Document:

exv4w2

 

Exhibit 4.2

THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), OR APPLICABLE STATE SECURITIES LAWS. THE WARRANT MAY NOT BE SOLD, OFFERED FOR SALE,
TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF UNLESS IT HAS BEEN REGISTERED UNDER THOSE LAWS OR
UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO IT THAT SUCH DISPOSITION IS
IN COMPLIANCE WITH THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS.

Right to Purchase [_________] Shares

of Common Stock of Tri-Isthmus Group, Inc.

TRI-ISTHMUS GROUP, INC.

Common Stock Purchase Warrant

     TRI-ISTHMUS GROUP, INC., a Delaware corporation (the “Company”), hereby certifies
that, for value received, [NAME, ADDRESS] (the “Holder”) is entitled, subject to
the terms set forth below, to purchase from the Company at any time on or before 5:00 p.m., Pacific
Daylight Time, on September 18, 2008 (the “Expiration Date”) [number of shares] ([___])
fully paid and nonassessable shares of common stock of the Company, par value $0.01 per share (the
“Common Stock”), at a purchase price per share equal to the Purchase Price, as defined
herein. The number of such shares of Common Stock and the Purchase Price are subject to adjustment
as provided in this Warrant. The initial purchase price for shares subject to this Warrant will be
50/100 Dollars ($0.50) per share (the “Initial Purchase Price”), and will be adjusted from
time to time as provided herein. The Initial Purchase Price or, if such price has been adjusted,
the price per share of Common Stock as last adjusted pursuant to the terms hereof is referred to as
the “Purchase Price” herein.

     1. Exercise of Warrant. This Warrant may be exercised by the Holder hereof in full at
any time until the Expiration Date by surrender of this Warrant and the subscription form annexed
hereto (duly executed by the Holder), to the Company, and by making payment in cash or by certified
or official bank check payable to the order of the Company, in the amount obtained by multiplying
(i) the number of shares of Common Stock subject to the Warrant by (ii) the Purchase Price then in
effect.

     2. Delivery of Stock Certificates, etc., on Exercise. As soon as practicable after
the exercise of this Warrant, the Company will cause to be issued in the name of and delivered to
the Holder hereof a certificate for the number of fully paid and nonassessable shares of Common
Stock (or Other Securities) to which the Holder shall be entitled on such exercise, plus, in lieu
of any fractional share to which the Holder would otherwise be entitled, cash equal to such
fraction multiplied by the then current fair market value (as reasonably determined by the Company)
of one full share, together with any other stock or other securities or property (including cash,
where applicable) to which the Holder is entitled upon
such exercise. “Other Securities” shall mean any stock (other than Common Stock) and
other securities of the Company or any other person (corporate or otherwise) which the Holder at

 

 

any time shall be entitled to receive, or shall have received, on the exercise of this Warrant, in
lieu of or in addition to Common Stock, or which at any time shall be issuable or shall have been
issued in exchange for or in replacement of Common Stock or Other Securities pursuant to Sections 3
or 4.

     3. Adjustment.

          (a) Initial Purchase Price; Subsequent Adjustment of Price and Number of Purchasable
Shares. The Initial Purchase Price will be adjusted from time to time as provided below. Upon
each adjustment of the Purchase Price, the Holder will thereafter be entitled to purchase, at the
Purchase Price resulting from such adjustment, the number of shares of Common Stock obtained by
multiplying the Purchase Price in effect immediately before such adjustment by the number of shares
of Common Stock purchasable pursuant to this Warrant immediately before such adjustment and
dividing the product by the Purchase Price resulting from such adjustment.

          (b) Adjustment for Stock Splits and Combinations. If the Company at any time or from
time to time after the date of this Warrant effects a subdivision of the outstanding shares of
Common Stock, by stock split or otherwise, the Purchase Price then in effect immediately before
that subdivision shall be proportionately decreased; and, conversely, if the Company at any time or
from time to time after the date of this Warrant combines the outstanding shares of Common Stock,
by reverse stock split or otherwise, the Purchase Price then in effect immediately before that
combination shall be proportionately increased. Any adjustment under this Section 3(b) shall
become effective at the close of business on the date the subdivision or combination becomes
effective.

