge that the
obligations of such Debtor undertaken herein might be construed to consist, at
least in part, of the guaranty of obligations of Persons other than such Debtor
(including the other Debtor party hereto) and, in full recognition of that
fact, each Debtor consents and agrees that Lender may, at any time and from
time to time, without notice or demand, whether before or after any actual or
purported termination, repudiation or revocation of this Agreement by any one
or more Debtors, and without affecting the enforceability or continuing
effectiveness hereof as to each Debtor: (a) supplement, extend, renew,
accelerate or otherwise change the time for payment or the terms of the
Obligations or any part thereof, including any increase or decrease of the
rate(s) of interest thereon; (b) supplement, restate, modify, amend, increase,
decrease or waiver, or enter into or give any agreement, approval or consent
with respect to, the Obligations or any part thereof, or any of the Loan
Documents or any additional security or guaranties, or any condition, covenant,
default, remedy, right, representation or term thereof or thereunder; (c)
accept new or additional instruments, documents or agreements in exchange for
or relative to any of the Loan Documents or the Obligations or any part
thereof; (d) accept partial payments on the Obligations; (e) receive and hold
additional security or guaranties for the Obligations or any part thereof; (f)
release, reconvey, terminate, waive, abandon, fail to perfect, subordinate,
exchange, substitute, transfer or enforce any security or guaranties, and apply
any security and direct the order or manner of sale thereof as Lender in its
sole and absolute discretion may determine; (g) release any Person from any
personal liability with respect to the Obligations or any part thereof; (h)
settle, release on terms satisfactory to Lender or by operation of applicable
laws or otherwise liquidate or enforce any Obligations and any security
therefor or guaranty thereof in any manner, consent to the transfer of any
security and bid and purchase at any sale; or (i) consent to the merger, change
or any other restructuring or termination of the corporate, partnership or
other form of existence of any Debtor or any other Person, and correspondingly
restructure the Obligations, and any such merger, change, restructuring or
termination shall not affect the liability of any Debtor or the continuing
effectiveness hereof, or the enforceability hereof with respect to all or any
part of the Obligations.
Upon the occurrence and during the continuance of any Event of
Default, Lender may enforce this Agreement independently as to each Debtor and
independently of any other remedy or security Lender at any time may have or
hold in connection with the Obligations, and it shall not be necessary for
Lender to marshal assets in favor of any Debtor or any other Person or to
proceed upon or against or exhaust any security or remedy before proceeding to
enforce this Agreement. Each Debtor expressly waives any right to require
Lender to marshal assets in favor of any Debtor or any other Person or to
proceed against any other Debtor or any collateral provided by any Person, and
agrees that Lender may proceed against Debtors or any collateral in such order
as it shall determine in its sole and absolute discretion.
41
<PAGE> 47
Lender may file a separate action or actions against any
Debtor, whether action is brought or prosecuted with respect to any security or
against any other Person, or whether any other Person is joined in any such
action or actions. Each Debtor agrees that Lender and any Debtor and any
Affiliate of any Debtor may deal with each other in connection with the
Obligations or otherwise, or alter any contracts or agreements now or hereafter
existing between any of them, in any manner whatsoever, all without in any way
altering or affecting the continuing efficacy of this Agreement.
Lender's rights hereunder shall be reinstated and revived, and
the enforceability of this Agreement shall continue, with respect to any amount
at any time paid on account of the Obligations which thereafter shall be
requested to be restored or returned by Lender, all as though such amount had
not been paid. The rights of Lender created or granted herein and the
enforceability of this Agreement at all times shall remain effective to cover
the full amount of all the Obligations even though the Obligations, including
any part thereof or any other security or guaranty therefor, may be or
hereafter may become invalid or otherwise unenforceable as against any Debtor
and whether or not any other Debtor shall have any personal liability with
respect thereto.
To the maximum extent permitted by applicable law, each Debtor
expressly waives any and all defenses now or hereafter arising or asserted by
reason of (a) any disability or other defense of any other Debtor with respect
to the Obligations, (b) the unenforceability or invalidity of any security or
guaranty for the Obligations or the lack of perfection or continuing perfection
or failure of priority of any security for the Obligations, (c) the cessation
for any cause whatsoever of the liability of any other Debtor (other than by
reason of the full payment and performance of all Obligations), (d) any failure
of Lender to marshal assets in favor of any Debtor or any other Person, (e) any
failure of Lender to give notice of sale or other disposition of Collateral to
any Debtor or any other Person or any defect in any notice that may be given in
connection with any sale or disposition of Collateral, (f) any failure of
Lender to comply with applicable law in connection with the sale or other
disposition of any Collateral or other security for any Obligation, including
any failure of Lender to conduct a commercially reasonable sale or other
disposition of any Collateral or other security for any Obligation, (g) any act
or omission of Lender or others that directly or indirectly results in or aids
the discharge or release of any Debtor or the Obligations or any security or
guaranty therefor by operation of law or otherwise, (h) any law which provides
that the obligation of a surety or guarantor must neither be larger in amount
nor in other respects more burdensome than that of the principal or which
reduces a surety's or guarantor's obligation in proportion to the principal
obligation, (i) any failure of Lender to file or enforce a claim in any
bankruptcy or other proceeding with respect to any Person, (j) the election by
Lender of the application or non-application of Section 1111(b)(2) of the
United States Bankruptcy Code, (k) any extension of credit or the grant of any
lien under Section 364 of the United States Bankruptcy Code, (l) any use of
cash collateral under Section 363 of the United States Bankruptcy Code, (m) any
agreement or stipulation with respect to the provision of adequate protection
in any bankruptcy proceeding of any Person, (n) the avoidance of any lien in
favor of Lender for any reason, or (o) any action taken by Lender that is
authorized by this Section or any other provision of any Loan Document. Until
such time as all of the Obligations have been fully, finally, and indefeasibly
paid in full in cash: (i) each Debtor hereby waives and postpones any right of
subrogation it has or may
42
<PAGE> 48
have as against any other Debtor with respect to the Obligations; and (ii) in
addition, each Debtor also hereby waives and postpones any right to proceed or
to seek recourse against or with respect to any property or asset of any other
Debtor. Each Debtor expressly waives all setoffs and counterclaims and all
presentments, demands for payment or performance, notices of nonpayment or
nonperformance, protests, notices of protest, notices of dishonor and all other
notices or demands of any kind or nature whatsoever with respect to the
Obligations, and all notices of acceptance of this Agreement or of the
existence, creation or incurring of new additional Obligations.
In the event that all or any part of the Obligations at any
time are secured by any one or more deeds of trust or mortgages or other
instruments creating or granting liens on any interests in real property, each
Debtor authorizes Lender on Lender's behalf, upon the occurrence of and during
the continuance of any Event of Default, at its sole option, without notice or
demand and without affecting the obligations of any Debtor, the enforceability
of this Agreement, or the validity or enforceability of any liens of, or for
the benefit of, Lender on any Collateral, to foreclose any or all of such deeds
of trust or mortgages or other instruments by judicial or nonjudicial sale.
Without limiting the foregoing and without waiving the benefits of California
Commercial Code Section 9501, Borrower specifically agrees that action
maintained by Lender for the appointment of any receiver, trustee or custodian
to collect rents, issues or profits or to obtain possession of any property
shall not constitute an "action" within the meaning of Section 726 of the
California Code of Civil Procedure.
To the fullest extent permitted by applicable law, each Debtor
expressly waives any defenses to the enforcement of this Agreement or any
rights of Lender created or granted hereby or to the recovery by Lender against
any Debtor or any other Person liable therefor of any deficiency after a
judicial or nonjudicial foreclosure or sale, even though such a foreclosure or
sale may impair the subrogation rights of Debtors and may preclude Debtors from
obtaining reimbursement or contribution from other Debtors. Each Debtor
expressly waives (i) any suretyship defenses or benefits that it otherwise
might or would have under applicable law, and (ii) the right, if any, to
require Lender to disclose to such Debtor any information it may now have or
hereafter acquire concerning the other Debtor's character, credit, Collateral,
financial condition or other matters. Each Debtor has established adequate
means to obtain from the other Debtor on a continuing basis financial and other
information pertaining to such Debtor's business and affairs, and assumes the
responsibility for being and keeping itself informed of the financial and other
conditions of the other Debtor and of all circumstances bearing upon the risk
of nonpayment of the Obligations which diligent inquiry would reveal. Each
Debtor expressly waives any right to receive notice of any judicial or
nonjudicial foreclosure or sale of any real property or interest therein of
another Debtor that is subject to any such deeds of trust or mortgages or other
instruments and any Debtor's failure to receive any such notice shall not
impair or affect such Debtor's obligations or the enforceability of this
Agreement or any rights of Lender created or granted hereby. WITHOUT LIMITING
THE GENERALITY OF ANY OTHER WAIVER OR OTHER PROVISION SET FORTH IN THIS
SECTION, EACH DEBTOR WAIVES ALL RIGHTS AND DEFENSES ARISING OUT OF AN ELECTION
OF REMEDIES BY LENDER, EVEN THOUGH THAT ELECTION OF REMEDIES, SUCH AS A
NONJUDICIAL FORECLOSURE WITH RESPECT TO SECURITY FOR THE
43
<PAGE> 49
OBLIGATIONS, HAS DESTROYED SUCH DEBTOR'S RIGHTS OF SUBROGATION AND
REIMBURSEMENT AGAINST THE PRINCIPAL DEBTOR BY THE OPERATION OF LAW, INCLUDING,
BUT NOT LIMITED TO, SECTION 580D OF THE CALIFORNIA CODE OF CIVIL PROCEDURE, OR
OTHERWISE. FURTHER, BORROWER EXPRESSLY WAIVES ANY RIGHT, DEFENSE OR BENEFIT
UNDER CALIFORNIA CIVIL CODE SECTIONS 2809, 2810, 2819, 2845, 2849, 2850 AND
2855, AND CALIFORNIA CODE OF CIVIL PROCEDURE SECTIONS 337, 580A AND 580B, AND
MY AMENDMENTS THERETO.
Lender need not inquire into the powers of any of the Debtors
or the authority of any of their respective officers, directors, partners or
agents acting or purporting to act in their behalf, and any obligations created
in reliance upon the purported exercise of such power or authority is hereby
guaranteed. All obligations of Debtors to Lender heretofore, now or hereafter
created shall be deemed to have been granted at Debtors' special insistence and
request and in consideration of and in reliance upon this Agreement.
Debtors and each of them warrant and agree that each of the
waivers and consents set forth herein are made after consultation with legal
counsel and with full knowledge of their significance and consequences, with
the understanding that events giving rise to any defense or right waived may
diminish, destroy or otherwise adversely affect rights which Debtors otherwise
may have against other Debtors, Lender or others, or against Collateral. If
any of the waivers or consents herein are determined to be contrary to any
applicable law or public policy, such waivers and consents shall be effective
to the maximum extent permitted by law.
12. NOTICES.
Unless otherwise provided in this Agreement, all notices or demands by
any party relating to this Agreement or any other Loan Document shall be in
writing and (except for financial statements and other informational documents
which may be sent by first-class mail, postage prepaid) shall be personally
delivered or sent by registered or certified mail, postage prepaid, return
receipt requested, or by prepaid telex, XX, telefacsimile, or telegram (with
messenger delivery specified) to Borrower or to Foothill, as the case may be,
at its address set forth below:
If to Borrower: 222 West Airport Freeway
Irving, Texas 75062
Attn.: Glenn Bollinger
Telefacsimile No. (214) 438-6242
If to Foothill: FOOTHILL CAPITAL CORPORATION
11111 Santa Monica Boulevard
Suite 1500
Los Angeles, California 90025-3333
Attn.: Business Finance Division Manager
Telefacsimile No. (310)479-2690
44
<PAGE> 50
The parties hereto may change the address at which they are to receive
notices hereunder, by notice in writing in the foregoing manner given to the
other. All notices or demands sent in accordance with this Section 12, other
than notices by Foothill in connection with Sections 9504 or 9505 of the Code,
shall be deemed received on the earlier of the date of actual receipt or three
(3) days after the deposit thereof in the mail. Borrower acknowledges and
agrees that notices sent by Foothill in connection with Sections 9504 or 9505
of the Code shall be deemed sent when deposited in the mail or transmitted by
telefacsimile or other similar method set forth above.
45
<PAGE> 51
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.
THE VALIDITY OF THIS AGREEMENT, ITS CONSTRUCTION, INTERPRETATION, AND
ENFORCEMENT, AND THE RIGHTS OF THE PARTIES HERETO WITH RESPECT TO ALL MATTERS
ARISING HEREUNDER OR RELATED HERETO SHALL BE DETERMINED UNDER, GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT
GIVING EFFECT TO ITS CONFLICT OF LAWS PRINCIPLES. THE PARTIES AGREE THAT ALL
ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS AGREEMENT SHALL BE TRIED
AND LITIGATED ONLY IN THE STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF LOS
ANGELES, STATE OF CALIFORNIA OR, AT THE SOLE OPTION OF FOOTHILL, IN ANY OTHER
COURT IN WHICH FOOTHILL SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND WHICH
HAS SUBJECT MATTER JURISDICTION OVER THE MATTER IN CONTROVERSY. EACH OF
BORROWER AND FOOTHILL WAIVES, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY
RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT
TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS
SECTION 13. BORROWER AND FOOTHILL HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A
JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF
THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING
CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW
OR STATUTORY CLAIMS. BORROWER AND FOOTHILL REPRESENT THAT EACH HAS REVIEWED
THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY W ITS JURY TRIAL RIGHTS
FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A COPY
OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
14. DESTRUCTION OF BORROWER'S DOCUMENTS.
All documents, schedules, invoices, agings, or other papers delivered
to Foothill may be destroyed or otherwise disposed of by Foothill four (4)
months after they are delivered to or received by Foothill, unless Borrower
requests, in writing, the return of said documents, schedules, or other papers
and makes arrangements, at Borrower's expense, for their return.
15. GENERAL PROVISIONS.
15.1 EFFECTIVENESS. This Agreement shall be binding and deemed
effective when executed by Borrower and Foothill.
15.2 SUCCESSORS AND ASSIGNS. This Agreement shall bind and inure
to the benefit of the respective successors and assigns of each of the parties;
provided, however, that Borrower may not assign this Agreement or any rights or
duties hereunder without Foothill's
46
<PAGE> 52
prior written consent and any prohibited assignment shall be absolutely void.
No consent to an assignment by Foothill shall release Borrower from its
Obligations. Foothill may assign this Agreement and its rights and duties
hereunder and no consent or approval by Borrower is required in connection with
any such assignment. Foothill reserves the right to sell, assign, transfer,
negotiate, or grant participations in all or any part of, or any interest in
Foothill's rights and benefits hereunder. In connection with any such
assignment or participation, Foothill may disclose all documents and
information which Foothill now or hereafter may have relating to Borrower or
Borrower's business. To the extent that Foothill assigns its rights and
obligations hereunder to a third Person, Foothill thereafter shall be released
from such assigned obligations to Borrower and such assignment shall effect a
novation between Borrower and such third Person.
15.3 SECTION HEADINGS. Headings and numbers have been set forth
herein for convenience only. Unless the contrary is compelled by the context,
everything contained in each section applies equally to this entire Agreement.
15.4 INTERPRETATION. Neither this Agreement nor any uncertainty or
ambiguity herein shall be construed or resolved against Foothill or Borrower,
whether under any rule of construction or otherwise. On the contrary, this
Agreement has been reviewed by all parties and shall be construed and
interpreted according to the ordinary meaning of the words used so as to fairly
accomplish the purposes and intentions of all parties hereto.
15.5 SEVERABILITY OF PROVISIONS. Each provision of this Agreement
shall be severable from every other provision of this Agreement for the purpose
of determining the legal enforceability of any specific provision.
15.6 AMENDMENTS IN WRITING. This Agreement can only be amended by
a writing signed by both Foothill and Borrower.
15.7 COUNTERPARTS; TELEFACSIMILE EXECUTION. This Agreement may be
executed in any number of counterparts and by different parties on separate
counterparts, each of which, when executed and delivered, shall be deemed to be
an original, and all of which, when taken together, shall constitute but one
and the same Agreement. Delivery of an executed counterpart of this Agreement
by telefacsimile shall be equally as effective as delivery of a manually
executed counterpart of this Agreement. Any party delivering an executed
counterpart of this Agreement by telefacsimile also shall deliver a manually
executed counterpart of this Agreement but the failure to deliver a manually
executed counterpart shall not affect the validity, enforceability, and binding
effect of this Agreement.
15.8 REVIVAL AND REINSTATEMENT OF OBLIGATIONS. If the incurrence
or payment of the Obligations by Borrower or any guarantor of the Obligations
or the transfer by either or both of such parties to Foothill of any property
of either or both of such parties should for any reason subsequently be
declared to be void or voidable under any state or federal law relating to
creditors' rights, including provisions of the Bankruptcy Code relating to
fraudulent conveyances, preferences, and other voidable or recoverable payments
of money or transfers of property (collectively, a AVoidable Transfer"), and if
Foothill is required to repay or restore, in whole or in part, any such
Voidable Transfer, or elects to do so upon the
47
<PAGE> 53
reasonable advice of its counsel, then, as to any' such Voidable Transfer, or
the amount thereof that Foothill is required or elects to repay or restore, and
as to all reasonable costs, expenses, and attorneys fees of Foothill related
thereto, the liability of Borrower or such guarantor automatically shall be
revived, reinstated, and restored and shall exist as though such Voidable
Transfer had never been made.
15.9 INTEGRATION. This Agreement, together with the other Loan
Documents, reflects the entire understanding of the parties with respect to the
transactions contemplated hereby and shall not be contradicted or qualified by
any other agreement, oral or written, before the date hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in Los Angeles, California.
FOOTHILL CAPITAL CORPORATION,
a California corporation
By: /s/ PATRICIA McLOUGHLIN
---------------------------------
Title: SVP
------------------------------
BOLLINGER INDUSTRIES, L.P.,
a Texas limited partnership
By: Bollinger Operating Corp., its
General Partner
By: /s/ BOBBY D. BOLLINGER
---------------------------------
Title: Vice Chairman
------------------------------
BOLLINGER INDUSTRIES, INC.,
a Delaware corporation
By: /s/ BOBBY D. BOLLINGER
---------------------------------
Title: President
------------------------------
NBF, INC.,
a Georgia corporation
By: /s/ BOBBY D. BOLLINGER
---------------------------------
Title: Chairman
------------------------------
48
<PAGE> 54
SCHEDULE E-1
TO
LOAN AND SECURITY AGREEMENT
BETWEEN
BOLLINGER INDUSTRIES INC., BOLLINGER INDUSTRIES, L.P.
AND NBF INC. AS BORROWERS
AND
FOOTHILL CAPITAL CORPORATION AS LENDER
Locations of Eligible Inventory
Bollinger Industries L.P.
222 W. Airport Freeway
Irving, Texas 75062
NBF Inc.
303 Swett Avenue
East Industrial Park
Americus, GA 31709
Bollinger Industries L.P.
1905 110th Street
Grand Prairie, Texas 75050
Bollinger Industries L.P.
602 Fountain Parkway
Grand Prairie, Texas 75050
Bollinger Industries L.P.
5853 49th Street
Lubbock, Texas 79424
Kings Warehouse & Distribution
2501 109th Street
Grand Prairie, Texas 75050
Fred Dunbar
5750 Coopers Avenue
Mississauga, Canada ON LAZ 2B9
Mega Freight Lines (Finished Goods)
1002 Fountain Parkway
Grand Prairie, Texas 75050
Meiko Freight Service (Finished Goods)
3132-A East Dominguez Street
Long Beach, CA 90810
<PAGE> 55
SCHEDULE P-1
PERMITTED LIENS
The collateral referred to in each of the following shall constitute Permitted
Liens under this Agreement:
NAME COLLATERAL DESCRIPTION
Pitney Bowes Credit Specific equipment
Associates Commercial Corporation Specific equipment
Aloha Processing Center Specific equipment
Toyota Motor Credit Corp. Specific equipment
Gestetner Services, Inc. Specific equipment
NationsBanc Leasing Corporation Specific equipment
Weyerhaeuser Company Specific equipment
Advanta Business Services Corp. Specific equipment
S & S Machinery Corp. Specific equipment
Associates Leasing, Inc. Specific equipment
Walnut Equipment Leasing Co., Inc. Specific equipment
World Omni Leasing, Inc. Specific equipment
Fountain Parkway, Ltd. Specific equipment
NationsBank Texas, N.A. Real Property and a
junior lien on personal
property (debt limited
to $2,000,000)
Bollinger Industries, L.P.
<PAGE> 56
SCHEDULE R-1
TO
LOAN AND SECURITY AGREEMENT
BETWEEN
BOLLINGER INDUSTRIES INC., BOLLINGER INDUSTRIES, L.P.
AND NBF INC. AS BORROWERS
AND
FOOTHILL CAPITAL CORPORATION AS LENDER
Real Property
1. Subject property on Southwest corner of Airport Freeway and Shoaf
Drive and is known as 222 West Airport Freeway, Irving, Texas.
Subject property is legally described as:
BEING a tract of land out of the J.C. Read Survey, Abstract No. 1182,
City of Irving, Dallas County, Texas, described by metes and bounds as
follows:
BEGINNING at point of intersection at South line of State Highway 183
with West line of Shoaf Drive;
THENCE South 0.0 degrees, 34 minutes 47 seconds West along said West
line of Shoaf Drive for a distance of 413.48 feet to a point for
corner;
THENCE North 89 degrees, 38 minutes, 02 seconds West for a distance of
174.83 feet to a point for corner;
THENCE North 0.0 degrees, 28 minutes, 38 seconds East for 413.48 feet
to a point on South line of State Highway 183 for corner;
THENCE South 89 degrees, 38 minutes, 0.0 seconds East along South line
of State Highway 183 for a distance of 175.56 feet to place of
beginning.
-2-
<PAGE> 57
SCHEDULE 5.7
TO
LOAN AND SECURITY AGREEMENT
BETWEEN
BOLLINGER INDUSTRIES INC., BOLLINGER INDUSTRIES, L.P.
AND NBF INC. AS BORROWERS
AND
FOOTHILL CAPITAL CORPORATION AS LENDER
Borrower's Business Organization Structure and Subsidiaries
Bollinger Industries Inc. (Delaware corporation FIN 75-2502577)
100% Subsidiaries
Bollinger Operating Corp. - A Nevada corporation (FIN 75-2502574) and
1% general partner in Bollinger Industries, L.P., a Texas limited
partnership (FIN 75-2502573).
Bollinger Holding Corp. - A Delaware corporation (FIN 51-0350501) and
the 99% limited partner in Bollinger Industries, L.P., a Texas limited
partnership (FIN 75-2502573).
NBF, Inc. - A Georgia corporation (FIN 58-2110622).
Bollinger Sports, Inc. - A Texas corporation (FIN 75-1633803)
currently in liquidation and the 100% parent of:
C.G. Products, Inc., a California corporation (FIN
95-2959026)currently in liquidation; and
Tarbox, Inc., a Texas corporation (FIN 75-1806447) currently
in liquidation.
-8-
<PAGE> 58
SCHEDULE 5.9
TO
LOAN AND SECURITY AGREEMENT
BETWEEN
BOLLINGER INDUSTRIES INC., BOLLINGER INDUSTRIES, L.P.
