<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JULY 31, 1996
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from_____________to________________
Commission file number: 0-26208
BUSINESS RESOURCE GROUP
(Exact name of Registrant as specified in its charter)
CALIFORNIA 77-0150337
(State or other jurisdiction (I.R.S. employer
of incorporation or organization) identification No.)
2150 NORTH FIRST STREET, SUITE 101
SAN JOSE, CA 95131
(Address of principal executive offices)
(408) 441-3700
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
__X__ Yes ____ No
At July 31, 1996 there were 4,858,864 shares of the Registrant's common stock
outstanding.
<PAGE> 2
BUSINESS RESOURCE GROUP
FORM 10-Q
QUARTER ENDED JULY 31, 1996
INDEX
PART I: FINANCIAL INFORMATION PAGE
Item 1: Condensed Financial Statements
Condensed Balance Sheets at
July 31, 1996 and October 31, 1995 ......................... 3
Condensed Statements of Income for the Three
Months and Nine Months ended July 31, 1996
and 1995 ................................................... 4
Condensed Statements of Cash Flows for the
Nine Months ended July 31, 1996 and 1995 ................... 5
Notes to Condensed Financial Statements .................... 6
Item 2: Management's Discussion and Analysis
of Financial Condition and Results
of Operations .............................................. 7
PART II: OTHER INFORMATION
Item 1: Legal Proceedings - none
Item 2: Changes in Securities - none
Item 3: Defaults Upon Senior Securities - none
Item 4: Submission of Matters to a Vote of
Security Holders - none
Item 5: Other Information - none
Item 6: Exhibits and Reports on Form 8-K ........................... 11
SIGNATURES ............................................................... 11
EXHIBITS ................................................................. 12
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
BUSINESS RESOURCE GROUP
CONDENSED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
JULY 31, OCTOBER 31,
1996 1995
------- -------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents ...................... $ 668 $ 5,326
Accounts receivable, net .................. 13,559 7,168
Inventory ................................. 1,021 929
Prepaids and other current assets ......... 1,446 941
------- -------
Total current assets .................... 16,694 14,364
Property and equipment, net .................. 1,734 733
Other assets, net ............................ 1,015 956
------- -------
$19,443 $16,053
======= =======
</TABLE>
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<S> <C> <C>
Current liabilities:
Bank overdraft ............................ $ 662 $ 651
Accounts payable .......................... 2,849 2,096
Accrued liabilities ....................... 3,042 1,905
Income taxes payable ...................... 244 --
Current portion of notes payable and
capital lease obligations ................. 79 242
------- -------
Total current liabilities ............... 6,876 4,894
Notes payable and capital lease obligations .. 48 120
Deferred income tax liability ................ 19 19
Shareholders' equity:
Preferred stock ........................... -- --
Common stock .............................. 49 48
Additional paid-in capital ................ 10,685 10,558
Retained earnings ......................... 1,766 414
------- -------
Total shareholders' equity .............. 12,500 11,020
------- -------
$19,443 $16,053
======= =======
</TABLE>
See notes to condensed financial statements.
<PAGE> 4
BUSINESS RESOURCE GROUP
CONDENSED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
JULY 31, JULY 31,
-------------------- --------------------
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net revenues:
Workspace products .............. $ 18,495 $ 10,350 $ 49,623 $ 27,335
Workspace services .............. 2,766 1,732 6,580 4,824
Vendor commissions .............. 79 113 280 452
-------- -------- -------- --------
Total net revenues ............ 21,340 12,195 56,483 32,611
-------- -------- -------- --------
Cost of net revenues:
Workspace products .............. 15,039 8,192 40,504 21,485
Workspace services .............. 2,002 1,022 4,760 3,091
-------- -------- -------- --------
Total cost of net revenues .... 17,041 9,214 45,264 24,576
-------- -------- -------- --------
Gross profit ....................... 4,299 2,981 11,219 8,035
Selling, general and
administrative expenses ......... 3,597 2,067 9,006 5,896
-------- -------- -------- --------
Income from operations ............. 702 914 2,213 2,139
Interest income (expense) - net .... 13 (37) 94 (63)
-------- -------- -------- --------
Income before income taxes ......... 715 877 2,307 2,076
Provision for income taxes ......... 296 253 955 274
-------- -------- -------- --------
Net income ......................... $ 419 $ 624 $ 1,352 $ 1,802
======== ======== ======== ========
Net income per common and common
equivalent share .............. $ .09 $ .28
======== ========
Shares used in computation ......... 4,914 4,864
======== ========
Pro forma (Note 2):
Historical income before
income taxes .............. $ 877 $ 2,076
Pro forma income taxes .......... 364 861
-------- --------
Pro forma net income ............ $ 513 $ 1,215
======== ========
Pro forma net income per common
and common equivalent share ..... $ .13 $ .34
======== ========
Pro forma shares used in computation 3,950 3,559
======== ========
</TABLE>
See notes to condensed financial statements.
<PAGE> 5
BUSINESS RESOURCE GROUP
CONDENSED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
JULY 31,
---------------------
1996 1995
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ............................................ $ 1,352 $ 1,802
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Depreciation and amortization ....................... 257 117
Stock compensation .................................. -- 67
Changes in operating assets and liabilities:
Accounts receivable ............................... (5,895) (3,290)
Inventory ......................................... (99) 729
Prepaids and other current assets ................. (498) (164)
Accounts payable .................................. 496 1,769
Accrued liabilities ............................... 1,094 462
Income taxes payable .............................. 245 261
-------- --------
Net cash provided (used) by operating activities ...... (3,048) 1,753
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment ................... (1,166) (282)
Cash paid for acquisitions ............................ (300) (150)
Other assets .......................................... (47) 2
-------- --------
Net cash used by investing activities ................. (1,513) (430)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Change in bank overdraft .............................. 11 --
Distributions to shareholders ......................... -- (4,163)
Repayments on line of credit - net .................... -- (1,175)
Repayment of notes payable & capital lease obligations (236) (231)
Issuance of common stock, employee stock purchase plan 128 --
Issuance of common stock, net of compensation ......... -- 9
Issuance of common stock in initial public offering ... -- 10,149
-------- --------
Net cash provided (used) by financing activities ...... (97) 4,589
-------- --------
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS .......... (4,658) 5,912
CASH AND EQUIVALENTS:
Beginning of period ................................... 5,326 192
-------- --------
End of period ......................................... $ 668 $ 6,104
======== ========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest .............................................. $ 29 $ 133
======== ========
Income taxes .......................................... $ 670 $ 300
======== ========
Noncash investing transactions:
Sale of distribution rights for note receivable ....... $ 177 $ --
======== ========
Cash flow for acquisitions:
Tangible assets acquired .............................. $ 333 $ 64
Intangible assets acquired ............................ 255 363
Liabilities assumed ................................... (288) (32)
Notes payable issued .................................. -- (245)
-------- --------
Cash paid for acquisitions ............................ $ 300 $ 150
======== ========
</TABLE>
See notes to condensed financial statements.
<PAGE> 6
BUSINESS RESOURCE GROUP
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
The financial information as of July 31, 1996 and for the three and nine
month periods ended July 31, 1996 and 1995 is unaudited. In the opinion of
management, such information reflects all adjustments, consisting only of normal
recurring adjustments, considered necessary for a fair presentation of the
results of such periods. The accompanying condensed financial statements should
be read together with the audited financial statements and notes thereto
included in the Company's annual report on Form 10-K for the year ended October
31, 1995. The financial statements have been prepared in accordance with the
regulations of the Securities and Exchange Commission, but omit certain
information and footnote disclosure necessary to present the statements in
accordance with generally accepted accounting principles.
Certain reclassifications have been made in fiscal 1995 financial
information to conform to the 1996 presentation.
NOTE 2. PRO FORMA INFORMATION
The condensed statements of income for the three month and nine month
periods ended July 31, 1995 included a pro forma provision for income taxes. At
the close of business on June 25, 1995, the election to treat the Company as an
S Corporation for tax purposes was revoked. The pro forma provision reflects
income taxes as if the Company had operated as a C Corporation for each of the
periods.
Pro forma net income per common and common equivalent share is computed by
dividing the pro forma net income by the weighted average number of common and
common equivalent shares outstanding during the period. Common stock equivalents
are calculated using the treasury stock method.
<PAGE> 7
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
INTRODUCTION:
Except for the historical information contained in this Quarterly Report on
Form 10-Q, the matters discussed herein are forward-looking statements that are
subject to certain risks and uncertainties that could cause the actual results
to differ materially from those projected. Factors that could cause actual
results to differ materially include the timely availability, delivery and
acceptance of new products and services, the impact of competitive products and
pricing, the management of growth and acquisitions, and other risks detailed
below and included from time to time in the Company's other SEC reports and
press releases, copies of which are available from the Company upon request.
Additionally, the results of operations for the three and nine month periods
ended July 31, 1996 are not necessarily indicative of the results to be expected
for the full fiscal year. Operating results are subject to the successful close
of large project business and related vendor lead times. The Company's revenues
are generally the result of a consultative selling process and the precise
timing of the issuance of customer purchase orders is often contingent upon
customer site development and move-in schedules. In order to minimize risk of
procurement errors and obsolete inventory, the Company generally does not issue
vendor purchase orders until final product configurations are documented in a
formal customer purchase order. As a result, the short-term timing of product
delivery can be impacted, which in turn may affect the specific quarter in which
revenue is recognized on particular projects. Vendor delivery lead times also
affect product availability and the resulting time at which the Company delivers
product and recognizes revenue; lead times for many of the products sold by the
Company average 4 to 12 weeks. Consequently, these factors can affect quarter to
quarter results. The Company assumes no obligation to update any forward-looking
statements contained herein.
RESULTS OF OPERATIONS:
THREE MONTHS ENDED JULY 31, 1996 COMPARED TO THREE MONTHS ENDED JULY 31, 1995.
Net revenues were $21.3 million for the three months ended July 31, 1996, an
increase of 75% from $12.2 million for the three months ended July 31, 1995.
Increases in product revenue ($8.1 million or 79%) and service revenue ($1.0
million or 60%) more than offset the decline in vendor commissions ($34,000 or
30%). The overall increase in revenue was primarily the result of new large
project business from both new and existing customers (including Cisco Systems,
National Semiconductor, the City & County of San Francisco and Silicon Valley
Group), the addition of fourteen new sales people (up 47% over the prior year to
44) and revenue generated by the Company's southwestern United States and Texas
regional business units acquired in September 1995 and January 1996,
respectively ($2.6 million, including large projects from Motorola, CompUSA and
ACS). Cisco Systems and National Semiconductor, which historically have been
significant customers of
<PAGE> 8
the Company, contributed $11.3 million or 53% of total revenue, up from $3.8
million or 26% of total revenue in the comparable period in 1995. Service
revenue increased due to increases in installation, delivery services and
workspace management services. Service revenue as a percentage of total revenue,
compared to the second quarter of 1995, declined to 13% from 14%, primarily
attributable to faster product sales growth, which resulted from the significant
year-on-year product revenue increase at Cisco coupled with the acquisition of
traditional dealers whose initial revenue contribution tends to be heavily
weighted toward product revenues rather than service revenues.
Commission revenue declined as most vendors have discontinued their policies
of billing customers directly and only paying a commission to the Company.
Gross profit increased to $4.3 million during the third fiscal quarter of
1996 from $3.0 million during the same period of fiscal 1995, a 44% increase,
while declining as a percentage of net revenues from 24% during the third fiscal
quarter of 1995 to 20% during the same fiscal quarter of 1996. The Company
experienced lower product margins as a percentage of net revenue, down 2% from
the comparable period in 1995. The decrease was primarily the result of a shift
in product mix from higher margin projects in the third quarter of 1995 to
higher volume, lower margin projects in the comparable quarter of 1996. Service
margins declined as a percentage of revenue, from 41% in the third quarter of
1995 to 28% in the third quarter of 1996. The decrease was due to a service mix
shift to lower margin volume-related delivery services, underabsorption of
overhead in the Company's developing regional installation businesses and the
use of outside contract installation companies in certain out-of-state
locations.
Selling, general and administrative expenses increased 74% to $3.6 million
for the three months ended July 31, 1996 from $2.1 million for the same period
of the prior year. As a percentage of net revenue, expenses remained constant at
17% in both fiscal 1996 and 1995. The increase in spending was primarily
attributable to higher revenue and related sales commissions, the addition of
two new businesses, RST & Associates and Corporate Source (acquired in September
1995 and January 1996, respectively), the continued building of the Company's
system and wide-area-network infrastructure, and the hiring of key management
personnel.
Interest income, net of interest and other expenses, totaled $13,000 for the
three months ended July 31, 1996 versus interest expense, net of interest
income, of $37,000 for the same period of fiscal 1995. The shift from net
interest expense to net interest income was due to higher cash balances as a
result of the Company's initial public offering of its common stock in June
1995.
During the Company's fiscal third quarter ended July 31, 1996, the Company
discontinued its Records Management business in order to streamline its
operations and focus on its core Workspace Products business and its new
Workspace Management Services business. The sale of the Company's exclusive TAB
Products distribution rights, including the write-off of related goodwill and
inventory, resulted in a net charge to earnings of approximately $10,000.
<PAGE> 9
The Company was treated as an S Corporation for tax purposes until the close
of business on June 25, 1995. As such, the Company was exempt from federal and
certain state taxes for the majority of the three month period ended July 31,
1995. The Company has used an effective tax rate of 41% for all pro forma
information.
NINE MONTHS ENDED JULY 31, 1996 COMPARED TO NINE MONTHS ENDED JULY, 1995.
Net revenues were $56.5 million for the nine months ended July 31, 1996, an
increase of 73% from $32.6 million for the nine months ended July 31, 1995.
Increases were achieved in product revenue ($22.3 million or 82%) and service
revenue ($1.8 million or 36%), partially offset by a decrease in commission
revenue ($172,000 or 38%). The overall increase in revenue was primarily the
result of the continuing strength of sales to Cisco Systems and National
Semiconductor, the Company's two largest customers, with combined revenue of
$25.4 million for the nine months ended July, 1996, up from $13.1 million for
the same period of 1995, and large project business from the City and County of
San Francisco's Main Library, Bechtel, Silicon Valley Group, Atmel and Perkin
Elmer (which combined accounted for approximately $6.8 million in the period),
and first time revenue of $5.8 million generated by the Company's southwestern
United States and Texas regional business units. Cisco Systems and National
Semiconductor accounted for 45% of net revenue for the first nine months of
fiscal 1996, up from 40% during the same period a year ago. Service revenue
increased in the first nine months of fiscal 1996 as compared to the prior year
period primarily due to increases in delivery services, installation and first
time revenue of workspace management services.
Commission revenue declined as most vendors have discontinued their policies
of billing customers directly and only paying a commission to the Company.
Gross profit increased to $11.2 million for the first nine months of fiscal
1996 from $8.0 million during the same period a year ago, a 40% increase. As a
percentage of net revenues gross profits decreased from 25% for the first nine
months of fiscal 1995 to 20% during the same period of fiscal 1996. Lower
service margins, resulting from underutilization of labor, underabsorption of
overhead on installation revenues and increased volume of lower margin delivery
services, and, in particular, lower product margins, accounted for the decrease
in gross profit as a percentage of net revenues. The Company experienced lower
product margins as a percentage of revenue due in part to the Company's decision
to accept certain low margin business which the Company felt was important to
its competitive positioning and its ability to penetrate certain markets. In
addition, lower product margins resulted from an increase in high volume sales
transactions which were aggressively priced based on such volumes.
Selling, general and administrative expenses increased 53% to $9.0 million
for the nine months ended July 31, 1996 from $5.9 million for the same period of
the prior year. Selling, general and administrative expenses, as a percentage of
net revenues, were 16% in the first nine months of fiscal 1996, down from 18% in
the comparable period in fiscal 1995. The increase in absolute spending levels
was primarily
<PAGE> 10
the result of higher revenues and related commissions, expanded operations in
existing Northern California regions, two acquisitions outside of California and
an overall effort to build infrastructure to support the growth of the company.
Interest income, net of interest and other expenses, totaled $94,000 for the
nine months ended July 31, 1996 versus interest expense, net of interest income
of $63,000 for the same period of fiscal 1995. The shift from net interest
expense to net interest income was due to cash received as a result of the
Company's initial public offering of its common stock in June 1995.
The Company was treated as an S Corporation for tax purposes until the close
of business on June 25, 1995. As such, the Company was exempt from federal and
certain state taxes for eight of the nine month period ended July 31, 1995. The
Company has used a tax rate of 41% for all pro forma information.
LIQUIDITY AND CAPITAL RESOURCES:
Working capital at July 31, 1996 was $9.8 million, up slightly from $9.5
million at October 31, 1995.
During the nine months ended July 31, 1996, net cash used by operating
activities was $3.0 million, representing net income of $1.4 million and
increases in accounts payable of $496,000, accrued liabilities of $1.1 million
and income taxes payable of $245,000, offset by increases in accounts receivable
of $5.9 million, inventory of $99,000 and prepaids and other current assets of
$498,000. Accounts receivable increased as a result of increased revenue and the
timing of such revenue during the quarter ended July 31, 1996, reflecting in
particular a relatively large percentage of sales during the final month of this
most recent fiscal quarter. Accrued liabilities increased primarily as a result
of increased customer deposits and accruals for sales commissions and sales tax.
