SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 for the quarterly period ended December 31, 1997
Commission file number 0-22924
HILITE INDUSTRIES, INC.
(Exact name of registrant specified in its charter)
Delaware 75-2147742
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1671 S. Broadway
Carrollton, Texas 75006
(Address of principal executive offices) (Zip code)
(972) 466-0475
(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 February 13, 1998, the Company had 4,900,000 shares of Common Stock
outstanding.
<PAGE>
HILITE INDUSTRIES, INC.
FORM 10-Q FOR THE QUARTER ENDED DECEMBER 31, 1997
INDEX
Page
Part I FINANCIAL STATEMENTS
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets as of
December 31, 1997 and June 30, 1997...................... 3
Consolidated Statements of Operations
for the Three and Six Months Ended
December 31, 1997 and 1996............................... 4
Consolidated Statements of Cash Flows
for the Three and Six Months Ended
December 31, 1997 and 1996............................... 5
Notes to Interim Consolidated Financial
Statements .............................................. 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations.............................................. 9
Part II. OTHER INFORMATION.................................................. 14
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HILITE INDUSTRIES, INC.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31, June 30,
1997 1997
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ................................... $ -- $ --
Accounts receivable, less allowance for doubtful accounts of
$237,268 and $195,427 at Dec. 31 and June 30, respectively 10,501,832 9,991,098
Tooling receivables ......................................... 126,156 96,734
Inventories ................................................. 10,351,896 10,075,786
Deferred income taxes ....................................... 1,774,082 1,774,082
Prepaid expenses and other .................................. 1,241,399 739,803
------------ ------------
Total current assets ...................................... 23,995,365 22,677,503
------------ ------------
Property, plant and equipment, at cost ........................ 39,642,659 38,400,240
Less: accumulated depreciation and amortization ............... (13,732,805) (12,077,533)
------------ ------------
Property, plant and equipment, net ............................ 25,909,854 26,322,707
Assets held for disposal ...................................... 2,253,800 2,330,800
Goodwill, net of amortization ................................. 5,725,360 5,888,167
------------ ------------
TOTAL ASSETS .................................................. $ 57,884,379 $ 57,219,177
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses ....................... $ 11,595,869 $ 11,875,962
Long-term debt - current portion ............................ 2,422,945 2,422,950
Income taxes payable (receivable) ........................... (370,927) 49,883
------------ ------------
Total current liabilities ................................. 13,647,887 14,348,795
------------ ------------
Long-term debt ................................................ 16,244,159 16,486,252
Deferred income taxes ......................................... 2,595,392 2,595,392
Subordinated debt ............................................. 1,785,184 1,785,184
------------ ------------
Total non-current liabilities ............................. 20,624,735 20,866,828
Shareholders' equity:
Preferred Stock, $.01 par value; 5,000,000 shares authorized,
none issued and outstanding ............................... -- --
Common stock, $.01 par value; 15,000,000 shares authorized,
4,900,000 issued and outstanding .......................... 49,000 49,000
Dividends paid .............................................. (122,500)
Additional paid-in capital .................................. 9,105,674 9,105,674
Retained earnings ........................................... 14,579,583 12,848,880
------------ ------------
Total shareholders' equity ................................ 23,611,757 22,003,554
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY .................... $ 57,884,379 $ 57,219,177
============ ============
</TABLE>
The accompanying notes are an integral part of these
interim consolidated financial statements.
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<PAGE>
HILITE INDUSTRIES, INC.
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales ....................................... $ 20,626,491 $ 16,372,759 $ 41,656,789 $ 34,425,936
Cost of sales ................................... 16,404,695 15,252,476 33,370,096 30,328,159
------------ ------------ ------------ ------------
Gross profit .................................... 4,221,796 1,120,283 8,286,693 4,097,777
Selling, general and administrative expenses .... 2,307,094 1,988,086 4,711,049 3,913,469
------------ ------------ ------------ ------------
Operating income (loss) ......................... 1,914,702 (867,803) 3,575,644 184,308
Interest expense, net ........................... 409,507 416,381 800,018 830,902
------------ ------------ ------------ ------------
Income (loss) before income taxes ............... 1,505,195 (1,284,184) 2,775,626 (646,594)
Income tax provision ............................ 566,617 (505,836) 1,044,922 (271,336)
------------ ------------ ------------ ------------
Net income (loss) ............................... $ 938,578 $ (778,348) $ 1,730,704 $ (375,258)
============ ============ ============ ============
Per share data:
Basic and fully-diluted earnings (loss) per share $ 0.19 $ (0.16) $ 0.35 $ (0.08)
============ ============ ============ ============
Weighted average number of
shares outstanding ............................ 4,900,000 4,900,000 4,900,000 4,900,000
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these
interim consolidated financial statements.
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<PAGE>
HILITE INDUSTRIES, INC.
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Six Months Ended
December 31,
1997 1996
----------- -----------
<S> <C> <C>
Cash flows from operations:
Net income (loss) ................................. $ 1,730,704 $ (375,258)
Adjustments to reconcile net income to
net cash provided by operations:
Depreciation ................................. 1,678,262 1,739,165
Amortization ................................. 162,806 164,985
----------- -----------
Increase in net deferred income taxes ........ -- 244,493
Cash provided from operations before changes in
operating assets and liabilities .............. 3,571,772 1,773,385
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable ... (511,274) 1,412,735
(Increase) decrease in tooling receivable .... (29,422) 760,982
Increase in inventories ...................... (276,110) (450,355)
Increase in prepaid expenses and
other current assets ....................... (501,594) (150,556)
Increase (decrease) in accounts payable
and accrued expenses ....................... (279,556) 1,495,592
Decrease in income taxes payable ............. (420,809) (513,377)
----------- -----------
Total changes in operating assets and liabilities (2,018,765) 2,555,021
----------- -----------
Net cash provided by operations ..................... 1,553,007 4,328,406
----------- -----------
Cash flows used in investing activities:
Net additions to property, plant and equipment .... (1,188,409) (2,790,231)
----------- -----------
Net cash used in investing activities ............... (1,188,409) (2,790,231)
----------- -----------
Cash flows from financing activities:
Payment of cash dividend .......................... (122,500) --
Repayment of debt and capital lease ............... (1,211,473) (1,149,166)
Repayment of subordinated debt .................... -- (75,000)
Net increase (decrease) in note payable ........... 969,375 (314,009)
----------- -----------
Net cash from financing activities .................. (364,598) (1,538,175)
----------- -----------
Net decrease in cash and cash equivalents ........... -- --
Cash and cash equivalents at beginning of period .... -- --
----------- -----------
Cash and cash equivalents at end of period .......... $ -- $ --
=========== ===========
</TABLE>
The accompanying notes are an integral part of these
interim consolidated financial statements.
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<PAGE>
HILITE INDUSTRIES, INC.
Notes to Consolidated Interim Financial Statements (Unaudited)
1. BUSINESS AND BASIS OF PRESENTATION
The interim financial statements of Hilite Industries, Inc. ("Hilite")
at December 31, 1997 and for the six-month period ended December 31, 1997, are
unaudited, but include all adjustments (consisting of normal recurring
adjustments) which the Company considers necessary for a fair presentation. The
June 30, 1997 balance sheet was derived from the balance sheet included in the
Company's audited Financial Statements as included in the Company's Annual
Report on Form 10-K.
In order to create a more flexible corporate structure for making
acquisitions, engaging in capital raising activities and for tax efficiency,
Hilite was reorganized on January 30, 1998. On that date Hilite completed a
transfer of all of its assets to Hilite Industries - Texas, Inc., a Delaware
corporation ("Hilite Texas"), a wholly-owned subsidiary of Hilite. Following the
transfer of its assets to Hilite Texas and Hilite Texas' assumption of the
related liabilities, Hilite Texas simultaneously transferred 99% of those assets
to Hilite Industries - Delaware, Inc., a newly formed Delaware corporation
("Hilite Delaware") in exchange for all of the issued and outstanding shares of
common stock of Hilite Delaware. Hilite Texas and Hilite Delaware then
contributed those assets to Hilite Industries Automotive, LP ("Hilite LP"), a
newly formed Texas limited partnership. Hilite Texas contributed to the
partnership its ownership of 1% of the total Hilite assets and in return
received a 1% general partnership interest, and Hilite Delaware contributed to
the partnership its ownership of 99% of the total Hilite assets and in return
received a 99% limited partnership interest. Hilite LP is now performing all of
the manufacturing, sales and product development activities previously performed
by Hilite in the state of Texas. In this Report, the term the "Company" refers
collectively to Hilite, Hilite Texas, Hilite Delaware, Hilite LP and North
American Spring and Stamping Corp. ("NASS"), a Delaware corporation and a
wholly-owned subsidiary of Hilite. The reorganization had no affect on NASS.
NASS remains a wholly-owned subsidiary of Hilite.
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes, and
should be read in conjunction with the Company's audited Financial Statements.
Operating results for the six-month period ended December 31, 1997 are not
necessarily indicative of the results that may be expected for the fiscal year
ending June 30, 1998.
Effective December 31, 1997 the Company adopted Statement of Financial
Accounting Standards No. 128, Earnings per Share. The statement requires basic
and fully-diluted earnings per share to be separately stated on the face of the
Statement of Operations.
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<PAGE>
2. INVENTORIES
Inventories at December 31, 1997 and June 30, 1997 consisted of the
following:
Dec. 31 June 30
----------- -----------
Raw materials ...................... $ 4,519,182 $ 3,916,344
Work in process .................... 2,346,161 2,254,960
Finished goods ..................... 3,486,553 3,904,482
----------- -----------
$10,351,896 $10,075,786
=========== ===========
3. RESTRUCTURING CHARGE
As a result of operating problems and inefficiencies at the specialty
components and assemblies division, the Company's Board of Directors
approved a plan to substantially restructure the NASS operations. In
conjunction with this plan, the Company recorded a charge to pre-tax
earnings in fiscal 1997 totaling approximately $2,700,000. The charge is
comprised of a reduction (approximately $900,000) in the net book value
of certain assets primarily machinery, equipment and tooling, to their
estimated fair value, net of estimated selling costs, accrual of certain
costs which the Company expects to incur in terminating contractual
obligations, but for which no future economic benefit will be received
(approximately $1,600,000) and other costs (approximately $200,000). For
the three and six months ended December 31, 1997 approximately $186,000
and $406,000, respectively, had been charged against the accrual for
terminating contractual obligations and approximately $10,000 and
$20,000, respectively, had been charged against the accrual of other
costs.
4. DEBT
Effective September 18, 1997, the Company executed an amendment to its
existing loan agreement ("the Agreement") with a bank to reflect new
terms in the Company's credit facilities. Under the new terms the credit
facilities consist of the following:
1) A revolving line of credit of up to $12,000,000 subject to
availability requirements. As of December 31, 1997, $7,470,000
had been used and $3,113,000 is currently available. The
interest rate on the line of credit is either LIBOR plus 1 1/2%
or prime rate less 1/2% which resulted in a blended rate ranging
from 7.084% to 8.00% at December 31, 1997. The revolving line of
credit expires on July 21, 1999. An annual commitment fee of
1/4% is payable quarterly on the average unused portion of the
revolving line of credit;
2) Term loans with an original principal balance of $13,700,000 and
a balance at December 31, 1997 of $9,008,000. Principal payments
on the term loan of
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<PAGE>
approximately $163,000 together with interest are payable
monthly. The maturity date of the term loans is August 1, 2002.
The interest rate on the term loans, LIBOR plus 1 1/2% was 7.53%
at December 31, 1997. The term loans were used for funding the
acquisition of NASS on July 21, 1995 and for refinancing
existing Company debt;
3) An equipment acquisition facility of $3,000,000 for the
financing of equipment purchases. Any term loans issued under
this facility will bear interest, at the Company's option, at
either prime rate or LIBOR plus 1 1/2%. As of December 31, 1997,
no amounts were outstanding under this facility.
In addition to the above credit facilities, the Company also has a
fifteen year real estate note and two five year equipment term notes
with the same bank. The real estate note, which has an original
principal amount of $960,000 and a $635,000 outstanding balance at
December 31, 1997, is payable in monthly installments of $5,333 plus
interest at the prime rate (8.50% at December 31, 1997) and becomes due
and payable on November 1, 2007. The equipment term notes which have
original principal amounts of $1,497,000 and $645,000, respectively, and
outstanding balances of $973,000 and $581,000, respectively, at December
31, 1997, are payable in monthly installments of $24,961 and $10,757,
respectively at LIBOR plus 1 1/2% (7.13% and 7.73%, respectively, at
December 31, 1997) and becomes due and payable on May 31, 2001 and 2002,
respectively. The due dates on each of the real estate and equipment
notes' can be accelerated, at the bank's option, to July 21, 1999.
The notes and credit facilities are collateralized by accounts
receivable, inventory, equipment and real estate of the Company.
5. CONTINGENCIES
On January 28, 1998, the Company announced that it had been notified by
a division of Ford Motor Company that a part manufactured by the
Company's specialty components and assemblies division may be involved
in a recall regarding a fuel gauge accuracy problem with certain 1997
model year vehicles. Based upon information currently available to the
Company, management believes that this matter will be resolved in a
manner not materially adverse to the Company.
6. SUBSEQUENT EVENT
In May 1997 the Company initiated a suit in the United States District
Court for the Northern District of Illinois (Eastern Division) against
the Selling Shareholders of NASS. The Company alleged, among other
things, that the Selling Shareholders made material misrepresentations
in connection with the acquisition of NASS. On February 13, 1998 an
agreement was reached between the Company and the Selling Shareholders
of NASS to settle the suit. Under the terms of the Settlement Agreement,
the Company is relieved of its obligation to pay approximately $2
million in principal and interest under the Note issued as
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<PAGE>
part of the consideration for the acquisition of NASS. The Company will
not be required to make any future payments under the employment and
non-compete agreements with the Selling Shareholders and, in addition,
the Selling Shareholders reimbursed the Company for a portion of its
legal fees incurred in connection with the law suit. The Selling
Shareholders, however, remain bound by the non-competition provisions in
their respective employment agreements. In addition, the parties
executed limited mutual general releases.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
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QUARTER ENDED DECEMBER 31, 1997 COMPARED TO QUARTER ENDED DECEMBER 31, 1996
Net sales for the quarter ended December 31, 1997 were $20,626,000 compared to
$16,373,000 for the quarter ended December 31, 1996, representing a increase of
$4,253,000 (26.0%). Brake valve sales increased 21.5% to $6,586,000 in the
second fiscal quarter of 1998 from $5,421,000 in the prior year. The increase
resulted from new programs which commenced since the first quarter of the prior
year such as the P-90 and W-Car programs for GM and the relief valve and UPN150
program for Bosch. Power transmission component sales increased from $4,690,000
in fiscal 1997 to $4,838,000 or 3.2%. This increase is attributable to increased
sales of air-conditioning compressor clutches for the heavy truck industry and
4-wheel drive transfer case components offset by decreased sales for machined
brackets to Mitsubishi. Second quarter sales by the specialty components and
assemblies division were $9,202,000, an increase of 46.9% over last year's
second quarter sales of $6,262,000. The increase in sales is primarily due to
significantly higher sales of certain assemblies to Motorola, Inc. and
approximately $700,000 of price increases, some of which are for parts which are
scheduled to be discontinued by the Company and sourced to other suppliers by
the third quarter as part of the restructuring plan for the specialty components
and assemblies division, approved by the Board of Directors in June 1997. Sales
for parts to be sourced elsewhere were approximately $1.8 million in the second
quarter. The impact of price changes in the quarter, other than those at the
specialty components and assemblies division, was not significant.
The Company's gross profit was $4,222,000 (20.5% of net sales) for the second
quarter of the 1998 fiscal year compared to gross profit of $1,120,000 (6.9% of
net sales) for the second quarter of the 1997 fiscal year. All three divisions
experienced an increase in gross profit with the specialty components and
assemblies division having the largest increase. The impact of the price and
volume increases of the specialty components and assemblies division and the
volume increase of the brake valve division were the primary contributors to the
increased gross profit; the Company's sales volume increase, without a
corresponding increase in fixed costs, also contributed to the increased gross
profit percent. In addition, in the second quarter of the prior year there were
approximately $920,000 of additional expenses related to negative inventory
adjustments, increased warranty reserves, additional management and engineering
resources and increased maintenance and tooling of equipment.
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<PAGE>
Selling, general and administrative expenses were $2,307,000 (11.2% of net
sales) in the second quarter of the 1998 fiscal year compared to $1,988,000
(12.2% of net sales) in the second quarter of the 1997 fiscal year. The increase
of $319,000 in selling, general and administrative expenses is primarily due to
increased commissions, legal, consulting costs and research and development
costs. Approximately $200,000 of costs associated with terminating contractual
obligations (primarily sales representative agreements) and other costs were
charged against an accrual established in the prior year as part of the
restructuring charge for the specialty components and assemblies division.
Approximately $60,000 was expensed in the second quarter of fiscal 1998 in
connection with a new sales representative agreement.
Interest expense was $410,000 for the three months ended December 31, 1997
compared to $416,000 for the three months ended December 31, 1996. The impact of
changes in interest rates was not significant.
Net income was $939,000 (4.6% of net sales) for the second quarter of the 1998
fiscal year compared to a loss of $778,000 ((4.8%) of net sales) for the same
period of the prior fiscal year, representing an increase of $1,717,000.
SIX MONTHS ENDED DECEMBER 31, 1997 COMPARED TO SIX MONTHS ENDED DECEMBER 31,
1996
Net sales for the six months ended December 31, 1997 were $41,656,000 compared
to $34,426,000 for the six months ended December 31, 1996, representing a
increase of $7,231,000 (21.0%). Brake valve sales increased 14.1% to $12,561,000
in the first six months of fiscal 1998 from $11,008,000 for the same period of
the prior year. The increase resulted from new programs which commenced since
the first quarter of the prior year such as the P-90 and W-Car programs for GM
and the relief valve and UPN150 program for Bosch. Power transmission component
sales increased from $9,860,000 in fiscal 1997 to $10,597,000 or 7.5% in fiscal
1998. This increase is attributable to increased sales of air-conditioning
compressor clutches for the heavy truck industry and 4-wheel drive transfer case
components offset by decreased demand for machined brackets to Mitsubishi. Sales
by the specialty components and assemblies division for the first six months of
fiscal 1998 were $18,498,000, an increase of 36.4% over last year's sales of
$13,559,000. The increase in sales is primarily due to significantly higher
sales of certain assemblies to Motorola, Inc. and approximately $1,300,000 of
price increases, some of which are for parts which are scheduled to be
discontinued by the Company and sourced to other suppliers by the third quarter
as part of the restructuring plan for the specialty components and assemblies
division, approved by the Board of Directors in June 1997. Sales for parts to be
sourced elsewhere were approximately $3.3 million in the first six months of
fiscal year 1998. The impact of price changes during the six-month period, other
than those at the specialty components and assemblies division, was not
significant.
Based on $14,000,000 of new business previously announced, brake valve sales are
expected to increase by approximately 15% in each of fiscal 1998 and 1999 over
the prior year and that the power transmission components division sales are
expected to increase by approximately 12% in
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<PAGE>
each of the two years. Because of the restructuring plan in process at the
Company's specialty components and assemblies division which includes the
elimination of approximately $8,000,000 of non-core products, sales for the
division are estimated to decrease by approximately 20% in the second half of
the 1998 fiscal year from the first half. These estimates assume automotive
build rates continue at current levels and that the timing of product resourcing
takes place on schedule.
The Company's gross profit was $8,286,000 (19.9% of net sales) for the first six
months of the 1998 fiscal year compared to gross profit of $4,098,000 (11.9% of
net sales) for the first six months of the 1997 fiscal year. The impact of the
price and volume increases of the specialty components and assemblies division
and the volume increase of the brake valve division were the primary
contributors to the increased gross profit; the Company's sales volume increase,
without a corresponding increase in fixed costs, also contributed to the
increased gross profit percent. In addition, in the second quarter of the prior
year there were approximately $920,000 of additional expenses related to
negative inventory adjustments, increased warranty reserves, additional
management and engineering resources and increased maintenance and tooling of
equipment.
Selling, general and administrative expenses were $4,711,000 (11.3% of net
sales) in the first six months of the 1998 fiscal year compared to $3,913,000
(11.4% of net sales) in the first six months of the 1997 fiscal year. The
increase of $798,000 in selling, general and administrative expenses is
primarily due to increased commissions, legal, consulting costs and research and
development costs. Approximately $400,000 of costs associated with terminating
contractual obligations (primarily sales representative agreements) and other
costs were charged against an accrual established in the prior year as part of
the restructuring charge for the specialty components and assemblies division.
Approximately $120,000 was expensed during the first six months of fiscal 1998
in connection with a new sales representative agreement.
Interest expense was $800,000 for the six months ended December 31, 1997
compared to $831,000 for the six months ended December 31, 1996. The decrease is
primarily due to lower average debt balances from the prior year. The impact of
changes in interest rates was not significant.
Net income was $1,731,000 (4.2% of net sales) for the first six months of the
1998 fiscal year compared to a loss of $375,000 ((1.1%) of net sales) for the
same period of the prior fiscal year, representing an increase of $2,106,000 or
$0.43 per share.
Liquidity and Capital Resources
- -------------------------------
During the first six months of fiscal 1998, the Company's net cash provided from
operations before changes in operating assets and liabilities (working capital)
was $3,572,000 compared to $1,173,000 of the prior year. Cash was used during
the first six months of fiscal 1998 to fund a working capital increase of
$2,019,000. In fiscal 1997, a working capital decrease of $2,555,000 contributed
to cash in the first six months of fiscal 1998. At December 31, 1997 the
Company's
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<PAGE>
working capital was $10,347,000 compared to working capital of $8,329,000 at
June 30, 1997. The current ratio was 1.8 to 1 at December 31, 1997 and 1.6 to
1.0 at June 30, 1997. The book value per share increased to $4.82 at December
31, 1997 from $4.49 per share at June 30, 1997.
Affecting the change in working capital was a $541,000 increase in accounts and
tooling receivables from the June 30, 1997 balance as compared to a $2,174,000
decrease in accounts and tooling receivables during the same period of the prior
year. The increase in accounts receivable is a result of the higher level of
sales as compared to prior periods, particularly late in the quarter. The
average number of days sales outstanding for receivables was 52 days at December
31, 1997 compared to 44 days at June 30, 1997 and 59 days at December 31, 1996.
The increase in the average number of days sales outstanding is typical of the
December 31 quarter when cash receipts slow down due to the holidays. The
decrease in the number of days sales outstanding at December 31,1997 compared to
December 31, 1996 is due to a temporary acceleration in payment by a significant
customer associated with a special project. When the special payment terms
return to normal, which is projected in the fourth quarter, the days sales
outstanding are expected to be consistenet with the prior year. As of December
31, 1997, no significant amounts were considered uncollectible. Inventory at
December 31, 1997 was 1.9 months supply compared to 1.8 months supply at
December 31, 1996.
Accounts payable and accrued expenses at December 31, 1997 decreased by
approximately $280,000 from the June 30, 1997 balance. The decrease is primarily
due to approximately $420,000 of payments made against reserves related to the
restructuring plan at the specialty components and assemblies division.
The Company's capital expenditures were $1,188,000 for the six months ended
December 31, 1997. The Company presently estimates capital expenditures for the
year ending June 30, 1998 will approximate $3,500,000, unless new business
opportunities require additional capital commitments. As of December 31, 1997,
commitments, net of progress payments, were $500,000 for capital expenditures
and $900,000 for tooling which is expected to be reimbursed from customers.
The Company utilized cash to pay down long term debt by a net of $365,000 and
$1,538,000 in the first six months of fiscal 1998 and 1997, respectively. The
Company has a general credit facility of up to $12,000,000 and an equipment
acquisition facility of $3,000,000 (collectively the "Credit Facilities") for
working capital and capital equipment needs. The Credit Facilities mature on
July 21, 1999. As of December 31, 1997, $7,470,000 was outstanding and
$3,113,000 was available under the general credit facility and $3,000,000 was
available under the equipment acquisition facility. An annual fee of one quarter
of one percent is payable monthly on the unused portion of the Credit
Facilities. The bank has the right to accelerate each of the maturity dates of
the consolidated term note and real estate note to coincide with the maturity
date of the Credit Facilities.
On October 22, 1997 and January 28, 1998, respectively, the Company announced a
quarterly cash dividend program with a 2 1/2 cents per share dividend to be
distributed in each of November
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1997 and February 1998. With 4,900,000 shares currently outstanding, a cash
distribution of $122,500 was paid in the second quarter and will be paid in the
third quarter.
Subsequent to the balance sheet date, the Company agreed to a settlement of its
lawsuit with the Selling Shareholders of NASS (See Note 5 to the Financial
Statements). As a result of that settlement, the Company's subordinated debt
will be eliminated and goodwill will be reduced by a like amount. Accordingly,
interest expense related to the debt will be eliminated.
On January 28, 1998, the Company announced that it had been notified by a
division of Ford Motor Company (See Note 6 to the Financial Statements) that a
part manufactured by the Company's specialty components and assemblies division
may be involved in a recall regarding a fuel gauge accuracy problem with certain
1997 model year vehicles. Based upon information currently available to the
Company, management believes that this matter will be resolved in a manner not
materially adverse to the Company.
Management anticipates that cash flow from operations and bank credit
availability will be adequate to fund the existing acquisition debt, anticipated
capital and tooling requirements and working capital needs of its existing
operations for the next two years.
Seasonality
- -----------
Net sales and operating results do not follow a predictable seasonal pattern
from quarter to quarter because the development, initial production and sales of
new products may occur at different times of the year. Generally, in these
periods certain inefficiencies are experienced which result in higher costs to
the Company. In addition, the Company usually experiences somewhat lower sales
in the quarters ended December 31 and September 30 as automobile manufacturers
traditionally close their plants for vacations or model changeovers during these
periods, resulting in lower demand for the Company's products.
Inflation
- ---------
The Company believes that the relatively moderate rate of inflation has not had
a significant impact on the Company's revenues or profitability.
Safe Harbor for Forward-looking Statements
- ------------------------------------------
Except for historical information contained herein, certain statements in this
Management's Discussion and Analysis of results of operation and financial
condition and other sections of this document contain forward-looking statements
that are made pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. Words such as "expects," "anticipates,"
"intends," "plans," "believes," "seeks," "estimates," or variations of such
words and similar expressions are intended to identify such forward-looking
statements. These
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<PAGE>
statements are not guarantees of future performance and involve unknown risks
and uncertainties which may cause the Company's actual results in future periods
to differ materially from forecasted results. Those risks include, among others,
risks associated with the manufacturing process and start-up of new products and
risks related to technological changes in components which affect the life of
the product. Further, there can be no assurance that the Ford Owner Notification
Program will be resolved in a manner consistent with the Company's expectations
or without affecting the Company's attempt to regain its Q1 status. These and
other risks are described in the Company's Form 10-K for the year ended June 30,
1997 filed with the Securities and Exchange Commission ("SEC"), copies of which
are available from the SEC or may be obtained upon request from the Company.
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual meeting of stockholders of Hilite (the "Meeting") was held on
November 12, 1997. Proxies for the Meeting were solicited pursuant to Regulation
14A of the Securities Exchange Act of 1934, as amended, and there was no
solicitation in opposition.
At the Meeting, James E. Lineberger, Daniel W. Brady, Samuel M. Berry, Ronald G.
Assaf and James D. Gerson were elected as directors of the Registrant for terms
of one year. The votes were as follows:
Shares Voted Shares Withheld
For from Voting
------------ ---------------
James E. Lineberger 4,163,877 21,275
Daniel W. Brady 4,163,877 21,275
Samuel M. Berry 4,163,877 21,275
Ronald G. Assaf 4,162,877 22,275
James D. Gerson 4,162,877 22,275
Also at the Meeting, Proposal 2 which sought the approval of an amendment to the
Company's 1993 Stock Option Plan to increase the total number of shares of
Common Stock reserved for issuance under the 1993 Stock Option Plan by 25,000
shares to 125,000 shares was adopted with 4,632,670 shares voted for and 88,306
shares voted against.
On or about December 24, 1997 Hilite received written consents in lieu of a
meeting of the stockholders representing approximately 75.7% of the total issued
shares and outstanding voting stock, adopting a resolution to reorganize its
corporate structure.
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<PAGE>
ITEM 5. OTHER INFORMATION
Cash Dividend
- -------------
On October 22, 1997 and January 28, 1998, the Company announced quarterly cash
dividends of 2 1/2 cents per share. The October dividend was paid in November of
1997 and the January dividend will be distributed in February 1998. Subsequent
dividends will depend upon future operating results.
New Board Member
- ----------------
At the January 27, 1998 Board of Director's meeting, Mr. John F. Creamer, Jr.
was elected to the Company's Board of Directors. Mr. Creamer is a Director of
Echlin, Inc., an aftermarket and original equipment supplier to the automobile
industry, the President and owner of Distribution Marketing Services, Inc., a
consulting firm to the automotive aftermarket and the President of the
Automotive Warehouse Distributors Association, a trade association for the
automotive aftermarket. In addition to his Director responsibilities, Mr.
Creamer has agreed to consult with the Company on business development and
marketing issues.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit
Number Description
10.1 Second Amended and Restated Secured Loan Agreement dated January
30, 1998 among Hilite Industries, Inc., Hilite Industries
Automotive, LP, and Comerica Bank - Texas.
10.2 Settlement Agreement and Mutual General Release dated February
13, 1998 among Hilite Industries, Inc., Michael L. McKee, Donald
P. Degenhardt and Robert S. Johnson.
10.3 Assignment and Assumption Agreement dated December 31, 1997
between Hilite Industries, Inc. and Hilite Industries - Texas,
Inc.
10.4 Assignment and Assumption Agreement dated December 31, 1997
between Hilite Industries - Texas, Inc. and Hilite Industries -
Delaware, Inc.
10.5 Limited Partnership Agreement dated December 31, 1997 between
Hilite Industries - Texas, Inc. and Hilite Industries - Delaware,
Inc.
(b) There were no reports on Form 8-K filed during the quarter for which
this report is filed.
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<PAGE>
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.
HILITE INDUSTRIES, INC.
Date: February 13, 1998 /s/ Daniel W. Brady
-----------------------
Daniel W. Brady
Chief Executive Officer
Date: February 13, 1998 /s/ Roy Wiegmann
-----------------------
Roy Wiegmann
Chief Financial Officer
-16-
SECOND AMENDED AND RESTATED SECURED LOAN AGREEMENT
THIS SECOND AMENDED AND RESTATED SECURED LOAN AGREEMENT is executed
this 30th day of January, 1998, by and among HILITE INDUSTRIES, INC., a Delaware
corporation, HILITE INDUSTRIES AUTOMOTIVE, LP, a Texas limited partnership, and
COMERICA BANK-TEXAS.
WITNESSETH
(The capitalized terms used in the following paragraphs shall have
the meanings given such terms in Section 1 of this Agreement, unless otherwise
defined in such paragraphs.)
WHEREAS, Parent and Bank have entered into that certain Amended and
Restated Secured Loan Agreement, dated as of July 21, 1995, as amended by that
certain (i) First Amendment to Secured Loan Agreement, effective as of June 30,
1997, and (ii) Second Amendment to Secured Loan Agreement, dated as of August
29, 1997 (as amended, the "Existing Loan Agreement");
WHEREAS, pursuant to a reorganization and a series of asset
transfers, Partnership has succeeded to substantially all of the assets of
Parent and in connection therewith Borrowers have requested that Bank permit
Partnership to be added as an additional borrower, to assume, jointly and
severally, all Indebtedness under the Existing Loan Agreement, and to restate
the Existing Loan Agreement; and
WHEREAS, Bank and Borrowers have agreed to amend, modify and restate
the Existing Loan Agreement as set forth in this Agreement subject to the terms
and conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein contained, Borrower and Bank agree as follows:
SECTION 1. DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the following
terms shall have the following respective meanings:
"ACCOUNTS," "CHATTEL PAPER," "DOCUMENTS," "EQUIPMENT," "FIXTURES,"
"GENERAL INTANGIBLES," "GOODS," "INSTRUMENTS" AND "INVENTORY" shall have the
meanings assigned to them in the UCC on the date of this Agreement.
"ACCOUNTS RECEIVABLE" shall mean and include all Accounts, Chattel
Paper and General Intangibles now owned or hereafter acquired by Borrowers and
Guarantors.
SECOND AMENDED AND RESTATED SECURED LOAN AGREEMENT - Page 1
<PAGE>
"ACQUISITION" shall mean the transactions pursuant to which Parent
acquired all of the issued and outstanding capital stock of NASS, pursuant to
the transactions evidenced by the Acquisition Documents.
"ACQUISITION AGREEMENT" shall mean that certain Stock Purchase
Agreement dated as of July 21, 1995, between Parent and Seller.
"ACQUISITION DOCUMENTS" shall mean the Acquisition Agreement and the
agreements, documents and instruments executed in connection therewith or
contemplated thereby, and all amendments thereto.
"AFFILIATE" shall mean, when used with respect to any person, any
other person which, directly or indirectly, controls or is controlled by or is
under common control with such person. For purposes of this definition,
"control" (including the correlative meanings of the terms "controlled by" and
"under common control with"), with respect to any person, shall mean possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such person, whether through the ownership of voting
securities or by contract or otherwise.
"AGREEMENT" shall mean this Second Amended and Restated Secured Loan
Agreement, as the same may be renewed, extended, amended and restated from time
to time.
"BANK" shall mean Comerica Bank-Texas, a state banking association.
"BANKRUPTCY CODE" shall mean Title 11 of the United States Code, as
amended, or any successor act or code.
"BORROWER" shall mean individually, Parent, Partnership, or their
successors and assigns, and collectively, they may be referred to as
"BORROWERS".
"BORROWING BASE" shall mean, as of any applicable date of
determination, the sum of (a) 85% of the aggregate outstanding principal balance
of Borrowers' and Guarantors' Eligible Accounts, plus (b) 30% of Borrowers' and
Guarantors' Eligible Raw Materials Inventory and Eligible Finished Goods
Inventory, calculated at the lesser of book or fair market value.
Notwithstanding the foregoing, Bank shall have the right to adjust the
aforementioned percentages for advances against Eligible Accounts, Eligible Raw
Materials Inventory and Eligible Finished Goods Inventory as and when Bank (in
exercising its reasonable credit judgment) deems it necessary and proper to do
so.
"BORROWING BASE CERTIFICATE" shall mean a certificate in the form and
content of Exhibit A to this Agreement or such other form as Bank may request,
completed in all appropriate respects and executed by the chief executive or
chief financial officer of each Borrower, and setting forth Borrowers'
computation of the Borrowing Base as of the date of such certificate.
SECOND AMENDED AND RESTATED SECURED LOAN AGREEMENT - Page 2
<PAGE>
"BUSINESS DAY" shall mean any day other than a Saturday, Sunday, or
day on which Bank is authorized to be closed under the laws of the State of
Texas.
"CASH FLOW" of any person shall mean, for any applicable period of
determination, the Net Income (after deduction for income taxes and other taxes
of such person determined by reference to income or profits of such person) for
such period, plus, to the extent deducted in computation of such Net Income, the
amount of depreciation and amortization expense, all as determined in accordance
with GAAP.
"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980 (42 U.S.C. ss.ss. 9601 et seq.), as
amended from time to time, including, without limitation, the Superfund
Amendments and Reauthorization Act ("SARA").
"CLOSING DATE" shall mean January 30, 1998.
"COLLATERAL" shall mean all property of Borrowers and Guarantors now
or hereafter in the possession of Bank or any Affiliate of Bank (or as to which
Bank or any Affiliate of Bank now or hereafter controls possession by documents
or otherwise), all amounts in all deposit or other accounts (including without
limitation an account evidenced by a certificate of deposit) of Borrowers and
Guarantors now or hereafter with Bank or any Affiliate of Bank, all of
Borrowers' and Guarantors' Accounts, Chattel Paper, Documents, Equipment,
Fixtures, General Intangibles, Goods, Instruments and Inventory, wherever
located and whether now owned or hereafter acquired, together with all
replacements thereof, substitutions therefor, accessions thereto, and all
proceeds and products of any of the foregoing, and all Real Property and
additional personal property of Borrowers and Guarantors which is now or
hereafter subject to a security interest, mortgage, lien, claim or other
encumbrance granted by Borrowers and Guarantors to, or in favor of, Bank.
Additionally, Collateral shall include the Pledged Interests.
"CONSOLIDATED" OR "CONSOLIDATED" shall mean when used with reference
to any financial term in this Agreement, the aggregate for two or more persons
of the amounts signified by such term for all such persons determined on a
consolidated basis in accordance with GAAP. Unless otherwise specified herein,
references to "consolidated" financial statements or data of any Borrower
includes consolidation with its Subsidiaries in accordance with GAAP.
"CURRENT MATURITIES OF LONG TERM DEBT" shall mean, as of any
applicable date of determination, that portion of Long Term Debt that should be
classified as current in accordance with GAAP.
"DEBT" shall mean, as of any applicable date of determination, all
items of indebtedness, obligation or liability of a person (other than, with
respect to a Borrower, Subordinated Debt), whether matured or unmatured,
liquidated or unliquidated, direct or indirect, absolute or contingent, joint or
several, that should be classified as liabilities in accordance with GAAP.
"DEED OF TRUST" shall mean, collectively, (i) that certain deed of
trust and security agreement with assignment of rents, dated October 28, 1992,
executed by Parent in favor of
SECOND AMENDED AND RESTATED SECURED LOAN AGREEMENT - Page 3
<PAGE>
Bank, pursuant to which Parent granted Bank a first priority lien on the Real
Property described therein (as modified, the "Parent Deed of Trust") and (ii)
that certain mortgage and security agreement with assignment of rents, dated as
of July 21, 1995, executed by NASS in favor of Bank pursuant to which NASS
grants Bank a first priority lien on the Real Property described therein (as
modified, the "NASS Deed of Trust").
"DEFAULT" shall mean a condition or event which, with the giving of
notice or the passage of time, or both, would become an Event of Default.
"DISBURSEMENT DATE" shall mean each date upon which Bank makes a loan
to Borrowers under Section 2.1 of this Agreement.
"ELIGIBLE ACCOUNTS" shall mean those Accounts of Borrowers and
Guarantors for which each of the representations and warranties in Section 5.16
of this Agreement are true and which has been represented by each Borrower to be
an Eligible Account on a Borrowing Base Certificate.
"ELIGIBLE FINISHED GOODS INVENTORY" shall mean that portion of
Borrowers' and Guarantors' Inventory which is comprised of finished goods or
returned and repossessed goods for which each of the representations and
warranties in Section 5.17 of this Agreement are true, and which has been
represented by each Borrower to be an item of Eligible Finished Goods Inventory
on a Borrowing Base Certificate.
"ELIGIBLE RAW MATERIALS INVENTORY" shall mean that portion of
Borrowers' and Guarantors' Inventory which is comprised of raw materials for
which each of the representations and warranties in Section 5.17 of this
Agreement are true, and which has been represented by each Borrower to be an
item of Eligible Raw Materials Inventory.
"ENVIRONMENTAL LAW" shall mean any federal, state or local law,
statute, ordinance, judgment, rule or regulation (a) pertaining to health,
industrial hygiene, or the environmental conditions on, under or about the Real
Property, including, but not limited to, CERCLA, SARA and RCRA; or (b) governing
the use, storage, treatment, handling, manufacture, transportation or disposal
of Hazardous Substances.
"EQUIPMENT ACQUISITION LOAN" shall mean a term loan described in
Section 2.2.2 of this Agreement.
"EQUIPMENT ACQUISITION NOTE" shall mean a promissory note conforming
to Section 2.2.2 of this Agreement and in the form and content of Exhibit D to
this Agreement.
"EQUIPMENT LOAN" shall mean the term loan described in Section 2.2.1
of this Agreement.
"EQUIPMENT NOTE" shall mean a promissory note conforming to Section
2.2.1 of this Agreement and in the form and content of Exhibit E to this
Agreement.
SECOND AMENDED AND RESTATED SECURED LOAN AGREEMENT - Page 4
<PAGE>
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended, or any successor act or code.
"EVENT OF DEFAULT" shall mean any of those conditions or events
listed in Section 9.1 of this Agreement.
"FINANCIAL STATEMENTS" shall mean all those balance sheets, earnings
statements and other financial data (whether of Borrowers, Guarantors, any of
their Subsidiaries, or otherwise) which have been furnished to Bank for the
purposes of, or in connection with, this Agreement and the transactions
contemplated hereby.
"FINANCING STATEMENTS" shall mean financing statements describing
Bank as secured party and a Borrower and/or a Guarantor as debtor covering the
Collateral and otherwise in such form, for filing in such jurisdictions and with
such filing offices, as Bank shall reasonably deem necessary or advisable.
"GAAP" shall mean, as of any applicable date of determination,
generally accepted accounting principles consistently applied.
"GUARANTOR" shall mean individually, NASS, HTX or HDE, and
collectively, they may be referred to as "GUARANTORS".