          (c) Adjustment for Certain Dividends and Distributions. In the event the Company at
any time or from time to time after the date of this Warrant either makes, or fixes a record date
for the determination of holders of Common Stock entitled to receive, a dividend or other
distribution payable in additional shares of Common Stock, then and in each such event the Purchase
Price then in effect shall be decreased as of the time of such issuance or, in the event such a
record date is fixed, as of the close of business on such record date, by multiplying the Purchase
Price then in effect by a fraction (1) the numerator of which is the total number of shares of
Common Stock issued and outstanding immediately prior to the time of such issuance on the close of
business on such record date, and (2) the denominator of which shall be (i) the total number of
shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the
close of business on such record date plus (ii) the number of shares of Common Stock issuable in
payment of such dividend or distribution; provided, however, that if such record
date is fixed and such dividend is not fully paid or if such distribution is not fully made on the
date fixed therefor, the Purchase Price shall be recomputed accordingly as of the close of business
on such record date or date fixed therefor and thereafter the Purchase Price shall be adjusted
pursuant to this Section 3(c) as of the time of actual payment of such dividend or distribution.
For purposes of the foregoing formula, “the total number of shares of Common Stock issued and
outstanding” on a particular date shall include shares of Common Stock issuable upon conversion of
stock or
securities convertible into Common Stock and the exercise of warrants, options or rights for
the purchase of Common Stock which are outstanding on such date.

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          (d) Adjustments for Other Dividends and Distributions. In the event the Company at
any time or from time to time after the date of this Warrant makes, or fixes a record date for the
determination of holders of Common Stock entitled to receive, a dividend or other distribution
payable in securities of the Company other than shares of Common Stock, then and in each such
event, provision shall be made so that the Holder shall receive upon exercise hereof, in addition
to the number of shares of Common Stock receivable thereupon, the amount and kind of securities of
the Company which it would have received had this Warrant been exercised for Common Stock as of the
date of such event and had it thereafter, during the period from the date of such event to and
including the date of exercise, retained such securities receivable by it as aforesaid during such
period, subject to all other adjustments called for during such period under this Section 3 with
respect to the rights of the Holder.

          (e) Adjustment for Recapitalization, Reclassification, or Exchange. If the Common
Stock issuable upon the exercise of this Warrant is changed into the same or a different number of
shares of any class or classes of stock of the Company, whether by recapitalization,
reclassification or other exchange (other than a subdivision or combination of shares, or a stock
dividend or a reorganization, merger, consolidation or sale of assets, provided for elsewhere in
this Section 3), then and in any such event the Holder shall have the right thereafter to exercise
this Warrant to purchase the kind and amount of stock and other securities and property receivable
upon such recapitalization, reclassification or other exchange by holders of the number of shares
of Common Stock which might have been purchased under this Warrant immediately prior to such
recapitalization, reclassification or other exchange, all subject to further adjustment as provided
herein.

          (f) Reorganizations, Mergers, Consolidations or Sales of Assets. If at any time or
from time to time there is a capital reorganization of the Common Stock (other than a subdivision
or combination of shares or a stock dividend or a recapitalization, reclassification or other
exchange of shares, provided for elsewhere in this Section 3 or a merger or consolidation of the
Company with or into another corporation, or the sale of all or substantially all of the Company’s
assets to any other person), then, as a part of such capital reorganization, provision shall be
made so that the Holder shall thereafter be entitled to receive upon exercise of this Warrant the
number of shares of stock or other securities or property of the Company, or of the successor
corporation resulting from such capital reorganization, to which a holder of the number of shares
of Common Stock deliverable upon such exercise would have been entitled on such capital
reorganization. In any such case, appropriate adjustment shall be made in the application of the
provisions of this Section 3 with respect to the rights of the Holder after the capital
reorganization to the end that the provisions of this Section 3 (including the number of shares
deliverable upon exercise of this Warrant) shall continue to be applicable after that event and
shall be as nearly equivalent to the provisions hereof as may be practicable.

          (g) Certificate of Adjustment. Upon the occurrence of each adjustment or readjustment
of the Purchase Price and/or the number of shares of Common Stock subject to this Warrant, the
Company at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof, and shall prepare and furnish to the Holder
a certificate setting forth such adjustment or readjustment and showing in detail the facts upon
which such adjustment or readjustment is based.

