AGREEMENT
This Agreement is entered into on August 24, 2000 and made effective as
of July 18, 2000 by and between Firstar Bank, N.A., f/k/a Mercantile Bank
Midwest ("Bank"), Top Air Manufacturing, Inc., an Iowa corporation ("Top Air"),
Xxxxxx Industries, Inc., an Iowa corporation ("Xxxxxx") and Xxxxxx Acquisition
Sub, Inc., an Iowa corporation ("Xxxxxx Sub").
RECITALS
Reference is made to the recitals in that certain Agreement entered
into by and between Bank, Top Air, Xxxxxx and Xxxxxx Sub effective as of April
18, 2000 (the "First Agreement'), a copy of which is attached to this Agreement
as Exhibit 1. All of the Recitals contained in the First Agreement are hereby
incorporated by reference.1
The First Agreement extended the maturity of the Notes, the New Notes
and the Term Notes to July 18, 2000. On July 18, 2000, Top Air did not pay the
amounts due under the Notes, the New Notes and the Term Notes, nor did Top Air
pay the amounts described in Paragraph 3 of the First Agreement.
In addition, Top Air has failed to pay the amounts due under that
Special Advance Agreement dated June 28, 2000.
As a result of the foregoing, Top Air is in default of its obligations
to Bank, and all amounts owed to Bank are payable in full without further notice
or demand.
In order to facilitate its efforts to reorganize its obligations to
Bank and to attract additional capital, Top Air, Xxxxxx and Xxxxxx Sub
(collectively the "Borrowers") have requested that Bank forego exercise of its
rights and remedies up to and including October 31, 2000. Bank is willing to do
so, but only on the terms and conditions set forth herein.
In consideration of the foregoing, and in consideration of the
following mutual promises, Bank and Borrowers agree as follows:
1. The balance owed to Bank on the Note and the New Notes, including
the June 28, 2000 Special Advance, (Note No. 3306438-0101) as of August 16, 2000
was $1,804,880.20, consisting of unpaid principal of $1,802,000.00 and unpaid
accrued interest (calculated prior to the rate adjustment hereafter provided for
in paragraph 5 of this Agreement) of $2,880.24. For purposes of this Agreement
the interest on the Special Advance included in this paragraph was calculated at
the rate of 9.75% rather than the Special Advance rate of prime plus 4% as set
forth in the Special Advance Agreement of June 28, 2000.
2. The balances owed to Bank on the Term Notes as of August 16, 2000
were:
a. As to Note 3306438-0001, the principal balance was $3,961,105.26,
plus accrued interest (calculated prior to the rate adjustment
hereafter provided for in paragraph 5 of this Agreement) of
$6,331.28.
b. As to Note 3306438-9001, the principal balance was $3,175,488.89,
plus accrued interest (calculated prior to the rate adjustment
hereafter provided for in paragraph 5 of this Agreement) of
$5,075.57.
3. The fee due under Paragraph 3(a) of the First Agreement was
$74,000.40 as of August 7, 2000. The fee shall be due and payable on October 31,
2000.
--------------
1 Capitalized terms not defined in this Agreement shall have the meaning given
to them in the First Agreement.
4. The $200,000.00 principal balance due under the Special Advance
Agreement dated June 28, 2000, plus the interest accrued thereon as modified by
paragraph 1 of this Agreement shall continue to be considered as part of the
total funds advanced under the Note and New Notes described in paragraph 1 of
this Agreement.
5. From and after August 7, 2000, interest on all of Top Air's
obligations to Bank will accrue at the rate of Bank's prime rate plus 3%. During
the term of this Agreement, Top Air will continue to make interest payments to
the Bank on the Note and New Notes referred to in paragraph 1 of this Agreement
and will continue to make all regular payments required under the Term Notes
referred to in paragraph 2 of this Agreement. Notwithstanding the foregoing, no
interest will accrue with respect to the fee referred to in Paragraph 3 of this
Agreement after August 7, 2000.
6. During the term of this Agreement, Top Air will not, without the
express written approval of Bank, make any payments on account of the
indebtedness owed to Owosso Corporation or on account of the subordinated
debentures dated January 25, 2000.
7. Top Air will provide borrowing base certificates on a weekly basis
commencing August 18, 2000 and continuing each Friday thereafter. Borrowing base
certificates will utilize unadjusted book numbers.
