As filed with the Securities and Exchange Commission on October 6, 1997
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
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TRAVIS INTERNATIONAL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
Delaware 5085 76-0206074
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
3000 Weslayan, Suite 350
Houston, Texas 77027
(713) 622-7475
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------
Kirby Attwell
President and Chief Executive Officer
Travis International, Inc.
3000 Weslayan, Suite 350
Houston, Texas 77027
(713) 622-7475
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
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WITH COPIES TO:
Diana M. Hudson Kathleen S. Schoene
Walter S. Keneally Peper, Martin, Jensen,
Mayor, Day, Caldwell & Keeton, L.L.P. Maichel and Hetlage
700 Louisiana, Suite 1900 720 Olive Street, 24th Floor
Houston, Texas 77002-2778 St. Louis, Missouri 63101-2396
(713) 225-7000 (314) 421-3850
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Approximate date of commencement of proposed sale to the public: As
soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box. |_|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Section
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. |_|
CALCULATION OF REGISTRATION FEE
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<CAPTION>
========================================================================================================
TITLE OF EACH CLASS PROPOSED MAXIMUM AMOUNT
OF SECURITIES TO BE AGGREGATE OF
REGISTERED OFFERING PRICE(1) REGISTRATION FEE
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Common Stock, $.01 par value per share....... $35,000,000 $10,607
========================================================================================================
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(1) Estimated solely for the purpose of determining the registration fee
pursuant to Rule 457(o).
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
================================================================================
<PAGE>
******************************************************************************
* *
* INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A *
* REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED *
* WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT *
* BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE *
* REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT *
* CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR *
* SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH *
* OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR *
* QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. *
* *
******************************************************************************
SUBJECT TO COMPLETION
DATED OCTOBER 6, 1997
________________ SHARES
[LOGO]
TRAVIS INTERNATIONAL, INC.
COMMON STOCK
------------
Of the ___________ shares of Common Stock, par value $.01 per share
(the "Common Stock"), offered hereby, ________ shares of Common Stock are being
sold by Travis International, Inc. (the "Company" or "Travis") and ________
shares are being sold by certain stockholders of the Company (the "Selling
Stockholders"). The Company will not receive any of the proceeds from the sale
of the shares by the Selling Stockholders. See "Principal and Selling
Stockholders."
Prior to this offering (the "Offering"), there has been no public
market for the Common Stock of the Company. It is currently estimated that the
initial public offering price will be between $ ________ and $ ________ per
share. See "Underwriting" for a discussion of the factors to be considered in
determining the initial public offering price. The Company intends to apply to
have the Common Stock approved for quotation and trading on the Nasdaq National
Market under the symbol "TRVI."
------------
SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR A DISCUSSION OF CERTAIN MATTERS THAT
SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.
------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
================================================================================
PROCEEDS TO
PRICE TO UNDERWRITING PROCEEDS TO SELLING
PUBLIC DISCOUNT(1) COMPANY(2) STOCKHOLDERS
- --------------------------------------------------------------------------------
Per Share... $ $ $ $
- --------------------------------------------------------------------------------
Total (3)... $ $ $ $
================================================================================
(1) The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended (the "Securities Act"). See
"Underwriting."
(2) Before deducting estimated expenses of $_______, all of which are payable by
the Company.
(3) The Selling Stockholders and the Company have granted the Underwriters a
30-day option to purchase up to ________ additional shares of Common Stock
on the same terms and conditions as set forth above solely to cover
over-allotments, if any. If such option is exercised in full, the total
Price to Public, Underwriting Discount, Proceeds to Company and Proceeds to
Selling Stockholders will be $_______, $_______, $_________ and $_______,
respectively. The Company will not receive any of the proceeds from the sale
of shares of Common Stock by the Selling Stockholders pursuant to the
Underwriter's over-allotment option, if exercised. See "Underwriting" and
"Principal and Selling Stockholders."
------------
The Common Stock is offered by the several Underwriters, subject to
prior sale, when, as and if delivered to and accepted by them and subject to
certain conditions. The Underwriters reserve the right to withdraw, cancel or
modify such offer or to reject any orders in whole or in part. It is expected
that delivery of the shares of Common Stock will be made on or about ________ ,
1997.
A.G. EDWARDS & SONS, INC. CLEARY GULL REILAND & MCDEVITT INC.
The date of this Prospectus is ________ , 1997.
<PAGE>
[Inside Front Cover]
[MAP TO COME]
The Company intends to furnish its stockholders with annual reports
containing audited consolidated financial statements and with quarterly reports
containing unaudited consolidated financial information for the first three
quarters of each fiscal year.
------------
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN
TRANSACTIONS THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE
COMMON STOCK, INCLUDING SYNDICATE COVERING TRANSACTIONS AND THE IMPOSITION OF A
PENALTY BID. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
2
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO APPEARING
ELSEWHERE IN THIS PROSPECTUS. INVESTORS SHOULD CONSIDER CAREFULLY THE RISK
FACTORS RELATED TO THE PURCHASE OF THE COMMON STOCK OF THE COMPANY. SEE "RISK
FACTORS." EXCEPT AS OTHERWISE INDICATED HEREIN, (I) THE TERM "COMPANY" REFERS TO
TRAVIS INTERNATIONAL, INC. AND ITS SUBSIDIARIES AND (II) ALL INFORMATION IN THIS
PROSPECTUS (A) ASSUMES THAT THE UNDERWRITERS' OVER-ALLOTMENT OPTION IS NOT
EXERCISED, AND (B) GIVES EFFECT TO THE RECAPITALIZATION OF THE COMPANY'S COMMON
STOCK, INCLUDING THE CONVERSION OF EACH SHARE OF THE COMPANY'S CLASS A COMMON
STOCK INTO ONE SHARE OF COMMON STOCK, THE CONVERSION OF ___________ SHARES OF
THE COMPANY'S SERIES 2 PREFERRED STOCK INTO ___________ SHARES OF COMMON STOCK
AND A ___________-FOR-ONE STOCK SPLIT. SEE "UNDERWRITING" AND "DESCRIPTION OF
CAPITAL STOCK--RECAPITALIZATION."
THE COMPANY
The Company is a diversified wholesale distributor of specialty
products and provider of related value-added services. From 13 operating
locations in five states in the southern and western United States, the Company
distributes post-tension cable products, household fixture products, specialty
industrial products and telecommunications equipment. In addition, the Company
provides value-added services in connection with such products, including
engineering and design assistance, just-in-time delivery, fabrication, warranty
repair, installation and other technical assistance. During fiscal 1996, the
Company sold its products to over 8,600 customers located primarily in the
United States and, to a lesser extent, Canada, Mexico and other countries. The
Company has three principal categories of customers: (i) residential builders
and commercial construction contractors, (ii) distributors of industrial
products and (iii) operators of central office telephone systems.
The Company differs from many other distributors in that it operates
exclusively in specialty markets. The specialty markets sought by the Company
are defined by a number of characteristics that distinguish them from the
markets for commodity-type products. Although not all specialty markets exhibit
all of these characteristics, generally they include: (i) a small to medium
total market size, (ii) above average gross margins and returns on assets due to
the nature of the products or unique value-added services, (iii) a limited
number of competitors and the absence of a dominant, national competitor, and
(iv) a high degree of fragmentation at the distributor, supplier and customer
levels. The Company believes specialty markets are less capable of being served
by alternatives to wholesale distribution and offer greater opportunities than
commodity-type markets to obtain substantial market shares in the niches the
Company serves.
The Company's objective is to become a leading diversified wholesale
distributor of specialty products and related value-added services in the United
States. In pursuing this objective, the Company endeavors to achieve significant
product, customer, vendor and geographic diversity by establishing operations in
a limited number of niche markets and to increase the sales and net income of
those operations through further market penetration and the addition of
locations and products sold within such markets. The Company focuses on markets
where the demand for specialized products or value-added services offers
opportunities to obtain higher margins than those typically attainable in
markets for more standard, high-volume merchandise and where opportunities exist
for consolidation. The Company implements its strategy through new market
acquisitions that add new product groups, vendors and customers to the Company's
base, through fill-in acquisitions that establish new locations or complementary
product lines for its existing business and through internal development efforts
to increase penetration of the markets in which it operates. The Company
maintains a decentralized management structure that provides the managers of its
operating subsidiaries with discretion in conducting their respective operations
while affording them the benefits of the Company's executive management
expertise. The Company leverages the expertise of its executive and operating
managers to achieve commonalities among its operating subsidiaries that result
in management efficiencies and cost savings.
The Company believes that acquisitions are often the most
cost-effective means to enter new specialty markets or to expand geographically
within existing markets. Since 1994, the Company has completed ten acquisitions,
two of which were new market acquisitions and eight of which were fill-in
acquisitions. The Company has also grown through internal development. The
Company has increased sales to existing customers by periodically expanding into
new product lines and continually adding new products to existing lines. The
Company also has added new customers in existing markets through targeted sales
programs and the addition of new operating
3
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locations and sales offices. In addition, the Company's internal development is
enhanced by a continued emphasis on value-added services, which provide it the
opportunity to expand gross margins and to attract a more loyal and diverse
group of customers.
Using this approach of balanced expansion through acquisitions and
internal development, the Company's revenues and operating income increased from
approximately $14.5 million and $2.1 million, respectively, in fiscal 1994 to
approximately $65.8 million and $4.9 million, respectively, in fiscal 1996.
The Company was organized as a Delaware corporation in 1986. The
Company's executive offices are located at 3000 Weslayan Street, Suite 350,
Houston, Texas 77027, and its telephone number is (713) 622-7475.
THE OFFERING
Common Stock offered by
the Company ......................
Common Stock offered by the
Selling Stockholders .............
Common Stock outstanding after
the Offering(1) ..................
Use of Proceeds .................... To repay approximately $_________
million of outstanding indebtedness, to
retire future obligations under certain
employment, consulting and
non-competition agreements relating to a
previous acquisition by the Company and
for general corporate purposes,
including working capital and possible
acquisitions. See "Use of Proceeds."
Proposed Nasdaq National
Market Symbol .................... The Company intends to apply to have its
Common Stock approved for quotation on
the Nasdaq National Market System under
the symbol "TRVI."
(1) Does not include (i) up to __________ shares of Common Stock reserved for
issuance upon exercise of outstanding warrants, (ii) an aggregate of
__________ shares of Common Stock reserved for issuance upon exercise of
outstanding options granted under various stock option plans and (iii)
__________ shares of Common Stock that may be issued from time to time in
connection with options not yet granted under such plans. As of ________,
1997, an aggregate of __________ options granted under such plans had vested
and were exercisable. See "Management--Compensation Plans" and "Shares
Eligible for Future Sale."
4
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
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NINE MONTHS
YEAR ENDED SEPTEMBER 30, ENDED JUNE 30,
------------------------ ---------------
1994 1995 1996 1996 1997
---- ---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Sales......................................................... $14,526 $46,339 $65,813 $47,624 $56,687
Gross profit.................................................. 5,985 13,223 18,672 13,508 17,618
Operating income.............................................. 2,080 3,601 4,923 3,707 4,826
Net income.................................................... 1,203 1,882 2,605 1,989 2,376
Net income per common and common equivalent share.............
Average number of shares used to
compute net income per common
and common equivalent share.................................
</TABLE>
JUNE 30, 1997
--------------------------------
ACTUAL AS ADJUSTED(1)
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(UNAUDITED)
BALANCE SHEET DATA:
Working capital........................... $17,362
Total assets.............................. 41,518
Total debt................................ 12,921
Stockholders' equity...................... 18,620
- ------------
(1) Gives effect to the sale of the shares of Common Stock offered by the
Company hereby and the application of the net proceeds therefrom as set
forth under "Use of Proceeds."
5
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RISK FACTORS
In addition to the other information in this Prospectus, the following
factors should be considered carefully in evaluating an investment in the shares
of Common Stock offered by this Prospectus.
NO ASSURANCE OF FUTURE GROWTH THROUGH ACQUISITIONS
Acquisitions are an important aspect of the Company's growth. While the
Company believes that the small- to medium-sized markets that it currently
serves and into which it may expand are highly fragmented and provide numerous
acquisition opportunities, there can be no assurance that suitable acquisition
candidates can be found. Even if such candidates are found, there can be no
assurance that the Company will have sufficient capital resources to complete
acquisitions, that acquisitions can be completed on terms acceptable to the
Company, that any acquisitions that are completed can be successfully integrated
into the Company, or that such integration will not result in unforeseen
operational difficulties or require a disproportionate amount of management's
attention. The Company also is likely to face competition from other companies
for acquisition opportunities that are available. Moreover acquisitions may be
financed through the issuance of debt or equity securities. The issuance of
Common Stock or securities convertible into Common Stock may be dilutive to the
Company's stockholders. While the Company continues to evaluate acquisition
opportunities, there are no material acquisitions pending as of the date of this
Prospectus. See "Business--Acquisitions."
DEPENDENCE ON CONSTRUCTION MARKETS
Demand for the Company's specialty builders' products depends to a
significant degree on the health of the single- and multi-family residential and
commercial construction markets. Specialty builders' products accounted for
approximately 68% of the Company's overall sales for fiscal 1996. The level of
activity in the commercial construction markets depends largely on vacancy and
absorption rates, interest rates, regional economic outlooks, availability of
financing and general economic conditions. The level of activity in the
residential construction market depends on new single-family and multi-family
housing starts, which are a function of many factors, including interest rates,
availability of financing, housing affordability, vacancy rates, rental rates,
unemployment, demographic trends, gross domestic product growth and consumer
confidence. These factors are beyond the Company's control. Moreover, the
single- and multi-family residential markets are sensitive to cyclical changes
in the economy that could negatively affect the Company's operating results,
particularly in Texas where a significant portion of the Company's sales of
specialty builders' products are made. See "Business--Products and
Services--Specialty Builders' Products and Services."
COMPETITION
The markets in which the Company competes are highly fragmented,
consisting of many regional and local specialty suppliers of the products
distributed by the Company. Although the Company is not aware of any other
company that competes in all of its markets, some competitors within those
markets are substantially larger, better capitalized and have access to greater
resources than the Company and others are smaller and more specialized than the
Company. Larger competitors may achieve economies of scale not available to the
Company, and smaller competitors may have lower overhead costs and greater
flexibility than the Company. As a result, these competitors may be able to
offer lower prices than the Company. The entry of new companies or products into
the Company's markets could result in reductions in pricing of the products sold
by the Company that could materially and adversely affect the Company's
profitability. In addition, the Company's success in achieving increased market
penetration will depend, in part, on its ability to gain market share from
established competitors. There can be no assurance that the Company will be able
to compete successfully. See "Business--Competition."
RELIANCE ON KEY PERSONNEL
The Company's success depends to a significant extent upon the
continued services of its officers, in particular its President and the
presidents of each of its subsidiaries, as well as upon other key personnel. The
Company carries key-man life insurance on its executive officers and certain
officers of its subsidiaries. The Company also maintains incentive and
compensation programs designed to retain key employees, including options to
purchase shares of the Company's Common Stock which are subject to certain
vesting requirements. The loss of the continuing services of the Company's
executive officers and its subsidiaries' officers and key personnel,
6
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particularly to a competitor, could have an adverse effect on the Company's
operating results. See "Business--Strategy."
INTERRUPTION IN OR LOSS OF SOURCES OF SUPPLY
As is customary in its industry, the Company's relationships with its
vendors are not governed by long-term contracts which set prices, product
volumes or other terms. Although the Company's relationships with its key
vendors allow it to obtain terms that the Company believes are favorable, such
as volume discounts, the lack of long-term contracts permits vendors to increase
prices or terminate the relationship at any time. Many factors that would cause
such vendors to increase prices or terminate a relationship, such as higher raw
material costs or financial difficulties, are beyond the Company's control.
While the Company believes it has access to adequate substitutes for most of its
products from other vendors at competitive prices, any interruption in the
Company's sources of supply, particularly of the most specialized items, could
have a material adverse effect upon the Company's operating results. The Company
is also subject to the risks of obtaining products abroad, including adverse
fluctuations in currency exchange rates, increases in import duties, decreases
in quotas, increased customs regulations and political turmoil. The occurrence
of any one or more of such risks could increase the Company's cost of obtaining
such products or adversely affect their availability. See "Business--Vendors."
PRODUCT AND OTHER LIABILITY
Products fabricated and distributed by the Company are used by original
equipment manufacturers ("OEMs") in the manufacturing process, by industrial
companies for plant maintenance, repair and operations (the "MRO market"), by
residential builders and commercial construction contractors and by operators of
central office telephone systems. In addition, the Company provides value-added
services in connection with the distribution of its products, such as
engineering and design assistance, just-in-time delivery, fabrication, warranty
repair, installation and other technical services. The Company's employees
operate machinery and delivery vehicles daily, and some of the Company's
fabrication services involve the handling of materials which could be considered
harmful under certain circumstances. As a result, the Company may be subject to
claims by its employees resulting from such work-related risks and to claims by
third parties for personal injury or other damages resulting from the negligence
of the Company's employees in connection with performing such services. Although
there is no material litigation pending against the Company and the Company
maintains liability insurance in amounts and coverages believed to be usual and
customary in the industry, the imposition of a large judgment against the
Company or the costs of defending an uninsured claim could adversely affect its
financial condition or operating results. See "Business--Legal Proceedings and
Insurance."
FIRE AND OTHER HAZARDS
The Company's inventory and equipment are concentrated in relatively
few warehouse locations that are subject to the risk of fire and other hazards,
such as hurricanes, floods and earthquakes. The destruction of or significant
damage to one or more of these warehouses would likely interfere with the
Company's ability to deliver the products generally maintained at such locations
on a timely basis and to perform the value-added services required by its
customers. Although the Company carries fire, casualty and business interruption
insurance in amounts that management believes are sufficient to insure against
property losses due to such hazards, the Company's relationships with customers
could be irreparably harmed or the Company could sustain losses to its property
or operations beyond the limits of its policies in the event of such an
occurrence. See "Business--Products and Services" for a description of the
Company's operations.
CHANGES IN DISTRIBUTION CHANNELS
The distribution industry has experienced significant changes in recent
years. Capitalizing on the industry's fragmentation, some larger distributors
grew considerably through consolidation to achieve economies of scale and
increase efficiency. At the same time, customers have begun to seek lower cost
distribution alternatives such as integrated supply, outsourcing and
computerized ordering or other alternatives to wholesale distribution, including
catalogs and mass merchants, to fulfill their purchasing needs. If these trends
continue or accelerate, the Company's customer base could become more
concentrated, particularly in the markets for its specialty industrial products,
as more products may flow through new channels or more manufacturers sell
directly to end users. In addition, although the Company believes that its broad
range of specialty products will allow it to compete successfully as a secondary
distributor to integrated suppliers, there can be no assurance that it will be
able to obtain
7
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favorable contracts with integrated suppliers, and the Company may lose some
customers completely. See "Business--Industry Overview."
SUBSIDIARIES' DEPENDENCE ON KEY CUSTOMERS
Some of the Company's subsidiaries have one or several key customers
that account for a meaningful share of its sales and net income. In general,
there are no long-term commitments by such customers to purchase products or
services from the Company's subsidiaries. Product sales by the Company's
subsidiaries are typically made on a purchase-order basis. While the loss by one
of the Company's subsidiaries of one of its key customers or the failure of one
of its key customers to pay accounts receivable on a timely basis could
materially adversely affect the financial condition and operating results of the
subsidiary, such an event is not likely to significantly affect the Company as
whole. However, the loss of several of the Company's largest customers or the
failure of several of such customers to pay accounts receivable on a timely
basis could have a material adverse effect on the Company's financial condition
and operating results. There can be no assurance that the Company's largest
customers will continue to place orders with the Company or that orders by such
customers will continue at their previous levels. See "Business--Customers."
NEED FOR ADDITIONAL FINANCING
The Company anticipates that its growth strategy will require an
increase in cash needed to finance acquisitions, for working capital and for
capital expenditures. At June 30, 1997, the Company had working capital of
approximately $17.4 million and current assets of approximately $28.2 million.
After exhausting the proceeds of the Offering, the Company must rely on
internally generated funds or additional financing to fund the cash component of
future acquisitions, for capital expenditures and to provide necessary working
capital. Although the Company currently believes it will be able to secure
necessary financing, there can be no assurance that it will be able to do so on
favorable terms, if at all. If the Company is unable to internally generate
funds or secure additional financing in the future, its ability to pursue its
business strategy and its results of operations for future periods may be
adversely affected. In addition, the Company may issue debt or equity securities
to the owners of the companies it acquires. The issuance of debt or equity
securities, either for cash or to owners in connection with acquisitions, could
have a material adverse impact on the value of the Company's Common Stock. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
CONTROL BY OFFICERS, DIRECTORS AND AFFILIATES
Upon consummation of the Offering, the Company's officers, directors
and their respective affiliates, including Bradford Venture Partners, L.P. and
Overseas Equity Investor Partners, will beneficially own approximately ___% of
the outstanding shares of the Company's Common Stock. Such persons, if acting
together, would have sufficient voting power to control the outcome of corporate
actions submitted to the stockholders for approval and to control the management
and affairs of the Company, including the election of the Board of Directors of
the Company. As a result of such control, certain transactions may not be
possible without the approval of such stockholders, including mergers involving
the Company and tender offers or other purchases of Common Stock that could give
stockholders of the Company the opportunity to realize a premium over the
then-prevailing market price for the Common Stock. See "Principal and Selling
Stockholders."
8
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SHARES ELIGIBLE FOR FUTURE SALE
A substantial number of the outstanding shares of Common Stock, shares
of Common Stock that may be issued upon exercise of outstanding stock options
and warrants, and shares of Common Stock issued in connection with future
acquisitions will become eligible for sale at prescribed times in reliance on
Rule 144 promulgated under the Securities Act or pursuant to piggyback or demand
registration rights in favor of certain stockholders. All of the Company's
stockholders prior to the Offering have been granted piggyback registration
rights with respect to Common Stock owned by such stockholders as of such date.
In general, such piggyback registration rights may be exercised by such
stockholders on each occasion after the Offering that the Company proposes to
register any public offering of shares of its capital stock under the Securities
Act. In addition to such piggyback registration rights, subject to certain
conditions, stockholders owning certain shares of Common Stock have the right,
exercisable on two occasions, to require the Company to register under the
Securities Act up to 100% of such shares of Common Stock. All of the Company's
stockholders prior to the Offering and its executive officers and directors have
agreed not to offer, sell or otherwise dispose of any shares of Common Stock for
a period of 180 days after the date of the Offering without the prior written
consent of A.G. Edwards & Sons, Inc. on behalf of the Underwriters. Following
such period, these shares will not be eligible for sale in the public market
without registration unless such sales meet the conditions and restrictions of
Rule 144. Sales of any of the shares described above in the public market could
adversely affect prevailing market prices for the Common Stock. See "Shares
Eligible for Future Sale."
ABSENCE OF PUBLIC MARKET; POTENTIAL VOLATILITY OF STOCK PRICE
Prior to the Offering, there has been no public market for the Common
Stock of the Company. There can be no assurance that, following the Offering, an
active trading market for the Common Stock will develop or be sustained or that
the market price of the Common Stock will not decline below the initial public
offering price. The initial public offering price will be determined by
negotiations between the Company and the Representatives of the Underwriters,
and such price will not necessarily be indicative of the market price of the
Common Stock after the Offering. See "Underwriting" for a discussion of the
factors to be considered in determining the initial public offering price. From
time to time, the stock market experiences significant price and volume
volatility, which could affect the market price of the Common Stock for reasons
that may be unrelated to the operating performance of the Company. In addition,
quarterly variations in the Company's financial results could cause the market
price of the Common Stock to fluctuate substantially.
IMMEDIATE AND SUBSTANTIAL DILUTION
Purchasers of Common Stock offered hereby will suffer an immediate and
substantial dilution in the net tangible book value of the Common Stock from the
initial offering price. See "Dilution."
DIVIDEND POLICY AND RESTRICTIONS
The Company does not intend to pay cash dividends on its Common Stock
in the foreseeable future and anticipates that future earnings will be retained
to finance future operations and expansion. The Board of Directors is
authorized, without the approval of the holders of the Common Stock, to issue
Preferred Stock containing restrictions on the payment of dividends to holders
of the Common Stock. In addition, certain provisions of the loan documents
relating to the Company's credit facilities have the effect of restricting or,
under certain circumstances, prohibiting one or more of the Company's
subsidiaries or the Company from declaring or paying dividends. Further, if the
Company obtains additional financing to fund the cash component of future
acquisitions or to provide necessary working capital, the terms of such
financing could restrict the Company's ability to declare or pay dividends on
its capital stock. See "Dividend Policy."
ANTI-TAKEOVER PROVISIONS
Certain provisions of the Company's Amended and Restated Certificate of
Incorporation and certain provisions of the General Corporation Law of Delaware
(the state in which the Company is incorporated) may make it difficult to change
control of the Company and to replace incumbent management. For example, the
Company's Amended and Restated Certificate of Incorporation permits the Board of
Directors, without stockholder approval, to issue additional shares of Common
Stock or to establish one or more classes or series of Preferred Stock having
the number of shares, designations, relative voting rights, dividend rates,
liquidation and other rights, preferences and
9
<PAGE>
limitations that the Board of Directors fixes. These provisions could limit the
price that certain investors might be willing to pay in the future for shares of
Common Stock. See "Description of Capital Stock."
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
All statements other than statements of historical facts included in
this Prospectus, including without limitation, statements under "Prospectus
Summary," "Risk Factors," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business," regarding planned capital
expenditures, the Company's financial position, business strategy, growth
strategy and other plans and objectives for future operations, are
forward-looking statements. In addition, the words "anticipate," "believe,"
"estimate," "expect" and similar expressions as they relate to the Company or
its management are intended to identify forward-looking statements. Although the
Company believes that the expectations reflected in such forward-looking
statements are reasonable, it can give no assurance that such expectations will
prove to have been correct. Additional important factors that could cause actual
results to differ materially from the Company's expectations are disclosed under
"Risk Factors" and elsewhere in this Prospectus, including without limitation in
conjunction with the forward-looking statements included in this Prospectus. All
subsequent written and oral forward-looking statements attributable to the
Company or persons acting on its behalf are expressly qualified in their
entirety by such factors.
BACKGROUND OF THE COMPANY
The Company was incorporated in Delaware in September 1986 to acquire
American Packing and Gasket Company, Inc. ("APG"). APG was a fabricator and
master distributor of sealing products, hose couplings and glass to industrial
customers, primarily in Texas and other states along the Gulf Coast. During its
first five years the Company focused on enhancing APG's operations by, among
other things, establishing a management team, expanding profitable product
lines, upgrading fabrication equipment, implementing inventory and accounting
controls, installing computerized accounting and management information systems
and developing a comprehensive marketing program and business plan. When APG's
operations had been significantly improved, the Company's management was able to
pursue the goal of becoming a leading wholesale distributor in a limited number
of diversified specialty markets. Following the sale in May 1992 of a
controlling interest in the Company's stock to the Bradford Venture Partners,
L.P., Overseas Equity Investor Partners and certain other parties, the Company
embarked on an expansion program that has included both acquisitions and
internal development.
Since 1994, the Company has completed ten acquisitions, two of which
were new market acquisitions and eight of which were fill-in acquisitions. The
Company considers a new market acquisition to be one that adds a new product
group that is distinct from the Company's existing product groups. These new
market acquisitions are operated as subsidiaries of the Company. Fill-in
acquisitions generally are smaller and represent the addition of operations,
products or locations that are complementary to the Company's existing
operations. The businesses acquired as fill-in acquisitions usually have been
integrated with one of the Company's subsidiaries. See "Business--Acquisitions."
The Company has also grown through internal development. The Company
has increased sales to existing customers by periodically expanding into new
product lines and continually adding new products to existing lines. The Company
also has added new customers in existing markets through targeted sales programs
and in new markets through the addition of new operating locations and sales
offices. Using this approach of balanced expansion through acquisitions and
internal development, the Company's sales and operating income increased from
approximately $14.5 million and $2.1 million, respectively, in fiscal 1994 to
approximately $65.8 million and $4.9 million, respectively, in fiscal 1996. The
Company now has 13 operating locations and two sales offices in six states. See
"Business--Products and Services" and "--Facilities."
The Company distributes products and provides related services through
four operating subsidiaries. The Company's specialty builders' products business
is operated through De-Ro/Suncoast, Inc. ("DRS"). DRS, in turn, operates through
two divisions, Suncoast Postension ("Suncoast"), its post-tension products
division, and De-Ro Products ("De-Ro"), its household fixtures products
division. The Company's specialty industrial products business is operated
through two separately managed subsidiaries, American Packing and Gasket Company
("APG") and Mountain Empire Rubber & Specialty Co., Inc. ("MERSCO"). The
Company's telecommunications equipment business is operated through New West
Communications, Inc. ("New West").
10
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the Offering are estimated to be
approximately $________ million (or approximately $________ million if the
Underwriters' over-allotment option is exercised in full), after deducting
estimated underwriting discount and offering expenses and assuming an initial
offering price of $________ per share. The Company will not receive any proceeds
from the sale of shares of Common Stock by the Selling Stockholders.
USE OF PROCEEDS. The Company intends to use a portion of the net
proceeds of the Offering to repay outstanding indebtedness in the aggregate
amount of $________ under its subsidiaries' credit facilities. After such
repayments, the Company's aggregate outstanding indebtedness will be $_______,
consisting of subordinated debt incurred in connection with the acquisitions of
DRS and New West. The Company may in the future enter into new credit
facilities, either at the Travis or subsidiary level.
The Company also intends to use approximately $1.4 million of the net
proceeds of the Offering to retire future obligations under certain employment,
consulting and non-competition agreements entered into in connection with the
acquisition of DRS in 1994. Pursuant to agreements between the former owners of
DRS and the Company, the Company has agreed to pay $1.4 million to such persons,
representing a discount of approximately $400,000 calculated by the Company to
be owing under such agreements through the year 2002 (based on certain
assumptions made by the Company regarding the amount and timing of such
payments).
The Company plans to use the net proceeds remaining after the payments
described above for working capital purposes, including to add new locations and
product lines and to finance possible acquisitions. Although there are no
material acquisitions pending as of the date of this Prospectus, the Company is
routinely engaged in evaluating and holding preliminary discussions regarding
potential acquisitions and intends to pursue new market and fill-in acquisitions
as opportunities arise. See "Business--Acquisitions." Until used, the proceeds
of the Offering will be invested in short-term, investment-grade,
interest-bearing obligations.
SUMMARY OF CREDIT FACILITIES. At August 31, 1997, each of the Company's
subsidiaries maintained separate bank credit facilities with the same bank. All
of such facilities (described below) bear interest at a variable rate equal to
the bank's reference rate (equal to 8.50% at August 31, 1997) or the bank's
reference rate plus up to .50%, except for $1,000,000 of New West's term loan
facility (which bears interest at a fixed rate of 9.33%). All of such facilities
are secured by the equipment, inventory and accounts receivable of the
respective subsidiary and are not cross-collateralized. Availability under each
revolving credit facility is based upon a valuation of certain of the respective
subsidiary's inventory and accounts receivable. In addition, each revolving
credit facility matures on December 31, 1998. Travis does not maintain its own
credit facility but may in the future consolidate its subsidiaries' facilities
into one credit facility at the Travis level or obtain its own credit facility
if circumstances warrant.
DRS has a revolving credit facility, a term loan facility and a
facility for the purchase of equipment and vehicles. At August 31, 1997, the
maximum availability under the revolving credit facility was $7.5 million and
$6.6 million was outstanding thereunder. DRS's term loan is payable in equal
quarterly installments of interest and principal through September 30, 2001. At
August 31, 1997, $923,210 remained outstanding under the term loan facility. A
maximum of $250,000 is available through December 31, 1998 under DRS's facility
for the purchase of equipment and vehicles. Each equipment advance is payable in
equal monthly installments over a five-year period and each vehicle advance is
payable in equal monthly installments over a two-to-four-year period. As of
August 31, 1997, $137,872 was outstanding under DRS's facility for the purchase
of equipment and vehicles.
APG has a revolving credit facility and a term loan facility. At August
31, 1997, the maximum availability under the revolving credit facility was $3.0
million and $900,000 was outstanding thereunder. APG's term loan is payable in
quarterly installments of interest and principal through December 31, 1997. At
August 31, 1997, $56,623 remained outstanding under the term loan facility.
MERSCO has a revolving credit facility which provides for a line of
credit of up to $750,000 and is guaranteed by Travis. At August 31, 1997,
$500,000 was outstanding under such facility.
11
<PAGE>
New West has a revolving credit facility and term loan facility. Up to
$1,000,000 under these facilities is guaranteed by Travis. At August 31, 1997,
the maximum availability under the revolving credit facility was $818,826 and
none was outstanding thereunder. New West's term loan is payable in quarterly
installments of interest and principal, with a final balloon payment due
September 30, 2001. At August 31, 1997, $1.3 million remained outstanding under
the term loan facility.
DIVIDEND POLICY
The Company has not paid dividends on its Common Stock and does not
anticipate paying dividends in the foreseeable future. The Company intends to
retain any future earnings for reinvestment in the Company. The Board of
Directors is authorized, without the approval of the holders of the Common
Stock, to issue Preferred Stock containing restrictions on the payment of
dividends to holders of the Common Stock. In addition, certain provisions of the
loan documents relating to the Company's credit facilities have the effect of
restricting or, under certain circumstances, prohibiting one or more of the
Company's subsidiaries or the Company from declaring or paying dividends.
Further, if the Company obtains additional financing to fund the cash component
of future acquisitions or to provide necessary working capital, the terms of
such financing also could restrict the Company's ability to declare or pay
dividends on its capital stock. Any future determination as to the payment of
dividends will be subject to any such restrictions, will be at the discretion of
the Company's Board of Directors and will depend on the Company's results of
operations, financial condition, capital requirements and other factors deemed
relevant by the Board of Directors.
12
<PAGE>
CAPITALIZATION
The following table sets forth the short-term debt and capitalization
of the Company at June 30, 1997. The table also sets forth the short-term debt
and capitalization of the Company at June 30, 1997 on an as adjusted basis to
reflect the sale by the Company of __________ shares of Common Stock offered
hereby at an assumed offering price of $_______ per share and the application
of the net proceeds therefrom as set forth in "Use of Proceeds."
<TABLE>
<CAPTION>
JUNE 30, 1997
---------------------------
ACTUAL AS ADJUSTED
------ -----------
(IN THOUSANDS)
<S> <C>
Current portion of long-term debt......................................... $
============
Total long-term debt, less current portion................................ $
Stockholders' equity:
Preferred Stock, par value $.01 per share; ________ shares
authorized; _________ shares issued and outstanding;
________ shares authorized, as adjusted; ________ shares
issued and outstanding, as adjusted .................................
Common Stock, par value $.01 per share; _________ shares authorized;
________ shares issued and outstanding; _________ shares authorized,
as adjusted; _________ shares issued and outstanding, as
adjusted (1) ........................................................
Common Stock, Class A, par value $.01 per share; ________ shares
authorized; ________ issued and outstanding; none authorized,
as adjusted .........................................................
Additional paid-in capital................................................
Retained earnings.........................................................
------------
Total stockholders' equity
------------
Total capitalization............................................. $
============
</TABLE>
- ------------
(1) Excludes shares of Common Stock issuable upon exercise of outstanding stock
options and warrants. See "Management--Compensation Plans."
13
<PAGE>
DILUTION
The net tangible book value of the Company's Common Stock as of
________, 1997 was approximately $________ million, or $ ________ per share of
Common Stock outstanding. Net tangible book value per share of Common Stock
represents the amount of the Company's common stockholders' equity, less
intangible assets, divided by shares of Common Stock outstanding as of ________,
1997.
Net tangible book value dilution per share of Common Stock represents
the difference between the amount per share paid by purchasers of shares of
Common Stock in the Offering and the net tangible book value per share of Common
Stock immediately after completion of the Offering. After giving effect to the
sale of _________ shares of Common Stock in the Offering at an assumed offering
price of $ _________ per share and the application of the estimated net proceeds
therefrom, the net tangible book value of the Common Stock as of ________ , 1997
would have been $ _________ million, or $ ________ per share of Common Stock.
This represents an immediate increase in the net tangible book value of $
_________ per share of Common Stock to existing common stockholders and an
immediate dilution in net tangible book value of $ ________ per share of Common
Stock to purchasers of Common Stock in the Offering. The following table
illustrates the dilution in the net tangible book value per share to new
investors:
Assumed initial public offering price per share .................
Net tangible book value per share at _______, 1997............
Increase in net tangible book value per share attributable
to new investors..........................................
Net tangible book value per share after the Offering.............
Dilution per share to new investors..............................
The following table sets forth, as of the close of the Offering, the
number of shares of Common Stock issued by the Company, the total consideration
paid and the average price per share paid by both existing stockholders and by
new investors purchasing shares of Common Stock in the Offering:
<TABLE>
<CAPTION>
TOTAL
SHARES PURCHASED(1) CONSIDERATION
------------------- ---------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------ ------- ------ ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders(1).......................
New investors(2)...............................
Total..........................................
</TABLE>
- --------------------
(1) Does not include ___________ shares of Common Stock issuable upon exercise
of outstanding stock options and warrants at a weighted average exercise
price of $ ________ per share, _________ of which are exercisable.
(2) Sales by the Selling Stockholders in the Offering will reduce the number of
shares of Common Stock held by existing stockholders to _________, or ___%,
of the total number of shares of Common Stock to be outstanding after the
Offering, and will increase the number of shares of Common Stock to be
purchased by new investors to ________, or ________%, of the total number of
shares of Common Stock to be outstanding after the Offering. See "Principal
and Selling Stockholders."
14
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The selected statement of income and balance sheet data as of and for
each of the years in the three-year period ended September 30, 1996 are derived
from the Company's consolidated financial statements included elsewhere herein
which have been audited by Arthur Andersen LLP, independent public accountants,
and should be read in conjunction with such financial statements and the Notes
thereto. The selected statement of income and balance sheet data as of and for
the years ended September 30, 1992 and 1993 are derived from the Company's
financial statements, audited by the Company's prior independent public
accountants, not included herein. The selected statement of income and balance
sheet data as of and for the nine-month periods ended June 30, 1996 and 1997 are
derived from the Company's unaudited consolidated interim financial statements
that are included elsewhere herein and should be read in conjunction with such
financial statements. In the opinion of management, the unaudited consolidated
financial statements have been prepared on the same basis as the audited
consolidated financial statements and include all adjustments (consisting of
only normal recurring accruals) necessary for a fair presentation of the
financial position and results of operations for these periods. Results of
operations for the nine months ended June 30, 1997 are not necessarily
indicative of results to be expected for the year ending September 30, 1997. The
following data should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations," "Business," "Risk
Factors" and the Consolidated Financial Statements and the Notes thereto,
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED SEPTEMBER 30, JUNE 30,
------------------------------------------------------- -------------------
1992 1993 1994 1995 1996 1996 1997
------- ------- ------- ------- ------- ------- -------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Sales ..................................... $12,596 $13,697 $14,526 $46,339 $65,813 $47,624 $56,687
Costs of goods sold ....................... 7,432 8,068 8,541 33,116 47,141 34,116 39,069
------- ------- ------- ------- ------- ------- -------
Gross profit .............................. 5,164 5,629 5,985 13,223 18,672 13,508 17,618
Operating expenses ........................ 3,489 3,412 3,580 9,317 13,467 9,592 12,506
Amortization of intangibles ............... 282 305 325 305 282 209 286
------- ------- ------- ------- ------- ------- -------
Operating income .......................... 1,393 1,912 2,080 3,601 4,923 3,707 4,826
Interest expense .......................... 217 108 96 525 673 521 890
------- ------- ------- ------- ------- ------- -------
Income before income taxes ................ 1,176 1,804 1,984 3,076 4,250 3,186 3,936
Income taxes .............................. 439 681 781 1,194 1,645 1,197 1,560
------- ------- ------- ------- ------- ------- -------
Net income ................................ $ 737 $ 1,123 $ 1,203 $ 1,882 $ 2,605 $ 1,989 $ 2,376
======= ======= ======= ======= ======= ======= =======
Net income per common and common
equivalent share ........................
Average number of shares used to
compute net income per common
and common equivalent share..............
SEPTEMBER 30, JUNE 30,
--------------------------------------------------------------- --------
1992 1993 1994 1995 1996 1997
------ ------ ------ ------- ------- --------
(IN THOUSANDS)
BALANCE SHEET DATA:
Working capital ........................... $4,689 $5,557 $6,091 $11,683 $14,789 $17,362
Total assets .............................. 7,043 7,793 8,013 26,394 30,606 41,518
Total debt ................................ 1,525 883 642 7,723 8,310 12,921
Stockholders' equity ...................... 4,557 5,757 6,348 12,454 15,210 18,620
</TABLE>
15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
The following discussion should be read in conjunction with, and is
qualified in its entirety by, the Consolidated Financial Statements and the
notes thereto and the Consolidated Financial Data included elsewhere herein.
Historical operating results are not necessarily indicative of the trends in
operating results for any future period.
GENERAL
The Company has experienced substantial growth in sales volume, gross
profit and operating income since 1994. The Company's sales increased from $14.5
million in fiscal 1994 to $65.8 million in fiscal 1996. Over this same period,
gross profit and operating income increased from $6.0 million and $2.1 million
to $18.7 million and $4.9 million, respectively. The Company accomplished this
growth by completing seven acquisitions between the beginning of fiscal 1994 and
the end of fiscal 1996 and through internal development of the Company's
operations during that period, including the operations of the companies which
it acquired.
The Company's gross margins have been significantly affected by changes
in the percentage of its sales derived from the various specialty markets it
serves as a result of acquisitions and differing rates of internal development.
For example, in late 1994, the Company acquired two distributors of specialty
builders' products, which more than doubled the Company's sales and added its
second major specialty market. These acquisitions resulted in a substantial
decrease in gross margins in the 1995 fiscal year compared to the 1994 fiscal
year due to lower gross margins experienced in the specialty builders' products
industry. In contrast, in the nine months ended June 30, 1997, gross margins
rose to 31.1% from 28.4% over the same period in fiscal 1996, primarily as a
result of the Company's acquisition of its telecommunications equipment
operations, better product sourcing and concentration on higher-margin business.
While the Company prefers acquisition candidates with higher gross margins, its
primary focus is on operating margins both in selecting acquisition candidates
and in conducting its business generally. Accordingly, the Company expects that
its gross margins will continue to fluctuate as a result of acquisitions and
other changes in the number and type of specialty markets in which it operates.
Demand for products in each of the markets currently served by the
Company is affected by different factors. The Company's specialty builders'
products business is affected by general economic conditions, the level of new
single and multi-family building activity, weather conditions, interest rates
and the availability of credit, among other factors. While these factors are
beyond the Company's control, management believes that the strength of the
economy as a whole, particularly in the Sunbelt region where management has
concentrated the internal development efforts of its specialty builders'
products operations, should result in continuing growth in sales from these
operations over the next 12 months. See "Risk Factors--Dependence on
Construction Markets." Management believes that a majority of the Company's
sales of specialty industrial products are made to the MRO market, including oil
refineries, chemical plants, manufacturing plants, power generation facilities,
waste water treatment plants and industrial equipment repair operations. Due to
the Company's emphasis on the MRO markets, demand for the Company's specialty
industrial products has been and is expected to be more stable than if sales
were concentrated in the new construction markets. Ultimately, demand for the
Company's specialty industrial products is affected by profitability of the
end-users of the Company's products and, to some extent, by the state of the
energy industry, the level of general economic activity and new requirements of
governmental environmental and safety regulations. Demand for the Company's
telecommunications products, almost all of which are related to the Lucent
Technologies 5ESS central office switch, is affected by the needs of the
telephone operating companies in maintaining and expanding their central office
switching equipment and by Lucent's position and strategy in the central office
switch industry.
The Company's business is somewhat seasonal. The Company's first and
second fiscal quarter operating results typically are adversely affected by
winter construction cycles and weather patterns as the level of activity in new
home construction markets decreases. The Company's first fiscal quarter
operating results also are typically adversely affected by the holiday season
due to the decreased level of business activity and decreased number of billing
days during that quarter. Management closely monitors and controls variable
operating expenses and inventory levels during seasonally affected periods to
partially offset these factors. In addition, management believes that as the
Company implements its operating strategy, including new-market acquisitions,
the effects of seasonality on the Company's overall operating results should
diminish.
16
<PAGE>
The following table sets forth, for the periods indicated, the
percentage of sales represented by certain items in "Selected Consolidated
Financial Data."
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED SEPTEMBER 30, JUNE 30,
------------------------- ----------------
1994 1995 1996 1996 1997
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Sales........................... 100.0% 100.0% 100.0% 100.0% 100.0%
Gross profit.................... 41.2 28.5 28.4 28.4 31.1
Operating expenses.............. 24.6 20.1 20.5 20.1 22.1
Amortization of intangibles..... 2.2 0.7 0.4 0.4 0.5
Operating income................ 14.3 7.8 7.5 7.8 8.5
Interest expense................ 0.7 1.1 1.0 1.1 1.6
Income before income taxes...... 13.7 6.6 6.5 6.7 6.9
Income taxes.................... 5.4 2.6 2.5 2.5 2.8
Net income...................... 8.3% 4.1% 4.0% 4.2% 4.2%
</TABLE>
RESULTS OF OPERATIONS
NINE MONTHS ENDED JUNE 30, 1997 COMPARED TO NINE MONTHS ENDED JUNE 30,
1996. Sales increased by 19.0% to $56.7 million in the nine months ended June
30, 1997 from $47.6 million in the nine months ended June 30, 1996. Of such
increase, $3.1 million (approximately 34%) resulted from sales of the Company's
telecommunications equipment operations which were acquired effective as of
October 1, 1996. The Company's specialty industrial products business posted a
broad-based sales increase of 17.2% to $17.7 million from $15.1 million in the
1996 period. Unusually rainy weather in early 1997 delayed new home construction
starts, limiting the sales growth of the specialty builders' products operations
to 10.3%, or $35.9 million compared to $32.5 million in the 1996 period.
Gross profit increased by $4.1 million to $17.6 million in the nine
months ended June 30, 1997 from $13.5 million in the nine months ended June 30,
1996. Of such increase, $1.6 million represents the gross profit of the
Company's telecommunications equipment operations and the balance resulted from
internal development and fill-in acquisitions. As a percentage of sales, gross
profit increased to 31.1% in the 1997 period from 28.4% in the 1996 period.
Approximately one-half of the percentage increase was attributable to the
Company's telecommunications operations which generate higher gross margins than
the Company's other businesses. The gross margins of the specialty builders'
products operations benefited in the 1997 period from better product sourcing
and a planned shift of marketing emphasis of the post-tension operations to
higher-margin residential builders and commercial construction contractors.
Operating expenses increased by $2.9 million to $12.5 million in the
nine months ended June 30, 1997 from $9.6 million in the 1996 period. As a
percentage of sales, operating expenses increased to 22.1% in the nine month
period ended June 30, 1997 from 20.1% of sales in the 1996 period, primarily
reflecting the Company's investment in personnel and overhead required to
support current and future growth.
Amortization of intangibles increased by $77,404 to $285,919 in the
nine months ended June 30, 1997 from $208,515 in the 1996 period, primarily due
to amortization of intangible assets in connection with the acquisition of the
Company's telecommunications equipment operations.
Interest expense increased by $368,593 to $889,664 during the nine
months ended June 30, 1997 from $521,071 in the 1996 period. The increase
resulted primarily from debt incurred in connection with the acquisition of the
telecommunications equipment operations and indebtedness incurred to finance
working capital expansion and equipment additions for the specialty builders'
products operations.
Income taxes increased by $363,072 to $1.6 million in the nine months
ended June 30, 1997 from $1.2 million in the 1996 period. As a percentage of
pre-tax income, income taxes increased to 39.6% during the 1997 period from
37.6%, primarily as a result of higher state income tax rates on operations in
California.
17
<PAGE>
YEAR ENDED SEPTEMBER 30, 1996 COMPARED TO YEAR ENDED SEPTEMBER 30,
1995. Sales increased by 42.0% to $65.8 million in fiscal 1996 from $46.3
million in fiscal 1995. This increase was primarily due to internal growth
(including the development of businesses acquired in fiscal 1995), the inclusion
of a full year's sales of those businesses acquired in fiscal 1995, and sales
from new operations acquired or opened during fiscal 1996.
Gross profit increased by $5.4 million to $18.7 million in fiscal 1996
from $13.2 million in fiscal 1995 primarily as a result of increased sales. As a
percentage of sales, gross profit remained relatively stable at 28.4% in fiscal
1996 compared to 28.5% in fiscal 1995.
Operating expenses increased by $4.2 million to $13.5 million in fiscal
1996 from $9.3 million in fiscal 1995. As a percentage of sales, operating
expenses increased to 20.5% in fiscal 1996 from 20.1% of sales in fiscal 1995,
primarily to support expansion by the specialty builders' products operations,
including new branch openings and the establishment of a specialty hardware
master distributor operation.
Amortization of intangibles decreased by $23,183 to $281,692 in fiscal
1996 from $304,875 in fiscal 1995.
Interest expense increased by $147,946 to $673,007 in fiscal 1996 from
$525,061 in fiscal 1995. The increase resulted primarily from the inclusion of a
full year's interest expense related to businesses acquired in fiscal 1995 and
additional borrowings to finance working capital needs resulting from increased
sales. The increase in interest expense was partially offset by an increase of
$73,239 in interest income on funds held by Travis to $116,314 in fiscal 1996
from $43,075 in fiscal 1995.
Income taxes as a percentage of pre-tax income remained relatively
constant at 38.7% during fiscal 1996 compared to 38.8% in fiscal 1995.
YEAR ENDED SEPTEMBER 30, 1995 COMPARED TO YEAR ENDED SEPTEMBER 30,
1994. Sales increased by 219% to $46.3 million in fiscal 1995 from $14.5 million
in fiscal 1994, primarily due to the acquisition of the Company's specialty
builders' products operations.
Gross profit increased by $7.2 million to $13.2 million in fiscal 1995
from $6.0 million in fiscal 1994. Of such increase, $6.4 million resulted from
operations acquired in fiscal 1995 while existing operations contributed
$791,780. As a percentage of sales, gross profit declined to 28.5% in fiscal
1995 from 41.2% in fiscal 1994. The decline in gross profit as a percentage of
sales was due primarily to the lower gross profit margins of the specialty
builders' products operations acquired in fiscal 1995.
Operating expenses increased by $5.7 million to $9.3 million in fiscal
1995 from $3.6 million in fiscal 1994. Of such increase, $5.4 million resulted
from operations acquired in fiscal 1995 and $359,762 resulted from the growth of
existing operations. As a percentage of sales, operating expenses decreased to
20.1% of sales in fiscal 1995 from 24.6% of sales in fiscal 1994, reflecting the
lower overhead percentage of the specialty builders' products operations
acquired during fiscal 1995.
Amortization of intangibles decreased by $20,593 to $304,875 in fiscal
1995 from $325,468 in fiscal 1994. Amortization resulting from operations
acquired during fiscal 1995 aggregated $159,471 while amortization relating to
existing operations decreased by $180,064 to $145,404 from $325,468. This
reduction resulted from expiration of an eight-year amortization period assigned
to a customer list.
Interest expense increased by $429,170 to $525,061 in fiscal 1995 from
$95,891 in fiscal 1994. The increase resulted from debt incurred in connection
with acquisition of businesses acquired during fiscal 1995, which was partially
offset by $43,075 of interest income on funds held by Travis during fiscal 1995.
Income taxes increased by $412,298 to $1.2 million in fiscal 1995 from
$781,500 in fiscal 1994. As a percentage of pre-tax income, income taxes
decreased by .6% to 38.8% in fiscal 1995 from 39.4% in fiscal 1994. Such
decrease is attributable to the settlement of an Internal Revenue Service
audit related to prior years' intangible asset amortization recorded in fiscal
1994, partially offset by an increase in non-deductible intangible assets
acquired in connection with acquisitions made in fiscal 1995.
18
<PAGE>
EFFECTS OF INFLATION
The Company does not believe that inflation has had a material impact
on results of operations for the periods presented. Substantial increases in
costs, however, could have an impact on the Company. The Company believes that,
to the extent inflation affects its costs in the future, it can generally offset
inflation by increasing prices if competitive conditions permit.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary needs for capital resources are to finance
acquisitions, inventories, accounts receivable and, to a lesser extent, capital
expenditures. Borrowings for working capital typically increase during periods
of sales expansion when higher levels of inventory and receivables are needed
and decrease as inventories and receivables are converted to cash and are used
to pay down debt. Subsidiaries of the Company had $12.0 million of long-term
debt, less current maturities, outstanding at June 30, 1997, consisting of the
borrowings described below. See Note 2 to the Consolidated Financial Statements
of the Company for a discussion of borrowings as of September 30, 1996.
Consistent with the Company's diversified and decentralized operating strategy,
all subsidiary debt obligations are separate with no cross-collateralization,
with the exception of the Company's guarantee of certain New West and MERSCO
obligations. See "Use of Proceeds."
CREDIT AGREEMENTS: Subsidiaries of the Company are parties to
individual credit agreements with the same bank. As of June 30, 1997, such
credit facilities: (i) permitted revolving borrowings up to an aggregate of
$12.5 million, of which an aggregate of $11.6 million was available based on the
subsidiaries borrowing base formulas and $7.9 million was outstanding; (ii)
included term loans with an aggregate of $2.4 million outstanding that are
repayable in quarterly installments aggregating $158,495, plus an annual cash
flow recapture provision of the New West loan; and (iii) included a facility of
up to $250,000 to partially finance the purchase of equipment and vehicles with
an outstanding balance of $122,655. Borrowings under these credit facilities are
secured by the equipment, inventory and accounts receivable of the respective
subsidiaries. Borrowings outstanding under these agreements will be retired from
the proceeds of the Offering.
SUBORDINATED DEBT: As of June 30, 1997, subsidiaries of the Company had
an aggregate of $2.2 million of subordinated debt outstanding, consisting of
$933,928 of unsecured debt payable in quarterly installments to sellers of
businesses acquired by the Company and $1.3 million payable in equal monthly
installments to an institutional lender, secured by a second lien on
substantially all the assets of New West. The holder of New West's subordinated
debt holds warrants to purchase _________ shares of the Company's Common Stock
at $________ per share, which may be exercised through an offset of part or all
of the outstanding balance of the debt.
OTHER DEBT: As of June 30, 1997, subsidiaries of the Company also had
$356,978 of indebtedness outstanding to capital lessors in connection with
capital lease obligations and to financial institutions for various equipment
purchases. These obligations generally are collateralized by certain assets of
the subsidiaries.
Under the terms of the respective credit agreements, the Company's
subsidiaries are subject to various restrictive covenants regarding, among other
things, maintenance of working capital, net worth and other financial ratios,
incurrence of additional indebtedness, payment of management fees to the Company
and consummation of mergers and acquisitions. The respective financial ratios
may, under certain circumstances, have the effect of restricting or prohibiting
the declaration and payment of dividends by a subsidiary or the Company.
Net cash generated from (used in) operating activities was ($152,408),
$2.5 million and ($667,848) for fiscal years 1995 and 1996 and the nine months
ended June 30, 1997, respectively. Cash required to finance increased accounts
receivable and inventories, net of accounts payable increases, aggregated $2.2
million, $1.9 million and $3.7 million for fiscal years 1995 and 1996 and the
nine months ended June 30, 1997, respectively. Changes in other non-cash working
capital accounts, other than deferred tax assets and the current portion of
long-term debt, provided (used) cash of ($317,507) in fiscal 1995, $1.3 million
in fiscal 1996 and $53,569 in the nine months ended June 30, 1997. Capital
expenditures were $660,679, $788,472 and $1.1 million for fiscal years 1995 and
1996 and the nine months ended June 30, 1997, respectively. Five acquisitions
were made in fiscal 1995 requiring cash of $8.2 million, two acquisitions were
made in fiscal 1996 requiring cash of less than $200,000 and three acquisitions
were made in the nine-months ended June 30, 1997 requiring cash of $4.2 million.
19
<PAGE>
Management believes that funds generated from operations, funds
available under future credit facilities and the net proceeds of the Offering
will be sufficient to meet the needs of the Company's current operations for at
least the next 12 months.
20
<PAGE>
BUSINESS
GENERAL
The Company is a diversified wholesale distributor of specialty
products and provider of related value-added services. From 13 operating
locations in five states in the southern and western United States, the Company
distributes post-tension cable products, household fixture products, specialty
industrial products and telecommunications equipment. In addition, the Company
provides value-added services in connection with such products, including
engineering and design assistance, just-in-time delivery, fabrication, warranty
repair, installation and other technical assistance. During fiscal 1996, the
Company sold its products to over 8,600 customers located primarily in the
United States and, to a lesser extent, Canada, Mexico and other countries. The
Company has three principal categories of customers: (i) residential builders
and commercial construction contractors, (ii) distributors of industrial
products and (iii) operators of central office telephone systems.
The Company's objective is to become a leading diversified wholesale
distributor of specialty products and related value-added services in the United
States. In pursuing this objective, the Company endeavors to achieve significant
product, customer, vendor and geographic diversity by establishing operations in
a limited number of distinct niche markets and to increase the sales and net
income of those operations through further market penetration and the addition
of locations and products sold within such markets. The Company focuses on
markets where the demand for specialized products or value-added services offers
opportunities to obtain higher margins than those typically attainable in
markets for more standard, high-volume merchandise and where opportunities exist
for consolidation. The Company implements its strategy through new market
acquisitions that add new product groups, vendors and customers to the Company's
base, through fill-in acquisitions that establish new locations or complementary
product lines for its existing business and through internal development efforts
to increase penetration of the markets in which it operates. The Company
maintains a decentralized management structure that provides the managers of its
operating subsidiaries with discretion in conducting their respective operations
while affording them the benefits of the Company's executive management
expertise. The Company leverages the expertise of its executive and operating
managers to achieve commonalities among its operating subsidiaries that result
in management efficiencies and cost savings.
INDUSTRY OVERVIEW
The Company operates in the distribution industry. Wholesale
distribution is one of the largest and most fragmented industries in the United
States. According to the U.S. Department of Commerce, aggregate sales of
distributors based in the United States in 1996 exceeded $2.5 trillion. The
Company believes that distributors generally add value to the supply chain for
products by reducing the cost of doing business for both their suppliers and
customers. Distributors may reduce the cost of their suppliers' operations by
placing large orders at regular intervals, which allows suppliers to plan
production more efficiently, by maintaining and financing inventories, and by
providing transportation, logistics, sales and marketing and customer support
services which these suppliers would otherwise be required to provide.
Similarly, customers receive inventory, logistics and technical support services
from distributors. These services may reduce operating costs of those customers
as a result of their ability to maintain lower levels of inventory, purchase
from a reduced number of suppliers and receive technical assistance and product
support.
The distribution industry has experienced significant changes in recent
years. Capitalizing on the industry's fragmentation, some larger distributors
grew considerably during the past decade through acquisitions to achieve
economies of scale and other advantages gained from higher sales volumes, wider
geographic range, added purchasing power and more sophisticated computer
systems. This consolidation trend has been accelerated by certain distribution
customers that have sought to reduce the total cost of their purchasing
activities by placing larger orders with fewer distributors or integrated
suppliers, by outsourcing their purchasing function to inventory management
firms or by investing in technology designed to maximize opportunities for
savings. At the same time, certain industries have developed effective
alternatives to wholesale distribution for the distribution of products, such as
catalogs, mass merchants and other retailers, and placing orders directly with
manufacturers through electronic commerce, including the Internet. The Company
believes these trends have been strongest in larger markets and markets for high
volume, low margin, commodity-type products, and have resulted in consolidation
and integrated supply alliances among distributors as they position themselves
to better serve their larger customers.
21
<PAGE>
The Company differs from many other distributors in that it operates
exclusively in specialty markets. The specialty markets sought by the Company
are defined by a number of characteristics that distinguish them from larger
markets and markets for commodity-type products. Although not all specialty
markets exhibit all of these characteristics, generally they include: (i) a
small to medium total market size, (ii) above-average margins and returns on
assets due to the nature of the products or unique value-added services offered,
(iii) a limited number of competitors and the absence of a dominant, national
competitor, and (iv) a high degree of fragmentation at the distributor, supplier
and customer levels. The Company believes specialty markets are less capable of
being served by alternatives to wholesale distribution and offer greater
opportunities than commodity-type markets to gain substantial market shares in
the niches the Company serves.
STRATEGY
The Company's objective is to become a leading diversified wholesale
distributor of specialty products and provider of related value-added services
in the United States. To achieve this objective, the Company's strategy includes
the following:
FOCUS ON DIVERSIFIED, SPECIALTY MARKETS. The Company focuses on
operating in specialty markets where it believes it can capitalize on its
competitive advantages relative to the smaller, local or regional distributors
who have traditionally served such markets. The Company believes that specialty
markets permit broader product, customer, vendor and geographic diversification
because initial entry into a number of such markets and subsequent geographic
expansion within those markets requires substantially less capital than is
required to penetrate larger markets. The markets targeted by the Company also
involve products requiring technical support or other value-added services which
the Company believes makes them less suitable for catalog, retail, electronic
commerce or other alternatives to traditional wholesale distribution. The
Company currently operates in three different markets and expects to enter other
distinct specialty markets over the next several years. By operating in a number
of different specialty markets, the Company believes it can more effectively
manage economic fluctuations than other distributors that may have a broad
geographic range and a large number of customers, but lack the Company's
product, customer and vendor diversity.
EMPHASIS ON VALUE-ADDED SERVICES. The Company seeks to provide superior
service to its customers by maintaining a broad inventory and providing
value-added services such as just-in-time delivery, technical assistance and
fabrication to customer specifications. The Company believes that the depth and
breadth of its inventory, combined with its just-in-time delivery services,
enable it to maintain its pricing structure, especially under circumstances
where product unavailability might result in shut-downs, delays or interruptions
in its customers' operations. The Company also offers a variety of other
value-added services in connection with its distribution activities, including
packaging, delivery, installation and warranty repair services for household
fixture products; design, engineering and in-field assistance for post-tension
cable systems; and fabrication of gaskets and other industrial rubber products,
industrial glass, plastics and mirrored by-pass doors. By providing such
services, the Company is typically able to generate above-average margins
without significant capital costs and to attract a more loyal and diverse group
of customers than would otherwise be possible.
EXPANSION THROUGH INTERNAL DEVELOPMENT. While the Company continually
searches for opportunities to expand existing operations through fill-in
acquisitions (see "--Acquisitions"), it balances its acquisition efforts with
internal development efforts. The Company's internal development goals are to
increase penetration of its existing geographic markets by adding new products
for sale to existing customers and to intensify efforts to sell to new customers
in those markets. The Company also pursues internal development by expanding
into new geographic markets through the addition of new production locations,
warehouses or sales offices in territories contiguous to existing operations.
For example, the Company recently established a sales office for its commercial
post-tension cable products and services in Orlando, Florida and will open a
showroom for its household fixture products and services in Austin, Texas in the
near future. The Company believes that its operating subsidiaries may expand
internally at a faster pace than most of their respective competitors because
the Company can provide its subsidiaries with the capital resources and
corporate-level services that such competitors often lack.
DECENTRALIZED, COMMON OPERATING APPROACH. The Company maintains a
decentralized operating structure that provides the managers of its subsidiaries
with discretion in conducting their respective operations while affording them
the benefits of the Company's executive management expertise. The Company's
executive management team performs all corporate-level executive functions of
the Company, including identifying acquisition targets, negotiating the terms of
acquisitions and related credit facilities and providing centralized
22
<PAGE>
administrative services, such as finance and insurance purchasing. This
structure allows the Company to spread the costs associated with administrative
services and other corporate-level functions while allowing its operating
managers the flexibility to maintain their focus on their respective businesses,
personally develop relationships with key customers and pursue opportunities in
their markets. In addition, although the Company operates in distinct markets,
it benefits from the efficiencies that can be achieved through a common but
flexible approach to several important operational elements of wholesale
distribution. The Company has implemented and refined common sales techniques
that include a combination of inside and outside sales forces, telemarketing,
direct mail programs and electronic catalogs. Each of the Company's subsidiaries
also has a computer operating system which provides inventory and warehousing
management, financial management reports, accounts payable and receivable
functions and computer-based ordering and purchasing capabilities tailored for
the individual requirements of the subsidiary. The Company believes that its
decentralized, common operating approach can be successfully applied to most of
the companies it may seek to acquire, even though they may be at various stages
of operational development.
ACQUISITIONS
The Company has relied on both new market and fill-in acquisitions in
connection with its efforts to become a leading diversified wholesale
distributor of specialty products and related value-added services. The Company
believes that acquisitions are often the most cost-effective means to enter new
specialty markets or to expand geographically within existing markets. To date,
the Company has established operations in three different specialty markets, and
intends to add operations in other new markets over the next several years. In
analyzing possible new market acquisitions, the Company considers candidates
that, like its previous new market acquisitions, exhibit some or all of the
following characteristics: (i) dominant local or regional competitor in a
specialty market, (ii) fragmented market with attractive opportunities for
consolidation, (iii) identifiable value-added services, (iv) high margins, (v)
above average return on assets and (vi) healthy earnings as a percentage of
sales. In addition, the Company generally requires that new market acquisition
candidates have experienced and dedicated managers willing to leverage the
business planning, operational experience, acquisition expertise, access to
capital and other advantages offered by the Company to obtain a substantial
share of the national market for their products and services.
After establishing operations in a new market, the Company seeks to
supplement its internal expansion within the market through fill-in
acquisitions. The Company believes that fill-in acquisitions can increase the
Company's sales without a proportionate increase in administrative costs. Since
1994, the Company has completed eight fill-in acquisitions and continually
searches for opportunities to add complementary product lines and extend its
reach into new territories utilizing fill-in acquisitions. In pursuing these
acquisitions, the Company typically considers smaller competitors that operate
in geographic areas contiguous to those in which the Company operates or that
distribute products within its existing territories that are related to the
Company's existing product lines and may be marketed effectively to its existing
customers.
The Company's general practice in connection with acquiring a new
business is to retain the services of its chief operating managers in order to
capitalize on their valuable understanding of the local or regional market and
their relationships with important customers. The Company's executive officers
and new operating managers jointly formulate business plans on an annual basis
to target areas for operational improvement. These plans identify opportunities
for growth and for implementing the Company's commonalities with respect to
corporate-level functions, marketing and MIS. In addition, in order to align the
interests of the Company's operating managers with those of the Company's
stockholders, a significant portion of the managers' compensation is based on
the performance of their respective businesses. Management believes that this
partnership approach, together with its access to capital and decentralized
management structure, will continue to attract qualified acquisition candidates
to the Company.
23
<PAGE>
The following table summarizes the new market and fill-in acquisitions
completed by the Company since 1994:
<TABLE>
<CAPTION>
Acquisition Date Type Location Products
----------- ---- ---- -------- --------
<S> <C> <C> <C> <C>
MERSCO 10/94 Fill-in Johnson City, Specialty industrial
Tennessee products
De-Ro(1) 12/94 New Market Houston, Texas Household
fixtures
Suncoast(1) 12/94 New Market Houston, Texas Post-tension
cable systems
Cable Systems, Inc.(2) 02/95 Fill-in Austin, Texas Post-tension
cable systems
Ameraflex Plastics(3) 03/95 Fill-in Houston, Texas Fabricated plastic
products
The Rebar Shop(2) 02/96 Fill-in Austin, Texas Reinforcing steel
bar and accessories
Pine Top Mine Supply(4) 06/96 Fill-in Pine Top, Specialty industrial
Kentucky products
New West 10/96 New Market San Luis Obispo, Refurbished
California telecommunications
equipment
MD Steel(2) 05/97 Fill-in Ontario, Post-tension
California cable systems
Fabrication Plus(4) 06/97 Fill-in Hazard, Specialty industrial
Kentucky products
Valley Seals(4) 10/97 Fill-in Johnson City, Specialty industrial
Tennessee products
</TABLE>
- ------------
(1) Although the Company acquired De-Ro and Suncoast in separate transactions,
the Company treats such acquisitions as one new market acquisition because
De-Ro and Suncoast both serve the specialty builders' products market.
(2) Purchased by DRS.
(3) Purchased by APG.
(4) Purchased by MERSCO.
The Company believes that there are many attractive acquisition
candidates in the wholesale distribution industry because of the highly
fragmented nature of specialty markets, industry participants' need for capital
and their owners' desire for liquidity. The Company believes that the proceeds
of the Offering, together with the availability of publicly traded stock
following the Offering, will enable it to pursue its acquisition program;
however, there can be no assurance that suitable candidates can be found or that
the Company will have the necessary resources to complete desirable
acquisitions. See "Risk Factors--No Assurance of Future Growth Through
Acquisitions."
PRODUCTS AND SERVICES
The Company's products and services fall into three general categories:
(i) specialty builders' products and services, (ii) specialty industrial
products and services and (iii) telecommunications equipment. The following
table sets forth the approximate percentage of the Company's sales attributable
to these categories for each of its last three fiscal years and for the
nine-month period ended June 30, 1997.
24
<PAGE>
<TABLE>
<CAPTION>
Products and Services Percentage of Sales
--------------------- -------------------------------------------------
Year Ended September 30, Nine Months Ended
------------------------- -----------------
1994 1995 1996 June 30, 1997
---- ---- ---- -----------------
<S> <C> <C> <C> <C>
Specialty Builders' Products............................. - 58% 68% 63%
Specialty Industrial Products............................ 100% 42% 32% 31%
Telecommunications Equipment............................. - - - 6%
----- ----- ----- ------
100% 100% 100% 100%
===== ===== ===== ======
</TABLE>
- ------------
SPECIALTY BUILDERS' PRODUCTS AND SERVICES. The specialty builders'
products distributed by the Company are primarily comprised of (i) post-tension
cable products and (ii) household fixture products.
POST-TENSION CABLE PRODUCTS AND SERVICES. The Company's post-tension
cable business serves the single-family residential markets around its
distribution facilities in Houston, San Antonio and Austin, Texas, Ontario,
California and Phoenix, Arizona, as well as the commercial markets throughout
the continental United States and in several foreign countries. The Company
generally does not compete for infrastructure construction projects (roads,
bridges and tunnels). The Company is the dominant post-tension cable company
serving the single-family residential construction market in Houston. In
addition, based on the volume of its steel cable purchases, the Company believes
it is one of the largest distributors of post-tension cable to the residential
and commercial construction markets (other than infrastructure projects) in the
United States. The Houston location is the main production and engineering
facility, housing two unbonded post-tension cable extruders, two cable cutting
lines and an engineering staff of 13. Each of the Company's other operating
locations, except the Phoenix location, has one cutting line.
The products distributed by the Company's post-tension cable business
are comprised primarily of unbonded post-tension cable tendons, reinforced steel
bar (rebar) and related anchors, and other accessories. Unbonded post-tension
cable is used by the Company's customers in connection with the post-tension
compression of pre-stressed concrete, particularly in connection with
slab-on-grade foundations and commercial concrete structures. The basic function
of pre-stressing concrete is to eliminate or greatly reduce the tensile stresses
to which crucial areas of concrete structures are subjected. This objective is
accomplished by stretching high-strength steel cable to induce compressive
stresses in concrete. Compressive stresses are induced in pre-stressed concrete
by either pre-tensioning or post-tensioning the steel cable. In post-tensioning,
the concrete is cast around, but not in contact with, unstretched steel cable.
The steel cable is stretched after the concrete has hardened by anchoring one
end against the concrete and using hydraulic jacks to pull the other. After
stretching, the second end also is anchored. The concrete in between the anchors
is consequently highly compressed. The strengthening effect of compression in
concrete acts like the horizontal squeeze that is applied to a row of books.
From each end, compressive stresses are applied throughout the entire row;
although the center volumes are unsupported, the books can be lifted and carried
horizontally.
Applying the post-tension cable system to slab-on-grade foundations
provides a floating slab less likely to crack in areas where soils are composed
primarily of clay or other sediments and are prone to shifting. In residential
slabs, the post-tension system allows use of less concrete than conventional
rebar foundations, typically resulting in savings to the builder of 10% to 15%.
The Company estimates that approximately 90% of the new residential construction
recently completed or commenced in the Houston area involved post-tension
slab-on-grade foundations. Use in other markets varies, but the Company believes
that the market for post-tension slab-on-grade foundations is growing at the
rate of 15% to 20% per year in some markets where a significant amount of new
housing development is in areas with unstable soils or the benefits of
post-tension cable systems otherwise have been recognized. In commercial
applications, pre-stressing of concrete can reduce limitations on the spans and
loads for many concrete structures, resulting in more economical designs. The
Company's commercial projects include parking garages, casinos, hotels,
condominium developments, apartment buildings, office towers and other concrete
buildings where the architectural plans call for large, open, covered spaces
where post-tension cable engineering is best applied.
25
<PAGE>
The Company is invited by commercial construction contractors to bid on
projects as a subcontractor and receives orders from residential and wholesale
customers by telephone and facsimile. Once an order is received, the Company
cuts the required lengths of cable at one of its locations and ships the order
for delivery to the job site. The Company uses its own fleet of trucks to
deliver its post-tension cable products to sites nearby its locations and uses
trucking services, freight trains or ships for post-tension cable deliveries to
other sites. The Company offers design, engineering and in-field assistance in
connection with most of its orders, and the Company believes that these
value-added services attract a significant number of its post-tension cable
product customers.
Since acquiring the post-tension cable business in December 1994, the
Company has concentrated on decreasing reliance on the Texas single-family
market by expanding the geographic reach of its single-family residential
component throughout the southwestern United States and intensifying its
marketing to commercial construction contractors operating nationwide and
overseas. The Company has completed three fill-in acquisitions that established
its post-tension cable and rebar businesses in Austin, Texas and Ontario,
California, and opened its Phoenix location in August 1996. The Company has seen
growing demand for residential post-tension cable systems in each of these
metropolitan areas. In addition, the Company was the successful bidder recently
for four projects in Peru and one in Uruguay, and expects to continue to explore
opportunities in the rest of South America through a joint marketing arrangement
with one of its suppliers. In April 1997, the Company opened a sales office in
Orlando, Florida to begin marketing its commercial products and services in
central and southern Florida.
HOUSEHOLD FIXTURE PRODUCTS AND SERVICES. The Company currently offers a
wide range of household fixture products including locksets, door and cabinet
hardware, functional hardware, decorative bath accessories, storage and closet
systems, high-end plumbing fixtures, front doors and mirrored by-pass doors. The
Company's primary household fixture product is door hardware (including handles
and locksets). The Company offers a wide variety of brand-name locksets,
including Kwikset(R), Harloc(R), Schlage(R), Baldwin(R) and Weiser,(R) as well
as well-known brands of other household fixtures.
From three warehouse locations in Houston, Dallas and San Antonio,
Texas, the Company distributes household fixture products primarily to
production and custom builders serving the new single-family residential markets
in Texas and the new multi-family market (including apartments, assisted living
centers, retirement homes and motels) throughout the United States. The markets
served by the Company are distinct from the repair and remodel market for
household fixtures, where the customer base is generally composed of
professional contractors and homeowners. The Company also acts as a wholesale
distributor of some of its household fixture products to hardware stores, lumber
yards and other retail outlets, primarily in Texas.
The Company maintains a broad selection of household fixture inventory
so that it may provide a correctly assembled package of products, properly
keyed, just-in-time for installation at the customer's jobsite. The Company
operates a fleet of trucks and vans in order to provide superior delivery
service in and around its warehouses or ships the package by one- or two-day
courier services to more remote locations. In addition to ordering by telephone
or facsimile, household fixture customers may visit the Company's showrooms in
Houston, Dallas, San Antonio and Austin. These facilities attract designers and
builders who prefer the personalized service provided by the Company's showroom
salespeople or whose home-buyers want to personally select the household fixture
products that will be installed in their homes. The Company also provides
installation and warranty repair services for certain products and offers
assistance to builders and home-buyers in selecting appropriate products by
reviewing architectural plans.
Since acquiring the household fixture products business in December
1994, the Company has focused on improving and internally expanding its
operations. The Company recently opened a custom showroom in Austin, Texas and
expanded its household fixture product offerings by adding an array of front
doors and high-end plumbing fixtures such as bathtubs and sinks. In early 1996,
the Company established the Express Lock(R) division of its household fixtures
business, which distributes locksets to other distributors in Texas, Oklahoma
and New Mexico. The Company plans to add other products to Express Lock(R)'s
wholesale distributor line over the next few years as opportunities arise.
SPECIALTY INDUSTRIAL PRODUCTS AND SERVICES. The Company distributes a
large variety of specialty industrial products, primarily industrial sealing and
hose products and related items, such as gaskets, compression packing, o-rings,
gasketing material, rubber hose and its APG(R) brand-name cam and groove hose
couplings. These industrial sealing and hose products, which are used
principally by process industries that use fluids in formulating their products,
accounted for approximately 88% of the Company's sales of specialty industrial
products in fiscal 1996.
26
<PAGE>
The Company also sells industrial glass manufactured by Corning(R), Schott(R)
and others. These products are used in various industrial processes requiring
observation points. In fiscal 1996, sales of all types of industrial glass
accounted for approximately 6% of the Company's specialty industrial products
sales. In addition, the Company distributes plastic lenses for sandblasting
helmets, plastic safety visors, plastic display arrangements and other
fabricated plastic products. Approximately 6% of the Company's specialty
industrial product sales in fiscal 1996 were attributable to sales of these
products.
The Company's specialty industrial products business is based in
Houston, Texas, where it acts as a master distributor of most products and
serves customers nationwide, and in Johnson City, Tennessee, where it generally
sells products directly to OEMs and the MRO market in eastern Tennessee, eastern
Kentucky, southwestern Virginia and western North Carolina. Customers purchasing
the Company's specialty industrial products may do so from catalogs by telephone
or facsimile, through the Company's computerized order system or in person. The
Company promptly fabricates or otherwise prepares the products to the customers'
specifications and generally ships them to their destination through one- or
two-day courier service. The Company's value-added services include custom
gasket cutting (utilizing a die library of over 10,000 dies); gasket material
cutting, stripping and fabrication; hose fabrication; o-ring vulcanization;
glass cutting, grinding and drilling; and plastics fabrication.
In early 1997, the Company added a new plastics press to its Houston
location which significantly increases production capacity. During fiscal 1996,
the Company completed a fill-in acquisition which added its Pine Top, Kentucky
facility serving primarily the mining industry in eastern Kentucky. This
facility moved to Hazard, Kentucky in the summer of 1997 and was supplemented
with a complementary product line purchased from a local company. The Company
also recently completed the purchase of another complementary line of products
for its Johnson City, Tennessee location. The Company's sales of industrial
products to customers in Canada and Mexico has been growing slowly over the past
few years, and the Company is increasing its marketing efforts in those
countries.
TELECOMMUNICATIONS EQUIPMENT. The Company distributes
telecommunications equipment from one warehouse location in San Luis Obispo,
California. This equipment consists primarily of surplus and refurbished plug-in
circuit boards (PICs) for the Lucent Technologies 5ESS telecommunications
central office switch. Central office switches perform routing and switching
tasks for operators of large telephone systems, such as the regional Bell
telephone companies, cellular telephone companies, government agencies,
universities and large corporations. Each PIC is designed to control a different
function performed by the switch, such as line boards that control routing to a
number of different telephone lines and memory boards that control voice mail
systems. The switch's modular design extends its useful life because owners may
expand its capabilities easily by adding or replacing PICs and other components,
which are upgraded continuously by Lucent.
The Company obtains surplus and refurbished telecommunications
equipment directly from Lucent and other sources, and is able to offer the
equipment to its customers at significant cost savings over new components. The
products obtained from Lucent have been tested by Lucent and are accompanied by
a manufacturer's warranty. While the Company distributes almost all of the PICs
for the Lucent 5ESS switch, the PICs represent a small percentage of the
switch's components. Almost all of the Company's sales of telecommunications
equipment are attributable to PICs for the Lucent 5ESS switch.
The Company maintains a broad inventory of its telecommunications
equipment products at its warehouse and continually monitors available resources
to determine quantities and prices of other equipment in the market. The
Company's customers may order telecommunications equipment by telephone or
facsimile. The Company then fills the order from its inventory stock or by
purchasing from other sources and has the equipment delivered to the customer by
one- or two-day delivery service. The Company does not perform any refurbishing
or warranty repair services in connection with its telecommunications equipment
business.
The Company plans to increase the number of salespeople marketing its
telecommunications equipment in order to reach a broader range of potential
customers, including large corporations, cellular phone companies, cable
companies and government agencies. The Company also plans to expand its
telecommunications equipment product range by offering other replacement parts
for the Lucent 5ESS switch and surplus and refurbished components for the Nortel
central office switch (one of the principal alternatives to the Lucent 5ESS
switch).
27
<PAGE>
COMPETITION
The markets in which the Company competes are highly fragmented,
consisting of many regional and local suppliers of the types of products
distributed by the Company. The Company is not aware, however, of any other
company that competes in all of its markets, and believes that the diversity of
its operations shelters it from many of the effects of industry-specific cycles
and general business cycles that impact its competitors.
The Company believes that the principal competitive factors in the
specialty wholesale distribution markets in which it competes are product
quality and selection, reliable immediate or next-day delivery, technical
value-added services, product pricing and customer relationships. The Company's
strategy includes elements that, in its view, position the Company to compete
effectively on these bases. See "--Strategy." Although there are a large number
of distributors of the products offered by the Company, based on industry
reports and its own experience, the Company believes that many of them carry
fewer products, operate in a more local area (often from a single location) and
have significantly lower sales than the Company. Nevertheless, the Company
encounters competition in each of its markets from larger companies with greater
resources and smaller companies with lower overhead.
CUSTOMERS
During fiscal 1996, the Company sold its products to over 8,600
customers located throughout the United States and, to a lesser extent, Canada,
Mexico and other countries. The Company has three principal categories of
customers: (i) residential builders and commercial construction contractors,
(ii) intermediate distributors of industrial products and (iii) operators of
central office telephone systems. In fiscal 1996, the Company's top ten
customers accounted for approximately 17% of the Company's overall sales, and no
customer accounted for more than 3% of the Company's overall sales.
The majority of the Company's sales of specialty builders' products
during fiscal 1996 were attributable to sales to single-family residential
builders in Texas; however, the Company anticipates more sales outside of Texas
as marketing efforts are focused on commercial construction contractors,
international customers and the customers accessible from recently added and
planned locations. None of the Company's specialty builders' products customers
was responsible for more than 4% of the Company's sales of specialty builders'
products during fiscal 1996, nor more than 3% of the Company's overall sales for
such period. In fiscal 1996, the Company distributed its specialty industrial
products to more than 7,200 geographically diverse customers, none of which
accounted for more than 2% of sales of such products, nor more than 1% of the
Company's overall sales. The Company's telecommunications equipment is
distributed to approximately 15 different customers, primarily the regional Bell
telephone companies.
VENDORS
The Company endeavors to maintain broad inventories of all of its
important products so that it may promptly fill and deliver customer orders. In
fiscal 1996, the Company placed aggregate orders exceeding $40.5 million with
575 different vendors. In general, the Company enters into short-term
arrangements with vendors, ranging from three months to a year, which set prices
and provide for shipping terms. In fiscal 1996, approximately 84% of the
Company's product costs were attributable to purchases from vendors in the
United States, with the balance attributable to purchases of foreign products,
including products manufactured in Venezuela, South Africa, Mexico, Taiwan,
China, Slovakia and Italy. While foreign sources may enable the Company to
source certain products at lower prices than those generally prevailing in the
U.S. market, the longer lead times for production and shipment by foreign
suppliers usually require the Company to carry a higher volume of inventory than
it otherwise might. In addition, while the Company avoids currency exchange
risks by purchasing in dollars, it is subject to political and other risks
associated with foreign purchasing.
In general, the Company believes that it has good relationships with
its vendors and, to date, has not experienced significant difficulty in
obtaining products in sufficient quantities. However, the Company purchases
substantially all of its telecommunications equipment from Lucent Technologies.
Although the Company has no reason to believe that its relationship with Lucent
will change materially in the near future, the Company has no control over
Lucent's prices or sales by Lucent to the Company's competitors. Similarly, the
Company acquires all of its APG(R) brand-name cam and groove couplings and
related products from a manufacturer in Taiwan. Sales of these products
generated approximately 5.0% of the Company's sales in fiscal 1996. While the
Company believes that alternative sources for its APG(R) brand-name cam and
groove couplings exist, there can be no assurance that it
28
<PAGE>
could purchase couplings with the same quality and special features as those
currently available. In addition, the Company believes it is one of the largest
purchasers of raw steel cable for use in post-tension cable systems in the
United States. The Company has not experienced interruptions in the supply of
such steel cable in the past; however, there are a limited number of companies
that can supply the Company with steel cable in the volumes it requires. Any
interruption in the supply of any of these and certain other products could
negatively affect the Company's operating results.
SALES AND MARKETING
The Company markets its products primarily through an experienced sales
force consisting on June 30, 1997 of approximately 33 field-based salespersons
and 30 inside salespersons, some of whom receive commissions or bonuses based on
sales or profits. The field-based sales force calls regularly on construction,
secondary distributor, industrial and corporate customers with the objective of
building strong sales relationships and ensuring that customers' technical and
product needs are satisfied. Inside salespersons handle telephone inquiries,
including responding to technical questions, and perform other tasks such as
order entry, expediting, invoicing and promotion of tools and accessories
related to products that have been ordered by customers. The Company's
salespersons receive regular training to develop their knowledge of the
Company's products and technical capabilities and to refine their customer
skills.
The Company supplements the efforts of its sales force through joint
marketing initiatives with suppliers, participation in industry trade shows and
conferences, direct mail programs, telemarketing and advertising in industry
publications. In addition, the Company promotes sales to existing customers
through paper and electronic catalogs, as well as through specific product
literature and newsletters. The Company updates all of its marketing materials
as necessary to keep customers informed of new and discontinued products. In
addition, the Company has recently created Internet home pages for two of its
four subsidiaries and is in the process of creating home pages for the others.
COMPUTER SYSTEMS
Each of the Company's operating subsidiaries other than New West
utilizes a computer software system developed for distribution companies. The
Company selected the system to improve the efficiency of its sales order entry,
purchasing, inventory management, expediting, quotation, credit granting and
management information reporting functions. In addition, a pricing module
provides contract pricing, pricing by specific customer and customer groups and
volume discount pricing. A built-in report feature, augmented by a report writer
module, provides flexible management reporting capabilities, including a daily
summary of sales, purchasing, inventory, accounts receivable and cash activity.
The system supports EDI and barcoding, and allows selected customers access via
modem to check stock and pricing and to place orders. New West does not maintain
a computer system because the small number of orders it possesses do not warrant
the expense.
The Company also has installed a personal computer network interfaced
to the primary distribution software system at APG. The network provides
multiple order entry sessions, faxing of scanned documents such as catalog
information, price lists and material specifications, access to personal
productivity software, freight rate shopping, order tracking via the freight
manifest system, and access to the Internet for e-mail and package tracking. The
Company is evaluating the benefits of installing similar networks at its other
subsidiaries' locations.
EMPLOYEES
As of June 30, 1997, the Company employed 374 individuals, 14 of whom
were executive or operations managers, 83 of whom were clerical and
administrative personnel, 63 of whom were sales personnel and 214 of whom were
warehouse, production and service personnel. Following the Offering, the Company
plans to expand its headquarters staff to manage the increased financial
reporting responsibilities of a publicly traded company and the increasing
administrative responsibilities associated with the Company's growth. The
Company's employees are not unionized. The Company considers its relations with
its employees to be good.
29
<PAGE>
FACILITIES
Other than its executive and sales offices, the Company's facilities
generally consist of warehouse and office space and fabrication or production
areas. All of such facilities are leased for terms ranging from one to five
years and expiring between January 1988 and July 2002. The Company's leases are
noncancelable prior to the expiration of their terms, and certain of the leases
contain renewal or purchase options. The Company believes its facilities are
adequate for its current and reasonably foreseeable needs and that suitable
additional or alternative space is or will be available as needed to replace
existing facilities or to accommodate future growth.
LEGAL PROCEEDINGS AND INSURANCE
While the Company is from time to time involved in various legal
proceedings incidental to the ordinary conduct of its business, it is not
currently a defendant in any legal proceedings. The Company maintains
comprehensive general liability insurance in scope and amounts which it believes
are customary for its industry. Although the Company believes that most lawsuits
against the Company will be covered by its insurance, there can be no assurance
that the coverage limits of such insurance will be adequate to protect the
Company against all claims. In addition, there can be no assurance that the
Company will be able to maintain comprehensive liability insurance in the future
on acceptable terms or with adequate coverage against potential liabilities.
30
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS, DIRECTORS AND KEY MANAGERS
The following table sets forth certain information regarding the
executive officers, members of the Board of Directors and certain key managers
of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Barbara Mills Henagan(1)(2) .............. 38 Chairman of the Board
Kirby Attwell............................. 62 President, Chief Executive Officer and Director
Tim W. Fogelsong.......................... 54 Vice President-Finance, Treasurer and Secretary
David K. Barth(1)......................... 53 Director
Nolan Lehmann(1)(2)....................... 53 Director
Irvin A. Levy(2) ......................... 63 Director
Craig R. Cowan............................ 34 President, New West
William G. Flesner........................ 57 President, APG
Curtis R. Sprague......................... 45 President, MERSCO
Larry E. Stadler.......................... 42 President, Suncoast
</TABLE>
- ------------
(1) Member of the Audit Committee of the Board of Directors.
(2) Member of the Compensation Committee of the Board of Directors.
The Board of Directors consists of five members who hold office for one
year terms or until their successors are elected. Executive officers hold office
for one year terms or until their successors are elected.
Ms. Henagan has been Chairman of the Board of Directors of the Company
since 1992. Ms. Henagan has been a senior managing director of Bradford
Ventures, Ltd., a private investment firm, since 1992, and a general partner of
Bradford Associates, a private venture firm that is the general partner of
Bradford Venture Partners, L.P., since 1986. Ms. Henagan also is a director of
Central Sprinkler Corporation.
Mr. Attwell co-founded the Company in 1986 and has been a director and
its President and Chief Executive Officer since that time. In June 1997, he
received Ernst & Young's Houston 1997 Entrepreneur of the Year Award in the
distribution industry category. From 1979 to 1983, he was president and chief
executive officer of Supply Corporation International, a pipe, valve and
fittings supplier, and from 1965 to 1979, he held various positions, including
president and chief executive officer, with Lincoln Financial, Inc., a financial
services company. Prior to joining Travis, he operated his own financial and
management consulting company. Mr. Attwell also serves as a director of Vallen
Corporation.
Mr. Fogelsong co-founded the Company in 1986 and has been Vice
President-Finance, Treasurer and Secretary of the Company since 1987. From 1979
to 1983, he was vice president/finance for Supply Corporation International,
which he left to join Equus Capital Corporation, an affiliate of Equus II
Incorporated. Mr. Fogelsong is a certified public accountant and, from 1970 to
1979, was a manager in the audit section of Arthur Young & Company.
Mr. Barth has been a director of the Company since 1992. He is the
president of Barth Smith Company, an investment and management consulting firm
specializing in strategy, marketing, operating and executive staffing issues
associated with various distribution channels, which he founded in 1991. Prior
to that time, he was vice president, planning and development of, and held
various other positions with, W.W. Grainger, Inc. Mr. Barth also is a director
of Industrial Distribution Group, Inc.
Mr. Lehmann has been a director of the Company since its founding in
1986. Mr. Lehmann is also the president and a director of Equus II Incorporated,
a registered investment company whose stock is traded on the American Stock
Exchange. He has been president and a director of Equus Capital Management
Corporation, a registered investment adviser, since 1983. Prior to joining
Equus, Mr. Lehmann was employed by Service Corporation International, where he
held various positions including vice president-corporate development. Mr.
Lehmann also serves as a director of Allied Waste Industries, Inc., American
Residential Services, Inc., Brazos Sportswear, Inc., Drypers Corporation and
Garden Ridge Corporation. Mr. Lehmann is a certified public accountant.
31
<PAGE>
Mr. Levy has been a director of the Company since 1992. He is the
chairman and chief executive officer of Paper Group Holding, Inc. and
affiliates, a group of privately held manufacturing and distribution companies
including Redi-Packaging, Inc. and West-Star Packaging, Inc., of which Mr. Levy
became President in 1960.
Mr. Cowan co-founded New West in 1989 and has been its president since
that time. Prior to starting New West, Mr. Cowan was a real estate broker in the
San Luis Obispo area.
Mr. Flesner has been president of APG since August 1995. He has worked
in the oilfield service industry for over 25 years, including as president of
each of Ensco Tool & Supply Company (1983-1990), International Testing Services,
Inc. (1990-1992) and International Tool & Supply Company (1993-1995).
Mr. Sprague founded MERSCO in 1979 and has been its president since
that time. Prior to founding MERSCO, Mr. Sprague held various positions with
Goodall Rubber Company.
Mr. Stadler co-founded Suncoast in 1983 and has been its president
since that time. He has been an Executive Vice President of DRS since December
1994, when Suncoast became a division of DRS. Prior to founding Suncoast, Mr.
Stadler was a regional sales manager in charge of sales to residential builders
in the southwestern United States for V.S.L. Corporation, a Swiss-owned
post-tension cable company.
COMMITTEES OF THE BOARD OF DIRECTORS
The Audit Committee was formed in 1988 and is responsible for reviewing
the Company's external auditing procedures and accounting controls and
recommending to the Board of Directors the engagement of the Company's
independent auditors. The current members of the Company's Audit Committee are
Ms. Henagan, Chairman of the Committee, and Messrs. Lehmann and Barth.
The Compensation Committee was formed in 1987 and is responsible for
reviewing and approving the amount and type of consideration to be paid to
executive officers and key employees and for administering the Company's stock
option and other compensation plans. See "--Compensation Plans." The current
members of the Company's Compensation Committee are Ms. Henagan, Chairman of the
Committee, and Messrs. Lehman and Levy.
COMPENSATION OF DIRECTORS
Directors of the Company who are also employees receive no separate
compensation for their services as directors of the Company. Non-employee
directors of the Company receive $1,000 for each meeting of the Board of
Directors attended by them. All directors are reimbursed for expenses incurred
in connection with their attendance at meetings. In addition, directors who are
not employees of the Company may receive grants of non-qualified stock options
under the Company's 1993 Director Stock Option Plan at the discretion of the
full Board of Directors. Under the 1993 Director Stock Option Plan, the full
Board of Directors may issue options to purchase up to __________ shares of
Common Stock to such directors, and has granted options to purchase up to
________ shares of Common Stock to each of Ms. Henagan and Messrs. Lehmann,
Barth and Levy. Such options are subject to a vesting schedule based on the
Company's performance and, to date, each of such directors has vested options to
purchase up to ________ shares of Common Stock. See "--Compensation Plans."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal 1997, Ms. Henagan and Messrs. Lehmann and Levy served on
the Compensation Committee. None of these persons is employed by the Company or
any of its subsidiaries. Ms. Henagan is an officer, director and stockholder of
the corporate general partner of Bradford Investment Partners, L.P., an
affiliate of Bradford Ventures Partners, L.P., and Mr. Lehmann is president of
Equus II Incorporated. The Company is a party to a consulting agreement under
which the Company pays each of Bradford Investment Partners, L.P. and Equus II
Incorporated a fee in exchange for certain management and consulting services.
See "Certain Transactions."
32
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth certain information regarding the
compensation paid to the Company's Chief Executive Officer and its only other
executive officer (the "Named Officers").
SUMMARY COMPENSATION TABLE
ALL OTHER
ANNUAL COMPENSATION COMPENSATION(1)
------------------------------ ---------------
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(2)
- --------------------------- ---- ------ --------
Kirby Attwell.................. 1996 $150,000 $101,777 $71,745
President and
Chief Executive Officer
Tim W. Fogelsong............... 1996 $ 92,700 $ 53,980 $43,192
Vice President-Finance,
Treasurer and Secretary
- ------------
(1) Represents contributions made by the Company on behalf of the Named Officers
to the Company's Non-Qualified Executive Retirement Plan or to a
subsidiary's profit sharing plan. See "--Compensation Plans."
(2) Paid in the current year based on prior year operating results pursuant to
the Company's Incentive Compensation Plan. See "--Compensation Plans."
EMPLOYMENT ARRANGEMENTS
The Company entered into an employment agreement with Mr. Attwell in
May 1992. Under the provisions of the employment agreement, which has been
renewed several times, Mr. Attwell serves as the President and Chief Executive
Officer of Travis and, if requested by the Company, of any subsidiary of Travis
until May 15, 1999, unless such employment is earlier terminated in accordance
with the terms of the employment agreement. The employment agreement provides
for an annual base salary of $150,000, subject to upward adjustment at the
discretion of the Compensation Committee of the Board of Directors, payment of
which continues for a one year period after Mr. Attwell's termination. The
employment agreement also contains certain provisions prohibiting Mr. Attwell's
solicitation of the Company's employees in connection with any business that
competes with the Company.
COMPENSATION PLANS
STOCK OPTION PLANS. The Company currently maintains three stock option
plans in which executive officers, directors and key managers may participate:
the 1992 Incentive Stock Option Plan, the 1993 Director Stock Option Plan and
the 1995 Key Employee Stock Option Plan (collectively, the "Stock Option
Plans"). The objective of the Stock Option Plans is to provide additional
incentive to the Company's executive officers, non-employee directors and key
employees and to provide them with an opportunity to acquire or increase a
proprietary interest in the Company through the receipt of Common Stock options.
No additional options may be granted under the 1992 Incentive Stock Option Plan.
Options to purchase an aggregate of __________ additional shares of Common Stock
are available for future issuance under the other Stock Option Plans. In
addition, options to purchase an aggregate of __________ shares of Common Stock,
at prices ranging from $_________ to $_________ per share, were outstanding as
of ________, 1997, _________ of which were vested and exercisable as of that
date.
INCENTIVE COMPENSATION PLAN. Effective beginning in the 1995 fiscal
year, the Compensation Committee of the Board of Directors adopted an Incentive
Compensation Plan (the "Incentive Compensation Plan") as an incentive to the
Company's executive officers. The Incentive Compensation Plan provides for an
annual cash bonus determined in accordance with a formula based on the amount by
which the Company's after-tax return on equity exceeds a minimum of 15%. The
percentage of such excess return on equity paid as a bonus to executive officers
increases as such excess return on equity increases. Under the Incentive
Compensation Plan, the Company paid Messrs. Attwell and Fogelsong an aggregate
of $34,726 and $155,757, for fiscal years 1995 and 1996, respectively.
NON-QUALIFIED EXECUTIVE RETIREMENT PLAN. Effective October 1, 1994, the
Board of Directors adopted the Company's Non-Qualified Executive Retirement Plan
(the "Retirement Plan") as an incentive to Messrs. Attwell and Fogelsong. The
Retirement Plan is structured as an unfunded defined contribution plan for the
purpose of providing
33
<PAGE>
deferred compensation to Messrs. Attwell and Fogelsong, is not qualified under
sections 401(a) and 501(a) of the Internal Revenue Code and is designed to be
exempt from the participation and vesting, funding and fiduciary responsibility
rules of the Employee Retirement Income Security Act of 1974. The Retirement
Plan is administered by the Board of Directors.
Under the Retirement Plan, the Board of Directors has discretion to set
aside on behalf of Messrs. Attwell and Fogelsong certain stipulated amounts each
year according to a fixed formula based on their compensation, expected Social
Security benefits and actuarial assumptions. For fiscal years 1995 and 1996,
respectively, the amounts set aside pursuant to the Retirement Plan on behalf of
Messrs. Attwell and Fogelsong totalled $87,761 and $88,453. Each of Mr. Attwell
and Mr. Fogelsong or his beneficiary will be entitled to receive accrued
benefits upon the latest to occur of (i) reaching the age of 65, (ii)
participating in the Retirement Plan for ten years and (iii) the termination of
employment (including by death or as a result of a disability). Assuming the
Board of Directors determines each year to set aside the stipulated amounts set
forth in the Retirement Plan, the estimated annual benefits payable to Mr.
Attwell (if he retires at age 70) and Mr. Fogelsong (if he retires at age 65)
are approximately $83,000 and $65,000, respectively. If a change in control of
the Company occurs, each of Mr. Attwell, Mr. Fogelsong or his beneficiary will
be entitled to receive benefits in an amount that would result if the Retirement
Plan were a defined benefit plan with the same set formula, based on the highest
five years of his compensation. The Retirement Plan may be amended (including to
add other highly compensated executives of Travis) or terminated at any time by
the Board of Directors.
APG PROFIT SHARING PLAN. APG has adopted a Profit Sharing Plan and
Trust (the "APG Plan") generally covering all of its employees. In September
1993, Travis adopted the APG Plan. The APG Plan allows for voluntary
contributions on behalf of eligible employees up to 15% of eligible compensation
at the discretion of the APG board of directors or, in the case of eligible
Travis employees, the Board of Directors. During fiscal years 1994, 1995 and
1996, Travis contributed an aggregate of $26,275, $26,175 and $26,484,
respectively, to the APG Plan on behalf of Messrs. Attwell and Fogelsong.
FISCAL 1996 YEAR-END OPTION VALUES
The following table sets forth, with respect to the Named Officers,
certain information concerning fiscal year-end values of options granted by the
Company; during fiscal 1996, no options were exercised by either of the Named
Officers. For a description of the Company's stock option plans, see
"--Compensation Plans."
AGGREGATE FISCAL 1996 YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED UNEXERCISED "IN-THE-MONEY" OPTIONS
NAME OPTIONS AT FISCAL YEAR-END AT FISCAL YEAR-END(1)
- ---- ------------------------------ -------------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Kirby Attwell.....................
Tim W. Fogelsong..................
</TABLE>
- ------------
(1) Computed based upon the difference between aggregate fair market value (at
$________ per share) and aggregate exercise price.
CERTAIN TRANSACTIONS
In May 1992 the Company, Bradford Investment Partners, L.P., an
affiliate of Bradford Venture Partners, L.P., and Equus II Incorporated, entered
into a consulting agreement. Barbara M. Henegan is an officer, director and
stockholder of the corporate general partner of Bradford Investment Partners,
L.P. and Nolan Lehmann is president of Equus II Incorporated. Pursuant to the
provisions of the consulting agreement, the Company agreed to pay each of
Bradford Investment Partners, L.P. and Equus II Incorporated a management fee in
exchange for corporate advisory, financial and other consulting services for a
period of ten years. For the years ended September 30, 1994, 1995 and 1996,
respectively, the Company paid management fees under the consulting agreement of
$56,250, $56,250 and $75,000 to Bradford Investment Partners, L.P. and $18,750,
$18,750 and $25,000 to Equus II Incorporated.
34
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock as of ________, 1997 and as
adjusted to reflect the sale of the shares offered hereby for: (i) each person
known by the Company to own beneficially more than 5% of the Common Stock, (ii)
each director of the Company, (iii) the Named Officers, (iv) all directors and
Named Officers as a group and (v) other Selling Stockholders. The Company
believes that each individual or entity named has sole investment and voting
power with respect to shares of Common Stock indicated as beneficially owned by
them, except as otherwise noted.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
BENEFICIAL OWNERSHIP SHARES BEING AFTER
STOCKHOLDER PRIOR TO OFFERING(1) OFFERED OFFERING(1)(2)
- ----------- ------------------------ ------------ -----------------------------
NUMBER NUMBER
OF SHARES PERCENTAGE OF SHARES PERCENTAGE
--------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C>
Bradford Venture Partners, L.P.(3)....
44 Nassau Street, Suite 365
Princeton, New Jersey 08542
Overseas Equity Investor Partners(4)..
Clarendon House, Church Street
Hamilton 5-31, Bermuda
Barbara Mills Henagan(5)..............
35 Valley Road
Atlanta, Georgia 30305
Robert J. Simon (6)...................
1212 Avenue of the Americas
Suite 1802
New York, New York 10036
Equus II Incorporated.................
The America Tower, 25th Floor
2929 Allen Parkway
Houston, Texas 77019
Grumman Hill Investments, L.P. .......
191 Elm Street
New Canaan, Connecticut 06840
Kirby Attwell(7)......................
Tim W. Fogelsong(8)...................
David K. Barth(9).....................
Nolan Lehmann(10).....................
Irvin A. Levy(11).....................
All directors and Named Officers
as a group (6 persons)...............
</TABLE>
- ------------
* Less than 1%
35
<PAGE>
(1) A person is deemed to have "beneficial ownership" of any security that such
person has a right to acquire within 60 days after such date. Shares which
each identified stockholder has the right to acquire within 60 days of the
date specified above are deemed outstanding in calculating the percentage
ownership of such stockholder, but are not deemed outstanding as to any
other person.
(2) For purposes of this table, information as to shares of Common Stock
assumes (i) the persons in the table do not purchase shares of Common Stock
in the Offering and (ii) no exercise of the Underwriters' over-allotment
option.
(3) Bradford Venture Partners, L.P. is a limited partnership. Barbara M.
Henagan and Robert J. Simon are the general partners of Bradford
Associates, which is the sole general partner of Bradford Venture Partners,
L.P. and holds a 1% interest in the partnership (which may increase upon
the satisfaction of certain contingencies related to the overall
performance of the investment portfolio of Bradford Venture Partners,
L.P.).