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     4. Exercise upon Reorganization, Consolidation, Merger, etc. In case at any time or
from time to time, the Company intends to (a) effect a reorganization, (b) consolidate with or
merge into any other person, (c) sell or transfer all or substantially all of its properties or
assets to any other person, (d) dissolve, (e) consummate an initial public offering of its
securities; or if the Company is sold through the sale of its capital stock, then, notwithstanding
any other provision of this Warrant, in each such case, as a condition of such reorganization,
consolidation, merger, sale, dissolution, conveyance, or offering the Company shall give at least
ten (10) days’ notice to the Holder of such pending transaction whereby the Holder shall have the
right to exercise this Warrant prior to any such reorganization, consolidation, merger, sale,
dissolution, conveyance or offering. Any exercise of this Warrant pursuant to notice under this
Section shall be conditioned upon the closing of such reorganization, consolidation, merger, sale,
dissolution, conveyance or offering which is the subject of the notice and the exercise of this
Warrant shall not be deemed to have occurred until immediately prior to the closing of such
transaction.

     5. Further Assurances. The Company will take all action that may be necessary or
appropriate in order that the Company may validly and legally issue fully paid and nonassessable
shares of Common Stock, free from all taxes, liens and charges with respect to the issue thereof,
on the exercise of all or any portion of this Warrant from time to time outstanding.

     6. Notices of Record Date, etc. In the event of:

          (a) any taking by the Company of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any dividend on, or any
right to subscribe for, purchase or otherwise acquire any shares of stock of any class or any other
securities or property, or to receive any other right, or

          (b) any capital reorganization of the Company, any reclassification or recapitalization of the
capital stock of the Company or any transfer of all or substantially all of the assets of the
Company to or the sale, consolidation or merger of the Company with, to or into any other person,
or

          (c) any voluntary or involuntary dissolution, liquidation or winding up of the Company;

then and in each such event the Company will mail or cause to be mailed to the Holder, at least ten
(10) days prior to such record date, a notice specifying (i) the date on which any such record is
to be taken for the purpose of such dividend, distribution or right, and stating the amount and
character of such dividend, distribution or right, (ii) the date on which any such reorganization,
reclassification, recapitalization, transfer, consolidation, merger, dissolution, liquidation or
winding up is to take place, and the time, if any is to be fixed, as of which the holders of record
of Common Stock (or Other Securities) shall be entitled to exchange their shares of Common Stock
(or Other Securities) for securities or other property deliverable on
such reorganization, reclassification, recapitalization, transfer, consolidation, merger,
dissolution, liquidation or winding up, and (iii) the amount and character of any stock or other
securities, or rights or options with respect thereto, proposed to be issued or granted, the date

6

 

of such proposed issue or grant and the persons or class of persons to whom such proposed issue or
grant is to be offered or made.

     7. Reservation of Stock, etc., Issuable on Exercise of Warrants. The Company will at
all times reserve and keep available out of its authorized but unissued shares of capital stock,
solely for issuance and delivery on the exercise of this Warrant, a sufficient number of shares of
Common Stock (or Other Securities) to effect the full exercise of this Warrant and the exercise,
conversion or exchange of any other warrant or security of the Company exercisable for, convertible
into, exchangeable for or otherwise entitling the Holder to acquire shares of Common Stock (or
Other Securities), and if at any time the number of authorized but unissued shares of Common Stock
(or Other Securities) shall not be sufficient to effect such exercise, conversion or exchange, the
Company shall take such action as may be necessary to increase its authorized but unissued shares
of Common Stock (or Other Securities) to such number as shall be sufficient for such purposes.

     8. Transfer of Warrant. This Warrant cannot be transferred without the prior written
consent of the Company, which consent shall not be unreasonably withheld; provided,
however, the Holder may transfer this Warrant to any of its affiliates without such consent
so long as such transfer complies with all applicable securities laws.

     9. No Rights as a Stockholder. This Warrant shall not entitle the Holder hereof to
any voting rights or other rights as a stockholder of the Company.

     10. Notices, etc. All notices which are required to be given pursuant to this Warrant
shall be in writing and shall be delivered by certified mail, return receipt requested, first class
postage prepaid, or sent by overnight express or similarly recognized overnight delivery with
receipt acknowledged or by facsimile, with a copy thereof sent by one of the other means. Notices
shall be deemed to have been given at the time delivered and shall be addressed as follows or to
such other address as a party may designate by proper notice hereunder.

	 	 	 
	If to Holder:
	 	To the address set forth on the first page hereof.
	 