8. During the term of this Agreement, Top Air may borrow, repay and
reborrow under the Note and the New Notes in accordance with the borrowing base
certificates provided to Bank. Notwithstanding anything in the Note, the New
Notes or the First Agreement to the contrary, Top Air may borrow an amount equal
to the borrowing base as calculated in the most recent borrowing base
certificate provided to Bank, plus an additional $600,000. In no event, however,
may the principal amounts outstanding under the Note and the New Notes exceed
$2,000,000. Top Air will maintain compliance with all other borrowing base
terms. By way of illustration of the foregoing, if the borrowing base
calculation indicates that Top Air can borrow up to one million, two hundred
thousand dollars ($1,200,000.00), Top Air will be permitted to borrow up to one
million, eight hundred thousand dollars ($1,800,000.00). If the borrowing base
calculation indicates Top Air can borrow up to one million, five hundred
thousand dollars ($1,500,000.00), Top Air will be permitted to borrow only up to
two million dollars ($2,000,000.00).
9. Top Air acknowledges that an amount equal to $74,000.40 shall be
deducted from the Borrowing Base under the Note and the New Notes unless and
until the fee due under Paragraph 3 of this Agreement is paid.
10. Top Air warrants and represents that all of the inventory of Top
Air and Xxxxxx Industries, Inc. is located at the principal places of business
of those companies, except for the inventory located at the places in Arkansas,
Wisconsin and Ontario, Canada described in Exhibit 2. Top Air will execute and
deliver for recording financing statements in form and substance reasonably
acceptable to Bank with respect to any assets subject to Bank's security
interest in Arkansas, Wisconsin and Ontario, Canada.
11. Commencing August 18, 2000, Top Air will provide confirmation of
the account balances for Borrowers' accounts at Xxxxxxx Bank and Toronto
Dominion Bank, as well as for the Owosso Escrow Account, and will provide copies
of the monthly statements for those accounts. Top Air warrants and represents
that it has no other accounts other than those described in this paragraph and
at Bank.
12. Top Air will provide Bank with a copy of its audit for the fiscal
year ending May 30, 2000 by September 30, 2000.
13. On or before August 31, 2000, Top Air will engage the services of
an independent business consultant acceptable to Bank. Upon execution of this
agreement, Bank will provide Top Air with the names and phone numbers of three
such consultants that are acceptable.
14. Top Air will deliver to Bank the certificates of title for all
vehicles owned by Borrowers on or before August 18, 2000 and will take all steps
reasonably requested by Bank to assist Bank in perfecting its lien on those
vehicles.
15. Borrowers will furnish to Bank monthly financial statements,
including an income statement, balance sheet, statement of cash flow and
expenses, and accounts receivable aging within 20 days of month end, beginning
August 21, 2000 for July, 2000.
16. To induce Bank to enter into this Agreement:
a. Top Air warrants that it has no existing defense or right of
offset against the Note, the New Notes, the Term Notes, the Loan
Agreement, the Special Advance Agreement, the First Agreement or
any other document executed in connection therewith
(collectively, the "Documents");
b. Top Air reaffirms all of its obligations to Bank;
c. Top Air warrants that since the Documents were signed by Top Air,
the ownership of the property securing the payment of the amounts
due under the Documents has not been altered nor has any lien or
claim been filed or threatened to be filed against the property;
d. Top Air warrants that as of August 1, 2000, the balance of the
Owosso Escrow Account was $11,778.44.
17. Provided that here are no further defaults by Borrowers under the
Documents or this Agreement, and except as provided in paragraph 19 of this
Agreement, Bank agrees that it will forbear from exercising its rights and
remedies against Borrowers under the Documents up to and through October 31,
2000. This forbearance period shall end as of November 1, 2000 at 12:01 a.m.
without further notice or demand, and all of Borrowers' obligations to Bank
shall be due and payable without further notice or demand.
18. Borrowers for themselves, their successors and assigns, absolutely,
unconditionally and irrevocably waive and release any and all claims, demands,
damages, actions and causes of action of any kind whatsoever whether known or
unknown or unforeseen against the Bank, its agents, employees, officers,
directors, attorneys, successors or assigns (each a "Released Party") arising
out of any transaction, agreement, note or contract of any nature prior to the
date of execution of this Agreement. Further, the Borrowers hereby waive any and
all claims against any Released Party based upon any assertions that such
Released Party has breached a covenant of good faith and fair dealing in
commercial lending transactions or breached any fiduciary duty to any of the
Borrowers in connection with any commercial lending transaction.