Net cash used in investing activities was $1.5 million, primarily representing
the purchase of property and equipment for $1.2 million and a payment of
$300,000 in connection with the acquisition of certain assets of Corporate
Source. Net cash used by financing activities was $97,000, representing the
change in bank overdraft of $11,000, the issuance of common stock for the
Company's employee stock purchase plan of $128,000, offset by repayments of
capital lease obligations and notes payable of $236,000.
The Company's $4 million revolving line of credit with a bank expired in July
1996 and was replaced with a new $8 million credit facility, including an option
to convert up to $3 million of the total facility into term loans.
The Company presently believes existing cash, together with cash generated
from operations and the Company's available borrowing capacity will provide
sufficient funds to meet the Company's anticipated working capital requirements
and its planned expansion/acquisition strategy for the foreseeable future.
<PAGE> 11
PART II - OTHER INFORMATION
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
10.25 Master Lease Agreement between the Company and Southwestern Bell
Telephone Company Inc., dated May 2, 1996, for facilities located at 105
Auditorium Circle, San Antonio, Texas 78209.
10.26 Third Amendment to Lease between the Company and Wells Fargo
Bank, NA, dated August 5, 1996, with respect to premises at 2150 N. First
Street, San Jose, CA 95131.
10.27 Amended and Restated Loan and Security Agreement, dated July 3,
1996, between the Company and Silicon Valley Bank.
11.1 Computation of Net Income Per Share.
27.1 Financial Data Schedule.
(b) Reports on Form 8-K. The Company did not file any reports on Form 8-K
during the three months ended July 31, 1996.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BUSINESS RESOURCE GROUP
--------------------------------------
Registrant
Date: 9/13/96 /s/P. Steven Melman
------------------------------ --------------------------------------
P. Steven Melman
Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
<PAGE> 1
Exhibit 10.25
COMMERCIAL LEASE
(105 AUDITORIUM CIRCLE)
This lease agreement is made and entered into by and between SOUTHWESTERN
BELL TELEPHONE COMPANY INC. (Landlord) and BUSINESS RESOURCE GROUP (Tenant).
Landlord hereby leases to Tenant and Tenant hereby leases from Landlord that
certain property with the improvements thereon, containing approximately 3382
square feet, hereinafter called the "leased premises ", known as Room 107, 105
Auditorium Circle, San Antonio, TX. (Address). Lot 4, Block 5 of New City
block 412, Addition, city of San Antonio, Bexar County, Texas; or as more
particularly described below or on attached exhibit:
The Primary term of this lease shall be For a Period of 5 Years commencing
on the Commencement Date which is defined as 60 days after the execution of the
lease or the completion of Tenant Improvements as outlined in Exhibit C
whichever is later, and ending at 11:59 P.M. on the last day of the 60th month
following the commencement date. A commencement letter will be executed after
the Tenant Improvements are completed to formalize the commencement and
termination dates.
1. TAXES. Included in Base Rent.
2. UTILITIES. Included in base rent with the exception of any equipment and/or
electric usage above and beyond the permitted uses of the space. Any such usage
deemed by the Landlord to be above that normally used by the average "General
Office" Tenant, shall be submetered and billed separately from the Base Rent.
3. HOLDING OVER. Failure of Tenant to surrender the leased premises at the
expiration of the lease constitutes a holding over which shall be construed as a
tenancy from month to month at a rental of 150% of Base Rent per month. -
4. RENT. Tenant agrees to and shall pay Landlord at 4119 Broadway G-60-J, San
Antonio, TX 78209, County of Bexar, Texas, or at such other place Landlord
shall designate from time to time in writing, as rent for the leased premises,
the total sum of $169,100.00, Payable without demand in equal monthly payments
of $2,818.33, each in advance on or before the 1st day of each month,
commencing on commencement date but not later than August 1, 1996, and
continuing thereafter until the total sum shall be paid. Rent received after the
first day of the month shall be deemed delinquent. If rent is not received by
Landlord by the 10th of each month, Tenant shall pay a late charge of 8% of the
monthly rent due plus a penalty of $20.00 per day until rent is received in
full.
5. USE. Tenant shall use the leased premises for the following purpose and no
other: General Office use,
No manufacturing allowed.
6. SECURITY DEPOSIT. Tenant shall pay to Landlord a security deposit in the sum
of $2,818.33, payable on or before the commencement of this lease for Tenant's
faithful performance hereunder. Refund thereof shall be made upon performance of
this lease agreement by Tenant, minus any assessments or damages unless Landlord
and Tenant provide otherwise in Special Provisions.
7. SERVICES TO BE FURNISHED BY LANDLORD. Landlord covenants and agrees to
furnish (as a part of the Basic Costs of the building) Tenant while occupying
the Premises, the following services:
(a) hot and cold water at those points of supply provided for general use
of other Tenants in the building, and seasonal central air conditioning
provided during normal business hours for the building
<PAGE> 2
(which are 8:00a.m. to 7:00p.m. on Mondays through Fridays and 8:00a.m. to
12:00p.m. on Saturdays, exclusive of legal holidays which include New
Year's Day, Easter, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day, Friday following Thanksgiving Day and Christmas Day).
(b) routine maintenance and electric lighting service for all public areas
and special service areas of the building.
(c) janitorial service, Monday through Friday, exclusive of holidays,
provided, however, if Tenant's floor covering or other improvements are
other than Building standard, Tenant shall pay the additional cleaning
cost attributable thereto as additional rent upon presentation of a
statement therefor by Landlord.
(d) electrical facilities to furnish sufficient power to operate
typewriters, dictating equipment, calculating machines, personal computers
or similarly configured workstations, and other machines of similar low
electrical consumption; but not including, special lighting in excess of
Building standard and any other item of electrical equipment which
(singly) consumes more than 0.5 kilowatts at rated capacity or requires a
voltage other than 120 volts single phase.
(e) all Building standard fluorescent bulb replacement in the Premises and
all incandescent or fluorescent bulb replacement in public areas, toilet
and restroom areas and stairwells.
(f) Landlord shall provide for a 24 hour guard service while current
Landlord occupies the Building. Landlord shall not be liable for losses
due to theft, personal injury, burglary, or for damages done by
unauthorized persons on the Premises unless caused by Landlord's gross
negligence.
The failure by Landlord to any extent to furnish these defined services,
resulting from causes beyond the reasonable control of Landlord or from
Landlord's actions to repair any of the equipment furnishing such services or
otherwise to restore such services shall not render Landlord liable in any
respect for damages, direct or consequential, to either person or property, nor
be construed as an eviction of Tenant, nor work an abatement of rent, nor
relieve Tenant from the obligation to fulfill any covenant or agreement
contained herein. Should any of the equipment or machinery which provide service
to the Building break down, or for any cause cease to function properly, Tenant
shall have no claim for rebate of rent or damages on account of an interruption
in service occasioned thereby or resulting therefrom so long as Landlord is
making a reasonable effort to repair or replace such non-functioning equipment
or machinery. All of the above notwithstanding, should Landlord be unable to
furnish these services for a period of five (5) days because of Landlord's
failure to repair or replace the equipment or machinery which supply the defined
services to the Building and which repairs and/or replacements are within the
reasonable control of the Landlord, then Rent shall abate until such time as the
defined services are reasonably restored. Should Landlord fail to provide these
services for a period of thirty (30) days, then Tenant shall have the option to
terminate the Lease with no further obligation to Landlord.
8. INSURANCE. Landlord and tenant agree to the following insurance provisions
regarding the premises:
I. Fire or Other Casualty; Casualty Insurance.
(A) Substantial Destruction of the Building. If the Building should be
substantially destroyed (which, as used herein, means destruction or damage to
at least 75% of the Building) by fire or other casualty, either party hereto
may, at its option, terminate this Lease by giving written notice hereof to the
other party within thirty (30) days of such casualty. In such event, the rent
shall be apportioned to and shall cease as of the date of such casualty. In the
event neither party exercises this option, then the Premises shall be
reconstructed and restored, at Landlord's expense, to substantially the same
condition as they were prior to the casualty.
(B) Substantial Destruction of Premises. If the Premises should be
substantially destroyed, or rendered wholly untenantable for the purposes for
which they were leased, by fire or other casualty but
<PAGE> 3
the Building is not substantially destroyed as provided above, then the parties
hereto shall have the following options:
(1) If such destruction is not the result of the acts or negligence
of Tenant, its employees or agents, Tenant may elect to terminate
this Lease or require that the Premises be reconstructed and
restored, at Landlord's expense, to substantially the same condition
as they were prior to the casualty. This option shall be exercised
by Tenant by giving written notice to Landlord within thirty (30)
days after the date of the casualty, and upon the exercise thereof
rent shall be abated from the date of the casualty until substantial
completion of the reconstruction of the Premises, whereupon this
Lease shall continue in full force and effect for the balance of the
term upon the same terms, conditions and convenience as are
contained herein. If such destruction is the result of the acts or
negligence of Tenant, its employees or agents, Landlord shall then
have the right to exercise same option within thirty (30) days
following the destruction, by giving written notice to Tenant, to
reconstruct and restore the Premises to substantially continue in
full force and effect for the balance of the term upon the same
terms, conditions and covenants as are contained herein; provided,
however, that the rent shall not be abated from the date of the
casualty until substantial completion of the reconstruction of the
Premises. If Landlord fails to exercise the last mentioned option,
this Lease shall be terminated as of the date of the casualty, to
which date rent shall be apportioned and shall thereafter cease.
(2) Notwithstanding the above, if the casualty occurs during the
last twelve (12) months of the term of this Lease, either party
hereto shall have the right and option to terminate this Lease as of
the date of the casualty, which option shall be exercised by written
notice to be given by either party to the other party within thirty
(30) days therefrom. If this option is exercised, rent shall be
apportioned to and shall cease as of the date of the casualty.
(C) Partial Destruction of the Premises. If the Premises should be
rendered partially untenantable for the purpose for which they were leased
(which, as used herein, means such destruction or damage as would prevent Tenant
from carrying on its business on the Premises to an extent exceeding 30% of its
normal business activity) by fire or other casualty which is not the result of
the acts or negligence of Tenant, its employees or agents, then such damaged
part of the Premises shall be reconstructed and restored, at Landlord's expense,
to substantially the same condition as it was prior to the casualty; rent shall
be abated in the proportion which the approximate area of the damaged part bears
to the total area in the Premises from the date of the casualty until
substantial completion of the reconstruction repairs; and this Lease shall
continue in full force and effect for the balance of the term. Landlord shall
use reasonable diligence in completing such reconstruction repairs, but in the
event Landlord fails to complete the same within ninety (90) days from the date
of the casualty, Tenant may, at its option, terminate this Lease upon giving
Landlord written notice to that effect, whereupon both parties shall be released
from all further obligations and liability hereunder.
(D) Casualty Insurance. Landlord shall be responsible for insuring and
shall at all times during the terms of this Lease carry, at its own expense,
such policies of insurance which insures the Office Building, including the
Premises, against loss or damage by fire or other casualty as Landlord shall
reasonably deem necessary; provided, however, that Landlord shall not be
responsible for , and shall not be obligated to insure against, any loss or
damage to personal property (including, but not limited to, any furniture,
additional improvements which Tenant may construct on the Premises. If Tenant's
operation or the Tenant Finish Improvements installed by Landlord pursuant to
the provisions set forth in the WORK LETTER hereof or any alterations or
improvements made by Tenant pursuant to the provisions of the WORK LETTER hereof
increase the cost of the standard insurance carried by Landlord on the Office
Park, then the cost of such increase in insurance premiums shall be borne by
Tenant, who shall reimburse Landlord for the same as Additional Rent upon being
separately billed therefor.
(E) Landlord's Responsibility Landlord's Responsibility to reconstruct and
restore the Premises as described in Paragraph 8(A), 8 (B) and 8 (C) shall be
limited to the repair and restoration of
<PAGE> 4
such of the Premises as were originally required to be made by Landlord in
accordance with "the Work Letter " of this lease, or as was tendered to Tenant
at the Commencement Date of this Lease, and excludes items not required to be
insured by Landlord under the above Paragraph 8(D). It is understood and agreed
that Tenant shall insure those items, if any, which are excluded from Landlord's
responsibility to insure.
(F) Waiver of Subrogation. To the extent permitted by applicable policies
of insurance, Landlord and Tenant hereby release each other and each other's
employees, agents, customers and invitees from any and all liability for any
loss, or damage to property occurring in, on or about or to the premises,
improvements to the Office Building or personal property within the Building, by
reason of fire or other casualty which are covered by applicable standard fire
and extended coverage insurance policies. Because the provisions of this
paragraph may preclude the assignment of any claim mentioned herein by way of
subrogation or otherwise to an insurance company or any other person, each party
to this Lease shall give to each insurance company which has issued to it one or
more policies of fire and extended coverage insurance notice of the terms of the
mutual releases contained in this paragraph, and have such insurance policies
properly endorsed, if necessary to prevent the invalidation of insurance
coverage's by reason of the mutual releases contained in this paragraph.
II. General Liability, Indemnification and Insurance.
(A) Tenant shall be responsible for, shall insure against, and shall
indemnify Landlord, its employees and agents and hold them harmless from , any
and all liability for any loss, damage or injury to person or property occurring
in, on or about the Premises and Tenant hereby releases Landlord, its employees
and agents from any and all liability for the same, provided, however, that such
loss, damage or injury is not the result of Landlord's sole negligence. Tenant's
obligation to indemnify Landlord, its employees and agents hereunder shall
include the duty to defend against any claims asserted by reason of such loss,
damage or injury and to pay any judgments settlements, costs, fees and expenses,
including attorney's fees, incurred in connection therewith.
(B) Tenant shall at all times during the term of this Lease carry, at its
own expense, for the protection of Tenant, Landlord and Landlord's Management
agent, if any, as their interests may appear, a general liability insurance
policy with minimum limits of $1,000,000 General Aggregate; $1,000,000 each
occurrence sublimit for Premises/Operations and Personal Injury; and $1,000,000
Products/Completed Operations Aggregate limit, with a $1,000,000 each occurrence
sublimit for Products/Completed Operations. Fire Legal Liability sublimits of
$100,000 are required for lease agreements.
Landlord is to be named as additional insured on the general liability policy.
The insurance company affording coverage hereunder must have an A.M. Best's
rating of B+ VII or better.
The policy shall provide Landlord with not less than thirty (30) days advance
written notice of cancellation or of a material change in coverage.
Tenant shall furnish Landlord with a certificate evidencing such insurance.
Should Tenant fail to carry such insurance or fail to furnish Landlord with
copies of all policies after a request to do so, Landlord shall have the right
to obtain such insurance and collect the cost thereof from Tenant as additional
rent. Tenant may elect to self-insure if approved by Landlord. In he event
Tenant exercises this option, Tenant warrants that its net worth, as shown by
its most recent audited annual financial statement with no negative notes, is at
least ten times the minimum general liability limits set forth herein.
(C) Landlord shall be responsible for, shall have the obligation to insure
against, and shall indemnify Tenant and hold it harmless from, any and all
liability for any loss, damage and injury to person or property occurring in, on
or about the common areas and facilities of the Building and the walks,
driveways, parking lot and landscaped areas adjacent to the Building, provided,
however, that such loss, damage or injury is not the result of Tenant's
negligence or negligent acts.
9. CONDITION OF PREMISES. See Exhibit B (work Letter).
<PAGE> 5
10. MAINTENANCE AND REPAIRS. Landlord shall keep the foundation, the exterior
walls (except glass; windows; doors; door closure devices; window and door
frames, molding, locks, and hardware; and interior painting or other treatment
of exterior walls), and the roof of the leased premises in good repair except
that Landlord shall not be required to make any repairs occasioned by the act or
negligence of Tenant, its employees, subtenants, licensees and concessionaires.
Landlord is responsible for maintenance of the common area and common area
equipment. If Landlord is responsible for any such repair and maintenance,
Tenant agrees to give Landlord written notice of needed repairs. Landlord shall
make such repairs within a reasonable time. Tenant shall notify Landlord
immediately of any emergency repairs. Tenant shall keep the leased premises in
good, clean condition and shall at its sole cost and expense, make all needed
repairs and replacements, including replacement of cracked or broken glass,
except for repairs and replacements required to be made by Landlord under this
section. If any repairs required to be made by Tenant hereunder are not made
within ten (10) days after written notice delivered to Tenant by Landlord,
Landlord may at its option make such repairs without liability to Tenant for any
loss or damage which may result by reason of such repairs, and Tenant shall pay
to Landlord upon demand as additional rent hereunder the cost of such repairs
plus interest. At the termination of this lease, Tenant shall deliver the leased
premises in good order and condition, normal wear and tear excepted. Normal wear
and tear means deterioration which occurs without negligence, carelessness,
accident or abuse.
