REVOLVING CREDIT AND TERM LOAN AGREEMENT
THIS REVOLVING CREDIT AND TERM LOAN AGREEMENT, dated as of May __,
2000, is by and between ALPHA CERAMICS, INC., a Minnesota corporation (the
"Borrower"), and EXCEL BANK, a Minnesota state banking corporation (the "Bank").
RECITALS:
A. The Borrower has requested that the Bank make available to the
Borrower (i) a revolving credit facility in an aggregate amount not to exceed
$200,000 (the "Revolving Loan"), and (ii) a term loan in the amount of
$1,000,000 (the "Term Loan") (the Revolving Loan and the Term Loan are
collectively referred to as the "Loans").
B. The Borrower will use the proceeds of the Revolving Loan and Term
Loan to acquire certain assets and for general working capital purposes.
C. The Bank has agreed to make available to the Borrower the Loans, all
upon the terms and conditions of this Agreement.
AGREEMENTS:
IN CONSIDERATION of the foregoing premises, and the mutual covenants
set forth herein, the parties agree as follows:
ARTICLE 1 DEFINITIONS AND ACCOUNTING TERMS
Section 1.1 Defined Terms. In addition to the terms defined elsewhere
in this Agreement, the following terms shall have the meanings set out
respectively after each (and such meanings shall be equally applicable to both
the singular and plural form of the terms defined, as the context may require):
Act of Bankruptcy: With respect to any Person, if (i) the Person shall
(1) be or become insolvent, or (2) apply for or consent to the appointment of,
or the taking of possession by, a receiver, custodian, trustee, liquidator or
the like of the Person or of all or a substantial part of the Person's property,
or (3) commence a voluntary case under any bankruptcy, insolvency,
reorganization, arrangement, readjustment of debt, dissolution, liquidation or
similar proceeding under the laws of any jurisdiction, or (4) file a petition
seeking to take advantage of any other law relating to bankruptcy, insolvency,
reorganization, winding up or composition or adjustment of debts, or (5) admit
in writing its inability to pay its debts as they mature, or (6) make an
assignment for the benefit of its creditors; or (ii) a proceeding or case shall
be commenced, without the application or consent of the Person, and which is not
dismissed within 30 days after such commencement, in any court of competent
jurisdiction, seeking (1) the liquidation, reorganization, dissolution, winding
up or the composition or adjustment of debts of the Person, (2) the appointment
of a trustee, receiver, custodian or liquidator or the like of the Person or of
all or any substantial part of the Person's property, or (3) similar relief in
respect of the Person under any law relating to bankruptcy, insolvency,
reorganization, winding up or composition or adjustment of debts.
Adverse Event: The occurrence of any event that could reasonably be
determined to have a material adverse effect on the business, operations,
property, assets or condition (financial or otherwise) of the Borrower or on the
ability of the Borrower or any other party obligated thereunder to perform its
obligations under the Loan Documents.
Affiliate: Any Person (i) which directly or indirectly through one or
more intermediaries controls, or is controlled by, or is under common control
with, the Borrower or any of its Subsidiaries or any Guarantor, or (ii) five
percent (5%) or more of the equity interest of which is held beneficially or of
record by the Borrower or any of its Subsidiaries or any Guarantor. Control for
purposes of this definition means the possession, directly or indirectly, of the
power to cause the direction of management and policies of a Person, whether
through the ownership of voting securities or otherwise.
Agreement: This Revolving Credit and Term Loan Agreement, as it may be
amended, modified, supplemented,
restated or replaced from time to time.
Assignment of Life Insurance: That certain Assignment of Life Insurance
Policy to be executed by the Borrower and delivered to the Bank as contemplated
by Section 8.15, as it may be amended, modified, supplemented, restated or
replaced from time to time.
Base Rate: The rate of interest from time to time publicly announced by
the Bank as its "base rate." The Bank may lend to its customers at rates that
are at, above or below the Base Rate. For purposes of determining any interest
rate which is based on the Base Rate, such interest rate shall change on the
effective date of any change in the Base Rate.
Borrower's Certificate: The borrower's certificate in the form of
Exhibit A hereto, or in such other form as the Bank may reasonably require from
time to time, to be delivered by the Borrower to the Bank within 30 days after
the end of each calendar month.
Borrowing Base: At any time and subject to change from time to time in
the Bank's discretion, an amount equal to (1) 75% of Eligible Receivables, plus,
if the Bank has received an audited opening balance sheet and a current monthly
inventory reporting (detailed by raw materials, work in process and finished
goods), all in form and substance acceptable to the Bank, (2) 30% of Eligible
Inventory.
Business Day: Any day (other than a Saturday, Sunday or legal holiday
in the State of Minnesota) on which state banks are permitted to be open in
Minneapolis, Minnesota.
Capitalized Lease: Any lease which is or should be capitalized on the books
of the lessee in accordance
with GAAP.
Code: The Internal Revenue Code of 1986, as amended, or any successor
statute, together with
regulations thereunder.
Collateral: The collateral as defined in Section 5.1.
Commitment: The obligation of the Bank to make loans to the Borrower
pursuant to Section 2.1 and the Revolving Note up to an aggregate principal
amount at any one time outstanding equal to the lesser of (a) the Borrowing
Base, or (b) $200,000.
Credit Party: The Borrower, the Borrower's Subsidiaries, the Guarantors or
any Affiliate, or any one or more of them.
Debt Service Coverage Ratio: For any period of determination, the ratio
of (a) the Borrower's EBITDA for such period, to (b) the sum of (i) scheduled
principal payments of all Indebtedness (including without limitation all
Subordinated Debt) of the Borrower paid on or before the last day of such period
excluding the Revolving Loan principal balance, plus (ii) Interest Expense for
such period.
Debt to Tangible Capital Base Ratio: As of any date of determination,
the ratio of (a) the Borrower's total liabilities (excluding the Subordinated
Debt) as of such date, to (b) the Borrower's total net worth less intangible
assets as of such date plus the Subordinated Debt as of such date, all
determined in accordance with GAAP.
Default: Any event which, with the giving of notice to the Borrower or
lapse of time, or both, would
constitute an Event of Default.
EBITDA: For any period of determination, the Borrower's net income for
such period, plus deductions for Interest Expense, income taxes, depreciation
and amortization for such period, all as determined in accordance with GAAP.
Eligible Inventory: The dollar value of all inventory owned solely by
the Borrower that is at all times subject to a first priority perfected security
interest in favor of the Bank and is not subject to any other Liens except
Permitted Liens which the Bank deems to be Eligible Inventory and excludes
inventory that is unsaleable or unusable for any reason in the Borrower's
operations. The value of Eligible Inventory shall be the lower of the cost or
market value of the Eligible Inventory computed on a first-in, first-out basis
in accordance with GAAP and shall be determined monthly from the Borrower's
Certificate and supporting reports delivered to the Bank pursuant to this
Agreement.