AND NBF INC. AS BORROWERS
AND
FOOTHILL CAPITAL CORPORATION AS LENDER
Litigation
1. Bollinger Industries, Inc. (the "Company"), Glenn D. Bollinger
(Chairman & CEO), Bobby D. Bollinger (President), Curtis D. Logan
(former CFO), Michael J. Beck (former CAO), John L. Maguire
(Director), William Blair & Company, Rauscher Pierce Refsnes, Inc.
(former underwriters of initial public offering), and Grant Thornton,
L.L.P. (former independent accountants) are defendants (the "Suntrust
Defendants") in a lawsuit brought in the District Courts, Dallas
County, Texas, by shareholder Suntrust Bank Atlanta, as trustee for
Suntrust Retirement Sunbelt Equity Fund, on behalf of themselves and
all persons similarly situated. In addition, the Company, Glenn D.
Bollinger, Bobby D. Bollinger, Curtis D. Logan, and Michael J.
Beck, are defendants (the "STI Defendants") in a lawsuit brought in
the United States District Court for the Northern District of Texas,
Dallas Division, by shareholders STI Classic Fund and STI Classic
Sunbelt, on behalf of themselves and all persons similarly situated.
The lawsuits purport to be class actions and allege certain
misrepresentations and fraudulent actions by the Suntrust and STI
Defendants. Both lawsuits seek damages, exemplary damages, interest,
costs, and expenses. Management of the Company does not believe
either lawsuit has merit. However, if the plaintiffs should prevail
in either lawsuit, it could have a material adverse effect on the
Company.
2. The Company has been contacted by the Department of Labor (DOL) in
regard to certain questions about its former Employee Stock Ownership
Plan (the "ESOP"). Assets of the ESOP are held in the Company's
401(K) plan which is the successor to the ESOP. The Company is
responding to and cooperating with the DOL. The DOL has not initiated
any proceeding with respect to the ESOP or any other of the Company's
employee benefit plans.
3. The staff of the Securities and Exchange Commission has indicated to
the Company it is their preliminary determination to recommend a civil
injunctive action be brought against the Company, Glenn Bollinger and
Ronald Bollinger, based upon what the staff believes to be violations
of various securities laws, including Sections 10(b), 13(a), and 13(b)
of the Securities Exchange Act of 1934 and various rules promulgated
thereunder. The purported violations are alleged to arise out of
certain transactions which occurred during the fiscal years
<PAGE> 59
1994 and 1995. The staff has stated it will not recommend seeking
monetary penalties against the Company.
4. A letter dated August 11, 1996 from George T. Johns of Tracy & Holland
L.L.P. (Counsel for Borrower) to Marshall C. Stoddard, Jr. of Kelley
Drye & Warren L.L.P. (Counsel to Lender) provides additional
disclosure with regard to a claim made by Sovereign General Insurance
against NBF Inc. This relates to a policy claim occurring prior to
the acquisition of assets in Georgia by NBF Inc. and under a policy
that was issued to the prior owner of the acquired assets. Borrower
has provided information to counsel for Sovereign General Insurance
that Borrower believes resolves the issue, and no further inquiry has
been received with regard to the issue. The referenced letter should
be referred to for additional information.
-2-
<PAGE> 60
EXHIBIT 5.14
TO
LOAN AND SECURITY AGREEMENT
BETWEEN
BOLLINGER INDUSTRIES INC., BOLLINGER INDUSTRIES, L.P.,
AND NBF INC. AS BORROWERS
AND
FOOTHILL CAPITAL CORPORATION AS LENDER
Patents, Copyrights, and Trademarks
Bollinger Fitness (TM)
StarLock (C), SlipLock (TM) and CamLock (C) weightlifting systems
Zoom Off (C) quick release weightlifting
BrightBells (C) dumbbells
Step by Step (TM), FlexStep and SoftStep (TM) low impact aerobics
items
UltraArm (TM) underarm firmer
ToneUp 1-2-3 exercise kit,
RibMat (TM) exercise mats
TrimRider (TM) aerobic riders
Nautilus (TM) Ab-Rock'it abdominal exerciser
NBF (TM) and UltraBounce (TM) trampolines
Solar (TM) trimming products
PowerShorts (TM) compression shorts
Softone (C) wrist weights
Exergrip (TM) strengthening putty
AirFlo (TM) nasal strips
-9-
<PAGE> 61
EXHIBIT 5.14 (CONTINUED)
BOLLINGER INDUSTRIES, INC. -FITNESS
INTELLECTUAL PROPERTY STATUS REPORT
PATENTS LICENSED BY BOLLINGER INDUSTRIES
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
SERIAL NO. ISSUE NO. INVENTORS TYPE OF LICENSE
PATENT TITLE FILING DATE ISSUE DATE AND LICENSOR
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Exercise Apparatus 389,360 5,004,227 Ned Hoffman Limited Exclusive License from Sports-Mitt
(Zoom Off Gloves) 8/25/89 04/02/91 International (assignee of record) for weight
lifting gloves, cross training gloves and all
purpose fitness gloves
Exercise Cuffs 627,275 4,602,784 Brent R. Budden Non-Exclusive License from by Gregory W. Durward
(Softone Weights) 7/2/84 7/29/86 Jo Anne Budden
Power Forearm 7,710,535 Exclusive License
Developer Taiwan Patent Manufacturing Purchase Agreement
Ziplock Collars 163,131 Non-Exclusive License
wrong no. Distribution Agreement
Universal Ankle 7,477,058 5,090,404 Charles Kellassy Exclusive License from Kellassy. For sale in
Support 02/07/90 02/25/92 U.S. only.
Softone Weights 610,777 D287,525 Gregory W. Durward Non-Exclusive License from by Durward
05/16/84 12/30/87
Pushovers 8/236/484 John Flemming
</TABLE>
-10-
<PAGE> 62
EXHIBIT 5.14 (CONTINUED)
INTELLECTUAL PROPERTY STATUS REPORT
PATENTS OWNED BY BOLLINGER INDUSTRIES, LP
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
Serial No. Issue No.
Patent Title Filing Date Issue Date
- ------------------------------------------------------------------------
<S> <C> <C>
Spring Type Exercising Device 631,860 4,022,463
11/14/75
Hand Exercise Weights 579,062 4,556,215
2/10/84 12/3/85
Hand Exercise Weights 579,062 4,575,075
2/10/84 3/11/86
Cross Country Ski Exercise Device 7/122,459 4,804,178
(Easy Glider Exercise Device) 11/19/87 2/14/89
Cross Country Ski Exerciser 7/183,179 D315,764
Easy Glider Exercise Device 04/19/88 03/26/91
</TABLE>
-11-
<PAGE> 63
EXHIBIT 5.14 (CONTINUED)
INTELLECTUAL PROPERTY STATUS REPORT
PATENTS OWNED BY BOLLINGER INDUSTRIES, INC.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
SERIAL NO. ISSUE NO.
PATENT TITLE FILING DATE ISSUE DATE
- ------------------------------------------------------------------------
<S> <C> <C>
Adjustable seat assembly for 6-915,987 4,746,114
Exercise Apparatus 10/6/86 5/24/88
Starlock Nut Design 6/510,064 D278,029
07/01/83 03/19/85
Curling Bar 6/700,520 D290,485
02/11/85 06/23/87
Adjustable Exercise Bench 6/916,060 D300,045
10/06/86 02/28/89
Physical Exerciser 6/916,060 D300,048
10/06/86 02/28/89
Adjustable Exercise Bench 7/169,336 D300,485
03/17/88 04/04/89
</TABLE>
INTELLECTUAL PROPERTY STATUS REPORT
PATENTS OWNED BY NBF, INC.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
SERIAL NO. ISSUE NO.
PATENT TITLE FILING DATE ISSUE DATE
- ------------------------------------------------------------------------
<S> <C> <C>
Trampoline having safety features 3/6/92 10/25/95
</TABLE>
-12-
<PAGE> 64
SCHEDULE 6.15
TO
LOAN AND SECURITY AGREEMENT
BETWEEN
BOLLINGER INDUSTRIES INC., BOLLINGER INDUSTRIES, L.P.
AND NBF INC. AS BORROWERS
AND
FOOTHILL CAPITAL CORPORATION AS LENDER
Inventory and Equipment Locations
BOLLINGER INDUSTRIES INC.
Locations for Doing Business:
1. (a) Americus (NBF) (Trampolines)
303 Swett Avenue
Sumter County
Americus, GA 31709
(b) Manufacturing trampolines and warehouse
2. (a) Grand Prairie (Fitness)
1905 110th Street
Tarrant County
Grand Prairie, Texas 75050
(b) Manufacturing and warehouse
3. (a) 602 Fountain Parkway
Tarrant County
Grand Prairie, Texas 75050
(b) Retail Outlet Store
4. (a) 524 E. 40th St.
Lubbock County
Lubbock, Texas 79404
(b) Manufacturing and warehouse
Bollinger Industries, Inc.
Offsite Warehouse Locations
ABG Packaging & Assembly Groupo ABC De Mexico
2716 Cullen Street AV North 4 No. 7
Fort Worth, TX 76104 San Juan Del Rio
Mexico, QRO 76809
Insul-Fab of Texas
9101 Chancellor Row Sew Whatever
Dallas, TX 75247 1061 Duncan-Perry #107
Arlington, Texas 76111
<PAGE> 65
Fiber Co. Dowling Textile
1330 Eden Dr. 304 Legion Dr.
Fort Worth, TX 76117 Eastman, GA 31023
Meiko Freight Service Pro-Tec (Bollinger)
3132-A East Dominguez St. 222 W. Airport Freeway
Long Beach, CA 90810 Irving, TX 75062
Komplete Packaging AirDock Systems
1141 108th St. 100 Craven Point Rd.
Arlington, TX 76011 Jersey City, NJ 07305
Dunhams Athleisure Cargo Logistics
5000 Dixie Hwy. 200 Middlesex Ave.
Waterford, MI 480l20 Cateret, NJ 07008
Bollinger Healthcare
5853 49th St.
Lubbock, TX 79424
QVC Network
1200 Wilson Dr.
West Chester, PA
Kings Warehouse & Distribution
2501 109th St.
Grand Prairie, TX 75050
Dowling Textile
615 Macon Rd.
McDonouigh, GA 30253
Pacer Fitness (Bollinger)
222 W. Airport Freeway
Irving, TX 75062
Fred Dunbar
5750 Coopers Ave.
Mississauga, Canada ON L4Z 2B9
NBF, Inc.
303 Swett Ave.
Americus, GA 31709
Mega Freight Lines
1002 Fountain Parkway
Grand Prairie, TX 75050
YKK
1306 Cobb Industrial
Marietta, GA 30066
-2-
<PAGE> 66
BOLLINGER INDUSTRIES L.P.
Locations for Doing Business:
1. (a) Americus (NBF) (Trampolines)
303 Swett Avenue
Sumter County
Americus, GA 31709
(b) Manufacturing trampolines and warehouse
2. (a) Grand Prairie (Fitness)
1905 110th Street
Tarrant County
Grand Prairie, Texas 75050
(b) Manufacturing and warehouse
3. (a) 602 Fountain Parkway
Tarrant County
Grand Prairie, Texas 75050
(b) Retail Outlet Store
4. (a) 524 E. 40th St.
Lubbock County
Lubbock, Texas 79404
(b) Manufacturing and warehouse
Bollinger Industries, LP
Offsite Warehouse Locations
ABG Packaging & Assembly Fiber Co.
2716 Cullen Street 1330 Eden Dr.
Fort Worth, TX 76104 Fort Worth, TX 76117
Insul-Fab of Texas Meiko Freight Service
9101 Chancellor Row 3132-A East Dominguez St.
Dallas, TX 75247 Long Beach, CA 90810
Groupo ABC De Mexico Komplete Packaging
AV North 4 No. 7 1141 108th St.
San Juan Del Rio Arlington, TX 76011
Mexico, QRO 76809
Dunhams Athleisure
Sew Whatever 5000 Dixie Hwy.
1061 Duncan-Perry #107 Waterford, MI 480l20
Arlington, Texas 76111
Bollinger Healthcare
5853 49th St.
Lubbock, TX 79424
-3-
<PAGE> 67
QVC Network
1200 Wilson Dr.
West Chester, PA
Kings Warehouse & Distribution
2501 109th St.
Grand Prairie, TX 75050
Fred Dunbar
5750 Coopers Ave.
Mississauga, Canada ON L4Z 2B9
NBF, Inc.
303 Swett Ave.
Americus, GA 31709
Mega Freight Lines
1002 Fountain Parkway
Grand Prairie, TX 75050
AirDock Systems
100 Craven Point Rd.
Jersey City, NJ 07305
Cargo Logistics
200 Middlesex Ave.
Cateret, NJ 07008
-4-
<PAGE> 68
NBF, INC.
Locations for Doing Business:
1. (a) Americus (NBF) (Trampolines)
303 Swett Avenue
Sumter County
Americus, GA 31709
(b) Manufacturing trampolines and warehouse
2. (a) Grand Prairie (Fitness)
1905 110th Street
Tarrant County
Grand Prairie, Texas 75050
(b) Manufacturing and warehouse
3. (a) 602 Fountain Parkway
Tarrant County
Grand Prairie, Texas 75050
(b) Retail Outlet Store
NBF, Inc.
Offsite Warehouse Locations
Dowling Textile
615 Macon Rd.
McDonouigh, GA 30253
YKK
1306 Cobb Industrial
Marietta, GA 30066
Dowling Textile
304 Legion Dr.
Eastman, GA 31023
-5-
<PAGE> 1
EXHIBIT 10.48
COLLATERAL ASSIGNMENT OF
PATENTS AND TRADEMARKS
THIS COLLATERAL ASSIGNMENT OF PATENTS AND TRADEMARKS (this
"Assignment"), dated as of August 16, 1996, is entered into by and between NBF,
Inc., a Georgia corporation ("Assignor") with its chief executive office
located at 222 West Airport Freeway, Irving, Texas 75062 and Foothill Capital
Corporation, a California corporation ("Assignee") with its chief executive
office 11111 Santa Monica Boulevard, Suite 1500, Los Angeles, California
90025, in light of the following facts:
RECITALS
A. Assignor has requested that Assignee enter into that certain
Loan and Security Agreement, of even date herewith, with Assignor (the "Loan
Agreement"), pursuant to which Assignee will extend certain loans and financial
accommodations to Assignor as described therein.
B. In order to induce Assignee to enter into the Loan Agreement,
Assignor has agreed to assign to Assignee the rights to all of Assignor's
currently existing and hereafter acquired or arising patents and trademarks
pursuant to this Assignment.
NOW, THEREFORE, in consideration of the premises set forth herein, and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Assignor hereby agrees with Assignee as follows:
1. To secure the complete and timely satisfaction of any and all
debts, liabilities, obligations or undertakings owing by Assignor to Assignee
of any kind or description, arising under, advanced pursuant to, or evidenced
by the Loan Agreement, whether direct or indirect, absolute or contingent, due
or to become due, voluntary or involuntary, whether now existing or hereafter
arising, and including all interest not paid when due and all Lender Expenses
(as defined in the Loan Agreement) which Assignor is required to pay or
reimburse pursuant to the Loan Agreement or by law (collectively, the
"Obligations"), Assignor hereby grants, assigns and conveys to Assignee all of
Assignor's right, title and interest (but not the obligation to register) in
and to all presently existing and hereafter acquired or arising patents and
trademarks including, without limitation, the trademark applications and
trademarks listed in Schedule A attached hereto and trademark registrations
identified therein, and the patent applications and patents listed in Schedule
B attached hereto (all as may be amended pursuant hereto from time to time),
all proceeds of infringement suits thereof, the right (but not the obligation)
to sue for past, present and future infringements thereof and all rights (but
not obligations) corresponding thereto, and all re-issues, divisions,
continuations, renewals, extensions and continuations-in-part thereof
(collectively, the "Patents and Trademarks" individually, the "Patents" and the
"Trademarks"), and in and to the goodwill and assets of the business to which
each of the Trademarks relate (the "Associated Goodwill").
<PAGE> 2
2. Assignor shall execute and deliver to Assignee concurrently
with Assignor's execution of this Assignment, and from time to time hereafter
at the request of Assignee, all assignments, powers of attorney, financing
statements, continuation financing statements, security agreements, chattel
mortgages, and all other documents that Assignee may reasonably request, in
form reasonably satisfactory to Assignee and its counsel, to perfect and
maintain perfected Assignee's interests in the Patents and Trademarks and the
Associated Goodwill, and in order to consummate fully all of the transactions
contemplated under this Assignment and the Loan Agreement.
3. Assignor covenants and warrants that:
a. The Patents and Trademarks are subsisting and have not been
adjudged invalid or unenforceable, in whole or in part;
b. To the best of Assignor's knowledge, each of the Patents
and Trademarks is valid and enforceable;
c. To the best of Assignor's knowledge, no claim has been made
that the use of any or all of the Patents or Trademarks does, or may, violate
the rights of any third person;
d. Assignor is the sole and exclusive owner of the entire and
unencumbered right, title and interest in and to each of the Patents and
Trademarks, free and clear of any voluntary or involuntary liens, charges and
encumbrances, including, without limitation, pledges, assignments, licenses,
registered user agreements and covenants by Assignor not to sue third persons
(collectively, "Liens"), except as specifically set forth in the Loan Agreement
and those licenses and sublicenses which are existing as of the date hereof and
those licenses and sublicenses which may be entered into after the date hereof
in the ordinary course of Assignor's business;
e. Assignor has the unqualified right to enter into this
Assignment and perform its terms;
f. Assignor has used, and will continue to use for the
duration of this Assignment, proper statutory notice in connection with its use
of the Patents and Trademarks;
g. Assignor has used, and its permitted licensees and
sublicensees have used, and will continue to use for the duration of this
Assignment, consistent standards of quality in its provision of services and
manufacture of products sold under the Patents and Trademarks, which standards
shall be at least equivalent to the standards used by Assignor as of the date
of this Assignment, and Assignor shall provide to Assignee an officer's
certificate to that effect, and Assignor will make or permit no change with
respect thereto without the prior written consent of Assignee;
2
<PAGE> 3
h. The Patents and Trademarks listed in Schedules A and B,
respectively, constitute all Patents and Trademarks now owned by Assignor or in
which Assignor has an interest as of the date hereof;
i. During the term of the Loan Agreement, Assignor will herein
keep each and all of the Patents and Trademarks and the registrations with
respect thereto, free and clear of all Liens (except as specifically set forth
in the Loan Agreement or as otherwise permitted herein), and Assignor will take
all steps necessary to maintain in force and renew each and all of the Patents
and Trademarks.
4. Assignor hereby grants to Assignee and its employees and
agents, on behalf of itself and its permitted licensees and sublicensees, the
right to visit Assignor's and its permitted licensees and sublicensees offices
and facilities which provide services or manufacture, inspect or store products
sold under or covered by any of the Patents or Trademarks, and to audit and
inspect the products and quality control records relating thereto at reasonable
times during regular business hours and upon at least one (1) business day's
prior written notice to Assignor. Assignor shall do any and all acts required
by Assignee to ensure Assignor's compliance with paragraph 3(g).
5. Assignor agrees that, until all of the Obligations shall have
been satisfied indefeasibly and in full and the Loan Agreement terminated, it
will not enter into any agreement, except as otherwise permitted herein,
encumbering, transferring, permitting the use of, or affecting any of the
Patents or the Trademarks, or which is inconsistent with Assignor's obligations
under this Assignment, without Assignee's prior written consent, which shall
not be unreasonably withheld. Assignor further agrees that it will not take
any action, or permit any action to be taken by any affiliate of Assignor or
other person subject to Assignor's control, or fail to take any reasonable
action, if such action or failure would affect the validity or enforcement of
the rights transferred to Assignee under this Assignment.
6. If, before the Obligations shall have been satisfied
indefeasibly and in full, Assignor shall obtain rights to any new trademarks or
patentable inventions, or become entitled to the benefit of any new trademarks
or patents, including without limitation, any improvement on any Patents, the
provisions of paragraph 1 shall automatically apply thereto and Assignor shall
give Assignee prompt written notice thereof.
7. Assignor authorizes Assignee to modify this Assignment by
amending Schedule A and/or B, as applicable, to include any future trademarks
or patents and trademark or patent applications covered by paragraphs 1 and 6
hereof, and to re-record this Assignment from time to time as Assignee sees
fit.
8. Unless and until there shall have occurred and be continuing an
Event of Default (as defined in the Loan Agreement), Assignee hereby grants to
Assignor the exclusive, non-transferable right and license to make, have made,
use and sell the inventions disclosed and claimed in the Patents, and to use
the Trademarks and registrations with respect thereto on and in connection with
services provided or products sold by Assignor, for Assignor's own benefit and
account and for none other, except that Assignor shall be
3
<PAGE> 4
permitted to license and sublicense the Patents and Trademarks in the ordinary
course of Assignor's business. Assignor hereby indemnifies Assignee from any
claims, suits, losses and damages, including attorneys' fees, arising from
Assignor's use and permitted licensees' and sublicensees' use of the Patents
and Trademarks, and its operations conducted pursuant to this paragraph 8.
This indemnity shall survive termination of this Assignment. Except as
otherwise provided herein, Assignor agrees not to sell or assign its interest
in, or grant any license or sublicense under the license granted to Assignor in
this paragraph 8, without the prior written consent of Assignee, which shall
not be unreasonably withheld.
9. If any Event of Default shall have occurred and be continuing,
upon notice from Assignee to Assignor (as provided in the Loan Agreement),
Assignor's license under the Patents and Trademarks, as set forth in paragraph
8, shall terminate forthwith, and Assignee shall have, in addition to all other
rights and remedies given it by this Assignment, and the Loan Agreement, those
allowed by law and the rights and remedies of a secured party under the Uniform
Commercial Code as enacted in any jurisdiction in which the Patents and
Trademarks may be located and, without limiting the generality of the
foregoing, Assignee may immediately, without demand of performance and without
other notice (except as set forth next below) or demand whatsoever to Assignor,
all of which are hereby expressly waived and, within the discretion of
Assignee, with or without advertisement, sell at public or private sale or
otherwise realize upon all or from time to time any of the Patents, Trademarks
and the Associated Goodwill, or any interest which Assignor may have therein,
and after deducting from the proceeds of sale or other disposition of the
Patents and Trademarks all expenses (including all reasonable broker's fees and
attorneys' fees), shall apply the residue of such proceeds toward the payment
of the Obligations. Any remainder of the proceeds after full and indefeasible
payment of the Obligations shall be paid over to Assignor. Notice of any sale
or other disposition of the Patents and Trademarks shall be given to Assignor
at least five (5) days before the time of any intended public or private sale
or other disposition of the Patents and Trademarks is to be made, which
Assignor hereby agrees shall be reasonable notice of such sale or other
disposition. At any such sale or other disposition, Assignee may, to the
extent permissible under applicable law, purchase the whole or any part of the
Patents and Trademarks and the Associated Goodwill sold, free from any right of
redemption on the part of Assignor, which right is hereby waived and released.
10. At such time as Assignor shall completely and indefeasibly
satisfy the Obligations, this Assignment shall terminate and Assignee shall
execute and deliver to Assignor all deeds, assignments and other instruments as
may be necessary or proper to re-vest in Assignor full title to the Patents,
Trademarks and the Associated Goodwill, subject to any disposition thereof
which may have been made by Assignee pursuant hereto or pursuant to the Loan
Agreement.
