EXHIBIT 10.1
LOAN AGREEMENT
This Loan Agreement is dated as of January 19, 2005 between National
City Bank of the Midwest ("Bank") and Pioneer Railcorp, an Iowa corporation
("Pioneer"); and is acknowledged by Alabama & Florida Railway Co., Inc., an Iowa
corporation ("AF"), Alabama Railroad Co., an Iowa corporation ("ALAB"), Decatur
Junction Railway Co., an Iowa corporation ("DT"), Elkhart & Western Railroad
Co., an Iowa corporation ("EWR"), Fort Xxxxx Railroad Co., an Iowa corporation
("FSR"), The Garden City Western Railway, Inc., a Kansas corporation ("GCW"),
Gettysburg & Northern Railroad Co., an Iowa corporation ("GET"), Indiana
Southwestern Railway Co., an Iowa corporation ("ISW"), Kendallville Terminal
Railway Co., an Iowa corporation ("KTR"), Keokuk Junction Railway Co., an Iowa
corporation ("KJRY"), Michigan Southern Railroad Company, an Iowa corporation
("MSO"), Mississippi Central Railroad Co., a Mississippi corporation ("MSCI"),
Pioneer Industrial Railway Co., an Iowa corporation ("PRY"), Shawnee Terminal
Railroad Co., an Illinois corporation ("STR"), Vandalia Railroad Company, an
Illinois corporation ("VRRC"), West Michigan Railroad Co., an Iowa corporation
("WMI") and Pioneer Railroad Equipment Co., Ltd., an Iowa corporation ("PRE")
(collectively, the "Guarantors"). Pioneer and the Guarantors are collectively
referred to as the "Borrowers".
ARTICLE I
THE LOANS
Section 1.01: Agreement to Borrow and Lend. Bank agrees to extend to
Pioneer, and Pioneer agrees to accept from the Bank, the obligations described
in Sections 1.02 and 1.03 of this Agreement, all on the terms and conditions set
forth in this Agreement.
Section 1.02: Term Loan. Upon the execution of this Agreement, and
on the terms and subject to the conditions set forth herein and in the Term
Note, Bank shall make the Term Loan to Pioneer in the amount of $16,000,000. The
Term Loan shall be disbursed, bear interest and shall be repaid as set forth in
the Term Note.
Section 1.03: Revolving Credit Facility. Upon the execution of this
Agreement, and on the terms and subject to the conditions set forth herein and
in the Revolving Credit Note, Bank shall make the Revolving Credit Facility
available to Pioneer in the amount of $2,000,000. The Revolving Credit Facility
shall bear interest and shall be repaid as set forth in the Revolving Credit
Note.
Section 1.04: Rate Management Transactions. Pioneer also expects to
enter into with Bank or its affiliated entitles one or more interest rate swap
or similar transactions.
Section 1.05: Definitions. As used herein, the following terms shall
have the following meanings for the purpose of this Agreement and the documents
related hereto unless the context in which such term is used clearly requires
otherwise:
Applicable Margin Grid: the Applicable Margin Grid attached hereto
and made a part hereof as Exhibit A.
LIBOR Rate: the rate per annum (rounded upwards, if necessary, to
the next higher 1/16 of 1%) determined by Administrative Agent and equal
to the average rate per annum at which deposits (denominated in United
States dollars) in an amount similar to the principal amount of the Loan
and with a maturity equal to the applicable Interest Period are offered to
Lender at 11:00 A.M. London time (or as soon thereafter as practicable) on
the date of reference by banking institutions in the
London, United Kingdom market, as such interest rate is referenced and
reported by the British Bankers Association in the Bridge Financial
Telerate system "Page 3570" report or, if the same is unavailable, any
other generally accepted authoritative source of such interest rate as
Lender may reference from time to time, plus the Applicable Margin set
forth on the Applicable Margin Grid. "Interest Period" shall mean one,
two, three, or six months.
Loans: the Revolving Credit Facility and the Term Loan.
Note and Notes: the Term Note and the Revolving Credit Note.
Obligations: each and every obligation described in Sections 1.02,
1.03 and 1.04 above and the Guaranty executed by each Guarantor of even
date herewith.
Revolving Credit Facility: the $2,000,000 secured revolving credit
facility provided to Borrower by the Bank pursuant to this Agreement, as
described in Section 1.03 of this Agreement.
Revolving Credit Note: the Revolving Credit Promissory Note of even
date herewith in the face principal amount of $2,000,000 evidencing the
Revolving Credit Facility.
Term Loan: the $16,000,000 secured term loan provided to Borrower by
Bank pursuant to this Agreement, as described in Section 1.02 of this
Agreement.
Term Note: the Term Promissory Note of even date herewith in the
face principal amount of $16,000,000 evidencing the Term Loan.
Section 1.06: Prepayment. The Loans may be prepaid as set forth in
the Notes.
Section 1.07: Use of Term Loan Proceeds. Pioneer shall use the
proceeds of the Term Loan as follows: up to $7,000,000 to refinance existing
debt of Pioneer to Bank, up to $4,000,000 to finance the acquisition of the west
end of the Toledo, Peoria and Western Railway Corporation and up to $5,000,000
to finance the repurchase of equity interests in Pioneer pursuant to its
privatization strategy.