(4) Overseas Equity Investor Partners is a general partnership with two
partners, Overseas Equity Investors Ltd., which is the managing corporate
partner and holds a 99% interest in the partnership, and Bradford
Associates, which holds a 1% interest in the partnership (which may
increase upon the satisfaction of certain contingencies related to the
overall performance of the investment portfolio of Overseas Equity
Investors Partners). Overseas Equity Investors Ltd. is a foreign
corporation with numerous foreign stockholders. Barbara M. Henagan and
Robert J. Simon are the general partners of Bradford Associates and serve
as co-chairs of the board of directors of Overseas Equity Investors Ltd.
Bradford Ventures, Ltd., an affiliate of Bradford Associates, acts as an
investment advisor for Overseas Equity Investor Partners.
(5) Includes _________ shares owned of record by Bradford Venture Partners,
L.P., __________ shares owned of record by Overseas Equity Investor
Partners and _________ shares owned of record by Mills Investment
Partnership. Ms. Henagan and Robert J. Simon are partners of Bradford
Associates, the sole general partner of Bradford Venture Partners, L.P.,
and co-chairs of the board of directors of the corporation that acts as the
managing partner of Overseas Equity Investor Partners. Ms. Henagan may be
deemed to share voting and investment power with respect to the shares held
by Bradford Venture Partners, L.P. and Overseas Equity Investor Partners,
but disclaims beneficial ownership with respect to all of such shares. Ms.
Henagan is the Managing Partner of Mills Investment Partnership and has
sole voting and investment power with respect to the shares held by Mills
Investment Partnership. Includes options to purchase up to __________
shares of Common Stock that are currently exercisable or will be
exercisable within 60 days of the date set forth above, and does not
include options to purchase up to ___________ shares of Common Stock that
are not exercisable within 60 days of the date set forth above.
(6) Includes ___________ shares owned of record by Bradford Venture Partners,
L.P. and __________ shares owned of record by Overseas Equity Investor
Partners. Mr. Simon and Barbara M. Henagan are partners of Bradford
Associates, the sole general partner of Bradford Venture Partners, L.P. and
co-chairs of the board of directors of the corporation that acts as the
managing partner of Overseas Equity Investor Partners. Mr. Simon may be
deemed to share voting and investment power with respect to the shares held
by Bradford Venture Partners, L.P. and Overseas Equity Investor Partners,
but disclaims beneficial ownership with respect to those shares.
(7) Includes ____________ shares owned by record by Khleber V. Attwell
Children's Trust and ___________ shares of Common Stock owned of record by
KA, Ltd., a limited partnership of which Mr. Attwell is the sole general
partner. Mr. Attwell is the beneficiary of the Khleber V. Attwell
Children's Trust, but does not have voting or investment power with respect
to those shares. Mr. Attwell has sole voting and investment power with
respect to the shares held by KA, Ltd.. Includes options to purchase up to
__________ shares of Common Stock that are currently exercisable or will be
exercisable within 60 days of the date set forth above.
(8) Includes options to purchase up to _________ shares of Common Stock that
are currently exercisable or will be exercisable within 60 days of the date
set forth above.
(9) Includes options to purchase up to _________ shares of Common Stock that
are currently exercisable or will be exercisable within 60 days of the date
set forth above, and does not include options to purchase up to shares of
Common Stock that are not exercisable within 60 days of the date set forth
above.
(10) Includes ________ shares owned of record by Equus II Incorporated, of which
Mr. Lehmann is president. Mr. Lehmann is deemed to have shared voting and
investment power with respect to the shares held by Equus II Incorporated,
but disclaims beneficial ownership with respect to those shares. Includes
options to purchase up to _________ shares of Common Stock that are
currently exercisable or will be exercisable within 60 days of the date set
forth above, and does not include options to purchase up to ___________
shares of Common Stock that are not exercisable within 60 days of the date
set forth above.
(11) Includes options to purchase up to _________ shares of Common Stock that
are currently exercisable or will be exercisable within 60 days of the date
set forth above, and does not include options to purchase up to ________
shares of Common Stock that are not exercisable within 60 days of the date
set forth above.
36
<PAGE>
DESCRIPTION OF CAPITAL STOCK
RECAPITALIZATION
As of the date of this Prospectus, the Company's authorized capital
stock consists of (i) _________ shares of Common Stock, $.01 par value per
share, __________ of which are outstanding, (ii) ___________ shares of Class A
Common Stock, $.01 par value per share, ___________ of which are outstanding,
(iii) ___________ shares of Series 2 Preferred Stock, $.01 par value per share,
all of which are outstanding, and (iv) __________ additional shares of Preferred
Stock, the terms and provisions of which may be designated by the Board of
Directors, none of which are outstanding. The Company has 33 stockholders of
record. Prior to the Offering, the Company intends to effect a recapitalization
of its capital stock, which will: (i) increase the authorized number of shares
of Common Stock to ________ , (ii) convert each share of Class A Common stock
into one share of Common Stock, (iii) convert shares of Series 2 Preferred Stock
into __________ shares of Common Stock, (iv) increase the authorized number of
shares of Preferred Stock to _________ and (v) effect a __________ -for-1 Common
Stock split in the form of a stock dividend. The following summary of the
Company's capital stock gives effect to the recapitalization and is qualified in
its entirety by reference to the Company's Amended and Restated Certificate of
Incorporation and Amended and Restated Bylaws that will be effective upon the
recapitalization, the form of each of which is filed as an exhibit to the
registration statement of which this Prospectus is a part. See "Available
Information."
COMMON STOCK
The Company's Amended and Restated Certificate of Incorporation
authorizes the Company to issue shares of Common Stock, $.01 par value per
share. Following the Offering (assuming no exercise of the over-allotment
option), __________ shares of Common Stock will be issued and outstanding. In
addition, the Company has granted options to purchase up to __________ shares of
Common Stock at an average exercise price of $____ per share and may grant
options to purchase up to an additional ___________ shares pursuant to certain
stock option plans. The Company has also issued warrants to purchase up to
__________ shares of Common Stock at $_____ per share. See "Capitalization."
Holders of Common Stock are entitled to one vote per share on all
matters on which the holders of Common Stock are entitled to vote. Because
holders of Common Stock do not have cumulative voting rights, the holders of a
majority of the shares of Common Stock voting for the election of directors can
elect all of the members of the Board of Directors standing for election at any
particular meeting. A majority vote is also sufficient for other actions that
require the vote or concurrence of stockholders. The Common Stock is not
redeemable and has no conversion or preemptive rights. All of the outstanding
shares of Common Stock are, and all of the shares of Common Stock sold in this
offering will be, when issued and paid for, fully paid and non-assessable. In
the event of the liquidation or dissolution of the Company, subject to the
rights of the holders of any outstanding shares of the Company's Preferred
Stock, if any, the holders of Common Stock are entitled to share pro rata in any
balance of the corporate assets available for distribution to them. The Company
may pay dividends if, when and as declared by the Board of Directors from funds
legally available therefor, subject to the dividend provisions of the Company's
Preferred Stock and certain provisions of the Company's credit agreements that
may have the effect of restricting the declaration and payment of dividends by
the Company's subsidiaries or the Company. See "Dividend Policy."
PREFERRED STOCK
SERIES 2 PREFERRED STOCK. All of the _________ shares of Series 2
Preferred Stock issued and outstanding are held by Curtis R. Sprague, the
president and former owner of MERSCO. The Series 2 Preferred Stock has a face
amount and liquidation preference of $ _________ per share and an aggregate
liquidation preference of $ __________. Shares of Series 2 Preferred Stock are
automatically convertible at the rate of ____________ shares of Common Stock for
each share of Series 2 Preferred Stock (as adjusted from time to time, the
"Conversion Rate") either upon consummation of the Offering or within ten days
of October 18, 1999; in each case, the number of shares of Series 2 Preferred
Stock required to be converted into Common Stock is determined by a formula
based on the average annual net income of MERSCO. Based on such formula,
__________ shares of series 2 Preferred Stock will be converted into shares of
Common Stock upon consummation of the Offering, and _________ shares of Series 2
Preferred Stock will remain outstanding following the Offering. Within ten days
of October 18, 1999, such outstanding shares of Series 2 Preferred Stock will be
either converted into shares of Common Stock at the Conversion Rate (based on
the MERSCO net income formula) or redeemed by the Company (subject to applicable
law) at the redemption price of $ ________ per share. The Series 2 Preferred
Stock is non-voting and ranks junior to all other Preferred Stock of the
company. Holders of shares of Series 2 Preferred Stock are entitled to receive,
if, as and when declared by the
37
<PAGE>
Board of Directors out of funds legally available therefor, cash dividends, for
each share of Series 2 Preferred Stock, equal to dividends declared and paid
with respect to _________ shares of Common Stock.
OTHER PREFERRED STOCK. In addition to the Series 2 Preferred Stock, the
Company's Amended and Restated Certificate of Incorporation authorizes the
Company to issue up to _________ shares of Preferred Stock, par value $.01 per
share. The Company's Board of Directors is authorized to issue such additional
Preferred Stock in series and, with respect to each series, to determine the
number of shares in any such series and fix the designations, preferences,
qualifications, limitations, restrictions and special or relative rights of
shares of any series of such Preferred Stock. The Board of Directors could,
without stockholder approval, issue Preferred Stock with voting and other rights
that could adversely affect the voting power of holders of Common Stock of the
Company and that could be used to prevent a third party from acquiring control
of the Company. The Company has no present plans to issue any shares of
Preferred Stock.
SPECIAL PROVISIONS OF THE CERTIFICATE OF INCORPORATION AND DELAWARE LAW
Certain provisions of the Company's Amended and Restated Certificate of
Incorporation and Amended and Restated Bylaws as well as certain provisions of
Delaware law may be deemed to have an anti-takeover effect or may delay, defer
or prevent a tender offer or takeover attempt that a stockholder might consider
in such stockholder's best interest, including those attempts that might result
in a premium over the market price for the shares held by a stockholder.
DELAWARE ANTI-TAKEOVER LAW. Section 203 of the Delaware General
Corporation Law ("Section 203") generally provides that a person who, together
with affiliates and associates owns, or within three years did own, 15% or more
of the outstanding voting stock of a corporation (an "Interested Stockholder")
but less than 85% of such stock may not engage in certain business combinations
with the corporation for a period of three years after the date on which the
person became an Interested Stockholder unless (i) prior to such date, the
corporation's board of directors approved either the business combination or the
transaction in which the stockholder became an Interested Stockholder or (ii)
subsequent to such date, the business combination is approved by the
corporation's board of directors and authorized at a stockholders' meeting by a
vote of at least two-thirds of the corporation's outstanding voting stock not
owned by the Interested Stockholder. Section 203 defines the term "business
combination" to encompass a wide variety of transactions with or caused by an
Interested Stockholder, including mergers, asset sales and other transactions in
which the Interested Stockholder receives or could receive a benefit on other
than a pro rata basis with other stockholders.
The provisions of Section 203, coupled with the Board's authority to
issue Preferred Stock without further stockholder action, could delay or
frustrate the removal of incumbent directors or a change in control of the
Company. The provisions also could discourage, impede or prevent a merger,
tender offer or proxy contest, even if such event would be favorable to the
interests of stockholders. The Company's stockholders may adopt an amendment to
its certificate of incorporation, effective 12 months after such adoption, to
elect not to be governed by Section 203. Neither the Amended and Restated
Certificate of Incorporation nor the Amended and Restated Bylaws exclude the
Company from the restrictions imposed by Section 203.
NOTICE PROVISIONS. The Amended and Restated Bylaws provide that only
business or proposals, including director nominations, properly brought before
an annual meeting of stockholders may be conducted at such meeting. In order to
bring business or a proposal before an annual meeting, a stockholder is required
to provide written notice to the Company at least 45 days prior to the annual
meeting that describes the business or proposal to be brought before the annual
meeting, the name and address of the stockholder proposing the business, the
class and number of shares of stock held by such stockholder and any material
interest of the stockholder in the business to be brought before the meeting.
These procedures may operate to limit the ability of stockholders to bring
business before the annual meeting, including with respect to the election of
directors or considering any transaction that could result in a change of
control of the Company.
TRANSFER AGENT
The Company's transfer agent and registrar for the Common Stock is
________ .
38
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering and assuming no exercise of outstanding
options, the Company will have outstanding ________ shares of Common Stock
(_________ shares if the Underwriters' over allotment option is exercised in
full). Of these shares, the __________ shares sold in the Offering will be
immediately eligible for resale in the public market without restriction under
the Securities Act, except for any shares purchased by an "Affiliate" (as that
term is defined under the Securities Act) of the Company, which will be subject
to the resale limitations of Rule 144 under the Securities Act. The remaining
___________ shares of Common Stock outstanding following the Offering (the
"Previously Issued Shares") are deemed to be "restricted securities" within the
meaning of the Securities Act and may be publicly sold only if registered under
the Securities Act or sold in accordance with an applicable exemption from
registration, such as those provided by Rule 144 promulgated under the
Securities Act.
All of the holders of the Previously Issued Shares have agreed to enter
into agreements with the Company ("Lock-up Agreements") pursuant to which they
will agree that, during the 180-day period after the date of this Prospectus,
they will not, except with the prior consent of A.G. Edwards & Son, Inc., offer,
sell, contract to sell or grant an option to purchase any of such Previously
Issued Shares. In addition, the Company has agreed that during such period it
will not, without the prior consent of A.G. Edwards & Sons, Inc., offer, sell,
contract to sell or grant an option to purchase any shares of Common Stock. See
"Underwriting." At the expiration of such lock-up period all of the Previously
Issued Shares will be eligible for sale, subject to the volume and other
limitations of Rule 144.
In general, under Rule 144, beginning 90 days after the date of this
Prospectus, an Affiliate of the Company or other person (or persons whose shares
are aggregated) who has beneficially owned Previously Issued Shares for at least
one year, will be entitled to sell in any three-month period a number of shares
that does not exceed the greater of (i) 1% of the then outstanding shares of the
Company's Common Stock (approximately ________ shares immediately after the
Offering, if the Underwriters' over-allotment option is exercised in full) or
(ii) the average weekly trading volume of the Company's Common Stock on the
Nasdaq National Market during the four calendar weeks immediately preceding the
date on which notice of the sale is filed with the Securities and Exchange
Commission. Sales pursuant to Rule 144 are subject to certain requirements
relating to manner of sale, notice and availability of current public
information about the Company. A person (or persons whose shares are aggregated)
who is not deemed to have been an Affiliate of the Company at any time during
the 90 days immediately preceding the sale and who has beneficially owned
Restricted Shares for at least two years is entitled to sell such shares
pursuant to Rule 144(k) without regard to the limitations described above.
Previously Issued Shares may also be resold (i) to a person whom the
seller reasonably believes is a qualified institutional buyer within the meaning
of Rule 144A under the Securities Act purchasing for its own account or for the
account of a qualified institutional buyer in a transaction meeting the
requirements of Rule 144A and (ii) in an offshore transaction complying with
Rules 903 or 904 of Regulation S under the Securities Act.
An employee of the company who purchased shares or was awarded options
to purchase shares pursuant to a written compensatory plan or contract meeting
the requirements of Rule 701 under the Securities Act is entitled to rely on the
resale provisions of Rule 701 under the Securities Act which permits Affiliates
and non-Affiliates to sell their Rule 701 shares without having to comply with
the holding period restrictions of Rule 144, in each case commencing 90 days
after the date of this Prospectus. In addition, non-affiliates may sell Rule 701
shares without complying with the public information, volume and notice
provisions of Rule 144.
Prior to the Offering, there has been no public market for the Common
Stock of the Company. Future sales of substantial amounts of Common Stock in the
public market could adversely affect market prices prevailing from time to time.
Sales of substantial amounts of Common Stock of the Company in the public market
after the restrictions lapse could adversely affect the prevailing market price
and the ability of the Company to raise equity capital in the future.
39
<PAGE>
REGISTRATION RIGHTS
Pursuant to the Company's Registration Rights Agreement, as amended,
all of the Company's stockholders prior to the Offering have been granted
piggyback registration rights with respect to Common Stock owned by such
stockholders as of such date. Such piggyback registration rights may be
exercised by such stockholders, subject to the Lock-up Period, on each occasion
that the Company proposes to register any public offering of shares of its
capital stock under the Securities Act and the Securities Act permits
registration of shares held by stockholders in connection with such
registration.
In addition to such piggyback registration rights, subject to certain
conditions, stockholders owning certain shares of Common Stock have the right,
exercisable on two occasions, to require the Company to register under the
Securities Act up to 100% of such shares of Common Stock.
Upon the closing of the Offering, there will be ___________ shares of
Common Stock subject to either piggyback or demand registration rights. The
Company is required to bear substantially all expenses of all such
registrations, except for underwriting discounts or commissions and fees and
disbursements of counsel for any stockholder.
UNDERWRITING
The Underwriters named below have severally agreed with the Company and
the Selling Stockholders, subject to the terms and conditions of the
Underwriting Agreement, to purchase the respective numbers of shares of Common
Stock set forth opposite their names below:
NUMBER
UNDERWRITERS OF
------------ SHARES
------
A.G. Edwards & Sons, Inc. ................................
Cleary Gull Reiland & McDevitt Inc. ......................
------
Total ...........................................
======
The Underwriting Agreement provides that the Underwriters are obligated
to purchase all of the shares of Common Stock, if any are purchased.
Pursuant to the terms of the Underwriting Agreement, the Underwriters
will acquire the shares of the Common Stock offered by the Company and the
Selling Shareholders at the public offering price set forth on the cover page of
this Prospectus at the public offering price less the underwriting discount and
commissions set forth on the cover page. The Company and the Selling
Stockholders have been advised by A.G. Edwards & Sons, Inc. and Cleary Gull
Reiland & McDevitt Inc., the representatives of the Underwriters (the
"Representatives"), that the Underwriters propose to offer the Common Stock to
the public at the offering price set forth on the cover page of this Prospectus
and to certain dealers at such price less a concession not in excess of
$_________ per share and that the Underwriters and such dealers may reallow a
discount of not in excess of $ ________ per share to other dealers. The public
offering price and the concession and discount to dealers may be changed by the
Representatives after the shares are released to the public.
The Selling Stockholders and the Company have granted to the
Underwriters an option, expiring at the close of business on the 30th day
subsequent to the date of the Underwriting Agreement, to purchase up to ________
additional shares of Common Stock at the public offering price, less the
discount set forth on the cover page of this Prospectus. The Underwriters may
exercise the option only for the purpose of covering overallotments, if any. To
the extent the Underwriters exercise such option, each of the Underwriters will
have a firm commitment, subject to certain conditions, to purchase approximately
the same percentage of the option shares as the number of shares set forth
opposite each Underwriter's name in the preceding table bears to _________ and
the Selling Stockholders and the Company will be obligated to sell such shares
to the Underwriters. See "Principal and Selling Stockholders."
40
<PAGE>
The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act, or to contribute to payments the Underwriters may be required to
make in respect thereof.
The Company, all directors and the Named Officers of the Company and
all stockholders prior to the Offering have agreed that they will not, directly
or indirectly, offer, sell or otherwise dispose of any shares of Common Stock or
any securities convertible into or exercisable or exchangeable for, or any
rights to purchase or acquire, Common Stock for a period of 180 days after the
date of this Prospectus without the prior written consent of A.G. Edwards &
Sons, Inc.
In connection with the Offering, certain Underwriters and selling group
members and their respective affiliates may engage in transactions that
stabilize, maintain or otherwise affect the market price of the Common Stock.
Such transactions may include stabilization transactions effected in accordance
with Rule 104 of Regulation M (pending effectiveness), pursuant to which such
persons may bid for or purchase Common Stock for the purpose of stabilizing its
market price. The Underwriters also may create a short position for the account
of the Underwriters by selling more Common Stock in connection with the Offering
than they are committed to purchase from the Company and the Selling
Stockholders, and in such case may purchase Common Stock in the open market
following completion of the Offering to cover all or a portion of such short
position. The Underwriters may also cover all or a portion of such short
position, up to ___________ shares of Common Stock, by exercising the
Underwriters' over-allotment option referred to above. In addition, A.G. Edwards
& Sons, Inc., on behalf of the Underwriters, may impose "penalty bids" under
contractual arrangements with the Underwriters whereby it may reclaim from an
Underwriter (or dealer participating in the Offering) for the account of the
other Underwriters, the selling concession with respect to Common Stock that is
distributed in the Offering but subsequently purchased for the account of the
Underwriters in the open market. Any of the transactions described in this
paragraph may result in the maintenance of the price of the Common Stock at a
level above that which might otherwise prevail in the open market. None of the
transactions described in this paragraph is required, and, if they are
undertaken, they may be discontinued at any time.
The Representatives have advised the Company and the Selling
Stockholders that they do not intend to confirm sales to any account over which
they exercise discretionary authority.
Prior to the Offering, there has been no public market for the Common
Stock. The public offering price for the Common Stock will be determined by
negotiation among the Company, the Selling Stockholders and the Representatives.
Among the factors considered in determining the public offering price was the
history of and the future prospects for the Company and the industry in which it
operates, the past and present operating results of the Company and the trends
of such results, an assessment of the Company's management, the general
condition for the securities markets at the time of the Offering and the prices
for similar securities of comparable companies.
CERTAIN LEGAL MATTERS
The validity of the issuance of the shares of Common Stock offered
hereby will be passed upon for the Company by Mayor, Day, Caldwell & Keeton,
L.L.P., Houston, Texas. Peper, Martin, Jensen, Maichel and Hetlage, St. Louis,
Missouri, will pass on certain legal matters for the Underwriters in connection
with the Offering.
EXPERTS
The audited Consolidated Financial Statements of the Company included
in this Prospectus and elsewhere in the Registration Statement have been audited
by Arthur Andersen LLP, independent public accountants, as indicated in their
report with respect thereto, and included herein in reliance upon the authority
of said firm as experts in accounting and auditing in giving said report.
AVAILABLE INFORMATION
This Prospectus constitutes a part of a Registration Statement on Form
S-1 filed by the Company with the Commission under the Securities Act through
the Electronic Data Gathering and Retrieval ("EDGAR") system with respect to the
Common Stock offered hereby. This Prospectus omits certain of the information
contained in the
41
<PAGE>
Registration Statement, and reference is hereby made to the Registration
Statement and related exhibits and schedules for further information with
respect to the Company and the Common Stock offered hereby. Any statements
contained herein concerning the provisions of any document are not necessarily
complete, and in each such instance reference is made to the copy of such
document filed as an exhibit to the Registration Statement. Each such statement
is qualified in its entirety by such reference. The Registration Statement and
the exhibits and schedules forming a part thereof can be inspected and copied at
the public reference facilities maintained by the Commission at Room 1024, 450
Fifth Street, N.W., Washington, D.C. 20549, and should also be available for
inspection and copying at the following regional offices of the Commission: 7
World Trade Center, Suite 1300, New York, New York 10048; and Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of
such material can be obtained from the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates.
Registration statements, reports, proxy and information statements filed through
the EDGAR system are publicly available through the Commission's Internet web
site at http://www.sec.gov.
42
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
Report of Independent Public Accountants .............................. F-2
Consolidated Balance Sheets ........................................... F-3
Consolidated Statements of Income ..................................... F-4
Consolidated Statements of Stockholders' Equity ....................... F-5
Consolidated Statements of Cash Flows ................................. F-6
Notes to Consolidated Financial Statements ............................ F-7
F-1
<PAGE>
After the recapitalization transactions discussed in Note 10 have been effected
and properly reflected in the Company's consolidated financial statements and
related notes thereto, we expect to be in a position to render the following
audit report.
ARTHUR ANDERSEN LLP
October 6, 1997
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Travis International, Inc.:
We have audited the accompanying consolidated balance sheets of Travis
International, Inc. (a Delaware corporation), and subsidiaries as of September
30, 1995 and 1996, and the related consolidated statements of income,
stockholders' equity and cash flows for each of the three years in the period
ended September 30, 1996. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Travis
International, Inc., and subsidiaries as of September 30, 1995 and 1996, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended September 30, 1996, in conformity with generally
accepted accounting principles.
Houston, Texas
November 20, 1996
F-2
<PAGE>
TRAVIS INTERNATIONAL, INC., AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30,
------------------------- June 30,
1995 1996 1997
----------- ----------- -----------
(Unaudited)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents .................... $ 1,225,734 $ 3,526,451 $ 1,943,943
Trade accounts receivable, net of
allowance for doubtful accounts of
$74,916, $202,742 and $187,702 .............. 8,376,768 9,298,395 12,802,915
Inventories .................................. 8,197,117 9,265,471 12,799,055
Prepaid expenses ............................. 209,462 76,460 169,885
Prepaid federal income taxes ................. 271,722 -- --
Deferred tax asset ........................... 259,302 408,463 506,141
----------- ----------- -----------
Total current assets ............ 18,540,105 22,575,240 28,221,939
PROPERTY AND EQUIPMENT, at cost, net of
accumulated depreciation of $560,332,
$1,018,960 and $1,455,735 .................... 1,861,761 2,175,107 2,879,747
INTANGIBLES, net of accumulated
amortization of $551,477, $833,169
and $1,119,088 ............................... 5,992,313 5,855,716 10,416,246
----------- ----------- -----------
$26,394,179 $30,606,063 $41,517,932
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current installments of long-term
debt ........................................ $ 736,974 $ 711,774 $ 894,780
Accounts payable ............................. 4,667,750 4,736,353 7,276,959
Accrued liabilities .......................... 1,290,532 2,022,898 2,416,743
Federal and state income tax payable ......... 162,137 315,467 271,714
----------- ----------- -----------
Total current liabilities ....... 6,857,393 7,786,492 10,860,196
LONG-TERM DEBT, net of current
installments ................................... 6,985,831 7,597,742 12,025,967
DEFERRED TAX LIABILITY ......................... 96,607 11,358 11,358
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Series 2 Preferred Stock, $.01 par;
______ shares authorized;
______ shares outstanding ...................
Common Stock, $.01 par; ______ shares
authorized; ______, ______ and ______ shares
outstanding .................................
Class A Common Stock, $.01 par; ______ shares
authorized; ______, ______ and _______ shares
outstanding .................................
Additional paid-in capital ................... 4,894,002 5,045,180 6,078,338
Retained earnings ............................ 7,551,013 10,155,891 12,532,230
----------- ----------- -----------
Total stockholders' equity ...... 12,454,348 15,210,471 18,620,411
----------- ----------- -----------
$26,394,179 $30,606,063 $41,517,932
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-3
<PAGE>
TRAVIS INTERNATIONAL, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30, NINE MONTHS ENDED JUNE 30,
------------------------------------------------- ------------------------------
1994 1995 1996 1996 1997
----------- ----------- ----------- ----------- -----------
(Unaudited)
<S> <C> <C> <C> <C> <C>
SALES ............................... $14,526,444 $46,338,621 $65,812,759 $47,624,308 $56,687,305
COST OF GOODS SOLD .................. 8,541,450 33,115,765 47,141,135 34,116,734 39,069,406
----------- ----------- ----------- ----------- -----------
Gross profit .................... 5,984,994 13,222,856 18,671,624 13,507,574 17,617,899
OPERATING EXPENSES .................. 3,579,343 9,316,894 13,466,821 9,592,267 12,506,081
AMORTIZATION OF
INTANGIBLES ....................... 325,468 304,875 281,692 208,515 285,919
----------- ----------- ----------- ----------- -----------
Operating income ................ 2,080,183 3,601,087 4,923,111 3,706,792 4,825,899
INTEREST EXPENSE .................... 95,891 525,061 673,007 521,071 889,664
----------- ----------- ----------- ----------- -----------
Income before
income taxes .................. 1,984,292 3,076,026 4,250,104 3,185,721 3,936,235
INCOME TAXES ........................ 781,500 1,193,798 1,645,226 1,196,824 1,559,896
----------- ----------- ----------- ----------- -----------
Net income ...................... $ 1,202,792 $ 1,882,228 $ 2,604,878 $ 1,988,897 $ 2,376,339
=========== =========== =========== =========== ===========
NET INCOME PER COMMON AND
COMMON EQUIVALENT SHARE ........... $ -- $ -- $ -- $ -- $ --
=========== =========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER
OF COMMON AND COMMON
EQUIVALENT SHARES ................. -- -- -- -- --
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
F-4
<PAGE>
TRAVIS INTERNATIONAL, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
CLASS A
PREFERRED STOCK COMMON STOCK COMMON STOCK
---------------- ---------------- ----------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
------ ------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, September 30, 1993 ................................ $ $ $
NET INCOME .................................................
REDEMPTION OF PREFERRED STOCK ..............................
------ ------- ------ ------- ------ -------
BALANCE, September 30, 1994 ................................
REDEMPTION OF PREFERRED STOCK ..............................
ISSUANCE OF PREFERRED STOCK IN CONNECTION WITH THE
ACQUISITION OF MERSCO ....................................
ISSUANCE OF COMMON STOCK IN CONNECTION WITH THE
ACQUISITION OF DE-RO AND SUNCOAST ........................
ISSUANCE OF COMMON STOCK IN CONNECTION WITH DRS'
ACQUISITION OF CABLE SYSTEMS .............................
ISSUANCE OF COMMON STOCK TO AN OFFICER .....................
NET INCOME .................................................
------ ------- ------ ------- ------ -------
BALANCE, September 30, 1995 ................................
EXCHANGE OF COMMON STOCK FOR CLASS A COMMON STOCK ..........
ISSUANCE OF COMMON STOCK TO OFFICERS .......................
NET INCOME .................................................
------ ------- ------ ------- ------ -------
BALANCE, September 30, 1996 ................................
ISSUANCE OF COMMON STOCK IN CONNECTION WITH THE ACQUISITION
OF NEW WEST COMMUNICATIONS (Unaudited) ...................
ISSUANCE OF COMMON STOCK IN CONNECTION WITH DRS' ACQUISITION
OF M D STEEL (Unaudited) .................................
RETIREMENT OF CLASS A COMMON STOCK (Unaudited) .............
NET INCOME (Unaudited) .....................................
------ ------- ------ ------- ------ -------
BALANCE, June 30, 1997 (Unaudited) ......................... $ $ $
====== ======= ====== ======= ====== =======
ADDITIONAL TOTAL
PAID-IN RETAINED STOCKHOLDERS'
CAPITAL EARNINGS EQUITY
----------- ----------- ------------
BALANCE, September 30, 1993 ................................ $ 1,283,853 $ 4,465,993 $ 5,757,331
NET INCOME ................................................. -- 1,202,792 1,202,792
REDEMPTION OF PREFERRED STOCK .............................. (611,994) -- (612,000)
----------- ----------- ------------
BALANCE, September 30, 1994 ................................ 671,859 5,668,785 6,348,123
REDEMPTION OF PREFERRED STOCK .............................. (187,998) -- (188,000)
ISSUANCE OF PREFERRED STOCK IN CONNECTION WITH THE
ACQUISITION OF MERSCO .................................... 237,000 -- 237,001
ISSUANCE OF COMMON STOCK IN CONNECTION WITH THE
ACQUISITION OF DE-RO AND SUNCOAST ........................ 4,023,213 -- 4,025,002
ISSUANCE OF COMMON STOCK IN CONNECTION WITH DRS'
ACQUISITION OF CABLE SYSTEMS ............................. 99,956 -- 100,000
ISSUANCE OF COMMON STOCK TO AN OFFICER ..................... 49,972 -- 49,994
NET INCOME ................................................. -- 1,882,228 1,882,228
----------- ----------- ------------
BALANCE, September 30, 1995 ................................ 4,894,002 7,551,013 12,454,348
EXCHANGE OF COMMON STOCK FOR CLASS A COMMON STOCK .......... -- -- --
ISSUANCE OF COMMON STOCK TO OFFICERS ....................... 151,178 -- 151,245
NET INCOME ................................................. -- 2,604,878 2,604,878
----------- ----------- ------------
BALANCE, September 30, 1996 ................................ 5,045,180 10,155,891 15,210,471
ISSUANCE OF COMMON STOCK IN CONNECTION WITH THE ACQUISITION
OF NEW WEST COMMUNICATIONS (Unaudited) ................... 999,546 -- 999,990
ISSUANCE OF COMMON STOCK IN CONNECTION WITH DRS' ACQUISITION
OF M D STEEL (Unaudited) ................................. 149,967 -- 150,010
RETIREMENT OF CLASS A COMMON STOCK (Unaudited) ............. (116,355) -- (116,399)
NET INCOME (Unaudited) ..................................... -- 2,376,339 2,376,339
----------- ----------- ------------
BALANCE, June 30, 1997 (Unaudited) ......................... $ 6,078,338 $12,532,230 $ 18,620,411
=========== =========== ============
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
F-5
<PAGE>
TRAVIS INTERNATIONAL, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30, NINE MONTHS ENDED JUNE 30,
----------------------------------------- --------------------------
1994 1995 1996 1996 1997
----------- ----------- ----------- ----------- -----------
(Unaudited)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ............................................. $ 1,202,792 $ 1,882,228 $ 2,604,878 $ 1,988,897 $ 2,376,339
----------- ----------- ----------- ----------- -----------
Adjustments to reconcile net income to net cash
provided by (used in) operating activities-
Depreciation and amortization ....................... 416,470 622,605 740,320 515,137 739,299
Deferred federal income taxes ....................... (40,000) (131,495) (234,410) (176,000) (97,678)
Loss on sale of equipment ........................... -- 2,166 13,198 -- --
Change in assets and liabilities, net of
effects from business acquisitions (Note 9)-
Increase in trade accounts receivable .............. (101,037) (3,049,416) (921,627) (1,520,027) (2,613,161)
Increase in inventories ............................ (9,184) (1,361,546) (1,068,354) (1,002,169) (2,823,057)
Decrease (increase) in prepaid expenses ............ 127,323 46,213 133,002 (151,494) (77,207)
Decrease (increase) in prepaid federal income
taxes ............................................. -- (182,432) 271,722 271,722 --
(Decrease) increase in accounts payable ............ (63,541) 2,200,557 68,603 452,764 1,696,841
(Decrease) increase in accrued liabilities ......... 3,590 (270,440) 732,366 350,212 177,889
(Decrease) increase in federal and state income
tax payable ....................................... (68,947) 89,152 153,330 252,905 (47,113)
----------- ----------- ----------- ----------- -----------
Total adjustments ............................ 264,674 (2,034,636) (111,850) (1,006,950) (3,044,187)
----------- ----------- ----------- ----------- -----------
Net cash provided by (used in) operating
activities .................................. 1,467,466 (152,408) 2,493,028 981,947 (667,848)
----------- ----------- ----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ................................... (231,596) (660,679) (788,472) (552,291) (1,088,680)
Proceeds from the sale of equipment .................... -- 7,500 3,300 -- --
Other asset additions .................................. -- (105,775) (145,095) (100,629) (160,045)
Business acquisitions, net of assets acquired (Note 9) . -- (8,172,824) -- -- (4,160,766)
----------- ----------- ----------- ----------- -----------
Net cash used in investing activities ........ (231,596) (8,931,778) (930,267) (652,920) (5,409,491)
----------- ----------- ----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of Common Stock ............................... -- 2,549,992 151,245 49,995 --
Redemption of Preferred Stock .......................... (612,000) (188,000) -- -- --
Redemption of Common Stock ............................. -- -- -- -- (116,400)
Capital lease additions ................................ -- 55,441 -- -- 225,108
Advances on bank term loans and revolving credit loans . 500,000 7,650,000 2,700,000 2,375,000 6,588,672
Issuance of subordinated debt .......................... -- 1,475,000 -- -- 1,250,000
Equipment loan proceeds ................................ -- -- 124,356 96,427 179,684
Principal payments on bank term loans and revolving
credit loans .......................................... (700,000) (2,014,284) (1,914,284) (1,610,713) (3,351,910)
Principal payments on subordinated debt ................ -- (162,321) (216,429) (162,322) (162,322)
Principal payments on noncompete agreements, equipment
and other loans ....................................... (41,667) (138,551) (106,932) (89,084) (118,001)
----------- ----------- ----------- ----------- -----------
Net cash provided by (used in) financing activities . (853,667) 9,227,277 737,956 659,303 4,494,831
----------- ----------- ----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ..... 382,203 143,091 2,300,717 988,330 (1,582,508)
CASH AND CASH EQUIVALENTS, beginning of year ............. 700,440 1,082,643 1,225,734 1,225,734 3,526,451
----------- ----------- ----------- ----------- -----------
CASH AND CASH EQUIVALENTS, end of year ................... $ 1,082,643 $ 1,225,734 $ 3,526,451 $ 2,214,064 $ 1,943,943
=========== =========== =========== =========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Payment of interest .................................... $ 96,496 $ 567,914 $ 791,394 $ 551,179 $ 896,783
Payment of federal and state income taxes .............. 819,064 1,283,980 1,669,413 1,064,356 1,684,164
Issuance of common stock in connection with acquisitions -- 1,625,004 -- -- 1,150,000
Issuance of preferred stock in connection with acquisition -- 237,001 -- -- --
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-6
<PAGE>
TRAVIS INTERNATIONAL, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
DESCRIPTION OF THE COMPANY
Travis International, Inc. (the Company), a Delaware corporation, was formed in
1986. The Company is a diversified wholesale distributor of specialty products
and provider of related value-added services. From 13 operating locations in
five states in the southern and western United States, the Company distributes
post-tension cable products, household fixture products, specialty industrial
products and telecommunications equipment. In addition, the Company provides
value-added services in connection with such products, including engineering and
design assistance, just-in-time delivery, fabricating, warranty repair,
installation and other technical assistance. During fiscal 1996, the Company
sold its products to customers located primarily in the United States and, to a
lesser extent, Canada, Mexico and other countries. The Company currently
operates through its wholly owned subsidiaries, American Packing and Gasket
Company (APG), Mountain Empire Rubber & Specialty Company, Inc. (MERSCO),
DE-RO/Suncoast, Inc. (DRS), Suncoast Post Tension and DE-RO Products, and New
West Communications, Inc. (NWC).
In October 1997, the Company filed a registration statement on Form S-1. See
"Risk Factors" included in this Prospectus.
BASIS OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of the
Company and all of its subsidiaries. All significant intercompany balances and
transactions have been eliminated in consolidation.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with an original
maturity of three months or less to be cash equivalents. At September 30, 1995
and 1996, cash equivalents of $896,361 and $2,103,142, respectively, consisted
of obligations of the U.S. Government.
INVENTORIES
Inventories principally consist of materials purchased and held for resale and
are stated at the lower of cost or market. Cost is determined on the first-in,
first-out (FIFO) basis.
PROPERTY AND EQUIPMENT
Property and equipment are depreciated using the straight-line method over
estimated useful lives of three to seven years. The costs of ordinary
maintenance and repairs are charged to operations when incurred, while
replacements and betterments are capitalized.
F-7
<PAGE>
At September 30, 1995 and 1996, property and equipment consisted of the
following:
SEPTEMBER 30, Estimated
-------------------------- Useful
1995 1996 LIFE
----------- ----------- ---------
Vehicles ............................. $ 386,762 $ 488,587 3-5 years
Leasehold improvements ............... 263,499 321,801 5 years
Machinery and equipment .............. 1,245,125 1,570,849 7 years
Furniture and fixtures ............... 526,707 812,830 5 years
----------- -----------
2,422,093 3,194,067
Less- Accumulated depreciation and
amortization ......................... (560,332) (1,018,960)
----------- -----------
$ 1,861,761 $ 2,175,107
=========== ===========
INTANGIBLES
At September 30, 1995 and 1996, intangibles consisted of the following:
SEPTEMBER 30, ESTIMATED
-------------------------- PERIOD OF
1995 1996 BENEFIT
----------- ----------- -----------
Goodwill ........................... $ 6,135,978 $ 6,142,418 10-35 years
Loan origination and other costs ... 164,557 321,467 1-7 years
Consulting/noncompete agreements ... 243,255 225,000 1-5 years
6,543,790 6,688,885
Less- Accumulated amortization ..... (551,477) (833,169)
----------- -----------
$ 5,992,313 $ 5,855,716
=========== ===========
Amortization lives of intangibles and other assets are based on management's
estimate of the period to be benefited or, in the case of goodwill, the economic
life of the operation to which it relates.
Loan origination costs are amortized over the life of the debt.
In October 1996, the Company recorded an additional $4,536,546 goodwill in
connection with the acquisition of NWC (see Note 9).
ACCRUED LIABILITIES
At September 30, 1995 and 1996, accrued liabilities consisted of the following:
SEPTEMBER 30,
---------------------------
1995 1996
---------- ----------
Accrued retirement contributions ............. $ 87,761 $ 176,214
Accrued profit sharing/bonuses ............... 617,581 1,205,149
Sales tax .................................... 162,787 202,045
Ad valorem taxes ............................. 139,938 141,917
Other ........................................ 282,465 297,573
---------- ----------
$1,290,532 $2,022,898
========== ==========
F-8
<PAGE>
INCOME TAXES
The Company follows the asset and liability method of accounting for income
taxes whereby deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
NET INCOME PER COMMON AND COMMON EQUIVALENT SHARES
The average number of common and equivalent common shares includes the weighted
average number of common and Class A common, shares outstanding and shares
issuable pursuant to the assumed exercise of stock options (by application of
the treasury stock method).
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 128, "Earnings Per Share," which
simplifies the standards required under current accounting rules for computing
earnings per share and replaces the presentation of primary earnings per share
and fully diluted earnings per share with a presentation of basic earnings per
share (basic EPS) and diluted earnings per share (diluted EPS). Basic EPS
excludes dilution and is determined by dividing income by the weighted average
number of common shares outstanding during the period. Diluted EPS reflects the
potential dilution that could occur if securities and other contracts to issue
common stock were exercised or converted into common stock. Diluted EPS is
computed similarly to fully diluted earnings per share under current accounting
rules. The implementation of SFAS No. 128 during fiscal 1998 is not expected to
have a material effect on the Company's earnings per share as determined under
current accounting rules.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist of cash and cash equivalents and
debt. The carrying amount of these financial instruments approximates fair value
due either to length of maturity or existence of interest rates that approximate
prevailing market rates unless otherwise disclosed in these financial
statements.
LONG-LIVED ASSETS
Effective October 1, 1995, the Company adopted SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of."
Accordingly, in the event that facts and circumstances indicate that property
and equipment and intangible or other assets may be impaired, an evaluation of
recoverability would be performed. If an evaluation is required, the estimated
future undiscounted cash flows associated with the asset are compared to the
asset's carrying amount to determine if a write-down to market value or
discounted cash flow value is necessary. Adoption of this standard did not have
an effect on the financial position or consolidated results of operations of the
Company.
STOCK-BASED COMPENSATION
In October 1995, the Financial Accounting Standards Board issued SFAS No. 123,
"Accounting for Stock-Based Compensation." SFAS No. 123 is required for
financial statements for fiscal years beginning after December 15, 1995. SFAS
No. 123 permits, but does not require, a fair value-based method of accounting
for
F-9
<PAGE>
employee stock option plans which results in compensation expense recognition
when stock options are granted. The Company intends to continue to account for
its stock-based compensation plans under Accounting Principles Board, Opinion
No. 25, "Accounting for Stock Issued to Employees" ("APB Opinion No. 25");
however, as required by SFAS No. 123, the Company will provide disclosure of the
pro forma impact to net income in the notes to future consolidated financial
statements.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements.
Additionally, management estimates affect the reported amounts of revenues and
expenses during the reported period. Actual results could differ from those
estimates.
INTERIM FINANCIAL INFORMATION
The interim consolidated balance sheet as of June 30, 1997, and consolidated
statements of income, stockholders' equity and cash flows for the nine months
ended June 30, 1996 and 1997, are unaudited, and certain information and
footnote disclosures, normally included in consolidated financial statements
prepared in accordance with generally accepted accounting principles, have been
omitted. In the opinion of management, all adjustments consisting only of normal
recurring adjustments necessary to fairly present the financial position,
results of operations and cash flows with respect to the interim consolidated
financial statements have been included. The results of operations for the
interim periods are not necessarily indicative of the results for the entire
fiscal year.
2. LONG-TERM DEBT:
At September 30, 1995 and 1996, long-term debt consisted of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30,
-----------------------
1995 1996
---------- ----------
<S> <C> <C>
DRS revolving credit loan with interest due monthly at
prime plus .25% (8.5% at September 30, 1996);
refinanced in February 1997 (see below) .................. $4,300,000 $5,450,000
Subordinated debt to former owners; due in quarterly
principal installments aggregating $54,107 plus interest
at 8.00% through December 2001 ........................... 1,312,679 1,096,250
Bank term loan with interest due monthly at 9.61%;
principal due in quarterly installments of $53,571;
refinanced in February 1997 (see below) .................. 1,285,716 1,071,432
Term loan with interest due monthly at 8.00%;
principal due in quarterly installments of $50,000;
refinanced in February 1997 (see below) .................. 400,000 200,000
APG revolving credit loan with interest due
monthly at prime, repaid in 1996 ......................... 200,000 --
Notes payable to bank; due in monthly installments ranging
from $671 to $1,885, including interest at 7.50% to 9.50%,
through December 2000; secured by vehicles and
equipment ................................................ 127,990 164,596
MERSCO revolving credit loan with interest due monthly at
prime plus .50% (8.75% at September 30, 1996); refinanced
in February 1997 (see below) ............................. 50,000 300,000
Other ...................................................... 46,420 27,238
---------- ----------
7,722,805 8,309,516
Less- Current installments ................................. 736,974 711,774
---------- ----------
$6,985,831 $7,597,742
========== ==========
</TABLE>
F-10
<PAGE>
Subordinated debt consists of unsecured indebtedness issued to former owners of
a subsidiary. Payment of principal and interest on subordinated debt is subject
to compliance with the revolving credit loan and term loan agreements.
Aggregate maturities of notes payable for years subsequent to September 30,
1996, are as follows:
Year ending September 30-
1997 .................................................. $ 711,774
1998 .................................................. 6,232,287
1999 .................................................. 469,258
2000 .................................................. 435,579
2001 .................................................. 411,530
Thereafter ............................................ 49,088
----------
$8,309,516
==========
In February 1997, the Company entered into new loan agreements and amended the
loan agreements in May 1997 and September 1997. APG and MERSCO entered into new
revolving credit loans with a financial institution (financial institution) and
repaid the balance outstanding on the former lines of credit. The APG and MERSCO
credit loans (APG/MERSCO Credit Loans) provide for maximum borrowings of
$3,000,000 and $750,000, respectively, due December 1998. The APG/MERSCO Credit
Loans provide for interest equal to the financial institution's prime rate which
is due monthly and a commitment fee of .375 percent on the unused balance. In
addition, DRS entered into $7,500,000 and $250,000 revolving credit loans
(collectively, the DRS Credit Loans) and repaid the former line of credit. The
DRS Credit Loans bear interest at the financial institution's prime rate plus
.25 percent which is due monthly. The DRS Credit Loans mature December 1998 and
have a commitment fee of .375 percent on the unused balance. APG and DRS also
entered into $151,067 and $1,075,000 new term loans, respectively (collectively,
the APG/DRS Term Loans), and repaid the balance on the former term loans. The
APG/DRS Term Loans bear interest at prime and prime plus .25 percent,
respectively, are payable in eight and 18 quarterly installments of $47,222 and
$57,701 plus interest, respectively, and mature in December 1997 and September
2001, respectively. As a result of the new loan agreements, the revised debt
maturities, as of June 30, 1997, for the aforementioned debt are as follows:
1998 - $1,243,990; 1999 - $8,553,375; 2000 - $939,296; 2001 - $1,078,184; 2002 -
$967,012; thereafter - $138,888.
3. INCOME TAXES:
Actual income tax expense differs from the "expected" income tax expense
computed by applying the statutory federal income tax rate of 34 percent to
income before income taxes for the years ended September 30, 1994, 1995 and
1996, as follows:
YEAR ENDED SEPTEMBER 30,
--------------------------------------
1994 1995 1996
----------- ----------- ----------
Computed "expected" income tax ........ $ 674,659 $ 1,045,849 $1,445,035
State franchise tax, net of federal tax
benefit ............................... 59,400 96,103 128,570
Audit settlement related to prior
years' intangible asset
amortization ........................ 28,623 -- --
Intangible asset and other ............ 16,744 48,923 62,847
Nondeductible expenses ................ 2,663 4,678 8,021
Other ................................. (589) (1,755) 753
----------- ----------- ----------
$ 781,500 $ 1,193,798 $1,645,226
=========== =========== ==========
F-11
<PAGE>
The components of the Company's income tax provision (benefit) for the years
ended September 30, 1994, 1995 and 1996, are as follows:
YEAR ENDED SEPTEMBER 30,
-------------------------------------------------
1994 1995 1996
----------- ----------- -----------
Federal-
Current ............. $ 726,500 $ 1,187,263 $ 1,681,636
Deferred ............ (26,700) (122,402) (218,410)
----------- ----------- -----------
$ 699,800 $ 1,064,861 $ 1,463,226
State-
Current ............. $ 95,000 $ 138,030 $ 198,000
Deferred ............ (13,300) (9,093) (16,000)
----------- ----------- -----------
$ 81,700 $ 128,937 $ 182,000
=========== =========== ===========
The tax effects of temporary differences that give rise to significant portions
of the deferred tax asset and deferred tax liability at September 30, 1995 and
1996, are as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30,
----------------------
1995 1996
--------- ---------
<S> <C> <C>
Deferred tax assets-
Accounts receivable, principally due to allowance for
doubtful accounts ........................................ $ 26,928 $ 76,422
Effect of uniform capitalization of inventory-related costs
for tax purposes ......................................... 151,002 198,419
Accrued bonuses ........................................... 64,373 113,712
Compensated absences ...................................... 8,534 3,913
Other ..................................................... 8,465 15,997
--------- ---------
Total deferred tax asset .............. $ 259,302 $ 408,463
========= =========
Deferred tax liabilities-
Property and equipment, principally due to differences in
depreciation ............................................. $ 138,880 $ 118,480
Book vs. tax amortization of noncompete agreement ......... (43,445) (47,789)
Other ..................................................... 1,172 (59,333)
--------- ---------
Total deferred tax liability .......... $ 96,607 $ 11,358
========= =========
</TABLE>
4. COMMITMENTS AND CONTINGENCIES:
FACILITY LEASES
The Company leases equipment, office and warehouse space under noncancelable
operating lease agreements expiring at various times through 2000. Lease expense
totaled $171,800, $387,900 and $592,886 for the years ended September 30, 1994,
1995 and 1996, respectively.
F-12
<PAGE>
The minimum future rental payments under noncancelable operating leases are as
follows:
Year ending September 30-
1997 ............................................. $ 549,404
1998 ............................................. 355,610
1999 ............................................. 281,322
2000 ............................................. 135,366
2001 ............................................. 12,068
----------
$1,333,770
==========
Certain leases include options for renewal.
BONUS PLANS
The Company has bonus plans, some of which are discretionary and some of which
are based on a percentage of income, as defined in each plan, in excess of
specified hurdle rates or rates of return on equity.
PROFIT-SHARING PLAN
Subsidiaries of the Company maintain qualified profit-sharing plans (the Plans).
The Plans, as amended, include annual employer contributions of up to 15 percent
of compensation, as defined, at the discretion of the subsidiaries' board of
directors. Contributions for 1994, 1995 and 1996 were approximately $197,000,
$204,000 and $260,000, respectively.
OTHER
Management is unaware of any legal proceedings against the Company. The Company
maintains comprehensive general liability insurance in scope and amounts which
it believes are customary for its industry. There can be no assurance that the
coverage limits of such insurance will be adequate to protect the Company
against all future claims. In addition, there can be no assurance that the
Company will be able to maintain comprehensive liability insurance in the future
on acceptable terms or with adequate coverage against potential liabilities.
5. PREFERRED STOCK:
Pursuant to a restated certificate of incorporation dated August 24, 1993, the
Company has the authority to issue a total of ______ shares of Series 2
preferred stock (Preferred Stock). Dividends are payable as declared by the
board of directors.
At September 30, 1995 and 1996, __ shares of $.01 par value nonvoting Preferred
Stock were issued and outstanding. Preferred Stock has a liquidation preference
and redemption value of ______ per share plus unpaid dividends.
The Series 2 Preferred Stock, all of which was issued in connection with the
acquisition of MERSCO (see Note 9), is mandatorily convertible, depending on
MERSCO's operating results, into a maximum of ____ shares of the Company's Class
A common stock (Class A Common Stock) in the event of a public offering or a
change in control of the Company within a five-year period. Should neither of
these events occur, the Company may call, and the holder may put, such shares at
a formula price based on MERSCO's equity and operating earnings.
F-13
<PAGE>
6. COMMON STOCK:
The Company has the authority to issue ______ shares of stock consisting of
______ shares of common stock (Common Stock) and ______ shares of Class A Common
Stock. Every holder of outstanding shares of Common Stock shall be entitled to
______ votes for each share of stock, and every holder of outstanding shares of
Class A Common Stock shall be entitled to one vote for each share of such stock.
Under the terms of an agreement executed in May 1992, if a stockholder desires
to dispose of all or a portion of his shares of Common Stock (offered shares),
the Company has exclusive right to purchase the offered shares within 10 days
from the stockholder. If the Company does not elect to purchase all or a portion
of the offered shares, the remaining stockholders have an additional 30 days to
purchase the portion of the offered shares not purchased by the Company.
However, the sale of Common Stock which results in the transfer of a majority
Common Stock of the Company is not subject to the above provisions.
Company officers purchased _____ and _____ shares of Class A Common Stock during
1995 and 1996, respectively.
In May 1997, the Company repurchased _____ shares of Class A Common Stock for
$116,399. The Company retired all the shares repurchased.
7. STOCK OPTIONS:
MANAGEMENT OPTION AGREEMENT
The Company established an incentive stock option plan in May 1992. Pursuant to
this plan, the Company entered into a management option agreement (the
Agreement) with certain key employees and granted options to purchase up to
_____ shares of common stock at $_____ per share. All of the options vest and
become exercisable on March 1, 2002. However, certain options will vest and
become exercisable, in increments from 1992 to 1997, if the Company's adjusted
earnings or cumulative adjusted earnings, as defined in the Agreement, achieve
certain predetermined targets. The remaining options will vest and become
exercisable upon the receipt by any one or more of certain stockholders of cash
or marketable securities, or both, in excess of $4,713,800 for common stock that
results from the sale, redemption or other transfer or from any dividends or
other distributions. At September 30, 1995 and 1996, _____ and ______ options,
respectively, were exercisable under this incentive stock option plan. No
options had been exercised as of September 30, 1996.
DIRECTOR OPTION AGREEMENT
The Company also established an incentive stock option plan for nonemployee
directors in August 1993. Pursuant to such plan, the Company entered into a
director option agreement (the Option Plan) with certain nonemployee directors
and granted options to purchase up to ______ shares of common stock at $_____
per share. All of the options vest and become exercisable on May 25, 2003.
However, these options will vest and become exercisable, in increments from 1993
to 1997, if the Company's earnings per share, as defined in the Option Plan,
achieve certain predetermined targets. At September 30, 1995 and 1996, _____ and
_____ options, respectively, were exercisable under the Option Plan, as amended.
No options had been exercised as of September 30, 1996.
F-14
<PAGE>
KEY EMPLOYEE STOCK OPTION PLAN
The Company established the 1995 Key Employee Stock Option Plan (the Plan) in
February 1995. Under the Plan, ______ shares of common stock are available for
purchase by key employees. As of September 30, 1996, ______ shares have been
granted under the Plan, at $_____ per share, which become exercisable over a
period not to exceed 10 years. At September 30, 1995 and 1996, ______ and _____
options, respectively, were exercisable and no options had been exercised.
In April 1997, _____ options were forfeited by an employee in connection with
his separation from the Company.
8. RELATED-PARTY TRANSACTIONS:
The Company pays management fees, in an amount which is subject to increases
with attainment of minimum levels of net income, to certain stockholders of the
Company under a consulting agreement executed in 1992. Amounts paid to related
parties under this agreement totaled $75,000 and $100,000 for the years ended
September 30, 1995 and 1996, respectively.
APG leases a portion of its facilities from a director/stockholder under a lease
agreement. Amounts paid to the related party totaled $34,000 per year during the
years ended September 30, 1994, 1995 and 1996.
9. ACQUISITIONS:
DRS ACQUISITION
On December 2, 1994, the Company acquired all of the outstanding common stock of
De-Ro Products Co., Inc., and Suncoast Postension Corp. for $3,936,544 in cash,
notes to former owners totaling $1,375,000 (see Note 2) and ______ shares of the
Company's Class A Common Stock recorded at fair market value. The funds used in
the acquisition were provided by the issuance of debt and cash contributions
made by the Company. The acquisition has been accounted for as a purchase. The
cost of the acquisition has been allocated on the basis of the estimated fair
value of net assets acquired. The excess of the purchase price over fair value
of the net assets acquired is reflected as goodwill in the amount of $5,380,043,
is included in intangibles at September 30, 1996 (see Note 1), and is being
amortized over 35 years.
In addition, as part of the acquisition, DRS entered into noncompete, consulting
and employment agreements with certain former owners and an employee of DRS all
of whom continue to be involved in the business. The agreements require annual
payments aggregating $380,000 for a period of five years, which will be expensed
as paid. Additionally, they are entitled to receive annual bonus payments for a
period of seven years based on a percentage of pretax income in years in which
pretax income exceeds predetermined levels. Such bonus payments are limited to
an aggregate of $1,355,000. Bonuses aggregating approximately $91,000 were
accrued under this agreement at September 30, 1996.
NEW WEST COMMUNICATIONS, INC., ACQUISITION
On October 1, 1996, the Company acquired substantially all of the assets and
liabilities of NWC for $4,000,000 in cash, ______ shares of the Company Class A
Common Stock recorded at fair market value and $63,641 in transaction costs. As
part of the acquisition, the Company entered into noncompete and employment
agreements with the former owner of NWC who continues to be involved in the
business. The agreements require annual payments of $250,000 for a period of
five years. Additionally, the former owner is entitled to receive annual bonus
payments for a period of five years based on a percentage of earnings (as
defined) in years in which earnings exceed predetermined levels. Such
noncompete, employment and bonus payments are limited to an aggregate of
$2,500,000.
F-15
<PAGE>
In connection with the acquisition of NWC, the Company entered into a $1,500,000
line of credit (NWC Credit Line), a $1,500,000 term loan (NWC Term Loan) and a
$1,250,000 senior subordinated note (NWC Subordinate Note) which bear interest
at prime, prime plus .5 percent, and 12.50 percent, respectively. Interest on
the NWC Credit Line, as amended in September 1997, is payable monthly with
principal due upon maturity, December 1998. The NWC Term Loan is payable in 19
quarterly installments of $53,572 plus interest with a balloon payment of
$482,132 plus accrued interest due upon maturity, September 2001. Interest on
the NWC Subordinate Note is due monthly through October 1999. Monthly principal
and interest payments of $34,722 are payable beginning November 1999 through
October 2002, the maturity date. In addition, the Company issued ______ warrants
to purchase the Company's common stock at an exercise price of $______ to the
holder of the NWC Subordinate Note.
This transaction has been accounted for utilizing the purchase method of
accounting, and the results of operations of the acquired business have been
included in the results of the Company from the date of acquisition. In
accordance with Accounting Principles Board Opinion No. 16, the purchase price
was allocated to the net assets acquired based on management's estimate of the
fair value of the acquired assets and liabilities at the date of acquisition, as
follows:
Cash paid ............................................... $ 4,000,000
Class A Common Stock issued ............................. 999,990
Transaction costs ....................................... 63,641
-----------
Total purchase price .......................... $ 5,063,631
===========
Net assets acquired-
Cash .................................................. $ 647,898
Receivables, net ...................................... 482,744
Inventory ............................................. 668,229
Prepaid expenses ...................................... 14,723
Property and equipment ................................ 29,011
Accounts payable and accrued
liabilities ............................................. (1,315,520)
Goodwill .............................................. 4,536,546
-----------
Total purchase price .......................... $ 5,063,631
===========
The following table reflects, on an unaudited pro forma basis, the combined
operations of the Company and NWC as if such acquisition had taken place at the
beginning of fiscal 1996. Appropriate adjustments have been made to reflect the
accounting basis used in recording the acquisition. These pro forma results have
been prepared for comparative purposes only and do not purport to be indicative
of the results of operations that would have resulted had the combination been
in effect on the date indicated, that have resulted since the date of
acquisition or that may result in the future.
YEAR ENDED
SEPTEMBER 30,
1996
-----------
(Unaudited)
Sales, net ................................................... $73,732,246
Income before income taxes ................................... 5,766,488
Net income per common and common equivalent share ............ $ --
Additionally, the Company has acquired several other businesses over the past
three years, none of which are material to the financial statements taken as a
whole.
F-16
<PAGE>
10. SUBSEQUENT EVENTS
DRS CONSULTING AND NONCOMPETITION AGREEMENTS
The Company signed agreements on September 30, 1997, to retire, subject to the
completion of the offering, certain amounts ($1.4 million) pursuant to
consulting and noncompetition agreements entered into in connection with the
acquisition of DRS in 1994. This amount will be expensed as of September 30,
1997.
RECAPITALIZATION
In _____, 1997, the Company (a) converted each share of Class A Common Stock
into one share of Common Stock, (b) converted each share of Preferred Stock into
______ shares of Common Stock and (c) effected a _____-for-one stock split. The
effects of the stock split have been retroactively reflected in the financial
statements and related notes thereto for all periods presented.
F-17
<PAGE>
[inside back cover graphics]
<PAGE>
================================================================================
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR ANY OF THE UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF ANY OFFER TO BUY ANY SECURITY
OTHER THAN THE SHARES OF COMMON STOCK OFFERED BY THIS PROSPECTUS, NOR DOES IT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER TO BUY THE SHARES OF
COMMON STOCK BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION
IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS
NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT ANY
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF.
TABLE OF CONTENTS
Page
----
Prospectus Summary...................................
Risk Factors.........................................
Background of the Company............................
Use of Proceeds......................................
Dividend Policy......................................
Capitalization.......................................
Dilution.............................................
Selected Consolidated Financial Data.................
Management's Discussion and Analysis of Financial
Condition and Results of Operations...............
Business.............................................
Management...........................................
Certain Transactions.................................
Principal and Selling Stockholders...................
Description of Capital Stock.........................
Shares Eligible for Future Sale......................
Underwriting.........................................
Certain Legal Matters................................
Available Information................................
Experts..............................................
Index to Consolidated Financial Statements...........
UNTIL _________ , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS) ALL DEALERS
EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OF SUBSCRIPTIONS.
================================================================================
================================================================================
________ Shares
[logo]
TRAVIS INTERNATIONAL, INC.
Common Stock
------------
PROSPECTUS
------------
A.G. EDWARDS & SONS, INC.
CLEARY GULL REILAND & MCDEVITT INC.
________, 1997
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is a statement of estimated expenses incurred in
connection with the shares of Common Stock being registered hereby, other than
underwriting discounts and commissions:
SEC Registration Fee................................ $ 10,607
NASD Filing Fee..................................... $ 4,000
Nasdaq Stock Market Listing Fee..................... *
Printing and Engraving Expenses..................... *
Legal Fees and Expenses............................. *
Accounting Fees and Expenses........................ *
Transfer Agent and Registrar Fees and Expenses...... *
Miscellaneous....................................... *
----------
Total............................................... $ *
==========
- ------------
* To be filed by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Amended and Restated Bylaws provide that the Company will
indemnify each of its directors and officers to the full extent permitted by the
laws of the State of Delaware and may indemnify certain other persons as
authorized by the Delaware General Corporation Law for liabilities and expenses
incurred in such capacities. In general, directors and officers are indemnified
with respect to actions taken in good faith in a manner reasonably believed to
be in, or not opposed to, the best interests of the Company, and, with respect
to any criminal proceeding, actions that the indemnitee had no reasonable cause
to believe were unlawful.
As permitted by Section 102(b) of the Delaware Law, the Amended and
Restated Certificate of Incorporation provides that directors of the Company
shall have no personal liability to the Company or its stockholders for monetary
damages for breach of fiduciary duty as a director, except (i) for any breach of
a director's duty of loyalty to the Company or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or
knowing violations of law, (iii) under Section 174 of the Delaware Law or (iv)
for any transaction from which a director derived an improper personal benefit.
The Underwriting Agreement contains reciprocal agreements of indemnity
between the Company and the Underwriters as to certain liabilities, including
liabilities under the Securities Act, and in certain circumstances provides for
indemnification of the Company's directors, officers and controlling persons.
The registration rights agreements between the Company and its
stockholders contains reciprocal agreements between the Company and such
stockholders as to certain liabilities, including liabilities under the
Securities Act, and in certain circumstances provide for indemnification of the
Company's directors, officers and controlling persons.
The Company maintains directors' and officers' liability insurance.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Since _________________, 1994, the Company has issued the following
securities which were not registered under the Securities Act. In each case,
exemption from registration is claimed on the ground that the issuance of such
securities did not involve any public offering within the meaning of Section
4(2) of the Securities Act.
II-1
<PAGE>
A. In connection with the Company's acquisition of Mountain Empire
Rubber and Specialty Co. ("MERSCO"), on October 18, 1994, the Company issued
__________ of its shares of Series 2 Preferred Stock to the former owner of
MERSCO in exchange for all of the capital stock of MERSCO.
B. In connection with the Company's acquisitions of De-Ro Products,
Inc. and Suncoast Postension Corp. ("DRS"), on December 2, 1994, the Company
issued an aggregate of _________ shares of its Class A Common Stock to former
owners of DRS in exchange for all of the capital stock of DRS. Immediately prior
to the Offering, the Company will convert each share of such Class A Common
Stock into one share of Common Stock pursuant to agreements entered into at the
time the acquisition of DRS was closed. The acquisition of DRS was financed in
part by the Company's issuance of _________ shares of Common Stock on December
2, 1994 to its existing stockholders in exchange for cash.
C. In connection with the Company's acquisition of Cable Systems, Inc.
("CSI"), on February 3, 1995, the Company issued _________ shares of the
Company's Class A Common Stock to the former owner of CSI in exchange for
substantially all of the assets of CSI. Immediately prior to the Offering, the
Company will convert each share of such Class A Common Stock into one share of
the Company's Common Stock pursuant to agreements entered into at the time the
acquisition of CSI was closed.
D. In March 1996, at the request of Equus II Incorporated ("Equus"),
the Company issued ________ shares of Class A Common Stock to Equus in exchange
for the cancellation of __________ shares of Common Stock then held by Equus.
E. In connection with the Company's acquisition of New West
Communications, Inc. ("New West"), on October 5, 1996, the Company issued
_________ shares of its Class A Common Stock to the former owner of New West in
exchange for substantially all of the assets of New West. Immediately prior to
the Offering, the Company will convert each share of such Class A Common Stock
into one share of the Company's Common Stock pursuant to agreements entered into
at the time the acquisition of New West was closed. The acquisition of New West
was financed in part by the Company's issuance of warrants to purchase up to
__________ shares of the Company's Class A Common Stock to Marwit Capital
Company on October 5, 1996. Immediately prior to the Offering, the warrants will
be amended to provide for the purchase of Common Stock rather than Class A
Common Stock.
F. In connection with the Company's acquisition of MD Steel Company,
Inc. ("MD Steel"), the Company issued ___________ shares of its Class A Common
Stock to the former owner of MD Steel in exchange for substantially all of the
assets of MD Steel. Immediately prior to the Offering, the Company will convert
________ each share of such Class A Common Stock into one share of the Company's
Common Stock pursuant to agreements entered into at the time the acquisition of
MD Steel was closed.
G. In connection with the Offering, on ____________________ , 1997, the
Company effected a recapitalization of its capital stock which (i) increased the
authorized number of shares of Common Stock to ________, (ii) converted each
share of Class A Common stock into one share of Common Stock, (iii) converted
________ shares of Series 2 Preferred Stock into __________ shares of Common
Stock, (iv) increased the authorized number of shares of Preferred Stock to
_________ and (iv) effected a _________ -for-1 Common Stock split in the form of
a stock dividend.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits.
1.1* Form of Underwriting Agreement
3.1* Amended and Restated Certificate of Incorporation
3.2* Amended and Restated Bylaws
3.3 Warrant to Purchase Class A Common Stock between Travis
International, Inc. and Marwit Capital Company, L.P. dated
October 9, 1996
II-2
<PAGE>
3.4 Registration Rights Agreement among Travis International, Inc.
and stockholders, dated May 28, 1992
3.5 First Amendment to Registration Rights Agreement dated
December 2, 1994
3.6 Second Amendment to Registration Rights Agreement dated
February 3, 1995
3.7 Third Amendment to Registration Rights Agreement dated
September 1, 1995
3.8 Fourth Amendment to Registration Rights Agreement dated June
18, 1996
3.9 Fifth Amendment to Registration Rights Agreement dated October
1, 1996
3.10 Sixth Amendment to Registration Rights Agreement dated October
9, 1996
4.1* Specimen Common Stock Certificate of the Registrant
5.1* Opinion of Mayor, Day, Caldwell & Keeton, L.L.P.
10.1 Employment Agreement between Travis International, Inc. and
Kirby Attwell dated May 28, 1992
10.2 Amendment to Employment Agreement between Travis
International, Inc. and Kirby Attwell dated May 15, 1996
10.3 Employment and Noncompetition Agreement between
De-Ro/Suncoast, Inc. and Larry Stadler dated December 2, 1994
10.4 First Amendment to Employment and Noncompetition Agreement
between De-Ro/Suncoast, Inc. and Larry Stadler dated February
9, 1996
10.5 Employment and Noncompetition Agreement between New West
Acquisition Corp. and Craig Cowan dated September 30, 1996
10.6 Travis International, Inc. 1992 Incentive Stock Option Plan
effective May 27, 1992
10.7 Travis International, Inc. 1995 Key Employee Stock Option Plan
effective February 2, 1995
10.8 Travis International, Inc. 1993 Director Stock Option Plan
effective July 29, 1993
10.9 Travis International, Inc. Non-Qualified Executive Retirement
Plan effective October 1, 1994
10.10 Memo from Kirby Attwell to Irvin Levy and Nolan Lehmann dated
January 4, 1995 regarding Travis International, Inc. Incentive
Compensation Plan
10.11 Asset Purchase Agreement among New West Acquisition Corp., New
West Communications, Inc. and Craig Cowan dated September 30,
1996
10.12 Business Loan Agreement dated February 24, 1997 between Bank
of America Texas, N.A. and De-Ro/Suncoast, Inc.
10.13 First Amendment to Business Loan Agreement dated May 30, 1997
between Bank of America Texas, N.A. and De-Ro/Suncoast, Inc.
II-3
<PAGE>
10.14 Second Amendment to Business Loan Agreement dated September
29, 1997 between Bank of America Texas, N.A. and
De-Ro/Suncoast, Inc.
10.15 Business Loan Agreement dated February 24, 1997 between Bank
of America Texas, N.A. and American Packing and Gasket Company
10.16 First Amendment to Business Loan Agreement dated September 24,
1997 between Bank of America Texas, N.A. and American Packing
and Gasket Company
10.17 Business Loan Agreement dated February 24, 1997 between Bank
of America Texas, N.A. and Mountain Empire Rubber & Specialty
Co., Inc.
10.18 First Amendment to Business Loan Agreement dated September 22,
1997 between Bank of America Texas, N.A. and Mountain Empire
Rubber & Specialty Co., Inc.
10.19 Business Loan Continuing Guarantee dated September 26, 1997
from Travis International, Inc. to Bank of America Texas, N.A.
10.20 Business Loan Agreement dated May 30, 1997, between Bank of
America Texas, N.A. and New West Communications, Inc.
10.21 Business Loan Continuing Guaranty dated May 30, 1997 from
Travis International, Inc. to Bank of America Texas, N.A.
10.22 First Amendment to Business Loan Agreement dated September 25,
1997 between Bank of America of Texas, N.A. and New West
Communications, Inc.
10.23 Securities Purchase Agreement dated October 9, 1996 between
New West Acquisition, Inc. and Marwit Capital Company. L.P.
10.24 Senior Subordinated Note dated October 9, 1996 from New West
Acquisition Inc. to Marwit Capital Company, L.P.
10.25 Subordination Agreement between Bank of America and Marwit
Capital Company, L.P. and acknowledged by New West
Communications, Inc. dated September 30, 1996
21.1 Subsidiaries of the Registrant
23.1 Consent of Arthur Andersen LLP
23.2* Consent of Mayor, Day, Caldwell & Keeton, L.L.P. (Contained in
Exhibit 5.1)
24 Powers of Attorney (included on Signature Page)
- ------------
* To be filed by amendment.
(b) Financial Statement Schedules.
Not applicable.
II-4
<PAGE>
ITEM 17. UNDERTAKINGS.
(a) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Company pursuant to its Third Amended and Restated Certificate of
Incorporation (the "Certificate of Incorporation"), Second Amended and Restated
Bylaws (the "Bylaws"), the Underwriting Agreement or otherwise, the Company has
been advised that, in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer or controlling person of the Company in
the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Company will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
(b) The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the
Securities Act, the information omitted from the form of prospectus
filed as part of this Registration Statement in reliance upon Rule 430A
and contained in a form of prospectus filed by the Registrant pursuant
to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be
deemed to be part of the Registration Statement as of the time it was
declared effective.
(2) For the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new Registration Statement relating
to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
(c) The undersigned Registrant hereby undertakes to provide to the
Underwriters at the closing specified in the underwriting agreement,
certificates in such denominations and registered in such names as required by
the Underwriters to permit prompt delivery to each purchaser.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Houston,
State of Texas, on the 3rd day of October, 1997.
TRAVIS INTERNATIONAL, INC.
By: /s/ KIRBY ATTWELL
Kirby Attwell
President and Chief Executive Officer
POWER OF ATTORNEY
The undersigned directors and officers of Travis International, Inc. do
hereby constitute and appoint Kirby Attwell and Tim W. Fogelsong, and each of
them, with full power of substitution, our true and lawful attorneys-in-fact and
agents to do any and all acts and things in our name and behalf in our
capacities as directors and officers, and to execute any and all instruments for
us and in our names in the capacities indicated below which such person may deem
necessary or advisable to enable Travis International, Inc. to comply with the
Securities Act of 1933, as amended, and any rules, regulations and requirements
of the Securities and Exchange Commission, in connection with this Registration
Statement, including specifically, but not limited to, power and authority to
sign for us, or any of us, in the capacities indicated below any and all
amendments (including pre-effective and post-effective amendments) hereto; and
we do hereby ratify and confirm all that such person or persons shall do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
- --------- ----- ----
President, Chief Executive
/s/ KIRBY ATTWELL Officer (Principal Executive October 3, 1997
Kirby Attwell Officer) and Director
/s/ BARBARA MILLS HENAGAN Chairman of the Board and
Barbara Mills Henagan Director October 3, 1997
Vice President-Finance
/s/ TIM W. FOGELSONG (Principal Accounting and October 3, 1997
Tim W. Fogelsong Financial Officer), Treasurer
and Secretary
/s/ NOLAN LEHMANN
Nolan Lehmann Director October 3, 1997
/s/ DAVID K. BARTH
David K. Barth Director October 3, 1997
/s/ IRVIN A. LEVY
Irvin A. Levy Director October 3, 1997
II-6
<PAGE>
INDEX TO EXHIBITS
1.1* Form of Underwriting Agreement
3.1* Amended and Restated Certificate of Incorporation
3.2* Amended and Restated Bylaws
3.3 Warrant to Purchase Class A Common Stock between Travis International,
Inc. and Marwit Capital Company, L.P. dated October 9, 1996
3.4 Registration Rights Agreement among Travis International, Inc. and
Stockholders, dated May 28, 1992
3.5 First Amendment to Registration Rights Agreement dated December 2, 1994
3.6 Second Amendment to Registration Rights Agreement dated February 3, 1995
3.7 Third Amendment to Registration Rights Agreement dated September 1, 1995
3.8 Fourth Amendment to Registration Rights Agreement dated June 18, 1996
3.9 Fifth Amendment to Registration Rights Agreement dated October 1, 1996
3.10 Sixth Amendment to Registration Rights Agreement dated October 9, 1996
4.1* Specimen Common Stock Certificate of the Registrant
5.1* Opinion of Mayor, Day, Caldwell & Keeton, L.L.P.
10.1 Employment Agreement between Travis International, Inc. and Kirby
Attwell dated May 28, 1992
10.2 Amendment to Employment Agreement between Travis International, Inc. and
Kirby Attwell dated May 15, 1996
10.3 Employment and Noncompetition Agreement between De-Ro/Suncoast, Inc. and
Larry Stadler dated December 2, 1994
<PAGE>
10.4 First Amendment to Employment and Noncompetition Agreement between
De-Ro/Suncoast, Inc. and Larry Stadler dated February 9, 1996
10.5 Employment and Noncompetition Agreement between New West Acquisition
Corp. and Craig Cowan dated September 30, 1996
10.6 Travis International, Inc. 1992 Incentive Stock Option Plan effective
May 27, 1992
10.7 Travis International, Inc. 1995 Key Employee Stock Option Plan effective
February 2, 1995
10.8 Travis International, Inc. 1993 Director Stock Option Plan effective
July 29, 1993
10.9 Travis International, Inc. Non-Qualified Executive Retirement Plan
effective October 1, 1994
10.10 Memo from Kirby Attwell to Irvin Levy and Nolan Lehmann dated January 4,
1995 regarding Travis International, Inc. Incentive Compensation Plan
10.11 Asset Purchase Agreement among New West Acquisition Corp., New West
Communications, Inc. and Craig Cowan dated September 30, 1996
10.12 Business Loan Agreement dated February 24, 1997 between Bank of America
Texas, N.A. and De-Ro/Suncoast, Inc.
10.13 First Amendment to Business Loan Agreement dated May 30, 1997 between
Bank of America Texas, N.A. and De-Ro/Suncoast, Inc.
10.14 Second Amendment to Business Loan Agreement dated September 29, 1997
between Bank of America Texas, N.A. and De-Ro/Suncoast, Inc.
10.15 Business Loan Agreement dated February 24, 1997 between Bank of America
Texas, N.A. and American Packing and Gasket Company
10.16 First Amendment to Business Loan Agreement dated September 24, 1997
between Bank of America Texas, N.A. and American Packing and Gasket
Company
10.17 Business Loan Agreement dated February 24, 1997 between Bank of America
Texas, N.A. and Mountain Empire Rubber & Specialty Co., Inc.
10.18 First Amendment to Business Loan Agreement dated September 22, 1997
between Bank of America Texas, N.A. and Mountain Empire Rubber &
Specialty Co., Inc.
<PAGE>
10.19 Business Loan Continuing Guarantee dated September 26, 1997 from Travis
International, Inc. to Bank of America Texas, N.A.
10.20 Business Loan Agreement dated May 30, 1997, between Bank of America
Texas, N.A. and New West Communications, Inc.
10.21 Business Loan Continuing Guaranty dated May 30, 1997 from Travis
International, Inc. to Bank of America Texas, N.A.
10.22 First Amendment to Business Loan Agreement dated September 25, 1997
between Bank of America of Texas, N.A. and New West Communications, Inc.
10.23 Securities Purchase Agreement dated October 9, 1996 between New West
Acquisition, Inc. and Marwit Capital Company. L.P.
10.24 Senior Subordinated Note dated October 9, 1996 from New West Acquisition
Inc. to Marwit Capital Company, L.P.
10.25 Subordination Agreement between Bank of America and Marwit Capital
Company, L.P. and acknowledged by New West Communications, Inc. dated
September 30, 1996
21.1 Subsidiaries of the Registrant
23.1 Consent of Arthur Andersen
23.2* Consent of Mayor, Day, Caldwell & Keeton, L.L.P. (Contained in Exhibit
5.1)
24 Powers of Attorney (included on Signature Page)
- ----------
* To be filed by amendment.
EXHIBIT 3.3
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY STATE SECURITIES LAWS AND
THUS MAY NOT BE TRANSFERRED UNLESS REGISTERED UNDER THAT ACT AND SUCH LAWS OR
UNLESS AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
- ----------------------------------------------------------------------------
TRAVIS INTERNATIONAL, INC.
WARRANT TO PURCHASE CLASS A COMMON STOCK
- ----------------------------------------------------------------------------
Travis International, Inc., a Delaware corporation ("Company"),
certifies that, for good and valuable consideration, Marwit Capital Company,
L.P. or its registered assigns ("Holder"), is entitled to purchase from Company,
at any time during the period set forth in Section 2.1 hereof, initially a
maximum of 30,000 fully paid and nonassessable shares of Company's Class A
common stock, $ .01 par value at the Exercise Price. The Company's Common Stock
and Class A Common Stock are hereinafter referred to as "Common Stock."
This Warrant and the shares of Common Stock issued and issuable upon
exercise hereof are subject to the terms and conditions hereinafter set forth:
1. DEFINITIONS. As used in this Warrant, the following terms
shall mean:
1.1 "Additional Shares" - All shares of Common Stock issued by
Company after the Issuance Date whether or not subsequently reacquired or
retired by Company, other than (i) shares of Common Stock issued upon exercise
of this Warrant and all Warrants issued pursuant to the Agreement; (ii) shares
of Common Stock issued on conversion of any Convertible Securities outstanding
as of the Issuance Date; and (iii) shares of Common Stock issued to employees or
directors of (or consultants to) Company, or issuable upon exercise of stock
options granted to such employees, directors or consultants after the Issuance
Date pursuant to stock-based compensation plans approved by the Board of
Directors, provided that the exercise price thereof was not less than Fair
Market Value on the date of grant of stock options.
1.2 "Agreement" - The Securities Purchase Agreement of even date
herewith by and between Company and the entity listed on Schedule I thereto as
amended and supplemented from time to time.
1.3 "Appreciation Currency" - The Fair Market Value per share of
Common Stock minus the current Exercise Price per share of Common Stock.
<PAGE>
1.4 "Common Stock" shall have the meaning set forth in the
introductory paragraph hereof
1.5 "Convertible Securities" - Any evidence of indebtedness,
stock or other securities directly or indirectly convertible into or
exchangeable for additional shares of Common Stock.
1.6 "Effective Price" - The Effective Price of an issue of
Additional Shares shall mean the quotient determined by dividing the total
number of Additional Shares in such issue which were issued or sold, or deemed
to have been issued or sold, by Company under subsection 3.6 hereof into the
aggregate consideration received or deemed to have been received by Company for
such issue, or deemed issue, under Section 3.6 hereof.
1.7 "Exercise Price" - Initially Twenty-Two Dollars and Fifty
Cents ($22.50) and thereafter the adjusted price then in effect as of the
relevant date, as determined in accordance with Section 3 hereof, depending upon
the context.
1.8 "Fair Market Value" - The fair market value of a freely
tradable security determined by the last reported sale price of such security on
or before the relevant date on the exchange or NASDAQ National Market System
where it is primarily traded, or if not primarily traded there, the closing bid
price on the relevant date as reported by NASDAQ. In the event that no Fair
Market Value is so ascertainable, then Fair Market Value shall be the amount
that a willing buyer would pay to a willing seller in an arm's length
transaction, as determined in good faith by a two-thirds vote of Company's Board
of Directors. If the determination of Fair Market Value is to be made for a
"cashless" or "net issue" of this Warrant in connection with an initial public
offering of the Company's Common Stock, the Fair Market Value per share of
Common Stock shall equal the per share offering price, without deductions for
any compensation, discounts or expenses paid in connection with such offering.
1.9 "Registration Rights Agreement" - shall refer to that certain
Registration Rights Agreement dated as of May 28, 1992 by and among Company, and
certain shareholders of Company, as amended pursuant to the Agreement.
1.10 "Issuance Date" - The date of the original issuance of
this Warrant.
1.11 "Registrable Securities" - Subject to the conditions
contained herein, the shares of Common Stock issued or issuable upon exercise of
this Warrant.
1.12 "Shareholders Agreement" - shall refer to that certain
Stockholder's Agreement by and among Company and its stockholders dated May 28,
1992, as amended pursuant to the Agreement.
1.13 "Subscription Form" - The form attached to this Warrant as
Exhibit A.
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<PAGE>
1.14 "Warrant" - This Warrant or any warrants delivered in
substitution or exchange therefor as provided herein.
2. EXERCISE.
2.1 TIME OF EXERCISE. This Warrant may be exercised at the office
of Company in whole or in part at any time or from time to time, commencing on
the Issuance Date and terminating on the later to occur of (i) the seventh (7th)
anniversary of the Issuance Date or (ii) ten (10) days after receipt by Holder
of certified audited financial statements of Company for the fiscal year ending
December 31, 2003.
2.2 MANNER OF EXERCISE. This Warrant is exercisable in whole or
in part at the Exercise Price per share of Common Stock issuable hereunder
payable in cash, or by cashier's check or wire transfer payable to the order of
Company, or by cancellation of any then existing indebtedness owed by Company or
any of its Subsidiaries including but not limited to New West Acquisition Corp.
to the Holder or by use of Appreciation Currency, or any combination thereof,
subject to adjustment as provided in Section 3 hereof. If Holder uses any
indebtedness of Company or its Subsidiaries, Holder shall be entitled to utilize
the full unpaid principal and interest amount regardless of whether such
indebtedness has been discharged in bankruptcy or is otherwise uncollectible.
Upon surrender of this Warrant with the annexed Subscription Form duly executed,
together with payment of the Exercise Price for the shares of Common Stock
purchased hereunder (and any applicable transfer taxes) at Company's principal
executive office in Houston, Texas, the Holder shall be entitled to receive a
certificate or certificates for the shares of Common Stock so purchased. In the
event that Holder elects to utilize Appreciation Currency, the number of shares
of Common Stock to be issued shall be computed by multiplying the number of
Warrants surrendered for issuance by a fraction the numerator of which is the
difference between the Fair Market Value per share and the Exercise Price and
the denominator of which is the Fair Market Value per share. The purchase rights
represented by this Warrant are exercisable at the option of the Holder hereof,
in whole or in part (but not as to fractional shares of Common Stock), during
any period in which this Warrant may be exercised as set forth above. In the
case of the purchase of less than all the shares of Common Stock purchasable
under this Warrant, Company shall cancel this Warrant upon the surrender hereof
and shall execute and deliver to the Holder a new Warrant of like tenor for the
balance of the shares of Common Stock purchasable hereunder.
2.3 DELIVERY OF STOCK CERTIFICATES. As soon as practicable, but
not exceeding ten business days, after complete or partial exercise of this
Warrant, Company, at its expense, shall cause to be issued in the name of the
Holder and deliver to the Holder a certificate or certificates for the number of
fully paid and nonassessable shares of Common Stock purchased hereunder or such
other stock or securities or property or combination thereof, together with
cash, in lieu of any fraction of a share of Common Stock, equal to such fraction
of the then current fair market value of one full share of Common Stock to which
the Holder shall be entitled upon such exercise, determined in accordance with
Section 3 hereof.
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<PAGE>
2.4 RECORD DATE OF TRANSFER OF SHARES. Irrespective of the date
of issuance and delivery of certificates for any Common Stock or securities
issuable upon the exercise of this Warrant, each person (including a
corporation) in whose name any such certificate is to be issued shall for all
purposes be deemed to have become the holder of record of the Common Stock or
other securities represented thereby immediately prior to the close of business
on the date on which a duly executed Subscription Form containing notice of
exercise of this Warrant and payment for the number of shares of Common Stock as
to which this Warrant shall have been exercised shall have been delivered to
Company.
2.5 VESTING OF CERTAIN WARRANT SHARES. Subject to adjustment, as
set forth hereinbelow, this Warrant shall be exercisable into up to 30,000
shares of Common Stock, up to 15,000 of which are initially exercisable. This
Warrant may be exercised into up to 30,000 shares of Common Stock if, prior to
December 31, 1998, Company has not sold its Common Stock to the public pursuant
to an effective registration statement in which the net proceeds after payment
of commissions and discounts were more than Ten Million Dollars ($10,000,000)
("IPO") and the per share offering price was at least Forty Dollars ($40.00) or
the average price per share following such IPO for any ten (10) successive
trading days prior to December 31, 1998, was at least Forty-Five Dollars
($45.00).
3. PROTECTION AGAINST DILUTION.
3.1 ADJUSTMENT FOR STOCK SPLITS AND COMBINATIONS. If Company at
any time or from time to time after the Issuance Date effects a subdivision of
the outstanding shares of Common Stock, the Exercise Price then in effect
immediately before the subdivision shall be proportionately decreased, and
conversely, if Company at any time or from time to time after the Issuance Date
combines the outstanding shares of Common Stock, the Exercise Price then in
effect immediately before the combination shall be proportionately increased.
Any adjustment under this Section 3.1 shall become effective as of the date and
time the subdivision or combination becomes effective.
3.2 ADJUSTMENT FOR CERTAIN DIVIDENDS AND DISTRIBUTIONS. In the
event Company at any time or from time to time after the Issuance Date makes, or
fixes a record date for the determination of holders of Common Stock entitled to
receive, a Common Stock dividend or other distribution payable in Common Stock,
then and in each such event the Exercise Price then in effect shall be decreased
as of the time of such issuance or, in the event such a record date is fixed, as
of the close of business on such record date, by multiplying the Exercise Price
then in effect by a fraction (a) the numerator of which is the total number of
shares of Common Stock issued and outstanding immediately prior to the time of
such issuance or the close of business on such record date, and (b) the
denominator of which shall be the total number of shares of Common Stock issued
and outstanding immediately prior to the time of such issuance or the close of
business on such record date plus the number of shares of Common Stock issuable
in payment of such dividend or distribution; provided, however, that if such
record date is fixed and such dividend is not fully paid, or if such
distribution is not fully made on the date fixed therefor, the Exercise Price
shall be recomputed to reflect that such dividend was not fully paid or that
such distribution was not fully made as of the close of
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<PAGE>
business on such record date and thereafter the Exercise Price shall be adjusted
pursuant to this Section 3.2 as of the time of actual payment of such dividends
or distributions.
3.3 ADJUSTMENTS FOR OTHER DIVIDENDS AND DISTRIBUTIONS. In the
event Company at any time or from time to time after the Issuance Date makes, or
fixes a record date for the determination of holders of Common Stock entitled to
receive, a dividend or other distribution payable in securities of Company other
than shares of Common Stock, then and in each such event provision shall be made
so that the Holder shall receive upon exercise of this Warrant, in addition to
the number of shares of Common Stock receivable thereupon, the amount of
securities of Company which the Holder would have received had its Warrant been
exercised into Common Stock on the date of such event and had it thereafter,
during the period from the date of such event to and including the date of
exercise, retained such securities receivable by it as aforesaid during such
period, subject to all other adjustments called for during such period under
this Section 3 with respect to the rights of the Holder of this Warrant.
3.4 ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE AND SUBSTITUTION.
If the Common Stock issuable upon the exercise of this Warrant is changed into
the same or a different number of shares of any class or classes of stock,
whether by recapitalization, reclassification or otherwise (other than a
subdivision or combination of shares or stock dividend or a reorganization,
merger, consolidation or sale of assets, provided for elsewhere in this Section
3), then and in any such event the Holder shall have the right thereafter, upon
exercise of this Warrant to receive the kind and amount of stock and other
securities and property receivable upon such reorganization or other change, in
an amount equal to the amount that the Holder would have been entitled to had
the Holder immediately prior to such recapitalization, reclassification or
exchange exercised this Warrant, but only to the extent this Warrant is actually
exercised, all subject to further adjustment as provided herein.
3.5 REORGANIZATIONS, MERGERS, CONSOLIDATIONS OR SALE OF ASSETS.
If at any time or from time to time there is a capital reorganization of the
Common Stock (other than a subdivision, combination, recapitalization,
reclassification or exchange of the Common Stock provided for elsewhere in this
Section 3) or merger or consolidation of Company with or into another entity, or
the sale of all or substantially all of Company's properties and assets to any
other person then, as a part of such reorganization, merger, consolidation or
sale, provision shall be made so that the Holder shall thereafter be entitled to
receive, upon exercise of this Warrant (and only to the extent this Warrant is
exercised), the number of shares of stock or other securities or property of
Company, or of the successor entity resulting from such merger or consolidation
or sale, to which a holder of Common Stock, or other securities, deliverable
upon the exercise of this Warrant would otherwise have been entitled on such
capital reorganization, merger, consolidation, or sale. In any such case,
appropriate adjustments shall be made in the application of the provisions of
this Section 3 (including adjustment of the Exercise Price then in effect and
number of shares purchasable upon exercise of this Warrant) which shall be
applicable after such events; provided, however, that any such adjustments shall
be made so as to insure that the provisions of this Section 3 applicable after
such events shall be as equivalent as may be practicable to the provisions of
this Section 3 applicable before such events.
5
<PAGE>
3.6 ADJUSTMENT FOR ISSUANCE OR SALE OF COMMON STOCK AT LESS
THAN FAIR MARKET VALUE.
(a) If at any time or from time to time Company
issues or sells, or is deemed by the express provisions of this Section 3.6 to
have issued or sold, Additional Shares, other than as a dividend or other
distribution on any class of stock as provided in Section 3.2 above and other
than upon a combination or subdivision of shares of Common Stock as provided in
Section 3.1 above, for an Effective Price less than Fair Market Value, then and
in each such case the then existing Exercise Price shall be reduced, but not
increased, as of the opening of business on the day of such issue or sale (or
such deemed issue or sale), to a price computed by dividing: (i) the sum of (A)
the number of shares of Common Stock outstanding, immediately prior to that
issue or sale, multiplied by the Exercise Price in effect immediately before
that issue or sale and (B) the consideration, if any, received by Company on
that issue or sale; by (ii) the number of shares of Company's Common Stock
outstanding immediately after that issue or sale.
(b) For the purpose of making any adjustment
required under this Section 3.6, the consideration received by Company for any
issue or sale of securities shall (i) to the extent it consists of cash, be
computed at the aggregate sales price paid in cash; (ii) to the extent it
consists of property other than cash, be computed at the fair value of that
property as determined in good faith by the Board of Directors; and (iii) if
Additional Shares, Convertible Securities or rights or options to purchase
either Additional Shares or Convertible Securities are issued or sold together
with other stock or securities or other assets of Company for a consideration
which covers both, be computed as the portion of the consideration so received
that may be reasonably determined in good faith by the Board of Directors to be
allocable to such Additional Shares, Convertible Securities or rights or
options.
(c) For the purpose of the adjustment required under
this Section 3.6, if Company issues or sells Convertible Securities or rights or
options to purchase Additional Shares, then in each such case if the Effective
Price of such Additional Shares shall be less than the Fair Market Value,
Company shall be deemed to have issued at the time of issuance of such
Convertible Securities, rights or options, the maximum number of Additional
Shares (determined without regard to adjustment provisions similar to those
contained in this Section 3) issuable upon conversion or exercise thereof and to
have received as consideration for the issuance of such shares an amount equal
to the total amount of the consideration, if any, received by Company for the
issuance of such Convertible Securities, rights or options, plus, in the case of
such rights or options, the minimum amount of consideration, if any, payable to
Company upon the exercise of such rights or options, and, in the case of.
Convertible Securities the minimum amount of consideration, if any, payable to
Company upon conversion (other than by cancellation of liabilities or
obligations evidenced by such Convertible Securities). No further adjustment of
the Exercise Price, adjusted upon the issuance of such Convertible Securities,
rights or options, shall be made as a result of the actual issuance of
Additional Shares upon exercise of such Convertible Securities, rights or
options. For purposes of this Section 3.6(c), the date as of which the Exercise
Price shall be computed shall be the
6
<PAGE>
earlier of the date upon which (i) Company shall enter into a firm contract for
the issuance of such Convertible Securities, rights or options provided that
such Convertible Securities, rights or options are actually issued or (ii) such
Convertible Securities, rights or options, are actually issued.
(d) For the purpose of the adjustments required
under this Section 3.6, if Company issues or sells any rights or options for the
purchase of Convertible Securities, then in each such case if the Effective
Price of the Additional Shares underlying such Convertible Securities is less
than Fair Market Value, Company shall be deemed to have issued at the time of
the issuance of such rights or options the maximum number of Additional Shares
(determined without regard to adjustment provisions similar to those contained
in this Section 3) issuable upon conversion of the total amount of Convertible
Securities covered by such rights or options and to have received as
consideration for the issuance of such Additional Shares an amount equal to the
amount of consideration, if any, received by Company for the issuance of such
rights or options, plus the minimum amount of consideration, if any, payable to
Company upon the exercise of such rights or options and plus the minimum amount
of consideration, if any, payable to Company (other than by cancellation of
liabilities or obligations evidenced by such Convertible Securities) upon
exercise of the conversion or purchase rights of such Convertible Securities. No
further adjustment of the Exercise Price, adjusted upon the issuance of such
rights or options, shall be made as a result of the actual issuance of the
Convertible Securities upon the exercise of such rights or options or upon the
actual issuance of Additional Shares upon exercise of the conversion or purchase
rights of such Convertible Securities. For purposes of this Section 3.6(d), the
date as of which the Exercise Price shall be computed shall be the earlier of
the date upon which Company shall (i) enter into a firm contract for the
issuance of such rights or other options, provided that such rights or other
options are actually issued or (ii) issue such rights or other options.
(e) For the purpose of the calculation described in
this Section 3.6, the number of shares of Common Stock outstanding shall
include, in addition to the number of shares of Common Stock actually
outstanding: (A) the number of shares of Common Stock into which the then
outstanding Convertible Securities could be converted if fully converted on the
day next preceding the issue or sale of Additional Shares; (B) the number of
shares of Common Stock issuable upon the exercise of warrants issued by Company
on or prior to the Issuance Date or issued by Company subsequent to the Issuance
Date pursuant to an obligation to do so arising under a written agreement
entered into by Company prior to the Issuance Date; (C) the number of shares of
Common Stock issuable upon exercise of stock options granted to employees but
excluded from the definition of-Additional Shares contained herein or stock
options issued to directors, provided that all such options are exercisable on
the day next preceding the issue or sale of Additional Shares for which such
calculation is made and provided further that their conversion price is more
than 90% of the Effective Price of the sale of Additional Shares which causes an
adjustment pursuant to Section 3.6; and (D) the number of shares of Common Stock
which could be obtained through the exercise or conversion of rights, options
and convertible securities on the day next preceding the issue or sale of
Additional Shares at their then existing respective conversion price, provided
that such shares of Common Stock prior thereto have been deemed Additional
Shares and such rights,
7
<PAGE>
options and convertible securities are exercisable or convertible on the day
next preceding the issue or sale of Additional Shares for which such calculation
is made.
3.7 ADJUSTMENT IN NUMBER OF SHARES. Upon each adjustment of the
Exercise Price pursuant to the provisions of this Section 3, the number of
shares of Common Stock issuable upon the exercise of this Warrant shall be
adjusted to the nearest full share by multiplying the Exercise Price in effect
immediately prior to such adjustment by the number of shares of Common Stock
issuable upon exercise of this Warrant immediately prior to such adjustment and
dividing the product so obtained by the adjusted Exercise Price.
3.8 OFFICER'S CERTIFICATE OF ADJUSTMENT. In any case of an
adjustment or readjustment of the Exercise Price or the number of shares of
Common Stock, or other securities issuable upon exercise of this Warrant, the
Chief Financial Officer of Company shall compute such adjustment or readjustment
in accordance with the provisions hereof and prepare a certificate showing such
adjustment or readjustment, and shall mail such certificate, by first class
mail, postage prepaid, to the Holder of this Warrant at the Holder's address as
shown in Company's books. The certificate shall set forth such adjustment or
readjustment, showing in detail the facts upon which such adjustment or
readjustment is based including a statement of (a) the consideration received or
deemed to be received by Company for any Common Stock issued or sold or deemed
to have been issued or sold; (b) the Exercise Price at the time in effect; (c)
the number of Additional Shares; and (d) the type and amount, if any, of other
property which at the time would be received upon exercise of this Warrant.
4. REGISTRATION RIGHTS. The shares of Common Stock issued on exercise
of this Warrant are subject to the terms and conditions of the Registration
Rights Agreement.
5. TRANSFER OF WARRANT.
5.1 RESTRICTIONS ON TRANSFER. This Warrant is subject to
restrictions on transfer upon the conditions specified in (i) Article 6 of the
Agreement, which conditions are intended to insure compliance with the
provisions of the Securities Act of 1933, as amended, and state securities laws
and (ii) that certain Stockholders Agreement as amended by a Fourth Amendment to
Stockholders Agreement. A copy of the Agreement and such Stockholders Agreement
shall be furnished to the Holder upon written request made to Company at the
address set forth in Section 8.2.
5.2 TRANSFER. Subject to the terms hereof, this Warrant and all
rights hereunder are transferable, in whole but not in part, on the books of
Company, maintained for such purpose at its principal office, by the Holder
hereof in person or by duly authorized attorney, upon surrender of this Warrant,
the notice of assignment in the form of Exhibit B properly endorsed and upon
payment of any necessary transfer tax or other governmental charge imposed upon
such transfer. Each taker and the holder of this Warrant, by taking or holding
the same, consents and agrees that this Warrant shall be deemed negotiable and
that, the Holder hereof may be treated by Company and all other persons dealing
with this Warrant, as the absolute owner hereof for any purpose and as the
person entitled to exercise the rights
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<PAGE>
represented hereby, or to the transfer hereof on the books of Company, any
notice to the contrary notwithstanding; but until such transfer on such books,
Company may treat the Holder hereof as the owner for all purposes. Not
withstanding the above, Holder shall have the right, but not the obligation, to
sell to third parties participating interests in the Warrant; PROVIDED, HOWEVER,
that Holder shall remain the sole record holder hereof, unless this Warrant and
all rights hereunder have been transferred in accordance with the provisions set
forth above.
5.3 EXCHANGE. This Warrant is exchangeable at the office of
Company referred to above for a Warrant or Warrants for the same aggregate
number of shares of Common Stock issuable upon exercise hereof, each new Warrant
to represent the right to purchase such number of shares of Common Stock as the
Holder hereof shall designate at the time of such exchange.
6. PAYMENT OF TAXES. All shares of Common Stock issuable upon exercise
hereof, issued upon the exercise of this Warrant shall be validly issued, fully
paid and nonassessable, and Company shall pay all taxes and other governmental
charges that may be imposed in respect of the issue or delivery thereof. Company
shall not be required, however, to pay any tax or other charge imposed in
connection with any transfer involved in the issuance and delivery of any
certificate for the shares of Common Stock issued upon exercise of this Warrant
in any name other than that of the Holder, and in such case Company shall not be
required to issue or deliver any stock certificate until such tax or other
charge has been paid or it has been established to Company's satisfaction that
no tax or other charge is due.
7. AFFIRMATIVE DUTIES OF COMPANY.
7.1 RESERVATION OF COMMON STOCK. Company shall at all times
reserve and keep available out of its authorized but unissued shares of Common
Stock, solely for the purpose of issuance upon the exercise of this Warrant,
such number of shares of Common Stock as shall be issuable upon the exercise
hereof. Company covenants and agrees that, upon exercise of this Warrant and
payment of the Exercise Price therefor, all shares of Common Stock issuable upon
such exercise shall be duly and validly issued, fully paid and nonassessable. No
shareholder of Company has or shall have any preemptive rights to subscribe for
the shares of Common Stock issued or issuable upon exercise of this Warrant that
has not been waived.
7.2 NO DILUTION OR IMPAIRMENT. Company will not, by amendment of
its certificate of incorporation or through reorganization, consolidation,
merger, dissolution, sale of assets or any other voluntary action, avoid or seek
to avoid the observance or performance of any of the terms of this Warrant, but
will at all times, in good faith, assist all such action as may be necessary or
appropriate in order to protect the rights of the Holder against dilution or
other impairment. Without limiting the generality of the foregoing, Company will
take all such action as may be necessary or appropriate in order that Company
may validly and legally issue fully paid and nonassessable shares of Common
Stock upon the exercise of this Warrant.
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7.3 LISTING ON EXCHANGE. If Company's initial public offering of
Common Stock pursuant to a registration statement that was declared effective by
the Securities and Exchange Commission pursuant to the Securities Act of 1933,
as amended, shall occur during the period during which this Warrant may be
exercised, then, as soon as practicable following such declaration of
effectiveness, Company, at its own expense and in accordance with applicable
law, shall list or file for authorization upon notice of issuance with any stock
exchange or automated quotation system, as determined by Company's board of
directors, and shall maintain and, when necessary, increase such listing or
amend such filing for the shares of Common Stock issued or, to the extent
permissible under any stock exchange's rules, issuable upon exercise of this
Warrant for so long as any shares of Common Stock shall be so listed during the
period in which this Warrant may be exercised.
8. NOTICES TO WARRANT HOLDERS.
8.1 NOTICES TO BE GIVEN. Nothing contained in this Warrant shall
be construed as conferring upon the Holder hereof the right to vote or to
consent or to receive notice as a shareholder in respect of any meetings of
shareholders for the election of directors or any other matter or as having any
rights whatsoever as a shareholder of Company. If, however, at any time prior to
the expiration of this Warrant and prior to its exercise, any of the following
events shall occur:
(a) Company shall take a record of the holders of
its shares of Common Stock for the purpose of entitling them to receive a
dividend or distribution;
(b) Company shall offer to the holders of its Common
Stock any additional shares of capital stock of Company or securities
convertible into or exchangeable for shares of capital stock of Company, or any
option, right or warrant to subscribe therefor; or
(c) a dissolution, liquidation or winding up of
Company (other than in connection with a consolidation or merger) or a sale of
all or substantially all of its property, assets and business as an entirety
shall be proposed; then Company shall give written notice of such event to the
Holder of this Warrant at least 15 days prior to the date fixed as a record date
or the date of closing the transfer books for the determination of the
shareholders entitled to receive such dividend, distribution, convertible or
exchangeable securities or subscription rights, or entitled to vote on such
proposed dissolution, liquidation, winding up or sale. Such notice shall specify
such record date or the date of closing the transfer books, as the case may be.