	 	 
	If to the Company:
	 	Tri-Isthmus Group, Inc.
	 
	 	149 South Barrington Ave., #808
	 
	 	Los Angeles, California  90049
	 
	 	Attn.: David Hirschhorn, Co-Chief Executive Officer

     11. Securities Laws. By acceptance of this Warrant, the Holder hereby represents to
the Company that this Warrant is being acquired for investment for the Holder’s own account, not as
a nominee or agent, and not with a view to the resale or distribution thereof, and that the Holder
has no present intention of selling, granting any participation in, or otherwise
distributing this Warrant or the Common Stock issuable upon exercise of this Warrant. By
acceptance of this Warrant, the Holder further represents that the Holder does not presently have
any contract, undertaking, agreement or arrangement with any person to sell, transfer or

7

 

grant
participations to such person or to any third person, with respect to this Warrant or the Common
Stock issuable upon exercise of this Warrant. The Holder is an “accredited investor” as the term
is defined in Rule 501(a) of Regulation D promulgated under the Securities Act and has sufficient
knowledge and experience in finance and business that it is capable of evaluating the risks and
merits of its investment in the shares subject to this Warrant and the Holder is able financially
to bear the risks thereof. The Holder understands that the sale and issuance of this Warrant and
the Common Stock issuable upon exercise of this Warrant have not been registered under the
Securities Act, by reason of a specific exemption from the registration provisions of the
Securities Act which depends upon, among other things, the bona fide nature of the investment
intent and the accuracy of the Holder’s representations as expressed herein. The Holder further
recognizes and acknowledges that because the sale and issuance of this Warrant and the Common Stock
issuable upon exercise of this Warrant are unregistered, they may not be eligible for resale, and
may only be resold in the future pursuant to an effective registration statement under the
Securities Act and any applicable state securities laws, or pursuant to a valid exemption from such
registration requirements and that the Holder must, therefore, bear the economic risk of such
investment indefinitely.

     12. Legend. Unless theretofore registered for resale under the Securities Act, each
certificate for shares of Common Stock issued upon exercise of this Warrant shall bear the
following or a similar legend:

     THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE RESOLD,
TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER THE SECURITIES ACT OR AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO THE
COMPANY THAT SUCH DISPOSITION IS IN COMPLIANCE WITH THE SECURITIES ACT AND ANY APPLICABLE
STATE SECURITIES LAWS.

     13. Miscellaneous. This Warrant and any terms hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party against which
enforcement of such change, waiver, discharge or termination is sought. This Warrant shall be
construed and enforced in accordance with and governed by the internal laws of the State of
Delaware, without regard to conflict of laws principles. The headings in this Warrant are for
purposes of reference only, and shall not limit or otherwise affect any of the terms hereof. The
invalidity or unenforceability of any provision hereof shall in no way affect the validity or
enforceability of any other provision.

* * *

8

 

     IN WITNESS WHEREOF, the Company has caused this Warrant to be executed on its behalf by one of
its officers thereunto duly authorized as of September 18, 2006.

	 	 	 	 	 
	 	TRI-ISTHMUS GROUP, INC.

 	 
	 	By:  	 	 
	 	 	DAVID HIRSCHHORN 	 
	 	 	Co-Chief Executive Officer 	 

 

 

	 	 	 	 	 

FORM OF SUBSCRIPTION

TRI-ISTHMUS GROUP, INC.

(To be signed only on exercise of Warrant)

TO: TRI-ISTHMUS GROUP, INC.

     1. The undersigned Holder of the attached original, executed Warrant of Tri-Isthmus Group,
Inc., a Delaware corporation (the “Company”), hereby elects to exercise its purchase right
under such Warrant with respect to ___(___) shares (the “Exercise
Shares”) of Common Stock (as defined in the Warrant), constituting all the shares of Common
Stock subject to the Warrant.

     2. The undersigned Holder is hereby paying the aggregate purchase price for such the
Exercise Shares (i) by the enclosed certified or official bank check payable in United
States dollars to the order of the Company in the amount of $___, or (ii) by wire transfer
of United States funds to the account of the Company in the amount of $___, which
transfer has been made before or simultaneously with the delivery of this Form of Subscription
pursuant to the instructions of the Company.

     3. Please issue a stock certificate or certificates representing the Exercise Shares in the
name of the undersigned Holder.

