INCOME SHARING AGREEMENT
THIS INCOME SHARING AGREEMENT (this "Agreement") is made and entered into
as of December 31, 1995 by and between SANWA BUSINESS CREDIT CORPORATION, a
Delaware corporation ("Lender"), and XXXXXX MANUFACTURING, INC., a Minnesota
corporation ("Borrower").
W I T N E S S E T H:
WHEREAS, Lender and Borrower have agreed to restructure certain obligations
of Borrower to Lender pursuant to the terms of that certain Loan and Security
Agreement of even date herewith (the "Loan Agreement"); and
WHEREAS, it is a condition precedent to the restructuring of Borrower's
obligations that the parties enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants and agreements set forth herein, and for other good and valuable
consideration, the mutuality, receipt and sufficiency of which hereby are
acknowledged, and intending to be legally bound, the parties hereto agree as
follows:
1. DEFINITIONS. Capitalized terms used herein and not otherwise defined
(including capitalized terms used in the foregoing recitals) shall have the
following meanings:
A. "CHANGE IN CONTROL" shall have the same meaning as "ownership change"
has for purposes of Section 382(g) of the Code.
B. "CODE" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
C. "XXXXXX AFFILIATED GROUP" shall mean the affiliated group of
corporations, of which Borrower or any successor is a member which are
consolidated for financial statement and reporting purposes under generally
accepted accounting principles.
D. "INCOME BEFORE TAXES" shall mean Borrower's income before taxes,
calculated in accordance with generally accepted accounting principles
consistently applied, including all cash gains and losses (including those gains
or losses associated with asset sales).
E. INCOME PAYMENT" shall mean the result of (A) times (B), where (A) is
Income Before Taxes MINUS actual interest payments made by Borrower to Lender on
the $2,750,000
Senior Subordinated Note of even date herewith, and (B) is forty percent (40%)
prior to a Change in Control; and, if a Change in Control has occurred, then (B)
shall mean a percentage equal to the long term tax-exempt rate as defined in
Section 382(f) of the Code.
2. QUARTERLY CALCULATION AND PAYMENT OF INCOME PAYMENT. Within thirty
(30) days of the end of each calendar quarter, Borrower shall: (i) compute
Income Before Taxes; (ii) complete the computation of Borrower's Income Payment
on the Form attached as Exhibit A hereto and (iii) forward such computation and
payment of 100% of the Income Payment due for such quarter to Lender.
3. ANNUAL CALCULATION AND PAYMENT OF INCOME PAYMENT. Within thirty (30)
days of the date on which Borrower receives its annual audited financial
statements, Borrower shall: (i) compute Borrower's Income Before Taxes; (iv)
complete the computation of Borrower's Income Payment on the form attached as
Exhibit A and (iii) forward such computation and payment of 100% of the Income
Payment remaining due to Lender after giving effect to the payments made
pursuant to Paragraph 2 hereinbefore.
4. THIRD PARTY REVIEW. If Lender disagrees with Borrower's calculation
of Income Before Taxes or the Income Payment, Lender shall be entitled to select
an independent public accounting firm to review such calculation. All costs
related to such review shall be paid for by Lender. If Lender's independent
public accounting firm disagrees with Borrower's determination of Income Before
Taxes or Income Payment, Borrower and Lender shall select a third public
accounting firm which shall calculate the Income Before Taxes or Income Payment.
The determination of such third public accounting firm shall be binding on
Borrower and Lender. Borrower and Lender shall split all costs relating to the
third accounting firm's determination. All amounts due in connection with such
adjustments shall be paid to Lender or to the third accounting firm entitled
thereto within 30 days of the date the third accounting firm's determination is
made.
5. OVERAGE. In the event the sum of the payments made by Borrower
pursuant to Paragraph 2 exceeds the amount due Lender pursuant to Paragraph 3
(an "Overage"), the Overage shall be credited against payments due Lender
pursuant to Paragraph 2 for each successive calendar quarter until the amount of
the Overage equals zero.
6. SUBSIDIARIES. All subsidiaries of Borrower included in the Xxxxxx
Group shall be subject to this Agreement. If at any time Borrower acquires or
creates one or more corporations that are affiliated corporations of the Xxxxxx
Group, they shall be subject to this Agreement, and, in Lender's sole
discretion, Borrower shall cause such corporations to become a party to this
Agreement.
7. TERM. The provisions of this Agreement shall apply until the earlier
of (i) Lender's receipt of Income Payments totalling Six Million Dollars
($6,000,000) or (ii) December 31, 2010.
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8. SUCCESSORS AND ASSIGNS. This Agreement shall bind and inure to the
respective successors and assigns of the parties hereto; but no assignment shall
relieve any party of its obligations hereunder without the written consent of
the other party.
9. SEVERABILITY. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
10. BANKRUPTCY. If the Borrower shall become subject to a proceeding
under the United States Bankruptcy Code, Borrower shall: (i) use its best
efforts to obtain authorization to make the payments due hereunder, if any, to
Lender during the pendency of the bankruptcy; (ii) incorporate the provisions of
this Agreement in any plan of reorganization submitted or supported by Borrower
(the "Plan of Reorganization"); and (iii) use its best efforts to obtain
confirmation of the Plan of Reorganization containing the provisions of this
Agreement.
11. ENTIRE AGREEMENT. This Agreement is the complete statement of the
agreement by and between Borrower and Lender and supersedes all prior
negotiations, understandings and representations between them with respect to
the subject matter of this Agreement.