Failure to give such notice of any defect therein shall not affect the. validity
of any action taken in connection with the declaration or payment of any such
dividend, or the issuance of any convertible or exchangeable securities, or
subscription rights, options or warrants, or any proposed dissolution,
liquidation, winding up or sale.
8.2 NOTICES. Except as otherwise provided herein, any notice or
demand which, by the provisions hereof, is required or which may be given to or
served upon the parties hereto shall be in writing and, if by telegram, telecopy
or telex, shall be deemed to have been validly served, given or delivered when
sent, if by personal delivery, shall be deemed to have
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<PAGE>
been validly served, given or delivered upon actual delivery and, if mailed,
shall be deemed to have been validly served, given or delivered three (3)
business day after deposit in the United States mails, as registered or
certified mail, with proper postage prepaid and addressed to the party or
parties to be notified, at the following addresses (or such other addressees) as
a party may designate for itself by like notice):
If to Holder:
Marwit Capital Company, L.P.
180 Newport Center Drive, Suite 200
Newport Beach, California 92660
Attention: Matthew Witte
Facsimile: 714/720-8077
With copy to:
Arter & Hadden
5 Park Plaza, Suite 1000
Irvine, California 92614-9809
Attention: Michael P. Ridley, Esq.
Facsimile: 714/833-9604
If to Company:
Travis International, Inc.
3000 Weslayan, Suite 350
Houston, Texas 77027
Attention: Kirby Attwell
Facsimile: 713/622-7477
With a copy to:
Mayor, Day, Caldwell & Keeton
700 Louisiana, Suite 1900
Houston, Texas 77002-2778
Attention: B. Scott Aitken, Esq.
Facsimile: 713/225-7047
9. Miscellaneous.
9.1 REPLACEMENT OF WARRANTS. Upon receipt of evidence reasonably
satisfactory to Company of the ownership of and the loss, theft, destruction or
mutilation of this Warrant and (in the case of loss, theft or destruction) upon
delivery of an indemnity agreement in an amount reasonably satisfactory to
Company, or (in the case of mutilation) upon surrender
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<PAGE>
and cancellation of the mutilated Warrant, Company will execute and deliver, in
lieu thereof, a new Warrant of like tenor.
9.2 LAW GOVERNING. This Warrant is delivered in the State of
California and shall for all purposes be construed and enforced in accordance
with, and governed by, the internal laws of the State of California without
giving effect to principles of conflict of laws. Company and Holder hereby agree
that all actions or proceedings arising directly or indirectly hereunder,
whether instituted by Holder or Company, may, at the option of Company be
litigated in courts having situs within the County of Orange in the State of
California, and Company hereby expressly consents to the jurisdiction of any
local, state or federal court located within said state and county.
9.3 REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties given by Company pursuant to the Agreement is true and correct in all
material respects as of the date of this Warrant and such representations and
warranties are hereby incorporated herein by this reference as though set forth
in their entirety herein.
9.4 SUCCESSORS. All of the covenants, agreements, representations
and warranties contained in this Warrant shall bind the parties hereto and their
respective heirs, executors, administrators, distributees, successors and
assigns.
9.5 CHANGE, WAIVER. Neither this Warrant nor any term hereof may be
changed, waived, discharged or terminated orally but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought.
9.6 HEADINGS. The section headings in this Warrant are inserted for
purposes of convenience only and shall have no substantive effect.
IN WITNESS WHEREOF, Travis International, Inc. has caused this Warrant to
be signed by its duly authorized officer and to be dated as of October 9TH,
1996.
TRAVIS INTERNATIONAL, INC.
a Delaware corporation
By:__________________________________
_____________________________________
Its: President
WITNESS:
______________________________
EXHIBIT 3.4
REGISTRATION RIGHTS AGREEMENT
THIS AGREEMENT is made as of the 28TH day of May 1992 by and among
Travis International, Inc., a Delaware corporation (the "Company"), and the
undersigned security holders of the Company (the "Stockholders").
BACKGROUND
The Stockholders are persons and entities that own or are acquiring
contemporaneously with the execution of this Agreement shares of Common Stock of
the Company (collectively, the "Common Stock"). Certain of the Stockholders are
also receiving on this date options to purchase Common Stock (the "Options").
The Company has agreed to provide the registration rights provided for in this
Agreement as an inducement for the Stockholders to enter into other agreements
contemporaneously with this Agreement.
WITNESSETH:
The parties hereto, each intending to be legally bound and in
exchange for the mutual covenants herein, agree as follows:
1. DEMAND REGISTRATIONS.
(a) REQUESTS FOR REGISTRATION. At any time, each Significant
Stockholder (defined below) may demand registration (a 'Demand Registration")
under the Securities Act of 1933, as amended (the "1933 Act"), of all or any
portion of the Registrable Securities (defined below) owned by such Significant
Stockholder. In order to accomplish such demand, a Significant Stockholder shall
send written notice of the demand to the Company, and such notice shall specify
the number of Registrable Securities sought to be registered. The Significant
Stockholders each have the right to one Demand Registration; provided, however,
that the Company shall only be required to proceed with a Demand Registration
requested by a Significant Stockholder if the number of Registrable Securities
that the Stockholders (including the Significant Stockholder requesting the
Demand Registration) and the Company shall have elected to include in such
Demand Registration pursuant to this Section 1 has an aggregate fair market
value, in the opinion of an investment banker acceptable to the Significant
Stockholder requesting the Demand Registration and to the Company, in excess of
$5 million.
(b) PROCEDURE. Within 10 days after receipt of such a demand, the
Company will give written notice of such requested registration to all other
holders of Registrable Securities and will include in such registration, subject
to the allocation provisions below, all other Registrable Securities with
respect to which the Company has received written requests for inclusion within
20 days after the Company's mailing of such notice, plus any securities of the
Company that the Company chooses to include on its own behalf.
<PAGE>
(c) EXPENSES. In a Demand Registration, the Company will pay the
Registration Expenses (defined below), but the Underwriting Commissions (defined
below) will be shared by the Company and those holders of Registrable Securities
whose Registrable Securities are included in the Demand Registration in
proportion to any securities included on their behalf.
(d) PRIORITY ON DEMAND REGISTRATIONS. If a Demand Registration is
underwritten and the managing underwriters advise the Company in writing that in
their opinion the number of Registrable Securities requested to be included
exceeds the number that can be sold in such offering, at a price reasonably
related to fair value, the Company will include in such Demand Registration (i)
first, the Registrable Securities requested to be included in such Demand
Registration by all Stockholders, including the Significant Stockholder making
the demand, pro rata on the basis of the number of Registrable Securities owned,
and (ii) second, any securities that the Company desires to include on its own
behalf. A Demand Registration shall not be considered to be a Significant
Stockholder's one Demand Registration under Section l(a), and the Company shall
pay the Registration Expenses of such Demand Registration, if (i) as a result of
the foregoing allocation, the Significant Stockholder that initiated the Demand
Registration is not able to register and sell in the Demand Registration at
least 75% of the Registrable Securities sought to be included in the Demand
Registration by such Significant Stockholder, as specified in such Stockholder's
notice by which the demand was made, (ii) the gross proceeds of the securities
included in the Demand Registration on behalf of the Company constitute at least
20% of the total gross proceeds of the Demand Registration, or (iii) the
registration statement requested by such Stockholder does not become effective
for any reason.
(e) SELECTION OF UNDERWRITERS. If any Demand Registration is
underwritten, the selection of investment banker(s) and manager(s) and the other
decisions regarding the underwriting arrangements for the offering will be made
by the Significant Stockholder initiating such registration; provided, however,
that the selection of the investment banker(s) and manager(s) shall be
reasonably acceptable to the Company.
(f) RESTRICTIONS ON DEMAND REGISTRATIONS. The Company will not be
obligated to effect any Demand Registration within six months after the
effective date of a previous Demand Registration or any registration in which
the holders of Registrable Securities were given piggyback rights pursuant to
Section 2 below.
(g) CONTEMPORANEOUS DEMAND. If any holder of the Company's
securities that is not a holder of Registrable Securities under this Agreement
exercises demand registration rights to have the Company register its securities
under the 1933 Act (a "Non-Stockholder Registration") within a period of 30 days
before or after the time any Significant Stockholder shall have requested a
Demand Registration, then (i) the holders of Registrable Securities that desire
to be included in the Non-Stockholder Registration and the holders of securities
other than Registrable Securities that have registration rights with respect to
such a registration shall be entitled to participate in the Non-Stockholder
Registration on a pro rata basis, according to the number of shares owned by the
holders seeking to have securities included in such registration, (ii) the
Company will pay all of the Registration Expenses of the Non-Stockholder
Registration,
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<PAGE>
and (iii) the NonStockholder Registration shall not count as a Demand
Registration with respect to any Significant Stockholder that shall have
requested a Demand Registration within such time period unless the Significant
Stockholder is able to register and sell at least 75% of the Registrable
Securities sought to be registered by that Stockholder in its Demand
Registration.
2. PIGGYBACK REGISTRATION.
(a) RIGHT TO PIGGYBACK. Whenever the Company proposes to register
any of its securities under the 1933 Act (other than a Demand Registration), and
the registration form to be used may be used for the registration of Registrable
Securities (a "Piggyback Registration"), the Company will give prompt written
notice to all holders of Registrable Securities and will include in such
Piggyback Registration, subject to the allocation provisions below, all
Registrable Securities with respect to which the Company has received written
requests for inclusion within 20 days after the Company's mailing of such
notice. The Company shall not select a form of registration statement that
imposes, for its use, limitations on the maximum value or number of securities
to be registered if these limitations would preclude registration of the
Registrable Securities that the Company has been requested to include in such
registration.
(b) EXPENSES. In a Piggyback Registration, the Company will pay the
Registration Expenses, but the Underwriting Commissions will be shared by the
Company and those holders of Registrable Securities whose Registrable Securities
are included in the Piggyback Registration in proportion to any securities
included on their behalf.
(c) PRIORITY ON PRIMARY REGISTRATIONS. If a Piggyback Registration
is an underwritten primary registration on behalf of the Company, and the
managing underwriters advise the Company in writing that in their opinion the
number of securities requested to be included in such registration exceeds the
number that can be sold in such offering, at a price reasonably related to fair
value, the Company will allocate the securities to be included as follows:
first, the securities the Company proposes to sell on its own behalf, and
second, Registrable Securities requested to be included in such registration,
pro rata on the basis of the number of Registrable Securities owned among the
Selling Stockholders.
(d) PRIORITY ON SECONDARY REGISTRATIONS. If a Piggyback Registration
is initiated as an underwritten secondary registration on behalf of holders of
the Company's securities (other than a Demand Registration pursuant to Section
1), and the managing underwriters advise the Company in writing that in their
opinion the number of securities requested to be included in such registration
exceeds the number that can be sold in such offering, at a price reasonably
related to fair value, the Company will allocate the securities to be included
as follows: first, the securities requested to be included by the holders
initiating such registration; and second, Registrable Securities requested to be
included in such registration, pro rata on the basis of the number of
Registrable Securities owned among the Selling Stockholders.
(e) SELECTION OF UNDERWRITERS. If any Piggyback Registration is
underwritten, the selection of investment banker(s) and manager(s) and the other
decisions regarding the underwriting arrangements for the offering will be made
by the Company, if the
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<PAGE>
registration is under Section 2(c), or by the holders initiating such
registration, if the registration is under Section 2(d); provided, however, that
any selection of the investment banker(s) and manager(s) by such holders shall
be reasonably acceptable to the Company.
3. REGISTRATION ON FORM S-3.
The Company shall use its best efforts to qualify for registration
on Form S-3 or any comparable or successor form or forms; and to that end, the
Company shall register (whether or not required by law to do so) its Common
Stock under the Securities Exchange Act of 1934, as amended, in accordance with
the provisions of that Act as soon as possible following the effective date of
the first registration of any of the Company's securities under the 1933 Act.
After the Company has so qualified, in addition to the rights contained in the
foregoing provisions of this Registration Rights Agreement, each holder of
Registrable Securities shall have the right to request registration of its
Registrable Securities on Form S-3 at the Company's expense, provided that (a)
the Registrable Securities requested for registration by such holder shall have
a market value of at least $1 million and (b) each holder shall be entitled to
only two such registrations during any 12-month period. When the Company
receives notice of any holder's request for a registration on Form S-3, it shall
send notice of such proposed registration to all other holders of Registrable
Securities, and such proposed registration shall be governed by the procedure
set forth in Section 2, except that if the proposed registration is requested by
a Significant Stockholder, such proposed registration shall be governed by the
procedure set forth in Section 1.
4. HOLDBACK AGREEMENTS.
None of the Stockholders or the Company shall effect any public sale
or distribution of equity securities of the Company or any securities
convertible into or exchangeable or exercisable for such securities during the
seven days prior to and the 90 days after any underwritten Demand Registration
or underwritten Piggyback Registration has become effective (except as part of
such underwritten registration).
5. REGISTRATION PROCEDURES.
Whenever the holders of Registrable Securities have requested that
any Registrable Securities be registered pursuant to Section 1 or 2 of this
Agreement, the Company will as expeditiously as possible:
(a) prepare and file with the Securities and Exchange Commission a
registration statement with respect to such Registrable Securities and use its
best efforts to cause such registration statement to become effective (provided
that before filing a registration statement or prospectus or any amendments or
supplements thereto, the Company will make available to each Selling Stockholder
or its counsel copies of all such documents proposed to be filed);
4
<PAGE>
(b) prepare and file with the Securities and Exchange Commission
such amendments and supplements to such registration statement and the
prospectus used in connection therewith as may be necessary to keep such
registration statement effective for such period as may be required by the rules
and regulations under the 1933 Act;
(c) furnish to each Selling Stockholder such number of copies of
such registration statement, each amendment and supplement thereto and the
prospectus included in such registration statement (including each preliminary
prospectus), and such other documents as such seller may reasonably request in
order to facilitate the disposition of the Registrable Securities owned by such
seller;
(d) use its best efforts to register or qualify such Registrable
Securities under such other securities or blue sky laws of such jurisdictions as
the managing underwriter(s) may reasonably request;
(e) notify each Selling Stockholder at any time when a prospectus
relating thereto is required to be delivered under the 1933 Act within the
period that the Company is required to keep the registration statement effective
of the happening of any event as a result of which the prospectus included in
such registration statement contains an untrue statement of a material fact or
omits any fact necessary to make the statement therein not misleading, and, at
the request of any such seller, the Company will prepare a supplement or
amendment to such prospectus so that, as thereafter delivered to the purchasers
of such Registrable Securities, such prospectus will not contain an untrue
statement of a material fact or omit to state any fact necessary to make the
statement therein not misleading;
(f) cause all such Registrable Securities to be listed or included
on securities exchanges on which similar securities issued by the Company are
then listed or included;
(g) provide a transfer agent and registrar for all such Registrable
Securities not later than the effective date of such registration statement;
(h) enter into such customary agreements (including an underwriting
agreement in customary form) and take such other customary actions as may be
reasonably necessary to expedite or facilitate the disposition of such
Registrable Securities;
(i) obtain a "comfort" letter addressed to the Company from its
independent public accountants in customary form and covering such matters of
the type customarily covered by "comfort" letters; and
(j) make available for inspection by any Selling Stockholder, any
underwriter participating in any disposition pursuant to such registration
statement, and any attorney, accountant or other agent retained by any such
seller or underwriter, all financial and other records, pertinent corporate
documents and properties of the Company, and cause the Company's officers,
directors and employees to supply all information reasonably requested by any
such seller, underwriter, attorney, accountant or agent in connection with such
registration statement.
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<PAGE>
6. INDEMNIFICATION.
(a) The Company hereby indemnifies, to the extent permitted by law,
each Stockholder, its officers and directors, and each person who controls such
holder (within the meaning of the 1933 Act), against all losses, claims,
damages, liabilities and expenses arising out of or resulting from any untrue or
alleged untrue statement of material fact contained in any registration
statement, prospectus or preliminary prospectus or any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading except insofar as the
same are caused by or contained in any information furnished in writing to the
Company by such holder expressly for use therein or by any such holder's failure
to deliver a copy of the registration statement or prospectus or any amendments
or supplements thereto after the Company has furnished such holder with a
sufficient number of copies of the same. In connection with an underwritten
offering, the Company will indemnify the underwriters, their officers and
directors, and each person who controls such underwriters (within the meaning of
the 1933 Act) to the same extent as provided above with respect to the
indemnification of the Stockholders.
(b) In connection with any registration statement in which a Selling
Stockholder is participating, each such holder will furnish to the Company in
writing such information as is reasonably requested by the Company for use in
any such registration statement or prospectus and will indemnify, to the extent
permitted by law, the Company, its directors and officers and each person who
controls the Company (within the meaning of the 1933 Act) against any losses,
claims, damages, liabilities and expenses resulting from any untrue or alleged
untrue statement of material fact or any omission or alleged omission of a
material fact required to be stated in the registration statement or prospectus
or any amendment thereof or supplement thereto or necessary to make the
statements therein not misleading, but only to the extent that such untrue
statement or omission is contained in, or omitted from, information so furnished
in writing by such holder specifically for use in preparing the registration
statement. Notwithstanding the foregoing, the liability of a Selling Stockholder
under this Section 6(b) shall be limited to an amount equal to the net proceeds
actually received by the Selling Stockholder from the sale of Registrable
Securities covered by the registration statement.
(c) Any person entitled to indemnification hereunder will (i) give
prompt notice to the indemnifying party of any claim with respect to which it
seeks indemnification and (ii) unless in such indemnified party's reasonable
judgment a conflict of interest between such indemnified and indemnifying
parties may exist with respect to such claim, permit such indemnifying party to
assume the defense of such claim with counsel reasonably satisfactory to the
indemnified party. If such defense is assumed, the indemnifying party will not
be subject to any liability for any settlement made without its consent (but
such consent win not be unreasonably withheld). An indemnifying party who is not
entitled, or elects not, to assume the defense of a claim will not be obligated
to pay the fees and expenses of more than one counsel for all parties
indemnified by such indemnifying party with respect to such claim, unless in the
reasonable judgment of any indemnified party a conflict of interest may exist
between such indemnified party and any other of such indemnified parties with
respect to such claim, in which
6
<PAGE>
case such indemnifying party shall pay the fees and expenses of a sufficient
number of counsel so that such conflicts are resolved.
7. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS.
No Selling Stockholder may participate in any underwritten
registration hereunder unless such holder (a) agrees to sell such holder's
securities on the basis provided in any underwriting arrangements approved by
the persons entitled hereunder to approve such arrangements under Sections l(e)
or 2(e), and (b) completes and executes all questionnaires, powers of attorney,
indemnities, underwriting agreements and other documents required under the
terms of such underwriting arrangements.
8. DEFINITIONS.
(a) The term "Registrable Securities' means (i) the Common Stock of
the Company registered in the names of the Stockholders from time to time, (ii)
the Common Stock issuable upon exercise of the Options registered in the names
of the Stockholders from time to time, and (iii) any securities issued or to be
issued with respect to the securities referred to above by way of a stock
dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization. As to any
particular Registrable Securities, such securities will cease to be Registrable
Securities when they have been (A) effectively registered under the 1933 Act and
disposed of in accordance with the registration statement covering them, or (B)
transferred pursuant to Rule 144 (or any similar provision then in force). For
purposes of this Section 8(a), any of the types of securities specified in
clauses (i), (ii) or (iii) above ("Successor Securities") that are registered in
the name of a person or entity that is deemed to be a Stockholder (a "Successor
Stockholder") solely as a result of being the successor, assign, heir or
personal representative of a Stockholder shall be considered "Registrable
Securities" only to the extent that the Successor Securities were transferred to
the Successor Stockholder and constituted Registrable Securities at the time of
their transfer to the Successor Stockholder.
(b) The term "Registration Expenses" means all expenses incident to
the Company's performance of or compliance with this Agreement, including
without limitation all registration and filing fees, fees and expenses of
compliance with securities or blue sky laws, printing expenses, messenger and
delivery expenses, expenses and fees for listing the securities to be registered
on exchanges on which similar securities issued by the Company are then listed,
and fees and disbursements of counsel for the Company and of all independent
certified public accountants, underwriters (other than Underwriting Commissions)
and other persons retained by the Company.
(c) The term "Selling Stockholders" means registered holders of
Registrable Securities who request inclusion of all or a portion of their shares
of Registrable Securities in a Demand Registration pursuant to Section l(b) or a
Piggyback Registration pursuant to Section 2(a). For the purposes of Sections 5,
6, and 7, such term also includes those Stockholders who demand a Demand
Registration.
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<PAGE>
(d) The term "Significant Stockholder" means Bradford Venture
Partners, LP. ("BVP"), Overseas Private Investor Partners ("OPIP") and Equus
Investments, Inc. ("Equus"); provided, however, that (i) Equus shall cease being
a Significant Stockholder when it no long owns of record at least 10% of the
issued and outstanding Common Stock, and (ii) BVP and OPIP shall cease being
Significant Stockholders when they no longer own, in the aggregate, at least 15%
of the issued and outstanding Common Stock.
(e) The term "Underwriting Commissions" means all underwriting
discounts or commissions relating to the sale of securities of the Company, but
excludes any expenses reimbursed to underwriters.
9. LIMITATIONS ON SUBSEQUENT REGISTRATION RIGHTS.
From and after the date of this Agreement, the Company may enter
into an agreement with any holder or prospective holder of any securities of the
Company that would allow such holder or prospective holder to include such
securities in any registration filed under Sections 1 or 2 hereof. However, the
Company shall not enter into any such agreement without the prior written
consent of the holders of 75% of the outstanding Registrable Securities unless
under the terms of such agreement, such holder or prospective holder may include
such securities in any such registration only to the extent that the inclusion
of its securities would not reduce the amount of the Registrable Securities that
the Stockholders would be entitled to include in such registration.
10. MISCELLANEOUS.
(a) NOTICES. Any notices required hereunder shall be deemed to be
given upon the earlier of the date when received at, or the seventh day after
the date when sent by certified or registered mail to, the address of the
Company's corporate headquarters in the case of any notice to the Company, and
until changed by notice to the Company, the respective addresses of the
Stockholders on file with the Company in the case of any notice to the
Stockholders. Notices may be given by personal delivery, mail Federal Express or
another delivery service.
(b) AMENDMENTS AND WAIVERS. The provisions of this Agreement may be
amended or terminated and the Company may take any action herein prohibited, or
omit to perform any act herein required to be performed by it, by the written
consent of the Stockholders that own 75% of the Registrable Securities and/or by
any agreement permitted by Section 9.
(c) SUCCESSORS AND ASSIGNS. This Agreement will bind and inure to
the benefit of the respective successors (including any successor resulting from
a merger or similar reorganization), assigns, heirs and personal representatives
of the parties hereto, and any such successors, assigns, heirs and personal
representatives of a Stockholder shall be entitled to the rights granted to, and
subject to the obligations imposed upon, a "Stockholder" hereunder, except to
the extent specified otherwise herein. Without limiting the generality of the
foregoing, in
8
<PAGE>
addition, if a Stockholder liquidates or reorganizes such that its assets are
transferred to its own stockholders or partners or to another entity, such
stockholders, partners or entity shall succeed to all of the rights of the
Stockholder hereunder.
(d) GOVERNING LAW. All questions concerning the construction,
validity and interpretation of this Agreement will be governed by the internal
law, not the law of conflicts, of the State of Delaware.
(e) COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be considered to be an original instrument and
to be effective as of the date first written above.
(f) INTERPRETATION. Unless the context of this Agreement requires
otherwise, (i) references to the plural include the singular, the singular the
plural and the part the whole, (ii) references to any gender includes all
genders, (iii) "or" has the inclusive meaning frequently identified with the
phrase "and/or" and (iv) "including" has the inclusive meaning frequently
identified with the phrase "but not limited to." The section and other headings
contained in this Agreement are for reference purposes only and shall not
control or affect the construction of this Agreement or the interpretation
thereof in any respect. Section and subsection references are to this Agreement
and use of the terms "hereunder" and "hereof'" refer to the entire Agreement.
9
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[SIGNATURE PAGE FOR REGISTRATION RIGHTS AGREEMENT]
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first written above.
TRAVIS INTERNATIONAL, INC.
By: _____________________________
BRADFORD VENTURE PARTNERS, L.P.
OVERSEAS EQUITY INVESTOR PARTNERS
By: Overseas Equity Investors Ltd. By: Bradford Associates
By: _____________________________ By: _____________________________
_________________________________ _________________________________
BRADFORD MILLS REVOCABLE TRUST BRADFORD MILLS REVOCABLE TRUST
NO. 1 U/D/T 12/3/91 NO. 2 U/D/T 12/3/91
_________________________________ _________________________________
BARBARA MILLS HENAGAN ROBERT J. SIMON
_________________________________ _________________________________
M. JOHN O'DONOGHUE JAMES A. HARDIE, TRUSTEE U/A/D
11/4/78 F/B/O ROSS D. MILLS
_________________________________ _________________________________
ELIZABETH M. HARDIE BARBARA L. MILLS, TRUSTEE U/A/D
3/28/89 F/B/O BRADFORD TAYBROOK MILLS
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<PAGE>
[SIGNATURE PAGE FOR REGISTRATION RIGHTS AGREEMENT]
_________________________________ _________________________________
BARBARA L. MILLS, TRUSTEE BARBARA L. MILLS, TRUSTEE U/A/D
U/A/D/ 12/16/84 F/B/O FRANCES LEE 2/26/88 F/B/O KENNETH IAN HARDIE
HARDIE
_________________________________ _________________________________
JOHN R. PETTY, TRUSTEE BRADFORD ALAN MILLS
U/A/D 3/17/69
_________________________________ _________________________________
DAVID ANDRYC ERWIN HOSONO
_________________________________ _________________________________
NEILL BROWNSTEIN MICHAEL I. BARACH
_________________________________ _________________________________
RICHARD R. DAVIS RODNEY COHEN
_________________________________ _________________________________
DANIEL MARTIN CHRISTOPHER F. O. GABRIELI
_________________________________ _________________________________
WARD W. WOODS THOMAS F. RUHM
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[SIGNATURE PAGE FOR REGISTRATION RIGHTS AGREEMENT]
_________________________________ _________________________________
KIRBY ATTWELL MR. HARRIS GREENWOOD,
TRUSTEE OF KHLEBER V. ATTWELL
CHILDREN'S TRUST
_________________________________ _________________________________
NANCY ATTWELL FREDERIC C. HAMILTON, by
FREDERIC C. HAMILTON, JR.,
attorney-in-fact
GRUMMAN HILL INVESTMENTS, L.P. EQUUS INVESTMENTS INCORPORATED
By: _____________________________ By: _____________________________
General Partner
FCH FAMILY INVESTMENTS, LTD.
_________________________________ By: _____________________________
FRED R. LUMMIS FREDERIC C. HAMILTON, by
FREDERIC C. HAMILTON, JR.
attorney-in-fact
_________________________________ _________________________________
TIM W. FOGELSONG FREDERIC C. HAMILTON, JR.
12
EXHIBIT 3.5
FIRST AMENDMENT TO REGISTRATION RIGHTS AGREEMENT
THIS FIRST AMENDMENT TO REGISTRATION RIGHTS AGREEMENT (this "First
Amendment") is made and entered into effective December 2, 1994, by and among
Travis International, Inc., a Delaware corporation (the "Company"), Earl Dean
Catlett ("Catlett"), Roger P. Lindstedt ("Lindstedt"), Larry Stadler ("Stadler")
and the undersigned security holders of the Company (the "Amending
Stockholders"), which Amending Stockholders own 75% or more of the Registrable
Securities (as defined in the Registration Rights Agreement described in Recital
A below).
RECITALS
A. The Company and certain security holders of the Company more
specifically described therein (the "Stockholders") entered into that certain
Registration Rights Agreement dated May 28, 1992 (the "Registration Rights
Agreement"), pursuant to which the Company agreed to provide certain
registration rights to the Stockholders, all as more particularly set forth in
the Registration Rights Agreement.
B. Section 10(b) of the Registration Rights Agreement permits the
amendment of the Registration Rights Agreement upon the written consent of the
Stockholders that own 75% of the Registrable Securities (as defined in the
Registration Rights Agreement).
C. Catlett, Lindstedt and Stadler jointly own all of the outstanding
capital stock of Suncoast Postension Corporation, a Texas corporation
("Suncoast").
D. Pursuant to that certain Share Purchase Agreement to be dated as of the
date hereof (the "Suncoast Purchase Agreement") among the Company, a
wholly-owned subsidiary of the Company to be formed ("Newco"), Catlett,
Lindstedt and Stadler, Newco will acquire all of the outstanding capital stock
of Suncoast.
E. Catlett and Lindstedt jointly own all of the outstanding capital stock
of DE-RO Products Co., Inc., a Texas corporation ("DE-RO").
F. Pursuant to that certain Share Purchase Agreement to be dated as of the
date hereof (the "DE-RO Purchase Agreement") among the Company, Newco, Catlett
and Lindstedt, Newco will acquire all of the outstanding capital stock of DE-RO.
G. In connection with the sale of all of the outstanding capital stock of
Suncoast and of DE-RO described above, Catlett, Lindstedt and Stadler wish to be
assured that following such sales such parties will be made party to the
Registration Rights Agreement as "Stockholders" thereunder.
H. The Company and the Amending Stockholders hereby acknowledge that the
consummation of the acquisitions described above are in the best interests of
the Company, and
<PAGE>
the parties hereto further acknowledge and agree that the parties to the DE-RO
Purchase Agreement and the Suncoast Purchase Agreement would not consummate such
agreements without the parties hereto entering into this Agreement.
I. As a further inducement to Catlett, Lindstedt and Stadler to enter into
the DE-RO Purchase Agreement and the Suncoast Purchase Agreement, the Company
and the Amending Stockholders are willing to enter into this Agreement.
AGREEMENT
For and in consideration of the terms, conditions, covenants and
agreements set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto,
intending to be legally bound as provided herein, do hereby agree as follows:
1. DEFINITIONS. As used in this First Amendment, the terms contained in
this First Amendment shall have the same meaning as set forth in the
Registration Rights Agreement, except as otherwise specifically described
herein.
2. ADDITION OF CATLETT AND LINDSTEDT AND STADLER. Effective as of the date
hereof, Catlett and Lindstedt and Stadler, as holders of shares of Class A
Common Stock of the Company, shall hereby be bound by all of the terms of the
Registration Rights Agreement as a Stockholder thereunder, and Catlett,
Lindstedt and Stadler hereby assume all of the rights, duties and obligations of
a Stockholder thereunder as if they were signatories thereto.
3. AMENDMENT TO SECTION 8(a). Section 8 (a) is hereby deleted and restated
in its entirety to read as follows:
(a) The term "Registrable Securities" means (i) the Common Stock and
the Class A Common Stock of the Company registered in the names of the
Stockholders from time to time, (ii) the Common Stock issuable upon
exercise of the Options registered in the names of the Stockholders from
time to time, and (iii) any securities issued or to be issued with respect
to the securities referred to above by way of a stock dividend or stock
split or in connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization. As to any particular
Registrable Securities, such securities will cease to be Registrable
Securities when they have been (A) effectively registered under the 1933
Act and disposed of in accordance with the registration statement covering
them, or (B) transferred pursuant to Rule 144 (or any similar provision
then in force). For purposes of this Section 8(a), any of the types of
securities specified in clauses (i), (ii) or (iii) above ("Successor
Securities") that are registered in the name of a person or entity that is
deemed to be a Stockholder (a "Successor Stockholder") solely as a result
of being the successor, assign, heir or personal representative of a
Stockholder shall be considered "Registrable Securities" only to the
extent that the Successor Securities were transferred to the Successor
Stockholder and
2
<PAGE>
constituted Registrable Securities at the time of their transfer to the
Successor Stockholder.
4. EFFECT OF AMENDMENT. Effective as of the date hereof, any references to
"this Agreement" contained in the Registration Rights Agreement shall mean the
Registration Rights Agreement as amended by this First Amendment, and any
reference to the "Stockholders" or a "Stockholder" in the Registration Rights
Agreement shall include Catlett, Lindstedt and Stadler. Except as expressly
amended hereby, all other terms and provisions of the Registration Rights
Agreement shall remain unchanged and in full force and effect.
EXECUTED AND DELIVERED effective as of the date first written above in
multiple original counterparts, each of which shall be an original, but which
together shall constitute one instrument.
TRAVIS INTERNATIONAL, INC.
By: _____________________________
OVERSEAS EQUITY INVESTOR BRADFORD VENTURE PARTNERS,
PARTNERS L.P.
By: Overseas Equity Investors Ltd. By: Bradford Associates
By: _____________________________ By: _____________________________
_________________________________ _________________________________
BRADFORD MILLS REVOCABLE BRADFORD MILLS REVOCABLE
TRUST NO. 1 U/D/T 12/3/91 TRUST NO. 2 U/D/T 12/3/91
_________________________________ _________________________________
BARBARA MILLS HENAGAN ROBERT J. SIMON
3
<PAGE>
[SIGNATURE PAGE FOR FIRST AMENDMENT
TO REGISTRATION RIGHTS AGREEMENT CONT'D.]
_________________________________ _________________________________
M. JOHN O'DONOGHUE JAMES A. HARDIE, TRUSTEE U/A/D
11/4/78 F/B/O ROSS D. MILLS
_________________________________ _________________________________
ELIZABETH M. HARDIE BARBARA L. MILLS, TRUSTEE U/A/D
3/28/89 F/B/O BRADFORD TAYBROOK
MILLS
_________________________________ _________________________________
BARBARA L. MILLS, TRUSTEE U/A/D BARBARA L. MILLS, TRUSTEE U/A/D
12/26/84 F/B/O FRANCES LEE HARDIE 2/26/88 F/B/O KENNETH IAN HARDIE
_________________________________ _________________________________
JOHN R. PETTY, TRUSTEE U/A/D BRADFORD ALAN MILLS
3/17/89
_________________________________ _________________________________
DAVID ANDRYC ERWIN HOSONO
_________________________________ _________________________________
NEILL BROWNSTEIN MICHAEL I. BARACH
4
<PAGE>
[SIGNATURE PAGE FOR FIRST AMENDMENT
TO REGISTRATION RIGHTS AGREEMENT CONT'D.]
_________________________________ _________________________________
RICHARD R. DAVIS RODNEY COHEN
_________________________________ _________________________________
DANIEL MARTIN CHRISTOPHER F.O. GABRIELI
_________________________________ _________________________________
WARD W. WOODS THOMAS F. RUHM
_________________________________ _________________________________
KIRBY ATTWELL MR. HARRIS GREENWOOD, TRUSTEE
OF KHLEBER V. ATTWELL
CHILDREN'S TRUST
_________________________________ _________________________________
NANCY ATTWELL FREDERIC C. HAMILTON
GRUMMAN HILL INVESTMENTS, L.P. EQUUS II, INCORPORATED
By: _____________________________ By:______________________________
General Partner President
5
<PAGE>
[SIGNATURE PAGE FOR FIRST AMENDMENT
TO REGISTRATION RIGHTS AGREEMENT CONT'D.]
FCH FAMILY INVESTMENTS, LTD.
__________________________________ By:______________________________
FRED R. LUMMIS FREDERIC C. HAMILTON
__________________________________ _________________________________
TIM W. FOGELSONG ROGER P. LINDSTEDT
__________________________________ _________________________________
EARL DEAN CATLETT LARRY STADLER
6
EXHIBIT 3.6
SECOND AMENDMENT TO REGISTRATION RIGHTS AGREEMENT
THIS SECOND AMENDMENT TO REGISTRATION RIGHTS AGREEMENT (this
"Second Amendment") is made and entered into effective February 3, 1995 by and
among Travis International, Inc., a Delaware corporation (the "Company"), Cable
Systems, Inc. ("Cable Systems") and the undersigned security holders of the
Company (the "Amending Stockholders"), which Amending Stockholders own 75% or
more of the Registrable Securities (as defined in the Registration Rights
Agreement described in Recital A below).
RECITALS
A. The Company and certain security holders of the Company more
specifically described therein (the "Stockholders") entered into that certain
Registration Rights Agreement dated May 28, 1992, as amended by that certain
First Amendment to Registration Rights Agreement dated as of December 2, 1994
(as amended, the "Registration Rights Agreement"), pursuant to which the Company
agreed to provide certain registration rights to the Stockholders, all as more
particularly set forth in the Registration Rights Agreement.
B. Section 10(b) of the Registration Rights Agreement permits the
amendment of the Registration Rights Agreement upon the written consent of the
Stockholders that own 75% of the Registrable Securities (as defined in the
Registration Rights Agreement).
C. Pursuant to that certain Purchase and Sale of Assets Agreement to be
dated as of the date hereof (the "Asset Purchase Agreement") by and between
De-Ro/Suncoast, Inc., a Delaware corporation and the wholly owned subsidiary of
the Company ("Suncoast") and Cable Systems, Suncoast will acquire substantially
all of the assets of Cable Systems.
D. In connection with the transaction described above, Cable Systems
wishes to be assured that following such sales it will be made party to the
Registration Rights Agreement as a "Stockholder" thereunder.
E. The Company and the Amending Stockholders hereby acknowledge that the
consummation of the acquisitions described above are in the best interests of
the Company, and the parties hereto further acknowledge and agree that the
parties to the Asset Purchase Agreement would not consummate such agreement
without the parties hereto entering into this Second Amendment.
F. As a further inducement to Cable Systems to enter into the Asset
Purchase Agreement, the Company and the Amending Stockholders are willing to
enter into this Second Amendment.
<PAGE>
AGREEMENT
For and in consideration of the terms, conditions, covenants and
agreements set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto,
intending to be legally bound as provided herein, do hereby agree as follows:
1. DEFINITIONS. As used in this Second Amendment, the terms contained in
this Second Amendment shall have the same meaning as set forth in the
Registration Rights Agreement, except as otherwise specifically described
herein.
2. ADDITION OF CABLE SYSTEMS. Effective as of the date hereof, Cable
Systems as the holder of shares of Class A Common Stock of the Company, shall
hereby be bound by all of the terms of the Registration Rights Agreement as a
Stockholder thereunder, and Cable Systems hereby assumes all of the rights,
duties and obligations of a Stockholder thereunder as if it were a signatory
thereto.
3. EFFECT OF AMENDMENT. Effective as of the date hereof, any references to
"this Agreement" contained in the Registration Rights Agreement shall mean the
Registration Rights Agreement as amended by this Second Amendment, and any
reference to the "Stockholders" or a "Stockholder" in the Registration Rights
Agreement shall include Cable Systems. Except as expressly amended hereby, all
other terms and provisions of the Registration Rights Agreement shall remain
unchanged and in full force and effect.
EXECUTED AND DELIVERED effective as of the date first written above in
multiple original counterparts, each of which shall be an original, but which
together shall constitute one instrument.
TRAVIS INTERNATIONAL, INC.
By:
OVERSEAS EQUITY INVESTOR BRADFORD VENTURE PARTNERS,
PARTNERS L.P.
By: Overseas Equity Investors Ltd. By: Bradford Associates
By:____________________________________ By:___________________________________
2
<PAGE>
_______________________________________ ______________________________________
BRADFORD MILLS REVOCABLE BRADFORD MILLS REVOCABLE
TRUST NO. 1 U/D/T 12/3/91 TRUST NO. 2 U/D/T 12/3/91
_______________________________________ ______________________________________
BARBARA MILLS HENAGAN ROBERT J. SIMON
_______________________________________ ______________________________________
M. JOHN O'DONOGHUE JAMES A. HARDIE, TRUSTEE U/A/D
11/4/78 F/B/O ROSS D. MILLS
_______________________________________ ______________________________________
ELIZABETH M. HARDIE BARBARA L. MILLS, TRUSTEE U/A/D
3/28/89 F/B/O BRADFORD TAYBROOK
MILLS
_______________________________________ ______________________________________
BARBARA L. MILLS, TRUSTEE U/A/D BARBARA L. MILLS, TRUSTEE U/A/D
12/26/84 F/B/O FRANCES LEE HARDIE 2/26/88 F/B/O KENNETH IAN HARDIE
_______________________________________ ______________________________________
JOHN R. PETTY, TRUSTEE U/A/D BRADFORD ALAN MILLS
3/17/89
_______________________________________ ______________________________________
DAVID ANDRYC ERWIN HOSONO
3
<PAGE>
[SIGNATURE PAGE FOR SECOND AMENDMENT
TO REGISTRATION RIGHTS AGREEMENT CONT'D.]
_______________________________________ ______________________________________
NEILL BROWNSTEIN MICHAEL I. BARACH
_______________________________________ ______________________________________
RICHARD R. DAVIS RODNEY COHEN
_______________________________________ ______________________________________
DANIEL MARTIN CHRISTOPHER F.O. GABRIELI
_______________________________________ ______________________________________
WARD W. WOODS THOMAS F. RUHM
_______________________________________ ______________________________________
KIRBY ATTWELL MR. HARRIS GREENWOOD, TRUSTEE
OF KHLEBER V. ATTWELL
CHILDREN'S TRUST
_______________________________________ ______________________________________
NANCY ATTWELL FREDERIC C. HAMILTON
GRUMMAN HILL INVESTMENTS, L.P. EQUUS II, INCORPORATED
By: ___________________________________ By: ___________________________________
DAVID K. BARTH NOLAN LEHMANN
General Partner
___________________________________
IRWIN LEVY
4
<PAGE>
[SIGNATURE PAGE FOR SECOND AMENDMENT
TO REGISTRATION RIGHTS AGREEMENT CONT'D.]
FCH FAMILY INVESTMENTS, LTD.
_______________________________________ By:___________________________________
FRED R. LUMMIS FREDERIC C. HAMILTON
_______________________________________ ______________________________________
TIM W. FOGELSONG ROGER P. LINDSTEDT
_______________________________________ ______________________________________
EARL DEAN CATLETT LARRY STADLER
CABLE SYSTEMS, INC.
By: ___________________________________
Mark Gosney, President
5
EXHIBIT 3.7
THIRD AMENDMENT TO REGISTRATION RIGHTS AGREEMENT
THIS THIRD AMENDMENT TO REGISTRATION RIGHTS AGREEMENT (this "Third
Amendment") is made and entered into effective September 1, 1995 by and among
Travis International, Inc., a Delaware corporation (the "Company"), Irvin Levy
("Levy"), David K. Barth ("Barth"), William G. Flesner ("Flesner") and the
undersigned security holders of the Company (the "Amending Stockholders"), which
Amending Stockholders own 75% or more of the Registrable Securities (as defined
in the Registration Rights Agreement described in Recital A below).
RECITALS
A. The Company and certain security holders of the Company more
specifically described therein (the "Stockholders") entered into that certain
Registration Rights Agreement dated May 28, 1992, as amended by that certain
First Amendment to Registration Rights Agreement dated as of December 2, 1994
and that certain Second Amendment to Registration Rights Agreement dated as of
February 3, 1995 (as amended, the "Registration Rights Agreement"), pursuant to
which the Company agreed to provide certain registration rights to the
Stockholders, all as more particularly set forth in the Registration Rights
Agreement.
B. Section 10(b) of the Registration Rights Agreement permits the
amendment of the Registration Rights Agreement upon the written consent of the
Stockholders that own 75% of the Registrable Securities (as defined in the
Registration Rights Agreement).
C. Levy and Barth are currently shareholders of the Common Stock of the
Company.
D. Flesner has been employed as the President of American Packing and
Gasket Company, a wholly owned subsidiary of the Company.
E. In connection with the employment of Flesner in the capacity described
in Recital D above, Flesner has agreed to purchase from the Company, and the
Company has agreed to issue to Flesner, 4,444 shares of the Class A Common Stock
of the Company.
F. Levy, Barth and Flesner desire to be assured that they are made party
to the Registration Rights Agreement as a "Stockholder" thereunder with respect
to the Company shares owned by each such party.
G. The Company and the Amending Stockholders hereby acknowledge that the
consummation of the acquisitions described above are in the best interests of
the Company.
AGREEMENT
For and in consideration of the terms, conditions, covenants and
agreements set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which are
<PAGE>
hereby acknowledged, the parties hereto, intending to be legally bound as
provided herein, do hereby agree as follows:
1. DEFINITIONS. As used in this Third Amendment, the terms contained in
this Third Amendment shall have the same meaning as set forth in the
Registration Rights Agreement, except as otherwise specifically described
herein.
2. ADDITION OF PARTIES. Effective as of the date hereof, Levy, Barth and
Flesner, as the holder of shares of Common Stock or Class A Common Stock of the
Company, as the case may be, shall hereby be bound by all of the terms of the
Registration Rights Agreement as a Stockholder thereunder, and each of Levy,
Barth and Flesner hereby assumes all of the rights, duties and obligations of a
Stockholder thereunder as if he were a signatory thereto.
3. EFFECT OF AMENDMENT. Effective as of the date hereof, any references to
"this Agreement" contained in the Registration Rights Agreement shall mean the
Registration Rights Agreement as amended by this Third Amendment, and any
reference to the "Stockholders" or a "Stockholder" in the Registration Rights
Agreement shall include Levy, Barth and Flesner. Except as expressly amended
hereby, all other terms and provisions of the Registration Rights Agreement
shall remain unchanged and in full force and effect.
EXECUTED AND DELIVERED effective as of the date first written above in
multiple original counterparts, each of which shall be an original, but which
together shall constitute one instrument.
TRAVIS INTERNATIONAL, INC.
By: __________________________________
Kirby Attwell, President
OVERSEAS EQUITY INVESTOR BRADFORD VENTURE PARTNERS,
PARTNERS L.P.
By: Overseas Equity Investors Ltd. By: Bradford Associates
By: _________________________________ By: __________________________________
_____________________________________ ______________________________________
BRADFORD MILLS REVOCABLE BRADFORD MILLS REVOCABLE
TRUST NO. 1 U/D/T 12/3/91 TRUST NO. 2 U/D/T 12/3/91
2
<PAGE>
[SIGNATURE PAGE FOR THIRD AMENDMENT
TO REGISTRATION RIGHTS AGREEMENT CONT'D.]
_________________________________ _________________________________
BARBARA MILLS HENAGAN ROBERT J. SIMON
_________________________________ _________________________________
M. JOHN O'DONOGHUE JAMES A. HARDIE, TRUSTEE U/A/D
11/4/78 F/B/O ROSS D. MILLS
_________________________________ _________________________________
ELIZABETH M. HARDIE CHERYL A. MILLS, TRUSTEE U/A/D
3/28/89 F/B/O BRADFORD TAYBROOK
MILLS
_________________________________ _________________________________
BARBARA L. MILLS, TRUSTEE U/A/D BARBARA L. MILLS, TRUSTEE U/A/D
12/26/84 F/B/O FRANCES LEE HARDIE 2/26/88 F/B/O KENNETH IAN HARDIE
_________________________________ _________________________________
JOHN R. PETTY, TRUSTEE U/A/D BRADFORD ALAN MILLS
3/17/89
_________________________________ _________________________________
DAVID ANDRYC ERWIN HOSONO
3
<PAGE>
[SIGNATURE PAGE FOR THIRD AMENDMENT
TO REGISTRATION RIGHTS AGREEMENT CONT'D.]
_________________________________ _________________________________
NEILL BROWNSTEIN MICHAEL I. BARACH
_________________________________ _________________________________
RICHARD R. DAVIS RODNEY COHEN
_________________________________ _________________________________
DANIEL MARTIN CHRISTOPHER F.O. GABRIELI
_________________________________ _________________________________
WARD W. WOODS THOMAS F. RUHM
_________________________________ _________________________________
KIRBY ATTWELL MR. HARRIS GREENWOOD, TRUSTEE
OF KHLEBER V. ATTWELL
CHILDREN'S TRUST
_________________________________ _________________________________
NANCY ATTWELL FREDERIC C. HAMILTON
GRUMMAN HILL INVESTMENTS, L.P. EQUUS II, INCORPORATED
By: __________________________ By: _____________________________
General Partner
4
<PAGE>
[SIGNATURE PAGE FOR THIRD AMENDMENT
TO REGISTRATION RIGHTS AGREEMENT CONT'D.]
FCH FAMILY INVESTMENTS, LTD.
_________________________________ By: _____________________________
FRED R. LUMMIS FREDERIC C. HAMILTON
_________________________________ _________________________________
TIM W. FOGELSONG ROGER P. LINDSTEDT
_________________________________ _________________________________
EARL DEAN CATLETT LARRY STADLER
CABLE SYSTEMS, INC.
By: _____________________________ _________________________________
Mark Gosney, President IRVIN LEVY
_________________________________ _________________________________
DAVID K. BARTH WILLIAM G. FLESNER
5
EXHIBIT 3.8
FOURTH AMENDMENT TO REGISTRATION RIGHTS AGREEMENT
THIS FOURTH AMENDMENT TO REGISTRATION RIGHTS AGREEMENT (this
"Fourth Amendment") is made and entered into effective June 18, 1996 by and
among Travis International, Inc., a Delaware corporation (the "Company"), John
Patnoivc ("Patnovic") and the undersigned security holders of the Company (the
"Amending Stockholders"), which Amending Stockholders own 75% or more of the
Registrable Securities (as defined in the Registration Rights Agreement
described in Recital A below).
RECITALS
A. The Company and certain security holders of the Company more
specifically described therein (the "Stockholders") entered into that certain
Registration Rights Agreement dated May 28, 1992, as amended by that certain
First Amendment to Registration Rights Agreement dated as of December 2, 1994,
that certain Second Amendment to Registration Rights Agreement dated as of
February 3, 1995 and that certain Third Amendment to Registration Rights
Agreement dated September 28, 1995 (as amended, the "Registration Rights
Agreement"), pursuant to which the Company agreed to provide certain
registration rights to the Stockholders, all as more particularly set forth in
the Registration Rights Agreement.
B. Section 10(b) of the Registration Rights Agreement permits the
amendment of the Registration Rights Agreement upon the written consent of the
Stockholders that own 75% of the Registrable Securities (as defined in the
Registration Rights Agreement).
C. Patnovic has been employed as a Vice President of De-Ro/Suncoast, Inc.,
a wholly owned subsidiary of the Company.
D. In connection with the employment of Patnovic in the capacity described
in Recital D above, Patnovic has agreed to purchase from the Company, and the
Company has agreed to issue to Patnovic, 4,500 shares of the Class A Common
Stock of the Company.
E. Patnovic desires to be assured that he is made party to the
Registration Rights Agreement as a "Stockholder" thereunder with respect to the
Company shares owned by each such party.
F. The Company and the Amending Stockholders hereby acknowledge that the
consummation of the acquisitions described above are in the best interests of
the Company.
AGREEMENT
For and in consideration of the terms, conditions, covenants and
agreements set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto,
intending to be legally bound as provided herein, do hereby agree as follows:
<PAGE>
1. DEFINITIONS. As used in this Fourth Amendment, the terms contained in
this Fourth Amendment shall have the same meaning as set forth in the
Registration Rights Agreement, except as otherwise specifically described
herein.
2. ADDITION OF PARTIES. Effective as of the date hereof, Patnovic, as the
holder of shares of Common Stock or Class A Common Stock of the Company, shall
hereby be bound by all of the terms of the Registration Rights Agreement as a
Stockholder thereunder, and Patnovic hereby assumes all of the rights, duties
and obligations of a Stockholder thereunder as if he were a signatory thereto.
3. EFFECT OF AMENDMENT. Effective as of the date hereof, any references to
"this Agreement" contained in the Registration Rights Agreement shall mean the
Registration Rights Agreement as amended by this Fourth Amendment, and any
reference to the "Stockholders" or a "Stockholder" in the Registration Rights
Agreement shall include Patnovic. Except as expressly amended hereby, all other
terms and provisions of the Registration Rights Agreement shall remain unchanged
and in full force and effect.
EXECUTED AND DELIVERED effective as of the date first written above in
multiple original counterparts, each of which shall be an original, but which
together shall constitute one instrument.
TRAVIS INTERNATIONAL, INC.
By:___________________________________
OVERSEAS EQUITY INVESTOR BRADFORD VENTURE PARTNERS,
PARTNERS L.P.
By: Overseas Equity Investors Ltd. By: Bradford Associates
By:__________________________________ By:___________________________________
MILLS INVESTMENT PARTNERSHIP
By:__________________________________
2
<PAGE>
[SIGNATURE PAGE FOR FOURTH AMENDMENT
TO REGISTRATION RIGHTS AGREEMENT CONT'D.]
_______________________________________ ______________________________________
M. JOHN O'DONOGHUE WARD W. WOODS
_______________________________________ ______________________________________
DAVID ANDRYC KA, LTD
_______________________________________ ______________________________________
ROBERT J. SIMON MICHAEL I. BARACH
_______________________________________ ______________________________________
ERWIN HOSONO RODNEY COHEN
_______________________________________ ______________________________________
NEILL BROWNSTEIN CHRISTOPHER F.O. GABRIELI
_______________________________________
RICHARD R. DAVIS
_______________________________________
DANIEL MARTIN
3
<PAGE>
[SIGNATURE PAGE FOR FOURTH AMENDMENT
TO REGISTRATION RIGHTS AGREEMENT CONT'D.]
_______________________________________ ______________________________________
THOMAS F. RUHM MR. HARRIS GREENWOOD, TRUSTEE
OF KHLEBER V. ATTWELL
CHILDREN'S TRUST
_______________________________________ GRUMMAN HILL INVESTMENTS, L.P.
FREDERIC C. HAMILTON
By:___________________________________
General Partner
EQUUS II, INCORPORATED
By:____________________________________ ______________________________________
NOLAN LEHMANN JOHN PATNOVIC
FCH FAMILY INVESTMENTS, LTD.
_______________________________________ By:__________________________________
FRED R. LUMMIS FREDERIC C. HAMILTON
_______________________________________ ______________________________________
TIM W. FOGELSONG ROGER P. LINDSTEDT
_______________________________________ ______________________________________
EARL DEAN CATLETT LARRY STADLER
4
<PAGE>
[SIGNATURE PAGE FOR FOURTH AMENDMENT
TO REGISTRATION RIGHTS AGREEMENT CONT'D.]
CABLE SYSTEMS, INC.
By:____________________________________ ______________________________________
Mark Gosney, President IRVIN LEVY
_______________________________________ ______________________________________
DAVID K. BARTH WILLIAM G. FLESNER
5
EXHIBIT 3.9
FIFTH AMENDMENT TO REGISTRATION RIGHTS AGREEMENT
This Fifth Amendment to Registration Rights Agreement ("Amendment") is an
amendment to the Registration Rights Agreement, made as of May 28, 1992, by and
among Travis International, Inc. ("Company") and security holders of Company who
executed such agreement ("Stockholders") as amended by the First Amendment to
Registration Rights Agreement dated December 2, 1994, the Second Amendment to
Registration Rights Agreement dated February 3, 1995, the Third Amendment to
Registration Rights Agreement dated September 28, 1995, and Fourth Amendment to
Registration Rights Agreement dated June 18, 1996 ("Registration Rights
Agreement"), is made as of October 1, 1996, by and among Company and
Stockholders.
RECITALS
A. Purchaser listed on Schedule 1 ("Purchaser") of the Securities Purchase
Agreement of even date ("October Agreement") is purchasing a Warrant to Purchase
Class A Common Stock of even date ("Warrant") and a Senior Subordinated Note of
New West Acquisition Corp., Inc., a Delaware corporation. The Warrant entitles
the holder of such Warrant to purchase a maximum thirty thousand (30,000) shares
of Company's Class A Common Stock
B. It is a condition precedent to Purchaser's purchase of the Warrant and Senior
Subordinated Note pursuant to the October Agreement, that it becomes a party to
the Registration Rights Agreement as amended pursuant to this Amendment with all
rights and obligations set forth therein.
NOW, THEREFORE, the parties agree as follows:
1 DEFINITIONS. As used in this Amendment, the terms contained in this Amendment
shall have the same meaning as set forth in the Registration Rights Agreement,
except as otherwise specifically described herein.
2 STOCKHOLDER. Upon execution of a counterpart to the Registration Rights
Agreement attached thereto as required by Company, Purchaser will become a party
as a "Stockholder" to the Registration Rights Agreement, as amended hereby.
3 SECTION 8 OF THE REGISTRATION RIGHTS AGREEMENT. The first sentence of Section
8(a) of the Registration Rights Agreement is hereby amended to read as follows:
The term "Registrable Securities" mean (i) the Common Stock and the Class
A Common Stock of the Company registered in the names of the Stockholders
from time to time, (ii) the Common Stock issuable upon exercise of the
Options registered in the names of the Stockholders from time to time,
(iii) the Class A Common Stock issuable upon exercise of the Warrant to
purchase Class A Common Stock granted in conjunction with that certain
Securities Purchase Agreement by and among Company, New West Acquisition
Corp. and Marwit Capital Company L.P. dated October ___, 1996, and (iv)
any securities issued or to be issued with respect to the securities
referred to above by way of a stock dividend or stock split or in
combination of shares, recapitalization, merger, consolidation or other
reorganization.
4 EFFECTIVE. This Amendment shall be effective upon the execution of this
Amendment by Stockholders of seventy-five percent (75%) of the "Registrable
Securities."
5 AGREEMENT IN FORCE. Except as amended by this Amendment, the Registration
Rights Agreement shall remain in full force and effect.
6 COUNTERPARTS. This Amendment may be executed in one or more counterparts, each
of which shall be deemed to be an original and which, together, shall constitute
one and the same instrument.
IN WITNESS WHEREOF, this Amendment has been duly executed this _____day of
October, 1996.
TRAVIS INTERNATIONAL, INC-
By: __________________________________
Its: __________________________________
OVERSEAS EQUM INVESTOR BRADFORD VENTURE PARTNERS,, L.P.
PARTNERS BY: BRADFORD ASSOCIATES
BY: OVERSEAS EQUITY INVESTORS, LTD.
By: _____________________________ By: ___________________________________
Its: _____________________________ Its: ___________________________________
MILLS INVESTMENT PARTNERSHIP
By: ________________________________
<PAGE>
[SIGNATURE PAGE FOR FIFTH AMENDMENT
TO REGISTRATION RIGHTS AGREEMENT CONT'D.]
_____________________________ ______________________________________
M. JOHN O'DONOGHUE WARD W. WOODS
_____________________________ ______________________________________
DAVID ANDRYC KA LTD.
_____________________________ ______________________________________
ROBERT J. SIMON MICHAEL I. BARACH
_____________________________ ______________________________________
ERWIN HOSONO RODNEY COHEN
_____________________________ ______________________________________
NEILL BORNSTEIN CHRISTOPHER F.O. GABRIELI
_____________________________ ______________________________________
DANIEL MARTIN RICHARD R. DAVIS
_____________________________ ______________________________________
THOMAS F. RUHM MR. HARRIS GREENWOOD, TRUSTEE
OF KHLEBER V. ATTWELL
CHILDREN'S TRUST
<PAGE>
[SIGNATURE PAGE FOR FIFTH AMENDMENT
TO REGISTRATION RIGHTS AGREEMENT CONT'D.]
_____________________________ ______________________________________
FREDERIC C. HAMILTON GRUMMAN HILL INVESTMENTS, L.P.
By:___________________________________
General Partner
EQUUS II, INCORPORATED
By:_________________________ ______________________________________
JOHN PATNOVIC
FCH FAMILY INVESTMENTS, LTD.
_____________________________ ______________________________________
FRED R. LUMMIS FREDERIC C. HAMILTON
_____________________________ ______________________________________
TIM W. FOGELSONG ROGER P. LINDSTEDT
_____________________________ ______________________________________
EARL DEAN CATLETT LARRY STADLER
CABLE SYSTEMS, INC.
By:___________________________ ______________________________________
Mark Gosney, President IRVIN LEVY
_____________________________ ______________________________________
DAVID K. BARTH WILLIAM G. FLESNER
EXHIBIT 3.10
SIXTH AMENDMENT TO REGISTRATION RIGHTS AGREEMENT
THIS SIXTH AMENDMENT TO REGISTRATION RIGHTS AGREEMENT (this "Sixth
Amendment") is made and entered into effective October 9, 1996 by and among
Travis International, Inc., a Delaware corporation (the "Company"), Craig Cowan
("Cowan") and the undersigned security holders of the Company (the "Amending
Stockholders"), which Amending Stockholders own 75% or more of the Registrable
Securities (as defined in the Registration Rights Agreement described in Recital
A below).
RECITALS
A. The Company and certain security holders of the Company more
specifically described therein (the "Stockholders") entered into that certain
Registration Rights Agreement dated May 28, 1992, as amended by that certain
First Amendment to Registration Rights Agreement dated as of December 2, 1994,
that certain Second Amendment to Registration Rights Agreement dated as of
February 3, 1995, that certain Third Amendment to Registration Rights Agreement
dated September 28, 1995, that certain Fourth Amendment to Registration Rights
Agreement dated June 18, 1996 and that certain Fifth Amendment to the
Registration Rights Agreement dated October 9, 1996 (as so amended, the
"Registration Rights Agreement"), pursuant to which the Company agreed to
provide certain registration rights to the Stockholders, all as more
particularly set forth in the Registration Rights Agreement.
B. Section 10(b) of the Registration Rights Agreement permits the
amendment of the Registration Rights Agreement upon the written consent of the
Stockholders that own 75% of the Registrable Securities (as defined in the
Registration Rights Agreement).
C. Cowan has acquired 44,444 shares of Class A Common Stock in connection
with his sale of assets to the Company.
D. Cowan desires to be assured that he is made party to the Registration
Rights Agreement as a "Stockholder" thereunder with respect to the Company
shares owned by each such party.
E. The Company and the Amending Stockholders hereby acknowledge that the
consummation of the acquisitions described above are in the best interests of
the Company.
AGREEMENT
For and in consideration of the terms, conditions, covenants and
agreements set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto,
intending to be legally bound as provided herein, do hereby agree as follows:
<PAGE>
1. DEFINITIONS. As used in this Sixth Amendment, the terms contained in
this Sixth Amendment shall have the same meaning as set forth in the
Registration Rights Agreement, except as otherwise specifically described
herein.
2. ADDITION OF PARTIES. Effective as of the date hereof, Cowan, as the
holder of shares of Common Stock or Class A Common Stock of the Company, shall
hereby be bound by all of the terms of the Registration Rights Agreement as a
Stockholder thereunder, and Cowan hereby assumes all of the rights, duties and
obligations of a Stockholder thereunder as if he were a signatory thereto.
3. EFFECT OF AMENDMENT. Effective as of the date hereof, any references to
"this Agreement" contained in the Registration Rights Agreement shall mean the
Registration Rights Agreement as amended by this Sixth Amendment, and any
reference to the "Stockholders" or a "Stockholder" in the Registration Rights
Agreement shall include Cowan. Except as expressly amended hereby, all other
terms and provisions of the Registration Rights Agreement shall remain unchanged
and in full force and effect.
EXECUTED AND DELIVERED effective as of the date first written above in
multiple original counterparts, each of which shall be an original, but which
together shall constitute one instrument.
_________________________________ TRAVIS INTERNATIONAL, INC.
CRAIG COWAN
By:______________________________
Vice President, Finance
OVERSEAS EQUITY INVESTOR BRADFORD VENTURE PARTNERS,
PARTNERS L.P.
By: Overseas Equity Investors Ltd. By: Bradford Associates
By:______________________________ By:______________________________
MILLS INVESTMENT PARTNERSHIP
By:______________________________
2
<PAGE>
[SIGNATURE PAGE FOR SIXTH AMENDMENT
TO REGISTRATION RIGHTS AGREEMENT CONT'D.]
______________________________________ ______________________________________
M. JOHN O'DONOGHUE WARD W. WOODS
______________________________________ ______________________________________
DAVID ANDRYC KA, LTD
______________________________________ ______________________________________
ROBERT J. SIMON MICHAEL I. BARACH
______________________________________ ______________________________________
ERWIN HOSONO RODNEY COHEN
______________________________________ ______________________________________
NEILL BROWNSTEIN CHRISTOPHER F.O. GABRIELI
______________________________________
RICHARD R. DAVIS
______________________________________
DANIEL MARTIN
3
<PAGE>
[SIGNATURE PAGE FOR SIXTH AMENDMENT
TO REGISTRATION RIGHTS AGREEMENT CONT'D.]
______________________________________ ______________________________________
THOMAS F. RUHM MR. HARRIS GREENWOOD, TRUSTEE
OF KHLEBER V. ATTWELL
CHILDREN'S TRUST
______________________________________
FREDERIC C. HAMILTON GRUMMAN HILL INVESTMENTS, L.P.
By: __________________________________
General Partner
EQUUS II, INCORPORATED
By:____________________________________ ______________________________________
President JOHN PATNOVIC
FCH FAMILY INVESTMENTS, LTD.
_______________________________________ By:___________________________________
FRED R. LUMMIS FREDERIC C. HAMILTON
_______________________________________ ______________________________________
TIM W. FOGELSONG ROGER P. LINDSTEDT
_______________________________________ ______________________________________
EARL DEAN CATLETT LARRY STADLER
4
<PAGE>
[SIGNATURE PAGE FOR SIXTH AMENDMENT
TO REGISTRATION RIGHTS AGREEMENT CONT'D.]
CABLE SYSTEMS, INC.
By:____________________________________ ______________________________________
Mark Gosney, President IRVIN LEVY
_______________________________________ ______________________________________
DAVID K. BARTH WILLIAM G. FLESNER
MARWIT CAPITAL, L.P.
By:____________________________________
CHRIS L. BRITT
5
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
This Agreement is made as of the 28th day of May 1992 among Travis
International Inc., a Delaware corporation (the "Company"), and Kirby Attwell
(the "Employee").
BACKGROUND
The Employee is the President and Chief Executive Officer of the
Company. A majority of the outstanding Common Stock of the Company is being sold
on the date hereof to new investors (the "Acquisition"). The Company is also
issuing to the Employee contemporaneously with this Agreement certain options to
purchase additional shares of Common Stock of the Company. The Company desires
to assure that it will continue to have the services of the Employee after the
Acquisition, and the Employee desires to provide such services, all upon the
terms and conditions hereinafter set forth.
WITNESSETH:
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, and also in consideration of the various transactions
occurring in connection with the Acquisition, the parties hereto, each intending
to be legally bound hereby, agree as follows:
1. EMPLOYMENT.
The Company hereby continues the employment of the Employee as the
President and Chief Executive Officer, and the Employee hereby accepts such
continued employment. If requested by the Company, the Grantee shall also serve
as an officer or director, or both, of any subsidiaries that the Company may
have from time to time, including American Packing and Gasket Company ("APG"),
without any compensation other than that payable by the Company hereunder and
any directors' fees payable by any of such subsidiaries. During the term of the
Employee's employment by the Company (the "Employment Term"), the Employee shall
perform such duties as are assigned by the Board of Directors of the Company and
as are appropriate to the Employee's office.
2. PERFORMANCE.
The Employee shall devote substantially all of his business efforts
to the performance of his duties hereunder; provided, however, that the Employee
may engage in personal investment activities and serve as a director of other
corporations so long as such activities do not interfere with the performance of
his duties hereunder. The Employee shall not be required to perform his services
hereunder outside of the Houston, Texas metropolitan area, except for services
rendered on business trips on behalf of the Company.
<PAGE>
3. TERM.
Unless otherwise terminated in accordance with Section 5, the
Employment Term shall be for an initial term beginning on the date of this
Agreement and continuing until September 30, 1995 (the "Initial Term").
Following the Initial Term, the Employment Term shall continue indefinitely
until terminated in accordance with Section 5.
4. COMPENSATION FOR EMPLOYMENT.
(a) The basic annual compensation of the Employee for his employment
services to the Companies hereunder shall be $150,000 (the "Salary"), which the
Company shall pay to the Employee in equal installments paid twice monthly. The
Salary may be adjusted upward from time to time at the discretion of the
Compensation Committee of the Board of Directors of Travis may approve, but the
Salary shall not be decreased, except that the Salary shall be decreased to the
extent that the Company or any subsidiary of the Company pays the Employee any
fees for being a director.
(b) The Employee shall also receive fringe benefits that are
substantially equivalent to the fringe benefits specified on Exhibit "A" (the
"Fringe Benefits").
5. TERMINATION AND ELIGIBILITY FOR COMPENSATION.
(a) NON-RENEWAL OF TERM. The Company may terminate the Employment
Term as of the end of the Initial Term by giving the Employee notice of
nonrenewal of the Employment Term on or before September 30, 1994, in which case
the Employment Term shall continue for the remainder of the Initial Term. The
Employee may also terminate the Employment Term as of the end of the Initial
Term by giving the Company notice of nonrenewal at least 120 days prior to the
end of the Initial Term. If neither the Company nor the Employee terminates the
Employment Term as of the end of the Initial Term, the Employment Term shall
continue indefinitely until terminated (i) by the Company by a notice of
termination at least one year prior to the proposed termination date, (ii) by
the Employee by a notice of termination at least 120 days prior to the proposed
termination date or (iii) as otherwise provided for termination by the Company
or the Employee in this Section 5. If either the Company or the Employee elects
not to renew the Employment Term as provided above, or if either the Company or
the Employee elects at any time after the Initial Term to terminate the
Employment Term as provided above, the Company shall pay to the Employee as a
severance benefit (the "Severance Benefit") an amount equal to the Salary then
in effect, on the same schedule as the Salary is then paid, for the one-year
period following the date when he ceases employment by the Company.
(b) WITHOUT CAUSE DURING INITIAL TERM. The Company shall have the
right to terminate the Employment Term without cause at any time during the
Initial Term by giving the Employee 30 days' advance notice of the termination
date. Under such circumstances, the Company shall pay to the Employee the
Severance Benefit as provided in subsection 5(a) above, and the Company shall
not have any further liability or obligation to the Employee hereunder, except
for any unpaid Salary and Fringe Benefits that have accrued through the date of
termination.
2
<PAGE>
(c) TOTAL DISABILITY. If the Employee becomes totally disabled (as
defined below), the Employment Term may be terminated by the Company, and the
Company shall not have any further liability or obligation to the Employee
hereunder except as follows: the Employee shall receive (i) any unpaid Salary
and Fringe Benefits that have accrued through the date of termination; and (ii)
whatever benefits that he may be entitled to receive under any then existing
disability benefit policies or plans of the Company, including the insurance
policy included in the Fringe Benefits. For the purposes hereof the Employee
shall be deemed to be "totally disabled" if the Employee is considered totally
disabled (A) under any individual disability insurance plan maintained by the
Company for the benefit of the Employee at that time, or (B) in the absence of
any such insurance, under any group disability plan maintained by any of the
Companies at that time, or (C) in the absence of any such plan, under then
applicable Social Security regulations.
(d) DEATH. If the Employee dies, the Employment Term shall
terminate, and thereafter the Company shall not have any further liability or
obligation to the Employee, his executors, administrators, heirs, assigns or any
other person claiming under or through him except as follows: the Employee's
estate shall receive any unpaid Salary and Fringe Benefits that have accrued
through the date of termination.
(e) CAUSE. The Company may terminate the Employment Term for "cause"
by giving the Employee 30 days' notice of the termination date, which notice
shall set forth the facts and circumstances claimed to constitute "cause"
hereunder. Upon any such termination, the Company shall not have any further
liability or obligation to the Employee hereunder. For purposes of this
Agreement, "cause" shall mean (i) any act or omission that constitutes a
material breach by Employee of his obligations or agreements under this
Agreement (other than by reason of illness, injury or incapacity), (ii)
Employee's conviction of a felony, (iii) Employee's engaging in willful
misconduct or gross neglect with respect to the Company's business that has had
a material adverse effect on the Company, or (iv) Employee's embezzlement or
wrongful diversion of the Company's funds. In the case of "cause" based on a
material breach under clause (i) above, the Employee's employment shall not be
terminated as of the proposed termination date if the Employee shall have
corrected the problem prior to that date.
(f) GOOD REASON, The Employee may terminate the Employment Term for
"good reason" by giving the Company 30 days notice of the termination date,
which notice shall set forth the facts and circumstances claimed to constitute
good reason hereunder. Upon any such termination, the Company shall pay the
Severance Benefit as provided in subsection 5(a) above, and the Company shall
not have any further liability or obligation to the Employee hereunder, except
for any unpaid Salary and Fringe Benefits that have accrued through the date of
termination. "Good reason" means the occurrence (without the Employee's written
consent) of any of the following circumstances that shall not have been remedied
prior to the termination date specified in the Employee's notice: (i) the
assignment to the Employee of any duties that are materially inconsistent with,
or the withdrawal from the Employee of any duties material to, the Employee's
position as Chief Executive Officer of the Company or (ii) any material breach
of this Agreement by the Company.
3
<PAGE>
(g) OTHER TERMINATION BY EMPLOYEE DURING INITIAL TERM. The Employee
may terminate his employment at any time prior to the end of the Initial Term
without good reason by giving the Company notice of his intention to terminate
his employment at least 60 days prior to the proposed termination date. Under
such circumstances, the Company shall not have any further liability or
obligation to the Employee hereunder, except for any unpaid Salary and Fringe
Benefits that have accrued through the date of termination.
6. SOLICITATION OF AND ASSOCIATION WITH EMPLOYEES.
While the Employee is employed with the Company and for a period of
one year after termination of such employment (a) the Employee shall not solicit
any employees of the Company for the purpose of having such employees directly
or indirectly render services to any person or entity other than the Company,
and (b) the Employee shall not directly or indirectly associate with any
employees of the Company in any business other than (i) the business of the
Company and (ii) investment activities in businesses that do not compete with
the business of the Company.
7. INVENTIONS, DESIGNS AND PRODUCT DEVELOPMENTS.
All inventions, innovations, designs, ideas and product developments
(collectively, the "Developments"), developed or conceived by the Employee,
solely or jointly with others, whether or not patentable or copyrightable, at
any time during the Employment Term and that relate to the actual or planned
business activities of the Company and all of the Employee's right, title and
interest therein, shall be the exclusive property of the Company. The Employee
hereby assigns, transfers and conveys to the Company all of his right, title and
interest in and to any and all such Developments. The Employee shall disclose
fully, as soon as practicable and in writing, all Developments to the Board of
Directors of the Company. At any time and from time to time, upon the request of
any of the Company, the Employee shall execute and deliver to the Companies any
and all instruments, documents and papers, give evidence and do any and all
other acts that, in the opinion of counsel for the Company, are or may be
necessary or desirable to document such transfer or to enable the Company to
file and prosecute applications for and to acquire, maintain and enforce any and
all patents, trademark registrations or copyrights under United States or
foreign law with respect to any such Developments or to obtain any extension,
validation, re-issue, continuance or renewal of any such patent, trademark or
copyright. The Company will be responsible for the preparation of any such
instruments, documents and papers and for the prosecution of any such
proceedings and will reimburse the Employee for all reasonable expenses incurred
by him in compliance with the provisions of this Section.
8. CONFIDENTIAL INFORMATION.
(a) The Employee has had and will have possession of or access to
confidential information relating to the business of the Company, including
writings, equipment, processes, drawings, reports, manuals, invention records,
financial information, business plans, customer lists, the identity of or other
facts relating to prospective customers, inventory lists, arrangements with
suppliers and customers, computer programs, or other material embodying
4
<PAGE>
trade secrets, customer or product information or technical or business
information of the Company. All such information, other than any information
that is in the public domain through no act or omission of the Employee or which
he is authorized to disclose, is referred to collectively as the "Company
Information." During and after the Employment Term, the Employee shall not (i)
use or exploit in any manner the Company Information for himself or any person,
partnership, association, corporation or other entity other than the Company,
(ii) remove any Company Information, or any reproduction thereof, from the
possession or control of the Company or (iii) treat Company Information
otherwise than in a confidential manner.
(b) All Company Information developed, created or maintained by the
Employee, alone or with others while employed by the Company, and all Company
Information maintained by the Employee thereafter, shall remain at all times the
exclusive property of the Company. The Employee shall return to the Company all
Company Information, and reproductions thereof, whether prepared by him or
others, that are in his possession immediately upon request and in any event
upon the completion of his employment by the Company.
9. REMEDIES.
The Employee expressly acknowledges that the remedy at law for any
breach of Sections 6, 7 and 8 will be inadequate and that upon any such breach
or threatened breach, the Company shall be entitled as a matter of right to
injunctive relief in any court of competent jurisdiction, in equity or
otherwise, and to enforce the specific performance of the Employee's obligations
under these provisions without the necessity of proving the actual damage to the
Company or the inadequacy of a legal remedy. Subject to the remainder of this
Section 9, the rights conferred upon the Company by the preceding sentence shall
not be exclusive of, but shall be in addition to, any other rights or remedies
which the Company may have at law, in equity or otherwise.
10. PRIOR AGREEMENTS.
Any prior agreements between or among the Employee and the Company
or APG, or both, regarding the subject matter of this Agreement are terminated
by this Agreement, including the Employment Agreement, dated December 9, 1987
between the Company and the Employee, as amended as of April 21, 1988 and
November 30, 1990.
11. GENERAL.
(a) GOVERNING LAW. The terms of this Agreement shall be governed by
the laws of the State of Texas.
(b) COMPANY. For purposes of Sections 6, 7, 8 and 9, the terms
"Company" and "Companies" shall be deemed to include any incorporated or
unincorporated subsidiaries or affiliates of the Company.
(c) BINDING EFFECT. All of the terms and provisions of this
Agreement shall be binding upon and inure to the benefit and be enforceable by
the respective heirs, representatives,
5
<PAGE>
successors (including any successor as a result of a merger or similar
reorganization) and assigns of the parties hereto, except that the duties and
responsibilities of the Employee hereunder are of a personal nature and shall
not be assignable in whole or in part by the Employee.
(d) NOTICES. All notices given under this Agreement shall be in
writing and shall be deemed to be effective and given in accordance with this
Agreement when personally delivered, mailed by registered or certified mail or
sent by Federal Express or another overnight delivery service, addressed as
follows:
TO EMPLOYEE:
Mr. Kirby Attwell
Travis International, Inc.
3000 Weslayan, Suite 350
Houston, TX 77027
TO THE COMPANY OR APG:
Ms. Barbara M. Henagan
Bradford Investment Partners LP.
22 Chambers Street
Princeton, NJ 08540
With a copy to:
Thomas J. Sharbaugh, Esq.
Morgan, Lewis & Bockius
2000 One Logan Square
Philadelphia, Pennsylvania 19103
(e) ENTIRE AGREEMENT; MODIFICATION. This Agreement constitutes the
entire agreement of the parties hereto with respect to the subject matter hereof
and may not be modified or amended in any way except in writing by the parties
hereto.
(f) DURATION. Notwithstanding the termination of the Employment Term
and of the Employee's employment by the Company, this Agreement shall continue
to bind the parties for so long as any obligations remain under the terms of
this Agreement.
(g) WAIVER. No waiver of any breach of this Agreement shall be
construed to be a waiver as to succeeding breaches.
(h) SEVERABILITY, If any provision of this Agreement or application
thereof to anyone under any circumstances is adjudicated to be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect any other provisions or applications of this Agreement which can be given
effect without the invalid or unenforceable provision or
6
<PAGE>
application and shall not invalidate or render unenforceable such provision in
any other jurisdiction.
(i) Unless the context of this Agreement requires otherwise, (i)
references to the plural include the singular, the singular the plural and the
part the whole, (ii) "or" has the inclusive meaning frequently identified with
the phrase "and/or" and (ii) "including" has the inclusive meaning frequently
identified with the phrase "but not limited to." The section and other headings
contained in this Agreement are for reference purposes only and shall not
control or affect the construction of this Agreement or the interpretation
thereof in any respect. Section and subsection references are to this Agreement
and use of the terms "hereunder" and "hereof" refer to the entire Agreement.
IN WITNESS WHEREOF, the parties hereto, intending to be legally
bound, have hereunto duly executed this Agreement the day and year first written
above.
TRAVIS INTERNATIONAL, INC.
By: ______________________________
__________________________________
KIRBY ATWELL
7
EXHIBIT 10.2
AMENDMENT TO EMPLOYMENT AGREEMENT
This agreement amends the Agreement dated May 28, 1992 (the "Employment
Agreement") between Travis International, Inc. (the "Company") and Kirby Attwell
(the "Employee")
The Company and the Employee agree as follows:
1. Subsection (a) of Section 5 of the Employment Agreement is amended so
as hereafter to provide in its entirety as follows:
(a) The Employment Term shall continue indefinitely until terminated
(i) by the Company by a notice of termination at least one year prior to
the proposed termination date PROVIDED THAT IN NO EVENT MAY THE PROPOSED
TERMINATION DATE BE EARLIER THAN MAY 15, 1999, (ii) by the Employee by a
notice of termination at least 120 days prior to the proposed termination
date, or (iii) as otherwise provided for termination by the Company or the
Employee in this Section 5. If either the Company or the Employee elects
at any time to terminate the Employment Term as provided above, the
Company shall pay to the Employee as a severance benefit (the "Severance
Benefit") an amount equal to the Salary then in effect, on the same
schedule as the Salary in then paid, for the one-year period following the
date when he ceases employment by the Company."
2. The Employment Agreement, amended as set forth above, is hereby
affirmed by the Company and the Employee.
Executed and effective as of 15th day of May, 1996.
TRAVIS INTERNATIONAL, INC.
By: ________________________________
Name: Barbara M. Henagan
Title: Chairman of the Board
____________________________________
Kirby Attwell
EXHIBIT 10.3
EMPLOYMENT AND NON-COMPETITION AGREEMENT
This EMPLOYMENT AND NON-COMPETITION AGREEMENT, made and entered into this
2nd day of December, 1994 by and between De-Ro/Suncoast, Inc., a Delaware
corporation ("Newco") and Larry Stadler (the "Employee"),
WITNESSETH:
WHEREAS, the parties hereto acknowledge and agree that this Agreement is
entered into pursuant to (i) that certain Share Purchase Agreement (the
"Suncoast Purchase Agreement") dated the date hereof among Travis International,
Inc., a Delaware corporation ("Travis"), Newco, Earl Dean Catlett ("Catlett"),
Roger P. Lindstedt ("Lindstedt") and the Employee, whereby Catlett, Lindstedt
and the Employee have agreed to sell all of their shares of capital stock in
Suncoast Postension Corp., a Texas corporation (the "Company"), to Newco, which
shares comprise all of the outstanding shares of capital stock in the Company,
and (ii) that certain Share Purchase Agreement (the "De-Ro Purchase Agreement")
dated the date hereof among Travis, Newco, Catlett and Lindstedt, whereby
Catlett and Lindstedt have agreed to sell all of their shares of capital stock
in De-Ro Products Co., a Texas corporation ("De-Ro"), to Newco, which shares
comprise all of the outstanding shares of capital stock in De-Ro; and
WHEREAS, Travis, as the owner of all of the outstanding principal stock of
Newco, will cause the merger of De-Ro and the Company with and into Newco; and
WHEREAS, as a consequence the consummation of the transaction described
above, Newco will engage in the businesses currently engaged in by De-Ro and the
Company; and
WHEREAS, the parties hereto acknowledge and agree that the parties to the
Suncoast Purchase Agreement and the De-Ro Purchase Agreement (collectively, the
"Purchase Agreements") would not have consummated such Purchase Agreements
without the parties hereto having entered into this Agreement; and
WHEREAS, Newco desires to engage the Employee to perform for Newco the
services set forth herein, and the Employee desires to perform such services for
Newco; and
WHEREAS, the Employee desires to assure Newco, and Newco desires to be
assured by the Employee, that the Employee will not engage in business
competitive with that of Newco during the term specified herein;
NOW, THEREFORE, in consideration of the mutual terms conditions and
covenants set forth herein, and intending to be legally bound, the parties
hereto agree as follows:
SECTION 1. EMPLOYMENT. Newco hereby employs Employee and the Employee
hereby accepts employment by Newco upon the terms and conditions of this
Agreement.
SECTION 2. POSITION, RESPONSIBILITIES AND PLACE OF SERVICE.
<PAGE>
(a) During the period of his employment hereunder, Employee agrees
to serve Newco and Newco shall employ Employee in the capacity of a senior
executive manager. During the term of this Agreement, Employee agrees to
devote his full time and attention during normal business hours to the
business and affairs of Newco and, to the extent necessary to discharge
the responsibilities assigned to the Employee hereunder, to use the
Employee's best efforts to perform faithfully and efficiently such
responsibilities, provided, however, that the foregoing shall not be
deemed to prohibit Employee from making personal investments in such form
or manner as will neither require Employee's services in the operation or
affairs in the companies or enterprises in which such investments are made
nor violate the terms of Sections 6 and 7.
(b) In connection with Employee's employment by Newco hereunder,
Employee shall perform his duties and obligations hereunder from the
Company's offices located in the metropolitan Houston, Texas area, except
for reasonably required travel on the Company's business.
(c) Newco shall furnish Employee with an office, secretarial help an
such other facilities and services suitable to Employee's position and
adequate for the performance of Employee's duties hereunder.
SECTION 3. TERM. Except for the duties and obligations of the Employee set
forth in Section 5 hereof and for the obligations of Newco under Section 4(c),
the respective duties and obligations of the parties hereto shall commence on
the date hereof and shall continue for a term of five (5) years (the "Term")
unless earlier terminated in accordance with the terms hereof. The Employee's
obligations set forth in Section 5 shall commence on the date hereof and shall
continue until the second anniversary of the date Employee ceases to be employed
by Newco (the "Non-Competition Term"). In no event shall the continuation of the
Employee's employment with Newco beyond the Term be deemed to be a renewal or
extension of the Agreement, the Term (other than the Non-Competition Term) or
any aspect thereof.
SECTION 4. COMPENSATION.
a. DEFINITIONS. For purposes hereof, the term "Before-Tax Income"
for any given fiscal year shall mean the earnings of Newco before all
federal income taxes, as reflected on the statements of income of the
Company prepared in connection with the audited annual consolidated
financial statements of Travis (the "Financial Statements"), which
Financial Statements shall deduct from Before-Tax Income any payments made
to Travis under the Management Contract (as defined in the Suncoast
Purchase Agreement). For purposes hereof, the term "Audit Date" shall mean
the date of completion of the audit of the consolidated financial
statements of Travis as of and for the fiscal year ending September 30,
1995 and for each subsequent fiscal year to and including September 30,
2002. In no event shall the Audit Date be later than 120 days after the
end of the applicable fiscal year.
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b. BASE SALARY. For all services rendered by Employee in any
capacity during his employment under this Agreement, including, without
limitation, services as an executive, officer, director, or member of any
committee of Newco or of any subsidiary or division thereof, Newco shall
pay Employee as compensation a salary at the rate of not less than One
Hundred Fifty Thousand Dollars ($150,000) per annum. Such salary be
payable in accordance with the customary payroll practices of Newco, but
in no event less than semi-monthly, and shall be subject to applicable
withholding and other taxes. During the period of this Agreement,
Employee's salary shall be reviewed at least annually. Such review shall
be conducted by the board of directors of Newco, or a committee designated
by the board of directors, and such board or committee may (but is under
no obligation to) increase said salary, but shall not decrease said
salary.
c. EARNINGS BONUS. In addition to the consideration payable to the
Employee under clause (b) above, Employee shall be entitled to receive
annual bonuses based on the Before-Tax Income of Newco, which annual bonus
shall be calculated in the following manner:
(i) In the event Before-Tax Income for the partial fiscal year
of Newco beginning on the date hereof (the "Closing Date") and
ending on September 30, 1995 equals or exceeds an amount equal to
$2739.73 times the number of days elapsed from the Closing Date to
and including September 30, 1995, Newco shall pay to the Employee an
amount equal to 11.25% of the Before-Tax Income in excess of such
amount for such period, such payment to be made on or before the
tenth day after the Audit Date with respect to such fiscal year;
(ii) In the event Before-Tax Income for any of the fiscal years
of Newco ending on September 30 of 1996, 1997, 1998, 1999, 2000 or
2001 equals or exceeds $1,000,000, Newco shall with respect to any
such fiscal year pay to the Employee an amount equal to 11.25% of
the Before-Tax Income in excess of such amount, such payment to be
made on or before the tenth day after the Audit Date with respect to
each such fiscal year; and
(iii) In the event Before-Tax Income for the partial fiscal
year of Newco beginning on October 1, 2001 and ending on the seventh
anniversary of the Closing Date equals or exceeds an amount equal to
$2739.73 times the number of days elapsed from the October 1, 2001
to and including such seventh anniversary, Newco shall pay to the
Employee an amount equal to 11.25% of the Before-Tax Income in
excess of such amount for such period, such payment to be made on or
before the tenth day after the Audit Date with respect to such
fiscal year.
(iv) In no event shall the aggregate amount payable to the
Employee under this Section 4(c) exceed Three Hundred Seventy-Five
Thousand Dollars ($375,000).
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d. DISCRETIONARY BONUS. In addition to the consideration payable to
the Employee under clauses (b) and (c) above, the Employee shall from time
to time be eligible for bonuses as shall be determined by the board of
directors of Newco in its sole discretion.
e. BENEFITS. Until the termination of the Employee's employment
pursuant to this Agreement, the Employee shall be eligible for
participation in and to receive all benefits under welfare benefit plans,
practices, policies and programs of Newco (including, without limitation,
medical, disability, employee life, group life, accidental death and
travel accident insurance plans and programs), as may be in effect from
time to time for other employees of Newco, and under any stock purchase or
stock option plans that may be in effect from time to time for other
senior executives of Newco (unless a plan specific to the Employee is
implemented or already in place, and such plan provides benefits to the
Employee which are substantially similar to, or more generous than, the
general plan in effect) it being agreed that the foregoing shall not
require Newco to continue or to put into effect any plan, practice, policy
or program. Employee shall be entitled to vacations in accordance with
Newco's prevailing policy for its executives.
f. REIMBURSEMENT OF EXPENSES. Newco shall reimburse the Employee for
all reasonable and proper travel and out-of-pocket expenses incurred by
Employee in connection with the performance of his duties, all in
accordance with Newco's written policies as provided to Employee from time
to time, as to the allowable amount of such expenses and the provision of
itemized reports.
g. COMPANY CAR. For the term hereof, Newco shall, at its sole cost
and expense, maintain for the exclusive use of the Employee the Chevrolet
Suburban VIN # 1GNEC16K2NJ339430 currently provided the Employee by the
Company, and shall replace such automobile with a substantially similar
automobile or automobiles as often as is reasonably necessary (as is
agreed by the Employee and Newco). Newco shall be responsible for all
costs of fuel, maintenance and repair with respect to any automobile
provided the Employee under this Section 4(g). Employee hereby
acknowledges and agrees that his personal use of the car hereunder is
compensation income as required by the Internal Revenue Code.
SECTION 5. AGREEMENT NOT TO COMPETE. The parties recognize that the
engagement of the Employee with Newco has been, and the engagement of the
Employee will be, special, unique and of an extraordinary character and that the
Employee has previously acquired, and will continue to acquire, special skill
and training. Newco recognizes that the Employee possesses a high degree of
skill in the industry, and the parties recognize that it is Newco's practice to
enforce agreements of this type. The parties also recognize that the covenants
of the Employee contained in this Agreement are an essential part of Employee's
engagement with Newco and that, but for the agreement of the Employee to comply
with such covenants, neither Newco nor Travis would have entered into the
Purchase Agreements, and Newco would not
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have entered into this Agreement. The Employee accordingly agrees that, at any
time during the Non-Competition Term hereof, the Employee shall not:
a. directly or indirectly participate in the ownership, management,
operation or control of, or be connected as an officer, employee, partner,
director, or otherwise with, or have any financial interest in or aid or
assist anyone else in the conduct of any business within the
Non-Competition Area (as hereinafter defined) that either conducts a
business similar to that conducted by Newco or provides or sells a service
or product that is the same, substantially similar to, or otherwise
competitive with the products and services provided or sold by Newco (a
"Competitive Operation"); provided, however, that this provision shall not
preclude the Employee from owning not more that 5% of the equity
securities of any publicly held Competitive Operation;
b. directly or indirectly, either as principal, agent, independent
contractor, consultant, director, officer, employee, employer, advisor,
stockholder, partner, or in any other individual or representative
capacity whatsoever, either for his own benefit or for the benefit of any
other person or entity either (i) attempt to hire, contact or solicit with
respect to hiring any employee of Newco or (ii) induce or otherwise
counsel, advise or encourage any employee of Newco to leave the employment
of Newco;
c. directly or indirectly, either as principal, agent, independent
contractor, consultant, director, officer, employee, employer, advisor,
stockholder, partner, or in any other individual or representative
capacity whatsoever, either for his own benefit or for the benefit of any
other person or entity, call upon, solicit, divert or take away, any
customer or vendor of Newco with whom the Employee dealt, directly or
indirectly, during his engagement with Newco, in connection with a
Competitive Operation; provided, however, that the Employee may call upon
such customers and vendors for the purpose of promoting sales of Newco's
services and products to such customers and vendors, and for such other
purposes as are not reasonably intended to result in any reduction in the
Newco's sales or prospective sales to such customers and vendors.
d. for purposes of this Agreement, the "Non-Competition Area" shall
be:
(i) with respect to Newco's, the Company's or De-Ro's
multifamily and commercial business, anywhere within the United
States of America; and
(ii) with respect to all other business conducted by Newco,
De-Ro or the Company, within a 250 mile radius of the city limits of
Houston, Dallas, San Antonio, or any other cities in which Newco
operates during the term hereof.
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It is expressly recognized and agreed that the covenants set forth in
Section 4 hereof are for the purpose of restricting the activities of the
Employee only to the extent necessary for the protection of the legitimate
business interests of Newco. The Employee hereby agrees that the limitations set
forth above on his rights to compete with Newco during the term of this
Agreement are reasonable and necessary for the protection of Newco. In this
regard, the Employee specifically agrees that such limitation as to the period
of time, geographic area and types and scopes of restriction on his activities
are reasonable and necessary to protect the good will and other business
interest of Newco and that such covenants do not and will not preclude the
Employee from engaging in activities sufficient for the purpose of earning a
living.
In the event that the Employee violates any non-competition covenant set
forth above in this Section 5, then, notwithstanding any provision herein to the
contrary, the time period specified above for which the non-competition
covenants are effective shall be extended day for day for the time period that
Employee is in violation of any such covenant.
SECTION 6. CONFIDENTIAL INFORMATION.
a. AGREEMENT TO HOLD CONFIDENTIAL. From the date hereof, the
Employee shall hold in secrecy for Newco all trade secrets and other
confidential information relating to the business and affairs of either the
Company, DE-RO or Newco that have come to his knowledge during his ownership of
the Company, including information concerning costs, profits, markets, sales,
business development plans, lists of clients or customers, and other information
of a similar nature (such categories of information being referred to herein as
"Confidential Information"), unless compelled to disclose any such Confidential
Information by judicial or administrative process or, in the opinion of its
counsel, by other requirements of law. In addition, the Employee shall hold in
secrecy for Newco all trade secrets and other Confidential Information relating
to any of the Company's, DE-RO's or Newco's business and affairs that have come
or may have come to his attention during his employment with either the Company
or Newco or during the Term. Employee shall not use for his own benefit or
disclose to any person any Confidential Information unless such use or
disclosure has the prior written authorization of Newco.
b. DELIVERY OF MATERIALS. The Employee shall deliver to Newco, at
the earlier to occur of the expiration of the Term or the termination of the
Employee's engagement, all correspondence, memoranda, notes, records, plans,
customer lists, product compositions and other documents and all copies thereof,
whether in hard copy form or electronically or magnetically stored, made,
composed, or received by the Employee, solely or jointly with others, that are
in the Employee's possession, custody or control and that are related in any
manner to the past, present or anticipated business of Newco.
SECTION 7. TERMINATION.
a. DATE OF TERMINATION. Except as set forth in Section 7(b), this
Agreement (except for the provisions set forth in Sections 4(c), 5, 6, 8, 10, 11
and 12) will terminate upon
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the earliest to occur of (i) the death or disability of the Employee, (ii)
immediately upon Newco's sending Employee written notice that it is terminating
Employee for cause, (iii) the expiration of five (5) days after Employee has
terminated his employment with Newco, or (iv) upon the expiration of its term,
and provided that Sections 4(c), 5, 6, 8, 10, 11 and 12 shall survive as set
forth therein. "Disability", as used in this Section 7, shall be defined to mean
the Employee's physical or mental inability to perform his duties hereunder for
a period of one hundred eighty days, due to accident, sickness or other
disability that prevents the Employee from satisfactorily performing the full
scope of his duties hereunder as such duties exist on the date immediately prior
to the date the Employee was first absent from work due to such disability.
Disability shall be determined by the board of directors of Newco based upon the
opinion of a licensed physician or physicians selected by the board of directors
of Newco. "Cause", as used in this Section 7, shall include the following:
(i) Any act of theft or other dishonesty, including, but not limited
to, any intentional misapplication of Newco's funds or other property;
(ii) Employee's gross neglect of his duties or Employee's gross
negligence in the performance of his duties that is not cured within
thirty (30) days after receiving written notice from Newco; or willful
disobedience of a lawful order or directive given to Employee by the
chairman and chief executive officer, president or the board of directors
of Newco and within the scope of Employee's duties that is not cured
within thirty (30) days after receiving written notice from Newco;
(iii) Employee's participation in an activity involving moral
turpitude that has a material adverse effect on Newco or in a criminal
activity;
(iv) Subject to Section 6(a), Employee's misappropriation or
disclosure to others in competition with Newco any Confidential
Information of the Company, DE-RO or Newco, including investment
prospects, analysis or advice, customer lists, plans or other property
interests of such party;
(v) Subject to the Employee's right to cure that is set forth in
Section 7(a)(ii) hereof, Employee's material breach any of the terms of
this Agreement; and
(vi) Subject to the Employee's right to cure that is set forth in
the Suncoast Purchase Agreement, Employee's material breach of any term of
the Suncoast Purchase Agreement or any document executed in connection
therewith, including but not limited to a material misrepresentation by
Employee in any such document.
b. OBLIGATIONS UPON TERMINATION. In the event the Employee's
employment with Newco is terminated by Newco without cause, Newco shall be
obligated to continue to pay to the Employee all amounts owing Employee under
Section 4 for the balance of the term
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hereof. Absent a designation of beneficiaries by the Employee, any amounts owing
under Section 4 hereof on account of the Employee's death shall be payable
directly to the Employee's surviving spouse if she is then living or, if not,
then to the Employee's estate. In the event the Employee's employment with Newco
is terminated for cause by Newco, or as a result of Employee's death or
disability, or for any reason by Employee, Newco, shall not be obligated to pay
to the Employee the amounts payable under Sections 4(b) and 4(d) hereof, except
any such amounts due as of the date of such termination and not subject to
Newco's rights of set-off under Section 9 hereof.
c. STOCK PURCHASE.
(i) In the event (1) the Employee's employment with Newco is
terminated by Newco without cause, (2) the Employee terminates his
employment with Newco as a result of a material breach by Newco of its
obligations hereunder (it being understood that the exercise of Newco's or
Travis' rights to set off against the payment of any funds hereunder
pursuant to Section 13.1 of the Suncoast Purchase Agreement, Section 13.1
of the De-Ro Purchase Agreement or any other document executed in
connection therewith shall not be deemed a breach hereof), or (3) that
this Agreement expires and is not renewed, and in the event that no Public
Offering (as defined in the Suncoast Purchase Agreement) has occurred as
of the last date of Employee's employment hereunder, then Employee shall
have the option to sell to Buyer (as hereinafter defined), and Buyer
shall, upon the exercise of such option, purchase from Employee the lesser
of (A) all of the shares of Travis Stock (as defined in the Suncoast
Purchase Agreement) issued to the Employee under the terms of the Suncoast
Purchase Agreement, if such shares are equal in value to or less in value
than Four Hundred Thousand Dollars ($400,000), or (B) the number of shares
of Travis Stock issued to the Employee under the terms of the Suncoast
Purchase Agreement which are equal in value to Four Hundred Thousand
Dollars ($400,000) (the "Purchase Shares"). For purposes of this Section
3(c) "Buyer" shall mean either Newco or Travis as determined by Newco and
Travis in their sole discretion, PROVIDED, HOWEVER, that so long as the
Credit Agreement (as defined in the Suncoast Purchase Agreement) remains
in effect, "Buyer" shall mean Travis.
(ii) The consideration paid for the purchased shares hereunder
shall be payable in eight (8) equal quarterly installments, beginning on
the last day of the quarter (based upon the fiscal year of Newco)
immediately following receipt by Newco of the appraisal described below
(the "Payment Start Date), and ending on the second anniversary of the
Payment Start Date.
(iii) If Employee elects to sell the Purchase Shares to Buyer
hereunder, he must deliver notice of his election to Travis and Newco
within thirty (30) days of the termination of his employment under the
circumstances set forth above. Employee's failure to give such notice
within the specified time period, or the delivery to Buyer of a notice
that the Employee declines to sell the Purchase Shares hereunder, shall
have the effect of terminating Employee's option to sell the Purchase
Shares under this Section
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7(c), and the rights granted employee under this Section 7(c) shall be of
no further force and effect.
(iv) Notwithstanding the provisions of clause (iii) above, if,
as of the effective date of the Employee's termination under the
circumstances set forth above, Travis has filed a form S-1 Registration
Statement, but the offering to which such registrations statement applies
has not yet become effective, the period during which Employee may
exercise his option to sell the Purchase Shares under this Section 7(c)
shall be extended until the date that is 180 days after the effective date
of the Employee's termination under the circumstances set forth above.
(v) For purposes of the share purchase under this Section 7(c),
the value of the Purchase Shares shall be determined as of the date of
Employee's termination under the circumstances set forth above, by an
appraiser chosen in good faith by Newco in its sole discretion, PROVIDED,
HOWEVER, that such appraiser must be an investment banking firm or an
appraiser with experience in the appraisal of the value of the securities
of non-public, closely held companies. The appraisal shall be completed
within sixty days of Employee's delivery to Buyer of notice that Employee
desires to exercise his option to sell the Purchase Shares under this
Section 7(c). If the appraisal valuation would result in the purchase by
Newco of a fraction of a Purchase Share, the number of shares of Travis
Stock subject to purchase hereunder shall be rounded up to the nearest
share. All fees, costs and expenses of the appraiser shall be allocated
equally between Buyer and the Employee.
d. SURVIVAL OF SECTIONS 5 AND 6. No termination of this Agreement or
termination of Employee's employment with Newco shall release Employee from the
covenants, conditions and obligations set out in Sections 5 and 6 of this
Agreement, which covenants, conditions and obligations shall remain in full
force and effect.
e. SURVIVAL OF SECTION 4(c). No termination of Employee's employment
by Newco shall release Newco from the covenants, conditions and obligations set
forth in Section 4(c) of this Agreement, which covenants, conditions and
obligations shall remain in full force and effect for the period of time
specified therein, PROVIDED, HOWEVER, that, in the case of a termination of the
Employee's employment hereunder as a result of Employee's intentional
misapplication of Newco's funds or other property that gives rise to Newco's
right of termination under Section 7(a)(i) above, Newco shall have a right to
set-off against any or all of the amounts payable under Section 4(c) of this
Agreement, all in accordance with Section 9 hereof.
SECTION 8. LIMITATION OF SCOPE. Should any portion of this Agreement be
deemed unenforceable because of the scope, duration or territory encompassed by
the undertakings of the Employee hereunder, and only in such event, then the
parties consent and agree to such limitation on scope, duration or territory as
may be finally adjudicated as enforceable by a court of competent jurisdiction
after the exhaustion of all appeals.
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SECTION 9. REMEDIES. With respect to each and every breach of violation or
threatened breach or violation by the Employee of this Agreement, Newco, in
addition to all other remedies available at law or in equity including specific
performance of the provisions hereof, shall be entitled to enjoin the
commencement or continuance thereof and may, without notice to the Employee,
apply to any court of competent jurisdiction for entry of an immediate
restraining order or injunction; provided, however, that the Employee shall have
the right to cure within thirty (30) days' notice from Newco any breach or
violation of Section 7(a)(ii) or Section 7(a)(v) hereof or any immaterial breach
or immaterial violation of the terms and provisions of Section 5 hereof. Newco
may set-off and apply against any and all amounts owing to the Employee by Newco
(except for any amounts owing to the Employee under Section 4(b) above) any
damages incurred by Newco in connection with any breach or violation by Employee
of this Agreement, or of the Suncoast Purchase Agreement (subject to Section
13.1 thereof), whether such obligations arise on, before or after the date
hereof; provided, however, that Newco shall not offset any such amounts until
any rights that Employee has to cure any breach or violation of this Agreement
(which rights are set forth in Section 7(a)(ii) and Section 7(a)(v) of this
Agreement), or of the Suncoast Purchase Agreement have expired. Newco may pursue
any of the remedies described herein concurrently or consecutively in any order
as to any breach or violation, and the pursuit of one of such remedies at any
time will not be deemed an election of remedies or a waiver of the right to
pursue any of the other of such remedies.
In the event that Newco fails to make any payment under this Agreement,
and after the expiration of a period of thirty (30) days, during which Newco has
not cured such material default, and provided that no material default of the
Employee under this Agreement exists, Employee's obligations under Section 5
hereunder shall terminate and shall be of no further force or effect (it being
understood that the exercise of Newco's or Travis' rights to set off against the
payment of any funds hereunder pursuant to Section 13.1 of the Suncoast Purchase
Agreement, Section 13.1 of the De-Ro Purchase Agreement or any other document
executed in connection therewith shall not be deemed a default in payment
thereof).