Section 1.08: Non-Use Fee. Borrower shall pay to the Bank a non-use
fee of twenty five (25) basis points as applied to the average daily unused
amount of the Revolving Credit Facility for each fiscal quarter of Pioneer. The
non-use fee shall be calculated for each fiscal quarter (or portion thereof)
beginning with the quarter ended March 31, 2005 and continuing until January 19,
2007. For purposes of calculating usage under this Section for any day, the
Revolving Credit Facility shall be deemed used on such day to extent of the
principal amount of all outstanding loans under the Revolving Credit Facility on
such day. Such non-use fee shall be payable in arrears on the last day of each
calendar quarter and on January 19, 2007, for any period then ending for which
such non-use fee shall not have previously been paid. The non-use fee shall be
computed for the actual number of days elapsed on the basis of a year of 360
days.
ARTICLE II
SECURITY
Section 2.01: Security. Borrowers (other than PRE) agree to grant to
the Bank the following security interests as security for the Obligations:
- Security Agreements - A security interest in all personal property
of Borrowers (other than PRE), evidenced by a security agreement
from each Borrower (other than PRE) and perfected by appropriate
financing statements;
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- Pledge Agreements - A pledge by Pioneer of its ownership interests
in all other Borrowers (other than PRE), evidenced by a pledge
agreement from Pioneer and perfected by appropriate financing
statements and/or possession; and
- Guaranties - Guaranties from each Guarantor.
The documents evidencing the security interests described above, together with
this Agreement, the Notes and all other documents and agreements executed in
connection with the Obligations, are hereinafter referred to as the "Collateral
Documents."
ARTICLE III
CLOSING
Prior to or at closing, the Borrowers shall deliver to the Bank the
following:
- all documents reasonably requested by Bank to evidence and secure
the Obligations, including without limitation the Collateral
Documents.
- a certificate of good standing for each Borrower and a certified
copy of the organizational document (with all amendments) of each
Borrower from the Secretary of State of each Borrower's state of
organization.
- a certified copy of the By-Laws of each Borrower.
- a certificate of incumbency for each Borrower.
- a certified copy of resolutions of the board of directors of each
Borrower approving this Agreement and the transactions described
herein.
- such other documents as the Bank may reasonably request.
ARTICLE IV
FINANCIAL MANAGEMENT, STATEMENTS AND COVENANTS
Section 4.01: Financial Management. The Borrower's financial
management system shall be structured to provide for accurate, current and
complete disclosure of the financial results of the Borrower's operations.
Section 4.02: Annual Financial Statements and Tax Returns. Furnish
to the Bank the following:
(a) within one hundred twenty (120) days after the end of each
fiscal year of the Pioneer, audited financial statements of Pioneer,
on a consolidated basis, including a balance sheet as of the close
of such fiscal year and related statement of income for such year,
setting forth in each case in comparative form corresponding figures
from the preceding annual financial statements, all in reasonable
detail and satisfactory in scope to the Bank, prepared in accordance
with GAAP applied on a consistent basis. Each such annual statement
shall be accompanied by the certificate of an authorized officer of
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Pioneer acceptable to Bank certifying that he has no knowledge of
any Default or Event of Default or, if he has obtained knowledge of
any Default or Event of Default, he shall disclose such Default or
Event of Default;
(b) within twenty (20) days of filing, a photocopy of each
Borrower's executed federal income tax returns (exclusive of wage
information) (with all forms and schedules attached) for the year to
which the filed return relates, certified to be true, correct and
complete by an appropriate officer of each Borrower acceptable to
Bank.
Section 4.03: Interim Financial Statements; Covenant Compliance
Worksheets and Reports. Furnish to the Bank the following:
(a) within forty-five (45) days after the end of each quarter
of each fiscal year of Pioneer, a balance sheet of Pioneer, on a
consolidated basis, as of the end of each such quarter and a related
statement of income for the period from the beginning of the fiscal
year to the end of such quarter, prepared in the manner set forth in
Section 4.02(a) above for the annual statements, subject to normal
year-end adjustments, certified by an authorized officer of Pioneer.
(b) Other Financial Information. Furnish to the Bank copies of
such other financial information as the Bank may from time to time
reasonably request.
Section 4.04: Financial Covenants. So long as any portion of the
Obligations shall remain outstanding, the Borrowers shall comply with the
following financial covenants:
- Minimum Tangible Net Worth - The Tangible Net Worth of Pioneer
shall not be less than $4,000,000 at the end of any fiscal
quarter of Pioneer. Beginning March 31, 2005, and on the last
day of each fiscal quarter of Pioneer thereafter, the Minimum
Tangible Net Worth amount shall be increased by fifty percent
(50%) of after-tax net income of Pioneer, on a consolidated
basis, during said fiscal quarter. The Minimum Tangible Net
Worth amount shall not be reduced due to any net losses of
Pioneer or otherwise.
- Maximum Funded Debt/EBITDA Ratio - The Funded Debt/EBITDA
Ratio for Pioneer shall be not more than 3.5:1.0 at the end of
any fiscal quarter of Pioneer, calculated in each instance for
the previous four fiscal (4) quarters. Beginning June 30,
2006, the Funded Debt/EBITDA Ratio maximum level shall be
decreased to 3.0:1.0.
- Minimum Fixed Charge Coverage Ratio - The Fixed Charge
Coverage Ratio for Pioneer shall be not less than 1.10:1.00 at
the end of any fiscal quarter of Pioneer, calculated in each
instance for the previous four fiscal (4) quarters. Beginning
June 30, 2006, the Fixed Charge Coverage Ratio minimum level
shall be increased to 1.15:1.00.
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Section 4.05: Financial Definitions.