Eligible Receivables: The dollar value of any account receivable owing
to the Borrower for services rendered or to be rendered or goods sold in the
ordinary course of business that has been invoiced to its customer by the
Borrower, is owned solely by the Borrower and is subject to a first priority
perfected security interest in favor of the Bank at the time it comes into
existence and continues to meet the same until it is collected in full and is
not subject to any other Liens except Permitted Liens which the Bank deems to be
an Eligible Receivable. Without limiting the generality of the foregoing, a
receivable shall not be an Eligible Receivable if:
(a) it has been unpaid more than 90 days past the due date
thereof or it is owed by an account debtor which has 10% or more of its
receivables unpaid more than 90 days past the due date thereof;
(b) it is subject to any Lien, other than the security
interest of the Bank or Permitted Liens;
(c) it is not a valid, legally enforceable obligation of the
account debtor to the full extent of its amount;
(d) it is subject to any setoff, counterclaim, credit
allowance, retainage, current claim against the warranty or adjustment
by the account debtor thereunder, or to any claim by such account
debtor denying liability thereunder in whole or in part, or such
account debtor has refused to accept or has returned or offered to
return any of the goods which are subject to such receivable;
(e) the account debtor is also a supplier or creditor of the
Borrower, to the extent of any contra account;
(f) it did not arise in the ordinary course of the Borrower's
business or any notice of the bankruptcy, insolvency or financial
impairment of the account debtor thereunder has been received by the
Borrower;
(g) it arose out of any contract or order which by its terms,
forbids or makes void or unenforceable its assignment by the Borrower
to the Bank; or
(h) it is a receivable owing by (1) the United States
government or any department, agency or other subdivision thereof
(except to the extent that the Borrower complies with the Federal
Assignment of Claims Act of 1940, as amended): (2) a Person located in
any jurisdiction outside the United States; or (3) any Affiliate,
employee or salesperson of the Borrower .
A receivable which is at any time an Eligible Receivable but which subsequently
fails to meet any of the foregoing requirements shall forthwith cease to be an
Eligible Receivable. The amount of Eligible Receivables shall be determined
monthly from the Borrower's Certificate and supporting reports delivered to the
Bank pursuant to the terms of this Agreement.
ERISA: The Employee Retirement Income Security Act of 1974, as amended, and
any successor statute, together with regulations thereunder.
ERISA Affiliate: Any trade or business (whether or not incorporated)
that is a member of a group of which the Borrower is a member and which is
treated as a single employer under Section 414 of the Code.
Event of Default: Any event described in Section 10.1.
Federal Reserve Board: The Board of Governors of the Federal Reserve System
or any successor thereto.
Financing Statements: UCC-1 Financing Statements naming the Borrower,
or the Guarantor, as the case may be, as debtor and the Bank as secured party
and describing the Collateral as the property covered thereby.
GAAP: Generally accepted accounting principles, consistently applied.
Guarantors: Xxxxx X. Xxxxxx or any other Person who may execute a Guaranty.
Guaranty: That certain Guaranty Agreements dated the date hereof
executed by the Guarantor and delivered to the Bank, as it may be amended,
modified, supplemented, restated or replaced from time to time.
Indebtedness: Without duplication, all obligations, contingent or
otherwise, which in accordance with GAAP should be classified upon the obligor's
balance sheet as liabilities, but in any event including the following (whether
or not they should be classified as liabilities upon such balance sheet): (a)
obligations secured by any mortgage, pledge, security interest, lien, charge or
other encumbrance existing on property owned or acquired subject thereto,
whether or not the obligation secured thereby shall have been assumed and
whether or not the obligation secured is the obligation of the owner or another
party; (b) any obligation on account of deposits or advances; (c) any obligation
for the deferred purchase price of any property or services, (d) any obligation
as lessee under any Capitalized Lease; (e) all guaranties, endorsements and
other contingent obligations respecting Indebtedness of others; and (f)
undertakings or agreements to reimburse or indemnify issuers of letters of
credit. For all purposes of this Agreement (i) the Indebtedness of any Person
shall include the Indebtedness of any partnership in which such Person is a
general partner, and (ii) the Indebtedness of any Person shall include the
Indebtedness of any joint venture in which such Person is a joint venturer. The
term "Indebtedness" shall in no event include Trade Accounts Payable.
Interest Expense: For any period of determination, the total scheduled
interest expense for such period (including any default rate of interest if then
applicable), whether paid or accrued, on all Indebtedness of the Borrower.
Investment: The acquisition, purchase, making or holding of any stock
or other security, any loan, advance, contribution to capital, extension of
credit (except for trade and customer accounts receivable for inventory sold or
services rendered in the ordinary course of business and payable in accordance
with customary trade terms), any acquisitions of real or personal property
(other than real and personal property acquired in the ordinary course of
business) and any purchase or commitment or option to purchase stock or other
debt or equity securities of or any interest in another Person or any integral
part of any business or the assets comprising such business or part thereof.
Lien: Any security interest, mortgage, pledge, lien, hypothecation,
judgment lien or similar legal process, charge, encumbrance, title retention
agreement or analogous instrument or device (including, without limitation, the
interest of the lessors under Capitalized Leases and the interest of a vendor
under any conditional sale or other title retention agreement).
Loan Documents: This Agreement, the Notes, the Security Agreement, the
Pledge Agreement, the Guaranty, the Financing Statements, the Assignment of Life
Insurance and each other instrument, document, guaranty, security agreement,
mortgage, or other agreement executed and delivered by the Borrower or any party
granting security interests in connection with this Agreement, the Loans or any
collateral for the Loans.
Notes: The Revolving Note and the Term Note, or any one or more of them.
Obligations: The obligation of the Borrower: (a) to pay the principal
of and interest on the Notes in accordance with the terms hereof and thereof,
and to satisfy all of the Borrower's other obligations to the Bank, whether
hereunder or otherwise, whether now existing or hereafter incurred, matured or
unmatured including without limitation the obligations pursuant to letters of
credit, direct or contingent, joint or several, and including without limitation
obligations to or credit from others in which the Bank has a direct or indirect
interest (including without limitation participations), including any
extensions, modifications, renewals thereof and substitutions therefor; (b) to
repay to the Bank all amounts advanced by the Bank hereunder or otherwise on
behalf of the Borrower, including, but without limitation, advances for
principal or interest payments to prior secured parties, mortgagees or lienors,
or for taxes, levies, insurance, rent, repairs to or maintenance or storage of
any of the Collateral; and (c) to pay all of the Bank's expenses and costs,
together with the reasonable fees and expenses of its counsel in connection with
the preparation and negotiation of this Agreement and other Loan Documents, and
any amendments thereto and the documents required hereunder or thereunder, or
any proceedings brought or threatened to enforce payment of any of the
Obligations described in clauses (a) or (b) above.
PBGC: The Pension Benefit Guaranty Corporation, established pursuant to
Subtitle A of Title IV of ERISA, and any successor thereto or to the functions
thereof.
Permitted Lien: Any Lien of a kind specified in paragraphs (a)-(d) of
Section 9.11.
Person: Any natural person, corporation, partnership, joint venture,
firm, association, trust, unincorporated organization, government or
governmental agency or political subdivision or any other entity, whether acting
in an individual, fiduciary or other capacity.
Plan: An employee benefit plan or other plan, maintained for employees
of the Borrower or of any ERISA Affiliate, and subject to Title IV of ERISA or
Section 412 of the Code.
Pledge Agreement: That certain Negative Pledge Agreement dated the date
hereof executed by Xxxxx X. Xxxxxx and delivered to the Bank, as it may be
amended, modified, supplemented, restated or replaced from time to time.
Pre-Tax Profit: For any period of determination, the Borrower's net profit
plus income tax expense for such period, as determined in accordance with GAAP.
Reportable Event: A reportable event as defined in Section 4043 of
ERISA and the regulations issued under such Section, with respect to a Plan,
excluding, however, such events as to which the PBGC by regulation has waived
the requirement of Section 4043(a) of ERISA that it be notified within 30 days
of the occurrence of such event, provided that a failure to meet the minimum
funding standard of Section 412 of the Code and Section 302 of ERISA shall be a
reportable event regardless of the issuance of any such waivers in accordance
with Section 412(d) of the Code.
Revolving Credit Expiration Date: The date that first occurs: (i) May 1,
2001, or (ii) the date on which the Commitment is terminated pursuant to Section
10.2.
Revolving Interest Rate: The rate of interest equal to the Base Rate
plus 0.50%; provided, however, that from and after the occurrence of any Default
and continuing thereafter until such Default shall be remedied to the written
satisfaction of the Bank, the Revolving Interest Rate shall, at the election of
the Bank, be that rate of interest equal to the Base Rate plus 2.50%. The Bank
may lend to its customers at rates that are at, above, or below the Revolving
Interest Rate.