11. Any and all fees, costs and expenses, of whatever kind or
nature, including the reasonable attorneys' fees and expenses incurred by
Assignee in connection with the preparation of this Assignment and all other
documents relating hereto and the consummation of this transaction, the filing
or recording of any documents (including all taxes in connection therewith) in
public offices, the payment or discharge of any taxes, counsel fees,
maintenance fees, renewal fees and encumbrances, or otherwise in protecting,
4
<PAGE> 5
maintaining or preserving the Patents, Trademarks and the Associated Goodwill,
or in defending or prosecuting any actions or proceedings arising out of or
related to the Patents, Trademarks and the Associated Goodwill, shall be borne
and paid by Assignor on demand by Assignee and until so paid shall be added to
the principal amount of the Obligations and shall bear interest at the highest
rate prescribed in the Loan Agreement.
12. Assignor shall have the duty, through counsel acceptable to
Assignee, to prosecute diligently any patent and trademark applications of the
Patents and Trademarks pending as of the date of this Assignment or thereafter
until the Obligations shall have been paid in full, to make federal application
on registrable but unregistered Trademarks and patentable but unpatented
inventions, to file and prosecute opposition and cancellation proceedings, and
to do any and all acts which are necessary or desirable to preserve and
maintain all rights in the Patents, the Trademarks and the Associated Goodwill.
Any expenses incurred in connection with the Patents and Trademarks as provided
herein shall be borne by Assignor. Except as otherwise provided herein,
Assignor shall not abandon any right to file a patent or trademark application,
or any pending patent or trademark application, or any of the Patents and
Trademarks without the consent of Assignee, which consent shall not be
unreasonably withheld.
13. Assignee shall have the right, but shall in no way be
obligated, to bring any opposition proceedings, cancellation proceedings or
suit in its own name to enforce or protect the Patents and Trademarks, and any
license thereunder, in which event Assignor shall at the request of Assignee do
any and all lawful acts and execute any and all proper documents reasonably
required by Assignee in aid of such enforcement. Assignor shall promptly, upon
demand, reimburse and indemnify Assignee for all damages, costs and expenses,
including reasonable attorneys' fees and expenses, incurred by Assignee in the
fulfillment of the provisions of this paragraph 13.
14. In the event of the occurrence of an Event of Default under the
Loan Agreement, Assignor hereby authorizes and empowers Assignee to make,
constitute and appoint any officer or agent of Assignee as Assignee may select,
in its exclusive discretion, as Assignor's true and lawful attorney-in-fact,
with the power to endorse Assignor's name on all applications, documents,
papers and instruments necessary for Assignee to use or make use of the
Patents, the Trademarks and the Associated Goodwill, or to grant or issue any
exclusive or nonexclusive license under the Patents and Trademarks to anyone
else, or necessary for Assignee to assign, pledge, convey or otherwise transfer
title in or dispose of the Patents and Trademarks, registrations with respect
thereto, and the Associated Goodwill, to anyone else. Assignor hereby ratifies
all that such attorney shall lawfully do or cause to be done by virtue hereof.
This power of attorney shall be irrevocable for the life of this Assignment.
15. If Assignor fails to comply with any of its obligations
hereunder, Assignee may, upon notice to Assignor, perform such obligations, in
Assignor's name or in Assignee's name, but at Assignor's expense, and Assignor
hereby agrees to reimburse, and on demand to indemnify and hold harmless,
Assignee, its successors, assigns, agents and servants, in full for any and all
claims, damages, losses, liabilities, demands, causes of action, and any costs
and expenses, including reasonable attorneys' fees, incurred
5
<PAGE> 6
by Assignee in connection with this Assignment or in protecting, defending and
maintaining the Patents and Trademarks including, without limitation, the loss
of any Patents or Trademarks or registrations with respect thereto, the
Associated Goodwill, or other rights, whether as a result of the assignment to
Assignee hereunder, the exercise or nonexercise by Assignee of any rights,
remedies, including foreclosure and sale or licensing remedies, or privileges
granted to Assignee hereunder or by law, or otherwise.
16. Notwithstanding anything to the contrary contained in this
Assignment, Assignor shall have the right to abandon such Patents and
Trademarks which it deems to be immaterial or not useful to its business.
17. No course of dealing between Assignor and Assignee, or any
failure to exercise, or any delay in exercising, on the part of Assignee, any
right, power or privilege hereunder or under the Loan Agreement shall operate
as a waiver thereof; nor shall any single or partial exercise of any right,
power or privilege hereunder or thereunder preclude any other or further
exercise thereof or the exercise of any other right, power or privilege.
18. All of Assignee's rights and remedies with respect to the
Patents, the Trademarks and the Associated Goodwill, whether established hereby
or by the Loan Agreement, or by any other agreements or by law shall be
cumulative and may be exercised singularly or concurrently.
19. The provisions of this Assignment are severable, and if any
clause or provision shall be held invalid and unenforceable in whole or in part
in any jurisdiction, then such invalidity or unenforceability shall affect only
such clause or provision, or part thereof, in such jurisdiction, and shall not
in any manner affect such clause or provision in any other jurisdiction, or any
other clause or provision of this Assignment in any jurisdiction.
20. This Assignment cannot be changed, modified, amended, or
terminated except by a written document signed by both Assignor and Assignee,
except as provided in paragraph 7.
21. This Assignment shall bind and inure to the benefit of the
respective successors and assigns of Assignor and Assignee; provided, however,
Assignor may not assign this Assignment or any rights hereunder without
Assignee's prior written consent and any prohibited assignment shall be
absolutely void. No such consent to an assignment by Assignee shall release
Assignor from its Obligations to Assignee.
22. Assignee reserves the right, upon an Event of Default under the
Loan Agreement, to sell, assign, transfer, negotiate, or grant participations
in all or any part of, or any interest in the rights hereunder; provided that,
with respect to any sale, assignment, transfer or negotiation by Assignee of
less than all of the rights and benefits hereunder, Assignee shall cause such
title to the Patents and Trademarks as exists in the name of Assignee pursuant
to this Assignment to remain in Assignee's name. In connection with any such
sale, assignment, transfer, negotiation or participation, Assignee may disclose
6
<PAGE> 7
all documents and information which Assignee now or hereafter may have relating
to Assignor, Assignor's business, the Patents or the Trademarks to any such
prospective or permitted transferee, if such transferee agrees to be bound by
the confidentiality provisions of the Loan Agreement.
23. The validity of this Assignment, its construction,
interpretation, and enforcement and the rights of the parties hereto shall be
determined under, governed by, and construed in accordance with, the internal
laws of the State of California, without regard to principles of conflicts of
law. The parties agree that all actions or proceedings arising in connection
with this Assignment shall be tried and litigated only in the state and federal
courts located in the County of Los Angeles, State of California. ASSIGNOR AND
ASSIGNEE EACH WAIVES THE RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION,
OR CAUSE OF ACTION ARISING UNDER THIS ASSIGNMENT, WHETHER NOW EXISTING OR
HEREAFTER ARISING, AND ANY RIGHT EITHER MAY HAVE TO ASSERT THE DOCTRINE OF
FORUM NON CONVENIENS, LACK OF PERSONAL JURISDICTION, OR TO OBJECT TO VENUE TO
THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 23.
24. All notices or demands by any party hereto to the other party
and relating to this Assignment shall be made in the manner and to the
addresses set forth in the notices provision of the Loan Agreement.
25. Unless the context of this Assignment clearly requires
otherwise, references to the plural include the singular, the singular includes
the plural, the part includes the whole, "including" is not limiting, and "or"
has the inclusive meaning represented by the phrase "and/or". The words
"hereof", "herein", "hereunder" and similar terms in this Assignment refer to
this Assignment as a whole and not to any particular provision of this
Assignment. Article, section, subsection, exhibit, and schedule references are
to this Assignment unless otherwise specified.
7
<PAGE> 8
WITNESS the execution hereof under seal as of the day and year first
above written.
BOLLINGER INDUSTRIES, L.P.,
A Texas limited partnership
By: Bollinger Operating Corp.,
general partner
By: /s/ BOBBY D. BOLLINGER
----------------------------
Its: Vice Chairman
---------------------------
FOOTHILL CAPITAL CORPORATION,
a California corporation
By: /s/ PATRICIA McLOUGHLIN
-----------------------------------
Title: SVP
--------------------------------
[Attach appropriate notarial acknowledgement.]
8
<PAGE> 9
SCHEDULE A
(List of Trademarks)
1. [Name of Mark]
Registration No:
Registration Date:
Serial No.:
Filing Date:
9
<PAGE> 10
SCHEDULE B
INTELLECTUAL PROPERTY STATUS REPORT
PATENTS OWNED BY BOLLINGER INDUSTRIES, LP
- --------------------------------------------------------------------------------
SERIAL NO. ISSUE NO.
PATENT TITLE FILING DATE ISSUE DATE
- --------------------------------------------------------------------------------
Spring Type Exercising Device 631,860 4,022,463
11/14/75
Hand Exercise Weights 579,062 4,556,215
2/10/84 12/3/85
Hand Exercise Weights 579,062 4,575,075
2/10/84 3/11/86
Cross Country Ski Exercise 7/122,459 4,804,178
Device (Easy Glider Exercise 11/19/87 2/14/89
Device)
Cross Country Ski Exerciser 7/183,179 D315,764
Easy Glider Exercise Device 04/19/88 03/26/91
<PAGE> 11
CALIFORNIA ALL-PURPOSE ACKNOWLEDGEMENT
================================================================================
STATE OF CALIFORNIA )
)
COUNTY OF LOS ANGELES )
On August 16, 1996 before me, Robert I. Treitler, Notary Public, personally
appeared Bobby Bollinger,
[ ] personally known to me - OR - [x] proved to me on the basis of
satisfactory evidence to be the
person whose name is subscribed to
[NOTARY STAMP] the within instrument and
acknowledged to me that he executed
the same in his authorized capacity,
and that by his signature on the
instrument the person, or the entity
upon behalf of which the person
acted, executed the instrument.
WITNESS my hand and official seal.
/s/ ROBERT I. TREITLER
-------------------------------------
SIGNATURE OF NOTARY
====================================OPTIONAL====================================
Though the data below is not required by law, it may prove valuable to persons
relying on the document and could prevent fraudulent reattachment of this form.
CAPACITY CLAIMED BY SIGNER DESCRIPTION OF ATTACHED DOCUMENT
[ ] INDIVIDUAL
[x] CORPORATE OFFICER(S)
COLLATERAL ASSIGNMENT OF PATENTS
AND TRADEMARKS
- ------------------------------------- ------------------------------------
TITLE(S) TITLE OR TYPE OF DOCUMENT
[ ] PARTNER(S) [ ] LIMITED
[ ] GENERAL ------------------------------------
NUMBER OF PAGES
[ ] ATTORNEY-IN-FACT
[ ] TRUSTEE(S)
August 16, 1996
[ ] GUARDIAN/CONSERVATOR ------------------------------------
DATE OF DOCUMENT
[ ] OTHER:
- ------------------------------------- ------------------------------------
SIGNER IS REPRESENTING: SIGNER(S) OTHER THAN NAMED ABOVE
(NAME OF PERSON(S) OR ENTITY(IES))
Bollinger Operating Corp.
- -------------------------------------
================================================================================
11
<PAGE> 12
CALIFORNIA ALL-PURPOSE ACKNOWLEDGEMENT
================================================================================
STATE OF CALIFORNIA )
)
COUNTY OF LOS ANGELES )
On August 16, 1996 before me, Robert I. Treitler, Notary Public, personally
appeared Patricia McLoughlin,
[ ] personally known to me - OR - [x] proved to me on the basis of
satisfactory evidence to be the
person whose name is subscribed to
[NOTARY STAMP] the within instrument and
acknowledged to me that her executed
the same in her authorized capacity,
and that by her signature on the
instrument the person, or the entity
upon behalf of which the person
acted, executed the instrument.
WITNESS my hand and official seal.
/s/ ROBERT I. TREITLER
-------------------------------------
SIGNATURE OF NOTARY
====================================OPTIONAL====================================
Though the data below is not required by law, it may prove valuable to persons
relying on the document and could prevent fraudulent reattachment of this form.
CAPACITY CLAIMED BY SIGNER DESCRIPTION OF ATTACHED DOCUMENT
[ ] INDIVIDUAL
[x] CORPORATE OFFICER(S)
COLLATERAL ASSIGNMENT OF PATENTS
AND TRADEMARKS
- ------------------------------------- ------------------------------------
TITLE(S) TITLE OR TYPE OF DOCUMENT
[ ] PARTNER(S) [ ] LIMITED
[ ] GENERAL ------------------------------------
NUMBER OF PAGES
[ ] ATTORNEY-IN-FACT
[ ] TRUSTEE(S)
August 16, 1996
[ ] GUARDIAN/CONSERVATOR ------------------------------------
DATE OF DOCUMENT
[ ] OTHER:
- ------------------------------------- ------------------------------------
SIGNER IS REPRESENTING: SIGNER(S) OTHER THAN NAMED ABOVE
(NAME OF PERSON(S) OR ENTITY(IES))
Foothill Capital Corporation
- -------------------------------------
================================================================================
12
<PAGE> 13
COLLATERAL ASSIGNMENT OF
PATENTS AND TRADEMARKS
THIS COLLATERAL ASSIGNMENT OF PATENTS AND TRADEMARKS (this
"Assignment"), dated as of August 16, 1996, is entered into by and between
Bollinger Industries, L.P., a Texas limited partnership ("Assignor") with its
chief executive office located at 222 West Airport Freeway, Irving, Texas 75062
and Foothill Capital Corporation, a California corporation ("Assignee") with
its chief executive office 11111 Santa Monica Boulevard, Suite 1500, Los
Angeles, California 90025, in light of the following facts:
RECITALS
A. Assignor has requested that Assignee enter into that certain
Loan and Security Agreement, of even date herewith, with Assignor (the "Loan
Agreement"), pursuant to which Assignee will extend certain loans and financial
accommodations to Assignor as described therein.
B. In order to induce Assignee to enter into the Loan Agreement,
Assignor has agreed to assign to Assignee the rights to all of Assignor's
currently existing and hereafter acquired or arising patents and trademarks
pursuant to this Assignment.
NOW, THEREFORE, in consideration of the premises set forth herein, and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Assignor hereby agrees with Assignee as follows:
1. To secure the complete and timely satisfaction of any and all
debts, liabilities, obligations or undertakings owing by Assignor to Assignee
of any kind or description, arising under, advanced pursuant to, or evidenced
by the Loan Agreement, whether direct or indirect, absolute or contingent, due
or to become due, voluntary or involuntary, whether now existing or hereafter
arising, and including all interest not paid when due and all Lender Expenses
(as defined in the Loan Agreement) which Assignor is required to pay or
reimburse pursuant to the Loan Agreement or by law (collectively, the
"Obligations"), Assignor hereby grants, assigns and conveys to Assignee all of
Assignor's right, title and interest (but not the obligation to register) in
and to all presently existing and hereafter acquired or arising patents and
trademarks including, without limitation, the trademark applications and
trademarks listed in Schedule A attached hereto and trademark registrations
identified therein, and the patent applications and patents listed in Schedule
B attached hereto (all as may be amended pursuant hereto from time to time),
all proceeds of infringement suits thereof, the right (but not the obligation)
to sue for past, present and future infringements thereof and all rights (but
not obligations) corresponding thereto, and all re-issues, divisions,
continuations, renewals, extensions and continuations-in-part thereof
(collectively, the "Patents and Trademarks" individually, the "Patents" and the
"Trademarks"), and in and to the goodwill and assets of the business to which
each of the Trademarks relate (the "Associated Goodwill").
<PAGE> 14
2. Assignor shall execute and deliver to Assignee concurrently
with Assignor's execution of this Assignment, and from time to time hereafter
at the request of Assignee, all assignments, powers of attorney, financing
statements, continuation financing statements, security agreements, chattel
mortgages, and all other documents that Assignee may reasonably request, in
form reasonably satisfactory to Assignee and its counsel, to perfect and
maintain perfected Assignee's interests in the Patents and Trademarks and the
Associated Goodwill, and in order to consummate fully all of the transactions
contemplated under this Assignment and the Loan Agreement.
3. Assignor covenants and warrants that:
a. The Patents and Trademarks are subsisting and have not been
adjudged invalid or unenforceable, in whole or in part;
b. To the best of Assignor's knowledge, each of the Patents
and Trademarks is valid and enforceable;
c. To the best of Assignor's knowledge, no claim has been made
that the use of any or all of the Patents or Trademarks does, or may, violate
the rights of any third person;
d. Assignor is the sole and exclusive owner of the entire and
unencumbered right, title and interest in and to each of the Patents and
Trademarks, free and clear of any voluntary or involuntary liens, charges and
encumbrances, including, without limitation, pledges, assignments, licenses,
registered user agreements and covenants by Assignor not to sue third persons
(collectively, "Liens"), except as specifically set forth in the Loan Agreement
and those licenses and sublicenses which are existing as of the date hereof and
those licenses and sublicenses which may be entered into after the date hereof
in the ordinary course of Assignor's business;
e. Assignor has the unqualified right to enter into this
Assignment and perform its terms;
f. Assignor has used, and will continue to use for the
duration of this Assignment, proper statutory notice in connection with its
use of the Patents and Trademarks;
g. Assignor has used, and its permitted licensees and
sublicensees have used, and will continue to use for the duration of this
Assignment, consistent standards of quality in its provision of services and
manufacture of products sold under the Patents and Trademarks, which standards
shall be at least equivalent to the standards used by Assignor as of the date
of this Assignment, and Assignor shall provide to Assignee an officer's
certificate to that effect, and Assignor will make or permit no change with
respect thereto without the prior written consent of Assignee;
2
<PAGE> 15
h. The Patents and Trademarks listed in Schedules A and B,
respectively, constitute all Patents and Trademarks now owned by Assignor or in
which Assignor has an interest as of the date hereof;
i. During the term of the Loan Agreement, Assignor will herein
keep each and all of the Patents and Trademarks and the registrations with
respect thereto, free and clear of all Liens (except as specifically set forth
in the Loan Agreement or as otherwise permitted herein), and Assignor will take
all steps necessary to maintain in force and renew each and all of the Patents
and Trademarks.
4. Assignor hereby grants to Assignee and its employees and
agents, on behalf of itself and its permitted licensees and sublicensees, the
right to visit Assignor's and its permitted licensees and sublicensees offices
and facilities which provide services or manufacture, inspect or store products
sold under or covered by any of the Patents or Trademarks, and to audit and
inspect the products and quality control records relating thereto at reasonable
times during regular business hours and upon at least one (1) business day's
prior written notice to Assignor. Assignor shall do any and all acts required
by Assignee to ensure Assignor's compliance with paragraph 3(g).
5. Assignor agrees that, until all of the Obligations shall have
been satisfied indefeasibly and in full and the Loan Agreement terminated, it
will not enter into any agreement, except as otherwise permitted herein,
encumbering, transferring, permitting the use of, or affecting any of the
Patents or the Trademarks, or which is inconsistent with Assignor's obligations
under this Assignment, without Assignee's prior written consent, which shall
not be unreasonably withheld. Assignor further agrees that it will not take
any action, or permit any action to be taken by any affiliate of Assignor or
other person subject to Assignor's control, or fail to take any reasonable
action, if such action or failure would affect the validity or enforcement of
the rights transferred to Assignee under this Assignment.
6. If, before the Obligations shall have been satisfied
indefeasibly and in full, Assignor shall obtain rights to any new trademarks or
patentable inventions, or become entitled to the benefit of any new trademarks
or patents, including without limitation, any improvement on any Patents, the
provisions of paragraph 1 shall automatically apply thereto and Assignor shall
give Assignee prompt written notice thereof.
7. Assignor authorizes Assignee to modify this Assignment by
amending Schedule A and/or B, as applicable, to include any future trademarks
or patents and trademark or patent applications covered by paragraphs 1 and 6
hereof, and to re-record this Assignment from time to time as Assignee sees
fit.
8. Unless and until there shall have occurred and be continuing an
Event of Default (as defined in the Loan Agreement), Assignee hereby grants to
Assignor the exclusive, non-transferable right and license to make, have made,
use and sell the inventions disclosed and claimed in the Patents, and to use
the Trademarks and registrations with respect thereto on and in connection with
services provided or products sold by Assignor, for Assignor's own benefit and
account and for none other, except that Assignor shall be
3
<PAGE> 16
permitted to license and sublicense the Patents and Trademarks in the ordinary
course of Assignor's business. Assignor hereby indemnifies Assignee from any
claims, suits, losses and damages, including attorneys' fees, arising from
Assignor's use and permitted licensees' and sublicensees' use of the Patents
and Trademarks, and its operations conducted pursuant to this paragraph 8.
This indemnity shall survive termination of this Assignment. Except as
otherwise provided herein, Assignor agrees not to sell or assign its interest
in, or grant any license or sublicense under the license granted to Assignor in
this paragraph 8, without the prior written consent of Assignee, which shall
not be unreasonably withheld.
9. If any Event of Default shall have occurred and be continuing,
upon notice from Assignee to Assignor (as provided in the Loan Agreement),
Assignor's license under the Patents and Trademarks, as set forth in paragraph
8, shall terminate forthwith, and Assignee shall have, in addition to all other
rights and remedies given it by this Assignment, and the Loan Agreement, those
allowed by law and the rights and remedies of a secured party under the Uniform
Commercial Code as enacted in any jurisdiction in which the Patents and
Trademarks may be located and, without limiting the generality of the
foregoing, Assignee may immediately, without demand of performance and without
other notice (except as set forth next below) or demand whatsoever to Assignor,
all of which are hereby expressly waived and, within the discretion of
Assignee, with or without advertisement, sell at public or private sale or
otherwise realize upon all or from time to time any of the Patents, Trademarks
and the Associated Goodwill, or any interest which Assignor may have therein,
and after deducting from the proceeds of sale or other disposition of the
Patents and Trademarks all expenses (including all reasonable broker's fees and
attorneys' fees), shall apply the residue of such proceeds toward the payment
of the Obligations. Any remainder of the proceeds after full and indefeasible
payment of the Obligations shall be paid over to Assignor. Notice of any sale
or other disposition of the Patents and Trademarks shall be given to Assignor
at least five (5) days before the time of any intended public or private sale
or other disposition of the Patents and Trademarks is to be made, which
Assignor hereby agrees shall be reasonable notice of such sale or other
disposition. At any such sale or other disposition, Assignee may, to the
extent permissible under applicable law, purchase the whole or any part of the
Patents and Trademarks and the Associated Goodwill sold, free from any right of
redemption on the part of Assignor, which right is hereby waived and released.
10. At such time as Assignor shall completely and indefeasibly
satisfy the Obligations, this Assignment shall terminate and Assignee shall
execute and deliver to Assignor all deeds, assignments and other instruments as
may be necessary or proper to re-vest in Assignor full title to the Patents,
Trademarks and the Associated Goodwill, subject to any disposition thereof
which may have been made by Assignee pursuant hereto or pursuant to the Loan
Agreement.