It is expressly recognized and agreed that the covenants set forth herein
are for the purpose of restricting the activities of the Employee only to the
extent necessary for the protection of the legitimate business interests of
Newco, and Newco and Employee agree that said covenants are reasonable for that
purpose and that such covenants do not and will not preclude Employee from
engaging in activities sufficient for the purpose of earning a living.
SECTION 10. SEVERABILITY. The provisions of the Agreement are severable
and any judicial determination that one or more of such provisions, or any
portion thereof, is invalid or unenforceable shall not affect the validity or
enforceability of any other provisions, or portions thereof, but rather shall
cause this Agreement to first be construed in all respect as if such invalid or
unenforceable provisions, or portions thereof, were modified to terms that are
valid and enforceable and provide the greatest protection to Newco's business
and interests; provided, however, that if necessary to render this Agreement
enforceable, it shall be construed as if such invalid or unenforceable
provisions, or portions thereof, were omitted.
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SECTION 11. SUCCESSORS. This Agreement is personal to the Employee and may
not be assigned by the Employee. This Agreement shall inure to the benefit of
and be binding upon Newco and its successors and assigns. This Agreement shall
not confer any rights or remedies upon any person other than the parties hereto
and their respective successors and permitted assigns.
SECTION 12. MISCELLANEOUS.
a. GOVERNING LAWS; HEADINGS; AMENDMENT; CONFLICTS. THIS AGREEMENT
SHALL BE CONSTRUED AND INTERPRETED AND THE RIGHTS OF THE PARTIES CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS. THE HEADINGS IN THIS AGREEMENT
ARE INSERTED FOR CONVENIENCE ONLY AND ARE NOT INTENDED TO BE PART OF OR TO
AFFECT THE MEANING OR INTERPRETATION OF THIS AGREEMENT. THIS AGREEMENT, TOGETHER
WITH THE SUNCOAST PURCHASE AGREEMENT, THE ESCROW AGREEMENT, THE BUYER NOTE (AS
DEFINED IN THE SUNCOAST PURCHASE AGREEMENT) EXECUTED IN RESPECT OF THE EMPLOYEE,
AND THE OTHER AGREEMENTS CONTEMPLATED BY THE PURCHASE AGREEMENT TO WHICH NEWCO
AND THE EMPLOYEE ARE PARTY, CONSTITUTES THE ENTIRE AGREEMENT BETWEEN THE PARTIES
CONCERNING THE SUBJECT MATTER HEREOF AND SUPERSEDES ALL PRIOR COMMITMENTS AND
UNDERSTANDINGS BETWEEN THE PARTIES RELATING TO SUCH SUBJECT MATTER. THIS
AGREEMENT MAY NOT BE AMENDED OR MODIFIED OTHER THAN BY A WRITTEN AGREEMENT
EXECUTED BY THE PARTIES HERETO OR THEIR RESPECTIVE SUCCESSORS AND LEGAL
REPRESENTATIVES. IN THE EVENT OF A CONFLICT BETWEEN THIS AGREEMENT AND THE
SUNCOAST PURCHASE AGREEMENT, THE TERMS OF THE SUNCOAST PURCHASE AGREEMENT SHALL
GOVERN.
b. NOTICES. All notice or other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Employee: Larry Stadler
15910 Harwick
Spring, Texas 77379
If to Newco: De-Ro/Suncoast, Inc.
3000 Weslayan, Suite 350
Houston, Texas 77027
Attention: Kirby Attwell
Chairman and Chief Executive Officer
SECTION 13. NO INCONSISTENT OBLIGATIONS. The Employee represents and
warrants that he has not previously assumed any obligations inconsistent with
the obligations of the Employee pursuant to this Agreement.
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IN WITNESS WHEREOF, the Employee has hereunto set his hand and Newco has
caused this Agreement to be executed in its name on its behalf, all as of the
day hereinabove first written.
"EMPLOYEE"
___________________________________
Larry Stadler
"NEWCO"
De-Ro/Suncoast, Inc.
By: _______________________________
Kirby Attwell
Title: President
JOINDER
Travis hereby joins in the foregoing Employment and Non-Competition
Agreement for the purpose of affirming its obligations under Section 7(c) only.
TRAVIS INTERNATIONAL, INC.
By: _______________________________
Kirby Attwell
Title: President
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EXHIBIT 10.4
FIRST AMENDMENT TO
EMPLOYMENT AND NON-COMPETITION AGREEMENT
This FIRST AMENDMENT TO EMPLOYMENT AND NON-COMPETITION
AGREEMENT (this "First Amendment"), made and entered into this 9th day of
February, 1996 but effective for all intents and purposes as of December 2,
1994, by and between De-Ro/Suncoast, Inc., a Delaware corporation ("Newco") and
Larry Stadler (the "Employee"),
WITNESSETH:
WHEREAS, the parties hereto have entered into an Employment and
Non-Competition Agreement dated as of December 2, 1994 (the "Original Employment
Agreement").
WHEREAS, the parties desire to correct certain provisions of the Original
Employment Agreement.
NOW, THEREFORE, in consideration of the mutual terms conditions and
covenants set forth herein, and intending to be legally bound, the parties
hereto agree as follows:
SECTION 1. DEFINITIONS. Any initially-capitalized term contained herein
and not otherwise defined herein shall have the meaning given such term in the
Original Employment Agreement.
SECTION 2. AMENDMENT TO ORIGINAL EMPLOYMENT AGREEMENT. Section 4 of the
Original Employment Agreement is hereby deleted and restated in its entirety to
read as follows:
SECTION 4. COMPENSATION.
(a) DEFINITIONS. For purposes hereof, the term "Before-Tax
Income" for any given fiscal year shall mean the earnings of Newco
before all federal income taxes, as reflected on the statements of
income of the Company prepared in connection with the audited annual
consolidated financial statements of Travis International, Inc. (the
"Financial Statements"), which Financial Statements shall deduct
from Before-Tax Income any payments made to Travis under the
Management Contract (as defined in the Suncoast Purchase Agreement).
For purposes hereof, the term "Audit Date" shall mean the date of
completion of the audit of the consolidated financial statements of
Travis as of and for the fiscal year ending September 30, 1995 and
for each subsequent fiscal year to and including September 30, 2002.
In no event shall the Audit Date be later than 120 days after the
end of the applicable fiscal year.
(b) BASE SALARY. For all services rendered by Employee in any
capacity during his employment under this Agreement, including,
without limitation, services as an executive, officer, director, or
member of any
<PAGE>
committee of Newco or of any subsidiary or division thereof, Newco
shall pay Employee as compensation a salary at the rate of not less
than One Hundred Fifty Thousand Dollars ($150,000) per annum. Such
salary be payable in accordance with the customary payroll practices
of Newco, but in no event less than semi-monthly, and shall be
subject to applicable withholding and other taxes. During the period
of this Agreement, Employee's salary shall be reviewed at least
annually. Such review shall be conducted by the board of directors
of Newco, or a committee designated by the board of directors, and
such board or committee may (but is under no obligation to) increase
said salary, but shall not decrease said salary.
(C) EARNINGS BONUS. In addition to the consideration payable
to the Employee under clause (b) above, Employee shall be entitled
to receive annual bonuses based on the Before-Tax Income of Newco,
which annual bonus shall be calculated in the following manner:
(i) In the event Before-Tax Income for the partial
fiscal year of Newco beginning on the date hereof (the
"Closing Date") and ending on September 30, 1995 equals or
exceeds an amount equal to $2739.73 times the number of days
elapsed from the Closing Date to and including September 30,
1995, Newco shall pay to the Employee an amount equal to 7.5%
of the Before-Tax Income in excess of such amount for such
period, such payment to be made on or before the tenth day
after the Audit Date with respect to such fiscal year;
(ii) In the event Before-Tax Income for any of the
fiscal years of Newco ending on September 30 of 1996, 1997,
1998, 1999, 2000 or 2001 equals or exceeds $1,000,000, Newco
shall with respect to any such fiscal year pay to the Employee
an amount equal to 7.5% of the Before-Tax Income in excess of
such amount, such payment to be made on or before the tenth
day after the Audit Date with respect to each such fiscal
year; and
(iii) In the event Before-Tax Income for the partial
fiscal year of Newco beginning on October 1, 2001 and ending
on the seventh anniversary of the Closing Date equals or
exceeds an amount equal to $2739.73 times the number of days
elapsed from the October 1, 2001 to and including such seventh
anniversary, Newco shall pay to the Employee an amount equal
to 7.5% of the Before-Tax Income in excess of such amount for
such period, such payment to be made on or before the tenth
day after the Audit Date with respect to such fiscal year.
(iv) In no event shall the aggregate amount payable to
the Employee under this Section 4(c) exceed Three Hundred
Seventy-Five Thousand Dollars ($375,000).
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(d) DISCRETIONARY BONUS. In addition to the consideration
payable to the Employee under clauses (b) and (c) above, the
Employee shall from time to time be eligible for bonuses as shall be
determined by the board of directors of Newco in its sole
discretion.
(e) BENEFITS. Until the termination of the Employee's
employment pursuant to this Agreement, the Employee shall be
eligible for participation in and to receive all benefits under
welfare benefit plans, practices, policies and programs of Newco
(including, without limitation, medical, disability, employee life,
group life, accidental death and travel accident insurance plans and
programs), as may be in effect from time to time for other employees
of Newco, and under any stock purchase or stock option plans that
may be in effect from time to time for other senior executives of
Newco (unless a plan specific to the Employee is implemented or
already in place, and such plan provides benefits to the Employee
which are substantially similar to, or more generous than, the
general plan in effect) it being agreed that the foregoing shall not
require Newco to continue or to put into effect any plan, practice,
policy or program. Employee shall be entitled to vacations in
accordance with Newco's prevailing policy for its executives.
(f) REIMBURSEMENT OF EXPENSES. Newco shall reimburse the
Employee for all reasonable and proper travel and out-of-pocket
expenses incurred by Employee in connection with the performance of
his duties, all in accordance with Newco's written policies as
provided to Employee from time to time, as to the allowable amount
of such expenses and the provision of itemized reports.
(f) COMPANY CAR. For the term hereof, Newco shall, at its sole
cost and expense, maintain for the exclusive use of the Employee the
Chevrolet Suburban VIN # 1GNEC16K2NJ339430 currently provided the
Employee by the Company, and shall replace such automobile with a
substantially similar automobile or automobiles as often as is
reasonably necessary (as is agreed by the Employee and Newco). Newco
shall be responsible for all costs of fuel, maintenance and repair
with respect to any automobile provided the Employee under this
Section 4(g). Employee hereby acknowledges and agrees that his
personal use of the car hereunder is compensation income as required
by the Internal Revenue Code."
SECTION 3. EFFECT. This First Amendment shall be effective only for the
specific purposes set forth herein, and, except as modified by this First
Amendment, the terms, covenants and provisions of the Original Employment
Agreement is hereby ratified and confirmed and shall continue in full force and
effect.
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IN WITNESS WHEREOF, the Employee has hereunto set his hand and Newco has
caused this First Amendment to be executed in its name on its behalf, all as of
the day hereinabove first written.
"EMPLOYEE"
___________________________________________
Larry Stadler
"NEWCO"
De-Ro/Suncoast, Inc.
By: _______________________________________
Kirby Attwell
Title: President
JOINDER
Travis hereby consents to the foregoing First Amendment to Employment and
Non-Competition Agreement.
TRAVIS INTERNATIONAL, INC.
By: _______________________________________
Kirby Attwell
Title: President
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EXHIBIT 10.5
EMPLOYMENT AND NON-COMPETITION AGREEMENT
This EMPLOYMENT AND NON-COMPETITION AGREEMENT, made and entered into as of
the 30th day of September, 1996 by and between New West Acquisition Corp., a
Delaware corporation ("Newco"), and Craig Cowan (the "Employee"),
WITNESSETH:
WHEREAS, the Employee owns 100% of the outstanding capital stock of New
West Communications, Inc., a California corporation ("New West"), that is
engaged in the business of marketing, selling and distributing new, surplus and
refurbished telecommunications components, and
WHEREAS, the parties hereto acknowledge and agree that this Agreement is
entered into pursuant to that certain Asset Purchase Agreement (the "Purchase
Agreement") dated the date hereof among, New West, Newco, Travis International,
Inc., and the Employee, whereby the Employee has voted for the sale of
substantially all of the assets of New West to Newco, and
WHEREAS, as a consequence of the consummation of the transaction described
above, Newco will engage in the business of marketing, selling, repairing,
refurbishing and distributing new, surplus and refurbished telecommunications
components and related services (the "Business"), and
WHEREAS, the parties hereto acknowledge and agree that the parties to the
Purchase Agreement would not have consummated such Purchase Agreement without
the parties hereto having entered into this Agreement; and
WHEREAS, Newco desires to engage the Employee to perform for Newco the
services set forth herein, and the Employee desires to perform such services for
Newco; and
WHEREAS, the Employee desires to assure Newco, and Newco desires to be
assured by the Employee, that the Employee will not engage in business
competitive with that of the Business during the term specified herein;
NOW, THEREFORE, in consideration of the mutual terms conditions and
covenants set forth herein, and intending to be legally bound, the parties
hereto agree as follows:
SECTION 1. EMPLOYMENT. Newco hereby employees Employee and the Employee
hereby accepts employment by Newco upon the terms and conditions of this
Agreement.
SECTION 2. POSITION AND RESPONSIBILITIES. During the period of his
employment hereunder, Employee agrees to serve Newco and Newco shall employ
Employee in the capacity of a senior executive manager, with responsibility for
the day-to-day management of Newco, subject to the ultimate authority of Newco's
Board of Directors, PROVIDED, HOWEVER, that the
<PAGE>
parties hereto agree that, subject to reasonable direction of Newco's directors
and Travis, the location, scope, and terms (other than with respect to
Compensation) of Employee's employment hereunder shall not be substantially
different from Employee's employment with New West immediately prior to the date
of this Agreement. During the term of this Agreement, Employee agrees to devote
substantially all of his business efforts to the business and affairs of Newco
and, to the extent necessary to discharge the responsibilities assigned to the
Employee hereunder, to use the Employee's best efforts to perform faithfully and
efficiently such responsibilities.
SECTION 3. TERM. Except for the duties and obligations of the Employee set
forth in Section 5 hereof, the respective duties and obligations of the parties
hereto shall commence on the date hereof and shall continue for a term of three
(3) years (the "Initial Term") unless earlier terminated in accordance with the
terms hereof. At the expiration of the Initial Term, the Employee shall have the
option of extending the term of this agreement for up to an additional two (2)
years (the "Term Extension") by providing written notice to Newco of his intent
to so extend the term of this Agreement at least 30 days prior to the expiration
of the Initial Term (the Initial Term and the Term Extension, if any, together
shall be referred to herein as the "Term"). In no event shall the continuation
of the Employee's employment with Newco beyond the Term be deemed to be a
renewal or extension of this Agreement, the Term or any aspect thereof. The
Employee's duties and obligations set forth in Section 5 shall commence on the
date hereof and shall continue until the second anniversary of the date Employee
ceases to be employed by Newco (the "Non-Competition Term").
SECTION 4. COMPENSATION.
a. BASE SALARY. For all services rendered by Employee in any
capacity during his employment under this Agreement, including, without
limitation, services as an executive, officer, director, or member of any
committee of Newco or of any subsidiary or division thereof, Newco shall pay
Employee as compensation a salary at the rate of not less Twelve Thousand Five
Hundred Dollars ($12,500) per month. Such salary shall be payable in accordance
with the customary payroll practices of Newco, but in no event less than
semi-monthly.
b. BONUSES. In addition to the Base Salary, from time to time, and
subject to the terms and conditions of such bonuses, the Employee shall be
eligible to receive a Participation Bonus, as described on EXHIBIT A-1 and a
Supplemental Bonus, as described on EXHIBIT A-2, in each case in respect of
periods during which the Employee is actually employed hereunder. An example of
Bonus Calculations is attached hereto as Exhibit A-3.
c. BENEFITS. Until the termination of the Employee's employment
pursuant to this Agreement, the Employee shall be eligible for participation in
and to receive all of the benefits set forth on EXHIBIT B attached hereto.
d. REIMBURSEMENT OF EXPENSES. Newco shall reimburse the Employee for
all reasonable and proper travel and out-of-pocket expenses incurred by Employee
in connection with the performance of his duties, all in accordance with Newco's
policies as to the allowable
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amount of such expenses and the provision of itemized reports and provided that
such expenditures satisfy the criteria under the Internal Revenue Code for
deductibility by Newco (whether or not fully deductible) for federal income tax
purposes as ordinary and necessary business expenses, reimbursements are
allowable deductions by Newco for income tax purposes in accordance with
regulations of the Internal Revenue Service regarding such expenses, including
relevant documentation requirements.
SECTION 5. AGREEMENT NOT TO COMPETE.
(a) The parties recognize that the engagement of the Employee with
Newco has been, and the engagement of the Employee will be, special, unique and
of an extraordinary character and that the Employee has previously acquired, and
will continue to acquire, special skill and training. Newco recognizes that the
Employee possesses a high degree of skill in the industry, and the parties
recognize that it is Newco's practice to enforce agreements of this type.
The parties also recognize that the covenants of the Employee contained in this
Agreement are an essential part of Employee's engagement with Newco and that,
but for the agreement of the Employee to comply with such covenants, Newco would
have not entered into the Purchase Agreement and would not have entered into
this Agreement. The Employee therefore agrees that from and after the date of
this Agreement until the later of (x) five years after the date hereof or (y)
two years after the termination of Employee's employment with Newco (such date
being referred to herein as the "Ending Date"), Employee shall not directly or
indirectly:
(1) engage in, control, invest in, advise, manage, serve as a
director, officer, or employee of, act as a consultant to, receive
any economic benefit from or exert any influence upon, any business
which conducts activities in the Territory (as hereinafter defined)
similar to those conducted by the Business (as now conducted or
hereafter expanded by Newco), at any time prior to the Ending Date;
(2) solicit, divert or attempt to solicit or divert any party
who is, was, or was solicited to become, a customer or supplier of
the Business (as now conducted or hereafter expanded by Newco) at
any time prior to the Ending Date;
(3) employ, solicit for employment or encourage to leave their
employment, any person who was during the two-year period prior to
such employment, solicitation or encouragement or is an officer,
employee, or independent contractor of the Business (as now
conducted or hereafter expanded by Newco);
(4) avail itself of or invest in any business opportunity which
is related to the activities conducted by the Business (as now
conducted or hereafter expanded by Newco), and which came to its
attention prior to the Ending Date;
(5) disturb, or attempt to disturb, any business relationship
between any third party and the Business (as now conducted or
hereafter expanded by Newco); or
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(6) make any statement to any third party, including the press
or media, likely to result in adverse publicity for the Business (as
now conducted or hereafter expanded by Purchaser).
For purposes of this SECTION 5, the term "Business" shall include the
sale, marketing, manufacturing, refurbishment, and distribution of new,
surplus, and refurbished telecommunications components; the term "directly
or indirectly" shall include acts or omissions as proprietor, partner,
joint venturer, employer, salesman, agent, employee, officer, investor,
director, lender or consultant of or owner of any interest in, any Person;
and the term "Territory" shall mean the United States, Canada and all
other countries in which the Business has transacted business prior to the
Ending Date.
Employee hereby agrees that the limitation set forth above on his rights
to compete with the Business and Newco during the Non-Competition Term are
reasonable and necessary for the protection of the Business and Newco. In this
regard, Employee specifically agrees that such limitation as to the period of
time, geographic area and types and scopes of restriction on his activities are
reasonable and necessary to protect the good will and other business interest of
the Business and Newco.
The parties acknowledge that Employee's agreement to enter into a
non-competition covenant has been conditioned upon the corresponding payment
obligations of Newco under paragraph 3.1(c) of the Purchase Agreement, as well
as Newco's covenants under this agreement. In the event that Newco is in
material default under this agreement or in default under paragraph 3.1(c) and
such default remains uncured for 30 days after written notice from Employee to
Newco of such default of the Purchase Agreement, the non-competition covenants
set forth above and in the Purchase Agreement shall be deemed terminated
provided, that in no event shall an offset of amounts owed under Article IX of
the Asset Purchase Agreement against amounts owed under Section 3.1(c) be deemed
to be a default hereunder or thereunder.
In the event that the Employee violates any non-competition covenant set
forth above in this Section 5, then, notwithstanding any provision herein to the
contrary, the time period specified above for which the non-competition
covenants are effective shall be extended day for day for the time period that
Employee is in violation of any such covenant.
(b) The parties acknowledge that Cowan has been involved in various
investment activities which are not similar to or in competition with those
conducted by the Business, including, but not limited to art distribution, real
estate investments, and prepaid cellular telephone products. The provisions of
this SECTION 5 shall not preclude such non-competitive activities by Cowan,
provided that such activities do not interfere with Cowan's obligations under
this Agreement.
(c) In the event of actual or threatened breach of the provisions of
this SECTION 5 by Employee or any of his Affiliates, Newco, in addition to any
other remedies available to it for such breach or threatened breach, including
the recovery of damages, shall be entitled to an injunction restraining the
Employee or such Affiliate from such conduct. If a bond is required
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<PAGE>
to be posted in order for Newco to secure an injunction, the parties agree that
said bond need not exceed the sum of $1,000.
(d) In the event Employee or any of his Affiliates engages in any
activity prohibited by this Section, Employee shall forfeit to Newco all rights
and amounts then remaining due to Employee under SECTION 3.1(c) of the Purchase
Agreement.
(e) If at any time any of the provisions of this SECTION 5 shall be
determined to be invalid or unenforceable by reason of being vague or
unreasonable as to duration, area, scope of activity or otherwise, then this
SECTION 5 shall be considered divisible (with the other provisions to remain in
full force and effect) and the invalid or unenforceable provisions shall become
and be deemed to be immediately amended to include only such time, area, scope
of activity and other restrictions, as shall be determined to be reasonable and
enforceable by the court or other body having jurisdiction over the matter, and
Employee expressly agree that this Agreement, as so amended, shall be valid and
binding as though any invalid or unenforceable provision had not been included
herein.
(f) The provisions of this SECTION 5 shall be in addition to, and
not in limitation of, any other provisions contained in any other agreement
restricting competition by Employee.
SECTION 6. CONFIDENTIAL INFORMATION.
a. AGREEMENT TO HOLD CONFIDENTIAL. From the date hereof, the
Employee shall hold in secrecy for Newco all trade secrets and other
confidential information relating to the business and affairs of either New West
or Newco that have come to his knowledge during his ownership of New West,
including information concerning costs, profits, markets, sales, business
development plans, lists of clients or customers, lists of suppliers and other
information about sources of supply and other information of a similar nature
(such categories of information being referred to herein as "Confidential
Information"). In addition, the Employee shall hold in secrecy for Newco all
trade secrets and other Confidential Information relating to either New West's
or Newco's business and affairs that have come or may have come to his attention
during his employment with either New West or Newco or during the Term. Employee
shall not use for his own benefit or disclose to any person any Confidential
Information unless such use or disclosure has the prior written authorization of
Newco.
b. DELIVERY OF MATERIALS. The Employee shall deliver to Newco, at
the earlier to occur of the expiration of the Term or the termination of the
Employee's engagement, all correspondence, memoranda, notes, records, plans,
customer lists, product compositions and other documents and all copies thereof,
whether in hard copy form or electronically or magnetically stored, made,
composed, or received by the Employee, solely or jointly with others, that are
in the Employee's possession, custody or control and that are related in any
manner to the past, present or anticipated business of Newco.
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<PAGE>
SECTION 7. TERMINATION.
a. DATE OF TERMINATION. Except as set forth in Section 7(b), this
Agreement (except for the provisions set forth in Sections 5, 6, 7, 8, 9, 10, 11
and 12) will terminate upon the earliest to occur of (i) the death or disability
of the Employee, (ii) immediately upon Newco's sending Employee written notice
that it is terminating Employee for cause or (iii) the expiration of five (5)
days after Employee has terminated his employment with Newco, and provided that
Sections 5, 6, 7, 8, 9, 10 and 11 shall survive as set forth without limitation.
"Disability", as used in this Section 7, shall be defined to mean the Employee's
physical or mental inability to perform his duties hereunder for a period of one
hundred eighty days, due to accident, sickness or other disability that prevents
the Employee from satisfactorily performing the full scope of his duties
hereunder as such duties exist on the date immediately prior to the date the
Employee was first absent from work due to such disability. Disability shall be
determined by the board of directors of Newco based upon the opinion of a
licensed physician or physicians selected by the board of directors of Newco.
"Cause", as used in this Section 7, shall mean the following:
(i) Any act of theft or other dishonesty, including, but not limited
to, any intentional misapplication of Newco's funds or other property;
(ii) Employee's gross neglect of his duties or Employee's gross
negligence in the performance of his duties that is not cured within ten
(10) days after receiving written notice from Newco; or willful
disobedience of a lawful order or directive given to Employee by the board
of directors of Newco and within the scope of Employee's duties that is
not cured within ten (10) days after receiving written notice from Newco;
(iii) Employee's participation in an activity involving moral
turpitude that has a material adverse effect on Newco or in a criminal
activity;
(iv) Employee's misappropriation or disclosure to others in
competition with Newco any Confidential Information of Newco, including
investment prospects, analysis or advice, customer lists, plans or other
property interests of Newco;
(v) Subject to the Employee's right to cure that is set forth in
Section 9 hereof, Employee's material breach any of the terms of this
Agreement, and;
(vi) Subject to the Employee's right to cure that is set forth in
Section 9, Employee's material breach of any term of the Purchase
Agreement or any document executed in connection therewith, including but
not limited to a material misrepresentation by Employee in any such
document.
b. OBLIGATIONS UPON TERMINATION WITHOUT CAUSE. In no event shall the
Employee be terminated without cause during the first year of the Term. In the
event the
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Employee's employment with Newco is terminated by Newco without cause, or Newco
materially breaches this Agreement and the Employee terminates his employment as
a result of such breach, the Employee shall receive as liquidated damages the
amounts set forth in the following subsections (i) and (ii). The liquidated
damages so received by the Employee shall not be limited or reduced by amounts
that the Employee might otherwise earn or be able to earn during the period
between termination of his employment under this agreement and payment of those
liquidated damages. The provisions of this Section 7(b) shall be the Employee's
sole and exclusive remedy in the event of such a termination.
(i) Newco shall pay to Employee the amount of base salary provided for
in Section 2 hereof for the remainder of the Liquidated Damages
Term, such amounts to be payable in the manner and on the dates that
such salary would have been payable had Employee remained employed
by Newco for the remainder of the Liquidated Damages Term; plus
(ii) Newco shall pay to Employee, within 30 days of each Audit Date until
the Audit Date after the end of the Liquidated Damages Term, an
amount equal to the arithmetic mean of all Participation Bonuses
paid or payable under this Agreement in respect of periods of at
least three months prior to Employee's termination, weighted to
reflect the length of the period in respect of which each such bonus
was paid; PROVIDED, HOWEVER, that the maximum aggregate amount
payable as Interim Compensation under the Purchase Agreement,
Participation Bonuses under this Agreement and liquidated damages
under this Section 7(b)(ii) shall in no event exceed $2,500,000 and
PROVIDED FURTHER, that if Employee is terminated prior to the first
anniversary hereof, for the purposes of calculating damages payable
pursuant to this section 7(b)(ii), such arithmetic mean shall be
deemed to be [$ ]. Examples of liquidated damages calculated in
accordance with this Section 7(b) are attached hereto as EXHIBIT
7(b).
For purposes of this Section 7(b), "Liquidated Damages Term" shall include only
the Initial Term unless the Employee is terminated during the Term Extension
provided for in Section 3, in which case the Liquidated Damages Terms shall also
include the Term Extension.
c. In the event the Employee's employment with Newco is terminated
for cause by Newco, or as a result of Employee's death or Disability, or for any
reason by Employee except as set forth in Section 7(b), Newco shall not be
obligated to pay to the Employee such portion of the amount owing under Section
4 hereof determined to be compensation for the Employee's responsibilities
described in Section 2 hereof beyond the determination date of death or
Disability.
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d. SURVIVAL OF SECTIONS 5 AND 6. No termination of this Agreement or
termination of Employee's employment with Newco shall release Employee from the
covenants, conditions and obligations set out in Sections 5 and 6 of this
Agreement, which covenants, conditions and obligations shall remain in full
force and effect.
SECTION 8. LIMITATION OF SCOPE. Should any portion of this Agreement be
deemed unenforceable because of the scope, duration or territory encompassed by
the undertakings of the Employee hereunder, and only in such event, then the
parties consent and agree to such limitation on scope, duration or territory as
may be finally adjudicated as enforceable by a court of competent jurisdiction
after the exhaustion of all appeals.
SECTION 9. REMEDIES; RESOLUTION OF DISPUTES.
a. Subject to the provisions of Section 9(b), below, if a dispute or
controversy arises between the parties relating to this Agreement including any
dispute regarding Newco's termination of the Employee for Cause or forfeiture of
Employee's entitlement to receive amounts payable under Section 3.1(c) of the
Purchase Agreement, the parties agree to use the following procedures prior to
either party pursuing other available remedies:
(i) A meeting will be held promptly between the parties attended by
individuals with decision-making authority to attempt in good faith to
negotiate a resolution of the dispute. If either party intends to be
accompanied at a meeting by an attorney, the other parties will be given
at least three (3) business days' notice of such intention, and those
parties also may be accompanied by an attorney. All negotiations pursuant
to this Section 9 are confidential and will be treated as compromise and
settlement negotiations for purposes of the Federal Rules of Evidence and
state rules of evidence.
(ii) If within ten (10) days after such meeting, the parties have
not succeeded in negotiating a resolution of the dispute, they will
jointly appoint a mutually acceptable neutral person not affiliated with
either of the parties (the "Neutral"), seeking assistance in such regard
from the American Arbitration Association ("AAA") if they have been unable
to agree upon such appointment within twenty (20) days from the initial
meeting. The obligation for payment of the fees of the Neutral shall be
shared equally by the parties. In consultation with the Neutral, the
parties will select or devise an alternative dispute resolution procedure
("ADR") by which they will attempt to resolve the dispute, and a time for
the ADR to be held, with the Neutral making the decision as to the
procedure and time (but unless circumstances require otherwise, not later
than sixty (60) days after selection of the Neutral) if the parties have
been unable to agree on any of such matters within twenty (20) days after
initial consultation with the Neutral. Any ADR proceeding will be held in
Los Angeles, California, at a location mutually agreeable to the parties
or, if they are unable to agree, selected by the Neutral. The parties
agree to participate in good faith in the ADR to its conclusion as
designated by the Neutral.
(iii) If the parties are not successful in resolving the dispute as
provided in Sections (i) and (ii), above, then the parties agree that such
dispute will be settled by
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binding arbitration conducted on a confidential basis pursuant to the AAA
Rules for Non- Administered Arbitration of Business Disputes by a sole
arbitrator selected from the AAA Panels of Neutrals. Any decision or award
as a result of any such arbitration proceeding will include the assessment
of costs, expenses and reasonable attorneys' fees in favor of the
prevailing party, which will be selected in the discretion of the
arbitrator. Absent an agreement by the parties to the contrary, any such
arbitration will be conducted at a location, in Los Angeles, California,
selected by the arbitrator. The parties reserve the right to object to any
proposed arbitrator who is employed by or affiliated with a competing
organization or entity. Prior to issuing the arbitrator's final award of
arbitration, the arbitrator will provide each party with the arbitrator's
written tentative award, which will include the findings of fact as
determined by the arbitrator upon which such tentative award is based.
Each party will have ten (10) business days from the delivery of such
tentative award to submit to the arbitrator a written rebuttal to the
findings of fact set forth in the tentative award, and the arbitrator will
promptly forward a copy of each party's rebuttal, if any, to the other
parties. If no party submits such a rebuttal, the tentative award will be
deemed final; if any party submits such a rebuttal, the arbitrator will
promptly review the same and will deliver a final award, in writing, to
each of the parties. An award of arbitration will be final and binding on
the parties and may be confirmed in any appropriate court with
jurisdiction.
(iv) All applicable statutes of limitation and defenses based upon
the passage of time will be tolled while the procedures specified in this
Section 9 are pending. The parties will take all such actions, if any,
necessary to effectuate such tolling.
b. Notwithstanding the foregoing, with respect to each and every
breach or violation or threatened breach or violation by the Employee of this
Agreement, Newco, in addition to all other remedies available at law or in
equity including specific performance of the provisions hereof, shall be
entitled to enjoin the commencement or continuance thereof and may, without
notice to the Employee, apply to any court of competent jurisdiction for entry
of an immediate restraining order or injunction; provided, however, that the
Employee shall have the right to cure within ten (10) days' notice from Newco
any breach or violation of Section 7(a)(v) or (vi) hereof or any immaterial
breach or immaterial violation of the terms and provisions of Section 5 hereof.
Upon the court's determination of Newco's application for a restraining order or
injunction, and subject to the parties' compliance therewith, further court
action will be stayed pending completion of the procedures outlined in Section
9(a), above. Newco may set-off and apply against any and all amounts owing to
the Employee by Newco any damages incurred by Newco in connection with any
breach or violation of this Agreement, as determined in accordance with Section
9(a) whether such obligations arise on, before or after the date hereof;
provided, however, that Newco shall not offset any such amounts until any rights
that Employee has to cure any breach or violation of this Agreement, which
rights are set forth in this Section 9, have expired. Newco may pursue any of
the remedies described herein concurrently or consecutively in any order as to
any breach or violation, and the pursuit of one of such remedies at any time
will not be deemed an election of remedies or a waiver of the right to pursue
any of the other of such remedies.
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It is expressly recognized and agreed that the covenants set forth herein
are for the purpose of restricting the activities of the Employee only to the
extent necessary for the protection of the legitimate business interests of
Newco, and Newco and Employee agree that said covenants are reasonable for that
purpose and that such covenants do not and will not preclude Employee from
engaging in activities sufficient for the purpose of earning a living.
SECTION 10. SEVERABILITY. The provisions of the Agreement are severable
and any judicial determination that one or more of such provisions, or any
portion thereof, is invalid or unenforceable shall not affect the validity or
enforceability of any other provisions, or portions thereof, but rather shall
cause this Agreement to first be construed in all respect as if such invalid or
unenforceable provisions, or portions thereof, were modified to terms that are
valid and enforceable and provide the greatest protection to Newco's business
and interests; provided, however, that if necessary to render this Agreement
enforceable, it shall be construed as if such invalid or unenforceable
provisions, or portions thereof, were omitted.
SECTION 11. SUCCESSORS. This Agreement is personal to the Employee and may
not be assigned by the Employee. This Agreement shall inure to the benefit of
and be binding upon Newco and its successors and assigns. This Agreement shall
not confer any rights or remedies upon any person other than the parties hereto
and their respective successors and permitted assigns.
SECTION 12. INDEMNIFICATION. Newco shall, to the extent permitted by its
bylaws, indemnify and hold the Employee harmless for any acts or decisions made
in good faith while performing services for Newco.
SECTION 13. MISCELLANEOUS.
a. GOVERNING LAWS; HEADINGS; AMENDMENT. THIS AGREEMENT SHALL BE
CONSTRUED AND INTERPRETED AND THE RIGHTS OF THE PARTIES CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF CALIFORNIA. THE HEADINGS IN THIS AGREEMENT ARE
INSERTED FOR CONVENIENCE ONLY AND ARE NOT INTENDED TO BE PART OF OR TO AFFECT
THE MEANING OR INTERPRETATION OF THIS AGREEMENT. THIS AGREEMENT MAY NOT BE
AMENDED OR MODIFIED OTHER THAN BY A WRITTEN AGREEMENT EXECUTED BY THE PARTIES
HERETO OR THEIR RESPECTIVE SUCCESSORS AND LEGAL REPRESENTATIVES.
b. ATTORNEYS' FEES; PREJUDGMENT INTEREST. If the services of an
attorney are required by any party to secure the performance of this Agreement
or otherwise upon the breach or default of another party to this Agreement, or
if any judicial remedy or arbitration is necessary to enforce or interpret any
provision of this Agreement or the rights and duties of any person in relation
thereto, the prevailing party will be entitled to reasonable attorneys' fees,
costs and other expenses, in addition to any other relief to which such party
may be entitled. Any award of damages following judicial remedy or arbitration
as a result of the breach of this Agreement or any of its provisions will
include an award of prejudgment interest from the date of the breach at the
court's or arbitrator's discretion, not to exceed 10%.
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<PAGE>
c. POST-JUDGMENT ATTORNEYS FEES. If the services of any attorney are
required by any party to enforce a judgment in connection with this Agreement,
the judgment creditor will be entitled to reasonable attorneys' fees, costs and
other expenses, and such fees, costs and expenses will be recoverable as a
separate item. This provision is severable from all other provisions of this
Agreement, will survive any judgment, and will not be deemed merged into the
judgment.
d. NOTICES. All notice or other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Employee: Craig Cowan
265 Indian Knob Road
San Luis Obispo, CA 93401
with a copy to: Roderick A. Rodewald, Esq.
Diehl & Rodewald
1043 Pacific Street
San Luis Obispo, CA 93401
If to Newco: New West Acquisition Corp.
3000 Weslayan, Suite 350
Houston, Texas 77027
Attention: Kirby Attwell
Chairman and Chief Executive Officer
with a copy to: Mayor, Day, Caldwell & Keeton, L.L.P.
700 Louisiana, Suite 1900
Houston, Texas 77002
Attention: Richard B. Mayor, Esq.
e. NOTICES. In the event Newco wishes to obtain a key man life
insurance policy payable to Newco as beneficiary insuring the life of Employee,
Employee agrees to submit to all necessary testing in connection with any
application for such insurance, including without limitation any medical
examinations required in connection with obtaining such insurance.
SECTION 14. NO INCONSISTENT OBLIGATIONS. The Employee represents and
warrants that he has not previously assumed any obligations inconsistent with
the obligations of the Employee pursuant to this Agreement.
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IN WITNESS WHEREOF, the Employee has hereunto set his hand and Newco has
caused this Agreement to be executed in its name on its behalf, all as of the
day hereinabove first written.
"EMPLOYEE"
______________________________
Craig Cowan
"NEWCO"
______________________________
By: /s/ KIRBY ATTWELL
Kirby Attwell,
Title: President
12
EXHIBIT 10.6
TRAVIS INTERNATIONAL, INC.
1992 INCENTIVE STOCK OPTION PLAN
The purpose of the Travis International, Inc. 1992 Incentive Stock
Option Plan (the "Plan") is to authorize the Board of Directors (the "Board") to
provide for the grant of incentive stock options ("Options") to designated
officers of Travis International, Inc. (the "Company"). The Company believes
that the Plan will cause the participants to perform at increasing levels of
effectiveness and to contribute materially to the growth of the Company, thereby
benefiting the Company's current stockholders.
1. ADMINISTRATION
The Plan shall be administered and interpreted by an administrator
(the "Administrator") that shall be the Board so long as a majority of the Board
consists of Disinterested Persons (as defined below) or if the Board so elects
or if a majority of the Board shall not be Disinterested Persons, a committee
consisting of not less than two persons appointed by the Board from among its
members who are Disinterested Persons. The Administrator shall have the sole
authority to determine (a) the officers to whom Options shall be granted under
the Plan, (b) the size and terms of the Options to be granted to each individual
selected, (c) the duration of the exercise period and (d) any other matters
arising under the Plan. The Administrator shall have full power and authority to
administer and interpret the Plan and to adopt or amend such rules, regulations,
agreements and instruments for implementing the Plan and for conduct of its
business as it deems necessary or advisable, in its sole discretion. The
Administrator's interpretations of the Plan and all determinations made by the
Administrator pursuant to the powers vested in it hereunder shall be conclusive
and binding on all persons having any interests in the Plan or in any Options
granted hereunder.
2. GRANTS
Grants of Options under the Plan ("Grants") shall be subject to the
terms and conditions set forth herein and to those other terms and conditions
consistent with this Plan as the Administrator deems appropriate and as are
specified in writing by the Administrator in a Management Option Agreement (the
"Option Agreement") between the Company and the Grantee (as defined below). The
Administrator's shall approve the form and provisions of each Option Agreement.
Grants under the Plan need not be uniform as among the individual Grantees.
3. SHARES SUBJECT TO THE PLAN
(a) The equity securities to be subject to Options granted under the
Plan shall be shares of Common Stock. Subject to the adjustment specified below,
the aggregate number of shares of Common Stock that may be issued under Options
granted pursuant to the Plan is 82,222 shares (the "Shares"). If and to the
extent Options granted under the Plan terminate, expire, or cancel without
having been exercised the Shares subject to such Options shall again be
available for purposes of the Plan. The Company shall reserve from its
authorized but unissued shares of Common Stock a number of shares that is equal
to the number of Shares related to all outstanding Options from time to time.
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(b) The number and type of shares of capital stock that are subject
to the Plan or an Option, or the exercise price applicable to an Option, or all
of such factors, shall be appropriately adjusted by the Board of Directors of
the Company, or by any successor or assign of the Company, to account for any
mergers, reorganizations, stock dividends, stock splits, recapitalizations or
similar actions as a result of which securities or other property are issued on
account of, in exchange for or in substitution of the outstanding shares of
Common Stock.
4. ELIGIBILITY FOR PARTICIPATION
The Committee shall select the individuals to whom Grants are to be
made ("Grantees" or "Participants") from among officers of the Company who are
employees of the Company.
5. GRANTING OF OPTIONS
(a) Number of Shares. The Administrator may grant to each Grantee
Options for such number of Shares as it shall determine in its sole discretion.
The Administrator, in its sole discretion, may provide a greater amount of
Options to any Grantee at any time.
(b) Type of Option and Price. The Administrator shall grant Options
for options qualifying at the time of grant as "incentive stock options" within
the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code") in accordance with the terms and conditions set forth herein, except
that to the extent the Fair Market Value of the Common Stock (measured on the
date of the Grant) with respect to which Options are exercisable for the first
time by a Grantee during any calendar year under the Plan or any other stock
option plan of the Company, exceeds $100,000, then such Options shall not be
incentive stock options. The exercise price per share of an Option shall not be
less than the Fair Market Value (as defined below) on the date of grant for such
Option.
(c) Exercise Period. The Administrator shall determine the option
exercise period of each Option; at the end thereof, the Option shall expire and
all rights to purchase Shares thereunder shall cease. The option exercise period
shall not exceed 10 years from the date of Grant.
(d) Vesting of Options. The Shares subject to each Option granted
hereunder may be purchased only to the extent that the Grantee is vested in such
Option. The vesting period for Options shall be as determined by the
Administrator and specified in the Option Agreement applicable to the Grantee.
(e) Manner of Exercise. A Grantee may exercise the vested portion of
an Option by delivering a written notice of exercise with accompanying payment
of the option price in cash or Shares as specified in the Option Agreement
applicable to the Grantee.
(f) Termination, Disability or Death. A Grantee's rights to exercise
Options upon termination of his employment and upon his death or disability
shall be specified in the Option Agreement applicable to the Grantee.
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<PAGE>
(g) Limits on Incentive Stock Options. In addition to any more
restrictive limitations set forth in the Option Agreement applicable to the
Grantee, each Grant of an Option shall provide that it is not transferable by
the Grantee otherwise than by will or the laws of descent and distribution, and
is exercisable, during the Grantee's lifetime, only by the Grantee. An Option
shall not be granted to any Participant who, at the time of grant, owns stock
possessing more than 10 percent of the total combined voting power of all
classes of stock of the Company.
6. AMENDMENT AND TERMINATION OF THE PLAN
(a) Amendment. The Board may amend or terminate the Plan at any
time; provided, however, that any amendment that materially increases the
benefits accruing to Participants under the Plan, increases the aggregate number
of shares of Common-Stock that may be issued or transferred under the Plan
(other than by operation of Section 3(b)), or materially modifies the
requirements as to eligibility for participation in the Plan, shall be subject
to approval by the stockholders of the Company, and provided, further, that the
Board shall not amend the Plan if such amendment would cause the Plan or the
Grant or exercise of an Option under the Plan to fail to comply with the
requirements of Section 422 of the Code including a reduction of the option
price set forth in Section 5(b) or an extension of the period during which an
Option may be exercised as set forth in Section 5(c).
(b) Termination of Plan. The Plan shall terminate on the 10th
anniversary of its effective date unless terminated earlier by the Board or
unless extended by the Board with the approval of the shareholders.
(c) Termination and Amendment of Outstanding Grants.
(1) A termination or amendment of the Plan that occurs after a
Grant is made shall not result in the termination or amendment of the Grant
unless the Grantee consents. The termination of the Plan shall not impair the
power and authority of the Committee with respect to an outstanding Grant.
Whether or not the Plan has terminated, an outstanding Grant may be terminated
or amended under Section 12(a) or may be amended by agreement of the Company and
the Grantee consistent with the Plan.
(2) The Administrator shall have the authority to effect, at
any time and from time to time, with the consent of the affected Grantees, the
cancellation of any or all outstanding Options under the Plan and to grant in
substitution therefor new Options under the Plan covering the same or a
different number of Shares but having a purchase price not less than the Fair
Market Value on the new date of the Grant. The Administrator may permit the
voluntary surrender of all or a portion of any Option to be conditioned upon the
granting to the Optionee under the Plan of a new Option for the same or a
different number of Shares as the Option surrendered, or may require such
voluntary surrender as a condition precedent to a Grant of a new Option to such
Grantee. Any new Option shall be exercisable at the price, during the period,
and in accordance with any other terms and conditions specified by the
Administrator at the time the new Option is granted, all determined in
accordance with the provisions of the Plan without regard to the price, period
of exercise, or any other terms or conditions of the Option surrendered.
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<PAGE>
7. RIGHTS OF PARTICIPANTS
Nothing in this Plan shall entitle any Participant or other person
to any claim or right to be granted an Option under this Plan. Neither this Plan
nor any action taken hereunder shall be construed as giving any Participant any
rights to be retained in the employ of the Company.
8. WITHHOLDING OF TAXES
The Company shall have the right to deduct from a Participant's cash
wages or fees any federal, state or local taxes required by law to be withheld
with respect to the exercise of an Option, or the Participant or other person
receiving Shares upon the exercise of an Option shall be required to pay to the
Company the amount of any such taxes which the Company is required to withhold
with respect to exercise. Participants may elect with respect to the exercise of
an Option either:
(a) to have the Company withhold, from the Shares to be issued
pursuant to such exercise, such number of Shares that, or
(b) to surrender to the Company such number of Shares already owned
by the Participant (which may be Shares received upon such exercise)
that,
in the case of both (a) and (b), shall, at their Fair Market Value on the Tax
Date, at least be equal to the Company's withholding obligation with respect to
the exercise of the Option. If the Fair Market Value on the Tax Date of the
number of Shares required to be withheld or surrendered pursuant to the
foregoing election exceeds the Company's withholding obligation with respect to
the exercise, a fractional Share shall not be issued for the excess, but an
amount equal to the excess shall be paid to the Participant in cash as soon as
reasonably practicable after the amount of such excess is determined by the
Company. A Grantee shall have the same rights as provided hereunder to surrender
shares to satisfy any withholding taxes due on account of a disqualifying
disposition of Shares acquired pursuant to an incentive stock option.
9. REQUIREMENTS FOR ISSUANCE OF SHARES
No Shares shall be issued or transferred upon payment of any Grant
hereunder unless and until all legal requirements applicable to the issuance or
transfer of such Shares have been complied with to the satisfaction of the
Administrator.
10. EFFECTIVE DATE OF THE PLAN
This Plan shall be effective as of May 27, 1992, subject to the
approval of the Plan by the Company's stockholders within 12 months thereafter.
11. CERTAIN DEFINITIONS.
Certain terms used herein are used with the respective meanings assigned
below:
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"Common Stock" means the Common Stock, par value $0.01 per share, of
the Company.
"Disinterested Person" is used as defined in Rule 16b-3 under the
Securities Exchange Act of 1934, as amended.
"Fair Market Value" means the average closing price for the five most
recent trading days on the stock exchange or system on which the shares of
Common Stock are listed or included; or if the shares of Common Stock are
not listed on a stock exchange or included in a system that provides for a
closing sales price, but are traded in the over- the-counter market
without the availability of closing sale price information, such
determination shall be made on the basis of the mean between the bid and
asked prices for such shares on the over-the-counter market for such
trading days; or if the shares of Common Stock are not listed, included or
traded in any such exchange, system or market, the fair market value of a
share of Common Stock as determined in good faith by the Board of
Directors based on a valuation of the entire Company on a consolidated
basis that is then divided by the total number of shares of Common Stock
issued and outstanding plus the number of shares of Common Stock issuable
upon exercise or conversion of all securities or other rights that are
then exercisable or convertible.
"Tax Date" means the date as of which the exercise of an Option is taxable
for federal income tax purposes.
12. MISCELLANEOUS
(a) Compliance with Law. The Plan, the exercise of Grants and the
obligations of the Company to issue or transfer Shares under Grants shall be
subject to all applicable laws and to approvals by any governmental or
regulatory agency as may be required. The Board may revoke any Grant if it is
contrary to law or modify a Grant to bring it into compliance with any valid and
mandatory government regulation. The Administrator may also adopt rules
regarding the withholding of taxes on payments to Grantees.
(b) Ownership of Stock. A Grantee shall have no rights as a
stockholder with respect to any Shares covered by a Grant until the Shares are
issued or transferred to the Grantee on the stock transfer records of the
Company upon the exercise or partial exercise of the Option.
(c) Choice of Law. The Plan, Options granted hereunder and the
exercise of Options shall be governed by the laws of the State of Delaware.
5
EXHIBIT 10.7
TRAVIS INTERNATIONAL, INC.
1995 KEY EMPLOYEE STOCK OPTION PLAN
1. PURPOSE. The purpose of the 1995 Key Employee Stock Option Plan (the
"Plan"), is to provide an additional incentive to eligible key employees, upon
whom rest major responsibilities for the successful operation, administration,
and management of Travis International, Inc., a Delaware corporation (the
"Company") and its subsidiaries. It is recognized that the present and potential
contributions of the key employees are important to the continued success of the
Company. The Plan is also intended to be used to retain highly qualified persons
for the successful conduct of the business of the Company. It is intended that
these purposes will be enhanced through the awarding of Stock Options.
2. DEFINITIONS. As used herein the words and phrases below shall have the
following meanings:
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(c) "Committee" shall mean the committee, which shall be comprised
of at least two and not more than four members who are disinterested
persons as defined under rules and regulations promulgated under Section
16(b) of the Exchange Act and who shall be members of the Board, appointed
by the Board to administer the Plan, which Board shall have the power to
fill vacancies on the Committee arising by resignation, death, removal or
otherwise.
(d) "Common Stock" shall mean any class or series of the common
stock of the Company.
(e) "Company" shall mean Travis International, Inc., a Delaware
corporation.
(f) "Disability" shall mean the person so affected is unable to
engage in substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result
in death or which has lasted or can be expected to last for a continuous
period of not less than one hundred eighty (180) days. The Committee's
determination as to whether a Participant has incurred a Disability shall
be final and conclusive as to all interested parties.
(g) "Eligible Employee" shall mean a key employee of the Company as
determined pursuant to Section 4.
(h) "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
(i) "Fair Market Value" shall mean, with respect to a share of
Common Stock on any date herein specified, the average daily Closing Price
per share of Common Stock
<PAGE>
for the ten (10) consecutive trading days commencing fifteen (15) trading
days before the date in question. The term "Closing Price" of per share of
Common Stock for a day or days shall mean (i) if the shares of Common
Stock are listed or admitted for trading on a national securities
exchange, the last reported sales price regular way, or, in case no such
reported sale takes place on such day or days, the average of the reported
closing bid and asked prices regular way, in either case on the principal
national securities exchange on which the shares of Common Stock are
listed or admitted for trading, or (ii) if the shares of Common Stock are
not listed or admitted for trading on a national securities exchange, (A)
the last transaction price of the shares of Common Stock on the National
Association of Securities Dealers Automated Quotation System ("NASDAQ")
or, in the case no such reported transaction takes place on such day or
days, the average of the reported closing bid and asked prices thereof
quoted on NASDAQ, or (B) if the shares of Common Stock are not quoted on
NASDAQ, the average of the closing bid and asked prices of the shares of
Common Stock in the over-the-counter market, as reported by The National
Quotation Bureau, Inc., or an equivalent generally accepted reporting
service, or (iii) if on any such trading days the shares of Common Stock
are not quoted by any such organization, the fair market value per share
of Common Stock on such day(s), as determined in good faith by the
Committee.
(j) "Incentive Stock Option" shall mean a stock option granted by
the Committee to an Eligible Employee under the Plan which is designated
by the Committee as an Incentive Stock Option and intended to qualify as
an Incentive Stock Option under Section 422 of the Code.
(k) "Nonqualified Stock Option" shall mean a stock option granted by
the Committee to an Eligible Employee under the Plan, which is not
designated by the Committee as an Incentive Stock Option.
(l) "Participant" shall mean any individual who has received an
award of a Stock Option and has not exercised the Stock Option and
received the Common Stock subject to the Stock Option.
(m) "Plan" shall mean the 1995 Key Employee Stock Option Plan, as
herein set forth and as amended from time to time.
(n) "Retirement" shall mean the termination of employment from the
Company constituting retirement as determined by the Committee.
(o) "Securities Act" shall mean the Securities Act of 1933, as now
in effect or as hereafter amended.
(p) "Stock Option" shall mean an Incentive Stock Option or
Nonqualified Stock Option pursuant to which a Participant is eligible to
acquire Common Stock pursuant to the terms and conditions of the Plan and
the Stock Option Agreement.
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(q) "Stock Option Agreement" shall mean the agreement described in
Section 7.
(r) "Terminated For Cause" shall mean that a Participant's
employment is terminated as a result of a breach of his or her written
employment agreement, if the Participant is subject to a written
employment agreement, or if the Committee determines that such Participant
is being terminated as a result of misconduct, dishonesty, disloyalty,
disobedience or action that might reasonably injure the Company or its
business interests or reputation.
3. ADMINISTRATION OF THE PLAN. The Plan shall be administered by the
Committee appointed by the Board. The Committee shall have authority to adopt
rules and regulations for carrying out the Plan, determine the Eligible
Employees, determine the number of Stock Options, if any, to be awarded to each
Eligible Employee, determine whether a Stock Option shall be an Incentive Stock
Option or a Nonqualified Stock Option, determine the exercise price of each
Stock Option, determine the vesting period and vesting conditions for Stock
Options, determine the series or class of Common Stock to be subject to the
Stock Option, determine the Fair Market Value of Common Stock, and interpret,
construe, and implement the provisions of the Plan. Decisions of the Committee
(including decisions regarding the interpretation and application of the Plan)
shall be binding on the Company and on all Participants and other interested
parties. The Committee shall hold its meetings at such times and places as it
deems advisable. A majority of the members of the Committee shall constitute a
quorum for a meeting. All determinations of the Committee shall be made by a
majority of its members attending the meeting. Furthermore, any decision or
determination reduced to writing and signed by a majority of the members of the
Committee shall be as effective as if it had been made by a majority vote at a
meeting properly called and held.
4. ELIGIBLE EMPLOYEES. The individuals who shall be eligible to
participate in the Plan shall be such members (including officers who may be
members of the Board of Directors) of the management of the Company, or of any
subsidiary of the Company, as the Committee shall determine from time to time.
No person will be eligible for the grant of any Incentive Stock Option who owns
or would own immediately before the grant of such Incentive Stock Option,
directly or indirectly, stock possessing more than ten percent of the total
combined voting power of all classes of stock of the Company, a subsidiary or a
parent corporation. This restriction does not apply if, at the time such
Incentive Stock Option is granted, the Incentive Stock Option exercise price is
at least 110% of the Fair Market Value on the date of grant and the Incentive
Stock Option by its terms is not exercisable after the expiration of five years
from the date of grant. For the purpose of this Section 4, the attribution rules
of Section 424(d) of the Code shall apply for the purpose of determining an
Eligible Employee's percentage ownership. No Eligible Employee shall be granted
Stock Options under this Plan with respect to more than 50,000 shares of Common
Stock.
5. SHARES OF COMMON STOCK SUBJECT TO THE PLAN. The number of shares of
Common Stock available for Stock Options shall equal 80,000 shares of the
Company's
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<PAGE>
outstanding Common Stock. The shares of Common Stock available under the Plan
may consist of shares of any series of Common Stock provided that the rights of
such shares to dividends, to liquidation proceeds and to share in the
appreciation in the value of the Company shall be not less than the rights of
any other series of Common Stock. If any Stock Option shall expire or terminate
for any reason, without being exercised, shares of Common Stock subject to such
Stock Option shall again be available for grant in connection with grants of
subsequent Stock Options.
6. STOCK OPTION TERMS.
(a) EXERCISE PRICE. The exercise price per share of Common Stock
under each Stock Option shall be determined by the Committee; provided,
however, that with respect to an Incentive Stock Option, such exercise
price shall not be less than 100% of the Fair Market Value per share of
such Common Stock on the date of grant, as determined by the Committee.
(b) TERM. The Committee shall fix the term of each Stock Option
which shall be not more than ten years from the date of grant. In the
event no term is fixed, such term shall be ten years from the date of
grant.
(c) EXERCISE; TRANSFERABILITY. The Committee shall determine the
time or times at which a Stock Option may be exercised in whole or in
part; provided, however, that other than as provided in Section 10, in no
event shall a Stock Option be exercisable before the expiration of six
months from the date of its grant or after ten years from the date of its
grant. Stock Options shall not be transferable by the Participant
otherwise than by will, under the laws of descent and distribution, or
pursuant to a qualified domestic relations order (as defined by the Code)
and shall be exercisable only by the Participant or by the Participant's
duly appointed personal representative.
(d) INCENTIVE STOCK OPTIONS. Anything in the Plan notwithstanding,
the aggregate Fair Market Value (determined as of the time the Incentive
Stock Option is granted) of the shares of Common Stock with respect to
which Incentive Stock Options are exercisable for the first time by any
Participant during any single calendar year (under the Plan and any other
incentive stock option plans of the Company and its subsidiaries or any
parent corporation) shall not exceed the sum of $100,000 (or such other
limits as may be required by the Code).
(e) METHOD OF EXERCISE. Stock Options shall be exercised by the
delivery of written notice to the Company setting forth the number of
shares of Common Stock with respect to which the Stock Option is to be
exercised and, subject to the subsequent provisions hereof, the address to
which the certificates representing shares of the Common Stock issuable
upon the exercise of such Stock Option shall be mailed. In order to be
effective, such written notice shall be accompanied at the time of its
delivery to the Company by payment of the exercise price of such shares of
Common Stock,
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<PAGE>
which payment shall be made in cash or by cashier's check, certified
check, or postal or express money order payable to the order of the
Company in an amount (in United States dollars) equal to the exercise
price of such shares of Common Stock. Such notice shall be delivered in
person to the Secretary of the Company, or shall be sent by registered
mail, return receipt requested, to the Secretary of the Company, in which
case, delivery shall be deemed made on the date such notice is deposited
in the mail. In its sole and absolute discretion, the Committee may
require as an additional condition to the issuance of Common Stock upon
exercise of a Stock Option that the optionee furnish the Committee with an
executed copy of a shareholder agreement and/or voting agreement in such
form as may be required by the Committee at the time notice of exercise is
delivered to the Company. Such shareholder agreement may impose
significant restrictions on the transfer of the Common Stock received upon
exercise of the Stock Option. In addition, the Committee may require that
there be presented to, and filed with it, such evidence as it may deem
necessary to establish that the shares of Common Stock to be purchased are
being acquired for investment and not with a view to their distribution.
(f) WITHHOLDING. Whenever shares of Common Stock are to be issued or
delivered pursuant to the Plan, the Company shall require the Participant
to remit to the Company an amount sufficient to satisfy federal, state,
and local withholding tax requirements prior to the delivery of any
certificate or certificates for such shares, which payment may be made in
the manner set forth in clause (e) above or in the manner permitted by
clause (g) below. With respect to shares received by a Participant
pursuant to the exercise of an Incentive Stock Option, if such Participant
disposes of any such shares within two years from the date of grant of
such option or within one year after the transfer of such shares to the
Participant, the Company shall have the right to withhold from any salary,
wages or other compensation payable by the Company to the Participant an
amount sufficient to satisfy federal, state and local withholding tax
requirements attributable to such disposition.
(g) ALTERNATIVE PAYMENT FOR STOCK. Alternatively, payment of the
exercise price may be made, in whole or in part, by delivery of shares of
Common Stock previously issued to the Participant. Unless otherwise
permitted by the Committee, payment of the exercise price with shares of
Common Stock shall be made only with shares owned by the Participant for
at least six (6) months. If payment is made in whole or in part in shares
of Common Stock owned by the Participant, then the Participant shall
deliver to the Company, in payment of the option price of the shares of
Common Stock with respect to which such Stock Option is exercised, (i)
certificates registered in the name of such Participant representing a
number of shares of Common Stock legally and beneficially owned by such
Participant, free of all liens, claims and encumbrances of every kind and
having a Fair Market Value as of the date of delivery of such notice that
is not greater than the exercise price of the shares of Common Stock with
respect to which such Stock Option is to be exercised, such certificates
to be accompanied by stock powers duly endorsed in blank by the record
holder of the shares represented by such
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certificates; and (ii), if the exercise price of the shares of Common
Stock with respect to which such Stock Option is to be exercised exceeds
such Fair Market Value, cash or a cashier's check, certified check, or
postal or express money order payable to the order of the Company in an
amount (in United States dollars) equal to the amount of such excess.
The Company may extend and maintain, or arrange for the extension
and maintenance of, financing to any Participant to purchase shares
pursuant to exercise of a Stock Option and/or to pay withholding taxes on
such terms as may be approved by the Committee in its sole discretion. In
considering the terms for extension or maintenance of credit by the
Company, the Committee shall, among other factors, consider the cost to
the Company of any financing extended by the Company.
(h) NOTIFICATION WITH RESPECT TO INCENTIVE STOCK OPTIONS. Any
Participant who disposes of shares of Common Stock acquired on the
exercise of an Incentive Stock Option by sale or exchange either (i)
within two years after the date of the grant of the Incentive Stock Option
under which the stock was acquired or (ii) within one year after the
transfer of such shares to such Participant pursuant to exercise shall
promptly following such sale or exchange notify the Company of such
disposition and of the amount realized and of the adjusted basis in such
shares.
7. STOCK OPTION AGREEMENT. The Stock Options awarded to an Eligible
Employee shall be evidenced by a separate written agreement (the "Stock Option
Agreement") which shall be subject to the terms and provisions of the Plan, and
which shall be signed by the Participant and by the President or a
Vice-President of the Company, other than the Participant, in the name of and on
behalf of the Company. The Stock Option Agreement shall contain such provisions
as the Committee in its discretion deems advisable. In the event of any
inconsistency or conflict between the terms of the Plan and a Stock Option
Agreement, the terms of the Plan shall govern.
8. TERMINATION OF EMPLOYMENT, DEATH, DISABILITY AND RETIREMENT.
(a) TERMINATION OF EMPLOYMENT. If a Participant is no longer
employed by the Company or any subsidiary for any reason whatsoever other
than death, Disability or Retirement, with respect to any Stock Option
granted pursuant to the Plan outstanding at the time, unless otherwise
established by the Committee, no further vesting shall occur and the
Participant shall be entitled to exercise his or her rights with respect
to the portion of the Stock Option vested as of the date of termination
for a period expiring on the earlier of (i) the expiration date set forth
in the Stock Option Agreement or (ii) thirty (30) calendar days after such
termination date and, thereafter, the Stock Option and the Participant's
rights thereunder shall be completely terminated; provided, however, that
if a Participant is Terminated for Cause, such Participant's right to
exercise the vested portion of his or her Stock Option shall terminate as
of 12:01 a.m. on the date of termination of employment.
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<PAGE>
(b) RETIREMENT, DEATH OR DISABILITY. Unless otherwise approved by
the Committee, upon the Retirement, death or Disability of a Participant:
(i) any nonvested portion of any outstanding Stock Option
shall immediately terminate and no further vesting shall occur; and
(ii) any vested Stock Option shall expire on the earlier of
(A) the expiration date set forth in the Stock Option Agreement with
respect to such Stock Option; or (B) the expiration of thirty (30)
days after the date of Retirement, death or Disability.
9. REQUIREMENTS OF LAW. The Company shall not be required to sell or issue
any shares of Common Stock under any Stock Option if the issuance of such shares
shall constitute a violation by the Participant or the Company of any provision
of any law, statute, or regulation of any governmental authority whether it be
Federal or State. Specifically, in connection with the Securities Act, upon
exercise of any Stock Option, unless a registration statement under the
Securities Act is in effect with respect to the shares of Common Stock covered
by such Stock Option, the Company shall not be required to issue such shares
unless the Committee has received evidence satisfactory to it to the effect that
the holder of such Stock Option is acquiring such shares of Common Stock for
investment and not with a view to the distribution thereof, and that such shares
of Common Stock may otherwise be issued without registration under the
Securities Act or State securities laws. Any determination in this connection by
the Committee shall be final, binding and conclusive. The Company may, but shall
in no event be obligated to, register any securities covered hereby pursuant to
the Securities Act. The Company shall not be obligated to take any affirmative
action in order to cause the exercise of a Stock Option, or the issuance of
shares pursuant thereto, to comply with any law or regulation of any
governmental authority.
10. CHANGE IN STOCK AND ADJUSTMENTS. The existence of outstanding Stock
Options shall not affect in any way the right or power of the Company or its
stockholders to make or authorize any or all adjustments, recapitalizations,
reorganizations or other changes in the Company's capital structure or its
business, or any merger or consolidation of the Company, or any issue of bonds,
debentures, preferred or prior preference stock ahead of, or affecting, the
Common Stock or the rights thereof, or the dissolution or liquidation of the
Company, or any sale or transfer of all or any part of its assets or business,
or any other corporate act or proceeding, whether of a similar character or
otherwise.
If the Company shall effect a subdivision or consolidation of shares or
other capital readjustment, the payment of a stock dividend, or other increase
or reduction of the number of shares of Common Stock outstanding, without
receiving compensation therefor in money, services or property, then (a) the
number, class, and per share price of shares of Common Stock subject to
outstanding Stock Options hereunder shall be appropriately adjusted in such a
manner as to entitle a Participant to receive upon exercise of a Stock Option,
for the same aggregate cash consideration, the same total number and class of
shares as he would have received had he
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<PAGE>
exercised his Stock Option in full immediately prior to the event requiring the
adjustment; and (b) the number and class of shares then reserved for issuance
under the Plan shall be adjusted by substituting for the total number and class
of shares of Common Stock then reserved that number and class of shares of
Common Stock that would have been received by the owner of an equal number of
outstanding shares of each class of Common Stock as the result of the event
requiring the adjustment.
After a merger of one or more corporations into the Company or after a
consolidation of the Company and one or more corporations in which the Company
is the surviving corporation, each holder of an outstanding Stock Option, upon
exercise of such Stock Option, shall be entitled to receive (at no additional
cost but subject to any required action by stockholders) in lieu of the number
and class of shares of Common Stock with respect to which such Stock Option is
exercisable, the number and class of shares of stock (or other securities or
consideration) to which such holder would have been entitled pursuant to the
terms of the agreement of merger or consolidation if, immediately prior to such
merger or consolidation, such holder had been the holder of record of the same
number and class of shares of Common Stock which he would have otherwise
received upon exercise of such Stock Option.
If the Company is merged into or consolidated with another corporation
under circumstances where the Company is not the surviving corporation, or if
the Company is liquidated, or sells or otherwise disposes of substantially all
its assets to another corporation while unexercised Stock Options remain
outstanding under the Plan, (i) subject to the provisions of clause (iii) below,
after the effective date of such merger, consolidation, liquidation, or sale, as
the case may be, each holder of an outstanding Stock Option shall be entitled,
upon exercise of such Stock Option, to receive at no additional cost, in lieu of
shares of Common Stock, shares of such stock (or other securities or
consideration) as the holders of shares of Common Stock received pursuant to the
terms of the merger, consolidation, liquidation, or sale; (ii) unless otherwise
provided in the Participant's Stock Option Agreement, any limitations set forth
in or imposed pursuant to Section 8 hereof shall automatically lapse so that all
Stock Options, from and after a thirty (30) day period preceding the effective
date of such merger, consolidation, liquidation or sale, as the case may be,
shall be exercisable in full; and (iii) all outstanding Stock Options may be
canceled by the Board as of the effective date of any such merger,
consolidation, liquidation or sale provided that (a) notice of such cancellation
shall be given to each holder of a Stock Option, and (b) unless otherwise
provided in the Participants's Stock Option Agreement, each holder of a Stock
Option shall have the right to exercise such Stock Option in full (without
regard to any limitations set forth in or imposed pursuant to Section 8 hereof)
during a thirty (30) day period preceding the effective date of such merger,
consolidation, liquidation, or sale. In the event the acceleration of vesting
provided by clause (ii) or (iii) above would result in imposition of the excise
tax imposed by Section 4999 of the Code, a Participant may elect to waive such
acceleration with respect to such number of shares subject to unvested Stock
Options as the Participant shall designate, and the Participant shall be
entitled to designate from among his unvested Stock Options those Stock Options
which shall not be subject to accelerated vesting.
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Except as expressly provided herein, the issue by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
for cash, property, labor, or services, either upon direct sale, exercise of
rights or warrants to subscribe therefor, or conversion of shares or obligations
of the Company convertible into such shares or other securities, shall not
affect, and no adjustment by reason thereof shall be made with respect to, the
number, class or price of shares of Common Stock then subject to outstanding
Stock Options.
11. NO RIGHTS AS STOCKHOLDER. A holder of a Stock Option shall have no
rights as a stockholder with respect to any shares of Common Stock until the
issuance of a stock certificate for such shares. Except as otherwise provided in
Section 10, no adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash, securities, or other property) or distributions
or other rights for which the record date is prior to the date such stock
certificate is issued.
12. NO EFFECT ON EMPLOYMENT RELATIONSHIP. Participation in the Plan shall
not confer upon any employee any right to continue in the employ of the Company
or interfere in any way with the right of the Company to terminate any
employee's employment at any time.
13. NO FUND ESTABLISHED. It is not intended that awards under this Plan be
set aside in a trust which would qualify as an employee's trust within the
meaning of sections 401 or 402 of the Internal Revenue Code of 1986, as amended,
or in any other type of trust, fund, or separate account. The rights of any
Participant and any person claiming under such Participant shall not rise above
or exceed those of an unsecured creditor of the Company.
14. NO ASSIGNMENT OR ALIENATION OF BENEFITS. Except as contemplated by
Section 6(c), no right or benefit under this Plan shall be subject to
anticipation, alienation, sale, assignment, pledge, encumbrance, or charge, and
any attempt to anticipate, alienate, sell, assign, pledge, encumber, or charge
the same shall be void. No right or benefit hereunder shall in any manner be
liable for or subject to any debts, contracts, liabilities, or torts of the
person entitled to such benefits.
15. LIABILITY AND INDEMNIFICATION OF COMMITTEE. No member of the Committee
shall be liable for any act or omission of any other member of the Committee or
for any act or omission on his own part, including but not limited to the
exercise of any power or discretion given to him under the Plan, except those
resulting from his own gross negligence or willful misconduct. The Company shall
indemnify each present and future member of the Committee against, and each
member of the Committee shall be entitled without further act on his part to
indemnity from the Company for all expenses (including the amount of judgments
and the amount of approved settlements made with a view to the curtailment of
costs of litigation) reasonably incurred by him in connection with or arising
out of any action, suit or proceeding in which he may be involved by reason of
his being or having been a member of the Committee, whether or not he continues
to be a member of the Committee at the time of incurring such expenses;
provided, however, that such indemnity shall not include any expense incurred by
any
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such member of the Committee (a) in respect of matters as to which he shall be
finally adjudged in any such action, suit, or proceeding to have been guilty of
gross negligence or willful misconduct in the performance of his duty as such
member of the Committee, or (b) in respect of matters in which any settlement is
effected in an amount in excess of the amount approved by the Company on the
advice of its legal counsel; and provided further, that no right of
indemnification under the provisions set forth herein shall be available to or
enforceable by any such member of the Committee unless, within thirty (30) days
after institution of any such action, suit, or proceeding, he shall have offered
the Company, in writing, the opportunity to handle and defend same at its own
expense. This indemnity expressly includes any claims arising out of or based
upon the negligence of the member of the Committee. The foregoing right of
indemnification shall inure to the benefit of the heirs, executors, or
administrators of each such member of the Committee and shall be in addition to
all other rights to which such member of the Committee may be entitled as a
matter of law, contract, or otherwise.
16. SUBSTITUTION OPTION. Stock Options may be granted under this Plan from
time to time in substitution for stock options held by employees (or nonemployee
directors) of another corporation who are about to become employees (or
nonemployee directors) of the Company as the result of a merger or consolidation
with the Company, or the acquisition by the Company of the assets of the other
corporation, or the acquisition by the Company of stock of the other corporation
as the result of which it becomes a subsidiary of the Company. The terms and
conditions of the substitute Stock Options so granted may vary from the terms
and conditions set forth in this Plan to such extent as the Board at the time of
grant may deem appropriate to conform, in whole or in part, to the provisions of
the stock options for which such substitute Stock Options are granted.
17. GENDER, TENSE AND HEADINGS. Whenever the context requires such, words
of the masculine gender used herein shall include the feminine and neuter, and
words used in the singular shall include the plural. Section headings as used
herein are inserted solely for convenience and reference and constitute no part
of the construction of this Plan.
18. AMENDMENT AND TERMINATION. The Board may modify, revise or terminate
the Plan at any time and from time to time; provided, however, that without the
further approval of the holders of at least a majority of the outstanding shares
of Common Stock, the Board may not (i) change the aggregate number of shares
which may be issued under Stock Options pursuant to the provisions of the Plan;
(ii) materially increase the benefits accruing to Participants under the Plan;
or (iii) change the class of persons eligible to receive Stock Options. No
amendment or termination may adversely affect any vested right of a Participant
without the written consent of such Participant.
19. NO GUARANTEE OF TAX CONSEQUENCES. Neither the Company nor the
Committee makes any commitment or guarantee that any federal, state or local tax
treatment will apply or be available to any person participating or eligible to
participate hereunder.
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20. SEVERABILITY. In the event that any provision of this Plan shall be
held illegal, invalid or unenforceable for any reason, such provision shall be
fully severable, but shall not affect the remaining provisions of the Plan, and
the Plan shall be construed and enforced as if the illegal, invalid, or
unenforceable provision had never been included herein.
21. GOVERNING LAW. The provisions of the Plan shall be construed,
administered, and governed by the laws of the State of Texas, without giving
effect to principles of conflicts of laws, and, to the extent applicable, the
laws of the United States.
22. EFFECTIVE DATE. The Plan shall become effective and shall be deemed to
have been adopted on February 2, 1995, if within one year of that date it shall
have been approved by the holders of at least the majority of the outstanding
Common Stock. No Stock Option shall be granted pursuant to the Plan after one
day more than ten years after the date the Plan was adopted by the Board or the
date the Plan was approved by the stockholders of the Company, whichever is
earlier.
23. STOCKHOLDERS APPROVAL. Notwithstanding any other provisions of the
Plan, in order for the Plan to continue as effective, on or before the date
which occurs twelve (12) months after the date the Plan is adopted by the Board,
the Plan must be approved by the holders of at least a majority of the
outstanding stock (unless applicable state law or the Company's charter or
by-laws require a greater number) of the Company entitled to vote thereon voting
in person, or by proxy, at a duly held stockholders' meeting, and no shares of
Common Stock shall be issued under the Plan until such approval has been
secured.
11
EXHIBIT 10.8
TRAVIS INTERNATIONAL, INC.
1993 DIRECTOR STOCK OPTION PLAN
The purpose of the Travis International, Inc. 1993 Director Stock Option
Plan (the "Plan") is to authorize the Board of Directors (the "Board") to
provide for the grant of stock options to non-employee directors of Travis
International, Inc. (the "Company"). The Company believes that the Plan will
cause the participants to perform at increasing levels of effectiveness and to
contribute materially to the growth of the Company, thereby benefitting the
Company's current stockholders.
Terms set forth herein with initial capitalized letters are used as defined
in Section 11 or elsewhere herein.
1. ADMINISTRATION
The Plan shall be administered and interpreted by an administrator (the
"Administrator") that shall be the full Board unless the Board decides to
appoint another Administrator, which may be a committee of the Board that has at
least two members. The Administrator shall have the sole authority to determine
(a) the directors to whom Options shall be granted under the Plan, (b) the size
and terms of the Options to be granted to each individual selected, (c) the
duration of the exercise period and (d) any other matters arising under the
Plan. The Administrator shall have full power and authority to administer and
interpret the Plan and to adopt or amend such rules, regulations, agreements and
instruments for implementing the Plan and for conduct of its business as it
deems necessary or advisable, in its sole discretion. The Administrator's
interpretations of the Plan and all determinations made by the Administrator
pursuant to the powers vested in it hereunder shall be conclusive and binding on
all persons having any interests in the Plan or in any Options granted
hereunder.
2. GRANTS
Grants of Options under the Plan shall be subject to the terms and
conditions set forth herein and to those other terms and conditions consistent
with this Plan as the Administrator deems appropriate and as are specified in
writing by the Administrator in a Director Option Agreement (the "Option
Agreement") between the Company and the Grantee. The Administrator's shall
approve the form and provisions of each Option Agreement. Grants under the Plan
need not be uniform among the individual Grantees.
3. SHARES SUBJECT TO THE PLAN
(a) The equity securities to be subject to Options granted under the Plan
shall be shares of Common Stock. Subject to the adjustment specified below, the
aggregate number of shares of Common Stock that may be issued under Options
granted pursuant to the Plan is 20,000 shares (the "Shares"). If and to the
extent Options granted under the Plan terminate, expire, or are cancelled
without having been exercised, the Shares subject to such Options shall
<PAGE>
again be available for purposes of the Plan. The Company shall reserve from its
authorized but unissued shares of Common Stock a number of shares that is equal
to the number of Shares related to all outstanding Options from time to time.
(b) The number and type of shares of capital stock that are subject to the
Plan or an Option, or the exercise price applicable to an Option, or all of such
factors, shall be appropriately adjusted by the Board to account for any stock
dividends, stock splits, recapitalizations or similar actions as a result of
which securities or other property are issued on account of, in exchange for or
in substitution of the outstanding shares of Common Stock.
4. ELIGIBILITY FOR PARTICIPATION
The Administrator shall select the individuals to whom Grants are to be
made (Grantees" or "Participants") from among directors of the Company who are
not employees of the Company or any of other corporations or other entities in
which the Company directly or indirectly owns a controlling interest.
5. TERMS OF OPTIONS
(a) NUMBER OF SHARES. The Administrator may grant to each Grantee Options
for such number of Shares as it shall determine in its sole discretion. The
Administrator, in its sole discretion, may provide a greater amount of Options
to any Grantee at any time.
(b) TYPE OF OPTION AND PRICE. None of the Options granted hereunder shall
be deemed to qualify as "incentive stock options" within the meaning of Section
422 of the Internal Revenue Code of 1986, as amended (the "Code"). The exercise
price per Share of an Option shall be such amount as the Administrator shall
determine at the time of grant, which amount may be less than, equal to or
greater than the Fair Market Value on the date of grant for such Option.
(c) EXERCISE PERIOD. The Administrator shall determine the exercise period
of each Option; at the end thereof, the Option shall expire and all rights to
purchase Shares thereunder shall cease.
(d) VESTING OF OPTIONS. The Shares subject to each Option granted hereunder
may be purchased only to the extent that the Grantee is vested in such Option.
The vesting period for Options shall be as determined by the Administrator and
specified in the Option Agreement applicable to the Grantee.
(e) MANNER OF EXERCISE. A Grantee may exercise the vested portion of an
Option by delivering a written notice of exercise with accompanying payment of
the option price in cash or Shares as specified in the Option Agreement
applicable to the Grantee.
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(f) TERMINATION, DISABILITY OR DEATH. A Grantee's rights to exercise
Options upon termination of the Grantee's role as a director of the Company,
including upon death or disability, shall be specified in the Option Agreement
applicable to the Grantee.
(g) TRANSFERABILITY. In addition to any more restrictive limitations set
forth in the Option Agreement applicable to the Grantee, an Option shall not be
transferable by the Grantee otherwise than by will or the laws of descent and
distribution, and is exercisable during the Grantee's lifetime only by the
Grantee.
6. AMENDMENT AND TERMINATION OF THE PLAN
(a) AMENDMENT. The Board may amend or terminate the Plan at any time.
(b) TERMINATION OF PLAN. The Plan shall terminate on the 10th anniversary
of its effective date unless terminated earlier by the Board or unless extended
by the Board.
(c) TERMINATION AND AMENDMENT OF OUTSTANDING OPTIONS.
(1) A termination or amendment of the Plan that occurs after an
Option is granted shall not result in the termination or amendment of the Option
unless the Grantee consents. The termination of the Plan shall not impair the
power and authority of the Administrator with respect to an outstanding Option.
Regardless of whether the Plan has terminated, an outstanding Option may be
terminated or amended under Section 13(a) or may be amended by agreement of the
Company and the Grantee consistent with the Plan.
(2) The Administrator shall have the authority to cancel, at any
time and from time to time, with the consent of the affected Grantees, any or
all outstanding Options and to grant in substitution therefor new Options under
the Plan covering the same or a different number of Shares. The Administrator
may permit the voluntary surrender of all or a portion of any Option to be
conditioned upon the granting to the Grantee under the Plan of a new Option for
the same or a different number of Shares as the Option surrendered, or may
require such surrender as a condition precedent to a grant of a new Option to
such Grantee. Any new Option shall be exercisable at the price, during die
period, and in accordance with any other terms and conditions specified by the
Administrator at the time the new Option is granted, all determined in
accordance with the provisions of the Plan without regard to the price, period
of exercise, or any other terms or conditions of the Option surrendered.
7. RIGHTS OF PARTICIPANTS
Nothing in this Plan shall entitle any Participant or other person to any
claim or right to be granted an Option under this Plan. Neither this Plan nor
any action taken hereunder shall be construed as giving any Participant any
rights to be retained as a director of the Company.
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8. WITHHOLDING OF TAXES
The Company shall have the right to deduct from any fees or other amounts
payable to a Participant any federal, state or local taxes required by law to be
withheld with respect to the exercise of an Option, or the Participant or other
person receiving Shares upon the exercise of an Option shall be required to pay
to the Company the amount of any such taxes that the Company is required to
withhold with respect to exercise. Participants may elect with respect to the
exercise of an Option either:
(a) to have the Company withhold, from the Shares to be issued
pursuant to such exercise, such number of Shares that, or
(b) to surrender to the Company such number of Shares already
owned by the Participant (which may be Shares received upon such
exercise) that,
in the case of both (a) and (b), shall, at their Fair Market Value on the Tax
Date, at least be equal to the Company's withholding obligation with respect to
the exercise of the Option. If the Fair Market Value on the Tax Date of the
number of Shares required to be withheld or surrendered pursuant to the
foregoing election exceeds the Company's withholding obligation with respect to
the exercise, a fractional Share shall not be issued for the excess, but an
amount equal to the excess shall be paid to the Participant in cash as soon as
reasonably practicable after the amount of such excess is determined by the
Company.
9. REQUIREMENTS FOR ISSUANCE OF SHARES
No Shares shall be issued or transferred upon payment of any Grant
hereunder unless and until all legal requirements applicable to the issuance or
transfer of such Shares have been complied with to the satisfaction of the
Administrator.
10. EFFECTIVE DATE OF THE PLAN
This Plan shall be effective as of July 29, 1993.
11. CORPORATE CHANGES
If the Company becomes a party or subject to a Reorganization Transaction,
with respect to outstanding Options, the Board shall either: (a) determine what
Participants shall be entitled to receive, in substitution for Shares issuable
or transferable to them upon the exercise of outstanding Options, in the form of
stock, securities, cash or other property to be received by owners of Stock as a
result of such Reorganization Transaction; provided, however, that the excess of
the aggregate fair market value of the stock, securities or other property
subject to the Options immediately after such substitution or the aggregate
value of such cash over the exercise price of the Options shall not be more than
the excess of the aggregate Fair Market Value of the Shares subject to such
Options immediately before such substitution over the
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<PAGE>
exercise price of the Options; or (ii) upon written notice to Participants,
provide that the Participants' Options shall be terminated unless exercised in
accordance with the Plan within 30 days after the date of such notice. In either
such case, the Board, in its absolute discretion, may determine whether and to
what extent the exercise and vesting periods applicable to such Options shall
continue to apply.
12. CERTAIN DEFINITIONS
Certain terms used herein are used with the respective meanings assigned
below:
"Board" means the Board of Directors of the Company.
"Common Stock" means the Common Stock, par value $0.01 per share, of the
Company, or any securities shares into which the Common Stock may be
changed.
"Fair Market Value" means the average closing price for the five most
recent trading days on the stock exchange or system on which the shares of
Common Stock are listed or included; or if the shares of Common Stock are not
listed on a stock exchange or included in a system that provides for a closing
sales price, but are traded in the over-the-counter market without the
availability of closing sale price information, such determination shall be made
on the basis of the mean between the bid and asked prices for such shares on the
over-the-counter market for such trading days; or if the shares of Common Stock
are not listed, included or traded in any such exchange, system or market, the
fair market value of a share of Common Stock as determined in good faith by the
Board of Directors based on a valuation of the entire Company on a consolidated
basis that is then divided by the total number of shares of Common Stock issued
and outstanding plus the number of shares of Common Stock issuable upon exercise
or conversion of all securities or other rights that are then exercisable or
convertible.
"Options" means options to purchase Shares that are granted under the
Plan.
"Person" means any natural person, trust, corporation, partnership, joint
venture or other entity, and it shall also include two or more Persons who act
together, or agree to act together.
"Reorganization Transaction" means a merger, consolidation or combination
of the Company with another corporation or entity or any similar reorganization
of the Company, the complete liquidation of the Company, or the sale of all or
substantially all of the assets of the Company; provided, however, that any such
transaction shall not be considered a Reorganization Transaction unless as a
result of such transaction a Person who is not a stockholder (or an affiliate of
a stockholder) prior to the transaction becomes the owner of or otherwise
controls (alone or together with the Person's affiliates) over 50% of the Common
Stock.
"Tax Date" means the date as of which the exercise of an Option is taxable
for federal income tax purposes.
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13. MISCELLANEOUS.
(a) COMPLIANCE WITH LAW. The Plan, the exercise of Options and the
obligations of the Company to issue or transfer Shares under Options shall be
subject to all applicable laws and to approvals by any governmental or
regulatory agency as may be required. Without obtaining the consent of the
holder thereof, the Board may revoke any Option if it is contrary to law or
modify an Option to bring it into compliance with any mandatory government
regulation. The Administrator may also adopt rules regarding the withholding of
taxes on payments to Grantees.
(B) OWNERSHIP OF STOCK. A Grantee shall have no rights as a stockholder
with respect to any Shares covered by an Option until the Shares are issued or
transferred to the Grantee on the stock transfer records of the Company upon the
exercise or partial exercise of the Option.
(C) CHOICE OF LAW. The Plan, the Options and the exercise thereof shall be
governed by the laws of the State of Delaware.
6
EXHIBIT 10.9
TRAVIS INTERNATIONAL, INC.
NON-QUALIFIED EXECUTIVE RETIREMENT PLAN
EFFECTIVE
OCTOBER 1, 1994
<PAGE>
TRAVIS INTERNATIONAL, INC.
NON-QUALIFIED EXECUTIVE RETIREMENT PLAN
TABLE OF CONTENTS
PAGE
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ARTICLE I - Purpose, Definitions and Construction
1.1 Purpose of the Plan..............................................1
1.2 Definitions......................................................1
1.3 Construction.....................................................3
ARTICLE II - Eligibility
2.1 Eligibility Requirements.........................................4
ARTICLE III - Contributions to the Plan
3.1 Participant Contributions........................................5
3.2 Employer Contributions...........................................5
3.3 Establishment of Account.........................................5
ARTICLE IV - Allocation and Investment
4.1 Allocation.......................................................6
4.2 Establishment of Trust...........................................6
4.3 Allocation of Investment Earnings................................6
ARTICLE V- Determination of Payment of Account
5.1 Timing of Payment................................................7
5.2 Payment Upon Death of Participant................................7
5.3 Form of Payment..................................................7
5.4 Change of Control................................................8
ARTICLE VI - Miscellaneous
6.1 Administration of the Plan.......................................9
6.2 Amendment of the Plan............................................9
6.3 Termination of the Plan..........................................9
6.4 Notices to Participants..........................................9
6.5 Non-Alienation...................................................9
<PAGE>
ARTICLE I
PURPOSE, DEFINITIONS AND CONSTRUCTION
1.1 PURPOSE OF THE PLAN
This Plan is established by the Employer to provide certain select
management employees, who are defined below, with a retirement benefit on a
non-qualified basis. This Plan is not intended to, and does not, qualify under
Sections 401(a) and 501(a) of the Internal Revenue Code, and is designed to be
exempt from the participation and vesting, funding and fiduciary responsibility
rules of the Employee Retirement Income Security Act of 1974, as amended,
pursuant to the exemptions under Sections 201(2), 301(a)(3) and 401(a)(1) of
that act.
1.2 DEFINITIONS
The following terms, when found in the Plan, shall have the meanings set
forth below:
(a) ACCOUNT BALANCE: At any time, the total of all amounts credited under
the terms of the Plan to a Participant, the rights to which are determined under
the Plan.
(b) BENEFICIARY: The person(s) and/or the trust(s) created for the benefit
of a person or persons who are the natural object of the Participant's bounty,
or the Participant's estate, whichever is designated by the Participant to
receive the benefits payable hereunder upon his death. Provided, however, if the
Participant is married as of the date of his death, and has not named another
Beneficiary, his spouse shall be his Beneficiary.
(c) CHANGE OF CONTROL: A Change of Control shall occur if (i) the
ownership of the Employer changes in such a manner that the interest of Bradford
Ventures Ltd. and affiliates becomes less than forty-five percent (45%) of the
total ownership of the Employer, or (ii) as a result of the retirement or other
separation of the person who is Chairman of the Board as of the date of
execution of this document, or (iii) upon dissolution of the Employer.
(d) CODE: The Internal Revenue Code of 1986, as it may be amended from
time to time, including any successor.
(e) COMPENSATION: Compensation, which has been taken into account in the
derivation of contribution amounts shown on Appendix A hereto, is total cash
remuneration paid by the Employer during each applicable period, consisting of
base salary, Board of Directors fees from affiliates of the Employer, and
contributions under any plan under Code Section 401(a), 401(k) or 125, and
amounts deferred under any salary reduction non-qualified program, other than
this Plan. compensation hereunder shall not be subject to any limitations
applicable to tax-qualified plans, such as pursuant to Code Sections 401(a)(17)
or 415. For the purpose of Section 3.2(a) hereof, the Compensation taken into
account shall be the highest one (1) year of compensation while a Participant.
<PAGE>
The amounts described above have been estimated to develop Appendix A
hereto, and such appendix will not be modified except pursuant to a specific
amendment approved and executed after the initial execution of this Plan by the
Board of Directors of the Employer.
(f) DISABILITY: A physical or mental condition of a Participant resulting
from bodily injury, disease or mental disorder which renders him incapable of
continuing in his occupation. The determination of Disability shall be made
either as a result of the Participant qualifying for a pension under the federal
Social Security Act, or based upon such evidence as the Employer in its sole
discretion determines to be sufficient to establish that such Participant is
incapable of performing the regular duties of his occupation.
(g) EFFECTIVE DATE: October 1, 1994.
(h) ELIGIBLE EMPLOYEE: There are two eligible employees hereunder: Mr.
Kirby Attwell and Mr. Tim Fogelsong. Further, this Plan may be amended at any
time by appropriate action of the Board of Directors of the Employer to expand
this class of Eligible Employee either by name or by position. However, no
person who is an employee of the Employer shall be selected as an Eligible
Employee except a member of the select group of management or highly compensated
employees of the Employer, as such term is defined under Section 201 of the
Employee Retirement Income Security Act of 1974, and regulations and rulings
promulgated thereunder by the Department of Labor.
(i) EMPLOYER: Travis International, Inc., a corporation organized and
existing under the laws of the State of Delaware and any successor or
successors, and any subsidiaries of Travis International, Inc.
(j) ERISA: The Employee Retirement Income Security Act of 1974.
(k) NORMAL RETIREMENT AGE: The later of the date on which a Participant
attains age sixty-five (65) or the date as of which he completes ten (10) years
of participation under this Plan.
(1) NORMAL RETIREMENT DATE: The first day of the month coincident with or
next following a Participant's Normal Retirement Age.
(m) PARTICIPANT: An Eligible Employee as defined under Section 1.2(h)
hereof, and whose participation has not been terminated.
(n) PLAN: The Travis International, Inc. Non-Qualified Executive
Retirement Plan, as set forth herein, and as it may be amended from time to
time.
(o) PLAN YEAR: The twelve month period beginning on October 1 and ending
on September 30 each year.
2
<PAGE>
1.3 CONSTRUCTION
The masculine gender, where appearing in the Plan, shall be deemed to
include the feminine gender, and the singular may indicate the plural, unless
the context clearly indicates the contrary. The words "hereof" , "herein",
"hereunder" and other similar compounds of the word "here" shall, unless
otherwise specifically stated, mean and refer to the entire Plan, not to any
particular provision or Section. Article and Section headings are included for
convenience of reference and are not intended to add to, or subtract from, the
terms of the Plan.
3
<PAGE>
ARTICLE II
ELIGIBILITY
2.1 ELIGIBILITY REQUIREMENTS
Each person defined as an Eligible Employee under Section 1.2(h) hereof
shall become a Participant as of the Effective Date hereunder. Any other person
later designated as an Eligible Employee in accordance with the terms of Section
1.2(h) hereof shall become a Participant as of the date his eligibility is
specified by the Employer pursuant to Section 1.2(h) hereof.
4
<PAGE>
ARTICLE III
CONTRIBUTIONS TO THE PLAN
3.1 PARTICIPANT CONTRIBUTIONS
Contributions to the Plan by a Participant shall neither be required nor
permitted.
3.2 EMPLOYER CONTRIBUTIONS
The Employer shall make contributions equal to the amounts listed for each
Participant in Appendix A hereto, calculated by the actuary for the Plan at Plan
inception based on reasonable actuarial assumptions in accordance with Financial
Accounting Standards Board Statement No. 87, which would be required if the Plan
were a defined benefit plan providing:
(a) A retirement benefit payable in the form of a sixty-six and
two-thirds percent (66 2/3%) Joint & Survivor Annuity at Normal
Retirement Age with ten (10) years of Plan participation based on
the formula:
(i) Four percent (4%) of Compensation, multiplied by the first
ten (10) years of Plan participation, plus
(ii) One percent (1%) of Compensation, multiplied by up to an
additional ten (10) years of Plan participation, less
(iii) The benefit expected to be received under the federal
Social Security Act as an old age benefit, assuming that the
Participant has the maximum number of years under the Social
Security Act allowed with each year credited at the maximum
federal Social Security taxable wage base, with such projected
to his Normal Retirement Date,
(b) A pre-retirement death benefit equal to sixty-six and two-thirds
percent (66 2/3%) of the accrued benefit of the Participant as of
his date of death, payable to his spouse or named Beneficiary.
3.3 ESTABLISHMENT OF ACCOUNT
Each Participant herein shall have maintained in his name an Account, to
which shall be credited his Employer Contributions, plus any gains and losses
credited pursuant to Section 4.3 hereof.
5
<PAGE>
ARTICLE IV
ALLOCATION AND INVESTMENT
4.1 ALLOCATION
Contributions made pursuant to Section 3.2 hereof shall be allocated to
the Account of the Participant on whose behalf such contributions are made as of
any date during the Plan Year.
4.2 ESTABLISHMENT OF TRUST
The Employer may establish a trust fund with regard to the Accounts
hereunder, designed to be an irrevocable grantor trust under Code Section 671.
It is the intention of the Employer that any trust established for this
purpose shall constitute an unfunded arrangement and shall not affect the status
of the Plan as an unfunded plan maintained for the purpose of providing deferred
compensation for a select group of highly compensated management employees for
purposes of Title I of ERISA. The Employer may make payment of benefits directly
to Participants or their Beneficiaries as they become due under the terms of the
Plan. In addition, if the principal of the trust established for this purpose,
and any earnings thereon, are not sufficient to make payments of benefits in
accordance with the terms of the Plan, the Employer shall make the balance of
each such payment as it falls due.
Any trust created by the Employer and any assets held by the Trust to
assist in meeting its obligation under the Plan shall conform to the terms of
the model trust as described in Revenue Procedure 92-64, as subsequently
amended.
The Participants and their Beneficiaries shall have the same status as
general unsecured creditors of the Employer and the Plan shall constitute a mere
promise by the Employer to make benefit payments in the future.
4.3 ALLOCATION OF INVESTMENT EARNINGS
Investment earnings shall be credited as of the last day of each Plan
Year, based on the actual investment results for such Plan Year. The earnings to
be allocated will be allocated to each Participant's Account in the proportion
that the Participant's Account balance at the beginning of the year, less any
withdrawals during the year, plus one-half (1/2) of any additions made to the
Account pursuant to Section 3.2 hereof during the year, bears to the total of
all such Accounts.
Each Participant shall have the rights relative to investment of funds
hereunder as are approved by the Board of Directors of the Employer, and which
has the final approval of the Trustee, both as to permissible funds and election
rights.
6
<PAGE>
ARTICLE V
DETERMINATION OF PAYMENT OF ACCOUNT
5.1 TIMING OF PAYMENT
A Participant's Account derived from contributions under Section 3.2
hereof, as well as any gains or losses allocable thereto under Section 4.3
hereof, shall be one hundred percent (100%) vested and non-forfeitable at all
times. Provided, however, a Participant or Beneficiary shall be entitled to
payment of his Account balance hereunder as of the earlier of (a) and (b),
where:
(a) is his termination of employment, and
(b) is his Normal Retirement Date.
At that time, a Participant, or in the case of a benefit due to the death
of a Participant, his Beneficiary, shall be entitled to payment of his vested
Account Balance immediately following the event providing for such payment, and
a special valuation of the Accounts shall be prepared as of such date, under the
provisions of Section 4.3 hereof.
Payment shall be made as soon as administratively feasible following such
valuation.
5.2 PAYMENT UPON DEATH OF PARTICIPANT
Upon the death of a Participant, his Account balance (based upon a special
valuation of the Accounts prepared as of the date of death, under the provisions
of section 4.3 hereof) shall become immediately payable (with payment made as
soon as administratively feasible following such valuation) to the Participant's
designated Beneficiary. In addition, the Employer shall purchase term life
insurance on the life of each Participant, to be held either inside any trust
established pursuant to Section 4.2 hereof, or to be held outside such trust by
the Employer. The proceeds of any such policy shall become payable to the
designated beneficiary of the Participant, in addition to the amounts provided
under the Plan. The amounts of such term life insurance are shown on Appendix B
hereto for each Plan Year in which such insurance is to be purchased.
5.3 FORM OF PAYMENT
A Participant or Beneficiary entitled to payment shall receive a single
lump sum payment in cash, or shall have such lump sum utilized to purchase a
Life Annuity or any other form of annuity available from an insurance company
with a "Best" quality rating of no less than A+, and a size rating of no less
than ten (10). This election, however, shall be made by the Participant before
the first contribution pursuant to Section 3.2 hereof is made to the Plan.
7
<PAGE>
5.4 CHANGE OF CONTROL
Provided, however, upon a Change of Control, the benefits payable to a
Participant or his designated Beneficiary shall be the amount that would result
if this Plan were a defined benefit plan with the provisions stated under
Section 3.2(a) and 3.2(b) hereof, with the Compensation taken into account in
determination of the benefit based on the highest five (5) years of
Compensation, not necessarily consecutive. If a trust under Section 4.2 hereof
has been established, assets under such trust will be utilized toward the
payment of such benefits.
8
<PAGE>
ARTICLE VI
MISCELLANEOUS
6.1 ADMINISTRATION OF THE PLAN
The Plan shall be administered by the Employer. The books and records of
the Plan shall be maintained by the Employer at its expense, and no member of
the Board of Directors of the Employer, or any employee of the Employer acting
on its behalf, shall be liable to any person for any action taken or omitted in
connection with the administration of the Plan, unless attributable to his own
fraud or willful misconduct.
6.2 AMENDMENT OF THE PLAN
The Plan may be amended, in whole or in part, from time-to-time, by the
Board of Directors of the Employer, without the consent of any other party,
provided that any benefits that have accrued prior to the date of such action,
by virtue of their having been credited to the Participant's Account pursuant to
Sections 3.2 and 4.3 hereof, may not be reduced or forfeited.
6.3 TERMINATION OF THE PLAN
The Plan may be terminated, at any time, by action of the Board of
Directors, without the consent of any other party. The termination of this Plan
shall not result in the granting of any additional rights to any Participant,
nor shall it result in the reduction of a Participant's Account balance which
has resulted from the crediting of amounts pursuant to Sections 3.2 and 4.3
hereof.
6.4 NOTICES TO PARTICIPANTS
From time-to-time, the Employer shall provide a Participant with an
accounting of the value of his Account. Further, a Participant will be provided
written notice of any amendment of the Plan that affects his rights herein, and
of the termination of the Plan.
6.5 NON-ALIENATION
To the extent permitted by law, the right of any Participant or
Beneficiary in any Account balance hereunder shall not be subject in any manner
to attachment or other legal process for the debts of such Participant or
Beneficiary, and any such Account balance shall not be subject to anticipation,
alienation, sale, transfer, assignment or encumbrance.
9
<PAGE>
IN WITNESS WHEREOF, and as conclusive evidence of the adoption of the
foregoing instrument comprising the Travis International, Inc. Non-Qualified
Executive Retirement Plan, TRAVIS INTERNATIONAL, INC., as the Employer, has
caused its seal to be affixed hereto and these presents to be duly executed in
its name and behalf by its proper officers thereunto authorized this day ___ of
______________________, 19__.
ATTEST: TRAVIS INTERNATIONAL, INC.
____________________ ____________________
Secretary Name: Title:
10
EXHIBIT 10.10
M E M O R A N D U M
TO: Buba Levy and Nolan Lehmann
FROM: Kirby Attwell
DATE: January 4, 1995
RE: Travis International, Inc. Incentive Compensation Program ("TICP")
------------------------------------------------------------------------------
The Incentive Compensation Program for Travis management discussed between Bubba
and Kirby on December 30, 1994, was based on creating a pool from the excess of
a 15% Return on Equity grossed up for tax effects.
The numerator would be the net income for the year plus an adjustment of the
after tax effect of any Consult and Non Compete Agreements which are part of the
acquisition trade The denominator would be the average net worth as calculated
by the average of the monthly book equity on the internal books during the year
and the audited year end.
A pool from the excess of the 15% Return on Equity would be created from:
5% of the excess between 15% and 17%, plus
10% of the excess between 17% and 19%, plus
15% of the excess between 19% and 21%, plus
20% of the excess over 21%
This pool would be grossed up for tax effects and paid to Travis management
which at this time includes Kirby and Tim.
The figures used in the discussion with Bubba were from the original Investors
Memorandum which did not include the additional $500,000 equity raised. This has
the result of lowering the calculations. The Investors Memorandum included a
reinvestment of cash in acquisitions Our Budget does not. Attached is a
worksheet prepared by Tim showing the results of the TICP per the current
Budget.
EXHIBIT 10.11
ASSET PURCHASE AGREEMENT
BETWEEN
NEW WEST ACQUISITION CORP.
NEW WEST COMMUNICATIONS, INC.