Dated:                                         

	 	 	 	 	 
	 	 	 
	 	 	

 	 
	 	 	Signature of Holder 	 
	 	 	 	 
	 

10exv10w2

 

Exhibit 10.2

FIRST AMENDMENT TO CREDIT AGREEMENT

     THIS FIRST AMENDMENT TO CREDIT AGREEMENT (herein called this “Amendment”) made as of September
30, 2006 by and between PEERLESS MFG. CO., a Texas corporation (“Borrower”), and COMERICA BANK, a
Michigan banking corporation (“Bank”).

WITNESSETH:

     WHEREAS, Borrower and Bank have entered into that certain Credit Agreement dated as of October
30, 2003 (the “Original Credit Agreement”), for the purposes and consideration therein expressed,
pursuant to which Bank became obligated to make loans to Borrower as therein provided; and

     WHEREAS, Borrower and Bank desire to amend the Original Credit Agreement as provided herein;

     NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements
contained herein and in the Original Credit Agreement, in consideration of the loans which may
hereafter be made by Bank to Borrower, and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto do hereby agree as follows:

ARTICLE I.

Definitions and References

     § 1.1 Terms Defined in the Original Credit Agreement. Unless the context otherwise
requires or unless otherwise expressly defined herein, the terms defined in the Original Credit
Agreement shall have the same meanings whenever used in this Amendment.

     § 1.2 Other Defined Terms. Unless the context otherwise requires, the following terms
when used in this Amendment shall have the meanings assigned to them in this § 1.2.

          “Amendment” means this First Amendment to Credit Agreement.

          “Amendment Documents” means, collectively, this Amendment and the confirmation
by Guarantor with respect to this Amendment and any other document required to be delivered
by Borrower pursuant to Article III hereof.

          “Credit Agreement” means the Original Credit Agreement as amended hereby.

          “Renewal Note” means a promissory note in the form attached hereto as Exhibit
A.

 

 

ARTICLE II.

Amendments to Original Credit Agreement

     § 2.1 Definitions.

     (a) The following definitions in the Defined Terms Addendum to the Original Agreement are
hereby amended in their entirety to read as follows:

          “‘Applicable Calendar Month’ means every calendar month.”

          “‘Revolving Credit Maturity Date’ shall mean September 30, 2008 or such earlier date on
which the entire unpaid principal amount of al Revolving Loans becomes due and payable
whether by the lapse of time, demand for payment, acceleration or otherwise; provided,
however, if any such date is not a Business Day, then the Revolving Credit Maturity Date
shall be the next succeeding Business Day.”

          “‘Revolving Credit Maximum Amount’ shall mean the lesser of (i) NINE MILLION DOLLARS
($9,000,000), or (ii) the Borrowing Base Limitation.”

     (b) The following definitions are hereby added to the Defined Terms Addendum of the Original
Agreement in alphabetical order:

          “Capital Expenditure” shall mean any expenditure by a Person for (a) an asset which
will be used in a year or years subsequent to the year in which the expenditure is made and
which asset is properly classified in relevant financial statements of such Person as
equipment, real property, a fixed asset or a similar type of capitalized asset in accordance
with GAAP or (b) an asset relating to or acquired in connection with an acquired business,
and any and all acquisition costs related to (a) or (b) above.

          “Letter of Credit Sublimit” means $8,000,000.

          “Net Income” shall mean the net income (or loss) of a Person for any applicable period
of determination, determined in accordance with GAAP, but excluding, in any event:

(a) any gains or losses on the sale or other disposition, not in the ordinary course
of business, of investments or fixed or capital assets, post-employment benefits for
retired executive officer incurred in the fourth fiscal quarter ending June 30, 2006
in the pre-tax amount of $412,000, any other non-recurring costs and expenses
approved by Bank in its discretion; and any taxes on the excluded gains and any tax
deductions or credits on account of any excluded losses or non-recurring costs and
expenses approved by Bank in its discretion; and

(b) in the case of Borrower, net earnings of any Person in which Borrower has an
ownership interest, unless such net earnings shall have actually been received by
Borrower in the form of cash distributions.

 

 

          “Walnut Hill Property Sale” shall mean the sale of Borrower’s real property and
improvements thereon located at 2819 Walnut Hill Lane, Dallas, Texas.”

     § 2.2 Reporting Covenants. Subsection (d) of Section 4.3 of the Original Credit
Agreement is hereby deleted.