Revolving Note: That certain Revolving Note dated the date hereof
executed by the Borrower and made payable to the order of the Bank in the
original principal amount of $200,000, as it may be amended, modified,
supplemented, restated or replaced from time to time.
Security Agreement: That certain Security Agreement dated the date
hereof executed by the Borrower and delivered to the Bank, as it may be amended,
modified, supplemented, restated or replaced from time to time.
Subordinated Debt: Any Indebtedness of the Borrower, now existing or
hereafter created, incurred or arising, which is subordinated in right of
payment to the payment of the Obligations in a manner and to an extent that the
Bank has approved in writing prior to the date hereof or prior to the creation
of such Indebtedness.
Subsidiary: Any Person of which or in which the Borrower and its other
Subsidiaries own directly or indirectly 50% or more of: (a) the combined voting
power of all classes of stock having general voting power under ordinary
circumstances to elect a majority of the board of directors of such Person, if
it is a corporation, (b) the capital interest or profit interest of such Person,
if it is a partnership, joint venture or similar entity, or (c) the beneficial
interest of such Person, if it is a trust, association or other unincorporated
organization.
Term Interest Rate: The rate of interest equal to the Base Rate plus
0.50%; provided, however, that from and after the occurrence of any Default and
continuing thereafter until such Default shall be remedied to the written
satisfaction of the Bank, the Term Interest Rate shall, at the election of the
Bank, be that rate of interest equal to the Base Rate plus 2.50%. The Bank may
lend to its customers at rates that are at, above, or below the Term Interest
Rate.
Term Note: That certain Term Note dated the date hereof executed by the
Borrower and made payable to the order of the Bank in the original principal
amount of $1,000,000, as it may be amended, modified, supplemented, restated or
replaced from time to time.
Trade Accounts Payable: The trade accounts payable of any Person with a
maturity of not greater than 90 days incurred in the ordinary course of such
Person's business.
Section 1.2 Accounting Terms and Calculations. Except as may be
expressly provided to the contrary herein, all accounting terms used herein
shall be interpreted and all accounting determinations hereunder (including,
without limitation, determination of compliance with financial ratios and
restrictions in Articles 8 and 9 hereof) shall be made in accordance with GAAP
consistently applied.
Section 1.3 Other Definitional Terms. The words "hereof," "herein" and
"hereunder" and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of this
Agreement. References to Sections, Exhibits, Schedules and like references are
to this Agreement unless otherwise expressly provided.
ARTICLE 2 TERMS OF LENDING
Section 2.1 Revolving Loan. Subject to and upon the terms and
conditions hereof and in reliance upon the representations and warranties of the
Borrower herein, the Bank agrees to make loans to the Borrower under this
Section 2.1 from time to time from the date hereof until the Revolving Credit
Expiration Date, during which period the Borrower may repay and reborrow in
accordance with the provisions hereof, provided, that the aggregate unpaid
principal amount of all outstanding loans under this Section 2.1 shall not
exceed the amount of the Commitment at any time. If, at any time, or for any
reason, the amount outstanding under the Revolving Loan exceeds the Commitment,
the Borrower shall immediately pay to the Bank, in cash, the amount of such
excess.
Section 2.2 Term Loan. Subject to and upon the terms and conditions
hereof and in reliance upon the representations and warranties of the Borrower
herein, the Bank agrees to make the Term Loan to the Borrower under this Section
2.2 on the date hereof.
Section 2.3 Borrowing Procedures. Each time the Borrower desires to
obtain a loan advance under the Revolving Loan pursuant to Section 2.1, such
request shall be in writing (which may be by telecopy) or by telephone promptly
confirmed in writing, and must be given so as to be received by the Bank not
later than 11:00 a.m., Minneapolis time, on the date of the requested advance.
Each request for an advance shall specify (i) the borrowing date (which shall be
a Business Day), and (ii) the amount of such advance. Unless the Bank determines
that any applicable condition specified in Article 6 has not been satisfied, the
Bank will make the amount of the requested advance available to the Borrower at
the Bank's principal office in Edina, Minnesota, in immediately available funds
not later than 5:00 p.m., Minneapolis time, on the date requested. The Borrower
shall be obligated to repay all advances the Bank reasonably determines were
requested on behalf of the Borrower notwithstanding the fact that the person
requesting the same was not in fact authorized to do so.
Section 2.4 The Notes.
(a) Revolving Note. The obligation of the Borrower to repay
any and all loans made under Section 2.1 shall be evidenced by the
Revolving Note of the Borrower, in form and substance acceptable to the
Bank, in the amount of $200,000 and dated as of the date of this
Agreement. The Bank shall enter in its records the amount of each
advance and the payments made on the Revolving Loan, and such records
shall be deemed conclusive evidence of the subject matter thereof,
absent manifest error.
(b) Term Note. The obligation of the Borrower to repay the
Term Loan made under Section 2.2 shall be evidenced by the Term Note of
the Borrower, in form and substance acceptable to the Bank, in the
amount of $1,000,000 and dated as of the date of this Agreement. The
Bank shall enter in its records the payments made on the Term Loan, and
such records shall be deemed conclusive evidence of the subject matter
thereof, absent manifest error.
ARTICLE 3 INTEREST AND COSTS
Section 3.1 Interest on Revolving Loan. The unpaid principal amount of
the Revolving Loan shall bear interest at a rate per annum equal to the
Revolving Interest Rate.
Section 3.2 Interest on Term Loan. The unpaid principal amount of the
Term Loan shall bear interest at a rate per annum equal to the Term Interest
Rate.
Section 3.3 Computation. Interest on each Note shall be computed on the
basis of actual days elapsed and a year of 360 days.
Section 3.4 Payment Dates. Interest accruing on each Note shall be due and
payable as specified in such Note.
Section 3.5 Increased Costs. If, as a result of any generally
applicable law, rule, regulation, treaty or directive, or any generally
applicable change therein or in the interpretation or administration thereof, or
compliance by the Bank with any generally applicable request or directive
(whether or not having the force of law) from any court, central bank,
governmental authority, agency or instrumentality, or comparable agency:
(a) any tax, duty or other charge with respect to any Loan,
any Note or the Commitment is imposed, modified or deemed applicable,
or the basis of taxation of payments to the Bank of interest or
principal of the Loans (other than taxes imposed on the overall net
income of the Bank by the jurisdiction in which the Bank has its
principal office) is changed;
(b) any reserve, special deposit, special assessment or
similar requirement against assets of, deposits with or for the account
of, or credit extended by, the Bank is imposed, modified or deemed
applicable;
(c) any increase in the amount of capital required or expected
to be maintained by the Bank or any Person controlling the Bank is
imposed, modified or deemed applicable; or
(d) any other condition affecting this Agreement, the Loans or
the Commitment is imposed on the Bank or the relevant funding markets;
and the Bank reasonably and in good faith determines that, by reason thereof,
the cost to the Bank of making or maintaining the Loans or the Commitment is
increased, or the amount of any sum receivable by the Bank hereunder or under
any Note in respect of any Loan is reduced; then, the Borrower shall pay to the
Bank upon demand (which demand shall include sufficient evidence thereof) such
additional amount or amounts as will compensate the Bank (or the controlling
Person in the instance of (c) above) for such additional costs or reduction.
Determinations by the Bank for purposes of this Section 3.5 of the additional
amounts required to compensate the Bank shall be presumptive evidence thereof.
In determining such amounts, the Bank may use any reasonable averaging,
attribution and allocation methods.