11. ALTERATIONS. All alterations, additions and improvements, except trade
fixtures, installed at expense of Tenant, shall become the property of Landlord
and shall remain upon and be surrendered with the leased premises as a part
thereof on the termination of this lease. Such alterations, additions, and
improvements may only be made with the prior written consent of Landlord, which
consent shall not be unreasonably withheld. If consent is granted for the making
of improvements or alterations to the leased premises, such improvements and
alterations shall not commence until Tenant has furnished to Landlord a
certificate of insurance showing coverage in an amount satisfactory to Landlord
protecting Landlord from liability for injury to any person and damage to any
personal property, on or off the leased premises, in connection with the making
of such improvements or alterations. No cooling tower, equipment or structure
temporarily, so that repairs to the roof can be made, Tenant shall promptly
remove and reinstall the cooling tower, equipment or structure at Tenant's
expense and repair at Tenant's expense any damage resulting from such removal or
reinstallation. Upon termination of this lease, Tenant shall remove or cause to
be removed from the roof any such cooling tower, equipment or structure if
directed to do so by Landlord. Tenant shall deliver the leased premises in good
order and condition, natural deterioration only excepted. Any damage caused by
the installation or removal or trade fixtures shall be repaired at Tenant's
expense prior to the expiration of the lease term. All alterations,
improvements, additions, and repairs made by Tenant shall be made in good and
workmanlike manner.
12. COMPLIANCE WITH LAWS AND REGULATIONS. Tenant shall, at its own expense,
comply with all laws, orders, and requirements of all governmental entities with
reference to the use and occupancy of the leased premises. Tenant and Tenant's
agents, employees and invitees shall full comply with any rules and regulations
governing the use of the buildings or other improvements to the leased premises
as required by Landlord. Landlord may make reasonable changes in such rules and
regulations from time to time as deemed advisable for the safety, care and
cleanliness of the leased premises, provided same are in writing and are not in
conflict with this lease.
13. ASSIGNMENT AND SUBLETTING. Tenant shall not assign this lease nor sublet the
leased premises or any interest therein without first obtaining the written
consent of the landlord. An assignment or subletting without the written consent
of landlord shall be void and shall, at the option of landlord, terminate this
lease.
14. DESTRUCTION. In the event the leased premises is partially damaged or
destroyed or rendered partially unfit for occupancy by fire or other casualty,
Landlord and Tenant should refer to Section 7.
15. TENANT DEFAULT AND REMOVAL OF ABANDONED PROPERTY. If Tenant abandons the
premises or otherwise defaults in the performance of any obligations or
covenants herein, Landlord may enforce the performance of this lease in any
manner provided by law. This lease may be
<PAGE> 6
terminated at Landlord's discretion of such abandonment or default continues for
a period of 10 days after Landlord notifies Tenant of such abandonment or
default and of Landlord's intention to declare this lease terminated. Such
notice shall be sent by Landlord to Tenant at Tenant's last known address by
certified mail. If Tenant has not completely removed or cured default within the
10-day period, this lease shall terminate. Thereafter, Landlord or its agents
shall have the right, without further notice or demand, to enter the leased
premises and remove all property without being deemed guilty of trespass and
without waiving any other remedies for arrears of rent or breach of covenant.
Upon abandonment or default by the Tenant, the remaining unpaid portion of the
rental from paragraph 4 herein, shall become due and payable. For purposes of
this section, Tenant is presumed to have abandoned the premises if goods,
equipment, or other property, in an amount substantial enough to indicate a
probable intent to abandon the premises, is being or has been removed from the
premises and the removal is not within the normal course of Tenant's business.
Landlord shall have the right to store any property of Tenant that remains on
premises that are abandoned; and, in addition to Landlord's other rights,
Landlord may dispose of the stored property if Tenant does not claim the
property within 60 days after the date the property is stored, provided Landlord
delivers by certified mail to Tenant at Tenant's last known address a notice
stating that Landlord may dispose of Tenant's property if Tenant does not claim
the property within 60 days after the date the property is stored.
16. INTERRUPTION OF UTILITIES. Landlord or Landlord's agent may not interrupt of
cause the interruption of utility service paid directly to the utility company
by Tenant unless interruption results from bona fide repairs, construction, or
any emergency. If any utility services furnished by Landlord are interrupted and
continue to be interrupted despite the good faith efforts of Landlord to remedy
same, Landlord shall not be liable in ANY respect for damages to the person or
property of Tenant or Tenant's employees, agents, or guests, and same shall not
be construed as grounds for constructive eviction or abatement of rent. Landlord
shall use reasonable diligence to repair and remedy such interruption promptly.
17. EXCLUSION OF TENANT. Landlord may not intentionally prevent Tenant from
entering the leased premises except by judicial process unless the exclusion
results from: (a) bona fide repairs, construction, or an emergency; (b) removing
the contents of premises abandoned by Tenant; or (c) changing the door locks of
Tenant in the event Tenant is delinquent in paying at least part of the rent. If
Landlord or Landlord's agent changes the door lock of Tenant, in the event
Tenant is delinquent in paying rent, Landlord or Landlord's agent must place a
written notice on Tenant's front door stating the name and the address or
telephone number of the individual or company from which the new key may be
obtained. The new key is required to be provided only during Tenant's regular
business hours.
18. LIEN. Landlord is granted an express contractual lien, in addition to any
lien provided by law, and a security interest in all property of Tenant found on
the leased premises to secure the compliance by Tenant with all terms of this
lease.
19. SUBORDINATION. Landlord is hereby irrevocably vested with full power and
authority to subordinate this lease to any mortgage, deed of trust, or other
lien hereafter placed on the demised premises and Tenant agrees on demand to
execute such further instruments subordinating this lease as Landlord may
request, provided such subordination shall be on the express condition that this
lease shall be recognized by the mortgagee, and the rights of Tenant shall
remain in full force and effect during the term of this lease so long as Tenant
shall continue to perform all of the covenants and conditions of this lease.
20. INDEMNITY. Landlord and its employees and agents shall not be liable to
Tenant or to Tenant's employees, patrons, visitors, invitees, or any other
persons for any such injury to any such persons or for damage to personal
property caused by an act, omission, or neglect of Tenant or Tenant's agents or
of any other tenant of the premises of which the leased premises is a part.
Tenant agrees to indemnify and hold Landlord and its employees and agents
harmless from any and all claims for such injury and damages, whether the injury
occurs on or off the leased premises.
21. SIGNS. Tenant shall not post or paint any signs at, on, or about the leased
premises or paint the exterior walls of the building except with the prior
written consent of the Landlord. Landlord shall have the right to remove any
sign or signs in order to maintain the leased premises or to make any repairs or
alterations thereto.
<PAGE> 7
22. TENANT BANKRUPTCY. If Tenant becomes bankrupt or makes voluntary assignment
for the benefit of creditors or if a receiver is appointed for Tenant, Landlord
may terminate this lease by giving five (5) days written notice to Tenant of
Landlord's intention to do so.
23. CONDEMNATION. If the whole or any substantial part of the leased premises is
taken for any public or quasi-public use under any governmental law, ordinance
or regulation or by right of eminent domain or should the leased premises be
sold to a condemning authority under threat of condemnation, this lease shall
terminate and the rent shall be abated during the unexpired portion of the lease
effective from the date of the physical taking of the leased premises.
24. HAZARDOUS MATERIALS. Landlord warrants and represents that the Property does
not contain "Hazardous Materials", as that phrase is defined herein. For
purposes of this provision, the phrase "Hazardous Materials" shall mean and
include any toxic contaminated or other hazardous materials including, without
limitation, asbestos, PCB, transformers, underground storage containers,
materials containing any radioactive substances, petroleum base products,
paints, solvents, lead, cyanide, DDT, acids, pesticides, ammonium compounds, and
any other substance forming a component part of the improvements which has
heretofore or may in the future be determined to contain toxic wastes, hazardous
materials, or undesirable substances injurious to the health of occupants living
or working in or around the subject Property. Landlord acknowledges that current
and future federal, state, and local laws and regulations may require the clean
up of any such Hazardous Materials at the expense of those persons who in the
past, present, or future may have had or continue to have any interest in the
Property including, but not limited to, current, past, and future owners and
users, including tenants, of the Property. The cost and expense of such clean up
may be substantial. Landlord further acknowledges Hazardous Materials. Landlord
acknowledges and agrees that Landlord shall look solely to experts and
professionals selected by Landlord to advise Landlord with respect to the
condition of the Property and shall not hold the real estate Brokers or their
agents responsible for any Hazardous Material condition or problem relating to
the Property. Landlord hereby agrees to indemnify, defend, and hold the real
estate Brokers and their agents participating in this transaction harmless of
and from any and all liability, claim, debt, damage, cost, or expense, including
reasonable attorneys' fees, relate to or arising out of or in any way connected
to Hazardous Materials and/or toxic wastes and/or any other undesirable
substances affecting the Property.
25. BROKERS FEE. SBC Asset Management, Inc. Broker and The Brian Brady Company,
Co-Broker, as Real Estate Broker (the Broker). has negotiated this lease and
Landlord agrees to pay Broker in Bexar, County, Texas, upon commencement of
this lease, a negotiated fee of $ n/a or 6% of the total rental provided for in
this lease to be divided as follows: 66% of commission to BBC and 34% to AMI.
Tenant warrants that it has had no dealings with any real estate broker or
agents in connection wit the negotiation of this lease excepting only The Brian
Brady Company and it knows of no other real estate broker or agent who is
entitled to a commission in connection with this Lease.
26. NOTICES. Notices to Tenant shall be by certified mail or other delivery to
the leased premises or to Tenant's last know address. Notices to Landlord shall
be by certified mail to the place where rent is payable.
27. DEFAULT BY LANDLORD. In the event of breach by Landlord of any covenant,
warranty, term or obligation of this lease, then Landlord's failure to cure same
or commence a good faith effort to cure same within 10 days after written notice
thereof by Tenant shall be considered a default and shall entitle Tenant either
to terminate this lease or cure the default and make the necessary repairs and
any expense incurred by Tenant shall be reimbursed by the Landlord after
reasonable notice of the repairs and expenses incurred. At Tenant's option, such
reimbursement can be made available to Tenant via abated rent.
28. SIGNS. During the last 60 days of this lease, a "FOR SALE" sign and/or a
"FOR LEASE" sign may be displayed on the leased premises and the leased premises
may be shown at reasonable times to prospective purchasers or tenants.
<PAGE> 8
29. RIGHT OF ENTRY. Landlord shall have the right during normal business hours
to enter the demised premises; (a) to inspect the general condition and state of
repair thereof, (b) to make repairs required or permitted under this lease, or
(c) for any other reasonable purpose.
30. WAIVER OF BREACH. The waiver by Landlord of any breach of any provision of
this lease shall not constitute a continuing waiver or a waiver of any
subsequent breach of the same or a different provision of this lease.
31. TIME OF ESSENCE. Time is expressly declared to be of the essence in this
lease.
32. BINDING OF HEIRS AND ASSIGNS. Subject to the provisions of this lease
pertaining to assignment of the Tenant's interest, all provisions of this lease
shall extend to and bind, or inure to the benefit not only of the parties to
this lease but to each and every one of the heirs, executors, representatives,
successors, and assigns of Landlord or Tenant.
33. RIGHTS AND REMEDIES CUMULATIVE. The rights and remedies by this lease
agreement are cumulative and the use of any one right or remedy by either party
shall not preclude or waive its right to use any or all other remedies, Said
rights and remedies are given in addition to any other rights the parties may
have by law, statue, ordinance, or otherwise.
34. TEXAS LAW TO APPLY. This agreement shall be construed under and in
accordance with the laws of the State of Texas.
35. LEGAL CONSTRUCTION. In case any one or more of the provisions contained in
this agreement shall for any reason be held to be invalid, illegal, or
unenforceable in any respect, such invalidity, illegality, or unenforceability
shall not affect any other provision hereof and this agreement shall be
construed as if such invalid, illegal, or unenforceable provision had never been
contained herein.
36. PRIOR AGREEMENTS SUPERCEDED. This agreement constitutes the sole and only
agreement of the parties to this lease and supersedes any prior understandings
or written or oral agreements between the parties respecting the subject matter
of this lease.
37. AMENDMENT. No amendment, modification, or alteration of the terms hereof
shall be binding unless it is in writing, dated subsequent to the date hereof,
and duly executed by the parties.
38. ATTORNEYS' FEES. Any signatory to this lease agreement who is the prevailing
party in any legal proceeding against any other signatory brought under or with
relation to this lease agreement or this transaction shall be additionally
entitled to recover court cost, reasonable attorney fees, and all other out-of-
pocket costs of litigation, including deposition, travel and witness costs,
from the nonprevailing party.
39. SPECIAL PROVISIONS. (This section to include additional factual data not
included above.)
(A) Tenant shall be responsible for restricting their employees, customers
and invitees use of the premises to the first floor space and first floor
common areas. All other areas of the premises are restricted for the
exclusive use of the Landlord and other owners of the building which is
condominium owned.
(B) Tenant may have use of the eighth floor restrooms for the exclusive
use of their employees, customers and invitees who are considered
handicapped and are unable to use the first floor restroom. Tenant will be
responsible for the actions of the above within the building and will be
responsible for following building procedures established by building
manager.
(C) Tenant has the option to renew at current market rates for one five
year term. Tenant must give Landlord written notice no later than 180 days
prior to the Termination date of its intention to renew.
<PAGE> 9
THE TEXAS ASSOCIATION OF REALTORS' AND THE SAN ANTONIO, BOARD OF REALTORS'
DO NOT FIX, CONTROL, RECOMMEND, SUGGEST OR MAINTAIN COMMISSION RATES OR FEES FOR
SERVICES TO BE RENDERED BY THEIR MEMBERS OR THE DIVISION OF COMMISSIONS OR FEES
BETWEEN COOPERATING PARTICIPANTS OR BETWEEN PARTICIPANTS AND NON-PARTICIPANTS.
THE AMOUNT OF COMPENSATION AND THE CONTRACT TERMS HEREIN ARE NOT PRESCRIBED BY
LAW AND ARE SUBJECT TO NEGOTIATION BETWEEN BROKER AND SUBLESSOR.
THIS IS A LEGAL DOCUMENT. READ IT CAREFULLY. IF YOU DO NOT UNDERSTAND THE
EFFECT OF ANY PART OF THIS AGREEMENT, SEEK COMPETENT LEGAL ADVICE.
EXECUTED this 2nd day of May, 1996.
BUSINESS RESOURCE GROUP SOUTHWESTERN BELL TELEPHONE CO
- ---------------------------------- ------------------------------------
TENANT OR TENANTS SIGNATURE(S) LANDLORD SIGNATURE
2150 N. First Street Suite 101
- ---------------------------------- ------------------------------------
ADDRESS ADDRESS
San Jose, CA 95131
- ---------------------------------- ------------------------------------
(408) 441-3700 (214) 464-3872
- ---------------------------------- ------------------------------------
TELEPHONE TELEPHONE
The Brian Brady Company
- ----------------------------------
BROKER SIGNATURE
BY:
-------------------------------
AGENT SIGNATURE
1920 Nacogdoches Rd #201
- ----------------------------------
ADDRESS
San Antonio, TX 78209
- ----------------------------------
(210) 826-0191
- ----------------------------------
TELEPHONE
<PAGE> 10
EXHIBIT A - map of office space
EXHIBIT B - Work Letter
1. Finishout
Immediately after the execution of this Lease, Tenant shall cause to have
construction drawings prepared and delivered to Landlord for approval. Upon the
approval of Landlord and upon the completion of the bidding process with the
contractors of Landlord's choice, construction shall begin according to the
general requirements listed below. In connection with the Tenant Improvements to
be performed by Tenant for the premises, Tenant shall pay for the cost of Tenant
Improvements. Landlord agrees to reimburse Tenant for Tenant Improvements up to
Twelve Thousand dollars ($12,000.00) in the form of abated rent. Such abated
rent shall take place at the commencement of this Lease and continue for a
period of time equivalent to the Tenant Improvements but not to exceed
$12,000.00 of rental abatement. (i.e. maximum abatement is equal to 4 months and
8 days of abated rent.) In the event that the Tenant Improvements exceed
$12,000.00, Tenant agrees to pay the balance to the General Contractor. At the
end of the abated rental period, Tenant shall pay to Landlord the prorated
balance of the then current month and continue to pay rent on the first of each
month as detailed in Section 4.
Costs of Tenant Improvements shall include the costs associated with the Tenant
Improvement Work, including, but not limited to, (i) the cost of Tenant
Improvement and all demolition cost incurred in connection with preparing the
Premises for the installation of the Tenant Improvements; (ii) permit fees and
other governmental fees; (iii) the cost of architects, consultants and
engineers; (iv) an amount equal to the actual cost of supervision,
administration and on-site facilities and equipment necessary to perform the
work; (v) the general contractor's overhead.
Items to be performed:
*a. Minor interior demolition and construction (install plumbing
line, remove ceiling, install kitchen, training and conference
room.