     § 2.3 Negative Covenants.

          (a) Sections 5.14 and 5.15 of the Original Credit Agreement are hereby amended in their
entirety to read as follows:

          “5.14 Sale of Assets. Except for the Walnut Hill Property Sale, sales of
inventory in the ordinary course of business and sales and dispositions of obsolete assets
that are material individually or in the aggregate, Borrower shall not sell, or otherwise
dispose of any of its assets in an aggregate amount that exceeds $250,000 in any fiscal
year.”

          “5.15 Contributions to Foreign Subsidiaries. Make any direct or indirect
payment or contribution to any Subsidiary that is not organized under the Laws of the United
States or any political subdivision thereof in an aggregate amount that exceeds $500,000
outstanding at any time other than (i) delivery of cash collateral in the amount of
$2,500,000 to secure credit facilities of Peerless Europe Ltd. and (ii) intercompany trade
and royalty balances between Borrower and Peerless Europe Ltd.”

     § 2.4 Financial Covenants.

          (a) The Financial Covenants Addendum of the Original Credit Agreement is hereby amended in its
entirety to read as follows:

          “1.1 Tangible Net Worth. Maintain a Tangible Net Worth of not less than (a)
$22,500,000 for the fiscal year ending June 30, 2006 and (b) during each fiscal year
thereafter, the sum of (i) the minimum Tangible Net Worth required pursuant to this Section
1.1 for the immediately preceding fiscal year, plus (ii) fifty percent (50%) multiplied by
the positive Net Income of Borrower for the immediately preceding fiscal year, in each case
as calculated from the Financial Statements of Borrower delivered pursuant to Section 4.3(b)
of the Credit Agreement, but in no event determined later than 90 days after the applicable
fiscal year end.

          1.2 Current Ratio. Maintain in a Current Ratio at all times of not less than
1.40 to 1.

          1.3 Net Income. Maintain a minimum positive Net Income of at least $1.00 (i)
for the aggregate period of three consecutive fiscal quarters of Borrower ending September
30, 2006 and (ii) for the aggregate period of four fiscal quarters ending on the last day of
each fiscal quarter of Borrower thereafter.

          1.4 Capital Expenditures. At no time permit the aggregate amount of all
Capital Expenditures made during any fiscal year of Borrower to exceed $1,000,000 (in

 

 

this section called the “Cap Ex Limit”); provided, however, the following shall be
excluded from and not considered in such calculation; (i) Capital Expenditures related to an
information technology upgrade occurring during 2006 and 2007 fiscal years of Borrower,
which shall not exceed $500,000 in the aggregate, (ii) Capital Expenditures funded with up
to $2,500,000 of the cash proceeds received from the Walnut Hill Property Sale, and (iii)
Capital Expenditures funded with the balance of the cash proceeds of the Walnut Hill
Property Sale that are in excess of $2,500,000 and for which Borrower has provided notice of
to Bank. If Capital Expenditures of Borrower for any fiscal year are less than the Cap Ex
Limit, the amount by which the Cap Ex Limit exceeds the actual Capital Expenditures of
Borrower for such fiscal year shall be added to the Cap Ex Limit for the next succeeding
fiscal year.”

     § 2.5 Unused Commitment Fee. Section 1.8 of the Loan Terms Conditions and Procedures
Addendum to the Original Credit Agreement is hereby amended in its entirety to read as follows:

          “1.8 Unused Commitment Fee. Borrower shall pay to Bank an unused commitment
fee, calculated at a per annum rate, in an amount equal to the product of (a) 0.25%
multiplied by (b) the amount by which $9,000,000 exceeds the sum of (i) the aggregate
outstanding principal balance of all Revolving Loans plus (ii) the Letter of Credit
Liabilities. Such fee shall be computed on a daily basis and shall be payable quarterly in
arrears as of the end of each of Borrower’s fiscal quarters. Bank shall invoice Borrower
for such fees, which invoice shall be due and payable within fifteen (15) days after
receipt.”