Section 3.6 Closing Fee. The Borrower shall pay the Bank a closing fee in
the amount of $7,500, which will be due and payable upon the execution of this
Agreement.
ARTICLE 4 PAYMENTS AND PREPAYMENTS
Section 4.1 Repayment. Principal of each Note shall be due and payable as
specified in such Note.
Section 4.2 Optional Prepayments. The Borrower may prepay the Loans, in
whole or in part, at any
time without premium or penalty.
Section 4.3 Accelerated Payments. Upon the occurrence of an Event of
Default and the acceleration of any one or more of the Notes, pursuant to and as
permitted by Section 10.2, all of the Notes and all other Obligations, shall be
immediately due and payable as provided in Section 10.2 and in the Notes.
Section 4.4 Payments. Payments and prepayments of principal of, and
interest on, the Notes and all fees, expenses and other obligations under the
Loan Documents shall be made without set-off or counterclaim in immediately
available funds not later than 2:00 p.m., Minneapolis time, on the dates due at
the main office of the Bank in Edina, Minnesota. Funds received on any day after
such time shall be deemed to have been received on the next Business Day.
Whenever any payment to be made hereunder or on any Note shall be stated to be
due on a day which is not a Business Day, such payment shall be made on the next
succeeding Business Day and such extension of time shall be included in the
computation of any interest or fees.
Section 4.5 Debits; Advances. The Bank shall have the right to pay
accrued interest and principal on the Notes, and any and all other amounts due
and payable under the Loan Documents, by debiting any account of the Borrower at
the Bank or by making one or more advances under the Revolving Loan, all without
further authorization of the Borrower.
Section 4.6 Application of the Payments. Any voluntary prepayment shall
be applied to such Note as the Borrower may direct, and any prepayment shall be
applied first to the payment of accrued interest and then to the reduction of
principal of such Note in inverse order of maturity. Any prepayment resulting
from an acceleration of the Notes shall be applied to any and all of the Notes
in such order and such amounts as the Bank may from time to time determine and
direct, notwithstanding any contrary instructions or directions of the Borrower.
ARTICLE 5 COLLATERAL SECURITY
Section 5.1 Composition of the Collateral. The property in which a
security interest is, or is intended to be, granted pursuant to this Agreement,
the Security Agreement, the Assignment of Life Insurance , the Pledge Agreement,
or any other Loan Document and the provisions of Section 5.2 is herein
collectively called the "Collateral." The Collateral, together with all the
Borrower's other property of any kind held by the Bank, shall stand as one
general, continuing collateral security for all of the Obligations, and may be
retained by the Bank until all Obligations have been satisfied in full, and the
Commitment has terminated.
Section 5.2 Rights in Property Held by the Bank. As security for the
prompt satisfaction of all Obligations, the Borrower hereby assigns, transfers
and sets over to the Bank all of its right, title and interest in and to, and
grants to the Bank a lien on and a security interest in, any amounts which may
be owing from time to time by the Bank to the Borrower in any capacity,
including, but without limitation, any balance or share belonging to the
Borrower of any deposit or other account with the Bank, which lien and security
interest shall be independent of any right of setoff which the Bank may have.
Section 5.3 Priority of Liens. The liens as provided for under this
Agreement, the Security Agreement, the Assignment of Life Insurance, the Pledge
Agreement, and the other Loan Documents shall be first and prior liens, subject
only to Permitted Liens.
Section 5.4 Financing Statements. The Borrower will authorize, execute
and deliver such security agreements, assignments, and UCC-1 financing
statements (including amendments thereto and continuation statements thereof) in
form satisfactory to the Bank as the Bank may specify and will pay or reimburse
the Bank for all costs of filing or recording the same in such public offices as
the Bank may designate, and take such other steps as the Bank shall direct,
including the noting of the Bank's lien on the chattel paper, in order to
perfect the Bank's interest in the Collateral.
ARTICLE 6 CONDITIONS PRECEDENT
Section 6.1 Conditions of Initial Loan. The obligation of the Bank to
make the initial Loan hereunder shall be subject to the satisfaction of the
conditions precedent, in addition to the applicable conditions precedent set
forth in Section 6.2 below, that the Bank shall have received all of the
following, in form and substance satisfactory to the Bank, each duly executed
and certified or dated the date hereof or such other date as is satisfactory to
the Bank:
(a) The Revolving Note and the Term Note, duly executed by
the Borrower.
(b) The Security Agreement, duly executed by the Borrower.
(c) The Financing Statements, duly executed by the Borrower.
(d) The Guaranty, duly executed by the Guarantor.
(e) The Pledge Agreement, duly executed by the Guarantor.
(f) An assignment separate from certificate and a financing
statement, duly executed by the Guarantor.
(g) A Secretary's Certificate certifying (1) a copy of the
Bylaws of the Borrower with all amendments thereto, (2) a copy of the
corporate resolutions of the Borrower authorizing the execution,
delivery and performance of the Loan Documents, and (3) the names,
titles, and signatures of the officers of the Borrower authorized to
execute the Loan Documents and to request advances hereunder.
(h) A copy of the Articles of Incorporation of the Borrower
with all amendments thereto, certified by the state of its
incorporation.
(i) Certificates of Good Standing for the Borrower, certified
by the state where the Borrower is incorporated and/or doing business.
(j) Copies of the policies of insurance or other evidence
acceptable to the Bank in its absolute discretion showing that the
insurance required by the Security Agreement and the other Loan
Documents is in full force and effect.
(k) Such collateral audits and equipment appraisals as the
Bank may request, each in form and substance, and conducted by
auditors/appraisers, acceptable to the Bank in its sole discretion.
(l) An officer's solvency certificate in form and substance
acceptable to the Bank.
(m) Such other documents or instruments as the Bank may
request to consummate the transaction contemplated hereby.
Section 6.2 Conditions Precedent to all Loans. The obligation of the
Bank to make any Loan hereunder (including the initial Loan) shall be subject to
the satisfaction of the following conditions precedent (and any request for a
Loan shall be deemed a written certification that such conditions precedent have
been satisfied):
(a) Before and after giving effect to such Loan, the
representations and warranties contained in Article 7 shall be true and
correct, as though made on the date of such Loan; and
(b) Before and after giving effect to such Loan, no Default or
Event of Default shall have occurred and be continuing.
ARTICLE 7 REPRESENTATIONS AND WARRANTIES
To induce the Bank to enter into this Agreement, to grant the
Commitment and to make Loans hereunder, the Borrower represents and warrants to
the Bank:
Section 7.1 Organization, Standing, Etc. The Borrower is a corporation
duly incorporated and validly existing and in good standing under the laws of
the State of Minnesota, and has all requisite corporate power and authority to
carry on its businesses as now conducted, to enter into the Loan Documents and
to perform its Obligations under the Loan Documents. The Borrower is duly
qualified and in good standing as a foreign corporation in each jurisdiction in
which the character of the properties owned, leased or operated by it or the
business conducted by it makes such qualification necessary, and where the
failure to so qualify could result in an Adverse Event.
Section 7.2 Authorization and Validity. The execution, delivery and
performance by the Borrower of the Loan Documents have been duly authorized by
all necessary corporate action by the Borrower, and the Loan Documents
constitute the legal, valid and binding obligations of the Borrower, enforceable
against the Borrower in accordance with their respective terms, subject to
limitations as to enforceability which might result from bankruptcy, insolvency,
moratorium and other similar laws affecting creditors' rights generally and
subject to limitations on the availability of equitable remedies.