"GUARANTY" shall mean (i) an Amended and Restated Guaranty executed
by NASS in favor of Bank and (ii) a Guaranty executed by HTX and HDE each in
favor of Bank, in form and content of Exhibit H to this Agreement, as amended,
restated, or modified from time to time.
"HAZARDOUS SUBSTANCE" shall mean one or more of the following
substances:
(a) those substances included within the definitions of
(i) "hazardous substances", "hazardous materials" or "toxic
substances", in CERCLA, SARA, RCRA, Toxic Substances Control Act,
Federal Insecticide, Fungicide and Rodenticide Act and the Hazardous
Materials Transportation Act (49 U.S.C. Sections 1801 et seq.), or
(ii) "solid waste", as defined under the Texas Solid Waste Disposal
Act;
(b) such other substances, materials and wastes which are
or become regulated as hazardous or toxic under applicable local,
state or federal law, or the United States government, or which are
or become classified as hazardous or toxic under federal, state, or
local laws or regulations; and
(c) any material, waste or substance which is: (i)
asbestos; (ii) polychlorinated biphenyls; (iii) designated as a
"hazardous substance" pursuant to Section 311 of the Clean Water Act,
33 U.S.C. Sections 1251 et seq. (33 U.S.C. ss. 1321) or listed
pursuant to Section 307 of the Clean Water Act 33 U.S.C. ss. 1317);
(iv) explosives; (v) radioactive materials; or (vi) petroleum,
petroleum products or any fraction thereof.
SECOND AMENDED AND RESTATED SECURED LOAN AGREEMENT - Page 5
<PAGE>
"HDE" shall mean Hilite Industries-Delaware, Inc., a Delaware
corporation.
"HTX" shall mean Hilite Industries-Texas, Inc., a Delaware
corporation.
"INDEBTEDNESS" shall mean all loans, advances, indebtedness,
obligations and liabilities of Borrowers to Bank under this Agreement, together
with all other indebtedness, obligations and liabilities whatsoever of Borrowers
to Bank, whether matured or unmatured, liquidated or unliquidated, direct or
indirect, absolute or contingent, joint or several, due or to become due, now
existing or hereafter arising.
"LEGAL RATE" shall mean the maximum rate of nonusurious interest
permitted to be paid by Borrowers or received by Bank with respect to the
Indebtedness from time to time under applicable state or federal law as now or
as may be hereafter in effect.
"LIBOR RATE" shall have the same meaning assigned thereto in the
Notes.
"LOAN DOCUMENTS" shall mean (a) this Agreement, (b) the Security
Agreements, Pledge Agreements, and the Notes and any and all other notes,
mortgages, deeds of trust, security agreements, pledge agreements, financing
statements and other agreements, documents and instruments ever delivered
pursuant to or in connection with this Agreement, and (c) all future renewals,
extensions, or restatements of, or amendments, modifications or supplements to,
all or any part of the foregoing.
"LOANS" shall mean the Revolving Loans and the Term Loans.
"LONG TERM DEBT" shall mean, as of any applicable date of
determination, all Debt of a Borrower (other than Subordinated Debt and the
outstanding principal balance of all Revolving Loans) which should be classified
as "funded indebtedness" or "long term indebtedness" on a balance sheet of such
Borrower prepared as of such date in accordance with GAAP.
"NASS" shall mean North American Spring & Stamping Corp. (Delaware),
a Delaware corporation.
"NET INCOME" shall mean the net income (or loss) of a person for any
period determined in accordance with GAAP but excluding in any event:
(a) any gains on the sale or other disposition, not in the
ordinary course of business, of investments or fixed or capital
assets, and any taxes on the excluded gains and any tax deductions or
credits on account on any excluded losses; and
(b) in the case of Borrower, net earnings of any Person in
which Borrower has an ownership interest, unless such net earnings
shall have actually been received by Borrower in the form of cash
distributions.
"NOTES" shall mean the Revolving Credit Note and the Term Notes.
SECOND AMENDED AND RESTATED SECURED LOAN AGREEMENT - Page 6
<PAGE>
"PARENT" shall mean Hilite Industries, Inc., a Delaware corporation.
"PARTNERSHIP" shall mean Hilite Industries Automotive, LP, a Texas
limited partnership.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
person succeeding to the present powers and functions of the Pension Benefit
Guaranty Corporation.
"PERMITTED LIENS" shall mean:
(a) liens and encumbrances in favor of Bank;
(b) liens for taxes, assessments or other governmental
charges incurred in the ordinary course of business and for which no
interest, late charge or penalty is attaching or which are being
contested in good faith by appropriate proceedings and, if requested
by Bank, bonded in an amount and manner satisfactory to Bank;
(c) liens, not delinquent, created by statute in
connection with worker's compensation, unemployment insurance, social
security and similar statutory obligations;
(d) liens of mechanics, materialmen, carriers,
warehousemen or other like statutory or common law liens securing
obligations incurred in good faith in the ordinary course of business
that are not yet due and payable;
(e) encumbrances consisting of existing or future zoning
restrictions, existing recorded rights-of-way, existing recorded
easements, existing recorded private restrictions or existing or
future public restrictions on the use of real property, none of which
materially impairs the use of such property in the operation of the
business for which it is used and none of which is violated in any
material respect by any existing or proposed structure or land use;
(f) existing liens described on Schedule 5.5 attached to
this Agreement; and
(g) liens securing indebtedness related to acquisitions
permitted by Section 7.11 of this Agreement.
"PERSON" OR "PERSON" shall mean any individual, corporation,
partnership, joint venture, association, trust, unincorporated association,
joint stock company, government, municipality, political subdivision or agency,
or other entity.
"PLEDGE AGREEMENT" shall mean a pledge agreement or pledge agreements
in form and substance satisfactory to the Bank pursuant to which all of the
Pledged Interests are pledged to Bank as security for the Indebtedness.
"PLEDGED INTERESTS" shall mean at any time (i) all of the capital
stock in NASS, HDE, and HTX, and (ii) all of the general and limited partnership
interests in Partnership.
SECOND AMENDED AND RESTATED SECURED LOAN AGREEMENT - Page 7
<PAGE>
"PRIME RATE" shall mean that annual rate of interest designated by
the Bank as its prime rate, which rate may not be the lowest rate of interest
charged by Bank to any of its customers, and which rate is changed by Bank from
time to time.
"PUT DATE" shall have the meaning specified in the Real Estate Note.
"RCRA" shall mean the Resource Conservation and Recovery Act of 1976
(42 U.S.C. Sections 6901, et seq.), as amended from time to time.
"REAL ESTATE LOAN" shall mean the term loan described in Section
2.2.3 of this Agreement.
"REAL ESTATE NOTE" shall mean that certain promissory note described
in Section 2.2.3 of this Agreement.
"REAL PROPERTY" shall mean all real property, wherever located, now
or hereafter owned or occupied by Borrowers and/or Guarantors or in which
Borrowers and/or Guarantors now or hereafter have any rights, title or interest.
"RESTRUCTURING" shall mean the transactions pursuant to which (i)
ultimately, Partnership will succeed to substantially all of the assets of
Parent, and (ii) HTX, a wholly-owned subsidiary of Parent would own, as sole
general partner, a one percent (1%) interest in Partnership; and (iii) HDE, a
wholly-owned subsidiary of HTX, would own, as sole limited partner, a
ninety-nine percent (99%) interest in Partnership.
"RESTRUCTURING DOCUMENTS" shall mean any agreements, documents and
instruments executed in connection with the Restructuring, as the same may be
renewed, amended and restated from time to time.
"REVOLVING CREDIT COMMITMENT AMOUNT" shall mean from period beginning
from the date hereof and continuing until the Termination Date, $12000000;
provided, however, that if Borrowers reduce the Revolving Credit Commitment
Amount from time to time under Section 2.1.5 of this Agreement, the Revolving
Credit Commitment Amount shall be deemed to be such lesser amount.
"REVOLVING CREDIT NOTE" shall mean a promissory note conforming to
Section 2.1.2 of this Agreement and in the form and content of Exhibit C to this
Agreement.
"REVOLVING LOAN" shall mean an advance made by Bank to Borrowers
under Section 2.1 of this Agreement on a Disbursement Date.
"SECURITY AGREEMENTS" shall mean (i) that certain Security Agreement
(Inventory and Accounts Receivable) dated July 21, 1995, executed by NASS in
favor of Bank, as amended by that certain First Amendment to Security Agreement
(Inventory and Accounts Receivable) dated as of the date hereof, (ii) that
certain Security Agreement (Equipment) dated July 21, 1995,
SECOND AMENDED AND RESTATED SECURED LOAN AGREEMENT - Page 8
<PAGE>
executed by NASS in favor of Bank, as amended by that certain First Amendment to
Security Agreement (Equipment), dated as of the date hereof, (iii) that certain
Security Agreement (Inventory and Accounts Receivable), dated December 21, 1990,
executed by Parent in favor of Bank, as amended by the First Amendment to
Security Agreement (Inventory and Accounts Receivable) dated August 25, 1995,
and the Second Amendment to Security Agreement (Inventory and Accounts
Receivable) dated as of the date hereof, (iv) that certain Security Agreement
(Equipment), dated December 21, 1990, executed by Parent in favor of Bank, as
amended by the First Amendment to Security Agreement (Equipment) dated August
25, 1995, and the Second Amendment to Security Agreement (Equipment) dated as of
the date hereof, (v) that certain Patent Security Agreement, dated December 21,
1990, executed by Parent in favor of Bank and recorded on March 22, 1991 by the
Acquisition Division of the U.S. Patent and Trademark Office on Reel 5640, Frame
166, (vi) that certain Trademark Security Agreement dated December 21, 1990,
executed by Parent in favor of Bank, (vii) that certain Security Agreement
(Inventory and Accounts Receivable), dated as of the date hereof, executed by
Partnership in favor of Bank and (viii) that certain Security Agreement
(Equipment), dated as of the date hereof, executed by Partnership in favor of
Bank.
"SELLER" shall mean, collectively, Michael L. McKee, Donald
Degenhardt and Robert Johnson.
"SUBORDINATED DEBT" shall mean indebtedness of a Borrower to third
parties which has been subordinated to the Indebtedness pursuant to a
subordination agreement in form and content satisfactory to Bank.
"SUBORDINATED NOTE" shall mean that certain subordinated note,
executed by Parent and payable to the order of Seller making all present and
future indebtedness of Parent to Seller subordinate to the Indebtedness and in
form and substance satisfactory to Bank.
"SUBSIDIARY" shall mean any corporation (whether now existing or
hereafter organized or acquired) in which more than fifty percent (50%) of the
outstanding securities having ordinary voting power for the election of
directors, as of any applicable date of determination, shall be owned directly,
or indirectly through one or more Subsidiaries, by a Borrower or a Guarantor.
"TANGIBLE EFFECTIVE NET WORTH" shall mean, as of any applicable date
of determination, Tangible Net Worth plus Subordinated Debt.
"TANGIBLE NET WORTH" shall mean, as of any applicable date of
determination, the excess of (a) the net book value of all assets of a person
(other than patents, patent rights, trademarks, trade names, franchises,
copyrights, licenses, goodwill, and similar intangible assets) after all
appropriate deductions in accordance with GAAP (including, without limitation,
reserves for doubtful receivables, obsolescence, depreciation and amortization),
over (b) all Debt of such person.
SECOND AMENDED AND RESTATED SECURED LOAN AGREEMENT - Page 9
<PAGE>
"TAX REFUNDS" shall mean refunds or claims for refunds of any taxes
at any time paid by a Borrower to the United States of America or any state,
city, county or other governmental entity.
"TELEPHONE NOTICE AUTHORIZATION" shall mean, collectively, (i) that
certain Telephone Notice Authorization, dated December 21, 1990, executed by
Parent, (ii) that certain Telephone Notice Authorization dated July 21, 1995,
executed by Parent and (iii) a Telephone Notice Authorization, dated the date
hereof, executed by Borrowers, in the form and content of Exhibit G to this
Agreement authorizing telephone notice of borrowing and establishing a codeword
system of identification in connection therewith.
"TERM LOANS" shall mean the Equipment Acquisition Loans, the
Equipment Loan and the Real Estate Loan.
"TERM NOTES" shall mean the Equipment Acquisition Notes, the
Equipment Note and the Real Estate Note.
"TERMINATION DATE" shall mean the earlier of (a) July 21, 1999 or, if
this Agreement is extended pursuant to Section 2.11, the last day of any such
extended term; (b) the date on which Bank's commitment to make Revolving Loans
and Equipment Acquisition Loans is terminated by Borrower pursuant to Section
2.1.5; or (c) the date on which Bank's commitment to make Revolving Loans and
Equipment Acquisition Loans is terminated pursuant to Section 9.2.
"UCC" shall mean the Uniform Commercial Code as adopted and in force
in the State of Texas, as from time to time amended.
1.2 Accounting Terms. All accounting terms not specifically
defined in this Agreement shall be construed in accordance with GAAP.
1.3 Singular and Plural. Where the context herein requires,
the singular number shall be deemed to include the plural, the masculine gender
shall include the feminine and neuter genders, and vice versa.
SECTION 2. CREDIT FACILITIES, INTEREST AND FEES
2.1 Revolving Loans.
2.1.1 Revolving Credit Commitment. Subject to the terms
and conditions of this Agreement, Bank agrees to make loans to Borrowers on a
revolving basis in such amount as Borrowers shall request pursuant to this
Section 2.1 at any time from the date of this Agreement until the Termination
Date, up to an aggregate principal amount outstanding at any time not to exceed
the lesser of (i) the Revolving Credit Commitment Amount or (ii) the Borrowing
Base.
2.1.2 Revolving Credit Note. The Revolving Loans shall be
evidenced by the Revolving Credit Note, executed by Borrowers, dated the date of
this Agreement, payable to
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Bank on the Termination Date (unless sooner accelerated pursuant to the terms of
this Agreement), and in the principal amount of the original Revolving Credit
Commitment Amount. The Revolving Loans shall bear interest in accordance with
the terms of the Revolving Credit Note and shall be secured by the Collateral.
2.1.3 Notice. Borrowers may by telephone give Bank notice
of Borrowers' desire for a Revolving Loan no later than 2:00 p.m. Dallas, Texas
time in order to have the date of notice be the Disbursement Date, otherwise the
following Business Day shall be the Disbursement Date. Such notice shall specify
the principal amount of the proposed advance for such Revolving Loan. Prior to
such telephone notice, Borrowers shall have executed and delivered to Bank a
Telephone Notice Authorization.
2.1.4 Bank Obligations. Bank agrees to make the Revolving
Loan on each Disbursement Date established by notice to Bank from Borrowers
conforming to the requirements of Section 2.1.3 by crediting the deposit account
of Borrowers with Bank specified in the Telephone Notice Authorization in the
amount of such Revolving Loan; provided, however that Bank shall not be
obligated to do so if:
(a) any of the conditions precedent set forth in Section 4
of this Agreement shall not have been satisfied or waived by Bank in
accordance with Section 10.3 of this Agreement, or
(b) such proposed Revolving Loan would cause the aggregate
unpaid principal amount of the Revolving Loans outstanding under this
Agreement to exceed the lesser of the Revolving Credit Commitment
Amount or the Borrowing Base on such Disbursement Date.
2.1.5 Termination or Reduction in Commitment by Borrowers.
Borrowers, at any time and from time to time (except as may hereinafter be
provided), upon at least five (5) Business Days' prior written notice received
by Bank, may permanently terminate Bank's commitment to make Revolving Loans
under this Agreement or permanently reduce the Revolving Credit Commitment
Amount by an integral multiple of $100000; provided, however, notwithstanding
anything to the contrary in this Agreement or in any Note, at the sole option of
Bank, the termination of Bank's commitment to make Revolving Loans shall also
constitute the termination and acceleration of the Term Loans. On the effective
date of such termination or reduction, Borrowers shall pay to Bank, in the case
of a termination, the aggregate unpaid principal amount of all Revolving Loans,
and, if required by Bank, the aggregate unpaid principal amount of all Term
Loans, or, in the case of a reduction, the amount, if any, by which the
aggregate unpaid principal amount of all Revolving Loans exceeds the then
reduced Revolving Credit Commitment Amount, together in either case with all
interest accrued and unpaid on the principal amounts so prepaid. The notice
shall specify the Termination Date or the reduced Revolving Credit Commitment
Amount and the effective date of the reduction, as the case may be. Borrowers
may not revoke any such notice of termination or reduction without the prior
written consent of Bank.
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2.1.6 Mandatory Payments.
(a) Borrowers shall pay to Bank, on demand, any amount by
which the aggregate unpaid principal amount of all Revolving Loans
from time to time exceeds the lesser of the Revolving Credit
Commitment Amount or the Borrowing Base, together with all interest
accrued and unpaid on the amount of such excess.
(b) If the aggregate unpaid principal amount of the
Equipment Loan shall exceed ninety percent (90%) of the appraised
value of the Equipment of Borrowers as specified in any appraisal
delivered to the Bank by or on behalf of the Borrowers, the Borrowers
shall, within five (5) Business Days of any delivery of such
appraisal, prepay the Equipment Loan in the amount, if any, by which
the outstanding principal amount of the Equipment Loan on the date of
prepayment under this Section 2.1.6(b) exceeds ninety percent (90%)
of the appraised value set forth in such appraisal, together with
accrued interest on the amount prepaid to the date of such
prepayment.
2.2 Term Loans.
2.2.1 Equipment Loan and Equipment Note. Bank has
previously made term loans (the "EQUIPMENT LOANS") to Parent pursuant to
Sections 2.2.1 and 2.2.2 of the Existing Loan Agreement, and the aggregate
unpaid principal balance thereof outstanding on the date hereof is
$8,847,357.68. Borrowers hereby represent and agree that such loans are
unconditionally owed by Borrowers to Bank without offset, defense or
counterclaim of any kind, nature or description whatsoever. The Equipment Loan
shall be evidenced by the Equipment Note to be executed by Borrowers, payable to
Bank in monthly principal installments as specified in the Equipment Note, with
all unpaid principal and accrued but unpaid interest to be due and payable seven
(7) years from the date the Equipment Loan was made (unless sooner accelerated
pursuant to the terms of this Agreement or unless, at the option of Bank, it
becomes payable earlier upon the Termination Date). The Equipment Loan shall
bear interest and shall be payable in accordance with the terms of the Equipment
Note, and it shall be secured by the Collateral.
2.2.2 Equipment Acquisition Loans and Equipment
Acquisition Notes. Subject to the terms and conditions of this Agreement, Bank
agrees to make Equipment Acquisition Loans to Borrowers, from time to time from
the date hereof until the Termination Date, to finance Borrowers' purchase of
Equipment for use in Borrowers' business. Each Equipment Acquisition Loan shall
be in a minimum amount of $50000 and the aggregate original principal amount of
all Equipment Acquisition Loans shall not exceed $3000000, or such greater
amount to which Bank, in its sole discretion, may agree upon Borrowers' request.
The amount of each Equipment Acquisition Loan shall not exceed:
(a) In the case of Equipment Acquisition Loans to finance
purchases of new Equipment, eighty percent (80%) of the actual cost
of new Equipment being purchased (exclusive of taxes, transportation
and shipping charges and installation or make-ready fees or
expenses); and
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(b) In the case of Equipment Acquisition Loans to finance
purchases of used Equipment, the lesser of (i) seventy percent (70%)
of the actual cost of used Equipment or (ii) the orderly liquidation
value of used Equipment being purchased.
So long as any Indebtedness remains outstanding, Bank shall have the right, at
Borrowers' sole expense, to obtain new appraisals of the orderly liquidation
value of the Equipment from time to time as Bank deems necessary; provided,
however, that a decrease in the value of the Equipment, as evidenced by any such
appraisal, shall not be deemed an Event of Default. Each Equipment Acquisition
Loan shall be evidenced by an Equipment Acquisition Note in the form of Exhibit
D hereto, to be executed by Borrower, dated the date such Loan is funded,
payable to Bank in up to sixty (60) (or such lesser number as Bank shall
determine in Bank's sole discretion) equal monthly installments (unless sooner
accelerated pursuant to the terms of this Agreement or unless, at the option of
Bank, it becomes payable earlier upon the Termination Date), and in the
principal amount of such Loan. Each Equipment Acquisition Loan shall bear
interest in accordance with the terms of the Equipment Acquisition Note
evidencing such Equipment Acquisition Loan and shall be secured by the
Collateral.
2.2.3 Real Estate Loan and Real Estate Note. Bank has made
a fifteen (15) year term loan (the "REAL ESTATE LOAN") to Parent pursuant to
Section 2.2.3 of the Existing Loan Agreement. The Real Estate Loan is evidenced
by the Real Estate Note which (together with the Parent Deed of Trust and the
NASS Deed of Trust) shall be modified to reflect the assumption by Borrowers
jointly and severally of the Indebtedness in a manner satisfactory to Bank. The
Real Estate Note shall remain, as originally executed by Parent, repayable to
Bank in monthly installments as specified in the Real Estate Note, with all
unpaid principal and accrued but unpaid interest to be due and payable in full
on November 1, 2007 (unless sooner accelerated pursuant to the terms of this
Agreement or unless, at the option of Bank, it becomes payable upon the
Termination Date, or unless, as described in the Real Estate Note, it becomes
payable upon a Put Date). Borrowers hereby acknowledge and agree that the
outstanding principal balance of the Real Estate Loan is $629,333.39 as of the
Closing Date, and such amount is unconditionally owed by Borrowers to Bank
without offset, defense or counterclaim of any kind, nature or description
whatsoever. The Real Estate Loan shall bear interest and be repayable in
accordance with the terms of the Real Estate Note, and it shall be secured by
the Collateral.
2.3 Interest.
2.3.1 Fluctuating Rate. To the extent the rate of interest
applicable to a Loan is a fluctuating rate, the rate of interest shall change as
and when the LIBOR Rate and/or the Bank's Prime Rate (which ever is used as a
basis for the computation of such fluctuating rate) changes.
2.3.2 Basis of Computation. The amount of all interest on
any Indebtedness shall be computed for the actual number of days elapsed on the
basis of a year consisting of 360 days.
2.3.3 Maximum Interest Rate. Notwithstanding anything in
this Agreement or in any other document or instrument to the contrary, if at any
time the rate of interest applicable
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to any Loan, as computed on the basis of the "contract rate" defined and
specified in the Note evidencing such Loan, would exceed the Legal Rate, the
interest payable under such Note shall be computed upon the basis of the Legal
Rate, but any subsequent reduction in such contract rate shall not reduce the
applicable interest rate thereafter applicable under such Note below the Legal
Rate until the aggregate amount of interest accrued and payable under such Note
as to such Loan equals the total amount of interest which would have accrued if
interest on such Loan had been at all times computed solely on the basis of such
contract rate.
2.3.4 Adjustments of Excess Interest. No agreements,
conditions, provisions or stipulations contained in this Agreement or any other
instrument, document or agreement between any Borrower and Bank or default of
any Borrower, or the exercise by Bank of the right to accelerate the payment of
the maturity of principal and interest or to exercise any option whatsoever
contained in this Agreement or any other agreement between any Borrower and
Bank, or the arising of any contingency whatsoever, shall entitle Bank to
collect, in any event, interest exceeding the Legal Rate and in no event shall
any Borrower be obligated to pay interest exceeding such Legal Rate and all
agreements, conditions or stipulations, if any, which may in any event or
contingency whatsoever operate to bind, obligate or compel any Borrower to pay a
rate of interest exceeding the Legal Rate, shall be without binding force or
effect, at law or in equity, to the extent only of the excess of interest over
such Legal Rate. In the event any interest is charged in excess of the Legal
Rate ("EXCESS"), each Borrower acknowledges and stipulates that any such charge
shall be the result of an accident and bona fide error, and such Excess shall
be, first, applied to reduce the principal then unpaid hereunder; second,
applied to reduce the Indebtedness; and third, returned to such Borrower, it
being the intention of the parties hereto not to enter at any time into a
usurious or otherwise illegal relationship. Each Borrower recognizes that, with
fluctuations in the Prime Rate, the LIBOR Rate and the Legal Rate, such an
unintentional result could inadvertently occur. By the execution of this
Agreement, each Borrower covenants that (a) the credit or return of any Excess
shall constitute the acceptance by such Borrower of such Excess, and (b) such
Borrower shall not seek or pursue any other remedy, legal or equitable, against
Bank, based in whole or in part upon the charging or receiving of any interest
in excess of the maximum authorized by applicable law. For the purpose of
determining whether or not any Excess has been contracted for, charged or
received by Bank, all interest at any time contracted for, charged or received
by Bank in connection with this Agreement, shall be amortized, prorated,
allocated and spread in equal parts during the entire term of this Agreement.
The provisions of this Section 2.3.4 shall be deemed to be incorporated into
every document or communication relating to the Indebtedness which sets forth or
prescribes any account, right or claim or alleged account, right or claim of
Bank with respect to each Borrower (or any other obligor in respect of
Indebtedness). All such documents and communications and all figures set forth
therein shall, for the sole purpose of computing the extent of the Indebtedness
and obligations of any Borrower (or other obligor) asserted by Bank thereunder,
be automatically recomputed by any Borrower or obligor, and by any court
considering the same, to give effect to the adjustments or credits required by
this Section 2.3.4.
2.3.5 Revolving Loan Unused Line Fees. If the average
outstanding daily balance of the Revolving Loans during any calendar quarter is
less than the Revolving Credit Commitment Amount, Borrowers shall pay to bank an
unused line fee equal to one-quarter of
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one percent (.25%) per annum upon the amount by which the Revolving Credit
Commitment Amount exceeds the average outstanding daily balance of the Revolving
Loans during such period. Such fee shall be due and payable on the 1st day
following the end of such calendar quarter and on the Termination Date.
2.3.6 Equipment Acquisition Loan Unused Line Fees. If the
average outstanding daily balance of the Equipment Acquisition Loans during any
calendar quarter is less than $3000000 (or such greater amount as Bank may
hereafter agree to pursuant to Section 2.2.2 hereof), Borrowers shall pay to
Bank an unused line fee equal to one-quarter of one percent (.25%) per annum
upon the amount by which $3000000 (or such greater amount as Bank may
hereafter agree to pursuant to Section 2.2.2 hereof) exceeds the average
outstanding daily balance of the Equipment Acquisition Loans during such period.
Such fee shall be due and payable on the 1st day following the end of such
calendar quarter and on the Termination Date.
2.3.7 Commitment Fee. Borrower shall pay to Bank as of the
Closing Date, a commitment fee of $49000 which shall be deemed fully earned and
nonrefundable at the closing of the transactions contemplated hereby and shall
be paid concurrently with the Acquisition Loan hereunder.
2.4 Preparation Fees. Upon demand of Bank from time to time,
Borrowers shall pay to Bank the amount of the reasonable expenses (including,
without Imitation, reasonable attorneys' fees, and disbursements) incurred by
Bank from time to time in connection with the preparation of this Agreement and
related instruments and/or the making (or preparation for the making) of
advances hereunder.
2.5 [This Section is intentionally omitted].
2.6 Prepayments.
2.6.1 Mandatory Prepayments. If any Borrower sells any of
the Collateral, or if any of such Collateral is taken by condemnation, such
Borrower shall immediately pay to Bank, unless otherwise agreed by Bank in
writing, a sum equal to the difference between (x) the proceeds received by or
behalf of such Borrower from such sale or condemnation, less (y) capital gains
taxes arising from such sale or condemnation and expenses incurred by such
Borrower in connection with such sale or condemnation. Any such amount shall be
applied (i) to accrued interest and then to installments of principal, in the
inverse order of their maturities, as a prepayment of the Equipment Loan (or the
Equipment Acquisition Loan, if such Collateral was purchased with proceeds of an
Equipment Acquisition Loan) or the Real Estate Loan to the extent such
Collateral consists of Real Estate of Borrowers, or (ii) if the Indebtedness
evidencing the Term Notes is indefeasibly paid in full, such other Indebtedness
as Bank may elect.
2.6.2 Optional Prepayments. Borrowers, at any time and
from time to time, upon at least one (1) Business Day's prior written notice
received by Bank, may prepay the unpaid principal amount of any Term Note in
whole or in part without premium, provided, however, that any such optional
prepayment under this Section 2.6.2 shall be made in integral multiples of
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$25000 and applied (a) to accrued interest and then to installments of
principal, in the inverse order of their maturities, on such Note, or (b) at
Bank's option, such other Indebtedness as Bank may elect.
2.7 Lock Box. Each Borrower shall cause such Borrower's and
each Guarantor's account debtors to make payments to such Borrower and such
Guarantor, as the case may be, in care of a lock box account to be established
with Bank prior to the Closing Date. Bank shall have sole access to such
account. Each Borrower shall endorse and cause each Guarantor to endorse to Bank
and forthwith deliver to Bank all payments which it receives on Accounts
Receivable or from the sale of any Inventory or arising from any other rights or
interests of such Borrower therein, in the form received by such Borrower and
such Guarantor, as the case may be, without commingling with any funds belonging
to such Borrower. All payments so received by Bank shall be applied in payment
of the Indebtedness, first to Bank's costs and expenses, then to interest, then
to principal on such Loans as Bank may elect (in inverse order of their
maturities if principal amounts are due in installments), and then to other
Indebtedness. The surplus, if any, shall be paid over to such Borrower.
2.8 Basis of Payments. All sums payable by each Borrower to
Bank under this Agreement or the other documents contemplated hereby shall be
paid directly to Bank at its principal office set forth Section 10.10 hereof in
immediately available United States funds, without set off, deduction or
counterclaim. In its sole discretion, Bank may charge any and all deposit or
other accounts (including, without limitation, an account evidenced by a
certificate of deposit) of any Borrower with Bank for all or a part of any
Indebtedness then due; provided, however, that this authorization shall not
affect any Borrower's obligation to pay, when due, any Indebtedness whether or
not account balances are sufficient to pay amounts due.
2.9 Receipt of Payments. Any payment of the Indebtedness made
by mail will be deemed tendered and received only upon actual receipt by Bank at
the address designated for such payment, whether or not Bank has authorized
payment by mail or any other manner, and shall not be deemed to have been made
in a timely manner unless received on the date due for such payment, time being
of the essence. Each Borrower expressly assumes all risks of loss or liability
resulting from non-delivery or delay of delivery of any item of payment
transmitted by mail or in any other manner. Acceptance by Bank of any payment in
an amount less than the amount then due shall be deemed an acceptance on account
only, and the failure to pay the entire amount then due shall be and continue to
be an Event of Default, and at any time thereafter and until the entire amount
then due has been paid, Bank shall be entitled to exercise any and all rights
conferred upon it herein upon the occurrence and during the continuance of an
Event of Default. Each Borrower waives the right to direct the application of
any and all payments at any time or times hereafter received by Bank from or on
behalf of such Borrower. Each Borrower agrees that Bank shall have the
continuing exclusive right to apply and to reapply any and all payments received
at any time or times hereafter against the Indebtedness in such manner as Bank
may deem advisable, notwithstanding any entry by Bank upon any of its books and
records. Each Borrower expressly agrees that to the extent that Bank receives
any payment or benefit and such payment or benefit, or any part thereof, is
subsequently invalidated, declared to be fraudulent or preferential, set aside
or is required to be repaid to a trustee, receiver, or any other
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party under any bankruptcy act, state or federal law, common law or equitable
cause, then to the extent of such payment or benefit, the Indebtedness or part
thereof intended to be satisfied shall be revived and continued in full force
and effect as if such payment or benefit had not been made and, further, any
such repayment by Bank, to the extent that Bank did not directly receive a
corresponding cash payment, shall be added to and be additional Indebtedness
payable upon demand by Bank.
2.10 Recordation by Bank of Amounts Due. The date and amount of
each Loan made by Bank and of each repayment of principal and interest thereon
received by Bank shall be recorded by Bank in its records. The aggregate unpaid
amount so recorded by Bank shall constitute the best evidence of the amount
owing and unpaid on the Indebtedness; provided, however, that the failure by
Bank so to record any such amount or any error in so recording any such amount
shall neither increase nor limit any Borrower's obligations under this Agreement
or any of the Notes to repay the principal amount of all the Loans together with
all interest accrued or accruing thereon.
2.11 Term of Agreement. Bank's commitment to make Revolving
Loans and Equipment Acquisition Loans shall be for a period of time beginning on
the date hereof until the Termination Date. If, after Bank's receipt and review
of each Borrower's most recent fiscal year end audited financial statements,
Bank desires to extend its commitment to make Revolving Loans and/or Equipment
Acquisition Loans hereunder for an additional period of time, Bank will notify
Borrowers of the terms upon which Bank would be willing to do so.
Notwithstanding any such notice or any negotiations between the parties with
respect to the terms of any proposed extension, Bank shall not be deemed to have
committed to any extension or renewal term until actual approval thereof by
Bank's loan committee. Failing such loan committee approval, this Agreement and
Bank's commitment to make Revolving Loans, and Equipment Acquisition Loans,
hereunder shall terminate as aforesaid on the applicable Termination Date.
Subsequent renewal periods, if any, shall be negotiated from time to time in a
like manner.
2.12 All Loans at Option of Bank become Due and Payable on
Termination Date. Notwithstanding anything in this Agreement or in any Note to
the contrary, Bank shall have the sole option, upon the Termination Date, to
require payment in full of all Indebtedness, including, without limitation,
payment in full of all Revolving Loans and all Term Loans.
SECTION 3. SECURITY
To secure full and timely performance of Borrowers' covenants set out
in this Agreement and to secure the repayment of the Notes and all other
Indebtedness, each Borrower agrees to grant and assign, or cause to be granted
and assigned, a lien upon, and security interest in, the Collateral pursuant to
the Security Agreements, the Pledge Agreements, the Financing Statements, and
such other agreements as Bank shall from time to time require.
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SECTION 4. CONDITIONS PRECEDENT TO OBLIGATIONS OF BANK
4.1 Conditions to Initial Disbursement. The obligations of Bank under
this Agreement are subject to the occurrence, prior to or simultaneously with
the Closing Date, of each of the following conditions:
4.1.1 Documents Executed and Filed. Each Borrower shall
have executed (or caused to be executed) and delivered to Bank and, as
appropriate, there shall have been filed or recorded with such filing or
recording offices as Bank shall deem appropriate, the following:
(a) this Agreement;
(b) the Fifth Amended and Restated Revolving Credit Note
and the Amended and Restated Equipment Note;
(c) the Guaranties, executed by the Guarantors in favor of
Bank;
(d) the Security Agreement (Inventory and Accounts
Receivable), executed by Partnership in favor of Bank;
(e) the Security Agreement (Equipment), executed by
Partnership in favor of Bank;
(f) the documents,and instruments which modify the Real
Estate Note, the Parent Deed of Trust and NASS Deed of Trust to
reflect the assumption by Borrowers jointly and severally of the
Indebtedness, in form and substance satisfactory to Bank:
(i) a copy of the title insurance commitment;
and
(ii) evidence satisfactory to Bank that such
Deed of Trust has been appropriately recorded and that all
other actions necessary or, in the opinion of Bank,
desirable to perfect and protect the security interests
and mortgage liens created by such Deed of Trust have been
taken;
(g) the First Amendment to Security Agreement (Inventory
and Accounts Receivable), executed by NASS;
(h) the First Amendment to Security Agreement (Equipment),
executed by NASS;
(i) the Second Amendment to Security Agreement (Inventory
and Accounts Receivable), executed by Parent;
(j) the Second Amendment to Security Agreement
(Equipment), executed by Parent;
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(k) the Pledge Agreements;
(l) the Financing Statements;
(m) the Restructuring Documents and all other documents
executed in connection with the Restructuring;
(n) landlord and mortgagee waivers and/or estoppel
certificates with respect to Borrowers' now owned or occupied Real
Property, all in form and substance reasonably satisfactory to Bank;
(o) the Telephone Notice Authorization, in the form of
Exhibit G, attached hereto;
(p) a Lockbox Agreement, duly executed by Borrowers, in
form and substance satisfactory to Bank; and
(q) such other documents and instruments as Bank shall
reasonably require.
4.1.2 Certified Resolutions. Each of Parent, NASS, HDE and
HTX shall have furnished to Bank a copy of resolutions of the Board of Directors
of such Person authorizing the execution, delivery and performance of this
Agreement, the borrowing hereunder, the Notes, the Restructuring Documents and
the other Loan Documents to which it is a party, which shall have been certified
by the Secretary or Assistant Secretary of such Person as of the Closing Date as
being complete, accurate and in effect. Partnership shall have furnished to Bank
a copy of resolutions of the Board of Directors of HTX authorizing the
execution, delivery and performance of this Agreement, the borrowing hereunder,
the Notes, the Restructuring Documents and the other Loan Documents, by HTX on
behalf of Partnership, to which Partnership is a party, which shall have been
certified by the Secretary or Assistant Secretary of HTX as of the Closing Date
as being complete, accurate and in effect.
4.1.3 Certified Articles or Certificate of Incorporation.
Each of the Parent, NASS, HTX and HDE shall have furnished to Bank a copy of its
Certificate of Incorporation including all amendments thereto and restatements
thereof, and all other charter documents of such Person, all of which shall have
been certified as of a date within thirty (30) days of the Closing Date by the
state agency issuing the same.
4.1.4 Certified Bylaws. Each of the Parent, NASS, HTX and
HDE shall have furnished to Bank a copy of the Bylaws of such Person, including
all amendments thereto and restatements thereof, which shall have been certified
by the Secretary or Assistant Secretary of such Person, as applicable, as of the
Closing Date as being complete, accurate and in effect.
4.1.5 Certified Partnership Agreement. Partnership shall
have furnished to Bank a copy of the Agreement of Limited Partnership of
Partnership, which shall have been certified
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by the Secretary or Assistant Secretary of HTX as of the Closing Date as being
complete accurate and in effect.
4.1.6 Certificate of Limited Partnership. Partnership
shall have furnished to Bank a Certificate of Limited Partnership, certified by
the state agency issuing the same as of a date within thirty (30) days of the
Closing Date.
4.1.7 Certificates of Good Standing and Existence. Each of
Borrowers and Guarantors shall have furnished to Bank certificates of good
standing and existence, if applicable, with respect to such Person, which shall
have been certified by the state agency issuing the same as of a date within
thirty (30) days of the Closing Date.
4.1.8 Certificate of Incumbency. Each of Parent, NASS, HDE
and HTX shall have furnished to Bank a certificate of the Secretary or Assistant
Secretary of such Person, certified as of the Closing Date, as to the incumbency
and signatures of the officers of such Person signing this Agreement, the Notes,
Restructuring Documents and any other Loan Documents to which such Person is a
party. Partnership shall have furnished to Bank a certificate of the Secretary
or Assistant Secretary of HTX, certified as of Closing Date, as to the
incumbency and signatures of the officers of HTX signing this Agreement, the
Notes, the Restructuring Documents and the other Loan Documents on behalf of
Partnership to which Partnership is a party.
4.1.9 Opinion of Borrowers' Counsel. Borrower shall have
furnished to Bank the favorable written opinion of legal counsel to Borrower,
dated as of the Closing Date, in form and content satisfactory to Bank and
Bank's legal counsel.
4.1.10 UCC Lien Searches. Bank shall have received UCC
record and copy searches, evidencing the appropriate filing and recording of the
Financing Statements and disclosing no notice of any liens or encumbrances filed
against any of the Collateral other than the Financing Statements or Permitted
Liens. If such searches disclose any liens or encumbrances other than the
Financing Statements or Permitted Liens, Borrowers shall have furnished Bank
with releases or modifications thereof, in form and content satisfactory to
Bank.
4.1.11 Casualty Insurance. Borrowers shall have furnished
to Bank, in form, content and amounts and with companies satisfactory to Bank,
casualty insurance policies with loss payable clauses in favor of Bank, relating
to the assets and properties (including, but not limited to, the Collateral) of
Borrowers.
4.1.12 Environmental Audit. Borrowers shall have furnished
to Bank an environmental audit report, covering the Real Property of NASS which
is now owned or occupied by NASS, in form, content and by an environmental
consultant acceptable to Bank. Each Borrower agrees that Bank may disclose the
contents of the environmental audit report to such governmental agencies and
entities as Bank deems necessary under applicable law, and Borrower shall
deliver to Bank the written consent to such disclosure from the environmental
consultant
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and the seller of any property the purchase of which by Borrower is being
financed in whole or part under this Agreement.
4.1.13 Financial and Other Information. Each Borrower
shall have furnished to Bank its current financial statements, agings, reports
and certificates set forth in Section 6.1.1 through Section 6.1.8.
4.1.14 Restructuring. The Restructuring Documents shall
have been duly executed and delivered by the parties thereto, all conditions to
the consummation of the Restructuring shall have been satisfied or waived with
Bank's consent, and the terms and provisions of the Restructuring Documents and
the structure of the Restructuring shall be satisfactory to Bank.
4.1.15 Commitment Fees. Borrower shall have paid to Bank,
in immediately available funds, a commitment fee of $49000, which commitment
fee is non-refundable and shall be deemed fully earned as of the date of
execution of this Agreement.