11. Any and all fees, costs and expenses, of whatever kind or
nature, including the reasonable attorneys' fees and expenses incurred by
Assignee in connection with the preparation of this Assignment and all other
documents relating hereto, and the consummation of this transaction, the filing
or recording of any documents (including all taxes in connection therewith) in
public offices, the payment or discharge of any taxes, counsel fees,
maintenance fees, renewal fees and encumbrances, or otherwise in protecting,
4
<PAGE> 17
maintaining or preserving the Patents, Trademarks and the Associated Goodwill,
or in defending or prosecuting any actions or proceedings arising out of or
related to the Patents, Trademarks and the Associated Goodwill, shall be borne
and paid by Assignor on demand by Assignee and until so paid shall be added to
the principal amount of the Obligations and shall bear interest at the highest
rate prescribed in the Loan Agreement.
12. Assignor shall have the duty, through counsel acceptable to
Assignee, to prosecute diligently any patent and trademark applications of the
Patents and Trademarks pending as of the date of this Assignment or thereafter
until the Obligations shall have been paid in full, to make federal application
on registrable but unregistered Trademarks and patentable but unpatented
inventions, to file and prosecute opposition and cancellation proceedings, and
to do any and all acts which are necessary or desirable to preserve and
maintain all rights in the Patents, the Trademarks and the Associated Goodwill.
Any expenses incurred in connection with the Patents and Trademarks as provided
herein shall be borne by Assignor. Except as otherwise provided herein,
Assignor shall not abandon any right to file a patent or trademark application,
or any pending patent or trademark application, or any of the Patents and
Trademarks without the consent of Assignee, which consent shall not be
unreasonably withheld.
13. Assignee shall have the right, but shall in no way be
obligated, to bring any opposition proceedings, cancellation proceedings or
suit in its own name to enforce or protect the Patents and Trademarks, and any
license thereunder, in which event Assignor shall at the request of Assignee do
any and all lawful acts and execute any and all proper documents reasonably
required by Assignee in aid of such enforcement. Assignor shall promptly, upon
demand, reimburse and indemnify Assignee for all damages, costs and expenses,
including reasonable attorneys' fees and expenses, incurred by Assignee in the
fulfillment of the provisions of this paragraph 13.
14. In the event of the occurrence of an Event of Default under the
Loan Agreement, Assignor hereby authorizes and empowers Assignee to make,
constitute and appoint any officer or agent of Assignee as Assignee may select,
in its exclusive discretion, as Assignor's true and lawful attorney-in-fact,
with the power to endorse Assignor's name on all applications, documents,
papers and instruments necessary for Assignee to use or make use of the
Patents, the Trademarks and the Associated Goodwill, or to grant or issue any
exclusive or nonexclusive license under the Patents and Trademarks to anyone
else, or necessary for Assignee to assign, pledge, convey or otherwise transfer
title in or dispose of the Patents and Trademarks, registrations with respect
thereto, and the Associated Goodwill, to anyone else. Assignor hereby ratifies
all that such attorney shall lawfully do or cause to be done by virtue hereof.
This power of attorney shall be irrevocable for the life of this Assignment.
15. If Assignor fails to comply with any of its obligations
hereunder, Assignee may, upon notice to Assignor, perform such obligations, in
Assignor's name or in Assignee's name, but at Assignor's expense, and Assignor
hereby agrees to reimburse, and on demand to indemnify and hold harmless,
Assignee, its successors, assigns, agents and servants, in full for any and all
claims, damages, losses, liabilities, demands, causes of action, and any costs
and expenses, including reasonable attorneys' fees, incurred
5
<PAGE> 18
by Assignee in connection with this Assignment or in protecting, defending and
maintaining the Patents and Trademarks including, without limitation, the loss
of any Patents or Trademarks or registrations with respect thereto, the
Associated Goodwill, or other rights, whether as a result of the assignment to
Assignee hereunder, the exercise or nonexercise by Assignee of any rights,
remedies, including foreclosure and sale or licensing remedies, or privileges
granted to Assignee hereunder or by law, or otherwise.
16. Notwithstanding anything to the contrary contained in this
Assignment, Assignor shall have the right to abandon such Patents and
Trademarks which it deems to be immaterial or not useful to its business.
17. No course of dealing between Assignor and Assignee, or any
failure to exercise, or any delay in exercising, on the part of Assignee, any
right, power or privilege hereunder or under the Loan Agreement shall operate
as a waiver thereof; nor shall any single or partial exercise of any right,
power or privilege hereunder or thereunder preclude any other or further
exercise thereof or the exercise of any other right, power or privilege.
18. All of Assignee's rights and remedies with respect to the
Patents, the Trademarks and the Associated Goodwill, whether established hereby
or by the Loan Agreement, or by any other agreements or by law shall be
cumulative and may be exercised singularly or concurrently.
19. The provisions of this Assignment are severable, and if any
clause or provision shall be held invalid and unenforceable in whole or in part
in any jurisdiction, then such invalidity or unenforceability shall affect only
such clause or provision, or part thereof, in such jurisdiction, and shall not
in any manner affect such clause or provision in any other jurisdiction, or any
other clause or provision of this Assignment in any jurisdiction.
20. This Assignment cannot be changed, modified, amended, or
terminated except by a written document signed by both Assignor and Assignee,
except as provided in paragraph 7.
21. This Assignment shall bind and inure to the benefit of the
respective successors and assigns of Assignor and Assignee; provided, however,
Assignor may not assign this Assignment or any rights hereunder without
Assignee's prior written consent and any prohibited assignment shall be
absolutely void. No such consent to an assignment by Assignee shall release
Assignor from its Obligations to Assignee.
22. Assignee reserves the right, upon an Event of Default under the
Loan Agreement, to sell, assign, transfer, negotiate, or grant participations
in all or any part of, or any interest in the rights hereunder; provided that,
with respect to any sale, assignment, transfer or negotiation by Assignee of
less than all of the rights and benefits hereunder, Assignee shall cause such
title to the Patents and Trademarks as exists in the name of Assignee pursuant
to this Assignment to remain in Assignee's name. In connection with any such
sale, assignment, transfer, negotiation or participation, Assignee may disclose
6
<PAGE> 19
all documents and information which Assignee now or hereafter may have relating
to Assignor, Assignor's business, the Patents or the Trademarks to any such
prospective or permitted transferee, if such transferee agrees to be bound by
the confidentiality provisions of the Loan Agreement.
23. The validity of this Assignment, its construction,
interpretation, and enforcement and the rights of the parties hereto shall be
determined under, governed by, and construed in accordance with, the internal
laws of the State of California, without regard to principles of conflicts of
law. The parties agree that all actions or proceedings arising in connection
with this Assignment shall be tried and litigated only in the state and federal
courts located in the County of Los Angeles, State of California. ASSIGNOR AND
ASSIGNEE EACH WAIVES THE RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION,
OR CAUSE OF ACTION ARISING UNDER THIS ASSIGNMENT, WHETHER NOW EXISTING OR
HEREAFTER ARISING, AND ANY RIGHT EITHER MAY HAVE TO ASSERT THE DOCTRINE OF
FORUM NON CONVENIENS, LACK OF PERSONAL JURISDICTION, OR TO OBJECT TO VENUE TO
THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 23.
24. All notices or demands by any party hereto to the other party
and relating to this Assignment shall be made in the manner and to the
addresses set forth in the notices provision of the Loan Agreement.
25. Unless the context of this Assignment clearly requires
otherwise, references to the plural include the singular, the singular includes
the plural, the part includes the whole, "including" is not limiting, and "or"
has the inclusive meaning represented by the phrase "and/or". The words
"hereof", "herein", "hereunder" and similar terms in this Assignment refer to
this Assignment as a whole and not to any particular provision of this
Assignment. Article, section, subsection, exhibit, and schedule references are
to this Assignment unless otherwise specified.
7
<PAGE> 20
WITNESS the execution hereof under seal as of the day and year first
above written.
BOLLINGER INDUSTRIES, INC.,
a Delaware corporation
By: Bollinger Operating Corp.,
general partner
By: /s/ BOBBY D. BOLLINGER
----------------------------
Its: Vice Chairman
---------------------------
FOOTHILL CAPITAL CORPORATION,
a California corporation
By: /s/ PATRICIA McLOUGHLIN
-----------------------------------
Title: SVP
--------------------------------
[Attach appropriate notarial acknowledgement.]
8
<PAGE> 21
SCHEDULE A
(List of Trademarks)
Owned by
Bollinger Industries, Incorporated
a Delaware Corporation
1. BOLLINGER HEALTHCARE
Registration No.: 1884788
Registration Date: 19950321
Serial No.: 74-439570
Filing Date: 19930924
2. SOLAR
Registration No.: 1888545
Registration Date: 19950411
Serial No.: 74-439573
Filing Date: 19930924
3. CAMLOCK
Registration No.: 1853716
Registration Date: 19940913
Serial No.: 74-439574
Filing Date: 19930924
4. STARLOCK
Registration No.: 1873968
Registration Date: 19950117
Serial No.: 74-439608
Filing Date: 19930924
5. SATURN
Registration No.: 1933786
Registration Date: 19951107
Serial No.: 74-439778
Filing Date: 19930924
6. BOLLINGER FITNESS PRODUCTS FOR
EVERY BODY
Registration No.: 1849841
Registration Date: 19940816
Serial No.: 74-440054
Filing Date: 19930924
7. BOLLINGER FITNESS PRODUCTS FOR
EVERY BODY
Registration No.: 1879635
Registration Date: 19950221
Serial No.: 74-440174
Filing Date: 19930927
8. PROTEC
Registration No.: 1875358
Registration Date: 19950124
Serial No.: 74-440661
Filing Date: 19930927
9. SOFTSTEP
Registration No.: 1891222
Registration Date: 19950425
Serial No.: 74-517765
Filing Date: 19940428
10. ULTRAARM
Registration No.: 1895195
Registration Date: 19950523
Serial No.: 74-517766
Filing Date: 19940428
11. TONE-UP 1-2-3
Registration No.: Notice of Allowance
- Issued
Registration Date:
Serial No.: 74-518136
Filing Date: 19940428
12. AIRFLO
Registration No.: Non-Final action -
Mailed
Registration Date:
Serial No.: 74-663252
Filing Date: 19950419
13. POWERRING
Registration No.: Publication/
Registration review
complete
Registration Date:
Serial No.: 75-006076
Filing Date: 19951016
14. ULTRABOUNCE
Registration No.: Publication/
Registration review
complete
Registration Date:
Serial No.: 75-006077
Filing Date: 19951016
<PAGE> 22
SCHEDULE B-1
INTELLECTUAL PROPERTY STATUS REPORT
PATENTS OWNED BY BOLLINGER INDUSTRIES, INC.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
SERIAL NO. ISSUE NO.
PATENT TITLE FILING DATE ISSUE DATE
- -------------------------------------------------------------------------------
<S> <C> <C>
Adjustable seat assembly for 6-915,987 4,746,114
Exercise Apparatus 10/6/86 5/24/88
Starlock Nut Design 6/510,064 D278,029
07/01/83 03/19/85
Curling Bar 6/700,520 D290,485
02/11/85 06/23/87
Adjustable Exercise Bench 6/916,060 D300,045
10/06/86 02/28/89
Physical Exerciser 6/916,060 D300,048
10/06/86 02/28/89
Adjustable Exercise Bench 7/169,336 D300,485
03/17/88 04/04/89
</TABLE>
<PAGE> 23
SCHEDULE B-2
BOLLINGER INDUSTRIES, INC.-FITNESS
INTELLECTUAL PROPERTY STATUS REPORT
PATENTS LICENSED BY BOLLINGER INDUSTRIES
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
SERIAL NO. ISSUE NO. TYPE OF LICENSE
PATENT TITLE FILING DATE ISSUE DATE INVENTORS AND LICENSOR
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Exercise Apparatus 389,360 5,004,227 Ned Hoffman Limited Exclusive License from Sports-Mitt
(Zoom Off Gloves) 8/25/89 04/02/91 International (assignee of record) for weight
lifting gloves, cross training gloves and all
purpose fitness gloves
Exercise Cuffs 627,275 4,602,784 Brent R. Budden Non-Exclusive License from by Gregory W.
(Softone Weights) 7/2/84 7/29/86 Jo Anne Budden Durward
Power Forearm 7,710,535 Exclusive License
Developer Taiwan Manufacturing Purchase Agreement
Patent
Ziplock Collars 163,131 Non-Exclusive License
wrong no. Distribution Agreement
Universal Ankle Support 7,477,058 5,090,404 Charles Kellassy Exclusive License from Kellassy. For sale in
02/07/90 02/25/92 U.S. only.
Softone Weights 610,777 D287,525 Gregory W. Non-Exclusive License from by Durward
05/16/84 12/30/87 Durward
Pushovers 8/236/484 John Flemming
</TABLE>
<PAGE> 24
CALIFORNIA ALL-PURPOSE ACKNOWLEDGEMENT
================================================================================
STATE OF CALIFORNIA )
)
COUNTY OF LOS ANGELES )
On August 16, 1996 before me, Robert I. Treitler, Notary Public, personally
appeared Bobby Bollinger,
[ ] personally known to me - OR - [x] proved to me on the basis of
satisfactory evidence to be the
person whose name is subscribed to
[NOTARY STAMP] the within instrument and
acknowledged to me that he executed
the same in his authorized capacity,
and that by his signature on the
instrument the person, or the entity
upon behalf of which the person
acted, executed the instrument.
WITNESS my hand and official seal.
/s/ ROBERT I. TREITLER
-------------------------------------
SIGNATURE OF NOTARY
====================================OPTIONAL====================================
Though the data below is not required by law, it may prove valuable to persons
relying on the document and could prevent fraudulent reattachment of this form.
CAPACITY CLAIMED BY SIGNER DESCRIPTION OF ATTACHED DOCUMENT
[ ] INDIVIDUAL
[ ] CORPORATE OFFICER(S)
COLLATERAL ASSIGNMENT OF PATENTS
AND TRADEMARKS
- ------------------------------------- ------------------------------------
TITLE(S) TITLE OR TYPE OF DOCUMENT
[ ] PARTNER(S) [ ] LIMITED
[ ] GENERAL ------------------------------------
[ ] ATTORNEY-IN-FACT NUMBER OF PAGES
[ ] TRUSTEE(S)
AUGUST 16, 1996
[ ] GUARDIAN/CONSERVATOR ------------------------------------
DATE OF DOCUMENT
[ ] OTHER:
- ------------------------------------- ------------------------------------
SIGNER IS REPRESENTING: SIGNER(S) OTHER THAN NAMED ABOVE
(NAME OF PERSON(S) OR ENTITY(IES))
BOLLINGER OPERATING CORP.
- -------------------------------------
================================================================================
<PAGE> 25
CALIFORNIA ALL-PURPOSE ACKNOWLEDGEMENT
================================================================================
STATE OF CALIFORNIA )
)
COUNTY OF LOS ANGELES )
On August 16, 1996 before me, Robert I. Treitler, Notary Public, personally
appeared Patricia McLoughlin,
[ ] personally known to me - OR - [x] proved to me on the basis of
satisfactory evidence to be the
person whose name is subscribed to
[NOTARY STAMP] the within instrument and
acknowledged to me that she executed
the same in her authorized capacity,
and that by her signature on the
instrument the person, or the entity
upon behalf of which the person
acted, executed the instrument.
WITNESS my hand and official seal.
/s/ ROBERT I. TREITLER
-------------------------------------
SIGNATURE OF NOTARY
====================================OPTIONAL====================================
Though the data below is not required by law, it may prove valuable to persons
relying on the document and could prevent fraudulent reattachment of this form.
CAPACITY CLAIMED BY SIGNER DESCRIPTION OF ATTACHED DOCUMENT
[ ] INDIVIDUAL
[ ] CORPORATE OFFICER(S)
COLLATERAL ASSIGNMENT OF PATENTS
AND TRADEMARKS
- ------------------------------------- ------------------------------------
TITLE(S) TITLE OR TYPE OF DOCUMENT
[ ] PARTNER(S) [ ] LIMITED
[ ] GENERAL ------------------------------------
[ ] ATTORNEY-IN-FACT NUMBER OF PAGES
[ ] TRUSTEE(S)
AUGUST 16, 1996
[ ] GUARDIAN/CONSERVATOR ------------------------------------
DATE OF DOCUMENT
[ ] OTHER:
- ------------------------------------- ------------------------------------
SIGNER IS REPRESENTING: SIGNER(S) OTHER THAN NAMED ABOVE
(NAME OF PERSON(S) OR ENTITY(IES))
FOOTHILL CAPITAL CORPORATION
- -------------------------------------
================================================================================
<PAGE> 26
COLLATERAL ASSIGNMENT OF
PATENTS AND TRADEMARKS
THIS COLLATERAL ASSIGNMENT OF PATENTS AND TRADEMARKS (this
"Assignment"), dated as of August 16, 1996, is entered into by and between
Bollinger Industries, Inc., a Delaware corporation ("Assignor") with its chief
executive office located at 222 West Airport Freeway, Irving, Texas 75062 and
Foothill Capital Corporation, a California corporation ("Assignee") with its
chief executive office 11111 Santa Monica Boulevard, Suite 1500, Los Angeles,
California 90025, in light of the following facts:
RECITALS
A. Assignor has requested that Assignee enter into that certain
Loan and Security Agreement, of even date herewith, with Assignor (the "Loan
Agreement"), pursuant to which Assignee will extend certain loans and financial
accommodations to Assignor as described therein.
B. In order to induce Assignee to enter into the Loan Agreement,
Assignor has agreed to assign to Assignee the rights to all of Assignor's
currently existing and hereafter acquired or arising patents and trademarks
pursuant to this Assignment.
NOW, THEREFORE, in consideration of the premises set forth herein, and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Assignor hereby agrees with Assignee as follows:
1. To secure the complete and timely satisfaction of any and all
debts, liabilities, obligations or undertakings owing by Assignor to Assignee
of any kind or description, arising under, advanced pursuant to, or evidenced
by the Loan Agreement, whether direct or indirect, absolute or contingent, due
or to become due, voluntary or involuntary, whether now existing or hereafter
arising, and including all interest not paid when due and all Lender Expenses
(as defined in the Loan Agreement) which Assignor is required to pay or
reimburse pursuant to the Loan Agreement or by law (collectively, the
"Obligations"), Assignor hereby grants, assigns and conveys to Assignee all of
Assignor's right, title and interest (but not the obligation to register) in
and to all presently existing and hereafter acquired or arising patents and
trademarks including, without limitation, the trademark applications and
trademarks listed in Schedule A attached hereto and trademark registrations
identified therein, and the patent applications and patents listed in Schedule
B attached hereto (all as may be amended pursuant hereto from time to time),
all proceeds of infringement suits thereof, the right (but not the obligation)
to sue for past, present and future infringements thereof and all rights (but
not obligations) corresponding thereto, and all re-issues, divisions,
continuations, renewals, extensions and continuations-in-part thereof
(collectively, the "Patents and Trademarks" individually, the "Patents" and the
"Trademarks"), and in and to the goodwill and assets of the business to which
each of the Trademarks relate (the "Associated Goodwill").
<PAGE> 27
2. Assignor shall execute and deliver to Assignee concurrently
with Assignor's execution of this Assignment, and from time to time hereafter
at the request of Assignee, all assignments, powers of attorney, financing
statements, continuation financing statements, security agreements, chattel
mortgages, and all other documents that Assignee may reasonably request, in
form reasonably satisfactory to Assignee and its counsel, to perfect and
maintain perfected Assignee's interests in the Patents and Trademarks and the
Associated Goodwill, and in order to consummate fully all of the transactions
contemplated under this Assignment and the Loan Agreement.
3. Assignor covenants and warrants that:
a. The Patents and Trademarks are subsisting and have not been
adjudged invalid or unenforceable, in whole or in part;
b. To the best of Assignor's knowledge, each of the Patents
and Trademarks is valid and enforceable;
c. To the best of Assignor's knowledge, no claim has been made
that the use of any or all of the Patents or Trademarks does, or may, violate
the rights of any third person;
d. Assignor is the sole and exclusive owner of the entire and
unencumbered right, title and interest in and to each of the Patents and
Trademarks, free and clear of any voluntary or involuntary liens, charges and
encumbrances, including, without limitation, pledges, assignments, licenses,
registered user agreements and covenants by Assignor not to sue third persons
(collectively, "Liens"), except as specifically set forth in the Loan Agreement
and those licenses and sublicenses which are existing as of the date hereof and
those licenses and sublicenses which may be entered into after the date hereof
in the ordinary course of Assignor's business;
e. Assignor has the unqualified right to enter into this
Assignment and perform its terms;
f. Assignor has used, and will continue to use for the
duration of this Assignment, proper statutory notice in connection with its use
of the Patents and Trademarks;
g. Assignor has used, and its permitted licensees and
sublicensees have used, and will continue to use for the duration of this
Assignment, consistent standards of quality in its provision of services and
manufacture of products sold under the Patents and Trademarks, which standards
shall be at least equivalent to the standards used by Assignor as of the date
of this Assignment, and Assignor shall provide to Assignee an officer's
certificate to that effect, and Assignor will make or permit no change with
respect thereto without the prior written consent of Assignee;
2
<PAGE> 28
h. The Patents and Trademarks listed in Schedules A and B,
respectively, constitute all Patents and Trademarks now owned by Assignor or in
which Assignor has an interest as of the date hereof;
i. During the term of the Loan Agreement, Assignor will herein
keep each and all of the Patents and Trademarks and the registrations with
respect thereto, free and clear of all Liens (except as specifically set forth
in the Loan Agreement or as otherwise permitted herein), and Assignor will take
all steps necessary to maintain in force and renew each and all of the Patents
and Trademarks.
4. Assignor hereby grants to Assignee and its employees and
agents, on behalf of itself and its permitted licensees and sublicensees, the
right to visit Assignor's and its permitted licensees and sublicensees offices
and facilities which provide services or manufacture, inspect or store products
sold under or covered by any of the Patents or Trademarks, and to audit and
inspect the products and quality control records relating thereto at reasonable
times during regular business hours and upon at least one (1) business day's
prior written notice to Assignor. Assignor shall do any and all acts required
by Assignee to ensure Assignor's compliance with paragraph 3(g).
5. Assignor agrees that, until all of the Obligations shall have
been satisfied indefeasibly and in full and the Loan Agreement terminated, it
will not enter into any agreement, except as otherwise permitted herein,
encumbering, transferring, permitting the use of, or affecting any of the
Patents or the Trademarks, or which is inconsistent with Assignor's obligations
under this Assignment, without Assignee's prior written consent, which shall
not be unreasonably withheld. Assignor further agrees that it will not take
any action, or permit any action to be taken by any affiliate of Assignor or
other person subject to Assignor's control, or fail to take any reasonable
action, if such action or failure would affect the validity or enforcement of
the rights transferred to Assignee under this Assignment.
6. If, before the Obligations shall have been satisfied
indefeasibly and in full, Assignor shall obtain rights to any new trademarks or
patentable inventions, or become entitled to the benefit of any new trademarks
or patents, including without limitation, any improvement on any Patents, the
provisions of paragraph 1 shall automatically apply thereto and Assignor shall
give Assignee prompt written notice thereof.
7. Assignor authorizes Assignee to modify this Assignment by
amending Schedule A and/or B, as applicable, to include any future trademarks
or patents and trademark or patent applications covered by paragraphs 1 and 6
hereof, and to re-record this Assignment from time to time as Assignee sees
fit.