     § 2.6 Letters of Credit. Sections 1.9 i. and ii. of the Loan Terms Conditions and
Procedures Addendum to the Original Credit Agreement are hereby amended in their entirety to read
as follows:

          “i. Letters of Credit. Subject to the terms and conditions of this Agreement
and the other Loan Documents, the Bank shall, upon request from Borrower from time to time
prior to the Revolving Credit Maturity Date, issue one or more Letters of Credit under this
Agreement for which the Letter of Credit Liabilities shall not exceed the Letter of Credit
Sublimit. The sum of (i) the outstanding principal balance of all Revolving Loans
plus (ii) the Letter of Credit Liabilities for Letters of Credit shall not exceed
the Revolving Credit Maximum Amount. No such Letter of Credit shall have a stated
expiration date later than twenty-four (24) months after the date of issuance thereof, and
in no event shall such stated expiration date be later than eighteen (18) months after the
Revolving Credit Maturity Date.

          ii. Additional Provisions. The following additional provisions shall apply to
each Letter of Credit:

	 	(1)	 	Borrower shall give the Bank written notice
requesting each issuance of a Letter of Credit hereunder not less than
three (3) Business Days prior to the requested issuance date and shall
furnish such additional information regarding such transaction as

 

 

	 	 	 	Bank may request. The issuance by Bank of each Letter of Credit
shall, in addition to the conditions precedent set forth elsewhere in
this Agreement, be subject to the conditions precedent that (A) such
Letter of Credit shall be in form and substance satisfactory to Bank,
(B) Borrower shall have executed and delivered such applications and
other instruments and agreements relating to such Letter of Credit as
Bank shall have requested and are not inconsistent with the terms of
this Agreement, (C) each of the statements in Section 1.3(d)(i),
(ii), (iv), (v) and (vi) of this Loan Terms, Conditions and
Procedures Addendum are true as of the date of issuance of such
Letter of Credit with respect to issuance of such Letter of Credit
(as opposed to making a Revolving Loan), and the submission of an
application for issuance of a Letter of Credit shall constitute a
representation, warranty and certification of Borrower to that
effect, and (D) no Letter of Credit (other than the Peerless Europe
Letter of Credit) may be issued if after giving effect thereto, the
sum of the aggregate outstanding principal balance of all Revolving
Loans plus the Letter of Credit Liabilities would exceed the
Revolving Credit Maximum Amount. With respect to the renewal of each
Letter of Credit, Borrower shall pay to Bank such letter of credit
fees and other expenses customarily charged by Bank in connection
with the renewals of letters of credit.

	 	(2)	 	Borrower shall be irrevocably and
unconditionally obligated forthwith to reimburse Bank for any amount
paid by Bank upon any drawing under any Letter of Credit, including
without limitation the Peerless Europe Letter of Credit, without
presentment, demand, protest or other formalities of any kind, all of
which are hereby waived. Unless Borrower shall elect to otherwise
satisfy such Reimbursement Obligation, such reimbursement shall,
subject to satisfaction of any conditions provided herein for the
making of Revolving Loans and, except for the Peerless Europe Letter of
Credit, to the Revolving Credit Maximum Amount, automatically be made
by advancing to Borrower a Revolving Loan in the amount of such
Reimbursement Obligation.
	 
	 	(3)	 	Borrower shall pay to Bank a fee, calculated at
a per annum rate, for the issuance of each Letter of Credit (the
“Letter of Credit Fee”), which fee shall be determined in accordance
with the following schedule based on Borrower’s Debt to Tangible Net
Worth Ratio:

 

 

	 	 	 
	 	 	Letter of
	 	 	Credit Fee
	Debt to Tangible Net Worth Ratio	 	Per Annum
	Equal to or greater than 1.5:1
	 	1.50%
	Less than 1.5:1 and greater than 1:1
	 	1.375%
	Less than or equal to 1:1
	 	1.25%

The Debt to Tangible Net Worth Ratio applicable to any Letter of Credit for
the purposes of calculating the Letter of Credit Fee shall be the Debt to
Tangible Net Worth Ratio demonstrated on the most recent Compliance
Certificate or Financial Statements received by Bank, or in the event the
Bank does not timely receive a Compliance Certificate and all Financial
Statements as required by Section 4.3 of this Agreement or any other Loan
Document, the Letter of Credit Fee shall be 1.50%. The Letter of Credit fee
shall be due and payable quarterly in arrears as of the end of each of
Borrower’s fiscal quarters. Notwithstanding any of the foregoing, for any
Letter of Credit having a face amount of less than $25,000, the Letter of
Credit Fee shall be $150 per annum and shall be due and payable in advance
on the date of the issuance of such Letter of Credit and on each annual
anniversary thereof.