- Tangible Net Worth shall mean the amount of total assets of
the Pioneer, on a consolidated basis, excluding the amount of
intangible assets of the Pioneer, on a consolidated basis,
minus the amount of total liabilities of the Pioneer, on a
consolidated basis, exclusive of subordinated debt, if any.
Intangible assets shall include, at book value, without
limitation, leasehold improvements, goodwill, patents,
copyrights, secret processes, deferred expenses related to
sales, general administrative, research and development
expenses, and all amounts due from any officer, employee,
director, or related person.
- Funded Debt/EBITDA Ratio shall mean the ratio of Funded Debt
to earnings before interest, taxes, depreciation and
amortization ("EBITDA"). "Funded Debt" shall mean all
interest-bearing debt plus capitalized leases. For purposes of
calculating this covenant, the following amounts shall be
added to EBITDA at the following calculation dates:
March 31, 2005 $620,000
June 30, 2005 $465,000
September 30, 2005 $310,000
December 31, 2005 $155,000
- Fixed Charge Coverage Ratio shall mean the ratio of net income
of Pioneer, on a consolidated basis, plus depreciation and
interest, less dividends and cash capital expenditures, to the
sum of scheduled principal payments made on senior term debt
plus interest expense, but deducting the sum of $160,000 from
interest expense for the calculations to be made on March 31,
2005, June 30, 2005, September 30, 2005 and December 31, 2005.
Each of the covenants described, and any term used but not defined, in this
Section 4.05 shall be determined and defined in accordance with GAAP applied on
a consistent basis.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
To induce the Bank to enter into the Agreement, the Borrowers represent
and warrant as follows:
Section 5.01: Duly Organized. Each Borrower is duly organized under
the laws of the State of its organization, and is duly qualified to do business
and in good standing in each jurisdiction where the operation of their
respective businesses makes qualification necessary. Each has the power to enter
into this Agreement and to borrow hereunder, and each has obtained all licenses
necessary for the conduct of its business.
Section 5.02: Duly Authorized. The making and performance by the
Borrowers of this Agreement and the execution and delivery of all documents
hereunder have been duly authorized by all necessary action and will not violate
any law, rule, regulation, order, judgment, decree, determination or award
presently in effect having applicability to the Borrower or any provision of the
organizational documents of any Borrower, or result in a breach of or constitute
a default under any indenture, bank
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loan, credit agreement or any other agreement or instrument to which any
Borrower is a party or by which it or its property may be bound or affected.
Section 5.03: No Legal Suits. There are no legal actions, suits or
proceedings pending, or to the knowledge of any Borrower, threatened against any
Borrower or otherwise relating to any of its business properties before any
court or administrative agency, which, if determined adversely to the Borrower,
would have a material adverse effect on the financial condition or business of
any Borrower.
Section 5.04: Not in Default. No Borrower is in default of any
obligation, covenant or condition contained in any bond, debenture, note, other
evidence of indebtedness or any mortgage or collateral instrument securing the
same or any other material agreement.
Section 5.05: Taxes are Paid. Each Borrower has filed all tax
returns which are required and has paid or made provision for the payment of all
taxes, including real estate taxes, which have or may become due pursuant to
said returns or pursuant to any assessments levied against any Borrower or its
personal or real property by any taxing agency, federal, state or local, and
shall continue to do so throughout the term of this Agreement. No tax liability
has been asserted by the Internal Revenue Service or other taxing agency,
federal or state, or local, for taxes materially in excess of those already
provided for and no Borrower knows of any basis for any such deficiency
assessment.
Section 5.06: No Adverse Change. There has been no adverse change
since the date of loan application in the financial condition, organization,
operation, business prospects, fixed properties or personnel of any Borrower.
Section 5.07: Governmental Approval. The Borrowers have secured all
necessary approvals or consents for their operations, if required, of (i) any
mortgagor, creditor or other party having any financial interest in any
Borrower, or (ii) governmental bodies having jurisdiction with respect to this
transaction or any use of these proceeds.
Section 5.08: Financial Information. Subject to any limitations
stated therein or in connection therewith, all balance sheets, earning
statements, and other financial data which have been or may hereafter be
furnished to the Bank with respect to any Borrower do or shall fairly present
the financial condition of each Borrower as of their respective dates and the
results of its operations for the periods for which the same are furnished, and
all other information, reports, and other papers and data furnished to the Bank
are or shall be, at the time the same are so furnished, accurate and correct in
all material respects and complete insofar as completeness may be necessary to
give the Bank a true and accurate knowledge of the subject matter.
Section 5.09: Compliance with Environmental Laws. The Borrowers
hereby represent and warrant to Bank as follows:
(a) To the best of Borrowers' knowledge, each Borrower is now and
will remain in compliance with all applicable laws and
regulations, including, without limitation, all Laws (as
hereinafter defined);
(b) All required governmental permits, licenses and, agreements
for the use and operation of the Borrowers' business
properties are now and will remain in effect, and the
Borrowers' business properties, their use and operation do now
and will in the future comply with all such permits, licenses
and agreements;
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(c) To the best of Borrowers' knowledge, there are and will be no
Hazardous or Toxic Material (as hereinafter defined) existing
on or under the surface of any of the Borrowers' business
properties or in any surface waters or ground waters on or
under said properties and no escape, seepage, spillage,
discharge, emission or release of any Hazardous or Toxic
Material shall occur on, under, above or emanate from, said
properties except to the extent that any such Hazardous or
Toxic Material is handled in accordance with all Laws;
(d) There are no pending, or to the best knowledge of the
Borrowers, threatened or anticipated suits, actions,
proceedings or notices from any governmental or
quasi-governmental agency with respect to any of Borrower's
business properties any Borrower.