Section 7.3 No Conflict; No Default. The execution, delivery and
performance by the Borrower of the Loan Documents will not (a) violate any
provision of any law, statute, rule or regulation or any order, writ, judgment,
injunction, decree, determination or award of any court, governmental agency or
arbitrator presently in effect having applicability to the Borrower, (b) violate
or contravene any provisions of the Articles of Incorporation or Bylaws of the
Borrower, or (c) result in a breach of or constitute a default under any
indenture, loan or credit agreement or any other agreement, lease or instrument
to which the Borrower is a party or by which it or any of its properties may be
bound or result in the creation of any Lien on any asset of the Borrower, other
than Liens in favor of the Bank. The Borrower is not in default under or in
violation of any such law, statute, rule or regulation, order, writ, judgment,
injunction, decree, determination or award or any such indenture, loan or credit
agreement or other agreement, lease or instrument in any case in which the
consequences of such default or violation could constitute an Adverse Event.
Section 7.4 Government Consent. No order, consent, approval, license,
authorization or validation of, or filing, recording or registration with, or
exemption by, any governmental or public body or authority is required on the
part of the Borrower to authorize, or is required in connection with the
execution, delivery and performance of, or the legality, validity, binding
effect or enforceability of, the Loan Documents, other than the filing of UCC-1
financing statements.
Section 7.5 Financial Projections. The Borrower's financial projections
as heretofore furnished to the Bank, have been prepared based upon reasonable
assumptions and fairly present the most probable anticipated financial condition
and operating results of the Borrower.
Section 7.6 Litigation. There are no actions, suits or proceedings
pending or, to the knowledge of the Borrower, threatened against or affecting
the Borrower or any of its properties before any court or arbitrator, or any
governmental department, board, agency or other instrumentality which, if
determined adversely to the Borrower, could constitute an Adverse Event.
Section 7.7 Contingent Payments or Liabilities. The Borrower does not have
any contingent payments or liabilities which are material to the Borrower.
Section 7.8 Compliance. The Borrower is in compliance with all statutes and
governmental rules and regulations applicable to it.
Section 7.9 Environmental, Health and Safety Laws. There does not exist
any violation by the Borrower of any applicable federal, state or local law,
rule or regulation or order of any government, governmental department, board,
agency or other instrumentality relating to environmental, pollution, health or
safety matters which will or threatens to impose a material liability on the
Borrower or which would require a material expenditure by the Borrower to cure.
The Borrower has not received any notice to the effect that any part of its
operations or properties is not in material compliance with any such law, rule,
regulation or order or notice that it or its property is the subject of any
governmental investigation evaluating whether any remedial action is needed to
respond to any release of any toxic or hazardous waste or substance into the
environment, the consequences of which non-compliance or remedial action could
constitute an Adverse Event.
Section 7.10 ERISA. Each Plan complies with all material applicable
requirements of ERISA and the Code and with all material applicable rulings and
regulations issued under the provisions of ERISA and the Code setting forth
those requirements. No Reportable Event, other than a Reportable Event for which
the reporting requirements have been waived by regulations of the PBGC, has
occurred and is continuing with respect to any Plan. All of the minimum funding
standards applicable to such Plans have been satisfied and there exists no event
or condition which would permit the institution of proceedings to terminate any
Plan under Section 4042 of ERISA. The current value of the Plans' benefits
guaranteed under Title IV of ERISA does not exceed the current value of the
Plans' assets allocable to such benefits.
Section 7.11 Regulation U. The Borrower is not engaged in the business
of extending credit for the purpose of purchasing or carrying margin stock (as
defined in Regulation U of the Federal Reserve Board) and no part of the
proceeds of any Loan will be used to purchase or carry margin stock or for any
other purpose which would violate any of the margin requirements of the Federal
Reserve Board.
Section 7.12 Ownership of Property; Liens. The Borrower has good and
marketable title to its real properties and good and sufficient title to its
other properties, including all properties and assets referred to as owned by it
in the financial projections referred to in Section 7.5. None of the properties,
revenues or assets of the Borrower is subject to a Lien, except for Permitted
Liens.
Section 7.13 Taxes. The Borrower has filed all federal, state and local
tax returns required to be filed and has paid or made provision for the payment
of all taxes due and payable pursuant to such returns and pursuant to any
assessments made against it or any of its property and all other taxes, fees and
other charges imposed on it or any of its property by any governmental authority
(other than taxes, fees or charges the amount or validity of which is currently
being contested in good faith by appropriate proceedings and with respect to
which reserves in accordance with GAAP have been provided on the books of the
Borrower). No tax Liens have been filed and no material claims are being
asserted with respect to any such taxes, fees or charges. The charges, accruals
and reserves on the books of the Borrower in respect of taxes and other
governmental charges are adequate.
Section 7.14 Licenses and Infringement. The Borrower possesses adequate
licenses, permits, franchises, patents, copyrights, trademarks and trade names,
or rights thereto, to conduct its business substantially as now conducted and as
presently proposed to be conducted. There does not exist and to the Borrower's
knowledge there is no reason to anticipate that there may exist, any liability
to the Borrower with respect to any claim of infringement regarding any
franchise, patent, copyright, trademark or trade name possessed or used by the
Borrower.
Section 7.15 Investment Company Act. The Borrower is not an "investment
company" or a company "controlled" by an investment company within the meaning
of the Investment Company Act of 1940, as amended.
Section 7.16 Public Utility Holding Company Act. The Borrower is not a
"holding company" or a "subsidiary company" of a holding company or an
"affiliate" of a holding company or of a subsidiary company of a holding company
within the meaning of the Public Utility Holding Company Act of 1935, as
amended.
Section 7.17 Subsidiaries. The Borrower does not have any Subsidiaries.
Section 7.18 Partnerships and Joint Ventures. The Borrower is not a partner
(limited or general) in any partnerships and the Borrower is not a joint
venturer in any joint ventures.
Section 7.19 Completeness of Disclosures. No representation or warranty
by the Borrower contained herein or in any other Loan Document, or in any
certificate or other document furnished heretofore or concurrently with the
signing of this Agreement or any other Loan Document by the Borrower to the Bank
in connection with the transactions contemplated hereunder or under any other
Loan Document, contains any untrue statement of a material fact or omits to
state a material fact which would prevent or materially inhibit the Borrower or
any Subsidiary from performing its respective obligations under this Agreement
or any other Loan Document according to its terms.
Section 7.20 Survival of Representations. All of the representations
and warranties set forth in the immediately preceding subsections shall survive
until all the Obligations shall have been satisfied in full, and the Commitment
has been terminated.
Each of the foregoing warranties and representations shall be deemed to be
repeated and reaffirmed on and as of the date any Loan is made hereunder by the
Bank to the Borrower pursuant to Article 2.
ARTICLE 8 AFFIRMATIVE COVENANTS
From the date of this Agreement and thereafter until the Commitment is
terminated or expires and the Obligations have been paid in full, unless the
Bank shall otherwise expressly consent in writing, the Borrower agrees that the
Borrower will do all of the following:
Section 8.1 Financial Statements and Reports. Furnish to the Bank:
(a) As soon as available and in any event within 90 days after
the end of each calendar year, the annual reviewed financial statements
of the Borrower prepared in conformity with GAAP, consisting of at
least statements of income, cash flow and stockholders' equity for such
year, and a balance sheet as at the end of such year, all in reasonable
detail and reviewed by independent certified public accountants of
recognized standing selected by the Borrower and acceptable to the
Bank.
(b) As soon as available and in any event within 45 days after
the end of each quarter, a copy of the compiled financial statements of
the Borrower prepared in the same manner as the financial statements
referred to in Section 8.1(a), compiled by independent certified public
accountants of recognized standing selected by the Borrower, consisting
of at least statements of income, cash flow, stockholders' equity for
such quarter, and a balance sheet as at the end of such quarter.
(c) As soon as available and in any event within 30 days after
the end of each month, a Borrower's Certificate (along with an aging of
the Borrower's accounts receivable, listing of the sale/disposal of any
equipment and, if requested by the Bank, a perpetual inventory
listing), signed by an officer of the Borrower.