*b. Finish work
*c. New finishes (paint, carpet, VCT) - replace damaged grid and
existing tile with new. Ceiling grid/lighting plan to be
provided (if required).
*d. New lighting - in sales and conference area. Clean up existing
work and make it more presentable.
* details of fixtures, buildout and demolition to be provided by Tenants
Architect.
<PAGE> 1
EXHIBIT 10.26
THIRD AMENDMENT TO LEASE
This Third Amendment to Lease is dated for reference purposes as of August 5,
1996 and is made a part of that Lease (the "Lease") dated May 28, 1991, by and
between Wells Fargo Bank, N.A., a California corporation, and Business Furniture
Solutions, Inc., a California corporation, dba Business Interiors ("Tenant"), as
amended, affecting certain real property commonly known as Suites 101, 102, 230
and 240, at 2150 North First Street, San Jose, California.
R E C I T A L S:
A. The parties hereto have previously amended the Lease by that First
Amendment to Lease dated for reference purposes as of December 21, 1993, and by
that Second Amendment to Lease dated November 15, 1995, which amendment, among
other things, added Suites 100, 102 and 240, terminated the lease of Suite 230
and extended the term of all their Leased Space to August 31, 2001.
B. The parties now desire to add certain additional space to the Premises
and to make certain additional provisions as more particularly set forth
hereinbelow. All capitalized terms in this Amendment which are not defined
herein shall have the meaning attributed to them in the Lease.
NOW, THEREFORE, in consideration of the mutual promises set forth herein,
the parties hereto agree as follows:
1. Additional Space. Suite 220 and a portion of Suite 210 (together to be
designated as Suite 220) within the Building, as shown on Exhibit "A-1",
attached hereto and incorporated herein by this reference, is hereby added to
the leased Premises, effective as of September 15, 1996:
Rentable
Suite No. Square Feet
--------- -----------
220 2364
As of September 15, 1996, the Tenant's total rentable square footage of
the entire Premises subject to the Lease, including the newly designated Suite
220, will be Twenty-One Thousand One Hundred Sixty-One (21,161) square feet.
<PAGE> 2
2. Base Monthly Rent. Commencing on September 15, 1996, and continuing
through January 31, 1999, Base Monthly Rent payable under the Lease by Tenant
for the Premises shall be as follows:
Monthly
Rentable Rental
Suite No. Square Feet Rate Rent
--------- ----------- ----- ----------
100 5,149 $1.60 $ 8,238.40
101 8,377 $1.60 $13,403.20
102 2,734 $1.60 $ 4,374.40
240 2,537 $1.48 $ 3,754.76
220 2,364 $1.58 $ 3735.12
----- ----------
Total 21,161 $33,505.88
==========
On February 1, 1999, and on February 1, 2000, ( the "Adjustment Dates" )
the Tenant's Base Monthly Rent for the Premises in effect as of each Adjustment
Date shall be increased by the Consumer Price Index (as defined in Section 1.11
of the Lease) as compared with the Consumer Price Index in effect one year prior
to such Adjustment Date. In no event shall Base Monthly Rent be reduced by the
foregoing adjustments.
3. Security Deposit. On the execution hereof, Tenant's existing Security
Deposit in the amount of Twenty -Nine Thousand Seven Hundred Seventy Dollars
($29,770.00) shall be increased by Three Thousand Seven Hundred Thirty-Five
Dollars ($3735.00) to bring the total security Deposit to Thirty-Three Thousand
Five Hundred Five Dollars ($33,505.00) and held by Landlord pursuant to Section
3.5 of the Lease.
4. Adjustment of Tenant's Share. Effective September 15, 1996, Tenant's
Share of the Building shall be adjusted to Seventeen and Sixty-Three Hundredths
Percent (17.63%).
5. Tenant Improvement Allowance. Tenant is accepting the space in an "as
is" condition except that landlord will add a partition and remove a wall as
depicted in Exhibit "A-1". The cost of any other tenant improvements will be
paid for by the tenant. All requirements set forth in the Lease, including
without limitation the terms and provisions of article 5, regarding Tenant
improvements and alterations to the Building shall apply with respect to the
improvements and alterations being constructed by Tenant to any part of the
Premises. Without limiting the generality of the foregoing, Landlord and Tenant
agree that Tenant's general contractor and the plans and specifications for
Tenant's improvements and alterations (or any changes made thereto) shall have
been approved in writing by Landlord prior to commencement of any work related
thereto. additionally, prior to commencement of any such work, Tenant shall
obtain and furnish Landlord with a certificate of insurance providing contingent
liability and broad form
<PAGE> 3
builder's risk insurance in an amount of not less than Five Million Dollars
($5,000,000) and otherwise reasonably acceptable to Landlord.
6. Effectiveness. The effectiveness of this Amendment shall be conditioned
upon the execution by First Franklin Financial Corporation ("First Franklin") of
an Amendment to that certain Office Lease between Landlord and First Franklin
dated January 30, 1992, as amended, pursuant to which First Franklin shall
terminate such lease with respect to the expanded Suite 220 within the Building.
7. No Brokerage Commission. Tenant shall hold Landlord harmless form the
payment of any brokerage commissions related to this Amendment owing or claimed
to be owing to any brokers hired, consulted or otherwise involved herein.
IN WITNESS WHEREOF, Landlord and Tenant hereby agree to the foregoing
provisions and make them a part of the Lease.
LANDLORD:
2150 NORTH FIRST STREET PARTNERS,
California Limited partnership
By:
-----------------------------
Tito J. Bianchi
Its: General Partner
TENANT:
BUSINESS RESOURCE GROUP, INC.,
A California Corporation
By:
-----------------------------
<PAGE> 1
EXHIBIT 10.27
BUSINESS RESOURCE GROUP
AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
<PAGE> 2
TABLE OF CONTENTS
Page
1. DEFINITIONS AND CONSTRUCTION......................................... 1
1.1 Definitions.................................................... 1
1.2 Accounting Terms............................................... 6
2. LOAN AND TERMS OF PAYMENT............................................ 6
2.1 Advances....................................................... 6
2.2 Overadvances................................................... 7
2.3 Interest Rates, Payments, and Calculations..................... 7
2.4 Crediting Payments............................................. 8
2.5 Fees........................................................... 8
2.6 Additional Costs............................................... 8
2.7 Term........................................................... 9
3. CONDITIONS OF LOANS.................................................. 9
3.1 Conditions Precedent to Initial Advance........................ 9
3.2 Conditions Precedent to all Advances........................... 9
4. CREATION OF SECURITY INTEREST........................................ 9
4.1 Grant of Security Interest..................................... 9
4.2 Delivery of Additional Documentation Required.................. 10
4.3 Right to Inspect............................................... 10
5. REPRESENTATIONS AND WARRANTIES....................................... 10
5.1 Due Organization and Qualification............................. 10
5.2 Due Authorization; No Conflict................................. 10
5.3 No Prior Encumbrances.......................................... 10
5.4 Bona Fide Eligible Accounts.................................... 10
5.5 Merchantable Inventory......................................... 10
5.6 Name; Location of Chief Executive Office....................... 10
5.7 Litigation..................................................... 10
5.8 No Material Adverse Change in Financial Statements............. 11
5.9 Solvency....................................................... 11
5.10 Regulatory Compliance.......................................... 11
5.11 Environmental Condition........................................ 11
5.12 Taxes.......................................................... 11
5.13 Subsidiaries................................................... 11
5.14 Government Consents............................................ 11
5.15 Full Disclosure................................................ 11
6. AFFIRMATIVE COVENANTS................................................ 12
6.1 Good Standing.................................................. 12
6.2 Government Compliance.......................................... 12
6.3 Financial Statements, Reports, Certificates.................... 12
6.4 Inventory; Returns............................................. 12
6.5 Taxes.......................................................... 12
6.6 Insurance...................................................... 13
6.7 Principal Depository........................................... 13
6.8 Quick Ratio.................................................... 13
6.9 Debt Service Coverage.......................................... 13
6.10 Debt-Net Worth Ratio........................................... 13
6.11 Tangible Net Worth............................................. 13
6.12 Profitability.................................................. 13
6.13 Further Assurances............................................. 14
7. NEGATIVE COVENANTS................................................... 14
7.1 Dispositions................................................... 14
7.2 Change in Business............................................. 14
7.3 Mergers or Acquisitions........................................ 14
i
<PAGE> 3
7.4 Indebtedness................................................... 14
7.5 Encumbrances................................................... 14
7.6 Distributions.................................................. 14
7.7 Investments.................................................... 14
7.8 Transactions with Affiliates................................... 14
7.9 Subordinated Debt.............................................. 14
7.10 Inventory...................................................... 14
7.11 Compliance..................................................... 15
8. EVENTS OF DEFAULT.................................................... 15
8.1 Payment Default................................................ 15
8.2 Covenant Default............................................... 15
8.3 Attachment..................................................... 15
8.4 Insolvency..................................................... 16
8.5 Other Agreements............................................... 16
8.6 Judgments...................................................... 16
8.7 Misrepresentations............................................. 16
9. BANK'S RIGHTS AND REMEDIES........................................... 16
9.1 Rights and Remedies............................................ 16
9.2 Power of Attorney.............................................. 17
9.3 Accounts Collection............................................ 17
9.4 Bank Expenses.................................................. 17
9.5 Bank's Liability for Collateral................................ 17
9.6 Remedies Cumulative............................................ 18
9.7 Demand; Protest................................................ 18
10. NOTICES.............................................................. 18
11. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER........................... 18
12. GENERAL PROVISIONS................................................... 19
12.1 Successors and Assigns......................................... 19
12.2 Indemnification................................................ 19
12.3 Time of Essence................................................ 19
12.4 Severability of Provisions..................................... 19
12.5 Amendments in Writing, Integration............................. 19
12.6 Counterparts................................................... 19
12.7 Survival....................................................... 19
12.8 Confidentiality................................................ 19
ii
<PAGE> 4
This AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT is entered into as
of July 3, 1996, by and between SILICON VALLEY BANK ("Bank") and BUSINESS
RESOURCE GROUP ("Borrower").
RECITALS
Borrower and Bank are parties to a Business Loan Agreement and Commercial
Security Agreement, as amended through the date hereof. Borrower has issued to
Bank a promissory note, as amended through the date hereof. Borrower wishes to
continue to obtain credit from time to time from Bank, and Bank desires to
extend credit to Borrower. This Agreement amends and restates the terms on which
Bank will advance credit to Borrower, and Borrower will repay the amounts owing
to Bank.
AGREEMENT
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION
1.1 Definitions. As used in this Agreement, the following terms
shall have the following definitions:
"Accounts" means all presently existing and hereafter arising
accounts, contract rights, and all other forms of obligations owing to Borrower
arising out of the sale or lease of goods (including, without limitation, the
licensing of software and other technology) or the rendering of services by
Borrower, whether or not earned by performance, and any and all credit
insurance, guaranties, and other security therefor, as well as all merchandise
returned to or reclaimed by Borrower and Borrower's Books relating to any of the
foregoing.
"Advance" or "Advances" means an Advance under the Revolving
Facility.
"Affiliate" means, with respect to any Person, any Person that
owns or controls directly or indirectly such Person, any Person that controls or
is controlled by or is under common control with such Person, and each of such
Person's senior executive officers, directors, and partners.
"Bank Expenses" means all: reasonable costs or expenses
(including reasonable attorneys' fees and expenses) incurred in connection with
the preparation, negotiation, administration, and enforcement of the Loan
Documents; and Bank's reasonable attorneys' fees and expenses incurred in
amending, enforcing or defending the Loan Documents (including fees and expenses
of appeal), whether or not suit is brought.
"Borrower's Books" means all of Borrower's books and records
including: ledgers; records concerning Borrower's assets or liabilities, the
Collateral, business operations or financial condition; and all computer
programs, or tape files, and the equipment, containing such information.
"Borrowing Base" has the meaning set forth in Section 2.1
hereof.
"Business Day" means any day that is not a Saturday, Sunday,
or other day on which banks in the State of California are authorized or
required to close.
"Closing Date" means the date of this Agreement.
"Code" means the California Uniform Commercial Code.
"Collateral" means the property described on Exhibit A
attached hereto.
"Committed Line" means Eight Million Dollars ($8,000,000),
minus the aggregate outstanding principal amount of the Term Loans.
"Contingent Obligation" means, as applied to any Person, any
direct or indirect liability, contingent or otherwise, of that Person with
respect to (i) any indebtedness, lease, dividend,
1
<PAGE> 5
letter of credit or other obligation of another, including, without limitation,
any such obligation directly or indirectly guaranteed, endorsed, co-made or
discounted or sold with recourse by that Person, or in respect of which that
Person is otherwise directly or indirectly liable; (ii) any obligations with
respect to undrawn letters of credit issued for the account of that Person; and
(iii) all obligations arising under any interest rate, currency or commodity
swap agreement, interest rate cap agreement, interest rate collar agreement, or
other agreement or arrangement designated to protect a Person against
fluctuation in interest rates, currency exchange rates or commodity prices;
provided, however, that the term "Contingent Obligation" shall not include
endorsements for collection or deposit in the ordinary course of business. The
amount of any Contingent Obligation shall be deemed to be an amount equal to the
stated or determined amount of the primary obligation in respect of which such
Contingent Obligation is made or, if not stated or determinable, the maximum
reasonably anticipated liability in respect thereof as determined by such Person
in good faith; provided, however, that such amount shall not in any event exceed
the maximum amount of the obligations under the guarantee or other support
arrangement.
"Current Assets" means, as of any applicable date, all amounts
that should, in accordance with GAAP, be included as current assets on the
consolidated balance sheet of Borrower and its Subsidiaries as at such date.
"Current Liabilities" means, as of any applicable date, all
amounts that should, in accordance with GAAP, be included as current liabilities
on the consolidated balance sheet of Borrower and its Subsidiaries, as at such
date, plus, to the extent not already included therein, all outstanding Advances
made under this Agreement, including all Indebtedness that is payable upon
demand or within one year from the date of determination thereof unless such
Indebtedness is renewable or extendable at the option of Borrower or any
Subsidiary to a date more than one year from the date of determination, but
excluding Subordinated Debt.
"Daily Balance" means the amount of the Obligations owed at
the end of a given day.
"Eligible Accounts" means those Accounts that arise in the
ordinary course of Borrower's business that comply with all of Borrower's
representations and warranties to Bank set forth in Section 5.4; provided, that
standards of eligibility may be fixed and revised from time to time by Bank in
Bank's reasonable judgment and upon notification thereof to Borrower in
accordance with the provisions hereof. Unless otherwise agreed to by Bank,
Eligible Accounts shall not include the following:
(a) Accounts that the account debtor has failed to pay within
ninety (90) days of invoice date;
(b) Accounts with respect to an account debtor, fifty percent
(50%) of whose Accounts the account debtor has failed to pay within ninety (90)
days of invoice date;
(c) Accounts with respect to which the account debtor is an
officer, employee, or agent of Borrower;
(d) Accounts with respect to which goods are placed on
consignment, guaranteed sale, sale or return, sale on approval, bill and hold,
or other terms by reason of which the payment by the account debtor may be
conditional;
(e) Accounts with respect to which the account debtor is an
Affiliate of Borrower;
(f) Accounts with respect to which the account debtor does not
have its principal place of business in the United States, except for Eligible
Foreign Accounts;
(g) Accounts with respect to which the account debtor is the
United States or any department, agency, or instrumentality of the United
States;
(h) Accounts with respect to which Borrower is liable to the
account debtor for goods sold or services rendered by the account debtor to
Borrower, but only to the extent of any amounts owing to the account debtor
against amounts owed to Borrower;
(i) Accounts with respect to an account debtor, including
Subsidiaries and
2
<PAGE> 6
Affiliates, whose total obligations to Borrower exceed twenty-five percent (25%)
of all Accounts, to the extent such obligations exceed the aforementioned
percentage, except as approved in writing by Bank, except that the concentration
limit shall be forty percent (40%) for each of Cisco Systems, Inc., National
Semiconductor Corporation, Motorola and CompUSA;
(j) Accounts with respect to which the account debtor disputes
liability or makes any claim with respect thereto as to which Bank believes, in
its sole discretion, that there may be a basis for dispute (but only to the
extent of the amount subject to such dispute or claim), or is subject to any
Insolvency Proceeding, or becomes insolvent, or goes out of business;
(k) Accounts the collection of which Bank reasonably
determines to be doubtful; and
(l) Accounts owing from Allsteel, Inc. so long as Allsteel,
Inc. maintains a first position security interest in respect of its inventory.
"Eligible Foreign Accounts" means Accounts with respect to
which the account debtor does not have its principal place of business in the
United States and that are: (1) covered by credit insurance in form and amount,
and by an insurer satisfactory to Bank less the amount of any deductible(s)
which may be or become owing thereon; or (2) supported by one or more letters of
credit in favor of Bank as beneficiary, in an amount and of a tenor, and issued
by a financial institution, acceptable to Bank; or (3) that Bank approves on a
case-by-case basis.