For purposes of this Agreement, the term Hazardous or Toxic Material shall
be defined to include: (i) asbestos or any material composed of or containing
asbestos in any form and of any type, or (ii) any hazardous, toxic or dangerous
waste, substance, material, smoke, gas or particulate matter, as from time to
time defined by or for purposes of the Comprehensive Environmental Response
Compensation and Liability Act, any law commonly referred to as of the date
hereof as "Superfund" or "Superlien" or any successor to such laws, or any other
federal, state or local environmental, health or safety statute, law, ordinance,
code, rule, regulation, order or decree regulating, relating to, or imposing
liability or standards concerning or in connection with hazardous, toxic or
dangerous waste, substance, material, smoke, gas or particulate matter, as now
or any time hereinafter in effect (collectively, the "Laws").
Section 5.10: Statements not Misleading. No document, agreement or
certificate furnished to Bank by any Borrower in connection with the Obligations
contains any untrue statement of a material fact or omits any material fact
necessary to make any other statements not misleading. There is no fact known to
any Borrower which may adversely affect any Borrower that has not been disclosed
to Bank in writing.
ARTICLE VI
AFFIRMATIVE COVENANTS
Section 6.01: Delivery of Loan Documents. The Borrowers will deliver
to the Bank originals of this Agreement and all documents reasonably requested
by Bank to evidence or secure the Obligations, including without limitation the
Collateral Documents.
Section 6.02: Payment of the Obligations. The Borrowers shall pay
punctually all principal and interest on the Obligations according to their
respective terms and conditions and shall pay punctually any other amounts that
may become due and payable to the Bank under or pursuant to the terms of this
Agreement or otherwise. Moreover, the Borrowers agree to pay punctually all
principal and interest due on any other indebtedness now or hereafter assumed by
the Borrowers.
Section 6.03: Maintain and Insure Property. Each Borrower agrees at
all times to maintain its business properties in such condition and repair that
the Bank's security will be adequately protected. Each Borrower shall also keep
its business properties fully insured with:
(i) comprehensive general liability insurance insuring the
Borrower against claims, demands and actions with respect to
bodily injury, death or
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property damage, with minimum limits of coverage and otherwise
appropriate for Borrower's business;
(ii) fire and casualty insurance on Borrower's primary business
office building located at 0000 X. Xxxxxxxx Xxxx, Xxxxxx,
Xxxxxxxx and contents, in an amount equal to the full
replacement value thereof.
All such policies shall be from carriers and in form and amount satisfactory to
Bank. Each Borrower shall provide Bank with certificates of insurance evidencing
such coverage, naming Bank as an additional insured and providing that Bank will
be given thirty (30) days notice prior to cancellation.
Section 6.04: Workers' Compensation, Social Security, Retirement and
Health Insurance Benefits, and Taxes. Each Borrower shall provide Workers'
Compensation insurance where the same is required, and shall accept full
responsibility for the payment of unemployment insurance, premiums for Workers'
Compensation, Social Security and retirement and health insurance benefits, as
well as all income tax deductions and any other taxes or payroll deductions
required by law for its employees.
Section 6.05: Compliance with Laws; Payment of Taxes and Other
Liabilities. Each Borrower will maintain its corporate existence, and will
comply with all applicable statutes, laws and regulations and will pay all
taxes, assessments, charges, claims for labor, supplies, rent and other
obligations which if unpaid might become a lien against any Borrower or its
property. Each Borrower will timely pay all taxes assessed on or against its
income, unless, and to the extent that, such taxes are being contested in good
faith and by appropriate litigation or other proceedings, if the books of the
Borrower reflect the maintenance of reasonable reserves therefor.
Section 6.06: Right to Inspection. Each Borrower agrees to grant the
Bank, until the Obligations have been fully repaid, the right at all reasonable
hours free access to any of its business properties for the purpose of
inspection to determine the condition of said properties. Each Borrower will as
often as deemed necessary by the Bank, permit the Bank, or its duly authorized
representatives to have full access to and the right to examine any pertinent
books, documents, papers and records until the Obligations are fully repaid.
Section 6.07: Damage or Destruction of the Property. In the event of
any damage to or destruction of any of the Borrowers' business properties or any
part thereof, the Borrowers will either (i) promptly cause the same to be
restored, replaced or rebuilt as nearly as possible to their value, condition
and character immediately prior to such damage or destruction; or (ii) pay to
Bank all insurance proceeds received by any Borrower on account of such damage
or destruction, to be applied to the balance due on the Obligations. The
Borrowers shall immediately notify Bank of the occurrence of any such damage or
destruction, and shall, within thirty (30) days thereafter, notify Bank whether
or not it intends to rebuild.
Section 6.08: Indemnification. Each Borrower shall indemnify and
hold Bank harmless from and against all claims arising from any breach or
default in any covenant, warranty, representation or in the performance of any
obligation on any Borrower's part to be performed under the terms of this
Agreement or any agreement executed pursuant hereto, or arising from any
negligence of any Borrower, or any Borrower's agents, contractors or employees,
and from and against all costs, attorney's fees, expenses and liabilities
incurred in the defense of any such claim or any action or proceeding brought
thereon. In case any action or proceeding is brought against Bank by reason of
any claim described above, the Borrowers shall defend the same at Borrowers'
expense by counsel satisfactory to Bank.