(d) Immediately upon becoming aware of the occurrence, with
respect to any Plan, of any Reportable Event (other than a Reportable
Event for which the reporting requirements have been waived by PBGC
regulations) or any "prohibited transaction" (as defined in Section
4975 of the Code), a notice specifying the nature thereof and what
action the Borrower proposes to take with respect thereto, and, when
received, copies of any notice from PBGC of intention to terminate or
have a trustee appointed for any Plan.
(e) Immediately upon becoming aware of the occurrence thereof,
notice of any violation as to any environmental matter by the Borrower
and of the commencement of any judicial or administrative proceeding
relating to health, safety or environmental matters (i) in which an
adverse determination or result could result in the revocation of or
have a material adverse effect on any operating permits, air emission
permits, water discharge permits, hazardous waste permits or other
permits held by the Borrower which are material to the operations of
the Borrower, or (ii) which will or threatens to impose a material
liability on the Borrower to any Person or which will require a
material expenditure by the Borrower to cure any alleged problem or
violation.
(f) On or before April 30 of each year, the Guarantor's
personal financial statements for the preceding calendar year
(including a year-end balance sheet and an annual statement of income).
(g) From time to time, such other information regarding the
business, operation and financial condition of the Borrower as the Bank
may reasonably request.
Section 8.2 Financial Covenants.
(a) Maintain its Debt to Tangible Capital Base Ratio at all times
not greater than 1.25 to 1.0.
(b) Obtain a Pre-Tax Profit equal to or greater than $110,000
for the year ended February 28, 2001, and each year thereafter.
(c) Maintain its Debt Service Coverage Ratio (determined at
the end of each fiscal year) equal to or greater than 1.4 to 1.0.
Section 8.3 Corporate Existence. Maintain its corporate existence in
good standing under the laws of its jurisdiction of incorporation and its
qualification to transact business in each jurisdiction in which the character
of the properties owned, leased or operated by it or the business conducted by
it makes such qualification necessary.
Section 8.4 Insurance. Maintain with financially sound and reputable
insurance companies such insurance in such amounts and against such risks as is
reasonably requested by the Bank or as may be required by law or as may be
customary in the case of reputable Persons engaged in the same or similar
business and similarly situated, including, without limitation, property,
hazard, fire, wind, hail, theft, collapse, comprehensive general public
liability, and business interruption insurance, and worker's compensation or
similar insurance. The Borrower shall furnish to the Bank full information and
written evidence as to the insurance maintained by the Borrower and its
Subsidiaries. All policies shall contain the insurer's promise not to cancel the
policy without 30 days prior written notice to the Bank at its address set forth
below. All policies shall name the Bank as an additional insured or loss payee,
as appropriate, as its interests may appear.
Section 8.5 Payment of Taxes and Claims. File all tax returns and
reports which are required by law to be filed by it and pay before they become
delinquent all taxes, assessments and governmental charges and levies imposed
upon it or its property and all claims or demands of any kind (including,
without limitation, those of suppliers, mechanics, carriers, warehouses,
landlords and other like Persons) which, if unpaid, might result in the creation
of a Lien upon its property; provided that the foregoing items need not be paid
if they are being contested in good faith by appropriate proceedings, and as
long as the Borrower's title to its property is not materially adversely
affected, its use of such property in the ordinary course of its business is not
materially interfered with and adequate reserves with respect thereto have been
set aside on the Borrower's books in accordance with GAAP. In addition, and
without limitation, promptly pay all Trade Accounts Payable.
Section 8.6 Inspection. Permit any Person designated by the Bank to
visit and inspect any of its properties, corporate books and financial records,
to examine and to make copies of its books of accounts and other financial
records, and to discuss the affairs, finances and accounts of the Borrower with,
and to be advised as to the same by, its officers at such reasonable times and
intervals as the Bank may designate. The expenses of the Bank for such visits,
inspections and examinations shall be at the reasonable expense of the Borrower.
Section 8.7 Maintenance of Properties. Maintain its properties used or
useful in the conduct of its business in good condition, repair and working
order, and supplied with all necessary equipment, and make all necessary
repairs, renewals, replacements, betterments and improvements thereto, all as
may be necessary so that the business carried on in connection therewith may be
properly and advantageously conducted at all times.
Section 8.8 Books and Records. Keep adequate and proper records and
books of account in which full and correct entries will be made of its dealings,
business and affairs.
Section 8.9 Compliance. Comply in all material respects with the
requirements of all applicable state and federal laws, and of all rules,
regulations, orders, writs, judgments, injunctions, decrees or awards to which
it may be subject.
Section 8.10 ERISA. Maintain each Plan in compliance with all material
applicable requirements of ERISA and of the Code and with all material
applicable rulings and regulations issued under the provisions of ERISA and of
the Code.
Section 8.11 Environmental Matters. Observe and comply with all laws,
rules, regulations and orders of any government or government agency relating to
health, safety, pollution, hazardous materials or other environmental matters to
the extent non-compliance could result in a material liability or otherwise
constitute an Adverse Event.
Section 8.12 Notice of Litigation. Promptly provide written notice to
the Bank of all litigation, arbitration or mediation proceedings, and of all
proceedings by or before any court or governmental or regulatory agency
affecting the Borrower which alone or together with other claims seeks $50,000
or more in the aggregate, describing the nature thereof and the steps being
taken with respect to such proceeding(s).
Section 8.13 Accounts. Maintain the Borrower's primary operating and
depository account(s) at the Bank.
Section 8.14 Notice of Default. Promptly provide written notice to the
Bank of any Default or Event of Default, describing the nature thereof and what
action the Borrower proposes to take with respect thereto.
Section 8.15 Assignment of Life Insurance. Obtain by July 31, 2000, and
maintain thereafter, an insurance policy on the life of Xxxxx X. Xxxxxx in an
amount equal to or greater than $1,000,000, and execute and deliver to the Bank
the Assignment of Life Insurance on or before July 31, 2000.
ARTICLE 9 NEGATIVE COVENANTS
From the date of this Agreement and thereafter until the Commitment is
terminated or expires and the Obligations have been paid in full, unless the
Bank shall otherwise expressly consent in writing, the Borrower agrees that the
Borrower will not do any of the following:
Section 9.1 Merger. Merge or consolidate or enter into any analogous
reorganization or transaction with any Person.
Section 9.2 Sale of Assets. Sell, transfer, assign, lease or otherwise
convey all or any substantial part of its assets (whether in one transaction or
in a series of transactions) to any Person other than in the ordinary course of
business.
Section 9.3 Purchase of Assets. Purchase or lease or otherwise acquire
any right, title or interest in or to, any real or personal property not
directly related to or necessary in connection with its present operations.
Section 9.4 Plans. Permit any condition to exist in connection with any
Plan which might constitute grounds for the PBGC to institute proceedings to
have such Plan terminated or a trustee appointed to administer such Plan, permit
any Plan to terminate under any circumstances which would cause the lien
provided for in Section 4068 of ERISA to attach to any property, revenue or
asset of the Borrower or any Subsidiary or permit the underfunded amount of Plan
benefits guaranteed under Title IV of ERISA to exceed $50,000.
Section 9.5 Change in Nature of Business. Make any material change in the
nature of its business
as carried on at the date hereof.
Section 9.6 Subsidiaries, Partnerships, Joint Ventures. Do any of the
following: (a) form or acquire any corporation which would thereby become a
Subsidiary; or (b) form or enter into any partnership as a limited or general
partner or into any joint venture.
Section 9.7 Other Agreements. Enter into any agreement, bond, note or
other instrument with or for the benefit of any Person other than the Bank which
would: (a) prohibit the Borrower from granting, or otherwise limit the ability
of the Borrower to grant, to the Bank any Lien on any assets or properties of
the Borrower; or (b) be violated or breached by the Borrower's performance of
its obligations under the Loan Documents.