4.2 Conditions to All Disbursements. The obligations of Bank
to make any Revolving Loan on any Disbursement Date, including, but not limited
to, the initial Disbursement Date, are subject to the occurrence, prior to or on
the Disbursement Date related to such Revolving Loan, of each of the following
conditions:
4.2.1 Certificate. Bank shall have received a certificate
in compliance with the terms of Section 6.1.7 hereof, executed by the chief
executive or chief financial officer of each Borrower, certified as of the date
of delivery of such certificate and confirming that as of such date:
(a) no Default or Event of Default has occurred and is
continuing; and
(b) the warranties and representations set forth in
Section 5 of this Agreement are true and correct on and as of such
date except as otherwise disclosed to Bank in such certificate.
4.2.2 Borrowing Base Certificate. Bank shall have received
from Borrowers a Borrowing Base Certificate in compliance with the terms of
Section 6.1.8 hereof, executed by the chief executive or chief financial officer
of each Borrower, certified as of the date required under Section 6.1.8 and
confirming that, as of such date, to the best of such officer's knowledge, the
aggregate unpaid principal amount of all Revolving Loans (including the
Revolving Loans made on or prior to such date) does not exceed the lesser of the
Revolving Credit Commitment Amount or the Borrowing Base as in effect on such
date.
4.2.3 Bank Satisfaction. As of such Disbursement Date:
(a) no Default or Event of Default has occurred and is
continuing;
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(b) all of the warranties or representations set forth in
Section 5 of this Agreement shall be true and correct; or
(c) any provision of law, any order of any court or other
agency of government on any regulation, rule or interpretation
thereof shall have had any material adverse effect on the validity or
enforceability of this Agreement, the Notes, the Security Agreements,
the Deed of Trust, the Pledge Agreements, the Financing Statements,
the Subordinated Note or any other Loan Documents.
4.2.4 Approval of Bank Counsel. All actions, proceedings,
instruments and documents required to carry out the transactions contemplated by
this Agreement or incidental thereto and all other related legal matters shall
have been reasonably satisfactory to and approved by legal counsel for Bank, and
said counsel shall have been furnished with such certified copies of actions and
proceedings and such other instruments and documents as they shall have
reasonably requested.
SECTION 5. WARRANTIES AND REPRESENTATIONS
On the date of this Agreement and upon each subsequent Disbursement
Date, Borrower represents and warrants to Bank that:
5.1 Corporate Existence and Power. (a) Parent is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware; (b) Partnership is a limited partnership duly organized,
validly existing and in good standing under the laws of the State of Texas; (c)
Parent is qualified to transact business as a foreign corporation in Texas and
is in good standing under the laws of the State of Texas; (d) each Borrower has
the power and authority to own its properties and assets and to carry out its
respective business as now being conducted and is qualified to do business and
in good standing in every jurisdiction wherein such qualification is necessary;
and (e) each Borrower has the power and authority to execute, deliver and
perform its respective obligations under this Agreement, to borrow money in
accordance with its terms, to execute, deliver and perform its respective
obligations under the Notes, the Restructuring Documents and the other Loan
Documents to which it is a party, to grant to Bank liens and security interests
in the Collateral as hereby contemplated and to do any and all other things
required of it hereunder.
5.2 Authorization and Approvals. The execution, delivery and
performance of this Agreement, the borrowings hereunder and the execution,
delivery and performance of the Notes, the Security Agreements, the Pledge
Agreements, the Financing Statements, the Subordinated Note and the other Loan
Documents to which it is a party (a) have been duly authorized by all requisite
corporate or partnership action of each Borrower; (b) except for UCC filings and
filings with the U.S. Patent & Trademark Office, do not require registration
with or consent or approval of, or other action by, any federal, state or other
governmental authority or regulatory body, or, if such registration, consent or
approval is required, the same has been obtained and disclosed in writing to
Bank; (c) will not violate any provision of law, any order of any court or other
agency of government, the Certificate of Incorporation, Bylaws, or limited
partnership agreement
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of any Borrower, any provision of any indenture, note, agreement or other
instrument to which such Borrower is a party, or by which it or any of its
respective properties or assets are bound; (d) will not be in conflict with,
result in a breach of or constitute (with or without notice or passage of time)
a default under any such indenture, note, agreement or other instrument; and (e)
will not result in the creation or imposition of any lien, charge or encumbrance
of any nature whatsoever upon any of the properties or assets of any Borrower
other than in favor of Bank and as contemplated hereby.
5.3 Valid and Binding Agreement. This Agreement is, and the
Notes, the Security Agreements, the Pledge Agreements, the Financing Statements,
the Acquisition Documents and all other Loan Documents to which each Borrower is
a party, when delivered, valid and binding obligations of such Borrower. The
Pledge Agreements, Guaranties and Security Agreements executed by Guarantors in
favor of Bank, and all other Loan Documents to which such Person is a party,
when delivered, will be valid and binding obligations of such Person in
accordance with their terms.
5.4 Actions, Suits or Proceedings. There are no actions, suits
or proceedings, at law or in equity, and no proceedings before any arbitrator or
by or before any governmental commission, board, bureau, or other administrative
agency, pending, or, to the best knowledge of Borrowers, threatened against or
affecting Borrowers, Guarantors or any of their Subsidiaries or any properties
or rights of Borrowers, Guarantors or any of their Subsidiaries, which, if
adversely determined, could materially impair the right of Borrowers or any of
their Subsidiaries to carry on business substantially as now conducted or could
have a material adverse effect upon the financial condition of Borrowers,
Guarantors, or any of their Subsidiaries.
5.5 No Liens, Mortgagees or Security Interests. Except for
Permitted Liens, none of Borrowers', Guarantors' or their Subsidiaries' assets
and properties, including, without limitation, the Collateral, are subject to
any mortgage, pledge, lien, security interest or other encumbrance of any kind
or character.
5.6 Accounting Principles. All consolidated and consolidating
balance sheets, earnings statements and other financial data furnished to Bank
for the purposes of, or in connection with, this Agreement and the transactions
contemplated by this Agreement, have been prepared in accordance with GAAP, and
do or will fairly present the financial condition of Borrowers, Guarantors and
their Subsidiaries as of the dates, and the results of their operations for the
periods, for which the same are furnished to Bank. Without limiting the
generality of the foregoing, the Financial Statements have been prepared in
accordance with GAAP (except as disclosed therein) and fairly present the
financial condition of Borrowers, Guarantors and their Subsidiaries as of the
dates, and the results of its operations for the fiscal periods, for which the
same are furnished to Bank. No Borrower nor any Guarantor has any material
contingent obligations, liabilities for taxes, long-term leases or unusual
forward or long-term commitments not disclosed by, or reserved against in, the
Financial Statements.
5.7 Financial Condition. Each of Borrowers and Guarantors is
solvent, able to pay its debts as they mature, has capital sufficient to carry
on its business and has assets the fair
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market value of which exceed its liabilities, and none of the Borrowers or
Guarantors will be rendered insolvent undercapitalized or unable to pay maturing
debts by the execution or performance of this Agreement or the other Loan
Documents. There has been no material adverse change in the business, properties
or condition (financial or otherwise) of Borrowers, Guarantors or any of their
Subsidiaries since the date of the latest of the Financial Statements.
5.8 Conditions Precedent. As of each Disbursement Date (a)
there is no Default or Event of Default which has occurred and is continuing,
(b) all of the warranties and representations set forth in Section 5 of this
Agreement are true and correct, (c) the aggregate unpaid principal balance of
all Revolving Loans (including the Revolving Loan to be made on such
Disbursement Date) does not exceed the maximum amount permitted under Section
2.2.1 hereof, (d) the aggregate unpaid principal balance of all Equipment
Acquisition Loans (including any Equipment Acquisition Loan to be made on such
Disbursement Date) does not exceed the maximum amount permitted under Section
2.2.2 hereof, and (e) no provision of law, no order of any court or other agency
of government and no regulation, rule or interpretation thereof shall have had
any material adverse effect on the validity or enforceability of this Agreement,
the Notes, the Security Agreements, the Pledge Agreements, the Financing
Statements, the Deed of Trust or any other documents contemplated hereby.
5.9 Taxes. Each Borrower and its Subsidiaries have each filed
by the due date therefor all federal, state and local tax returns and other
reports they are required by law to file, have paid or caused to be paid all
taxes, assessments and other governmental charges that are shown to be due and
payable under such returns, and have made adequate provision for the payment of
such taxes, assessments or other governmental charges which have accrued but are
not yet payable. No Borrower has any knowledge of any deficiency or assessment
in connection with any taxes, assessments or other governmental charges not
adequately disclosed in the Financial Statements.
5.10 Compliance with Laws. Each Borrower and its Subsidiaries
have each complied with all applicable laws, to the extent that failure to
comply would materially interfere with the conduct of the business of such
Borrower or any of its Subsidiaries.
5.11 Indebtedness. Except as disclosed on Schedule 5.11
attached hereto, no Borrower or any of its Subsidiaries has any indebtedness
(other than indebtedness owed to Bank) for money borrowed or any direct or
indirect obligations under any leases (whether or not required to be capitalized
under GAAP) or any agreements of guarantee or surety except for the endorsement
of negotiable instruments by such Borrower or its Subsidiaries in the ordinary
course of business for deposit or collection.
5.12 Material Agreements. Except as disclosed on Schedule 5.12
attached hereto, no Borrower or any of its Subsidiaries has any material leases,
contracts or commitments of any kind (including, without limitation, employment
agreements, collective bargaining agreements, powers of attorney, distribution
contracts, patent or trademark licenses, contracts for future purchase or
delivery of goods or rendering of services, bonus, pension and retirement plans,
or accrued vacation pay, insurance and welfare agreements); to the best
knowledge of each Borrower, all
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parties to such agreements have complied with the provisions of such leases,
contracts or commitments; and to the best knowledge of each Borrower, no party
to such agreements is in default thereunder, nor has there occurred any event
which with notice or the passage of time, or both, would constitute such a
default.
5.13 Margin Stock. No Borrower or any of its Subsidiaries is
engaged principally, or as one of its important activities, in the business of
extending credit for the purpose of purchasing or carrying any "margin stock"
within the meaning of Regulation U of the Board of Governors of the Federal
Reserve System, and no part of the proceeds of any Loan hereunder will be used,
directly or indirectly, to purchase or carry any margin stock or to extend
credit to others for the purpose of purchasing or carrying any margin stock or
for any other purpose which might violate the provisions of Regulation G, S, T,
U or X of the said Board of Governors. No Borrower owns any margin stock.
5.14 Pension Funding. No Borrower or any of its Subsidiaries
has incurred any accumulated funding deficiency within the meaning of ERISA or
incurred any liability to the PBGC in connection with any employee benefit plan
subject to Title IV of ERISA established or maintained by Borrower or any of its
Subsidiaries and no reportable event, within the meaning of Section 4043(b) of
ERISA and with respect to which the thirty (30) day notice requirement under 29
C.F.R. ss. 2615 is not waived, or prohibited transaction, as defined in ERISA,
has occurred with respect to such plans.
5.15 Misrepresentation. No warranty or representation by any
Borrower contained herein or in any certificate or other document furnished by
such Borrower pursuant hereto contains any untrue statement of material fact or
omits to state a material fact necessary to make such warranty or representation
not misleading in light of the circumstances under which it was made. There is
no fact which any Borrower has not disclosed to Bank in writing which materially
and adversely affects nor, so far as such Borrower can now foresee, is likely to
prove to affect materially and adversely the business, operations, properties,
prospects, profits or condition (financial or otherwise) of such Borrower or any
of its Subsidiaries or ability of such Borrower to perform this Agreement or
Guarantors to perform the Guaranties, the Pledge Agreements or Security
Agreements, as applicable.
5.16 Eligible Accounts. As to each Account represented by
Borrowers to be an "Eligible Account" on a Borrowing Base Certificate, as of the
date of each such Borrowing Base Certificate:
(a) Such Account arose in the ordinary course of the
business of Borrowers or Guarantors out of either (i) a bona fide
sale of Inventory by Borrowers or Guarantors, and in such case such
Inventory has in fact been shipped to, and accepted and retained by,
the appropriate account debtor or the sale has otherwise been
consummated in accordance with such account debtor's order therefor,
or (ii) services performed by Borrowers or Guarantors under an
enforceable contract, and in such case such services have in fact
been performed for the appropriate account debtor in accordance with
such contract.
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(b) Such Account represents a legally valid and
enforceable claim which is due and owing to Borrowers or Guarantors
by such account debtor and for such amount as is represented by
Borrowers or Guarantors to Bank on such Borrowing Base Certificate,
such Account is due and payable not more than sixty (60) days from
the delivery of the related Inventory or the performance of the
related services giving rise to such Account and not more than ninety
(90) days have passed since the invoice date corresponding to such
Account.
(c) The unpaid balance of such Account as represented by
Borrowers or Guarantors to Bank on such Borrowing Base Certificate is
not subject to any defense, counterclaim, set off, contra account,
credit, allowance or adjustment by the account debtor because of
returned, inferior or damaged Inventory or services, or to each
Borrower's knowledge for any other reason, except for customary
discounts allowed by Borrowers or Guarantors in the ordinary course
of business for prompt payment, and there is no agreement between
Borrowers or Guarantors, the related account debtor and any other
person for any rebate, discount, concession or release of liability,
in whole or in part.
(d) The transactions leading to the creation of such
Account comply with all applicable local, state and federal laws and
regulations.
(e) Borrowers or Guarantors have granted to Bank a
perfected security interest in such Account (as an item of the
Collateral) prior in right to all other Persons (other than Permitted
Liens), and such Account has not been sold, transferred or otherwise
assigned by any Borrower or any Guarantor to any Person, other than
Bank.
(f) Such Account is not represented by any note, trade
acceptance, draft or other negotiable instrument or by any chattel
paper, except any such as have been endorsed and delivered by
Borrowers or Guarantors to Bank on or prior to such Account's
inclusion on such Borrowing Base Certificate.
(g) No Borrower or Guarantor has received, with respect to
such Account, any notice of the death (with respect to an individual
account debtor) of the related account debtor or any partner thereof,
nor of the dissolution, liquidation, termination of existence,
insolvency, business failure, appointment of a receiver for any part
of the property of, assignment for the benefit of creditors by, or
the filing of a petition in bankruptcy or the commencement of any
proceeding under any bankruptcy or insolvency laws by or against,
such account debtor.
(h) The account debtor on such Account is not:
(i) an Affiliate of Borrowers or Guarantors;
(ii) the United States of America or any
department, agency, or instrumentality thereof,
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(iii) a citizen or resident of any jurisdiction
other than (A) one of the United States of America (B)
Canada with respect to Accounts of Canadian account
debtors not exceeding $200000 in the aggregate
outstanding at any time and (C) Germany, Italy, Spain,
Great Britain, France, Greece, Switzerland, Netherland,
Denmark, or Mexico with respect to Accounts not exceeding
$500000 in the aggregate outstanding at any time, which
the account debtor thereunder is Ford Motor Company; or
(iv) an account debtor whom Bank has, in the
exercise of such Bank's reasonable discretion, determined
to be (based on such facts as Bank deems appropriate) an
ineligible account debtor and as to which Bank has
notified Borrower.
5.17 Eligible Finished Goods and Eligible Raw Materials
Inventory. As to each item of Inventory represented by Borrowers and Guarantors
to be Eligible Finished Goods Inventory or Eligible Raw Materials Inventory on a
Borrowing Base Certificate, as of the date of each such Borrowing Base
Certificate:
(a) Such item of Inventory is of good and merchantable
quality and is usable or salable by Borrowers or Guarantors in the
ordinary course of Borrowers' or Guarantors' business, and is not
obsolete.
(b) Borrowers or Guarantors, as the case may be, have
granted to Bank a perfected security interest in such item of
Inventory (as an item of the Collateral) prior in right to all other
persons (other than Permitted Liens), and such item of Inventory has
not been sold, transferred or otherwise assigned by any Borrower or
Guarantor to any person other than Bank.
(c) Such item of Inventory is located within the United
States of America at such location or locations as Borrowers and
Guarantors, as the case may be, shall have represented in the
Security Agreements relating to Inventory.
5.18 [This Section Intentionally Omitted.]
5.19 No Conflicting Agreements. No Borrower or any of its
Subsidiaries is in default under any shareholder agreement, preferred stock
agreement or any other agreement to which it is a party or by which it or any of
its property is bound, the effect of which might have a material adverse effect
on the business or operations of any Borrower or any of its Subsidiaries. No
provision of the Certificate of Incorporation, By-Laws, limited partnership
agreement or preferred stock, if any, of any Borrower, and no provision of any
existing mortgage, indenture, note, contract, agreement, statute (including,
without limitation, any applicable usury or similar law), rule, regulation,
judgment, decree or order binding on any Borrower or affecting the property of
any Borrower conflicts with, or requires any consent under, or would in any way
prevent the execution, delivery or carrying out of the terms of, this Agreement
and the other Loan Documents, and the taking of any such action will not
constitute a default under, or result
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in the creation or imposition of, or obligation to create any lien upon the
property of any Borrower pursuant to the terms of any such mortgage, indenture,
note, contract or agreement.
5.20 Restructuring. No default has occurred under any of the
Restructuring Documents.
SECTION 6. AFFIRMATIVE COVENANTS
On a continuing basis from the date of this Agreement until the later
of the Termination Date or when the Indebtedness is paid in full and all
Borrowers have performed all of their other obligations hereunder, each Borrower
covenants and agrees that it will, at its sole expense:
6.1 Financial and Other Information.
6.1.1 Annual Financial Reports. Furnish to Bank, in form
and reporting basis satisfactory to Bank, not later than ninety (90) days after
the close of each fiscal year of Borrower, beginning with the fiscal year ending
June 30, 1998, consolidated financial statements of Borrowers and Guarantors (on
a consolidated and consolidating basis if any Borrower then has any
Subsidiaries) containing the consolidated balance sheet of Borrowers and
Guarantors as of the close of each such fiscal year, consolidated statements of
income and retained earnings and a consolidated statement of cash flows for each
such fiscal year, and such other comments and financial details as are usually
included in similar reports. Such reports shall be prepared in accordance with
GAAP by independent certified public accountants of recognized standing selected
by Borrowers and acceptable to Bank and shall contain unqualified opinions as to
the fairness of the statements therein contained.
6.1.2 Monthly Financial Statements. Furnish to Bank not
later than twenty-five (25) days after the close of each calendar month,
beginning with the month ending June 30, 1998, financial statements (on a
consolidated and consolidating basis if any Borrower then has any Subsidiaries)
containing the consolidated balance sheet of Borrowers and Guarantors as of the
end of such period, statements of income and retained earnings of Borrowers and
Guarantors and a consolidated statement of cash flows of Borrowers and
Guarantors for the portion of the fiscal year up to the end of such period, and
such other comments and financial details as are usually included in similar
reports. These statements shall be prepared on the same accounting basis as the
statements required in Section 6.1.1 of this Agreement and shall be in such
detail as Bank may reasonably require, and the accuracy of the statements shall
be certified by the chief executive or financial officer of each Borrower.
6.1.3 Aging of Accounts. Furnish, or caused to be
furnished, to Bank monthly by the tenth day of each month an aging as of the end
of the preceding month of Borrowers' and Guarantors' Accounts in a form
satisfactory to Bank.
6.1.4 Aging of Payables. Furnish, or caused to be
furnished, to Bank monthly by the tenth day of each month an aging of Borrowers'
and Guarantors' accounts payable as of the end of the preceding month in a form
satisfactory to Bank.
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6.1.5 Inventory Listing. Furnish, or caused to be
furnished, to Bank monthly by the tenth day of each month, a listing of the
Borrowers' and Guarantors' Eligible Raw Materials Inventory and Eligible
Finished Goods Inventory, and the cost and location thereof as of the end of the
preceding month in a form satisfactory to Bank.
6.1.6 Shares and Shareholders. Promptly inform Bank of any
options, warrants or rights to purchase, or any agreement for the subscription,
purchase or acquisition of, any shares of the capital stock of any Borrower or
of any of the Subsidiaries issued or entered into after the Closing Date.
6.1.7 Certificate. Together with each delivery of the
financial statements required by Sections 6.1.1 and 6.1.2 of this Agreement,
furnish to Bank a certificate, in the form of Exhibit B hereto, executed by the
chief executive or chief financial officer of each Borrower, certified as of
such date, and confirming that, as of such date:
(a) no Default or Event of Default has occurred, or if any
such matter exists, stating the nature thereof, the period of
existence thereof, and what action Borrowers propose to take with
respect thereto;
(b) the warranties and representations set forth in
Section 5 of this Agreement are true and correct on and as of such
date, except as otherwise specified in such certificate; and
(c) each Borrower is in compliance with all the terms and
conditions contained in this Agreement;
and attached to which certificate shall be a report in form satisfactory to
Bank, prepared by such chief executive or chief financial officer of each
Borrower, setting forth information and calculations that demonstrate compliance
(or noncompliance) with each of the covenants set forth in Sections 6.5, 6.6,
and 6.7 of this Agreement.
As part of each such Borrowing Base Certificate, Borrowers and
Guarantors shall prepare reports of its Accounts and Inventory (in the forms
shown in Exhibit A); provided, however, that Borrowers and Guarantors shall be
required to update their Inventory reports only at the end of each month and,
for each Borrowing Base Certificate submitted effective as of the 15th day of
each month, Borrowers and Guarantors shall use the inventory calculations for
the most recent month-end.
6.1.8 Borrowing Base Certificate. Furnish to Bank, in the
form of Exhibit A hereto by the 20th day of each month, a Borrowing Base
Certificate as of the 15th day of such month, executed by the chief executive or
chief financial officer of each Borrower, confirming that the aggregate unpaid
principal amount of all Revolving Loans does not exceed the lesser of the
Revolving Credit Commitment Amount or the Borrowing Base as then in effect (or,
if such is not the case, accompanied by a prepayment of the Revolving Credit
Note in accordance with Section 2.1.6 of this Agreement).
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As part of each such Borrowing Base Certificate, Borrowers and
Guarantors shall prepare reports of its Accounts and Inventory (in the forms
shown in Exhibit A); provided, however, that Borrowers and Guarantors shall be
required to update their Inventory reports only at the end of each month and,
for each Borrowing Base Certificate submitted effective as of the 15th day of
each month, Borrowers and Guarantors shall use the inventory calculations for
the most recent month-end.
6.1.9 Adverse Events. Promptly inform Bank of the
occurrence of any Default or Event of Default, or of any other occurrence which
has or could reasonably be expected to have a materially adverse effect upon any
Borrower's or any of its Subsidiaries' business, properties, or financial
condition or upon any Borrower's ability to comply with its respective
obligations hereunder.
6.1.10 Shareholder Reports. Promptly furnish to Bank upon
becoming available a copy of all financial statements, reports, notices, proxy
statements and other communications sent by any Borrower or any of its
Subsidiaries to their stockholders, and all regular and periodic reports filed
by any Borrower or any of its Subsidiaries with any securities exchange, the
Securities and Exchange Commission, or other governmental authority.
6.1.11 Management Letters. Furnish to Bank, promptly upon
receipt thereof, copies of all management letters and other reports of substance
submitted to any Borrower or any of its Subsidiaries by independent certified
public accountants in connection with any annual or interim audit of the books
of such Borrower or any of its Subsidiaries.
6.1.12 Other Information As Requested. Promptly furnish to
Bank such other information regarding the operations, business affairs and
financial condition of any Borrower and its Subsidiaries as Bank may reasonably
request from time to time and permit Bank, its employees, attorneys and agents,
to inspect all of the books, records and properties of any Borrower and its
Subsidiaries at any reasonable time.
6.2 Insurance. Keep its insurable properties (including but
not limited to the Collateral) and the insurable properties of Borrowers,
Guarantors and their Subsidiaries adequately insured and maintain (a) insurance
against fire and other risks customarily insured against under an "all-risk"
policy and such additional risks customarily insured against by companies
engaged in the same or a similar business to that of Borrowers, Guarantors or
their Subsidiaries, as the case may be, (b) self-insurance against worker's
compensation claims, (c) public liability and product liability insurance, and
(d) such other insurance as may be required by law or as may be reasonably
required in writing by Bank, all of which insurance shall be in such amounts,
containing such terms, in such form, for such purposes, prepaid for such time
period, and written by such companies as may be reasonably satisfactory to Bank.
Each Borrower will promptly deliver to Bank evidence satisfactory to Bank that
such insurance has been so procured, including satisfactory loss payable
endorsements naming Bank a loss payee and additional insured. Each policy and
endorsement shall contain a provision whereby it may not be canceled or amended
except upon thirty (30) days' prior written notice to Bank. If any Borrower
fails to maintain satisfactory insurance as herein provided, Bank shall have the
option
SECOND AMENDED AND RESTATED SECURED LOAN AGREEMENT - Page 30
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to do so, and each Borrower agrees to repay Bank upon demand, with interest at
the Legal Rate, all amounts so expended by Bank. Each Borrower hereby appoints
Bank or any employee or agent of Bank as such Borrower's attorney-in-fact, which
appointment is coupled with an interest and irrevocable, and authorizes Bank or
any employee or agent of Bank, on behalf of such Borrower, to adjust and
compromise any loss under said insurance and to endorse any check or draft
payable to such Borrower in connection with returned or unearned premiums on
said insurance or the proceeds of said insurance, and any amount so collected
may be applied toward satisfaction of the Indebtedness; provided, however, that
Bank shall not be required hereunder so to act.
6.3 Taxes. Pay promptly and within the time that they can be
paid without late charge, penalty or interest all taxes, assessments and similar
imposts and charges of every kind and nature lawfully levied, assessed or
imposed upon any Borrower or its Subsidiaries, and their property, except to the
extent being contested in good faith. If any contested amount exceeds $150000,
upon Bank's request each Borrower shall escrow funds, provide adequate reserves
in conformity with GAAP, or provide other security, in an amount and manner
satisfactory to Bank. If any Borrower shall fail to pay such taxes and
assessments within the time they can be paid without penalty, late charge or
interest Bank shall have the option to do so, and each Borrower agrees to repay
Bank upon demand, with interest at the Legal Rate, all amounts so expended by
Bank.
6.4 Maintain Corporation and Business. Do or cause to be done
all things necessary to preserve and keep in full force and effect Borrowers',
Guarantors' and each of their Subsidiaries' corporate existence, rights and
franchises and comply with all applicable laws; continue to conduct and operate
their, Guarantors' and each of their Subsidiaries' business substantially as
conducted and operated during the present and preceding calendar year; at all
times maintain, preserve and protect all franchises and trade names and preserve
all the remainder of their, Guarantors' and their Subsidiaries' property and
keep the same in good repair, working order and condition; and from time to time
make, or cause to be made, all needed and proper repairs, renewals,
replacements, betterments and improvements thereto so that the business carried
on in connection therewith may be properly and advantageously conducted at all
times.
6.5 Maintain Tangible Effective Net Worth. Cause Borrowers to
maintain at all times a Tangible Effective Net Worth on a consolidated and
consolidating basis of not less than the amount specified below for each period
specified below:
Period Amount
------ ------
Closing Date until May 31, 1998 $14000000
June 1, 1998 and thereafter $15000000
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6.6 Maintain Debt Ratio. Cause Borrowers to maintain at all
times the ratio of their Debt to Tangible Effective Net Worth on a consolidated
and consolidated basis at not more than the ratio specified below for each
period specified below:
Period Ratio
------ -----
Closing Date until May 31, 1998 2.50 to 1.00
June 1, 1998 and thereafter 2.00 to 1.00
6.7 Maintain Flow Coverage Ratio. Cause Borrowers to maintain
at all times the ratio of their Cash Flow to their Current Maturities of Long
Term Debt on a consolidated and consolidating basis at not less than (a) 1.0 to
1.0 during the period beginning on January 1, 1998 and ending on June 30, 1998,
and (b) 1.75 to 1.0 thereafter. Such ratio shall be calculated on a rolling
twelve-month basis.
6.8 [This Section Intentionally Omitted]
6.9 ERISA. (a) At all times meet and cause Guarantors and each
of the Subsidiaries to meet the minimum funding requirements of ERISA with
respect to each Borrower's, Guarantor's and Subsidiary's employee benefit plans
subject to Title IV of ERISA which, in any one case or in the aggregate,
involves a contribution of $125000 or more; (b) promptly after any Borrower
knows or has reason to know (i) of the occurrence of any event, which would
constitute a reportable event, within the meaning of Section 4043(b) of ERISA
and with respect to which the thirty (30) day notice requirement under 29 C.F.R.
ss. 2615 is not waived for a nonexempt prohibited transaction, or prohibited
transaction under Section 406 of ERISA which, in any one case or in the
aggregate, involves a liability of $125000 or more, or (ii) that the PBGC or
any Borrower or Guarantor has instituted or will institute proceedings to
terminate an employee pension plan, deliver to Bank a certificate of the chief
financial officer of each Borrower setting forth details as to such event or
proceedings and the action which such Borrower or Guarantor, as the case may be,
proposes to take with respect thereto, together with a copy of any notice of
such event which may be required to be filed with the PBGC; and (c) furnish to
Bank (or cause the plan administrator to furnish Bank) a copy of the annual
return (including all schedules and attachments) for each employee pension
benefit plan covered by Title IV of ERISA, and filed with the Internal Revenue
Service by each Borrower and/or each Guarantor not later than ten (10) days
after such report has been so filed.
6.10 Use of Loan Proceeds. Use the proceeds of the Loans
hereunder only for Borrower's working capital purposes.
6.11 Collateral Audits. Permit Bank to conduct audits of any
Borrower's and/or Guarantor's Accounts and Inventory as often as Bank, in its
credit judgment, deems such audits to be reasonably necessary. Upon Bank's
request, each Borrower shall reimburse Bank for the reasonable costs and
expenses expended by Bank in connection with such audits. Notwithstanding the
foregoing, without limiting Bank's right to conduct more frequent audits, Bank
acknowledges that it currently intends to conduct (a) two (2) such audits on
Accounts
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during each 12-month period this Agreement is in effect and (b) one (1) such
audit on Inventory during each 12-month period this Agreement is in effect.
SECTION 7. NEGATIVE COVENANTS
On a continuing basis from the date of this Agreement until the later
of the Termination Date or when the Indebtedness is paid in full and each
Borrower has performed all of its other respective obligations hereunder, each
Borrower covenants and agrees that it will not, and will not permit Guarantor or
any Subsidiary to:
7.1 Dividends. Upon the occurrence and during the continuance
of a Default or an Event of Default, declare or pay any dividends on, or make
any other distribution (whether by reduction of capital or otherwise) with
respect to any shares of its capital stock, except for dividends from a
Subsidiary of any Borrower to Borrowers.
7.2 Set-Off Against Subordinated Debt. Notwithstanding
anything to the contrary contained in the Subordinated Note, without the prior
written consent of Bank, at any time offset any amounts due under the
Acquisition Agreement against any amounts due and payable under the Subordinated
Note in an aggregate amount in excess of $250000.
7.3 Stock Acquisition. Purchase, redeem, retire or otherwise
acquire any of the shares of its capital stock, or make any commitment to do so,
which in the aggregate exceeds a book value equal to $500000.
7.4 Liens and Encumbrances. Create, incur, assume or suffer to
exist any mortgage, pledge, encumbrance, security interest, lien or charge of
any kind upon any of its property or assets (including, without limitation, any
charge upon property purchased or acquired under a conditional sales or other
title retaining agreement or lease required to be capitalized under GAAP)
whether now owned or hereafter acquired other than (a) Permitted Liens and (b)
liens securing indebtedness, which does not exceed, at any time, an aggregate
amount equal to $250000.
7.5 Indebtedness. Incur, create, assume or permit to exist any
indebtedness or liability on account of deposits or advances or any indebtedness
or liability for borrowed money, or any other indebtedness or liability
evidenced by notes, bonds, debentures or similar obligations, or any other
indebtedness whatsoever, except for (a) the Indebtedness, (b) indebtedness
subordinated to the prior payment in full of the Indebtedness upon terms and
conditions approved in writing by Bank, (c) existing indebtedness to the extent
set forth on Schedule 5.11 of this Agreement, (d) trade indebtedness incurred
and paid in the ordinary course of business, (e) contingent indebtedness to the
extent permitted by Section 7.7 of this Agreement, (f) indebtedness secured by
Permitted Liens, (g) indebtedness related to acquisitions permitted by Section
7.11 of this Agreement.
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7.6 Extension of Credit. Make loans, advances or extensions of
credit to any Person in excess of an aggregate amount equal to $250000, except
for sales on open account and otherwise in the ordinary course of business.
7.7 Guarantee Obligations. Guarantee or otherwise, directly or
indirectly, in any way be or become responsible for obligations of any other
Person, whether by agreement to purchase the indebtedness of any other Person,
agreement for the furnishing of funds to any other Person through the furnishing
of goods, supplies or services, by way of stock purchase, capital contribution,
advance or loan, for the purpose of paying or discharging (or causing the
payment or discharge of) the indebtedness of any other Person, or otherwise,
except for the endorsement of negotiable instruments by such Borrower in the
ordinary course of business for deposit or collection.
7.8 Subordinate Indebtedness. Subordinate any indebtedness due
to it from a Person to indebtedness of other creditors of such Person.
7.9 Property Transfer, Merger or Lease-Back. (a) Sell, lease,
transfer or otherwise dispose of properties and assets having an aggregate book
value of more than $100000 (whether in one transaction or in a series of
transactions) except as to (i) the sale of Inventory in the ordinary course of
business and (ii) the disposition of Equipment; provided that (A) the proceeds
thereof are utilized by such Borrower to purchase Equipment of like kind,
function or value, (B) the replacement Equipment is acquired prior to or
concurrently with any disposition of Equipment which is to be replaced, and (C)
the replacement Equipment is free and clear of all liens other than Permitted
Liens; (b) change its name, consolidate with or merge into any other
corporation, permit another corporation to merge into it, enter into any
reorganization or recapitalization or reclassify its capital stock, (c) without
the prior approval of Bank, acquire, during any fiscal year, properties or
assets of any other Person(s) if such acquisitions would exceed $2,500000 in
the aggregate, or (d) enter into any sale-leaseback transaction.
7.10 Acquire Securities. Purchase or hold beneficially any
stock or other securities of, or make any investment or acquire any interest
whatsoever in, any other Person, except for (i) the common stock of the
Subsidiaries owned by each Borrower on the date of this Agreement, (ii)
certificates of deposit with maturities of one year or less of United States
commercial banks with capital, surplus and undivided profits in excess of
$100000000 and direct obligations of the United States Government maturing
within one year from the date of acquisition thereof, and (iii) commercial paper
of domestic corporations maturing no more than 270 days from the date of
acquisition a rating of A-l (or comparable rating if the rating system is
changed) by Standard & Poor's Rating Service, a division of McGraw/Hill, Inc. or
P-1 rating (or comparable rating if the rating system has changed) by Moody's
Investors Service, Inc.
7.11 Acquire Fixed Assets. Acquire or expend for, or commit
itself to acquire or expend for, fixed assets by lease, purchase or otherwise in
an aggregate amount that exceeds $6000000 per fiscal year.
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7.12 Pension Plan. (a) Allow any fact, condition or event to
occur or exist with respect to any employee pension or profit sharing plans
established or maintained by it which might constitute grounds for termination
of any such plan or for the court appointment of a trustee to administer any
such plan, or (b) permit any such plan to be the subject of termination
proceedings (whether voluntary or involuntary) from which termination
proceedings there may result a liability of such Borrower, any Guarantor or any
of its Subsidiaries to the PBGC which, in the opinion of Bank, will have a
materially adverse effect upon the operations, business, property, assets,
financial condition or credit of such Borrower, Guarantor or any of its
Subsidiaries.
7.13 Misrepresentation. Furnish Bank with any certificate or
other document that contains any untrue statement of a material fact or omits to
state a material fact necessary to make such certificate or document not
misleading in light of the circumstances under which it was furnished.
7.14 Margin Stock. Apply any of the proceeds of any Note to the
purchase or carrying of any "margin stock" within the meaning of Regulation U of
the Board of Governors of the Federal Reserve System, or any regulations,
interpretations or rulings thereunder.
SECTION 8. PROVISIONS REGARDING ENVIRONMENTAL LAWS
8.1 Covenants Regarding Environmental Compliance. Each
Borrower hereby covenants and agrees with Bank as follows:
8.1.1 Hazardous Substance Use, Manufacture. Each Borrower
shall not use, generate, manufacture, produce, store, release, discharge, or
dispose of on, under, or about the Real Property or transport to or from the
Real Property any Hazardous Substance, or allow any other person or entity to do
so on the Real Property, except in material compliance with all applicable laws
(including all applicable Environmental Laws).
8.1.2 Compliance with Environmental Laws. Each Borrower
shall keep and maintain, or cause to be kept and maintained, the Real Property
in compliance with, and shall not cause the Real Property to be in material
violation of, any applicable Environmental Law.
8.1.3 Notices. Each Borrower shall give prompt written
notice to Bank of:
(a) any proceeding or written inquiry by any governmental
authority with respect to the presence of any Hazardous Substance on
the Real Property or the migration thereof from or to other property;
(b) all written claims made, or to the best knowledge of
each Borrower, threatened by any third party against any Borrower,
Guarantor or the Real Property relating to any loss or injury
resulting from any Hazardous Substance;
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(c) any Borrower's or Guarantor's discovery of any
occurrence or condition on any real property adjoining or in the
vicinity of the Real Property that would reasonably be expected to
cause the Real Property or any part thereof to be subject to any
material restrictions on the ownership, occupancy, transferability or
use of the Real Property under any applicable Environmental Law, or
to be otherwise subject to any material restrictions on the
ownership, occupancy, transferability or use of the Real Property
under any applicable Environmental Law;
(d) any written notice of violation or complaint from a
governmental authority and relating to an applicable Environmental
Law;
(e) any written notices or reports any Borrower or
Guarantor provides to a governmental authority relating to instances
of non-compliance with an applicable Environmental Law; and
(f) any written application any Borrower or Guarantor
provides to a governmental authority to obtain or amend a permit or
approval relating to the generation, storage, treatment, or disposal
of a Hazardous Substance or air contaminant.
8.1.4 [This Section Intentionally Omitted].
8.1.5 Indemnity. Each Borrower shall defend, indemnify and
hold harmless Bank, its employees, agents, officers, directors, attorneys,
successors and assigns from and against any and all claims, demands, penalties,
fines, liabilities, settlements, damages, costs or expenses of whatever kind or
nature, including, without limitation, reasonable attorney's and consultant's
fees (said attorneys and consultants to be selected by Bank), investigation and
laboratory fees, environmental studies reasonably required by Bank (whether
prior to foreclosure or otherwise), court costs and litigation expenses, any of
which arise out of or are related to: (a) the use, generation, manufacture,
production, storage, presence, disposal, release or threatened release of any
Hazardous Substance on, from or affecting the Real Property or the soil, water,
vegetation, buildings, personal property, persons or animals thereon, (b) any
personal injury (including wrongful death) or property damage (real or personal)
arising out of or related to such Hazardous Substance, (c) any lawsuit brought
or threatened, settlement reached, or governmental order relating to such
Hazardous Substances, (d) the cost of removal of all such Hazardous Substances
from all or any portions of the Real Property, (e) taking necessary precautions
to protect against the release of Hazardous Substances on or affecting the Real
Property, (f) complying with all Environmental Laws, (g) any violation of
Environmental Laws or requirements of Bank which are based upon or in any way
related to such Hazardous Substances, and/or (h) the costs of any repair,
cleanup or remediation of the Real Property and the preparation and
implementation of any closure, remedial or other plans required to be undertaken
by applicable Environmental Laws. Upon Bank's request, each Borrower shall
execute a separate indemnity covering the foregoing matters, containing such
terms and provisions required by Bank and not materially more onerous to such
Borrower than the indemnity provided in this Section 8.1.5.
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8.1.6 Remedial Work. In the event that any investigation,
site monitoring, containment, cleanup, removal, restoration or other remedial
work of any kind or nature (the "REMEDIAL WORK") is required to be undertaken
under any applicable local, state or federal law or regulation, any judicial
order, or by any governmental entity because of, or in connection with, the
current or reasonably threatened future presence or release of a Hazardous
Substance in or into the air, soil, ground water, surface water or soil vapor
at, on, about, under or within the Real Property (or any portion thereof), each
Borrower shall promptly after written demand for performance thereof by
appropriate governmental authorities or Bank (or such shorter period of time as
may be required under any applicable law, regulation, order or agreement),
commence, or undertake efforts to require other responsible parties to commence,
and thereafter diligently prosecute to completion, all such Remedial Work. All
Remedial Work shall be performed by contractors selected by Borrowers and
approved in advance by Bank, and under the supervision of a consulting engineer
selected by Borrowers and approved by Bank (which approval Bank shall not
unreasonably withhold). All costs and expenses of such Remedial Work shall be
paid by Borrowers including, but not limited to, Bank's reasonable attorneys'
fees and reasonable costs incurred in connection with its monitoring or review
of such Remedial Work except in the event Borrowers shall assert and can
establish a good faith defense to any such claims.