"Equipment" means all present and future machinery, equipment,
tenant improvements, furniture, fixtures, vehicles, tools, parts and attachments
in which Borrower has any interest.
"ERISA" means the Employment Retirement Income Security Act of
1974, as amended, and the regulations thereunder.
"GAAP" means generally accepted accounting principles as in
effect from time to time.
"Indebtedness" means (a) all indebtedness for borrowed money
or the deferred purchase price of property or services, including without
limitation reimbursement and other obligations with respect to surety bonds and
letters of credit, (b) all obligations evidenced by notes, bonds, debentures or
similar instruments, (c) all capital lease obligations and (d) all Contingent
Obligations.
"Insolvency Proceeding" means any proceeding commenced by or
against any person or entity under any provision of the United States Bankruptcy
Code, as amended, or under any other bankruptcy or insolvency law, including
assignments for the benefit of creditors, formal or informal moratoria,
compositions, extension generally with its creditors, or proceedings seeking
reorganization, arrangement, or other relief.
"Inventory" means all present and future inventory in which
Borrower has any interest, including merchandise, raw materials, parts,
supplies, packing and shipping materials, work in process and finished products
intended for sale or lease or to be furnished under a contract of service, of
every kind and description now or at any time hereafter owned by or in the
custody or possession, actual or constructive, of Borrower, including such
inventory as is temporarily out of its custody or possession or in transit and
including any returns upon any accounts or other proceeds, including insurance
proceeds, resulting from the sale or disposition of any of the foregoing and any
documents of title representing any of the above, and Borrower's Books relating
to any of the foregoing.
"Investment" means any beneficial ownership of (including
stock, partnership interest or other securities) any Person, or any loan,
advance or capital contribution to any Person.
"IRC" means the Internal Revenue Code of 1986, as amended, and
the regulations thereunder.
"Lien" means any mortgage, lien, deed of trust, charge,
pledge, security interest or other encumbrance.
3
<PAGE> 7
"Loan Documents" means, collectively, this Agreement, any note
or notes executed by Borrower, and any other agreement entered into between
Borrower and Bank in connection with this Agreement, all as amended or extended
from time to time.
"Material Adverse Effect" means a material adverse effect on
(i) the business operations or condition (financial or otherwise) of Borrower
and its Subsidiaries taken as a whole or (ii) the ability of Borrower to repay
the Obligations or otherwise perform its obligations under the Loan Documents.
"Maturity Date" means the fifth (5th) anniversary of the date
of the last Term Loan made under this agreement.
"Negotiable Collateral" means all of Borrower's present and
future letters of credit of which it is a beneficiary, notes, drafts,
instruments, securities, documents of title, and chattel paper, and Borrower's
Books relating to any of the foregoing.
"Obligations" means all debt, principal, interest, Bank
Expenses and other amounts owed to Bank by Borrower pursuant to this Agreement
or any other agreement, whether absolute or contingent, due or to become due,
now existing or hereafter arising, including any interest that accrues after the
commencement of an Insolvency Proceeding and including any debt, liability, or
obligation owing from Borrower to others that Bank may have obtained by
assignment or otherwise.
"Periodic Payments" means all installments or similar
recurring payments that Borrower may now or hereafter become obligated to pay to
Bank pursuant to the terms and provisions of any instrument, or agreement now or
hereafter in existence between Borrower and Bank.
"Permitted Indebtedness" means:
(a) Indebtedness of Borrower in favor of Bank arising under
this Agreement or any other Loan Document;
(b) Indebtedness existing on the Closing Date and disclosed in
the Schedule;
(c) Subordinated Debt; and
(d) Indebtedness to trade creditors incurred in the ordinary
course of business.
"Permitted Investment" means:
(a) Investments existing on the Closing Date disclosed in the
Schedule; and
(b) (i) marketable direct obligations issued or
unconditionally guaranteed by the United States of America or any agency or any
State thereof maturing within one (1) year from the date of acquisition thereof,
(ii) commercial paper maturing no more than one (1) year from the date of
creation thereof and currently having the highest rating obtainable from either
Standard & Poor's Corporation or Moody's Investors Service, Inc., and (iii)
certificates of deposit maturing no more than one (1) year from the date of
investment therein issued by Bank.
"Permitted Liens" means the following:
(a) Any Liens existing on the Closing Date and disclosed in
the Schedule or arising under this Agreement or the other Loan Documents;
(b) Liens for taxes, fees, assessments or other governmental
charges or levies, either not delinquent or being contested in good faith by
appropriate proceedings, provided the same have no priority over any of Bank's
security interests;
(c) Liens (i) upon or in any equipment acquired or held by
Borrower or any of its Subsidiaries to secure the purchase price of such
equipment or indebtedness incurred solely for the purpose of financing the
acquisition of such equipment, or (ii) existing on such equipment at the time of
its acquisition, provided that the Lien is confined solely to the property so
acquired and improvements
4
<PAGE> 8
thereon, and the proceeds of such equipment;
(d) Liens incurred in connection with the extension, renewal
or refinancing of the indebtedness secured by Liens of the type described in
clauses (a) through (c) above, provided that any extension, renewal or
replacement Lien shall be limited to the property encumbered by the existing
Lien and the principal amount of the indebtedness being extended, renewed or
refinanced does not increase.
"Person" means any individual, sole proprietorship,
partnership, limited liability company, joint venture, trust, unincorporated
organization, association, corporation, institution, public benefit corporation,
firm, joint stock company, estate, entity or governmental agency.
"Prime Rate" means the variable rate of interest, per annum,
most recently announced by Bank, as its "prime rate," whether or not such
announced rate is the lowest rate available from Bank.
"Quick Assets" means, at any date as of which the amount
thereof shall be determined, the consolidated cash, cash-equivalents, accounts
receivable and investments, with maturities not to exceed 90 days, of Borrower
determined in accordance with GAAP.
"Responsible Officer" means each of the Chief Executive
Officer, the Chief Financial Officer and the Controller of Borrower.
"Revolving Maturity Date" means July 2, 1997.
"Revolving Facility" means the facility under which Borrower
may request Bank to issue cash advances, as specified in Section 2.1 hereof.
"Schedule" means the schedule of exceptions attached hereto.
"Subordinated Debt" means any debt incurred by Borrower that
is subordinated to the debt owing by Borrower to Bank on terms acceptable to
Bank (and identified as being such by Borrower and Bank).
"Subsidiary" means any corporation or partnership in which (i)
any general partnership interest or (ii) more than 50% of the stock of which by
the terms thereof ordinary voting power to elect the Board of Directors,
managers or trustees of the entity shall, at the time as of which any
determination is being made, be owned by Borrower, either directly or through an
Affiliate.
"Tangible Net Worth" means at any date as of which the amount
thereof shall be determined, the consolidated total assets of Borrower and its
Subsidiaries minus, without duplication, (i) the sum of any amounts attributable
to (a) goodwill, (b) intangible items such as unamortized debt discount and
expense, patents, trade and service marks and names, copyrights and research and
development expenses except prepaid expenses, and (c) all reserves not already
deducted from assets, and (ii) Total Liabilities.
"Term Loan" means an Advance that Borrower has converted into
a term loan pursuant to Section 2.1.1.
"Total Liabilities" means at any date as of which the amount
thereof shall be determined, all obligations that should, in accordance with
GAAP be classified as liabilities on the consolidated balance sheet of Borrower,
including in any event all Indebtedness, but specifically excluding Subordinated
Debt.
1.2 Accounting Terms. All accounting terms not specifically defined
herein shall be construed in accordance with GAAP and all calculations made
hereunder shall be made in accordance with GAAP. When used herein, the terms
"financial statements" shall include the notes and schedules thereto.
2. LOAN AND TERMS OF PAYMENT
2.1 Advances. Subject to and upon the terms and conditions of this
Agreement,
5
<PAGE> 9
Bank agrees to make Advances to Borrower in an aggregate amount not to exceed
the lesser of the Committed Line or the Borrowing Base. For purposes of this
Agreement, "Borrowing Base" shall mean an amount equal to eighty percent (80%)
of Eligible Accounts. Subject to the terms and conditions of this Agreement,
amounts borrowed pursuant to this Section 2.1 may be repaid and reborrowed at
any time prior to the Revolving Maturity Date.
Whenever Borrower desires an Advance, Borrower will notify Bank by
facsimile transmission or telephone no later than 3:00 p.m. California time, on
the Business Day that the Advance is to be made. Each such notification shall be
promptly confirmed by a Payment/Advance Form in substantially the form of
Exhibit B hereto. Bank is authorized to make Advances under this Agreement,
based upon instructions received from a Responsible Officer, or without
instructions if in Bank's discretion such Advances are necessary to meet
Obligations which have become due and remain unpaid. Bank shall be entitled to
rely on any telephonic notice given by a person who Bank reasonably believes to
be a Responsible Officer, and Borrower shall indemnify and hold Bank harmless
for any damages or loss suffered by Bank as a result of such reliance. Bank will
credit the amount of Advances made under this Section 2.1 to Borrower's deposit
account.
The Revolving Facility shall terminate on the Revolving Maturity Date, at
which time all Advances under this Section 2.1 shall be immediately due and
payable.
2.1.1 Term Conversion. Subject to the last sentence of this
Section 2.1.1, at any time and from time to time prior to the Revolving Maturity
Date, Borrower shall have a right to convert all or any part of outstanding
Advances (in an aggregate amount not to exceed $3,000,000) into a Term Loan. To
effect such conversion, Borrower shall give Bank not less than three (3)
Business Days' notice in a form reasonably acceptable to Bank specifying the
principal amount to be converted and the requested date of conversion (the
"Conversion Date"). Each Term Loan shall bear interest at a floating rate equal
to the Prime Rate, and shall be payable in sixty (60) equal monthly installments
of principal plus accrued interest, beginning the first day of the month
immediately following the Conversion Date and continuing on the first day of
each month thereafter until the Term Loan has been repaid in full. The Committed
Line shall be permanently reduced by the outstanding principal balance of the
Term Loans. Borrower may convert an Advance under this Section 2.1 provided a
Event of Default is not continuing and provided further that Borrower's Debt
Service Coverage after giving effect to the conversion will not be less than 1.5
to 1.0. "Debt Service Coverage" means (i) Borrower's earnings before interest,
taxes, depreciation and amortization for the two quarters prior to the
Conversion Date, multiplied by two divided by (ii) the sum of the current
portion of long-term debt (as defined pursuant to GAAP) of the requested Term
Loans plus the interest expense for twelve (12) months that will accrue on such
Term Loans plus the current portion of long-term debt (as defined pursuant to
GAAP) of any existing Term Loans plus the interest expense for twelve (12)
months that will accrue on such Term Loans.
2.2 Overadvances. If, at any time or for any reason, the amount of
Obligations owed by Borrower to Bank pursuant to Section 2.1 of this Agreement
is greater than the lesser of (i) the Committed Line or (ii) the Borrowing Base,
Borrower shall immediately pay to Bank, in cash, the amount of such excess. If,
at anytime or for any reason, the amount of Obligations owed by Borrower to Bank
pursuant to this Agreement is greater than the Committed Line, Borrower shall
immediately pay to Bank, in cash, the amount of such excess.
2.3 Interest Rates, Payments, and Calculations.
(a) Interest Rate. Except as set forth in Section 2.3(b), any
Advances shall bear interest, on the average Daily Balance, at a rate equal to
the Prime Rate.
(b) Default Rate. All Obligations shall bear interest, from
and after the occurrence of an Event of Default, at a rate equal to five (5)
percentage points above the interest rate applicable immediately prior to the
occurrence of the Event of Default.
(c) Payments. Interest hereunder shall be due and payable on
the fourth calendar day of each month during the term hereof. Bank shall, at its
option, charge such interest, all Bank Expenses, and all Periodic Payments
against any of Borrower's deposit accounts or against the Committed Line, in
which case those amounts shall thereafter accrue interest at the rate then
applicable hereunder. Any interest not paid when due shall be compounded by
becoming a part of the Obligations, and such interest shall thereafter accrue
interest at the rate then applicable hereunder.
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<PAGE> 10
(d) Computation. In the event the Prime Rate is changed from
time to time hereafter, the applicable rate of interest hereunder shall be
increased or decreased effective as of 12:01 a.m. on the day the Prime Rate is
changed, by an amount equal to such change in the Prime Rate. All interest
chargeable under the Loan Documents shall be computed on the basis of a three
hundred sixty (360) day year for the actual number of days elapsed.
2.4 Crediting Payments. Prior to the occurrence of an Event of
Default, Bank shall credit a wire transfer of funds, check or other item of
payment to such deposit account or Obligation as Borrower specifies. After the
occurrence of an Event of Default, the receipt by Bank of any wire transfer of
funds, check, or other item of payment shall be immediately applied to
conditionally reduce Obligations, but shall not be considered a payment on
account unless such payment is of immediately available federal funds or unless
and until such check or other item of payment is honored when presented for
payment. Notwithstanding anything to the contrary contained herein, any wire
transfer or payment received by Bank after 12:00 noon California time shall be
deemed to have been received by Bank as of the opening of business on the
immediately following Business Day. Whenever any payment to Bank under the Loan
Documents would otherwise be due (except by reason of acceleration) on a date
that is not a Business Day, such payment shall instead be due on the next
Business Day, and additional fees or interest, as the case may be, shall accrue
and be payable for the period of such extension.
2.5 Fees. Borrower shall pay to Bank the following:
(a) Facility Fee. A Facility Fee equal to Fifteen Thousand
Dollars ($15,000), which fee shall be due on the Closing Date and shall be fully
earned and nonrefundable;
(b) Financial Examination and Appraisal Fees. Bank's customary
fees and out-of- pocket expenses for Bank's audits of Borrower's Accounts, and
for each appraisal of Collateral and financial analysis and examination of
Borrower performed from time to time by Bank or its agents;
(c) Bank Expenses. Upon the date hereof, all Bank Expenses
incurred through the Closing Date, including reasonable attorneys' fees and
expenses, and, after the date hereof, all Bank Expenses, including reasonable
attorneys' fees and expenses, as and when they become due; provided that
Borrower shall only be responsible for up to $3,000 in legal fees for providing
the first draft to the Loan Documents.
2.6 Additional Costs. In case any change in any law, regulation,
treaty or official directive or the interpretation or application thereof by any
court or any governmental authority charged with the administration thereof or
the compliance with any guideline or request of any central bank or other
governmental authority (whether or not having the force of law), in each case
after the date of this Agreement:
(a) subjects Bank to any tax with respect to payments of
principal or interest or any other amounts payable hereunder by Borrower or
otherwise with respect to the transactions contemplated hereby (except for taxes
on the overall net income of Bank imposed by the United States of America or any
political subdivision thereof);
(b) imposes, modifies or deems applicable any deposit
insurance, reserve, special deposit or similar requirement against assets held
by, or deposits in or for the account of, or loans by, Bank; or
(c) imposes upon Bank any other condition with respect to its
performance under this Agreement,
and the result of any of the foregoing is to increase the cost to Bank, reduce
the income receivable by Bank or impose any expense upon Bank with respect to
any loans, Bank shall notify Borrower thereof. Borrower agrees to pay to Bank
the amount of such increase in cost, reduction in income or additional expense
as and when such cost, reduction or expense is incurred or determined, upon
presentation by Bank of a statement of the amount and setting forth Bank's
calculation thereof, all in reasonable detail, which statement shall be deemed
true and correct absent manifest error.
2.7 Term. This Agreement shall become effective on the Closing Date
and, subject to Section 12.7, shall continue in full force and effect for a term
ending on the Maturity Date. Notwithstanding the foregoing, Bank shall have the
right to terminate its obligation to make Advances
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under this Agreement immediately and without notice upon the occurrence and
during the continuance of an Event of Default. Notwithstanding termination,
Bank's Lien on the Collateral shall remain in effect for so long as any
Obligations are outstanding.
3. CONDITIONS OF LOANS
3.1 Conditions Precedent to Initial Advance. The obligation of Bank
to make the initial Advance is subject to the condition precedent that Bank
shall have received, in form and substance satisfactory to Bank, the following:
(a) this Agreement;
(b) a certificate of the Secretary of Borrower with respect to
incumbency and resolutions authorizing the execution and delivery of this
Agreement;
(c) financing statement (Form UCC-1);
(d) insurance certificate;
(e) payment of the fees and Bank Expenses then due specified
in Section 2.5 hereof; and
(f) such other documents, and completion of such other
matters, as Bank may reasonably deem necessary or appropriate.
3.2 Conditions Precedent to all Advances. The obligation of Bank to
make each Advance, including the initial Advance, is further subject to the
following conditions:
(a) timely receipt by Bank of the Payment/Advance Form as
provided in Section 2.1; and
(b) the representations and warranties contained in Section 5
shall be true and correct in all material respects on and as of the date of such
Payment/Advance Form and on the effective date of each Advance as though made at
and as of each such date, and no Event of Default shall have occurred and be
continuing, or would result from such Advance. The making of each Advance shall
be deemed to be a representation and warranty by Borrower on the date of such
Advance as to the accuracy of the facts referred to in this Section 3.2(b).