Section 9.8 Restricted Payments. Either: (a) purchase or redeem or
otherwise acquire for value any shares of the Borrower's stock, declare or pay
any dividends thereon (other than stock dividends), make any distribution on, or
payment on account of the purchase, redemption, defeasance or other acquisition
or retirement for value of, any shares of the Borrower's stock or set aside any
funds for any such purpose; or (b) directly or indirectly make any payment on,
or redeem, repurchase, defease, or make any sinking fund payment on account of,
or any other provision for, or otherwise pay, acquire or retire for value, any
Indebtedness of the Borrower that is subordinated in right of payment to the
Loans (whether pursuant to its terms or by operation of law), except for
regularly-scheduled payments of interest and principal (which shall not include
payments contingently required upon occurrence of a change of control or other
event) that are not otherwise prohibited hereunder or under the document or
agreement stating the terms of such subordination.
Section 9.9 Investments. Acquire for value, make, have or hold any
Investments, except:
(a) Investments outstanding on the date hereof and listed on Schedule 9.9;
(b) direct obligations of the United States of America;
(c) travel advances to officers and employees in the ordinary course of
business;
(d) extensions of credit in the nature of accounts receivable
or notes receivable arising from the sale of goods and services in the
ordinary course of business; and
(e) commercial paper issued by U.S. corporations rated "A-1"
by Standard & Poor Corporation or "P-1" by Xxxxx'x Investors Service or
certificates of deposit or bankers' acceptances having a maturity of
one year or less issued by members of the Federal Reserve System having
deposits in excess of $100,000,000 (which certificates of deposit or
bankers' acceptances are fully insured by the Federal Deposit Insurance
Corporation).
Section 9.10 Indebtedness. Create, incur, issue, assume or suffer to exist
any Indebtedness, except:
(a) the Obligations;
(b) any Subordinated Debt;
(c) Indebtedness outstanding on the date hereof and listed on
Schedule 9.10.
Section 9.11 Liens. Create, incur, assume or suffer to exist any Lien
with respect to any property, revenues or assets now owned or hereafter arising
or acquired, except Liens in favor of the Bank and except:
(a) Liens existing on the date hereof and disclosed on Schedule 9.11;
(b) Deposits or pledges to secure payment of workers'
compensation, unemployment insurance, old age pensions or other social
security obligations, in the ordinary course of its business;
(c) Liens for taxes, fees, assessments and governmental
charges not delinquent or to the extent that payments therefor shall
not at the time be required to be made in accordance with the
provisions of Section 8.5; and
(d) Liens of carriers, warehousemen, mechanics and
materialmen, and other like Liens arising in the ordinary course of
business, for sums not due or to the extent that payment therefor shall
not at the time be required to be made in accordance with the
provisions of Section 8.5.
Section 9.12 Contingent Payments or Liabilities. Either: (i) endorse,
guarantee, contingently agree to purchase or to provide funds for the payment
of, or otherwise become contingently liable upon, any obligation of any other
Person, except by the endorsement of negotiable instruments for deposit or
collection (or similar transactions) in the ordinary course of business, or (ii)
agree to maintain the net worth or working capital of, or provide funds to
satisfy any other financial test applicable to, any other Person.
Section 9.13 Unconditional Purchase Obligations. Enter into or be a
party to any contract for the purchase or lease of materials, supplies or other
property or services if such contract requires that payment be made by it
regardless of whether or not delivery is ever made of such materials, supplies
or other property or services.
Section 9.14 Transactions with Affiliates. Enter into or be a party to
any transaction or arrangement, including, without limitation, the purchase,
sale, lease or exchange of property or the rendering of any service, with any
Affiliate, except in the ordinary course of and pursuant to the reasonable
requirements of the Borrower's business and upon fair and reasonable terms no
less favorable to the Borrower than would be obtained in a comparable
arm's-length transaction with a Person not an Affiliate.
Section 9.15 Use of Proceeds. Permit any proceeds of the Loans to be
used, either directly or indirectly, for the purpose, whether immediate,
incidental or ultimate, of "purchasing or carrying any margin stock" within the
meaning of Regulation U of the Federal Reserve Board, as amended from time to
time, and furnish to the Bank, upon its request, a statement in conformity with
the requirements of Federal Reserve Form U-1 referred to in Regulation U.
ARTICLE 10 EVENTS OF DEFAULT AND REMEDIES
Section 10.1 Events of Default. The occurrence of any one or more of the
following events shall constitute an Event of Default:
(a) The Borrower shall fail to make when due, whether by
acceleration or otherwise, any payment of principal of, or interest on,
any one or more of the Notes or any fee or other amount required to be
made to the Bank pursuant to the Loan Documents and such failure shall
continue for a period of ten (10) days after notice thereof; or
(b) Any representation or warranty made or deemed to have been
made by or on behalf of the Borrower in the Loan Documents or on behalf
of the Borrower in any certificate, statement, report or other writing
furnished by or on behalf of the Borrower to the Bank pursuant to the
Loan Documents or any other instrument, document or agreement shall
prove to have been false or misleading in any material respect on the
date as of which the facts set forth are stated or certified or deemed
to have been stated or certified; or
(c) The Borrower shall fail to comply with Section 8.2 hereof or any
Section of Article 9 hereof; or
(d) The Borrower or any other Credit Party shall fail to
comply with any agreement, covenant, condition, provision or term
contained in this Agreement or in any other Loan Document and such
failure shall continue for a period of twenty (20) days after notice
thereof (and such failure shall not constitute an Event of Default
under any of the other provisions of this Section 10.1); or
(e) An Act of Bankruptcy shall occur with respect to the
Borrower or any other Credit Party; or
(f) A judgment or judgments for the payment of money in excess
of the sum of $50,000 in the aggregate shall be rendered against the
Borrower or any other Credit Party and the Borrower or such Credit
Party shall not pay or discharge the same or provide for its discharge
in accordance with its terms, or procure a stay of execution thereof,
prior to any execution on such judgments by such judgment creditor,
within 30 days from the date of entry thereof, and within said period
of 30 days, or such longer period during which execution of such
judgment shall be stayed, appeal therefrom and cause the execution
thereof to be stayed during such appeal; or
(g) Any property of the Borrower or any other Credit Party
(including, without limitation, the Collateral) shall be garnished or
attached in any proceeding and such garnishment or attachment shall
remain undischarged for a period of 30 days during which execution is
not effectively stayed; or
(h) The institution by the Borrower or any ERISA Affiliate of
steps to terminate any Plan if in order to effectuate such termination,
the Borrower or any ERISA Affiliate would be required to make a
contribution to such Plan, or would incur a liability or obligation to
such Plan, in excess of $50,000, or the institution by the PBGC of
steps to terminate any Plan; or
(i) The maturity of any Indebtedness (other than Indebtedness
under this Agreement and whether owed to the Bank or to others) of the
Borrower or any other Credit Party shall be accelerated, or the
Borrower or such Credit Party shall fail to pay any such Indebtedness
when due or, in the case of such Indebtedness payable on demand, when
demanded, or any event shall occur or condition shall exist and shall
continue for more than the period of grace, if any, applicable thereto
and shall have the effect of causing or permitting (any required notice
having been given and grace period having expired) the holder of any
such Indebtedness in such aggregate amount or any trustee or other
Person acting on behalf of such holder to cause, such Indebtedness to
become due prior to its stated maturity or to realize upon any
collateral given as security therefor; or
(j) The Borrower shall fail to pay, withhold, collect or remit
any tax or tax deficiency when assessed or due or notice of any state
or federal tax lien shall be filed or issued; or
(k) Any Guarantor dies or purports to revoke such
Guarantor's Guaranty; or
(l) Any Guarantor purports to revoke his Pledge Agreement;
or
(m) Any Event of Default shall occur under the Pledge
Agreement; or
(n) Xxxxx X. Xxxxxx shall fail to own and hold of record
at least 51% of the outstanding voting stock of the
Borrower.