19. The occurrence of any of the following events shall constitute an
"event of default" hereunder and entitle the Bank to immediately exercise all of
its rights and remedies under the Documents:
(a) Commencement of foreclosure or other action to repossess or
execute upon any collateral on which Bank holds a lien under
the documents by any creditor of Borrowers holding a lien
against such collateral that is prior in right to the
interest of Bank in the collateral;
(b) Borrower(s) (i) admit in writing their inability to pay any
of their debts generally; (ii) make a general assignment for
the benefit of creditors; or (iii) any case, proceeding or
other action under the federal bankruptcy laws or under
similar laws now or hereafter in effect is instituted by any
of them or against any of them seeking liquidation, winding
up, reorganization, adjustment, protection or relief or
seeking the entry of an order for relief or for the
appointment of a receiver, trustee or other similar official
for Borrower(s) or any of them or for any substantial part
of their property;
(c) Borrowers' default in the observance or performance of any
negative or affirmative covenant or any other agreement of
Borrower herein set forth in this Agreement;
(d) Borrowers, without notice to Bank and without first
obtaining Bank's written approval, grants a mortgage to, or
allow the affixing of a lien or other encumbrance, on any
property constituting Bank's collateral under the documents;
(e) If any representation, warranty, certificate, schedule or
other information made or furnished by Borrower herein or
pursuant to this Agreement is or shall be untrue or
misleading in any material respect; and
(f) Default in the making of any payments due Bank under the
terms of this Agreement
20. Nothing herein shall waive Borrowers' existing defaults to Bank.
21. Except as modified herein, all of the terms and provisions of the
Documents remain in full force and effect.
22. Each party is executing this Agreement solely in reliance upon
their own knowledge, belief and judgment and not upon the representations made
by any other party or others on their behalf.
23. This Agreement shall be binding upon and inure to the benefit of
and shall be enforceable by the parties hereto, their respective personal
representatives, heirs, administrators, successors and assigns.
24. No delay or failure by Bank to exercise any right under this
Agreement, and no partial or single exercise of that right, shall constitute a
waiver of that or any other right, unless otherwise express provided by Bank.
25. No further modifications of any kind, whether oral or written,
shall be made or accepted with respect to any of Top Air's obligations to the
Bank, except as may be agreed to and confirmed in writing between the parties.
26. Borrowers acknowledge receiving a copy of this Agreement.
IMPORTANT: READ BEFORE SIGNING.
THE TERMS OF THIS AGREEMENT SHOULD BE READ CAREFULLY BECAUSE ONLY THOSE
TERMS IN WRITING ARE ENFORCEABLE. NO OTHER TERMS OR ORAL PROMISES NOT
CONTAINED IN THIS WRITTEN CONTRACT MAY BE LEGALLY ENFORCED. YOU MAY
CHANGE THE TERMS OF THIS AGREEMENT ONLY BY ANOTHER WRITTEN AGREEMENT.
TOP AIR MANUFACTURING, INC. FIRSTAR BANK, N.A.
By: /s/ Xxxxxx X. Xxxx By:
---------------------------------- ---------------------------------
XXXXXX INDUSTRIES, INC.
By: /s/ Xxxxxx X. Xxxx
---------------------------------
XXXXXX ACQUISITION SUB, INC.
By: /s/ Xxxxxx X. Xxxx
---------------------------------
EXHIBIT 1
TO
FORBEARANCE AGREEMENT
BETWEEN
FIRSTAR BANK, N.A. AND TOP AIR MANUFACTURING, INC.
AGREEMENT
This Agreement is made effective as of the 18th day of April, 2000, by
and between MERCANTILE BANK MIDWEST ("Bank"), TOP AIR MANUFACTURING, INC., an
Iowa corporation, ("Top Air"), XXXXXX INDUSTRIES, INC., an Iowa corporation,
("Xxxxxx"), and XXXXXX ACQUISITION SUB, INC., an Iowa corporation, ("Xxxxxx
Sub").
RECITALS
WHEREAS, Top Air and Bank entered into a November 2, 1998, Loan
Agreement, which was modified by a March 4, 1999, Modification Agreement, and
further modified by an Agreement dated January 28, 2000, (collectively, the
"Loan Agreement"); and
WHEREAS, Top Air borrowed money pursuant to said Loan Agreement
evidenced by promissory note No. 254839 dated March 4, 1999, as extended by a
written Loan Extension Agreement dated November 10, 1999, (collectively, the
"Note"), which Note was extended and replaced by an Overadvance Line of Credit
Promissory Note and a Line of Credit Promissory Note, (collectively the "New
Notes") pursuant to the January 28, 2000 Agreement; and
WHEREAS, the Note and New Notes continue to be secured by certain
assets of Top Air and certain assets of Top Air's subsidiaries, Xxxxxx and
Xxxxxx Sub, all as provided under the Loan Agreement, Note and New Notes; and
WHEREAS, the New Notes were due and payable in full according to their
terms on April 18, 2000, but Top Air has not paid the New Notes, and is in
default under the terms of the Note, New Notes, term note no. 211094 and term
note no. 300822 (the "Term Notes"), and the Loan Agreement; and
WHEREAS, Bank and Top Air have agreed, notwithstanding Top Air's
default, to amend the maturity dates of the New Notes and Term Notes, provided
Top Air, Xxxxxx and Xxxxxx Sub perform all the terms and conditions of this
Agreement as hereinafter set forth;
NOW, THEREFORE, IT IS AGREED AS FOLLOWS:
1. The balance owed on the Note and New Notes as of April 21, 2000, was
$2,206,000.00.