4. CREATION OF SECURITY INTEREST
4.1 Grant of Security Interest. Borrower grants and pledges to Bank
a continuing security interest in all presently existing and hereafter acquired
or arising Collateral in order to secure prompt repayment of any and all
Obligations and in order to secure prompt performance by Borrower of each of its
covenants and duties under the Loan Documents. Except as set forth in the
Schedule, such security interest constitutes a valid, first priority security
interest in the presently existing Collateral, and will constitute a valid,
first priority security interest in Collateral acquired after the date hereof.
4.2 Delivery of Additional Documentation Required. Borrower shall
from time to time execute and deliver to Bank, at the request of Bank, all
Negotiable Collateral, all financing statements and other documents that Bank
may reasonably request, in form satisfactory to Bank, to perfect and continue
perfected Bank's security interests in the Collateral and in order to fully
consummate all of the transactions contemplated under the Loan Documents.
4.3 Right to Inspect. Bank (through any of its officers, employees,
or agents) shall have the right, upon reasonable prior notice, from time to time
during Borrower's usual business hours, to inspect Borrower's Books and to make
copies thereof and to check, test, and appraise the Collateral in order to
verify Borrower's financial condition or the amount, condition of, or any other
matter relating to, the Collateral.
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5. REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants as follows:
5.1 Due Organization and Qualification. Borrower and each Subsidiary
is a corporation duly existing and in good standing under the laws of its state
of incorporation and qualified and licensed to do business in, and is in good
standing in, any state in which the conduct of its business or its ownership of
property requires that it be so qualified.
5.2 Due Authorization; No Conflict. The execution, delivery, and
performance of the Loan Documents are within Borrower's powers, have been duly
authorized, and are not in conflict with nor constitute a breach of any
provision contained in Borrower's Articles of Incorporation or Bylaws, nor will
they constitute an event of default under any material agreement to which
Borrower is a party or by which Borrower is bound. Borrower is not in default
under any agreement to which it is a party or by which it is bound, which
default could have a Material Adverse Effect.
5.3 No Prior Encumbrances. Borrower has good and indefeasible title
to the Collateral, free and clear of Liens, except for Permitted Liens.
5.4 Bona Fide Eligible Accounts. The Eligible Accounts are bona fide
existing obligations. The property giving rise to such Eligible Accounts has
been delivered to the account debtor or to the account debtor's agent for
immediate shipment to and unconditional acceptance by the account debtor.
Borrower has not received notice of actual or imminent Insolvency Proceeding of
any account debtor that is included in any Borrowing Base Certificate as an
Eligible Account.
5.5 Merchantable Inventory. All Inventory is in all material
respects of good and marketable quality, free from all material defects.
5.6 Name; Location of Chief Executive Office. Except for the names
"Business Furniture Solutions, Inc." and "Business Interiors," Borrower has not
done business under any name other than that specified on the signature page
hereof. The chief executive office of Borrower is located at the address
indicated in Section 10 hereof.
5.7 Litigation. Except as set forth in the Schedule, there are no
actions or proceedings pending by or against Borrower or any Subsidiary before
any court or administrative agency in which an adverse decision could have a
Material Adverse Effect or a material adverse effect on Borrower's interest or
Bank's security interest in the Collateral. Borrower does not have knowledge of
any such pending or threatened actions or proceedings.
5.8 No Material Adverse Change in Financial Statements. All
consolidated financial statements related to Borrower and any Subsidiary that
have been delivered by Borrower to Bank fairly present in all material respects
Borrower's consolidated financial condition as of the date thereof and
Borrower's consolidated results of operations for the period then ended. There
has not been a material adverse change in the consolidated financial condition
of Borrower since the date of the most recent of such financial statements
submitted to Bank.
5.9 Solvency. Borrower is solvent and able to pay its debts
(including trade debts) as they mature.
5.10 Regulatory Compliance. Borrower and each Subsidiary has met the
minimum funding requirements of ERISA with respect to any employee benefit plans
subject to ERISA. No event has occurred resulting from Borrower's failure to
comply with ERISA that is reasonably likely to result in Borrower's incurring
any liability that could have a Material Adverse Effect. Borrower is not an
"investment company" or a company "controlled" by an "investment company" within
the meaning of the Investment Company Act of 1940. Borrower is not engaged
principally, or as one of the important activities, in the business of extending
credit for the purpose of purchasing or carrying margin stock (within the
meaning of Regulations G, T and U of the Board of Governors of the Federal
Reserve System). Borrower has complied with all the provisions of the Federal
Fair Labor Standards Act. Borrower has not violated any statutes, laws,
ordinances or rules applicable to it, violation of which could have a Material
Adverse Effect.
5.11 Environmental Condition. None of Borrower's or any Subsidiary's
properties or
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assets has ever been used by Borrower or any Subsidiary or, to the best of
Borrower's knowledge, by previous owners or operators, in the disposal of, or to
produce, store, handle, treat, release, or transport, any hazardous waste or
hazardous substance other than in accordance with applicable law; to the best of
Borrower's knowledge, none of Borrower's properties or assets has ever been
designated or identified in any manner pursuant to any environmental protection
statute as a hazardous waste or hazardous substance disposal site, or a
candidate for closure pursuant to any environmental protection statute; no lien
arising under any environmental protection statute has attached to any revenues
or to any real or personal property owned by Borrower or any Subsidiary; and
neither Borrower nor any Subsidiary has received a summons, citation, notice, or
directive from the Environmental Protection Agency or any other federal, state
or other governmental agency concerning any action or omission by Borrower or
any Subsidiary resulting in the releasing, or otherwise disposing of hazardous
waste or hazardous substances into the environment.
5.12 Taxes. Borrower and each Subsidiary has filed or caused to be
filed all tax returns required to be filed, and has paid, or has made adequate
provision for the payment of, all taxes reflected therein.
5.13 Subsidiaries. Borrower does not own any stock, partnership
interest or other equity securities of any Person, except for Permitted
Investments.
5.14 Government Consents. Borrower and each Subsidiary has obtained
all consents, approvals and authorizations of, made all declarations or filings
with, and given all notices to, all governmental authorities that are necessary
for the continued operation of Borrower's business as currently conducted.
5.15 Full Disclosure. No representation, warranty or other statement
made by Borrower in any certificate or written statement furnished to Bank
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained in such certificates or
statements not misleading.
6. AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, until payment in full of all
outstanding Obligations, and for so long as Bank may have any commitment to make
an Advance hereunder, Borrower shall do all of the following:
6.1 Good Standing. Borrower shall maintain its and each of its
Subsidiaries' corporate existence and good standing in its jurisdiction of
incorporation and maintain qualification in each jurisdiction in which the
failure to so qualify could have a Material Adverse Effect. Borrower shall
maintain, and shall cause each of its Subsidiaries to maintain, to the extent
consistent with prudent management of Borrower's business, in force all
licenses, approvals and agreements, the loss of which could have a Material
Adverse Effect.
6.2 Government Compliance. Borrower shall meet, and shall cause each
Subsidiary to meet, the minimum funding requirements of ERISA with respect to
any employee benefit plans subject to ERISA. Borrower shall comply, and shall
cause each Subsidiary to comply, with all statutes, laws, ordinances and
government rules and regulations to which it is subject, noncompliance with
which could have a Material Adverse Effect or a material adverse effect on the
Collateral or the priority of Bank's Lien on the Collateral.
6.3 Financial Statements, Reports, Certificates. Borrower shall
deliver to Bank: (a) as soon as available, but in any event within one hundred
twenty (120) days after the end of Borrower's fiscal year, audited consolidated
financial statements of Borrower prepared in accordance with GAAP, consistently
applied, together with an unqualified opinion on such financial statements of an
independent certified public accounting firm reasonably acceptable to Bank; (b)
within five (5) days upon becoming available, copies of all statements, reports
and notices sent or made available generally by Borrower to its security holders
or to any holders of Subordinated Debt and all reports on Form 10-K and 10-Q
filed with the Securities and Exchange Commission; (c) promptly upon receipt of
notice thereof, a report of any legal actions pending or threatened against
Borrower or any Subsidiary that could result in damages or costs to Borrower or
any Subsidiary of One Hundred Thousand Dollars ($100,000) or more; and (d) such
budgets, sales projections, operating plans or other financial information as
Bank may reasonably request from time to time.
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Within twenty (20) days after the last day of each month, Borrower shall
deliver to Bank a Borrowing Base Certificate signed by a Responsible Officer in
substantially the form of Exhibit C hereto, together with aged listings of
accounts receivable and accounts payable.
Borrower shall deliver to Bank with the quarterly financial statements a
Compliance Certificate signed by a Responsible Officer in substantially the form
of Exhibit D hereto.
Bank shall have a right from time to time hereafter to audit Borrower's
Accounts at Borrower's expense, provided that such audits will be conducted no
more often than every six (6) months unless an Event of Default has occurred and
is continuing.
6.4 Inventory; Returns. Borrower shall keep all Inventory in good
and marketable condition, free from all material defects. Returns and
allowances, if any, as between Borrower and its account debtors shall be on the
same basis and in accordance with the usual customary practices of Borrower, as
they exist at the time of the execution and delivery of this Agreement. Borrower
shall promptly notify Bank of all returns and recoveries and of all disputes and
claims, where the return, recovery, dispute or claim involves more than Five
Hundred Thousand Dollars ($500,000).
6.5 Taxes. Borrower shall make, and shall cause each Subsidiary to
make, due and timely payment or deposit of all material federal, state, and
local taxes, assessments, or contributions required of it by law, and will
execute and deliver to Bank, on demand, appropriate certificates attesting to
the payment or deposit thereof; and Borrower will make, and will cause each
Subsidiary to make, timely payment or deposit of all material tax payments and
withholding taxes required of it by applicable laws, including, but not limited
to, those laws concerning F.I.C.A., F.U.T.A., state disability, and local,
state, and federal income taxes, and will, upon request, furnish Bank with proof
satisfactory to Bank indicating that Borrower or a Subsidiary has made such
payments or deposits; provided that Borrower or a Subsidiary need not make any
payment if the amount or validity of such payment is contested in good faith by
appropriate proceedings and is reserved against (to the extent required by GAAP)
by Borrower.
6.6 Insurance.
(a) Borrower, at its expense, shall keep the Collateral
insured against loss or damage by fire, theft, explosion, sprinklers, and all
other hazards and risks, and in such amounts, as ordinarily insured against by
other owners in similar businesses conducted in the locations where Borrower's
business is conducted on the date hereof. Borrower shall also maintain insurance
relating to Borrower's ownership and use of the Collateral in amounts and of a
type that are customary to businesses similar to Borrower's.
(b) All such policies of insurance shall be in such form, with
such companies, and in such amounts as are customary to businesses similar to
Borrower and are reasonably satisfactory to Bank. All such policies of property
insurance shall contain a lender's loss payable endorsement, in a form
reasonably satisfactory to Bank, showing Bank as an additional loss payee
thereof and all liability insurance policies shall show the Bank as an
additional insured, and shall specify that the insurer must give at least twenty
(20) days notice to Bank before canceling its policy for any reason. Upon Bank's
reasonable request, Borrower shall deliver to Bank certified copies of such
policies of insurance and evidence of the payments of all premiums therefor. All
proceeds payable under any such policy shall, at the option of Bank, be payable
to Bank to be applied on account of the Obligations.
6.7 Principal Depository. Borrower shall maintain its principal
depository and operating accounts with Bank.
6.8 Quick Ratio. Borrower shall maintain, as of the last day of each
fiscal quarter, a ratio of Quick Assets to Current Liabilities of at least 1.25
to 1.0.
6.9 Debt Service Coverage. Beginning the last day of each quarter in
which a Term Loan is outstanding, Borrower shall maintain a Debt Service Ratio
of not less than 1.5 to 1.0. "Debt Service Ratio" means (i) Borrower's earnings
before interest expense, taxes, depreciation and amortization for the prior two
(2) fiscal quarters, multiplied by two, divided by (ii) the current portion of
the Term Loans plus the interest expense for twelve (12) months that have
accrued on the Term Loans.
6.10 Debt-Net Worth Ratio. Borrower shall maintain, as of the last
day of each fiscal
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quarter, a ratio of Total Liabilities less Subordinated Debt to Tangible Net
Worth plus Subordinated Debt of not more than 2.0 to 1.0.
6.11 Tangible Net Worth. Borrower shall maintain, as of the last day
of each fiscal quarter, a Tangible Net Worth of not less than Eight Million,
Eight Hundred Four Thousand, Five Hundred Dollars ($8,804,500), plus seventy
five percent (75%) of Borrower's net income after taxes.
6.12 Profitability. Borrower shall have a minimum net profit of One
Dollar ($1.00) for each fiscal quarter.
6.13 Further Assurances. At any time and from time to time Borrower
shall execute and deliver such further instruments and take such further action
as may reasonably be requested by Bank to effect the purposes of this Agreement.
7. NEGATIVE COVENANTS
Borrower covenants and agrees that, so long as any credit hereunder
shall be available and until payment in full of the outstanding Obligations or
for so long as Bank may have any commitment to make any Advances, Borrower will
not do any of the following without Bank's prior written approval:
7.1 Dispositions. Convey, sell, lease, transfer or otherwise dispose
of (collectively, a "Transfer"), or permit any of its Subsidiaries to Transfer,
all or any part of its business or property, other than: (i) Transfers of
Inventory in the ordinary course of business; (ii) Transfers of non-exclusive
licenses and similar arrangements for the use of the property of Borrower or its
Subsidiaries; or (iii) Transfers of worn-out or obsolete Equipment.
7.2 Change in Business. Engage in any business, or permit any of its
Subsidiaries to engage in any business, other than the businesses currently
engaged in by Borrower and any business substantially similar or related thereto
(or incidental thereto). Borrower will not, without thirty (30) days prior
written notification to Bank, relocate its chief executive office.
7.3 Mergers or Acquisitions. Merge or consolidate, or permit any of
its Subsidiaries to merge or consolidate, with or into any other business
organization, or acquire, or permit any of its Subsidiaries to acquire, all or
substantially all of the capital stock or property of another Person where an
Event of Default is continuing or would exist after giving effect to such
merger, consolidation or acquisition.
7.4 Indebtedness. Create, incur, assume or be or remain liable with
respect to any Indebtedness, or permit any Subsidiary so to do, other than
Permitted Indebtedness.
7.5 Encumbrances. Create, incur, assume or suffer to exist any Lien
with respect to any of its property, or assign or otherwise convey any right to
receive income, including the sale of any Accounts, or permit any of its
Subsidiaries so to do, except for Permitted Liens.
7.6 Distributions. Pay any dividends or make any other distribution
or payment on account of or in redemption, retirement or purchase of any capital
stock.
7.7 Investments. Directly or indirectly acquire or own, or make any
Investment in or to any Person, or permit any of its Subsidiaries so to do,
other than Permitted Investments.
7.8 Transactions with Affiliates. Directly or indirectly enter into
or permit to exist any material transaction with any Affiliate of Borrower
except for transactions that are in the ordinary course of Borrower's business,
upon fair and reasonable terms that are no less favorable to Borrower than would
be obtained in an arm's length transaction with a nonaffiliated Person.
7.9 Subordinated Debt. Make any payment in respect of any
Subordinated Debt, or permit any of its Subsidiaries to make any such payment,
except in compliance with the terms of such Subordinated Debt, or amend any
provision contained in any documentation relating to the Subordinated Debt
without Bank's prior written consent.
7.10 Inventory. Store the Inventory with a bailee, warehouseman, or
similar party
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unless Bank has received a pledge of the warehouse receipt covering such
Inventory. Except for Inventory sold in the ordinary course of business, and
except for such other locations as Bank may approve in writing, and except for
Inventory valued in the aggregate at no more than One Hundred Thousand Dollars
($100,000), Borrower shall keep the Inventory only at the location set forth in
Section 10 hereof and such other locations of which Borrower gives Bank prior
written notice and as to which Borrower signs and files a financing statement
where needed to perfect Bank's security interest.
7.11 Compliance. Become an "investment company" controlled by an
"investment company," within the meaning of the Investment Company Act of 1940,
or become principally engaged in, or undertake as one of its important
activities, the business of extending credit for the purpose of purchasing or
carrying margin stock, or use the proceeds of any Advance for such purpose. Fail
to meet the minimum funding requirements of ERISA, permit a Reportable Event or
Prohibited Transaction, as defined in ERISA, to occur, fail to comply with the
Federal Fair Labor Standards Act or violate any law or regulation, which
violation could have a Material Adverse Effect or a material adverse effect on
the Collateral or the priority of Bank's Lien on the Collateral, or permit any
of its Subsidiaries to do any of the foregoing.