8.1.7 Certain Rights of Bank. Upon Bank's receipt of
notice from any source concerning the existence of any Hazardous Substance or
the noncompliance by any Borrower or any Real Property with any Environmental
Law, which matter, if true, could result in an order, suit or other action
against such Borrower and/or any Real Property and which could, in Bank's sole
opinion, jeopardize such Borrower's ability to repay the Indebtedness or Bank's
collateral security, Bank shall have the right (but not the obligation) to enter
any such Real Property or to take any other actions that Bank deems appropriate
to clean up, remove, resolve or minimize the adverse impact of any such matter.
The foregoing sentence shall not be deemed to limit any other rights Bank may
have under this Agreement, any other document, or at law or in equity. All
reasonable costs and expenses incurred by Bank in the exercise of any such
rights shall become part of the Indebtedness, shall be secured by the collateral
contemplated hereunder, and shall be payable by Borrowers upon demand.
8.2 Representations and Warranties Relating to Environmental
Matters. Each Borrower represents and warrants to Bank that, except as disclosed
on Schedule 8.2 hereto:
8.2.1 No Existing Violation. None of the Real Property,
Borrowers, or Guarantors are in violation of or subject to any existing, pending
or, to the knowledge of Borrowers, threatened investigation by any governmental
authority under any Environmental Law.
8.2.2 No Permits Required. No Borrower or Guarantor has
acquired and is required by any applicable Environmental Law to obtain any
permits or license to construct or use any improvements, fixtures or equipment
forming a part of the Real Property except such permits or licenses as have been
obtained.
8.2.3 Previous Uses. Each Borrower or its environmental
advisors has made diligent inquiry into previous uses and ownership of the Real
Property of such Borrower, and
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based upon such inquiry has no knowledge of any Hazardous Substance disposed of
or released on or to the Real Property of such Borrower. To the best of each
Borrower's knowledge, no Borrower, Guarantor or their environmental advisors has
any knowledge of any Hazardous Substance disposed of or released on or to the
Real Property.
8.2.4 Use by Borrowers or Guarantors. Borrowers' and
Guarantors' prior, present and intended use of the Real Property will not result
in the disposal or release of any Hazardous Substance on or to the Real Property
except in material compliance with applicable law.
8.2.5 Underground Storage. No underground storage tanks,
whether or not containing any Hazardous Substances, are located on or under the
Real Property.
8.3 Environmental Risk Assessment. At any time (a) that Bank
reasonably believes that Hazardous Substances have been disposed of on, or have
been released to or from any of the Real Property in material violation of
Environmental Laws, or (b) after an Event of Default arising under Section 9,
within thirty (30) days after a written request therefor by Bank, each Borrower
shall deliver to Bank a report prepared at such Borrower's cost and expense by
an environmental consultant acceptable to Bank, detailing the results of an
environmental investigation concerning the Real Property, including results of
any soil and ground water samples that may have been taken in connection with
such investigation.
8.4 Survival of Obligations. The provisions of this Section 8
shall be in addition to any and all other obligations and liabilities each
Borrower may have to Bank at common law or pursuant to any other agreement and,
notwithstanding anything in Section 10.13 hereof to the contrary, shall survive
(a) the repayment of the Notes and all other Indebtedness, (b) the satisfaction
of all of each Borrower's other obligations hereunder and under the other Loan
Documents, (c) the discharge of any mortgage hereafter granted to Bank, and (d)
the foreclosure or acceptance of a deed in lieu of foreclosure of any mortgage
hereafter granted to Bank.
SECTION 9. EVENTS OF DEFAULT - ENFORCEMENT - APPLICATION OF
PROCEEDS
9.1 Events of Default. The occurrence of any of the following
events shall constitute an Event of Default hereunder:
9.1.1 Failure to Pay Monies Due. If each Borrower shall
fail to pay, when due, any of the Indebtedness, including, without limitation,
any principal or interest under the Notes or any taxes, insurance or other
amount payable by such Borrower under this Agreement or under any other Loan
Document execution in connection herewith, or if any of such Borrower's
Subsidiaries shall fail to pay, when due, any indebtedness, obligation or
liability whatsoever of such person to Bank.
9.1.2 Misrepresentation. If any warranty or representation
of any Borrower in connection with or contained in this Agreement, or if any
financial data or other information now
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or hereafter furnished to Bank by or on behalf of such Borrower, shall prove to
be false or misleading in any material respect.
9.1.3 Noncompliance with Agreement. If any Borrower,
Guarantor or any of their Subsidiaries shall fail to perform in the time and
manner required any of its respective obligations or covenants under, or shall
fail to comply with any of the provisions of, this Agreement or any other
agreement with Bank to which it may be a party, which does not involve the
failure to make a payment when due (be it principal, interest, taxes, insurance
or otherwise) and which is not cured by such Borrower or Guarantor within thirty
(30) days after the earlier of the date of notice to such Borrower by Bank of
such Default or the date Bank is notified, or should have been notified pursuant
to such Borrower's obligation under Section 6.1.9 hereof, of such Default.
9.1.4 Other Defaults. If any Borrower, Guarantor or any of
their Subsidiaries shall default in the payment when due of any of its capital
lease obligations or its indebtedness for borrowed money (other than to Bank) in
the aggregate amount in excess of $100000 or in the observance or performance
of any term, covenant or condition in any agreement or instrument evidencing,
securing or relating to such indebtedness, and such default be continued for a
period sufficient to permit acceleration of the indebtedness, irrespective of
whether any such default shall be forgiven or waived or there has been
acceleration by the holder thereof.
9.1.5 Judgments. If there shall be rendered against any
Borrower, Guarantor or any of their Subsidiaries one or more judgments or
decrees involving an aggregate liability of $125000 or more, which has or have
become nonappealable and shall remain undischarged, unsatisfied by insurance and
unstayed for more than forty-five (45) days, whether or not consecutive; or if a
writ of attachment or garnishment against the property of any Borrower,
Guarantor or any of their Subsidiaries shall be issued and levied in an action
claiming $125000 or more and not released or appealed and bonded/secured in an
amount and manner reasonably satisfactory to Bank within forty-five (45) days
after such issuance and levy.
9.1.6 Business Suspension, Bankruptcy, Etc. If any
Borrower, Guarantor or any of their Subsidiaries shall voluntarily suspend
transaction of its business; or if any Borrower, Guarantor or any of their
Subsidiaries shall not pay its debts as they mature or shall make a general
assignment for the benefit of creditors; or proceedings in bankruptcy, or for
reorganization or liquidation of any Borrower, Guarantor or any of their
Subsidiaries under the Bankruptcy Code or under any other state or federal law
for the relief of debtors shall be commenced or shall be commenced against any
Borrower, Guarantor or any of their Subsidiaries and shall not be discharged
within forty-five (45) days of commencement; or a receiver, trustee or custodian
shall be appointed for any Borrower, Guarantor or any of their Subsidiaries or
for any substantial portion of their respective properties or assets.
9.1.7 Change of Management or Ownership. If (i) Parent
shall cease to own and control, beneficially and of record, one hundred percent
(100%) of the issued and outstanding capital stock of NASS and HTX, (ii) HTX
shall cease to own and control, beneficially and of record, one hundred percent
(100%) of HDE or one percent (1%) general partnership interest in
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Partnership, or (iii) if HDE shall cease to own and control, beneficially and of
record, ninety-nine percent (99%) limited partnership interest in Partnership.
9.1.8 Inadequate Funding or Termination of Employee
Benefit Plan(s). If any Borrower, Guarantor or any of their Subsidiaries shall
fail to meet its minimum funding requirements under Title IV of ERISA with
respect to any employee pension benefit plan subject to Title IV of ERISA
established or maintained by it, or if any such plan shall be subject of
termination proceedings (whether voluntary or involuntary) and there shall
result from such termination proceedings a liability of such Borrower, Guarantor
or any of their Subsidiaries to the PBGC which in the reasonable opinion of Bank
will have a materially adverse effect upon the operations, business, property,
assets, financial condition or credit of such Borrower or any of its
Subsidiaries.
9.1.9 Occurrence of Certain Reportable Events. If there
shall occur, with respect to any pension plan maintained by any Borrower,
Guarantor or any of their Subsidiaries any reportable event, within the meaning
of Section 4043(b) of ERISA and with respect to which the thirty (30) day notice
requirement under 29 C.F.R. ss. 2615 is not waived, which Bank shall determine
constitutes a ground for the termination of any such plan, and if such event
continues for thirty (30) days after Bank gives written notice to such Borrower,
provided that termination of such plan or appointment of such trustee would, in
the opinion of Bank, have a materially adverse effect upon the operations,
business, property, assets, financial condition or credit of such Borrower,
Guarantor or any of their Subsidiaries.
9.1.10 Default Under Acquisition Documents. Any event of
default shall occur under, or any Borrower shall default in the performance or
observance of any term, covenant, condition or agreement contained in, any of
the Acquisition Documents.
9.1.11 Default Under Restructuring Documents. Any event of
default shall occur under, or any Borrower shall default in the performance or
observance of any term, covenant, condition or agreement contained in, any of
the Restructuring Documents.
9.2 Acceleration of Indebtedness, Remedies. Upon the
occurrence of an Event of Default, all Indebtedness shall be due and payable in
full immediately at the option of Bank without presentation, demand, protest,
notice of dishonor or other notice of any kind, all of which are hereby
expressly waived. Unless all of the Indebtedness is then immediately fully paid,
Bank shall have and may exercise any one or more of the rights and remedies for
which provision is made for a secured party under the UCC, under the Security
Agreements, the Pledge Agreements or under any other document contemplated
hereby or for which provision is provided by law or in equity, including,
without limitation, the right to take possession and sell, lease or otherwise
dispose of any or all of the Collateral and to set off against the Indebtedness
any amount owing by Bank to any Borrower and/or any property of such Borrower in
possession of Bank. Each Borrower agrees, upon request of Bank, to assemble the
Collateral and make it available to Bank at any place designated by Bank which
is reasonably convenient to Bank and such Borrower. In addition to and not in
limitation of the other provisions of this Section 9.2, upon the
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occurrence of an Event of Default, Bank may, at its option, terminate its
commitment under this Agreement to make Revolving Credit Loans.
9.3 One Obligation; Application of Proceeds. All of the
Indebtedness, including the Loans, shall constitute one loan and obligation,
secured by Bank's security interest in the Collateral and by all other security
interests, mortgages, liens, claims, and encumbrances now and from time to time
hereafter granted from each Borrower to Bank. Upon the occurrence of an Event of
Default, Bank may in its sole discretion apply the Collateral to any portion of
the Indebtedness. The proceeds of any sale or other disposition of the
Collateral authorized by this Agreement shall be applied by Bank, first upon all
expenses authorized by the UCC or otherwise in connection with the sale and all
reasonable attorneys' fees and legal expenses incurred by Bank. The balance of
the proceeds of such sale or other disposition shall be applied in the payment
of the Indebtedness, first to Bank's costs and expenses, then to interest, then
to principal, and then to other Indebtedness. The surplus, if any, shall be paid
over to each Borrower or to such other Person or Persons as may be entitled
thereto under applicable law. Each Borrower shall remain liable for any
deficiency, which such Borrower shall pay to Bank immediately upon demand.
9.4 Cumulative Remedies. The remedies provided for herein are
cumulative to the remedies for collection of the Indebtedness as provided by
law, in equity or by any mortgage, security agreement or other document
contemplated hereby. Nothing herein contained is intended, nor shall it be
construed, to preclude Bank from pursuing any other remedy for the recovery of
any other sum to which Bank may be or become entitled for the breach of this
Agreement by any Borrower.
9.5 Payable Upon Demand. To the extent that any of the
Indebtedness is payable upon demand, nothing contained in this Agreement or any
document contemplated hereby shall be construed to prevent Bank from making
demand, without notice and with or without reason, for immediate payment of all
or any part of such Indebtedness at any time or times, whether or not a Default
or an Event of Default has occurred.
SECTION 10. MISCELLANEOUS.
10.1 Independent Rights. No single or partial exercise of any
right, power or privilege hereunder, or any delay in the exercise thereof, shall
preclude other or further exercise of the rights of the parties to this
Agreement.
10.2 Covenant Independence. Each covenant in this Agreement
shall be deemed to be independent of any other covenant, and an exception or
illegality in one covenant shall not create an exception or illegality in
another covenant.
10.3 Waivers and Amendments. No forbearance on the part of Bank
in enforcing any of its rights under this Agreement, nor any renewal, extension
or rearrangement of any payment or covenant to be made or performed by any
Borrower hereunder, shall constitute a waiver of any of the terms of this
Agreement or of any such right. No Default or Event of Default shall
SECOND AMENDED AND RESTATED SECURED LOAN AGREEMENT - Page 41
<PAGE>
be waived by Bank except in a writing signed and delivered by an officer of
Bank, and no waiver of any other Default or Event of Default shall operate as a
waiver of any Default or Event of Default or of the same Default or Event of
Default on a future occasion. No other amendment, modification or waiver of, or
consent with respect to, any provision of this Agreement or the Notes or other
documents contemplated hereby shall be effective unless the same shall be in
writing and signed and delivered by an officer of Bank.
10.4 Governing Law. This Agreement, and each and every term and
provision hereof, shall be governed by and construed in accordance with the
internal law of the State of Texas. If any provisions of this Agreement shall
for any reason be held invalid or unenforceable, such invalidity or
unenforceability shall not affect any other provision hereof, but this Agreement
shall be construed as if such invalid or unenforceable provisions had never been
contained herein.
10.5 Survival of Warranties, Etc. All of each Borrower's
covenants, agreements, representations and warranties made in connection with
this Agreement and any document contemplated hereby shall survive the borrowing
and the delivery of the Notes hereunder and shall be deemed to have been relied
upon by Bank notwithstanding any investigation heretofore or hereafter made by
Bank. All statements contained in any certificate or other document delivered to
Bank at any time by or on behalf of each Borrower pursuant hereto or in
connection with the transactions contemplated hereby shall constitute
representations and warranties by such Borrower in connection with this
Agreement.
10.6 Costs and Expenses. Each Borrower agrees that it will
reimburse Bank, upon demand, for all costs and expenses incurred by Bank in
connection with (a) collecting or attempting to collect the Indebtedness or any
part thereof; (b) maintaining or defending Bank's security interests or liens
(or the priority thereof); (c) the enforcement of Bank's rights or remedies
under this Agreement or the other documents contemplated hereby; (d) the
preparation or making of any amendments, modifications, waivers or consents with
respect to this Agreement or the other documents contemplated hereby; and/or (e)
any other matters or proceedings arising out of or in connection with any
lending arrangement between Bank and any Borrower, which costs and expenses
include, without limitation, payments made by Bank for taxes, insurance,
assessments, or other costs or expenses which such Borrower is required to pay
under this Agreement or the other documents contemplated hereby; reasonable
expenses related to the examination and appraisal of the Collateral; reasonable
audit expenses; court costs and reasonable attorneys' fees (whether in-house or
outside counsel is used, whether legal assistants are used, and whether such
costs are incurred in formal or informal collection actions, federal bankruptcy
proceedings, probate proceedings, on appeal or otherwise); and all other costs
and expenses of Bank incurred in connection with any of the foregoing. All
Bank's costs and expenses shall become part of the Indebtedness and shall be
secured by the Collateral.
10.7 Payments on Saturdays, Etc. Whenever any payment to be
made hereunder shall be stated to be due on a Saturday, Sunday or any other day
which is not a Business Day, such payment may be made on the next succeeding
Business Day, and such extension, if any, shall be included in computing
interest in connection with such payment.
SECOND AMENDED AND RESTATED SECURED LOAN AGREEMENT - Page 42
<PAGE>
10.8 Binding Effect. This Agreement shall inure to the benefit
of and shall be binding upon the parties hereto and their respective successors
and assigns; provided, however, that no Borrower may assign or transfer its
rights or obligations hereunder without the prior written consent of Bank.
10.9 Maintenance of Records. Each Borrower will keep all of its
records concerning its business operations and accounting at its principal place
of business. Each Borrower will give Bank prompt written notice of any change in
its principal place of business, or in the location of its records.
10.10 Notices. All notices and communications provided for
herein or in any document contemplated hereby or required by law to be given
shall be in writing (unless expressly provided to the contrary) and, if
personally delivered, effective when delivered at the address below or, in the
case of mailing, effective five (5) days after sending by registered or
certified mail, postage prepaid, addressed as follows, or to such other address
as a party shall have designated to the other in writing in accordance with this
section:
If to Borrowers: Hilite Industries, Inc.
1671 South Broadway
Carrollton, Texas 75381
Attn: Mr. Daniel W. Brady
Hilite Industries Automotive, LP
1671 South Broadway
Carrollton, Texas 75381
Attn: Mr. Daniel W. Brady
with a copy to: Parker Chapin Flattau & Klimpl, L.L.P.
1211 Avenue of the Americas
New York, New York 10036
Attn: Edward R. Mandell, Esq.
If to Bank: Comerica Bank-Texas
P. O. Box 650282
Mail Code 6528
Dallas, Texas 75262-0282
Attn: J. Michael Park
with a copy to: Winstead Sechrest & Minick P.C.
5400 Renaissance Tower
1201 Elm Street
Dallas, Texas 75270-2199
Attn: Joe T. Hyde, Esq.
SECOND AMENDED AND RESTATED SECURED LOAN AGREEMENT - Page 43
<PAGE>
The giving of at least five (5) days notice before Bank shall take any action
described in any notice shall conclusively be deemed reasonable for all
purposes; provided, that this shall not be deemed to require Bank to give five
(5) days notice or any notice if not specifically required in this Agreement.
10.11 Counterparts. This Agreement may be signed in any number
of counterparts with the same effect as if the signatures were upon the same
instrument.
10.12 Headings. Article and section headings in this Agreement
are included for the convenience of reference only and shall not constitute a
part of this Agreement for any purpose.
10.13 Release and Discharge. Upon full payment of the
Indebtedness and performance by each Borrower of all its other obligations
hereunder, except as otherwise expressly provided herein, the parties shall
thereupon automatically each be fully, finally and forever released and
discharged from any claim, liability or obligation in connection with this
Agreement and the other documents contemplated hereby.
10.14 Inconsistency with Other Agreements. To the extent any
term or provision contained in this Agreement shall be inconsistent with any
provision in any other document or instrument executed in connection herewith,
this Agreement shall control.
10.15 Joint Borrowers. If more than one party executes this
Agreement as Borrower, then for the purpose of this Agreement the term
"Borrower" shall mean each such party and each such party shall be jointly and
severally liable as Borrower for the Indebtedness as defined herein without
regard to which party receives the proceeds of any of the Loans. Each such party
hereby acknowledges that it expects to derive economic advantage from each of
the Loans.
10.16 WAIVER OF CONSUMER RIGHTS. EACH BORROWER HEREBY WAIVES ITS
RIGHTS UNDER THE DECEPTIVE TRADE PRACTICES -- CONSUMER PROTECTION ACT, SECTION
17.41 ET. SEQ. BUSINESS & COMMERCE CODE, A LAW THAT GIVES CONSUMERS SPECIAL
RIGHTS AND PROTECTIONS. AFTER CONSULTATION WITH AN ATTORNEY OF BORROWERS' OWN
SELECTION, EACH BORROWER VOLUNTARILY CONSENTS TO THIS WAIVER. EACH BORROWER
EXPRESSLY WARRANTS AND REPRESENTS THAT SUCH BORROWER (a) IS NOT IN A
SIGNIFICANTLY DISPARATE BARGAINING POSITION RELATIVE TO BANK, AND (b) HAS BEEN
REPRESENTED BY LEGAL COUNSEL IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY
THIS AGREEMENT.
10.17 WAIVER OF JURY TRIAL. EACH BORROWER AND BANK HEREBY
IRREVOCABLY WAIVE THE RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY AND ALL ACTIONS
OR PROCEEDINGS AT ANY TIME IN WHICH SUCH BORROWER AND BANK ARE PARTIES ARISING
OUT OF THIS AGREEMENT OR THE OTHER DOCUMENTS CONTEMPLATED HEREBY. EACH BORROWER
HAS REVIEWED THE FOREGOING WAIVERS WITH ITS LEGAL COUNSEL AND HAS KNOWINGLY AND
VOLUNTARILY WAIVED ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION
SECOND AMENDED AND RESTATED SECURED LOAN AGREEMENT - Page 44
<PAGE>
WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE
FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
10.18 Amendment and Restatement. This Agreement and the
financing commitments set forth herein constitute an amendment, modification and
restatement, but not an extinguishment or novation, of the Existing Loan
Agreement and the financing commitments set forth therein. This Agreement and
the other Loan Documents are not intended as, and shall not be construed as, a
release, impairment or novation of the indebtedness, liabilities and obligations
of the Borrower under the Existing Loan Agreement and the other documents
contemplated thereby or the liens and security interests granted therein, all of
which liens and security interests are hereby modified and affirmed. With
respect to matters relating to the period of this Agreement prior to the date
hereof, all of the provisions of the Existing Loan Agreement are hereby ratified
and confirmed, and shall remain in full force and effect. The Existing Loan
Agreement, as modified by the provisions of this Agreement, shall be construed
as one agreement.
[Remainder of Page Intentionally Left Blank]
SECOND AMENDED AND RESTATED SECURED LOAN AGREEMENT - Page 45
<PAGE>
IN WITNESS WHEREOF, Borrowers and Bank have caused this Agreement to
be executed by their duly authorized officers as of the day and year first
written above.
HILITE INDUSTRIES, INC.,
a Delaware corporation
By: /s/ Samuel M. Berry
-----------------------------------
Samuel M. Berry
President
HILITE INDUSTRIES AUTOMOTIVE, LP,
a Texas limited partnership
By: HILITE INDUSTRIES-TEXAS, INC.,
a Delaware corporation,
as its general partner
By: /s/ Daniel W. Brady
-----------------------------------
Daniel W. Brady
Chief Executive Officer
COMERICA BANK-TEXAS
By: /s/ J. Michael Park
-----------------------------------
J. Michael Park, Vice President
SECOND AMENDED AND RESTATED SECURED LOAN AGREEMENT - Page 46
<PAGE>
LIST OF EXHIBITS
EXHIBIT A - Borrowing Base Certificate
EXHIBIT B - Compliance Certificate
EXHIBIT C - Revolving Credit Note
EXHIBIT D - Equipment Acquisition Note
EXHIBIT E - Equipment Note
EXHIBIT F - Real Estate Note
EXHIBIT G - Telephone Notice Authorization
EXHIBIT H - Guaranty
LIST OF SCHEDULES
SCHEDULE 5.5 - Permitted Liens
SCHEDULE 5.11 - Indebtedness
SCHEDULE 5.12 - Material Agreements
SCHEDULE 8.2 - Environmental Disclosures
DB973570130
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SECOND AMENDED AND RESTATED SECURED LOAN AGREEMENT - Page 47
<PAGE>
EXHIBIT A
---------
BORROWING BASE CERTIFICATE
[INTENTIONALLY OMITTED]
<PAGE>
EXHIBIT B
---------
COMPLIANCE CERTIFICATE
LENDER: COMERICA BANK-TEXAS DATE: ___________, 199___
BORROWERS: HILITE INDUSTRIES, INC. and
HILITE INDUSTRIES AUTOMOTIVE, LP
This Compliance Certificate is executed and delivered to Comerica
Bank - Texas ("BANK") by Hilite Industries, Inc., a Delaware corporation
("PARENT"), and Hilite Industries Automotive, LP, a Texas limited partnership
("PARTNERSHIP"; together with Parent, "BORROWERS"), this _____ day of
_______________, 199___. All capitalized terms used but not defined herein shall
have the meanings given to such terms in that certain Second Amended and
Restated Secured Loan Agreement, dated January 30, 1998, among Borrowers and
Bank (as thereafter renewed, extended, modified and restated from time to time,
the "LOAN AGREEMENT"). Each of the undersigned hereby certifies to Bank as
follows:
(1) The undersigned is the duly elected, qualified and acting officer
of a Borrower and as such officer is authorized to make and deliver this
Compliance Certificate.
(2) The undersigned has reviewed the provisions of the Loan Agreement
and confirms that, as of the date hereof:
(a) the representations and warranties contained in Section 5
of the Loan Agreement are true and correct in all material respects on and as of
the date hereof with the same force and effect as though made on and as of the
date hereof [except as otherwise disclosed on Annex I attached hereto and made a
part hereof];
(b) no Default or Event of Default has occurred and is
continuing or is imminent and Borrowers have complied with all of the terms,
covenants and conditions set forth in the Loan Agreement; and
(c) attached hereto as Schedule A is a report prepared by the
undersigned setting forth information and calculations that demonstrate
compliance (or noncompliance) with each of the covenants set forth in Sections
6.5, 6.6 and 6.7 of the Loan Agreement.
Exhibit B, Compliance Certificate - Page 1
<PAGE>
The foregoing certificate is given in the undersigned's capacity as an officer
of a Borrower, and not in the undersigned's individual capacity.
HILITE INDUSTRIES, INC.,
a Delaware corporation
By:_______________________________
Samuel M. Berry
President
HILITE INDUSTRIES AUTOMOTIVE, LP,
a Texas limited partnership
By: HILITE INDUSTRIES-TEXAS, INC.,
______________________________
a Delaware corporation,
as its general partner
By:_______________________________
Daniel W. Brady
Chief Executive Officer
db973630051
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Exhibit B, Compliance Certificate - Page 2
<PAGE>
SCHEDULE A
TO COMPLIANCE CERTIFICATE
A. As of the date of this certificate, all representations and
warranties contained in the Loan Agreement are true and correct in all material
respects.
B. As of the date of this certificate, no Event of Default has
occurred and is continuing, except as has been disclosed in writing to the Bank,
or except as has been waived in writing by the Bank.
C. As of the applicable date:
================================================================================
1. Tangible Effective Net Worth (Annual Test)
- --------------------------------------------------------------------------------
(a) Borrowers' consolidated Tangible Effective Net Worth (as
defined in and determined by Section 1.1 of the Loan
Agreement): $
- --------------------------------------------------------------------------------
(b) Loan Agreement presently requires Borrowers' consolidated
Tangible Effective Net Worth be not less than: $
Borrowers are to check one of the following categories
relating to the above financial covenant:
(i) Covenant Satisfied
(ii) Covenant Not Satisfied
(iii) Covenant Not Tested
- --------------------------------------------------------------------------------
2. Debt Ratio (Annual Test)
- --------------------------------------------------------------------------------
(a) Borrowers' consolidated Debt (as defined in and determined
by Section 1.1 of the Loan Agreement): $
- --------------------------------------------------------------------------------
(b) Borrowers' consolidated Tangible Effective Net Worth: $
-
- --------------------------------------------------------------------------------
(c) Ratio of (i) Borrowers' consolidated Debt to (ii) Borrowers'
consolidated Tangible Effective Net Worth [(a), (b)]: ____ to 1.0
SCHEDULE A TO COMPLIANCE CERTIFICATE, Page 1
<PAGE>
- --------------------------------------------------------------------------------
(d) Loan Agreement presently requires the ratio of (i)
Borrowers' consolidated Debt to (ii) Borrowers'
consolidated Tangible Effective Net Worth be not more ____ to 1.0
than:
Borrowers are to check one of the following categories
relating to the above financial covenant:
(i) Covenant Satisfied
(ii) Covenant Not Satisfied
(iii) Covenant Not Tested
- --------------------------------------------------------------------------------
3. Cash Flow Coverage Ratio (Quarterly Test based on preceding 12
------------------------
calendar months)
- --------------------------------------------------------------------------------
(a) Borrowers' consolidated Cash Flow (as defined in and
determined by Section 1.1 of the Loan Agreement): $
- --------------------------------------------------------------------------------
(b) Borrowers' consolidated Current Maturities of Long
Term Debt (as defined in and determined by Section 1.1
of the
Loan Agreement): $
- --------------------------------------------------------------------------------
(c) Ratio of (i) Borrowers' consolidated Cash Flow to (ii)
Borrowers' consolidated Current Maturities of Long Term ____ to 1.0
Debt [(a),(b)]:
- --------------------------------------------------------------------------------
(d) Loan Agreement presently requires the ratio of (i)
Borrowers' consolidated Cash Flow to (ii) Borrowers'
consolidated Current Maturities of Long Term Debt be not ____ to 1.0
less than:
Borrowers are to check one of the following categories
relating to the above financial covenant:
(i) Covenant Satisfied
(ii) Covenant Not Satisfied
(iii) Covenant Not Tested
================================================================================
db973630051
SCHEDULE A TO COMPLIANCE CERTIFICATE, Page 2
<PAGE>
EXHIBIT C
---------
FIFTH AMENDED AND RESTATED REVOLVING CREDIT NOTE
$12,000,000.00 Dallas, Texas January 30, 1998
FOR VALUE RECEIVED, the undersigned promises to pay to the order of
COMERICA BANK-TEXAS (the "Bank") at 1601 Elm Street, Dallas, Texas 75201, on the
Termination Date, the principal sum or so much of the principal sum of Twelve
Million and No/100ths Dollars ($12,000,000.00) as may from time to time have
been advanced and be outstanding hereunder, plus all accrued but unpaid interest
hereon.
All capitalized terms used but not defined herein, shall have the
meanings given to such terms in that certain Second Amended and Restated Secured
Loan Agreement, dated as of the date hereof, between the undersigned and Bank
(as amended, renewed, extended, modified and restated from time to time, the
"Agreement").
Bank may disburse the principal of this Note to Borrowers in one or
more Revolving Loans from time to time, in accordance with the Agreement, so
long as the outstanding principal balance hereof never at any time exceeds the
lesser of (i) the Commitment Amount or (ii) the Borrowing Base in effect at such
time. Borrowers shall pay to Bank, on demand, any amount by which the aggregate
unpaid principal amount of all Revolving Loans evidenced hereby exceeds the
lesser of (i) the Commitment Amount or (ii) the Borrowing Base in effect at such
time, together with all interest accrued and unpaid on the amount of such
excess. This Note is a Master Note under which sums may or must be repaid from
time to time and under which new Revolving Loans are to be made by Bank pursuant
to the terms and conditions of the Agreement, and the books and records of Bank
shall constitute the best evidence of the amount of the Indebtedness at any time
owing hereunder. This Note is the "Revolving Credit Note" referred to in the
Agreement, and is subject to the terms and provisions thereof, and the holder
hereof is entitled to the benefits thereof and may enforce the agreements
contained therein and exercise the remedies provided for thereby or otherwise in
respect thereof, all in accordance with the terms thereof.
The unpaid principal amount of this Note shall bear interest (i)
until maturity (whether by acceleration or otherwise) at all times during which
there has not occurred or then exist an Event of Default, at a fluctuating rate
per annum equal to the lesser of (a) the Applicable Rate or (b) the Legal Rate
(as hereinafter defined); and (ii) after maturity, as well as at all times
during which there has occurred or then exists an Event of Default, at a
fluctuating rate per annum equal to the lesser of (a) three percent (3.0%) per
annum above the Applicable Rate (the "Default Rate") or (b) the Legal Rate (the
Applicable Rate and the Default Rate, whichever is in effect at any particular
time, being hereinafter referred to as the "Contract Rate"). Interest shall be
payable to the extent accrued on the first (1st) day of each consecutive
calendar month,
FIFTH AMENDED AND RESTATED
REVOLVING CREDIT NOTE - Page 1
<PAGE>
beginning February 1, 1998, until maturity (whether by acceleration or
otherwise) and from and after such maturity, on demand.
The term "Applicable Rate" shall mean (i) with respect to any Prime
Rate Balance, a fluctuating per annum rate of interest equal to one-half of one
percent (0.50%) below the Prime Rate and (ii) with respect to any LIBOR Balance,
a per annum rate of interest equal to one and one-quarter of one percent (1.25%)
above the LIBOR Rate. Each determination by Bank of the LIBOR Rate or Prime
Rate, as the case may be, shall, in the absence of manifest error, be conclusive
and binding.
The term "Prime Rate" shall mean that annual rate of interest
designated by the Bank as its prime rate and which is changed by the Bank from
time to time. The Bank's prime rate is a reference rate and does not necessarily
represent the lowest or best rate actually charged by the Bank to any of its
customers. The Bank may make commercial loans at rates of interest at, above or
below its prime rate.
The term "LIBOR Rate" shall mean, with respect to any LIBOR Interest
Period, the interest rate per annum conclusively determined by the Bank to be
the per annum, rate (as adjusted for any applicable reserve requirements
applicable to "eurocurrency liabilities" pursuant to Regulation D or any other
applicable regulation of the Board of Governors (or any successor) which
prescribes reserve requirements applicable to "eurocurrency liabilities" as
presently defined in Regulation D, or any eurocurrency funding) at which
deposits in immediately available funds in U.S. dollars are offered to the Bank
(at such time as the Bank elects on the first day of such LIBOR Interest Period)
by prime banks in the interbank eurodollar market selected by Bank for delivery
on the first day of such LIBOR Interest Period in an amount equal to the
principal amount of the corresponding LIBOR Balance for a period equal to the
length of such LIBOR Interest Period.
The term "LIBOR Interest Period" shall mean a period commencing on
the date upon which, pursuant to an Interest Notice, the LIBOR Balance begins to
accrue interest at the LIBOR Rate (or, in the case of a rollover to a successive
LIBOR Interest Period, the last day of the immediately preceding LIBOR Interest
Period) and ending 30, 60, 90, 180 or 360 days (whichever is selected by the
undersigned in the applicable Interest Notice) after the commencement date;
provided, that, (i) any LIBOR Interest Period which would otherwise end on a day
which is not a LIBOR Business Day shall be extended to the next succeeding LIBOR
Business Day (unless such LIBOR Business Day falls in another calendar month, in
which case such LIBOR Interest Period shall end on the next preceding LIBOR
Business Day); and (ii) any LIBOR Interest Period which begins on the last LIBOR
Business Day of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such LIBOR Interest
Period) shall, subject to clause (i) above, end on the last LIBOR Business Day
of a calendar month.
The term "LIBOR Business Day" shall mean a day on which dealings in
U.S. dollars are carried out in the interbank eurodollar market selected by
Bank.
FIFTH AMENDED AND RESTATED
REVOLVING CREDIT NOTE - Page 2
<PAGE>
The term "Interest Notice" shall mean the written notice given by the
undersigned of the Interest Option selected hereunder and specifying the amount
of principal to bear interest at the rate selected.
Subject to the provisions hereof, the undersigned shall have the
option (an "Interest Option") exercisable from time to time to designate
portions of the unpaid principal balance of this Note to bear interest at the
Prime Rate (such portions being herein referred to as a "Prime Rate Balance") or
at the LIBOR Rate (such portions being referred to as a "LIBOR Balance");
provided, however, that no LIBOR Balance designated for any LIBOR Interest
Period shall be less than $500,000. The Interest Option shall be exercisable,
subject to the other limitations in this Note, by the undersigned only in the
manner provided below:
(i) If the undersigned desires the initial Revolving Loan
made hereunder, or a portion thereof, to be a LIBOR Balance, the
undersigned shall give the Bank the initial Interest Notice and the
initial amounts of the Prime Rate Balance and LIBOR Balance at least
two (2) LIBOR Business Days prior to the date hereof. If the required
Interest Notice shall not have been timely received by the Bank or
the undersigned fails to designate all or any portion of the unpaid
principal balance of this Note as either a Prime Rate Balance or a
LIBOR Balance, the undersigned shall be deemed conclusively to have
designated such amounts to be Prime Rate Balances and to have given
the Bank notice of such designation.
(ii) At least two (2) LIBOR Business Days prior to the
termination of any LIBOR Interest Period for a LIBOR Balance, the
undersigned shall give the Bank an Interest Notice specifying the
Interest Option which is to be applicable to such LIBOR Balance upon
the expiration of such LIBOR Interest Period; provided, however, no
Interest Option specifying an interest rate based on the LIBOR Rate
shall end after the Termination Date. If the required Interest Notice
shall not have been timely received by the Bank prior to the
expiration of such LIBOR Interest Period, the undersigned shall be
deemed conclusively to have designated such LIBOR Balance to become a
Prime Rate Balance immediately upon the expiration of such LIBOR
Interest Period and to have given the Bank notice of such
designation.
(iii) The undersigned shall have the right to convert an
eligible portion of the Prime Rate Balance to a LIBOR Balance by
giving the Bank an Interest Notice of such designation at least two
(2) LIBOR Business Days prior to the effective date of such exercise.
An Interest Notice shall be irrevocable and binding on the
undersigned and the undersigned shall indemnify Bank against any loss
or expense incurred by Bank due to sums paid or payable to fund the
LIBOR Balance when such LIBOR Balance is not made on such date.
Each change in the interest rate applicable to the Prime Rate Balance
or the LIBOR Balance shall become effective without prior notice to the
undersigned automatically as of the opening of business on the date of such
change in the Prime Rate or the LIBOR Rate, as the case
FIFTH AMENDED AND RESTATED
REVOLVING CREDIT NOTE - Page 3
<PAGE>
may be; provided, that, the LIBOR Rate shall not change during any applicable
LIBOR Interest Period. Interest on this Note shall be calculated on the basis of
a 360-day year for the actual number of days outstanding.
If the Bank determines that deposits in U.S. dollars (in the
applicable amounts) are not being offered to the Bank in the interbank
eurodollar market selected by the Bank for such LIBOR Interest Period, or that
the rate at which such dollar deposits are being offered will not adequately and
fairly reflect the cost to the Bank of making or maintaining a LIBOR Balance for
the applicable LIBOR Interest Period, the Bank shall forthwith give notice
thereof to the undersigned, whereupon until the Bank notifies the undersigned
that such circumstances no longer exist, (i) the right of the undersigned to
select an Interest Option based upon the LIBOR Rate shall be suspended, and (ii)
each LIBOR Balance in effect shall thereupon automatically be converted into a
Prime Rate Balance in accordance with the provisions hereof. If notice has been
given by the Bank to the undersigned requiring a LIBOR Balance to be repaid or
converted, then unless and until the Bank notifies the undersigned that the
circumstances giving rise to such repayment or conversion no longer apply, the
only Interest Option available shall be a rate based upon the Prime Rate. If the
Bank notifies the undersigned that the circumstances giving rise to such
repayment or conversion no longer apply, the undersigned may thereafter select a
rate based upon the LIBOR Rate in accordance with the terms of this Note.
If the adoption of any applicable law, rule or regulation, or any
change therein, or any change in the interpretation or administration thereof by
any governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by the Bank with any
request or directive (whether or not having the force of law) of any such
authority, central bank or comparable agency shall make it unlawful or
impractical for the Bank to make or maintain a LIBOR Balance, the Bank shall so
notify the undersigned and any then-existing LIBOR Balance shall automatically
convert to a Prime Rate Balance either (i) on the last day of the then-current
LIBOR Interest Period applicable to such LIBOR Balance, if the Bank may lawfully
continue to maintain and fund such LIBOR Balance to such day, or (ii)
immediately, if the Bank may not lawfully continue to maintain such LIBOR
Balance to such day.
If either (i) the adoption of any applicable law, rule or regulation,
or any change therein, or any change in the interpretation or administration
thereof by any governmental authority, central bank or comparable agency charged
with the interpretation or administration thereof, or compliance by the Bank
with any request or directive (whether or not having the force of law) of any
such authority, central bank or comparable agency shall subject the Bank to any
tax (including without limitation any United States interest equalization or
similar tax, however named), duty or other charge with respect to any LIBOR
Balance, this Note or the Bank's obligation to compute interest on the principal
balance of this Note at a rate based upon the LIBOR Rate, or shall change the
basis of taxation of payments to the Bank of the principal of or interest on any
LIBOR Balance or any other amounts due under this Note in respect of any LIBOR
Balance or the Bank's obligation to compute the interest on the balance of this
Note at a rate based upon the LIBOR Rate, or (ii) any governmental authority,
central bank or other
FIFTH AMENDED AND RESTATED
REVOLVING CREDIT NOTE - Page 4
<PAGE>
comparable authority shall at any time impose, modify or deem applicable any
reserve (including, without limitation, any imposed by the Board of Governors of
the Federal Reserve System) other than as is included above, special deposit or
similar requirement against assets of, deposits with or for the account of, or
credit extended by, the Bank, or shall impose on the Bank (or its eurodollar
lending office) or any relevant interbank eurodollar market any other condition
affecting any LIBOR Balance, this Note or the Bank's obligation to compute the
interest on the balance of this Note at a rate based upon the LIBOR Rate; and
the result of any of the foregoing is to increase the cost to the Bank of
maintaining any LIBOR Balance, or to reduce the amount of any sum received or
receivable by the Bank under this Note by an amount deemed by the Bank to be
material, then upon demand by the Bank, the undersigned shall pay to the Bank
such additional amount or amounts as will compensate the Bank for such increased
cost or reduction. The Bank will promptly notify the undersigned of any event of
which it has knowledge, occurring after the date hereof, which will entitle the
Bank to compensation pursuant to this paragraph. A certificate of the Bank
claiming compensation under this paragraph and setting forth the additional
amount or amounts to be paid to the Bank hereunder shall be conclusive in the
absence of manifest error.