AND
CRAIG COWAN
DATED AS OF SEPTEMBER 30, 1996
<PAGE>
TABLE OF CONTENTS
PAGE
----
ARTICLE I - DEFINITIONS.................................................... 1
1.1 DEFINITIONS................................................. 1
1.2 INTERPRETATION.............................................. 7
ARTICLE II - SALE AND PURCHASE OF ACQUIRED ASSETS; ASSUMPTION OF
ASSUMED OBLIGATIONS......................................... 8
2.1 ACQUIRED ASSETS............................................. 8
2.2 ASSIGNMENT OF CONTRACTS, LEASES AND OTHER ASSETS............ 9
2.3 EXCLUDED ASSETS............................................. 10
2.4 ASSUMED OBLIGATIONS......................................... 11
2.5 NO OTHER LIABILITIES ASSUMED................................ 11
ARTICLE III - PURCHASE PRICE AND PAYMENT................................... 11
3.1 PAYMENT OF PURCHASE PRICE................................... 11
3.2 ALLOCATION OF CONSIDERATION................................. 13
3.3 BULK SALES LAWS............................................. 13
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF SELLING
PARTIES..................................................... 13
4.1 DUE INCORPORATION, ETC...................................... 13
4.2 OWNERSHIP OF SELLER......................................... 14
4.3 DUE AUTHORIZATION........................................... 14
4.4 CONSENTS AND APPROVALS; NO CONFLICTS, ETC................... 14
4.5 FINANCIAL STATEMENTS; NO UNDISCLOSED LIABILITIES............ 15
4.6 NO ADVERSE EFFECTS OR CHANGES............................... 15
4.7 FUTURE RELATIONSHIPS........................................ 17
4.8 TITLE TO PROPERTIES......................................... 18
4.9 CONDITION AND SUFFICIENCY OF ASSETS......................... 18
4.10 REAL PROPERTY............................................... 18
4.11 EQUIPMENT AND VEHICLES...................................... 19
4.12 INVENTORIES................................................. 19
4.13 ACCOUNTS RECEIVABLE......................................... 20
4.14 INTELLECTUAL PROPERTY....................................... 20
4.15 CONTRACTS................................................... 20
4.16 PERMITS..................................................... 22
4.17 INSURANCE................................................... 22
4.18 EMPLOYEE BENEFIT PLANS...................................... 22
4.19 EMPLOYMENT AND LABOR MATTERS................................ 23
4.20 CAPITAL IMPROVEMENTS........................................ 23
i
<PAGE>
4.21 TAXES....................................................... 23
4.22 NO DEFAULTS OR VIOLATIONS................................... 24
4.23 ENVIRONMENTAL MATTERS....................................... 25
4.24 LITIGATION.................................................. 25
4.25 NO CONFLICT OF INTEREST..................................... 26
4.26 BANK ACCOUNTS............................................... 26
4.27 CLAIMS AGAINST OFFICERS AND DIRECTORS....................... 26
4.28 IMPROPER PAYMENTS........................................... 26
4.29 DUE DILIGENCE MATERIALS..................................... 26
4.30 NO OTHER AGREEMENT.......................................... 26
4.31 CLOSING FINANCIAL STATEMENTS................................ 27
4.32 BROKERS..................................................... 27
4.33 INVESTMENT MATTERS.......................................... 27
4.34 ACCURACY OF STATEMENTS...................................... 27
4.35 NO REPRESENTATIONS OR WARRANTIES RE PROFITABILITY........... 28
ARTICLE V - REPRESENTATIONS AND WARRANTIES OF PURCHASER AND
TRAVIS...................................................... 28
5.1 DUE INCORPORATION/OWNERSHIP................................. 28
5.2 DUE AUTHORIZATION........................................... 28
5.3 CONSENTS AND APPROVALS; NO CONFLICTS, ETC................... 29
5.4 BROKERS..................................................... 29
5.5 CAPITALIZATION.............................................. 29
5.6 VALUATION OF TRAVIS STOCK................................... 30
5.7 ACCURACY OF STATEMENTS...................................... 30
ARTICLE VI - COVENANTS OF SELLING PARTIES.................................. 30
6.1 IMPLEMENTING AGREEMENT...................................... 30
6.2 INTERIM COMPENSATION........................................ 30
6.3 PRESERVATION OF ACQUIRED ASSETS............................. 30
6.4 COMPLIANCE WITH STATE TAX LAWS.............................. 30
6.5 NON-COMPETITION............................................. 31
6.6 USE OF NAME................................................. 33
6.7 TERMINATION OF CERTAIN AGREEMENTS........................... 33
6.8 TAX MATTERS................................................. 33
ARTICLE VII - COVENANTS OF PURCHASER....................................... 34
7.1 TAX MATTERS................................................. 34
ARTICLE VIII - CLOSING..................................................... 34
8.1 CLOSING..................................................... 34
8.2 DELIVERIES BY SELLING PARTIES............................... 34
8.3 DELIVERIES BY PURCHASER..................................... 36
ii
<PAGE>
ARTICLE IX - INDEMNIFICATION............................................... 36
9.1 SURVIVAL.................................................... 36
9.2 INDEMNIFICATION BY SELLING PARTIES.......................... 36
9.3 INDEMNIFICATION BY PURCHASER................................ 37
9.4 CLAIMS...................................................... 38
9.5 THIRD PARTY CLAIMS.......................................... 38
9.6 PAYMENT OF INDEMNIFICATION OBLIGATIONS...................... 39
9.7 EXCLUSIVE REMEDY............................................ 40
9.8 INSURANCE OR THIRD PARTY INDEMNIFICATION.................... 40
ARTICLE X - MISCELLANEOUS.................................................. 40
10.1 EXPENSES.................................................... 40
10.2 AMENDMENT................................................... 40
10.3 NOTICES..................................................... 40
10.4 EFFECT OF INVESTIGATION..................................... 42
10.5 WAIVERS..................................................... 42
10.6 ASSIGNMENT.................................................. 42
10.7 NO THIRD PARTY BENEFICIARIES................................ 42
10.8 PUBLICITY................................................... 42
10.9 FURTHER ASSURANCES.......................................... 42
10.10 SEVERABILITY................................................ 42
10.11 REMEDIES CUMULATIVE......................................... 43
10.12 ENTIRE UNDERSTANDING........................................ 43
10.13 APPLICABLE LAW.............................................. 43
10.14 BINDING ARBITRATION......................................... 43
10.15 COUNTERPARTS................................................ 45
EXHIBITS
Exhibit A Form of Employment and Non-Competition Agreement
Exhibit B Form of Bill of Sale
Exhibit C Form of Opinion of Counsel to Seller
Exhibit D Form of Opinion of Counsel to Purchaser
SCHEDULES
Schedule 1.1 Financial Statements
Schedule 2.1(a) Equipment
Schedule 2.1(b) Vehicles
Schedule 2.1(c) Inventories
iii
<PAGE>
Schedule 2.1(d) Accounts Receivable
Schedule 2.1(f) Intellectual Property
Schedule 2.1(h)(i) Cash
Schedule 2.1(h)(ii) Interim Compensation
Schedule 2.2(a) Real Property Leases
Schedule 2.2(b) Personal Property Leases
Schedule 2.2(c) Seller Purchase Orders
Schedule 2.2(d) Customer Purchase Orders
Schedule 2.2(e) Independent Contractor Contracts
Schedule 2.2(f) Other Contracts
Schedule 2.2(g) Permits
Schedule 2.3 Excluded Assets
Schedule 2.4 Certain Current Liabilities
Schedule 3.2 Allocation of Purchase Price
Schedule 4.1 Jurisdictions in which Seller Is Qualified
Schedule 4.4 Required Consents
Schedule 4.5 Certain Changes
Schedule 4.10(i) Sublessees
Schedule 4.17 Insurance
Schedule 4.19 Employment and Labor Matters
Schedule 4.20 Capital Improvements
Schedule 4.26 Bank Accounts
Schedule 5.3 Certain Other Consents and Approvals
iv
<PAGE>
ASSET PURCHASE AGREEMENT
THIS AGREEMENT is made as of the 30th day of September, 1996, by and
between NEW WEST ACQUISITION CORP., a Delaware corporation ("Purchaser"), NEW
WEST COMMUNICATIONS, INC., a California corporation ("Seller") and CRAIG COWAN,
the sole shareholder of Seller ("Cowan", together with Seller, the "Selling
Parties") and is joined by TRAVIS INTERNATIONAL, INC., a Delaware corporation,
for the limited purpose of joining the representations and warranties contained
in ARTICLE V hereof. Certain capitalized terms used herein are defined in
ARTICLE I.
W I T N E S S E T H:
WHEREAS, Purchaser wishes to purchase from Seller and Seller wishes to
sell to Purchaser all of the Acquired Assets (defined herein), and Purchaser
wishes to assume all of the Assumed Obligations (also defined herein), all upon
the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants, agreements and warranties herein contained, the parties agree as
follows:
ARTICLE I
DEFINITIONS
1.1 DEFINITIONS. The following terms shall have the following meanings for
the purposes of this Agreement:
"Accounts Receivable" shall have the meaning provided in SECTION 2.1(d).
"Acquired Assets" shall have the meaning provided in SECTIONS 2.1 and 2.2.
"Affiliate" shall mean, with respect to any specified Person (i) any other
Person which, directly or indirectly, owns or controls, is under common
ownership or control with, or is owned or controlled by, such specified Person,
(ii) any other Person which is a director, officer or partner or is, directly or
indirectly, the beneficial owner of 10 percent or more of any class of equity
securities, of the specified Person or a Person described in CLAUSE (I) of this
paragraph, (iii) another Person of which the specified Person is a director,
officer or partner or is, directly or indirectly, the beneficial owner of 10
percent or more of any class of equity securities, (iv) another Person in which
the specified Person has a substantial beneficial interest or as to which the
specified Person serves as trustee or in a similar capacity, (v) any relative or
spouse of the specified Person or any of the foregoing Persons, any relative of
such spouse or any spouse of any such relative.
<PAGE>
"Agreement" shall mean this Asset Purchase Agreement, including all
exhibits and schedules hereto as it may be amended from time to time in
accordance with its terms.
"Assumed Obligations" shall have the meaning provided in SECTION 2.4.
"Benefit Plans" shall have the meaning provided in SECTION 4.18.
"Bulk Sales Laws" shall mean the Laws of any jurisdiction relating to bulk
sales which are applicable to the sale of the Acquired Assets by Seller
hereunder (other than laws described in Section 6.4).
"Business" shall mean the business and operations of Seller.
"Business Day" shall mean any day of the year other than (i) any Saturday
or Sunday or (ii) any other day on which banks located in Houston, Texas
generally are closed for business.
"Cash" shall mean all cash, certificates of deposits, bank deposits and
other cash equivalents, together with all accrued but unpaid interest thereon.
"Cash Amount" shall have the meaning provided in SECTION 3.1(a).
"Closing" shall mean the consummation of the transactions contemplated
herein in accordance with ARTICLE VIII.
"Closing Date" shall mean the date on which the Closing occurs or is to
occur.
"Closing Financial Statements" shall mean the unaudited Financial
Statements of Seller prepared by Seller immediately prior to closing and
delivered to Purchaser at Closing, which statements shall include accruals for
all expenses, including the Interim Compensation incurred prior to Closing.
"Code" shall mean the United States Internal Revenue Code of 1986, as
amended.
"Confidential Information" shall mean all secrets, confidential
information, customer lists, supplier information, and all other data of or
pertaining to Seller with respect to the Business or to its financial affairs or
products that is not and has not become ascertainable or obtainable from public
or published information.
"Consideration Stock" shall have the meaning provided in SECTION 3.1(b).
"Continuing Employee" shall mean any employee of Seller who works at or is
employed in connection with the Business immediately prior to the Closing,
except for those employees who (i) are Excluded Employees, (ii) do not accept
employment with Purchaser, (iii) are not actively at work for Seller on the
Closing Date or (iv) who, at any time within 30 days after the Closing Date,
voluntarily terminate employment with Purchaser or who are terminated by
Purchaser for cause.
2
<PAGE>
"Contract" shall mean any contract, lease, letter agreement, commitment,
understanding, sales order, purchase order, agreement, indenture, mortgage,
note, bond, right, warrant, instrument, plan, permit or license, whether written
or verbal, which is intended or purports to be binding and enforceable.
"Customer Purchase Orders" shall have the meaning provided in SECTION
2.2(d).
"Employment Agreement" shall mean the Employment and Non-Competition
Agreement between Purchaser and Craig Cowan, Seller's president and sole
shareholder, to be dated on or before the Closing Date, substantially in the
form attached hereto as EXHIBIT A.
"Ending Date" shall have the meaning provided in SECTION 6.5(a).
"Environmental Law" shall mean any Law which relates to or otherwise
imposes liability or standards of conduct concerning discharges, emissions,
releases or threatened releases of noises, odors or any pollutants, contaminants
or hazardous or toxic wastes, substances or materials, whether as matter or
energy, into ambient air, water, or land, or otherwise relating to the
manufacture, processing, generation, distribution, use, treatment, storage,
disposal, cleanup, transport or handling of pollutants, contaminants, or
hazardous or toxic wastes, substances or materials, including the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, the
Superfund Amendments and Reauthorization Act of 1986, as amended, the Resource
Conservation and Recovery Act of 1976, as amended, the Toxic Substances Control
Act of 1976, as amended, the Federal Water Pollution Control Act Amendments of
1972, the Clean Water Act of 1977, as amended, any so-called "Superfund" or
"Superlien" Law (including those already referenced in this definition), any
similar Laws or regulations of the State of California or county of San Luis
Obispo, and any other Law of any Governmental Authority having a similar subject
matter.
"Environmental Permit" shall mean any permit, license, approval, consent
or other authorization required by or pursuant to any applicable Environmental
Law.
"Environmental Warranty" shall mean a warranty contained in SECTION 4.23.
"Equipment" shall have the meaning provided in SECTION 2.1(a).
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" shall mean, with respect to any Person, each
corporation, trade or business that is, along with such Person, part of the
controlled group of corporations, trades or businesses under common control
within the meaning of sections 414(b) or (c) of the Code.
"Escrow Agent" shall mean the escrow agent appointed by the Seller and the
Purchaser pursuant to the Escrow Agreement.
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"Escrow Agreement" shall mean the Escrow Agreement executed in connection
herewith and attached hereto as EXHIBIT B.
"Escrowed Shares" shall have the meaning provided in SECTION 3.1(b).
"Excluded Assets" shall have the meaning provided in SECTION 2.3.
"Excluded Obligations" shall have the meaning provided in SECTION 2.5.
"Financial Statements" shall mean the unaudited financial statements of
Seller with respect to the Business as of December 31, 1995, December 31, 1994
and August 31, 1996 which are set forth on SCHEDULE 1.1 consisting of the
balance sheets at such dates and the related statements of earnings and retained
earnings for the periods then ended.
"GAAP" shall mean U.S. generally accepted accounting principles at the
time in effect.
"Governmental Authority" shall mean the government of the United States or
any foreign country or any state or political subdivision thereof and any
entity, body or authority exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government, including
the Pension Benefit Guaranty Corporation and other quasi-governmental entities
established to perform such functions.
"Hazardous Substance" shall mean any material or substance which (i)
constitutes a hazardous substance, toxic substance or pollutant (as such terms
are defined by or pursuant to any Environmental Law) or (ii) is regulated or
controlled as a hazardous substance, toxic substance, pollutant or other
regulated or controlled material, substance or matter pursuant to any
Environmental Law.
"Indemnified Person" shall mean the Person or Persons entitled to, or
claiming a right to, indemnification under ARTICLE IX.
"Indemnifying Person" shall mean the Person or Persons claimed by the
Indemnified Person to be obligated to provide indemnification under ARTICLE IX.
"Information and Records" shall have the meaning provided in SECTION
2.1(e).
"Intellectual Property" shall have the meaning provided in SECTION 2.1(f).
"Interim Compensation" shall have the meaning set forth on SCHEDULE
2.1(H)(II).
"Inventories" shall have the meaning provided in SECTION 2.1(c).
"Latest Balance Sheet" shall mean the unaudited balance sheet of Seller
with respect to the Business dated as of August 31, 1996 set forth on SCHEDULE
1.1.
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"Law" shall mean any law, statute, regulation, ordinance, rule, order,
decree, judgment. consent decree, settlement agreement or governmental
requirement enacted, promulgated, entered into, agreed or imposed by any
Governmental Authority.
"Leased Assets" shall mean all assets subject to any of the Real Property
Leases or Personal Property Leases, or otherwise leased by Seller
"Lien" shall mean any mortgage, lien (except for any lien for taxes not
yet due and payable), charge, restriction, pledge, security interest, option,
lease or sublease, claim, right of any third party, easement, encroachment or
encumbrance.
"Loss" or "Losses" shall mean any and all liabilities, losses, costs,
claims, damages (including consequential damages), penalties and expenses
(including attorneys' fees and expenses and costs of investigation and
litigation). In the event any of the foregoing are indemnifiable hereunder, the
terms "Loss" and "Losses" shall include any and all attorneys' fees and expenses
and costs of investigation and litigation incurred by the Indemnified Person in
enforcing such indemnity.
"Material Adverse Change" shall mean a change (or circumstance involving a
prospective change) in the business, operations, assets, liabilities, results of
operations, cash flows, condition (financial or otherwise) or prospects of
Seller which is materially adverse or constitutes a material change in the
ability of Purchaser to own the Acquired Assets or conduct the Business
following the Closing.
"Material Adverse Effect" shall mean an effect (or circumstance involving
a prospective effect) on the business, operations, assets, liabilities, results
of operations, cash flows, condition (financial or otherwise) or prospects of
the Business which is materially adverse or has a material effect on the ability
of Purchaser to own the Acquired Assets or conduct the Business following the
Closing.
"Other Assets" shall have the meaning provided in SECTION 2.1(K).
"Other Contracts" shall have the meaning provided in SECTION 2.2(e).
"Permits" shall have the meaning provided in SECTION 2.2(f).
"Person" shall mean any individual, corporation, proprietorship, firm,
partnership, limited partnership, trust, association or other entity.
"Personal Property Leases" shall have the meaning provided in SECTION
2.2(b).
"Purchaser" shall have the meaning provided in the PREAMBLE.
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"Purchaser Indemnified Parties" shall mean Purchaser, Travis and each of
their Affiliates and their respective officers, directors, employees, agents and
representatives, provided that in no event shall Seller be deemed a Purchaser
Indemnified Party.
"Real Property Leases" shall have the meaning provided in SECTION 2.2(a).
"Registration Rights Agreement" shall mean that certain Registration
Rights Agreement by and among Travis and its shareholders dated as of May 28,
1992, as amended from time to time.
"Related Agreement" shall mean any Contract which is or is to be entered
into at the Closing or otherwise pursuant to this Agreement. The Related
Agreements executed by a specified Person shall be referred to as "such Person's
Related Agreements," "its Related Agreements" or another similar expression.
"Required Consents" shall have the meaning provided in SECTION 4.4.
"Secretary" shall have the meaning provided in SECTION 8.2(I).
"Seller" shall have the meaning provided in the PREAMBLE.
"Seller Indemnified Parties" shall mean Seller, and each of Seller's
Affiliates and their respective officers, directors, employees, agents, and
representatives, provided that in no event shall Purchaser be deemed a Seller
Indemnified Party.
"Seller Purchase Orders" shall have the meaning provided in
SECTION 2.2(c).
"Seller Shares" shall have the meaning provided in SECTION 3.1(b).
"Shareholders Agreement" shall mean that certain Shareholders Agreement by
and among Travis and its shareholders dated as of May 28, 1992, as amended from
time to time.
"Tax Return" shall mean any report, return or other information required
to be supplied to a Governmental Authority in connection with any Taxes.
"Tax Statute of Limitations Date" shall mean the close of business on the
90th day after the expiration of the applicable statute of limitations with
respect to Taxes, including any extensions thereof (or if such date is not a
Business Day, the next Business Day).
"Taxes" shall mean all taxes, charges, fees, duties (including customs
duties), levies or other assessments, including income, gross receipts, net
proceeds, ad valorem, turnover, real and personal property (tangible and
intangible), sales, use, franchise, excise, value added, stamp, leasing, lease,
user, transfer, fuel, excess profits, occupational, interest equalization,
windfall profits, license, payroll, environmental, capital stock, disability,
severance, employee's income
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withholding, other withholding, unemployment and Social Security taxes, which
are imposed by any Governmental Authority, and such term shall include any
interest, penalties or additions to tax attributable thereto.
"Territory" shall have the meaning provided in SECTION 6.5(a).
"Title and Authorization Warranty" shall mean a representation or warranty
in SECTION 4.1, 4.2, 4.3, 4.4 or 4.8.
"Travis" shall mean Travis International, Inc., a Delaware corporation.
"Travis Stock" shall mean the shares of Class A Common Stock of Travis,
par value $.01 per share, delivered to Seller in connection with this agreement.
"Vehicles" shall have the meaning provided in SECTION 2.1(b).
1.2 INTERPRETATION. The headings preceding the text of Articles and
Sections included in this Agreement and the headings to Schedules attached to
this Agreement are for convenience only and shall not be deemed part of this
Agreement or be given any effect in interpreting this Agreement. The use of the
masculine, feminine or neuter gender or the singular or plural form of words
herein shall not limit any provision of this Agreement. The use of the terms
"including" or "include" shall in all cases herein mean "including, without
limitation" or "include, without limitation," respectively. Reference to any
Person includes such Person's successors and assigns to the extent such
successors and assigns are permitted by the terms of any applicable agreement,
and reference to a Person in a particular capacity excludes such Person in any
other capacity or individually. Reference to any agreement (including this
Agreement), document or instrument means such agreement, document or instrument
as amended or modified and in effect from time to time in accordance with the
terms thereof and, if applicable, the terms hereof. Reference to any Law means
as amended, modified, codified, replaced or re-enacted, in whole or in part, and
in effect on the date hereof, including rules, regulations, enforcement
procedures and any interpretations promulgated thereunder. Underscored
references to Articles, Sections, clauses, Exhibits or Schedules shall refer to
those portions of this Agreement, and any underscored references to a clause
shall, unless otherwise identified, refer to the appropriate clause within the
same Section in which such reference occurs. The use of the terms "hereunder",
"hereof", "hereto" and words of similar import shall refer to this Agreement as
a whole and not to any particular Article, Section or clause of or Exhibit or
Schedule to this Agreement. Consummation of the transactions contemplated herein
shall not be deemed a waiver of a breach of or inaccuracy in any representation,
warranty or covenant or of any party's rights and remedies with regard thereto.
No specific representation, warranty or covenant contained herein shall limit
the generality or applicability of a more general representation, warranty or
covenant contained herein. A breach of or inaccuracy in any representation,
warranty or covenant shall not be affected by the fact that any more general or
less general representation, warranty or covenant was not also breached or
inaccurate.
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ARTICLE II
SALE AND PURCHASE OF ACQUIRED ASSETS;
ASSUMPTION OF ASSUMED OBLIGATIONS
2.1 ACQUIRED ASSETS. Subject to the terms and conditions of this
Agreement, at the Closing Seller shall sell, assign, transfer and deliver to
Purchaser, and Purchaser shall purchase, acquire and take assignment and
delivery of, all of the assets owned by Seller (wherever located), except for
those assets specifically excluded pursuant to SECTION 2.3 (all of the assets
sold, assigned, transferred and delivered to Purchaser hereunder are referred to
collectively herein as the "Acquired Assets"). The Acquired Assets include all
of Seller's right, title and interest in and to the following:
(a) EQUIPMENT. All machinery, equipment, furniture, tools, spare
parts, supplies, maintenance equipment and supplies, warehouse racks,
computers, office equipment, materials and other items of personal
property of every kind and description (other than the Vehicles and
Inventories, which are separately referenced in SECTIONS 2.1(b) and
2.1(c), respectively), including those items set forth on SCHEDULE 2.1(a)
(the "Equipment");
(b) VEHICLES. All trucks, trailers, automobiles and other vehicles
set forth on SCHEDULE 2.1(b) (the "Vehicles");
(c) INVENTORIES. All inventories wherever located whether or not
reflected on the books of Seller, as of the Closing Date, including all
raw materials, work in process and finished goods inventories, including
those items set forth on SCHEDULE 2.1(c), which schedule does not include
inventory which has been written down or written off;
(d) ACCOUNTS RECEIVABLE. Any and all accounts receivable, trade
receivables, notes receivable and other receivables (the "Accounts
Receivable");
(e) INFORMATION AND RECORDS. All technical information, confidential
information, price lists, marketing information, lists of product number
cross-references relating to the Company's products, sales records,
customer lists and files (including customer credit and collection
information), and other proprietary information (other than the
Intellectual Property, which is separately referenced in SECTION 2.1 (f)),
which are in Seller's care, custody or control or otherwise available to
it (the "Information and Records");
(f) INTELLECTUAL PROPERTY. The name "New West Communications" and
any logos relating to such name and all trade names, trademarks, service
marks, patents, copyrights (including any registrations, applications,
licenses or rights relating to any of the foregoing), technology, trade
secrets, inventions, know-how, designs, computer
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programs, processes, formulas and all other intangible assets, properties
and rights, including those items set forth on SCHEDULE 2.1(f) (the
"Intellectual Property");
(g) OTHER INTANGIBLES. Goodwill, if any, related to or used in
conjunction with the Business;
(h) CASH. All Cash and marketable securities, PROVIDED, HOWEVER,
that Seller shall be entitled to retain, and distribute to Cowan (i) the
amount of cash necessary to pay Cowan's personal federal income tax
relating to operations of Seller during 1996 and California state income
tax relating to operations of the Seller during 1996 prior to Closing and
Seller's corporate income tax liability for S Corporations operated in
California, as calculated by the parties immediately prior to Closing
based upon the Closing Financial Statements and set forth on Schedule
2.1(h)(i) and based upon the assumption that payments to Cowan by Seller
during the period between July 22, 1996 and Closing shall be deductible
from income as compensation, and (ii) the amount of cash necessary to pay
to Cowan the Interim Compensation; and
(i) OTHER ASSETS. All other assets of Seller (except for Excluded
Assets and other than those assets previously described in this SECTION
2.1), including proceeds of insurance policies paid with respect to claims
made prior to the Closing Date, prepaid expenses and lease, utility and
similar deposits of Seller and any and all deposits, prepayments,
guaranties, letters of credit and other security held by Seller in
connection with the Customer Purchase Orders described in SECTION 2.2(d)
and the other Contracts described in SECTION 2.2(e) (the "Other Assets").
2.2 ASSIGNMENT OF CONTRACTS, LEASES AND OTHER ASSETS. Subject to the terms
and conditions of this Agreement, Seller will assign and transfer to Purchaser,
effective as of the Closing Date, all of Seller's right, title and interest in
and to, and Purchaser will take assignment of the following (and all of the
following shall be deemed included in the term "Acquired Assets" as used
herein):
(a) REAL PROPERTY LEASES. All leases of real property set forth on
SCHEDULE 2.2(a) (the "Real Property Leases");
(b) PERSONAL PROPERTY LEASES. All leases of equipment, machinery,
vehicles and other personal property set forth on SCHEDULE 2.2(b) (the
"Personal Property Leases");
(c) SELLER PURCHASE ORDERS. All open purchase orders and other
Contracts, as set forth on SCHEDULE 2.2(c), for the purchase by Seller of
goods, materials and/or services and such other purchase orders or other
Contracts as shall be entered into between the date hereof and the Closing
Date in the ordinary course of business of the Business and in accordance
with the provisions of this Agreement, including SECTION 6.3(b) (the
"Seller Purchase Orders");
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(d) CUSTOMER PURCHASE ORDERS. All open purchase orders and other
Contracts, as set forth on SCHEDULE 2.2(d) for the sale by Seller of goods
and/or services and such other purchase orders and other Contracts for the
sale by Seller of goods and/or services as shall be entered into between
the date hereof and the Closing Date in the ordinary course of business of
the Business and in accordance with the provisions of this Agreement,
including SECTION 6.3(b) (the "Customer Purchase Orders");
(e) INDEPENDENT CONTRACTOR CONTRACTS. All current contracts relating
to the independent contractor sales agents listed on SCHEDULE 2.2(e).
(f) OTHER CONTRACTS. All other open Contracts set forth on SCHEDULE
2.2(f) and such other Contracts as shall be entered into between the date
hereof and the Closing Date and which shall be expressly accepted and
approved in writing by Purchaser prior to the Closing (the "Other
Contracts"); and
(g) LETTER AGREEMENTS. All letter agreements with suppliers and
customers, including letter agreements with Lucent Technologies, Inc. if
any exist as of the Closing Date.
(h) PERMITS. All licenses, certificates, permits, variances, interim
permits, permit applications, approvals, franchises, rights, code
approvals and private product approvals under any Law applicable to the
Business or otherwise required by any Governmental Authority in connection
with the Business, including those set forth on SCHEDULE 2.2(H) (the
"Permits").
Anything in this Agreement to the contrary notwithstanding, this Agreement shall
not constitute an agreement to assign any Contract or Permit or any claim or
right or any benefit or obligation thereunder or resulting therefrom if an
assignment thereof, without the consent of a third party thereto, would
constitute a breach or violation thereof. If such a consent is required or if an
attempted assignment is ineffective, Seller shall cooperate with Purchaser in
any reasonable arrangement requested by Purchaser to provide for Purchaser the
benefits under any such Contracts or Permits.
2.3 EXCLUDED ASSETS. The assets of Seller listed on Schedule 2.3 shall be
retained by Seller and are not being sold or assigned to Purchaser hereunder
(all such assets referred to collectively as the "Excluded Assets"). Excluded
Assets shall include (a) Seller's corporate seal, minute books, charter
documents, corporate stock record books, and such other books and records
relating to the organization, existence or capitalization of Seller; (b) all
insurance policies in effect prior to the Closing Date and proceeds of such
insurance policies paid with respect to any claims made on or before the Closing
Date; (c) all contracts that have terminated or have expired prior to the
Closing Date in the ordinary course of business and as permitted under the terms
hereof; and (d) any assets listed on Schedule 2.3.
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2.4 ASSUMED OBLIGATIONS. At the Closing, Purchaser shall assume, and agree
to pay, perform, fulfill and discharge, the following obligations of Seller (the
"Assumed Obligations"):
(a) the obligations of Seller which are required to be performed,
and which accrue, after the Closing Date under the following Contracts
(but not any liabilities of Seller in respect of a breach of or default
under such Contracts arising prior to the Closing), to the extent such
Contracts, and all rights of Seller thereunder, are effectively assigned
to Purchaser on the Closing Date pursuant to SECTION 2.2: (i) the Real
Property Leases; (ii) the Personal Property Leases; (iii) the Seller
Purchase Orders; (iv) the Customer Purchase Orders; and (v) the Other
Contracts;
(b) the current liabilities of Seller set forth on SCHEDULE 2.4; and
(c) all of Seller's other recorded liabilities set forth on SCHEDULE
2.4, including no more than $350,000.00 of interest-bearing debt.
2.5 NO OTHER LIABILITIES ASSUMED. Anything in this Agreement to the
contrary notwithstanding, except as specifically set forth in SECTION 2.4,
neither Purchaser nor any of its Affiliates shall assume or otherwise be liable
in respect of, or be deemed to have assumed or otherwise be liable in respect
of, any debt, claim, obligation or other liability of Seller or any of its
Affiliates whatsoever (the "Excluded Obligations").
ARTICLE III
PURCHASE PRICE AND PAYMENT
3.1 PAYMENT OF PURCHASE PRICE.
(a) On the Closing Date, in consideration for the Acquired Assets,
Purchaser shall pay to Seller an aggregate amount equal to $4,000,000 (the
"Cash Amount"). The Cash Amount shall be paid to Seller by means of a
certified check or by wire transfer of immediately available funds to a
bank account pursuant to wiring instructions designated by Seller.
(b) Stock Payment.
(i) At the Closing, in consideration for the Acquired Assets,
Purchaser will deliver to Seller 22,222 shares of Travis Stock (the
"Closing Shares") free and clear of all pledges, liens, transfer and
stamp tax obligations, encumbrances, claims, and other charges
thereof of every kind, subject to the terms and conditions of this
SECTION 3.1(b). The Closing Shares will be evidenced by delivery by
the Purchaser to the Seller of a share certificate.
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(ii) At the Closing, in consideration for the Acquired Assets,
Purchaser will deliver to the Escrow Agent 22,222 shares of Travis
Stock (the "Escrowed Shares" and together with the Closing Shares,
"Consideration Stock"), free and clear of all pledges, liens,
transfer and stamp tax obligations, encumbrances, claims, and other
charges thereof of every kind, subject to the terms and conditions
of this SECTION 3.1(b) and of the Escrow Agreement. The Escrowed
Shares will be evidenced by delivery by the Purchaser to the Escrow
Agent of a share certificate.
(iii) Seller shall not be entitled to possession of the
Escrowed Shares until the terms of the Escrow Agreement have been
satisfied. Seller acknowledges and agrees that the transfer of the
Closing Shares and, upon release of the Escrowed Shares pursuant to
the Escrow Agreement, the transfer of any Escrowed Shares will be
subject to and restricted by the terms of that certain Stockholders
Agreement dated as of May 28, 1992, as amended from time to time, by
and among Travis and the stockholders of Travis (the "Stockholders
Agreement"). Seller further acknowledges and agrees that all Travis
Stock shall bear an appropriate legend reflecting such restriction
on transfer. At the Closing, Seller shall execute and deliver the
documents necessary to bind Seller under and to make Seller subject
to the terms of the Stockholders Agreement, subject to Seller's and
its counsel's prior review of such Stockholders Agreement.
(iv) Effective as of the Closing Date, Purchaser shall cause
to be executed and Seller shall execute an amendment to the
Registration Rights Agreement dated as of May 28, 1992, as amended
from time to time, by and among Travis and the Stockholders of
Travis (the "Registration Rights Agreement"), pursuant to which
amendment Seller shall be made a party to the Registration Rights
Agreement and shall have all of the rights and obligations of a
"Stockholder" (but not of a "Significant Stockholder") under the
Registration Rights Agreement, as each such term is defined therein.
(v) With respect to the delivery of the Consideration Stock
hereunder, Purchaser shall pay all customary fees, costs and
expenses of such issuance, including without limitation all fees and
disbursements of counsel and accountants for the Purchaser.
(c) Deferred Purchase Price. In consideration of the non-competition
covenant contained in SECTION 6.5 of this Agreement, on the date three
months after the Closing Date and quarterly thereafter until the fifth
anniversary of the Closing Date, Purchaser shall pay to Seller the sum of
$25,000.00; PROVIDED, HOWEVER, that such amount shall not be payable in
the event of any breach by any of the Selling Parties of such
non-competition covenant and shall be subject to the rights of set-off
relating to the indemnification obligations of the Selling Parties
contained in ARTICLE IX.
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3.2 ALLOCATION OF CONSIDERATION. The Purchase Price shall be allocated
among the Acquired Assets in accordance with the principles set forth on
SCHEDULE 3.2. Seller and Purchaser shall each make all required filings under
Section 1060 of the Code consistent with such allocation and shall not take any
position inconsistent with such allocation in any other of their respective Tax
Returns. SCHEDULE 3.2 shall also set forth the parties' mutual agreement as to
the value of Travis stock to be delivered in connection herewith.
3.3 BULK SALES LAWS. The parties hereto waive compliance with the
requirements of the applicable Bulk Sales Laws in connection with the
consummation of the transactions contemplated hereby. Seller agrees to indemnify
Purchaser for any losses sustained by Purchaser as a result of the failure of
the parties to so comply with California Bulk Sales Laws.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLING PARTIES
Seller and Cowan hereby jointly and severally represent and warrant to
Purchaser as of the Closing Date as follows:
4.1 DUE INCORPORATION, ETC. Seller is duly organized, validly existing and
in good standing under the laws of California, with all requisite corporate
power and authority to own, lease and operate its properties and to carry on the
Business as it is now being owned, leased, operated and conducted. Seller is
licensed or qualified to do business and is in good standing as a foreign
corporation in each jurisdiction where the nature of the properties owned,
leased or operated by it and the businesses transacted by it require such
licensing or qualification, except where failure to be so licensed or qualified
would not have a Material Adverse Effect. Seller shall remain solely responsible
for any liability which might arise from a failure to so license or qualify the
corporation in a state other than California prior to the date hereof. However,
Purchaser shall be responsible to make Purchaser's own determination as to the
necessity of licensing or qualifying Purchaser in any state other than
California after the date hereof and Seller shall have no liability for any
failure to license or qualify Purchaser in a state other than California after
the date hereof. The jurisdictions in which Seller is incorporated and licensed
or qualified to do business as a foreign corporation are set forth on SCHEDULE
4.1. The Business does not involve any direct or indirect subsidiaries of
Seller, either wholly or partially owned, or any direct or indirect economic,
voting or management interest or security held by Seller in or of any Person.
True, accurate and complete copies of the articles of incorporation and bylaws
(or similar organizational instruments), as amended, and all minutes of all
meetings since January 1, 1996 (or written consents in lieu of meetings) of the
Board of Directors (and all committees thereof) and stockholders of Seller
(other than such minutes or consents that the Seller is prohibited from
disclosing under a confidentiality agreement with Michael Rietkerk) have been
delivered to Purchaser. All actions taken by the Board of Directors (and all
committees thereof) and stockholders of Seller are reflected in such minutes and
written consents.
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4.2 OWNERSHIP OF SELLER. Cowan is the sole owner of capital stock of
Seller and no other person owns or has rights to receive any stock of Seller. No
other person or entity has any rights arising out of prior ownership of capital
stock of Seller, except as follows: the sale of assets of Seller shall cause an
acceleration of the amounts due from Cowan to a former shareholder of Seller,
Michael Rietkerk. The amounts currently owing to Rietkerk are guaranteed by
Seller, and shall be paid by Cowan and/or Seller immediately after the Closing
of this transaction. Purchaser is assuming no liability for any such debt.
4.3 DUE AUTHORIZATION. Seller and Cowan each has full power and authority
to enter into this Agreement and its Related Agreements and to consummate the
transactions contemplated hereby and thereby. The execution, delivery and
performance by Seller of this Agreement and its Related Agreements have been
duly and validly approved by Seller's board of directors and by the sole
stockholder of Seller and no other actions or proceedings on the part of Seller
are necessary to authorize this Agreement, the Related Agreements and the
transactions contemplated hereby and thereby. Each of Seller and Cowan has duly
and validly executed and delivered this Agreement and has duly and validly
executed and delivered (or prior to or at the Closing will duly and validly
execute and deliver) its Related Agreements. This Agreement constitutes legal,
valid and binding obligations of Cowan and Seller and Seller's and Cowan's
Related Agreements upon execution and delivery by Seller or Cowan will
constitute legal, valid and binding obligations of Seller and Cowan, in each
case, enforceable in accordance with their respective terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency, moratorium,
reorganization or similar laws in effect which affect the enforcement of
creditors' rights generally and by equitable limitations on the availability of
specific remedies.
4.4 CONSENTS AND APPROVALS; NO CONFLICTS, ETC.
(a) Except for the Required Consents set forth on SCHEDULE 4.4, no
consent, authorization or approval of, filing or registration with, or
cooperation from, any Governmental Authority or any other Person not a
party to this Agreement is necessary in connection with the execution,
delivery and performance by Seller and Cowan of this Agreement and its
Related Agreements or the consummation of the transactions contemplated
hereby or thereby.
(b) The execution, delivery and performance by Seller and Cowan of
this Agreement and its Related Agreements do not and will not (i) violate
any Law applicable to Seller, Cowan, any of the Acquired Assets or the
Business; (ii) violate or conflict with, result in a breach or termination
or constitute a default or give any third party any additional right
(including a termination right) under, permit cancellation or result in
the creation of any Lien upon any of the assets or properties of Seller or
Cowan under, or result in or constitute a circumstance which, with or
without notice or lapse of time or both, would constitute any of the
foregoing under, any Contract to which Seller or Cowan is a party or by
which Seller, Cowan or any of their assets or properties are bound; (iii)
permit the acceleration of the maturity of any indebtedness of Seller or
Cowan or indebtedness secured by any of their assets or properties other
than as
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referenced in SECTION 4.2, above; (iv) violate or conflict with any
provision of any of the articles of incorporation, bylaws or similar
organizational instruments of Seller; or (v) violate or conflict with any
provision of any agreement between either of the Selling Parties and any
former shareholder of Seller.
4.5 FINANCIAL STATEMENTS; NO UNDISCLOSED LIABILITIES.
(a) Seller has delivered to Purchaser copies of the Financial
Statements. The Financial Statements are in accordance with the books and
records of Seller, do not reflect any transactions which are not bona fide
transactions and do not contain any untrue statement of a material fact or
omit to state any material fact necessary to make the statements contained
therein, in light of the circumstances in which they were made, not
misleading.
(b) The Financial Statements make full and adequate disclosure of,
and provision for, all material obligations and liabilities of Seller as
of the date thereof. Seller has no liabilities, debts, claims or
obligations (including "off-balance sheet" liabilities, debts, claims or
obligations), whether accrued, absolute, contingent or otherwise, and
whether due or to become due, other than (i) as set forth on SCHEDULE 4.5
or in the Latest Balance Sheet and (ii) trade payables and accrued
expenses incurred in the ordinary course of business since the date of the
Latest Balance Sheet.
4.6 NO ADVERSE EFFECTS OR CHANGES. Since May 29, 1996, Seller has
conducted the Business in all respects only in the ordinary course and
consistent with past practices. Without limiting the foregoing, since May 29,
1996, Seller has not:
(a) suffered any Material Adverse Effect;
(b) suffered any damage, destruction or Loss to any of its assets or
properties (whether or not covered by insurance);
(c) except for Seller Purchase Orders or Customer Purchase Orders in
the ordinary course of business or distribution to Cowan, incurred any
obligation or entered into any Contract which either (i) required a
payment by any party in excess of, or a series of payments which in the
aggregate exceeds $5,000 or provides for the delivery of goods or
performance of services, or any combination thereof, by Seller having a
value in excess of $25,000, or (ii) has a term of or requires the
performance of any obligations by Seller over a period in excess of six
months;
(d) taken any action, or entered into or authorized any Contract or
transaction other than in the ordinary course of business and consistent
with past practice;
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(e) sold, transferred, conveyed, assigned or otherwise disposed of
any of its assets or properties, except sales of inventory in the ordinary
course of business and consistent with past practice;
(f) waived, released or cancelled any claims against third parties
or debts owing to it, or any rights which have any value;
(g) made any material changes in its accounting systems, policies,
principles or practices;
(h) made any changes in the terms of any of the Assumed Obligations;
(i) entered into, authorized, or permitted any transaction with any
Affiliate of Seller;
(j) made any borrowing, incurred any debt (other than trade payables
in the ordinary course of business and consistent with past practice), or
assumed, guaranteed, endorsed (except for the negotiation or collection of
negotiable instruments in transactions in the ordinary course of business
and consistent with past practice) or otherwise become liable (whether
directly, contingently or otherwise) for the obligations of any other
Person, or made any payment or repayment in respect of any indebtedness
(other than trade payables and accrued expenses in the ordinary course of
business and consistent with past practice);
(k) made any loans, advances or capital contributions to, or
investments in, any other Person;
(l) entered into, adopted, amended or terminated any bonus, profit
sharing, compensation, termination, stock option, stock appreciation
right, restricted stock, performance unit, pension, retirement, deferred
compensation, employment, severance or other employee benefit agreements,
trusts, plans, funds or other arrangements for the benefit or welfare of
any director, officer, consultant or employee, or increased in any manner
the compensation or fringe benefits of any director, officer, consultant
or employee which is not set forth on SCHEDULE 4.19, or paid any benefit
not required by any existing plan and arrangement or entered into any
contract, agreement, commitment or arrangement to do any of the foregoing;
(m) except for capital expenditures contemplated by CLAUSE (N),
acquired, leased or encumbered any assets outside the ordinary course of
business or any assets which are material to Seller;
(n) [Intentionally omitted.]
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(o) made any Tax election or settled or compromised any federal,
state, local or foreign Tax liability, or waived or extended the statute
of limitations in respect of any such Taxes, to the extent such election,
settlement, compromise, waiver or extension could result in a Lien on any
of the Acquired Assets or could otherwise adversely affect the Business;
(p) paid any amount, performed any obligation or agreed to pay any
amount or perform any obligation, in settlement or compromise of any suits
or claims of liability against Seller, or any of its directors, officers,
employees or agents;
(q) terminated, modified, amended or otherwise altered or changed
any of the material terms or provisions of any Contract, or paid any
amount not required by Law or by any Contract;
(r) except as contemplated by SECTION 2.1(H)(I) or disclosed on
SCHEDULE 4.19, declared any dividend or made any other distribution in
respect of its capital stock; or
(s) except as approved in writing by Purchaser entered into any
sublease affecting any of the Real Property.
4.7 FUTURE RELATIONSHIPS.
(a) To the knowledge of the Selling Parties, (i) there are no facts,
circumstances, or conditions which, individually or in the aggregate would
cause any material customer of Seller to discontinue its relationship with
the Business after the Closing and (ii) there are no facts not disclosed
in the Schedules or in this Agreement, circumstances or conditions that
individually or in the aggregate could reasonably be expected to interfere
with the relationship of Lucent Technologies, Inc. and the Business after
the Closing.
(b) Notwithstanding the foregoing, Seller has disclosed to Purchaser
the highly competitive nature of Seller's business, and has made no
representations with regard to any assurance of continued relationships
with its customers or suppliers. Seller has specifically disclosed to
Purchaser that Seller's previous agreement with AT&T for the resale of
refurbished and surplus 5ESS switch circuit packs has expired as of August
9, 1996, and a new entity, Lucent Technologies, Inc., has assumed
responsibilities previously held by AT&T for the distribution and repair
of refurbished telecommunications equipment. While Seller has already
commenced a profitable relationship with Lucent and is exploring the
potential for an expansion of its product lines from the previous
relationship with AT&T, Seller makes no representations or assurances to
Purchaser with regard to such future relationships. Seller has also
disclosed to Purchaser that Seller is currently negotiating with Nynex for
a form of exclusive vendor agreement for certain of Seller's products, but
Seller will not enter into any such agreement unless Seller has determined
that the pricing schedule for such a
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contract is advantageous to Seller. Seller has also disclosed to Purchaser
that its approved vendor status with Southwestern Bell for spot purchasing
will come up for review on September 30, 1997. While Seller has no reason
to believe that the approved vendor status will not be renewed, no
assurance is made hereunder to that effect.
4.8 TITLE TO PROPERTIES. Seller has good and valid record and marketable
title to and is the lawful owner of the Acquired Assets, free and clear of any
Lien. Seller has the full right to sell, convey, transfer, assign and deliver
the Acquired Assets to Purchaser, and, at and as of the Closing, Seller will
convey the Acquired Assets to Purchaser by deeds, bills of sale, certificates of
title and instruments of assignment and transfer effective to vest in Purchaser,
and Purchaser shall have, good and valid record and marketable title to all of
the Acquired Assets, free and clear of all Liens.
4.9 CONDITION AND SUFFICIENCY OF ASSETS. All of the tangible Acquired
Assets, whether real or personal, owned or leased, have been well maintained and
are in good operating condition and repair (with the exception of normal wear
and tear), and are free from defects other than such minor defects as do not
interfere with the intended use thereof in the conduct of normal operations or
adversely affect the resale value thereof. The Acquired Assets constitute all
the assets, properties and rights which are required for or currently used in
connection with the conduct of the Business as it is presently conducted.
4.10 REAL PROPERTY.
(a) SCHEDULE 2.2(a) sets forth a true, accurate and complete list of
all of the Real Property Leases, and true, accurate, complete and
insurable legal descriptions of all of the land subject to the Real
Property Leases. The land subject to the Real Property Leases constitutes
all of the land used by Seller in the conduct of the Business. Seller has
delivered to Purchaser true, accurate and complete copies of the Real
Property Leases, together with copies of all reports (if any) of any
engineers, environmental consultants or other consultants in its
possession relating to any of the land subject to a Real Property Lease.
(b) The activities carried on in all buildings, plants, facilities,
installations, fixtures and other structures or improvements included as
part of or located on or at the land subject to a Real Property Lease, and
the buildings, plants, facilities, installations, fixtures and other
structures or improvements themselves, are not to the best of Seller's
knowledge in violation of or in conflict with, any applicable zoning,
environmental or health regulations or ordinance or any other similar Law.
(c) All of the Real Property Leases are in full force and effect,
valid and enforceable in accordance with their respective terms, except as
such enforceability may be limited by applicable bankruptcy, insolvency,
moratorium, reorganization or similar laws in effect which affect the
enforcement of creditors' rights generally and by equitable
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limitations on the availability of specific remedies. None of the Real
Property Leases have been amended or modified except as reflected therein
and except that the lease for the premises occupied by Seller has been
modified to reduce the size of the leased premises by 2,500 square feet
and to reduce the rent by $891.00, in each case is as of the Closing Date.
(d) Seller has not received any notice of any, and there exists no,
dispute, claim, event of default or event which constitutes or would
constitute (with notice or lapse of time or both) a default under any Real
Property Lease. All rent and other amounts due and payable with respect to
the Real Property Leases have been paid through the date of this Agreement
and all rent and other amounts due and payable with respect to the Real
Property Leases on or prior to the Closing Date will have been paid prior
to the Closing Date.
(e) All lessors under the Real Property Leases have consented or
prior to Closing will have consented (where such consent is necessary) to
the consummation of the transactions contemplated by this Agreement or the
Related Agreements without requiring modification in the rights or
obligations thereunder. None of the Real Property Leases are expected to
expire or terminate during the year following the Closing Date. There are
no indications that the landlord with respect to any Real Property Lease
would refuse to renew such lease upon expiration of the period thereof
upon substantially the same terms, except for rent increases that would
not be material.
(f) Attached hereto as SCHEDULE 4.10(I) is a list of all sublessees
of the Real Property.
4.11 EQUIPMENT AND VEHICLES. SCHEDULE 2.1(a) sets forth a true, accurate
and complete list of all of the Equipment. SCHEDULE 2.1(b) sets forth a true,
accurate and complete list of all of the Vehicles. The Personal Property Leases
set forth on SCHEDULE 2.2(d) constitute all leases by Seller of any item of
personal property used by Seller, except for those leases of personal property
which have been disclosed to Purchaser and are not being assumed by Purchaser
hereunder. All of the Equipment and all of the other personal property leased by
Seller under the Personal Property Leases is presently utilized by Seller in the
ordinary course of business. Seller has delivered to Purchaser true, accurate
and complete copies of all Personal Property Leases.
4.12 INVENTORIES. SCHEDULE 2.1(c) sets forth a true, accurate and complete
schedule of all Inventories, with an accurate and complete description of each
item and an accounting of the cost of each item and [does not include]
[designates] items that have been written off or written down with the consent
of Purchaser. Each item of the Inventories, except those given a value of zero
in the Financial Statements, is of merchantable quality and is usable in the
ordinary course of business, and none of such items is obsolete or non-saleable,
has been pledged or otherwise given as collateral, or is held by Seller on
assignment or consignment. The Inventories are fairly reflected in the inventory
accounts on the balance sheets included in the Financial Statements, including
all appropriate reserves, and are valued at the lower of cost or market.
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4.13 ACCOUNTS RECEIVABLE. SCHEDULE 2.1(d) sets forth a true, accurate and
complete aging schedule of all Accounts Receivable. Each Account Receivable
represents (a) a sale made in the ordinary course of business and which arose
pursuant to an enforceable written Contract for a bona fide sale of goods or for
services performed, and Seller has performed all of its obligations to produce
the goods or perform the services to which such Account Receivable relates, and
(b) except as adequately reserved against in the balance sheets of Seller
included in the Financial Statements, amounts owed which are not more than 30
days past due and which are not subject to any claim or reduction, counterclaim,
set-off, recoupment or other claim for credit, allowances or adjustments by the
obligor owing such amount. Except as reserved against on such balance sheets,
the Accounts Receivable are collectible in full within 60 days in at least the
amount at which they are carried on the books of Seller.
4.14 INTELLECTUAL PROPERTY.
(a) Seller has no interest in any intellectual property, other than
the use of its corporate name of New West Communications, Inc. While said
corporate name has been approved for use by the California Secretary of
State and Department of Corporations, Seller has not attempted to obtain
any state or federal trademark protection for said name, and makes no
representations with regard to the use of said name, other than as
follows:
(i) Seller has not granted any license or agreed to pay or
receive any royalty in respect of use of its trade name; and
(ii) Seller's use of the trade name "New West Communications"
has not been the subject of any pending or threatened litigation or claim
of infringement to date.
(b) The products and services produced and sold by Seller, any
process, method, part, design or material it employs, and the marketing
and use by Seller of any such product or service do not, to the best of
Seller's knowledge, infringe any Intellectual Property or confidential or
proprietary rights of another Person, and Seller has not received any
notice contesting its right to use any such Intellectual Property.
4.15 CONTRACTS. SCHEDULE 2.2(f) sets forth a true, accurate and complete
list of all current Contracts and arrangements of the following types to which
Seller is a party or by which it is bound, or to which any of the Acquired
Assets is subject, including:
(a) any collective bargaining agreement;
(b) any Contract or arrangement of any kind with any employee,
officer or director of Seller or any of the respective Affiliates of such
individuals, or any Contract or other arrangement of any kind with any
Affiliate of Seller;
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(c) any Contract or arrangement with a sales representative,
manufacturer's representative, distributor, dealer, broker, sales agency,
advertising agency or other Person engaged in sales, distributing or
promotional activities, or any Contract to act as one of the foregoing on
behalf of any Person;
(d) any Contract or arrangement of any nature which involves the
payment or receipt of cash or other property, an unperformed commitment,
or goods or services, having a value in excess of $5,000, except Seller
Purchase Orders and Customer Purchase Orders in the ordinary course of
business.
(e) any Contract or arrangement pursuant to which Seller has made or
will make loans or advances, or has or will have incurred debts or become
a guarantor or surety or pledged its credit on or otherwise become
responsible with respect to any undertaking of another (except for the
negotiation or collection of negotiable instruments in transactions in the
ordinary course of business);
(f) any indenture, credit agreement, loan agreement, note, mortgage,
security agreement, lease of real property or personal property, loan
commitment or other Contract or arrangement relating to the borrowing of
funds, an extension of credit or financing;
(g) any Contract or arrangement involving a partnership, joint
venture or other cooperative undertaking;
(h) any Contract or arrangement involving any restrictions with
respect to the geographical area of operations or scope or type of
business of Seller;
(i) any power of attorney or agency agreement or arrangement with
any Person pursuant to which such Person is granted the authority to act
for or on behalf of Seller, or Seller is granted the authority to act for
or on behalf of any Person;
(j) any Contract relating to the Computer System;
(k) any Contract for which the full performance thereof may extend
beyond 60 days from the date of this Agreement;
(l) any Contract not made in the ordinary course of business which
is to be performed in whole or in part at or after the date of this
Agreement;
(m) any Contract, whether or not fully performed, relating to any
acquisition or disposition of Seller or any predecessor in interest of
Seller, or any acquisition or disposition of any subsidiary, division,
line of business, or real property; and
(n) any Contract not specified above that is material to Seller.
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Seller has delivered to Purchaser true, accurate and complete copies of
each document set forth on SCHEDULE 2.2(f) and a written description of each
oral arrangement so listed. All such Contracts and arrangements have been
entered into by Seller in the ordinary course of business. Seller has delivered
to Purchaser true, accurate and complete copies of each form which has been used
in the Business and is in effect with respect to any third party on the date
hereof.
4.16 PERMITS. SCHEDULE 2.2(H) sets forth a true, accurate and complete
list of all Permits held by Seller. All such Permits are in full force and
effect and are transferable to Purchaser without cost or any action on Seller's
or Purchaser's part. Except for the Permits set forth on SCHEDULE 2.2(H), there
are no Permits, whether federal, state, local or foreign, which are necessary
for the lawful operation of the Business.
4.17 INSURANCE.
(a) SCHEDULE 4.17 sets forth a true, accurate and complete list of
all policies of fire, liability, workmen's compensation, title and other
forms of insurance owned, held by or applicable to Seller and its assets,
and Seller has heretofore delivered to Purchaser a true, accurate and
complete copy of all such policies. [To the best of Seller's knowledge,]
all such policies are in full force and effect, all premiums with respect
thereto covering all periods up to and including the Closing Date have
been paid, and no notice of cancellation or termination has been received
with respect to any such policy. Such policies are sufficient for
compliance with (i) all requirements of Law and (ii) all Contracts to
which Seller is a party, and are valid, outstanding and enforceable
policies. Such insurance policies provide types and amounts of insurance
customarily obtained by businesses similar to the Business. Seller has not
been refused any insurance with respect to its assets or operations, and
its coverage has not been limited by any insurance carrier to which it has
applied for any such insurance or with which it has carried insurance,
during the last three years.
(b) SCHEDULE 4.17(b) sets forth a true, accurate and complete list
of all claims which have been made by Seller within the past three years
under any workmen's compensation, general liability, property or other
insurance policy applicable to Seller or any of its properties. There are
no pending or threatened claims under any insurance policy. Such claim
information includes the following information with respect to each
accident, loss, or other event: (i) the identity of the claimant; (ii) the
date of the occurrence; (iii) the status as of the report date and (iv)
the amounts paid or expected to be paid or recovered.
4.18 EMPLOYEE BENEFIT PLANS. Neither Seller nor any ERISA Affiliate of
Seller is a party to nor participates in or has any liability or contingent
liability under any collective bargaining agreement, pension, bonus, profit
sharing, stock option or other agreement or arrangements providing for employee
benefits (other than health insurance), including any "employee welfare benefit
plan", "employee pension benefit plan" as those terms are defined
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under ERISA. Seller has not entered into any severance or similar arrangement in
respect of any present or former employee that will result in any absolute or
contingent obligation of Purchaser to make any payment to any present or former
employee following termination of employment, other than as set forth in the
Employment Agreement attached hereto as Exhibit "A".
4.19 EMPLOYMENT AND LABOR MATTERS. SCHEDULE 4.19 sets forth a true,
accurate and complete list of the names, titles, annual compensation and all
bonuses and similar payments made with respect to each such individual for the
current and preceding fiscal years for and the location of all directors,
officers and employees of Seller who work at or in connection with the Business,
wherever located. To the best of Seller's knowledge, Seller has and currently is
conducting the Business in full compliance with all Laws relating to employment
and employment practices, terms and conditions of employment, wages and hours
and nondiscrimination in employment. Seller's relationship with its employees is
good and there is, and during the past five years there has been, no labor
strike, dispute, slow-down, work stoppage or other labor difficulty actually
pending or threatened against or involving Seller. No grievance or arbitration
proceeding arising out of or under any collective bargaining agreement between
Seller and any employees of the Business is pending and no claim therefor has
been asserted. None of the employees of Seller is covered by any collective
bargaining agreement, no collective bargaining agreement is currently being
negotiated and no attempt is currently being made or during the past three years
has been made to organize any employees of Seller to form or enter a labor union
or similar organization.
4.20 CAPITAL IMPROVEMENTS. SCHEDULE 4.20 sets forth a true, accurate and
complete list of all of the capital improvements or purchases or other capital
expenditures to which Seller has committed or for which it has contracted and
which in any event have not been completed prior to the date hereof and the cost
and expense reasonably estimated to complete such work and purchases.
4.21 TAXES.
(a) All Federal, state, local and foreign income, corporation and
other Tax Returns have been filed for Seller and all other filings in
respect of Taxes have been made for Seller for all periods through and
including the Closing Date as required by applicable Law. All Taxes shown
as due on all such Tax Returns and other filings have been paid. Each such
Tax Return and filing is true, accurate and complete and Seller does not
and will not have any additional liability for Taxes with respect to any
Tax Return or other filing heretofore filed or which was required by Law
to be filed other than as reflected as liabilities on the Financial
Statements. There are no Tax Liens (other than Liens for current Taxes not
yet due and payable) upon the properties or assets of Seller. All Taxes
which Seller is required by Law to withhold or collect, including sales
and use taxes, and amounts required to be withheld for Taxes of employees
and other withholding taxes, have been duly withheld or collected and, to
the extent required, have been paid over to the proper Governmental
Authorities or are held in separate bank
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accounts for such purpose. Notwithstanding the foregoing, Seller has
disclosed to Purchaser that Seller has not filed tax returns in any state
other than California and Colorado (for 1995), and has not paid income or
sales taxes in any such other states. Seller has obtained resale
certificates from purchasers of Seller's products in other states, and has
acted on the assumption that sales and income tax would not be due or
payable in any states other than California. Notwithstanding the
foregoing, Purchaser is not assuming any liabilities for unpaid taxes of
Seller.
(b) Seller is not a "foreign person" as defined in Section
1445(f)(3) of the Code.
(c) None of the Acquired Assets constitutes a joint venture,
partnership or other arrangement or contract which is treated as a
partnership for Federal income tax purposes.
(d) None of the Acquired Assets constitutes tax-exempt bond financed
property or tax-exempt use property within the meaning of Section 168 of
the Code, and none of the Acquired Assets is subject to a lease, safe
harbor lease or other arrangement as a result of which Seller is not
treated as the owner for Federal income tax purposes.
4.22 NO DEFAULTS OR VIOLATIONS.
(a) Seller has not breached any provision of nor is it in default
under the terms of, any current Contract to which it is a party or under
which it has any rights or by which it is bound, and no other party to any
such Contract has breached such Contract or is in default thereunder.
(b) Seller, the Business, each of the Acquired Assets and each of
the Leased Assets is, to the best of Seller's knowledge, in compliance
with, and no violation exists under, any and all Laws applicable to
Seller, the Business, each of the Acquired Assets and each of the Leased
Assets.
(c) No notice from any Governmental Authority has been received by
Seller claiming any violation of any Law (including any building, zoning
or other ordinance) or requiring any work, construction or expenditure, or
asserting any Tax, assessment or penalty.
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4.23 ENVIRONMENTAL MATTERS.
(a) the Business, the Acquired Assets and the Leased Assets are, to
the best of Seller's knowledge, in full compliance with all Environmental
Laws in effect as of the date hereof, and no condition exists or event has
occurred which, with or without notice or the passage of time or both,
would constitute a violation of or give rise to any Lien under any
Environmental Law;
(b) no releases of Hazardous Materials have, to the best of Seller's
knowledge, occurred at or from any property which is now owned or leased
by Seller or which was otherwise owned or used by the Seller;
(c) there are no past, pending, or threatened claims against the
Seller with respect to a violation of any Environmental Law;
(d) there are no leaking underground storage tanks owned by Seller
or located at any facility owned or operated by the Seller;
(e) to the best of Seller's knowledge, no condition has existed or
event has occurred with respect to any property that was at any time owned
or leased, or any direct or indirect subsidiary that was at any time
owned, by Seller, any predecessor to Seller or any Person that is or was
an Affiliate of Seller, which property or subsidiary has been sold,
transferred or disposed or for which any lease has terminated, that in any
case could, with or without notice, passage of time or both, give rise to
any present or future liability of Purchaser pursuant to any Environmental
Law; and
(f) there are no facts, circumstances or conditions that could
reasonably be expected to restrict, under any Environmental Law or
Environmental Permit in effect prior to or at the Closing Date, the
ownership, occupancy, use or transferability of any property owned,
operated or leased by the Seller.
4.24 LITIGATION.
(a) There are no actions, suits, arbitrations, regulatory
proceedings or other litigation, proceedings or governmental
investigations pending or threatened against or affecting Seller or any of
its officers, directors, employees, agents or stockholders thereof in
their capacity as such, or any of the properties or businesses of Seller,
including the Acquired Assets and the Leased Assets, and Seller is not
aware of any facts or circumstances which may give rise to any of the
foregoing. Seller is not subject to any order, judgment, decree,
injunction, stipulation or consent order of or with any court or other
Governmental Authority. Seller has not entered into any agreement to
settle or compromise any proceeding pending or threatened against it which
has involved any obligation other than the payment of money or for which
Seller has any continuing obligation.
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(b) There are no claims, actions, suits, proceedings or
investigations pending or threatened by or against Seller with respect to
this Agreement or the Related Agreements, or in connection with the
transactions contemplated hereby or thereby, and Seller has no reason to
believe there is a valid basis for any such claim, action, suit,
proceeding, or investigation.
4.25 NO CONFLICT OF INTEREST.
(a) neither Seller nor any of its Affiliates (i) has or claims to
have any direct or indirect interest in any tangible or intangible
property used in a business similar to the Business or (ii) has any direct
or indirect interest in any other Person which conducts a business similar
to the Business; and
(b) none of Seller's Affiliates has any Contract or arrangement
with, or does business or is involved in any way with, the Business.
4.26 BANK ACCOUNTS. SCHEDULE 4.26 sets forth a true, accurate and complete
list of the names and locations of each bank or other financial institution at
which Seller has an account (giving the account numbers) or safe deposit box and
the names of all Persons authorized to draw thereon or have access thereto, and
the names of all Persons, if any, now holding powers of attorney or comparable
delegation of authority from Seller and a summary statement thereof.
4.27 CLAIMS AGAINST OFFICERS AND DIRECTORS. There are no pending or
threatened claims against any director, officer, employee or agent of Seller or
any other Person which could give rise to any claim for indemnification against
Seller.
4.28 IMPROPER PAYMENTS. Neither Seller, any of its Affiliates, any of
their respective directors, officers, employees, agents or representatives, nor
any other Person acting on behalf of any of them, has, to the best of Seller's
knowledge, made, paid or received any improper payments that is in any manner
related to the Business, which Seller knows or has reason to believe has been
illegal under federal, state or local law of the United States.
4.29 DUE DILIGENCE MATERIALS. Seller has provided to Purchaser or its
representatives all documents of the character and type requested by Purchaser
and its representatives in connection with their due diligence review of the
Business, and there are no documents in the possession of Seller or any of its
agents or representatives of a similar character or type which have not been so
provided to Purchaser after request therefor.
4.30 NO OTHER AGREEMENT. Neither Seller nor any of its Affiliates has any
Contract or arrangement with respect to the sale or other disposition of the
Business, except as set forth in this Agreement, or the capital stock of Seller.
Except for sales of assets in the ordinary course of business, neither Seller
nor any of its Affiliates has any Contract or arrangement with respect to the
sale or other disposition of any of the Acquired Assets or Leased Assets, except
as set forth in this Agreement.
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4.31 CLOSING FINANCIAL STATEMENTS. Seller has accrued on the Closing
Financial Statements all expenses incurred in connection with the Business prior
to the Closing Date.
4.32 BROKERS. Seller has not used any broker or finder in connection with
the transactions contemplated hereby, and neither Purchaser nor any Affiliate of
Purchaser has or shall have any liability or otherwise suffer or incur any Loss
as a result of or in connection with any brokerage or finder's fee or other
commission of any Person retained by Seller in connection with any of the
transactions contemplated by this Agreement.
4.33 INVESTMENT MATTERS.
(a) Each of the Selling Parties is an "accredited investor," as such
term is defined in Regulation D of the Securities Act;
(b) Each of the Selling Parties is acquiring the Travis Stock for
his own account and not with a view to or for sale in connection with any
distribution of such interests;
(c) Each of the Selling Parties has knowledge and expertise in
financial and business matters such that he is capable of evaluating the
merits and risks of purchasing the Travis Stock and has the capacity to
protect his interests in connection with the purchase of the Travis Stock;
(d) Each of the Selling Parties has consulted with counsel of his
own choosing in connection with the rights and obligations of each of the
Selling Parties under this Agreement, under the documents to be executed
in connection herewith and under the Stockholders Agreement and the
Registration Rights Agreement, which counsel is experienced in
transactions of this nature;
(e) Each of the Selling Parties acknowledges that the Travis Stock
has not been registered under the Securities Act or under applicable state
securities laws, and, except as otherwise provided in the Registration
Rights Agreement, such Selling Party has no right to require such
registration; and each of the Selling Parties further acknowledges that
the right of such Selling Party to transfer the Travis Stock may be
further restricted by the Securities Act and applicable state securities
laws; and
(f) Each of the Selling Parties is familiar with the assets,
liabilities, results of operations, business and prospects of Travis and
has been afforded the opportunity to review and inspect any and all
information, documents or facilities of, or relating to, Travis for the
purpose of evaluating whether to enter into this Agreement and is
satisfied with such investigation.
4.34 ACCURACY OF STATEMENTS. Neither this Agreement nor any schedule,
exhibit, statement, list, document, certificate or other information furnished
or to be furnished by or on
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behalf of Seller to Purchaser or any representative or Affiliate of Purchaser in
connection with this Agreement or any of the transactions contemplated hereby
contains or will contain any untrue statement of a material fact or omits or
will omit to state a material fact necessary to make the statements contained
herein or therein, in light of the circumstances in which they are made, not
misleading.
4.35 NO REPRESENTATIONS OR WARRANTIES RE PROFITABILITY. Seller does not
make any representations or warranties with regard to the potential
profitability of a company acquiring the assets of Seller. While Seller has
fully and accurately disclosed information necessary to give a financial history
of Seller's operation of such business for the past two years, Purchaser is
aware that Seller is involved in a highly competitive business, and Purchaser
has made its own determination as to the potential profitability of a company
utilizing the assets of Seller in the future.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASER AND TRAVIS.
Purchaser and Travis hereby jointly and severally represent and warrant to
Seller, as of the Closing Date, as follows:
5.1 DUE INCORPORATION/OWNERSHIP. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of Delaware,
with all requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as they are now being owned, leased,
operated and conducted. Travis is the sole owner of capital stock of Purchaser,
and no other person owns or has rights to receive any stock of Purchaser. Unless
otherwise agreed by Cowan, Purchaser shall remain a direct or indirect 50% owned
subsidiary of Travis until all of the terms and conditions to be performed by
Purchaser under this Agreement, and the Related Agreements, have been satisfied
in full.
5.2 DUE AUTHORIZATION. Purchaser has full power and authority to enter
into this Agreement and its Related Agreements and to consummate the
transactions contemplated hereby and thereby. The execution, delivery and
performance by Purchaser of this Agreement and its Related Agreements have been
duly and validly approved by the boards of directors of Purchaser and no other
actions or proceedings on the part of Purchaser are necessary to authorize this
Agreement, its Related Agreements and the transactions contemplated hereby and
thereby. Purchaser has duly and validly executed and delivered this Agreement
and has duly and validly executed and delivered (or prior to or at the Closing
will duly and validly execute and deliver) its Related Agreements. This
Agreement constitutes legal, valid and binding obligations of Purchaser and the
Related Agreements, upon execution and delivery by Purchaser will constitute
legal, valid and binding obligations of Purchaser, in each case, enforceable in
accordance with their respective terms, except as such enforceability may be
limited by applicable bankruptcy,
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insolvency, moratorium, reorganization or similar laws in effect which affect
the enforcement of creditors' rights generally and by equitable limitations on
the availability of specific remedies.
5.3 CONSENTS AND APPROVALS; NO CONFLICTS, ETC.
(a) Except as set forth on SCHEDULE 5.3, no consent, authorization
or approval of filing or registration with, or cooperation from, any
Governmental Authority or any other Person not a party to this Agreement
is necessary in connection with the execution, delivery and performance by
Purchaser of this Agreement and its Related Agreements and the
consummation of the transactions contemplated hereby and thereby.
(b) The execution, delivery and performance by Purchaser of this
Agreement and its Related Agreements do not and will not (i) violate any
Law applicable to Purchaser or any of its properties or assets; (ii)
violate or conflict with, result in a breach or termination of, constitute
a default or give any third party any additional right (including a
termination right) under, permit cancellation of, result in the creation
of any Lien upon any of the assets or properties of Purchaser under, or
result in or constitute a circumstance which, with or without notice or
lapse of time or both, would constitute any of the foregoing under, any
Contract to which Purchaser is a party or by which Purchaser or any of its
assets or properties are bound; (iii) permit the acceleration of the
maturity of any indebtedness of Purchaser or indebtedness secured by any
of its assets or properties; or (iv) violate or conflict with any
provision of Purchaser's articles of incorporation or bylaws (or similar
organizational instruments).
5.4 BROKERS. Purchaser has not used any broker or finder in connection
with the transactions contemplated hereby, and neither Seller nor any Affiliate
of Seller has or shall have any liability or otherwise suffer or incur any Loss
as a result of or in connection with any brokerage or finder's fee or other
commission of any Person retained by Purchaser in connection with any of the
transactions contemplated by this Agreement.
5.5 CAPITALIZATION.
(a) The total authorized capital stock of the Purchaser consists of
(i) 1,000 shares of common stock, par value $.01 per share, of which 1,000
of such shares are issued and outstanding on the date hereof. All of the
outstanding shares of capital stock of the Purchaser have been duly
authorized and validly issued, are fully paid and non-assessable, were not
issued in violation of the terms of any agreement binding upon the
Purchaser, and no holder of any of the capital stock of the Purchaser has
any rescission rights with respect to such capital stock under any
agreement, under the applicable charter documents of the Purchaser, or
under any applicable federal, state and foreign securities laws, rules and
regulations.
(b) There are no outstanding subscriptions, options, warrants,
convertible securities, calls, commitments, agreements or rights
(contingent or otherwise) of any
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character to purchase or otherwise acquire from the Purchaser any shares
of, or any securities convertible into, the capital stock of the
Purchaser.
5.6 VALUATION OF TRAVIS STOCK. The parties have set forth their mutual
agreement as to the value of Travis Stock on SCHEDULE 3.2. Travis and Purchaser
represent to Seller that the last transfer of Travis Common Stock made prior to
July 22, 1996, utilized a value of $22.50 per share.
5.7 ACCURACY OF STATEMENTS. No representation or warranty made by
Purchaser in this agreement, or to be furnished in connection with the
transactions herein contemplated contains or will contain any untrue statement
of a material fact, or omits or will omit to state any material facts necessary
to make such representation or warranty, or any such statement not misleading to
a prospective creditor of Purchaser or Travis, who is seeking full information
with respect to Purchaser's or Travis' creditworthiness.
ARTICLE VI
COVENANTS OF SELLING PARTIES
Each of the Selling Parties agrees to perform each of the following
covenants:
6.1 IMPLEMENTING AGREEMENT. Subject to the terms and conditions hereof,
each of the Selling Parties shall take all action required of it to fulfill its
obligations under the terms of this Agreement and shall otherwise use its best
efforts to facilitate the consummation of the transactions contemplated hereby.
Except as otherwise expressly permitted hereby, each of the Selling Parties
agrees that it will not take any action which would have the effect of
preventing or impairing such Selling Party's performance of its obligations
under this Agreement.
6.2 INTERIM COMPENSATION. Immediately prior to Closing Seller shall pay to
Cowan as compensation the Interim Compensation described on SCHEDULE 2(H)(II).
6.3 PRESERVATION OF ACQUIRED ASSETS. Seller agrees that it will not sell
the Acquired Assets to any Person other than Purchaser (or an Affiliate of
Purchaser) and will not create a Lien over any of the Acquired Assets.
6.4 COMPLIANCE WITH STATE TAX LAWS. Seller and Purchaser shall share
equally in the payment of all taxes due under applicable state tax Laws
governing bulk sales of assets or sales of assets outside the ordinary course of
business, and shall jointly ensure that (a) all required filings have been made
and (b) certification is obtained from the relevant taxing Governmental
Authorities that there is no tax liability to which Purchaser may be subject
under such Laws.
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6.5 NON-COMPETITION.
(a) In exchange for the consideration described in SECTION 3.1(c),
except as set forth below or as Purchaser may otherwise expressly agree in
writing, each of the Selling Parties agrees that, from and after the date
of this Agreement until the later of (x) five years after the Closing Date
or (y) two years after the termination of Cowan's employment with
Purchaser (such date being referred to herein as the "Ending Date"), it
shall not, and shall not permit its Affiliates or any of its or their
respective directors, officers or employees to, directly or indirectly:
(i) engage in, control, invest in, advise, manage, serve as a
director, officer, or employee of, act as a consultant to, receive
any economic benefit from or exert any influence upon, any business
which conducts activities in the Territory (as hereinafter defined)
similar to those conducted by the Business (as now conducted or
hereafter expanded by Purchaser), at any time prior to the Ending
Date;
(ii) solicit, divert or attempt to solicit or divert any party
who is, was, or was solicited to become, a customer or supplier of
the Business (as now conducted or hereafter expanded by Purchaser)
at any time prior to the Ending Date;
(iii) employ, solicit for employment or encourage to leave
their employment, any person who was during the two-year period
prior to such employment, solicitation or encouragement or is an
officer, employee, or independent contractor of the Business (as now
conducted or hereafter expanded by Purchaser);
(iv) avail itself of or invest in any business opportunity
which is related to the activities conducted by the Business (as now
conducted or hereafter expanded by Purchaser), and which came to its
attention prior to the Ending Date,
(v) disturb, or attempt to disturb, any business relationship
between any third party and the Business (as now conducted or
hereafter expanded by Purchaser); or
(vi) make any statement to any third party, including the
press or media, likely to result in adverse publicity for the
Business (as now conducted or hereafter expanded by Purchaser).
For purposes of this SECTION 6.5(a), the term "Business" shall include the
sale, marketing, manufacturing, refurbishment, and distribution of new,
surplus, and refurbished telecommunications components, and the term
"directly or indirectly" shall
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include acts or omissions as proprietor, partner, joint venturer,
employer, salesman, agent, employee, officer, investor, director, lender
or consultant of or owner of any interest in, any Person and the term
"Territory" shall mean the United States, Canada and all other countries
in which the Business has transacted business prior to the Ending Date.
Seller hereby agrees that the limitation set forth above on its
rights to compete with the Business and Purchaser during the
Non-Competition Term are reasonable and necessary for the protection of
the Business and Purchaser. In this regard, Seller specifically agrees
that such limitation as to the period of time, geographic area and types
and scopes of restriction on his activities are reasonable and necessary
to protect the good will and other business interest of the Business and
Purchaser.
The parties acknowledge that Seller's agreement to enter into a
non-competition covenant has been conditioned upon the corresponding
payment obligations of Purchaser under paragraph 3.1(c) hereof, as well as
Purchaser's covenants under the Employment Agreement. In the event that
Purchaser is in default with respect to payment under paragraph 3.1(c)
hereof or is in material default under the Employment Agreement, and such
default remains uncured for 30 days after written notice from Employee to
Purchaser of such default of the Purchase Agreement, the non-competition
covenants set forth above and in the Employment Agreement shall be deemed
terminated; PROVIDED THAT in no event shall an offset of amounts owed
under Article IX of this Agreement against amounts owed under Section
3.1(c) or a failure to pay such amounts pursuant to Section 6.5(d) be
deemed to be a default hereunder or thereunder.
In the event that the Employee violates any non-competition covenant
set forth above in this Article VI, then, notwithstanding any provision
herein to the contrary, the time period specified above for which the
non-competition covenants are effective shall be extended day for day for
the time period that Employee is in violation of any such covenant.
(b) The parties acknowledge that Cowan has been involved in various
investment activities which are not similar to or in competition with
those conducted by the Business, including, but not limited to art
distribution, real estate investments, and prepaid cellular telephone
products. The provision of SECTION 6.5(a) shall not preclude such
non-competitive activities by Cowan, provided that such activities do not
interfere with Cowan's obligations under the Employment Agreement.
(c) In the event of actual or threatened breach of the provisions of
this Section by any of the Selling Parties, Purchaser, in addition to any
other remedies available to it for such breach or threatened breach,
including the recovery of damages, shall be entitled to an injunction
restraining such Selling Party from such conduct. If a bond is required to
be posted in order for Purchaser to secure an injunction, the parties
agree that said bond need not exceed the sum of $1,000.
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(d) In the event any Selling Party engages in any activity
prohibited by this Section, Seller shall forfeit to Purchaser all rights
and amounts then remaining due to Seller under SECTION 3.1(c).
(e) If at any time any of the provisions of this SECTION 6.5 shall
be determined to be invalid or unenforceable by reason of being vague or
unreasonable as to duration, area, scope of activity or otherwise, then
this SECTION 6.5 shall be considered divisible (with the other provisions
to remain in full force and effect) and the invalid or unenforceable
provisions shall become and be deemed to be immediately amended to include
only such time, area, scope of activity and other restrictions, as shall
be determined to be reasonable and enforceable by the court or other body
having jurisdiction over the matter, and the Selling Parties expressly
agree that this Agreement, as so amended, shall be valid and binding as
though any invalid or unenforceable provision had not been included
herein.
(f) The provisions of this SECTION 6.5 shall be in addition to, and
not in limitation of, any other provisions contained in any other
agreement restricting competition by the Selling Parties.
(g) None of the Selling Parties shall, and each of the Selling
Parties shall cause its Affiliates not to, directly or indirectly,
disclose or use for their own benefit or for the benefit of any other
Person, any Confidential Information. Each of the Selling Parties agrees
that upon the request of Purchaser on or after the Closing Date, it will
immediately deliver to Purchaser all papers, books, manuals, lists,
correspondence and documents containing or relating to the Confidential
Information, together with all copies thereof other than such materials as
shall be necessary to permit the Selling Parties to prepare its tax
returns and financial statements.
6.6 USE OF NAME. From and after the Closing Date, each of the Selling
Parties and its Affiliates will not directly or indirectly use in any manner any
trade name, trademark, service mark or logo used by the Business or any word or
logo that is similar in sound or appearance and the Selling Parties agree that
they will cause Seller to change its name within 30 days of the Closing.
6.7 TERMINATION OF CERTAIN AGREEMENTS. Effective as of the Closing,
without any cost to Purchaser or the Business, Seller shall, and Seller agrees
that it shall cause its Affiliates to, terminate, rescind, cancel and render
void and of no effect any and all Contracts between the Business on the one hand
and Seller or any of its Affiliates on the other hand; PROVIDED that this
SECTION 6.7 shall not apply to this Agreement or any Related Agreement.
6.8 TAX MATTERS. Seller shall make available to Purchaser such records as
Purchaser may require for the preparation of any Tax Returns or other similar
reports or forms required to be filed by Purchaser and such records as Purchaser
may require for the defense of any audit,
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examination, administrative appeal or litigation of any such Tax Return or other
similar report or form.
ARTICLE VII
COVENANTS OF PURCHASER
Purchaser agrees to perform each of the following covenants:
7.1 TAX MATTERS. Purchaser shall make available to Seller such records as
Seller may require for the preparation of any Tax Returns or other similar
reports or forms required to be filed by Seller and such records as Seller may
require for the defense of any audit, examination, administrative appeal or
litigation of any such Tax Return or other similar report or form.
ARTICLE VIII
CLOSING
8.1 CLOSING. The Closing shall take place at the offices of Diehl and
Rodewald, 1043 Pacific, San Luis Obispo, California 93401, at 10:00 a.m. on
September 30, 1996. The Closing, and all transactions to occur at the Closing,
shall be deemed to have taken place at, and shall be effective as of, the close
of business on the Closing Date.
8.2 DELIVERIES BY SELLING PARTIES. At the Closing, in addition to any
other documents or agreements required under this Agreement, Selling Parties
shall deliver to Purchaser the following:
(a) A bill of sale in the form set forth in EXHIBIT B;
(b) Originals of, and duly executed assignments of, all of the
following: (i) the Real Property Leases; (ii) the Equipment and Other
Personal Property Leases; (iii) the Seller Purchase Orders; (iv) the
Customer Purchase Orders; and (v) the Other Contracts;
(c) Evidence, in form and substance satisfactory to Purchaser, that
all Required Consents have been obtained;
(d) Estoppel certificates of all landlords under the Real Property
Leases in form and substance satisfactory to Purchaser;
(e) A written statement from each Person holding a Lien upon any of
the Acquired Assets, confirming the repayment of the indebtedness secured
thereby and the
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release as of the Closing Date of (i) such Lien and (ii) all obligations
under any and all Contracts relating thereto, except to the extent such
Liens relate solely to Assumed Obligations;
(f) The originals and/or duly executed assignments (in form suitable
for filing or recording with the appropriate Governmental Authority, if
applicable) of all of the Permits;
(g) The title for each of the Vehicles, duly endorsed for transfer
by Seller;
(h) Other instruments of transfer reasonably required by Purchaser
to evidence the transfer of the Acquired Assets to Purchaser, including
assignments with respect to any Intellectual Property registered, recorded
or filed with any Governmental Authority, in form suitable for
registration, recordation or filing with such Governmental Authority, in
each case duly executed by Seller;
(i) A certificate of the secretary or equivalent Person (a
"Secretary") of Seller certifying resolutions of the board of directors of
Seller and of the sole stockholder of Seller approving and authorizing the
execution, delivery and performance of this Agreement and its Related
Agreements and the consummation of the transactions contemplated hereby
and thereby (together with an incumbency and signature certificate
regarding the officer(s) signing on behalf of Seller);
(j) The articles of incorporation or similar instruments of Seller
certified by the Secretary of State or equivalent Person of the
jurisdiction of incorporation of Seller, and the bylaws or similar
instruments of Seller, certified by the Secretary of Seller;
(k) A Certificate of Good Standing for Seller from the State of
California;
(l) An opinion, dated the Closing Date, of Diehl & Rodewald, counsel
for Seller, in form and substance satisfactory to Purchaser and to the
effect noted on EXHIBIT C;
(m) a certificate from Seller in form satisfactory to Purchaser
certifying that Seller is not a "foreign person" within the meaning of
section 1445(f)(3) of the Code;
(n) A copy of an amendment of Seller's articles of incorporation to
change Seller's name to a name dissimilar to, and which is not susceptible
to confusion with "New West Communications", together with all filings
required to effectuate such amendment in each state in which Seller is
qualified to do business as a foreign corporation, all of which shall be
certified by the Secretary of Seller and which shall be filed with such
states within five(5) days of Closing;
(o) All Cash and marketable securities included in the Acquired
Assets;
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(p) The Employment Agreement duly executed by Cowan; and
(q) The Closing Financial Statements.
8.3 DELIVERIES BY PURCHASER. At the Closing, in addition to any other
documents or agreements required under this Agreement, Purchaser shall deliver
to Seller the following:
(a) The Cash Amount and certificates representing the Seller Stock;
(b) Consent and signature page authorizing Cowan's accession to the
Stockholders Agreement;
(c) Consent and signature page authorizing Cowan's accession to the
Registration Rights Agreement;
(d) A certificate of Purchaser's secretary certifying resolutions of
the board of directors of Purchaser approving this Agreement and its
Related Agreements and the transactions contemplated hereby (together with
an incumbency and signature certificate regarding the officer(s) signing
on behalf of Purchaser);
(e) The long-form certificate of incorporation or similar
instruments of Purchaser certified by the Secretary of State or equivalent
Person of Purchaser's jurisdiction of incorporation, the bylaws or similar
instruments of Purchaser, certified by Purchaser's Secretary and
authorization from the California Secretary of State that Purchaser may do
business in California as a foreign corporation; and
(f) An opinion, dated the Closing Date, of Mayor, Day, Caldwell &
Keeton, L.L.P., counsel for Purchaser, in form and substance satisfactory
to Seller and to the effect set forth on EXHIBIT D;
In addition, Purchaser shall deliver to Escrow Agent the Escrowed Shares.
ARTICLE IX
INDEMNIFICATION
9.1 SURVIVAL. The representations and warranties of the parties hereto
contained herein shall survive the Closing for a period of three years, except
that Tax Warranties shall survive until the Tax Statute of Limitations Date and
the Environmental Warranties Title and Authorization Warranties shall survive
forever.
9.2 INDEMNIFICATION BY SELLING PARTIES. The Selling Parties jointly and
severally agree to indemnify each of the Purchaser Indemnified Parties against,
and agrees to hold each of them
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harmless from, any and all Losses incurred or suffered by them relating to or
arising out of or in connection with any and all Losses suffered, sustained,
incurred or required to be paid by any Purchaser Indemnified Party because of or
that result from or arise out of:
(a) the untruth, inaccuracy or breach of any representation or
warranty, or the failure to fulfill any agreement or covenant, of either
of the Selling Parties contained in this Agreement or in any certificate
or other writing furnished to the Purchaser or Travis by or on behalf of
either of the Selling Parties in connection herewith;
(b) the Excluded Assets or the Excluded Obligations;
(c) the assertion against any Purchaser Indemnified Party of any
Liability relating to or arising out of the business, operations or assets
of the Seller prior to the Closing Date or the actions or omissions of the
Seller's directors, officers, shareholders, employees or agents prior to
the Closing Date; or
(d) any claim by The Geneva Companies pursuant to any agreement with
Seller or Affiliate of Seller;
; PROVIDED, HOWEVER, that, except for Losses pursuant to (d) above, the initial
$5,000 of Losses incurred or paid by the Purchaser Indemnified Parties for which
the Selling Parties would otherwise be liable to such Purchaser Indemnified
Parties hereunder shall be the liability of such Purchaser Indemnified Parties
and the Selling Parties shall have no liability therefor and PROVIDED, FURTHER
that in no event shall Seller be liable to the Purchaser Indemnified Parties
under this ARTICLE IX for an aggregate amount in excess of $5,500,000.
9.3 INDEMNIFICATION BY PURCHASER. Purchaser agrees to indemnify Seller and
each of its respective Affiliates, officers, directors, employees, agents and
representatives (the "Seller Indemnified Parties") against, and agrees to hold
each of them harmless from, any and all Losses incurred or suffered by them
relating to or arising out of or in connection with any of the following:
(a) any breach of or any inaccuracy in any representation or
warranty made by Purchaser in this Agreement or any Related Agreement or
any document delivered at the Closing; or
(b) any breach of or failure by Purchaser to perform any covenant or
obligation of Purchaser set out or contemplated in this Agreement or any
Related Agreement or any document delivered at the Closing.
(c) the assertion against any Seller Indemnified Party of any
Liability relating to or arising out of the Acquired Assets and Assumed
Obligations after the Closing Date;
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PROVIDED, HOWEVER; that the initial $5,000 of Losses incurred or paid by the
Seller Indemnified Parties for which Purchaser would otherwise be liable
hereunder shall be the liability of such Seller Indemnified Parties and the
Purchaser shall have no liability therefor.
9.4 CLAIMS. (a) The provisions of this section shall be subject to SECTION
9.5. As soon as is reasonably practicable after becoming aware of a claim for
indemnification under this Agreement the Indemnified Person shall promptly give
notice to the Indemnifying Person of such claim and the amount the Indemnified
Person will be entitled to receive hereunder from the Indemnifying Person;
PROVIDED that the failure of the Indemnified Person to give notice shall not
relieve the Indemnifying Person of its obligations under this ARTICLE IX except
to the extent (if any) that the Indemnifying Person shall have been prejudiced
thereby. If the Indemnifying Person does not object in writing to such
indemnification claim within 30 days of receiving notice thereof, the
Indemnified Person shall be entitled to recover promptly from the Indemnifying
Person the amount of such claim (but such recovery shall not limit the amount of
any additional indemnification to which the Indemnified Person may be entitled
pursuant to SECTION 9.2 or 9.3), and no later objection by the Indemnifying
Person shall be permitted. If the Indemnifying Person agrees that it has an
indemnification obligation but objects that it is obligated to pay only a lesser
amount, the Indemnified Person shall nevertheless be entitled to recover
promptly from the Indemnifying Person the lesser amount, without prejudice to
the Indemnified Person's claim for the difference. Any disputes as to any
Indemnification Claim shall be resolved in accordance with Section 10.14 hereof.
9.5 THIRD PARTY CLAIMS.
(a) The Indemnified Person shall give notice as promptly as is
reasonably practicable to the Indemnifying Person of the assertion of any
claim, or the commencement of any suit, action or proceeding, by any
Person not a party hereto in respect of which indemnity may be sought
under this Agreement; PROVIDED that the failure of the Indemnified Person
to give notice shall not relieve the Indemnifying Person of its
obligations under this ARTICLE X except to the extent (if any) that the
Indemnifying Person shall have been prejudiced thereby. The Indemnifying
Person may, at its own expense (a) participate in the defense of any
claim, suit, action or proceeding and (b) upon notice to the Indemnified
Person and the Indemnifying Person's delivering to the Indemnified Person
a written agreement that the Indemnified Person is entitled to
indemnification pursuant to SECTION 3.3, 9.2 or 9.3 for all Losses arising
out of such claim, suit, action or proceeding and that the Indemnifying
Person shall be liable for the entire amount of any Loss, at any time
during the course of any such claim, suit, action or proceeding, assume
the defense thereof, PROVIDED that (i) the Indemnifying Person's counsel
is reasonably satisfactory to the Indemnified Person, and (ii) the
Indemnifying Person shall thereafter consult with the Indemnified Person
upon the Indemnified Person's reasonable request for such consultation
from time to time with respect to such claim, suit, action or proceeding.
If the Indemnifying Person assumes such defense, the Indemnified Person
shall have the right (but not the obligation) to participate in the
defense thereof and to employ counsel, at its own expense, separate from
the counsel
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employed by the Indemnifying Person. If, however, the Indemnified Person
reasonably determines in its judgment that representation by the
Indemnifying Person's counsel of both the Indemnifying Person and the
Indemnified Person would present such counsel with a conflict of interest,
then such Indemnified Person may employ separate counsel to represent or
defend it in any such claim, action, suit or proceeding and the
Indemnifying Person shall pay the fees and disbursements of such separate
counsel. Whether or not the Indemnifying Person chooses to defend or
prosecute any such claim, suit, action or proceeding, all of the parties
hereto shall cooperate in the defense or prosecution thereof.
(b) Any settlement or compromise made or caused to be made by the
Indemnified Person or the Indemnifying Person, as the case may be, of any
such claim, suit, action or proceeding of the kind referred to in SECTION
9.5(a) shall also be binding upon the Indemnifying Person or the
Indemnified Person, as the case may be, in the same manner as if a final
judgment or decree had been entered by a court of competent jurisdiction
in the amount of such settlement or compromise; PROVIDED that no
obligation, restriction or Loss shall be imposed on the Indemnified Person
as a result of such settlement without its prior written consent. The
Indemnified Person will give the Indemnifying Person at least 30 days'
notice of any proposed settlement or compromise of any claim, suit, action
or proceeding it is defending, during which time the Indemnifying Person
may reject such proposed settlement or compromise; PROVIDED that from and
after such rejection, the Indemnifying Person shall be obligated to assume
the defense of and full and complete liability and responsibility for such
claim, suit, action or proceeding and any and all Losses in connection
therewith in excess of the amount of unindemnifiable Losses which the
Indemnified Person would have been obligated to pay under the proposed
settlement or compromise.
(c) In the event that the Indemnifying Person does not elect to
assume the defense of any claim, suit, action or proceeding, then any
failure of the Indemnified Person to defend or to participate in the
defense of any such claim, suit, action or proceeding or to cause the same
to be done, shall not relieve the Indemnifying Person of its obligations
hereunder.
9.6 PAYMENT OF INDEMNIFICATION OBLIGATIONS. In the event that either of
the Selling Parties or the Purchaser is required to make any payment under
SECTION 9.4 or pursuant to a final determination under SECTION 10.14, such party
shall promptly pay the Purchaser Indemnified Party or the Seller Indemnified
Party, as the case may be, the amount of such indemnity obligation; PROVIDED,
HOWEVER, that in the event that either of the Selling Parties shall be obligated
to pay to Purchaser any amount pursuant to SECTION 9.4 or pursuant to a final
determination under SECTION 10.14, Purchaser may set off the amount of such
indemnity obligation against amounts owed pursuant to SECTION 3.1(c) or may
submit to the Escrow Agent a request to withhold delivery of the amount of
Escrowed Shares the fair market value of which is equal to the amount of such
indemnity obligation. If there should be a dispute as to such amount, such
Selling Party or the Purchaser, as the case may be, shall nevertheless pay when
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due (or Purchaser may set off) such portion, if any, of the obligation as shall
not be subject to dispute. The difference, if any, between the amount of the
obligation ultimately determined as properly payable under this SECTION 9.6 and
the portion, if any, theretofore paid shall bear interest for the period from
the date the amount was demanded by the Purchaser Indemnified Party or the
Seller Indemnified Party, as the case may be, until payment in full, payable on
demand, at the fluctuating rate per annum which at all times shall be the rate
which is publicly announced from time to time by NationsBank of Texas, N.A. or
its successor as its "prime rate".
9.7 EXCLUSIVE REMEDY. Following the Closing, the indemnification
provisions set forth in this Agreement constitute the sole and exclusive
recourse and remedy for monetary damages (whether through indemnification,
contribution or otherwise) available to the parties hereto with respect to the
breach of any representation, warranty or covenant contained in this Agreement,
but this provision shall not be construed to preclude any rights or remedies
available to the parties under the Employment Agreement.
9.8 INSURANCE OR THIRD PARTY INDEMNIFICATION. Notwithstanding anything to
the contrary herein, an Indemnifying Person shall not be liable for a Loss
arising out of or in connection with any matter described in this ARTICLE IX if
and to the extent such Loss is covered by a policy of insurance or benefits from
a right to indemnification from a Person not party to this Agreement and payment
is made under such policy to the Indemnified Person by the insurer or under such
right to indemnification by such Person, as applicable.
ARTICLE X
MISCELLANEOUS
10.1 EXPENSES. Each party hereto shall bear its own expenses, including
all legal and accounting fees, with respect to the transactions contemplated
hereby. Seller and Purchaser shall share equally in the payment of all sales,
use, stamp, transfer, service, recording, real estate and like taxes or fees, if
any, imposed by any Governmental Authority in connection with the transfer and
assignment of the Acquired Assets. All such expenses, taxes, fees and other
costs payable by Seller or Cowan shall be paid by Cowan using funds from the
consideration payable by Purchaser hereunder and not from funds in the Seller's
possession immediately prior to Closing.
10.2 AMENDMENT. This Agreement may be amended, modified or supplemented
but only in writing signed by Purchaser and Seller.
10.3 NOTICES. Any notice, request, instruction or other document to be
given hereunder by a party hereto shall be in writing and shall be deemed to
have been given (a) when received if given in person or by courier or a courier
service, (b) on the date of transmission if sent by
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telex, facsimile or other wire transmission or (c) five Business Days after
being deposited in the mail, certified or registered, postage prepaid:
If to Seller, addressed as follows:
Craig Cowan
265 Indian Knob Road
San Luis Obispo, California 93401
Telephone No.: (805)595-2020
with a copy to:
Diehl & Rodewald
1043 Pacific Street
San Luis Obispo, California 93401
Attention: Roderick Rodewald, Esq .
Telephone No.: (805)541-1000
Facsimile No.: (805)541-6870
If to Purchaser, addressed as follows:
New West Acquisition Corp.
Travis International, Inc.
3000 Wesleyan, Suite 350
Houston, Texas 77027
Attention: Kirby Attwell
Telephone No.: (713) 622-7475
Facsimile No.: (713) 622-7477
with a copy to:
Mayor, Day, Caldwell & Keeton, L.L.P.
700 Louisiana, Suite 1900
Houston, Texas 77002
Attention: Richard B. Mayor, Esq.
Telephone No.: (713) 225-7019
Facsimile No.: (713) 225-7047
or to such other individual or address as a party hereto may designate for
itself by notice given as herein provided.
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10.4 EFFECT OF INVESTIGATION. Any due diligence review, audit or other
investigation or inquiry undertaken or performed by or on behalf of Purchaser
shall not limit, qualify, modify or amend the representations, warranties or
covenants of, or indemnities by, Seller made or undertaken pursuant to this
Agreement, irrespective of the knowledge and information received (or which
should have been received) therefrom by Purchaser.
10.5 WAIVERS. The failure of a party hereto at any time or times to
require performance of any provision hereof shall in no manner affect its right
at a later time to enforce the same. No waiver by a party of any condition or of
any breach of any term, covenant, representation or warranty contained in this
Agreement shall be effective unless in writing, and no waiver in any one or more
instances shall be deemed to be a further or continuing waiver of any such
condition or breach in other instances or a waiver of any other condition or
breach of any other term, covenant, representation or warranty.
10.6 ASSIGNMENT. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns;
PROVIDED that no assignment of any rights or obligations shall be made by Seller
without the written consent of Purchaser or by Purchaser without the written
consent of Seller, except that Purchaser may assign its rights hereunder without
such consent to any Affiliate of Purchaser.
10.7 NO THIRD PARTY BENEFICIARIES. This Agreement is solely for the
benefit of the parties hereto and, to the extent provided herein, their
respective Affiliates, directors, officers, employees, agents and
representatives, and no provision of this Agreement shall be deemed to confer
upon third parties any remedy, claim, liability, reimbursement, cause of action
or other right.
10.8 PUBLICITY. Except as required by Law or the rules of any stock
exchange, no public announcement or other publicity regarding the transactions
referred to herein shall be made by Purchaser or Seller or any of their
respective Affiliates, officers, directors, employees, representatives or
agents, without the prior written agreement of Purchaser and Seller, in any
case, as to form, content, timing and manner of distribution or publication;
PROVIDED that nothing in this SECTION 10.8 shall prevent such parties from
discussing such transactions with those Persons whose approval, agreement or
opinion, as the case may be, is required for consummation of such particular
transaction or transactions.
10.9 FURTHER ASSURANCES. Upon the reasonable request of Purchaser, Seller
will on and after the Closing Date execute and deliver to Purchaser such other
documents, releases, assignments and other instruments as may be required to
effectuate completely the transfer and assignment to Purchaser of, and to vest
fully in Purchaser title to, each of the Acquired Assets, and to otherwise carry
out the purposes of this Agreement.
10.10 SEVERABILITY. If any provision of this Agreement shall be held
invalid, illegal or unenforceable, the validity, legality or enforceability of
the other provisions hereof shall not be
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affected thereby, and there shall be deemed substituted for the provision at
issue a valid, legal and enforceable provision as similar as possible to the
provision at issue.
10.11 REMEDIES CUMULATIVE. The remedies provided in this Agreement shall
be cumulative and shall not preclude the assertion or exercise of any other
rights or remedies available by law, in equity or otherwise.
10.12 ENTIRE UNDERSTANDING. This Agreement and the Related Agreements set
forth the entire agreement and understanding of the parties hereto in respect to
the transactions contemplated hereby and supersede any and all prior agreements,
arrangements and understandings among the parties relating to the subject matter
hereof.
10.13 APPLICABLE LAW. This Agreement shall be governed by and construed
and enforced in accordance with the internal laws of the State of California
without giving effect to the principles of conflicts of law thereof.
10.14 BINDING ARBITRATION.
(a) Subject to the provisions of Section 10.14(b), below, if a
dispute or controversy arises between the parties relating to this Agreement
including any dispute regarding Article IX, the parties agree to use the
following procedures prior to either party pursuing other available remedies:
(i) A meeting will be held promptly between the parties
attended by individuals with decision-making authority to attempt in good
faith to negotiate a resolution of the dispute. If either party intends to
be accompanied at a meeting by an attorney, the other parties will be
given at least three (3) business days' notice of such intention, and
those parties also may be accompanied by an attorney. All negotiations
pursuant to this Section 10.14 are confidential and will be treated as
compromise and settlement negotiations for purposes of the Federal Rules
of Evidence and state rules of evidence.
(ii) If within ten (10) days after such meeting, the parties
have not succeeded in negotiating a resolution of the dispute, they will
jointly appoint a mutually acceptable neutral person not affiliated with
either of the parties (the "Neutral"), seeking assistance in such regard
from the American Arbitration Association ("AAA") if they have been unable
to agree upon such appointment within twenty (20) days from the initial
meeting. The obligation for payment of the fees of the Neutral shall be
shared equally by the parties. In consultation with the Neutral, the
parties will select or devise an alternative dispute resolution procedure
("ADR") by which they will attempt to resolve the dispute, and a time for
the ADR to be held, with the Neutral making the decision as to the
procedure and time (but unless circumstances require otherwise, not later
than sixty (60) days after selection of the Neutral) if the parties have
been unable to agree on any of such matters within twenty (20) days after
initial consultation with the Neutral.
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Any ADR proceeding will be held in Los Angeles, California, at a location
mutually agreeable to the parties or, if they are unable to agree,
selected by the Neutral. The parties agree to participate in good faith in
the ADR to its conclusion as designated by the Neutral.
(iii) If the parties are not successful in resolving the
dispute as provided in Sections (i) and (ii), above, then the parties
agree that such dispute will be settled by binding arbitration conducted
on a confidential basis pursuant to the AAA Rules for Non- Administered
Arbitration of Business Disputes by a sole arbitrator selected from the
AAA Panels of Neutrals. Any decision or award as a result of any such
arbitration proceeding will include the assessment of costs, expenses and
reasonable attorneys' fees in favor of the prevailing party, which will be
selected in the discretion of the arbitrator. Absent an agreement by the
parties to the contrary, any such arbitration will be conducted at a
location, in Los Angeles, California, selected by the arbitrator. The
parties reserve the right to object to any proposed arbitrator who is
employed by or affiliated with a competing organization or entity. Prior
to issuing the arbitrator's final award of arbitration, the arbitrator
will provide each party with the arbitrator's written tentative award,
which will include the findings of fact as determined by the arbitrator
upon which such tentative award is based. Each party will have ten (10)
business days from the delivery of such tentative award to submit to the
arbitrator a written rebuttal to the findings of fact set forth in the
tentative award, and the arbitrator will promptly forward a copy of each
party's rebuttal, if any, to the other parties. If no party submits such a
rebuttal, the tentative award will be deemed final; if any party submits
such a rebuttal, the arbitrator will promptly review the same and will
deliver a final award, in writing, to each of the parties. An award of
arbitration will be final and binding on the parties and may be confirmed
in any appropriate court with jurisdiction.
(iv) All applicable statutes of limitation and defenses based
upon the passage of time will be tolled while the procedures specified in
this Section 10.14 are pending. The parties will take all such actions, if
any, necessary to effectuate such tolling.
(b) Notwithstanding the foregoing, with respect to each and every
breach or violation or threatened breach or violation by any party hereto, any
other party, Purchaser, in addition to all other remedies available at law or in
equity including specific performance of the provisions hereof, shall be
entitled to enjoin the commencement or continuance thereof and may, without
notice to such other party, apply to any court of competent jurisdiction for
entry of an immediate restrainig order or injunction. Upon the court's
determination of such application for a restraining order or injunction, and
subject to the parties' compliance therewith, further court action will be
stayed pending completion of the procedures outlined in Section 10.14(a), above.
Purchaser may set-off and apply against any and all amounts owing to the Selling
Parties by Purchaser any damages incurred by Purchaser in connection with any
breach or violation of this Agreement, whether such obligations arise on, before
or after the date hereof; provided, however, that Purchaser shall not offset any
such amounts until any rights that any of the Selling
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Parties has to cure any breach or violation of this Agreement, which rights are
set forth in this Section 10.14, have expired. Purchaser may pursue any of the
remedies described herein concurrently or consecutively in any order as to any
breach or violation, and the pursuit of one of such remedies at any time will
not be deemed an election of remedies or a waiver of the right to pursue any of
the other of such remedies.
10.15 COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered as of the date first above written.
NEW WEST ACQUISITION, CORP.
By: ______________________________
Kirby Attwell
President
NEW WEST COMMUNICATIONS
By: ______________________________
Craig Cowan
President
______________________________
Craig Cowan
FOR THE LIMITED PURPOSE OF JOINING
IN THE REPRESENTATIONS AND WARRANTIES
SET FORTH IN ARTICLE V:
TRAVIS INTERNATIONAL, INC.