8. Unless and until there shall have occurred and be continuing an
Event of Default (as defined in the Loan Agreement), Assignee hereby grants to
Assignor the exclusive, non-transferable right and license to make, have made,
use and sell the inventions disclosed and claimed in the Patents, and to use
the Trademarks and registrations with respect thereto on and in connection with
services provided or products sold by Assignor, for Assignor's own benefit and
account and for none other, except that Assignor shall be
3
<PAGE> 29
permitted to license and sublicense the Patents and Trademarks in the ordinary
course of Assignor's business. Assignor hereby indemnifies Assignee from any
claims, suits, losses and damages, including attorneys' fees, arising from
Assignor's use and permitted licensees' and sublicensees' use of the Patents
and Trademarks, and its operations conducted pursuant to this paragraph 8.
This indemnity shall survive termination of this Assignment. Except as
otherwise provided herein, Assignor agrees not to sell or assign its interest
in, or grant any license or sublicense under the license granted to Assignor in
this paragraph 8, without the prior written consent of Assignee, which shall
not be unreasonably withheld.
9. If any Event of Default shall have occurred and be continuing,
upon notice from Assignee to Assignor (as provided in the Loan Agreement),
Assignor's license under the Patents and Trademarks, as set forth in paragraph
8, shall terminate forthwith, and Assignee shall have, in addition to all other
rights and remedies given it by this Assignment, and the Loan Agreement, those
allowed by law and the rights and remedies of a secured party under the Uniform
Commercial Code as enacted in any jurisdiction in which the Patents and
Trademarks may be located and, without limiting the generality of the
foregoing, Assignee may immediately, without demand of performance and without
other notice (except as set forth next below) or demand whatsoever to Assignor,
all of which are hereby expressly waived and, within the discretion of
Assignee, with or without advertisement, sell at public or private sale or
otherwise realize upon all or from time to time any of the Patents, Trademarks
and the Associated Goodwill, or any interest which Assignor may have therein,
and after deducting from the proceeds of sale or other disposition of the
Patents and Trademarks all expenses (including all reasonable broker's fees and
attorneys' fees), shall apply the residue of such proceeds toward the payment
of the Obligations. Any remainder of the proceeds after full and indefeasible
payment of the Obligations shall be paid over to Assignor. Notice of any sale
or other disposition of the Patents and Trademarks shall be given to Assignor
at least five (5) days before the time of any intended public or private sale
or other disposition of the Patents and Trademarks is to be made, which
Assignor hereby agrees shall be reasonable notice of such sale or other
disposition. At any such sale or other disposition, Assignee may, to the
extent permissible under applicable law, purchase the whole or any part of the
Patents and Trademarks and the Associated Goodwill sold, free from any right of
redemption on the part of Assignor, which right is hereby waived and released.
10. At such time as Assignor shall completely and indefeasibly
satisfy the Obligations, this Assignment shall terminate and Assignee shall
execute and deliver to Assignor all deeds, assignments and other instruments as
may be necessary or proper to re-vest in Assignor full title to the Patents,
Trademarks and the Associated Goodwill, subject to any disposition thereof
which may have been made by Assignee pursuant hereto or pursuant to the Loan
Agreement.
11. Any and all fees, costs and expenses, of whatever kind or
nature, including the reasonable attorneys' fees and expenses incurred by
Assignee in connection with the preparation of this Assignment and all other
documents relating hereto and the consummation of this transaction, the filing
or recording of any documents (including all taxes in connection therewith) in
public offices, the payment or discharge of any taxes, counsel fees,
maintenance fees, renewal fees and encumbrances, or otherwise in protecting,
4
<PAGE> 30
maintaining or preserving the Patents, Trademarks and the Associated Goodwill,
or in defending or prosecuting any actions or proceedings arising out of or
related to the Patents, Trademarks and the Associated Goodwill, shall be borne
and paid by Assignor on demand by Assignee and until so paid shall be added to
the principal amount of the Obligations and shall bear interest at the highest
rate prescribed in the Loan Agreement.
12. Assignor shall have the duty, through counsel acceptable to
Assignee, to prosecute diligently any patent and trademark applications of the
Patents and Trademarks pending as of the date of this Assignment or thereafter
until the Obligations shall have been paid in full, to make federal application
on registrable but unregistered Trademarks and patentable but unpatented
inventions, to file and prosecute opposition and cancellation proceedings, and
to do any and all acts which are necessary or desirable to preserve and
maintain all rights in the Patents, the Trademarks and the Associated Goodwill.
Any expenses incurred in connection with the Patents and Trademarks as provided
herein shall be borne by Assignor. Except as otherwise provided herein,
Assignor shall not abandon any right to file a patent or trademark application,
or any pending patent or trademark application, or any of the Patents and
Trademarks without the consent of Assignee, which consent shall not be
unreasonably withheld.
13. Assignee shall have the right, but shall in no way be
obligated, to bring any opposition proceedings, cancellation proceedings or
suit in its own name to enforce or protect the Patents and Trademarks, and any
license thereunder, in which event Assignor shall at the request of Assignee do
any and all lawful acts and execute any and all proper documents reasonably
required by Assignee in aid of such enforcement. Assignor shall promptly, upon
demand, reimburse and indemnify Assignee for all damages, costs and expenses,
including reasonable attorneys' fees and expenses, incurred by Assignee in the
fulfillment of the provisions of this paragraph 13.
14. In the event of the occurrence of an Event of Default under the
Loan Agreement, Assignor hereby authorizes and empowers Assignee to make,
constitute and appoint any officer or agent of Assignee as Assignee may select,
in its exclusive discretion, as Assignor's true and lawful attorney-in-fact,
with the power to endorse Assignor's name on all applications, documents,
papers and instruments necessary for Assignee to use or make use of the
Patents, the Trademarks and the Associated Goodwill, or to grant or issue any
exclusive or nonexclusive license under the Patents and Trademarks to anyone
else, or necessary for Assignee to assign, pledge, convey or otherwise transfer
title in or dispose of the Patents and Trademarks, registrations with respect
thereto, and the Associated Goodwill, to anyone else. Assignor hereby ratifies
all that such attorney shall lawfully do or cause to be done by virtue hereof.
This power of attorney shall be irrevocable for the life of this Assignment.
15. If Assignor fails to comply with any of its obligations
hereunder, Assignee may, upon notice to Assignor, perform such obligations, in
Assignor's name or in Assignee's name, but at Assignor's expense, and Assignor
hereby agrees to reimburse, and on demand to indemnify and hold harmless,
Assignee, its successors, assigns, agents and servants, in full for any and all
claims, damages, losses, liabilities, demands, causes of action, and any costs
and expenses, including reasonable attorneys' fees, incurred
5
<PAGE> 31
by Assignee in connection with this Assignment or in protecting, defending and
maintaining the Patents and Trademarks including, without limitation, the loss
of any Patents or Trademarks or registrations with respect thereto, the
Associated Goodwill, or other rights, whether as a result of the assignment to
Assignee hereunder, the exercise or nonexercise by Assignee of any rights,
remedies, including foreclosure and sale or licensing remedies, or privileges
granted to Assignee hereunder or by law, or otherwise.
16. Notwithstanding anything to the contrary contained in this
Assignment, Assignor shall have the right to abandon such Patents and
Trademarks which it deems to be immaterial or not useful to its business.
17. No course of dealing between Assignor and Assignee, or any
failure to exercise, or any delay in exercising, on the part of Assignee, any
right, power or privilege hereunder or under the Loan Agreement shall operate
as a waiver thereof; nor shall any single or partial exercise of any right,
power or privilege hereunder or thereunder preclude any other or further
exercise thereof or the exercise of any other right, power or privilege.
18. All of Assignee's rights and remedies with respect to the
Patents, the Trademarks and the Associated Goodwill, whether established hereby
or by the Loan Agreement, or by any other agreements or by law shall be
cumulative and may be exercised singularly or concurrently.
19. The provisions of this Assignment are severable, and if any
clause or provision shall be held invalid and unenforceable in whole or in part
in any jurisdiction, then such invalidity or unenforceability shall affect only
such clause or provision, or part thereof, in such jurisdiction, and shall not
in any manner affect such clause or provision in any other jurisdiction, or any
other clause or provision of this Assignment in any jurisdiction.
20. This Assignment cannot be changed, modified, amended, or
terminated except by a written document signed by both Assignor and Assignee,
except as provided in paragraph 7.
21. This Assignment shall bind and inure to the benefit of the
respective successors and assigns of Assignor and Assignee; provided, however,
Assignor may not assign this Assignment or any rights hereunder without
Assignee's prior written consent and any prohibited assignment shall be
absolutely void. No such consent to an assignment by Assignee shall release
Assignor from its Obligations to Assignee.
22. Assignee reserves the right, upon an Event of Default under the
Loan Agreement, to sell, assign, transfer, negotiate, or grant participations
in all or any part of, or any interest in the rights hereunder; provided that,
with respect to any sale, assignment, transfer or negotiation by Assignee of
less than all of the rights and benefits hereunder, Assignee shall cause such
title to the Patents and Trademarks as exists in the name of Assignee pursuant
to this Assignment to remain in Assignee's name. In connection with any such
sale, assignment, transfer, negotiation or participation, Assignee may disclose
6
<PAGE> 32
all documents and information which Assignee now or hereafter may have relating
to Assignor, Assignor's business, the Patents or the Trademarks to any such
prospective or permitted transferee, if such transferee agrees to be bound by
the confidentiality provisions of the Loan Agreement.
23. The validity of this Assignment, its construction,
interpretation, and enforcement and the rights of the parties hereto shall be
determined under, governed by, and construed in accordance with, the internal
laws of the State of California, without regard to principles of conflicts of
law. The parties agree that all actions or proceedings arising in connection
with this Assignment shall be tried and litigated only in the state and federal
courts located in the County of Los Angeles, State of California. ASSIGNOR AND
ASSIGNEE EACH WAIVES THE RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION,
OR CAUSE OF ACTION ARISING UNDER THIS ASSIGNMENT, WHETHER NOW EXISTING OR
HEREAFTER ARISING, AND ANY RIGHT EITHER MAY HAVE TO ASSERT THE DOCTRINE OF
FORUM NON CONVENIENS, LACK OF PERSONAL JURISDICTION, OR TO OBJECT TO VENUE TO
THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 23.
24. All notices or demands by any party hereto to the other party
and relating to this Assignment shall be made in the manner and to the
addresses set forth in the notices provision of the Loan Agreement.
25. Unless the context of this Assignment clearly requires
otherwise, references to the plural include the singular, the singular includes
the plural, the part includes the whole, "including" is not limiting, and "or"
has the inclusive meaning represented by the phrase "and/or". The words
"hereof", "herein", "hereunder" and similar terms in this Assignment refer to
this Assignment as a whole and not to any particular provision of this
Assignment. Article, section, subsection, exhibit, and schedule references are
to this Assignment unless otherwise specified.
7
<PAGE> 33
WITNESS the execution hereof under seal as of the day and year first
above written.
NBF, INC.,
a Georgia corporation
By: Bollinger Operating Corp.,
general partner
By: /s/ BOBBY D. BOLLINGER
---------------------------
Its: Vice Chairman
--------------------------
FOOTHILL CAPITAL CORPORATION,
a California corporation
By: /s/ PATRICIA McLOUGHLIN
-----------------------------------
Title: SVP
--------------------------------
[Attach appropriate notarial acknowledgement.]
8
<PAGE> 34
SCHEDULE A
(List of Patents)
1. Trampoline having safety features
Serial No: 07/847,302
Filing Date: 03/06/92
Issue No:
Issue Date: 10/25/95
9
<PAGE> 35
SCHEDULE B
Not applicable.
<PAGE> 36
CALIFORNIA ALL-PURPOSE ACKNOWLEDGEMENT
================================================================================
STATE OF CALIFORNIA )
)
COUNTY OF LOS ANGELES )
On August 16, 1996 before me, Robert I. Treitler, Notary Public, personally
appeared Bobby Bollinger,
[ ] personally known to me - OR - [x] proved to me on the basis of
satisfactory evidence to be the
person whose name is subscribed to
[NOTARY STAMP] the within instrument and
acknowledged to me that he executed
the same in his authorized capacity,
and that by his signature on the
instrument the person, or the entity
upon behalf of which the person
acted, executed the instrument.
WITNESS my hand and official seal.
/s/ ROBERT I. TREITLER
-------------------------------------
SIGNATURE OF NOTARY
====================================OPTIONAL====================================
Though the data below is not required by law, it may prove valuable to persons
relying on the document and could prevent fraudulent reattachment of this form.
CAPACITY CLAIMED BY SIGNER DESCRIPTION OF ATTACHED DOCUMENT
[ ] INDIVIDUAL
[ ] CORPORATE OFFICER(S)
COLLATERAL ASSIGNMENT OF PATENTS
AND TRADEMARKS
- ------------------------------------- ------------------------------------
TITLE(S) TITLE OR TYPE OF DOCUMENT
[ ] PARTNER(S) [ ] LIMITED
[ ] GENERAL ------------------------------------
[ ] ATTORNEY-IN-FACT NUMBER OF PAGES
[ ] TRUSTEE(S)
AUGUST 16, 1996
[ ] GUARDIAN/CONSERVATOR ------------------------------------
DATE OF DOCUMENT
[ ] OTHER:
- ------------------------------------- ------------------------------------
SIGNER IS REPRESENTING: SIGNER(S) OTHER THAN NAMED ABOVE
(NAME OF PERSON(S) OR ENTITY(IES))
BOLLINGER OPERATING CORP.
- -------------------------------------
================================================================================
11
<PAGE> 37
CALIFORNIA ALL-PURPOSE ACKNOWLEDGEMENT
================================================================================
STATE OF CALIFORNIA )
)
COUNTY OF LOS ANGELES )
On August 16, 1996 before me, Robert I. Treitler, Notary Public, personally
appeared Patricia McLoughlin,
[ ] personally known to me - OR - [x] proved to me on the basis of
satisfactory evidence to be the
person whose name is subscribed to
[NOTARY STAMP] the within instrument and
acknowledged to me that she executed
the same in her authorized capacity,
and that by her signature on the
instrument the person, or the entity
upon behalf of which the person
acted, executed the instrument.
WITNESS my hand and official seal.
/s/ ROBERT I. TREITLER
-------------------------------------
SIGNATURE OF NOTARY
====================================OPTIONAL====================================
Though the data below is not required by law, it may prove valuable to persons
relying on the document and could prevent fraudulent reattachment of this form.
CAPACITY CLAIMED BY SIGNER DESCRIPTION OF ATTACHED DOCUMENT
[ ] INDIVIDUAL
[ ] CORPORATE OFFICER(S)
COLLATERAL ASSIGNMENT OF PATENTS
AND TRADEMARKS
- ------------------------------------- ------------------------------------
TITLE(S) TITLE OR TYPE OF DOCUMENT
[ ] PARTNER(S) [ ] LIMITED
[ ] GENERAL ------------------------------------
[ ] ATTORNEY-IN-FACT NUMBER OF PAGES
[ ] TRUSTEE(S)
AUGUST 16, 1996
[ ] GUARDIAN/CONSERVATOR ------------------------------------
DATE OF DOCUMENT
[ ] OTHER:
- ------------------------------------- ------------------------------------
SIGNER IS REPRESENTING: SIGNER(S) OTHER THAN NAMED ABOVE
(NAME OF PERSON(S) OR ENTITY(IES))
FOOTHILL CAPITAL CORPORATION
- -------------------------------------
================================================================================
12
<PAGE> 1
EXHIBIT 10.49
SUBORDINATION AGREEMENT
by and among
GLENN D. BOLLINGER
BOBBY D. BOLLINGER
DELL BOLLINGER
and
FOOTHILL CAPITAL CORPORATION
August 16, 1996
<PAGE> 2
INDEX
<TABLE>
SECTION HEADING PAGE
--------------- ----
<S> <C> <C>
1. Certain Defined Terms 2
a. General . . . . . . . . . . . . . . . . . . . . . 2
b. Other Terms . . . . . . . . . . . . . . . . . . . 4
2. Representations, Warranties, and Covenants 4
a. Junior Debt Documents . . . . . . . . . . . . . . 4
b. No Default . . . . . . . . . . . . . . . . . . . 5
c. Notice of Default . . . . . . . . . . . . . . . . 5
d. Further Action. . . . . . . . . . . . . . . . . . 5
3. Subordination. . . . . . . . . . . . . . . . . . . . 5
a. General . . . . . . . . . . . . . . . . . . . . . 5
b. Payments to Subordinating Lender . . . . . . . . 6
c. Priority of Interests in Collateral . . . . . . . 7
4. Restrictions on Subordinating Lender's Actions . . . 8
5. Remedies . . . . . . . . . . . . . . . . . . . . . . 8
6. No Action to Violate Senior Lender Agreements . . . 9
7. No Amendment of Junior Debt Documents. . . . . . . . 9
8. Extensions, Compromises, etc. . . . . . . . . . . . 9
9. Waiver . . . . . . . . . . . . . . . . . . . . . . . 9
10. No Constraint on Senior Lender . . . . . . . . . . . 9
11. Impact of Bankruptcy . . . . . . . . . . . . . . . . 10
12. Casualty Insurance; Condemnation Proceeds . . . . . 10
13. Miscellaneous. . . . . . . . . . . . . . . . . . . . 11
a. Amendment . . . . . . . . . . . . . . . . . . . . 11
b. Binding Effect; Governing Law; Venue. . . . . . . 11
c. Counterparts. . . . . . . . . . . . . . . . . . . 12
d. Headings. . . . . . . . . . . . . . . . . . . . . 12
e. Attorneys' Fees; etc. . . . . . . . . . . . . . . 12
f. Severability. . . . . . . . . . . . . . . . . . . 12
g. Entire Agreement. . . . . . . . . . . . . . . . . 12
</TABLE>
i
<PAGE> 3
INDEX
-----
(continued)
<TABLE>
<CAPTION>
PAGE(S)
-------
<S> <C>
h. Notice. . . . . . . . . . . . . . . . . . . . . . 12
i. Termination . . . . . . . . . . . . . . . . . . . 13
k. Rules of Construction . . . . . . . . . . . . . . 14
</TABLE>
ii
<PAGE> 4
SUBORDINATION AGREEMENT
THIS SUBORDINATION AGREEMENT (this "Agreement"), dated as of August 16,
1996, is entered into by and among GLENN D. BOLLINGER ("Glenn"), an individual
residing in the State of Texas, BOBBY D. BOLLINGER ("Bobby"), an individual
residing in the State of Texas, and DELL BOLLINGER ("Dell"), an individual
residing in the State of Texas (collectively, "Subordinating Lender"), and
FOOTHILL CAPITAL CORPORATION, a California corporation ("Senior Lender"), with
reference to the following facts:
RECITALS
A. Bollinger Industries, L.P., Bollinger Industries, Inc. and NBF, Inc.
("Borrower"), has entered into the Junior Debt Documents (as defined below)
with Subordinating Lender, pursuant to which Subordinating Lender has extended
certain loans and financial accommodations to Borrower.
B. Borrower has requested that Senior Lender enter into various agreements
with Borrower, including that certain Loan and Security Agreement, of even date
herewith (the "Senior Loan Agreement"), pursuant to which Senior Lender would
extend various loans and financial accommodations to Borrower.
C. Senior Lender is unwilling to enter into the Senior Loan Agreement with
Borrower and to extend to Borrower the loans and financial accommodations
contemplated thereunder unless Subordinating Lender enters into this Agreement.
1
<PAGE> 5
D. Subordinating Lender is interested in the financial success of Borrower
and will benefit by the loans and financial accommodations which Senior Lender
proposes to extend to Borrower under the Senior Loan Agreement.
E. Accordingly, to induce, but without obligating, Senior Lender to enter
into the Senior Loan Agreement with Borrower and to extend to Borrower the
loans and financial accommodations contemplated thereunder, Subordinating
Lender is willing to enter into this Agreement with Senior Lender.
AGREEMENT
NOW, THEREFORE, the parties agree as follows:
1. Certain Defined Terms.
a. General: When used in this Agreement, the following terms have the
following respective meanings:
"Agreement" has the meaning set forth in the introduction hereto.
"Assignment" has the meaning set forth in the definition of "Junior Debt
Documents".
"Borrower" has the meaning set forth in the recitals of this Agreement.
"Consent" has the meaning set forth in the definition of "Junior Debt
Documents".
"Junior Debt" means all present and future indebtedness and other
obligations (direct or indirect) owing by Borrower to Subordinating Lender (but
shall not include salary, bonuses, employee benefits or reimbursement for
normal employee expenses) under the Junior Debt Documents, together with any
other debts, demands, monies, indebtedness, liabilities, and obligations now or
hereafter owed by Borrower to Subordinating Lender,
2
<PAGE> 6
including interest, principal, costs, and other charges, together with
all claims, rights, causes of action, judgments, decrees and other
obligations.
"Junior Deed of Trust" has the meaning set forth in the definition of
"Junior Debt Documents".
"Junior Debt Documents" means all instruments and agreements
evidencing or securing the Junior Debt, including (i) that certain
Promissory Note, dated March 28, 1993, in the original principal amount
of Five Hundred Thousand Dollars ($500,000) originally made by Bollinger
Industries, Inc., a Texas corporation, and payable to the order of Sid
Reisman, as modified by that certain Renewal, Extension and Modification
Agreement dated as of April 6, 1993, between Bollinger Industries, Inc.,
a Texas corporation, and Sid Reisman (the "Modification"), and as
modified by that certain Assignment, Consent and Amendment of Note and
Deed of Trust dated as of October 1, 1993, recorded in Volume 93219,
Page 4664, of the Real Property Records of Dallas County, Texas, by and
among Sid Reisman, Bollinger Industries, Inc., a Texas corporation,
Bollinger Industries, Inc., a Delaware corporation, and Borrower (the
"Consent"), and assigned to Subordinating Lender (in undivided interests
of 40% to Glenn, 40% to Bobby and 20% to Dell) pursuant to that certain
Assignment of Note and Deed of Trust dated as of December 15, 1993,
recorded in Volume 94112, Page 05990 of the Real Property Records of
Dallas Country, Texas (the "Assignment") (said promissory note being
herein referred to as the "Junior Note"), and (ii) that certain Deed of
Trust Dated May 13, 1993, executed by Bollinger Industries, Inc., a
Texas corporation for the benefit of Sid Reisman, recorded in Volume
93115, Page 5605, of the Real Property Records of Dallas County, Texas
(as amended by the Modification and Consent, the "Junior Deed of Trust")
covering the Property and assigned to Subordinating Lender pursuant to
the Assignment.
3
<PAGE> 7
"Modification" has the meaning set forth in the definition of
"Junior Debt Documents".
"Property" has the meaning set forth in Section 3(a) of this
Agreement.
"Senior Debt" has the meaning set forth in Section 3(a) of this
Agreement.
"Senior Deed of Trust" has the meaning set forth in Section 3(a) of
this Agreement.
"Senior Lender" has the meaning set forth in the introduction of
this Agreement.
"Senior Loan Agreement" has the meaning set forth in the
recitals of this Agreement.
"Subordinating Lender" has the meaning set forth in the
introduction of this Agreement.
b. Other Terms. Unless otherwise defined in this Agreement,
any and all initially capitalized terms set forth in this Agreement
shall have the meaning ascribed thereto in the Senior Loan Agreement.