8. EVENTS OF DEFAULT
Any one or more of the following events shall constitute an Event of
Default by Borrower under this Agreement:
8.1 Payment Default. If Borrower fails to pay the principal of, or
any interest on, any Advances when due and payable; or fails to pay any portion
of any other Obligations not constituting such principal or interest, including
without limitation Bank Expenses, within thirty (30) days of receipt by Borrower
of an invoice for such other Obligations;
8.2 Covenant Default. If Borrower fails to perform any obligation
under Sections 6.7, 6.8, 6.9, 6.10, 6.11 or 6.12 or violates any of the
covenants contained in Article 7 of this Agreement, or fails or neglects to
perform, keep, or observe any other material term, provision, condition,
covenant, or agreement contained in this Agreement, in any of the Loan
Documents, or in any other present or future agreement between Borrower and Bank
and as to any default under such other term, provision, condition, covenant or
agreement that can be cured, has failed to cure such default within ten (10)
days after Borrower receives notice thereof or any officer of Borrower becomes
aware thereof; provided, however, that if the default cannot by its nature be
cured within the ten (10) day period or cannot after diligent attempts by
Borrower be cured within such ten (10) day period, and such default is likely to
be cured within a reasonable time, then Borrower shall have an additional
reasonable period (which shall not in any case exceed thirty (30) days) to
attempt to cure such default, and within such reasonable time period the failure
to have cured such default shall not be deemed an Event of Default (provided
that no Advances will be required to be made during such cure period);
8.3 Attachment. If any material portion of Borrower's assets is
attached, seized, subjected to a writ or distress warrant, or is levied upon, or
comes into the possession of any trustee, receiver or person acting in a similar
capacity and such attachment, seizure, writ or distress warrant or levy has not
been removed, discharged or rescinded within ten (10) days, or if Borrower is
enjoined, restrained, or in any way prevented by court order from continuing to
conduct all or any material part of its business affairs, or if a judgment or
other claim becomes a lien or encumbrance upon any material portion of
Borrower's assets, or if a notice of lien, levy, or assessment is filed of
record with respect to any of Borrower's assets by the United States Government,
or any department, agency, or instrumentality thereof, or by any state, county,
municipal, or governmental agency, and the same is not paid within ten (10) days
after Borrower receives notice thereof, provided that none of the foregoing
shall constitute an Event of Default where such action or event is stayed or an
adequate bond has been posted pending a good faith contest by Borrower (provided
that no Advances will be required to be made during such cure period);
8.4 Insolvency. If Borrower becomes insolvent, or if an Insolvency
Proceeding is commenced by Borrower, or if an Insolvency Proceeding is commenced
against Borrower and is not dismissed or stayed within ten (10) days (provided
that no Advances will be made prior to the dismissal of such Insolvency
Proceeding);
8.5 Other Agreements. If there is a default in any agreement to
which Borrower is a party with a third party or parties resulting in a right by
such third party or parties, whether or not
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exercised, to accelerate the maturity of any Indebtedness in an amount in excess
of Two Hundred Fifty Thousand Dollars ($250,000) or that could have a Material
Adverse Effect;
8.6 Judgments. If a judgment or judgments for the payment of money
in an amount, individually or in the aggregate, of at least Two Hundred Thousand
Dollars ($200,000) shall be rendered against Borrower and shall remain
unsatisfied and unstayed for a period of forty-five (45) days (provided that no
Advances will be made prior to the satisfaction or stay of such judgment); or
8.7 Misrepresentations. If any material misrepresentation or
material misstatement exists now or hereafter in any warranty or representation
set forth herein or in any certificate delivered to Bank by any Responsible
Officer pursuant to this Agreement or to induce Bank to enter into this
Agreement or any other Loan Document.
9. BANK'S RIGHTS AND REMEDIES
9.1 Rights and Remedies. Upon the occurrence and during the
continuance of an Event of Default, Bank may, at its election, without notice of
its election and without demand, do any one or more of the following, all of
which are authorized by Borrower:
(a) Declare all Obligations, whether evidenced by this
Agreement, by any of the other Loan Documents, or otherwise, immediately due and
payable (provided that upon the occurrence of an Event of Default described in
Section 8.5 all Obligations shall become immediately due and payable without any
action by Bank);
(b) Cease advancing money or extending credit to or for the
benefit of Borrower under this Agreement or under any other agreement between
Borrower and Bank;
(c) Settle or adjust disputes and claims directly with account
debtors for amounts, upon terms and in whatever order that Bank reasonably
considers advisable;
(d) Without notice to or demand upon Borrower, make such
payments and do such acts as Bank considers necessary or reasonable to protect
its security interest in the Collateral. Borrower agrees to assemble the
Collateral if Bank so requires, and to make the Collateral available to Bank as
Bank may designate. Borrower authorizes Bank to enter the premises where the
Collateral is located, to take and maintain possession of the Collateral, or any
part of it, and to pay, purchase, contest, or compromise any encumbrance,
charge, or lien which in Bank's determination appears to be prior or superior to
its security interest and to pay all expenses incurred in connection therewith.
With respect to any of Borrower's owned premises, Borrower hereby grants Bank a
license to enter into possession of such premises and to occupy the same,
without charge, in order to exercise any of Bank's rights or remedies provided
herein, at law, in equity, or otherwise;
(e) Without notice to Borrower set off and apply to the
Obligations any and all (i) balances and deposits of Borrower held by Bank, or
(ii) indebtedness at any time owing to or for the credit or the account of
Borrower held by Bank;
(f) Ship, reclaim, recover, store, finish, maintain, repair,
prepare for sale, advertise for sale, and sell (in the manner provided for
herein) the Collateral. Bank is hereby granted a license or other right, solely
pursuant to the provisions of this Section 9.1, to use, without charge,
Borrower's labels, patents, copyrights, rights of use of any name, trade
secrets, trade names, trademarks, service marks, and advertising matter, or any
property of a similar nature, as it pertains to the Collateral, in completing
production of, advertising for sale, and selling any Collateral and, in
connection with Bank's exercise of its rights under this Section 9.1, Borrower's
rights under all licenses and all franchise agreements shall inure to Bank's
benefit;
(g) Sell the Collateral at either a public or private sale, or
both, by way of one or more contracts or transactions, for cash or on terms, in
such manner and at such places (including Borrower's premises) as Bank
determines is commercially reasonable, and apply any proceeds to the Obligations
in whatever manner or order Bank deems appropriate;
(h) Bank may credit bid and purchase at any public sale; and
(i) Any deficiency that exists after disposition of the
Collateral as provided
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above will be paid immediately by Borrower.
9.2 Power of Attorney. Effective only upon the occurrence and during
the continuance of an Event of Default, Borrower hereby irrevocably appoints
Bank (and any of Bank's designated officers, or employees) as Borrower's true
and lawful attorney to: (a) send requests for verification of Accounts or notify
account debtors of Bank's security interest in the Accounts; (b) endorse
Borrower's name on any checks or other forms of payment or security that may
come into Bank's possession; (c) sign Borrower's name on any invoice or bill of
lading relating to any Account, drafts against account debtors, schedules and
assignments of Accounts, verifications of Accounts, and notices to account
debtors; (d) make, settle, and adjust all claims under and decisions with
respect to Borrower's policies of insurance; and (e) settle and adjust disputes
and claims respecting the accounts directly with account debtors, for amounts
and upon terms which Bank determines to be reasonable; provided Bank may
exercise such power of attorney to sign the name of Borrower on any of the
documents described in Section 4.2 regardless of whether an Event of Default has
occurred. The appointment of Bank as Borrower's attorney in fact, and each and
every one of Bank's rights and powers, being coupled with an interest, is
irrevocable until all of the Obligations have been fully repaid and performed
and Bank's obligation to provide advances hereunder is terminated.
9.3 Accounts Collection. At any time from the date of this
Agreement, Bank may notify any Person owing funds to Borrower of Bank's security
interest in such funds and verify the amount of such Account. Borrower shall
collect all amounts owing to Borrower for Bank, receive in trust all payments as
Bank's trustee, and immediately deliver such payments to Bank in their original
form as received from the account debtor, with proper endorsements for deposit.
9.4 Bank Expenses. If Borrower fails to pay any amounts or furnish
any required proof of payment due to third persons or entities, as required
under the terms of this Agreement, then Bank may do any or all of the following:
(a) make payment of the same or any part thereof; (b) set up such reserves under
the Revolving Facility as Bank deems necessary to protect Bank from the exposure
created by such failure; or (c) obtain and maintain insurance policies of the
type discussed in Section 6.6 of this Agreement, and take any action with
respect to such policies as Bank deems prudent. Any amounts so paid or deposited
by Bank shall constitute Bank Expenses, shall be immediately due and payable,
and shall bear interest at the then applicable rate hereinabove provided, and
shall be secured by the Collateral. Any payments made by Bank shall not
constitute an agreement by Bank to make similar payments in the future or a
waiver by Bank of any Event of Default under this Agreement.
9.5 Bank's Liability for Collateral. So long as Bank complies with
reasonable banking practices, Bank shall not in any way or manner be liable or
responsible for: (a) the safekeeping of the Collateral; (b) any loss or damage
thereto occurring or arising in any manner or fashion from any cause; (c) any
diminution in the value thereof; or (d) any act or default of any carrier,
warehouseman, bailee, forwarding agency, or other person whomsoever. All risk of
loss, damage or destruction of the Collateral shall be borne by Borrower.
9.6 Remedies Cumulative. Bank's rights and remedies under this
Agreement, the Loan Documents, and all other agreements shall be cumulative.
Bank shall have all other rights and remedies not inconsistent herewith as
provided under the Code, by law, or in equity. No exercise by Bank of one right
or remedy shall be deemed an election, and no waiver by Bank of any Event of
Default on Borrower's part shall be deemed a continuing waiver. No delay by Bank
shall constitute a waiver, election, or acquiescence by it. No waiver by Bank
shall be effective unless made in a written document signed on behalf of Bank
and then shall be effective only in the specific instance and for the specific
purpose for which it was given.
9.7 Demand; Protest. Borrower waives demand, protest, notice of
protest, notice of default or dishonor, notice of payment and nonpayment, notice
of any default, nonpayment at maturity, release, compromise, settlement,
extension, or renewal of accounts, documents, instruments, chattel paper, and
guarantees at any time held by Bank on which Borrower may in any way be liable.
10. NOTICES
Unless otherwise provided in this Agreement, all notices or demands
by any party relating to this Agreement or any other agreement entered into in
connection herewith shall be in writing and (except for financial statements and
other informational documents which may be sent by first-class mail, postage
prepaid) shall be personally delivered or sent by a recognized overnight
delivery service,
15
<PAGE> 19
certified mail, postage prepaid, return receipt requested, or by telefacsimile
to Borrower or to Bank, as the case may be, at its addresses set forth below:
If to Borrower: Business Resource Group
2150 N. First Street, Suite 101
San Jose, CA 95131
Attn: Mr. P. Steven Melman
FAX: (408) 441-3740
If to Bank: Silicon Valley Bank
3003 Tasman Drive
Santa Clara, CA 95054
Attn: James R. Marshall
FAX: (408) 727-8728
The parties hereto may change the address at which they are to receive
notices hereunder, by notice in writing in the foregoing manner given to the
other.
11. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER
This Agreement shall be governed by, and construed in accordance
with, the internal laws of the State of California, without regard to principles
of conflicts of law. Each of Borrower and Bank hereby submits to the exclusive
jurisdiction of the state and Federal courts located in the County of Santa
Clara, State of California. BORROWER AND BANK EACH HEREBY WAIVE THEIR RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN,
INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER
COMMON LAW OR STATUTORY CLAIMS. EACH PARTY RECOGNIZES AND AGREES THAT THE
FOREGOING WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR IT TO ENTER INTO THIS
AGREEMENT. EACH PARTY REPRESENTS AND WARRANTS THAT IT HAS REVIEWED THIS WAIVER
WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY
TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.
12. GENERAL PROVISIONS
12.1 Successors and Assigns. This Agreement shall bind and inure to
the benefit of the respective successors and permitted assigns of each of the
parties; provided, however, that neither this Agreement nor any rights hereunder
may be assigned by Borrower without Bank's prior written consent, which consent
may be granted or withheld in Bank's sole discretion. Bank shall have the right
without the consent of or notice to Borrower to sell, transfer, negotiate, or
grant participation in all or any part of, or any interest in, Bank's
obligations, rights and benefits hereunder.
12.2 Indemnification. Borrower shall defend, indemnify and hold
harmless Bank and its officers, employees, and agents against: (a) all
obligations, demands, claims, and liabilities claimed or asserted by any other
party in connection with the transactions contemplated by this Agreement; and
(b) all losses or Bank Expenses in any way suffered, incurred, or paid by Bank
as a result of or in any way arising out of, following, or consequential to
transactions between Bank and Borrower whether under this Agreement, or
otherwise (including without limitation reasonable attorneys fees and expenses),
except for losses caused by Bank's gross negligence or willful misconduct.
12.3 Time of Essence. Time is of the essence for the performance of
all obligations set forth in this Agreement.
12.4 Severability of Provisions. Each provision of this Agreement
shall be severable from every other provision of this Agreement for the purpose
of determining the legal enforceability of any specific provision.
12.5 Amendments in Writing, Integration. This Agreement cannot be
amended or terminated orally. All prior agreements, understandings,
representations, warranties, and negotiations between the parties hereto with
respect to the subject matter of this Agreement, if any, are merged into this
Agreement and the Loan Documents. The security interest granted under the
Commercial Security Agreement and perfected by the financing statement filed
with the California Secretary of State as
16
<PAGE> 20
Document No. 88-083054 on April 8, 1988, as continued from time to time,
continues to secure all of the Obligations.
12.6 Counterparts. This Agreement may be executed in any number of
counterparts and by different parties on separate counterparts, each of which,
when executed and delivered, shall be deemed to be an original, and all of
which, when taken together, shall constitute but one and the same Agreement.
12.7 Survival. All covenants, representations and warranties made in
this Agreement shall continue in full force and effect so long as any
Obligations remain outstanding. The obligations of Borrower to indemnify Bank
with respect to the expenses, damages, losses, costs and liabilities described
in Section 12.2 shall survive until all applicable statute of limitations
periods with respect to actions that may be brought against Bank have run.
12.8 Confidentiality. In handling any confidential information Bank
shall exercise the same degree of care that it exercises with respect to its own
proprietary information of the same types to maintain the confidentiality of any
non-public information thereby received or received pursuant to this Agreement
except that disclosure of such information may be made (i) to the subsidiaries
or affiliates of Bank in connection with their present or prospective business
relations with Borrower, (ii) to prospective transferees or purchasers of any
interest in the Loans, provided that they have entered into a comparable
confidentiality agreement in favor of Borrower and have delivered a copy to
Borrower, (iii) as required by law, regulations, rule or order, subpoena,
judicial order or similar order, (iv) as may be required in connection with the
examination, audit or similar investigation of Bank and (v) as Bank may
reasonably determine in connection with the enforcement of any remedies pursuant
to Article 9 of this Agreement. Confidential information hereunder shall not
include information that either: (a) is in the public domain, or becomes part of
the public domain after disclosure to Bank through no fault of Bank; or (b) is
disclosed to Bank by a third party, provided Bank does not have actual knowledge
that such third party is prohibited from disclosing such information.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
BUSINESS RESOURCE GROUP
By:___________________________________
Title:________________________________
SILICON VALLEY BANK
By:___________________________________
Title:________________________________
17
<PAGE> 21
EXHIBIT A
The Collateral shall consist of all right, title and interest of Borrower
in and to the following:
(a) All goods and equipment now owned or hereafter acquired, including,
without limitation, all machinery, fixtures, vehicles (including motor vehicles
and trailers), and any interest in any of the foregoing, and all attachments,
accessories, accessions, replacements, substitutions, additions, and
improvements to any of the foregoing, wherever located;
(b) All inventory, now owned or hereafter acquired, including, without
limitation, all merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products including such
inventory as is temporarily out of Borrower's custody or possession or in
transit and including any returns upon any accounts or other proceeds, including
insurance proceeds, resulting from the sale or disposition of any of the
foregoing and any documents of title representing any of the above, and
Borrower's Books relating to any of the foregoing;
(c) All contract rights and general intangibles now owned or hereafter
acquired, including, without limitation, goodwill, trademarks, servicemarks,
trade styles, trade names, patents, patent applications, leases, license
agreements, franchise agreements, blueprints, drawings, purchase orders,
customer lists, route lists, infringements, claims, computer programs, computer
discs, computer tapes, literature, reports, catalogs, design rights, income tax
refunds, payments of insurance and rights to payment of any kind;
(d) All now existing and hereafter arising accounts, contract rights,
royalties, license rights and all other forms of obligations owing to Borrower
arising out of the sale or lease of goods, the licensing of technology or the
rendering of services by Borrower, whether or not earned by performance, and any
and all credit insurance, guaranties, and other security therefor, as well as
all merchandise returned to or reclaimed by Borrower and Borrower's Books
relating to any of the foregoing;
(e) All documents, cash, deposit accounts, securities, letters of credit,
certificates of deposit, instruments and chattel paper now owned or hereafter
acquired and Borrower's Books relating to the foregoing;
(f) All copyright rights, copyright applications, copyright registrations
and like protections in each work of authorship and derivative work thereof,
whether published or unpublished, now owned or hereafter acquired; all trade
secret rights, including all rights to unpatented inventions, know-how,
operating manuals, license rights and agreements and confidential information,
now owned or hereafter acquired; all mask work or similar rights available for
the protection of semiconductor chips, now owned or hereafter acquired; all
claims for damages by way of any past, present and future infringement of any of
the foregoing; and
(g) Any and all claims, rights and interests in any of the above and all
substitutions for, additions and accessions to and proceeds thereof.