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Section 6.09: Notice of Litigation. Promptly after receiving notice
or otherwise acquiring knowledge thereof, the Borrowers will advise Bank, in
writing, of the filing or commencement of litigation or proceedings wherein any
Borrower is named as a defendant, if the amount of damages claimed against said
Borrower exceeds the sum of Fifty Thousand Dollars ($50,000).
Section 6.10: Change in Financial Condition: No Borrower will suffer
or allow any substantial or materially adverse change in the financial condition
of any Borrower to occur.
Section 6.11: Attorney-In-Fact. After the occurrence of any Event of
Default hereunder, each Borrower hereby irrevocably designates and appoints Bank
as its attorney-in-fact to perform in its name any acts Bank reasonably deems
necessary to implement the provisions of this Agreement in the event of the
failure, refusal or inability of any Borrower to act, and each Borrower will
indemnify Bank with respect to any costs, expenses, damages or liabilities
(including attorney's fees) incurred by the Bank in connection therewith.
Section 6.12: Interest Rate Protection. Within one hundred eighty
(180) days of the date hereof, Borrower shall enter into and maintain in full
force and effect interest rate protection agreements in an amount not less than
fifty percent (50%) of the aggregate outstanding principal balance of the Term
Loan. Such agreements shall conform to International Swap Dealers Association,
Inc. standards, shall be with institutions reasonably acceptable to Lender and
shall otherwise be in form and substance reasonably acceptable to Lender.
ARTICLE VII
NEGATIVE COVENANTS OF THE BORROWERS
Section 7.01: Non-Breach of Agreement. Each Borrower covenants and
agrees that, from the date hereof until repayment in full of the Obligations, it
will not enter into any agreement or other commitment the performance of which
would constitute a breach of any of the covenants and agreements contained in
this Agreement or any document or agreement executed in connection herewith.
Section 7.02: Additional Indebtedness. No Borrower will accept or
enter into any secondary financing or incur or permit any existing indebtedness
to continue in excess of $5,000,000, in the aggregate, except for indebtedness
(i) outstanding on the date of this Agreement and disclosed in writing to Bank;
and (ii) indebtedness owed to Bank.
Section 7.03: Dividends or Distributions. Intentionally omitted.
Section 7.04: Encumber Property. No Borrower will create or permit
any mortgage, pledge, lien, charge or encumbrance, including liens arising from
judgments, on any Borrower's real or personal property, except for (i) any such
liens in favor of Bank or approved by Bank and (ii) any such liens securing
indebtedness permitted under Section 7.02 above.
Section 7.05: Sell Property. No Borrower will, other than in the
ordinary course of its business, sell, convey or suffer to be conveyed, assign,
transfer, relinquish possession or otherwise dispose of any of its business
properties unless approved in writing by the Bank.
Section 7.06: Benefit Plans. Intentionally omitted.
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Section 7.07: Changes in Business Structure. Without the written
permission of the Bank, there will be no change in the ownership structure,
control or operation of any Borrower, including but not limited to (i) merger
into or consolidation with any other entity; (ii) issuance of any shares of its
capital stock; (iii) changing the nature of its business as carried on at the
date hereof; or (iv) substantial distribution, liquidation or other disposal of
the assets of Borrower to its stockholders.
Section 7.08: Intercompany Transactions. No Borrower shall make any
loans to, or borrow any funds from any affiliated entities other than other
Borrowers except in the ordinary course of business or in accordance with past
practice of the Borrowers. In the event that Bank consents to any such loans,
the debt of any Borrower to any other party shall be subordinate to all debt
owed to Bank. No Borrower shall enter into any other transactions with
affiliated entities other than other Borrowers except in the ordinary course of
business and on reasonable terms and conditions. PRE shall not be considered a
Borrower for purposes of this Section 7.08.
Section 7.09: Guaranties. No Borrower will guaranty any indebtedness
of any other person or entity without the prior written consent of Bank, except
for (i) guaranties of debt to Bank and (ii) guaranties existing on the date of
this Agreement and disclosed in writing to Bank.
Section 7.10: Investments. No Borrower shall acquire or dispose of
any interest in any non-publicly traded company without the prior written
consent of Bank.
Section 7.11: Negative Pledge: Real Estate. No Borrower shall create
or permit to exist any mortgage or other lien on any real estate owned by the
Borrower.
ARTICLE VIII
EVENTS OF DEFAULT
The entire unpaid principal of the Obligations, and the interest
then accrued thereon, shall become and immediately due and payable upon the
written demand of the Bank, without any other notice or demand of any kind or
presentment of protest, if any one of the following events (hereafter an "Event
of Default") shall occur and be continuing at the same time of such demand,
whether voluntarily or involuntarily, with or without limitation, occurring or
brought about by the operation of law or pursuant to or in compliance with
regulations of any administrative or governmental body.
Section 8.01: Non-payment of Obligations. If the Borrower shall fail
to make payment when due of any installment of principal on the Obligations, or
interest accrued thereon.
Section 8.02: Non-payment of Other Indebtedness. If default shall be
made in the payment when due of any installment of principal or of interest on
any Borrower's other indebtedness.
Section 8.03: Incorrect Representation or Warranty. If any
representation or warranty contained in, or made in connection with the
execution and delivery of, this Agreement, any Collateral Document or in any
agreement, certificate or other document furnished pursuant thereto, shall prove
to have been incorrect when made in any material respect.