By: _______________________________
Kirby Attwell
President
46
EXHIBIT 10.12
BUSINESS LOAN AGREEMENT
(RECEIVABLES AND INVENTORY)
BANK OF AMERICA
- --------------------------------------------------------------------------------
This Agreement dated as of February 24, 1997 is between Bank of America
Texas, N.A. (the "Bank") and De-Ro/Suncoast, Inc. (the "Borrower").
1. DEFINITIONS In addition to the terms which are defined elsewhere in this
Agreement, the following terms have the meanings indicated for the purposes of
this Agreement:
1.1 "BORROWING BASE" means the lesser of:
(a) Seven Million and no/100 Dollars ($7,000,000.00); or
(b) the sum of:
(i) 85% of the balance due on Acceptable Receivables; and
(ii) The lesser of fifty (50%) of the Borrowing Base or a percentage of
the value of Acceptable Inventory calculated by adding together:
(A) 55% of the value of Acceptable Inventory of the Suncoast
Division; and
(B) 45% of the value of Acceptable Inventory of the De-Ro
Division.
In determining the value of Acceptable Inventory to be included in the Borrowing
Base, the Bank will use the lowest of (i) the Borrower's cost, (ii) the
Borrower's estimated market value, substantiated by evidence satisfactory to
Bank in its reasonable discretion.
1.2 "ACCEPTABLE RECEIVABLE" means an account receivable which satisfied the
following requirements:
(a) The account has resulted from the sale of goods or the performance of
services by the Borrower in the ordinary course of the Borrower's
business.
(b) There are no conditions which must be satisfied before the Borrower is
entitled to receive payment of the account. Accounts arising from COD
sales, consignments or guaranteed sales are not acceptable.
(c) The debtor upon the account does not claim any defense to payment and has
not asserted any counterclaims or offsets against the Borrower.
(d) The account represents a genuine obligation of the debtor for goods sold
and accepted by the debtor, or for services performed for and accepted by
the debtor.
(e) The Borrower has set an invoice to the debtor in the amount of the
account.
(f) The account is owned by the Borrower free of any title defects or any
liens or interests of others except the security interest in favor of the
Bank.
(g) The debtor on the account is not any of the following:
(i) an employee, affiliate, parent or subsidiary of the Borrower, or an
entity which has common officers or directors with the Borrower.
(ii) the U.S. government or any agency or department of the U.S.
government unless the Bank agrees in writing to accept the
obligation and the Borrower complies
<PAGE>
with the procedures in the Federal Assignment of Claims Act of 1940
with respect to the obligation.
(iii) any state, county, city, town or municipality.
(iv) any person or entity located in a foreign country unless the account
is supported by a letter of credit issued by a bank acceptable to
the Bank.
(v) any person or entity to whom the Borrower is obligated for goods
purchased by the Borrower or for services performed for the
Borrower. This will not exclude accounts upon which any such debtor
is obligated to the extent that the accounts exceed the amount of
the Borrower's obligation to such debtor.
(h) The account is not in default. An account will be considered in default if
any of the following occurs:
(i) The account is not paid with the 90-day period starting on its
invoice date.
(ii) The debtor obligated upon the account suspends business, makes a
general assignment for the benefit of creditors, or fails to pay its
debts generally as they come due; or
(iii) Any petition is filed by or against the debtor obligated on the
account under any bankruptcy law or any other law or laws for the
relief of debtors.
(i) The account, when added to all other accounts that are obligations of the
same debtor, does not cause that debtor's total obligations to either the
Suncoast Division or the De-Ro Division that are included in Acceptable
Receivables that to exceed 20% of the balance due on all Acceptable
Receivables for each division.
(j) The account does not arise from the sale of goods which remain the
Borrower's possession or under the Borrower's control.
(k) The account is not evidenced by a promissory note or chattel paper.
(l) The account is otherwise reasonable acceptable to the Bank.
1.3 "ACCEPTABLE INVENTORY" means raw materials and finished goods inventory
which satisfies the following requirements:
(a) The inventory is owned by the Borrower free of any title defects or any
liens or interest of others except the security interest in favor of the
Bank.
(b) The inventory is permanently located at locations which the Borrower has
disclosed to the Bank and which are reasonably acceptable to the Bank. If
the inventory is covered by a negotiable document of title (such as a
warehouse receipt) that document must be delivered to the Bank.
(c) The inventory is held for sale in the ordinary course of the Borrower's
business and is of good and merchantable quality. Inventory which is
obsolete, unsalable, damaged or defective, discontinued or which has been
returned by the buyer, is not acceptable. Display items, work-in-process
and packing and shipping materials are not acceptable.
(d) The inventory is not placed on consignment.
(e) The inventory is otherwise reasonable acceptable to the Bank.
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2. FACILITY NO. 1 LINE OF CREDIT AMOUNT AND TERMS
2.1 LINE OF CREDIT AMOUNT. During the availability period described below, the
Bank will provide a line of credit to the Borrower. The amount of the line of
credit (the "Facility No. 1 Commitment") is equal to the amount of the Borrowing
Base.
This is a revolving line of credit with a within line facility for letters of
credit. During the availability period, the Borrower may repay principal amounts
and reborrow them.
Each advance must be for at least Twenty Five thousand and no/100 Dollars
($25,000.00), or for the amount of the remaining available line of credit, if
less.
The Borrower agrees not to permit the outstanding principal balance of the line
of credit plus the undrawn amounts of any outstanding letters of credit, plus
amounts drawn on letters of credit and not yet reimbursed, to exceed the
Facility No. 1 Commitment.
2.2 AVAILABILITY PERIOD. (a) The line of credit is available between the date of
this Agreement and March 31, 1998 (the "Expiration Date") unless an Event of
Default has occurred and in continuing.(b) At any time and from time to time,
the Borrower may terminate in whole or reduce in part the Facility No. 1
Commitment, PROVIDED that any such partial reduction shall be in aggregate
amount not less than $25,000 or integral multiples thereof. The amount of any
such termination or reduction may not thereafter be reinstated.
2.3 INTEREST RATE. The interest rate is the lesser of
(a) the maximum lawful rate of interest permitted under applicable usury laws
now or hereafter enacted (the "Maximum Rate"), or
(b) the rate (the "Basic Rate") that is equal to the sum of the Bank's
Reference Rate plus 0.25 percentage point(s).
Notwithstanding the foregoing, if at any time the Basic Rate shall exceed the
Maximum Rate and thereafter the Basic Rate shall become less than the Maximum
Rate, the Rate of interest payable shall be the Maximum rate until the Bank
shall have received the amount of interest it otherwise would have received if
the interest payable has not been limited by the Maximum Rate during the period
of time the Basic Rate exceeded the Maximum Rate.
The Referenced Rate is the rate of interest publicly announced from time to time
by the Bank in Irving, Texas, as its Reference Rate. The Reference Rate is set
by the bank based on various factors, including its costs and desired return,
general economic conditions and other factors, and is used as a reference point
for pricing some loans. The Bank may price loans to its customers at, above, or
below the Reference Rate. Any change in the Reference Rate will take effect at
the opening of business on the date specified in the public announcement of a
change in the Reference Rate.
2.4 CONDITIONS TO EACH EXTENSION OF CREDIT. Before each extension of credit
under the line of credit, including the first, the Borrower will deliver the
following to the Bank if requested by the Bank:
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(a) a borrowing certificate, in form and detail reasonably satisfactory to the
Bank, setting forth the Acceptable Receivables and the Acceptable
Inventory on which the requested extension of credit is to be based;
2.5 REPAYMENT TERMS.
(a) The Borrower will pay interest on February 28, 1997 and on the last day of
each month thereafter until payment in full of any principal outstanding under
this line of credit. (b) The Borrower will repay in full all principal and
accrued unpaid interest or other charges outstanding under this line of credit
no later than the Expiration Date.
2.6 LETTERS OF CREDIT. This line of credit may be used for financing commercial
letters of credit with a maximum maturity of the Expiration Date but not to
extend more than 90 days beyond the Expiration Date. Each commercial letter of
credit will require drafts payable at sight.
This line of credit may be used for financing standby letters of credit with a
maximum maturity of the Expiration Date but not to extend more than 90 days
beyond the Expiration Date.
The aggregate undrawn face amount of all letters of credit outstanding at any
one time plus amounts drawn on letters of credit and not yet reimbursed) may not
exceed Two Hundred Fifty Thousand and no/100 Dollars ($250,000.00) for
commercial letters of credit and for standby letters of credit. The sum of (a)
the aggregate face amount of all letters of credit, plus (b) the principal
amount of all extensions of credit outstanding hereunder, may not any time
exceed the Facility No. 1 Commitment.
The Borrower agrees: (a) any sum drawn under a letter of credit may, at the
option of the Bank, be added to the principal amount outstanding under this
Agreement. The amount will bear interest and be due as described elsewhere in
this Agreement, (b) if an Event of Default has occurred, to immediately deposit
with the Bank an amount equal to the aggregate undrawn face amount of all
outstanding letters of credit plus amounts drawn on letters of credit and not
yet reimbursed with undrawn portion of such amount shall promptly be refunded if
such Event of Default shall no longer be continuing; (c) the issuance of any
letter of credit and any amendment to a letter of credit is subject to the
Bank's written approval and each letter of credit and amendment must be in form
and content satisfactory to the Bank and in favor of a beneficiary acceptable to
the Bank; (d) to sign the Bank's form Application and Agreement for Commercial
Letter of Credit or Application and Agreement for Standby Letter of Credit, in
the forms attached hereto as Exhibits A1 and A2, in connection with each letter
of credit issued hereunder, PROVIDED HOWEVER, that the terms of this Agreement
shall govern in the event that there is any inconsistency between the terms of
such application and any of the terms and conditions hereof; (e) to pay any
customary issuance and/or other fees that the Bank notifies the Borrower will be
charged for issuing and processing letters of credit for the Borrower, (f) to
allow the Bank to automatically charge its checking account for applicable fees,
discounts, and other charges; and (g) to pay the Bank a non-refundable fee equal
to 1.00% per annum of the outstanding undrawn amount of each outstanding undrawn
standby letter of credit, payable annually in advance,
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calculated on the basis of the outstanding undrawn face amount outstanding on
the day the fee is calculated.
3. FACILITY NO. 2: TERM LOAN AMOUNT AND TERMS
3.1 LOAN AMOUNT. The Bank agrees to provide a term loan to the Borrower in the
Amount of One Million Seventy Five Thousand and no/100 Dollars ($1,075,000.00)
(the "Facility No. 2 Commitment").
3.2 AVAILABILITY PERIOD
The loan is available in one disbursement from the Bank between the date of this
Agreement and February 28, 1997 unless an Event of Default or other event which
with notice or lapse of time or both would be an event of Default shall have
occurred and be continuing.
3.3 INTEREST RATE.
Unless the Borrower elects an optional interest rate as described below, the
interest rate is the lesser of (a) the maximum lawful rate of interest permitted
under applicable usury laws, now or hereafter enacted (the "Maximum Rate"), or
(b) the rate (the "Basic Rate") that is equal to the sum of the Bank's Reference
Rate plus 0.25 percentage points.
Notwithstanding the foregoing, if at any time the Basic Rate shall exceed the
Maximum Rate and thereafter the Basic Rate shall become less than the Maximum
Rate, the Rate of interest payable shall be the Maximum Rate until the bank
shall have received the amount of interest it otherwise would have received if
the interest payable had not been limited by the Maximum Rate during the period
of time the Basic Rate exceeded the Maximum Rate.
3.4 REPAYMENT TERMS.
(a) the Borrower will pay all accrued but unpaid interest on March 31, 1997 and
on the last day of each quarter thereafter and upon payment in full of the
principal of the loan. (b) the borrower will repay principal in 18 successive
equal quarterly installments, starting march 31, 1997, and in one final
installment on September 30, 2001 in the amount of the remaining principal
balance plus all accrued unpaid interest. (c) The Borrower may repay the loan in
full or in part at any time. Prepayments of portions of the loan bearing
interest at Bank's Reference Rate may be made without penalty or premium. The
prepayment will be applied to the most remote installment of principal due under
this Agreement.
3.5 OPTIONAL INTEREST RATES. Instead of the interest rate based on the Bank's
Reference Rate, the Borrower may elect to have all or portions of the loan bear
interest at the rate(s) described below during an interest period agreed to by
the Bank and the Borrower, provided, however, that the borrower shall not have
the option or right tot elect to have all or any portion of the loan bear
interest at the rate(s) described below when such rate(s) exceeds the Maximum
Rate. Each interest rate is a rate per year. Interest will be paid on the last
day of each interest period, and on the last date of each quarter during the
interest period. At the end of any interest period, the interest rate will
revert to the rate based on the Reference Rate, unless the Borrower has
designated another optional interest rate for the portion.
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3.6 LONG TERM RATE. The Borrower may elect to have all or portions of the
principal balance of the loan bear interest at the rate equal to the lesser of
(a) the Maximum Rate, or (b) the Long Term Rate, subject to the following
requirements:
(a) The interest period during which the Long Term Rate will be in effect will
be one year or more.
(b) The "Long Term Rate" means the fixed interest rate the Bank and the
borrowers agree will apply to the portion during the applicable interest
period.
(c) Each Long Term Rate portion will be for an amount not less than One
Hundred Thousand Dollars ($100,000).
(d) Any portion of the principal balance of the loan already bearing interest
at the Long Term Rate will not be converted to a different rate during its
interest period.
(e) The Borrowers may prepay the Long Term Rate portion in whole in part in
the minimum amount in whole or in part. The Borrowers will give the Bank
irrevocable written notice of the Borrower's intention to make the
prepayment, specifying the date and amount of the prepayment. The notice
must be received by the Bank at least 5 banking days in advance of the
prepayment. All prepayments of principal on the Long Term Rate portion
will be applied on the most remote principal installment or installments
then unpaid.
(f) Each prepayment of a Long Term Rate portion, whether voluntary, by reason
of acceleration or otherwise, will be accompanied by payment of all
accrued interest on the amount of the prepayment and the prepayment fee
described below.
(g) The prepayment will be the sum of fees calculated separately for each
Prepaid Installment, as follows: (i) The Bank will first determine the
amount of interest which would have accrued each month for the Prepaid
Installment had it remained outstanding until the applicable Original
Payment Date, using the Long Term Rate; (ii) The Bank will then subtract
from each monthly interest amount determined in (i), above, the amount of
interest which would accrue for that Prepaid Installment if it were
reinvested from the date of prepayment through the Original Payment Date,
using the following rate: (A) If the Original Payment Date is more than 5
years after the date of prepayment the Treasury Rate plus one-quarter of
one percentage point, (B) If the Original Payment Date is 5 years or less
after the date of prepayment: the Money Market Rate. (iii) If (i) minus
(ii) for the Prepaid Installment is greater than zero, the Bank will
discount the monthly differences to the date of prepayment by the rate
used in (ii) above. The sum of the discou8nted monthly differences is the
prepayment fee for that Prepaid Installment.
(h) The following definitions will apply to the calculation of the prepayment
fee:
"Money Market" means the domestic certificate of deposit market, the eurodollar
deposit market or other appropriate money market selected by the Bank.
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"Money Market Rate" means the fixed interest rate per annum which the Bank
determines could be obtained by reinvesting a specified Prepaid Installment in
the Money market from the date of prepayment through the Original Payment Date.
"Original Payment Dates" mean the dates on which principal of the Long Term Rate
portion would have been paid if there had been no prepayment. If a portion of
the principal would have been paid later than the end of the interest period in
effect at the time of prepayment, then the Original Payment Date for that
portion will be the last day of the interest period.
"Prepaid Installment" means the amount of the prepaid principal of the Long Term
Rate portion which would have been paid on a single Original Payment Date.
"Treasury Rate" means the interest rate yield for U.S. Government Treasury
Securities which the Bank determines could be obtained by reinvesting a
specified Prepaid Installment in such securities from the date of prepayment
through the Original Payment Date.
(i) The Bank may adjust the Treasury Rate and Money Market Rate to reflect the
compounding, accrual basis, or other costs of the Long Term Rate portion.
Each of the rates is the Bank's estimate only and the Bank is under no
obligation to actually reinvest any prepayment. The rates will be based on
information from either the Telerate or Reuters information services, THE
WALL STREET JOURNAL, or other information sources the bank deems
appropriate.
(j) If at any time during any applicable interest period the Long Term Rate
shall exceed the Maximum Rate and thereafter the Long Term Rate shall
become less than the Maximum Rate, the rate of interest payable shall be
the Maximum Rate until the bank shall have received the amount of interest
it otherwise would have received if the interest payable had not been
limited by the Maximum Rate during the period of time the Long Term Rate
exceeded the Maximum Rate.
4. FACILITY NO. 3 LINE OF CREDIT AMOUNT AND TERMS
4.1 LINE OF CREDIT AMOUNT. During the availability period described below, the
Bank will provide a line of credit to the Borrower. The amount of the line of
credit (the "Facility No. 3 Commitment") is Two Hundred Fifty Thousand and
no/100 Dollars ($250,000.00).
This is a non-revolving line of credit with a term repayment option for
equipment and new vehicle advances. Any amount of credit extended permanently
reduces the remaining available line of credit.
Each advance will be used to purchase equipment and or new vehicles for use in
the Borrower's business. All equipment and vehicles acquired with the proceeds
of such advances shall be free and clear of all security agreements required
under this Agreement. Each request for an equipment or new vehicle advance shall
be accompanied by a copy of the purchase order or invoice for the equipment or
new vehicle to be purchased with the proceeds of such advance.
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The amount of each advance shall not exceed 75% of the purchase price of such
equipment and 80% for new vehicles.
The Borrower agrees not to permit the outstanding principal balance of the line
of credit to exceed the Facility No. 3 Commitment.
4.2 AVAILABILITY PERIOD. (a) The line of credit is available between the date of
this Agreement and March 31, 1998 (the "Expiration Date") unless an Event of
Default has occurred and is continuing. (b) At any time and from time to time,
the Borrower may terminate in whole or reduce in part the Facility No. 1
Commitment, PROVIDED that any such partial reduction shall be in aggregate
amount not less than $25,000 or integral multiples thereof. The amount of any
such termination or reduction may not thereafter be reinstated.
4.3 INTEREST RATE. Unless the Borrower elects an optional interest rate as
described below, the interest rate is the lesser of (a) the maximum lawful rate
of interest permitted under applicable usury laws, now or hereafter enacted (the
"Maximum Rate"), or (b) the rate (the "Basic Rate") that is equal to the sum of
the Bank's Reference Rate plus 0.25 percentage points.
Notwithstanding the foregoing, if at any time the Basic Rate shall exceed the
Maximum Rate and thereafter the Basic Rate shall become less than the Maximum
Rate, the Rate of Interest payable shall be the Maximum Rate until the bank
shall have received the amount of interest it otherwise would have received if
the interest payable had not bee limited by the Maximum Rate during the period
of time the Basic Rate exceed the Maximum Rate.
4.4 REPAYMENT TERMS.
(a) The Borrower will pay all accrued but unpaid interest beginning with the
last day of the month following the date the advance is made and then
monthly thereafter and upon payment in full of the principal of the loan.
(b) Equipment Advances. The Borrower will repay principal in 59 successive
monthly installments starting the last day of the month following the date
the equipment advance is made. On the 60th month the Borrower will repay
the remaining principal balance plus any interest then due.
(c) Vehicle Advances. The Borrower will repay principal in 47 successive
monthly installments starting the last day of the month following the date
the new vehicle advance is made. On the 48th month the Borrower will repay
the remaining principal balance plus any interest then due.
(d) Any amount bearing interest at an optional interest rate (as described
below) may be repaid a the end of the applicable interest period, which
shall be no later than the Expiration Date.
(e) The Borrower may prepay the loan in full or in part at any time. The
prepayment will be applied to the most remote installment of principal due
under this Agreement.
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4.5 OPTIONAL INTEREST RATES. Instead of the interest rate based on the Bank's
Reference Rate, the borrower may elect to have all or portions of the loan bear
interest at the rate(s) described below during an interest period agreed to by
the Bank and the Borrower, provided, however, that the borrower shall not have
the option or right to elect to have all or any portion of the loan bear
interest at the rate(s) described below when such rate(s) exceeds the Maximum
Rate. Each interest rate is a rate per year. Interest will be paid on the last
day of each interest period, and on the last day of each month during the
interest period. At the end of any interest period, the interest rate will
revert to the rate based on the Reference Rate, unless the Borrower has
designated another optional interest rate for the portion.
4.6 LONG TERM RATE. The Borrower may elect to have all or portions of the
principal balance of the loan bear interest at the rate equal to the lesser of
(a) the Maximum Rate, or (b) the Long Term Rate, subject to the following
requirements:
(a) The interest period during which the Long Term Rate will be in effect will
be one year or more.
(b) The "Long Term Rate" means the fixed interest rate the Bank and the
Borrowers agree will apply to the portion during the applicable interest
period.
(c) Each Long Term Rate portion will be an amount not less than One Hundred
Thousand Dollars ($100,00).
(d) Any portion of the principal balance of the loan already bearing interest
at the Long Term Rate will not be converted to a different rate during its
interest period.
(e) The Borrowers may prepay the Long Term Rate portion in whole or in part
in the minimum amount in whole or in part. The Borrowers will give the
Bank irrevocable written notice of the Borrower's intention to make the
prepayment, specifying the date and amount of the prepayment. The
notice must be received by the Bank at least 5 banking days in advance
of the prepayment. All prepayments of principal on the Long Term Rate
portion will be applied on the most remote principal installment or
installments then unpaid.
(f) Each prepayment of a Long Term Rate portion, whether voluntary, by reason
of acceleration or otherwise will be accompanied by payment of all accrued
interest on the amount of the prepayment and the prepayment fee described
below.
(g) The prepayment fee will be the sum of fees calculated separately for each
Prepaid Installment, as follows:
(i) The Bank will first determine the amount of interest which would
have accrued each month for the Prepaid Installment had it remained
outstanding until the applicable Original Payment Date, using the
Long Term Rate;
(ii) The Bank will then subtract from each monthly interest amount
determined in (i), above, the amount of interest which would accrue
for that Prepaid Installment if it
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were reinvested from the date of prepayment through the Original
Payment Date, using the following rate:
(A) If the Original Payment Date is more than 5 years after the
date of prepayment: the Treasury Rate plus one-quarter of one
percentage point;
(B) If the Original Payment Date is 5 years or less after the date
of prepayment: the Money Market Rate.
(iii) If (i) minus (ii) for the Prepaid Installment is greater than zero,
the Bank will discount the monthly differences to the date of
prepayment by the rate used in (ii) above. The sum of the discounted
monthly differences is the prepayment fee for that Prepaid
Installment.
(h) The following definitions will apply to the calculation of the prepayment
fee:
"Money Market" means the domestic certificate of deposit market, the eurodollar
deposit market or other appropriate money market selected by the Bank.
"Money Market Rate" means the fixed interest rate per annum which the Bank
determines could be obtained by reinvesting a specified Prepaid Installment in
the Money Market from the date of prepayment through the Original Payment Date.
"Original Payment Dates" mean the dates on which principal of the Long Term Rate
portion would have been paid if there had been no prepayment. If a portion of
the principal would have been paid later than the end of the interest period in
effect at the time of prepayment, then the Original Payment Date for that
portion will be the last day of the interest period.
"Prepaid Installment" means the amount of the prepaid principal of the Long Term
Rate portion which would have been paid on a single Original Payment Date.
"Treasury Rate" means the interest rate yield for U.S. Government Treasury
Securities which the Bank determines could be obtained by reinvesting a
specified Prepaid Installment in such securities from the date of prepayment
through the Original Payment Date.
(i) The Bank may adjust the Treasury Rate and Money Market Rate to reflect the
compounding, accrual basis, or other costs of the Long Term Rate portion.
Each of the rates is the Bank's estimate only and the Bank is under no
obligation to actually reinvest any prepayment. The rates will be based on
information from either the Telerate of Reuters information services, THE
WALL STREET JOURNAL, or other information sources the Bank deems
appropriate.
(j) If at any time during any applicable interest period the Long Term Rate
shall exceed the Maximum Rate and thereafter the Long Term Rate shall
become less than the Maximum Rate, the rate of interest payable shall be
the Maximum Rate until the Bank shall have received the amount of interest
it otherwise would have received if the interest payable
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had not been limited by the Maximum Rate during the period of time the
long Term Rate exceeded the Maximum Rate.
5. FEES AND EXPENSES
5.1 UNUSED COMMITMENT FEE. The Borrower agrees to pay the Bank a fee on any
difference between the Facility No. 1 Commitment and the amount of credit it
actually uses, determined by the weighted average loan balance maintained during
the specified period. The fee will be calculated at 3/8% per year on the last
day of each year, starting on February 14, 1997 and continuing through the
Expiration Date.
5.2 REIMBURSEMENT COST.
(a) The Borrower agrees to immediately repay the Bank for expenses that
include, but are not limited to, filing, recording and search fees,
appraisal fees, and title report fees.
(b) The Borrower agrees to reimburse the Bank for any expenses it incurs in
the preparation of this Agreement and any agreement or instrument required
by this Agreement. Expenses include, but are not limited to, reasonable
attorneys' fees.
(c) The Borrower agrees to reimburse the Bank for the cost of periodic audits
and appraisals of the real or personal property collateral securing this
Agreement, at such intervals as the Bank may reasonably require but not to
exceed annual except if an Event of Default has occurred and is continuing
although Bank may require semi-annual audits at Bank's cost without event
of default. The audits and appraisals may be performed by employees of the
Bank or by independent appraisers.
5.3 NO EXCESS FEES. Notwithstanding anything to the contrary in this Section 5 ,
in no event shall any sum payable under this Section 5 (to the extent, if any,
constituting interest under any applicable laws), together with all amounts
constituting interest under applicable laws and payable in connection with the
credit evidenced hereby, exceed the Maximum Rate or the maximum amount of
interest permitted to be charged, taken, reserved, received or contracted for
under applicable usury laws.
6. COLLATERAL
6.1 PERSONAL PROPERTY. The Borrower's obligations to the Bank under this
Agreement will be secured by personal property the Borrower now owns or will own
in the future as listed below. The collateral is further defined in certain
security agreement(s) executed by the Borrower.
(a) Equipment.
(b) Inventory.
(c) Receivables.
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7. DISBURSEMENTS, PAYMENTS AND COSTS
7.1 ADDITIONAL COSTS. The Borrower will pay the Bank, on demand, for the Bank's
costs or losses arising from any statute or regulation, or any request or
requirement of a regulatory agency. The costs and losses will be allocated to
the loan in a manner determined by the Bank, using any reasonable method. The
costs include the following:
(a) any reserve or deposit requirements; and
(b) any capital requirements relating to the Bank's assets and commitments for
credit.
7.2 INTEREST CALCULATION. Except as otherwise stated in this Agreement, all
interest fees, if any, will be computed on the basis of a 365-day year and the
actual number of days elapsed.
7.3 DEFAULT RATE. Upon the occurrence and during the continuation of any Event
of Default under this Agreement, advances under this Agreement will at the
option of the Bank bear interest at the lesser of
(a) the Maximum Rate and
(b) a rate per annum which is 2.00 percentage points higher than the rate of
interest otherwise provided under this Agreement. This will not constitute
a waiver of any default.
8. CONDITIONS The Bank must receive the following items, in form and content
acceptable to the Bank, before it is required to extend any credit to the
Borrower under this Agreement
8.1 AUTHORIZATIONS. Evidence that the execution, delivery and performance by the
Borrower and each subordinating creditor of this Agreement and any instrument or
agreement required under this Agreement have been duly authorized.
8.2 SECURITY AGREEMENTS. Signed original security agreements, assignments,
financing statements and fixture filings (together with collateral in which the
Bank requires a possessory security interest), which the Bank requires.
8.3 EVIDENCE OF PRIORITY. Evidence that security interests and liens in favor of
the Bank are valid, enforceable, and prior to all others' rights and interests,
except those the Bank consents to in writing.
8.4 INSURANCE. Evidence of insurance coverage, as required in the "Covenants"
section of this Agreement.
8.5 SUBORDINATION AGREEMENTS. Satisfactory execution of the amendment to
subordination agreement in favor of the Bank signed by the Borrower and
subordinating noteholders.
8.6 GOOD STANDING. Certificates of good standing for the Borrower from its state
of incorporation and from any other state in which the Borrower is required to
qualify to conduct its business.
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9. REPRESENTATIONS AND WARRANTIES When the Borrower signs this Agreement the
Borrower makes the following representations and warranties. Each request for an
extension of credit constitutes a renewed representation.
(a) The Borrower is a corporation duly formed and existing under the laws of
the state where organized.
(b) This Agreement, and any instrument or agreement required hereunder, are
within the Borrower's powers, have been duly authorized, and do not
conflict with any of its organizational papers.
(c) This Agreement is a legal, valid and binding agreement of the Borrower,
enforceable against the Borrower in accordance with its terms, and any
instrument or agreement required hereunder, when executed and delivered,
will be similarly legal, valid, binding and enforceable.
(d) In each state in which the Borrower is required to be licensed or
qualified, it is properly licensed or qualified, in good standing, and,
where required, in compliance with assumed name statutes, except where the
failure to be so licensed or qualified or to comply with such statutes
would not have a material adverse effect on the Borrower's business,
financial conditions, or ability to repay the Loan.
(e) This Agreement does not conflict in any material respect with any law,
agreement concerning or obligating Borrower for more than Ten Thousand and
no/100 dollars ($10,000.00), or obligation by which the borrower is bound.
(f) All financial and other information that has been or will be supplied to
the Bank is:
(i) sufficiently complete to give the Bank accurate knowledge of the
Borrower's (and any guarantor's) financial condition.
(ii) in form and content reasonably required by the Bank, and (iii) in
compliance with all government regulations that apply.
(g) There is no lawsuit, tax claim or other dispute pending or threatened
against the Borrower, which, if lost, would impair in any material respect
the Borrower's financial condition or ability to repay the loan, except as
have been disclosed in writing to the Bank.
(h) all collateral required in this Agreement is owned by the grantor of the
security interest free of any title defects and any liens or interests of
others, except those which have been approved by the Bank in writing or
are permitted in Section 10.8 of this Agreement or in the Security
Agreement
(i) The Borrower possesses all permits, memberships, franchises, contracts and
licenses required and all trademark rights, trade name rights, patent
rights and assumed name rights necessary to enable it to conduct the
business in which it is now engaged (such will not be considered
"necessary to enable Borrower to conduct its business", if the failure to
obtain same would not materially adversely affect Borrower's, business
financial condition, or ability to repay the Loan).
(j) There is no event which is, or with notice or lapse of time or both would
be, an Event of Default under this Agreement.
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(k) all inventory which is included in the Borrowing Base is of good and
merchantable quality and free from defects.
(l) the Borrower is in full compliance with all applicable requirements of the
employee Retirement Income Security Act of 1974, as amended ("ERISA");
provided that such will only be considered out of compliance if the
failure to comply could reasonably be expected to materially adversely
effect Borrower's business, financial condition, or ability to repay the
Loan.
(m) The Borrower's place of business (or, if the Borrower has more than one
place of business, its chief executive office) is located at the address
listed under the Borrower's signature on this Agreement.
10. COVENANTS The Borrower agrees, so long as credit is available under this
Agreement and until the Bank is repaid in full:
10.1 USE OF PROCEEDS. To use the proceeds of the credit only for.
Facility No. 1: working capital.
Facility No. 2: the refinance of an existing term loan.
Facility No. 3: the purchase of new vehicles and new and/or used
equipment.
10.2 FINANCIAL INFORMATION. To provide the following financial information and
statements and such additional information as reasonably requested by the Bank
from time to time, all in form and detail acceptable to the Bank:
(a) Within 120 days of the end of each fiscal year of the Borrower, the
Borrower's annual financial statements. These financial statements must be
audited by a Certified Public Accountant ("CPA") reasonably acceptable to
the Bank.
(b) Within 60 days of each period's end, the Borrower' quarterly financial
statements and compliance certificate. The financial statements may be
Borrower prepared.
(c) A borrowing certificate setting forth the respective amounts of Acceptable
Receivable and Acceptable Inventory as of the last day of each month
within thirty (30) days after month end.
(d) Statements showing an aging of the borrower's receivables within thirty
(30) days after the end of each month.
(e) An inventory listing within thirty (30) days after the end of each month;
the listing must include a description of the inventory, its location and
cost, and such other information as the Bank may require.
(f) Promptly upon the Bank's request, such other statements, lists of property
and accounts, budgets, forecasts or reports as to the Borrower and as to
each guarantor of the Borrower's obligations to the Bank as the Bank may
request.
10.3 CURRENT RATIO. To maintain a ratio of current assets to current
liabilities of at least 1.50:1.0.
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For purposes of this calculation any principal amount outstanding under Facility
No. 1 shall be excluded from current liabilities.
10.4 NET WORTH. To maintain net worth equal to at least Four Million Five
Hundred Thousand and no/100 dollars ($4,500,000.00).
"Net worth" means the gross book value of the Borrower's assets less total
liabilities, including but not limited to accrued and deferred income taxes, and
any reserves against assets.
10.5 MAXIMUM DEBT RATIO. To maintain a Maximum Debt Ratio not exceeding
2.25:1.0.
"Maximum Debt Ratio" means the sum of current liabilities plus long term
liabilities, excluding debt subordinated to the sum of Net Worth plus debt
subordinated to the Borrower's obligations to the Bank in a manner acceptable to
the Bank.
10.6 FIXED CHARGE COVERAGE RATIO. To maintain a Fixed Charge Coverage Ratio of
at least 1.25:1.0.
"Fixed Charge Coverage Ratio" means the ratio of earnings before interest,
taxes, depreciation and amortization to the sum of taxes paid, interest expense,
scheduled debt payments, and One Hundred Fifty Thousand and no/100 dollars
($150,000.00) for capital expenditures (provided that this shall not be a limit
on the amount of capital expenditures that may be made by Borrower).
This ratio will be calculated at the end of each fiscal quarter, using the
results of that quarter and each of the 3 immediately preceding quarters.
10.7 OTHER DEBTS. Not to have outstanding or incur any direct or contingent
debts or lease obligations (other than those to the Bank), or become liable for
the debts of others without the Bank's prior written consent. This does not
prohibit:
(a) Acquiring goods, supplies, or merchandise on normal trade credit.
(b) Endorsing negotiable instruments received in the usual course of
business.
(c) Obtaining surety bonds in the usual course of business.
(d) Debt secured by lines permitted in Section 10.8.
(e) Additional debts for business purposes which do not exceed a total
principal amount of One Hundred Fifty Thousand and no/100 Dollars
($150,000.00) outstanding at any one time.
(f) Additional debts for the financing of insurance premiums which do not
exceed a total principal amount of Two Hundred Fifty Thousand and no/100
Dollars ($250,000.00) outstanding at any one time.
10.8 OTHER LIENS. Not to create, assume, or allow any security interest or lien
(including judicial liens) on property the Borrower now or later owns, except:
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(a) Deeds of trust and security agreements in favor of the Bank.
(b) Liens for taxes not yet due or remaining payable up to 120 days without
any penalty or that are being contested in good faith.
(c) Liens imposed by law, such as materialmen's, mechanics', carriers',
workmen's and repairmen's liens, and other similar liens arising in the
ordinary course of business securing obligations which are not overdue for
a period of more than 30 days.
(d) Other liens arising in the ordinary course of business which are not
incurred in connection with the borrowing of money or the obtaining of
advances or credit and which do not materially detract from the value of
its property or its assets or materially impair the use thereof in the
operation of its business including any landlord's liens.
(e) Liens for taxes, assessment or other governmental charges which are not
yet due or which are being actively contested in good faith by appropriate
proceedings.
(f) Liens arising from material adverse legal judgments (including liens in
connection with appeal bonds) not in excess of $200,000 (after taking
insurance coverage into account).
(g) Additional liens which, together with the liens permitted under
subparagraphs 10.7(d) and (e), above, secure obligations in a total
principal amount of Four Hundred Thousand and no/100 Dollars ($400,000.00)
outstanding at any one time.
10.9 DIVIDENDS. Not to declare or pay any dividends on any of its shares,
except
(a) if the Maximum Debt Ratio as defined in Paragraph 10.5 above, adjusted to
reflect the effect of the proposed dividend, is less than or equal to
3.50:1.0; and
(b) following the making of the proposed dividend, the aggregate amount of all
dividends made during the current fiscal year would not exceed thirty (30)
percent of net income.
10.10 CHANGE OF OWNERSHIP. Not to cause, permit, or suffer any change, direct or
indirect, in the Borrower's capital ownership.
10.11 NOTICES TO BANK. Notify the Bank in writing not later than five (5)
business days after the earlier of when Borrower obtains actual knowledge or
receives written notice thereof of:
(a) any lawsuit over Two Hundred Thousand and no/100 Dollars ($200,000.00)
against the Borrower.
(b) any material dispute between the Borrower and any government authority. (c)
any failure to comply with this Agreement. (d) any change in the Borrower's
name, legal structure, place of business,
or chief executive office if the Borrower has more than one place of
business.
10.12 BOOKS AND RECORDS. To maintain adequate books and records.
10.13 AUDITS. To allow the Bank and its agents to inspect Borrower's properties
and to make available to the Bank and its agents for examination, audit, and
copying, books and records of the Borrower, in each case at any reasonable time.
If any of the Borrower's properties, books or records are in the possession of
any third party (other than legal counsel) the Borrower authorizes such third
party (other than legal counsel) to permit the Bank or its agents to have access
to and perform inspections or audits of such books or records and to respond to
the
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Bank's requests for information concerning such properties, books and records;
provided that, the Bank shall have given notice to the Borrower a reasonable
time prior to such an inspection, audit or request for information and, if a
representative of the Borrower is available, shall permit a representative of
the Borrower, at the Borrower's option, to be present at the time of such
inspection, audit or response to request for information.
10.14 COMPLIANCE WITH LAWS. To comply with the laws, (including any assumed name
statute), REGULATIONS, and orders of any government body with authority over the
Borrower's business. The Borrower shall comply at all times with all applicable
requirements of ERISA. Borrower will only be considered out of compliance
hereunder if the failure to comply could reasonably be expected to materially
adversely effect Borrower's business, financial condition, or ability to repay
the Loan.
10.15 PRESERVATION OF RIGHTS. To maintain and preserve all rights, privileges,
and franchises the Borrower now has Borrower will only be considered out of
compliance hereunder if the failure to Maintain or preserve same could
reasonably be expected to materially adversely effect Borrower's business,
financial condition, or ability to repay the Loan.
10.16 MAINTENANCE OF PROPERTIES. To make any necessary repairs, renewals, or
replacements to keep the Borrower's properties that are, in the borrower's sound
business judgment, necessary for the conduct of the Borrower's business, in good
working condition.
10.17 PERFECTION OF LIENS. To help the Bank perfect and protect its security
interests and liens, and reimburse it for related costs it incurs to protect its
security interests and liens.
10.18 COOPERATION. To take any action reasonably requested by the Bank to carry
out the intent of this Agreement.
10.19 INSURANCE.
(A) INSURANCE COVERING COLLATERAL. To maintain all risk property damage
insurance policies covering the tangible property comprising the
collateral and any insurance usual for Borrower's business. Each insurance
policy must be in an amount reasonably acceptable to the Bank. The
insurance must be issued by an insurance company reasonably acceptable to
the Bank and must include a lender's loss payable endorsement in favor of
the Bank in a form acceptable to the Bank.
(B) GENERAL BUSINESS INSURANCE. To maintain insurance reasonably satisfactory
to the Bank as to amount, nature and carrier covering property damage
(including loss of use and occupancy) to any of the Borrower's properties,
public liability insurance including coverage for contractual liability,
product liability and workers' compensation, and any other insurance which
is usual for the Borrower's business
(C) EVIDENCE OF INSURANCE. Upon the request of the Bank, to deliver to the
Bank a copy of each insurance policy or, if permitted by the Bank, a
certificate of insurance listing all insurance in force.
10.20 ADDITIONAL NEGATIVE COVENANTS. Not to, without the Bank's written
consent:
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(a) engage in any business activities substantially different from the
Borrower's present business;
(b) liquidate or dissolve the Borrower's business;
(c) enter into any consolidation, merger, pool, joint venture, syndicate, or
other combination;
(d) acquire or purchase a business or its assets; or
(e) sell or otherwise dispose of any assets for less than fair market value or
enter into any sale and leaseback agreement covering any of its fixed or
capital assets.
11. DEFAULT If any of the following events (each an "Event of Default") occurs,
the Bank may do one or more of the following:
(i) declare the Borrower in default,
(ii) stop making any additional credit available to the Borrower, (iii)
exercise any and all rights and remedies as may be available to
the Bank under the terms of any collateral documents, security
instruments, debt instruments or any other document or instrument
executed in connection herewith or in any way related hereto,
(iv) exercise any and all rights and remedies as may be available to
the Bank at law or in equity, and
(v) declare the entire debt created and evidenced hereby to be
immediately due and payable in full, whereupon the entire unpaid
principal indebtedness evidenced hereby, and all accrued unpaid
interest thereon, shall at once mature and become due and payable
without presentment, demand, protest, grace or notice of any kind
(including, without limitation, notice of intent to accelerate,
notice of acceleration or notice of protest), all of which are
hereby severally waived by the Borrower. If a bankruptcy
petition is filed with respect to the Borrower, the entire debt
outstanding under this Agreement will automatically become due
immediately.
11.1 FAILURE TO PAY. The Borrower fails to make a payment under this Agreement
within 3 days after the date when due.
11.2 NON-COMPLIANCE. The Borrower fails to perform any obligation after Borrower
obtains actual knowledge hereof or receives written notice thereof from the Bank
under:
(a) this Agreement and such failure continues for 20 days, (b) any other
agreement made in connection with this loan and such failure
continues for 20 days, or
(c) any other material agreement the Borrower has with the Bank or any
affiliate of the Bank and such failure continues past any grace or cure
period provided for in such agreement.
11.3 CROSS-DEFAULT. Any default occurs under any agreement in connection with
any credit in excess of Fifty Thousand and no/100 Dollars ($50,000.00) the
Borrower has obtained from anyone else or which the Borrower has guaranteed and
such failure continues after the lapse of any grace or cure period.
18
<PAGE>
11.4 LIEN PRIORITY. The Bank fails to have an enforceable first lien (except for
any liens permitted hereunder and prior liens to which the Bank has consented in
writing) on or security interest in any property given as security for this
loan.
11.5 FALSE INFORMATION. The Borrower has given the Bank materially false or
misleading information or representations that were materially false or
misleading at the time given or made. Borrower will only be considered to have
given materially false or misleading information or representations if same
could reasonably be expected to materially adversely effect Borrower's business,
financial condition, or ability to repay the Loan.
11.6 BANKRUPTCY. The Borrower files a bankruptcy petition, a bankruptcy petition
is filed against the Borrower and such involuntary petition is not dismissed
within 60 days after such filing, or the Borrower makes a general assignment for
the benefit of creditors.
11.7 RECEIVERS. A receiver or similar official is appointed for the Borrower's
business, or the business is terminated.
11.8 JUDGMENTS. Any judgments or arbitration awards are entered against the
Borrower which shall not have been dismissed, discharged, stayed pending appeal
or bonded within 60 days after entry, or the Borrower enters into any settlement
agreements with respect to any litigation or arbitration , in any aggregate
amount of Two Hundred Thousand and no/100 Dollars ($200,000.00) or more in
excess of any insurance coverage.
11.9 GOVERNMENT ACTION. Any government authority takes action with respect to
the borrower that the Bank reasonably believes materially adversely affects the
Borrower's financial condition or ability to repay.
Notwithstanding anything above to the contrary, a default under the application
and Agreement for Standby Letter of Credit under Section 8(b), 8(c), 8(d), 8(e),
or 8(f) of that Agreement shall not constitute a cross-default under this
Agreement (unless the event giving rise to such default would independently
cause an Event of Default under the terms of this Section 10).
11.10 DEFAULT UNDER GUARANTY OR SUBORDINATION AGREEMENT. Any guaranty,
subordination agreement, security agreement, deed of trust, or other document
required by this Agreement is revoked in whole or in part, violated or not
longer in effect.
12. ENFORCING THIS AGREEMENT; MISCELLANEOUS
12.1 GAAP. Except as otherwise stated in this Agreement, all financial
information provided to the Bank and all financial covenants will be made under
generally accepted accounting principles, consistently applied.
12.2 GOVERNING LAW. THIS AGREEMENT IS GOVERNED BY TEXAS LAW.
19
<PAGE>
12.3 SUCCESSORS AND ASSIGNS. This Agreement is binding on the Borrower's and the
Bank's successors and assignees. The Borrower agrees that it may not assign this
Agreement without the Bank's prior written consent. The Bank may sell
participations in or assign this loan, and may exchange financial information
about the Borrower with actual or potential participants or assignees who have
agreed to be bound by the provisions of Section 12.15. If the loan is assigned,
the purchase will have the right of set-off against the Borrower.
12.4 ARBITRATION.
(a) This paragraph concerns the resolution of any controversies or claims
between the Borrower and the Bank, including but not limited to those that
arise from:
(i) this Agreement (including any renewals, extensions or
modifications of this Agreement);
(ii) any document, agreement or procedure related to or delivered in
connection with this Agreement;
(iii) any violation of this Agreement; or
(iv) any claims for damages resulting from any business conducted between
the Borrower and the Bank, including claims for injury to persons,
property or business interests (torts).
(b) At the request of the Borrower of the Bank, any such controversies or
claims will be settled by arbitration in accordance with the United States
Arbitration Act. THE UNITED STATES ARBITRATION ACT WILL APPLY EVEN THOUGH
THIS AGREEMENT PROVIDES THAT IT IS GOVERNED BY TEXAS LAW.
(c) Arbitration proceedings will be administered by the American Arbitration
Association and will be subject to its commercial rules of arbitration.
(d) For purposes of the application of the statute of limitations, the filing
of an arbitration pursuant to this paragraph is the equivalent of the
filing of a lawsuit, and any claim or controversy which may be arbitrated
under this paragraph is subject to any applicable statutes of limitations.
The arbitrators will have the authority to decide whether any such claim
or controversy is barred by the statute of limitations and, if so, to
dismiss the arbitration on that basis.
(e) If there is a dispute as to whether an issue is arbitratable, the
arbitrators will have the authority to resolve any such dispute.
(f) The decision that results from an arbitration proceeding may be submitted
to an authorized court of law to be confirmed and enforced.
(g) This provision does not limit the right of the Borrower or the Bank to:
(i) exercise self-help remedies such as setoff;
(ii) foreclose against or sell any real or personal property collateral;
or
(iii) act in a court of law before, during or after the arbitration
proceeding to obtain:
(A) an interim remedy; and/or
(B) additional or supplementary remedies.
20
<PAGE>
(h) The pursuit of a successful action for interim, additional or
supplementary remedies, or the filing of a court action, does not
constitute a waiver of the right of the Borrower or the Bank, including
the suing party, to submit the controversy or claim to arbitration if the
other party contests the lawsuit.
12.5 SEVERABILITY; WAIVERS. If any part of this Agreement is not enforceable,
the rest of the Agreement may be enforced. The Bank retains all rights, even if
it makes a loan after default. If the Bank waives a default, it may enforce a
later default. Any consent or waiver under this Agreement must be in writing.
12.6 COSTS. If the Bank incurs any expenses in connection with administering or
enforcing this Agreement, or if the Bank takes collection action under this
Agreement, it is entitled to costs and reasonable attorneys' fees, including any
allocated costs of in-house counsel.
12.7 ATTORNEY'S FEES. In the event of a lawsuit or arbitration proceeding, the
prevailing party is entitled to recover costs and reasonable attorneys' fees
(including any allocated costs of in-house counsel) incurred in connection with
the lawsuit or arbitration proceeding, as determined by the court or arbitrator.
12.8 DESTRUCTION OF BORROWER'S DOCUMENTS. The Bank will not be obligated to
return any schedules, invoices, statements, budgets, forecasts, reports or other
papers delivered by the Borrower, other than original documents which the
Borrower is legally required to retain. The Bank will destroy or otherwise
dispose of such materials at such time as the Bank, in its discretion, deems
appropriate.
12.9 RETURNED MERCHANDISE. Until the Bank exercises its rights to collect the
accounts receivable as provided under any security agreement required under this
Agreement, the Borrower may continue its present policies for returned
merchandise and adjustments. Credit adjustments with respect to returned
merchandise shall be made immediately upon receipt of the merchandise by
Borrower or upon other disposition of the merchandise by the debtor in
accordance with the Borrower's instructions. If a credit adjustment is made with
respect to any Acceptable Receivable, the amount of such adjustment shall no
longer be included in the amount of such Acceptable Receivable in computing the
Borrowing Base.
12.10 VERIFICATION OF RECEIVABLES. The Bank may in the Event of Default, either
orally or in writing, request confirmation from any debtor of the current amount
and status of the accounts receivable upon which such debtor is obligated. At
any other time, the Bank may reasonably request confirmation from any other
debtor of the current amount and status of accounts receivable using a third
party acceptable to the Bank, at cost to the Borrower.
12.11 INDEMNIFICATION. The Borrower agrees to indemnify the Bank against, and
hold the Bank harmless from, all claims, actions, losses, costs and expenses
(including attorneys' fees and allocated costs for in-house counsel) incurred by
the Bank and arising from any contention whether well-founded or otherwise, that
there has been a failure to comply with any law regulating the Borrower's sales
or leases to or performance of services for debtors obligated
21
<PAGE>
upon the Borrower's accounts receivable and disclosures in connection therewith.
This indemnity will survive repayment of the Borrower's obligations to the Bank
and termination of this Agreement.
12.12 NOTICES. All notices required under this Agreement shall be personally
delivered or sent by first class mail, postage prepaid, to the addresses, or by
telecopy to the telecopier number on the signature page of this Agreement, or to
such other addresses as the Bank and the Borrower may specify from time to time
in writing. In the event of telecopier use, original notices to follow by
personal delivery or first class mail.
12.13 USURY LAWS. It is the intention of the parties hereto to comply with
applicable usury laws; accordingly, it is agreed that notwithstanding any
contrary provision herein or in any note or other agreement or commitment
between Borrower and Bank, whether written or oral, expressed or implied, Bank
shall never be entitled to charge, receive, or collect, nor shall amounts
received by Bank be credited so that bank shall be paid, as interest a sum
greater than interest at the Maximum Rate. It is the intention of the parties
that this Agreement, and all notes and other instruments evidencing or securing
the payment of the indebtedness outstanding hereunder, or executed or delivered
in connection herewith, shall comply with applicable law. If Bank ever contracts
for, charges, receives or collects anything of value which is deemed to be
interest under applicable law, and if the occurrence of any circumstance or
contingency, whether acceleration or maturity, prepayment, delay in advancing
proceeds, or other event, should cause such interest to exceed the maximum
lawful amount, any amount which exceeds interest at the Maximum Rate shall be
applied to the reduction of the unpaid principal balance outstanding hereunder
or any other indebtedness owed to Bank by Borrower, and if all such indebtedness
is paid in full, any remaining excess shall be paid to Borrower. In determining
whether the interest hereon exceeds interest at the Maximum Rate, the total
amount of interest shall be spread throughout the entire term of such
indebtedness until its payment in full. To the extent that TEX. REV. CIV. STAT.
ANN. art 5069-1.04, as amended (the "Act"), is relevant to the Bank for the
purposes of determining the Maximum Rate, the parties elect to determine the
Maximum Rate under the Act pursuant to the "indicate rate ceiling" from time to
time in effect, as referred to and defined in article 1.04(a)(1) of the Act;
subject, however, to any right the Bank may have subsequently under applicable
law, to change the method of determining the Maximum Rate.
12.14 WAIVERS; RELEASES; ENFORCEMENT. The Borrower and all guarantors of the
indebtedness evidenced by this Agreement severally waive diligence in collecting
and bringing suit against any party, and agree
(a) to all extensions and partial payments, with or without notice, before
or after maturity,
(b) to any substitution, exchange or release of any security now or hereafter
given for such indebtedness, and
(c) that it shall not be necessary for the Bank, in order to enforce payment
of such indebtedness, to first institute or exhaust the Bank's remedies
against the borrower or any other party liable therefor or against any
security for such indebtedness.
12.15 CONFIDENTIALITY. The Bank agrees to take reasonable precautions and
exercise due care to maintain the confidentiality of all non-public confidential
information provided in connection
22
<PAGE>
with this Agreement or any document executed in connection herewith and agrees
that it shall not use any such information for any purpose or in any manner
other than pursuant to the terms contemplated by this Agreement. The bank may
disclose such information
(i) to BankAmerica Corporation affiliates and other related entities,
(ii) at the request of any Bank regulatory authority or in connection
with an examination of the Bank by any such authority,
(iii) pursuant to subpoena or other court process,
(iv) when required to do so in accordance with the provisions of any
applicable law or regulation,
(v) at the express direction of any agency of any State of the United
States or at any other jurisdiction in which the Bank conducts its
business,
(vi) to its independent auditors and other professional advisors that
have a reasonable need or basis for access thereto and provided that
such persons agree to be bound by the terms of this Section 12.15
and
(vii) to the extent reasonably required in connection with any proceeding
to enforce its rights hereunder, provided, however, the Bank shall
instruct such independent auditors or other professional advisors to
keep such information confidential in accordance with the terms of
this Section 12.15; provided further, that in the event of any
disclosure of no public information pursuant to any of clauses (ii),
(iii), (iv) and (vi) above, the Bank shall make a good faith
attempt, to the extent practicable, to notify Borrower of any such
disclosure of non-public information at least three (3) Business
Days prior to disclosing such information, and in any event shall
notify Borrower of such disclosure as soon as practicable.
12.16 NO ORAL AGREEMENTS. THIS WRITTEN AGREEMENT AND THE INSTRUMENTS AND
DOCUMENTS EXECUTED IN CONNECTION HEREWITH REPRESENT THE FINAL AGREEMENT BETWEEN
THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS,
OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
This Agreement is executed as of the date stated at the top of the first page.
BANK OF AMERICA TEXAS, N.A. Name: Kim a. Ruth
Title: Vice President
By: __________________________
Telecopy No. (713) 652-3619 DE-RO/SUNCOAST, INC.
By: ________________________
Name: Kirby Attwell
Title: chairman
23
<PAGE>
Address where notices to the Bank Are to be sent:
By: ________________________
Bank of America Texas, N.A. Name: Tim Fogelsong
Attn: commercial Loan Services Title: Secretary
333 Clay Street, Ste. 3600
Houston, Texas 77002 Telecopy No.: (713) 622-7477
Address where notices to the Borrower
are to be sent:
140 Fallbrook Drive
Houston, Texas 77038
24
EXHIBIT 10.13
BANK OF AMERICA
AMENDMENT TO DOCUMENTS
- --------------------------------------------------------------------------------
FIRST AMENDMENT TO BUSINESS LOAN AGREEMENT (RECEIVABLES AND INVENTORY)
This First Amendment to Business Loan Agreement (Receivables and Inventory) is
entered into as of May _______, 1997, between Bank of America Texas, N.A.
(""Bank"") and De-Ro/ Suncoast, Inc. ("Borrower").
RECITALS
A. WHEREAS, Bank and Borrower have entered into that certain Business Loan
Agreement (Receivables and Inventory) dated February 24, 1997, (the
"Agreement"); and
B. WHEREAS, Borrower and Bank desire to amend certain terms and provisions of
said Agreement as more specifically hereinafter set forth.
AGREED
NOW, THEREFORE, in consideration of the foregoing recitals and other valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Bank and Borrower mutually agree to amend said Agreement as follows:
1. In Paragraph 1.1(a) (Borrowing Base) of the Agreement, the amount "Seven
Million Five Hundred Thousand and No/100 Dollars ($7,500,000.00)" is
substituted for the amount "Seven Million and No/100 Dollars
($7,000,000.00)".
2. In the first three sentences of Paragraph 2.6 (Letters of Credit) of the
Agreement, the days "365" is substituted for the days "90".
3. In Paragraph 10.7(e) (Other Debts) of the Agreement, the amount "Four
Hundred Thousand and No/100 dollars ($400,000.00)" is substituted for the
amount "One Hundred Fifty Thousand and No/100 Dollars ($150,000.00)".
4. Paragraph 10.7(f) (Other Debts) is deleted from the Agreement in its
entirety.
This Amendment will become effective as of the date first written above,
provided that each of the following conditions precedent have been satisfied in
a manner satisfactory to Bank:
The Bank has received from the Borrower a duly executed original of this
Amendment.
The Bank has received from the Borrower a corporate resolution in the
amount of Eight Million Seven Hundred Thirty-One and No/100 Dollars
($8,731,000.00).
<PAGE>
The Bank has received from the Borrower and the Creditor a Business Loan
Subornation Agreement.
Except as provided in this Amendment, all of the terms and provisions of the
Agreement and the documents executed in connection therewith shall remain in
full force and effect. All references in such other documents to the Agreement
shall hereafter be deemed to be references to the Agreement as amended hereby.
THIS WRITTEN AMENDMENT AND THE DOCUMENTS EXECUTED IN CONNECTION HEREWITH
REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES.
IN WITNESS WHEREOF, this Amendment has been executed by the parties hereto as of
the date first written above.
BANK OF AMERICA TEXAS, N.A. DE-RO/SUNCOAST, INC.
By: ___________________________ By: ___________________________
Kim Ruth, Vice President Kirby Attwell, Chairman
EXHIBIT 10.14
BANK OF AMERICA
AMENDMENT TO DOCUMENTS
- --------------------------------------------------------------------------------
SECOND AMENDMENT TO BUSINESS LOAN AGREEMENT
This Second Amendment to Business Loan Agreement (Receivables and Inventory) is
entered into as of September _________, 1997, between Bank of America Texas, N.
A. ("Bank") and De-Ro/Suncoast, Inc. ("Borrower").
RECITALS
A. WHEREAS, Bank and Borrower have entered into that certain Business Loan
Agreement (Receivables and Inventory) dated February 24, 1997, and amended on
May 30, 1997 (collectively the "Agreement"); and
B. WHEREAS, Borrower and Bank desire to amend certain terms and provisions of
said Agreement as more specifically hereinafter set forth.
AGREED
NOW, THEREFORE, in consideration of the foregoing recitals and other valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Bank and Borrower mutually agree to amend said Agreement as follows:
1. In Paragraphs 2.2 (a) and 4.2 (a) (Availability Period) of the Agreement, the
date "December 31, 1998" is substituted for the date "March 31, 1998".
2. Paragraph 5.1 (Unused Commitment Fee) of the Agreement is amended in its
entirety to read as follows:
5.1 UNUSED COMMITMENT FEE. The Borrower agrees to pay the Bank a fee on
any difference between the Facility No. 1 Commitment and the amount of
credit it actually uses, determined by the weighted average loan balance
maintained during the specified period. The fee will be calculated at 3/8%
per year and is payable at the end of each quarter in arrears, starting on
December 31, 1997 and continuing through the Expiration Date.
This Amendment will become effective as of the date first written above,
provided that each of the following conditions precedent have been satisfied in
a manner satisfactory to Bank:
The Bank has received from the Borrower a duly executed original of this
Amendment.
<PAGE>
Except as provided in this Amendment, all of the terms and provisions of the
Agreement and the documents executed in connection therewith shall remain in
full force and effect. All references in such other documents to the Agreement
shall hereafter be deemed to be references to the Agreement as amended hereby.
THIS WRITTEN AMENDMENT AND THE DOCUMENTS EXECUTED IN CONNECTION HEREWITH
REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES.
IN WITNESS WHEREOF, this Amendment has been executed by the parties hereto as of
the date first written above.
BANK OF AMERICA TEXAS, N.A. DE-RO/SUNCOAST, INC.
By: _____________________________ By: _____________________________
Kim Ruth, Vice President Kirby Attwell, Chairman
EXHIBIT 10.15
BANK OF AMERICA
BUSINESS LOAD AGREEMENT
(RECEIVABLES AND INVENTORY)
This Agreement dates as of February 24, 1997 is between Bank of America Texas,
N.A. (the "Bank") and American Packing and Gasket Company (the "Borrower").
1. DEFINITIONS In addition to the terms which are defined elsewhere in this
Agreement, the following terms have the meanings indicated for the purposes of
the Agreement.
1.1 "Borrowing Base" means the lesser of:
(a) Three Million and no/100 Dollars ($3,000,000.00); or
(b) the sum of
(i) 80% of the balance due on Acceptable Receivables; and
(ii) 55% of the value of Acceptable Inventory Consisting of raw materials
and finished goods.
In determining the value of Acceptable Inventory to be included in the Borrowing
Base, the Bank will use the lowest of (i) the Borrower's cost, (ii) the
Borrower's estimated market value, substantiated by evidence satisfactory to
Bank in its reasonable discretion.
1.2 "ACCEPTABLE RECEIVABLE" means an account receivable which satisfies the
following requirements:
(a) The account has resulted from the sale of goods or the performance of
services by the Borrower in the ordinary course of the Borrower's
business.
(b) There are no conditions which must be satisfied before the Borrower is
entitled to receive payment of the account. Accounts arising from COD
sales, consignments or guaranteed sales are not acceptable.
(c) The debtor upon the account does not claim any defense to payment and has
not asserted any counterclaims or offsets against the Borrower.
(d) The account represents a genuine obligation of the debtor for goods sold
and accepted by the debtor, or for services performed for and accepted by
the debtor.
(e) The Borrower has sent an invoice to the debtor in the amount of the
account.
(f) The account is owned by the Borrower free of any title defects or any
liens or interests of others except the security interest in favor of the
Bank.
(g) The debtor on the account is not any of the following:
(i) an employee, affiliate, parent or subsidiary of the Borrower, or an
entity which has common officers or directors with the Borrower.
(ii) the U.S. government or any agency or department of the U.S.
government unless the Bank agrees in writing to accept the
obligation and the Borrower complies with the procedures in the
Federal Assignment of Claims Act of 1940 with respect to the
obligation.
<PAGE>
(iii) any state, county, city, town or municipality.
(iv) any person or entity located in a foreign country.
(v) any person or entity to whom the Borrower is obligated for goods
purchased by the Borrower or for services performed for the
Borrower. This will not exclude accounts upon which any such debtor
is obligated to the extent that the accounts exceed the amount of
the Borrower's obligation to such debtor.
(h) The account is not in default. An account will be considered in default if
any of the following occurs:
(i) The account is not paid within the 90-day period starting on its
invoice date;
(ii) The debtor obligated upon the account suspends business, makes a
general assignment for the benefit of creditors, or fails to pay its
debts generally as they come due; or
(iii) Any petition is filed by or against the debtor obligated on the
account under any bankruptcy law or any other law or laws for the
relief of debtors.
(i) The account, when added to all other accounts that are obligations of the
same debtor, does not cause that debtor's total obligations to the
Borrower that are included in Acceptable Receivables to exceed 15% of the
balance due on all Acceptable Receivables
(j) The account is not the obligation of a debtor who is in default (as
defined above) on 20% or more of the accounts upon which such debtor is
obligated.
(k) The account does not arise from the sale of goods which remain in the
Borrower's possession or under the Borrower's control.
(l) The account is not evidenced by a promissory note or chattel paper. (m)
(m) The account is otherwise reasonably acceptable to the Bank.
1.3 "ACCEPTABLE INVENTORY" means raw materials and finished goods inventory
which satisfies the following requirements:
(a) The inventory is owned by the Borrower free of any title defects or any
liens or interests of others except the security interest in favor of the
Bank.
(b) The inventory is permanently located at locations which the Borrower has
disclosed to the Bank and which are reasonably acceptable to the Bank. If
the inventory is covered by a negotiable document of title (such as a
warehouse receipt) that document must be delivered to the Bank.
(c) The inventory is held for sale in the ordinary course of the borrower's
business and is of good and merchantable quality. Inventory which is
obsolete, unsalable, damaged, defective or discontinued or which has been
returned by the buyer, is not acceptable. Display items, work-in-process
and shipping materials are not acceptable.
(d) The inventory is not placed on consignment.
(e) The inventory is otherwise reasonably acceptable to the Bank.
<PAGE>
2. FACILITY NO. 1 LINE OF CREDIT AMOUNT AND TERMS
2.1 LINE OF CREDIT AMOUNT. During the availability period described below, the
Bank will provide a line of credit to the Borrower. The amount of the line of
credit (the "Facility No. 1 Commitment") is equal to the amount of the Borrowing
Base. This is a revolving line of credit with a within line facility for letters
of credit. During the availability period, the Borrower may repay principal
amounts and reborrow them. Each advance must be for at least Twenty Five
Thousand and no/100 Dollars ($25,000.00), or for the amount of the remaining
available line of credit, if less.
The Borrower agrees not to permit the outstanding principal balance of the line
of credit plus the undrawn amounts of any outstanding letters of credit, plus
amounts drawn on letters of credit and not yet reimbursed, to exceed the
Facility No. 1 Commitment.
2.2 AVAILABILITY PERIOD. (a) The line of credit is available between the date of
this Agreement and March 31, 1998 (the "Expiration Date") unless an Event of
Default has occurred and is continuing. (b) At any time and from time to time,
the Borrower may terminate in whole or reduce in part the Facility No. 1
Commitment, provided that any such partial reduction shall be in an aggregate
amount not less that $25,000 or integral multiples thereof. The amount of any
such termination or reduction may not thereafter be reinstated.
2.3 INTEREST RATE. The interest rate is the lesser of (a) the maximum lawful
rate of interest permitted under applicable usury laws, now or hereafter enacted
(the "Maximum Rate"), or (b) the rate (the "Basic Rate") that is equal to the
Bank's Reference Rate.
Notwithstanding the foregoing, if at any time the Basic Rate shall exceed the
Maximum Rate and thereafter the Basic Rate shall become less than the Maximum
Rate, the Rate of interest payable shall be the Maximum Rate until the Bank
shall have received the amount of interest it otherwise would have received if
the interest payable had not been limited by the Maximum Rate during the period
of time the Basic Rate exceeded the Maximum Rate.
The Reference Rate is the rate of interest publicly announced from time to time
by the Bank in Irving, Texas, as its Reference Rate. The Reference Rate is set
by the Bank based on various factors, including its costs and desired return,
general economic conditions and other factors, and is used as a reference point
for pricing some loans. The Bank may price loans to its customers at, above, or
below the Reference Rate. Any change in the Reference Rate will take effect at
the opening of business on the day specified in the public announcement of a
change in the Reference Rate.
2.4 CONDITIONS TO EACH EXTENSION OF CREDIT. Before each extension of credit
under the line of credit, including the first, the Borrower will deliver the
following to the Bank if requested by the Bank:
<PAGE>
(a) a borrowing certificate, in form and detail reasonably satisfactory to the
Bank, setting forth the Acceptable Receivables and the Acceptable
Inventory on which the requested extension of credit is to be based.
2.5 REPAYMENT TERMS.
(a) The Borrower will pay interest on February 28, 1997 and on the last day of
each month thereafter until payment in full of any principal outstanding under
this line of credit. (b) The Borrower will repay in full all principal and
accrued unpaid interest or other charges outstanding under this line of credit
no later than the Expiration Date.
2.6 LETTERS OF CREDIT. This line of credit may be used for financing commercial
letters of credit with a maximum maturity not to extend more than 90 days beyond
the Expiration Date. Each commercial letter of credit will require drafts
payable at sight.
This line of credit may be used for financing standby letters of credit with a
maximum maturity of the Expiration Date but not to extend more than 90 days
beyond the Expiration Date. The aggregate undrawn face amount of all letters of
credit outstanding at any one time plus amounts drawn on letters of credit and
not yet reimbursed may not exceed One Million and no/100 Dollars
($1,000,000.00).
The Borrower agrees: (a) any sum drawn under a letter of credit may, at the
option of the Bank, be added to the principal amount outstanding under this
Agreement. The amount will bear interest and be due as described elsewhere in
this Agreement; (b) if an Event of Default has occurred, to immediately deposit
with the Bank an amount equal to the aggregate undrawn face amount of all
outstanding letters of credit plus amounts drawn on letters of credit and not
yet reimbursed which undrawn portion of such amount shall promptly be refunded
if such Event of Default shall no longer be continuing; (c) the issuance of any
letter of credit and any amendment to a letter of credit is subject to the
Bank's written approval and each letter of credit and amendment must be in form
and content satisfactory to the Bank and in favor of a beneficiary acceptable to
the Bank; (d) to sign the Bank's form Application and Agreement for Commercial
Letter of Credit or Application and Agreement for Standby Letter of Credit, in
the forms attached hereto as Exhibits A1 and A2, in connection with each letter
of credit issued hereunder; provided, however, that the terms of this Agreement
shall govern in the event that there is any inconsistency between the terms of
such application and any of the terms and conditions hereof; (e) to pay any
customary issuance and/or other fees that the Bank notifies the Borrower will be
charged for issuing and processing letters of credit for the Borrower; (f) to
allow the Bank to automatically charge its checking account for applicable fees,
discounts, and other charges; and (g) to pay the Bank a non-refundable fee equal
to 1.00% per annum of the outstanding undrawn amount of each outstanding undrawn
standby letter of credit, payable annually in advance, calculated on the basics
of the outstanding undrawn face amount outstanding on the day the fee is
calculated.
<PAGE>
3. FACILITY NO.2: TERM LOAN AMOUNT AND TERMS
3.1 LOAN AMOUNT. The Bank agrees to provide a term loan to the Borrower in the
amount of Four Hundred Twenty Five Thousand and no/100 Dollars ($425,000.00)
(the "Facility No. 2 Commitment").
3.2 AVAILABILITY PERIOD. The loan is available in one disbursement from the Bank
between the date of this Agreement and February 28, 1997, unless an Event of
Default or other event which with notice or lapse of time or both would be an
Event of Default shall have occurred and be continuing.
3.3 INTEREST RATE. Unless the Borrower elects an optional interest rate as
described below, the interest rate is the lesser of (a) the maximum lawful rate
of interest permitted under applicable usury laws, now or hereafter enacted (the
"Maximum Rate"), or (b) the rate (the "Basic Rate") that is equal to the Bank's
Reference Rate.
Notwithstanding the foregoing, if at any time the Basic Rate shall exceed the
Maximum Rate and thereafter the Basic Rate shall become less than the Maximum
Rate, the Rate of interest payable shall be the Maximum Rate until the Bank
shall have received the amount of interest it otherwise would have received if
the interest payable had not been limited by the Maximum Rate during the period
of time the Basic Rate exceeded the Maximum Rate.
3.4 REPAYMENT TERMS.
(a) The Borrower will pay all accrued but unpaid interest on March 31, 1997 and
on the last day of each quarter thereafter and upon payment in full of the
principal of the loan. (b) The Borrower will repay principal in 8 successive
quarterly installments of Forty Seven Thousand Two Hundred Twenty Two and no/100
Dollars ($47,222.000) each, starting March 31, 1997, and in one final
installment on March 31, 1999 in the amount of the remaining principal balance
plus all accrued unpaid interest. (c) The Borrower may prepay the loan in full
or in part at any time. Prepayments of portions of the loan bearing interest at
Bank's Reference Rate may be made without penalty or premium. The prepayment
will be applied to the most remote installment of principal due under this
Agreement.
3.5 OPTIONAL INTEREST RATES. Instead of the interest rate based on the Bank's
Reference Rate, the Borrower may elect to have all or portions of the loan bear
interest at the rate(s) described below during an interest period agreed to by
the Bank and the Borrower; provided, however, that the Borrower shall not have
the option or right to elect to have all or any portion of the loan bear
interest at the rate(s) described below when such rate(s) exceeds the Maximum
Rate. Each interest rate is a rate per year. Interest will be paid on the last
day of each interest period, and on the last day of each month during the
interest period. At the end of any interest period, the interest rate will
revert to the rate based on the Reference Rate, unless the Borrower has
designated another optional interest rate for the portion.
3.6 LONG TERM RATE. The Borrower may elect to have all or portions of the
principal balance of the loan bear interest at the rate equal to the lesser of
(a) the Maximum Rate, or (b) the Long Term Rate, subject to the following
requirements:
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(a) The interest period during which the Long Term Rate will be in effect will
be one year or more.
(b) The "Long Term Rate" means the fixed interest rate the Bank and the
Borrowers agree will apply to the portion during the applicable interest period.
(c) Each Long Term Rate portion will be for an amount not less than One Hundred
Thousand Dollars ($100,000). (d) Any portion of the principal balance of the
loan already bearing interest at the Long Term Rate will not be converted to a
different rate during its interest period.
(e) The Borrowers may prepay the Long Term Rate portion in whole or in part. The
Borrowers will give the Bank irrevocable written notice of the Borrowers'
intention to make the prepayment, specifying the date and amount of the
prepayment. The notice must be received by the Bank at least 5 banking days in
advance of the prepayment. All prepayments of principal on the Long Term Rate
portion will be applied on the most remote principal installment or installments
then unpaid. (f) Each prepayment of a Long Term Rate portion, whether voluntary,
by reason of acceleration or otherwise, will be accompanied by payment of all
accrued interest on the amount of the prepayment and the prepayment fee
described below.
(g) The prepayment fee will be the sum of fees calculated separately for each
Prepaid Installment, as follows: (i) The Bank will first determine the amount of
interest which would have accrued each month for the Prepaid Installment had it
remained outstanding until the applicable Original Payment Date, using the Long
Term Rate; (ii) The Bank will then subtract from each monthly interest amount
determined in (i), above, the amount of interest which would accrue for that
Prepaid Installment if it were reinvested from the date of prepayment through
the Original Payment Date, using the following rate: (A) If the Original Payment
Date is more than 5 years after the date of prepayment: the Treasury Rate plus
one-quarter of one percentage point; (B) If the Original Payment Date is 5 years
or less after the date of prepayment: the Money Market Rate. (iii) If (i) minus
(ii) for the Prepaid Installment is greater than zero, the Bank will discount
the monthly differences to the date of prepayment by the rate used in (ii)
above. The sum of the discounted monthly differences is the prepayment fee for
that Prepaid Installment.
(h) The following definitions will apply to the calculation of the prepayment
fee:
"Money Market" means the domestic certificate of deposit market, the eurodollar
deposit market or other appropriate money market selected by the Bank.
"Money Market Rate" means the fixed interest rate per annum which the Bank
determines could be obtained by reinvesting a specified Prepaid Installment in
the Money Market from the date of prepayment through the Original Payment Date.
"Original Payment Dates" mean the dates on which principal of the Long Term Rate
portion would have been paid if there had been no prepayment. If a portion of
the principal would have
<PAGE>
been paid later than the end of the interest period in effect at the time of
prepayment, then the Original Payment Date for that portion will be the last day
of the interest period.
"Prepaid Installment" means the amount of the prepaid principal of the Long Term
Rate portion which would have been paid on a single Original Payment Date.
"Treasury Rate" means the interest yield for U.S. Government Treasury Securities
which the Bank determines could be obtained by reinvesting a specified Prepaid
Installment in such securities from the date of prepayment through the Original
Payment Date.
(i) The Bank may adjust the Treasury Rate and Money Market Rate to reflect the
compounding, accrual basis, or other costs of the Long Term Rate portion. Each
of the rates is the Bank's estimate only and the Bank is under no obligation to
actually reinvest any prepayment. The rates will be based on information from
either the Tellurite or Reuters information services, The Wall Street Journal,
or other information sources the Bank deems appropriate.
(j) If at any time during any applicable interest period the Long Term Rate
shall exceed the Maximum Rate and thereafter the Long Term Rate shall become
less that the Maximum Rate, the rate of interest payable shall be the Maximum
Rate until the Bank shall have received the amount of interest it otherwise
would have received if the interest payable had not been limited by the Maximum
Rate during the period of time the Long Term Rate exceeded the Maximum Rate.
4. FEES AND EXPENSES
4.1 UNUSED COMMITMENT FEE. The Borrower agrees to pay the Bank a fee on any
difference between the Facility No. 1 Commitment and the amount of credit it
actually uses, determined by the weighted average loan balance maintained during
the specified period. The fee will be calculated at 3/8% per year on the last
day of each year, starting on February 14, 1997 and continuing through the
Expiration Date.
4.2 REIMBURSEMENT COST. (a) The Borrower agrees to immediately repay the Bank
for expenses that include, but are not limited to, filing, recording and search
fees, appraisal fees, title report fees. (b) The Borrower agrees to reimburse
the Bank for any expenses it incurs in the preparation of this Agreement and any
agreement or instrument required by this Agreement. Expenses include, but are
not limited to, reasonable attorneys' fees. (c) The Borrower agrees to reimburse
the Bank for the cost of periodic audits and appraisals of the real or personal
property collateral securing this Agreement, at such intervals as the Bank may
reasonably require but not to exceed annual except if an Event of Default has
occurred and is continuing. The audits and appraisals may be performed by
employees of the Bank or by independent appraisers.
4.3 NO EXCESS FEES. Notwithstanding anything to the contrary in this Section 4,
in no event shall any sum payable under this Section 4 (to the extent, if any,
constituting interest under any applicable laws), together with all amounts
constituting interest under applicable laws and payable in connection with the
credit evidenced hereby, exceed the Maximum Rate or the
<PAGE>
maximum amount of interest permitted to be charged, taken, reserved, received or
contracted for under applicable usury laws.
5. COLLATERAL
5.1 PERSONAL PROPERTY. The Borrower's obligations to the Bank under this
Agreement will be secured by personal property the Borrower now owns or will own
in the future as listed below. The collateral is further defined in certain
security agreement(s) executed by the Borrower.
(a) Equipment.
(b) Inventory.
(c) Receivables.
6. DISBURSEMENTS, PAYMENTS AND COSTS
6.1 INTEREST CALCULATION. Except as otherwise stated in this Agreement, all
interest and fees, if any, will be computed on the basis of a 365-day year and
the actual number of days elapsed.
6.2 DEFAULT RATE. Upon the occurrence and during the continuation of any Event
of Default under this Agreement, advances under this Agreement will at the
option of the Bank bear interest at the lesser of (a) the Maximum Rate and (b) a
rate per annum which is 2.00 percentage points higher than the rate of interest
otherwise provided under this Agreement. This will not constitute a waiver of
any default.
7. CONDITIONS The Bank must receive the following items, in form and content
acceptable to the Bank, before it is required to extend any credit to the
Borrower under this Agreement.
7.1 AUTHORIZATIONS. Evidence that the execution, delivery and performance by the
Borrower of this Agreement and any instrument or agreement required under this
Agreement have been duly authorized.
7.2 SECURITY AGREEMENTS. Signed original security agreements, assignments,
financing statements and fixture filings (together with collateral in which the
Bank requires a possessor security interest), which the Bank requires.
7.3 EVIDENCE OF PRIORITY. Evidence that security interests and liens in favor of
the Bank are valid, enforceable, and prior to all others' rights and interest,
except those the Bank consents to in writing.
7.4 INSURANCE. Evidence of insurance coverage, as required in the "Covenants"
section of this Agreement.
<PAGE>
7.5 GOOD STANDING. Certificates of good standing for the Borrower from its state
of incorporation and from any other state in which the Borrower is required to
qualify to conduct its business.
8. REPRESENTATION AND WARRANTIES When the Borrower signs this Agreement the
Borrower makes the following representations and warranties. Each request for an
extension of credit constitutes a renewed representation. (a) The Borrower is a
corporation duly formed and existing under the laws of the state where
organized. (b) This Agreement, and any instrument or agreement required
hereunder, are within the Borrower's powers, have been duly authorized, and do
not conflict with any of its organizational papers. (c) This Agreement is a
legal, valid and binding agreement of the Borrower, enforceable against the
Borrower in accordance with its terms and any instrument or agreement required
hereunder, when executed and delivered, will be similarly legal, valid, binding,
and enforceable. (d) In each state in which the Borrower is required to be
licensed or qualified, it is properly licensed or qualified, in good standing,
and, where required, in compliance with assumed name statutes, except where the
failure to be so licensed or qualified or to comply with such statutes would not
have a material adverse effect on the Borrower's business, financial condition,
or ability to repay the Loan. (e) This Agreement does not conflict in any
material respect with any law, agreement concerning or obligating Borrower for
more than Ten Thousand and no/100 Dollars ($10,000.00), or obligation by which
the Borrower is bound. (f) All financial and other information that has been or
will be supplied to the Bank is: (i) sufficiently complete to give the Bank
accurate knowledge of the Borrower's (and any guarantor's) financial condition.
(ii) in form and content reasonably required by the Bank, and (iii) in
compliance with all government regulations that apply. (g) There is no lawsuit,
tax claim or other dispute pending or threatened against the Borrower, which, if
lost, would impair in any material respect the Borrower's financial condition or
ability to repay the loan, except as have been disclosed in writing to the Bank.
(h) All collateral required in this Agreement is owned by the grantor of the
security interest free of any title defects and any liens or interest of others,
except those which have been approved by the Bank in writing or are permitted in
Section 9.9 of this Agreement or in the Security Agreement. (i) The Borrower
possess all permits, memberships, franchises, contracts and licenses required
and all trademark rights, trade name rights, patent rights and assumed name
rights necessary to enable it to conduct the business in which it is now engaged
(such will not be considered "necessary to enable Borrower to conduct its
business", if the failure to obtain same would not materially adversely affect
Borrower's, business financial condition, or ability to repay the Loan). (j)
There is no event which is, or with notice or lapse of time or both would be, an
Event of Default under this Agreement. (k) All inventory which is included in
the Borrowing Base is of good and merchantable quality and free from defects.
(l) The Borrower is in full compliance with all applicable requirements of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"); provided
that such will only be considered out of compliance if the failure to comply
could reasonably be expected to materially adversely effect Borrower's business,
financial condition, or ability to repay the Loan. (m) The Borrower's place of
business (or, if the Borrower has more than one place of business, its chief
executive office) is located at the address listed under the Borrower's
signature on this Agreement.
9. COVENANTS The Borrower agrees, so long as credit is available under this
Agreement and until the Bank is repaid in full:
<PAGE>
9.1 USE OF PROCEEDS. To use the proceeds of the credit only for:
Facility No. 1: the support of working capital and general corporate purposes.
Facility No. 2: the refinance of an existing term loan.
9.2 FINANCIAL INFORMATION. To provide the following financial information and
statements and such additional information as reasonably requested by the Bank
from time to time, all in form and detail acceptable to the Bank.
(a) Within 120 days of the Borrower's fiscal year end, the Borrower's annual
financial statements. These financial statements must be audited by a
Certified Public Accountant ("CPA") reasonably acceptable to the Bank.
(b) Within 120 days of the Borrower's fiscal year end, Travis International,
Incr.'s annual financial statements. These financial statements must be
audited by a Certified Public Accountant ("CPA") reasonably acceptable to
the Bank. They shall be prepared on a consolidated basis.
(c) Within 60 days of the period's end, the Borrower's quarterly financial
statements and compliance certificate. These financial statements may be
Borrower prepared.
(d) A borrowing certificate setting forth the respective amounts of Acceptable
Receivables and Acceptable Inventory as of the last day of each month
within thirty (30) days after month end.
(e) Statements showing an aging of the Borrower's Receivables within thirty
(30) days after the end of each month.
(f) Promptly upon the Bank's request, such other statements, lists of property
and accounts, budgets, forecasts or reports as to the Borrower and as to
each guarantor of the Borrower's obligations to the Bank as the Bank may
reasonably request.
9.3 CURRENT RATIO. To maintain a ratio of current assets liabilities of at least
1.50:1.0, measured quarterly.
For purposes of this calculation, principal outstanding under Facility No. 1
shall be included as a current liability.
9.4 TANGIBLE NET WORTH. To maintain tangible net worth equal to at least Four
Million Five Hundred Thousand and no/100 Dollars ($4,500,000.00), measured
quarterly.
"Tangible net worth" means the gross book value of the Borrower's assets
(excluding goodwill, patents, trademarks, trade names, organization expense,
treasury stock, unamoritized debt discount and expense, deferred research and
development costs, deferred marketing expenses,
<PAGE>
and other like intangibles) less total liabilities, including but not limited to
accrued and deferred income taxes, and any reserves against assets.
9.5 TOTAL LIABILITIES TO TANGIBLE NET WORTH RATIO. To maintain a ratio of Total
Liabilities to Tangible Net Worth not exceeding 1.25:1.0, measured quarterly.
"Total Liabilities" means the sum of current liabilities plus long term
liabilities.
9.6 FIXED CHARGE COVERAGE RATIO. To maintain a Fixed Charge Coverage of at
Least 1.25:1.0.
"Fixed Charge Coverage Ratio" means the ratio of earnings before interest,
taxes, depreciation and amortization to the sum of total cash taxes, interest
expense, scheduled debt payments, and Fifty thousand and no/100 Dollars
($50,000.00) for capital expenditures (provided that this shall not be a limit
on the amount of capital expenditures that may be made by Borrower). This ratio
will be calculated at the end of each fiscal quarter, using the results of that
quarter and each of the 3 immediately preceding quarters.
9.7 PROFITABILITY. To maintain a positive net income after taxes and
extraordinary items for each fiscal year end accounting year.
9.8 OTHER DEBTS. Not to have outstanding or incur any direct or contingent debts
(other than those to the Bank), or become liable for the debts of others without
the Bank's written consent. This does not prohibit:
(a) Acquiring good, supplies, or merchandise on normal trade credit.
(b) Endorsing negotiable instruments received in the usual course of business.
(c) Obtaining surety bonds in the usual course of business.
(d) Debt secured by liens permitted in Section 9.9.
(e) Additional debts for the acquisition of product lines which do not exceed
a total principal amount of Three Hundred Thousand an no/100 Dollars
($300,000.00) outstanding at any one time.
(f) Additional debts for the financing the payment of insurance premiums which
do not exceed a total principal amount of One Hundred Fifty Thousand and
no/100 Dollars ($150,000.00) outstanding at any one time.
9.9 OTHER LIENS. Not to create, assume, or allow any security interest or lien
(including judicial liens) on property the Borrower now or later owns, except:
(a) Deeds of trust and security agreements in favor of the Bank.
(b) Liens for taxes not yet due or remaining payable up to 120 days without
any penalty or that are being contested in good faith.
(c) Liens imposed by law, such as materialmen's, mechanics', carriers',
workmen's and repairmen's liens, and other similar liens arising in the
ordinary course of business securing obligations which are not overdue for
a period of more than 30 days.
<PAGE>
(d) Other liens arising in the ordinary course of business which are not
incurred in connection with the borrowing of money or the obtaining of
advances or credit and which do not materially detract from the value of
its property or its assets or materially impair the use thereof in the
operation of its business, including any landlord's liens.
(e) Liens for taxes, assessment or other governmental charges which are not
yet due or which are being actively contested in good faith by appropriate
proceedings.
(f) Liens arising from material adverse legal judgments (including liens in
connection with appeal bonds) not in excess of $200,000 (after taking
insurance coverage into account).
(g) Additional liens which secure obligations in a total principal amount not
exceeding Four Hundred Fifty Thousand no/100 Dollars ($450,000.00).
9.10 NOTICES TO BANK. Notify the Bank in writing not later than five (5)
business days after the earlier of when Borrower obtains actual knowledge or
receives written notice thereof of: (a) any lawsuit over Two Hundred Thousand
and no/100 Dollars ($200,000.00) against the Borrower. (b) any material dispute
between the Borrower and any government authority. (c) any failure to comply
with this Agreement. (d) any change in the Borrower's name, legal structure,
place of business, or chief executive office if the Borrower has more than one
place of business.
9.11 BOOKS AND RECORDS. To maintain adequate books and records.
9.12 AUDITS. To allow the Bank and its agents to inspect Borrower's properties
and to make available to the Bank and its agents for examination, audit, and
copying, books and records of the Borrower, in each case at any reasonable time.
If any of the Borrower's properties, books or records are in the possession of
any third party (other than legal counsel) the Borrower authorizes such third
party (other than legal counsel) to permit the Bank or its agents to have access
to and perform inspections or audits of such books or records and to respond to
the Bank's requests for information concerning such properties, books and
records; provided that, the Bank shall have given notice to the Borrower a
reasonable time prior to such an inspection, audit or request for information
and, if a representative of the Borrower is available, shall permit a
representative of the Borrower, at the Borrower's option, to be present at the
time of such inspection, audit or response to request for information.
9.13 COMPLIANCE WITH LAWS. To comply with the laws, (including any assumed name
statute), regulations, and orders of any government body with authority over the
Borrower's business. The Borrower shall comply at all times with all applicable
requirements of ERISA. Borrower will only be considered out of compliance
hereunder if the failure to comply could reasonably be expected to materially
adversely effect Borrower's business, financial condition, or ability to repay
the Loan.
9.14 PRESERVATION OF RIGHTS. To maintain and preserve all rights, privileges,
and franchises the Borrower has. Borrower will only be considered out of
compliance hereunder if the failure to Maintain or preserve same could
reasonably be expected to materially adversely effect Borrower's business,
financial condition, or ability to repay the Loan.
<PAGE>
9.15 MAINTENANCE OF PROPERTIES. To make any necessary repairs, renewals, or
replacements to keep Borrower's properties that are, in the Borrower's sound
business judgment, necessary for the conduct of Borrower's business, in good
working condition.
9.16 PERFECTION OF LIENS. To help the Bank perfect and protect its security
interests and liens, and reimburse it for related costs it incurs to protect its
security interests and liens.
9.17 COOPERATION. To take any action reasonably requested by the Bank to carry
out the intent of this Agreement.
9.18 INSURANCE. (a) INSURANCE COVERING COLLATERAL. To maintain all risk property
damage insurance policies covering the tangible property comprising the
collateral and any insurance usual for Borrower's business. Each insurance
policy must be in an amount reasonably acceptable to the Bank. The insurance
must be issued by an insurance company reasonably acceptable to the Bank (b)
GENERAL BUSINESS INSURANCE. To maintain insurance reasonably satisfactory to the
Bank as to amount, nature and carrier covering property damage (including loss
of use and occupancy) to any of the Borrower's properties, public liability
insurance including coverage for contractual liability, product liability and
workers' compensation, and any other insurance which is usual for the Borrower's
business. (c) EVIDENCE OF INSURANCE. Upon the request of the Bank, to deliver to
the Bank a cop of each insurance policy or, if permitted by the Bank, a
certificate of insurance listing all insurance in force.
9.19 ADDITIONAL NEGATIVE COVENANTS. Not to, without the Bank's written consent:
(a) engage in any business activities substantially different from the
Borrower's present business; (b) liquidate or dissolve the Borrower's business;
(c) enter into any consolidation, merger, pool, joint venture, syndicate, or
other combination; (d) acquire or purchase a business or its assets except that
Borrower may purchase assets of one or more businesses not exceeding Three
Hundred Thousand and no/100 Dollars ($300,000.00) in the aggregate for any
fiscal year without Bank's prior written consent; or (e) sell or otherwise
dispose of any assets for less than fair market value or enter into any sale and
leaseback agreement covering any of its fixed or capital assets.
10. DEFAULT If any of the following events (each an "Event of Default") occurs,
the Bank may do one or more of the following: (i) declare the Borrower in
default, (ii)stop making any additional credit available to the Borrower, (ii)
exercise any and all rights and remedies as may be available to the Bank under
the terms of any collateral documents, security instruments, debt instruments or
any other document or instrument executed in connection herewith or in any way
related hereto, (iv) exercise any and all rights and remedies as may be
available to the Bank at law or in equity, and (v) declare the entire debt
created and evidenced hereby to be immediately due and payable in full,
whereupon the entire unpaid principal indebtedness evidenced hereby, and all
unpaid interest thereon, shall at once mature and become due and payable without
presentment, demand, protest, grace or notice of any kind (including, without
limitation, notice of intent to accelerate, notice of acceleration or notice of
protest), all of which are hereby severally waived by the Borrower. If a
bankruptcy petition is filed with respect to the Borrower, the entire debt
outstanding under this Agreement will automatically become due immediately.
<PAGE>
10.1 FAILURE TO PAY. The Borrower fails to make a payment under this Agreement
with 3 days after the date when due.
10.2 NON-COMPLIANCE. The Borrower fails to perform any obligation after Borrower
obtains actual knowledge hereof or receives written notice thereof from the Bank
under: (a) this Agreement and such failure continues for 20 days, (b) any other
agreement made in connection with this loan and such failure continues for 20
days, or (c) any other material agreement the Borrower has with the Bank or any
affiliate of the Bank and such failure continues past any grace or cure period
provided for in such agreement.
10.3 CROSS-DEFAULT. Any default occurs under any agreement in connection with
any credit in excess of Fifty Thousand and no/100 Dollars ($50,000.00) the
Borrower has obtained from anyone else or which the Borrower has guaranteed and
such failure continues after the lapse of any applicable grace or cure period.
10.4 LIEN PRIORITY. The Bank fails to have an enforceable first lien (except for
any liens permitted hereunder and prior liens to which the Bank has consented in
writing) on or security interest in any property given as security for this
loan.
10.5 FALSE INFORMATION. The Borrower has given the Bank materially false or
misleading information or representations that were materially false or
misleading at the time given or made. Borrower will only be considered to have
given materially false or misleading information or representations if same
could reasonably be expected to materially adversely effect Borrower's business,
financial condition, or ability to repay the Loan.
10.6 BANKRUPTCY. The Borrower files a bankruptcy petition, bankruptcy petition
is filed against the Borrower and such involuntary petition is not dismissed
within 60 days after such filing, or the Borrower makes a general assignment for
the benefit of creditors.
10.7 RECEIVERS. A receiver or similar official is appointed for the Borrower's
business, or the business is terminated.
10.8 JUDGMENTS. Any judgments or arbitration awards are entered against the
Borrower which shall not have been dismissed, discharge, stayed pending appeal
or bonded within 60 days after entry, or the Borrower enters into any settlement
agreements with respect to any litigation or arbitration, in an aggregate amount
of Two Hundred Thousand and no/100 Dollars ($200,000.00) or more in excess of
any insurance coverage.
10.9 GOVERNMENT ACTION. Any government authority takes action with respect to
the Borrower that the Bank reasonably believes materially adversely affects the
Borrower's financial condition or ability to repay.
Notwithstanding anything above to the contrary, a default under the Application
and Agreement for Standby Letter of Credit under Section 8(b), 8(c), 8(d), 8(e),
or 8(f) of that Agreement shall not constitute a cross-default under this
Agreement (unless the event giving rise to such default would independently
cause an Event of Default under the terms of this Section 10).
<PAGE>
11. ENFORCING THIS AGREEMENT; MISCELLANEOUS
11.1 GAAP. Except as otherwise stated in this Agreement, all financial
information provided to the Bank and all financial covenants will be made under
generally accepted accounting principles, consistently applied.
11.2 GOVERNING LAW. THIS AGREEMENT IS GOVERNED BY TEXAS LAW.
11.3 SUCCESSORS AND ASSIGNS. This Agreement is binding on the Borrower's and the
Bank's successors and assignees. The Borrower agrees that it may not assign this
Agreement without the Bank's prior written consent. The Bank may sell
participations in or assign this loan, and may exchange financial information
about the Borrower with actual potential participants or assignees who have
agreed to be bound by the provision of Section 11.15. If the loan is assigned,
the purchaser will have the right of set-off against the Borrower.
11.4 ARBITRATION. (a) This paragraph concerns the resolution of any
controversies or claims between the Borrower and the Bank, including but not
limited to those that arise from: (i) this Agreement (including any renewals,
extensions or modifications of this Agreement); (ii) any document, agreement or
procedure related to or delivered in connection with this Agreement; (iii) any
violation of this Agreement; or (iv) any claims for damages resulting form any
business conducted between the Borrower and the Bank, including claims for
injury to persons, property or business interests (torts). (b) At the request of
the Borrower of the Bank, any such controversies or claims will be settled by
arbitration in accordance with the United States Arbitration Act. THE UNITED
STATES ARBITRATION ACT WILL APPLY EVEN THOUGH THIS AGREEMENT PROVIDES THAT IS
GOVERNED BY TEXAS LAW. (c) Arbitration proceedings will be administered by the
American Arbitration Association and will be subject to its commercial rules of
arbitration. (d) For purposes of the application of the statute of limitations,
the filing of an arbitration pursuant to this paragraph is the equivalent of the
filing of a lawsuit, and any claim or controversy which may be arbitrated under
this paragraph is subject to any applicable statues of limitations. The
arbitrators will have the authority to decide whether any such claim or
controversy is barred by the statue of limitations and, if so, to dismiss the
arbitration on that basis. (e) If there is a dispute as to whether an issue is
arbitratable, the arbitrators will have the authority to resolve any such
dispute. (f) The decision that results from an arbitration proceeding may be
submitted to an authorized court of law to be confirmed and enforced. (g) This
provision does not limit the right of the Borrower or the Bank to: (i) exercise
self-help remedies such as setoff, (ii) foreclose against or sell any real or
personal property collateral; or (iii) act in a court of law before, during or
after the arbitration proceeding to obtain: (A) an interim remedy; and/or (B)
additional or supplementary remedies. (h) The pursuit of a successful action for
interim, additional or supplementary remedies, or the filing of a court action,
does not constitute a waiver of the right of the Borrower or the Bank, including
the suing party, to submit the controversy or claim to arbitration if the other
party contests the lawsuit.
11.5 SEVERABILITY; WAIVERS. If any part of this Agreement is not enforceable,
the rest of the Agreement may be enforced. The Bank retains all rights, even if
it makes a loan after default. If
<PAGE>
the Bank waives a default, it may enforce a later default. Any consent or waiver
under this Agreement must be in writing.
11.6 COSTS. If the Bank incurs any expenses in connection with administering or
enforcing this Agreement, or if the Bank takes Collection action under this
Agreement, it is entitled to costs and reasonable attorneys' fees, including any
allocated costs of in-house counsel.
11.7 ATTORNEYS' FEES. In the event of a lawsuit or arbitration proceeding, the
prevailing party is entitled to recover costs and reasonable attorneys' fees
(including any allocated costs of in-house counsel) incurred in connection with
the lawsuit or arbitration proceeding, as determined by the court or arbitrator.
11.8 DESTRUCTION OF BORROWER'S DOCUMENTS. The Bank will not be obligated to
return any schedules, invoices, statements, budgets, forecasts, reports or other
papers delivered by the Borrower, other than original documents which the
Borrower is legally required to retain. The Bank will destroy or otherwise
dispose of such materials at such time as the Bank, in its discretion, deems
appropriate.
11.9 RETURNED MERCHANDISE. Until the Bank exercises its rights to collect the
accounts receivable as provided under any security agreement required under this
Agreement, the Borrower may continue its present policies for returned
merchandise and adjustments. Credit adjustments with respect to returned
merchandise shall be made immediately upon receipt of the merchandise by the
Borrower or upon other disposition of the merchandise by the debtor in according
with Borrower's instructions. If a credit adjustment is made with respect to any
Acceptable Receivable, the amount of such adjustment shall not longer be
included in the amount of such Acceptable Receivable in computing the Borrowing
Base.
11.10 VERIFICATION OF RECEIVABLES. The Bank may in the Event of Default, either
orally or in writing, request confirmation from any debtor of the current amount
and status of the accounts receivable upon which such debtor is obligated. At
any other time, the Bank may reasonably request confirmation from any other
debtor of the current amount and status of accounts receivable using a third
party acceptable to the Bank, at cost to the Borrower.
11.11 INDEMNIFICATION. The Borrower agrees to indemnify the Bank against, and
hold the Bank harmless from, all claims, actions, losses, costs and expenses
(including attorneys' fees and allocated costs for in-house counsel) incurred by
the Bank and arising from any contention whether well-founded or otherwise, that
there has been a failure to comply with any law regulating the Borrower's sales
or leases to or performance of services for debtors obligated upon the
Borrower's accounts receivable and disclosure in connection therewith. This
indemnity will survive repayment of the Borrower's obligations to the Bank and
termination of this Agreement.
11.12 NOTICES. All notices required under this Agreement shall be personally
delivered or sent by first class mail, postage prepaid, to the addresses, or by
telecopy to the telecopier number on the signature page of this Agreement, or to
such other addresses as the Bank and the Borrower
<PAGE>
may specify from time to time in writing. In the event of telecopier use,
original notices to follow by personal delivery or first class mail.
11.13 USURY LAWS. It is the intention of the parties hereto to comply with
applicable usury laws; accordingly, it is agreed that notwithstanding any
contrary provision herein or in any note or other agreement or commitment
between Borrower and Bank, whether written or oral, expressed or implied, Bank
shall never be entitled to charge, receive, or collect, nor shall amounts
received by Bank be credited so that Bank shall be paid, as interest a sum
greater than interest at the Maximum Rate. It is the intention of the parties
that this Agreement, and all notes and other instruments evidencing or securing
the payment of the indebtedness outstanding hereunder, or executed or delivered
in connection herewith, shall comply with applicable law. If Bank ever contracts
for, charges, receives or collects anything of value which is deemed to be
interest under applicable law, and if the occurrence of any circumstance or
contingency, whether acceleration of maturity, prepayment, delay in advancing
proceeds, or other event, should cause such interest to exceed the maximum
lawful amount, any amount which exceeds interest at the Maximum Rate shall be
applied to the reduction of the unpaid principal balance outstanding hereudner
or any other indebtedness owned to Bank by Borrower, and if all such
indebtedness is paid in full, any remaining excess shall be paid to Borrower. In
determining whether the interest hereon exceeds interest at the Maximum Rate,
the total amount of interest shall be spread throughout the entire term of such
indebtedness until its payment in full. To the extent the TEX. REV. CIV. STAT.
ANN. art 5069-1.04, as amended (the "Act"), is relevant to the Bank for the
purposes of determining the Maximum Rate, the parties elect to determine the
Maximum Rate under the Act pursuant to the "indicate rate ceiling" from time to
time in effect, as referred to and defined in article 1.04(a)(1) of the Act;
subject, however, to any right the Bank may have subsequently under applicable
law, to change the method of determining the Maximum Rate.
11.14 WAIVERS; RELEASE; ENFORCEMENT. The Borrower and all guarantors of the
indebtedness evidenced by this Agreement severally waive diligence in collecting
and bringing suit against any party, and agree (a) to all extensions and partial
payments, with or without notice, before or after maturity, (b) to any
substitution, exchange or release of any security now or hereafter given for
such indebtedness, and (c) that it shall not be necessary for the Bank, in order
to enforce payment of such indebtedness, to first institute or exhaust the
Bank's remedies against the Borrower or any other party liable therefore or
against any security for such indebtedness.
11.15 CONFIDENTIALITY. The Bank agrees to take reasonable precautions and
exercise due care to maintain the confidentiality of all non-0public
confidential information provided in connection with this Agreement or any
document executed in connection herewith and agrees that it shall not use any
such information for any purpose or in any manner other than pursuant to the
terms contemplated by this Agreement. The bank may disclose such information (i)
to BankAmerica Corporation affiliates and other related entities, (ii) at the
request of any Bank regulatory authority or in connection with an examination of
the Bank by any such authority, (iii) pursuant to subpoena or other court
process, (iv) when required to do so in accordance with the provisions of any
applicable law or regulation, (v) at the express direction of any agency of any
State of the United States or at any other jurisdiction in which the Bank
conducts its business, (vi) to its independent auditors and other professional
advisors that have a reasonable need or basis for access thereto and provided
that such persons agree to be bound by the terms of this SECTION 11.15 and (vii)
to the extent reasonably required in connection with any proceeding to enforce
its rights hereunder; provided, however, the Bank shall instruct such
independent auditors or other professional advisors to keep such information
confidential in accordance with the terms of this SECTION
<PAGE>
11.15; provided further, that in the event of any disclosure of non-public
information pursuant to any of clauses (ii), (iii), (iv) and (vi) above, the
Bank shall make a good faith attempt, to the extent practicable, to notify
Borrower of any such disclosure of non-public information at least three (3)
Business Days prior to disclosing such information, and in any event shall
notify Borrower of such disclosure as soon as practicable.
11.16 NO ORAL AGREEMENTS. THIS WRITTEN AGREEMENT AND THE INSTRUMENTS AND
DOCUMENTS EXECUTED IN CONNECTION HEREWITH REPRESENT THE FINAL AGREEMENT BETWEEN
THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORARNEOUS,
OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
<PAGE>
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
This Agreement is executed as of the date stated at the top of the first page.
Bank of America Texas, N.A. American Packing and Gasket
Company
By: ____________________________ By: ________________________
Name: Kim A. Ruth, Vice President Kirby Attwell, Chairman
Telecopy No: _________________ Telecopy No:________________
Address where notices to the Bank Address where notices to the
Borrower are to be sent: are to be sent:
Bank of America Texas, N.A. 6039 Armour Drive
Attn: Commercial Loan Services Houston, Texas 77020
333 Clay Street, Ste. 3600
Houston, Texas 77002
EXHIBIT 10.16
Bank of America
Amendment to Documents
- ------------------------------------------------------------------------------
FIRST AMENDMENT TO BUSINESS LOAN AGREEMENT
(RECEIVABLES AND INVENTORY)
This First Amendment to Business Loan Agreement (Receivables and Inventory) is
entered into as of September 24, 1997, between Bank of America Texas, N.A.
("Bank") and American Packing and Gasket Company ("Borrower).
RECITALS
A. WHEREAS, Bank and Borrower have entered into that certain Business Loan
Agreement (Receivables and Inventory) dated February 24, 1997, (the
"Agreement"); and
B. WHEREAS, Borrower and Bank desire to amend certain terms and provisions of
said Agreement as more specifically hereinafter set forth.