The undersigned may not repay any LIBOR Balance or convert all or any
portion of a LIBOR Balance to a Prime Rate Balance prior to the expiration of
the applicable LIBOR Interest Period, unless (i) such repayment or conversion is
specifically required by the terms of this Note, (ii) the Bank demands that such
repayment or conversion be made, or (iii) the Bank, in its sole discretion,
consents to such repayment or conversion. If for any reason any LIBOR Balance is
repaid or converted prior to the expiration of the corresponding LIBOR Interest
Period, the undersigned shall pay to the Bank on demand any amounts required to
compensate the Bank for any losses, costs or expenses which it may incur as a
result of such repayment or conversion. A certificate of the Bank claiming
compensation under this paragraph and setting forth the additional amount or
amounts to be paid to the Bank hereunder shall be conclusive in the absence of
manifest error.
This Note is secured by the Collateral described in the Agreement
(including, without limitation, all Accounts, Chattel Paper, Documents,
Equipment, Fixtures, Real Property, General Intangibles, Goods, Instruments and
Inventory of North American Spring & Stamping Corp. (Delaware), Hilite
Industries-Texas, Inc., Hilite Industries-Delaware, Inc., and the undersigned),
and reference is hereby made to the Agreement for, among other things, the
conditions under which this Note may or must be paid in whole or in part prior
to its due date or its due date accelerated. Bank is hereby granted a security
interest in all property of the undersigned at any time in the possession of
Bank or any Affiliate of Bank (or as to which Bank or any Affiliate of Bank at
any time controls possession by documents or otherwise) and in all balances of
deposit or other accounts (including, without limitation, an account evidenced
by a certificate of deposit) of the undersigned from time to time with Bank or
any Affiliate of Bank.
If an Event of Default occurs and is not cured within the time, if
any, provided for by the Agreement, or the undersigned or any indorser,
guarantor or accommodation party (or any of them) fails to pay this Note or any
Indebtedness when due (by demand, upon maturity, upon
FIFTH AMENDED AND RESTATED
REVOLVING CREDIT NOTE - Page 5
<PAGE>
acceleration or otherwise), Bank may at its option and without prior notice to
the undersigned or any indorser, guarantor or accommodation party (or any of
them) exercise any one or more of the rights and remedies granted by the
Agreement or any document contemplated thereby or given to a secured party under
applicable law, including, without limitation, the right to accelerate this Note
and any other Indebtedness and the right to sell or liquidate all or any portion
of the Collateral, and may set off against the principal of and interest on this
Note or against any other Indebtedness (i) any amount owing by Bank to the
undersigned, (ii) any property of the undersigned at any time in the possession
of Bank or any Affiliate of Bank, and (iii) any amount in any deposit or other
account (including, without limitation, an account evidenced by a certificate of
deposit) of the undersigned with Bank or any Affiliate of Bank.
If at any time the relevant Contract Rate exceeds the Legal Rate, the
interest payable hereunder shall be computed upon the basis of the Legal Rate,
but any subsequent reduction in the relevant Contract Rate shall not reduce the
applicable interest rate hereunder below the Legal Rate until the aggregate
amount of interest accrued and payable hereunder equals the total amount of
interest which would have accrued hereunder if the applicable interest rate
hereunder had been at all times computed solely on the basis of the relevant
Contract Rate.
No agreements, conditions, provisions or stipulations contained in
this Note, or the default of the undersigned, or the exercise by the holder
hereof of the right to accelerate the payment or the maturity of principal and
interest, or to exercise any option whatsoever contained herein, or in any other
agreements between the undersigned and Bank, or the arising of any contingency
whatsoever, shall entitle the holder of this Note to collect, in any event,
interest exceeding the maximum rate of nonusurious interest allowed from time to
time by applicable state or federal law as now or as may hereinafter be in
effect (the "Legal Rate"). Unless preempted by federal law, the rate of interest
from time to time in effect hereunder shall not exceed the "applicable rate
ceiling" from time to time in effect under Article 5069-1D.001 et seq., Vernon's
Texas Civil Statutes (and as the same may be incorporated by reference in other
Texas statutes), as amended or codified. All agreements, conditions or
stipulations, if any, which may in any event or contingency whatsoever operate
to bind, obligate or compel the undersigned to pay a rate of interest exceeding
the Legal Rate shall be without binding force or effect, at law or in equity, to
the extent only of the excess of interest over such Legal Rate. In the event any
interest is charged in excess of the Legal Rate (the "Excess"), the undersigned
acknowledges and stipulates that any such charge shall be the result of an
accidental and bona fide error, and such Excess shall be first applied to reduce
the principal then unpaid hereunder; second, applied to reduce any obligation
for other Indebtedness of the undersigned to Bank; and third, returned to the
undersigned, it being the intention of the parties hereto not to enter at any
time into an usurious or other illegal relationship. The undersigned recognizes
that such an unintentional result could inadvertently occur. By the execution of
this Note, the undersigned covenants that (i) the credit or return of any Excess
shall constitute the acceptance by the undersigned of such Excess, and (ii) the
undersigned shall not seek or pursue any other remedy, legal or equitable,
against Bank or any holder hereof based, in whole or in part, upon the charging
or receiving of any interest in excess of the Legal Rate. For the purpose of
determining whether or not any Excess has been contracted for, charged or
received by Bank or any holder hereof, all interest at any time
FIFTH AMENDED AND RESTATED
REVOLVING CREDIT NOTE - Page 6
<PAGE>
contracted for, charged or received by Bank or any holder hereof, in connection
with this Note, shall be amortized, prorated, allocated and spread in equal
parts during the entire term of the Notes. For the sole purpose of computing the
extent of the Indebtedness and obligations of the undersigned asserted hereunder
by Bank or any holder hereof, the figures set forth herein and the provisions
hereof shall be automatically recomputed by the undersigned, and by any court
considering the same, to give effect to the adjustments or credits required by
this paragraph. Except for any applicable unused line fees incurred pursuant to
the terms of the Agreement, no interest shall accrue hereunder until the date of
the first Revolving Loan made by Bank; thereafter, interest on all Revolving
Loans shall accrue and be computed on the principal balance outstanding from
time to time hereunder until the same is paid in full.
All notices required or permitted under this Note shall be in writing
and shall be deemed to have been delivered when delivered in accordance with the
provisions of the Agreement.
THE UNDERSIGNED AND ALL ACCOMMODATION PARTIES, GUARANTORS AND
ENDORSERS, IF ANY, (I) WAIVE DEMAND AND NOTICE OF DEMAND, (II) WAIVE
PRESENTMENT, NOTICE OF INTENTION TO DEMAND, PROTEST AND NOTICE OF PROTEST,
NOTICE OF DISHONOR, NOTICE OF INTENTION TO ACCELERATE, NOTICE OF ACCELERATION,
AND ALL OTHER NOTICES OTHER THAN AS EXPRESSLY PROVIDED IN THE AGREEMENT, (III)
AGREE THAT NO EXTENSION OR INDULGENCE TO THE UNDERSIGNED OR RELEASE OR
NON-ENFORCEMENT OF ANY SECURITY, WHETHER WITH OR WITHOUT NOTICE, SHALL AFFECT
THE OBLIGATIONS OF ANY ACCOMMODATION PARTY, GUARANTOR OR ENDORSER, AND (IV)
AGREE TO REIMBURSE THE HOLDER OF THIS NOTE FOR ANY AND ALL COSTS AND EXPENSES
INCURRED IN COLLECTING OR ATTEMPTING TO COLLECT ANY AND ALL PRINCIPAL AND
INTEREST UNDER THIS NOTE (INCLUDING, BUT NOT LIMITED TO, COURT COSTS AND
REASONABLE ATTORNEYS' FEES, WHETHER IN-HOUSE OR OUTSIDE COUNSEL IS USED AND
WHETHER SUCH COSTS AND EXPENSES ARE INCURRED IN FORMAL OR INFORMAL COLLECTION
ACTIONS, FEDERAL BANKRUPTCY PROCEEDINGS, APPELLATE PROCEEDINGS, PROBATE
PROCEEDINGS, OR OTHERWISE).
THE PROVISIONS OF CHAPTER 346 OF THE TEXAS FINANCE CODE (FORMERLY
CHAPTER 15 OF THE TEXAS CREDIT CODE (VERNON'S TEXAS CIVIL STATUTES), ARTICLE
5069-15), AS AMENDED, ARE SPECIFICALLY DECLARED BY THE UNDERSIGNED NOT TO BE
APPLICABLE TO THE INDEBTEDNESS EVIDENCED BY THIS NOTE.
The undersigned, if two or more in number, shall be jointly and
severally bound hereunder.
The indebtedness evidenced by this Note is in amendment, modification
and restatement, but not an extinguishment or novation, of the indebtedness
evidenced by that certain Fourth Amended and Restated Revolving Credit Note
dated August 29, 1997, in the original principal
FIFTH AMENDED AND RESTATED
REVOLVING CREDIT NOTE - Page 7
<PAGE>
amount of $12,000,000.00 executed by Hilite Industries, Inc. and payable to the
order of Bank, and the provisions of this Note are in amendment, modification
and restatement of the provisions of such note.
This Note shall bind the undersigned and the undersigned's respective
heirs, personal representatives, successors and assigns.
[PAGE INTENTIONALLY LEFT BLANK]
FIFTH AMENDED AND RESTATED
REVOLVING CREDIT NOTE - Page 8
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this Note this 30th
day of January, 1998.
HILITE INDUSTRIES, INC.,
a Delaware corporation
By:__________________________________
Samuel M. Berry
President
HILITE INDUSTRIES AUTOMOTIVE, LP,
a Texas limited partnership
By: HILITE INDUSTRIES-TEXAS, INC.,
__________________________________
a Delaware corporation,
as its general partner
By:__________________________________
Daniel W. Brady
Chief Executive Officer
db973560141
012798 v8
333:3134-488
FIFTH AMENDED AND RESTATED
REVOLVING CREDIT NOTE - Page 9
<PAGE>
EXHIBIT D
---------
EQUIPMENT ACQUISITION NOTE
Dallas, Texas __________, 199__ $____________
FOR VALUE RECEIVED, the undersigned promises to pay To the order of
COMERICA BANK-TEXAS (the "Bank") at 1601 Elm Street, Dallas, Texas 75201, the
principal sum of ___________________ and ______/100ths Dollars ($____________)
in consecutive monthly installments of principal in the amount of
______________________ and _______/100ths Dollars ($____________) each,
beginning _______________, 199__, and on the _____ day of each calendar month
thereafter, plus interest on the unpaid principal balance of this Note at the
Applicable Rate (hereinafter defined), on the first day of each month during the
term of this Note, beginning ____________ until maturity, and thereafter at a
default rate equal to the rate of interest otherwise prevailing hereunder plus
three percent (3%) per annum (but in no event in excess of the Legal Rate, as
hereinafter defined), with all outstanding principal and accrued but unpaid
interest due and payable in full on the earlier of (i) five (5) years from the
date hereof, or (ii) at Bank's sole option, the Termination Date.
All capitalized terms used but not defined herein, shall have the
meanings given to such terms in that certain Second Amended and Restated Secured
Loan Agreement, dated January __, 1998, among the undersigned and Bank (as
renewed, extended, modified and restated from time to time, the "Agreement").
This Note is an "Equipment Acquisition Note" as described in the
Agreement, and is subject to the terms and provisions thereof, and the holder
hereof is entitled to the benefits thereof and may enforce the agreements
contained therein and exercise the remedies provided for thereby or otherwise in
respect thereof, all in accordance with the terms thereof.
Subject to the provisions hereof, the undersigned shall have the
option (an "Interest Option") exercisable from time to time to designate
portions of the unpaid principal balance of this Note to bear interest at the
Prime Rate (such portions being herein referred to as a "Prime Rate Balance") or
at the LIBOR Rate (such portions being herein referred to as a "LIBOR Balance"),
provided, however, that no LIBOR Balance designated for any LIBOR Interest
Period (hereinafter defined) shall be less than $500,000.
The term "Applicable Rate", as used herein, shall mean (i) with
respect to any Prime Rate Balance outstanding from time to time, a fluctuating
per annum rate of interest equal to the Prime Rate, and (ii) with respect to any
LIBOR Balance outstanding from time to time, a per annum rate of interest equal
to one and one-half percent (1.5%) above the LIBOR Rate for the LIBOR Interest
Period then in effect with respect to such LIBOR Balance. Each determination by
Bank of the LIBOR Rate or Prime Rate, as the case may be, shall, in the absence
of manifest error, be conclusive and binding.
EQUIPMENT ACQUISITION NOTE - Page 1
<PAGE>
The term "Interest Notice" shall mean the written notice given by the
undersigned of the Interest Option selected hereunder and specifying the amount
of principal to bear interest at the rate selected.
The term "Prime Rate", as used herein, shall mean that annual rate of
interest designated by the Bank as its prime rate and which is changed by the
Bank from time to time. The Bank's prime rate is a reference rate and does not
necessarily represent the lowest or best rate actually charged by the Bank to
any of its customers. The Bank may make commercial loans at rates of interest
at, above or below its prime rate.
The term "LIBOR Rate", as used herein, shall mean, with respect to
any LIBOR Interest Period, the interest rate per annum conclusively determined
by the Bank to be the per annum rate (as adjusted for any applicable reserve
requirements applicable to "eurocurrency liabilities" pursuant to Regulation D
or any other applicable regulation of the Board of Governors (or any successor)
which prescribes reserve requirements applicable to "eurocurrency liabilities"
as presently defined in Regulation D, or any eurocurrency funding) at which
deposits in immediately available funds in U.S. dollars are offered to the Bank
(at such time as the Bank elects on the first day of such LIBOR Interest Period)
by prime banks in the interbank eurodollar market selected by Bank for delivery
on the first day of such LIBOR Interest Period in an amount equal to the
principal amount of the corresponding LIBOR Balance for a period equal to the
length of such LIBOR Interest Period.
The term "LIBOR Interest Period", as used herein, shall mean, with
respect to any LIBOR Balance, a period commencing on the date upon which,
pursuant to an Interest Notice, the principal amount of such LIBOR Balance
begins to accrue interest at the LIBOR Rate (or, in the case of a rollover to a
successive LIBOR Interest Period, the last day of the immediately preceding
LIBOR Interest Period) and ending 30, 60, 90, 180 or 360 days (whichever is
selected by the undersigned in the applicable Interest Notice) after the
commencement date; provided, that: (i) any LIBOR Interest Period which would
otherwise end on a day which is not a LIBOR Business Day shall be extended to
the next succeeding LIBOR Business Day (unless such LIBOR Business Day falls in
another calendar month, in which case such LIBOR Interest Period shall end on
the next preceding LIBOR Business Day); and (ii) any LIBOR Interest Period which
begins on the last LIBOR Business Day of a calendar month (or on a day for which
there is no numerically corresponding day in the calendar month at the end of
such LIBOR Interest Period) shall, subject to clause (A) above, end on the last
LIBOR Business Day of a calendar month.
The term "LIBOR Business Day", as used herein, shall mean a day on
which dealings in U.S. dollars are carried out in the interbank eurodollar
market selected by Bank.
The Interest Option shall be exercisable by the undersigned subject
to the other limitations in this Note on the undersigned's option to designate a
portion of the unpaid principal balance hereof as a LIBOR Balance and only in
the manner provided below:
(i) At least two (2) LIBOR Business Days prior to the date hereof the
undersigned shall give the Bank (an Interest Notice) specifying the initial
Interest Option(s) and the respective
EQUIPMENT ACQUISITION NOTE - Page 2
<PAGE>
initial amounts of the Prime Rate Balance, and LIBOR Balance designated by the
undersigned. If the required Interest Notice shall not have been timely received
by the Bank or fails to designate all or any portion of the unpaid principal
balance of this Note as either a Prime Rate Balance or a LIBOR Balance in
accordance with the terms and provisions of this Note, the undersigned shall be
deemed conclusively to have designated such amounts to be a Prime Rate Balance
and to have given the Bank notice of such designation.
(ii) At least two (2) LIBOR Business Days prior to the termination of any
LIBOR Interest Period for a LIBOR Balance, the undersigned shall give the Bank
an Interest Notice specifying the Interest Option which is to be applicable to
such LIBOR Balance upon the expiration of such LIBOR Interest Period, provided,
however, no Interest Option specifying an interest rate based on the LIBOR Rate
shall end after the Termination Date. If the required Interest Notice shall not
have been timely received by the Bank prior to the expiration of such LIBOR
Interest Period, the undersigned shall be deemed conclusively to have designated
such LIBOR Balance to become a Prime Rate Balance immediately upon the
expiration of such LIBOR Interest Period and to have given the Bank notice of
such designation.
(iii) The undersigned shall have the right to convert an eligible portion
of the Prime Rate Balance to a LIBOR Balance by giving the Bank an Interest
Notice of such designation at least two (2) LIBOR Business Days prior to the
effective date of such exercise. Additionally, upon termination of any LIBOR
Interest Period, the undersigned shall have the right, on any LIBOR Business
Day, to convert all or a portion of such principal amount from the LIBOR Balance
to a Prime Rate Balance by giving Bank an Interest Notice of such selection at
least two (2) LIBOR Business Days prior to effective date of such exercise. An
Interest Notice shall be irrevocable and binding on the undersigned and the
undersigned shall indemnify Bank against any loss or expense incurred by Bank
due to sums paid or payable to fund the LIBOR Balance when such LIBOR Balance is
not made on such date.
Each change in the interest rate applicable to the Prime Rate Balance
or the LIBOR Balance shall become effective without prior notice to the
undersigned automatically as of the opening of business on the date of such
change in the Prime Rate or the LIBOR Rate, as the case may be provided, that,
the LIBOR Rate shall not change during any applicable LIBOR Interest Period.
Interest on this Note shall be calculated on the basis of a 360-day year for the
actual number of days outstanding.
If the Bank determines that deposits in U.S. dollars (in the
applicable amounts) are not being offered to the Bank in the interbank
eurodollar market selected by the Bank for such LIBOR Interest Period, or that
the rate at which such dollar deposits are being offered will not adequately and
fairly reflect the cost to the Bank of making or maintaining a LIBOR Balance for
the applicable LIBOR Interest Period, the Bank shall forthwith give notice
thereof to the undersigned, whereupon until the Bank notifies the undersigned
that such circumstances no longer exist, (i) the right of the undersigned to
select an Interest Option based upon the LIBOR Rate shall be suspended, and (ii)
each LIBOR Balance in effect shall thereupon automatically be converted into a
Prime Rate Balance in accordance with the provisions hereof. If notice has been
given by the Bank to the undersigned requiring a LIBOR Balance to be repaid or
converted, then
EQUIPMENT ACQUISITION NOTE - Page 3
<PAGE>
unless and until the Bank notifies the undersigned that the circumstances giving
rise to such repayment or conversion no longer apply, the only Interest Option
available shall be a rate based upon the Prime Rate. If the Bank notifies the
undersigned that the circumstances giving rise to such repayment or conversion
no longer apply, the undersigned may thereafter select a rate based upon the
LIBOR Rate in accordance with the terms of this Note.
If the adoption of any applicable law, rule or regulation, or any
change therein, or any change in the interpretation or administration thereof by
any governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by the Bank with any
request or directive (whether or not having the force of law) of any such
authority, central bank or comparable agency shall make it unlawful or
impractical for the Bank to make or maintain a LIBOR Balance, the Bank shall so
notify the undersigned and any then-existing LIBOR Balance shall automatically
convert to a Prime Rate Balance either (i) on the last day of the then-current
LIBOR Interest Period applicable to such LIBOR Balance, if the Bank may lawfully
continue to maintain and fund such LIBOR Balance to such day, or (ii)
immediately, if the Bank may not lawfully continue to maintain such LIBOR
Balance to such day.
If either (i) the adoption of any applicable law, rule or regulation,
or any change therein, or any change in the interpretation or administration
thereof by any governmental authority, central bank or comparable agency charged
with the interpretation or administration thereof, or compliance by the Bank
with any request or directive (whether or not having the force of law) of any
such authority, central bank or comparable agency shall subject the Bank to any
tax (including without limitation any United States interest equalization or
similar tax, however named), duty or other charge with respect to any LIBOR
Balance, this Note or the Bank's obligation to compute interest on the principal
balance of this Note at a rate based upon the LIBOR Rate, or shall change the
basis of taxation of payments to the Bank of the principal of or interest on any
LIBOR Balance or any other amounts due under this Note in respect of any LIBOR
Balance or the Bank's obligation to compute the interest on the balance of this
Note at a rate based upon the LIBOR Rate, or (ii) any governmental authority,
central bank or other comparable authority shall at any time impose, modify or
deem applicable any reserve (including, without limitation, any imposed by the
Board of Governors of the Federal Reserve System) other than as is included
above, special deposit or similar requirement against assets of, deposits with
or for the account of, or credit extended by, the Bank, or shall impose on the
Bank (or its eurodollar lending office) or any relevant interbank eurodollar
market any other condition affecting any LIBOR Balance, this Note or the Bank's
obligation to compute the interest on the balance of this Note at a rate based
upon the LIBOR Rate; and the result of any of the foregoing is to increase the
cost to the Bank of maintaining any LIBOR Balance, or to reduce the amount of
any sum received or receivable by the Bank under this Note by an amount deemed
by the Bank to be material, then upon demand by the Bank, the undersigned shall
pay to the Bank such additional amount or amounts as will compensate the Bank
for such increased cost or reduction. The Bank will promptly notify the
undersigned of any event of which it has knowledge, occurring after the date
hereof, which will entitle the Bank to compensation pursuant to this paragraph.
A certificate of the Bank claiming compensation under this paragraph and setting
EQUIPMENT ACQUISITION NOTE - Page 4
<PAGE>
forth the additional amount or amounts to be paid to the Bank hereunder shall be
conclusive in the absence of manifest error.
The undersigned may not repay any LIBOR Balance or convert all or any
portion of a LIBOR Balance to a Prime Rate Balance prior to the expiration of
the applicable LIBOR Interest Period, unless (i) such repayment or conversion is
specifically required by the terms of this Note, (ii) the Bank demands that such
repayment or conversion be made, or (iii) the Bank, in its sole discretion,
consents to such repayment or conversion. If for any reason any LIBOR Balance is
repaid or converted prior to the expiration of the corresponding LIBOR Interest
Period, the undersigned shall pay to the Bank on demand any amounts required to
compensate the Bank for any losses, costs or expenses which it may incur as a
result of such repayment or conversion. A certificate of the Bank claiming
compensation under this paragraph and setting forth the additional amount or
amounts to be paid to the Bank hereunder shall be conclusive in the absence of
manifest error.
The books and records of the Bank shall be the best evidence of the
principal amount and the unpaid interest amount owing at any time hereunder and
shall be conclusive absent manifest error. Interest shall accrue and be computed
on the principal balance outstanding from time to time hereunder until the same
is paid in full.
This Note is secured by the Collateral described in the Agreement
(including, without limitation, all Accounts, Chattel Paper, Documents,
Equipment, Fixtures, Real Property, General Intangibles, Goods, Instruments and
Inventory of North American Spring & Stamping Corp. (Delaware), Hilite
Industries-Texas, Inc., Hilite Industries-Delaware, Inc., and the undersigned),
and reference is hereby made to the Agreement for, among other things, the
conditions under which this Note may or must be paid in whole or in part prior
to its due date. Bank is hereby granted a security interest in all property of
the undersigned at any time in the possession of Bank or any Affiliate of Bank
(or as to which Bank or any Affiliate of Bank at any time controls possession by
documents or otherwise) and in all balances of deposit or other accounts
(including, without limitation, an account evidenced by a certificate of
deposit).
If an Event of Default occurs and is not cured within the time, if
any, provided for by the Agreement, or the undersigned or any indorser,
guarantor or accommodation party (or any of them) fails to pay this Note or any
other Indebtedness when due (by demand, upon maturity, upon acceleration or
otherwise) then the Bank may at its option and without prior notice to the
undersigned or any indorser, guarantor or accommodation party (or any of them)
exercise any one or more of the rights and remedies granted by the Agreement or
any document contemplated thereby or given to a secured party under applicable
law, including, without limitation, the right to accelerate this Note and any
other Indebtedness and the right to sell or liquidate all or any portion of the
Collateral, and may set off against the principal of and interest on this Note
or against any other Indebtedness (i) any amount owing by Bank to the
undersigned, (ii) any property of the undersigned at any time in the possession
of Bank or any Affiliate of Bank, and (iii) any amount in any deposit or other
account (including, without limitation, an account evidenced by a certificate of
deposit) of the undersigned with Bank or any Affiliate of Bank.
EQUIPMENT ACQUISITION NOTE - Page 5
<PAGE>
This Note shall bind the undersigned and the undersigned's heirs,
personal representatives, successors and assigns.
If at any time the relevant Contract Rate exceeds the Legal Rate, the
interest payable hereunder shall be computed upon the basis of the Legal Rate,
but any subsequent reduction in the relevant Contract Rate shall not reduce the
applicable interest rate hereunder below the Legal Rate until the aggregate
amount of interest accrued and payable hereunder equals the total amount of
interest which would have accrued hereunder if the applicable interest rate
hereunder had been at all times computed solely on the basis of the relevant
Contract Rate.
No agreements, conditions, provisions or stipulations contained in
this Note, or the default of the undersigned, or the exercise by the holder
hereof of the right to accelerate the payment or the maturity of principal and
interest, or to exercise any option whatsoever contained herein, or in any other
agreements between the undersigned and Bank, or the arising of any contingency
whatsoever, shall entitle the holder of this Note to collect, in any event,
interest exceeding the maximum rate of nonusurious interest allowed from time to
time by applicable state or federal law as now or as may hereinafter be in
effect (the "Legal Rate"). Unless preempted by federal law, the rate of interest
from time to time in effect hereunder shall not exceed the "applicable rate
ceiling" from time to time in effect under Article 5069-1D.001 et seq., Vernon's
Texas Civil Statutes (and as the same may be incorporated by reference in other
Texas statutes), as amended or codified. All agreements, conditions or
stipulations, if any, which may in any event or contingency whatsoever operate
to bind, obligate or compel the undersigned to pay a rate of interest exceeding
the Legal Rate shall be without binding force or effect, at law or in equity, to
the extent only of the excess of interest over such Legal Rate. In the event any
interest is charged in excess of the Legal Rate (hereinafter referred to as the
"Excess"), the undersigned acknowledges and stipulates that any such charge
shall be the result of an accidental and bona fide error, and such Excess shall
be first applied to reduce the principal then unpaid hereunder; second, applied
to reduce any obligation for other Indebtedness of the undersigned to Bank; and
third, returned to the undersigned, it being the intention of the parties hereto
not to enter at any time into an usurious or other illegal relationship. The
undersigned recognizes that such an unintentional result could inadvertently
occur. By the execution of this Note, the undersigned covenants that (a) the
credit or return of any Excess shall constitute the acceptance by the
undersigned of such Excess, and (b) the undersigned shall not seek or pursue any
other remedy, legal or equitable, against Bank or any holder hereof based, in
whole or in part, upon the charging or receiving of any interest in excess of
the Legal Rate. For the purpose of determining whether or not any Excess has
been contracted for, charged or received by Bank or any holder hereof, all
interest at any time contracted for, charged or received by Bank or any holder
hereof, in connection with this Note, shall be amortized, prorated, allocated
and spread in equal parts during the entire term of this Note. For the sole
purpose of computing the extent of the Indebtedness and obligations of the
undersigned asserted hereunder by Bank or any holder hereof, the figures set
forth herein and the provisions hereof shall be automatically recomputed by the
undersigned, and by any court considering the same, to give effect to the
adjustments or credits required by this paragraph.
EQUIPMENT ACQUISITION NOTE - Page 6
<PAGE>
THE UNDERSIGNED AND ALL ACCOMMODATION PARTIES, GUARANTORS AND
ENDORSERS, IF ANY, (I) WAIVE DEMAND AND NOTICE OF DEMAND, (II) WAIVE
PRESENTMENT, NOTICE OF INTENTION TO DEMAND, PROTEST AND NOTICE OF PROTEST,
NOTICE OF DISHONOR, NOTICE OF INTENTION TO ACCELERATE, NOTICE OF ACCELERATION,
AND ALL OTHER NOTICES OTHER THAN AS EXPRESSLY PROVIDED IN THE AGREEMENT, (III)
AGREE THAT NO EXTENSION OR INDULGENCE TO THE UNDERSIGNED OR RELEASE OR
NON-ENFORCEMENT OF ANY SECURITY, WHETHER WITH OR WITHOUT NOTICE, SHALL AFFECT
THE OBLIGATIONS OF ANY ACCOMMODATION PARTY, GUARANTOR OR ENDORSER, AND (IV)
AGREE TO REIMBURSE THE HOLDER OF THIS NOTE FOR ANY AND ALL COSTS AND EXPENSES
INCURRED IN COLLECTING OR ATTEMPTING TO COLLECT ANY AND ALL PRINCIPAL AND
INTEREST UNDER THIS NOTE (INCLUDING, BUT NOT LIMITED TO, COURT COSTS AND
REASONABLE ATTORNEYS' FEES, WHETHER IN-HOUSE OR OUTSIDE COUNSEL IS USED AND
WHETHER SUCH COSTS AND EXPENSES ARE INCURRED IN FORMAL OR INFORMAL COLLECTION
ACTIONS, FEDERAL BANKRUPTCY PROCEEDINGS, APPELLATE PROCEEDINGS, PROBATE
PROCEEDINGS, OR OTHERWISE.
The undersigned, if two or more in number, shall be jointly and
severally bound hereunder.
All notices required or permitted under this Note shall be in writing
and shall be deemed to have been delivered when delivered in accordance with the
provisions of the Agreement.
IN WITNESS WHEREOF, the undersigned has executed this Note this _____
day of ____________, 199__.
HILITE INDUSTRIES, INC.
By:______________________________
Name:
Title:
EQUIPMENT ACQUISITION NOTE - Page 7
<PAGE>
HILITE INDUSTRIES AUTOMOTIVE, LP,
a Texas limited partnership
By: HILITE INDUSTRIES-TEXAS, INC.,
------------------------------------
a Delaware corporation,
as its general partner
By:________________________________
Name:
Title:
DB973560127
012198 v7
333:3134-488
EQUIPMENT ACQUISITION NOTE - Page 8
<PAGE>
EXHIBIT E
---------
AMENDED AND RESTATED EQUIPMENT NOTE
Dallas, Texas January 30, 1998 $13,700,000.00
FOR VALUE RECEIVED, the undersigned promises to pay to the order of
Comerica Bank-Texas ("Bank"), at any office of the Bank in the State of Texas,
THIRTEEN MILLION SEVEN HUNDRED THOUSAND AND NO/100 DOLLARS ($13,700,000.00) in
fifty-four (54) consecutive monthly installments of principal in the amount of
One Hundred Sixty-Three Thousand Ninety-Five and 23/100ths Dollars ($163,095.23)
each, beginning February 1, 1998, and on the first day of each calendar month
thereafter, plus interest on the unpaid principal balance of this Note at the
Applicable Rate (hereinafter defined), on the first day of each month during the
term of this Note, beginning February 1, 1998 until maturity, and thereafter at
a default rate equal to the rate of interest otherwise prevailing hereunder plus
three percent (3%) per annum (but in no event in excess of the Legal Rate, as
hereinafter defined), with all outstanding principal and accrued but unpaid
interest due and payable in full on the earlier of July 20, 2002 or the
Termination Date.
All capitalized terms used but not defined herein, shall have the
meanings given to such terms in that certain Second Amended and Restated Secured
Loan Agreement, as of even date herewith, among the undersigned and Bank (as
renewed, extended, modified and restated from time to time, the "Agreement").
This Note is the "Equipment Note" referred to in the Agreement, and
is subject to the terms and provisions thereof, and the holder hereof is
entitled to the benefits thereof and may enforce the agreements contained
therein and exercise the remedies provided for thereby or otherwise in respect
thereof, all in accordance with the terms thereof.
Subject to the provisions hereof, the undersigned shall have the
option (an "Interest Option") exercisable from time to time to designate
portions of the unpaid principal balance of this Note to bear interest at the
Prime Rate (such portions being herein referred to as a "Prime Rate Balance") or
at the LIBOR Rate (such portions being herein referred to as a "LIBOR Balance"),
provided, however, that no LIBOR Balance designated for any LIBOR Interest
Period (hereinafter defined) shall be less than $500,000.
The term "Applicable Rate", as used herein, shall mean (i) with
respect to any Prime Rate Balance outstanding from time to time, a fluctuating
per annum rate of interest equal to the Prime Rate, and (ii) with respect to any
LIBOR Balance outstanding from time to time, a per annum rate of interest equal
to one and one-half percent (1.5%) above the LIBOR Rate for the LIBOR Interest
Period then in effect with respect to such LIBOR Balance. Each determination by
Bank of the LIBOR Rate or Prime Rate, as the case may be, shall, in the absence
of manifest error, be conclusive and binding.
AMENDED AND RESTATED EQUIPMENT NOTE - Page 1
<PAGE>
The term "Interest Notice" shall mean the written notice given by the
undersigned of the Interest Option selected hereunder and specifying the amount
of principal to bear interest at the rate selected.
The term "Prime Rate", as used herein, shall mean that annual rate of
interest designated by the Bank as its prime rate and which is changed by the
Bank from time to time. The Bank's prime rate is a reference rate and does not
necessarily represent the lowest or best rate actually charged by the Bank to
any of its customers. The Bank may make commercial loans at rates of interest
at, above or below its prime rate.
The term "LIBOR Rate", as used herein, shall mean, with respect to
any LIBOR Interest Period, the interest rate per annum conclusively determined
by the Bank to be the per annum rate (as adjusted for any applicable reserve
requirements applicable to "eurocurrency liabilities" pursuant to Regulation D
or any other applicable regulation of the Board of Governors (or any successor)
which prescribes reserve requirements applicable to "eurocurrency liabilities"
as presently defined in Regulation D, or any eurocurrency funding) at which
deposits in immediately available funds in U.S. dollars are offered to the Bank
(at such time as the Bank elects on the first day of such LIBOR Interest Period)
by prime banks in the interbank eurodollar market selected by Bank for delivery
on the first day of such LIBOR Interest Period in an amount equal to the
principal amount of the corresponding LIBOR Balance for a period equal to the
length of such LIBOR Interest Period.
The term "LIBOR Interest Period", as used herein, shall mean, with
respect to any LIBOR Balance, a period commencing on the date upon which,
pursuant to an Interest Notice, the principal amount of such LIBOR Balance
begins to accrue interest at the LIBOR Rate (or, in the case of a rollover to a
successive LIBOR Interest Period, the last day of the immediately preceding
LIBOR Interest Period) and ending 30, 60, 90, 180 or 360 days (whichever is
selected by the undersigned in the applicable Interest Notice) after the
commencement date; provided, that: (i) any LIBOR Interest Period which would
otherwise end on a day which is not a LIBOR Business Day shall be extended to
the next succeeding LIBOR Business Day (unless such LIBOR Business Day falls in
another calendar month, in which case such LIBOR Interest Period shall end on
the next preceding LIBOR Business Day); and (ii) any LIBOR Interest Period which
begins on the last LIBOR Business Day of a calendar month (or on a day for which
there is no numerically corresponding day in the calendar month at the end of
such LIBOR Interest Period) shall, subject to clause (A) above, end on the last
LIBOR Business Day of a calendar month.
The term "LIBOR Business Day", as used herein, shall mean a day on
which dealings in U.S. dollars are carried out in the interbank eurodollar
market selected by Bank.
The Interest Option shall be exercisable by the undersigned subject
to the other limitations in this Note on the undersigned's option to designate a
portion of the unpaid principal balance hereof as a LIBOR Balance and only in
the manner provided below:
(i) At least two (2) LIBOR Business Days prior to the date hereof
the undersigned shall give the Bank (an Interest Notice) specifying the initial
Interest Option(s) and the respective
AMENDED AND RESTATED EQUIPMENT NOTE - Page 2
<PAGE>
initial amounts of the Prime Rate Balance, and LIBOR Balance designated by the
undersigned. If the required Interest Notice shall not have been timely received
by the Bank or fails to designate all or any portion of the unpaid principal
balance of this Note as either a Prime Rate Balance or a LIBOR Balance in
accordance with the terms and provisions of this Note, the undersigned shall be
deemed conclusively to have designated such amounts to be a Prime Rate Balance
and to have given the Bank notice of such designation.
(ii) At least two (2) LIBOR Business Days prior to the termination
of any LIBOR Interest Period for a LIBOR Balance, the undersigned shall give the
Bank an Interest Notice specifying the Interest Option which is to be applicable
to such LIBOR Balance upon the expiration of such LIBOR Interest Period,
provided, however, no Interest Option specifying an interest rate based on the
LIBOR Rate shall end after the Termination Date. If the required Interest Notice
shall not have been timely received by the Bank prior to the expiration of such
LIBOR Interest Period, the undersigned shall be deemed conclusively to have
designated such LIBOR Balance to become a Prime Rate Balance immediately upon
the expiration of such LIBOR Interest Period and to have given the Bank notice
of such designation.
(iii) The undersigned shall have the right to convert an eligible
portion of the Prime Rate Balance to a LIBOR Balance by giving the Bank an
Interest Notice of such designation at least two (2) LIBOR Business Days prior
to the effective date of such exercise. Additionally, upon termination of any
LIBOR Interest Period, the undersigned shall have the right, on any LIBOR
Business Day, to convert all or a portion of such principal amount from the
LIBOR Balance to a Prime Rate Balance by giving Bank an Interest Notice of such
selection at least two (2) LIBOR Business Days prior to effective date of such
exercise. An Interest Notice shall be irrevocable and binding on the undersigned
and the undersigned shall indemnify Bank against any loss or expense incurred by
Bank due to sums paid or payable to fund the LIBOR Balance when such LIBOR
Balance is not made on such date.
Each change in the interest rate applicable to the Prime Rate Balance
or the LIBOR Balance shall become effective without prior notice to the
undersigned automatically as of the opening of business on the date of such
change in the Prime Rate or the LIBOR Rate, as the case may be provided, that,
the LIBOR Rate shall not change during any applicable LIBOR Interest Period.
Interest on this Note shall be calculated on the basis of a 360-day year for the
actual number of days outstanding.
If the Bank determines that deposits in U.S. dollars (in the
applicable amounts) are not being offered to the Bank in the interbank
eurodollar market selected by the Bank for such LIBOR Interest Period, or that
the rate at which such dollar deposits are being offered will not adequately and
fairly reflect the cost to the Bank of making or maintaining a LIBOR Balance for
the applicable LIBOR Interest Period, the Bank shall forthwith give notice
thereof to the undersigned, whereupon until the Bank notifies the undersigned
that such circumstances no longer exist, (i) the right of the undersigned to
select an Interest Option based upon the LIBOR Rate shall be suspended, and (ii)
each LIBOR Balance in effect shall thereupon automatically be converted into a
Prime Rate Balance in accordance with the provisions hereof. If notice has been
given by the Bank to the undersigned requiring a LIBOR Balance to be repaid or
converted, then
AMENDED AND RESTATED EQUIPMENT NOTE - Page 3
<PAGE>
unless and until the Bank notifies the undersigned that the circumstances giving
rise to such repayment or conversion no longer apply, the only Interest Option
available shall be a rate based upon the Prime Rate. If the Bank notifies the
undersigned that the circumstances giving rise to such repayment or conversion
no longer apply, the undersigned may thereafter select a rate based upon the
LIBOR Rate in accordance with the terms of this Note.
If the adoption of any applicable law, rule or regulation, or any
change therein, or any change in the interpretation or administration thereof by
any governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by the Bank with any
request or directive (whether or not having the force of law) of any such
authority, central bank or comparable agency shall make it unlawful or
impractical for the Bank to make or maintain a LIBOR Balance, the Bank shall so
notify the undersigned and any then-existing LIBOR Balance shall automatically
convert to a Prime Rate Balance either (i) on the last day of the then-current
LIBOR Interest Period applicable to such LIBOR Balance, if the Bank may lawfully
continue to maintain and fund such LIBOR Balance to such day, or (ii)
immediately, if the Bank may not lawfully continue to maintain such LIBOR
Balance to such day.