Section 8.04: Default in Covenants. If any Borrower shall default in
the performance of any non-monetary term, covenant or agreement contained in any
Collateral Document or any other document executed in connection therewith or
otherwise, and such default shall continue for thirty (30) days after either (i)
it becomes known to Borrower or (ii) written notice thereof shall have been
given to
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any Borrower by the Bank; provided, however, that if the default is of such
nature that it can be corrected but not within said period, the cure period
shall be extended so long as Borrower initiates curative action within such
period and diligently pursues that action to completion.
Section 8.05: Voluntary Insolvency. If any Borrower shall become
insolvent or shall cease to pay its debts as they mature or shall voluntarily
file a petition seeking reorganization, or the appointment of a receiver,
trustee or liquidator for it or a substantial portion of its assets or to effect
a plan or other arrangement with creditors, or shall be adjudicated bankrupt, or
shall make a voluntary assignment for the benefit of creditors.
Section 8.06: Involuntary Insolvency. If an involuntary petition
shall be filed against any Borrower under any bankruptcy, insolvency or similar
law or seeking reorganization or the appointment of any receiver, trustee or
liquidator for any Borrower of a substantial part of the property of any
Borrower or a writ or warrant of attachment or similar process shall be issued
against a substantial part of the property of any Borrower and such petition
shall not be dismissed, or such writ or warrant of attachment or similar process
shall not be released or bonded, within thirty days after filing or levy.
Section 8.07: Judgments. If any final judgment for the payment of
money that is not fully covered by liability insurance and is in excess of Ten
Thousand Dollars ($10,000) shall be rendered against any Borrower, and within
thirty days, shall not be discharged, or an appeal therefrom taken and execution
thereon effectively stayed pending such appeal, and, if such judgment be
affirmed on such appeal, and the same shall not be discharged within thirty
days.
Section 8.08: Dissolution, Merger or Consolidation. If any Borrower
is dissolved, merged or consolidated with any entity, or the transfer of a
substantial part of the ownership or assets of any Borrower is made.
Section 8.09: Termination of Business. If any Borrower shall
terminate the operation of its business, or materially change the manner of
operation of such business.
ARTICLE IX
REMEDIES
Section 9.01: Note Remedies. Upon the occurrence of any Event of
Default and at any time thereafter until such Event of Default is cured, the
Bank shall have, in addition to all other rights and remedies, all remedies
provided in any Collateral Document or any other documents executed in
connection therewith or otherwise.
Section 9.02: Offset. Upon the occurrence of an Event of Default,
Bank shall have the right to apply any funds held by Bank on behalf of any
Borrower to offset any of the indebtedness hereby secured.
Section 9.03: Waivers. Each Borrower waives demand, notice, protest,
notice of acceptance of this Agreement, notice of loans made, credit extended,
collateral received or delivered, or other action taken in reliance hereon and
all other demands and notices of any description unless otherwise required
herein. With respect to the Obligations, each Borrower agrees to any extension
or postponement of the time of payment or any other indulgence, to any
substitution, exchange or release of collateral, to the addition or release of
any party or person primarily or secondarily liable, to the acceptance of
partial payments thereon and the settlement, compromising, or adjusting of any
thereof, all
11
in such manner and at such time or times as the Bank may deem advisable. The
Bank shall have no duty as to the collection or protection of collateral or any
income thereon, nor as to the preservation of any rights pertaining thereto
beyond the safe custody thereof. The Bank may exercise its rights with respect
to collateral without resorting or regard to other collateral or source of
reimbursement. The Bank shall not be deemed to have waived any of its rights
under the Collateral Documents or any other document executed in connection
therewith or otherwise unless such waiver is in writing and signed by the Bank.
No delay or omission on the part of the Bank in exercising any right shall
operate as a waiver of such rights or any other right. A waiver on any one
occasion shall not be construed as a bar to or waiver of any right on any future
occasion. All rights and remedies of the Bank under the Collateral Documents or
any other document executed in connection therewith or otherwise shall be
cumulative and may be exercised singularly or concurrently.
Section 9.04: Right of Bank to Make Advances to Cure Events of
Default. In the event that any Borrower shall fail to perform any covenant or
agreement contained in this Agreement or any other Collateral Document, or fail
to make any payments required by this Agreement or any other Collateral
Document, Bank may (but shall not be obligated to) perform any one or all of
such covenants or agreements, make any such payments (including those due Bank)
or advance funds in excess of the face amount of any obligation, and any amounts
expended by Bank in so doing, plus interest thereon at the default interest
rate, shall be due and payable by Borrowers to Bank, on demand.
Section 9.05: Expenses and Proceeds of Collateral. Each Borrower
agrees to pay to the Bank on demand any and all expenses, including reasonable
counsel fees, incurred or paid by the Bank in protecting or enforcing its rights
upon or under this Agreement. After deducting all such expenses, the residue of
any proceeds of sale of liabilities or property shall be applied to the payment
of principal or interest on the Obligations in such order of preference as the
Bank may determine, proper allowance for interest on the Obligations not then
due being made, and any excess shall be returned to the Borrowers and the
Borrowers shall remain liable for any deficiency.