2. Representations, Warranties, and Covenants. Subordinating
Lender and Borrower each represents, warrants, and covenants (jointly
and severally) to Senior Lender that:
a. Junior Debt Documents. Upon Senior Lender's request, to
be given by notice to Borrower and Subordinating Lender: (i) a copy of
all Junior Debt Documents shall be delivered to Senior Lender; and/or
(ii) all Junior Debt Documents shall be conspicuously marked with
substantially the following legend:
"Subject to that certain Subordination Agreement, dated as of
August 16, 1996, by and among Glenn D. Bollinger, an
individual residing in the State of Texas, Bobby D. Bollinger,
4
<PAGE> 8
an individual residing in the State of Texas, and Dell
Bollinger, an individual residing in the State of Texas, and
Foothill Capital Corporation, a California corporation."
and after being so marked the originals of the Junior Debt Documents shall be
exhibited to Senior Lender and a copy of the marked Junior Debt Documents shall
be delivered to Senior Lender.
b. No Default. Borrower is not in default under any Junior
Debt Document.
c. Notice of Default. Subordinating Lender and Borrower shall
each promptly notify Senior Lender of all defaults, events of default,
and unmatured events of default under any Junior Debt Document.
d. Further Action. Upon Senior Lender's request, Subordinating
Lender will promptly take all actions which Senior Lender believes
appropriate to carry out the purposes of this Agreement, including
actions to effectuate Senior Lender's disposition of the Collateral.
e. Assignment of Junior Debt. The Junior Debt is not and will
not be subordinated or assigned (other than to third parties who have
agreed to become bound by the terms of this Agreement) except to Senior
Lender.
3. Subordination.
a. General. As more fully provided in the remainder of this
Section 3, the Junior Debt is hereby subordinated and made junior to all
obligations now or hereafter owing to Senior Lender by Borrower. The
obligations referred to in the preceding sentence as being owing to
Senior Lender are referred to in this Agreement as the "Senior Debt,"
and include the Obligations, all present and future representations,
warranties, covenants, agreements, indemnities, and other obligations
which Borrower or its successors and assigns
5
<PAGE> 9
may incur to Senior Lender, including (without limitation) those
incurred after the filing of a bankruptcy petition by or against
Borrower. The Senior Debt is secured in part by that certain Deed of
Trust (With Assignment of Rents and Fixture Filing) dated as of even
date, executed by Borrower in favor of David G. Drumm, as trustee for
the benefit of Senior Lender and recorded in the Real Property Records
of Dallas County, Texas (the "Senior Deed of Trust"), covering the real
property located in Dallas County, Texas, as described on Schedule I
attached hereto and incorporated herein by reference (the "Property").
b. Payments to Subordinating Lender. Borrower and
Subordinating Lender agree (and Subordinating Lender acknowledges such
agreement) that Borrower shall not: (i) make any payments of principal
or interest to Subordinating Lender in respect of the Junior Debt; (ii)
make any accrued or regularly scheduled payments of principal or
interest, or any prepayments or payments upon acceleration or demand in
respect of the Junior Debt; (iii) without Senior Lender's prior written
consent, execute or deliver any negotiable instruments as evidence of
the Junior Debt; or (iv) give Subordinating Lender any additional
collateral as security for payment of the Junior Debt. Notwithstanding
the foregoing, Borrower may pay interest on the Junior Debt and
following receipt by Senior Lender of audited financial statements of
Borrower for the Borrower's 1997 fiscal year in form and substance
satisfactory to Senior Lender, and for each year thereafter, Borrower
may make payments of principal to Dell in respect of her pro rata
interest in the Junior Note up to a maximum aggregate amount of $100,000
and an aggregate per annum amount equal to the lesser of (i) $50,000 or
(ii) 25% of Adjusted Cash Flow; provided, however, that after giving
effect to any such payments, no default, event of default or unmatured
event of default by Borrower under any present or future instrument or
agreement between Borrower and Senior Lender (including any Event of
Default under the Senior Loan Agreement between
6
<PAGE> 10
Borrower and Senior Lender) shall have occurred, and Borrower shall have
Excess Availability of $500,000 or more. Dell may not receive any such
payments until Senior Lender provides prior written confirmation that
all of the above conditions have been met. Other than as set forth
herein, in no event may Borrower pay, nor may Subordinating Lender
receive and retain, any payments, prepayments or accelerated payments of
principal in respect of the Junior Debt. For purposes of this Section
3(c), "Adjusted Cash Flow" shall mean, in respect of Borrower, net
income plus depreciation and amortization less capital expenditures less
principal payments on all Indebtedness (other than ordinary course
payments on revolving loans).
c. Priority of Interests in Collateral. Subordinating Lender hereby
subordinates any security interest, lien, or other right or interest (if any) it
now has or may hereafter acquire in the Collateral, including, without
limitation, the liens evidenced by the Junior Deed of Trust, to any security
interest, lien, or other right or interest Senior Lender now has or may
hereafter acquire in the Collateral, including, without limitation, the liens on
the Property evidenced by the Senior Deed of Trust. The subordination provided
in this Section 3(c) shall apply irrespective of the time or order of attachment
or the time, order or manner of perfection of any security interest, or the time
or order of filing of any deed of trust, financing statement or other documents
or instruments, and irrespective of any statute, rule, law, or court decision to
the contrary. The only lien Subordinating Lender possesses or shall possess on
the assets of Borrower is the lien, pursuant to the Junior Deed of Trust, on the
Property, and such lien is subject, junior, and subordinate to Senior Lender's
lien on Borrower's assets including the Property. Subordinating Lender shall not
attempt to avoid any lien securing the Senior Debt of Senior Lender in
connection with any bankruptcy proceeding against Borrower. This Agreement will
be filed of record in the official real
7
<PAGE> 11
property records of Dallas County, Texas, and if Senior Lender so
chooses, a copy may also be filed in the applicable UCC records.
4. Restrictions on Subordinating Lender's Actions. Unless it
shall have obtained Senior Lender's prior written consent, until the
Senior Debt has been indefeasibly paid in full, Subordinating Lender
will not: (i) demand or accept any payment upon the Junior Debt, except
as may be permitted by this Agreement; (ii) foreclose or realize upon
any collateral securing the Junior Debt (whether such collateral
constitutes part of the Collateral or consists of other assets of
Borrower), or otherwise enforce any security agreement, mortgage, lien
instrument, or other encumbrance securing the Junior Debt, including,
without limitation, the Junior Deed of Trust; or (iii) commence,
prosecute, or participate in any administrative, legal, or equitable
action that in Senior Lender's judgment might adversely affect
Borrower's business or Borrower's ability to pay the Senior Debt.
5. Remedies. If Borrower or Subordinating Lender attempts to
violate Section 3(b) or Clause (i) of Section 4, or if Subordinating
Lender in any other manner receives any funds which by virtue of this
Agreement it is precluded from receiving, Subordinating Lender shall be
deemed to hold any payment or distribution it receives in trust for
Senior Lender's benefit. In such case, Subordinating Lender shall
immediately remit such payment or distribution to Senior Lender. If
Subordinating Lender attempts to violate Clause (ii) of Section 4,
Senior Lender (in Senior Lender's or Borrower's name) or Borrower may
seek injunctive or other equitable relief to prevent or stop
Subordinating Lender's actions, it being agreed that legal remedies may
be inadequate. If Subordinating Lender attempts to violate Clause (iii)
of Section 4, Borrower may interpose as a defense or plea the making of
this Agreement, and Senior Lender may intervene and interpose such
defense or plea in its own
8
<PAGE> 12
or Borrower's name. The remedies provided in this Section 5 are not
exclusive; Senior Lender shall be entitled to all other remedies
available at law or in equity.
6. No Action to Violate Senior Lender Agreements. Subordinating
Lender shall not take any action which in Senior Lender's judgment might
cause Borrower to violate the Senior Loan Agreement or any other
agreement between Borrower and Senior Lender.
7. No Amendment of Junior Debt Documents. Except as otherwise
provided in this Agreement, unless Senior Lender's prior written consent
shall have been obtained, no Junior Debt Document, including but not
limited to the Junior Note and the Junior Deed of Trust, may be amended
or modified.
8. Extensions, Compromises, etc. Without having to obtain either
Borrower's or Subordinating Lender's consent, Senior Lender may grant to
Borrower extensions of the time of payment or performance, and may enter
into compromises (including releases of collateral and settlements) with
Borrower with respect to the Senior Debt.
9. Waiver. Subordinating Lender waives any right it may now or
hereafter have to require Senior Lender to marshall assets, to exercise
rights or remedies in a particular manner, or to forbear from exercising
such rights and remedies in any particular manner or order.
10. No Constraint on Senior Lender. Nothing contained in this
Agreement shall preclude Senior Lender from discontinuing its extension
of credit to Borrower (whether under the Senior Loan Agreement or
otherwise) or from taking (without notice to Subordinating Lender,
Borrower, or any other Person) any other action in respect of the Senior
Debt or the Collateral which Senior Lender is otherwise entitled to take
with respect to the Senior Debt or the Collateral. Among the actions
which Lender may take in accordance with this Section 10 are: renewing,
extending, and increasing the amount of the
9
<PAGE> 13
Senior Debt; otherwise changing the terms of the Senior Debt; settling,
releasing, compromising, and collecting on the Senior Debt; making (and
refraining from making) other secured and unsecured loans and advances
to Borrower; amending any present or future agreement between Senior
Lender and Borrower; and all other actions which Senior Lender deems
advisable.
11. Impact of Bankruptcy. If a voluntary or involuntary
bankruptcy petition shall be filed respecting Borrower: (a) this
Agreement (including the subordination provisions contained in Section
3) shall continue in full force and effect; (b) Subordinating Lender
shall take no action in the bankruptcy proceeding which might (in Senior
Lender's opinion) adversely affect Senior Lender's rights and interests
respecting the Senior Debt; and (c) Subordinating Lender shall take all
actions reasonably requested by Senior Lender to protect Senior Lender's
interests during the course of such bankruptcy proceedings.
Subordinating Lender irrevocably authorizes Senior Lender or any person
Senior Lender may designate to collect and receive all amounts payable
on the Junior Debt and to file and prove claims therefor in the name of
Subordinating Lender or in Senior Lender's own name in bankruptcies,
receiverships and other similar proceedings. All such amounts, less
Senior Lender's reasonable expenses in connection therewith, shall be
applied to the payment of the Obligations which Borrower owes Senior
Lender, and any excess shall be paid over to Subordinating Lender.
12. Casualty Insurance; Condemnation Proceeds. The priorities
between Senior Lender and Subordinating Lender set forth herein shall
govern the ultimate disposition of casualty insurance and condemnation
proceeds. Senior Lender shall, subject to Borrower's rights under its
agreement with Senior Lender, have the sole and exclusive right, as
against Subordinating Lender, to adjust settlement of insurance claims
in the event of any covered
10
<PAGE> 14
loss, theft or destruction of Borrower's assets or to negotiate with
condemning authorities the settlement of any condemnation proceedings.
All proceeds of such insurance shall inure to Senior Lender as named in
any applicable loss payable endorsement, and Subordinating Lender shall
cooperate (if necessary) in a reasonable manner in effecting the payment
of Insurance proceeds to Senior Lender. All condemnation proceeds shall
inure to Senior Lender. After the Senior Debt is paid in full,
Subordinating Lender shall be entitled to any may enforce its rights (if
any) relating to the insurance proceeds and condemnation proceeds and
Senior Lender will pay over to Subordinating Lender any sums it had
received in excess of the Senior Debt.
13. Miscellaneous.
a. Amendment. No amendment or waiver of this Agreement
shall be effective unless in a writing signed by each party hereto.
b. Binding Effect; Governing Law; Venue. This Agreement
shall be binding upon and inure to the benefit of the parties and their
respective successors and assigns. This Agreement shall be governed by
and construed in accordance with the internal laws of the State of
California. All actions and proceedings arising in connection with this
Agreement shall be tried and litigated only in state or federal courts
located in Los Angeles County, State of California, or (at Senior
Lender's sole option) in any other court in which Senior Lender may
initiate legal or equitable proceedings, so long as such court has
subject matter jurisdiction. SUBORDINATING LENDER, SENIOR LENDER AND
BORROWER EACH WAIVES THE RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND,
ACTION, OR CAUSE OF ACTION ARISING UNDER THIS AGREEMENT, WHETHER NOW
EXISTING OR HEREAFTER ARISING, AND ANY RIGHT EITHER MAY HAVE TO ASSERT
THE DOCTRINE OF FORUM NON CONVENIENS, LACK OF PERSONAL
11
<PAGE> 15
JURISDICTION, OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS
BROUGHT IN ACCORDANCE WITH THIS SECTION 13.b.
c. Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original and all of which
together shall constitute one agreement.
d. Headings. The headings contained in this Agreement are
for convenience only. They shall not affect the interpretation of this
Agreement.
e. Attorneys' Fees; etc. In any suit or action brought to
enforce this Agreement or to obtain an adjudication (declaratory or
otherwise) of rights or obligations hereunder, the losing party shall
pay to the prevailing party reasonable attorneys' fees and other costs
and expenses incurred by the prevailing party.
f. Severability. Any provision of this Agreement that is
prohibited by law or unenforceable in any jurisdiction shall be
ineffective in that jurisdiction to the extent of such prohibition or
unenforceability, without invalidating the remaining provisions hereof
or affecting the validity or enforceability of such provision in any
other jurisdiction. To the extent permissible, the parties waive any
law that renders this Agreement prohibited or unenforceable.
g. Entire Agreement. This Agreement constitutes the entire
agreement between and among the parties regarding the subject matter
hereof. This Agreement supersedes all prior and contemporaneous
agreements between or among the parties with respect to the subject
matter hereof.
h. Notice. All notices or demands by any party hereunder
must be in writing and personally delivered or sent by registered or
certified mail, postage prepaid, return receipt requested, or by prepaid
telex, facsimile, telecopy, telegram (with messenger delivery
specified), or other method of electronic communication as follows:
12
<PAGE> 16
Senior Lender: Foothill Capital Corporation
11111 Santa Monica Blvd., Suite 1500
Los Angeles, California 90025-3333
Attn: Suzanne Witkowsky
with a copy to: Kelley Drye & Warren LLP
515 South Flower Street, Suite 1100
Los Angeles, California 90071
Attn: Marshall C. Stoddard, Jr.
Subordinating Lender: Glenn D. Bollinger
Bobby D. Bollinger
Dell Bollinger
222 West Airport Freeway
Irving, Texas 75062
with a copy to: Tracy & Holland LLP
306 West Seventh Street, Suite 500
Fort Worth, Texas 76102
Attn: George T. Johns
Borrower: Bollinger Industries, L.P.
222 West Airport Freeway
Irving, Texas 75062
Attn: Mr. Jack Pryor
with a copy to: Tracy & Holland LLP
306 West Seventh Street, Suite 500
Fort Worth, Texas 76102
Attn: George T. Johns
The parties may change the address at which they receive notice, by giving
notice to each other in the foregoing manner. Notices or demands sent in
accordance with this Section shall be deemed to be received on the earlier of
the date of actual receipt or five (5) calendar days after deposit in the
United States mail.
i. Termination. This Agreement shall continue in full force and effect
until the Senior Debt has been indefeasibly paid in full by Borrower.
j. Neither Senior Lender nor Subordinating Lender, nor any of their
respective directors, officers, agents or employees, shall be responsible to
the other or to any
13
<PAGE> 17
person for (i) Borrower's solvency, financial condition or ability to
repay its indebtedness, (ii) any oral or written statement of Borrower,
or (iii) the validity or enforceability or such indebtedness, any
promissory note, mortgage, security agreement or the security interests
and liens granted by Borrower to Senior Lender or Subordinating Lender.
Both Senior Lender and Subordinating Lender have entered into their
respective financing arrangements with Borrower based upon independent
investigation, and neither Senior Lender nor Subordinating Lender makes
any warranty or representation to the other, nor relies upon any
warranty or representation of the other.
k. Rules of Construction. As used in this Agreement, the
singular includes the plural; the plural includes the singular.
References to one gender include all genders. Unless otherwise
specified, references to Sections, Exhibits and parties refer to
Sections, Exhibits and parties of or to this Agreement. The words
"include," "including," and similar words are not intended to be
limiting.
14
<PAGE> 18
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective duly authorized officers, as of the date
first above written.
/s/ GLENN D. BOLLINGER
-------------------------------------
GLENN D. BOLLINGER
/s/ BOBBY D. BOLLINGER
------------------------------------
BOBBY D. BOLLINGER
/s/ DELL BOLLINGER
------------------------------------
DELL BOLLINGER
FOOTHILL CAPITAL CORPORATION
By: /s/ PATRICIA McLOUGHLIN
---------------------------------
Title: SVP
------------------------------
15
<PAGE> 19
CALIFORNIA ALL-PURPOSE ACKNOWLEDGEMENT
================================================================================
STATE OF CALIFORNIA )
)
COUNTY OF LOS ANGELES )
On August 16, 1996 before me, Robert I. Treitler, Notary Public, personally
appeared Glen Bollinger,
[ ] personally known to me - OR - [x] proved to me on the basis of
satisfactory evidence to be the
person whose name is subscribed to
[NOTARY STAMP] the within instrument and
acknowledged to me that he executed
the same in his authorized capacity,
and that by his signature on the
instrument the person, or the entity
upon behalf of which the person
acted, executed the instrument.
WITNESS my hand and official seal.
/s/ ROBERT I. TREITLER
-------------------------------------
SIGNATURE OF NOTARY
====================================OPTIONAL====================================
Though the data below is not required by law, it may prove valuable to persons
relying on the document and could prevent fraudulent reattachment of this form.
CAPACITY CLAIMED BY SIGNER DESCRIPTION OF ATTACHED DOCUMENT
[ ] INDIVIDUAL
[ ] CORPORATE OFFICER(S)
- ------------------------------------- ------------------------------------
TITLE(S) TITLE OR TYPE OF DOCUMENT
[ ] PARTNER(S) [ ] LIMITED
[ ] GENERAL ------------------------------------
NUMBER OF PAGES
[ ] ATTORNEY-IN-FACT
[ ] TRUSTEE(S)
[ ] GUARDIAN/CONSERVATOR ------------------------------------
DATE OF DOCUMENT
[ ] OTHER:
- ------------------------------------- ------------------------------------
SIGNER IS REPRESENTING: SIGNER(S) OTHER THAN NAMED ABOVE
(NAME OF PERSON(S) OR ENTITY(IES))
- -------------------------------------
================================================================================
<PAGE> 20
CALIFORNIA ALL-PURPOSE ACKNOWLEDGEMENT
================================================================================
STATE OF CALIFORNIA )
)
COUNTY OF LOS ANGELES )
On August 16, 1996 before me, Robert I. Treitler, Notary Public, personally
appeared Bobby Bollinger,
[ ] personally known to me - OR - [x] proved to me on the basis of
satisfactory evidence to be the
person whose name is subscribed to
[NOTARY STAMP] the within instrument and
acknowledged to me that she executed
the same in his authorized capacity,
and that by his signature on the
instrument the person, or the entity
upon behalf of which the person
acted, executed the instrument.
WITNESS my hand and official seal.
/s/ ROBERT I. TREITLER
-------------------------------------
SIGNATURE OF NOTARY
====================================OPTIONAL====================================
Though the data below is not required by law, it may prove valuable to persons
relying on the document and could prevent fraudulent reattachment of this form.
CAPACITY CLAIMED BY SIGNER DESCRIPTION OF ATTACHED DOCUMENT
[ ] INDIVIDUAL
[ ] CORPORATE OFFICER(S)
- ------------------------------------- ------------------------------------
TITLE(S) TITLE OR TYPE OF DOCUMENT
[ ] PARTNER(S) [ ] LIMITED
[ ] GENERAL ------------------------------------
NUMBER OF PAGES
[ ] ATTORNEY-IN-FACT
[ ] TRUSTEE(S)
[ ] GUARDIAN/CONSERVATOR ------------------------------------
DATE OF DOCUMENT
[ ] OTHER:
- ------------------------------------- ------------------------------------
SIGNER IS REPRESENTING: SIGNER(S) OTHER THAN NAMED ABOVE
(NAME OF PERSON(S) OR ENTITY(IES))
- -------------------------------------
================================================================================
<PAGE> 21
CALIFORNIA ALL-PURPOSE ACKNOWLEDGEMENT
================================================================================
STATE OF CALIFORNIA )
)
COUNTY OF LOS ANGELES )
On August 16, 1996 before me, Robert I. Treitler, Notary Public, personally
appeared Patricia McLoughlin,
[ ] personally known to me - OR - [x] proved to me on the basis of
satisfactory evidence to be the
person whose name is subscribed to
[NOTARY STAMP] the within instrument and
acknowledged to me that she executed
the same in her authorized capacity,
and that by her signature on the
instrument the person, or the entity
upon behalf of which the person
acted, executed the instrument.
WITNESS my hand and official seal.
/s/ ROBERT I. TREITLER
-------------------------------------
SIGNATURE OF NOTARY
====================================OPTIONAL====================================
Though the data below is not required by law, it may prove valuable to persons
relying on the document and could prevent fraudulent reattachment of this form.
CAPACITY CLAIMED BY SIGNER DESCRIPTION OF ATTACHED DOCUMENT
[ ] INDIVIDUAL
[ ] CORPORATE OFFICER(S)
- ------------------------------------- ------------------------------------
TITLE(S) TITLE OR TYPE OF DOCUMENT
[ ] PARTNER(S) [ ] LIMITED
[ ] GENERAL ------------------------------------
NUMBER OF PAGES
[ ] ATTORNEY-IN-FACT
[ ] TRUSTEE(S)
[ ] GUARDIAN/CONSERVATOR ------------------------------------
DATE OF DOCUMENT
[ ] OTHER:
- ------------------------------------- ------------------------------------
SIGNER IS REPRESENTING: SIGNER(S) OTHER THAN NAMED ABOVE
(NAME OF PERSON(S) OR ENTITY(IES))
- -------------------------------------
================================================================================
<PAGE> 22
BORROWER'S ACKNOWLEDGMENT
The undersigned Borrower hereby approves of, and agrees and consents to,
the foregoing Subordination Agreement, dated as of even date by and among Glenn
D. Bollinger, an individual residing in the State of Texas, Bobby D. Bollinger,
an individual residing in the State of Texas, and Dell Bollinger, an individual
residing in the State of Texas, and Foothill Capital Corporation, a California
corporation (the "Subordination Agreement"). Unless otherwise defined in this
Acknowledgment, terms defined in the Subordination Agreement have the same
meanings when used in this Acknowledgment.
Borrower agrees to be bound by the Subordination Agreement, and agrees
that any default, event of default, or unmatured event of default by Borrower
under any present or future instrument or agreement between Borrower and
Subordinating Lender shall constitute an immediate default, event of default,
and unmatured event of default under all present and future instruments and
agreements between Borrower and Senior Lender. Borrower agrees that the
Subordination Agreement may be amended by Senior Lender and Subordinating
Lender without notice to, or the consent of, Borrower.
BOLLINGER INDUSTRIES, L.P.
By: Bollinger Operating Corp.,
General Partner
By: /s/ BOBBY D. BOLLINGER
----------------------------------
Title: Vice Chairman
-------------------------------
BOLLINGER INDUSTRIES, INC.
By: /s/ BOBBY D. BOLLINGER
----------------------------------
Title: President
-------------------------------
NBF, INC.