AGREED
NOW, THEREFORE, in consideration of the foregoing recitials and other valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Bank and Borrower mutually agree to amend said Agreement as follows:
1. In Paragraph 2.2 (Availability Period) of the Agreement, the date
"December 31, 1998" is substituted for the date "March 31, 1998".
This Amendment will become effective as of the date first written above,
provided that each of the following conditions precedent have been satisfied in
a manner satisfactory to Bank:
The Bank has received from the Borrower a duly executed original of this
Amendment.
Except as provided in this Amendment, all of the terms and provisions of the
Agreement and the documents executed in connection therewith shall remain in
full force and effect. All references in such other documents to the Agreement
shall hereafter be deemed to be references to the Agreement as amended hereby.
THIS WRITTEN AMENDMENT AND THE DOCUMENTS EXECUTED IN CONNECTION HEREWITH
REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES.
<PAGE>
IN WITNESS WHEREOF, this Amendment has been executed by the parties hereto as of
the date first written above.
BANK OF AMERICA TEXAS, N.A. AMERICAN PACKING AND GASKET COMPANY
By:____________________________ By:______________________________
Kim Ruth, Vice President Kirby Attwell, Chairman
EXHIBIT 10.17
BANK OF AMERICA
BUSINESS LOAN AGREEMENT
This Agreement dated as of February 24, 1997 is between Bank of America
Texas, N.A. (the "Bank") and Mountain Empire Rubber & Specialty Co.,
Inc. (the "Borrower").
1. LINE OF CREDIT AMOUNT AND TERMS.
1.1 Line of Credit Amount. During the availability period described below, the
Bank will provide a line of credit to the Borrower. The amount of the line of
credit (the "Commitment") is Five Hundred Thousand and no/100 Dollars
($500,000.00).
This is a revolving line of credit. During the availability period, the Borrower
may repay principal amounts and reborrow them.
Each advance must be for at least Ten Thousand and no/100 Dollars ($10,000.00),
or for the amount of the remaining available line of credit, if less.
The Borrower agrees not to permit the outstanding principal balance of the line
of credit to exceed the Commitment.
1.2 AVAILABILITY. (a) The line of credit is available between the date of this
Agreement and March 31, 1998 (the "Expiration Date") unless an Event of Default
has occurred and is continuing. (b) At any time and from time to time, the
Borrower may terminate in whole or reduce in part the Commitment, provided that
any such partial reduction shall be in an aggregate amount not less that $25,000
or integral multiples thereof. The amount of any such termination or reduction
may not thereafter be reinstated.
1.3 INTEREST RATE. The interest rate is the lesser of (a) the maximum lawful
rate of interest permitted under applicable usury laws, now or hereafter enacted
(the "Maximum Rate"), or (b) the rate (the "Basic Rate") that is equal to the
sum of the Bank's Reference Rate.
Notwithstanding the foregoing, if at any time the Basic Rate shall exceed the
Maximum Rate and thereafter the Basic Rate shall become less than the Maximum
Rate, the Rate of interest payable shall be the Maximum Rate until the Bank
shall have received the amount of interest it otherwise would have received if
the interest payable had not been limited by the Maximum Rate during the period
of time the Basic Rate exceeded the Maximum Rate.
The Reference Rate is the rate of interest publicly announced from time to time
by the Bank in Irving, Texas, as its Reference Rate. The Reference Rate is set
by the Bank based on various factors, including its costs and desired return,
general economic conditions and other factors, and is used as a reference point
for pricing some loans. The Bank may price loans to its customers
<PAGE>
at, above, or below the Reference Rate. Any change in the Reference Rate will
take effect at the opening of business on the day specified in the public
announcement of a change in the Bank's Reference Rate.
1.4 REPAYMENT TERMS.
(a) The Borrower will pay interest on February 28, 1997 and on the last day of
each month thereafter until payment in full of any principal outstanding under
this line of credit. (b) The Borrower will repay in full all principal and
accrued unpaid interest or other charges outstanding under this line of credit
no later than the Expiration Date.
2. FEES AND EXPENSES.
2.1 Unused Commitment Fee. The Borrower agrees to pay the Bank a fee on any
difference between the and the amount of credit it actually uses, determined by
the weighted average loan balance maintained during the specified period. The
fee will be calculated at 3/8% per year on the last day of each quarter,
starting on February 14, 1997 and continuing through the Expiration Date.
2.2 Reimbursement Cost. (a) The Borrower agrees to immediately repay the Bank
for expenses that include, but are not limited to, filing, recording and search
fees, appraisal fees, and title report fees. (b) The Borrower agrees to
reimburse the Bank for any expenses it incurs in the preparation of this
Agreement and any agreement or instrument required by this Agreement. Expenses
include, but are not limited to, reasonable attorneys' fees. (c) The Borrower
agrees to reimburse the Bank for the cost of periodic audits and appraisals of
the real or personal property collateral securing this Agreement, at such
intervals as the Bank may reasonably require but not to exceed annual except if
any Event of Default has occurred and is continuing. The audits and appraisals
may be performed by employees of the Bank or by independent appraisers.
2.3 No Excess Fees. Notwithstanding anything to the contrary in this Section 2,
in no event shall any sum payable under this Section 2 (to the extent, if any,
constituting interest under any applicable laws), together with all amounts
constituting interest under applicable laws and payable in connection with the
credit evidenced hereby, exceed the Maximum Rate or the maximum amount of
interest permitted to be charged, taken, reserved, received or contracted for
under applicable usury laws.
3. COLLATERAL
3.1 PERSONAL PROPERTY. The Borrower's obligations to the Bank under this
Agreement will be secured by personal property the Borrower now owns or will own
in the future as listed below. The collateral is further defined in security
agreement(s) executed by the Borrower.
(a) Equipment.
(b) Inventory.
(c) Receivables.
<PAGE>
4. DISBURSEMENTS, PAYMENTS AND COSTS
4.1 INTEREST CALCULATION. Except as otherwise stated in this Agreement, all
interest and fees, if any, will be computed on the basis of a 365-day year and
the actual number of days elapsed.
4.2 DEFAULT RATE. Upon the occurrence and during the continuation of any Event
of Default under this Agreement, advances under this Agreement will at the
option of the Bank bear interest at the lesser of (a) the Maximum Rate and (b) a
rate per annum which is 2.00 percentage points higher than the rate of interest
otherwise provided under this Agreement. This will not constitute a waiver of
any default.
5. CONDITIONS The Bank must receive the following items, in form and content
acceptable to the Bank, before it is required to extend any credit to the
Borrower under this Agreement.
5.1 AUTHORIZATIONS. Evidence that the execution, delivery and performance by the
Borrower and each guarantor or subordinating creditor of this Agreement and any
instrument or agreement required under this Agreement have been duly authorized.
5.2 SECURITY AGREEMENTS. Signed original security agreements, assignments,
financing statements and fixture filings (together with collateral in which the
Bank requires a possessory security interest) which the Bank requires.
5.3 EVIDENCE OF PRIORITY. Evidence that security interests and liens in favor of
the Bank are valid, enforceable, and prior to all others' rights and interests,
except those the Bank consents to in writing.
5.4 INSURANCE. Evidence of insurance coverage, as required in the "Covenants"
section of this Agreement.
5.5 GUARANTY. Guaranty signed by Travis International, Inc. on the
Bank's standard form in an amount as may be acceptable, from time to
time, to the Bank.
5.6 GOOD STANDING. Certificates of good standing for the Borrower from its state
of incorporation and from any other state in which the Borrower is required to
qualify to conduct its business.
6. REPRESENTATIONS AND WARRANTIES When the Borrower signs this Agreement the
Borrower makes the following representations and warranties. Each request for an
extension of credit constitutes a renewed representation. (a) The Borrower is a
corporation duly formed and existing under the laws of the state where
organized. (b) This Agreement, and any instrument or agreement required
hereunder, are within the Borrower's powers, have been duly authorized, and do
not conflict with any of its organizational papers. (c) This Agreement is a
legal, valid and binding agreement of the Borrower, enforceable against the
Borrower in accordance with its terms, and any instrument or agreement required
hereunder, when executed and delivered, will be similarly legal, valid, binding
and enforceable. (d) In each state
<PAGE>
1in which the Borrower is required to be licensed or qualified, it is properly
licensed or qualified, in good standing, and, where required in compliance with
assumed name statutes, except where the failure to be so licensed or qualified
or to comply with such statutes would not have a material adverse effect on the
Borrower's business, financial condition, or ability to repay the Loan. (e) This
Agreement does not conflict in any material respect with any law, agreement
concerning or obligating Borrower for more than Ten Thousand and no/100 Dollars
($10,000.00), or obligation by which the Borrower is bound. (f) All financial
and other information that has been or will be supplied to the Bank is: (i)
sufficiently complete to give the Bank accurate knowledge of the Borrower's (and
any guarantor's) financial condition. (ii) in form and content reasonably
required by the Bank, and (iii) in compliance with all government regulations
that apply. (g) There is no lawsuit, tax claim or other dispute pending or
threatened against the Borrower, which, if lost, would impair in any material
respect the Borrower's financial condition or ability to repay the loan, except
as have been disclosed in writing to the Bank. (h) All collateral required in
this Agreement is owned by the grantor of the security interest free of any
title defects and any liens or interests of others, except those which have been
approved by the Bank in writing or are permitted in Section 7.8 of this
Agreement or in the Security Agreement. (i) The Borrower possesses all permits,
memberships, franchises, contracts and licenses required and all trademark
rights, trade name rights, patent rights and assumed name rights necessary to
enable it to conduct the business in which it is now engaged (such will not be
considered "necessary to enable Borrower to conduct its business" if the failure
to obtain same would not materially adversely affect Borrower's business
financial condition, or ability to repay the Loan. (j) There is no event which
is, or with notice or lapse of time or both would be, an Event of Default under
this Agreement. (k) All inventory which is included in the Borrowing Base is of
good and merchantable quality and free from defects. (l) The Borrower is in full
compliance with all applicable requirements of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"); provided that such will only be
considered out of compliance if the failure to comply could reasonably be
expected to materially adversely affect Borrower's business, financial
condition, or ability to repay the Loan). (m) The Borrower's place of business
(or, if the Borrower has more than one place of business, its chief executive
office) is located at the address listed under the Borrower's signature on this
Agreement.
7. COVENANTS The Borrower agrees, so long as credit is available under this
Agreement and until the Bank is repaid in full:
7.1 USE OF PROCEEDS. To use the proceeds of the credit only for working capital.
7.2 FINANCIAL INFORMATION. To provide the following financial information and
statements and such additional information as reasonably requested by the Bank
from time to time:
(a) Within 120 days of the end of each fiscal year of the Borrower, the
Borrower's annual financial statements. These financial statements must be
reviewed by a Certified Public Accountant ("CPA") reasonably acceptable to
the Bank.
(b) Within 60 days of each period's end, the Borrower's quarterly financial
statements and compliance certificate. These financial statements may be
Borrower prepared.
<PAGE>
(c) Guarantor's annual financial statements in form satisfactory to the Bank
within 120 days of the end of each fiscal year of the Borrower. These
financial statements must be audited by a Certified Public Accountant
("CPA") reasonably acceptable to the Bank. The statements shall be
prepared on a consolidated basis. The Borrower will also provide a
consolidating schedule to be submitted with these statements.
7.3 CURRENT RATIO. To maintain a ratio of current assets to current liabilities
of at least 1.50:1.0, measured quarterly.
7.4 TOTAL LIABILITIES TO TANGIBLE NET WORTH RATIO. To maintain a ratio of Total
Liabilities to Tangible Net Worth not exceeding 1.25:1.0, measured quarterly.
"Total Liabilities" means the sum of current liabilities plus long term
liabilities. "Tangible net worth" means the gross book value of the Borrower's
assets (excluding goodwill, patents, trademarks, trade names, organization
expense, treasury stock, unamortized debt discount and expense, deferred
research and development costs, deferred marketing expenses, and other like
intangibles) less total liabilities, including but not limited to accrued and
deferred income taxes, and any reserves against assets.
7.5 NET WORTH (GUARANTOR). Guarantor to maintain on a consolidated basis net
worth equal to at least Twelve Million and no/100 Dollars ($12,000,000.00),
measured annually. "Net worth" means the gross book value of the Borrower's
assets less total liabilities, including but not limited to accrued and deferred
income taxes, and any reserves against assets.
7.6 PROFITABILITY (GUARANTOR). Guarantor to maintain on a consolidated basis a
positive net income after taxes and extraordinary items for each annual
accounting period.
7.7 OTHER DEBTS Not to have outstanding or incur any direct or contingent debts
or lease obligations (other than those to the Bank), or become liable for the
debts of others without the Bank's prior written consent. This does not
prohibit: (a) Acquiring goods supplies, or merchandise on normal trade credit.
(b) Endorsing negotiable instruments received in the usual course of business.
(c) Obtaining surety bonds in the usual course of business (d) Debts and lines
of credit in existence on the date of this Agreement disclosed in writing to the
Bank.
7.8 OTHER LIENS. Not to create, assume, or allow any security interest or lien
(including judicial liens) on property the Borrower now or later owns, accept:
(a) Deeds of trust and security agreements in favor of the Bank.
(b) Liens for taxes not year due or remaining payable up to 120 days without
any penalty or that are being contested in good faith.
(c) Liens outstanding on the date of this Agreement disclosed in writing to
the Bank.
(d) Liens imposed by law, such as materialmen's mechanics', carriers',
workmen's and repairmen's liens, and other similar liens arising in the
ordinary course of business securing obligations which are not overdue for
a period of more than 30 days.
<PAGE>
(e) Other liens arising in the ordinary course of business which are not
incurred in connection with the borrowing of money or the obtaining of
advances or credit and which do not materially detract from the value of
its property or its assets or materially impair the use thereof in the
operation of its business, including any landlord's liens.
(f) Liens for taxes, assessment or other governmental charges which are not
yet due or which are being actively contested in good faith by appropriate
proceedings.
(g) Liens arising from material adverse legal judgments (including liens in
connection with appeal bonds) not in excess of $200,000 (after taking
insurance coverage into account).
7.9 CHANGE OF OWNERSHIP. Not to cause, permit, or suffer any material change,
direct or indirect, in the Borrower" capital ownership.
7.10 NOTICES TO BANK. Notify the Bank in writing not later than five (5)
business days after the earlier of when Borrower obtains actual knowledge or
receives written notice thereof of: (a) any lawsuit over Two Hundred Thousand
and no/100 Dollars ($200,000.00) against Borrower. (b) any material dispute
between the Borrower and any government authority. (c) any failure to comply
with this Agreement. (d) any change in the Borrower's name, legal structure,
place of business, or chief executive office if the Borrower has more than one
place of business.
7.11 BOOKS AND RECORDS. To maintain adequate books and records.
7.12 AUDITS. To allow the Bank and its agents to inspect Borrower's properties
and to make available to the Bank and its agents for examination, audit, and
copying, books and records of the Borrower, in each case at any reasonable time.
If any of the Borrower's properties, books or records are in the possession of
any third party (other than legal counsel) to permit the Bank or its agents to
have access to and perform inspections or audits of such books or records and to
respond to the Bank's requests for information concerning such properties, books
and records; provided that, the Bank shall have given notice to the Borrower a
reasonable time prior to such an inspection, audit or request for information
and, if a representative of the Borrower is available, shall permit a
representative of the Borrower, at the Borrower's option, to be present at the
time of such inspection, audit or response to request for information.
7.13 COMPLIANCE WITH LAWS. To comply with the laws, (including any assumed name
statute), regulations, and orders of any government body with authority over the
Borrower's business. The Borrower shall comply at all times with all applicable
requirements of ERISA. Borrower will only be considered out of compliance
hereunder if the failure to comply could reasonably be expected to materially
adversely effect Borrower's business, financial condition, or ability to repay
the Loan.
7.14 PRESERVATION OF RIGHTS. To maintain and preserve all rights, privileges,
and franchises the Borrower now has. Borrower will only be considered out of
compliance hereunder if the failure to Maintain or preserve same could
reasonably be expected to materially adversely effect Borrower's business,
financial condition, or ability to repay the Loan.
<PAGE>
7.15 MAINTENANCE OF PROPERTIES. To make any necessary repairs, renewals, or
replacements to keep the Borrower's properties that are, in the Borrower's sound
business judgment, necessary for the conduct of the Borrower's business, in good
working condition.
7.16 PERFECTION OF LIENS. To help the Bank perfect and protect its security
interests and liens, and reimburse it for related costs it incurs to protect its
security interests and liens.
7.17 COOPERATION. To take any action reasonably requested by the Bank to carry
out the intent of this Agreement.
7.18 INSURANCE. (a) INSURANCE COVERING COLLATERAL. To maintain all risk property
damage insurance policies covering the tangible property comprising the
collateral and any insurance usual for Borrower's business. Each insurance
policy must be in an amount acceptable to the Bank. The insurance must be issued
by an insurance company reasonably acceptable to the Bank and must include a
lender's loss payable endorsement in favor of the Bank in a form acceptable to
the Bank. (b) GENERAL BUSINESS INSURANCE. To maintain insurance reasonably
satisfactory to the Bank as to amount, nature and carrier covering property
damage (including loss of use and occupancy) to any of the Borrower's
properties, public liability insurance including coverage for contractual
liability, product liability and workers' compensation, and any other insurance
which is usual for the Borrower's business. (c) EVIDENCE OF INSURANCE. Upon the
request of the Bank, to deliver to the Bank a copy of each insurance policy or,
if permitted by the Bank, a certificate of insurance listing all insurance in
force.
7.19 ADDITIONAL NEGATIVE COVENANTS. Not to, without the Bank's written consent:
(a) engage in any business activities substantially different from the
Borrower's present business; (b) liquidate or dissolve the Borrower's business;
(c) enter into any consolidation, merger, pool, joint venture, syndicate, or
other combination; (d) acquire or purchase a business or its assets; or (e) sell
or otherwise dispose of any assets for less than fair market value or enter into
any sale and leaseback agreement covering any of its fixed or capital assets.
8. DEFAULT If any of the following events (each an "Event of Default") occurs,
the Bank may do one or more of the following: (i) declare the Borrower in
default, (ii) stop making any additional credit available to the Borrower, (iii)
exercise any and all rights and remedies as may be available to the Bank under
the terms of any collateral documents, security instruments, debt instruments or
and other document or instrument executed in connection herewith or in any way
related hereto, (iv) exercise any and all rights and remedies as may be
available to the Bank at law or in equity, and (v) declare the entire debt
created and evidence hereby to be immediately due and payable in full, whereupon
the entire unpaid principal indebtedness evidenced hereby, and all accrued
unpaid interest thereon, shall at once mature and become due and payable without
presentment, demand, protest, grace or notice of any kind (including, without
limitation, notice of intent to accelerate, notice of acceleration or notice of
protest), all of which are hereby severally waived by the Borrower. If a
bankruptcy petition is filed with respect to the Borrower, the entire debt
outstanding under this Agreement will automatically become due immediately.
<PAGE>
8.1 FAILURE TO PAY. The Borrower fails to make a payment under this Agreement
within 3 days after the date when due.
8.2 NON-COMPLIANCE. The Borrower fails to perform any obligation after Borrower
obtains actual knowledge hereof or receives written notice thereof from the Bank
under: (a) this Agreement and such failure continues for 20 days, (b) any other
agreement made in connection with this loan and such failure continues for 20
days, or (c) any other material agreement the Borrower has with the Bank or any
affiliate of the Bank and such failure continues past any grace or cure period
provided for in such agreement.
8.3 CROSS-DEFAULT. Any default occurs under any agreement in connection with any
credit in excess of Fifty Thousand and no/100 Dollars ($50,000.00) the Borrower
has obtained from anyone else or which the Borrower has guaranteed and such
failure continues after the lapse of any applicable grace or cure period.
8.4 LIEN PRIORITY. The Bank fails to have an enforceable first lien (except for
any liens permitted hereunder and prior liens to which the Bank has consented in
writing) on or security interest in any property given as security for this
loan.
8.5 FALSE INFORMATION. The Borrower has given the Bank materially false or
misleading information or representations that were materially false or
misleading at the time given or made. Borrower will only be considered to have
given materially false or misleading information or representations if same
could reasonably be expected to materially adversely effect Borrower's business,
financial condition, or ability to repay the Loan.
8.6 BANKRUPTCY. The Borrower files a bankruptcy petition, a bankruptcy petition
is filed against the Borrower and such involuntary petition is not dismissed
within 60 days after such filing, or the Borrower makes a general assignment for
the benefit of creditors.
8.7 RECEIVERS. A receiver or similar official is appointed for the Borrower's
business, or the business is terminated.
8.8 JUDGMENTS. Any judgments or arbitration awards are entered against the
Borrower which shall not have been dismissed, discharged, stayed pending appeal
or bonded within 60 days after entry, or the Borrower enters into any settlement
agreements with respect to any litigation or arbitration, in an aggregate amount
of Two Hundred Thousand and no/100 Dollars ($200,000.00) or more in excess of
any insurance coverage.
8.9 GOVERNMENT ACTION. Any government authority takes action with respect to the
Borrower that the Bank reasonably believes materially adversely affects the
Borrower's financial condition or ability to repay.
<PAGE>
9. ENFORCING THIS AGREEMENT; MISCELLANEOUS
9.1 GAAP. Except as otherwise stated in this Agreement, all financial
information provided to the Bank and all financial covenants will be made under
generally accepted accounting principles, consistently applied.
9.2 GOVERNING LAW. THIS AGREEMENT IS GOVERNED BY TEXAS LAW
9.3 SUCCESSORS AND ASSIGNS. This Agreement is binding on the Borrower's and the
Bank's successors and assigns. The Borrower agrees that it may not assign this
Agreement without the Bank's prior written consent. The Bank may sell
participations in or assign this loan, and may exchange financial information
about the Borrower with actual or potential participants or assignees who have
agreed to be bound by the provisions of Section 9.15. If the loan is assigned,
the purchaser will have the right of set-off against the Borrower.
9.4 ARBITRATION (a) This paragraph concerns the resolution of any controversies
or claims between the Borrower and the Bank, including but not limited to those
that arise from: (i) this Agreement (including any renewals, extensions or
modifications of this Agreement); (ii) any document, agreement or procedure
related to or delivered in connection with this Agreement, (iii) any violation
of this Agreement; or (iv) any claims for damages resulting from any business
conducted between the Borrower and the Bank, including claims for injury to
persons, property or business interests (torts). (b) At the request of the
Borrower or the Bank, any such controversies or claims will be settled by
arbitration in accordance with the United States Arbitration Act. THE UNITED
STATES ARBITRATION ACT WILL APPLY EVEN THOUGH THIS AGREEMENT PROVIDES THAT IT IS
GOVERNED BY TEXAS LAW. (c) Arbitration proceedings will be administered by the
American Arbitration Association and will be subject to its commercial rules of
arbitration. (d) For purpose of the application of the statute of limitations,
the filing of an arbitration pursuant to this paragraph is the equivalent of the
filing of a lawsuit, and any claim or controversy which may be arbitrated under
this paragraph is subject to any applicable statutes of limitations. The
arbitrators will have the authority to decide whether any such claim or
controversy is barred by the statute of limitations and, if so, to dismiss the
arbitration on that basis. (e) If there is a dispute as to whether an issue is
arbitratable, the arbitrators will have the authority to resolve any such
dispute. (f) The decision that results from an arbitration proceeding may be
submitted to an authorized court of law to be confirmed and enforced. (g) This
provision does not limit the right of the Borrower or the Bank to: (i) exercise
self-help remedies such as setoff, (ii) foreclose against or sell any real or
personal property collateral; or (iii) act in a court of law before, during or
after the arbitration proceeding to obtain: (A) an interim remedy; and/or (B)
additional or supplementary remedies. (h) The pursuit of a successful action for
interim, additional or supplementary remedies, or the filing of a court action,
does not constitute a waiver of the right of the Borrower or the Bank, including
the suing party, to submit the controversy or claim to arbitration if the other
party contests the lawsuit.
9.5 SEVERABILITY; WAIVERS. If any part of this Agreement is not enforceable, the
rest of the Agreement may be enforced. The Bank retains all rights, even if it
makes a loan after default. If the Bank waives a default, it may enforce a later
default. Any consent or waiver under this Agreement must be in writing.
<PAGE>
9.6 COSTS. If the Bank incurs any expenses in connection with administering or
enforcing this Agreement, or if the Bank takes collection action under this
Agreement, it is entitled to costs and reasonable attorneys' fees, including any
allocated costs of in-house counsel.
9.7 ATTORNEYS' FEES. In the event of a lawsuit or arbitration proceeding, the
prevailing party is entitled to recover costs and reasonable attorneys' fees
(including any allocated costs of in-house counsel) incurred in connection with
the lawsuit or arbitration proceeding, as determined by the court or arbitrator.
9.8 DESTRUCTION OF BORROWER'S DOCUMENTS. The Bank will not be obligated to
return any schedules, invoices, statements, budgets, forecasts, reports or other
papers delivered by the Borrower, other than original documents which the
Borrower is legally required to retain. The Bank will destroy or otherwise
dispose of such materials at such time as the Bank, in its discretion, deems
appropriate.
9.9 RETURNED MERCHANDISE. Until the Bank exercises its rights to collect the
accounts receivable as provided under any security agreement required under this
Agreement, the Borrower may continue its present policies for returned
merchandise and adjustments. Credit adjustments with respect to returned
merchandise shall be made immediately upon receipt of the merchandise by the
Borrower or upon other disposition of the merchandise by the debtor in
accordance with the Borrower's instructions. If a credit adjustment is made with
respect to any Acceptable Receivable, the amount of such adjustment shall no
longer be included in the amount of such Acceptable Receivable in computing the
Borrowing Base.
9.10 VERIFICATION OF RECEIVABLES. The Bank in the Event of Default, either
orally or in writing, request confirmation from any debtor of the current amount
and status of the accounts receivable upon which such debtor is obligated. At
any other time, the Bank may reasonably request confirmation from any other
debtor of the current amount and status of accounts receivable using a third
party acceptable to the Bank, at cost to the Borrower.
9.11 INDEMNIFICATION. The Borrower agrees to indemnify the Bank against, and
hold the Bank harmless from, all claims, actions, losses, costs and expenses
(including attorneys' fees and allocated costs for in-house counsel) incurred by
the Bank and arising from any contention whether well-founded or otherwise, that
there has been a failure to comply with any law regulating the Borrower's sales
or leases to or performance of services for debtors obligated upon the
Borrower's accounts receiveable and disclosures in connection therewith. This
indemnity will survive repayment of the Borrower's obligations to the Bank and
termination of this Agreement.
9.12 NOTICES. All notices required under this Agreement shall be personally
delivered or sent by first class mail, postage prepaid, to the addresses, or by
telecopy to the telecopier number on the signature page of this Agreement, or to
such other addresses as the Bank and the Borrower may specify from time to time
in writing. In the event of telecopier use, original notices to follow by
personal delivery or first class mail.
<PAGE>
9.13 USURY LAWS. It is the intention of the parties hereto to comply with
applicable usury laws; accordingly, it is agreed that notwithstanding any
contrary provision herein or in any note or other agreement or commitment
between Borrower and Bank, whether written or oral, expressed or implied, Bank
shall never be entitled to charge, receive, or collect, nor shall amounts
received by Bank be credited so that Bank shall be paid, as interest a sum
greater than interest at the Maximum Rate. It is the intention of the parties
that this Agreement, and all notes and other instruments evidencing or securing
the payment of the indebtedness outstanding hereunder, or executed or delivered
in connection herewith, shall comply with applicable law. If Bank ever contracts
for, charges, receives or collects anything of value which is deemed to be
interest under applicable law, and if the occurrence of any circumstance or
contingency, whether acceleration of maturity, prepayment, delay in advancing
proceeds, or other event, should cause such interest to exceed the maximum
lawful amount, any amount which exceeds interest ant the Maximum Rate shall be
applied to the reduction of the unpaid principal balance outstanding hereunder
or any other indebtedness owed to Bank by Borrower, and if all such indebtedness
is paid in full, any remaining excess shall be paid to Borrower. In determining
whether the interest hereon exceeds interest at the maximum Rate, the total
amount of interest shall be spread throughout the entire term of such
indebtedness until its payment in full. To the extent that TEX. REV. CIV. STAT.
ANN. art 5069-1.04, as amended (the "Act"), is relevant to the Bank for the
purposes of determining the Maximum Rate, the parties elect to determine the
Maximum Rate under the Act pursuant to the "indicate rate ceiling" from time to
time in effect, as referred to and defined in article 1.04(a)(1) of the Act;
subject, however, to any right the Bank may have subsequently under applicable
law, to change the method of determining the Maximum Rate.
9.14 WAIVERS; RELEASES; ENFORCEMENT. The Borrower and all guarantors of the
indebtedness evidenced by this Agreement severally waive diligence in collecting
and bringing suit against any party, and agree (a) to all extensions and partial
payments, with or without notice, before or after maturity, (b) to any
substitution, exchange or release of any security now or hereafter given for
such indebtedness, and (c) that it shall not be necessary for the Bank in order
to enforce payment of such indebtedness, to first institute or exhaust the
Bank's remedies against the Borrower or any other party liable therefor or
against any security for such indebtedness.
9.15 CONFIDENTIALITY. The Bank agrees to take reasonable precautions and
exercise due care to maintain the confidentiality of all non-public confidential
information provided in connection with this Agreement or any document executed
in connection herewith and agrees that it shall not use any such information for
any purpose or in any manner other than pursuant to the terms contemplated by
this Agreement. The bank may disclose such information (i) to BankAmerica
Corporation affiliated and other related entitles, (ii) at the request of any
Bank regulatory authority or in connection with an examination of the Bank by
any such authority, (iii) pursuant to subpoena or other court process, (iv) when
required to do so in accordance with the provisions of any applicable law or
regulation, (v) at the express direction of any agency of any State of the
United States or at any other jurisdiction in which the Bank conducts it
business, (vi) to its independent auditors and other professional advisors that
have a reasonable need or basis for access thereto and provided that such
persons agree to be bound by the terms of this SECTION 9.15 and (vii) to the
extent reasonably required in connection with any proceeding to enforce its
rights hereunder; provided, however, the Bank shall instruct such independent
auditors or other professional advisors to keep such information confidential in
accordance with the terms of this
<PAGE>
SECTION 9.15; provided, further, that in the event of any disclosure of
non-public information pursuant to any of clauses (ii), (iii), (iv) and (vi)
above, the Bank shall make a good faith attempt, to the extent practicable, to
notify Borrower of any such disclosure of non-public information at least three
(3) Business Days prior to disclosing such information, and in any event shall
notify Borrower of such disclosure as soon as practicable.
9.16 NO ORAL AGREEMENTS. THIS WRITTEN AGREEMENT AND THE INSTRUMENTS AND
DOCUMENTS EXECUTED IN CONNECTION HEREWITH REPRESENT THE FINAL AGREEMENT BETWEEN
THE PATIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
This Agreement is executed as of the date stated at the top of the page.
Bank of America Texas, N.A. Mountain Empire Rubber &
Specialty Co., Inc.
By:________________________________ By:_______________________________
Kim A. Ruth, Vice President Kirby Atwell, Chairman
By:_______________________________
Tim Fogelsong, Secretary
Telecopy No.: 713-652-3619 Telecopy No.: 713-622-7477
Address where notices to the Bank Address where notices to the
are to be sent: Borrower are to be sent:
Bank of America Texas, N.A. 606 Wesinpar Road
Attn.: Commercial Loan Services Johnson City, Tennessee 37602
333 Clay Street, Ste. 3600
Houston, Texas 77002
EXHIBIT 10.18
Bank of America
Amendment to Documents
- --------------------------------------------------------------------------------
FIRST AMENDMENT TO BUSINESS LOAN AGREEMENT
This First Amendment to Business Loan Agreement is entered into as of
September 22, 1997, between Bank of America Texas, N.A. ("Bank") and Mountain
Empire Rubber & Specialty Co., Inc. ("Borrower").
RECITALS
A. WHEREAS, Bank and Borrower have entered into that certain Business Loan
Agreement dated February 24, 1997, (the "Agreement"), and
B. WHEREAS, Borrower and Bank desire to amend certain terms and provisions of
said Agreement as more specifically hereinafter set forth.
AGREED
NOW, THEREFORE, in consideration of the foregoing recitals and other valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Bank and Borrower mutually agree to amend said Agreement as follows:
1. In Paragraph 1.1 (Line of Credit Amount) of the Agreement, the amount
"Seven Hundred Fifty Thousand and no/100 Dollars ($750,000.00)" is
substituted for the amount "Five Hundred Thousand and no/100 Dollars
($500,000.00)".
2. In Paragraph 1.2 (Availability) of the Agreement, the date "December 31,
1998" is substituted for the date "March 31, 1998".
3. In Paragraph 7.4 (Total Liabilities to Tangible Net Worth) of the
Agreement, the ratio "1.50:1.0" is substituted for the ratio "1.25:1.0".
This Amendment will become effective as of the date first written above,
provided that each of the following conditions precedent have been satisfied in
a manner satisfactory to Bank:
The Bank has received from the Borrower a duly executed original of this
Amendment, together with a duly executed Guarantor Acknowledgment and
Consent in the form attached hereto (the "Consent").
The Bank has received from the Borrower a duly executed Corporate
Resolution Authorizing Execution of Guaranty.
<PAGE>
The Bank has received from the Borrower a duly executed Corporate
Resolution to Borrow.
Except as provided in this Amendment, all of the terms and provisions of this
Agreement and the documents executed in connection therewith shall remain in
full force and effect. All references in such other documents to the Agreement
shall hereafter be deemed to be references to the Agreement as amended hereby.
THIS WRITTEN AMENDMENT AND THE DOCUMENTS EXECUTED IN CONNECTION HEREWITH
REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES.
IN WITNESS WHEREOF, this Amendment has been executed by the parties hereto as of
the date first written above.
BANK OF AMERICA TEXAS, N.A. Mountain Empire Rubber & Specialty Co., Inc.
By: ____________________________ By: ___________________________________
Kim A. Ruth, Vice President Kirby Attwell, Chairman
By: ___________________________________
Tim Fogelsong, Secretary
<PAGE>
GUARANTOR ACKNOWLEDGEMENT
AND CONSENT
The undersigned, each a guarantor of the Borrower's obligations to the
Bank under the Agreement, each hereby (i) acknowledge and consent to the
execution, delivery, and performance by Borrower of the foregoing First
Amendment to Agreement (the "Amendment"), and (ii) reaffirm and agree that the
guaranty to which the undersigned is party and all other documents and
agreements executed and delivered by the undersigned to the Bank in connection
with the Agreement are in full force and effect, without defense, offset, or
counterclaim, to secure the indebtedness of the Borrower to the Bank, including
without limitation the indebtedness evidenced by the Agreement as amended.
(Capitalized terms used herein have the meanings specified in the Amendment.)
TRAVIS INTERNATIONAL, INC.
a Delaware corporation
Dated: _____________________
____________________________
Kirby Attwell, President
EXHIBIT 10.19
Band of America
Business Loan
Continuing Guaranty
In this guaranty (the "Guaranty"), "Guarantor", refers to each business
organization or person who signs below. "Bank" refers to Bank of America Texas,
N.A.
1. GUARANTY In consideration of the financial arrangements between Bank and the
Borrowers listed below (each a "Borrower" and collectively, the "Borrowers"),
Guarantor guarantees payment of, and agrees to pay to the order of Bank on
demand, the debts (herein so called) to the Bank of the following Borrower as
defined in the below referenced Loan Agreement:
1. Mountain Empire Rubber & Specialty Co., Inc. Borrower
If two or more Borrowers are named above, the Guarantor; guarantees payment of
any Debt they incur together as well as any Debt each one incurs alone. Subject
to the limitations contained in Section 2, the Debt includes all obligations to
Bank that any Borrower incurs:
o at any time, past, present, or future;
o voluntarily or involuntarily;
o directly or indirectly;
o or individually or together with others.
The Debt includes obligations:
o due or not yet due;
o absolute or contingent;
o liquidated or unliquidated; or
o for a determined or undetermined amount.
The Debt also includes any and all renewals, extensions, modifications and
increases of each Borrower's obligations to Bank.
Guarantor irrevocably and unconditionally covenants and agrees that it is liable
for the Debt as primary obligor subject to the limitations contained in Section
2.
Guarantor represents and warrants that it has received or will receive direct or
indirect benefit from the making of this Guaranty and the loans made by Bank to
Borrower, that Guarantor is familiar with the financial condition of Borrower
and the value of any collateral security for the Debt, and that Bank has made no
representations to Guarantor to induce Guarantor to execute this Guaranty.
This Guaranty is continuous. Until revoked, it covers Debts Borrower incurs even
after fully repaying any previous Debts. Each guarantor's obligations remain and
will not be affected in the event of revocation by any other guarantor.
<PAGE>
This Guaranty is unconditional. Bank may require Guarantor to pay, and Guarantor
shall not be released or discharged, even if Bank does not.:
o proceed against any borrower, guarantor, or other party;
o perfect any ;security interest;
o proceed against any security; or
o pursue any other remedy.
Bank may do any of the following without release or discharging Guarantor:
o release, in full or in part, Borrower, other guarantors, or any other
obligors from liability with respect to the Debt;
o grant any forbearance or compromise to Borrower;
o release, subordinate its interest in, surrender, or otherwise impair the
value of, its interest in any collateral securing the Debt; or
o fail to exercise diligence, commercial reasonableness, or reasonable care
in the preservation, enforcement or sale of any collateral securing the
Debt.
Bank may require Guarantor to pay even if a statute of limitations or disability
bars recover from Borrower, or the Debt is or becomes otherwise unenforceable.
Guarantor waives the benefit of any statue of limitations that would apply to
this Guaranty.
Guarantor hereby waives all notices, including, without limitation, notice of
(a) acceptance of this Guaranty,
(b) the extension of credit by Bank to Borrower,
(c) the occurrence of any breach or default by borrower in respect of the Debt,
(d) the sale or foreclosure of any collateral for the Debt,
(e) the transfer of the Debt to any third party,
(f) intent to accelerate, and (g) acceleration.
Guarantor's obligations are independent of Borrower's obligations, and Bank may
sue Guarantor without suing Borrower. Capitalized terms used herein, but not
defined herein, shall have the same meanings described thereto in that certain
Loan Agreement (as amended or otherwise modified from time to time, the "Loan
Agreement") between the Borrower and the Bank.
2. LIMITS OF THE GUARANTY Guarantor shall not be liable for any amount over the
following limit, although Bank may allow the Debt to go above it:
o the principal amount of $750,000.00; plus
o any interest, fees, and other expenses arising out of, or constituting
part of, the Debt.
This Guaranty is in addition to any other guaranty given by Guarantor.
<PAGE>
3. RIGHTS OF THE BANK Bank may from time to time, without notice to or demand on
Guarantor:
o change the interest rate on or renew the Debt;
o accelerate, extend, compromise, or otherwise change the repayment period
of the Debt;
o receive, substitute, or release collateral for the Debt;
o sell, otherwise dispose of, or apply collateral in any order;
o apply amounts received from anyone other than Guarantor to any unguaranteed
part of the Debt;
o assign or sell the whole or a portion of the Debt and this Guaranty; or
o foreclose any deed of trust securing the Debt, either by judicial
foreclosure of power of sale. Even if the foreclosure destroys or lessens
Guarantor's rights against Borrower, the Guarantor will be liable to Bank
for any part of the Debt remaining unpaid after foreclosure.
Bank may, at its option, request periodic financial statements from Guarantor.
Guarantor agrees to supply these statements promptly whenever they are
requested.
Bank may exercise these rights either before or after Guarantor revokes this
Guaranty, and without affecting any obligation under this Guaranty.
Bank may assign this Guaranty, in whole or in part, without notice, and Bank and
any assignee or purchaser, or any prospective assignee or purchaser of the Debt,
may exchange financial information about Guarantor with each other in connection
with any assignment or purchase transaction.
If a Borrower is a corporation or partnership, Bank is not required to
investigate the powers of anyone acting on Borrower's behalf.
4. PROTECTING THE BANK'S INTEREST Guarantor agrees that any amounts Borrower
owes Guarantor now or in the future are subordinated to Borrower's debt to Bank.
If Bank Requires, Guarantor, as a trustee for the Bank, shall collect amounts
Borrower owes Guarantor and pay them to Bank in reduction of the Debt without
affecting or reducing any obligations under this Guaranty.
Guarantor agrees that Guarantor does not have, and hereby waives, any:
o right of subrogation, reimbursement, indemnification or contribution
arising from the existence or performance of this Guaranty. This includes
any such rights arising from contract, statutory law or otherwise, and
includes any claim of subrogation under the Bankruptcy Code (Title 11 of
the U.S. Code) or any successor statute;
o right to enforce a remedy which Bank now has or may later have against
Borrower;
o right to participate in security now or later held by Bank; or
o right to any defense based on a claim that the obligations under this
Guaranty are more burdensome or are in excess of Borrower's debt to Bank.
<PAGE>
Guarantor is solely responsible for obtaining any financial information from
Borrower that guarantor may require. Bank is not required to give Guarantor any
information about Borrower's business operations or financial condition, or any
other notices or demands of any kind, including notices of new debts that may be
incurred by Borrower, notices of default or notice of acceptance of this
Guaranty.
5. ARBITRATION
(a) This paragraph concerns the resolution of any controversies or claims
between Borrower and Bank, including but not limited to those that rise
from:
(i) This Guaranty (including any renewals, extensions or modifications
of this Guaranty);
(ii) Any document, agreement or procedure related to or delivered in
connection with this Guaranty;
(iii) Any violation of this Guaranty; or
(iv) Any claims for damages resulting from any business conducted between
Guarantor and Bank, including claims for injury to persons, property
or business interests (torts).
(b) At the request of Guarantor or Bank, any such controversies or claims will
be settled by arbitration in accordance with the United States Arbitration
Act. THE UNITED STATES ARBITRATION ACT WILL APPLY EVEN THOUGH THIS
AGREEMENT PROVIDES THAT IT IS GOVERNED BY TEXAS LAW.
(c) Arbitration proceeds will be administered by the American Arbitration
Association and will be subject to its commercial rules of arbitration.
(d) For purposes of the application of the statute of limitation, the filing
of a lawsuit, and any claim or controversy which may be arbitrated under
this paragraph is subject to any applicable statute of limitations. The
arbitrators will have the authority to decide whether any such claim or
controversy is barred by the statute of limitations and, if so, to dismiss
the arbitration on that basis.
(e) If there is a dispute as to whether an issue is arbitrable, the
arbitrators will have the authority to resolve any such dispute.
(f) The decision that results from an arbitration proceeding may be submitted
to any authorized court of law to be confirmed and enforced.
(g) This provision does not limit the right of Guarantor or Bank to:
(i) exercise self-help remedies such as setoff;
(ii) foreclose against or sell any real or personal property collateral;
(iii) act in a court of law, before, during or after the arbitration
proceeding to obtain:
(A) a provisional or interim remedy; and/or
(B) additional or supplementary remedies
(h) The pursuit of a successful action for provision, interim, additional or
supplementary remedies, or the filing of a court action, does not
constitute a waiver of the right of
<PAGE>
Guarantor or Bank, including the suing party, to submit the controversy or
claim to arbitration if the other party contests the lawsuit.
6. EXPENSES Guarantor agrees to pay all reasonable attorneys' fees, including
allocated costs of the Bank's in-house counsel, court costs and all other
expenses Bank incurs in enforcing this Guaranty.
7. REVOKING THE GUARANTY Guarantor may revoke this Guaranty as to future
transactions at any time, provided that Guarantor renounces any consideration
given in return for the guaranty of such transactions. Guarantor is obligated on
all credit extended by Bank to Borrower until Bank receives a written notice at
the address shown below revoking this Guaranty.
Any revocation will not affect the Guarantor's obligation for any transactions
that preceded receipt of the written notice, and the Guarantor shall remain
obligated on all debts related to such transactions, even if such debts, before
or after the revocation, have been renewed or modified or any of their terms
shall have been changed in any way.
If this Guaranty is revoked, cancelled or returned, and Bank late must refund or
rescind a payment, or transfer an interest in property bank to Borrower, this
Guaranty shall be reinstated as to such payment or interest.
8. ENFORCING THIS GUARANTY THIS GUARANTY IS GOVERNED BY TEXAS LAW, AND BANK MAY
SUE GUARANTOR IN COURTS IN DALLAS COUNTY, TEXAS.
Bank may delay or waive exercising or enforcing any of its rights, including,
without limitation, its rights to setoff and lien, without losing them. Such
rights continue until Bank waives them in writing.
9. SIGNATURES/DATE All guarantors who sign are jointly and severally liable for
all obligations under this Guaranty.
This Guaranty is executed as of ________________________, 1997.
Travis International, Inc.
a Delaware corporation
_____________________________
Kirby Attwell, President
3000 Weslayan, Suite 350
Houston, Texas 77027
Tax I.D.#: 760206074
<PAGE>
Address for notices to the Bank:
BANK OF AMERICA TEXAS, N.A.
Houston Commercial Lending #2552
333 Clay Street, Suite #3600
Houston, Texas 77002
EXHIBIT 10.20
BANK OF AMERICA
BUSINESS LOAN AGREEMENT
(RECEIVABLES AND INVENTORY)
This Agreement dated as of May ________, 1997 between Bank of America
Texas, N.A. (the "Bank") and New West Communications, Inc. (the
"Borrower"); formerly known as New West Acquisition Corp.
1. DEFINITIONS. In addition to the terms which are defined elsewhere in this
Agreement, the following terms have the meanings indicated for the purposes of
this Agreement:
1.1 "BORROWING BASE." means the lesser of:
(a) One Million Five Hundred Thousand and no/100 Dollars ($1,500,000.00); or
(b) the sum of:
(i) 80% of the balance due on Acceptable Receivables; and
(ii) 55% of the value of Acceptable Inventory or 60% of the Borrowing
Base, reducing 50% of the Borrowing Base at September 30, 1997.
In determining the value of Acceptable Inventory to be included in the Borrowing
Base, the Bank will use the lowest of the Borrower's cost, or (ii) the
Borrower's estimated market value, substantiated by evidence satisfactory to
Bank in its reasonable discretion.
1.2 "ACCEPTABLE RECEIVABLE" means an account receivable which satisfies the
following requirements:
(a) The account has resulted from the sale of goods or the performance of
services by the Borrower in the ordinary course of the Borrower's
business.
(b) There are no conditions which must be satisfied before the Borrower is
entitled to receive payment of the account. Accounts arising from COD
sales, consignments or guaranteed sales are not acceptable.
(c) The debtor upon the account does not claim any defense to payment and has
not asserted any counterclaim or offsets against the Borrower.
(d) The account represents a genuine obligation of the debtor for goods sold
and accepted by the debtor, or for services performed for and accepted by
the debtor.
(e) The Borrower has sent an invoice to the debtor in the amount of the
account.
(f) The account is owned by the Borrower free of any title defects or any
liens or interests of others except the security interest in favor of the
Bank.
(g) The debtor on the account is not any of the following:
(i) an employee, affiliate, parent or subsidiary of the Borrower, or an
entity which has common officers or directors with the Borrower.
(ii) the U.S. government or any agency or department of the U.S.
government unless the Bank agrees in writing to accept the
obligation and the Borrower complies with the procedures in the
Federal Assignment of Claims Act of 1940 with respect to the
obligation.
<PAGE>
(iii) any state, county, city, town or municipality.
(iv) any person or entity located in a foreign country.
(v) any person or entity to whom the Borrower is obligated for goods
purchased by the Borrower or for services performed for the
Borrower. This will not exclude accounts upon which any such debtor
is obligated to the extent that the accounts exceed the amount of
the Borrower's obligation to such debtor.
(h) The account is not in default. An account will be considered in default if
any of the following occurs:
(i) The account is not paid within the 90-day period starting on its
invoice date;
(ii) The debtor obligated upon the account suspends business, makes a
general assignment for the benefit of creditors, or fails to pay its
debts generally as they come due; or
(iii) Any petition is filed by or against the debtor obligated on the
account under any bankruptcy law or any other law or laws for the
relief of debtors
(i) The account, when added to all other accounts that are obligations of the
same debtor, does not cause that debtor's total obligations to the
Borrower to exceed 20% of the balance due on all Acceptable Receivables.
It is provided, however, that if the debtor obligated upon an account is a
regional Bell company, the limitation applicable to such debtor will be
increased to 100%.
(j) The account is not the obligation of a debtor who is in default (as
defined above) on 10% or more of the accounts upon which such debtor is
obligated.
(k) The account does not arise from the sale of goods which remain in the
Borrower's possession or under the Borrower's control.
(1) The account is not evidenced by a promissory note or chattel paper.
(m) The account is otherwise reasonably acceptable to the Bank.
1.3 "ACCEPTABLE INVENTORY" means raw materials and finished goods inventory
which satisfies the following requirements:
(a) The inventory is owned by the Borrower free of any title defects or any
liens or interests of others except the security interest in favor of the
Bank.
(b) The inventory is permanently located at locations which the Borrower has
disclosed to the Bank and which are reasonably acceptable to the Bank. If
the inventory is covered by a negotiable document of title (such as a
warehouse receipt) that document must be delivered to the Bank.
(c) The inventory is held for sale in the ordinary course of the Borrower's
business and is of good and merchantable quality. Inventory which is
obsolete, unsalable, damaged, defective, discontinued or slow-moving or
which has been returned by the buyer, is not acceptable. Display items,
work-in-process and packing and shipping materials are not acceptable.
<PAGE>
(d) The inventory is not placed on consignment.
(e) The inventory has had a sale in the past 12 months or has not been
otherwise identified by Borrower as obsolete.
(f) The inventory is otherwise reasonably acceptable to the Bank.
2. FACILITY NO. 1 LINE OF CREDRT AMOUNT AND TERMS
2.1 LINE OF CREDIT AMOUNT. During the availability period described below, the
Bank will provide a line of credit to the Borrower. The amount of the line of
credit (the "Facility No. 1 Commitment") is equal to the amount of the Borrowing
Base.
This is a revolving line of credit. During the availability period, the Borrower
may repay principal amounts and reborrow them.
Each advance must be for at least Twenty Five Thousand and no/100 Dollars
($25,000.00), or for the amount of the remaining available line of credit, if
less.
The Borrower agrees not to permit the outstanding principal balance of the line
of credit to exceed the Facility No. 1 Commitment.
2.2 AVAILABILITY PERIOD. (a) The line of credit is available between the date of
this Agreement and September 30, 1998 (the "Expiration Date") unless an Event of
Default has occurred and is continuing. (b) At any time and from time to time,
the Borrower may terminate in whole or reduce in part the Facility No. 1
Commitment, provided that any such partial reduction shall be in an aggregate
amount not less that $25,000 or integral multiples thereof. The amount of any
such termination or reduction may not thereafter be reinstated.
2.3 INTEREST RATE. The interest rate is the lesser of (a) the maximum lawful
rate of interest permitted under applicable usury laws, now or hereafter enacted
(the "Maximum Rate"), or (b) the rate (the "Basic Rate") that is equal to the
Bank's Reference Rate.
Notwithstanding the foregoing, if at any time the Basic Rate shall exceed the
Maximum Rate and thereafter the Basic Rate shall become less than the Maximum
Rate, the Rate of interest payable shall be the Maximum Rate until the Bank
shall have received the amount of interest it otherwise would have received if
the interest payable had not been limited by the Maximum Rate during the period
of time the Basic Rate exceeded the Maximum Rate.
The Reference Rate is the rate of interest publicly announced from time to time
by the Bank in Irving, Texas, as its Reference Rate. The Reference Rate is set
by the Bank based on various factors, including its costs and desired return,
general economic conditions and other factors, and is used as a reference point
for pricing some loans. The Bank may price loans to its customers at, above, or
below the Reference Rate. Any change in the Reference Rate will take effect at
the opening of business on the day specified in the public announcement of a
change in the Reference Rate.
<PAGE>
2.4 CONDITIONS TO EACH EXTENSION OF CREDIT. Before each extension of credit
under the line of credit, including the first, the Borrower will deliver the
following to the Bank if requested by the Bank:
(a) a borrowing certificate, in form and detail satisfactory to the Bank,
setting forth the Acceptable Receivables and the Acceptable Inventory on which
the requested extension of credit is to be based.
2.5 REPAYMENT TERMS.
(a) The Borrower will pay interest on October 31, 1996 and on the last day of
each month thereafter until payment in full of any principal outstanding under
this line of credit. (b) The Borrower will repay in full all principal and
accrued unpaid interest or other charges outstanding under this line of credit
no later than the Expiration Date.
3. FACILITY NO. 2: TERM LOAN AMOUNT AND TERMS
3.1 LOAN AMOUNT. The Bank agrees to provide a term loan to the Borrower in the
amount of One Million Five Hundred Thousand and no/100 Dollars ($1,500,000.00)
(the "Facility No. 2 Commitment").
3.2 AVAILABILITY PERIOD.
The loan is available in one disbursement from the Bank between the date of this
Agreement and October 30, 1996 unless the Borrower is in default.
3.3 INTEREST RATE. Unless the Borrower elects an optional interest rate as
described below, the interest rate is the lesser of (a) the maximum lawful rate
of interest permitted under applicable usury laws, now or hereafter enacted (the
"Maximum Rate"), or (b) the rate (the "Basic Rate") that is equal to the sum of
the Bank's Reference Rate plus 0.50 percentage points.
Notwithstanding the foregoing, if at any time the Basic Rate shall exceed the
Maximum Rate and thereafter the Basic Rate shall become less than the Maximum
Rate, the Rate of interest payable shall be the Maximum Rate until the Bank
shall have received the amount of interest it otherwise would have received if
the interest payable had not been limited by the Maximum Rate during the period
of time the Basic Rate exceeded the Maximum Rate.
3.4 REPAYMENT TERMS.
(a) The Borrower will pay all accrued but unpaid interest on December 31, 1996
and on the last day of each quarter thereafter and upon payment in full of the
principal of the loan. (b) The Borrower will repay principal in 19 successive
quarterly installments of Fifty Three Thousand Five Hundred Seventy Two and
no/100 Dollars ($53,572.00) each, starting December 31, 1996, and in one final
installment on September 30, 2001 in the amount of the remaining principal
balance plus all accrued unpaid interest. (c) The Borrower may prepay the loan
in full or in part at any time.
<PAGE>
Prepayments of portions of the loan bearing interest at Bank's Reference Rate
may be made without penalty or premium. The prepayment will be applied to the
most remote installment of principal due under this Agreement
3.5 OPTIONAL INTEREST RATES. Instead of the interest rate based on the Bank's
Reference Rate, the Borrower may elect to have all or portions of the loan
(during the availability period and during the term repayment period) bear
interest at the rate(s) described below during an interest period agreed to by
the Bank and the Borrower, provided, however, that the Borrower shall not have
the option or right to elect to have all or any portion of the loan line of
credit bear interest at the rate(s) described below when such rate(s) exceeds
the Maximum Rate. Each interest rate is a rate per year. Interest will be paid
on the last day of each interest period, and on the last day of each quarter
during the interest period. At the end of any interest period, the interest rate
will revert to the rate based on the Reference Rate, unless the Borrower has
designated another optional interest rate for the portion.
3.6 LONG TERM RATE. The Borrowers may elect to have all or portions of the
principal balance of the loan bear interest at the rate equal to the lesser of
(a) the Maximum Rate, or (b) the Long Term Rate, subject to the following
requirements:
(a) The interest period during which the Long Term Rate will be in effect will
be one year or more.
(b) The "Long Term Rate" means the fixed interest rate the Bank and the
Borrowers agree will apply to the portion during the applicable interest period.
(c) Each Long Term Rate portion will be for an amount not less than One Hundred
Thousand Dollars ($100,000).
(d) Any portion of the principal balance of the loan already bearing interest at
the Long Term Rate will not be converted to a different rate during its interest
period.
(e) The Borrowers may prepay the Long Term Rate portion in whole or in part. The
Borrowers will give the Bank irrevocable written notice of the Borrowers'
intention to make the prepayment specifying the date and amount of the
prepayment. The notice must be received by the Bank at least 5 banking days in
advance of the prepayment. All prepayments of principal on the Long Term Rate
portion will be applied on the most remote principal installment or installments
then unpaid. (f) Each prepayment of a Long Term Rate portion, whether voluntary,
by reason of acceleration or otherwise, will be accompanied by payment of all
accrued interest on the amount of the prepayment and the prepayment fee
described below.
(g) The prepayment fee will be the sum of fees calculated separately for each
Prepaid Installment as follows: (i) The Bank will first determine the amount of
interest which would have accrued each month for the Prepaid Installment had it
remained outstanding until the applicable Original Payment Date, using the Long
Term Rate; (ii) The Bank will then subtract from each monthly interest amount
determined in (i), above, the amount of interest which would accrue
<PAGE>
for that Prepaid Installment it were reinvested from the date of prepayment
through the Original Payment Date, using the following rate: (A) If the Original
Payment Date is more than 5 years after the date of prepayment the Treasury Rate
plus one-quarter of one percentage point (B) If the Original Payment Date is 5
years or less after the date of prepayment the Money Market Rate. (iii) If (i)
minus (ii) for the Prepaid Installment is greater than zero, the Bank will
discount the monthly differences to the date of prepayment by the rate used in
(ii) above. The sum of the discounted monthly differences is the prepayment fee
for that Prepaid Installment
(h) The following definitions will apply to the calculation of the prepayment
fee:
"Money Market" means the domestic certificate of deposit market, the eurodollar
deposit market or other appropriate money market selected by the Bank.
"Money Market Rate" means the fixed interest rate per annum which the Bank
determines could be obtained by reinvesting a specified Prepaid Installment in
the Money Market from the date of prepayment through the Original Payment Date.
"Original Payment Dates" mean the dates on which principal of the Long Term Rate
portion would have been paid if there had been no prepayment if a portion of the
principal would have been paid later than the end of the interest period in
effect at the time of prepayment, then the Original Payment Date for that
portion will be the last day of the interest period.
"Prepaid Installment" means the amount of the prepaid principal of the Long Term
Rate portion which would have been paid on a single Original Payment Date.
"Treasury Rate" means the interest rate yield for U.S. Government Treasury
Securities which the Bank determines could be obtained by reinvesting a
specified Prepaid Installment in such securities from the date of prepayment
through the Original Payment Date.
(i) The Bank may adjust the Treasury Rate and Money Market Rate to reflect the
compounding, accrual basis, or other costs of the Long Term Rate portion. Each
of the rates is the Bank's estimate only and the Bank is under no obligation to
actually reinvest any prepayment. The rates will be based on information from
either the Telerate or Reuters information services, The Wall Street Journal, or
other information sources the Bank deems appropriate.
(j) If at any time during any applicable interest period the Long Term Rate
shall exceed the Maximum Rate and thereafter the Long Term Rate shall become
less than the Maximum Rate, the rate of interest payable shall be the Maximum
Rate until the Bank shall have received the amount of interest it otherwise
would have received if the interest payable had not been limited by the Maximum
Rate during the period of time the Long Term Rate exceeded the Maximum Rate.
4. FEES AND EXPENSES
4.1 UNUSED COMMITMENT FEE. The Borrower agrees to pay the Bank a fee on any
difference between the Facility No. 1 Commitment and the amount of credit it
actually uses, determined by the weighted average loan balance maintained during
the specified period. The fee will be
<PAGE>
calculated at 3/8% per year on the last day of each quarter, starting on
December 31, 1996 and continuing through September 30, 1998.
4.2 REIMBURSEMENT COST. (a) The Borrower agrees to immediately repay the Bank
for expenses that include, but are not limited to, filing, recording and search
fees, appraisal fees, title report fees. (b) The Borrower agrees to reimburse
the Bank for any expenses it incurs in the preparation of this Agreement and any
agreement or instrument required by this Agreement Expenses include, but are not
limited to, reasonable attorneys' fees. (c) The Borrower agrees to reimburse the
Bank for the cost of periodic audits and appraisals of the real or personal
property collateral securing this Agreement, at such intervals as the Bank may
reasonably require but not to exceed annual except if an Event of Default has
occurred and is continuing. The audits and appraisals may be performed by
employees of the Bank or by independent appraisers.
4.3 NO EXCESS FEES. Notwithstanding anything to the contrary in this Section 4,
in no event shall any sum payable under this Section 4 (to the extent, if any,
constituting interest under any applicable laws), together with all amounts
constituting interest under applicable laws and payable in connection with the
credit evidenced hereby, exceed the Maximum Rate or the maximum amount of
interest permitted to be charged, taken, reserved, received or contacted for
under applicable usury laws.
5. COLLATERAL
5.1 PERSONAL PROPERTY. The Borrower's obligations to the Bank under this
Agreement will be secured by personal property the Borrower now owns or will own
in the future as listed below. The collateral is further defined in security
agreement(s) executed by the Borrower.
(a) Machinery and equipment
(b) Inventory.
(c) Receivables.
6. DISBURSEMENTS, PAYMENTS AND COSTS
6.1 INTEREST CALCULATION. Except as otherwise stated in this Agreement, all
interest and fees, if any, will be computed on the basis of a 365 day year and
the actual number of days elapsed.
6.2 DEFAULT RATE. Upon the occurrence and during the continuation of any Event
of Default under this Agreement, advances under this Agreement will at the
option of the Bank bear interest at the lesser of (a) the Maximum Rate and (b) a
rate per annum which is 2.00 percentage points higher than the rate of interest
otherwise provided under this Agreement. This will not constitute a waiver of
any default
<PAGE>
7. CONDITIONS The Bank must receive the following items, in form and content
acceptable to the Bank, before it is required to extend any credit to the
Borrower under this Agreement.
7.1 AUTHORIZATIONS. Evidence that the execution, delivery and performance by the
Borrower and each guarantor or subordinating creditor of this Agreement and any
instrument or agreement required under this Agreement have been duty authorized.
7.2 SECURITY AGREEMENTS. Signed original security agreements, assignments,
financing statements and fixture filings (together with collateral in which the
Bank requires a possessory security interest), which the Bank requires.
7.3 EVIDENCE OF PRIORITY. Evidence that security interests and liens in favor of
the Bank are valid, enforceable, and prior to all others' rights and interests,
except those the Bank consents to in writing.
7.4 CONSENT TO REMOVAL. For any personal property collateral located on real
property which is subject to a mortgage or deed of trust or which is not owned
by the Borrower, a Consent to Removal from the owner of the real property and
the holder of any mortgage or deed of trust
7.5 INSURANCE. Evidence of insurance coverage, as required in the "Covenants"
section of this Agreement
7.6 GUARANTY. Guaranty signed by Travis International, Inc. in an amount as set
forth in the Guaranty.
7.7 SUBORDINATION AGREEMENTS. Subordination agreements in favor of the Bank
signed by Marwit Capital Company, L.P.
7.8 GOOD STANDING. Certificates of good standing for the Borrower from its state
of incorporation and from any other state in which the Borrower is required to
qualify to conduct its business.
8. REPRESENTATIONS AND WARRANTIES When the Borrower signs this Agreement the
Borrower makes the following representations and warranties. Each request for an
extension of credit constitutes a renewed representation. (a) The Borrower is a
corporation duly formed and existing under the laws of the state where
organized. (b) This Agreement and any instrument or agreement required
hereunder, are within the Borrower's powers, have been duly authorized, and do
not conflict with any of its organizational papers. (c) This Agreement is a
legal, valid and binding agreement of the Borrower, enforceable against the
Borrower in accordance with its terms, and any instrument or agreement required
hereunder, when executed and delivered, will be similarly legal, valid, binding
and enforceable. (d) In each state in which the Borrower is required to be
licensed or qualified, it is properly licensed or qualified, in good standing,
and, where required, in compliance with assumed name statutes, except where the
failure to be so licensed or qualified or to comply with such statutes would not
have a material
<PAGE>
adverse effect on the Borrower's business, financial condition, or ability to
repay the Loan. (e) This Agreement does not conflict in any material respect
with any law, agreement concerning or obligating Borrower for more than Ten
Thousand and no/100 Dollars ($10,000.00), or obligation by which the Borrower is
bound. (f) All financial and other information that has been or will be supplied
to the Bank is: (i) sufficiently complete to give the Bank accurate knowledge of
the Borrower's (and any guarantors) financial condition. (ii) in form and
content reasonably required by the Bank and (iii) in compliance with all
government regulations that apply. (g) There is no lawsuit, tax claim or other
dispute pending or threatened against the Borrower, which, if lost would impair
in any material respect the Borrower's financial condition or ability to repay
the loan, except as have been disclosed in writing to the Bank. (h) All
collateral required in this Agreement is owned by the grantor of the security
interest free of any title defects and any liens or interests of others, except
those which have been approved by the Bank in writing or are permitted in
Section 9.13 of this Agreement or in the Security Agreement. (i) The Borrower
possesses all permits, memberships, franchises, contracts and licenses required
and all trademark rights, trade name rights, patent rights and assumed name
rights necessary to enable it to conduct the business in which it is now engaged
(such will not be considered "necessary to enable Borrower to conduct its
business," if the failure to obtain same would not materially adversely affect
Borrower's, business financial condition, or ability to repay the Loan). (j)
There is no event which is, or with notice or lapse of time or both would be, an
Event of Default under this Agreement. (k) All inventory which is included in
the Borrowing Base is of good and merchantable quality and free from defects.
(l) The Borrower is in full compliance with all applicable requirements of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"); provided
that such will only be considered out of compliance if the failure to comply
could reasonably be expected to materially adversely effect Borrower's business,
financial condition, or ability to repay the Loan. (m) The Borrower's place of
business (or, if the Borrower has more than one place of business, its chief
executive office) is located at the address listed under the Borrower's
signature on the Agreement
9. COVENANTS The Borrower agrees, so long as credit is available under this
Agreement and until the Bank is repaid in full:
9.1 USE OF PROCEEDS. To use the proceeds of the credit only to:
FACILITY NO.1: partial finance of acquisition of New West Communications, Inc.;
support the purchase of inventory, financing of accounts
receivable and general corporate purposes.
FACILITY NO.2: partial finance of acquisition of New West Communications, Inc.
9.2 FINANCIAL INFORMATION. To provide the following financial information and
statements and such additional information as requested by the Bank from time to
time, all in form and detail acceptable to the Bank:
(a) Within 120 days of the end of each fiscal year of the Borrower, the
Borrower's annual financial statements. These financial statements must be
audited by a Certified Public Accountant ("CPA") reasonably acceptable to
the Bank.
<PAGE>
(b) Within 30 days of each period's end, the Borrower's quarterly financial
statements. These financial statements may be Borrower prepared.
(c) Guarantor's annual financial statements in form satisfactory to the Bank
within 120 days of the end of each fiscal year of the Borrower. These
financial statements must be audited by a Certified Public Accountant
("CPA") reasonably acceptable to the Bank.
(d) A borrowing certificate setting forth the respective amounts of Acceptable
Receivables and Acceptable Inventory as of the last day of each month
within twenty (20) days after month end.
(e) Statements showing an aging of the Borrower's receivables within twenty
(20) days after the end of each month.
(f) Statements showing an aging of the Borrower's accounts payable within
twenty (20) days after the end of each month
(g) Inventory stock status report within twenty (20) after the end of each
month.
(h) A compliance certificate within thirty (30) days after each quarter.
(i) Promptly upon the Bank's request, such other statements, loss of property
and accounts, budgets, forecasts or reports as to the Borrower and as to
each guarantor of the Borrower's obligations to the Bank as the Bank may
reasonably request
9.3 CURRENT RATIO. The Borrower shall maintain a ratio of current assets to
current liabilities of at least 1.25:1.0, measured quarterly.
For purposes of this calculation, the principal outstanding under Facility No. 1
will be included as a current liability.
9.4 CAPITAL FUNDS. The Borrower shall maintain capital funds equal to at least
the sum of the following, measured quarterly:
(a) Three Million Two Hundred Thousand and no/100 Dollars ($3,200,000.00);
plus
(b) the sum of 75% of net income after income taxes (without subtracting
losses) earned in each fiscal year commencing September 30, 1997.
"Capital Funds" means the gross book value of the Borrower's assets less total
liabilities exclusive of "Subordinated Debt". "Subordinated Debt" means debt
subordinated to the Bank in a manner acceptable to the Bank, including without
limitation the debt of Borrower in favor of Marwit Capital Company, LP
("Marwit") evidenced by that certain Senior Convertible Note dated of even date
herewith in the
<PAGE>
original principal amount of $1,250,000, executed by Borrower as maker, and
payable to the order of Marwit.
9.5 TOTAL LIABILITIES TO CAPITAL FUNDS. The Borrower shall maintain a ratio of
Total Liabilities Not Subordinated to Capital Funds not exceeding the amounts
indicated for each period specified below:
Period Ratio
------ -----
December 31, 1996 quarterly
through September 30, 1997 1.00:1.0
December 31, 1997 and
quarterly thereafter 0.75:1.0
"Total Liabilities Not Subordinated" means the sum of current liabilities plus
long term liabilities, excluding debt subordinated to the Borrower's obligations
to the Bank in a manner acceptable to the Bank.
9.6 ADJUSTED EBITDA. The Borrower shall maintain an Adjusted EBITDA of at least
One Million Two Hundred Thousand and no/100 Dollars ($1,200,000.00).
"Adjusted EBITDA" means the sum of net income before taxes, total interest
expense, depreciation and amortization and before the prior owner's profit
participation.
The Adjusted EBITDA will be calculated annually commencing September 30,1997,
using fiscal year results.
If Borrower maintains an Adjusted EBITDA of at least One Million Six Hundred
Thousand ($1,600,000.00) and is in compliance with all other covenants, then the
Guaranty from Travis International, Inc. will be reduced to Five Hundred
Thousand and no/100 Dollars ($500,000.00), measured upon receipt of Borrower's
fiscal year 1997 audited financial statement. The Guaranty will be reduced to
zero, measured upon receipt of Borrower's fiscal year 1998 audited financial
statement if Borrower maintains an Adjusted EBITDA of at least One Million Six
Hundred Thousand ($1,600,000.00) and is in compliance with all other covenants.
9.7 FIXED CHARGE COVERAGE RATIO. The Borrower shall maintain a Fixed Charge
Coverage Ratio of at least 1.25:1.0. "Fixed Charge Coverage Ratio" means net
income before taxes, depreciation and amortization ("EBITDA") divided by the sum
of cash taxes, interest expense (based on Senior debt & Subordinated debt),
scheduled debt payments (based on Senior debt & Subordinated debt), and capital
expenditures.
At March 31, 1997 there will be a one time calculation of the Fixed Charge
Coverage Ratio as defined above, except that 50% of scheduled Facility No. 2
debt payments will be used. This ratio will be calculated at the end of each
fiscal quarter beginning September 30, 1997, using the results of that quarter
and each of the 3 immediately preceding quarters.
<PAGE>
9.8 CASH FLOW RECAPTURE. Defined as EBITDA less cash taxes, interest expense,
scheduled debt payments, and capital expenditures, multiplied by fifty percent
(50%) to reduce the Facility No. 2 principal balance, measured annually
beginning with receipt of fiscal year end 1997 CPA audited financials on
Borrower. Cash Flow Recapture capped at Two Hundred Fifty Thousand and no/100
Dollars ($250,000.00) per fiscal year, with a lifetime cap of Five Hundred
Thousand and no/100 Dollars ($500,000.00).
9.9 NET WORTH (GUARANTOR). The Guarantor shall maintain net worth equal to at
least Twelve Million no/100 Dollars ($12,000,000.00), measured annually. "Net
worth" means the gross book value of the Borrower's assets less total
liabilities, including but not limited to accrued and deferred income taxes, and
any reserves against assets.
9.10 PROFITABILITY (GUARANTOR). The Guarantor shall maintain a positive net
income after taxes and extraordinary items for each fiscal year end.
9.11 OTHER DEBTS (BORROWER). The Borrower agrees not to have outstanding or
incur any direct or contingent debts or capital lease obligations (other than
those to the Bank), or become liable for the debts of others without the Bank's
prior written consent. This does not prohibit (a) Acquiring goods, supplies, or
merchandise on normal trade credit. (b) Endorsing negotiable instruments
received in the usual course of business. (c) Obtaining surety bonds in the
usual course of business. (d) Debt secured by liens permitted in Section 9.13.
(a) Additional debts for the acquisition of fixed or capital assets, which do
not exceed a total principal amount of Fifty Thousand and no/100 Dollars
($50,000.00) outstanding at any one time.
9.12 OTHER DEBTS (GUARANTOR). The Guarantor agrees not to have outstanding or
incur any direct debt without the Bank's prior written consent. This does not
prohibit (a) Acquiring goods, supplies, or merchandise on normal trade credit.
(b) Endorsing negotiable instruments received in the usual course of business.
(c) Obtaining surety bonds in the usual course of business. (d) Additional debts
for business purposes which do not exceed a total principal amount of One
Hundred Fifty Thousand and no/l00 Dollars ($150,000.00) outstanding at any one
time.
9.13 OTHER LIENS. Not to create, assume, or allow any security interest or lien
(including judicial liens) on property the Borrower now or later owns, except:
(a) Deeds of trust and security agreements in favor of the Bank.
(b) Liens for taxes not yet due or remaining payable up to 120 days without
any penalty or that are being contested in good faith.
(c) Liens imposed by law, such as materialmen's, mechanics', carriers',
workmen's and repairmen's liens, and other similar liens arising in the
ordinary course of business securing obligations which are not overdue for
a period of more than 30 days.
(d) Other liens arising in the ordinary course of business which are not
incurred in connection with the borrowing of money or the obtaining of
advances or credit and which do not materially detract from the value of
its property or its assets or materially impair the use thereof in the
operation of it business, including any landlord's liens.
<PAGE>
(e) Liens for taxes, assessment or other governmental charges which are not
yet due or which are being actively contested in good faith by appropriate
proceedings.
(f) Liens arising from material adverse legal judgements (including liens in
connection with appeal bonds) not in excess of $200,000 (after taking
insurance coverage into account).
(g) Additional liens which, together with the liens permitted under
subparagraphs 9.11(d), above, secure obligations in a total principal
amount of Fifty Thousand and no/100 Dollars ($50,000.00) outstanding at
any one time.
(h) Subordinate position on accounts receivable, inventory, and equipment in
favor of Marwit Capital.
9.14 CAPITAL EXPENDITURES. The Borrower agrees not to spend or incur obligations
(including the total amount of any capital leases) for more than One Hundred
Thousand and no/l00 Dollars ($100,000.00) in any single fiscal year to acquire
fixed or capital assets.
9.15 CHANGE OF OWNERSHIP (GUARANTOR). The Guarantor agrees not to cause, permit
or suffer any change, direct or indirect, in the Borrower's capital ownership of
New West Acquisition Corp.
9.16 NOTICES TO BANK. Notify the Bank in writing not later than five (5)
business days after the earlier of when Borrower obtains, actual knowledge or
receives written notice thereof of (a) any lawsuit over Two Hundred Thousand and
no/100 Dollars ($200,000.00) against the Borrower. (b) any material dispute
between the Borrower and any government authority. (c) any failure to comply
with this Agreement, (d) any change in the Borrower's name, legal structure,
place of business, or chief executive office if the Borrower has more than one
place of business.
9.17 BOOKS AND RECORDS. To maintain adequate books and records.
9.18 AUDITS. To allow the Bank and its agents to inspect Borrower's properties
and to make available to the Bank and its agents for examination, audit and
copying, books and records of the Borrower, in each case at any reasonable time.
If any of the Borrower's properties, books or records are in the possession of
any third party (other than legal counsel) the Borrower authorizes such third
party (other than legal counsel) to permit the Bank or its agents to have access
to and perform inspections or audits of such books or records and to respond to
the Bank's requests for information concerning such properties, books and
records; provided that the Bank shall have given notice to the Borrower a
reasonable time prior to such an inspection, audit or request for information
and, if a representative of the Borrower is available, shall permit a
representative of the Borrower, at the Borrower's option, to be present at the
time of such inspection, audit or response to request for information.
9.19 COMPLIANCE WITH LAW. To comply with the laws, (including any assumed name
statute), regulations, and orders of any government body with authority over the
Borrower's business. The Borrower shall comply at all times with all applicable
requirements of ERISA, Borrower will only be considered out of compliance
hereunder the failure to comply could reasonably be expected to materially
adversely effect Borrower's business, financial condition, or ability to repay
the Loan.
<PAGE>
9.20 PRESERVATION OF RIGHTS. To maintain and preserve all rights, privileges,
and franchises the Borrower now has. Borrower will only be considered out of
compliance hereunder if the failure to Maintain or preserve same could
reasonably be expected to materially adversely effect Borrowers business,
financial condition, or ability to repay the Loan.
9.21 MAINTENANCE OF PROPERTIES. To make any necessary repairs, renewals, or
replacements to keep the Borrower's properties that are, in the Borrower's sound
business judgement necessary for the conduct of the Borrower's business, in good
working condition.
9.22 PERFECTION OF LIENS. To help the Bank perfect and protect its security
interests and liens, and reimburse it for related costs it incurs to protect its
security interests and liens.
9.23 COOPERATION. To take any action reasonably requested by the Bank
to carry out the intent of this Agreement
9.24 INSURANCE. (A) INSURANCE COVERING COLLATERAL. To maintain all risk property
damage insurance policies covering the tangible property comprising the
collateral and any insurance usual for Borrower's business. Each insurance
policy must be in an amount reasonably acceptable to the Bank The insurance must
be issued by an insurance company reasonably acceptable to the Bank and must
include a lender's loss payable endorsement in favor of the Bank in a form
acceptable to the Bank. (b) GENERAL BUSINESS INSURANCE. To maintain insurance
reasonably satisfactory to the Bank as to amount nature and carrier covering
property damage (including loss of use and occupancy) to any of the Borrower's
properties, public liability insurance including coverage for contractual
liability, product liability and workers' compensation, and any other insurance
which is usual for the Borrower's business. (c) EVIDENCE OF INSURANCE. Upon the
request of the Bank, to deliver the Bank a copy of each insurance policy or, if
permitted by the Bank a certificate of insurance listing all insurance in force.
9.25 ADDITIONAL NEGATIVE COVENANTS. Not to, without the Bank's written consent:
(a) engage in any business activities substantially different from the
Borrower's present business; (b) liquidate or dissolve the Borrower's business;
(c) enter into any consolidation, merger, pool, joint venture, syndicate, or
other combination; (d) acquire or purchase a business or its assets; or (e) sell
or otherwise dispose of any assets for less than fair market value or enter into
any sale and leaseback agreement covering any of its fixed or capital assets.
9.26 SUBORDINATED DEBT PREPAYMENTS. Not to make any unscheduled prepayments of
principal on account of any Subordinated Debt
10. DEFAULT. If any of the following events (each an "Event of Default") occurs,
the Bank may do one or more of the following: (i) declare the Borrower in
default (ii) stop making any additional credit available to the Borrower, (iii)
exercise any and all rights and remedies as may be available to the Bank under
the terms of any collateral documents, security instruments, debt instruments or
any other document or instrument executed in connection herewith or in any way
related hereto, (iv) exercise any and all rights and remedies as may be
available to the Bank at law
<PAGE>
or in equity, and (v) declare the entire debt created and evidenced hereby to be
immediately due and payable in full, whereupon the entire unpaid principal
indebtedness evidenced hereby, and all accrued unpaid interest thereon, shall at
once mature and become due and payable without presentment, demand, protest,
grace or notice of any kind (including, without limitation, notice of intent to
accelerate, notice of acceleration or notice of protest), all of which we hereby
severally waived by the Borrower. If a bankruptcy petition is filed with respect
to the Borrower, the entire debt outstanding under this Agreement will
automatically become due immediately.
10.1 FAILURE TO PAY. The Borrower fails to make a payment under this Agreement
within 3 days after the date when due.
10.2 NON-COMPLIANCE. The Borrow fails to perform any obligation after Borrower
obtains actual knowledge hereof or receives written notice thereof from the Bank
under (a) this Agreement and such failure continues for 20 days, (b) any other
agreement made in connection with this loan and such failure continues for 20
days, or (c) any other material agreement the Borrower has with the Bank or any
affiliate of the Bank and such failure continues past any grace or cure period
provided for in such agreement
10.3 CROSS-DEFAULT Any default occurs under any agreement in connection with any
credit in excess of Fifty Thousand and no/100 Dollars ($50,000.00) the Borrower
has obtained from anyone else or which the Borrower has guaranteed and such
failure continues after the lapse of any applicable grace or cure period.
10.4 LIEN PRIORITY. The Bank fails to have an enforceable first lien (except for
any liens permitted hereunder and prior liens to which the Bank has consented in
writing) on or security interest in any property given as security for the loan.
10.5 FALSE INFORMATION. The Borrower has given the Bank materially false or
misleading information or representations that were materially false or
misleading at the time given or made. Borrower will only be considered 10 have
given materially false or misleading information or representations if same
could reasonably be expected to materially adversely effect Borrower's business,
financial condition, or ability to repay the Loan.
10.6 BANKRUPTCY. The Borrower files a bankruptcy petition, a bankruptcy petition
is filed against the Borrower and such involuntary petition is not dismissed
within 60 days after such filing, or the Borrower makes a general assignment for
the benefit of creditors.
10.7 RECEIVERS. A receiver or similar official is appointed for the Borrower's
business, or the business is terminated.
10.8 JUDGMENTS. Any judgments or arbitration awards are entered against the
Borrower which shall not have been dismissed, discharged, stayed pending appeal
or bonded within 60 days after entry, or the Borrower enters into any settlement
agreements with respect to any litigation or arbitration, in an aggregate amount
of Two Hundred Thousand and no/100 Dollars ($200,000.00) or more in excess of
any insurance coverage.
<PAGE>
10.9 GOVERNMENT ACTION Any government authority takes action with respect to the
Borrower that the Bank reasonably believes materially adversely affects the
Borrower's financial condition or ability to repay.
10.10 DEFAULT UNDER GUARANTY OR SUBORDINATION AGREEMENT. Any guaranty,
subordination agreement security agreement, deed of trust or other document
required by this Agreement is revoked in whole or in part violated or no longer
in effect.
11. ENFORCING THIS AGREEMENT; MISCELLANEOUS
11.1 GAAP. Except as otherwise stated in this Agreement, all financial
information provided to the Bank and all financial covenants will be made under
generally accepted accounting principles, consistently applied.
11.2 GOVERNING LAW. THIS AGREEMENT IS GOVERNED BY TEXAS LAW.
11.3 SUCCESSORS AND ASSIGNS. This Agreement is binding on the Borrower's and the
Bank's successors and assignees. The Borrower agrees that it may not assign this
Agreement without the Bank's prior written consent The Bank may sell
Participations in or assign this loan, and may exchange financial information
about the Borrower with actual or potential participants or assignees who have
agreed to be bound by the provisions of Section 11.15. If the loan is assigned,
the purchaser will have the right of set-off against the Borrower.
11.4 ARBITRATION. (a) This paragraph concerns the resolution of any
controversies or claims between the Borrower and the Bank, including but not
limited to those that arise from: (i) this Agreement (including any renewals,
extensions or modifications of this Agreement); (ii) any document agreement or
procedure related to or delivered in connection with this Agreement (iii) any
violation of this Agreement or (iv) any claims for damages resulting from any
business conducted between the Borrower and the Bank, including claims for
injury to persons, property or business interests (torts). (b) At the request of
the Borrower or the Bank, any such controversies or claims will be settled by
arbitration in accordance with the United States Arbitration Act THE UNITED
STATES ARBITRATION ACT WILL APPLY EVEN THOUGH THIS AGREEMENT PROVIDES THAT IT IS
GOVERNED BY TEXAS LAW. (c) Arbitration proceedings will be administered by the
American Arbitration Association and will be subject to its commercial rules of
arbitration. (d) For purposes of the application of the statute of limitations,
the filing of an arbitration pursuant to this paragraph is the equivalent of the
filing of a lawsuit and any claim or controversy which may be arbitrated under
this paragraph is subject to any applicable statutes of limitations. The
arbitrators will have the authority to decide whether any such claim or
controversy is barred by the statute of limitations and, if so, to dismiss the
arbitration on that basis. (e) If there is a dispute as to whether an issue is
arbitratable, the arbitrators will have the authority to resolve any such
dispute. (f) The decision that results from an arbitration proceeding may be
submitted to an authorized court of law to be confirmed and enforced. (g) This
provision does not limit the right of the Borrower or the Bank to: (i) exercise
self-help remedies such as setoff, (ii) foreclosure against or sell any real or
personal property
<PAGE>
collateral; or (iii) act in a court of law before, during or after the
arbitration proceeding to obtain: (A) an interim remedy; and/or (B) additional
or supplementary remedies. (h) The pursuit of a successful action for interim,
additional or supplementary remedies, or the filing of a court action, does not
constitute a waiver of the right of the Borrower or the Bank, including the
suing party, to submit the controversy or claim to arbitration if the other
party contests the lawsuit
11.5 SEVERABILITY; WAIVERS. If any part of this Agreement is not enforceable,
the rest of the Agreement may be enforced. The Bank retains all rights, even if
it makes a loan after default. If the Bank waives a default, it may enforce a
later default. Any consent or waiver under this Agreement must be in writing.
11.6 COSTS. If the Bank incurs any expenses in connection with administering or
enforcing this Agreement, or if the Bank takes collection action under this
Agreement it is entitled to costs and reasonable attorneys' fees, including any
allocated costs of in-house counsel.
11.7 ATTORNEYS' FEES. In the event of a lawsuit or arbitration proceeding, the
prevailing party is entitled to recover costs and reasonable attorneys' fees
(including any allocated costs of in-house counsel, incurred in connection with
the lawsuit or arbitration proceeding, as determined by the court or arbitrator.
11.8 DESTRUCTION OF BORROWER'S DOCUMENTS. The Bank will not be obligated to
return any schedules, invoices, statements, budgets, forecasts, reports or other
papers delivered by the Borrower, other than original documents which the
Borrower is legally required to retain. The Bank will destroy or otherwise
dispose of such materials at such time as the Bank, in its discretion, deems
appropriate.
11.9 RETURNED MERCHANDISE. Until the Bank exercises its rights to collect the
accounts receivable as provided under any security agreement required under this
Agreement, the Borrower may continue its present policies for returned
merchandise and adjustments. Credit adjustments with respect to returned
merchandise shall be made immediately upon receipt of the merchandise by the
Borrower or upon other disposition of the merchandise by the debtor in
accordance with the Borrower's instructions. If a credit adjustment is made with
respect to any Acceptable Receivable, the amount of such adjustment shall no
longer be included in the amount of such Acceptable Receivable in computing the
Borrowing Base.
11.10 VERIFICATION OF RECEIVABLES. The Bank may in the Event of Default, either
orally or in writing, request confirmation from any debtor of the current amount
and status of the accounts receivable upon which such debtor is obligated. At
any other time, the Bank may reasonably request confirmation from any other
debtor of the current amount and status of accounts receivable using a third
party acceptable to the Bank, at cost to the Borrower.
11.11 INDEMNIFICATION. The Borrower agrees to indemnify the Bank against, and
hold the Bank harmless from, all claims, actions, losses, costs and expenses
(including attorneys' fees and allocated costs for in-house counsel) incurred by
the Bank and arising from any convention whether well-founded or otherwise, that
there has been a failure to comply with any law regulating the Borrower's sales
or leases to or performance of services for debtors obligated upon the
Borrower's accounts receivable and disclosures in connection therewith. This
indemnity will survive repayment of to Borrower's obligations to the Bank and
termination of this Agreement
11.12 NOTICES. All notices required under this Agreement shall be personally
delivered or sent by first class mail, postage prepaid, to the addresses, or by
telecopy to the telecopier number on the signature page of this Agreement, or to
such other addresses as the Bank and the Borrower may specify from time to time
in writing. In the event of telecopier use, original notices to follow by
personal delivery or first class mail.
11.12 PRIOR AGREEMENT SUPERSEDED. This Agreement supersedes the Business Loan
Agreement (Receivables and Inventory) entered into as of October 8, 1996,
between the Bank and the Borrower, as such agreement has been amended from time
to time prior to the date hereof, and any credit outstanding thereunder shall be
deemed to be outstanding under this Agreement
11.13 USURY LAWS. It is the intention of the parties hereto to comply with
applicable usury laws; accordingly, it is agreed that notwithstanding any
contrary provision herein or in any note or other agreement or commitment
between Borrower and Bank, whether written or oral, expressed or implied, Bank
shall never be entitled to charge, receive, or collect, nor shall amounts
received by Bank be credited so that Bank shall be paid, as interest a sum
greater than interest at the Maximum Rate. It is the intention of the parties
that this Agreement and all notes and other instruments evidencing or securing
the payment of the indebtedness outstanding hereunder, or executed or delivered
in connection herewith, shall comply with applicable law. If Bank ever contracts
for, charges, receives or collects anything of value which is deemed to be
interest under applicable law, and if the occurrence of any circumstance or
contingency, whether acceleration of maturity, prepayment delay in advancing
proceeds, or other event, should cause such interest to exceed the maximum
lawful amount any amount which exceeds interest at the Maximum Rate shall be
applied to the reduction of the unpaid principal balance outstanding hereunder
or any other indebtedness owed to Bank by Borrower, and if all such indebtedness
is paid in full, any remaining excess shall be paid to Borrower. In determining
whether the interest hereon exceeds interest at the Maximum Rate, the total
amount of interest shall be spread throughout the entire term of such
indebtedness until its payment in full. To the extent that TEX. REV. CIV. STAT.
ANN. art 5069-1.04, as amended (the "Act"), is relevant to the Bank for the
purposes of determining the Maximum Rate, the parties elect to determine the
Maximum Rate under the Act pursuant to the "indicate rate ceiling" from time to
time in effect, as referred to and defined in article 1.04(a)(1) of the Act;
subject, however, to any right the Bank may have subsequently under applicable
law, to change the method of determining the Maximum Rate.
11.14 WAIVERS; RELEASES; ENFORCEMENT. The Borrower and all guarantors of the
indebtedness evidenced by this Agreement severally waive diligence in collecting
and bringing suit against any party, and agree (a) to all extensions and partial
payments, with or without notice, before or after maturity, (b) to any
substitution, exchange or release of any security now or hereafter given for
such indebtedness, and (c) that it shall not be necessary for to Bank, in order
to enforce payment
<PAGE>
of such indebtedness, to first institute or exhaust the Banks remedies against
the Borrower or any other party liable therefor or against any security for such
indebtedness.
11.15 CONFIDENTIALITY. The Bank agrees to take reasonable precautions and
exercise due care to maintain the confidentiality of all non-public confidential
information provided in connection with this Agreement or any document executed
in connection herewith and agrees that it shall not use any such information for
any purpose or in any manner other than pursuant to the terms contemplated by
this Agreement. The bank may disclose such information (i) to BankAmerica
Corporation affiliates and other related entities, (ii) at the request of any
Bank regulatory authority or in connection with an examination of the Bank by
any such authority, (iii) pursuant to subpoena or other court process, (iv) when
required to do so in accordance with the provisions of any applicable law or
regulation, (v) at the express direction of any agency of any State of the
United States or at any other jurisdiction in which the Bank conducts its
business, (vi) to its independent auditors and other professional advisors that
have a reasonable need or basis for access thereto and provided that such
persons agree to be bound by the terms of this Section 11.15 and (vii) to the
extent reasonably required in connection with any proceeding to enforce its
rights hereunder, provided, however, the Bank shall instruct such independent
auditors or other professional advisors to keep such information confidential in
accordance with the terms of this Section 11.15; provided further, that in the
event of any disclosure of non-public information pursuant to any of clauses
(ii), (iii), (iv) and (vi) above, the Bank shall make a good faith attempt to
the extent practicable, to notify Borrower of any such disclosure of non-public
information at least three (3) Business Days prior to disclosing such
information, and in any event shall notify Borrower of such disclosure as soon
as practicable.
11.16 NO ORAL AGREEMENTS. THIS WRITTEN AGREEMENT AND THE INSTRUMENTS AND
DOCUMENTS EXECUTED IN CONNECTION HEREWTTH REPRESENT THE FINAL AGREEMENT BETWEEN
THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS,
OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
This Agreement is executed as of the date stated at the top of the first page.
Bank of America Texas, NA. New West
Communications, Inc.
By:________________________________ By:_______________________________
Kim A. Ruth, Vice President Kirby Atwell, Chairman
Telecopy No.: ____________________ Telecopy No.: ____________________
<PAGE>
Address where notices to the Bank Address where notices to the
are to be sent: Borrower are to be sent:
Bank of America Texas, N.A. 3000 Weslayan, Ste 350
Attn: Commercial Loan Services Houston, Texas 77027
333 Clay Street Ste. 3600
Houston, Texas 77002
EXHIBIT 10.21
Bank of America
Business Loan
Continuing Guaranty
In this guaranty (the "Guaranty"), "Guarantor", refers to each business
organization or erasion who signs below. "Bank" refers to Bank of America Texas,
N.A.
1. GUARANTY In consideration of the financial arrangements between Bank and the
Borrowers listed below (each a "Borrower" and collectively, the "Borrowers"),
Guarantor guarantees payment of, and agrees to pay to the order of Bank on
demand, the debts (herein so called) to the Bank of the following Borrower under
the Facility No. 2 Commitment (as defined in the below referenced Loan
Agreement):
1. New West Acquisition Corp., Borrower
If two or more Borrowers are named above, the Guarantor guarantees payment of
any Debt they incur together as well as any Debt each one incurs alone. Subject
to the limitations contained in Section 2, the Debt includes all obligations to
Bank that any Borrower incurs:
. at any time, past, present, or future;
. voluntarily or involuntarily;
. directly or indirectly; or
. individually or together with others.
The Debt includes obligations:
. due or not yet due;
. absolute or contingent;
. liquidated or unliquidated; or
. for a determined or undetermined amount.
The Debt also includes any and all renewals, extensions, modifications and
increases of each Borrower's obligations to Bank.
Guarantor irrevocably and unconditionally covenants and agrees that it is liable
for the Debt as primary obligor subject to the limitations contained in Section
2.
Guarantor represents and warrants that it has received or will receive direct or
indirect benefit from the making of this Guaranty and the loans made by Bank to
Borrower, that Guarantor is familiar with the financial condition of Borrower
and the value of any collateral security for the Debt, and that Bank has made no
representations to Guarantor to induce Guarantor to execute this Guaranty.
<PAGE>
This Guaranty is continuous. Until revoked, it covers Debts Borrower incurs even
after fully repaying any previous Debts. Each guarantor's obligations remain and
will not be affected in the event of revocation by any other guarantor.
This Guaranty is unconditional. Bank may require Guarantor to pay, and Guarantor
shall not be released or discharged, even if Bank does not:
. proceeds against any borrower, guarantor, or other party;
. perfect any security interest;
. proceed against any security; or
. pursue any other remedy.
Bank may do any of the following without release or discharging Guarantor,
. release, in full or in part, Borrower, other guarantors, or any other
obligors from liability with respect to the Debt;
. grant any forbearance or compromise to Borrower;
. release, subordinate its interest in, surrender, or otherwise impair the
value of, its interest in any collateral securing the Debt; or
. fail to exercise reasonable diligence, commercial reasonableness, or
reasonable care in the preservation, enforcement or sale of any collateral
securing the Debt.
Bank may require Guarantor to pay even if a statute of limitations or disability
bars recovery from Borrower, or the Debt is or becomes otherwise unenforceable.
Guarantor waives the benefit of any statute of limitations that would apply to
this Guaranty.
Guarantor hereby waives all notices, including, without limitation, notice of
(a) acceptance of this Guaranty,
(b) the extension of credit by Bank to Borrower,
(c) the occurrence of any breach or default by Borrower in respect of the
Debt,
(d) the sale or foreclosure of any collateral for the Debt,
(e) the transfer of the Debt to any third party,
(f) intent to accelerate, and
(g) acceleration.
Guarantor's obligations are independent of Borrower's obligations, and Bank may
sue Guarantor without suing Borrower. Capitalized terms used herein, but not
defined herein, shall have the same meanings described thereto in that certain
Loan Agreement (as amended or otherwise modified from time to time, the "Loan
Agreement") between the Borrower and the Bank.
2. LIMITS OF THE GUARANTY Guarantor shall not be liable for any amount over the
following limit, although Bank may allow the Debt to go above it:
principal and any interest, fees, and other expenses arising out of, or
constituting part of, the Debt, in no event to exceed the amount of
$1,000,000.00. Such amount to be reduced
<PAGE>
to $500,000 on the date Borrower delivers its audited financial statements
showing that the Borrower has an Adjusted EBITDA of $1,600,000, if on such
date Borrower is in compliance with all covenants under the Loan
Agreement. This Guaranty shall terminate in full on the second anniversary
of the Loan Agreement, if the Borrower's audited financial statements show
that the Borrower has an Adjusted EBITDA of $1,600,000, and on such date
Borrower is in compliance with all covenants under the Loan Agreement.
This Guaranty is in addition to any other guaranty, if any, given by Guarantor.
3. RIGHTS OF THE BANK Bank may from time to time, without notice to or demand on
Guarantor:
. change the interest rate on or renew the Debt;
. accelerate, extend, compromise, or otherwise change the repayment period
of the Debt;
. receive, substitute, or release collateral for the Debt;
. sell, otherwise dispose of, or apply collateral in any order;
. apply amounts received from anyone other than Guarantor to any
unguaranteed part of the Debt;
. assign or sell the whole or a portion of the Debt and this Guaranty; or
. foreclose any deed of trust securing the Debt, either by judicial
foreclosure or power of sale. Even if the foreclosure destroys or lessens
Guarantor's rights against Borrower, the Guarantor will be liable to Bank
for any part of the Debt remaining unpaid after foreclosure.
Bank may, at its option, request annual financial statements from Guarantor.
Guarantor agrees to supply these statements promptly whenever they are
requested.
Bank may exercise these rights either before or after Guarantor revokes this
Guaranty, and without affecting any obligation under this Guaranty.
Bank may assign this Guaranty, in whole or part, without notice, and Bank and
any assignee or purchaser, or any prospective assignee or purchaser of the Debt,
may exchange financial information about Guarantor with each other in connection
with any assignment or purchase transaction.
If a Borrower is a corporation or partnership, Bank is not required to
investigate the powers of anyone acting on Borrower's behalf.
4. PROTECTING THE BANK'S INTEREST Guarantor agrees that any amounts Borrower
owes Guarantor now or in the future are subordinated to borrower's Debt to Bank.
Guarantor shall be entitled to collect repayments on account of such debt so
long as no default or event of default has occurred, or would occur after giving
effect to such repayment in connection with such debt. At any time after a
default has occurred and is continuing in connection with the Debt, if Bank
requires, Guarantor, as a trustee for the Bank, shall collect amounts Borrower
owes Guarantor and pay them to Bank in reduction of the Debt without affecting
or reducing any obligations under this Guaranty.
<PAGE>
Guarantor agrees that Guarantor does not have, and hereby waives, any:
. right of subrogation, reimbursement, indemnification or contribution
arising from the existence or performance of this Guaranty. This includes
any such rights arising from contract, statutory law or otherwise, and
includes any claim of subrogation under the Bankruptcy Code (Title 11 of
the U.S. Code) or any successor statute;
. right to enforce a remedy which Bank now has or may later have against
Borrower;
. right to participate in security now or later held by Bank; or
. right to any defense based on a claim that the obligations under this
Guaranty are more burdensome or are in excess of Borrower's debt to Bank
Guarantor is solely responsible for obtaining any financial information from
Borrower that guarantor may require. Bank is not required to give Guarantor any
information about Borrower's business operations or financial condition, or any
other notices or demands of any kind, including notices of new debts that may be
incurred by borrower, notices of default or notice of acceptance of this
Guaranty.
5. ARBITRATION
(a) This paragraph concerns the resolution of any controversies or claims
between Borrower and Bank, including but not limits to those that rise
from:
(i) This Guaranty (including any renewals, extensions or modifications
of this Guaranty);
(ii) Any document, agreement or procedure related to or delivered in
connection with this Guaranty;
(iii) Any violation of this Guaranty; or
(iv) Any claims for damages resulting from any business conducted between
Guarantor and Bank, including claims for injury to persons, property
or business interests (torts).
(b) At the request of Guarantor or Bank, any such controversies or claims will
be settled by arbitration in accordance with the United States Arbitration
Act. THE UNITED STATES ARBITRATION ACT WILL APPLY EVEN THOUGH THIS
AGREEMENT PROVIDES THAT IT IS GOVERNED BY TEXAS LAW.
(c) Arbitration proceedings will be administered by the American Arbitration
Association and will be subject to its commercial rules of arbitration.
(d) For purposes of the application of the statute of limitation, the filing
of a lawsuit, and any claim or controversy which may be arbitrated under
this paragraph is subject to any applicable statute of limitations. The
arbitrators will have the authority to decide whether any such claim or
controversy is barred by the statute of limitations and, if so, to dismiss
the arbitration on that basis.
<PAGE>
(e) If there is a dispute as to whether an issue is arbitrable, the
arbitrators will have the authority to resolve any such dispute.
(f) The decision that results from an arbitration proceeding may be submitted
to any authorized court of law to be confirmed and enforced.
(g) This provision does not limit the right of Guarantor or Bank to:
(i) exercise self-help remedies such as setoff;
(ii) foreclose against or sell any real or personal property collateral
(iii) act in a court of law, before, during or after the arbitration
proceeding to obtain:
(A) a provisional or interim remedy; and/or (B) additional or
supplementary remedies
(h) The pursuit of a successful action for provision, interim, additional or
supplementary remedies, or the filing of a court action, does not
constitute a waiver of the right of Guarantor or Bank, including the suing
party, to submit the controversy or claim to arbitration if the other
party contests the lawsuit.
6. EXPENSES Guarantor agrees to pay all reasonable attorneys' fees, including
allocated costs of the Bank's in-house counsel, court costs, and all other
expenses Bank incurs in enforcing this Guaranty.
7. REVOKING THE GUARANTY Guarantor may revoke this Guaranty as to future
transactions at any time, provided that Guarantor renounces any consideration
given in return for the guaranty of such transactions. Guarantor is obligated on
all credit extended by Bank to Borrower until Bank receives a written notice at
the address shown below revoking this Guaranty.
Any revocation will not affect the Guarantor's obligation for any transactions
that preceded receipt of the written notice, and the Guarantor shall remain
obligated on all debts related to such transactions, even if such debts, before
or after the revocation, have been renewed or modified or any of their terms
shall have been changed in any way.
If this Guaranty is revoked, canceled or returned, and Bank later must refund or
rescind a payment, or transfer an interest in property back to Borrower, this
Guaranty shall be reinstated as to such payment or interest.
8. ENFORCING THIS GUARANTY THIS GUARANTY IS GOVERNED BY TEXAS LAW, AND BANK MAY
SUE GUARANTOR IN COURTS IN DALLAS COUNTY, TEXAS.
Bank may delay or waive exercising or enforcing any of its rights, including,
without limitation, its rights to setoff and lien, without losing them. Such
rights continue until Bank waives them in writing.
<PAGE>
9. SIGNATURES/DATE All guarantors who sign are jointly and severally liable for
all obligations under this Guaranty.
This Guaranty is executed as of May 30, 1997.
Travis International, Inc.
a Delaware corporation
Dated: _________________________, 1996.
X____________________________________
Kirby Atwell, President
3000 Weslayan, Suite 350
Houston, Texas 77027
Tax I.D. No.: 760206074
Address for notices to the Bank:
BANK OF AMERICA TEXAS, N.A.
Houston Commercial Lending #2552
333 Clay Street, Suite #3600
Houston, Texas 77002
EXHIBIT 10.22
Bank of America
Amendment to Documents
FIRST AMENDMENT TO BUSINESS LOAN AGREEMENT
This First Amendment to Business Loan Agreement is entered into as of September
25, 1997, between Bank of America Texas, N.A. ("Bank") and New West
Communications, Inc. ("Borrower"); formerly known as New West Acquisition Corp.
RECITALS
A. WHEREAS, Bank and Borrower have entered into that certain Business Loan
Agreement dated May 30, 1997, and
B. WHEREAS, Borrower and Bank desire to amend certain terms and provisions of
said Agreement as more specifically hereinafter set forth.
AGREED
NOW, THEREFORE, in consideration of the foregoing recitals and other valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Bank and Borrower mutually agree to amend said Agreement as follows:
1. In Paragraph 2.2 (Availability Period) of the Agreement, the date
"December 31, 1998" is substituted for the date "September 30, 1998".
This Amendment will become effective as of the date first written above,
provided that each of the following conditions precedent have been satisfied in
a manner satisfactory to Bank:
The Bank has received from the Borrower a duly executed original of this
Amendment, together with a duly executed Guarantor Acknowledgment and
Consent in the form attached hereto (the "Consent").
Except as provided in this Amendment, all of the terms and provisions of the
Agreement and the documents executed in connection therewith shall remain in
full force and effect. All references in such other documents to the Agreement
shall hereafter be deemed to be references to the Agreement as amended hereby.
THIS WRITTEN AMENDMENT AND THE DOCUMENTS EXECUTED IN CONNECTION HEREWITH
REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENT OF THE PARTIES.
IN WITNESS WHEREOF, this Amendment has been executed by the parties hereto as of
the date first written above.
<PAGE>
BANK OF AMERICA TEXAS, N.A. NEW WEST COMMUNCIATIONS, INC.