ARTICLE III.

Conditions of Effectiveness

     § 3.1 Effective Date. This Amendment shall become effective as of the date first
above written when and only when Bank shall have received, at Bank’s office,

     (a) a duly executed counterpart of this Amendment,

     (b) the Renewal Note,

     (c) a duly executed Consent and Agreement from Guarantor in the form of Exhibit B hereto,

     (d) a duly executed certificate of the president — chief executive officer and secretary of
Borrower certifying that (i) resolutions of its board of directors authorizing the execution,
delivery, and performance of this Amendment and identifying the officers authorized to sign such
instrument are in full force and effect and (ii) the specimen signatures of the officers so
authorized are true and correct, and

     (e) an upfront fee in the amount of $9,000.

 

 

ARTICLE IV.

Representations and Warranties

     § 4.1 Representations and Warranties of Borrower. In order to induce Bank to enter
into this Amendment, Borrower represents and warrants to Bank that:

     (a) This Amendment is a “Loan Document” for all purposes under the Credit Agreement and the
other Loan Documents;

     (b) The representations and warranties contained in Section 3 of the Original Credit Agreement
are true and correct at and as of the time of the effectiveness hereof;

     (c) Borrower is duly authorized to execute and deliver this Amendment and the other Amendment
Documents to which it is a party and is and will continue to be duly authorized to borrow and to
perform its obligations under the Credit Agreement. Borrower has duly taken all corporate action
necessary to authorize the execution and delivery of this Amendment and the other Amendment
Documents to which it is a party and to authorize the performance of the obligations of Borrower
hereunder and thereunder; and

     (d) When duly executed and delivered, each of this Amendment and the other Amendment Documents
to which it is a party will be a legal and binding instrument and agreement of Borrower,
enforceable in accordance with its terms, except as limited by bankruptcy, insolvency and similar
laws applying to creditors’ rights generally and by principles of equity applying to creditors’
rights generally.

ARTICLE V.

Miscellaneous

     § 5.1 Ratification of Agreement. The Original Credit Agreement as hereby amended is
hereby ratified and confirmed in all respects. Any reference to the Credit Agreement in any Loan
Document shall be deemed to refer to this Amendment also. Any reference to the Note in any other
Loan Document shall be deemed to be a reference to the Renewal Note issued and delivered pursuant
to this Amendment. The execution, delivery and effectiveness of this Amendment and the other
Amendment Documents shall not, except as expressly provided herein, operate as a waiver of any
right, power or remedy of Bank under the Credit Agreement or any other Loan Document nor constitute
a waiver of any provision of the Credit Agreement or any other Loan Document.

     § 5.2 Survival of Agreements. All representations, warranties, covenants and
agreements of Borrower herein shall survive the execution and delivery of this Amendment and the
performance hereof, and shall further survive until all of the Obligations are paid in full. All
statements and agreements contained in any certificate or instrument delivered by Borrower
hereunder or under the Credit Agreement to Bank shall be deemed to constitute representations and
warranties by, or agreements and covenants of, Borrower under this Amendment and under the Credit
Agreement.

 

 

     § 5.3 Loan Documents. This Amendment and the other Amendment Documents are each a
Loan Document, and all provisions in the Credit Agreement pertaining to Loan Documents apply hereto
and thereto.

     § 5.4 Governing Law. This Amendment shall be governed by and construed in accordance
with the laws of the State of Texas and any applicable laws of the United States of America in all
respects, including construction, validity and performance.

     § 5.5 Counterparts; Fax. This Amendment may be separately executed in counterparts
and by the different parties hereto in separate counterparts, each of which when so executed shall
be deemed to constitute one and the same Amendment. This Amendment may be duly executed by
facsimile or other electronic transmission.

     THIS AMENDMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES
AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF
THE PARTIES.

     THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]

 

 

     IN WITNESS WHEREOF, this Amendment is executed as of the date first above written.

	 	 	 	 	 
	 	PEERLESS MFG. CO.

 	 
	 	By:  	/s/ Henry G. Schopfer, III
 	 
	 	 	Henry G. Schopfer, III 	 
	 	 	Chief Financial Officer 	 
	 
	 	COMERICA BANK

 	 
	 	By:  	/s/ Donald P. Hellman
 	 
	 	 	Donald P. Hellman 	 
	 	 	Senior Vice President

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