By: /s/ BOBBY D. BOLLINGER
----------------------------------
Title: Chairman
-------------------------------
16
<PAGE> 23
SCHEDULE I
BEING a tract of land out of the J.C. Read Survey, Abstract No. 1182, in the
City of Irving, Dallas County, Texas, described by metes and bounds as follows:
BEGINNING at a point at the intersection of the South line of State Highway No.
183 with the West line of Shoaf Drive (a 50 feet wide street);
THENCE South 00 degrees 34 minutes 42 seconds West along said West line of
Shoaf Drive, for a distance of 413.48 feet to a point for corner;
THENCE North 89 degrees 38 minutes 02 seconds West for a distance of 174.83
feet to a point for corner;
THENCE North 00 degrees 28 minutes 38 seconds East for a distance of 413.48
feet to a point in the South line of State Highway No. 183 for corner;
THENCE South 89 degrees 38 minutes 00 seconds East along said South Line of
State Highway No. 183, for a distance of 175.56 feet to the PLACE OF BEGINNING.
17
<PAGE> 24
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective duly authorized officers, as of the date
first above written.
/s/ GLENN D. BOLLINGER
-------------------------------------
GLENN D. BOLLINGER
/s/ BOBBY D. BOLLINGER
------------------------------------
BOBBY D. BOLLINGER
/s/ DELL BOLLINGER
------------------------------------
DELL BOLLINGER
FOOTHILL CAPITAL CORPORATION
By: /s/ PATRICIA McLOUGHLIN
---------------------------------
Title: SVP
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15
<PAGE> 25
ACKNOWLEDGEMENT
STATE OF TEXAS
COUNTY OF DALLAS
This instrument was acknowledged before me on the 19 day of August,
1996, by Dell Bollinger.
/s/ KIM GUERRA
[NOTARY SEAL] ------------------------------------
Notary Public, State of Texas
Notary name (printed):
Notary's commission expires: 3-15-97
AFTER RECORDING RETURN TO:
Chicago Title Insurance Company
Attn: Kerri Majors
350 N. St. Paul, Suite 250
Dallas, Texas 75201
<PAGE> 1
EXHIBIT 10.50
DEED OF TRUST
(WITH ASSIGNMENT OF RENTS AND FIXTURE FILING)
STATE OF TEXAS )
) KNOW ALL MEN BY THESE PRESENTS:
COUNTY OF DALLAS )
GRANT OF LIEN
BY THIS AGREEMENT, August 16, 1996, the undersigned, BOLLINGER
INDUSTRIES, L.P., a Texas limited partnership (herein referred to as the
"Grantor"), whose address is 222 West Airport Freeway, Suite 1500, Irving,
Texas 75062, to secure the indebtedness and obligations hereinafter described,
does hereby GRANT, BARGAIN, SELL, ASSIGN and CONVEY unto David G. Drumm, as
trustee ("Trustee"), the following described real property located in Dallas
County, Texas (the "Land"):
as described on Exhibit A attached hereto and incorporated
herein by reference;
TOGETHER WITH the following, whether now owned or hereafter
acquired by Grantor: (a) all improvements now or hereafter attached to or
placed, erected, constructed or developed on the Land (the "Improvements"); (b)
all equipment, fixtures, furnishings, inventory and articles of personal
property (the "Personal Property") owned by Grantor and now or hereafter
attached to or used in or about the Improvements or that are necessary or
useful for the complete and comfortable use and occupancy of the Improvements
for the purposes for which they were or are to be attached, placed, erected,
constructed or developed, or which Personal Property is or may be used in or
related to the planning, development, financing or operation of the
Improvements, and all renewals of or replacements or substitutions for any of
the foregoing, whether or not the same are or shall be attached to the Land or
Improvements; (c) all water and water rights, timber, crops, and mineral
interests pertaining to the Land; (d) all building materials and equipment
owned by Grantor and now or hereafter delivered to and intended to be installed
in or on the Land or the Improvements; (e) all plans and specifications owned
by Grantor for the Improvements or the Personal Property, (f) all deposits
(including tenants' security deposits), bank accounts, funds, documents,
contract rights, accounts, commitments, construction contracts, architectural
agreements, general intangibles (including without limitation trademarks, trade
names and symbols) and instruments, notes or chattel paper arising from or by
virtue of any transactions related to the Land, the Improvements or the
Personal Property; (g) all permits, licenses, franchises, certificates, and
other rights and privileges obtained in connection with the Land, the
Improvements and the Personal Property; (h) all proceeds arising from or by
value of the sale, lease or other disposition of the Land, the Improvements or
the Personal Property; (i) all proceeds (including premium refunds) of each
Deed of Trust (with Security Agreement
and Assignment of Rents) - Page 1
<PAGE> 2
policy of insurance relating to the Land, the Improvements or the Personal
Property; (j) all proceeds from the taking of the Land, the Improvements, the
Personal Property or any rights appurtenant thereto by right of eminent domain
or by private or other purchase in lieu thereof, including change of grade of
streets, curb cuts or other rights of access, for any public or quasi-public
use under any law; (k) all right, title and interest of Grantor in and to all
streets, roads, public places, easements and rights-of-way, existing or
proposed, public or private, adjacent to or used in connection with, belonging
or pertaining to the Land; (l) all of the leases, rents, royalties, bonuses,
issues, profits, revenues or other benefits of the Land, the Improvements or
the Personal Property, including, without limitation, cash or securities
deposited pursuant to leases to secure performance by the lessees of their
obligations thereunder; (m) all consumer goods owned by Grantor and located in,
on or about the Land or the Improvements or used in connection with the use or
operation thereof; (n) all rights, hereditaments and appurtenances pertaining
to the foregoing, and (o) other interests of every kind and character that
Grantor now has or at any time hereafter acquires in and to the Land,
Improvements, and Personal Property described herein and all property that is
used or useful in connection therewith, including rights of ingress and egress
and all reversionary rights or interests of Grantor with respect to such
property. This conveyance shall include, and the lien and security interest
created hereby shall encumber, all additional title, estate, interest, and
other rights that may hereafter be acquired by Grantor in the Land. The
above-described property is collectively referred to herein as the "Mortgaged
Property."
TO HAVE AND TO HOLD the Mortgaged Property, together with the
rights, privileges and appurtenances thereto belonging, unto the Trustee and
his substitutes or successors, forever, and Grantor hereby binds Grantor and
Grantor's heirs, executors, administrators, personal representatives,
successors and assigns to warrant and forever defend the Mortgaged Property
unto the Trustee, his substitutes or successors and assigns, against the claim
or claims of all persons claiming or to claim the same or any part thereof,
together with such future exceptions to title as may hereafter be created by
Grantor with the written consent of Beneficiary (the "Permitted Exceptions").
ARTICLE 1
INDEBTEDNESS
This Deed of Trust is given to secure the following:
1.1 Payment of Loan. Payment to Beneficiary of all
indebtedness evidenced by or arising under that certain Loan and Security
Agreement between Grantor and Foothill Capital Corporation, whose address is
11111 Santa Monica Boulevard, Suite 1500, Los Angeles, California 90067-3333
("Beneficiary"), dated of even date herewith (the "Loan Agreement"), together
with interest thereon, including sums added to the principal balance of the
Loan Agreement in accordance with the terms thereof, and all prepayment, late
or other charges or fees payable thereunder, and any and all modifications,
extensions, renewals or substitutions thereof. This loan includes revolving
and future advances and repayments on a revolving basis. Future and revolving
advances and other future obligations and indebtedness owed by Grantor to
Beneficiary shall be secured hereunder.
Deed of Trust (with Security Agreement
and Assignment of Rents) - Page 2
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1.2 Payment of Further Loans. Payment of such further
indebtedness with interest thereon, and performance of and compliance with such
further obligations as Grantor may undertake to pay, perform or comply with for
the benefit of Beneficiary, its successors or assigns, when such borrowing or
obligation is evidenced by a note or by any writing reciting that it or they
are so secured.
1.3 Performance Under Loan Documents. Performance of and
compliance with each agreement, undertaking, obligation, warranty or
representation of Grantor contained in the Loan Documents (as such term is
defined in the Loan Agreement), or incorporated therein by reference, or in any
and all documents, leases or instruments assigned to Beneficiary or executed in
Beneficiary's favor and delivered thereunder, and payment of all sums, fees,
costs and expenses as therein set forth or which may otherwise be advanced by
or due to Trustee or Beneficiary under any provision thereof with interest
thereon at the rate provided therein.
1.4 Deed of Trust. Payment of all sums advanced by
Beneficiary to or for the benefit of Grantor contemplated hereby and
performance of all obligations and covenants herein contained.
The obligations above described are hereinafter collectively
called the "Indebtedness."
ARTICLE 2
FIXTURE FILING
Some of the items of the Mortgaged Property described herein
are goods that are or are to become fixtures related to the Land on which such
fixtures are located, and it is intended that, as to those goods, this Deed of
Trust shall be effective as a financing statement filed as a fixture filing
from the date of its filing for record in the real estate records of the county
in which the Mortgaged Property is situated. Information concerning the
security interest created by this instrument may be obtained from Beneficiary,
as secured party, at the address of Beneficiary stated above. The mailing
address of the Grantor, as debtor, is as stated above.
ARTICLE 3
REPRESENTATIONS, WARRANTIES,
COVENANTS AND AGREEMENTS OF GRANTOR
Grantor does hereby covenant, warrant and represent to and
agree with Beneficiary as follows:
3.1 Payment and Performance. Grantor shall make all
payments on the Indebtedness when due and shall punctually and properly perform
all of Grantor's covenants, obligations and liabilities under the Loan
Documents.
Deed of Trust (with Security Agreement
and Assignment of Rents) - Page 3
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3.2 Title to Mortgaged Property and Lien of this Deed of
Trust. Grantor has good and indefeasible title to the Land free and clear of
any liens, charges, encumbrances, security interests, and adverse claims except
the Permitted Exceptions. If the interest of Beneficiary in the Mortgaged
Property or any part thereof shall be endangered or shall be attacked, directly
or indirectly, Grantor hereby authorizes Beneficiary, at Grantor's expense, to
take all necessary and proper steps for the defense of such interest, including
the employment of counsel, the prosecution or defense of litigation, and the
compromise or discharge of claims made against such interest.
3.3 Insurance. Grantor shall provide, obtain, maintain
and keep in full force and effect for each tract comprising the Land, during
the term of this Deed of Trust, insurance of the types and in the amounts set
forth in the Loan Agreement. Each such insurance policy is hereby deemed to be
an incident to the title to the Mortgaged Property and is hereby assigned and
pledged as additional security for the indebtedness secured hereby. If this
Deed of Trust is foreclosed, the purchaser at the foreclosure sale shall become
the sole and absolute owner of any and all such insurance policies with the
sole right to collect and retain all unearned premiums thereon.
In no event shall Beneficiary be held responsible for failure
to pay for any insurance required hereby or for any loss or damage growing out
of a defect in any policy thereof or growing out of any failure of any
insurance company to pay for any loss or damage insured against or for failure
by Beneficiary to effect such insurance or for failure to collect or to
exercise diligence in the collection of any proceeds of any insurance required
hereby.
3.4 Taxes and Assessments. Grantor shall pay all taxes
and assessments against or affecting the Mortgaged Property as the same become
due and payable, and Grantor shall deliver to Beneficiary, on demand, paid
receipts or other evidence of the payment thereof, and, if Grantor fails to do
so, Beneficiary may pay them, together with all costs and penalties thereon, at
Grantor's expense.
3.5 Condemnation. All judgments, decrees and awards for
injury or damage to the Mortgaged Property, and all awards pursuit to
proceedings for condemnation thereof, are hereby assigned in their entirety to
Beneficiary, who may apply the same to the Indebtedness in such manner as it
may elect. Beneficiary is hereby authorized, in the name of Grantor, to
execute and deliver valid acquittances for, and to appeal from, any such award,
judgment or decree. Immediately upon its obtaining knowledge of the
institution or the threatened institution of any proceedings for the
condemnation Mortgaged Property, Grantor shall notify Beneficiary of such fact.
Grantor shall then, if requested by Beneficiary, file or defend its claim
thereunder and prosecute same with due diligence to its final disposition and
shall cause any awards or settlements (less reasonable costs and expenses
incurred in connection therewith) to be paid over to Beneficiary for
disposition pursuant to the terms of this Deed of Trust. Beneficiary shall be
entitled to participate in and to control same and to be represented therein by
counsel of its own choice, and Grantor shall deliver, or cause to be delivered,
to Beneficiary such instruments as may be requested by it from time to time to
permit such participation. In the event Beneficiary, as a result of any such
judgment, decree or award, reasonably believes that the payment or performance
of any obligation secured by this Deed of Trust is impaired, Beneficiary shall
Deed of Trust (with Security Agreement
and Assignment of Rents) - Page 4
<PAGE> 5
provide written notice to Grantor of the extent of the principal payment under
the Loan Agreement which would, in the reasonable belief of Beneficiary, remove
such impairment and Grantor shall have thirty (30) days thereafter to make such
principal payment required (and any prepayment penalty or prohibition on
prepayment shall be amended to allow Grantor to make such prepayment without
penalty) and if such payment is not made within thirty (30) day period
Beneficiary may, without further notice, declare all of the Indebtedness due
and payable.
3.6 Taxes on Deed of Trust. At any time any law shall be
enacted imposing or authorizing the imposition of any tax upon this Deed of
Trust, or upon any rights, titles, liens, or security interests created hereby,
Grantor shall immediately pay all such taxes.
3.7 Repair, Waste, Alterations, etc. Grantor shall keep
every part of the Mortgaged Property in good operating order, repair and
condition and shall not commit or permit any waste thereof. Grantor shall make
promptly all repairs, renewals and replacements necessary to such end. Grantor
shall discharge all claims for labor performed and material furnished therefor,
and shall not suffer any lien or mechanics or materialmen to attach to any part
of the Mortgaged Property unless bonded in an amount satisfactory to
Beneficiary while being contested. If Grantor shall fail to discharge any such
lien, then, in addition to any other right or remedy of Beneficiary,
Beneficiary may, but shall not be obligated to, discharge the same, either by
paying the amount claimed to be due, or by procuring the discharge of such lien
by depositing in court a bond for the amount, or otherwise giving security for
such claim, or by taking such action as may be prescribed by law.
3.8 No Drilling or Exploration. Without the prior
written consent of Beneficiary, there shall be no drilling or exploring for or
extraction, removal, or production of minerals from the surface or subsurface
of the land. The term "minerals" as used herein shall include, without
limiting the generality of such term, oil, gas, casinghead gas, coal, lignite,
hydrocarbons, methane, carbon dioxide, helium, uranium and all other natural
elements, compounds and substances, including sand and gravel.
3.9 Compliance With Restrictive Covenants. Grantor shall
ensure that the Mortgaged Property complies at all times with the terms of all
restrictive covenants and other agreements of record that pertain to the
Mortgaged Property.
3.10 Compliance With Laws. Grantor, the Mortgaged
Property, and the use thereof by Grantor shall comply with all laws, rules,
ordinances, regulations, covenants, conditions, restrictions, orders and
decrees of any governmental authority or court applicable to Grantor or the
Mortgaged Property and its use, and Grantor shall pay all fees or charges of
any kind in connection therewith.
3.11 Hold Harmless. Grantor shall defend, at its own cost
and expense, and hold Beneficiary harmless from any proceeding or claim
affecting the Mortgaged Property, this Deed of Trust or any of the other Loan
Documents, except claims arising as a result of Beneficiary's gross negligence
or willful misconduct. All costs and expenses incurred by Beneficiary in
protecting its interest hereunder, including all court costs and reasonable
attorneys' fees, shall be borne by Grantor.
Deed of Trust (with Security Agreement
and Assignment of Rents) - Page 5
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3.12 Further Assurances. Grantor, upon the request of
Beneficiary, shall execute, acknowledge, deliver, and record such further
instruments and do such further acts as may be necessary, reasonably desirable
or reasonably proper to carry out the purposes of this Deed of Trust and the
other Loan Documents and to subject to the liens and security interests created
thereby any property intended by the terms thereof to be covered thereby,
including specifically, but without limitation, any renewals, additions,
substitutions, replacements, improvements, or appurtenances to the Mortgaged
Property.
3.13 Recording and Filing. Grantor shall cause this Deed
of Trust and the other Loan Documents and all amendments, supplements and
extensions thereto and substitutions therefor to be recorded, filed,
re-recorded and refiled in such manner and in such places as Beneficiary shall
reasonably request, and shall pay all such recording, filing, re-recording and
refiling fees, title insurance premiums, and other charges.
ARTICLE 4
SUBORDINATE DEED OF TRUST
AND OTHER ENCUMBRANCES
4.1 Subordinate Deed of Trusts. Grantor shall not,
without the prior written consent of Beneficiary, grant any lien, security
interest, or other encumbrance (hereinafter called "Subordinate Deed of Trust")
covering any of the Mortgaged Property. Any Subordinate Deed of Trust to which
Beneficiary hereafter consents or which is created by Grantor in the event the
foregoing prohibition is determined by a court of competent jurisdiction to be
unenforceable, shall contain express covenants to the effect that:
(a) the Subordinate Deed of Trust is unconditionally
subordinate to this Deed of Trust;
(b) if any action (whether judicial or pursuant to a
power of sale) shall be instituted to foreclose or otherwise enforce the
Subordinate Deed of Trust, no tenant of any lease of any part of the Mortgaged
Property, Land, or Improvements shall be named as a party defendant, and no
action shall be taken that would terminate any occupancy or tenancy without the
prior written consent of Beneficiary;
(c) rents, if collected by or for the holder of the
Subordinate Deed of Trust, shall be applied first to the payment of the
Indebtedness then due and expenses incurred in the ownership, operation and
maintenance of the Mortgaged Property in such order as Beneficiary may
determine, prior to being applied to any indebtedness secured by the
Subordinate Deed of Trust; and
(d) written notice of default under the Subordinate Deed of
Trust and written notice of the commencement of any action (whether judicial or
pursuant to a power of sale) to foreclose or otherwise enforce the Subordinate
Deed of Trust shall be given to Beneficiary with or immediately after the
occurrence of any such default or commencement.
Deed of Trust (with Security Agreement
and Assignment of Rents) - Page 6
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ARTICLE 5
ASSIGNMENT OF RENTS AND LEASES
5.1 Assignment of Rents, Profits, etc. All of the rents,
royalties, bonuses, issues, profits, revenue, income, and other benefits
derived from the Mortgaged Property or arising from the use or enjoyment of any
portion thereof or from any lease or agreement pertaining thereto and
liquidated damages following default under such leases, and all proceeds
payable under any policy of insurance covering loss of rents resulting from
untenantability caused by damage to any part of the Mortgaged Property,
together with any and all rights that Grantor may have against any tenant under
such leases or any subtenants or occupants of any part of the Mortgaged
Property (hereinafter called the "Rents"), are hereby absolutely and
unconditionally assigned to Beneficiary, to be applied by Beneficiary in
payment of the Indebtedness. Prior to an Event of Default (as hereinafter
defined), Grantor shall have a license to collect and receive all Rents as
trustee for the benefit of Beneficiary and Grantor, and Grantor shall apply the
funds so collected first to the payment of the portions of the Indebtedness
then due and payable and thereafter to the account of Grantor.
5.2 Beneficiary in Possession. Beneficiary's acceptance
of this assignment shall not, prior to entry upon and taking possession of the
Mortgaged Property by Beneficiary, be deemed to constitute Beneficiary a
"mortgagee in possession," nor obligate Beneficiary to appear in or defend any
proceeding relating to any of the Leases or to the Mortgaged Property, take any
action hereunder, expend any money, incur any expenses, or perform any
obligation or liability under the leases in effect with respect to the
Property, or assume any obligation for any deposits delivered to Grantor by any
tenant and not delivered to Beneficiary. Beneficiary shall not be liable for
any injury or damage to person or property in or about the Mortgaged Property,
except injury or damage caused by Beneficiary's gross negligence or willful
misconduct.
5.3 Right to Rely. Grantor hereby authorizes and directs
the tenants under the Leases to pay Rents to Beneficiary upon written demand by
Beneficiary upon the occurrence of an Event of Default, without further consent
of Grantor, and the tenants may rely upon any written statement delivered by
Beneficiary to the tenants. Any such payment to Beneficiary shall constitute
payment to Grantor under the Leases.
ARTICLE 6
MISCELLANEOUS
6.1 Collection. If the Indebtedness shall be collected
by legal proceedings, whether through a probate or bankruptcy court or
otherwise, or shall be placed in the hands of an attorney for collection after
default or maturity, Grantor agrees to pay the reasonable attorneys' and
collection fees in the amount set forth in the Loan Agreement, and such fees
shall be part of the Indebtedness.
Deed of Trust (with Security Agreement
and Assignment of Rents) - Page 7
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6.2 Change in Ownership. If the ownership (legal or
beneficial) of the Mortgaged Property or any part thereof becomes vested in a
person other than Grantor (legal or beneficial), Beneficiary may, without
written notice to Grantor, deal with such successor or successors in interest
with reference to this Deed of Trust and to the Indebtedness in the same manner
as with Grantor without in any way vitiating or discharging Grantor's liability
hereunder or upon the Indebtedness. No sale of the Mortgaged Property, and no
forbearance on the part of Beneficiary, and no extension of the time for the
payment of the Indebtedness, shall operate to release or affect the original
liability of Grantor.
6.3 Release of Lien. If Grantor shall perform each of
the other covenants and agreements herein contained, then this conveyance shall
become null and void and shall be released at Grantor's written request and
expense; otherwise, it shall remain in full force and effect. No release or
modification of this conveyance, or of the lien, security interest or
assignment created and evidenced hereby, shall be valid unless executed by
Beneficiary.
6.4 Waiver of Marshalling and Certain Rights. To the
extent that Grantor may lawfully do so, Grantor hereby expressly waives any
right pertaining to the marshalling of assets, the exemption of homestead, the
administration of estates of decedents, or other matter to defeat, reduce or
affect the right of Beneficiary to sell the Mortgaged Property for the
collection of the Indebtedness (without any prior or different resort for
collection), or the right of Beneficiary to the payment of the Indebtedness out
of the proceeds of sale of the Mortgaged Property in preference to every other
person and claimant.
6.5 Renewal and Subrogation. To the extent that proceeds
of the Indebtedness are used to pay any outstanding lien, charge or encumbrance
affecting the Mortgaged Property, such proceeds have been advanced by
Beneficiary at Grantor's request, and Beneficiary shall be subrogated to all
rights, interests and liens owned or held by any owner or holder of such
outstanding liens, charges and encumbrances, irrespective of whether such
liens, charges or encumbrances are released of record, provided, however, that
the terms and provisions hereof shall govern the rights and remedies of
Beneficiary and shall supersede the terms, provisions, rights, and remedies
under the prior deed of trust and any lien or liens to which Beneficiary is
subrogated hereunder.
6.6 No Waiver. No waiver of any default on the part of
Grantor or breach of any of the provisions of this Deed of Trust or of any
other instrument executed in connection with the Indebtedness shall be
considered a waiver of any other or subsequent default or breach, and no delay
or omission in exercising or enforcing the rights and powers, and likewise no
exercise or enforcement of any rights or powers hereunder shall be held to
exhaust such rights and powers, and every such right and power may be exercised
from time to time. Acceptance by Beneficiary of partial payments shall not
constitute a waiver of the default by failure to make full payments.