By:_____________________________ By:_________________________________
Kim Ruth Vice President Kirby Attwell, President
<PAGE>
GUARANTOR ACKNOWLEDGMENT
AND CONSENT
The undersigned, each a guarantor of the Borrower's obligations to
the Bank under the Agreement, each hereby (i) acknowledge and consent to the
execution, delivery, and performance by Borrower of the foregoing First
Amendment to Agreement (the "Amendment"), and (ii) reaffirm and agree that the
guaranty to which the undersigned is party and all other documents and
agreements executed and delivered by the undersigned to the Bank in connection
with the Agreement are in full force and effect, without defense, offset, or
counterclaim, to secure the indebtedness of the Borrower to the Bank, including
without limitation the indebtedness evidenced by the Agreement as amended.
(Capitalized terms used herein have the meanings specified in the Amendment.)
Travis International, Inc.
a Delaware corporation
Dated: September 29, 1997
____________________________________
By: Kirby Attwell, President
EXHIBIT 10.23
SECURITIES PURCHASE AGREEMENT
TRAVIS INTERNATIONAL, INC.
NEW WEST ACQUISITION CORP.
MARWIT CAPITAL COMPANY, L.P.
<PAGE>
TABLE OF CONTENTS
1. DEFINITIONS......................................................1
2. AUTHORIZATION AND ISSUANCE OF SECURITIES.........................3
2.1 Authorization..............................................3
2.2 Purchase and Sale..........................................3
3. CONDITIONS OF PURCHASER'S OBLIGATIONS............................3
3.1 Representations and Warranties.............................3
3.2 Acquisition................................................3
3.3 Closing Papers.............................................3
3.4 Proceedings................................................4
3.5 Opinion of Counsel.........................................4
3.6 Amendment to Registration Rights Agreement.................4
3.7 Amendment to Stockholders Agreement........................4
3.8 Notice.....................................................5
3.9 Examination of Books and Records...........................5
3.10 Insurance..................................................5
3.11 Composition of the Board...................................5
3.12 Small Business Concern.....................................5
3.13 Security Filings...........................................5
3.14 Financial Statements.......................................6
3.15 Compensation Policy........................................6
3.16 Credit Agreement...........................................6
3.17 Acquisition Agreement......................................6
3.18 Credit Availability........................................6
3.19 Closing Fees...............................................6
3.20 Waiver of Preemptive Rights................................7
4. CONDITIONS OF COMPANY'S OBLIGATIONS..............................7
4.1 Representations and Warranties.............................7
4.2 Delivery of Consideration..................................8
4.3 Amendment of Shareholder Agreement.........................8
5. REPRESENTATIONS AND WARRANTIES OF COMPANY AND
SHAREHOLDER......................................................8
5.1 Organization and Corporate Power...........................9
5.2 Capital Stock and Related Matters..........................9
5.3 Subsidiaries...............................................9
5.4 Authorization; No Breach...................................9
5.5 Changes Since Financial Statements........................10
5.6 Investments and Loans Since June 30, 1996.................11
5.7 Assets....................................................11
5.8 Litigation................................................12
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5.9 Tax Returns and Payments..................................12
5.10 Employee Compensation.....................................13
5.11 Material Licenses, Agreements, Related Party Agreements...13
5.12 Registration Rights.......................................13
5.13 Financial Statements......................................13
5.14 Insurance.................................................14
5.15 Fees, Commissions and Expenses............................14
5.16 Governmental Consent, etc.................................14
5.17 Liabilities...............................................14
5.18 SBA Forms.................................................15
5.19 Acquisition Agreement.....................................15
5.20 Credit Agreement..........................................15
5.21 Disclosure................................................15
5.22 Priority Position.........................................15
5.23 Inventory.................................................15
5.24 Ownership of Target Company...............................16
6. REGISTRATION, TRANSFER OF SECURITIES............................16
6.1 Restrictive Legends.......................................16
6.2 Notice of Proposed Transfers..............................16
7. COVENANTS OF COMPANY............................................17
7.1 Financial Statements and Other Information................17
7.2 Inspection of Property....................................18
7.3 Unfunded Liabilities - ERISA..............................18
7.4 Restrictions..............................................18
7.5 Affirmative Covenants.....................................21
7.6 Application of Proceeds...................................22
7.7 Board Matters.............................................22
7.8 Covenants of Shareholder..................................22
7.9 Put Of Conversion Common Stock............................23
7.10 Licensing.................................................23
7.11 Termination of Covenants..................................23
7.12 Purchaser's Cure of Default...............................24
7.13 Enforcement of Representations and Warranties.............24
8. MISCELLANEOUS...................................................24
8.1 Expenses..................................................24
8.2 Remedies..................................................24
8.3 Default...................................................24
8.4 Consent to Amendments.....................................24
8.5 Survival of Representations and Warranties................25
8.6 Successors and Assigns....................................25
8.7 Severability..............................................25
8.8 Counterparts..............................................25
8.9 Descriptive Headings......................................25
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<PAGE>
8.10 Notices...................................................25
8.11 Governing Law.............................................26
8.12 Exhibits..................................................26
8.13 Final Agreement...........................................26
8.14 Subordination.............................................26
iii
<PAGE>
SCHEDULES & EXHIBITS:
Schedule 1 Purchaser
Schedule 1.3 Business Plan
Schedule 1.7 Compensation Policy
Schedule 1.8 Employment and Noncompetition Agreement
Schedule 1.12 Projections
Schedule 1.20 Senior Management
Schedule 3.5 Opinion of Counsel for Company
Schedule 3.14 Pro Forma
Schedule 5.2 Ownership of Capital Stock
Schedule 5.3 Subsidiaries
Schedule 5.5 Changes Since Financial Statements
Schedule 5.6 Investment Since June 30, 1996
Schedule 5.7 Liens, Encumbrances, Ownership
Schedule 5.8 Litigation
Schedule 5.9 Tax Return Audits
Schedule 5.10 Employee Compensation
Schedule 5.11 Material Agreements
Schedule 5.16 Permits
Schedule 5.17 Liabilities
Schedule 7.6 Application of Proceeds
Exhibit 1 Form of Senior Subordinated Note
iv
<PAGE>
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "Agreement") dated as of the
_____ day of October 1996, by and among Travis International, Inc., a Delaware
corporation ("Shareholder"), the entity set forth on Schedule 1 attached hereto
("Purchaser") and New West Acquisition Corp. ("Company").
The parties hereby agree as follows:
1. DEFINITIONS.
1.1 "Agreement" shall mean, and the words "herein," "hereof,"
"hereunder" and words of similar import shall refer to this instrument and any
amendment hereto.
1.2 "Acquisition Agreement" shall refer to that certain asset purchase
agreement, exhibits and attachments and Related Agreements as that term is
defined in the Asset Purchase Agreement, wherein Company is acquiring all of the
assets of New West Communications, Inc. ("Target Company").
1.3 "Business Plan" shall refer to that certain Summary Information for
Lenders dated August ___, 1996, as supplemented through the date hereof,
provided to Purchaser which describes Target Company's and Company's business,
financial condition and prospects for the future and which is attached hereto as
Schedule 1.3.
1.4 "Commission" shall refer to the Securities and Exchange
Commission.
1.5 "Commissioner" shall refer to the California Commissioner of
Corporations.
1.6 "Conversion Common Stock" shall refer to any and all common stock
of Shareholder issued and issuable on exercise of the Warrant.
1.7 "Compensation Policy Statement" shall refer to the Employment and
NonCompetition Agreement and funds payable to Shareholder for administrative and
management services attached as Schedule 1.7.
1.8 "Employment and Noncompetition Agreement" shall refer to that
certain agreement by and between Craig Cowan and Company attached hereto as
Schedule 1.8.
1.9 "Note" shall refer to the Senior Subordinated Note in the amount of
One Million Two Hundred Fifty Thousand Dollars ($1,250,000) issued by Company
and shall be substantially in the form attached hereto as Exhibit 1, issued to
Purchaser pursuant to this Agreement.
1.10 "Officer's Certificate" shall have the meaning ascribed to
it in Section 173 of the California General Corporation Law.
<PAGE>
1.11 "Person" shall refer to any corporation, trust, partnership,
individual, association, or other entity.
1.12 "Projections" shall include the monthly projected statements of
income, cash flow and balance sheets for 1996 and annual calendar year summary
pro forma profit & loss statements for 1997 through 2002 as supplemented by
Shareholder prior to closing, attached as Schedule 1. 12.
1.13 "Registered Public Offering" shall refer to a public sale of
Company's common stock pursuant to a registration statement in which Company
receives at least Ten Million Dollars ($10,000,000) in net proceeds.
1.14 "Registrable Securities" shall refer to Conversion Common Stock.
1.15 "Registration Rights Agreement" shall refer to that certain
Registration Rights Agreement dated May 28, 1992 by and among Shareholder and
its stockholders as most recently amended.
1.16 "Securities" shall refer to the Note and Warrant issued to
Purchaser pursuant to this Agreement and any Conversion Common Stock.
1.17 "Securities Act" shall refer to the Securities Act of 1993, as
amended.
1.18 "Security Agreement" shall refer to a Security Agreement of even
date herewith among Company and Purchaser granting a subordinated security
interest in all assets of Company in favor of Purchaser.
1.19 "Senior Lender" shall refer to Bank of America Texas, N.A.
1.20 "Senior Management" shall refer to those individuals
depicted on Schedule 1.20.
1.21 "Shareholder" shall refer to Travis International, Inc.
1.22 "Stockholders Agreement" shall refer to that certain Stockholder's
Agreement by and among Shareholder and its stockholders dated May 28, 1992, as
most recently amended.
1.23 "Subordination Agreement" shall refer to that certain
Subordination Agreement by and among Company, Purchaser and the Senior Lender.
1.24 "Subsidiary" shall mean, with respect to Company, any corporation
in which Company possesses a controlling interest or fifty percent (50%) of the
capital stock and with respect to Shareholder, any corporation in which
Shareholder possesses a controlling interest or fifty percent (50%) of the
capital stock.
2
<PAGE>
1.25 "Warrant" shall refer to that certain warrant to acquire 30,000
shares of Conversion Common Stock of Shareholder.
2. AUTHORIZATION AND ISSUANCE OF SECURITIES.
2.1 AUTHORIZATION. Company is authorized to issue the Note to Purchaser
in the principal amount of One Million Two Hundred Fifty Thousand Dollars
($1,250,000) to acquire Target Company and for working capital and Shareholder
is authorized to issue the Warrant, all upon the terms and conditions herein
described.
2.2 PURCHASE AND SALE. Company agrees to borrow from and, in
confirmation thereof to issue the Note to Purchaser subject to the terms and
conditions set forth herein and Purchaser agrees to lend to Company One Million
Two Hundred Fifty Thousand Dollars ($1,250,000). The closing of the issuance of
the Note and Warrant (the "Closing") will take place at the offices of Arter &
Hadden, 5 Park Plaza, Suite 1000, Irvine, California 92714 at 10:00 a.m. on
October ____, 1996 or at such other time and place as Shareholder and Purchaser
may direct. At the Closing, Company will deliver to the Purchaser the Note and
Warrant and all other documents required to be delivered by Company or
Shareholder by this Agreement.
3. CONDITIONS OF PURCHASER'S OBLIGATIONS
The obligation of Purchaser, to consummate the transactions
contemplated at the Closing is subject to the satisfaction on or before the date
of the Closing of the following conditions, all or any of which may be waived in
writing by Purchaser:
3.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
in Article 5 will be true and correct at and as of the date of the Closing as
though then made, except to the extent of changes caused by the transactions
expressly contemplated herein.
3.2 ACQUISITION. Company and Target Company shall have executed and
entered into the Acquisition Agreement for the acquisition by Company of
substantially all the assets of Target Company and all preconditions thereto
shall have been satisfied or waived (with the prior written consent of Purchaser
in its absolute discretion).
3.3 CLOSING PAPERS. Company will have delivered to Purchaser
or its special counsel all of the following documents:
(i) an Officers' Certificate for Company dated the date of the
Closing, stating that all the preconditions specified in Article 3
have been satisfied;
(ii) certified copies of the resolutions adopted by the board
of directors of Company and Shareholder, authorizing the execution,
delivery and performance of this Agreement and each of the other
agreements contemplated hereby, and authorizing all other transactions
contemplated by this Agreement, including, but not limited to, the
issuance of the Note and Warrant and the reservation of the Conversion
Common Stock;
3
<PAGE>
(iii) copies of the certificate of incorporation of Company
and Shareholder each certified by the Secretary of State of Delaware
and bylaws of Company and Shareholder certified by their respective
secretaries, as amended;
(iv) a good standing certificate issued by the Secretary of
State of Delaware and California for Company;
(v) a good standing tax certificate issued by the Franchise
Tax Board for the State of California;
(vi) such other documents relating to the transactions
contemplated by this Agreement or the Acquisition Agreement as
Purchaser or its special counsel may reasonably request; and
(vii) executed copies of the Acquisition Agreement and all
documents, certificates and schedules delivered in conjunction with
the closing therewith.
3.4 PROCEEDINGS. All corporate and other proceedings taken or to be
taken in connection with the transactions contemplated hereby and all documents
incident thereto or required to be delivered prior to or at the Closing will be
satisfactory in form and substance to Purchaser and their special counsel,
including, but not limited to, the closing of the Acquisition Agreement.
3.5 OPINION OF COUNSEL. Purchaser shall have received an opinion, dated
as of the Closing, from Mayor, Day, Caldwell and Keeton, L.L.P., in form and
substance satisfactory to Purchaser and its counsel and which is attached hereto
as Schedule 3.5.
3.6 AMENDMENT TO REGISTRATION RIGHTS AGREEMENT. At the Closing, or as
soon thereafter as is practicable for a diligent person, but no later than
thirty (30) days following Closing, the Registration Rights Agreement shall have
been amended, INTER ALIA, to add Purchaser as a "Stockholder" therein and the
term "Registrable Securities" shall include the Conversion Common Stock. If the
Registrations Rights Agreement shall not have been so amended within such period
of time, Shareholder, promptly upon the written demand of Purchaser, shall
tender to Purchaser all unpaid principal and interest accrued thereon under the
Note.
3.7 AMENDMENT TO STOCKHOLDERS AGREEMENT. At the Closing, or as soon
thereafter as is practicable for a diligent person, but no later than thirty
(30) days following Closing, the Stockholders Agreement shall be amended, INTER
ALIA, to add Purchaser as a stockholder therein. If the Stockholders Agreement
shall not have been so amended within such period of time, Shareholder, promptly
upon the written demand of Purchaser, shall tender to Purchaser all unpaid
principal and interest accrued thereon under the Note.
4
<PAGE>
3.8 NOTICE. Prior to the Closing, Shareholder, at its cost and expense,
shall have prepared a Notice of Transaction pursuant to California Corporations
Code ss. 25102(f) for filing with the Commissioner authorizing the issuance of
the Note and Warrant and any other filings required by applicable state
securities laws, for the issuance and sale of the Securities, which documents
shall be or shall have been filed by Shareholder within the applicable filing
periods.
3.9 EXAMINATION OF BOOKS AND RECORDS. Company shall have made available
to Purchaser or its representatives for inspection and copying all of Target
Company's, Shareholder's, and Company's books, records, contracts and documents
of or relating to Company, Target Company, and Shareholder, as Purchaser shall
have requested.
3.10 INSURANCE. As of the Closing Company shall have applied for and
within 30 days after the Closing, Company shall have in force a term life
insurance policy on the life of Craig Cowan in a minimum amount of One Million
Two Hundred Fifty Thousand Dollars ($1,250,000), naming Purchaser as loss
beneficiary which policy shall be issued by a company reasonably acceptable to
Purchaser and licensed to do business in California and shall provide that such
policy may not be canceled without at least five (5) days prior notice to
Purchaser or the beneficiaries changed without consent of Purchaser. Any
proceeds received by Purchaser from such policy shall be applied to reduce
principal and accrued interest on the Note and to the extent there is any amount
remaining after payment of the then outstanding principal and interest balance,
such amount shall be paid to Company. Prior to Closing, Company shall deliver
certificates of insurance for all risk property damage covering all tangible
property of Company covering the full replacement cost thereof issued by an
insurance company acceptable to Purchaser and must include a lender loss
contract endorsement payable in favor of Purchaser subject to any prior rights
of the Senior Lender. Such policy may not be cancelled without at least fifteen
(15) days notice to Purchaser.
3.11 COMPOSITION OF THE BOARD. The authorized number of the directors
of the Company shall be four (4) and Craig Cowan, Kirby Attwell and Tim
Fogelsong, shall be the duly elected directors effective as of the Closing.
3.12 SMALL BUSINESS CONCERN. Prior to the Closing, Company and
Shareholder shall have completed and delivered to Purchaser in form proper for
filing with the Small Business Administration ("SBA"), the following SBA forms
identified by title and number as Size Status Declaration No. 480 and Assurance
of Compliance No. 652D, and Company shall have completed the information
required for Part A of SBA form Portfolio Financing Report No. 1031.
3.13 SECURITY FILINGS. The Security Agreement shall have been executed
by Company and all filings, recordings and other actions which Purchaser or its
counsel deems necessary or advisable to establish, preserve and perfect a
security interest in all existing and future assets of Company and evidence,
satisfactory in form and substance to Purchaser's counsel, that all required
filings and recordings have been made and liens have been created in favor of
Purchaser, shall have been delivered to Purchaser, including UCC-1 Financing
Statements for filing in California, Missouri and Texas.
5
<PAGE>
3.14 FINANCIAL STATEMENTS. Company shall have delivered to Purchaser a
copy of Target Company's unaudited balance sheet as of December 31, 1992-95, and
statements of income for the respective 12-month periods then ended and an
unaudited balance sheet as of September 30, 1996 and statements of income for
the nine-month period then ended. Further, Company shall have delivered to
Purchaser a copy of Shareholder's audited balance sheets and statements of
income and changes in financial position for fiscal years ending September 30,
1993, 1994 and 1995 and unaudited balance sheet as of June 30, 1996 and
statement of income and changes in financial position for nine month period then
ended. Company shall deliver a pro forma balance sheet of Company as of the
Closing of the Acquisition Agreement which shall show a book value, of at least
Three Million Four Hundred and Fifty Thousand Dollars ($3,450,000) after
eliminating this Note as a liability and a minimum equity investment of Two
Million Two Hundred Thousand Dollars ($2,200,000) in cash and stock by
Shareholder and which is attached hereto as Schedule 3.14.
3.15 COMPENSATION POLICY. On or before the Closing, Company shall have
delivered to Purchaser the Compensation Policy Statement agreed to by
Shareholder and Company and a true and correct executed copy of the Employment
and Noncompetition Agreement.
3.16 CREDIT AGREEMENT. Company shall have entered into a credit
agreement ("Credit Agreement") with Senior Lender providing for an extension of
Three Million Dollars ($3,000,000) of credit to Company represented by a
revolver and a term loan, and all conditions precedent to Senior Lender's
obligation to fund shall have been satisfied or waived (with the prior written
consent of Purchaser in its absolute discretion). All documents delivered in
conjunction with the closing of the transactions contemplated by the Credit
Agreement shall be delivered to Purchaser.
3.17 ACQUISITION AGREEMENT. Company and Target Company shall have
entered into the Acquisition Agreement and all conditions precedent to closing
thereof shall have been satisfied or waived (with the prior written consent of
Purchaser in its absolution discretion) other than the payment of the purchase
price for the assets of Target Company, and the Acquisition Agreement shall each
close simultaneously with the Closing of this Agreement. All documents delivered
in conjunction with the closing of the Acquisition Agreement shall be delivered
to Purchaser.
3.18 CREDIT AVAILABILITY. Upon Closing and after payment to Target
Company pursuant to the terms of the Acquisition Agreement, Company will have
the cash, cash equivalent and/or the availability to borrow on a revolving line
of credit with Senior Lender of at least Five Hundred Thousand Dollars
($500,000).
3.19 CLOSING FEES. Company shall pay to Purchaser a processing fee of
Twenty-Five Thousand Dollars ($25,000) which will be subtracted from the amount
advanced under the Note.
6
<PAGE>
3.20 WAIVER OF PREEMPTIVE RIGHTS. Any stockholder with preemptive
rights shall have waived the same with respect to the issuance of the Warrant
and Conversion Common Stock.
4. CONDITIONS OF COMPANY'S OBLIGATIONS.
The obligation of Company and Shareholder to issue their respective
Securities is subject to the satisfaction on or before the date of the Closing
of the following conditions, all or any of which may be waived in writing by
Company:
4.1 REPRESENTATIONS AND WARRANTIES. The following representations and
warranties are made by Purchaser, and are now and will be true and correct at
and as of the date of the Closing:
(i) This Agreement constitutes a valid and legally binding
obligation of such Purchaser, enforceable in accordance with its terms,
subject to bankruptcy and other laws of general application affecting
the rights and remedies of creditors and the availability of equitable
remedies.
(ii) This Agreement is made with such Purchaser in reliance
upon such Purchaser's representation to Company, which by Purchaser's
execution of this Agreement, Purchaser hereby confirms, that (A) the
Securities are being acquired for investment for Purchaser's own
account, not as a nominee or agent, and not with a view to the resale
or distribution of any part thereof to the public, and that such
Purchaser has no present intention of selling, granting any
participation in, or otherwise distributing the same to; (B) such
Purchaser does not have any contract, undertaking, agreement or
arrangement with any person to sell, transfer or grant participation to
person or to any third person, with respect to any of the Securities
other than to accredited investors as defined in Section 4.1 (vi); (C)
such Purchaser is not an underwriter of the Securities within the
meaning of Section 2(11) of the Securities Act; and (D) such Purchaser
has full power and authority to enter into this Agreement.
(iii) Such Purchaser has not been attracted to the purchase of
the Securities by any publication or any advertising, and the
transactions contemplated by this Agreement are not being effected by
or through a broker-dealer.
(iv) Such Purchaser believes it has received all the
information it considers necessary or appropriate for deciding whether
to purchase the Securities, including, but not limited to, the Business
Plan and represents that it has had an opportunity to ask questions and
receive answers from Shareholder and Company regarding Company,
Shareholder and Target Company, their business and prospects, and the
terms and conditions of the offering of the Securities. The foregoing,
however, does not limit or modify the representations and warranties of
Company and Shareholder in Article 5 of this Agreement.
7
<PAGE>
(v) Such Purchaser has not been organized for the purpose of
acquiring the Securities and is an investor in securities of
privately-held companies and acknowledges that it is able to protect
its interests in connection with the purchase of the Securities, can
bear the economic risk of its investment with full understanding that
it can lose its entire investment in the Securities without producing a
material adverse change in its financial condition and has such
knowledge and experience in financial or business matters that it is
capable of evaluating the merits and risks of the investment in the
Securities.
(vi) Such Purchaser is an "accredited investor" within the
meaning of Rule 501 of Regulation D promulgated by the Commission, as
presently in effect.
(vii) Such Purchaser understands that (A) neither the
Securities nor the sale thereof to it has been registered under the
Securities Act, or under any state securities law; (B) no registration
statement has been filed with the Commission, nor with any other
regulatory authority and that, as a result, any benefit which might
normally accrue to an investor such as Purchaser by an impartial review
of such a registration statement by the Commission or other regulatory
commission will not be forthcoming; and (C) the Securities are
characterized as "restricted securities" under the federal securities
laws inasmuch as they are being acquired from Company in a transaction
not involving a public offering and that under such laws and applicable
regulations such securities may be resold without registration under
the Securities Act only in certain limited circumstances. In this
connection, such Purchaser represents that it is familiar with the
Commission's Rule 144, as presently in effect, and understands the
resale limitations imposed thereby and by the Securities Act.
4.2 DELIVERY OF CONSIDERATION. Purchaser shall have tendered the
aggregate consideration set forth in Schedule 1 aggregating at least One Million
Two Hundred Fifty Thousand Dollars ($1,250,000), net of processing fees of
Twenty-Five Thousand Dollars ($25,000) payable to Purchaser.
4.3 AMENDMENT OF SHAREHOLDER AGREEMENT. Purchaser shall have
executed a counterpart of the Shareholder's Agreement as amended.
5. REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDER.
Except as set forth in the attached Disclosure Statement, with respect
to each of the following representations and warranties, Shareholder is
representing solely as to itself and Company, and Company is representing solely
as to itself and Target Company and all representations and warranties as to the
Company and the Target Company are made as of a time immediately prior to the
closing of the transactions contemplated by the Acquisition Agreement, that:
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5.1 ORGANIZATION AND CORPORATE POWER. Company is a corporation duly
organized, validly existing and in good standing under the laws of, and is
qualified to do business in the state of Delaware, and is qualified as a foreign
corporation in California which is the only jurisdiction in which the nature of
property owned or leased by it or the conduct of its business requires such
qualification. Shareholder is a corporation duly organized, validly existing and
in good standing under the laws of, and is qualified to do business in the state
of Delaware, and is qualified as a foreign corporation in Texas which is the
only jurisdiction in which the nature of property owned or leased by it or the
conduct of its business requires such qualification. Each of Shareholder and
Company has all requisite corporate power and authority necessary to own and
operate its properties and to carry on its business as now conducted and as
presently proposed to be conducted. The copies of Company's and Shareholder's
charter documents and bylaws furnished to Purchaser's counsel reflect all
amendments made thereto at any time prior to the Closing and are correct and
complete.
5.2 CAPITAL STOCK AND RELATED MATTERS. The authorized capital stock of
Company will be set forth in its certificate of incorporation and the
outstanding capital stock, options and other rights to acquire capital stock and
shares reserved for issuance and the ownership of the capital stock and options
of Company is set forth in Schedule 5.2(a) (all of which capital stock and
options are validly issued, fully paid and nonassessable and have been issued in
full compliance with all applicable securities laws). The authorized capital
stock of Shareholder will be set forth in its certificate of incorporation and
the outstanding capital stock, options and other rights to acquire capital stock
and shares reserved for issuance and the ownership of the capital stock and
options of Shareholder is set forth in Schedule 5.2(b) (all of which capital
stock and options are validly issued, fully paid and nonassessable and have been
issued in full compliance with all applicable securities laws). Except as set
forth in Schedule 5.2(a) or (b) and as contemplated by this Agreement, (i)
Company will not have outstanding any stock or securities convertible or
exchangeable for any shares of capital stock, nor will there be outstanding any
rights or options to subscribe for or to purchase any capital stock or any stock
or securities convertible into or exchangeable for any capital stock of Company
and (ii) Company will not be subject to any obligation (contingent or otherwise)
to repurchase or otherwise acquire or retire any shares of its capital stock.
5.3 SUBSIDIARIES. Except as set forth on Schedule 5.3, neither Company
nor Bradford Venture Partners, L.P. owns any securities of any Person and
officers, managers and directors of Company do not own, directly or indirectly,
any security or financial interest in any other Person which competes with or
does business with Company other than securities in any publicly traded entity,
which securities comprise less than one percent (1%) of that entity's capital
stock.
5.4 AUTHORIZATION; NO BREACH. The execution and delivery of this
Agreement, Note, the Security Agreement, Warrant, and each of the other
agreements and transactions contemplated hereby, have been duly authorized by
Company and, to the extent it is party hereto or bound thereby by, Shareholder.
This Agreement, the Securities, the Security Agreement, and each of the other
agreements contemplated hereby constitute valid and binding obligations of
Company and the Shareholder, to the extent either is a party thereto or bound
thereby, enforceable in accordance with their respective terms. The execution,
delivery and
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compliance with and performance by Company or Shareholder of this Agreement, the
Securities, the Security Agreement, and each of the other agreements
contemplated hereby, does not and will not (i) conflict with or result in a
breach of the terms, conditions or provisions of; (ii) constitute a default
under; (iii) result in the creation of any material lien, security interest,
charge or encumbrance upon Company's or Shareholder's capital stock or assets
pursuant to; (iv) give any third party the right to accelerate any material
obligation under; (v) result in a material violation of; or (vi) require any
authorization, consent, approval, permit, exemption or other action by or notice
to any court or administrative or governmental body pursuant to (x) the
certificate of incorporation or bylaws of Company or Shareholder, (y) any law,
statute, rule or regulation to which Company or Shareholder is subject or (z)
any agreement, instrument, order, judgment or decree to which Company or
Shareholder is subject, including, but not limited to, the Credit Agreement.
5.5 CHANGES SINCE FINANCIAL STATEMENTS. Except as set forth in Schedule
5.5 or as contemplated hereby or by the Acquisition Agreement, since June 30,
1996 (as to Shareholder) and September 30, 1996 (as to Company and Target
Company) and to the Closing:
(i) there has been no material change, adverse or otherwise, in
the business, property, employee relations or conditions, financial or
otherwise, of Company, Target Company, or Shareholder;
(ii) no dividend to stockholders has been declared or paid by
Shareholder;
(iii) no stock of Shareholder has been redeemed or otherwise
acquired by Company, or split or otherwise subdivided;
(iv) no equity securities of Shareholder have been issued other
than Securities issued in connection with the transactions contemplated
by the Acquisition Agreement;
(v) no union organizing activity has occurred and no key
employee or executive or significant group of employees have terminated
his employment with Shareholder or Target Company or indicated a desire
to depart from Shareholder or Target Company or to work less than full
time; and
(vi) there has been no sale or transfer of any of Target
Company's assets nor cancellation of any of the claims of Target
Company and no sale or transfer of any material amount of Shareholder's
assets, except as any such sales, transfer, or cancellation occurred in
the ordinary course of business, none of which individually or in the
aggregate has been materially adverse to the business, properties,
financial condition or affairs of Shareholder or Target Company.
Neither Company nor Shareholder has any knowledge of any facts or events that
would give rise to the occurrence of any of the events listed in this Section
5.5.
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5.6 INVESTMENTS AND LOANS SINCE JUNE 30, 1996. Except as set forth in
Schedule 5.6 or in connection with the transactions contemplated by the
Acquisition Agreement, since June 30, 1996, neither Shareholder, Company nor
Target Company has invested in or made any loan to any Person, other than in the
ordinary course of business, including usual reasonable travel expenses and
payroll advances to employees which, in the aggregate, do exceed Twenty-Five
Thousand Dollars ($25,000).
5.7 ASSETS.
(a) Except as set forth in Schedule 5.7, to the best knowledge
of Company, no officer, manager, member, director, employee or material
consultant of Company or Target Company, nor any spouse, child or other relative
of any of these persons, owns or has any interest, directly or indirectly, in
any of the property owned by or leased by Company necessary for the conduct of
the business or in any license or product development agreement with Company or
Target Company. Except as set forth in Schedule 5.7, each of Target Company and
Company has good and marketable title to all its properties of any kind other
than Proprietary Information (as defined below) and interests in such
properties, which constitute all the properties and interests in property other
than Proprietary Information that are necessary for the conduct of the business
of Company or Target Company, free and clear of restrictions or conditions on
transfer or assignment and free and clear of mortgages, liens, pledges, charges,
encumbrances, equities, claims, easements, rights of way, covenants, conditions
or restrictions, except for matters that, in the aggregate, are not substantial
in amount and do not materially detract from or interfere with the present or
intended use of any of these assets, nor materially impair the business or
proposed operation of Company.
(b) Except as set forth in Schedule 5.7, each of Company and
Target Company has good title and exclusive ownership to all of their respective
patents, patent applications, trademarks, copyrights, trade names, mask works,
proprietary information, know-how, processes, models, designs, trade secrets,
and other intellectual property rights (collectively the "Proprietary
Information"), or adequate licenses and rights to use the Proprietary
Information of others on terms deemed favorable by Company which are necessary
for the current (and as proposed in the Business Plan) conduct of the business
of Company free of any claim by any officer, manager, director, employee,
consultant or other person, or, to the best knowledge of Company, do not and
will not conflict or infringe with the Proprietary Information of others;
PROVIDED, HOWEVER, that the possibility exists that other Persons completely
independent of Company or their respective employees or agents could have
developed trade secrets or items of technical information similar to or
identical with those of Company or Target Company. Company or Target Company,
their respective current shareholders, members, managers, officers or employees
do not have any rights in any technology, including, without limitation, any
software or hardware or related copyright or mask works registrations or patents
issued or applications pending for any software, device, process, design or
invention of any kind now used by or contemplated by Company in the furtherance
of its business operations presently conducted and as proposed to be conducted
following Closing of the Acquisition Agreement, which rights and related
registrations, patents
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or applications have not been assigned to Company or Target Company, with such
assignments duly recorded in the United States Patent and Trademark Office.
(c) Company has taken reasonable security measures to protect
the secrecy, value and confidentiality of its Proprietary Information. Each of
Company and Shareholder has not disclosed the contents of any Proprietary
Information to Persons other than such employees or consultants or to Purchaser
or other entities who have executed appropriate confidentiality agreements. To
the best knowledge of Company after reasonable investigation and inquiry, no
consultant or employee is under any restriction, whether contractual, or by
virtue of previous employment or otherwise, that would prevent him from
performing his duties for the Company or prevent Company from using the
Proprietary Information. Except as set forth in Schedule 5.7, neither Company
nor Target Company is a party to any nondisclosure or confidentiality agreements
with any other person or entity that is not an employee of or a consultant to
Company.
(d) To the best knowledge of Company, all of the plant
machinery, equipment and other fixed assets of Target Company are in good
operating condition, reasonable wear and tear excepted.
5.8 LITIGATION. Except as disclosed in Schedule 5.8, and (i) to the
best of Shareholder's knowledge after due inquiry, there are no actions,
proceedings or investigations pending involving the Shareholder, Target Company
or Company, its officers, members, managers, or directors or, to the best
knowledge of Company or Shareholder, threatened, or verdicts or judgments
entered against or in favor of Target Company, Company or Shareholder, its
officers or members or managers or directors or Shareholder before any court or
before any administrative agency or officer which might result in any material
adverse change in the business, properties or condition, financial or otherwise,
of Company or Target Company or Shareholder; or (ii) to the best knowledge of
Company or Shareholder, there are no violations by Company, Target Company or
Shareholder of any foreign, federal, state or local laws, regulations or orders,
including but not limited to, environmental protection laws and occupational and
safety laws relating to job conditions or safety and federal and state laws
governing the sale and distribution of telecommunications products, the
violation of which would have a material adverse effect on the business of
Company and neither Company, Shareholder nor Target Company has received any
correspondence or communications with respect to any possible violation or
investigation of the same.
5.9 TAX RETURNS AND PAYMENTS. To the best of Company's knowledge after
due inquiry, Target Company has filed all federal and state income tax returns
and all other federal, state and local tax returns which are required to be
filed, completed all such returns accurately and paid or caused to be paid or
set aside adequate reserves for all taxes, withholding penalties, and interest
due or which may become due. Except as disclosed in Schedule 5.9, the federal
and state tax returns of Shareholder, Company and Target Company, to best of
each of Shareholder's and Company's knowledge after due inquiry, are not now the
subject of an audit by the Internal Revenue Service or California or Texas state
taxing authorities which audit if decided adversely to Shareholder, Company or
Target Company would have a material adverse
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effect, and no waivers of the applicable statute of limitations have been
executed and remain in force.
5.10 EMPLOYEE COMPENSATION. Except as set forth in Schedule 5.10,
Company is not a party to or bound by any employment agreement not terminable at
will with more than one month's severance pay or commission agreements for a
term in excess of one year and requiring or which could require compensation and
benefits of more than Four Thousand Dollars ($4,000) per month, modified
collective employment contracts, deferred compensation agreements, bonus plans,
profit sharing plans, pension plans or any other plans or programs subject to
the Employment Retirement Income Security Act of 1974 ("ERISA") or health,
disability, sick pay or other employee benefits. Company believes that relations
with its employees are satisfactory.
5.11 MATERIAL LICENSES, AGREEMENTS, RELATED PARTY AGREEMENTS. Except as
set forth in Schedule 5.11, Company is not a party to, nor is its property bound
by, (i) any agreement requiring the performance by Company or Target Company of
any obligation for a period of time extending beyond one year from the Closing,
calling for or which could result in the payment or receipt of consideration of
more than Fifty Thousand Dollars ($50,000), excluding purchase orders entered
into in the ordinary course of business for which Company reasonably expects to
receive its normal gross margins, or licensing of any Proprietary Information of
Company or any third party; (ii) any agreement or understanding between Company
and any officer, manager, director, or employee other than employee compensation
and benefits entered into in the ordinary course of business; (iii) loan or
credit agreements providing for the extension of credit to Company; (iv)
agreements or commitments containing a provision limiting the ability of Company
to compete with any Person or engage in any line of business; (v) agreements of
guarantees or indemnification; or (vi) any agreement that is materially adverse
to the business, properties, or financial condition of Company or precludes the
payment of principal and interest on the Note, copies of which agreements have
been furnished or made available to Purchaser. Except as set forth in Schedule
5.11, there is no default or event that with notice or lapse of time, or both,
would constitute a default by any party to any of these agreements. Company has
not received notice nor does it have knowledge that any party to any of these
agreements intends to cancel or terminate any of these agreements or to exercise
or not exercise any options under any of these agreements or to seek a
renegotiation or adjustment of any material provisions.
5.12 REGISTRATION RIGHTS. The registration rights are only granted in
the Registration Rights Agreement. The preemptive rights are only granted in the
Stockholders' Agreement.
5.13 FINANCIAL STATEMENTS.
(a) The balance sheets and statements of income and
changes in financial position of Shareholder
referenced in Section 3.14 present fairly the
financial position and results of operations and,
with respect to each such statement relating to a
period of a full fiscal year or providing
information as of the end of a fiscal year,
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cash flows and changes in financial condition as of the
dates thereof and for the periods covered thereby.
(b) Except as disclosed in Schedule 5.13, the Financial
Statements of Target Company referenced in Section
3.14 present fairly the financial position and
results of operations of Target, are in accordance
with the books and records of Seller, do not
reflect any transactions which are not bona fide
transactions and do not contain any untrue
statement of a material fact or omit to state any
material fact necessary to make the statements
contained therein, in light of the circumstances in
which they were made, not misleading.
(c) The opening pro forma balance sheet of the Company
attached as Schedule 3.12 is accurate.
5.14 INSURANCE. The insurance coverage of Company and Shareholder with
respect to their respective properties, assets and business is customary for
corporations engaged in similar lines of business, other than flood insurance
and is in full force and effect.
5.15 FEES, COMMISSIONS AND EXPENSES. There are no claims for brokerage
commissions, finders' fees or similar compensation in connection with the
transactions contemplated by this Agreement based on any arrangement or
agreement binding upon Company or Shareholder. Company and Shareholder shall
indemnify and hold harmless Purchaser from all other claims, costs, or attorney
fees arising out of breach of this paragraph.
5.16 GOVERNMENTAL CONSENT, ETC. Except for such filings as provided in
this Agreement, no further permit, consent, approval, authorization of,
declaration to, or filing with any governmental authority is required in
connection with the execution, delivery and performance of this Agreement by
Company or the consummation by Company of any transactions contemplated hereby,
except as have already been obtained or accomplished. Except as set forth on
Schedule 5.16, all material licenses, permits or registration needed by Target
Company and Company to conduct their respective businesses are in full force and
effect.
5.17 LIABILITIES. Schedule 5.17 sets forth the outstanding balance,
interest rate, payee, and amortization rate of all debt and amount of all trade
payables over sixty (60) days of Target Company and Company as of September 30,
1996. Except as set forth in Schedule 5.17, Target Company and Company do not
have any debt, liability or obligation of any nature, whether accrued, absolute
or contingent, and whether due or to become due, that is not reflected or
reserved against in the Balance Sheet, except for those that (i) may have been
incurred after the date of the Balance Sheet; or (ii) are not required by
generally accepted accounting principles to be included in the Balance Sheet,
all of which debts, liabilities and obligations were incurred in the ordinary
course of business and are usual and normal in amount, both individually and in
the aggregate; or (iii) are not being assumed by Company or for which Company
has no liability or obligation.
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5.18 SBA FORMS. The information set forth on the SBA forms referred to
in Section 3.12 is true and correct. Shareholder and Company are each a "small
concern" as such term is defined in 13 C.F.R. ss. 107.3 and complies with all
applicable size standards specified in 13 C.F.R. ss. 121.802.
5.19 ACQUISITION AGREEMENT. The Acquisition Agreement accurately set
forth the agreement with respect to the parties thereto and there are no other
agreements or understandings not delivered in writing to Purchaser. All
representations and warranties made by Target Company and Craig Cowan in the
Acquisition Agreement are incorporated herein by reference as though made by
Company, subject to the provisions of Section 5(c) of the Note; PROVIDED,
HOWEVER, that such incorporated representations and warranties shall be deemed
to have been made "to the best knowledge of" Company, if, and only if, such
representations and warranties of Target Company and Craig Cowan set forth in
the Acquisition Agreement (i) are so qualified in the Acquisition Agreement or
(ii) are duplicative of Company's representations and warranties in this
Agreement (in respect of Target Company) and such duplicative representations
and warranties contained in this Agreement, if any, were made by Company "to
[its] best knowledge." Company is not in breach of any obligation under the
Acquisition Agreements and no person other than Target Company and Craig Cowan
have any rights to receive any consideration other than as set forth in the
Acquisition Agreement.
5.20 CREDIT AGREEMENT. The Credit Agreement accurately sets forth the
agreement with respect to the parties hereto and there are no other agreements
or understandings not delivered in writing to Purchaser. All representations and
warranties made by Company in the Credit Agreement are incorporated herein by
reference. Company is not in breach of any obligation under the Credit
Agreement.
5.21 DISCLOSURE. Neither this Agreement, nor any of the schedules,
attachments, written statements, documents, certificates or other materials
prepared or supplied by Company with respect to the transactions contemplated
hereby, contain any untrue statements of a material fact or omit a material fact
necessary to make the statements contained herein or therein not misleading.
There is no fact which Company has not disclosed to Purchaser, orally or in
writing, and of which any of Company's officers, managers or directors are
aware, or involving a claim or loss in excess of Twenty-Five Thousand Dollars
($25,000), individually, or in the aggregate, or which could reasonably be
anticipated to have a material adverse effect, upon the existing or expected
financial condition, operating results, assets, customer relations, employee
relations or business prospects of Company.
5.22 PRIORITY POSITION. Upon the Closing and throughout the term of the
Note, Purchaser shall have a second priority secured position in all assets of
Company junior only to the lien of the Senior Lender.
5.23 INVENTORY. All of the inventory shown on the balance sheets as of
September 30, 1996 referenced in Section 3.14 were at such balance sheet date
(i) generally usable or saleable in the normal course of business of the Target
Company, (ii) not excessive in kind or amount in light of the business to be
performed by Company, and (iii) carried at its current cost.
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5.24 OWNERSHIP OF TARGET COMPANY. Craig Cowan is the sole owner of the
capital stock of Target Company and Company will indemnify, defend and hold
harmless Purchaser from any losses, damages or claims brought by any prior
shareholder or equity holder of Target Company or claimed shareholder or equity
holder of Target Company against Company.
6. REGISTRATION, TRANSFER OF SECURITIES.
The Securities are not transferable except upon the conditions
specified in the Fourth Amendment of Stockholders Agreement of even date
herewith and Article 6, which conditions are intended to ensure compliance with
the provisions of the Securities Act and state securities laws in respect of the
transfer of any of such Securities.
6.1 RESTRICTIVE LEGENDS. Unless and until otherwise permitted by this
Agreement, the Note and Warrant and any share certificate for any Conversion
Common Stock issued to Purchaser or to any subsequent transferee shall be
stamped or otherwise imprinted with a legend in substantially the following
form:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, and thus may not be
transferred unless registered under that Act or unless an exemption
from registration is available."
Company may order its transfer agents to stop the transfer of any Securities
bearing the legend required by this section 6.1 until the conditions herein with
respect to transfer of such securities have been satisfied.
6.2 NOTICE OF PROPOSED TRANSFERS.
(a) Prior to any transfer or attempted transfer of any
Conversion Common Stock or any Securities bearing the legend in Section 6. 1,
the holder thereof shall give Company written notice of its intention so to do,
describing briefly the nature of any such proposed transfer. If, in the written
opinion of counsel for holder, in form and substance satisfactory to Company and
its counsel, addressed to Company and the holder, the proposed transfer may be
effected without registration of such Security, the Securities proposed to be
transferred may be transferred in accordance with the terms of said notice and
in compliance with applicable state securities laws and regulations. Company
shall not be required to effect any such transfer prior to the receipt of such
favorable opinion or opinions; provided that if the proposed transfer is
governed by Rule 144 promulgated by the Commission, or any successor rule, such
opinion shall not be required, but Company may prevent such transfer until it
receives evidence satisfactory to it and its counsel that the transfer complies
with Rule 144. Each transfer shall comply with all applicable Commissioner's
rules and applicable state securities laws.
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(b) If, in the opinion of such counsel, the proposed transfer
of such Securities may not be effected without registration thereof under the
Securities Act, such holder shall not consummate the proposed transfer.
7. COVENANTS OF COMPANY AND SHAREHOLDER.
7.1 FINANCIAL STATEMENTS AND OTHER INFORMATION. Company, will deliver
to Purchaser, so long as any of the Note is outstanding (unless otherwise
specified), the following:
(i) Within thirty (30) days of each monthly accounting period,
unaudited financial statements of Company.
(ii) Within 120 days of the end of each fiscal year of Company,
Company's annual financial statements. These financial statements must
be audited by a Certified Public Accountant ("CPA").
(iii) Upon submission to Company's board of directors, but no
later than within sixty (60) days after the end of the fiscal year of
Company, a monthly budget of Company including income statement,
balance sheet cash flow statement, and capital expenditure plan.
(iv) A copy of the following information submitted to the
Company's Senior Lender (initially, Bank of America Texas N.A., or
replacement or successor financial institution if applicable): (A) a
borrowing base certificate within twenty (20) days after month end; (B)
an accounts receivable aging within twenty (20) days of month end; (C)
a compliance certificate as defined in the Senior Lender's loan
documents within thirty (30) days after each quarter.
(v) Promptly upon receipt thereof, any additional reports,
management letters or other detailed information concerning significant
aspects of Company's operations and financial affairs or in conjunction
with any annual or interim audit given to Company by its independent
accountants (and not otherwise contained in other materials provided
pursuant to this Section).
(vi) Promptly, but in any event within ten (10) days after the
discovery of any material adverse event or circumstance affecting
Company (including, but not limited to, the filing of any litigation or
administrative claim against Company, any senior officer of Company, or
any Subsidiary of Company involving a claim in excess of Fifty Thousand
Dollars ($50,000) or which, if concluded adversely, would reasonably be
expected to materially adversely affect the business or assets of
Company, or any Subsidiary of Company, or the existence of any dispute
with any Person which involves a reasonable likelihood of such
litigation being filed or any investigation or proceeding instituted or
threatened by any federal or state regulatory agency or any notice of
default by Company under any material agreement to which it is a party)
(A) an Officers' Certificate specifying the nature
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and period of existence thereof, and what actions Company has taken
and/or proposes to take with respect thereto; and (B) upon the request
of any Purchaser, copies of any filings, complaints or notices
delivered to or served upon Company, any Subsidiary of Company, or any
manager or officer of either, in connection therewith.
(vii) Within five (5) days of transmission thereof, copies of
all such financial statements, proxy statements and reports as Company
sends to its stockholders, and copies of all registration statements
and all regular, special or periodic reports which it or any of its
officers, managers or directors file with any state securities
regulatory agency, the Commission or with any securities exchange on
which any of its securities are then listed, and copies of all press
releases and other statements made available generally by Company to
the public concerning material developments in Company's business.
(viii) To the extent not provided above, copies of all reports
when provided to Senior Lender and any notices of default from Senior
Lender when received.
(ix) With reasonable promptness, such other information and
financial data concerning Company and its Subsidiaries, as any person
entitled to receive materials under this section may reasonably request
including but not limited to data on the impact of the investment by
Purchaser on jobs created or retained, revenue and taxes, and other
economic benefits.
7.2 INSPECTION OF PROPERTY. Company will permit any representative
designated by any Purchaser upon reasonable notice and during normal business
hours, to (i) visit and inspect any of the properties of Company, (ii) examine
the financial records of Company and make copies thereof or extracts therefrom,
and (iii) discuss the affairs, finances and accounts of Company with the
directors, officers, managers, key employees and independent accountants of
Company.
7.3 UNFUNDED LIABILITIES - ERISA. Company will not incur any liability
or tax under section 4971 of the Internal Revenue Code of 1986, as amended
("Code") in respect of an accumulated funding deficiency (or obtain any waiver
under section 412(d) of the Code or section 303 of ERISA) or incur any material
liability to the Pension Benefit Guaranty Corporation in connection with any
employee benefit plan of Company. No Reportable Event, as defined in Title IV of
ERISA, will occur or continue with respect to any such plan.
7.4 RESTRICTIONS. Except as specified herein, so long as the Note is
outstanding, Company will not, without the consent of Purchaser, which may be
withheld in its sole and absolute discretion;
(i) pay any dividend or make any distribution upon any
of its equity securities;
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(ii) redeem, purchase or otherwise acquire, any of its equity
securities, except any repurchase of Company's common stock issued to
employees on termination of employment;
(iii) increase compensation or other benefits to senior
management of Company in excess of the Employment and non-Competition
Agreement or Compensation Policy Statement or repay any loans between
Shareholder and Company, make any payments in excess of the
Compensation Policy Statement or to make any payment from Company to
Shareholder for general or administrative support in excess of One
Hundred Fifty Thousand Dollars ($150,000) per year or any sums if an
Event of Default under this Agreement has occurred and is continuing;
(iv) merge or consolidate with any Person, or sell, lease or
otherwise dispose of any of its consolidated assets, or acquire assets
from any Person, which disposition or acquisition is not in the
ordinary course of Company's business, and involves an aggregate
consideration of more than twenty percent (20%) of the aggregate book
value of its total assets in any 12-month period (other than sales in
the ordinary course of business), or liquidate, dissolve, recapitalize
or reorganize in any form of transaction; provided that a merger with a
wholly-owned Subsidiary in which Company is the surviving entity will
be permitted
(v) only so long as the Note is outstanding, except as
permitted by (vii) below, make loans, advances to, guarantees for the
benefit of, or investments in, any Person except investments in (A)
obligations of the United States government or any agency thereof or
obligations guaranteed by the United States government, (B)
certificates of deposit of commercial banks insured by the Federal
Deposit Insurance Corporation, (C) commercial paper with a rating of at
least Prime-1 according to Moody's Investors Service, Inc., in each
case having a maturity not, in excess of one year, or (D) shares of a
wholly-owned Subsidiary;
(vi) enter into the active management or operation of any
businesses other than the ownership and operation of businesses of the
nature now conducted or proposed in the Business Plan to be conducted
by Company or its Subsidiaries;
(vii) enter into any transaction or loan or advance (other than
reimbursement of reasonable travel and business expenses) which shall
exceed Five Thousand Dollars ($5,000) with any Shareholder or any
officers, directors, managers, members, shareholders, employees of
Shareholder, Company, or Subsidiaries or affiliates of Company
affiliates, except that Company and its Subsidiaries may enter into
normal employment arrangements; provided that any employee stock option
or stock purchase plan in excess of that disclosed in Schedule 5.2
shall require approval of Purchaser;
(viii) only so long as the Note is outstanding, create or
permit to continue in existence any lien upon any assets of Company
other than (A) purchase
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money liens; (B) liens for taxes not yet due and payable; (C) liens
arising out of indebtedness authorized by the board of directors of
Company; (D) involuntary liens contested in good faith, an adverse
decision in which contest would not materially adversely affect
Company; (E) liens in favor of the Senior Lender in existence at
Closing; or (F) lien contemplated by this Agreement;
(ix) issue any stock of Company to employees of Company that is
not subject to agreements granting a right to repurchase on termination
of employment nor amend or terminate any such agreements;
(x) Only so long as the Note is outstanding permit (all
capitalized terms in this Subsection shall have the meaning ascribed to
them in the Credit Agreement).
(A) Capital Funds to be less the sum of the following,
measured quarterly:
(a) Three Million Two Hundred Thousand Dollars
($3,200,000); plus
(b) the sum of 75% of net income after income taxes
(without subtracting losses) earned in each fiscal
year commencing September 30, 1997,
(B) the ratio of Total Liabilities Not Subordinated to Capital
Funds exceed the amounts indicated for each period specified
below:
PERIOD RATIO
December 31, 1996 quarterly
through September 30, 1997 1.00:1.0
December 31, 1997 and
quarterly thereafter 0.75:1.0
(C) annual Adjusted EBITDA commencing September 30, 1997 to be
less than One Million Two Hundred Thousand Dollars
($1,200,000).
(D) a Fixed Charge Coverage Ratio to be less than 1.25:1.0 as
calculated in the Credit Agreement.
(xi) enter into any material financial agreements, including
loan agreements and leases, which shall not permit (but cannot
require) Purchaser to cure any defaults thereunder;
(xii) make capital expenditures (including the total amount of
any capital leases) aggregating in excess of One Hundred Thousand
Dollars ($100,000) per year;
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(xiii) enter into employment agreements in excess of One
Hundred Thousand Dollars ($100,000) per year not terminable at will
with new or existing employees or renew any existing employment
agreements (except those which are terminable at will);
(xiv) Shareholder will not allow any officer, manager or
director of Shareholder or Company to use Company's assets in such a
manner as would violate such officer's, manager's or director's
fiduciary duties to Company and/or its stockholders;
(xv) only so long as the Note is outstanding, without thirty
(30) days prior written notice to Purchaser, (a) change Company's
name, business structure, or identity, or add any new fictitious name,
or relocate its chief executive office or (b) other than in the
ordinary course of business, move, relocate, or transfer, whether by
sale or otherwise, any of Company's assets; or
(xvi) allow the Company to issue any capital stock to any
Person other than as set forth on Schedule 5.2.
7.5 AFFIRMATIVE COVENANTS. Company will, and will cause each
Subsidiary to:
(i) at all times cause to be done all things necessary to
maintain, preserve and renew its corporate existence and all material
licenses and permits necessary for the conduct of its businesses;
(ii) maintain and keep its properties in good repair, working
order and condition, and from time to time make all necessary or
desirable repairs, renewals and replacements, so that its businesses
may be properly and advantageously conducted at all times;
(iii) pay and discharge, when payable, all taxes, assessments
and governmental charges imposed upon its properties or upon the
income or profits therefrom (in each case before the same become
delinquent and before penalties accrue thereon) and all claims for
labor, materials or supplies which if unpaid might by law become a
lien upon any of its property, unless and to the extent that the same
are being contested in good faith and by appropriate proceedings and
adequate reserves, determined in accordance with generally accepted
accounting principles, have been set aside on its books with respect
thereto;
(iv) comply with all other material obligations which it
incurs pursuant to any contract or agreement, whether oral or written,
express or implied, as such obligations become due, unless and to the
extent that the same are being contested in good faith and by
appropriate proceedings and adequate reserves have been set aside on
its books with respect thereto;
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(v) comply with all applicable laws, rules and regulations of
all foreign and domestic governmental authorities, the violation of
which would have a material adverse effect upon its businesses or
financial condition;
(vi) maintain a system of accounting established and
administered in accordance with generally accepted accounting
principles consistently followed, and set aside on its books and cause
each of its operating Subsidiaries to set aside on its books all such
proper reserves as shall be required by generally accepted accounting
principles; and
(vii) take reasonable steps to protect Company's and each
Subsidiary's trade secrets, including requiring employees, agents and
consultants, to execute agreements comparable to those required in
Section 3.2, within thirty (30) days of the Closing with respect to
existing employees and prior to employment with respect to new
employees.
7.6 APPLICATION OF PROCEEDS. Company will apply the proceeds from the
sale of the Securities solely for the purposes set forth in Schedule 7.6.
Company will provide Purchaser with access to Company's financial records so as
to allow such Purchaser to confirm that such proceeds were used in the manner
contemplated by this Agreement, such access to include a review by Purchaser
within ninety (90) days of the Closing. Company acknowledges and agrees that if
the proceeds are not used by Company in the manner contemplated by this
Agreement, Purchaser shall have the right to demand immediate repayment.
7.7 BOARD MATTERS.
(a) So long as the Note is outstanding, Purchaser shall have
the right to elect one (1) of the total number of Board of Directors of Company
and increased to two (2) if the Board is increased to eight or more directors.
Company will hold Board of Director's meetings when required by the Board but at
least quarterly. Purchaser whose nominee is serving as a board member on the
Board of Directors may select a representative to attend as an observer in said
nominee's absence.
(b) Purchaser's nominee as director or advisory director will
receive out-of-pocket costs related to such attendance plus a minimum of Five
Hundred Dollars ($500.00) per meeting attended; PROVIDED, HOWEVER, that such
amount shall be not less than the greatest amount paid by Company to its other
advisory directors. The Board shall decide whether to obtain Officers' and
Directors' liability insurance.
7.8 COVENANTS OF SHAREHOLDER. So long as Purchaser holds the Warrant or
any Conversion Common Stock:
(i) Within 120 days of the end of each fiscal year of
Shareholder, Shareholder will deliver Shareholder's annual financial
statements. These financial statements must be audited
by a Certified Public Accountant ("CPA");
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(ii) Shareholder and its officers, managers and directors will
treat Purchaser as a person to which it owes a fiduciary obligation
equivalent to the fiduciary obligation of all stockholders of
Shareholder;
(iii) Shareholder shall not amend Shareholder's bylaws or
certificate of incorporation (if such amendment would adversely affect
the rights of the Conversion Common Stock relative to other equity
securities of Shareholders);
(iv) if, and to the extent, Shareholder provides any interim
financial information or budget(s) regarding Shareholder or
Shareholder's Subsidiaries, to any other stockholder in such entity's
capacity as a stockholder of Shareholder or to any option, warrant, or
right holder of Shareholder in such holder's capacity as such,
Shareholder shall also promptly provide same to Purchaser; and
(v) Shareholder shall keep reserved a sufficient number of
shares of Conversion Common Stock for issuance on exercise of the
Warrant.
7.9 PUT OF CONVERSION COMMON STOCK. Purchaser shall have the right to
require that Shareholder purchase from it ("Purchaser Put") the Conversion
Common Stock. The Purchaser Put shall be exercisable on the first day following
the Fifth Anniversary of the Closing of the Note. The purchase price of the
Purchaser Put will be the product of (a) five times the sum of Shareholder's
Earnings Before Interest, Taxes, Depreciation and Amortization for the twelve
preceding calendar months immediately preceding the date of exercise of the
Purchaser Put determined by generally accepted accounting principles by the
Shareholder's auditors plus cash or cash equivalents less interest bearing debt,
including the Note and (b) a fraction, the numerator of which is the number of
Shares of Conversion Common Stock subject to the Purchaser Put and the
denominator is the number of Shares outstanding on a fully diluted basis reduced
by the Exercise Price, as that term is defined in the Warrant, per share of the
Conversion Common Stock. Shareholder may pay the Purchaser in cash or promissory
note where the term of the note shall be three years, fully amortized, with
interest at 15% per annum based on a 360 day year and shall include commercially
standard conditions such as a provision for attorney's fees, acceleration of the
obligation in the case of a default and late charges. If the Purchaser Put is
not exercised by the Purchaser within two years after final payment of the Note
but in no event earlier than the due date of the Note, the Purchaser Put will
expire and terminate.
7.10 LICENSING. Company will not without approval of the Board of
Directors enter into any licensing, production, agency, or sales agreement which
would effectively transfer market control of all, or substantially all, of any
major product lines of Company to any third party.
7.11 TERMINATION OF COVENANTS. The covenants set forth in Sections 7.1,
7.2, 7.3, 7.4, 7.5, 7.6, 7.7, 7.10, 7.12 and 7.13 shall terminate and be of no
force and effect upon payment in full of the Note. The covenants set forth in
Section 7.8 and 7.9 shall survive and continue in full force so long as
Purchaser holds any Conversion Common Stock, but shall terminate upon the
occurrence registered public offering of Shareholder's securities.
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<PAGE>
7.12 PURCHASER'S CURE OF DEFAULT. In the event that Company should be
in breach or default of any material agreement, lease or contract, it shall
immediately give notice of such fact to Purchaser who shall have the right, but
not the obligation, to cure such default, where possible or permitted, on behalf
of Company. Any monies advanced by Purchaser on behalf of Company for such
purposes shall become an obligation, which shall bear interest at the same rate
as that provided for in the Note, of Company to Purchaser advancing such monies.
Any contract between third parties will include a provision to cure.
7.13 ENFORCEMENT OF REPRESENTATIONS AND WARRANTIES. Company shall send
a copy of any notice to Target Company or Craig Cowan claiming a breach of any
material representation or warranty of Target Company or Craig Cowan under the
Acquisition Agreement to Purchaser on the same date such notice is delivered to
Target Company or Craig Cowan. Purchaser shall be entitled to require the
Company to enforce the material representations, warranties and covenants
granted in Company's favor contained in the Acquisition Agreement, subject to
Company's right under Section 5(c) of the Note to attempt to cure or otherwise
satisfy any materially false or misleading representation or warranty of Target
Company or Craig Cowan to Purchaser's satisfaction within 30 days of date of
such notice.
8. MISCELLANEOUS.
8.1 EXPENSES. Company agrees to pay, and save Purchaser harmless
against liability for the payment of, the reasonable fees and expenses of
Purchaser and fees of their counsel, Arter & Hadden, not to exceed Twelve
Thousand Five Hundred Dollars ($12,500) and costs of such counsel, arising in
connection with the negotiation, execution and consummation of the transactions
contemplated by this Agreement.
8.2 REMEDIES. Any Person having any rights under any provision of this
Agreement will be entitled to enforce such rights specifically, to recover any
sums allowable under Section 7.11 or any damages by reason of any breach of any
provision of this Agreement, and to exercise all other rights granted by law or
equity, which rights may be exercised cumulatively and not alternatively. The
prevailing party in any such dispute shall receive its reasonable attorneys'
fees and costs.
8.3 DEFAULT. Any breach of any provision in Article 7 hereof, which
remains uncured for a period of five (5) days from delivery of notice to Company
if said breach involves the payment of money by Company or thirty (30) days from
delivery of notice to Company for any other breach, shall constitute an Event of
Default under this Agreement.
8.4 CONSENT TO AMENDMENTS. Except as otherwise expressly provided
herein, the provisions of this Agreement may be amended and Company may take any
action herein prohibited, or omit to perform any act herein required to be
performed by them, only if it has obtained the written consent of Purchaser. No
course of dealing between Company and the holder of any Security or Conversion
Common Stock or any delay in exercising any rights hereunder or under Company's
certificate of incorporation will operate as a waiver of any rights of any such
holders.
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<PAGE>
8.5 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties contained herein or made in writing by any party in connection
herewith will survive the execution and delivery of this Agreement, regardless
of any investigation made by Purchaser or on its behalf.
8.6 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, all covenants and agreements contained in this Agreement by or on behalf
of any of the parties hereto will bind and inure to the benefit of the
respective successors and assigns of the parties hereto whether or so expressed
or not.
8.7 SEVERABILITY. Whenever possible, each provision of this Agreement
will be interpreted in such a manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
8.8 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, any one of which need not contain the signatures of more than one
party, but all such counterparts when taken together will constitute one and the
same Agreement.
8.9 DESCRIPTIVE HEADINGS. The descriptive headings of this
Agreement are inserted for convenience only and do not constitute a part of
this Agreement.
8.10 NOTICES. Any notice, demand or other communication required or
permitted under the terms of this Agreement shall be in writing and shall be
made by telegram, telex or electronic transmitter or certified or registered
mail, return receipt requested, and shall be deemed to be received by the
addressee one (1) business day after sending, if sent by Federal Express,
Express Mail, or other similar overnight delivery service, the date of sending,
if sent by telegram, telex, telecopy or electronic transmitter, and three (3)
business days after mailing, if sent by certified or registered mail, with
postage prepaid, and properly addressed as follows:
If to Purchaser: Marwit Capital Company, L.P.
180 Newport Center Drive, Suite 200
Newport Beach, California 92660
Attention: Matthew Witte
Facsimile: 714/720-8077
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<PAGE>
With a Copy to: Arter & Hadden
5 Park Plaza, Suite 1000
Irvine, California 92614-9809
Attention: Michael P. Ridley, Esq.
If to Company
or Shareholder: New West Acquisition Corp.
3000 Weslayan, Suite 350
Houston, Texas 77027
Attention: Kirby Attwell
Facsimile: 713/622-7477
With a Copy to: Mayor, Day, Caldwell & Keeton
700 Louisiana, Suite 1900
Houston, Texas 77002-2778
Attention: B. Scott Aitken, Esq.
Facsimile: 713/225-7047
8.11 GOVERNING LAW. The validity, meaning and effect of this Agreement
shall be determined in accordance with the laws of California applicable to
contracts made and to be performed in that state.
8.12 EXHIBITS. All exhibits and schedules are an integral part of this
Agreement.
8.13 FINAL AGREEMENT. This Agreement constitutes the final agreement of
the parties concerning the matters herein, and supersedes all prior and
contemporaneous agreements and understandings.
8.14 SUBORDINATION. Purchaser agrees to subordinate the Note pursuant
to the terms of the Subordination Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
October ____, 1996.
TRAVIS INTERNATIONAL, INC.
By:________________________________
Its:________________________________
26
<PAGE>
NEW WEST ACQUISITION CORP.
By:__________________________________
Its:__________________________________
MARWIT CAPITAL COMPANY, L.P.
By: MARWIT ASSOCIATES, INC.
Its: General Partner
By:________________________________
EXHIBIT 10.24
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY STATE SECURITIES LAWS AND
THUS MAY NOT BE TRANSFERRED UNLESS REGISTERED UNDER THAT ACT AND SUCH LAWS OR
UNLESS AN EXEMPTION FROM REGISTRATION IS AVAILABLE. THIS NOTE AND THE
INDEBTEDNESS EVIDENCED BY THIS NOTE ARE SUBORDINATED, IN RIGHT OF PAYMENT, TO
THE PRIOR PAYMENT IN FULL OF THE INDEBTEDNESS OF COMPANY TO THE BANK OF AMERICA
TEXAS, N.A. AS SENIOR LENDER ("SENIOR LENDER") IN ACCORDANCE WITH THE TERMS OF
THE SUBORDINATION AGREEMENT, DATED OF EVEN DATE HEREWITH, BETWEEN SENIOR LENDER
AND HOLDER.
- -----------------------------------------------------------------------------
SENIOR SUBORDINATED NOTE
- -----------------------------------------------------------------------------
Due October 1, 2002
FOR VALUE RECEIVED, New West Acquisition Corp., a Delaware corporation
("Company") , hereby promises to pay to Marwit Capital Company, L.P., or its
registered assigns ("Holder") , the sum of One Million Two Hundred Fifty
Thousand Dollars ($1,250,000) and to pay interest thereon at the rate of twelve
and one half percent (12 1/2%) per annum from the date hereof.
Principal shall be payable in thirty-six (36) consecutive equal monthly
payments of $34,722.22 beginning November 1, 1999 and on the first day of the
month thereafter. In addition, interest on the unpaid amounts outstanding shall
be paid beginning November 1, 1996, and on the first day of each consecutive
month thereafter. All remaining principal and accrued but unpaid interest
thereon shall be payable in full on October 1, 2002 ("Due Date"). Any payment of
principal or interest not paid within five (5) days of its due date shall be
subject to a five percent (5%) charge on the unpaid payment.
<PAGE>
In no event shall Holder be entitled to interest exceeding the maximum
rate permitted by law or under the regulations promulgated by the United States
Small Business Administration. If any excess of interest is provided for or
shall be adjudicated to be so provided for in this Note, then in such event: (i)
the provisions of this paragraph shall govern and control; (ii) Company shall
not be obligated to pay the amount of such interest to the extent that it is in
excess of the maximum amount permitted by law, and the same shall be construed
as a mutual mistake of the parties which shall not affect the conversion right
granted herein; and (iii) any such excess which may have been collected or
attributed shall be subtracted from the then unpaid principal amount hereof, or
refunded to Company.
Both principal hereof and interest thereon are payable in lawful money of
the United States of America at the offices of Holder as indicated in the
official records of Company. Interest hereunder shall be computed on the basis
of a year of three hundred sixty (360) days for the actual number of days
elapsed.
This Note is secured by that certain Security Agreement of even date
herewith executed by Company.
This Note is subject to the terms and conditions hereinafter set forth:
1. DEFINITIONS. As used in this Note, the following terms shall
mean:
1.1 "Agreement" - shall mean the Securities Purchase Agreement
dated as the date hereof, by and among Company, Parent and Holder.
1.2 "Loan Documents" - shall refer to the Agreement and the
Security Agreement, executed at even date herewith and delivered pursuant to the
Agreement.
1.3 "Notes" - shall mean this Note and any notes delivered in
substitution or exchange therefor as provided herein and the other Notes issued
pursuant to the Agreement.
1.4 "Parent" - shall refer to Travis International, Inc.
1.5 "Securities Act" - shall mean the Securities Act of 1933,
as amended.
1.6 "Senior Lender" - shall mean Bank of America Texas, N.A.
1.7 "Subordination Agreement" - shall refer to that certain
Subordination Agreement by and among Senior Lender, Company and Holder.
1.8 "Subsidiary" - shall mean any corporation, association or other
business entity at least fifty percent (50%) of the outstanding voting stock of
which is at the time owned or controlled directly or indirectly by Company or by
one or more of such subsidiary entities or both.
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2. PREPAYMENT OF NOTE.
2.1 MANDATORY PREPAYMENT. Except as set forth below and subject to
the Subordination Agreement, in the event of (i) a sale of all or substantially
all of the assets of Company, a merger, reorganization or consolidation of
Company with or into another entity other than Parent or a wholly owned
subsidiary of Company or Parent, or (ii) a transfer of a majority of the
outstanding voting securities of Company or, prior to a registered public
offering of Parent's securities, of Parent in a transaction or series of related
transactions, all principal and accrued but unpaid interest thereon on the Notes
shall immediately become due and payable without prepayment penalty or premium.
Except as set forth below and subject to the Subordination Agreement, in the
event of a registered public offering of Parent, a portion of the proceeds of
which are utilized to pay some or all of the Senior Lender's Term Loan, Company
shall pay a pro rata portion of the principal then outstanding on this Note.
2.2 OPTIONAL PREPAYMENT. Company, at its option, may make
additional payments in reduction of the principal outstanding on this Note in
increments of $34,722.22 on thirty (30) days' written notice plus a prepayment
penalty equal to three percent (3%) of the amount prepaid if such prepayment is
made prior to the third anniversary date of this Note and one percent (1%) if
such prepayment is made after the third anniversary, but prior to the fifth
anniversary and zero percent (O%) thereafter. Such optional prepayments shall be
applied, in reverse order of maturity, to the required installments of principal
described herein above. Any prepayment made from life insurance proceeds on the
life of Craig Cowan or from proceeds of a registered public offering of Parent
or Company shall be free of any prepayment penalty or premium.
3. INTEREST ADJUSTMENT. The parties agree that if the warrants to acquire
30,000 shares of Common Stock were not issued in conjunction with this Note, the
interest rate would be one percent (1%) higher.
4. REPLACEMENT OF NOTE. Upon receipt of evidence reasonably satisfactory
to Company of the ownership of and the loss, theft, destruction or mutilation of
this Note and (in the case of loss, theft or destruction) upon delivery of an
indemnity agreement in an amount reasonably satisfactory to Company, or (in the
case of mutilation) upon surrender and cancellation of the mutilated Note,
Company will execute and deliver, in lieu thereof, a new Note of like tenor.
5. EVENTS OF DEFAULT. The occurrence of any of the following "Events of
Default" shall, at the option of the Holder make all sums of principal and
interest then remaining unpaid and all other amounts payable hereon due and
payable, all without demand, presentment, notice or protest, all of which hereby
are expressly waived, and permit Holder to exercise any other right available to
it at law or in equity, all of which rights and powers may be exercised
cumulatively and not alternatively.
(a) FAILURE TO PAY PRINCIPAL OR INTEREST. Failure to pay any
installment of interest or principal hereon when due and continuance thereof for
a period of five
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(5) days after receipt of written notice by the Company that Holder has not
received a payment when due.
(b) BREACH OF COVENANTS. The continuance for a period of ten
(10) days after notice to Company of (i) the material breach by Company of any
one of the covenants contained in the Agreement or (ii) a material breach of any
other covenant contained in the Loan Documents.
(c) BREACH OF REPRESENTATIONS AND WARRANTIES. Any of Company'
s representations or warranties made in the Loan Documents or in any statement
or certificate at any time given in writing to Holder pursuant to the Agreement
or this Note or in connection therewith or herewith, shall prove to have been
false or misleading in any material respect as of the date such representations
and warranties were made; PROVIDED, HOWEVER, that with respect to materially
false or misleading representations and warranties of New West Communications,
Inc., or Craig Cowan incorporated by reference into Section 5.19 of the
Agreement as being made by the Company, no "Event of Default" shall have
occurred hereunder until the date that is 30 days after the date the Company
delivers to New West Communications, Inc., or Craig Cowan a notice claiming a
breach of a material representation or warranty and then only if the Company (i)
has not, to the satisfaction of the Holder, exercised the remedies available to
it in respect of such material representation or warranty or (ii) has not cured,
to the satisfaction of the Holder, or submitted a written plan of action as to
such cure or other satisfaction of such material representation or warranty,
which plan is satisfactory to Holder.
(d) JUDGMENTS. The making or filing of any money judgment,
writ or similar process individually or in the aggregate in excess of Fifty
Thousand Dollars ($50,000) involving other than trade creditors against Company
or Parent or any of its respective property or other assets which shall remain
unsatisfied, unvacated, unbonded or unstayed for a period of ten (10) days or in
the event no later than five (5) days prior to the date of any proposed sale
thereunder.
(e) DEFAULT OF OTHER AGREEMENTS. The occurrence of any event
of default under the Senior Lender's loan documents or any other note, agreement
or other instrument involving the issuance of indebtedness of Company, whether
such indebtedness now exists or may hereafter be created, if, as a result of
such event of default, the maturity of such indebtedness has been accelerated or
has otherwise become or been declared to be due prior to its stated maturity or
Company has been precluded from making payments or Holder receiving payments on
the Notes and the principal amount of such indebtedness which has been
accelerated or has otherwise become or been declared to be due exceeds,
individually or in the aggregate, Two Hundred Thousand Dollars ($200,000).
(f) ATTACHMENTS. The levying of any writ of attachment against
any property or other assets of Company valued individually or in the aggregate
at an amount equal to or greater than Fifty Thousand Dollars ($50,000) where
Company fails to post a bond or obtain other relief for the release of such
attachment within ten (10) days.
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<PAGE>
(g) BANKRUPTCY. The institution of bankruptcy, insolvency,
reorganization or liquidation proceedings or other proceedings for relief under
any bankruptcy law or any law for the relief of debtors shall be instituted by
or against Company, which proceedings shall not have been vacated by appropriate
court order within sixty (60) days of such institution.
(h) DEATH. If the Company does not have in force a term life
insurance policy on the life of Craig Cowan in a minimum amount of $1,250,000
with the proceeds payable to Holder within fifteen (15) days of the date on
which the proceeds of such policy are paid, and if Company has failed to appoint
a replacement for such individual acceptable to the Holder in its sole
discretion who has commenced performing duties of the deceased within thirty
(30) days following his death and continue to perform such duties thereafter.
(i) DISSOLUTION. Any order, judgment or decree shall have been
entered against Company decreeing the dissolution or liquidation of Company and
such order shall remain undischarged or unstayed for a period of thirty (30)
days.
(j) INSOLVENCY, RECEIVER OR TRUSTEE. The making by Company of
an assignment for the benefit of creditors; or the making by Company of an offer
of settlement, composition or extension to the claims of all or substantially
all of Company's creditors or the application for or consent to the appointment
of a receiver or trustee for it or for a substantial part of its property or
business; or the appointment otherwise of such a receiver or trustee or a
committee of Company's creditors.
6. TRANSFER OF SECURITIES. Subject to the restrictions on transfer
contained in the Agreement, this Note and all rights hereunder are transferable
in whole on the books of Company maintained for such purpose at its principal
office referred to above by Holder in person or by duly authorized attorney,
upon surrender of this Note properly endorsed and upon payment of any necessary
transfer tax or other governmental charge imposed upon such transfer. Each taker
and holder of this Note, by taking or holding the same, consents and agrees
that'this Note when endorsed in blank shall be deemed negotiable and that when
this Note shall have been so endorsed, Holder hereof may be treated by Company
and all other persons dealing with this Note, as the absolute owner hereof for
any purpose and as the person entitled to exercise the rights represented
hereby, or to the transfer hereof on the books of Company, any notice to the
contrary notwithstanding; but until such transfer on such books, Company may
treat Holder hereof as the owner for all purposes. Notwithstanding the above,
the original Holder hereof shall not transfer this Note to a competitor of
Company or Parent without the prior written consent thereto from the Company,
which consent shall not be unreasonably withheld. Except as so limited, the
Holder of this Note may sell participations in or assign this Note, and may
exchange financial information about Company with actual or potential
participants, or assignees; PROVIDED, HOWEVER, that Holder shall remain the sole
record holder hereof, unless this Note and all rights hereunder have been
transferred in accordance with the provisions set forth above. If a
participation is sold or the loan is assigned, the assignee or participant shall
have the right of set-off against Company and shall be subject to the provisions
of the Agreement and the Note.
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7. NOTICES. Except as otherwise provided herein, any notice or demand
which, by the provisions hereof, is required or which may be given to or served
upon the parties hereto shall be in writing and, if by telegram, telecopy or
telex, shall be deemed to have been validly served, given or delivered when
sent, if by personal delivery, shall be deemed to have been validly served,
given or delivered upon actual delivery and, if mailed, shall be deemed to have
been validly served, given or delivered three (3) business days after deposit in
the United States mails, as registered or certified mail, with proper postage
prepaid and addressed to the party or parties to be notified, at the following
addresses (or such other addresses) as a party may designate for itself by like
notice):
If to Holder:
Marwit Capital Company, L.P.
180 Newport Center Drive, Suite 200
Newport Beach, California 92660
Attention: Matthew Witte
Facsimile: 714/720-8077
With copy to:
Arter & Hadden
5 Park Plaza, Suite 1000
Irvine, California 92614-9809
Attention: Michael P. Ridley, Esq.
Facsimile: 714/833-9604
If to Company:
New West Acquisition Corp.
3000 Weslayan, Suite 350
Houston, Texas 77027
Attention: Kirby Attwell
Facsimile: 713/622-7477
with a copy to:
Mayor, Day, Caldwell & Keeton
700 Louisiana, Suite 1900
Houston, Texas 77002-2778
Attention: B. Scott Aitken, Esq.
Facsimile: 713/225-7047
8. MISCELLANEOUS.
8.1 SURVIVAL OF COVENANTS. All agreements and covenants made herein
shall survive the execution and delivery hereof.
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<PAGE>
8.2 FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the
part of Holder in the exercise of any power, right or privilege hereunder shall
operate as a waiver thereof, nor shall any one or more of such failures or
delays constitute a course of performance or dealing on which Company is
entitled to rely, nor shall any single or partial exercise of any such power,
right or privilege preclude other or further exercises thereof or of any other
right, power or privilege. All rights and remedies existing hereunder are
cumulative to, and not exclusive of, any rights or remedies otherwise available.
8.3 COST OF COLLECTION. If any default is made in the payment of
this Note, Company shall pay Holder all costs of collection, including, without
limitation, reasonable attorneys', and accountants' fees and costs of appeals
and interest on any sums actually disbursed at the rate set forth herein.
8.4 GOVERNING Law. This Note has been executed in and shall be
governed by the laws of the State of California. As part of the consideration
for Holder's investment herein, Company and Holder hereby agree that all actions
or proceedings arising directly or indirectly hereunder, whether instituted by
Holder or Company, may, at the option of Holder, be litigated in courts having
situs within the State of California, County of orange and Company hereby
expressly consents to the jurisdiction of any local, state or federal court
located within said state and county, and consents that any service of process
in such action or proceeding may be made by personal service upon Company
wherever Company may be located, or by certified or registered mail directed to
Company at its last known address. Company and Holder waive trial by jury, any
objection based on FORUM NON CONVIENS, and any objection to venue of any
action instituted hereunder.
8.5 MODIFICATION. Neither this Note nor any provision hereof may be
amended, modified, waived, discharged or terminated with respect to Holder
unless agreed to by the holders of a majority of the outstanding principal
balance of the Note except for an amendment which changes the Due Date which
shall require the consent of all of the holders of the Note.
8.6 SEVERABILITY. Whenever possible, each provision of this Note
will be interpreted in such manner as to be effective and valid under applicable
law, but, if any provision of this Note is held to be prohibited by or invalid
under applicable law, such provision will be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of this Note.
8.7 FURTHER ASSURANCE. At any time or from time to time upon the
request of Holder, Company will execute and deliver such further documents and
do such other acts and things as Holder may reasonably request in order fully to
effectuate the purposes of this Note, to provide for the payment of the
principal and interest due hereunder, and to facilitate, if required, the
exercise of Holder's conversion right.
8.8 SUCCESSORS. All the covenants, agreements, representations and
warranties contained in this Note shall bind the parties hereto and their
respective heirs, executors, administrators, distributees, successors and
assigns.
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8.9 HEADINGS. The section headings in this Note are inserted for
purposes of convenience only and shall have no substantive effect.
IN WITNESS WHEREOF, New West Communications, Inc. has caused this
Note to be signed by its duly authorized officer and to be dated October
______ , 1996.
NEW WEST ACQUISITION CORP.
By:_______________________________
Its:______________________________
EXHIBIT 10.25
SUBORDINATION AGREEMENT
THIS SUBORDINATION AGREEMIENT (this "AGREEMENT") is made as of the 30th
day of September, 1996, by and between Bank of America Texas, N.A. ("BOFA") and
Marwit Capital Company, L.P. ("MARWIT") and acknowledged by New West
Communications, Inc., a Delaware corporation ("BORROWER").
RECITALS
WHEREAS, BofA has made, or in the future may make, credit accommodations
available to Borrower, pursuant to the terms and provisions of that certain
Business Loan Agreement (Receivables and Inventory) dated as of September 30,
1996, by and between BofA and Borrower (the "LOAN AGREEMENT").
WHEREAS, Marwit has made credit accommodations available to Borrower,
pursuant to the terms and provisions of that certain Senior Convertible Note,
dated as of September 30, 1996, in the principal amount of $1,250,000.00, by
Borrower for the benefit of Marwit (the "SUBORDINATED NOTE").
WHEREAS, in order to induce BofA to make the credit accommodations
described above available to Borrower, Marwit has agreed to subordinate certain
of its rights and claims now existing or hereafter arising against Borrower to
the rights and claims of BofA now existing or hereafter arising against
Borrower, all in accordance with the terms and provisions of this Agreement.
WHEREAS, but for the agreements of Marwit contained herein BofA would not
make the credit accommodations available to Borrower.
WHEREAS, the parties hereto are entering into this Agreement in order to
set forth their agreements as to payment of the Senior Indebtedness (hereinafter
defined) and the Junior Indebtedness (hereinafter defined) and their agreements
as to certain other matters, including but not limited to lien priorities.
NOW, THEREFORE, for and in consideration of the premises and the mutual
agreements contained herein, the parties hereto hereby agree as follows:
AGREEMEENT
ARTICLE I - DEFINITIONS
As used in this Agreement, the terms defined above shall have their
respective meanings set forth above and the following terms shall have the
following meanings:
<PAGE>
"COLLATERAL" shall mean any and all property which now constitutes
or hereafter will constitute collateral or other security for payment of
the Senior Indebtedness or the Junior Indebtedness.
"DISTRIBUTION" by any Person shall mean (a) with respect to any
stock issued by such Person, the retirement, redemption, purchase or other
acquisition for value of any such stock, (b) the declaration or payment of
any dividend or other distribution on or with respect to any such stock,
(c) any loan or advance by such Person to, or other investment by such
Person in, the holder of any such stock, and (d) any other payment (other
than ordinary salaries to employees or advances made in the ordinary
course of business to employees for travel or other expenses incurred in
the ordinary course of business) by such Person to or for the benefit of
the holder of any such stock.
"FEDERAL BANKRUPTCY CODE" shall have the meaning set forth in
Article VIII of this Agreement.
"JUNIOR CREDITOR" shall mean Marwit and its successors and assigns.
"JUNIOR DOCUMENTS" shall mean any and all agreements, documents and
instruments evidencing, governing or executed or delivered in connection
with the Junior Indebtedness, including, without limitation, the
Subordinated Note.
"JUNIOR INDEBTEDNESS" shall mean any and all indebtedness,
obligations and liabilities of every kind and character of Borrower now or
hereafter owing to Junior Creditor, including, without limitation, the
indebtedness evidenced and to be evidenced by the Junior Documents,
whether such indebtedness, obligations and liabilities are direct or
indirect, primary or secondary, joint, several or joint and several, fixed
or contingent and whether incurred by Borrower as maker, endorser,
guarantor or otherwise.
"PERMITTED PAYMENTS" shall have the meaning set forth in Article IV
of this Agreement.
"PERSON" shall mean and include an individual, a partnership, a
corporation, a business trust, a joint stock company, a trust, an
unincorporated association, a joint venture or other entity or a
governmental authority.
"PROCEEDS" shall have the meaning assigned to it under the Uniform
Commercial Code, shall also include "products" (as defined in the Uniform
Commercial Code), and, in any event, shall include, but not be limited to
(a) any and all proceeds of any insurance, indemnity, warranty, letter of
credit or guaranty or collateral security payable to any grantor from time
to time with respect to any of the Collateral, (b) any and all payments
(in any form whatsoever) made or due and payable to the owner of the
Collateral from time to time in connection with any requisition,
confiscation, condemnation, seizure or forfeiture of all or any part of
the Collateral by any
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governmental body, authority, bureau or agency (or any Person acting under
color of governmental authority) and (c) any and all other amounts from
time to time paid or payable under or in connection with any of the
Collateral.
"SENIOR CREDITOR" shall mean BofA and its successors and assigns.
"SENIOR DOCUMENTS" shall mean any and all agreements, documents and
instruments evidencing, governing or executed or delivered in connection
with the Senior Indebtedness or the Senior Creditor's interests in the
Collateral, including, without limitation, the Loan Agreement and that
certain Security Agreement (Receivables, Inventory and Equipment) by and
between Borrower and Senior Creditor.
"SENIOR INDEBTEDNESS" shall mean any and all indebtedness,
obligations and liabilities of every kind and character of Borrower now or
hereafter owing to Senior Creditor pursuant to or evidenced by the Senior
Documents, whether such indebtedness, obligations and liabilities are
direct or indirect, primary or secondary, joint, several or joint and
several, fixed or contingent and whether incurred by Borrower as maker,
endorser, guarantor or otherwise, not to exceed Three Million and No/100
Dollars ($3,000,000.00).
ARTICLE II - RIGHTS IN COLLATERAL
2.1 PRIORITIES REGARDING COLLATERAL. Any and every lien and security
interest in the Collateral in favor of or held for the benefit of the Senior
Creditor has and shall have priority over any lien or security interest that
Junior Creditor might have or acquire in the Collateral notwithstanding any
statement or provision contained in the Junior Documents or otherwise to the
contrary and irrespective of the time or order of filing or recording of
financing statements, deeds of trust, mortgages or other notices of security
interests, liens or assignments granted pursuant thereto, and irrespective of
anything contained in any filing or agreement to which any party hereto or its
respective successors and assigns may now or hereafter be a party, and
irrespective of the ordinary rules for determining priorities under the Uniform
Commercial Code or under any other law governing the relative priorities of
secured creditors. Junior Creditor will note on any and all filings that it
makes pursuant to the Uniform Commercial Code that its interest in the
Collateral is subordinated to the interest held by Senior Creditor.
2.2 MANAGEMENT OF COLLATERAL. Senior Creditor shall have the exclusive
right to manage, perform and enforce the terms of the Senior Documents with
respect to the Collateral, to exercise and enforce all privileges and rights
thereunder according to its discretion and the exercise of its business judgment
including, but not limited to, the exclusive right to take or retake possession
of the Collateral and to hold, prepare for sale, process, sell, lease, dispose
of, or liquidate the Collateral, pursuant to a foreclosure or otherwise.
Notwithstanding any rights or remedies available to Junior Creditor under
applicable law or under any document or instrument evidencing, securing or
otherwise executed in connection with the incurrence of the obligations
contemplated by the Junior Documents, Junior Creditor shall nor foreclose upon
its
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<PAGE>
security interest in any of the Collateral, or exercise similar remedies with
respect thereto, so long as any of the Senior Indebtedness shall continue to
exist, and only the Senior Creditor shall have the right to restrict or permit,
or approve or disapprove, the sale, transfer or other disposition of Collateral.
Junior Creditor will not in any manner interfere with Senior Creditor's security
interests in the Collateral unless and until Borrower has satisfied in full the
Senior Indebtedness and Senior Creditor has given Junior Creditor written notice
thereof. Junior Creditor waives notice of, and agrees not to challenge the
method, manner, time, place or terms, of any disposition of the Collateral by
Senior Creditor. Accordingly, should Senior Creditor elect to exercise its
rights and remedies with respect to any of the Collateral, Senior Creditor may
proceed to do so without regard to any interest of Junior Creditor, and Junior
Creditor waives any claims that it may have against Senior Creditor for any
disposition of the Collateral. Junior Creditor agrees, whether or not a default
has occurred in the payment of any indebtedness or the performance of any other
obligations to it, that any liens on and security interests in the Collateral or
any portion thereof that it might have or acquire shall automatically be fully
released ipso facto as to all indebtedness and other obligations secured thereby
owing to Junior Creditor if and when Senior Creditor releases its lien in and
security interest on such Collateral in the event of any sale, disposition or
other realization by Senior Creditor (or any agent therefor) upon such
Collateral.
ARTICLE III - PROCEEDS
3.1 DISTRIBUTION OF PROCEEDS OF COLLATERAL. At any time during which all
or any part of the Senior Indebtedness remains outstanding, and whether or not
the same is then due and payable, the Proceeds of any sale, disposition or other
realization by Senior Creditor (or any agent therefor) upon all or any pan of
the Collateral shall be applied first to the payment in full of all Senior
Indebtedness in such order as Senior Creditor shall determine in its sole
discretion.
3.2 CONTINGENT OBLIGATIONS. For purposes of distributing the Proceeds of
Collateral pursuant to this ARTICLE III, the portion of Senior Indebtedness
consisting of loans or advances not yet made by Senior Creditor to Borrower
under the Senior Documents (including, but not limited to, reimbursement for
fees, costs and expenses) shall be considered Senior Indebtedness then
outstanding, and the Senior Creditor shall have the right to retain, in a cash
collateral account, cash collateral equal to the amount thereof which Senior
Creditor determines, in its sole good faith discretion, may arise or exist from
time to time.
3.3 HOLDING OF PROCEEDS IN TRUST. Except as provided for in Article IV of
this Agreement, in the event Junior Creditor receives Proceeds of the
Collateral, Junior Creditor shall be deemed to hold all of such Proceeds in bust
for the benefit of Senior Creditor until the proper application thereof in
accordance with SECTION 3.1 hereof. Junior Creditor shall not seek to challenge
the validity, enforceability, priority or perfection of any of the Senior
Documents if the purpose or effect thereof would in any manner defeat or delay
the distribution of the Proceeds of any Collateral in the manner set forth in
SECTION 3.1 hereof.
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ARTICLE IV - SUBORDINATION
Junior Creditor covenants and agrees that the Junior Indebtedness,
howsoever evidenced and whether now existing or hereafter incurred, shall be
subordinate and junior in right of payment, to the extent and in the manner
hereinafter set forth, to all Senior Indebtedness:
(a) The holder of the Senior Indebtedness shall first be finally and
irrevocably paid in cash an aggregate amount equal to the principal thereof and
termination fees, if any, interest at the time due thereon, and all other costs,
fees, expenses and/or obligations now or hereafter owing thereunder, before any
payment or Distribution of any character, whether in cash, securities or other
property, shall be made on account of the Junior Indebtedness or otherwise to or
for the benefit of Junior Creditor; and any payment or Distribution of any
character, whether in cash, securities or other property, which would otherwise,
but for the provisions of this ARTICLE IV, be payable or deliverable in respect
of the Junior Indebtedness or otherwise shall be paid or delivered directly to
the holder of the Senior Indebtedness (or its duly authorized representatives),
until all the Senior Indebtedness shall have been paid in full.
(b) Notwithstanding the provisions of SUBPARAGRAPH (A) of this
ARTICLE IV, Borrower may (i) pay interest on the unpaid principal balance of the
Subordinated Note on a monthly basis in arrears; (ii) make regularly scheduled
payments of principal on the terms and conditions set forth in the Subordinated
Note in effect on the date hereof; and (iii) make mandatory prepayments of
principal on the terms and conditions set forth in the Subordinated Note in
effect on the date hereof, but only in the event that the Senior Indebtedness
shall have been paid in fall prior to such time (the "PERMITTED PAYMENTS");
PROVIDED, HOWEVER, that as a condition precedent to Borrower's right to make
(and the Junior Creditor's right to receive) any and all such Permitted
Payments, there shall not have occurred or then exist a default or event of
default under any of the Senior Indebtedness or any of the Senior Documents, or
an event or condition which with notice, lapse of time or the making of such
payment would constitute a default or event of default under any of the
foregoing.
(c) In the event that Junior Creditor exercises its rights under the
Subordinated Note to purchase stock of Borrower and to apply balances on the
Subordinated Note against the purchase price of such stock, Junior Creditor
shall not sue for, collect or receive any Distribution on account of such stock
in amounts that would exceed payments permitted herein on the principal amount
of the Subordinated Note used to purchase such stock, until such time as the
Senior Indebtedness has been paid in full.
(d) Junior Creditor agrees to promptly notify the Senior Creditor in
writing of any default or event of default on any Junior Indebtedness or
otherwise or under any of the Junior Documents and further agrees not to
exercise any right or remedy or take any enforcement action with respect to any
default or event of default on any of the Junior Indebtedness or otherwise or
under any of the Junior Documents until the earliest of (a) the expiration of
120 days following Senior Creditor's receipt of Junior Creditor's notice of
default, (b) the exercise by Senior Creditor of any acceleration or foreclosure
available to it upon a
5
<PAGE>
default or event of default with respect to the Senior Indebtedness, or (c) at
such time as the Senior Indebtedness has been paid in full. Without limiting any
of the foregoing, any failure of Borrower to perform any of its obligations to
Junior Creditor as a result of any of the prohibitions, restrictions or
limitations set forth in this Agreement shall not constitute the basis for a
default or event of default on any Junior Indebtedness or under any Junior
Documents.
(e) No reimbursement, payment, direct or indirect, or disbursement
of other property or assets of Borrower shall be made by Borrower on account of
the Junior Indebtedness or otherwise or received, accepted, retained or applied
by Junior Creditor (except for the account and benefit of Senior Creditor, which
shall be held in trust for Senior Creditor or except for Permitted Payments as
allowed in SUBPARAGRAPH (b) of this ARTICLE IV) until such time as the Senior
Indebtedness has been finally and irrevocably paid in full in cash.
(f) Without affecting Junior Creditor's obligations set forth in
this Agreement not to exercise any remedy as set forth in this Agreement, in the
event that Junior Creditor receives any payment of any character, whether in
cash, securities, or other properties, that would, but for the provisions of
this Agreement, be payable or deliverable in respect of the Junior Indebtedness,
such cash, securities or other properties shall be held in trust for the benefit
of the holder of the Senior Indebtedness and shall be paid or delivered to the
holder of the Senior Indebtedness (or its authorized representatives), in the
proportions in which it holds same, until all the Senior Indebtedness shall have
been paid in full.
(g) The provisions of this Agreement are and are intended solely for
the purpose of defining the relative rights of the holder of the Junior
Indebtedness, on the one hand, and the holder of the Senior Indebtedness on the
other hand. Nothing contained in this Agreement is intended to or shall impair,
as between Borrower and its creditors other than the holder of the Senior
Indebtedness and the holder of the Junior Indebtedness, the obligation of
Borrower which is absolute and unconditional, to pay to the holder of the Junior
Indebtedness the principal thereof and interest thereon as and when the same
shall become due and payable in accordance with its terms, or is intended to or
shall affect the relative rights against Borrower of the holder of the Senior
Indebtedness.
(h) No right of any present or future holder of any of the Senior
Indebtedness to enforce the subordination as herein provided shall at any time
in any way be prejudiced or impaired by any act or failure to act on the part of
Borrower or by any act in good faith or failure to act in good faith by any such
holder, or by any noncompliance by Borrower with the covenants, agreements and
conditions of the Junior Indebtedness, regardless of any knowledge thereof any
such holder may have or be otherwise charged with.
(i) Senior Creditor shall have no obligation to preserve the rights
of the Collateral against any prior parties or to marshal any of the Collateral
for the benefit of any Person.
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<PAGE>
ARTICLE V - BENEFIT OF AGREEMENT; AMENDMENT
This Agreement shall constitute a continuing offer to all persons who, in
reliance upon such provisions, become a Senior Creditor, and such provisions are
made for the benefit of each Senior Creditor and each of them may enforce such
provisions. Junior Creditor agrees not to assign or transfer, at any time this
Agreement remains in effect, any rights, claim or interest of any kind in or to
any Junior Indebtedness without first notifying Senior Creditor and making such
assignment expressly subject to this Agreement. The provisions of the Junior
Documents as in effect on the date hereof may not be amended or modified in any
respect without the prior written consent of Senior Creditor.
ARTICLE VI - FURTHER ASSURANCES
Each of the parties hereto hereby agrees to promptly execute and deliver
to the other parties hereto any and all such further instruments and documents
and take such further action as such other parties may reasonably request in
order to fully effect the purposes of this Agreement.
ARTICLE VII - REPRESENTATIONS AND WARRANTIES
7.1 AUTHORITY; BINDING OBLIGATION. Each of the parties hereto hereby
represents and warrants to the other party hereto that:
(a) such party has full power, authority and legal right to execute,
deliver and perform this Agreement, and has taken all necessary corporate action
to authorize the execution, delivery and performance of this Agreement; and
(b) this Agreement constitutes a legal, valid and binding obligation
of such party enforceable against it in accordance with its terms except as
enforceability may be limited by applicable bankruptcy, insolvency, moratorium
or other similar laws affecting creditors rights generally and except as
enforceability may be limited by general principles of equity (whether
considered in a suit at law or in equity).
7.2 TOTAL INDEBTEDNESS. Junior Creditor represents and wan-ants to Senior
Creditor that the Subordinated Note in effect as of the date hereof identifies
all of Borrower's existing indebtedness and obligations to Junior Creditor.
ARTICLE VIII - BANKRUPTCY
Junior Creditor agrees not to commence, or to join with any other creditor
in commencing, any case under Title 11 of the United States Code, as amended
and/or superseded (the "FEDERAL BANKRUPTCY CODE") by or against Borrower or any
of its property without the prior
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written consent of Senior Creditor. The provisions of this Agreement shall
continue in frill and effect, notwithstanding the commencement of a case under
the Federal Bankruptcy Code by or against Borrower. In furtherance of the
foregoing, if Junior Creditor receives any property of, or payments from
Borrower after the commencement of such a case on account of a secured claim
which is subordinated by the terms of this Agreement (whether as "adequate
protection" payments or otherwise), Junior Creditor shall immediately turn such
property or payments over to the Senior Creditor. To the extent that Junior
Creditor has or acquires any rights under Section 363 or Section 364 of the
Federal Bankruptcy Code with respect to the Collateral, Junior Creditor hereby
agrees not to assert such rights without the prior written consent of the Senior
Creditor. The Junior Creditor hereby grants to the Senior Creditor the right,
but Senior Creditor shall not be obligated, to file, prove and vote claims on
account of the Junior Indebtedness in any receivership, bankruptcy, or other
proceeding under the Federal Bankruptcy Code commenced by or against Borrower.
Notwithstanding the foregoing, Senior Creditor's rights to file and prove claims
on account of the Junior Indebtedness shall vest if and only if Junior Creditor
has not elected to file and prove its claim on account of the Junior
Indebtedness within thirty (30) days prior to the bar date for claims or the
date fixed for such filings; however, Senior Creditor shall have the right to
vote the claims on account of the Junior Indebtedness in any event.
ARTICLE IX - MISCELLANEOUS
9.1 NO WAIVER, CUMULATIVE REMEDIES. No failure to exercise, and no delay
in exercising on the part of any party hereto, any right, power or privilege
under this Agreement shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, power or privilege under this Agreement preclude
any other or further exercise thereof or the exercise of any other right, power
or privilege. The rights and remedies provided in this Agreement are cumulative
and shall not be exclusive of any rights or remedies provided by law.
9.2 NOTICES. All notices, requests and demands to or upon the respective
parties hereto to be effective shall be in writing (including by telegraph,
telecopier, or telex) and, unless otherwise expressly provided herein, shall be
deemed to have been duly given or made when delivered by hand, or five days
after being deposited in the mail, postage prepaid, or, in the case of
telegraphic notice, when delivered to the telegraph company, or in the case of
telex notice, when sent, answer back received, addressed as set forth below or
to such address or other address as may be hereafter notified by the respective
parties hereto:
To Senior Creditor Bank of America Texas, N.A.
333 Clay Street, Suite 3600
Houston, Texas 77002
Attn: Kim Ruth
Facsimile: 713/652-3628
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With a copy to Hughes & Luce L.L.P.
Three Allen Center
333 Clay, Suite 3800
Houston, Texas 77002
ATN: Paul A. Berry
Facsimile: 713/754-5206
To Junior Creditor Marwit Capital Company, L.P.
180 Newport Center Drive, Suite 200
Newport Beach, California 92660
ATN: Matthew L. Witte
Facsimile: 714/720-8077
9.3 GOVERNING LAW. TIES AGREEMENT SHALL BE INTERPRETED AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF
TEXAS AND SHALL BE BINDING UPON AND INURE TO THE BENEFIT OF THE PARTIES HERETO
AND THEIR RESPECTIVE SUCCESSORS, TRANSFEREES AND ASSIGNS.
9.4 AMENDMENTS AND WAIVERS. Neither this Agreement nor any of the terms
hereof may be amended, waived, discharged or terminated unless such amendment,
waiver, discharge or termination is in writing signed by each of the parties
hereto.
9.5 EXCULPATION. Neither the Senior Creditor nor its agents have made to
the other parties hereto nor do any of them hereby or otherwise make any
representations or warranties, express or implied, nor do they assume any
liability with respect to (i) obligors under any instruments of guarantee; (ii)
the enforceability, validity, value or collectibility of the Senior
Indebtedness, any Collateral therefor, or any guarantee or security which may
have been granted to any of them in connection with the Senior Documents; or
(iii) Borrower's title or right to transfer any collateral or security. No party
hereto shall be liable to any other party hereto for any action or failure to
act or any error of judgment, negligence, or mistake or oversight whatsoever on
its part or its respective agents, officers, employees or attorneys with respect
to any transaction relating to the Collateral or this Agreement. To the maximum
extent permitted by law, except as otherwise provided herein, Junior Creditor
waives any claim it might have against Senior Creditor with respect to, or
arising out of, the handling of the Collateral (including, without limitation,
any such claim based upon the timing or method of realizing upon such
Collateral).
9.6 THIRD PARTY RIGHTS. This Agreement is solely for the benefit of the
parties hereto and their respective successors and assigns, and no other Person
shall have any right, benefit, priority or other interest under, or because of
the existence of, this Agreement.
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9.7 TERMINATION. This Agreement shall terminate upon the final and
indefeasible payment in full of all the Senior Indebtedness and the termination
of all of the Senior Documents.
9.8 COUNTERPARTS. This Agreement may be executed by one or more of the
parties hereto in any number of separate counterparts, each of which shall be an
original, but all of which shall constitute but one agreement.
9.9 LEGEND. The Subordinated Note and all other promissory notes issued in
connection with the Junior Indebtedness shall contain a legend substantially in
the form of the following:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY
STATE SECURITIES LAWS AND THUS MAY NOT BE TRANSFERRED UNLESS REGISTERED
UNDER THAT ACT AND SUCH LAWS OR UNLESS AN EXEMPTION FROM REGISTRATION IS
AVAILABLE. THIS NOTE AND THE INDEBTEDNESS EVIDENCED BY THIS NOTE ARE
SUBORDINATED, IN RIGHT OF PAYMENT, TO THE PRIOR PAYMENT IN FULL OF THE
INDEBTEDNESS OF THE COMTANY TO BANK OF AMERICA TEXAS, N.A. AS SENIOR
LENDER ("SENIOR LENDER") IN ACCORDANCE WITH THE TERMS OF THE SUBORDINATION
AGREEMENT, DATED OF EVEN DATE HEREWITH, BETWEEN SENIOR LENDER AND HOLDER."
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their proper and duly authorized officers as of the day and
year first above written.
SENIOR CREDITOR:
BANK OF AMERICA TEXAS, N.A.
By: _______________________
Name: _____________________
Title: ____________________
10
<PAGE>
JUNIOR CREDITOR:
MARWIT CAPITAL COMPANY, L.P.
By: Marwit Associates, Inc., its general
partner
By: _______________________
Name: _____________________
Title: ____________________
11
EXHIBIT 21.1
SUBSIDIARIES OF THE REGISTRANT
1. De-Ro/Suncoast, Inc.
2. American Packing and Gasket Company
3. Mountain Empire Rubber & Specialty Co., Inc.
4. New West Communications, Inc.
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
report and all references to our Firm included in this registration statement
on Form S-1 filed by Travis International, Inc.
ARTHUR ANDERSEN LLP
Houston, Texas
October 6, 1997