ARTICLE X
INDEMNIFICATION
Borrowers agree to exonerate, indemnify, pay and protect, defend (with
counsel reasonably approved by Bank) and save Bank and the directors, officers,
shareholders, employees and agents of Bank harmless from and against any claims
(including without limitation third party claims for personal injury or real or
personal property damage), actions, administrative proceedings (including
informal proceedings), judgments, damages, punitive damages, penalties, fines,
costs, liabilities (including sums paid in settlement of claims), interest or
losses, including reasonable attorneys' and paralegals' fees and expenses,
investigation and remediation costs, consultant fees, and expert fees, together
with all other costs and expenses of any kind or nature (collectively, the
"Costs") that arise directly or indirectly from or in connection with this
Agreement and the other Collateral Documents. The indemnification provided in
this Article X shall specifically apply to and include claims or actions brought
by or on behalf of employees of Borrowers. In the event Bank shall suffer or
incur any Costs, Borrowers shall pay to Bank the total of all such Costs
suffered or incurred by Bank upon demand therefor by Bank. Without limiting the
generality of the foregoing, the indemnification provided in this Article X
shall specifically cover Costs, including capital, operating, supervision and
maintenance costs, incurred in connection with any investigation or monitoring
of site conditions, any clean-up, containment, remedial, removal or restoration
work required or performed by any federal, state or local governmental agency or
political subdivision or performed by any nongovernmental entity or person
because of the presence, suspected presence, release or suspected release of any
hazardous materials in or into the air, soil, groundwater or surface water at,
12
on, about, under or within any real estate owned or operated by the Borrowers,
or elsewhere in connection with the transportation of hazardous materials to or
from any such real estate and any claims of third parties for loss or damage due
to such hazardous materials; provided that, only to the extent prohibited by
law, this indemnity shall not be sought for damages that result from the gross
negligence or wilful misconduct of the Bank.
ARTICLE XI
MISCELLANEOUS
Section 11.01: Notices. All notices, consents, requests, demands and
other communications hereunder shall be in writing and shall be deemed to have
been duly given to a party hereto if mailed to the Bank at its address set forth
below, and to the Borrower at the address set forth below or at such other
addresses as any party has designated in writing to any other party hereto.
IF TO LENDER: IF TO THE BORROWERS:
National City Bank of the Midwest Pioneer Railcorp
000 XX Xxxxx Xx, Xxxxxxx X-X00-00 0000 X. Xxxxxxxx Xx
XX Xxx 000 Xxxxxx, XX 00000-0000
Xxxxxx, XX 00000-0000 Attn: J. Xxxxxxx Xxxx
Attn: Xxxxxxx X. Xxxxxx
with copy to:
Xxxxxxx X. Xxxxxxxx
Elias, Meginnes, Xxxxxx & Seghetti
000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxx, XX 00000
Section 11.02: Survival of Representations and Warranties. All
agreements, representations and warranties made by the Borrowers herein or any
other document or certificate delivered to the Bank in connection with the
transaction contemplated by this Agreement shall continue in full force and
effect so long as any Obligations are outstanding.
Section 11.03: Successors and Assigns. This Agreement shall be
binding upon the Borrowers, their successors and assigns, except that the
Borrowers may not assign or transfer its rights without prior written consent of
the Bank. This Agreement shall inure to the benefit of the Bank, its successors
and assigns, and, except as otherwise expressly provided in particular
provisions hereof, all subsequent holders of the Obligations.
Section 11.04: Counterparts. This Agreement may be executed in any
number of counterparts, each which will deemed an original, but all of which
together shall constitute one and the same instrument.
Section 11.05: Article and Section Headings. Headings used in this
Agreement are for convenience only and shall not affect the construction of this
Agreement.
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Section 11.06: Monitoring and Evaluation. The Bank will monitor and
evaluate the Borrowers' performance under this Agreement. The Borrowers will be
monitored for compliance with rules, regulations and requirements applicable to
this Agreement.
Section 11.07: Severance Clause. The Borrowers agree that in the
event that any provision of this Agreement or any other instrument executed at
closing, or the application thereof to any person or circumstances, shall be
declared null and void, invalid, or held for any reason to be unenforceable by a
Court of competent jurisdiction, the remainder of such Agreement shall
nevertheless remain in full force and effect, and to this end, the provisions of
all covenants, conditions and agreements described herein are deemed separate.
Section 11.08: Integration Clause. It is agreed between the parties
that this Agreement, with attachments, as written, is the full and complete
agreement between the parties and that there are no oral agreements or
understandings between the parties other than what has been reduced to writing
herein.
Section 11.09: Notice of Default. Each Borrower agrees to give
written notice to the Bank within 15 days of any event which constitutes an
Event of Default under this Agreement as described in Article VIII herein or
that would, with notice or lapse of time or both, constitute and Event of
Default under this Agreement.
Section 11.10: Expenses of Collection or Enforcement. Each Borrower
agrees to pay the Bank or its assigns, in addition to any other amounts that may
be due from the Borrowers, an amount equal to the costs and expenses of
collection, enforcement or correction or waiver of any default by any Borrower
incurred by the Bank or its assigns with such collection, enforcement,
correction or waiver of default, including, without limitation, reasonable
attorneys fees.
Section 11.11: Prohibition Against Assignment. The Borrowers may not
assign or, in any way, transfer its rights and benefits under this Agreement
without the prior, written permission of the Bank.
Section 11.12: Waiver of Jury Trial. Intentionally omitted.