6.7 Successors and Assigns; Use of Terms. The covenants
herein contained shall bind, and the benefits and advantages shall inure to,
the respective heirs, executors, administrators, personal representatives,
successors, and assigns of the parties hereto. Whenever used, the singular
number shall include the plural and the plural the singular, and the use of any
Deed of Trust (with Security Agreement
and Assignment of Rents) - Page 8
<PAGE> 9
gender shall be applicable to all genders. The term "Grantor" shall include in
their individual capacities and jointly all parties hereinabove named a
Grantor. The term "Beneficiary" shall include any lawful owner, holder,
pledges, or assignee of any of the Indebtedness. The duties, covenants,
conditions, obligations, and warranties of Grantor in this Deed of Trust shall
be joint and several obligations of Grantor and each Grantor, if more than one,
and each Grantor's heirs, executors, administrators, personal representatives,
successors and assigns. Except as expressly limited herein, each party who
executes this Deed of Trust and each subsequent owner of the Mortgaged
Property, or any part thereof (other than Beneficiary), covenants and agrees
that it will perform, or cause to be performed, each term and covenant of this
Deed of Trust.
6.8 Severability. If any provision of this Deed of Trust
is held to be illegal, invalid, or unenforceable under present or future laws
effective while this Deed of Trust is in effect, the legality, validity, and
enforceability of the remaining provisions of this Deed of Trust shall not be
affected thereby, and in lieu of each such illegal, invalid or unenforceable
provision there shall be added automatically as a part of this Deed of Trust a
provision that is legal, valid and enforceable and as similar in terms to such
illegal, invalid or unenforceable provision as may be possible. If any of the
Indebtedness shall be unsecured, the unsecured portion of the Indebtedness
shall be completely paid prior to the payment of the secured portion of such
Indebtedness, and all payments made on account of the Indebtedness shall be
considered to nave been paid on and applied first to the complete payment of
the unsecured portion of the Indebtedness.
6.9 Modification or Termination. This Deed of Trust may
only be modified or terminated by a written instrument or instruments executed
by the party against whom enforcement of the modification or termination is
asserted. Any alleged modification or termination that is not so documented
shall not be effective as to any party.
6.10 Headings. The Article, Paragraph and Subparagraph
headings hereof are inserted for convenience of reference only and shall not
alter, define, or be used in construing the text of such Articles, Paragraphs
or Subparagraphs.
6.11 CHOICE OF LAW. THIS DEED OF TRUST SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS, AND THE
LAWS OF THE UNITED STATES APPLICABLE TO TRANSACTIONS WITHIN THE STATE OF TEXAS.
6.12 ENTIRE AGREEMENT. THE LOAN DOCUMENTS CONSTITUTE THE
ENTIRE UNDERSTANDING AND AGREEMENT BETWEEN GRANTOR AND BENEFICIARY WITH RESPECT
TO THE TRANSACTIONS ARISING IN CONNECTION WITH THE INDEBTEDNESS AND SUPERSEDE
ALL PRIOR WRITTEN OR ORAL UNDERSTANDINGS AND AGREEMENTS BETWEEN GRANTOR AND
BENEFICIARY IN CONNECTION THEREWITH.
6.13 Inspection. Beneficiary or its agent may make
reasonable entries upon and inspections of the Property. Beneficiary shall
give Borrower five days' prior written notice to an inspection specifying
reasonable cause for the inspection.
Deed of Trust (with Security Agreement
and Assignment of Rents) - Page 9
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6.14 Notices. All notices or demands by any party
relating to this Agreement or Deed of Trust shall be in writing and shall be
personally delivered or sent by registered or certified mail, postage prepaid,
return receipt requested, or by prepaid telex, telefacsimile, or telegram (with
messenger delivery specified) to Grantor, Beneficiary or Trustee, as the case
may be, at its address set forth below:
If to Grantor: 222 West Airport Freeway
Irving, Texas 75062
Attn: Glenn D. Bollinger
Telefacsimile: (714) 438-6242
With copies to: George T. Johns
Tracy & Holland, L.L.P.
306 West 7th Street, Suite 500
Forth Worth, Texas 76102
If to Beneficiary FOOTHILL CAPITAL COOPERATION
or Trustee: 11111 Santa Monica Boulevard
Suite 1500
Los Angeles, California 90067-333
Attn: Business Finance Division Manager
Telefacsimile: (310) 479-2690
Marshall C. Stoddard, Jr.
Kelley Drye & Warren LLP
515 South Flower Street
Suite 1100
Los Angeles, California 90071-2213
The parties hereto may change the address at which they are to
receive notices hereunder, by notice in writing in the foregoing manner given
to the other. All notices or demands under this Agreement shall be deemed
received on the earlier of the date of actual receipt or three (3) business
days after the deposit thereof in the mail.
6.15 Conveying or Encumbering the Mortgaged Property. If
Grantor shall voluntarily or involuntarily cause, suffer or permit any sale or
transfer of any interest of Grantor, legal or equitable, in the Mortgaged
Property or any part or portion thereof, or shall create, suffer or permit to
be outstanding any mortgage, pledge (other than mechanics' and materialmen's
liens which are bonded pursuant to Section 3.7) on the Mortgaged Property, or
security interest therein, without in each instance the prior written consent
of the Beneficiary, Beneficiary shall have the right to accelerate the
Indebtedness and to declare the same to be immediately due and payable.
Deed of Trust (with Security Agreement
and Assignment of Rents) - Page 10
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ARTICLE 7
EVENTS OF DEFAULT
The occurrence of any one of the following shall be a default hereunder ("Event
of Default"):
7.1 Failure to Pay Principal. Grantor shall default in
the payment of principal due according to the terms hereof or of the Loan
Agreement, subject to the notice and opportunity to cure provision set forth in
the Loan Agreement.
7.2 Failure to Pay Interest or Other Amounts. Grantor
shall default in the payment of interest on advances made by Beneficiary or in
the payment of fees or other amounts payable to Beneficiary hereunder or under
any one or more of the Loan Documents, subject to the notice and opportunity to
cure provision set forth in the Loan Agreement.
7.3 Failure to Perform Covenants. Grantor shall default
in the performance or observance of any other agreements, covenants or
conditions required to be performed or observed by Grantor under the terms of
this Deed of Trust, the Loan Agreement, or any of the other Loan Documents,
subject to the notice and opportunity to cure provision, set forth in the Loan
Agreement.
7.4 False Representations. Any representation or
warranty made by Grantor in this Deed of Trust or contained in any one or more
of the Loan Documents or in any certificate or document furnished under or
pursuant to the terms of this Deed of Trust or in connection with the Loan
Agreement shall prove untrue in any material respect, subject, to the notice
and opportunity to cure provisions set forth in the Loan Agreement.
7.5 Grant of Easement, etc. Without the prior written
consent of Beneficiary, Grantor grants any easement (over than an easement
designed to service the Mortgaged Property) or dedication, or files any plat,
condominium declaration, or restriction, unless such action is contemplated by
the Loan Documents or does not affect the Mortgaged Property.
7.6 Foreclosure of Other Liens. The holder of any lien,
security interest or assignment on the Mortgaged Property institutes
foreclosure or other proceedings for the enforcement of its remedies
thereunder.
ARTICLE 8
REMEDIES
8.1 Exercise of Specific Remedies. If an Event of
Default shall occur and such Event of Default has not been cured within any
applicable cure period as provided by the Loan Agreement, Beneficiary may
exercise any one or more of the following remedies, without notice (except as
may be expressly provided for in the Loan Agreement or herein):
Deed of Trust (with Security Agreement
and Assignment of Rents) - Page 11
<PAGE> 12
(a) Acceleration. Beneficiary may declare Indebtedness
immediately due and payable, without notice, whereupon the same shall become
immediately due and payable. Grantor hereby waives notice of intent to
accelerate and notice of acceleration.
(b) Foreclosure. Beneficiary may require the Trustee to
sell all or part of the Mortgaged Property, at public auction, to the highest
bidder, for cash, at the county courthouse of the county in Texas in which such
Mortgaged Property or any part thereof is situated, between the hours of 10:00
o'clock a.m. and 4:00 o'clock p.m. on the first Tuesday of any month, after
giving notice of the time, place and terms of said sale and of the property to
be sold, by posting written notice thereof at the courthouse door of the county
in which the sale is to be made at least twenty-one (21) days preceding the
date of the sale, and if the property to be sold is in more than one county, a
notice shall be posted at the courthouse door and filed with the County Clerk
of each county in which the property is to be sold is situated. In addition,
Beneficiary shall, at least twenty-one (21) days preceding the date of sale,
serve written notice of the proposed sale by certified mail on each debtor
obligated to pay the debt secured hereby according to the records of
Beneficiary. Service of such notice shall be completed upon deposit of the
notice, enclosed in a postpaid wrapper, properly addressed to such debtor at
the most recent address as shown by the records of Beneficiary, in a post
office or official depository under the care and custody of the United States
Postal Service. The affidavit of any person having knowledge of the facts to
the effect that such service was completed shall be prima facie evidence of the
fact of service. Any notice that is required or permitted to be given to
Grantor may be addressed to Grantor at Grantor's address as stated above. Any
notice that is to be given by certified mail to any other debtor may, if no
address for such other debtor is shown by the records of Beneficiary, be
addressed to such other debtor at the address of Grantor as is shown by the
records of Beneficiary. Notwithstanding the foregoing provisions of this
paragraph, notice of such sale given in accordance with the requirements of the
applicable laws of the State of Texas in effect at the time of such sale shall
constitute sufficient notice of such sale. Trustee may sell all or any portion
of the Mortgaged Property, together or in lots or parcels, and may execute and
deliver to the purchaser or purchasers of such property good and sufficient
deeds of conveyance of fee simple title with covenants of general warranty made
on behalf of Grantor, subject, however, to the Permitted Exceptions. In no
event shall Trustee be required to exhibit, present or display at any such sale
any of the personalty described herein to be sold at such sale. The Trustee
making such sale shall receive the proceeds thereof and shall apply the same as
follows: (i) first, he shall pay the reasonable expenses of Trustee and a
reasonable Trustee's fee or commission; (ii) second, he shall pay, so far as
may be possible, the Indebtedness, pursuant to the terms of the Loan Agreement;
(iii) third, he shall pay the residue, if any, to the persons legally entitled
thereto. Payment of the purchase price to Trustee shall satisfy the obligation
of the purchaser at such sale therefor, and such purchaser shall not be
responsible for the application thereof. The sale or sales by Trustee of less
than the whole of the Mortgaged Property shall not exhaust the power of sale
herein granted, and Trustee is specifically empowered to make a successive sale
or sales under such power until the whole of the Mortgaged Property shall be
sold; and if the proceeds of such sale or sales of less than the whole of the
Mortgaged Property shall be less than the aggregate of the Indebtedness and the
expenses thereof, this Deed of Trust and the lien, security interest and
assignment hereof shall remain in full force and effect as to the unsold
portion of the Mortgage Property just as though no sale or sales had been made;
provided, however, that Grantor shall never have any right to
Deed of Trust (with Security Agreement
and Assignment of Rents) - Page 12
<PAGE> 13
require the sale or sales of less than the whole of the Mortgaged Property, but
Beneficiary shall have the right, at its sole election, to request Trustee to
sell less than the whole of the Mortgaged Property. If default is made
hereunder, the holder of the Indebtedness or any part thereof on which the
payment is delinquent shall have the option to proceed with foreclosure in
satisfaction of such item either through judicial proceedings or by directing
Trustee to proceed as if under a full foreclose, conducting the sale as herein
provided without declaring the entire Indebtedness due, and if sale is made
because of default of an installment, or a part of an installment, such sale
may be made subject to the unmatured part of the Indebtedness; and it is agreed
that such sale, if so made, shall not in any manner affect the unmatured part
of the Indebtedness, but as to such unmatured part this Deed of Trust shall
remain in full force and effect as though no sale had been made under the
provisions of this paragraph. Several sales may be made hereunder without
exhausting the right of sale for any unmatured part of the Indebtedness. At
such sale (1) Grantor hereby agrees, in its behalf and in behalf of its heirs,
executors, administrators, successors persona representatives and assigns, that
any and all recitals made in any deed of conveyance given by Trustee with
respect to the identity of Beneficiary, the occurrence or existence of any
default, the acceleration of the maturity of any of the Indebtedness, the
request to sell, the notice of sale, the giving of notice to all debtors
legally entitled thereto, the time, place, terms, and manner of sale, and
receipt, distribution and application of the money realized therefrom, or the
due and proper appointment of a substitute Trustee, and, without being limited
by the foregoing, with respect to any other act or thing having been duly done
by Beneficiary or by Trustee hereunder, shall be taken by all courts of law and
equity as prima fame evidence that the statements or recitals state facts, and
Grantor hereby ratifies and confirms every act that Trustee or any substitute
Trustee hereunder may lawfully do in the premises by virtue hereof, and (2) the
purchaser may disaffirm any easement granted, or rental, lease or other
contract made in violation of any provision of this Deed of Trust, and may take
immediate possession of the Mortgaged Property free from, and despite the terms
of, such grant of easement and rental or lease contract. Beneficiary may bid
and become the purchaser of all or any part of the Mortgaged Property at any
trustee's or foreclosure sale hereunder, and the amount of Beneficiary's
successful bid may be credited on the Indebtedness.
(c) Lawsuits. Beneficiary may proceed by a suit or suits
in equity or at law, whether for the specific performance of any covenant or
agreement herein contained or in aid of the execution of any power herein
granted, or for any foreclosure hereunder or for the sale of the Mortgaged
Property under the judgment or decree of any court or courts of competent
jurisdiction.
(d) Entry on Mortgaged Property. Upon occurrence of an
Event of Default hereunder, Beneficiary may enter into and upon and take
possession of all or any part of the Mortgaged Property, and may exclude
Grantor, and all persons claiming upon Grantor, and its or their agents or
servants, wholly or partly therefrom; and, holding the same, Beneficiary may
use, administer, manage, operate, and control the Mortgaged Property and may
exercise all rights and powers of Grantor in the name, place and stead of
Grantor, or otherwise, as the Beneficiary shall deem best; and in the exercise
of any of the foregoing rights and powers Beneficiary shall not be liable to
Grantor for any loss or damage thereby sustained unless due solely to the
willful misconduct or gross negligence of Beneficiary.
Deed of Trust (with Security Agreement
and Assignment of Rents) - Page 13
<PAGE> 14
(e) Trustee or Receiver. Beneficiary may make
application to a court of competent jurisdiction, as a matter of strict right
and without notice to Grantor or regard to the adequacy of the Mortgaged
Property for the repayment of the Indebtedness, for appointment of a receiver
of the Mortgaged Property, and Grantor does hereby irrevocably consent to such
appointment. Any such receiver shall have all the usual powers and duties of
receivers in similar cases, including the full power to rent, maintain and
otherwise operate the Mortgaged Property upon such terms as may be approved by
the court.
8.2 Tenancy at Will. In the event of a trustee's sale
hereunder and if at the time of such sale Grantor or any other party occupies
the portion of the Mortgaged Proper so sold or any part thereof, such occupant
shall immediately become the tenant of the purchaser at such sale, which
tenancy shall be a tenancy from day to day, terminable at the will of either
tenant or landlord, at a reasonable rental per day based upon the value of the
portion of the Mortgaged Property so occupied, such rental to be due and
payable daily to the purchaser. An action of forcible detainer shall lie if the
tenant holds over after a demand in writing for possession of such Mortgaged
Property.
8.3 Substitute Trustee. If, for any reason, Beneficiary
prefers to appoint a substitute Trustee hereunder, Beneficiary may, from time
to time, by written instrument, appoint one or more substitute Trustees, who
shall succeed to all the estate, rights, powers, and duties of the original
Trustee named herein. Such appointment may be executed by anyone acting in a
representative capacity, and such appointment shall be presumed to have been
executed with appropriate authority, absent proof to the contrary.
8.4 Indemnification of Trustee. Except for gross
negligence or willful misconduct, Trustee shall not be liable for any act or
omission or error of judgment. Trustee may rely on any document believed by
him in good faith to be genuine. All money received by Trustee shall, until
used or applied as herein provided, be held in trust, but need not be
segregated (except to the extent required by law), and Trustee shall not be
liable for interest thereon.
8.5 Beneficiary's Right to Perform. Upon Grantor's
failure to make a payment or perform an act required by the Loan Documents
(after giving effect to any cure period provided by the Loan Documents), then
at any time thereafter, and without notice to or demand upon Grantor and
without waiving or releasing any other right, remedy or recourse, Beneficiary
may (but shall not be obligated to) make such payment or perform such act for
the account of and at the expense of Grantor, and shall have the right to enter
upon the Mortgaged Property for such purpose and to take all such action as it
may deem necessary or appropriate.
8.6 Reimbursement of Expenditure. If Beneficiary shall
expend any money chargeable to Grantor or subject to reimbursement by Grantor
under the terms of the Loan Documents, Grantor shall repay the same to
Beneficiary immediately at the place where the Loan Agreement is payable,
together with interest thereon at the Default Rate (as defined in the Loan
Agreement).
Deed of Trust (with Security Agreement
and Assignment of Rents) - Page 14
<PAGE> 15
8.7 Other Rights. Beneficiary may exercise any and all
over rights, remedies and recourses granted in the Loan Documents and available
at law or equity (including, without limitation, those granted by the Code and
applicable to the Mortgaged Property, or any portion thereof), and same (a)
shall be cumulative and concurrent, (b) may be pursued separately, successively
or concurrently against Grantor or others obligated for the Indebtedness, or
any part thereof or against any one or more of them, or against the Mortgaged
Propped, at the sole discretion of Beneficiary, (c) may be exercised as often
as occasion therefor shall arise, it being agreed by Grantor that the exercise
of or failure to exercise any of same shall in no event be construed as a
waiver or release thereof or of ally other right, remedy or recourse, and (d)
are intended to be, and shall be, nonexclusive.
DATED AND EFFECTIVE AS OF the date first set forth above
GRANTOR:
BOLLINGER INDUSTRIES, L.P.,
a Texas limited partnership
By: Bollinger Operating Corp.,
a general partner
By: /s/ BOBBY D. BOLLINGER
------------------------------
Name: Bobby D. Bollinger
----------------------------
Title: Vice Chairman
Deed of Trust (with Security Agreement
and Assignment of Rents) - Page 15
<PAGE> 16
CALIFORNIA ALL-PURPOSE ACKNOWLEDGEMENT
================================================================================
STATE OF CALIFORNIA )
)
COUNTY OF LOS ANGELES )
On August 16, 1996 before me, Robert I. Treitler, Notary Public, personally
appeared Bobby Bollinger,
[ ] personally known to me - OR - [x] proved to me on the basis of
satisfactory evidence to be the
person whose name is subscribed to
[NOTARY STAMP] the within instrument and
acknowledged to me that he executed
the same in his authorized capacity,
and that by his signature on the
instrument the person, or the entity
upon behalf of which the person
acted, executed the instrument.
WITNESS my hand and official seal.
/s/ ROBERT I. TREITLER
-------------------------------------
SIGNATURE OF NOTARY
====================================OPTIONAL====================================
Though the data below is not required by law, it may prove valuable to persons
relying on the document and could prevent fraudulent reattachment of this form.
CAPACITY CLAIMED BY SIGNER DESCRIPTION OF ATTACHED DOCUMENT
[ ] INDIVIDUAL
[x] CORPORATE OFFICER(S)
DEED OF TRUST/GRANT OF LIEN
- ------------------------------------- ------------------------------------
TITLE(S) TITLE OR TYPE OF DOCUMENT
[ ] PARTNER(S) [ ] LIMITED DEED OF TRUST (WITH ASSIGNMENT OF
RENTS AND FIXTURE FILING)
[ ] GENERAL ------------------------------------
[ ] ATTORNEY-IN-FACT NUMBER OF PAGES
[ ] TRUSTEE(S)
[ ] GUARDIAN/CONSERVATOR ------------------------------------
DATE OF DOCUMENT
[ ] OTHER:
- ------------------------------------- ------------------------------------
SIGNER IS REPRESENTING: SIGNER(S) OTHER THAN NAMED ABOVE
(NAME OF PERSON(S) OR ENTITY(IES))
- -------------------------------------
================================================================================
<PAGE> 17
EXHIBIT A
BEING a tract of land out of the J.C. Read Survey, Abstract No. 1182, in the
City of Irving, Dallas County, Texas, described by metes and bounds as follows:
BEGINNING at a point at the intersection of the South line of State Highway No.
183 with the West line of Shoaf Drive (a 50 feet wide street);
THENCE South 00 degrees 34 minutes 42 seconds West along said West line of
Shoaf Drive, for a distance of 413.48 feet to a point for corner;
THENCE North 89 degrees 38 minutes 02 seconds West for a distance of 174.83
feet to a point for corner;
THENCE North 00 degrees 28 minutes 38 seconds East for a distance of 413.48
feet to a point in the South line of State Highway No. 183 for corner;
THENCE South 89 degrees 38 minutes 00 seconds East along said South Line of
State Highway No. 183, for a distance of 175.56 feet to the PLACE OF BEGINNING.
<PAGE> 1
Exhibit 11.1
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
Thirteen Week Twenty-six Week Six Month
Period Ended Three Months Period Ended Period Ended
September 29, Ended September September 29, September 30,
1996 30, 1995 1996 1995
-------------- --------------- ---------------- -------------
<S> <C> <C> <C> <C>
Earnings (loss) from continuing
operations ......................... $ (1,074,113) $ 639,966 $ (1,838,833) $ (130,333)
Net earnings(loss)........................ $ (267,417) $ 461,081 $ (1,032,137) $ (533,750)
Weighted average number of common
shares outstanding during the
period.............................. 4,000,210 3,708,090 4,000,210 3,708,090
Net effect of dilutive stock options
based on the treasury stock method
at market prices....................... 0 242,406 0 264,039
----------- ----------- ------------ ----------
Shares used for computation............... 4,000,210 3,950,496 4,000,210 3,972,129
=========== =========== ============ ==========
Earnings (loss) from continuing
operations.......................... $ (.27) $ .16 $ (.46) $ (.03)
====== ====== ====== ======
Net earnings (loss) per share............. $ (.07) $ .12 $ (.26) $ (.13)
====== ====== ====== ======
</TABLE>
14
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-30-1997
<PERIOD-END> SEP-29-1996
<CASH> 397,569
<SECURITIES> 0
<RECEIVABLES> 16,429,628
<ALLOWANCES> 0
<INVENTORY> 28,351,274
<CURRENT-ASSETS> 49,448,133
<PP&E> 4,738,885
<DEPRECIATION> 2,823,520
<TOTAL-ASSETS> 54,555,773
<CURRENT-LIABILITIES> 41,478,348
<BONDS> 0
0
0
<COMMON> 40,001
<OTHER-SE> 11,390,390
<TOTAL-LIABILITY-AND-EQUITY> 54,555,773
<SALES> 41,526,581
<TOTAL-REVENUES> 41,526,581
<CGS> 33,135,242
<TOTAL-COSTS> 8,955,444
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 371,236
<INTEREST-EXPENSE> 1,274,728
<INCOME-PRETAX> (1,838,833)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 806,696
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,032,137)
<EPS-PRIMARY> 0.26
<EPS-DILUTED> 0.26
</TABLE>