If either (i) the adoption of any applicable law, rule or regulation,
or any change therein, or any change in the interpretation or administration
thereof by any governmental authority, central bank or comparable agency charged
with the interpretation or administration thereof, or compliance by the Bank
with any request or directive (whether or not having the force of law) of any
such authority, central bank or comparable agency shall subject the Bank to any
tax (including without limitation any United States interest equalization or
similar tax, however named), duty or other charge with respect to any LIBOR
Balance, this Note or the Bank's obligation to compute interest on the principal
balance of this Note at a rate based upon the LIBOR Rate, or shall change the
basis of taxation of payments to the Bank of the principal of or interest on any
LIBOR Balance or any other amounts due under this Note in respect of any LIBOR
Balance or the Bank's obligation to compute the interest on the balance of this
Note at a rate based upon the LIBOR Rate, or (ii) any governmental authority,
central bank or other comparable authority shall at any time impose, modify or
deem applicable any reserve (including, without limitation, any imposed by the
Board of Governors of the Federal Reserve System) other than as is included
above, special deposit or similar requirement against assets of, deposits with
or for the account of, or credit extended by, the Bank, or shall impose on the
Bank (or its eurodollar lending office) or any relevant interbank eurodollar
market any other condition affecting any LIBOR Balance, this Note or the Bank's
obligation to compute the interest on the balance of this Note at a rate based
upon the LIBOR Rate; and the result of any of the foregoing is to increase the
cost to the Bank of maintaining any LIBOR Balance, or to reduce the amount of
any sum received or receivable by the Bank under this Note by an amount deemed
by the Bank to be material, then upon demand by the Bank, the undersigned shall
pay to the Bank such additional amount or amounts as will compensate the Bank
for such increased cost or reduction. The Bank will promptly notify the
undersigned of any event of which it has knowledge, occurring after the date
hereof, which will entitle the Bank to compensation pursuant to this paragraph.
A certificate of the Bank claiming compensation under this paragraph and setting
AMENDED AND RESTATED EQUIPMENT NOTE - Page 4
<PAGE>
forth the additional amount or amounts to be paid to the Bank hereunder shall be
conclusive in the absence of manifest error.
The undersigned may not repay any LIBOR Balance or convert all or any
portion of a LIBOR Balance to a Prime Rate Balance prior to the expiration of
the applicable LIBOR Interest Period, unless (i) such repayment or conversion is
specifically required by the terms of this Note, (ii) the Bank demands that such
repayment or conversion be made, or (iii) the Bank, in its sole discretion,
consents to such repayment or conversion. If for any reason any LIBOR Balance is
repaid or converted prior to the expiration of the corresponding LIBOR Interest
Period, the undersigned shall pay to the Bank on demand any amounts required to
compensate the Bank for any losses, costs or expenses which it may incur as a
result of such repayment or conversion. A certificate of the Bank claiming
compensation under this paragraph and setting forth the additional amount or
amounts to be paid to the Bank hereunder shall be conclusive in the absence of
manifest error.
The books and records of the Bank shall be the best evidence of the
principal amount and the unpaid interest amount owing at any time hereunder and
shall be conclusive absent manifest error. Interest shall accrue and be computed
on the principal balance outstanding from time to time hereunder until the same
is paid in full.
This Note is secured by the Collateral described in the Agreement
(including, without limitation, all Accounts, Chattel Paper, Documents,
Equipment, Fixtures, Real Property, General Intangibles, Goods, Instruments and
Inventory of North American Spring & Stamping Corp. (Delaware), Hilite
Industries-Texas, Inc., Hilite Industries-Delaware, Inc., and the undersigned),
and reference is hereby made to the Agreement for, among other things, the
conditions under which this Note may or must be paid in whole or in part prior
to its due date. Bank is hereby granted a security interest in all property of
the undersigned at any time in the possession of Bank or any Affiliate of Bank
(or as to which Bank or any Affiliate of Bank at any time controls possession by
documents or otherwise) and in all balances of deposit or other accounts
(including, without limitation, an account evidenced by a certificate of
deposit).
If an Event of Default occurs and is not cured within the time, if
any, provided for by the Agreement, or the undersigned or any indorser,
guarantor or accommodation party (or any of them) fails to pay this Note or any
other Indebtedness when due (by demand, upon maturity, upon acceleration or
otherwise) then the Bank may at its option and without prior notice to the
undersigned or any indorser, guarantor or accommodation party (or any of them)
exercise any one or more of the rights and remedies granted by the Agreement or
any document contemplated thereby or given to a secured party under applicable
law, including, without limitation, the right to accelerate this Note and any
other Indebtedness and the right to sell or liquidate all or any portion of the
Collateral, and may set off against the principal of and interest on this Note
or against any other Indebtedness (i) any amount owing by Bank to the
undersigned, (ii) any property of the undersigned at any time in the possession
of Bank or any Affiliate of Bank, and (iii) any amount in any deposit or other
account (including, without limitation, an account evidenced by a certificate of
deposit) of the undersigned with Bank or any Affiliate of Bank.
AMENDED AND RESTATED EQUIPMENT NOTE - Page 5
<PAGE>
This Note shall bind the undersigned and the undersigned's heirs,
personal representatives, successors and assigns.
If at any time the relevant Contract Rate exceeds the Legal Rate, the
interest payable hereunder shall be computed upon the basis of the Legal Rate,
but any subsequent reduction in the relevant Contract Rate shall not reduce the
applicable interest rate hereunder below the Legal Rate until the aggregate
amount of interest accrued and payable hereunder equals the total amount of
interest which would have accrued hereunder if the applicable interest rate
hereunder had been at all times computed solely on the basis of the relevant
Contract Rate.
No agreements, conditions, provisions or stipulations contained in
this Note, or the default of the undersigned, or the exercise by the holder
hereof of the right to accelerate the payment or the maturity of principal and
interest, or to exercise any option whatsoever contained herein, or in any other
agreements between the undersigned and Bank, or the arising of any contingency
whatsoever, shall entitle the holder of this Note to collect, in any event,
interest exceeding the maximum rate of nonusurious interest allowed from time to
time by applicable state or federal law as now or as may hereinafter be in
effect (the "Legal Rate"). Unless preempted by federal law, the rate of interest
from time to time in effect hereunder shall not exceed the "applicable rate
ceiling" in effect from time to time. Article 5069-1D.001 et. seq., Vernon's
Texas Civil Statutes (and as the same may be incorporated by reference in other
Texas statutes), as amended or codified. All agreements, conditions or
stipulations, if any, which may in any event or contingency whatsoever operate
to bind, obligate or compel the undersigned to pay a rate of interest exceeding
the Legal Rate shall be without binding force or effect, at law or in equity, to
the extent only of the excess of interest over such Legal Rate. In the event any
interest is charged in excess of the Legal Rate (hereinafter referred to as the
"Excess"), the undersigned acknowledges and stipulates that any such charge
shall be the result of an accidental and bona fide error, and such Excess shall
be first applied to reduce the principal then unpaid hereunder; second, applied
to reduce any obligation for other Indebtedness of the undersigned to Bank; and
third, returned to the undersigned, it being the intention of the parties hereto
not to enter at any time into an usurious or other illegal relationship. The
undersigned recognizes that such an unintentional result could inadvertently
occur. By the execution of this Note, the undersigned covenants that (a) the
credit or return of any Excess shall constitute the acceptance by the
undersigned of such Excess, and (b) the undersigned shall not seek or pursue any
other remedy, legal or equitable, against Bank or any holder hereof based, in
whole or in part, upon the charging or receiving of any interest in excess of
the Legal Rate. For the purpose of determining whether or not any Excess has
been contracted for, charged or received by Bank or any holder hereof, all
interest at any time contracted for, charged or received by Bank or any holder
hereof, in connection with this Note, shall be amortized, prorated, allocated
and spread in equal parts during the entire term of this Note. For the sole
purpose of computing the extent of the Indebtedness and obligations of the
undersigned asserted hereunder by Bank or any holder hereof, the figures set
forth herein and the provisions hereof shall be automatically recomputed by the
undersigned, and by any court considering the same, to give effect to the
adjustments or credits required by this paragraph.
AMENDED AND RESTATED EQUIPMENT NOTE - Page 6
<PAGE>
THE UNDERSIGNED AND ALL ACCOMMODATION PARTIES, GUARANTORS AND
ENDORSERS, IF ANY, (I) WAIVE DEMAND AND NOTICE OF DEMAND, (II) WAIVE
PRESENTMENT, NOTICE OF INTENTION TO DEMAND, PROTEST AND NOTICE OF PROTEST,
NOTICE OF DISHONOR, NOTICE OF INTENTION TO ACCELERATE, NOTICE OF ACCELERATION,
AND ALL OTHER NOTICES OTHER THAN AS EXPRESSLY PROVIDED IN THE AGREEMENT, (III)
AGREE THAT NO EXTENSION OR INDULGENCE TO THE UNDERSIGNED OR RELEASE OR
NON-ENFORCEMENT OF ANY SECURITY, WHETHER WITH OR WITHOUT NOTICE, SHALL AFFECT
THE OBLIGATIONS OF ANY ACCOMMODATION PARTY, GUARANTOR OR ENDORSER, AND (IV)
AGREE TO REIMBURSE THE HOLDER OF THIS NOTE FOR ANY AND ALL COSTS AND EXPENSES
INCURRED IN COLLECTING OR ATTEMPTING TO COLLECT ANY AND ALL PRINCIPAL AND
INTEREST UNDER THIS NOTE (INCLUDING, BUT NOT LIMITED TO, COURT COSTS AND
REASONABLE ATTORNEYS' FEES, WHETHER IN-HOUSE OR OUTSIDE COUNSEL IS USED AND
WHETHER SUCH COSTS AND EXPENSES ARE INCURRED IN FORMAL OR INFORMAL COLLECTION
ACTIONS, FEDERAL BANKRUPTCY PROCEEDINGS, APPELLATE PROCEEDINGS, PROBATE
PROCEEDINGS, OR OTHERWISE.
The undersigned, if two or more in number, shall be jointly and
severally bound hereunder.
The indebtedness evidenced by this Note is in amendment, modification
and restatement, but not an extinguishment or novation, of the indebtedness
evidenced by that certain Equipment Note dated July 21, 1995, in the original
principal amount of $13,700,000.00 executed by the Hilite Industries, Inc. and
payable to the order of Bank, and the provisions of this Note are in amendment,
modification and restatement of the provisions of such note.
All notices required or permitted under this Note shall be in writing
and shall be deemed to have been delivered when delivered in accordance with the
provisions of the Agreement.
IN WITNESS WHEREOF, the undersigned has executed this Note this 30th
day of January, 1998.
HILITE INDUSTRIES, INC.,
a Delaware corporation
By:______________________________
Samuel M. Berry
President
AMENDED AND RESTATED EQUIPMENT NOTE - Page 7
<PAGE>
HILITE INDUSTRIES AUTOMOTIVE, LP,
a Texas limited partnership
By: HILITE INDUSTRIES-TEXAS, INC.,
----------------------------------
a Delaware corporation,
as its general partner
By:______________________________
Daniel W. Brady
Chief Executive Officer
DB973560139
012798 v12
333:3134-488
AMENDED AND RESTATED EQUIPMENT NOTE - Page 8
<PAGE>
EXHIBIT F
---------
REAL ESTATE NOTE
$960,000.00 Dallas, Texas
October 28, 1992
FOR VALUE RECEIVED, the undersigned promises to pay to the order of
COMERICA BANK-TEXAS (the "Bank") at 1909 Woodall Rodgers, Dallas, Texas 75201,
the principal sum of Nine Hundred Sixty Thousand and No/100ths Dollars
($960,000.00) in consecutive monthly installments of principal in the amount of
Five Thousand Three Hundred Thirty-Three and 34/100ths Dollars ($5,333.34) each,
beginning on the first day of the calendar month immediately succeeding the date
of disbursement of the Real Estate Loan evidenced by the Note and on the first
day of each calendar month thereafter, with all outstanding principal and
accrued but unpaid interest due and payable in full on the earlier of (i)
November 1, 2007, or (ii) at Bank's sole option, the Termination Date.
Notwithstanding the foregoing or anything to the contrary in the
Agreement (as hereinafter defined), Bank shall have the. sole option, upon the
fifth anniversary of the date of disbursement of the Real Estate Loan evidenced
by this Note or upon each thereafter occurring anniversary of the date of
disbursement of the Real Estate Loan evidenced by this Note (a "Put Date"), to
require payment in full of all Indebtedness evidenced by this Note, Bank to
exercise this option by giving the undersigned written notice of such election,
which written notice must be given by Bank to the undersigned at least 60 days
prior to the relevant Put Date. The undersigned hereby agrees and acknowledges
that the right of Bank pursuant to the preceding sentence to require payment in
full on a Put Date of the Indebtedness evidenced by this Note is a bargained for
part of the terms pursuant to which Bank made the Real Estate Loan evidenced by
this Note and that exercise of such right by Bank is in no way dependent or
conditioned upon Bank believing at such time that the prompt payment of the
Indebtedness evidenced by this Note is in any way impaired.
All capitalized terms used but not defined herein, shall have the
meanings given to such terms in that certain Secured Loan Agreement, dated as of
December 21, 1990, between the undersigned and Bank (as the same has been
renewed, extended, modified and restated and as the same may be further renewed,
extended, modified and restated from time to time, the "Agreement").
This Note is the "Real Estate Note" referred to in the Agreement, and
is subject to the terms and provisions thereof, and the holder hereof is
entitled to the benefits thereof and may enforce the agreements contained
therein and exercise the remedies provided for thereby or otherwise in respect
thereof, all in accordance with the terms thereof.
The unpaid principal amount of this Note shall bear interest from the
date of disbursement of the Real Estate Loan evidenced by this Note (i) until
maturity (whether by acceleration or otherwise) at a fluctuating rate per annum
equal to the lesser of (a) 1.75% above the Prime Rate
REAL ESTATE NOTE - Page 1
<PAGE>
(the "Annual Rate") or (b) the Legal Rate (as hereinafter defined); and (ii)
thereafter, at a fluctuating rate per annum equal to the lesser of (a) 3.0% per
annum above the Annual Rate (the "Default Rate") or (b) the Legal Rate (the
Annual Rate and the Default Rate, whichever is in effect at any particular time,
being hereinafter referred to as the "Contract Rate"). Interest shall be payable
to the extent accrued on the first day of each consecutive calendar month,
beginning November 1, 1992, until maturity (whether by acceleration or
otherwise) and from and after such maturity, on demand. The rate of interest
applicable to this Note shall change as and when the Prime Rate changes.
Interest hereunder shall be calculated on the basis of a 360-day year for the
actual number of days outstanding. If at any time the relevant Contract Rate
exceeds the Legal Rate, the interest payable hereunder shall be computed upon
the basis of the Legal Rate, but any subsequent reduction in the relevant
Contract Rate shall not reduce the applicable interest rate hereunder below the
Legal Rate until the aggregate amount of interest accrued and payable hereunder
equals the total amount of interest which would have accrued hereunder if the
applicable interest rate hereunder had been at all times computed solely on the
basis of the relevant Contract Rate. The books and records of the Bank shall be
the best evidence of the principal amount and the unpaid interest amount owing
at any time hereunder and shall be conclusive absent manifest error.
This Note is secured by the Collateral described in the Agreement
(including, without limitation, all Real Property, Accounts, Chattel Paper,
Documents, Equipment, Fixtures, General Intangibles, Goods, Instruments and
inventory of the undersigned), and reference is hereby made to the Agreement
for, among other things, the conditions under which this Note may or must be
paid in whole or in part prior to its due date or its due date accelerated. Bank
is hereby granted a security interest in all property of the undersigned at any
time in the possession of Bank or any Affiliate of Bank (or as to which Bank or
any Affiliate of Bank at any time controls possession by documents or otherwise)
and in all balances of deposit or other accounts (including without limit an
account evidenced by a certificate of deposit) of the undersigned from time to
time with Bank or any Affiliate of Bank.
If an Event of Default occurs and is not cured within the time, if
any, provided for by the Agreement, Bank may exercise any one or more of the
rights and remedies granted by the Agreement or any document contemplated
thereby or given to a secured party under applicable law, including without
limit the right to accelerate this Note and any other indebtedness, and may set
off against the principal of and interest on this Note or against any other
Indebtedness (i) any amount owing by Bank to the undersigned, (ii) any property
of the undersigned at any time in the possession of Bank or any Affiliate of
Bank, and (iii) any amount in any deposit or other account (including without
limit an account evidenced by a certificate of deposit) of the undersigned with
Bank or any Affiliate of Bank.
The undersigned and all accommodation parties, guarantors and
endorsers (i) waive presentment, demand, protest and notice of protest, notice
of dishonor, notice of intention to accelerate, notice of acceleration, and all
other notices other than as expressly provided in the Agreement, (ii) agree that
no extension or indulgence to the undersigned or release or non-enforcement of
any security, whether with or without notice, shall affect the obligations of
any accommodation party, guarantor or endorser, and (iii) agree to reimburse the
holder of this
REAL ESTATE NOTE - Page 2
<PAGE>
Note for any and all costs and expenses incurred in collecting or attempting to
collect any and all principal and interest under this Note (including, but not
limited to, court costs and reasonable attorney fees, whether in-house or
outside counsel is used and whether such costs and expenses are incurred in
formal or informal collection actions, federal bankruptcy proceedings, appellate
proceedings, probate proceedings, or otherwise).
No agreements, conditions, provisions or stipulations contained in
this Note, or the default of the undersigned, or the exercise by the holder
hereof of the right to accelerate the payment or the maturity of principal and
interest, or to exercise any option whatsoever contained herein, or in any other
agreements between the undersigned and Bank, or the arising of any contingency
whatsoever, shall entitle the holder of this Note to collect, in any event,
interest exceeding the maximum rate of nonusurious interest allowed from time to
time by applicable state or federal law as now or as may hereinafter be in
effect, including, as to article 5069-1.04 Vernon's Texas Civil Statutes (and as
the same may be incorporated by reference in other Texas statutes), but
otherwise without limitation, that rate based upon the "indicated rate ceiling"
(the "Legal Rate") and in no event shall the undersigned be obligated to pay
interest exceeding such Legal Rate; and all agreements, conditions or
stipulations, if any, which may in any event or contingency whatsoever operate
to bind, obligate or compel the undersigned to pay a rate of interest exceeding
the Legal Rate shall be without binding force or effect, at law or in equity, to
the extent only of the excess of interest over such Legal Rate. In the event any
interest is charged in excess of the Legal Rate (the "Excess"), the undersigned
acknowledges and stipulates that any such charge shall be the result of an
accidental and bona fide error, and such Excess shall be first applied to reduce
the principal then unpaid hereunder; second, applied to reduce any obligation
for other indebtedness of the undersigned to Bank; and third, returned to the
undersigned, it being the intention of the parties hereto not to enter at any
time into an usurious or other illegal relationship. The undersigned recognizes
that such an unintentional result could inadvertently occur. By the execution of
this Note, the undersigned covenants that (i) the credit or return of any Excess
shall constitute the acceptance by the undersigned of such Excess, and (ii) the
undersigned shall not seek or pursue any other remedy, legal or equitable,
against Bank or any holder hereof based, in whole or in part, upon the charging
or receiving of any interest in excess of the Legal Rate. For the purpose of
determining whether or not any Excess has been contracted for, charged or
received by Bank or any holder hereof, all interest at any time contracted for,
charged or received by Bank or any holder hereof, in connection with this Note,
shall be amortized, prorated, allocated and spread in equal parts during the
entire term of this Note. For the sole purpose of computing the extent of the
Indebtedness and obligations of the undersigned asserted hereunder by Bank or
any holder hereof, the figures set forth herein and the provisions hereof shall
be automatically recomputed by the undersigned, and by any court considering the
same, to give effect to the adjustments or credits required by this paragraph.
This Note shall be construed under and governed by the laws of the
State of Texas and applicable federal law.
REAL ESTATE NOTE - Page 3
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this Note as of the
28th day of October, 1992, to be effective as of the date of disbursement of the
Real Estate Loan evidenced by this Note.
Hilite Industries, Inc.
By:______________________
Its:_____________________
DB973560117
122297 v2
333:3134-488
REAL ESTATE NOTE - Page 4
<PAGE>
EXHIBIT G
---------
TELEPHONE NOTICE AUTHORIZATION
January 30, 1998
Comerica Bank-Texas
4100 Spring Valley
Spring Valley at Midway
Dallas, Texas 75244
Gentlemen:
We hereby confirm borrowing arrangements made with you as described in this
letter. Pursuant to and subject to the terms of the FIFTH AMENDED AND RESTATED
REVOLVING CREDIT NOTE (the "NOTE") and the Second Amended and Restated Secured
Loan Agreement ("Agreement"), both dated January 30, 1998 executed and delivered
by us to you, you have agree until notice to the contrary to us, that, upon our
advice to you by telephone from time to time that we wish to borrow money under
the NOTE, you will lend and forthwith credit such sums of money as requested to
account number with you.
You may rely on the giving to you of the Security Code listed below as proof
that the caller is authorized to make such borrowings on our behalf.
We acknowledge that all our borrowings under the NOTE may at our election, but
subject to the terms of the Agreement, be repaid upon our advice to you to do so
by telephone (together with the Security Code listed below). Repayment may be
effected (in whole or in part) by debiting the above mentioned account. Of
course, we acknowledge that we remain fully responsible for any amounts
outstanding under the NOTE if our accounts with you are insufficient for the
repayment of the NOTE. We recognize that all requests for payments are to be
against collected funds.
We acknowledge that the methods of borrowing and repayment set forth in this
letter are for our convenience and, therefore, agree that you shall have no
liability whatsoever to us arising out of your administration and servicing of
the loans under the NOTE or our borrowings and repayments thereunder (excepting
only those arising solely out of your willful misconduct) and all such risks and
liabilities whatsoever are assumed and accepted by us. Without limitation of the
foregoing, we acknowledge that we have been advised to protect and safeguard the
Security Code contained herein, so as to permit its use only for purposes
intended by us and to prevent any loss or damage to us from such use. We assume
any losses or damages whatsoever which may occur or arise out of our failure to
protect and safeguard the Security Code.
<PAGE>
Security Code: Very truly yours,
Comerica Bank-Texas Date:_____________ HILITE INDUSTRIES, INC.
(214) 818-2118
By:______________________________ By:______________________________
J. Michael Park Samuel M. Berry
Vice President President
HILITE INDUSTRIES AUTOMOTIVE, LP,
a Texas limited partnership
By: HILITE INDUSTRIES-TEXAS, INC.,
------------------------------------
a Delaware corporation,
as its general partner
By:_______________________________
Daniel W. Brady
Chief Executive Officer
-2-
<PAGE>
SECURITY CODE AUTHORIZATIONS
The following persons are authorized to use the Security Code for requesting
loan advances and paydowns:
______________________________ __________________________________
(Print Name) (Print Name)
______________________________ __________________________________
(Title) (Title)
______________________________ __________________________________
(Signature) (Signature)
______________________________ __________________________________
(Print Name) (Print Name)
______________________________ __________________________________
(Title) (Title)
______________________________ __________________________________
(Signature) (Signature)
A change in authorities will require another form to be completed containing
current information.
Comerica Bank-Texas
P.O. Box 650282
Dallas, Texas 75265-9979
Attn: J. Michael Park
Mail Code - 6528
DB973630079
012798 v6
333:3134-488
-3-
<PAGE>
GUARANTY
(HTX)
COMERICA BANK-TEXAS
The undersigned, for value received, unconditionally and absolutely
guarantee(s) to Comerica Bank-Texas (hereinafter called the "Bank"), and to the
Bank's successors and assigns, payment when due, whether by acceleration or
otherwise, of all existing and future indebtedness to the Bank of
HILITE INDUSTRIES, INC. AND
HILITE INDUSTRIES AUTOMOTIVE, LP
and also of any debtor-in-possession or trustee in bankruptcy ,which succeeds to
the interests of said party or person (jointly and severally hereinafter called
the "Customer"), for principal of and interest (including interest accruing at
the rates provided for in the Loan Agreement (as defined below) after the
commencement of a bankruptcy) on all loans and other extensions of credit under,
and all expenses, fees, reimbursements, indemnities and other amounts owing
pursuant to that certain Second Amended and Restated Secured Loan Agreement,
dated as of the date hereof, executed by Hilite Industries, Inc., Hilite
Industries Automotive, LP and Bank (as amended, renewed, extended and restated
from time to time with the consent of the undersigned, the "Loan Agreement"),
together with all other indebtedness, liabilities and obligations of Customer to
Bank, howsoever such indebtedness, liabilities and other obligations have been
or may be incurred or evidenced, whether absolute or contingent, direct or
indirect, and whether or not known to the undersigned at the time of this
Guaranty or at the time any future indebtedness is incurred (all of which,
together with all costs of collection thereof, including, without limitation,
reasonable attorney fees, is hereinafter collectively called the
"Indebtedness").
The Indebtedness guaranteed includes, but is not limited to: (a) any
and all direct indebtedness of the Customer to the Bank, including indebtedness
evidenced by any and all promissory notes; (b) any and all obligations or
liabilities of the Customer to the Bank arising under any guaranty wherein the
Customer has guaranteed the payment of indebtedness owing to the Bank from a
third party; (c) any and all obligations or liabilities of the Customer to the
Bank arising from applications or agreements for the issuance of letters of
credit; (d) any and all amendments, modifications, renewals and/or extensions of
any of the foregoing, including but not limited to amendments, modifications,
renewals and/or extensions which are evidenced by new or additional instruments,
documents or agreements; and (e) all interest and all costs of collecting
Indebtedness, including without limitation reasonable attorney fees.
The undersigned waive(s) notice of acceptance of this Guaranty, and
presentment, demand, protest, notice of protest, notice of default and diligence
in collecting any Indebtedness,
<PAGE>
and agree(s) that the Bank may modify the terms of borrowing, compromise,
extend, increase, accelerate, renew or forbear to enforce payment of any part or
all of any Indebtedness, or permit the Customer to incur additional
Indebtedness, all without notice to the undersigned and without affecting in any
manner the unconditional obligation of the undersigned under this Guaranty. The
undersigned acknowledge(s) and agree(s) that the liabilities created by this
Guaranty are direct and are not conditioned upon pursuit by the Bank of any
remedy the Bank may have against the Customer or any other person or any
security. No invalidity, irregularity or unenforceability by reason of any
bankruptcy, insolvency or other similar law, or any law or order of any
government or agency thereof purporting to reduce, amend or otherwise affect the
Indebtedness shall impair, affect or be a defense to the obligations of' the
undersigned under this Guaranty.
The undersigned deliver(s) this Guaranty based solely on the
undersigned's independent investigation of the financial condition of the
Customer and is (are) not relying on any information furnished by the Bank. The
undersigned assume(s) full responsibility for obtaining any further information
concerning the Customer's financial condition, the status of the Indebtedness or
any other matter which the undersigned may deem necessary or appropriate from
time to time. The undersigned hereby waive(s) any duty on the part of the Bank,
and agree(s) that it is not relying upon nor expecting the Bank to disclose to
the undersigned any fact now or hereafter known by the Bank, whether relating to
the operations or condition of the Customer, the existence, liabilities or
financial condition of any co-guarantor of the Indebtedness, the occurrence of
any default with respect to the Indebtedness, or otherwise, notwithstanding any
effect such fact may have upon the undersigned's risk hereunder or the
undersigned's rights against the Customer. The undersigned knowingly accept(s)
the full range of risk encompassed in this contract of Guaranty, which risk
includes, but is not limited to, the possibility that the Customer may incur
Indebtedness to the Bank after the financial condition of the Customer, or its
ability to pay its debts as they mature, has deteriorated.
The undersigned grant(s) to the Bank a security interest in and right
of setoff with respect to any and all property of the undersigned now or
hereafter in the possession of the Bank. The undersigned hereby subordinate(s)
any claim of any nature whatsoever that the undersigned now or hereafter has
(have) against the Customer to and in favor of all Indebtedness and agree(s) not
to accept payment or satisfaction of any claim that the undersigned now or
hereafter may have against the Customer without the prior written consent of the
Bank. The undersigned further hereby assign(s) to the Bank as collateral
security for the obligations of the undersigned hereunder all claims of any
nature whatsoever that the undersigned now or hereafter has (have) against the
Customer with full right on the part of the Bank, in its own name or in the name
of the undersigned, to collect and enforce such claims.
The undersigned agree(s) that no security now or hereafter held by
the Bank for the payment of any Indebtedness, whether from the Customer, any
guarantor or otherwise, and whether in the nature of a security interest,
pledge, lien, assignment, setoff, suretyship, guarantee indemnity, insurance or
otherwise, shall affect in any manner the unconditional obligation of the
undersigned under this Guaranty, and the Bank, in its sole discretion, without
notice to the undersigned, may release, exchange, enforce and otherwise deal
with any such security without
-2-
<PAGE>
affecting in any manner the unconditional obligation of the undersigned under
this Guaranty. The undersigned acknowledge(s) and agree(s) that the Bank has no
obligation to acquire or perfect any lien on or security interest in any asset
or assets, whether realty or personalty, to secure payment of the Indebtedness,
and the undersigned is (are) not relying upon assets in which the Bank has a
lien or security interest for payment of the Indebtedness.
Until such time as the Indebtedness shall be indefeasibly paid in
full, the undersigned hereby waive(s) any and all rights to be subrogated to the
position of the Bank or to have the benefit of any lien, security interest or
other guaranty now or hereafter held by the Bank for the Indebtedness. Until
such time as the Indebtedness shall be indefeasibly paid in full, the
undersigned shall have no right of reimbursement, indemnity, contribution or
other right of recourse to or with respect to the Customer. The Bank shall have
no duty to enforce or protect any rights which the undersigned may have against
the Customer, and the undersigned assume(s) full responsibility, for enforcing
and protecting any such rights.
If the Indebtedness or any portion thereof is guaranteed by two or
more guarantors, the obligation of the undersigned shall be several and also
joint, each with all and also each with any one or more of the others, and may
be enforced at the option of the Bank against each severally, any two or more
jointly, or some severally and some jointly. The Bank, in its sole discretion,
may release any one or more of such guarantors for any consideration which it
deems adequate, and may fail or elect not to prove a claim against the estate of
any bankrupt, insolvent, incompetent or deceased guarantor; and thereafter
without notice to any other guarantor, the Bank may extend or renew any part or
all of any Indebtedness and may permit the Customer to incur additional
Indebtedness, without affecting in any manner the unconditional obligation of
the remaining guarantor(s). Such action by the Bank shall not, however, be
deemed to affect any right to contribution which may exist among the guarantors.
The undersigned guarantor may terminate the obligation of this
Guaranty as to future Indebtedness by delivering written notice to an officer of
the Bank and receiving from an officer of the Bank written acknowledgment of
such delivery, such termination to be effective at the opening of business on
the fifteenth (15th) day following such written acknowledgment of delivery. Any
such termination shall not affect in any way the unconditional obligations of
the remaining guarantor(s), whether or not such termination is known to said
remaining guarantor(s), nor shall termination affect in any way the
unconditional obligations of the terminating guarantor(s) as to any
Indebtedness, existing at the date of termination or any Indebtedness created
thereafter pursuant to any commitment of the Bank existing at the date of
termination, or any extensions or renewals of any such Indebtedness, whether in
whole or in part, and as to all such Indebtedness and extensions or renewals
thereof, this Guaranty shall continue effective until the same shall have been
fully paid with interest. The Bank shall have no duty to give notice of such
termination by any guarantor(s) to any remaining guarantor(s). The undersigned
shall indemnify the Bank against all claims, damages, costs and expenses,
including without limitation reasonable attorney fees, incurred by the Bank in
connection with any suit, claim or action against the Bank arising out of any
modification or termination of a Customer loan or any
-3-
<PAGE>
refusal by the Bank to extend additional credit in connection with the
termination of this Guaranty.
If after receipt of any payment of all or any part of the
Indebtedness, the Bank is for any reason compelled to surrender such payment to
any person or entity because such payment is determined to be void or voidable
as a preference, impermissible setoff, diversion of trust funds or for any other
reason, then to the extent of that payment, the Indebtedness shall be revived
and the obligations under this Guaranty shall be continued in effect without
reduction or discharge for that payment, and this Guaranty shall continue in
full force notwithstanding any contrary action which may have been taken by the
Bank in reliance upon such payment, and any such contrary action so taken shall
be without prejudice to Bank's rights under this Guaranty and shall be deemed to
have been conditioned upon such payment having become final and irrevocable.
No agreements, conditions, provisions or stipulations contained in
this Guaranty or any other instrument, document or agreement between Customer
and Bank or default of Customer, or the exercise by Bank of the right to
accelerate the payment of the maturity of principal and interest or to exercise
any option whatsoever contained in this Guarantee or any other agreement between
Customer and Bank, or the arising of any contingency whatsoever, shall entitle
Bank to collect, in any event, interest exceeding the Legal Rate and in no event
shall the undersigned or Customer be obligated to pay interest exceeding such
Legal Rate and all agreements, conditions or stipulations, if any, which may in
any event or contingency whatsoever operate to bind, obligate or compel the
undersigned or Customer to pay a rate of interest exceeding the Legal Rate,
shall be without binding force or effect, at law or in equity, to the extent
only of the excess of interest over such Legal Rate. In the event any interest
is charged in excess of the Legal Rate ("Excess"), each of the undersigned
acknowledges and stipulates that any such charge shall be the result of an
accident and bona fide error, and such Excess shall be, first, applied to reduce
the principal then unpaid hereunder; second, applied to reduce the Indebtedness;
and third, returned to Customer, it being the intention of the parties hereto
not to enter at any time into a usurious or otherwise illegal relationship. Each
of the undersigned recognizes that with fluctuations in the Prime Rate and the
Legal Rate, such an unintentional result could inadvertently occur. By the
execution of this Guaranty, each of the undersigned covenants that (a) the
credit or return of any Excess shall constitute the acceptance of the
undersigned of such Excess, and (b) the undersigned shall not seek or pursue any
other remedy, legal or equitable, against Bank, based in whole or in part upon
the charging or receiving of any interest in excess of the maximum authorized by
applicable law. For the purpose of determining whether or not any Excess has
been contracted for, charged or received by Bank, all interest at any time
contracted for, charged or received by Bank in connection with this Guaranty
shall be amortized, prorated, allocated and spread in equal parts during the
entire term of this Guaranty.
ADDITIONAL PROVISIONS: It is expressly agreed that, for so long as
this Guaranty, is in effect, (a) the undersigned will furnish to Bank,
consolidated annual financial statements of the undersigned and the customer not
later than 90 days after the close of each fiscal year of the undersigned and
consolidated monthly financial statements of the undersigned and the customer
not later than 20 days after the close of each calendar month in form reasonably
satisfactory to
-4-
<PAGE>
Bank and certified by the chief executive officer or chief financial officer of
the undersigned; and (b) the undersigned hereby makes all of the representations
and warranties and agrees to all of the covenants of Customer set forth in the
Loan Agreement that refer to the undersigned, with the same force and effect as
representations, warranties and covenants of the undersigned as though the same
were set forth in their entirety herein. Anything contained in this Guaranty to
the contrary notwithstanding, the obligations of the undersigned hereunder shall
be limited to a maximum aggregate amount equal to the largest amount that would
not render the undersigned's obligations hereunder subject to avoidance as a
fraudulent transfer or conveyance under Section 548 of Title 11 of the United
States Code or any applicable provisions of comparable state law (collectively,
the Fraudulent Transfer Laws"), after giving effect to all other liabilities of
the undersigned, contingent or otherwise, that are relevant under the Fraudulent
Transfer laws and after giving effect as assets to the value (as determined
under the applicable provisions of the Fraudulent Transfer laws) of any rights
to subrogation or contribution of the undersigned pursuant to (i) applicable law
or (ii) any agreement providing for an equitable allocation among the
undersigned and other affiliates of Customer of obligations under guaranties by
such parties.
THE UNDERSIGNED HEREBY WAIVES ITS RIGHTS UNDER THE DECEPTIVE TRADE
PRACTICES -- CONSUMER PROTECTION ACT, SECTION 17.41 ET. SEQ. BUSINESS & COMMERCE
CODE, A LAW THAT GIVES CONSUMERS SPECIAL RIGHTS AND PROTECTIONS. AFTER
CONSULTATION WITH AN ATTORNEY OF THE UNDERSIGNED'S OWN SELECTION, THE
UNDERSIGNED VOLUNTARILY CONSENTS TO THIS WAIVER. THE UNDERSIGNED EXPRESSLY
WARRANTS AND REPRESENTS THAT THE UNDERSIGNED (A) IS NOT IN A SIGNIFICANTLY
DISPARATE BARGAINING POSITION RELATIVE TO LENDER, AND (B) HAS BEEN REPRESENTED
BY LEGAL COUNSEL IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THIS
GUARANTY.
The total obligation under this Guaranty shall be UNLIMITED unless
otherwise indicated in the Additional Provisions of this Guaranty, and such
obligation (whether unlimited or limited to the extent indicated in the
Additional Provisions) shall include in addition to any limited amount any and
all interest thereon, and all costs and expenses including, but not limited to,
reasonable attorney fees incurred in enforcing any of the duties and obligations
of the undersigned under this Guaranty. Any reference in this Guaranty to
attorney fees shall be deemed a reference to fees, charges, costs, and expenses
of both in-house and outside counsel, whether or not suit is instituted, and
whether incurred at the trial court level, on appeal, in a bankruptcy proceeding
or otherwise.
This Guaranty is secured by the Collateral described in the Loan
Agreement and the other Loan Documents (as defined on the Loan Agreement)
(including, without limitation, all Accounts, Chattel Paper, Documents,
Equipment, Fixtures, Real Property, General Intangibles, Goods, Instruments and
Inventory of the undersigned (as each such term is defined in the Loan
Agreement)).
-5-
<PAGE>
This Guaranty constitutes the entire agreement of the undersigned and
the Bank with respect to the subject matter hereof. No waiver, consent,
modification or change of the terms of this Guaranty shall bind any of the
undersigned or the Bank unless in writing and signed by the waiving party or an
authorized officer of the waiving party, and then such waiver, consent,
modification or change shall be effective only, in the specific instance and for
the specific purpose given. This Guaranty shall be binding on the undersigned
and the undersigned's heirs, legal representatives, successors and assigns
including, without limiting the generality of the foregoing, any debtor in
possession or trustee in bankruptcy for any of the undersigned. The undersigned
has (have) entered into this Guaranty in good faith for the purpose of inducing
the Bank to extend credit or make other financial accommodations to the
Customer, and the undersigned acknowledge(s) that the terms hereof are
reasonable. If any provision of this Guaranty is unenforceable in whole or in
part for any reason, the remaining provisions shall continue to be effective.
THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF TEXAS.
THE UNDERSIGNED WAIVE ANY AND ALL RIGHTS TO TRIAL BY JURY IN ANY
ACTION, SUIT OR CLAIM ARISING OUT OF THIS GUARANTY.
In witness whereof the undersigned has signed this Guaranty on
January 30, 1998.
HILITE INDUSTRIES-TEXAS, INC.
By:___________________________
Daniel W. Brady,
Chief Executive Officer
db980070154
012798 v8
333:3134-488
-6-
<PAGE>
SCHEDULE 5.5
PERMITTED LIENS
A. Borrowers
(i) Purchase money security interests, none of which
individually exceeds $25,000 and all of which in
the aggregate do not exceed $250,000.
B. NASS
(i) Liens for taxes or assessments or other
governmental charges or levies, either not yet due
and payable or to the extent that non-payment
thereof is permitted by the terms of the
Agreement.
(ii) Pledges or deposits (provided that any current
asset so pledged or deposited is included on the
Company's balance sheet within a line item denoted
as a "pledged" asset or with a similar title)
securing obligations (all of which are reflected
in the ordinary course as liabilities on the
Company's balance sheet) under workmen's
compensation, unemployment insurance, social
security or public liability laws or similar
legislation.
(iii) Pledges or deposits (provided that any current
asset so pledged or deposited is included on the
Company's balance sheet within a line item denoted
as a "pledged" asset or with a similar title)
securing bids, tenders, contracts (other than
contracts for the payment of money), or leases to
which the Company is a party as lessee, made in
the ordinary course of business.
(iv) Deposits (provided that any current asset so
pledged or deposited is included on the Company's
balance sheet within a line item denoted as a
"Pledged" asset or with a similar title) securing
public or statutory obligations (all of which are
reflected in the ordinary course as liabilities on
the Company's balance sheet) of the Company.
(v) Workers', mechanics', suppliers', carriers',
warehousemen's or other similar liens arising in
the ordinary course of business and securing
obligations (all of which are reflected in the
ordinary course as liabilities on the Company's
balance sheet) aggregating not in excess of
$25,000.00, not yet due and payable.
(vi) Deposits (provided that any current asset so
pledged or deposited is included on the Company's
balance sheet within a line item denoted as a
"pledged" asset or with a similar title) securing
or in lieu of surety, appeal or customs bonds in
proceedings to which the Company is a party,
<PAGE>
(vii) Exceptions set forth on Schedule B in Commitment
for Title Insurance Policy No. 7569028 dated July
21, 1995 issued by Chicago Title Insurance
Company, as well as zoning restrictions,
easements, licenses or other restrictions on the
use of Real Property or other minor irregularities
in 'title (including leasehold title) thereto, so
long as the same do not materially impair the use,
value, or marketability of such Real Property,
leases or leasehold estates.
(viii) Liens held by Yale Financial Services, Inc. on all
equipment leased by them to the Company, which is
comprised of forklifts, and all accessions,
additions, replacements and substitutions thereto
and therefor, and all proceeds (including
insurance proceeds) thereof.
(ix) Liens held by The old Second National Bank of
Aurora on: (a) No. 35 Baird Multislide with three
(3) extra die heads, serial number 35-90, (b) No.