18
<PAGE> 22
EXHIBIT B
LOAN PAYMENT/ADVANCE TELEPHONE REQUEST FORM
DEADLINE FOR SAME DAY PROCESSING IS 3:00 P.M., P.S.T.
TO: CENTRAL CLIENT SERVICE DIVISION DATE:_______________
FAX#: (408) 496-2426 TIME:_______________
FROM:___________________________________________________________________________
CLIENT NAME (BORROWER)
REQUESTED BY:___________________________________________________________________
AUTHORIZED SIGNER'S NAME
AUTHORIZED SIGNATURE:___________________________________________________________
PHONE NUMBER:___________________________________________________________________
FROM ACCOUNT #________________________TO ACCOUNT #______________________________
REQUESTED TRANSACTION TYPE REQUEST DOLLAR AMOUNT
- -------------------------- ---------------------
PRINCIPAL INCREASE (ADVANCE) $_______________________________
PRINCIPAL PAYMENT (ONLY) $_______________________________
INTEREST PAYMENT (ONLY) $_______________________________
PRINCIPAL AND INTEREST (PAYMENT) $_______________________________
OTHER INSTRUCTIONS:_____________________________________________________________
________________________________________________________________________________
All representations and warranties of Borrower stated in the Loan
Agreement are true, correct and complete in all material respects as of the date
of the telephone request for and Advance confirmed by this Borrowing
Certificate; provided, however, that those representations and warranties
expressly referring to another date shall be true, correct and complete in all
material respects as of such date.
BANK USE ONLY
TELEPHONE REQUEST:
The following person is authorized to request the loan payment transfer/loan
advance on the advance designated account and is known to me.
__________________________________ ___________________________________
Authorized Requester Phone #
__________________________________ ___________________________________
Received By (Bank) Phone #
______________________________
Authorized Signature (Bank)
19
<PAGE> 23
EXHIBIT C
BORROWING BASE CERTIFICATE
Borrower: Business Resource Group Lender: Silicon Valley Bank
Commitment Amount: $8,000,000
ACCOUNTS RECEIVABLE
1. Accounts Receivable Book Value as of ________ $________
2. Additions (please explain on reverse) $________
3. TOTAL ACCOUNTS RECEIVABLE $________
ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)
4. Amounts over 90 days due $________
5. Balance of 50% over 90 day accounts $________
6. Concentration Limits $________
7. Foreign Accounts $________
8. Governmental Accounts $________
9. Contra Accounts $________
10. Promotion or Demo Accounts $________
11. Intercompany/Employee Accounts $________
12. Allsteel Contra Accounts $________
13. TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS $________
14. Eligible Accounts (#3 minus #13) $________
15. LOAN VALUE OF ACCOUNTS (80% of #14) $________
BALANCES
16. Maximum Loan Amount $________
17. Total Funds Available (Lesser of #15 or #16) $________
18. Present balance owing on Line of Credit $________
19. RESERVE POSITION (#17 minus #18) $________
The undersigned represents and warrants that the foregoing is true, complete and
correct, and that the information reflected in this Borrowing Base Certificate
complies with the representations and warranties set forth in the Loan and
Security Agreement between the undersigned and Silicon Valley Bank.
COMMENTS:
BANK USE ONLY
Rec'd By:____________
BUSINESS RESOURCE GROUP Auth. Signer
Date:________________
Verified:____________
By: Auth. Signer
Authorized Signer Date:________________
_____________________
- ----------------------------------
20
<PAGE> 24
EXHIBIT D
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK
FROM: BUSINESS RESOURCE GROUP
The undersigned authorized officer of Business Resource Group hereby
certifies that in accordance with the terms and conditions of the Loan and
Security Agreement between Borrower and Bank (the "Agreement"), (i) Borrower is
in complete compliance for the period ending _________ with all required
covenants except as noted below and (ii) all representations and warranties of
Borrower stated in the Agreement are true and correct in all material respects
as of the date hereof. Attached herewith are the required documents supporting
the above certification. The Officer further certifies that these are prepared
in accordance with Generally Accepted Accounting Principles (GAAP) and are
consistently applied from one period to the next except as explained in an
accompanying letter or footnotes.
PLEASE INDICATE COMPLIANCE STATUS BY CIRCLING YES/NO UNDER "COMPLIES" COLUMN.
<TABLE>
<CAPTION>
REPORTING COVENANT REQUIRED COMPLIES
------------------ -------- --------
<S> <C> <C>
Annual (CPA Audited) FYE within 120 days Yes No
A/R & A/P Agings Monthly within 20 days Yes No
A/R Audit Initial and Semi-Annual Yes No
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL COVENANT REQUIRED ACTUAL COMPLIES
------------------ -------- ------ --------
<S> <C> <C> <C>
Maintain on a Quarterly Basis:
Minimum Quick Ratio 1.25:1.0 _____:1.0 Yes No
Minimum Debt Service Coverage 1.5:1.0* _____:1.0 Yes No
Minimum Tangible Net Worth $8,804,500** $________ Yes No
Maximum Debt/Tangible Net Worth 2.0:1.0 _____:1.0 Yes No
Profitability: Quarterly $ 1.00 $________ Yes No
</TABLE>
*For any quarter in which a Term Loan is outstanding.
** plus 75% of net income after tax
COMMENTS REGARDING EXCEPTIONS: See Attached. BANK USE ONLY
Sincerely, Received by:_________________
AUTHORIZED SIGNER
____________________________________
SIGNATURE Date:________________________
____________________________________ Verified:____________________
TITLE AUTHORIZED SIGNER
____________________________________ Date:________________________
DATE
Compliance Status: Yes No
21
<PAGE> 25
DISBURSEMENT REQUEST AND AUTHORIZATION
Borrower: Business Resource Group Bank: Silicon Valley Bank
LOAN TYPE. This is a Variable Rate, Revolving Line of Credit of a principal
amount up to $8,000,000.
PRIMARY PURPOSE OF LOAN. The primary purpose of this loan is for business.
SPECIFIC PURPOSE. The specific purpose of this loan is: Short Term Working
Capital.
DISBURSEMENT INSTRUCTIONS. Borrower understands that no loan proceeds will be
disbursed until all of Bank's conditions for making the loan have been
satisfied. Please disburse the loan proceeds as follows:
Revolving Line
--------------
Amount paid to Borrower directly: $_____________
Undisbursed Funds $_____________
Principal $ 8,000,000
CHARGES PAID IN CASH. Borrower has paid or will pay in cash as agreed the
following charges:
Charges Paid in Cash:
$15,000 Loan Fee
$50 UCC Search
$35 Credit Report
$3,000 Outside Counsel Fees and Expenses
(Estimate for first draft of Loan Documents)
Total Charges Paid in Cash $18,085
AUTOMATIC PAYMENTS. Borrower hereby authorizes Bank automatically to deduct from
Borrower's account numbered 0330824370 the amount of any loan payment. If the
funds in the account are insufficient to cover any payment, Bank shall not be
obligated to advance funds to cover the payment.
FINANCIAL CONDITION. BY SIGNING THIS AUTHORIZATION, BORROWER REPRESENTS AND
WARRANTS TO BANK THAT THE INFORMATION PROVIDED ABOVE IS TRUE AND CORRECT AND
THAT THERE HAS BEEN NO ADVERSE CHANGE IN BORROWER'S FINANCIAL CONDITION AS
DISCLOSED IN BORROWER'S MOST RECENT FINANCIAL STATEMENT TO BANK. THIS
AUTHORIZATION IS DATED AS OF JULY ___, 1996.
BORROWER:
BUSINESS RESOURCE GROUP
____________________________________
Authorized Officer
<PAGE> 26
AGREEMENT TO PROVIDE INSURANCE
GRANTOR: Business Resource Group BANK: Silicon Valley Bank
INSURANCE REQUIREMENTS. Business Resource Group ("Grantor") understands
that insurance coverage is required in connection with the extending of a loan
or the providing of other financial accommodations to Grantor by Bank. These
requirements are set forth in the Loan Documents. The following minimum
insurance coverages must be provided on the following described collateral (the
"Collateral"):
Collateral: All Inventory, Equipment and Fixtures.
Type: All risks, including fire, theft and liability.
Amount: Full insurable value.
Basis: Replacement value.
Endorsements: Loss payable clause to Bank with stipulation that
coverage will not be cancelled or diminished without a
minimum of twenty (20) days' prior written notice to
Bank.
INSURANCE COMPANY. Grantor may obtain insurance from any insurance company
Grantor may choose that is reasonably satisfactory to Bank. Grantor understands
that credit may not be denied solely because insurance was not purchased through
Bank.
FAILURE TO PROVIDE INSURANCE. Grantor agrees to deliver to Bank, on or
before closing, evidence of the required insurance as provided above, with an
effective date of July 3, 1996, or earlier. Grantor acknowledges and agrees that
if Grantor fails to provide any required insurance or fails to continue such
insurance in force, Bank may do so at Grantor's expense as provided in the Loan
and Security Agreement. The cost of such insurance, at the option of Bank, shall
be payable on demand or shall be added to the indebtedness as provided in the
security document. GRANTOR ACKNOWLEDGES THAT IF BANK SO PURCHASES ANY SUCH
INSURANCE, THE INSURANCE WILL PROVIDE LIMITED PROTECTION AGAINST PHYSICAL DAMAGE
TO THE COLLATERAL, UP TO THE BALANCE OF THE LOAN; HOWEVER, GRANTOR'S EQUITY IN
THE COLLATERAL MAY NOT BE INSURED. IN ADDITION, THE INSURANCE MAY NOT PROVIDE
ANY PUBLIC LIABILITY OR PROPERTY DAMAGE INDEMNIFICATION AND MAY NOT MEET THE
REQUIREMENTS OF ANY FINANCIAL RESPONSIBILITY LAWS.
AUTHORIZATION. For purposes of insurance coverage on the Collateral,
Grantor authorizes Bank to provide to any person (including any insurance agent
or company) all information Bank deems appropriate, whether regarding the
Collateral, the loan or other financial accommodations, or both.
GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS AGREEMENT TO
PROVIDE INSURANCE AND AGREES TO ITS TERMS. THIS AGREEMENT IS DATED JULY 3, 1996.
GRANTOR:
BUSINESS RESOURCE GROUP
x
Authorized Officer
___________________________________________
FOR BANK USE ONLY
INSURANCE VERIFICATION
DATE:___________ PHONE:_________
AGENT'S NAME:___________________________________________________________________
INSURANCE COMPANY:______________________________________________________________
POLICY NUMBER:__________________________________________________________________
EFFECTIVE DATES:________________________________________________________________
COMMENTS:_______________________________________________________________________
<PAGE> 27
CORPORATE RESOLUTIONS TO BORROW
Borrower: Business Resource Group
I, the undersigned Secretary or Assistant Secretary of Business Resource
Group (the "Corporation"), HEREBY CERTIFY that the Corporation is organized and
existing under and by virtue of the laws of the State of California.
I FURTHER CERTIFY that attached hereto as Attachments 1 and 2 are true and
complete copies of the Certificate of Incorporation and Bylaws of the
Corporation, each of which is in full force and effect on the date hereof.
I FURTHER CERTIFY that at a meeting of the Directors of the Corporation,
duly called and held, at which a quorum was present and voting (or by other duly
authorized corporate action in lieu of a meeting), the following resolutions
were adopted.
BE IT RESOLVED, that ANY ONE (1) of the following named officers,
employees, or agents of this Corporation, whose actual signatures are shown
below:
NAMES POSITIONS ACTUAL SIGNATURES
- ---------------------- ------------------------ ------------------------
______________________ ________________________ ________________________
______________________ ________________________ ________________________
______________________ ________________________ ________________________
______________________ ________________________ ________________________
______________________ ________________________ ________________________
acting for an on behalf of this Corporation and as its act and deed be, and they
hereby are, authorized and empowered:
BORROW MONEY. To borrow from time to time from Silicon Valley Bank
("Bank"), on such terms as may be agreed upon between the officers, employees,
or agents and Bank, such sum or sums of money as in their judgment should be
borrowed, without limitation, including such sums as are specified in that
certain Loan and Security Agreement dated as of July 3, 1996 (the "Loan
Agreement").
EXECUTE NOTES. To execute and deliver to Bank the promissory note or notes
of the Corporation, on Lender's forms, at such rates of interest and on such
terms as may be agreed upon, evidencing the sums of money so borrowed or any
indebtedness of the Corporation to Bank, and also to execute and deliver to
Lender one or more renewals, extensions, modifications, refinancings,
consolidations, or substitutions for one or more of the notes, or any portion of
the notes.
GRANT SECURITY. To grant a security interest to Bank in the Collateral
described in the Loan Agreement, which security interest shall secure all of the
Corporation's Obligations, as described in the Loan Agreement.
NEGOTIATE ITEMS. To draw, endorse, and discount with Bank all drafts,
trade acceptances, promissory notes, or other evidences of indebtedness payable
to or belonging to the Corporation or in which the Corporation may have an
interest, and either to receive cash for the same or to cause such proceeds to
be credited to the account of the Corporation with Bank, or to cause such other
disposition of the proceeds derived therefrom as they may deem advisable.
LETTERS OF CREDIT; FOREIGN EXCHANGE. To execute letters of credit
applications, foreign exchange agreements and other related documents pertaining
to Bank's issuance of letters of credit and foreign exchange contracts.
FURTHER ACTS. In the case of lines of credit, to designate additional or
alternate individuals as being authorized to request advances thereunder, and in
all cases, to do and perform such other acts and things, to pay any and all fees
and costs, and to execute and deliver such other documents and agreements as
they may in their discretion deem reasonably
1
<PAGE> 28
necessary or proper in order to carry into effect the provisions of these
Resolutions.
BE IT FURTHER RESOLVED, that any and all acts authorized pursuant to these
resolutions and performed prior to the passage of these resolutions are hereby
ratified and approved, that these Resolutions shall remain in full force and
effect and Bank may rely on these Resolutions until written notice of their
revocation shall have been delivered to and received by Bank. Any such notice
shall not affect any of the Corporation's agreements or commitments in effect at
the time notice is given.
I FURTHER CERTIFY that the officers, employees, and agents named above are
duly elected, appointed, or employed by or for the Corporation, as the case may
be, and occupy the positions set forth opposite their respective names; that the
foregoing Resolutions now stand of record on the books of the Corporation; and
that the Resolutions are in full force and effect and have not been modified or
revoked in any manner whatsoever.
IN WITNESS WHEREOF, I have hereunto set my hand on July ___, 1996 and
attest that the signatures set opposite the names listed above are their genuine
signatures.
CERTIFIED TO AND ATTESTED BY:
X________________________________
<PAGE> 1
Exhibit 11.1
BUSINESS RESOURCE GROUP
COMPUTATION OF NET INCOME PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
JULY 31, JULY 31,
--------------------- ---------------------
1996 1995 1996 1995
------ ------ ------ ------
<S> <C> <C> <C> <C>
PRIMARY (2)
Net income ....................................... $ 419 $1,352
====== ======
Weighted average shares outstanding-
Common shares ................................. 4,847 4,843
Common equivalent shares-
Stock options ................................. 67 21
------ ------
Total common stock and common
stock equivalents ............................. 4,914 4,864
====== ======
Net income per common and
common share equivalent ....................... $ .09 $ .28
====== ======
Pro forma net income ............................. $ 513 $1,215
====== ======
Weighted average shares outstanding-
Pro forma common shares ....................... 3,642 3,273
Pro forma common equivalent shares:
Stock options ................................. 136 50
Warrants ...................................... 6 6
Supplemental shares (1) ....................... 166 230
------ ------
Total pro forma common stock and
common stock equivalents ...................... 3,950 3,559
====== ======
Pro forma net income
per common share .............................. $ .13 $ .34
====== ======
</TABLE>
(1) Represents the approximate number of shares that would have to have been
sold to fund the distribution of undistributed S Corporation earnings.
(2) Presentation of fully diluted net income per share was not provided as
amounts were not materially different from primary net income per share.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> NOV-01-1995
<PERIOD-END> JUL-31-1996
<CASH> 668
<SECURITIES> 0
<RECEIVABLES> 13614
<ALLOWANCES> 55
<INVENTORY> 1021
<CURRENT-ASSETS> 16694
<PP&E> 2263
<DEPRECIATION> 529
<TOTAL-ASSETS> 19443
<CURRENT-LIABILITIES> 6876
<BONDS> 0
0
0
<COMMON> 49
<OTHER-SE> 12451
<TOTAL-LIABILITY-AND-EQUITY> 19443
<SALES> 49623
<TOTAL-REVENUES> 56483
<CGS> 40504
<TOTAL-COSTS> 45264
<OTHER-EXPENSES> 9006
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
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</TABLE>