Section 11.13: Arbitration. Bank and the Borrowers agree that upon
the written demand of either party, whether made before or after the institution
of any legal proceedings, but prior to the rendering of any judgment in that
proceeding, all disputes, claims and controversies between them, whether
individual, joint, or class in nature, arising from this Agreement or any
document or agreement executed in connection herewith or otherwise, including
without limitation contract disputes and tort claims, shall be resolved by
binding arbitration pursuant to the Commercial Rules of the American Arbitration
Association. Any arbitration proceeding held pursuant to this arbitration
provision shall be conducted in the city nearest the Borrowers' address having
an AAA regional office, or at any other place selected by mutual agreement of
the parties. No act to take or dispose of any collateral shall constitute a
waiver of this arbitration provision or be prohibited by this arbitration
provision. This arbitration provision shall not limit the right of either party
during any dispute, claim or controversy to seek, use, and employ ancillary, or
preliminary rights and/or remedies, judicial or otherwise, for the purposes of
realizing upon, preserving, protecting, foreclosing upon or proceeding under
forcible entry and detainer for possession of, any real or personal property,
and any such action shall not be deemed an election of remedies. Such remedies
include, without limitation, obtaining injunctive relief or a temporary
restraining order, invoking a power of sale under any deed of trust or mortgage,
obtaining a writ of attachment or imposition of a receivership, or exercising
any rights relating to personal property,
14
including taking or disposing of such property with or without judicial process
pursuant to Article 9 of the Uniform Commercial Code or when applicable, a
judgment by confession of judgment. Any disputes, claims or controversies
concerning the lawfulness or reasonableness of an act, or exercise of any right
or remedy concerning any collateral, including any claim to rescind, reform, or
otherwise modify any agreement relating to the collateral, shall also be
arbitrated; provided, however, that no arbitrator shall have the right or the
power to enjoin or restrain any act of either party. Judgment upon any award
rendered by any arbitrator may be entered in any court having jurisdiction.
Nothing in this arbitration provision shall preclude either party from seeking
equitable relief from a court of competent jurisdiction. The statute of
limitations, estoppel, waiver, laches and similar doctrines which would
otherwise be applicable in an action brought by a party shall be applicable in
any arbitration proceeding, and the commencement of an arbitration proceeding
shall be deemed the commencement of any action for these purposes. The Federal
Arbitration Act (Title 9 of the United States Code) shall apply to the
construction, interpretation, and enforcement of this arbitration provision.
NATIONAL CITY BANK OF THE MIDWEST PIONEER RAILCORP
BY: /s/ Xxxxxxx X. Xxxxxx BY: /s/ X. X. Xxxx
---------------------------------- ----------------------------------
ITS: Vice-President ITS: President
The following Guarantors of the Obligations of Pioneer under the foregoing
Agreement hereby acknowledge and consent to the provisions of said Agreement.
ALABAMA RAILROAD CO. ALABAMA & FLORIDA RAILWAY CO., INC.
BY: /s/ X. X. Xxxx BY: /s/ X. X. Xxxx
---------------------------------- ----------------------------------
ITS: Treasurer ITS: Treasurer
XXXXXXX XXXXXXXX XXXXXXX XX. XXXXXXX & XXXXXXX XXXXXXXX CO.
BY: /s/ X. X. Xxxx BY: /s/ X. X. Xxxx
---------------------------------- ----------------------------------
ITS: Treasurer ITS: Treasurer
FORT XXXXX RAILROAD CO. THE GARDEN CITY WESTERN RAILWAY, INC.
BY: /s/ X. X. Xxxx BY: /s/ X. X. Xxxx
---------------------------------- --------------------------------
ITS: Treasurer ITS: Treasurer
00
XXXXXXXXXX & XXXXXXXX XXXXXXXX XX. XXXXXXX XXXXXXXXXXXX RAILWAY CO.
BY: /s/ X. X. Xxxx BY: /s/ X. X. Xxxx
---------------------------------- ----------------------------------
ITS: Treasurer ITS: Treasurer
KENDALLVILLE TERMINAL RAILWAY CO. KEOKUK JUNCTION RAILWAY CO.
BY: /s/ X. X. Xxxx BY: /s/ X. X. Xxxx
---------------------------------- ----------------------------------
ITS: Treasurer ITS: Treasurer
MICHIGAN SOUTHERN RAILROAD COMPANY MISSISSIPPI CENTRAL RAILROAD CO.
BY: /s/ X. X. Xxxx BY: /s/ X. X. Xxxx
---------------------------------- ----------------------------------
ITS: Treasurer ITS: Treasurer
PIONEER INDUSTRIAL RAILWAY CO. SHAWNEE TERMINAL RAILROAD CO.
BY: /s/ X. X. Xxxx BY: /s/ X. X. Xxxx
---------------------------------- ----------------------------------
ITS: Treasurer ITS: Treasurer
VANDALIA RAILROAD COMPANY WEST MICHIGAN RAILROAD CO.
BY: /s/ X. X. Xxxx BY: /s/ X. X. Xxxx
---------------------------------- ----------------------------------
ITS: Treasurer ITS: Treasurer
PIONEER RAILROAD EQUIPMENT CO., LTD
BY: /s/ X. X. Xxxx
----------------------------------
ITS: Treasurer
16
EXHIBIT A
APPLICABLE MARGIN GRID
(Basis points per annum)
BASIS FOR PRICING LEVEL I LEVEL II LEVEL III LEVEL IV
-----------------------------------------------------------------------------------------
Funded Debt/EBITDA > or = 3.0:1.0 > or = 2.5:1.0 > or = 2.0:1.0 < 2.0:1.0
Ratio*
But < 3.0:1.0 But <2.5:1.0
-----------------------------------------------------------------------------------------
LIBOR Margin 275.00 250.00 225.00 200.00
-----------------------------------------------------------------------------------------
* As defined in Section 1 of the Loan Agreement.
17