35 Baird Multislide with two (2) die heads and a
power reel, serial number 16272, (C) Hitachi Model
406P wire EDM machine, serial number D410046004,
and (d) Cleaning System Model Formula II and WTS
Westek, invoice number 0121191-1, leased to the
Company by J.M. & A. Leasing Inc.
(x) Liens Lien held by J-M Engineering Co. on No. 35
Baird Multislide, serial number MT104-10.
C. HDE
None.
D. HTX
None
<PAGE>
SCHEDULE 5.11
INDEBTEDNESS
A. Borrowers
None.
B. NASS
None.
C. HDE
None.
D. HTX
None
<PAGE>
SCHEDULE 5.12
MATERIAL AGREEMENTS
A. Borrowers
1. 1993 Stock Option Plan of Hilite Industries, Inc.
2. Employment Agreement dated July 1, 1993 between
Hilite Industries, Inc. and Samuel M. Berry.
3. Management Contract between Hilite Industries,
Inc. and Lineberger & Co. dated July 1, 1996.
4. Lease Agreement between Hilite Industries, Inc.
and Roger C. Hunsacker d/b/a Hunsacker Properties
dated September 2, 1993.
5. Lease Agreement between Hilite Industries, Inc.
and Leonard Properties dated August, 1992 and
Amendment No. 1 thereto.
6. Secured Loan Agreement between Hilite Industries,
Inc. and the Bank dated December 21, 1990 (the
"Loan Agreement").
7. Amendment to Loan Agreement dated January 31,
1992.
8. Second Amendment to Loan Agreement dated October
28, 1992.
9. Third Amendment to Loan Agreement dated November
11, 1993.
10. Fourth Amendment to Loan Agreement dated February
15, 1994.
11. Amended and Restated Secured Loan Agreement dated
July 21, 1995.
12. Fifth Amendment to Loan Agreement dated July 1997.
13. Underwriting Agreement among Hilite Industries,
Inc., Fahnestock & Co. and First Hanover
Securities, Inc., dated January 24, 1994.
14. Union Contract Agreement between Pitts Division of
Hilite Industries, Inc. and the International
Union of Electronic, Electrical, Salaried, Machine
and Furniture Workers, AFL-CIO, dated September
21, 1997.
15. Company Proposed Collective Bargaining Agreement
between Surfaces Division of Hilite Industries,
Inc. and the International Union of Electronic,
Electrical, Salaried, Machine and Furniture
Workers, AFL-CIO, dated May 21, 1996.
<PAGE>
B. NASS
1. Employment Agreements, dated July 21, 1995,
between the Guarantor and each of Michael L.
McKee, Donald P. Degenhardt and Robert S. Johnson.
C. HDE
None.
D. HTX
None
<PAGE>
SCHEDULE 8.2
ENVIRONMENTAL MATTERS
A. Borrowers
None.
B. NASS
1. Paint solvent is used at the 345 Criss Circle, Elk Grove
Village facility, and has either been recycled or
disposed of at an off-site facility. Recycling is
conducted on the premises by licensed companies that
process the used solvent into sludge and reusable
solvent. The sludge is then hauled away by the companies
and properly disposed.
The following companies perform the recycling and transportation
services for the Company:
Name Licenses
- ---- --------
Solvent Systems U.S. EPA I.D. #ILD984832006
International, Inc. State transporters I.D. #2604
339 West River Road
Elgin, Illinois 60123
J.B. Hunt Special U.S. EPA I.D. #ARD981908551
Commodities Inc. State transporters I.D. #3091
P.O. Box 130
Lowell, Arkansas 72745
The following company operates the disposal facility where the
Company's waste is disposed:
Name Licenses
- ---- --------
Environmental Services of America-In U.S. EPA I.D. #ILD980590947
604 South Scott Street
South Bend, Indiana 46601
Hazardous materials shipped by the Company from the
facility at 345 Criss Circle, Elk Grove Village, are referred to in
the manifest history, which was previously delivered to Buyer.
<PAGE>
2. One (1) Underground Storage Tank was removed at the 34.5
Criss Circle, Elk Grove Village facility. The Illinois
Environmental Protection Agency determined in 1992 that
no further remediation of the area is necessary.
3. In 1990, a discharge of condensate from a compressor
resulted in a small oil spill at the 345 Criss Circle,
Elk Grove Village facility. Remediation was conducted
and approved by the Metropolitan Water Reclamation
District of Greater Chicago.
4. In 1991, asbestos-containing insulation was discovered
in the Kentucky facility. The asbestos was removed by a
certified asbestos abatement specialist.
C. HDE
None.
D. HTX
None
SETTLEMENT AGREEMENT AND MUTUAL GENERAL RELEASE
This Settlement Agreement and Mutual General Release ("Agreement") is
entered into between (1) Hilite Industries, Inc. ("Hilite") and (2) Michael L.
McKee, Donald P. Degenhardt and Robert S. Johnson (collectively the
"Defendants").
WHEREAS, the parties hereto are parties to an action styled Hilite
Industries, Inc. v. McKee et al., No. 97 C 3448 (Leinenweber, J.) (United States
District Court for the Northern District of Illinois) (the "Suit");
WHEREAS, Hilite alleges in the Suit that, inter alia, the Defendants
breached certain representations and warranties in a Stock Purchase Agreement
entered into between Hilite and Defendants on or about July 21, 1995, pursuant
to which Defendants sold Hilite 100% of the stock of North American Spring &
Stamping Corp. ("NASS") (the "Stock Purchase Agreement");
WHEREAS, pursuant to the Stock Purchase Agreement and as partial payment
of the purchase price called for by the Stock Purchase Agreement, each Defendant
was issued a Subordinated Note ("Note") by Hilite, copies of which are attached
hereto as Group Exhibit A;
WHEREAS, pursuant to the Stock Purchase Agreement, each Defendant
entered into an Employment Agreement ("Employment Agreement") with NASS, which
include provisions for a salary to be paid to each Defendant for services
rendered as well as the payment of a non-competition fee, copies of which are
attached hereto as Group Exhibit B;
WHEREAS, the Defendants have filed a counterclaim in the Suit seeking
payment under each of their respective Notes;
<PAGE>
WHEREAS, incident to execution of the Stock Purchase Agreement, the
parties entered into an agreement dealing with certain environmental matters
(the "Environmental Agreement"), a copy of which is attached hereto as Exhibit
C;
WHEREAS, the Defendants deny any and all allegations of wrongdoing and
liability raised by Hilite in the Suit, and Hilite denies any and all
allegations of wrongdoing and liability raised by Defendants in the Suit; and
WHEREAS, the parties, in order to avoid the costs of litigation and the
risks attendant upon trial, desire to settle their disputes and arrange for the
dismissal of all claims and counterclaims raised in the Suit with prejudice,
upon the terms set forth herein.
NOW, THEREFORE, in consideration of the promises and covenants set forth
below, the parties agree as follows:
1. The recitals set forth above are incorporated herein by
reference.
2. Upon execution of this Agreement by all parties:
(a) The Notes, including all principal and interest thereon (accrued
and unpaid), shall be cancelled, and Hilite shall be discharged and released
from any further obligations thereunder;
(b) Any remaining obligation of NASS to the Defendants under each
Defendant's Employment Agreement, including without limitation any remaining
payment obligation under paragraph 4 thereof, shall be cancelled and NASS shall
be discharged and released from any futher obligations thereunder;
-2-
<PAGE>
(c) The Defendants shall collectively pay Hilite by certified or
bank check or checks the total amount of $101,498.00;
(d) Any obligations that the Defendants may have pursuant to the
Environmental Agreement shall be cancelled, and Defendants shall be discharged
and released from any further obligations thereunder, except that the Defendants
shall pay the fees owed to their environmental consultant for work requested by
the Defendants and performed by such consultant up to the date of this
Agreement; and
(e) The parties shall execute a stipulation and agreed order of
dismissal, in the form attached hereto as Exhibit D, providing for the dismissal
of the Suit, including all claims and counterclaims, with prejudice, and further
providing that all parties shall bear their own costs and fees.
3. The parties agree that:
(a) The release of Hilite's obligations to make any further payment
under the Notes shall constitute a reduction of $1,785,184 to the purchase price
set forth in, and to be paid pursuant to, the Stock Purchase Agreement;
(b) The Defendants' payment of $101,498.00 shall be in partial
reimbursement of Hilite's legal fees incurred in the Suit;
(c) The release of NASS' obligations to make further salary payments
under the Employment Agreements for services to be rendered thereunder is in
exchange for the release of the Defendants' obligations, if any, to perform
further services thereunder; and
-3-
<PAGE>
(d) The release of NASS' obligation to make further payments of the
non- competition fee under the Employment Agreement shall constitute a reduction
in the consideration paid therefore. Notwitstanding the foregoing, the
Defendants shall remain bound by the terms of the confidentiality and
non-compete provisions set forth in their respective Employment Agreements,
including the provisions in paragraph 3 thereof.
4. With the exception of those obligations imposed upon each
Defendant under the terms of this Agreement and those obligations imposed upon
each Defendant by the confidentiality and non-compete provisions of each
Defendant's respective Employment Agreement, which are not released by this
Agreement and shall remain in force as written, Hilite, on behalf of itself and
its successors, assigns, employees, officers, directors, affiliates, parent
corporations and subsidiaries (including, without limitation, NASS), agrees,
promises, releases and forever discharges the Defendants and their respective
heirs, executors, administrators, successors and assigns from liability from any
and all claims, controversies, actions, causes of actions, demands, torts,
damages, costs, attorneys' fees, moneys due on account, contractual obligations,
obligations, warranties, representations, covenants, judgments or liabilities of
any kind whatsoever in law or equity, arising out of any agreement or alleged
breach of agreement or imposed by statute, common law or otherwise, including
but not limited to all claims that were or could have been raised by Hilite in
the Suit or pursuant to the Stock Purchase Agreement, from the beginning of time
to the date this Agreement is signed, whether or not known now, anticipated,
unanticipated, suspected or claimed, fixed or contingent, whether yet accrued or
not and whether damage has resulted from such or not. Without limiting the
foregoing, pursuant to
-4-
<PAGE>
the terms of this paragraph, any rights that Hilite has to ever again bring an
action for breach of the Stock Purchase Agreement, for indemnification under
Article 11 of the Stock Purchase Agreement or based upon alleged acts or
omissions in connection with the negotiation and execution of the Stock Purchase
Agreement are extinguished in full by this paragraph.
5. Hilite represents and warrants that it has not assigned any
claims or causes of action that it now has, or ever had, against any of the
Defendants to any third party.
6. With the exception of those obligations imposed upon Hilite
under the terms of this Agreement, the Defendants, on behalf of themselves and
their respective heirs, executors, administrators, successors and assigns,
agree, promise, release and forever discharge Hilite and its successors,
assigns, agents, employees, officers, directors, attorneys, representatives,
affiliates, parent corporations and subsidiaries (including without limitation
NASS), from liability from any and all claims, controversies, actions, causes of
actions, demands, torts, damages, costs, attorneys' fees, moneys due on account,
contractual obligations, obligations, warranties, representations, covenants,
judgments or liabilities of any kind whatsoever in law or equity, arising out of
any agreement or alleged breach of agreement, or imposed by statute, common law
or otherwise, including but not limited to claims for any payments under the
Defendants' respective Notes or Employment Agreements, from the beginning of
time to the date this Agreement is signed, whether or not known now,
anticipated, unanticipated, suspected or claimed, fixed or contingent, whether
yet accrued or not and whether damage has resulted from such or not. Without
limiting the foregoing, pursuant to the terms of this paragraph, any rights that
the Defendants have to ever bring an action for breach of the Stock Purchase
Agreement, for
-5-
<PAGE>
indemnification under Article 11 of the Stock Purchase Agreement or based upon
alleged acts or omissions in connection with the negotiation and execution of
the Stock Purchase Agreement are extinguished in full by this paragraph.
7. The Defendants represent and warrant that they have not assigned
any claims or causes of action that they now have, or ever had, against Hilite
to any third party.
8. Notwithstanding any other provision of this Agreement, any
rights that the Defendants currently have in NASS' Employee Pension Benefit
Plans, as identified in Schedule 4.21(a)(ii) of the Stock Purchase Agreement, or
any successor plans thereto, are not affected in any way by this Agreement, and
shall be preserved.
9. This Agreement may be executed in multiple counterparts, each of
which shall be deemed an original, but which together shall constitute a single
agreement.
10. This Agreement shall, in all respects, be governed by the laws
of the State of Illinois, without regard to Illinois conflicts of laws rules.
11. Each party represents that such party has been advised to seek
consultation with an attorney before signing this Agreement, that such party has
had the benefit of independent counsel of its own choosing and that such party
has carefully read this Agreement, has reviewed it with counsel and understands
each provision thereof.
12. This Agreement constitutes the entire agreement of the parties
with respect to the claims and counterclaims raised in the Suit. Each party
represents that no promises, obligations, representations, inducements, or
agreements of any kind not set forth in this Agreement have been made by any
party to this Agreement or their respective attorneys.
-6-
<PAGE>
Dated: February 13, 1998 HILITE INDUSTRIES, INC.
By: /s/ DANIEL W. BRADY
--------------------------------
Its: Chief Executive Officer
----------------------------
Dated: February 13, 1998 /s/ MICHAEL L. McKEE
-----------------------------------
MICHAEL L. McKEE
Dated: February 13, 1998 /s/ DONALD P. DEGENHARDT
-----------------------------------
DONALD P. DEGENHARDT
Dated: February 13, 1998 /s/ ROBERT S. JOHNSON
-----------------------------------
ROBERT S. JOHNSON
-7-
ASSIGNMENT AND ASSUMPTION AGREEMENT
THIS ASSIGNMENT AND ASSUMPTION AGREEMENT, dated as of December 31, 1997,
(the "Agreement"), between Hilite Industries, Inc., a Delaware corporation
("Transferor"), and Hilite Industries-Texas, Inc., a Delaware corporation and a
wholly-owned subsidiary of Transferor ("Transferee").
W I T N E S S E T H:
WHEREAS, pursuant to the terms of this Agreement, Transferor is agreeing
to transfer and Transferee is agreeing to accept all of the Assets (as
hereinafter defined) and assume all of the liabilities of Transferor, except for
those assets and liabilities expressly excluded herein;
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Transferee and Transferor hereby
agree as follows:
1. ASSIGNMENT. Transferor agrees to transfer, convey and assign to
Transferee, and Transferee agrees to accept from Transferor, all of the
assets and properties owned by Transferor, of every kind and description,
real, personal and mixed, tangible and intangible, wherever located,
except for the Excluded Assets (as hereinafter defined) (collectively, the
"Assets") at the Closing (as hereinafter defined). The Assets shall
include, but not be limited to:
a. all machinery, equipment, computers, computer hardware, tools,
inventory, supplies, construction in progress, furniture,
automobiles and all other tangible assets of Transferor whether
located at the Transferor's facilities in Carrollton, Texas (the
"Real Property") or elsewhere;
b. all the interest of and the rights and benefits accruing to
Transferor as lessee under all leases or rental agreements covering
the Fixed Assets;
c. all of the rights and benefits accruing to Transferor under all
written or oral contracts, agreements, arrangements or
understandings, including without limitation any loan agreement or
indenture, purchase, sales, supply or service order or agreement,
real property, equipment or other lease, or license of trade rights,
to which the Transferor is a party or by which the Transferor or any
of the Assets are bound (the "Contracts");
d. all operating data and records of Transferor, including without
limitation client lists and records, referral sources, mailing
lists, equipment logs, operating guides and manuals, copies of
financial, accounting and personnel records, correspondence and
other similar documents and records;
e. all of Transferor's rights to any intellectual property;
f. the Real Property and all other real property owned by Transferor;
<PAGE>
g. all prepaid expenses; and
h. all receivables of the Transferor.
2. EXCLUDED ASSETS. Anything contained in Section 1 hereof to the contrary
notwithstanding, the Assets shall exclude and Pur chaser shall not
purchase the following property and assets (collectively, the "Excluded
Assets"):
a. the shares of common stock of Transferee received by Transferor in
consideration for the transfer of the Assets to Transferee;
b. the corporate minute books, stock books, tax returns or other
records (other than the records relating to the Business included in
the Assets of Transferor;
c. the shares of common stock of North American Spring & Stamping
Corp., a Delaware corporation and a wholly-owned subsidiary of
Transferor ("NASS"); and
d. the rights which accrue or will accrue to Transferor under this
Agreement.
3. ASSUMPTION.
3.1 Transferee agrees to assume, and shall discharge in accordance with
their terms, all of the obligations and liabilities of Transferor relating to
the Assets to the extent that they shall remain uncompleted and outstanding as
of the Closing. Such liabilities and obligations shall include but not be
limited to all liabilities and obligations of Transferor under the Contracts.
3.2 Transferee and Transferor further agree that Transferee shall assume
and become liable for or perform when due all liabilities (contingent or
otherwise), debts, contracts, commitments and other obligations of Transferor of
any nature other than those related to the Excluded Assets.
3.3 To the extent that any Contract shall not be assignable from
Transferor to Transferee because a party to such Contract shall not have
consented to such assignment ("Non-Assignable Contract"), Transferor
acknowledges and agrees that Transferee will be granted at the Closing, to the
fullest extent permitted by law, the same rights and privileges enjoyed by
Transferor under the Non-Assignable Contracts and Transferee will assume all
liabilities under the Non-Assignable Contracts.
4. CONSIDERATION. Subject to the terms and conditions of this Agreement, in
consideration of the sale, conveyance, assignment, transfer and delivery
of the Assets, the Transferee shall issue one hundred (100) shares (the
"Shares") of its common stock ("Transferee's Common Stock") to Transferor
as set forth in paragraph 6 below.
2
<PAGE>
5. CLOSING. The closing (the "Closing") of the transaction contemplated by
this Agreement shall take place at the offices of counsel to the
Transferor, Parker Chapin Flattau & Klimpl, LLP, 1211 Avenue of the
Americas, New York, New York 10036, at 6:00 p.m. local time on January 31,
1998 or on a date designated by Transferor which shall be after all
requisite approvals have been received by Transferor. The execution and/or
delivery of each document to be executed and/or delivered at the Closing
and each other action to be taken at the Closing shall be subject to the
condition that every other document to be executed and/or delivered at the
Closing is so executed and/or delivered and every other action to be taken
at the Closing is so taken, and all such documents and actions shall be
deemed to be executed and/or delivered or taken, as the case may be,
simultaneously.
6. DELIVERY OF CONSIDERATION. Upon signing of this Agreement, Transferee
shall issue and deliver one (1) Share to Transferor. At the Closing,
Transferee shall issue and deliver the remaining ninety nine (99)
authorized Shares to Transferor. If the Closing does not occur on or
before March 31, 1998, the Share delivered upon signing of this Agreement
shall be returned by Transferor to Transferee.
7. UNREGISTERED SHARES.
7.1 Transferor understands that (i) the Shares have not been registered
under the Securities Act of 1933, as amended (the "Act") or the securities laws
of any state by reason of their issuance in a transaction exempt from the
registration requirements of the Act, (ii) the Shares must be held indefinitely
unless a subsequent disposition thereof is registered under the Act and any
applicable state securities law or is exempt from such registration, (iii) all
of the Shares will bear a legend to such effect as set forth in Section 7.2
hereof, and (iv) the Transferee will make notation on its transfer books to such
effect.
7.2 Each certificate representing Shares and each certificate issued
upon exchange or transfer of any Shares shall be stamped or otherwise imprinted
with a legend substantially in the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED OR THE SECURITIES LAWS OF ANY STATE. SUCH SECURITIES MAY NOT BE
TRANSFERRED OR OTHERWISE DISPOSED OF ABSENT SUCH REGISTRATION OR THE
RECEIPT BY HILITE INDUSTRIES-TEXAS, INC. OF AN OPINION OF COUNSEL FOR THE
HOLDER HEREOF, WHICH COUNSEL AND OPINION SHALL BE REASONABLY ACCEPTABLE TO
HILITE INDUSTRIES-TEXAS, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.
8. FURTHER ASSURANCES. Each party hereto covenants and agrees promptly to
execute, deliver, file or record such agreements, instruments,
certificates and other documents and to perform such other and further
acts as the other party hereto may reasonably request or as may otherwise
be necessary or proper to consummate and perfect the transactions
contemplated hereby.
3
<PAGE>
9. BINDING EFFECT. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective legal representatives,
successors and permitted assigns.
10. CHOICE OF LAW. This Agreement shall be governed by, and interpreted and
enforced in accordance with, the laws of the State of Delaware.
11. MULTIPLE COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
12. HEADINGS. All section titles or captions in this Agreement are for
convenience. They shall not be deemed part of this Agreement and shall in
no way define, limit, extend or describe the scope or intent of provisions
herein.
13. SEPARABILITY. Inapplicability or unenforceability of any provision of this
Agreement shall not impair the operation or validity of any other
provision hereof.
14. ENTIRE AGREEMENT. This Agreement, and all other agreements delivered
contemporaneously with this Agreement, collectively constitute the entire
agreement between the parties hereto with respect to the matter addressed
herein.
IN WITNESS WHEREOF, Transferee and Transferor have caused this Assignment
and Assumption Agreement to be duly executed as of the date first written above.
HILITE INDUSTRIES, INC.
By: /s/ Samuel M. Berry
----------------------------
Samuel M. Berry
President, Chief Operating
Officer and Director
HILITE INDUSTRIES-TEXAS, INC.
By: /s/ Daniel W. Brady
----------------------------
Daniel W. Brady
Vice Chairman of the
Board of Directors and
Chief Operating Officer
4
ASSIGNMENT AND ASSUMPTION
AGREEMENT
THIS ASSIGNMENT AND ASSUMPTION AGREEMENT, dated as of December 31, 1997
(the "Agreement"), between Hilite Industries-Texas, Inc., a Delaware corporation
("Transferor"), and Hilite Industries-Delaware, Inc., a Delaware corporation and
a wholly-owned subsidiary of Transferor ("Transferee").
W I T N E S S E T H:
WHEREAS, pursuant to the terms of this Agreement, Transferor is agreeing
to transfer and Transferee is agreeing to accept all of the Assets (as
hereinafter defined) and assume all of the liabilities of Transferor, except for
those assets and liabilities expressly excluded herein;
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Transferee and Transferor hereby
agree as follows:
1. ASSIGNMENT. Transferor agrees to transfer, convey and assign to
Transferee, and Transferee hereby agrees to accept from Transferor, all of
the assets and properties owned by Transferor, of every kind and
description, real, personal and mixed, tangible and intangible, wherever
located, except for the Excluded Assets (as hereinafter defined)
(collectively, the "Assets"). The Assets shall include, but not be limited
to:
(a) all machinery, equipment, computers, computer hardware,
tools, inventory, supplies, construction in progress, furniture,
automobiles and all other tangible assets of Transferor whether
located at the Transferor's facilities in Carrollton, Texas (the
"Real Property") or elsewhere;
(b) all the interest of and the rights and benefits accruing
to Transferor as lessee under all leases or rental agreements
covering the Fixed Assets;
(c) all of the rights and benefits accruing to Transferor
under all written or oral contracts, agreements, arrangements or
understandings, including without limitation any loan agreement or
indenture, purchase, sales, supply or service order or agreement,
real property, equipment or other lease, or license of trade rights,
to which the Transferor is a party or by which the Transferor or any
of the Assets are bound (the "Contracts");
(d) all operating data and records of Transferor, including
without limitation client lists and records, referral sources,
mailing lists, equipment logs, operating guides and manuals, copies
of financial, accounting and personnel records, correspondence and
other similar documents and records;
<PAGE>
(e) all of Transferor's rights to any intellectual property;
(f) the Real Property and all other real property owned by
Transferor;
(g) all prepaid expenses; and
(h) all receivables of the Transferor.
2. EXCLUDED ASSETS. Anything contained in Section 1 hereof to the
contrary notwithstanding, the Assets shall exclude and Transferee shall not
purchase the following property and assets (collectively, the "Excluded
Assets"):
(a) the shares of common stock of Transferee received by
Transferor in consideration for the transfer of the Assets to
Transferee;
(b) the corporate minute books, stock books, tax returns or
other records (other than the records relating to the Business
included in the Assets of Transferor;
(c) those accounts receivable of the Transferor as set forth
on the closing certificate, dated as of the date of the Closing, a
form of which is attached hereto as Exhibit A;
(d) the rights which accrue or will accrue to Transferor
under this Agreement.
3. ASSUMPTION.
3.1 Transferee hereby assumes and shall discharge in accordance with
their terms, all of the obligations and liabilities of Transferor relating to
the Assets to the extent that they shall remain uncompleted and outstanding as
of the date hereof. Such liabilities and obligations shall include but not be
limited to all liabilities and obligations of Transferor under the Contracts.
3.2 Transferee and Transferor further agree that Transferee shall assume
and become liable for or perform when due all liabilities (contingent or
otherwise), debts, contracts, commitments and other obligations of Transferor of
any nature other than those related to the Excluded Assets.
3.3 To the extent that any Contract shall not be assignable from
Transferor to Transferee because a party to such Contract shall not have
consented to such assignment ("Non-Assignable Contract"), Transferor
acknowledges and agrees that Transferee is hereby granted, to the fullest extent
permitted by law, the same rights and privileges enjoyed by Transferor under the
Non-Assignable Contracts and Transferee assumes all liabilities under the
Non-Assignable Contracts.
-2-
<PAGE>
4. CONSIDERATION. Subject to the terms and conditions of this
Agreement, in consideration of the conveyance, assignment, transfer and delivery
of the Assets, the Transferee shall issue one hundred (100) shares (the
"Shares") of its common stock ("Transferee's Common Stock") to Transferor.
5. CLOSING. The closing (the "Closing") of the transaction contemplated
by this Agreement shall take place at the offices of counsel to the Transferor,
Parker Chapin Flattau & Klimpl, LLP, 1211 Avenue of the Americas, New York, New
York 10036, at 6:00 p.m. local time on January 31, 1998 or on a date designated
by Transferor which shall be after all requisite approvals have been received by
Transferor. The execution and/or delivery of each document to be executed and/or
delivered at the Closing and each other action to be taken at the Closing shall
be subject to the condition that every other document to be executed and/or
delivered at the Closing is so executed and/or delivered and every other action
to be taken at the Closing is so taken, and all such documents and actions shall
be deemed to be executed and/or delivered or taken, as the case may be,
simultaneously.
6. DELIVERY OF CONSIDERATION. Upon signing of this Agreement,
Transferee shall deliver one (1) Share to Transferor. At the Closing, Transferee
shall deliver the remaining ninety nine (99) authorized Shares to Transferor. If
the Closing does not occur on or before March 31, 1998 the Share delivered upon
signing of this Agreement shall be returned by Transferee to Transferor.
7. UNREGISTERED SHARES.
7.1 Transferor understands that (i) the Shares have not been registered
under the Securities Act of 1933, as amended (the "Act") or the securities laws
of any state by reason of their issuance in a transaction exempt from the
registration requirements of the Act, (ii) the Shares must be held indefinitely
unless a subsequent disposition thereof is registered under the Act and any
applicable state securities law or is exempt from such registration, (iii) all
of the Shares will bear a legend to such effect as set forth in Section 7.2
hereof, and (iv) the Transferee will make notation on its transfer books to such
effect.
7.2 Each certificate representing Shares and each certificate issued
upon exchange or transfer of any Shares shall be stamped or otherwise imprinted
with a legend substantially in the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED OR THE SECURITIES LAWS OF ANY STATE. SUCH SECURITIES MAY NOT BE
TRANSFERRED OR OTHERWISE DISPOSED OF ABSENT SUCH REGISTRATION OR THE
RECEIPT BY HILITE INDUSTRIES-TEXAS, INC. OF AN OPINION OF COUNSEL FOR THE
HOLDER HEREOF, WHICH COUNSEL AND OPINION SHALL BE REASONABLY ACCEPTABLE TO
HILITE INDUSTRIES-TEXAS, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.
-3-
<PAGE>
8. FURTHER ASSURANCES. Each party hereto covenants and agrees promptly
to execute, deliver, file or record such agreements, instruments, certificates
and other documents and to perform such other and further acts as the other
party hereto may reasonably request or as may otherwise be necessary or proper
to consummate and perfect the transactions contemplated hereby.
9. BINDING EFFECT. This Assignment shall be binding upon and inure to
the benefit of the parties hereto and their respective legal representatives,
successors and permitted assigns.
10. CHOICE OF LAW. This Assignment shall be governed by, and interpreted
and enforced in accordance with, the laws of the State of Delaware.
11. MULTIPLE COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
12. HEADINGS. All section titles or captions in this Agreement are for
convenience. They shall not be deemed part of this Agreement and shall in no way
define, limit, extend or describe the scope or intent of provisions herein.
13. SEPARABILITY. Inapplicability or unenforceability of any provision
of this Agreement shall not impair the operation or validity of any other
provision hereof.
14. ENTIRE AGREEMENT. This Agreement, and all other agreements delivered
contemporaneously with this Agreement, collectively constitute the entire
agreement between the parties hereto with respect to the matter addressed
herein.
IN WITNESS WHEREOF, Transferee and Transferor have caused this Bill
of Sale, Assignment and Assumption Agreement to be duly executed as of the date
first written above.
HILITE INDUSTRIES-TEXAS, INC.
By: /s/ Daniel W. Brady
-------------------------------
Daniel W. Brady
Vice Chairman of the Board of
Directors and Chief Operating
Officer
HILITE INDUSTRIES-DELAWARE, INC.
By: /s/ James E. Lineberger, Jr.
-------------------------------
James E. Lineberger, Jr.
President and Treasurer
-4-
AGREEMENT OF LIMITED PARTNERSHIP
OF
HILITE INDUSTRIES AUTOMOTIVE, LP
<PAGE>
TABLE OF CONTENTS
Section Title Page
- ------- ----- ----
Recitals.......................................................................1
Agreement......................................................................1
ARTICLE I
DEFINITIONS
Section 1.1. Certain Defined Terms.....................................1
ARTICLE II
ORGANIZATION
Section 2.1. Formation.................................................2
Section 2.2. Name of Partnership.......................................2
Section 2.3. Place of Business; Registered Agent.......................3
Section 2.4. Term......................................................3
Section 2.5. Purpose and Powers........................................3
Section 2.6. Qualification in other Jurisdictions......................3
ARTICLE III
CAPITALIZATION
Section 3.1. Capital Contributions by the Partners.....................3
Section 3.2. Matters Relating to Capital Accounts......................4
Section 3.3. Other Matters Relating to Capital Contributions...........4
ARTICLE IV
DISTRIBUTIONS AND ALLOCATIONS
Section 4.1. Allocation of Profit and Loss.............................5
Section 4.2. Special Allocations.......................................5
Section 4.3. Distributions of Net Cash Flow............................6
Section 4.4. Allocation of Nonrecourse Liabilities.....................6
Section 4.5. Amounts Withheld..........................................6
ARTICLE V
FISCAL MATTERS
Section 5.1. Fiscal Year and Other Elections...........................7
Section 5.2. Tax Returns...............................................7
259850-2 8
- i -
<PAGE>
Section 5.3. Books and Records.........................................7
Section 5.4. Reports to Partners.......................................7
ARTICLE VI
ADMINISTRATION
Section 6.1. Management of the Partnership.............................7
Section 6.2. The General Partner's Role................................9
Section 6.3. Certain Expenses of the General Partner...................9
Section 6.4. Bank Accounts.............................................9
Section 6.5. Exculpation and Indemnification of the General Partner....9
Section 6.6. The Limited Partners' Limited Role.......................10
Section 6.7. The Limited Partners' Limited Liability..................10
Section 6.8. Reliance by Third Parties................................10
Section 6.9. Reliance by the General Partner..........................10
Section 6.10. No Rights in Other Activities............................10
ARTICLE VII
COMPOSITION
Section 7.1. Transfers, Pledges and Dispositions......................10
Section 7.2. Death, Etc., of a Limited Partner........................11
Section 7.3. Other Successors and Assigns.............................11
Section 7.4. Admission of an Additional/Substitute Partner............11
ARTICLE VIII
DISSOLUTION AND LIQUIDATION
Section 8.1. Dissolution..............................................13
Section 8.2. Right to Continue the Limited Partnership's Business.....13
Section 8.3. Liquidation..............................................13
Section 8.4. Termination..............................................14
Section 8.5. Fiscal Year of Termination...............................14
Section 8.6. Continuing Liabilities and Other Obligations.............14
Section 8.7. Final Statement..........................................15
ARTICLE IX
MISCELLANEOUS
Section 9.1. Notice...................................................15
Section 9.2. Further Assurances.......................................15
Section 9.3. Power of Attorney........................................15
Section 9.4. Section and Other Headings...............................16
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Section 9.5. Governing Law............................................16
Section 9.6. Severability.............................................16
Section 9.7. Counterparts.............................................16
Section 9.8. Successors and Assigns; Assignment.......................17
Section 9.9. No Third Party Rights....................................17
Section 9.10. No Waiver by Actions, Etc................................17
Section 9.11. Modification, Amendment, Etc.............................17
Section 9.12. Entire Agreement.........................................18
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THIS AGREEMENT OF LIMITED PARTNERSHIP OF HILITE INDUSTRIES, LP (the
"Agreement") is entered into as of December 31, 1997, by and between Hilite
Industries -Texas, Inc., a Delaware corporation, as general partner (the
"General Partner"), and Hilite Industries -Delaware, Inc., a Delaware
corporation, as limited partner (the "Limited Partner").
RECITALS
The parties hereto desire to form a limited partnership under the
Texas Revised Limited Partnership Act (the "Act") for the purposes of
establishing, owning and operating the Business (as defined below) and
undertaking such other acts as may be allowed pursuant to this Agreement, all
upon the terms and provisions and subject to the conditions hereinafter set
forth.
AGREEMENT
In consideration of the foregoing and the mutual covenants and
agreements hereinafter set forth, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. CERTAIN DEFINED TERMS. As used in this Agreement the
following capitalized terms shall have the meanings respectively assigned to
them below, which meanings shall be applicable equally to both the singular and
plural forms of the term defined:
"Act" means the Texas Revised Limited Partnership Act, as it may be
amended from time to time, and any successor to such Act.
"Affiliate" means a person, entity or organization directly or
indirectly, through one or more intermediaries, controlling, controlled by, or
under common control with the person, entity or organization in question. The
term "control," as used in the immediately preceding sentence, means, with
respect to an entity that is a corporation, the right to exercise, directly or
indirectly, more than 50% of the voting rights attributable to the shares of
such corporation and, with respect to a person or organization that is not a
corporation, the possession, directly or indirectly, of the power to direct or
cause the direction of the management or policies of such person or
organization.
"Agreement" shall mean this Agreement of Limited Partnership and the
schedules hereto, as the same may be supplemented, modified, amended or restated
from time to time in the manner provided herein.
"Business" shall mean the engaging in the design manufacture and sale
of highly engineered components and assemblies for the automotive industry, any
activities incidental thereto and such other business activity as may be
determined by the Partners.
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"Capital Account" shall have the meaning assigned to it in Section 3.2
hereof.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
the regulations promulgated thereunder, or any corresponding or succeeding
provisions of applicable law.
"General Partner" shall mean Hilite Industries - Texas, Inc., a
Delaware corporation, and any other person admitted as a General Partner in
accordance with this Agreement.
"Limited Partners" shall mean Hilite Industries - Delaware, Inc., a
Delaware corporation, and any other person admitted as a Limited Partner in
accordance with this Agreement.
"Liquidating Partner" shall mean (a) the General Partner, or (b) if
the General Partner is without capacity to act, a Limited Partner selected by
Limited Partners owning a majority of the Percentage of the Limited Partners.
"Net Cash Flow" for a fiscal year shall mean the amount by which the
sum of (a) the gross cash receipts of the Partnership during the fiscal year and
(b) the amount of any reduction in the Reserves from Net Cash Flow from the
prior fiscal year, exceeds the sum of (c) the gross cash expenditures of the
Partnership during the fiscal year and (d) the amount of any increase in the
Reserves from Net Cash Flow from the prior fiscal year.
"Partners" shall mean the General Partner and the Limited Partners.
"Partner" shall mean either one of the Partners.
"Percentage" of a Partner means initially the percentage set forth
opposite such Partner's name on Schedule A hereto and shall subsequently be
adjusted as provided herein.
"Person" shall mean, without limitation, a natural person,
corporation, joint stock company, limited liability company, partnership, joint
venture, association, trust, government or governmental authority, agency or
instrumentality, and any group of any of the foregoing acting in concert.
"Profit" or "Loss" shall mean, for any fiscal year of the Partnership,
the Partnership's taxable income or loss, respectively, for such year as
computed for federal income tax purposes (including all items required to be
separately stated), increased by items of income which are exempt from federal
income tax and reduced by expenditures which, under federal income tax law, are
neither deductible nor properly chargeable to a capital account, other than
amounts required to be specially allocated pursuant to Section 4.2 hereof.
"Reserves" shall mean, for any fiscal year of the Partnership, such
cash amounts as the General Partner, in its sole discretion, determines from
time to time are reserved for the payment of liabilities, operating capital
expenses or contingent obligations of the Partnership.
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"Transfer" shall have the meaning ascribed to it in Section 7.1
hereof.
1.2 Number and Gender. Whenever the context requires, references in
this Agreement to the singular number include the plural, and the plural number
includes the singular, and words denoting gender include the masculine, feminine
and neuter.
ARTICLE II
ORGANIZATION
SECTION 2.1. FORMATION. By execution of this Agreement, the Limited
Partners become members of the limited partnership (the "Partnership") formed
pursuant to the Certificate of Limited Partnership filed with the Secretary of
State of the State of Texas on December 31, 1997, all upon the terms and
provisions and subject to the conditions set forth in this Agreement.
SECTION 2.2. NAME OF PARTNERSHIP. The name of the Partnership is
HILITE INDUSTRIES AUTOMOTIVE, LP, or such other name as from time to time may be
selected by the General Partner which is acceptable to the appropriate recording
authorities. The General Partner shall notify the Limited Partners of any change
of the name of the Partnership. The Partnership shall promote all of its
purposes and conduct all of its affairs and business under such name, and title
to all of its assets shall be held in such name.
SECTION 2.3. PLACE OF BUSINESS; REGISTERED AGENT. The registered
office of the Partnership in the State of Texas shall be located at 400 North
St. Paul, Dallas, Texas 75201, and its registered agent for service of process
at such registered office shall be Corporation Service Company, d/b/a
CSC-Lawyers Incorporating Service Company. The principal office and the
principal place of business of the Partnership in the State of Texas shall be
located at 1671 S. Broadway, Carrollton, Texas 75006. The General Partner may
open additional offices of the Partnership or change the principal place of
business of the Partnership to any other place upon ten days written notice to
the Limited Partner.
SECTION 2.4. TERM. The term of the Partnership shall continue for an
indefinite term, unless sooner terminated in the manner provided in this
Agreement.
SECTION 2.5. PURPOSE AND POWERS.
(a) Subject to the limitations set forth in this Agreement and
of applicable law, the purpose of the Partnership is to establish, own, operate,
manage and dispose of the Business.
(b) In pursuance of such purposes, the Partnership shall have
the power to:
(1) own, operate, manage, and dispose of the Business;
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(2) mortgage or otherwise encumber, finance,
refinance, sell, exchange, transfer or otherwise dispose of the Partnership's
assets, in whole or in part; and
(3) enter into and perform such contracts, make such
borrowings (whether on a secured or unsecured basis), conduct such activities,
engage in such transactions, and do such other acts and things as may be
necessary, appropriate or desirable in connection with, or incidental or related
to, the furtherance or accomplishment of the Partnership's purpose.
SECTION 2.6. QUALIFICATION IN OTHER JURISDICTIONS. The General Partner
shall cause the Partnership to be qualified in any jurisdiction determined by
the General Partner to be necessary.
ARTICLE III
CAPITALIZATION
SECTION 3.1. CAPITAL CONTRIBUTIONS BY THE PARTNERS.
(a) Upon the execution of this Agreement, the General Partner
and the Limited Partner shall contribute the assets set forth opposite such
Partner's name on Schedule A hereto to the capital of the Partnership and shall
receive the Percentage set forth opposite such Partner's name on Schedule A
hereto.
(b) In the event the Partnership requires additional capital,
the General Partner may require the Partners to contribute on a pro rata basis
to the Partnership such additional capital as it shall deem necessary in its
discretion. If a Partner is unable or unwilling to make any or all of his
proportionate contributions, then the Partnership shall pro rata dilute such
Partner's Partnership Interest based on the contributions made by the other
Partners.
(c) Except as otherwise expressly provided in this Agreement, no
Partner shall be required to contribute or lend funds or property to the
Partnership. Except as otherwise expressly provided in this Agreement, no
Partner shall be permitted to contribute or lend funds or property to the
Partnership without the consent of the General Partner.
SECTION 3.2. MATTERS RELATING TO CAPITAL ACCOUNTS.