Section 10.2 Remedies. If (a) any Event of Default described in Section
10.1(e) shall occur, the Commitment shall automatically terminate and the
outstanding unpaid principal balance of the Notes, the accrued interest thereon
and all other obligations of the Borrower to the Bank under the Loan Documents
shall automatically become immediately due and payable; or (b) any other Event
of Default shall occur and be continuing, then the Bank may take any or all of
the following actions: (i) declare the Commitment to be terminated, whereupon
the Commitment shall terminate, and (ii) declare that the outstanding unpaid
principal balance of one or more of the Notes, the accrued and unpaid interest
thereon and all other obligations of the Borrower to the Bank under the Loan
Documents to be forthwith due and payable, whereupon such Notes, all accrued and
unpaid interest thereon and all such obligations shall immediately become due
and payable, in each case without further demand or notice of any kind, all of
which are hereby expressly waived, anything in this Agreement or in the Notes to
the contrary notwithstanding. In addition, upon any Event of Default and so long
as such Event of Default continues, the Bank may exercise all rights and
remedies under any other instrument, document or agreement between the Borrower
and the Bank, and enforce all rights and remedies under any applicable law,
including without limitation the rights and remedies available upon default to a
secured party under the Uniform Commercial Code as adopted in the State of
Minnesota, including, without limitation, the right to take possession of the
Collateral, or any evidence thereof, proceeding without judicial process or by
judicial process (without a prior hearing or notice thereof, which the Borrower
hereby expressly waives) and the right to sell, lease or otherwise dispose of
any or all of the Collateral, and, in connection therewith, the Borrower will on
demand assemble the Collateral and make it available to the Bank at a place to
be designated by the Bank which is reasonably convenient to both parties.
Section 10.3 Offset. In addition to the remedies set forth in Section
10.2, upon the occurrence of any Event of Default or at any time thereafter
while such Event of Default continues, the Bank or any other holder of the Notes
may offset any and all balances, credits, deposits (general or special, time or
demand, provisional or final), accounts or monies of the Borrower then or
thereafter with the Bank or such other holder, or any obligations of the Bank or
such other holder of the Notes, against the Indebtedness then owed by the
Borrower to the Bank. Nothing in this Agreement shall be deemed a waiver or
prohibition of the Bank's rights of banker's lien, offset, or counterclaim,
which right the Borrower hereby grants to the Bank.
ARTICLE 11 MISCELLANEOUS
Section 11.1 Waiver and Amendment. No failure on the part of the Bank
or the holder of the Notes to exercise and no delay in exercising any power or
right hereunder or under any other Loan Document shall operate as a waiver
thereof; nor shall any single or partial exercise of any power or right preclude
any other or further exercise thereof or the exercise of any other power or
right. The remedies herein and in any other instrument, document or agreement
delivered or to be delivered to the Bank hereunder or in connection herewith are
cumulative and not exclusive of any remedies provided by law. No notice to or
demand on the Borrower not required hereunder or under the Notes shall in any
event entitle the Borrower to any other or further notice or demand in similar
or other circumstances or constitute a waiver of the right of the Bank or the
holder of the Notes to any other or further action in any circumstances without
notice or demand. No amendment, modification or waiver of any provision of this
Agreement or consent to any departure by the Borrower therefrom shall be
effective unless the same shall be in writing and signed by the Bank, and then
such amendment, modifications, waiver or consent shall be effective only in the
specific instances and for the specific purpose for which given.
Section 11.2 Expenses and Indemnities. Whether or not any Loan is made
hereunder, the Borrower agrees to reimburse the Bank upon demand for all
reasonable expenses paid or incurred by the Bank (including collateral audit
expenses, filing and recording costs and fees and expenses of legal counsel) in
connection with the preparation, review, execution, delivery, amendment,
modification, interpretation, collection and enforcement of the Loan Documents.
The Borrower agrees to pay, and save the Bank harmless from all liability for,
any stamp or other taxes which may be payable with respect to the execution or
delivery of the Loan Documents. The Borrower agrees to indemnify and hold the
Bank harmless from any loss or expense which may arise or be created by the
acceptance of instructions for making Loans or disbursing the proceeds thereof.
The obligations of the Borrower under this Section 11.2 shall survive any
termination or expiration of the Commitment and payment in full of the
Obligations.
Section 11.3 Notices. Except when telephonic notice is expressly
authorized by this Agreement, any notice or other communication to any party in
connection with this Agreement shall be in writing and shall be sent by manual
delivery, telegram, telex, facsimile transmission, overnight courier or United
States mail (postage prepaid) addressed to such party at the address specified
on the signature page hereof, or at such other address as such party shall have
specified to the other party hereto in writing. All periods of notice shall be
measured from the date of delivery thereof if manually delivered, from the date
of sending thereof if sent by telegram, telex or facsimile transmission, from a
first Business Day after the date of sending if sent by overnight courier, or
from four days after the date of mailing if mailed; provided, however, that any
notice to the Bank under Article 2 hereof shall be deemed to have been given
only when received by the Bank. If notice to the Borrower of any intended
disposition of the Collateral or any other intended action is required by law in
a particular instance, such notice shall be deemed commercially reasonable if
given at least ten calendar days prior to the date of intended disposition or
other action.
Section 11.4 Successors. This Agreement shall be binding on the
Borrower and the Bank and their respective successors and assigns, and shall
inure to the benefit of the Borrower and the Bank, and the successors and
assigns of the Bank. The Borrower shall not assign its rights or duties
hereunder without the written consent of the Bank.
Section 11.5 Participations and Information. The Bank may sell
participation interests in any or all of the Loans and in all or any portion of
the Commitment to any Person. The Bank may furnish any information concerning
the Borrower in the possession the Bank from time to time to participants and
prospective participants and may furnish information in response to credit
inquiries consistent with general banking practice.
Section 11.6 Severability. Any provision of the Agreement which is
prohibited or unenforceable in any jurisdiction shall, in such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.
Section 11.7 Captions. The captions or headings herein are for convenience
only and in no way define, limit or describe the scope or intent of any
provision of this Agreement.
Section 11.8 Entire Agreement. This Agreement and the Notes, and the
other Loan Documents, embody the entire agreement and understanding between the
Borrower and the Bank with respect to the subject matter hereof and thereof.
This Agreement supersedes all prior agreements and understandings relating to
the subject matter hereof.
Section 11.9 Counterparts. This Agreement may be executed in any number
of counterparts, all of which taken together shall constitute one and the same
instrument, and any party hereto may execute this Agreement by signing any such
counterpart.
Section 11.10 Governing Law. The validity, construction and
enforceability of this Agreement and the Notes shall be governed by the internal
laws of the State of Minnesota, without giving effect to conflict of laws
principles thereof.
(The signature page follows.)
THE PARTIES HERETO have caused this Revolving Credit and Term Loan
Agreement to be executed as of the date first above written.
ALPHA CERAMICS, INC.
By:
Its:
0000 Xxxxxxxx Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxxxx, XX 00000-0000
Attention: Xxx Xxxxxx
Telephone: (000) 000-0000
Fax: (000) 000-0000
BANK
By:
Its:
0000 Xxxxxx Xxxxxx Xxxxx
Xxxxx, XX 00000
Attention: Xx. Xxx Xxxxxx
Telephone: (000) 000-0000
Fax: (000) 000-0000
2371858-2
List of Schedules
9.9 Existing Investments
9.10 Existing Indebtedness
9.11 Existing Liens