12. GOVERNING LAW; SUBMISSION TO JURISDICTION. THIS AGREEMENT HAS BEEN
DELIVERED FOR ACCEPTANCE BY LENDER IN CHICAGO, ILLINOIS AND SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO THE CONFLICTS
OF LAW PROVISIONS) OF THE STATE OF ILLINOIS. EACH OF BORROWER AND LENDER HEREBY
(I) WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION TO ENFORCE OR DEFEND ANY
MATTER ARISING FROM OR RELATED TO THIS AGREEMENT; (II) IRREVOCABLY SUBMITS TO
THE JURISDICTION OF ANY FEDERAL OR STATE COURT LOCATED IN XXXX COUNTY, ILLINOIS,
OVER ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY MATTER ARISING FROM OR
RELATED TO THIS AGREEMENT; AND (III) IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
BORROWER MAY EFFECTIVELY DO SO, THE DEFENSE OF AN INCONVENIENT FORUM TO THE
MAINTENANCE OF ANY SUCH ACTION OR PROCEEDING. BORROWER: (I) AGREES THAT A FINAL
JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE
ENFORCED IN ANY OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER
MANNER PROVIDED BY LAW; AND (II) AGREES NOT TO INSTITUTE ANY LEGAL ACTION OR
PROCEEDING AGAINST LENDER OR ANY OF LENDER'S DIRECTORS, OFFICERS, EMPLOYEES,
AGENTS OR PROPERTY, CONCERNING ANY MATTER ARISING OUT OF OR RELATING TO THIS
AGREEMENT IN ANY COURT OTHER THAN ONE LOCATED IN XXXX COUNTY, ILLINOIS. NOTHING
IN THIS SECTION 13 SHALL AFFECT OR IMPAIR LENDER'S RIGHT TO SERVE LEGAL PROCESS
IN ANY MANNER PERMITTED BY LAW OR LENDER'S RIGHT TO BRING ANY ACTION OR
PROCEEDING AGAINST BORROWER OR BORROWER'S PROPERTY IN THE COURTS OF ANY OTHER
JURISDICTION.
13. NOTICE. Except as otherwise provided herein, any notice required
hereunder shall be in writing and shall be deemed to have been validly served,
given or delivered upon (i) deposit in the United States certified or registered
mails, with proper postage prepaid; (ii) sent by facsimile
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transmission with a duplicate copy sent contemporaneously by U.S. Mail; or (iii)
delivered by overnight courier or messenger delivery, addressed to the party to
be notified as follows:
(1) If to Lender, at: Sanwa Business Credit Corporation
Xxx Xxxxx Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: Asset Management Division
Fax: (000) 000-0000
with a copy to: Xxxxxxx X. Xxxxxx, Esq.
Xxxxxxxx & Xxxxxx, Ltd.
00 Xxxxx Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Fax: (000) 000-0000
(2) If to Borrower, at: Xxxxxx Manufacturing, Inc.
000 Xxxxxxxx Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxxxx 00000
Attn:Xxxxx Xxxxxx, President and
Chief Executive Officer
Fax: (000) 000-0000
with a copy to: Xxxx Xxxxxx, Esq.
Winthrop & Weinstine, P.A.
3200 Minneapolis World Trade Center
00 Xxxx Xxxxxxx Xxxxxx
Xx. Xxxx, Xxxxxxxxx 00000
Fax: (000) 000-0000
The above addresses may be changed by notice of such change, mailed as provided
herein, to the last address designated.
14. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original agreement, but all of
which together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, this Agreement has been duly executed as of the date
specified at the beginning hereof.
XXXXXX MANUFACTURING, INC.
By: /s/ Xxxxx X. Xxxxxx
-----------------------------------
Name: Xxxxx X. Xxxxxx
-----------------------------------
Its: President
-----------------------------------
SANWA BUSINESS CREDIT CORPORATION
By: /s/ Xxxxxx X. Xxxxx
-----------------------------------
Name: Xxxxxx X. Xxxxx
-----------------------------------
Its: Group Vice President
-----------------------------------
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Exhibit A to that certain
Income Sharing Agreement dated December 31, 1995
between Xxxxxx Manufacturing, Inc.
and Sanwa Business Credit Corporation
XXXXXX MANUFACTURING, INC.
INCOME STATEMENT
Time period covered: _________________________ to ___________________________
Date prepared: ______________________________________________________________
This is (check one):
/ / The original calculation for this period
/ / A revised calculation for this period
INCOME PAYMENT CALCULATION
Income Payment Calculation:
Income Before Taxes (1)
---------------
MINUS actual Interest Payments made
on the $2,780,000 Senior Subordinated Note
---------------
MULTIPLIED BY: 40% (.40) (2) .40
---------------
TOTAL: INCOME PAYMENT
---------------
I certify that the above is correct to the best of my knowledge and belief.
XXXXXX MANUFACTURING, INC.
By:
-------------------------------
Name:
------------------------------
Its:
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(1) GAAP defined, including all cash gains and losses (including those gains or
losses associated with asset sales). The parties hereto agree that in
calculating Income Before Taxes, income shall not be reduced by: scheduled CIT
(Term Loan) Principal Payments, scheduled CIT (R/E Loan) Principal Payments,
scheduled CIT Accommodation Fees, scheduled Senior Subordinated Secured Note
Interest Payments, scheduled Senior Subordinated Secured Note Principal Payments
or Income Payments.
(2) If a Change in Control has occurred the percentage applied shall be
governed by Section 1(E) hereinbefore.
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