(a) A separate Capital Account shall be established and
maintained for each Partner in accordance with Treasury Regulation
ss.1.704-1(b). A Partner's Capital Account shall reflect the fair market value
of the property (net of any liabilities secured by such property that the
Partnership is considered to assume or take subject to) initially contributed to
the Partnership's capital by such Partner and thereafter shall be: (1) increased
by (i) the amount of Profit allocable to such Partner and any income or gain
specially allocated to such Partner, (ii) any cash and the fair market value of
any property (net of any liabilities secured by such property that the
Partnership is considered to assume
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or take subject to) subsequently contributed to the capital of the Partnership
by the Partner, and (iii) in the case of property distributed in kind, the
amount of gain, if any, which would have been allocated to such Partner if the
property had been sold by the Partnership for its fair market value on the date
of distribution; and (2) decreased by (i) the amount of Loss allocable to such
Partner and any losses or deductions specially allocated to such Partner, (ii)
the amount of cash and the fair market value of any property (net of any
liabilities secured by such property that the Partner is considered to assume or
take subject to) distributed to such Partner, and (iii) in the case of property
distributed in kind, the amount of loss, if any, that would have been allocated
to such Partner if the property had been sold by the Partnership for its fair
market value on the date of distribution.
(b) The General Partner may adjust the Capital Accounts to
reflect a revaluation of Partnership property on the Partnership's books in
accordance with Treasury Regulation ss.1.704- 1(b)(2)(iv)(f) under the
circumstances described therein. In the event that property contributed to the
Partnership has a fair market value which differs from its basis (at the time of
contribution) or an election is made under Treasury Regulation
ss.1.704-1(b)(2)(iv)(f), the Capital Accounts shall be adjusted in accordance
with Treasury Regulation ss.1.704-1(b)(2)(iv)(g) for allocations of
depreciation, amortization and gain or loss, as computed for book purposes, with
respect to such property.
(c) The provisions of this Agreement are intended to comply with
Treasury Regulation ss.1.704-1(b) and -2 and shall be interpreted and applied in
a manner consistent with such regulations. The General Partner shall have the
power to amend this Agreement (including, without limitation, to modify the
manner in which Capital Accounts are maintained) in order to comply with such
regulations (as they are currently in effect or may subsequently be amended).
SECTION 3.3. OTHER MATTERS RELATING TO CAPITAL CONTRIBUTIONS.
(a) No Partner shall be liable to any other Partner for the
return of that other Partner's capital contribution.
(b) No interest shall accrue for the benefit of any Partner or
be paid on to any Partner on account of any contribution to the capital of the
Partnership.
(c) In the event of a Transfer by a Partner of all or a part of
the Partner's interest in the Partnership in accordance with this Agreement, a
proportionate amount of the Capital Account and Percentage of the transferor
shall be transferred to such transferee and Schedule A to this Agreement shall
be adjusted to reflect such transfer.
(d) Except as otherwise expressly provided in this Agreement, no
Partner shall be permitted to withdraw any part of the Partner's contribution to
the capital of the Partnership without the written consent of the General
Partner.
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(e) Except as otherwise expressly provided in this Agreement, a
Partner who lends money to or transacts other business with the Partnership
shall have the same rights and obligations with respect thereto as a person who
is not a Partner.
ARTICLE IV
DISTRIBUTIONS AND ALLOCATIONS
SECTION 4.1. ALLOCATION OF PROFIT AND LOSS. Profit and Loss for each
fiscal year of the Partnership shall be allocated to the Partners in accordance
with their respective Percentages.
SECTION 4.2. SPECIAL ALLOCATIONS.
(a) Notwithstanding the foregoing, if there is a net decrease in
the Partnership minimum gain under Treasury Regulation ss.1.704-2(d) (with
respect to "nonrecourse liabilities") or partner nonrecourse debt minimum gain
under Treasury Regulation ss.1.704-2(i) (with respect to "partner nonrecourse
debt") during a fiscal year, the Partners shall be allocated items of income and
gain for such year (and if necessary for subsequent years) in the amounts and
proportions determined pursuant to the provisions of Treasury Regulation
ss.1.704-2(f) and (i)(4), respectively. In addition, if a Partner unexpectedly
receives any adjustments, allocation or distributions described in Treasury
Regulation ss.1.704-1(b)(2) (ii)(d)(4), (5) or (6) which creates or increases a
deficit in his Capital Account balance (as adjusted pursuant to such
regulations), items of Partnership income (including gross income) and gain
(consisting of a pro rata portion of each item of Partnership income and gain)
shall be specially allocated to such Partner in an amount and manner sufficient
to eliminate such deficit balance as quickly as possible pursuant to the
provisions of Treasury Regulation ss.1.704-1(b)(2)(ii)(d). If at the end of any
fiscal year of the Partnership (after taking into account all allocations as if
this sentence and the prior sentence were not part of the Agreement) a Partner
has a deficit Capital Account balance (taking into account any deficit
restoration obligation of such Partner, including without limitation, any amount
which such Partner is deemed obligated to restore pursuant to Treasury
Regulation ss.1.704-1(g)(1) or (i)(5), and any adjustment pursuant to Treasury
Regulation ss.1.704- 1(b)(2) (ii)(d)(4), (5) or (6)), such Partners shall be
specially allocated items of Partnership income and gain in the amount of such
deficit as quickly as possible. Except as otherwise provided in this Section
4.2(a), nonrecourse deductions within the meaning of Treasury Regulation
ss.1.704-2(i) shall be allocated as provided therein. It is the intent of the
Partners that any special allocation pursuant to this Section 4.2(a) shall be
offset with other special allocations pursuant to this Section 4.2(a).
Accordingly, special allocations of Partnership income, gain, loss or deduction
shall be made in a manner so that, in the reasonable determination of the
General Partner, taking into account likely future allocations under this
Section 4.2(a), after such allocations are made, each Partner's Capital Account
is, to the extent possible, equal to the Capital Account it would have had if
this Section 4.2(a) were not part of the Agreement.
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(b) In the event that property contributed to the Partnership
has a fair market value which differs from its basis (at the time of
contribution) or an election is made by the General Partner under Section 3.2(b)
hereof to adjust Capital Accounts to reflect a revaluation of Partnership
property, income, gain, loss and deduction as computed for federal income tax
purposes with respect to such property shall be allocated in the manner
determined by the General Partner, consistently applied, pursuant to Section
704(c) of the Code so as to take into account any variation between the
Partnership's basis in the property and its fair market value on the date of the
contribution, and the computation of Profit, Loss, any depreciation,
amortization and gain or loss with respect to such property shall be based on
such fair market value, as adjusted to take into account any depreciation and
amortization deductions thereon.
(c) In the event that the relative Percentages of the Partners
vary during a fiscal year of the Partnership, the Profit, Loss, and any amount
specially allocated pursuant to Section 4.2(a) hereof shall be allocated among
the Partners under Section 706(d) of the Code in the manner determined by the
General Partner, consistently applied.
SECTION 4.3. DISTRIBUTIONS OF NET CASH FLOW. The Partnership shall
make distributions of Net Cash Flow, at such times and in such amounts as the
General Partner may determine in its sole discretion. Except in connection with
the liquidation of the Partnership, Net Cash Flow for each fiscal year of the
Partnership shall be distributed in proportion to the Percentages on the date of
distribution.
SECTION 4.4. ALLOCATION OF NONRECOURSE LIABILITIES. A Partner's share
of the nonrecourse liabilities of the Partnership shall be allocated in
accordance with Treasury Regulation ss.1.752-3(a), except that excess
nonrecourse liabilities shall be allocated among the Partners in accordance with
the manner in which the General Partner reasonably expects that the nonrecourse
deductions allocable to such liabilities will be allocated.
SECTION 4.5. AMOUNTS WITHHELD. Any amount withheld pursuant to
federal, state, local or foreign tax law from a distribution by or on behalf of
the Partnership to a Partner shall be treated as distribution to such Partner
pursuant to Section 4.3. Any other amount withheld with respect to a Partner
pursuant to any federal, state, local or foreign tax law in connection with any
payment to or income of the Partnership from a third party as determined by the
General Partner shall be treated as a loan from the Partnership to such Partner.
If such loan is not repaid within 30 days from the date the Partnership notifies
the Partner of such withholding, the loan shall bear interest at a rate equal to
Comerica Bank - Texas' prime rate as announced from time to time plus five
percentage points, compounded annually. In addition to all other remedies the
Partnership may have, the Partnership may withhold distributions that would
otherwise be payable to such Partner and apply such amount toward repayment of
the loan.
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ARTICLE V
FISCAL MATTERS
SECTION 5.1. FISCAL YEAR AND OTHER ELECTIONS.
(a) The fiscal year of the Partnership shall be the year from
July 1 to June 30 or such other year as the General Partner may select pursuant
to applicable law. Except as otherwise expressly provided in this Agreement, all
tax and accounting decisions and elections required or permitted to be made by
the Partnership for tax purposes under applicable law shall be made by the
General Partner, in its sole discretion.
(b) The General Partner shall be the "tax matters partner" of
the Partnership within the meaning of Section 6231(a)(7) of the Code.
SECTION 5.2. TAX RETURNS. The General Partner, at the expense of the
Partnership, shall prepare and file, or shall cause to be prepared and filed,
all federal and any required state and local income and other tax returns for
the Partnership.
SECTION 5.3. BOOKS AND RECORDS. The General Partner shall maintain or
cause to be maintained full and accurate books and records of the assets,
business and affairs of the Partnership, in accordance with the Partnership's
method of accounting.
SECTION 5.4. REPORTS TO PARTNERS. The Partnership shall distribute to
each Partner a copy of such Partners, Schedule K-1 to the U.S. Partnership
Return of Income (Form 1065) as soon as practicable after the end of each fiscal
year of the Partnership.
SECTION 5.5. PARTNERSHIP STATUS. The Partners intend that the
Partnership be characterized as a partnership for federal income tax purposes.
No Partner shall make any election that would adversely affect such
characterization without the consent of the General Partner.
ARTICLE VI
ADMINISTRATION
SECTION 6.1. MANAGEMENT OF THE PARTNERSHIP.
(a) Except as otherwise expressly provided in this Agreement or
by applicable law, the General Partner shall have the exclusive right, power and
authority to manage the assets, business and affairs of the Partnership, with
all rights and powers and the full authority necessary, desirable or appropriate
to operate the same for Partnership purposes, to incur, perform, satisfy and
compromise all manner of obligations on behalf of the Partnership; and to make
all decisions and do all things necessary or desirable in connection therewith.
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(b) Without limiting the generality of Section 6.1(a) above, or
any other term or provision of this Agreement and except as otherwise prohibited
or limited by the provisions of this Agreement or applicable law, the General
Partner shall have the exclusive right, power and authority to, directly or
indirectly, take or omit whatever action for Partnership purposes that the
General Partner may, in its sole discretion, deem necessary or desirable to
carry out the Partnership's purposes, including but not limited to the right,
power and authority:
(1) to enter into and perform in the name of the
Partnership any contract, lease, agreement, instrument or other arrangement;
(2) to pay or otherwise satisfy, perform or compromise
any and all of the Partnership's administrative, interest, operating and other
expenses, capital expenditures, indebtedness and other liabilities and
obligations;
(3) to employ, retain or otherwise secure the services
of various persons (including the General Partner and its Affiliates), or to
enter into contracts or other arrangements with them, and to delegate one or
more of its rights, powers and obligations under this Agreement and applicable
law to one or more of them;
(4) to borrow money and encumber the assets of the
Partnership;
(5) to adjust, compromise, settle, abandon or refer to
arbitration any suit, proceeding, dispute or claim in favor of or against the
Partnership, and to institute, prosecute and defend any legal action or
proceeding or any arbitration proceeding;
(6) to sell, assign, exchange, transfer or otherwise
dispose of one or more, or all or substantially all, of the Partnership's
assets;
(7) to exercise any or all of the powers of the
Partnership set forth in Section 2.5(b) and to perform other obligations and
make the determinations provided elsewhere in this Agreement to be performed by
the General Partner; and
(8) to do all such other things, engage in such other
transactions, and execute, acknowledge, deliver and perform such other
instruments and documents as may be deemed necessary, desirable or appropriate
by the General Partner to effectuate the foregoing powers or conduct the
business or affairs of the Partnership.
(c) Any payment to the General Partner or an Affiliate of the
General Partner (other than in its capacity as a Partner) for services rendered
to the Partnership shall be an arm's length amount, not exceeding the prevailing
rate in the area for comparable services.
(d) Notwithstanding the foregoing, the General Partner shall not
have any right to permit transfers of Partnership interests or admit new
Partners, except in accordance with Article VII hereof.
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SECTION 6.2. THE GENERAL PARTNER'S ROLE. The General Partner shall
cause its officers and employees to devote such time and attention to the
business and affairs of the Partnership as it deems necessary for the full and
faithful performance of its duties hereunder.
SECTION 6.3. CERTAIN EXPENSES OF THE GENERAL PARTNER. The Partnership
shall directly pay or promptly reimburse the General Partner for all
out-of-pocket expenses reasonably incurred or paid by the General Partner in
connection with the rights, powers and authority and the discharge of its
obligations under this Agreement or applicable law, the formation of the
Partnership, or the formation, operation, management or supervision of the
Partnership's Business.
SECTION 6.4. BANK ACCOUNTS. The General Partner shall cause the
Partnership to maintain one or more accounts, including checking, cash
management and/or money market accounts, in such banks or other financial
institutions as the General Partner may select. All amounts deposited by, or on
behalf of the Partnership, in those accounts shall be and remain the property of
the Partnership. Withdrawals from such accounts shall be made by signatories
designated by the General Partner. No funds of the Partnership shall be kept in
any account other than a Partnership account, and funds of the Partnership shall
not be commingled with the funds of any other Person; and no Partner shall
apply, or permit any other Person to apply, such funds in any manner, except in
a manner which is for the benefit of the Partnership.
SECTION 6.5. EXCULPATION AND INDEMNIFICATION OF THE GENERAL PARTNER.
The Partnership shall, to the fullest extent permitted by law, indemnify and
hold harmless the General Partner, its Affiliates and all officers, directors,
partners, employees and agents of the General Partner and its Affiliates
(individually an "Indemnitee") from and against any and all losses, claims,
demands, costs, damages, liabilities, expenses of any nature (including
attorneys' fees and disbursements), judgments, fines, settlements and other
amounts arising from any and all claims, demands, actions, suits or proceedings,
civil, criminal, administrative or investigative, in which an Indemnitee may be
involved, or threatened to be involved, as a party or otherwise, arising out of
the business of the Partnership (regardless of whether an Indemnitee continues
to be the General Partner, affiliate, officer, director, partner, employee or
agent of the General Partner or Affiliate at the time any such liability or
expense is paid or incurred) if the Indemnitee acted in good faith and in a
manner the Indemnitee reasonably believed to be in the interests of the
Partnership and the Indemnitee's conduct did not constitute intentional
misconduct, gross negligence, fraud, self-dealing or usurpation or wasting of
Partnership assets. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction or upon a plea of nolo contendere shall
not, in and of itself, create a presumption or otherwise constitute evidence
that the Indemnitee acted in a manner contrary to that specified above. Any
indemnification hereunder shall be satisfied solely out of the assets of the
Partnership (or from insurance permitted to be obtained by the Partnership) and
no Partner shall be subject to any personal liability by reason of these
indemnification provisions.
SECTION 6.6. THE LIMITED PARTNERS' LIMITED ROLE. The Limited Partners
shall not take any part in the management of the business or affairs of the
Partnership and shall have no right or authority to act for the Partnership or
to bind the Partnership in any way. Except as otherwise
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expressly provided in this Agreement or by applicable law, the Limited Partners
shall have no right to vote on any matter, and neither the consent nor the
approval of the Limited Partners shall be required for any Partnership act.
SECTION 6.7. THE LIMITED PARTNERS' LIMITED LIABILITY. The Limited
Partners shall not have any personal liability whatsoever for any debts,
liabilities or other obligations of the Partnership, and the liability of a
Limited Partner shall be limited to the loss of its capital contribution, except
as otherwise provided by applicable law.
SECTION 6.8. RELIANCE BY THIRD PARTIES. Third parties dealing with the
Partnership may rely conclusively upon the power and authority of the General
Partner to act and shall not be required to inquire into or ascertain its
authority.
SECTION 6.9. RELIANCE BY THE GENERAL PARTNER. Without limiting the
generality of any term or provision of this Agreement, the General Partner shall
be entitled to reasonably rely upon any notice, consent, certificate, affidavit,
statement, paper, document, writing or other communication reasonably believed
by the General Partner to be genuine and correct and to have been signed, sent
or delivered by the proper person or persons; and the General Partner shall not
be liable for any action taken or suffered in good faith by it in accordance
therewith.
SECTION 6.10. NO RIGHTS IN OTHER ACTIVITIES. Except as otherwise
expressly provided in this Agreement, any Partner may engage in any other
profession, activity or investment of any nature and description, independently
or with others and may receive compensation therefrom and participate in the
profits thereof, whether or not such profession, business, activity or
investment is competitive with the Business and neither the Partnership nor the
other Partners shall have any claim with respect thereto merely as a result of
their relationship hereunder.
ARTICLE VII
COMPOSITION
SECTION 7.1. TRANSFERS, PLEDGES AND DISPOSITIONS.
(a) No Partner may withdraw from the Partnership or pledge,
hypothecate, grant a security interest in, or otherwise encumber, or sell,
assign, bequeath, exchange, give, transfer or otherwise voluntarily or
involuntarily dispose of (collectively, "Transfer") any interest in the
Partnership, except as otherwise expressly permitted under this Agreement. Any
purported Transfer in violation of this Agreement shall be null and void ab
initio and of no force or effect.
(b) No Limited Partner may Transfer all or any part of its
Partnership interest without the prior written consent of the General Partner,
which consent may be withheld in its sole discretion.
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(c) Notwithstanding anything herein to the contrary, no Partner
may Transfer all or any part of its Partnership interest if such Transfer could
(1) result in a Transfer to an incompetent; (2) cause a termination of the
Partnership under the Code; (3) violate or cause the Partnership to violate any
applicable law, rule or ordinance; or (4) breach any agreement, with or without
notice and/or the passage of time, to which the Partnership is a party. The
General Partner may, if it deems it appropriate, require that the Transferring
Partner deliver to the Partnership a favorable legal opinion of counsel,
acceptable to the General Partner, in form and substance satisfactory to the
General Partner, as to compliance with securities laws and may obtain at the
Partnership's expense a legal opinion of counsel, as to all or any of the other
matters listed above and as to such other matters as the General Partner deems
appropriate in connection with the Transfer.
SECTION 7.2. DEATH, ETC., OF A LIMITED PARTNER. The withdrawal,
bankruptcy, dissolution, death, incapacity or removal of a Limited Partner shall
not cause a dissolution of the Partnership, nor shall the Partnership be
required to take cognizance of, or take any action with respect to, such
withdrawal, bankruptcy, dissolution, death, incapacity or removal, except as
otherwise expressly provided herein.
SECTION 7.3. OTHER SUCCESSORS AND ASSIGNS. A successor or permitted
transferee who does not become a Partner shall be entitled as a result of a
Transfer only to receive the economic benefits of the interest in the
Partnership to which his predecessor or transferor would otherwise have been
entitled, and such successor or transferee shall have no right as a Limited
Partner, unless and until such time as he may be admitted to the Partnership in
accordance with the terms and provisions of this Agreement.
SECTION 7.4. ADMISSION OF AN ADDITIONAL/SUBSTITUTE PARTNER.
(a) Subject to the provisions of this Article VII, a permitted
transferee of a Partnership interest shall be admitted as a Partner, only upon
the consent of the General Partner, which consent may be withheld in its sole
discretion, and the satisfactory completion of the following:
(1) the transferee shall have accepted and agreed to
be bound by the terms and provisions of this Agreement by executing a
counterpart hereof and shall have expressly assumed all the obligations of the
transferor hereunder and shall have executed such other documents or instruments
as the General Partner may require in order to effect the admission of such
person as a Partner;
(2) an amendment to the Certificate of Limited
Partnership on file with the Office of the Secretary of State of the State of
Texas shall, if required by applicable law, be filed for recording, evidencing
the admission of such person as a Partner;
(3) the transferee shall have delivered a letter
containing a representation that its acquisition of a Partnership interest is
made as a principal for its own account, for investment purposes only, and not
with the view to the resale or distribution of such Partnership interest, and
that
-12-
<PAGE>
it will not transfer such Partnership interest or any portion thereof to anyone
who does not so represent and warrant;
(4) if the transferee is an entity, it shall have
provided evidence satisfactory to counsel for the Partnership of its authority
to become a Partner under the terms and provisions of this Agreement; and
(5) the transferee shall comply with applicable law,
including all applicable governmental rules and regulations.
(b) A transferee who is admitted as a Partner shall be admitted
as a General Partner if the transferor was a General Partner and as a Limited
Partner if the transferor was a Limited Partner.
(c) Upon the prior written consent of the General Partner, the
other Partners shall cooperate with any such transferee who wishes to become a
substitute Partner by preparing the documentation required and making all
official filings and publications as promptly as possible. All expenses in
connection therewith shall be paid by such transferee.
ARTICLE VIII
DISSOLUTION AND LIQUIDATION
SECTION 8.1. DISSOLUTION. The Partnership shall be dissolved upon the
first of the following events to occur:
(a) the withdrawal, bankruptcy, dissolution, death, incapacity
or removal of a General Partner, unless the Partnership's business is continued
as provided in Section 8.2 hereof;
(b) the sale of all or substantially all of the Partnership's
assets;
(c) the determination of the General Partner to terminate the
Partnership; or
(d) entry of a decree of judicial dissolution by the courts of
the State of Texas.
SECTION 8.2. RIGHT TO CONTINUE THE LIMITED PARTNERSHIP'S BUSINESS.
Upon the withdrawal, bankruptcy, death, incapacity or removal of the last
remaining General Partner, a majority of the Limited Partners, shall have the
right but not the obligation, exercisable in writing within ninety (90) days
from such withdrawal, bankruptcy, death, incapacity or removal, to continue the
Partnership's affairs and business in a reconstituted form as herein provided;
provided that, a successor general partner is elected by Limited Partners owning
a majority of the Percentages of the Limited Partners and is admitted to the
Partnership as a general partner within such time period. In that event, the
Partnership shall not be liquidated but shall continue, and the former General
Partner
-13-
<PAGE>
shall transfer its entire Partnership interest at fair market value to such
successor general partner, provided, however, that if the former General Partner
withdraws, the successor general partner shall acquire its interest from the
Partnership. The reconstituted Partnership shall succeed to the name, style,
assets, business and affairs, as well as the debts, liabilities and other
obligations, of the Partnership.
SECTION 8.3. LIQUIDATION.
(a) Upon a dissolution of the Partnership, unless the
Partnership is reconstituted under Section 8.2 hereof, the Liquidating Partner
shall take or cause to be taken a full account of the Partnership's assets,
indebtedness and liabilities as of the date of such dissolution and shall
proceed with reasonable promptness to liquidate the Partnership's assets and to
terminate its affairs and business. The Partnership property, or the proceeds
from the liquidation thereof, shall be applied in cash or in kind in the
following order:
(1) to the payment of all liabilities and obligations
of the Partnership, including expenses of the liquidation and liabilities and
obligations to the Partners, other than on account of their Capital Accounts or
liabilities for distributions under applicable law,
(2) to the establishment of such reserves for
contingent and unforeseen liabilities or obligations of the Partnership as are
deemed necessary or desirable by the Liquidating Partner, provided, however,
that, at the expiration of such period as the Liquidating Partner may reasonably
deem advisable, the remaining balance of such reserves shall be distributed in
accordance with subparagraph (3) below, and
(3) to the Partners, to be divided among them in
accordance with their respective Capital Account balances (determined after the
allocation of Profit, Loss and special allocations and any required capital
contribution).
(b) The Liquidating Partner shall be allowed a reasonable time
for the orderly liquidation of the Partnership's assets and the discharge of
indebtedness and other liabilities to creditors, so as to minimize losses
resulting from the liquidation of the Partnership's assets. The Liquidating
Partner shall not be entitled to compensation for its services in liquidating
the Partnership.
SECTION 8.4. TERMINATION. Upon completion of the foregoing liquidation
and distribution, the Liquidating Partner shall file or cause to be filed with
the Secretary of State of the State of Texas, a certificate of cancellation of
the Certificate of Limited Partnership, and the Partnership thereupon shall be
terminated.
SECTION 8.5. FISCAL YEAR OF TERMINATION. The Liquidating Partner shall
use its best efforts to liquidate the Partnership and terminate its affairs and
business in the same fiscal year that the Partnership sells all or substantially
all of its assets. Upon the liquidation of the Partnership (or any Partner's
interest therein) within the meaning of Treasury Regulation ss.1.704-1(b) (2)
(ii) (g), the
-14-
<PAGE>
liquidating distributions shall be made on or before the close of the
Partnership's fiscal year in which the liquidation occurs, or if later within
ninety (90) days after the date of such liquidation. In the case of the
liquidation of the Partnership, such distribution may be made to a trust
established for the benefit of the Partners for purposes of liquidating
Partnership assets, collecting amounts owed to the Partnership, paying any
liabilities of the Partnership and distributing the remaining amounts to the
Partners in the same amounts as would have been distributed by the Partnership
without regard to the trust.
SECTION 8.6. CONTINUING LIABILITIES AND OTHER OBLIGATIONS. Except as
may otherwise be expressly provided herein, no reconstitution, termination,
dissolution or liquidation of the Partnership shall relieve, release or
otherwise discharge any Partner, or any of that Partner's successors, assigns,
heirs or legal representatives, from any previous breach or default of, or any
liability or other obligation theretofore incurred or accrued under, any term or
provision of this Agreement or applicable law, and any and all liabilities,
claims, demands or causes of action arising from any such breaches, defaults,
liabilities and obligations shall survive any such reconstitution, termination,
dissolution or liquidation.
SECTION 8.7. FINAL STATEMENT. As soon as practicable after dissolution
of the Partnership, the Liquidating Partner shall cause to be prepared a
statement of the Partnership's assets and liabilities as of the date of such
dissolution and furnished to the Partners.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1. LIMITATION OF AUTHORITY. Except as expressly provided
herein, no provision hereof shall be deemed to create any partnership, joint
venture, joint enterprise or association among the parties hereto, or to
authorize or to empower any party hereto to act on behalf of, obligate or bind
any other party hereto.
SECTION 9.2. NOTICE. Any notice, request, demand or other
communication permitted or required to be given hereunder shall be in writing,
shall be signed by the party giving it, shall be sent to the addressee at the
address or telecopy number set forth below on Schedule A hereto and to the
Partnership at its principal office (or at such other address or telecopy number
as shall be designated hereunder by notice to the other parties) and shall be
deemed conclusively to have been given: (a) on the business day following the
day on which it is sent by telecopy with a confirmation generated by the
transmitting machine showing the proper number of pages being transmitted
without error; (b) on the date which it is delivered if delivered by hand; (c)
on the business day following the day on which it is sent postage prepaid and
return receipt requested by United States Express Mail or other reputable
overnight courier service for next day or next business day delivery; (d) on the
fifth day following the day sent by certified or registered United States mail,
postage prepaid and return receipt requested; or (e) when received by the
addressee, if sent otherwise.
-15-
<PAGE>
SECTION 9.3. FURTHER ASSURANCES. Each Partner hereto agrees that, upon
the request of the General Partner, it will do such further acts and things and
execute, acknowledge, deliver and record such other agreements, instruments and
statements as from time to time may be reasonably necessary or desirable to
evidence, confirm or carry out the intent and purpose of this Agreement.
SECTION 9.4. POWER OF ATTORNEY.
(a) Each Partner, by his execution of this Agreement, hereby
irrevocably makes, constitutes and appoints the General Partner as its true and
lawful attorney-in-fact, with full power of substitution, to act in his name,
place and stead, to make, execute, sign, acknowledge and file on behalf of each
of them and on behalf of the Partnership:
(1) Amendments to or restatements of this Agreement
and the Certificate of Limited Partnership as may be required or permitted
pursuant to law or the provisions of this Agreement, including without
limitation, amendments required to effect the admission of additional or
substitute Partners pursuant to Article VII;
(2) Any instruments, documents, certificates or other
papers which the General Partner may deem necessary or desirable to effect the
termination of the Partnership after its dissolution as provided in this
Agreement;
(3) Any fictitious name certificate required or
permitted by law to be filed on behalf of the Partnership; and
(4) Any other instruments, documents and certificates
which may from time to time be required or permitted by the laws of any state,
the United States of America, or any political subdivision or agency thereof, to
effectuate, implement, continue and defend the valid and subsisting existence,
rights and property of the Partnership as a limited partnership and its power to
carry out its purposes as set forth in this Agreement.
(b) The power of attorney granted under this Section 9.3 may be
exercised by the attorney-in-fact by listing the Partners executing the
agreement, certificate, instrument or other document with the single signature
of the attorney-in-fact acting as attorney-in-fact for all such Partners.
(c) The power of attorney under this Section 9.3 shall be
irrevocable and shall be deemed to be a power coupled with an interest. The
power of attorney shall survive the death, disability, legal incapacity,
withdrawal, bankruptcy, insolvency, dissolution or cessation of the Partner and
the transfer (by operation or law or otherwise) of its Partnership interest and
shall survive and pass to a Liquidation Partner upon a liquidation of the
Partnership.
-16-
<PAGE>
SECTION 9.5. SECTION AND OTHER HEADINGS. The section and other
headings contained in this Agreement are for reference purposes only and shall
not affect the meaning or interpretation of this Agreement.
SECTION 9.6. FEES AND EXPENSES. All fees and expenses, including,
without limitation, attorneys' fees and expenses incurred in connection with
this Agreement shall be borne by the Partnership.
SECTION 9.7. GOVERNING LAW; JURY WAIVERS. This Agreement shall be
governed by and construed in accordance with the laws of the State of Texas,
without regard to any conflict of law provisions that would defer to the
substantive laws of another jurisdiction. Each party hereto hereby waives trial
by jury with respect to any action brought, or any claim made, regarding, or in
connection with, this Agreement.
SECTION 9.8 SEVERABILITY. In the event that any term or provision of
this Agreement shall be finally determined to be superseded, invalid, illegal or
otherwise unenforceable pursuant to applicable law by a governmental authority
having jurisdiction and venue, that determination shall not impair or otherwise
affect the validity, legality or enforceability (a) by or before that authority
of the remaining terms and provisions Agreement, which shall be enforced as if
the unenforceable term or provision were deleted, or (b) by or before any other
authority of any of the terms and provisions of this Agreement.
SECTION 9.9 REMEDIES. In the event of any actual or prospective breach
or default by any party, the other parties shall be entitled to equitable
relief, including remedies in the nature of injunction and specific performance
(without being required to post a bond or other security or to establish any
actual damages). In this regard, the parties acknowledge that they will be
irreparably damaged in the event this Agreement is not specifically enforced,
since (among other things) the Percentages are not readily marketable. All
remedies hereunder are cumulative and not exclusive, may be exercised
concurrently and nothing herein shall be deemed to prohibit or limit any party
from pursuing any other remedy or relief available at law or in equity for any
actual or prospective breach or default, including the recovery of damages.
SECTION 9.10. COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute but one agreement binding upon all of the
parties hereto.
SECTION 9.11. SUCCESSORS AND ASSIGNS; ASSIGNMENT. Whenever in this
Agreement reference is made to any party, such reference shall be deemed to
include the successors, assigns, heirs and legal representatives of such party;
provided, however, that the foregoing provision shall not be deemed to authorize
or permit any Partner to transfer any Partnership interest or any of its rights
or obligations hereunder to any other person except as otherwise expressly
permitted in this Agreement.
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<PAGE>
SECTION 9.12. NO THIRD PARTY RIGHTS. The terms and provisions of this
Agreement are for the exclusive benefit of the parties hereto, and no other
person, including creditors of any party hereto, shall have any right or claim
against any party by reason of those terms and provisions or be entitled to
enforce any of those terms and provisions against any party.
SECTION 9.13. NO WAIVER BY ACTIONS, ETC. Any waiver of, or consent to
any departure from, any term or provision of this Agreement shall be in writing
and signed by each party adversely affected thereby. Any waiver or consent
respecting any term or provision of this Agreement shall be effective only in
the specific instance and for the specific purpose for which given and shall not
be deemed, regardless of frequency given, to be a further or continuing waiver
or consent. The failure or delay of a party at any time or times to require
performance of, or to exercise or enforce any of its rights, powers, privileges,
remedies and interests with respect to, any term or provision of this Agreement
in no manner (except as otherwise expressly provided herein) shall affect that
party's right at a later time to enforce any such provision. No notice to or
demand on a party in any event shall entitle such party to any other or further
notice or demand in the same, similar or other circumstances. All rights,
powers, privileges, remedies and interests of a party under this Agreement are
cumulative and not alternatives, and they are in addition to and shall not limit
(except as otherwise expressly provided herein) any other right, power, or
privilege granted herein or pursuant to applicable law.
SECTION 9.14. MODIFICATION, AMENDMENT, ETC. Any modification or
amendment of this Agreement, except as otherwise expressly provided in the
Agreement or as otherwise required by applicable law, shall be in writing and
signed or consented to in writing by the General Partner and by Partners holding
a majority of the Percentage; provided, however, that the General Partner,
without the consent of any Limited Partner, may amend any provision of this
Agreement or of the Certificate of Limited Partnership to reflect (a) the
admission of additional or substitute Partners in accordance with this
Agreement, (b) a change that is necessary to qualify the Partnership as a
limited partnership under the laws of any state or that is necessary or
advisable in the opinion of the counsel to the Partnership to ensure that the
Partnership will not be treated as an association taxable as a corporation for
federal income tax purposes, except that as otherwise expressly provided by this
Agreement, no amendment may (a) without the consent of the Partners who are
materially adversely affected by such amendment, (1) alter a Partner's personal
liability for liabilities or obligations of the Partnership or (2) alter the
allocation of Partnership income, gain, loss or deduction or any distribution
hereunder to which a Partner may be entitled, or (b) without the consent of the
Partners owning the requisite Percentages to take the action which is the
subject of the provision being amended, amend any provision of this Agreement
relating to such action, including this Section 9.14 with respect to any such
provision.
SECTION 9.15. ENTIRE AGREEMENT. This Agreement contains the entire
agreement of the parties and supersedes all other representations, agreements
and understandings, oral or otherwise, between the parties with respect to the
matters contained herein.
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<PAGE>
IN WITNESS WHEREOF, the Partners have executed and delivered this
Agreement as of the date first written above.
GENERAL PARTNER:
Hilite Industries - Texas, Inc.
By: /s/ Daniel W. Brady
--------------------------------
Daniel W. Brady
Vice Chairman of the Board of
Directors and Chief Operating
Officer
LIMITED PARTNER:
Hilite Industries - Delaware, Inc.
By: /s/ James E. Lineberger, Jr.
--------------------------------
James E. Lineberger, Jr.
President and Treasurer
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<PAGE>
SCHEDULE A
NAME, ADDRESS AND CAPITAL CONTRIBUTIONS OF THE PARTNERS
PERCENTAGE
GENERAL PARTNER CAPITAL CONTRIBUTION INTEREST
- --------------- -------------------- ----------
Hilite Industries - Texas, Inc. All of its assets, as 1%
1671 S. Broadway described in Schedule
Carrollton, Texas 75006 A1.
Attn: General Counsel
Tel: (972) 242-2116
Fax: (972) 242-2902
LIMITED PARTNER
- ---------------
Hilite Industries - Delaware, Inc. All of its assets, as 99%
300 Delaware Avenue described in Schedule
Wilmington, DE 19801 A2.
Attn: General Counsel
Tel:
Fax:
-20-
<PAGE>
SCHEDULE A1
BILL OF SALE
THIS BILL OF SALE, dated January 30, 1998 is being executed and delivered
pursuant to the Assignment and Assumption Agreement dated December 31, 1997 (the
"Agreement"), between Hilite Industries, Inc., a Delaware corporation
("Transferor"), hereby assigns and transfers to Hilite Industries-Texas, Inc., a
Delaware corporation and a wholly-owned subsidiary of Transferor ("Transferee").
Capitalized terms used herein without definition have the respective meanings
given to them in the Agreement.
For good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, Transferor and Transferee hereby agree as follows:
Section 1. Transferor hereby assigns, transfers, conveys and delivers to
Transferee, and Transferee hereby acquires and accepts, all of the Assets with
the exception of the Excluded Assets. The Assets include, but are not limited
to:
(1) all machinery, equipment, computers, computer hardware, tools,
inventory, supplies, construction in progress, furniture,
automobiles, and all other tangible assets of Transferor wherever
located;
(2) all the interest of and the rights and benefits accruing to
Transferor as lessee under all leases or rental agreements
covering the Assets;
(3) all of the rights and benefits accruing to Transferor under the
Contracts;
(4) all operating data and records of Transferor, including without
limitation client lists and records, referral sources, mailing
lists, equipment logs, operating guides and manuals, copies of
financial, accounting and personnel records, correspondence and
other similar documents and records;
(5) all of Transferor's rights to any intellectual property;
(6) the Real Property and all other real property owned by
Transferor;
(7) all prepaid expenses; and
(8) all receivables of the Transferor.
TO HAVE AND TO HOLD such Assets unto Transferee and its successors and
assigns, to and for their use forever.
Section 2. To the extent there is a conflict between the terms and
provisions of this Bill of Sale and those of the Agreement, the terms and
provisions of the Agreement will govern.
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<PAGE>
IN WITNESS WHEREOF, Transferor and Transferee have caused this Bill of Sale
to be duly executed as of the date first written above.
HILITE INDUSTRIES, INC.
By: /s/ Samuel M. Berry
-------------------------
Samuel M. Berry
President, Chief Operating
Officer and Director
HILITE INDUSTRIES-TEXAS, INC.
By: /s/ Daniel W. Brady
-------------------------
Daniel W. Brady
Vice Chairman of the Board of
Directors and Chief Operating
Officer
-22-
<PAGE>
SCHEDULE A2
BILL OF SALE
THIS BILL OF SALE, dated January 30, 1998 is being executed and delivered
pursuant to the Assignment and Assumption Agreement dated December 31, 1997 (the
"Agreement"), between Hilite Industries-Texas, Inc., a Delaware corporation (the
"Transferor"), and Hilite Industries-Delaware, Inc., a Delaware corporation and
a wholly-owned subsidiary of the Transferor (the "Transferee"). Capitalized
terms used herein without definition have the respective meanings given to them
in the Agreement.
For good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, Transferor and Transferee hereby agree as follows:
Section 1. Transferor hereby assigns, transfers, conveys and delivers to
Transferee, and Transferee hereby acquires and accepts, all of the Assets with
the exception of the Excluded Assets. The Assets include, but are not limited
to:
(1) all machinery, equipment, computers, computer hardware, tools,
inventory, supplies, construction in progress, furniture,
automobiles, and all other tangible assets of Transferor wherever
located;
(2) all the interest of and the rights and benefits accruing to
Transferor as lessee under all leases or rental agreements
covering the Assets;
(3) all of the rights and benefits accruing to Transferor under the
Contracts;
(4) all operating data and records of Transferor, including without
limitation client lists and records, referral sources, mailing
lists, equipment logs, operating guides and manuals, copies of
financial, accounting and personnel records, correspondence and
other similar documents and records;
(5) all of Transferor's rights to any intellectual property;
(6) the Real Property and all other real property owned by
Transferor;
(7) all prepaid expenses; and
(8) all receivables of the Transferor.
TO HAVE AND TO HOLD such Assets unto Transferee and its successors and
assigns, to and for their use forever.
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<PAGE>
Section 2. To the extent there is a conflict between the terms and
provisions of this Bill of Sale and those of the Agreement, the terms and
provisions of the Agreement will govern.
IN WITNESS WHEREOF, Transferor and Transferee have caused this Bill of Sale
to be duly executed as of the date first written above.
HILITE INDUSTRIES-TEXAS, INC.
By: /s/ Daniel W. Brady
-------------------------------
Daniel W. Brady
Vice Chairman of the Board of
Directors and Chief Operating
Officer
HILITE INDUSTRIES-DELAWARE, INC.
By: /s/ James E. Lineberger, Jr.
-------------------------------
James E. Lineberger, Jr.
President and Treasurer
-24-
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000915197
<NAME> HILITE INDUSTRIES, INC.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 10,865,256
<ALLOWANCES> 237,628
<INVENTORY> 10,351,896
<CURRENT-ASSETS> 23,995,365
<PP&E> 39,642,659
<DEPRECIATION> 13,732,805
<TOTAL-ASSETS> 57,844,379
<CURRENT-LIABILITIES> 13,647,887
<BONDS> 0
0
0
<COMMON> 49,000
<OTHER-SE> 23,562,757
<TOTAL-LIABILITY-AND-EQUITY> 57,844,379
<SALES> 41,656,789
<TOTAL-REVENUES> 41,656,789
<CGS> 33,370,096
<TOTAL-COSTS> 38,081,115
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 800,018
<INCOME-PRETAX> 2,775,626
<INCOME-TAX> 1,044,922
<INCOME-CONTINUING> 1,730,704
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,730,704
<EPS-PRIMARY> 0.35
<EPS-DILUTED> 0.35
</TABLE>