2. The balances owed on the Term Notes as of April 18, 2000, was as
follows:
a. Note no. 211094 had a principal balance of $4,044,986.76, plus
accrued interest of $7,062.15.
b. Note no. 300822 had a principal balance of $3,241,983.67, plus
accrued interest of $6,178.37.
3. The Note, New Notes and Term Notes shall continue to be payable
according to their respective terms, provided:
a. From and after April 18, 2000, the interest rate on the Note, New
Notes and Term Notes shall accrue at a variable rate equal to the Bank
Prime Rate plus .25%, and the maturity date of each of said obligations
shall be changed to July 18, 2000. In addition, Top Air will pay Bank a
fee, determined as hereafter provided ("Fee"), on the earlier of: (i)
July 18, 2000, or (ii) the date Top Air obtains replacement financing
to pay the Note, New Notes and Term Notes in full. The Fee shall be an
amount equal to additional interest accrued on the Note, the New Notes
and the Term Notes at the rate of 2.75% per annum from April 18, 2000,
to the earlier of: (i) July 18, 2000, or (ii) the date that Top Air
obtains replacement financing to pay the Note, New Notes and the Term
Notes in full.
b. The Borrowing Base under the Note and New Notes shall be limited to
$2,900,000.00, or less based on the total collateral value shown on the
monthly Borrowing Base Certificates provided by Top Air to Bank. Top
Air may utilize the unused portion of the Borrowing Base, or collected
receivables, for its operating needs, which may or may not include
replenishing the escrow account established with respect to Owosso
warranty claims (the "Owosso Escrow Account"), if necessary, and paying
Top Air's debt to Owosso Corporation ("Owosso Debt"), provided the
total value of the Bank's collateral continues to support the amount of
Top Air's borrowing. Notwithstanding the foregoing, Top Air shall make
no payments on the Owosso Debt, and shall make no payments to replenish
the Owosso Escrow Account, to the extent that such payments would
result in Top Air being in violation of any of the terms of its
obligations to the Bank. The Owosso Debt and the "Owosso Receivables",
as defined in the Loan Agreement, shall both continue to be excluded
from the Borrowing Base Certificate. To the extent not already granted,
Top Air hereby grants to Bank a first priority security interest in the
Owosso Escrow Account, and agrees to execute such documents as may be
necessary or appropriate to effectuate such security interest.
c. No additional advances shall be made on term note no. 211094 from
and after the effective date of this Agreement.
d. Top Air and Bank acknowledge and agree that, as of April 18, 2000,
Top Air has failed to meet the net worth, working capital and
debt/equity covenants of Top Air's obligations to Bank, but Bank shall
not treat such failure as a default during the term of this Agreement,
provided Top Air's net worth and debt/equity, as defined in said
obligations, do not decline below the levels that existed on April 18,
2000. Bank agrees to waive the working capital covenant during the term
of this agreement.
4. Top Air acknowledges and agrees that Top Air's obligations to Owosso
corporation are unsecured, and that Bank hold a first priority security interest
in all of Top Air's accounts receivable, including, but not limited to, the
Owosso Receivables.
5. Top Air shall provide Bank a monthly Borrowing Base Certificate with
supporting documentation by the 20th of the following month, including, but not
limited to, a statement or report of aged accounts receivable, cross age default
data, ineligible receivables, and such other documents, reports or information
as Bank may reasonably request, provided the May 31, 2000, information shall be
unadjusted based on Top Air's books and records.
6. Top Air shall engage Hillpipre Auction of Cedar Falls to complete an
orderly liquidation analysis of all of Top Air's inventory and the estimated
cost to complete such inventory by May 18, 2000.
7. Top Air shall provide Bank a copy of the real estate appraisal that
has been, or will be completed, with respect to Top Air's Cedar Falls property,
and will execute the Assignment to Bank attached hereto as Exhibit "A." Bank
acknowledges that its lien on Lot 1 of the Cedar Falls property shall be
subordinate to a lien in favor of the City of Cedar Falls, and agrees that it
shall, if necessary, execute an appropriate subordination agreement to that
effect.
8. Top Air shall provide Bank a copy of the Great Bend Manufacturing
Purchase Agreement.
9. Contemporaneously with the execution of this Agreement, Top Air
shall reimburse Bank the sum of $16,600.00 for the ABL Audit completed with
respect to Top Air, and the sum of $$2,937.46 for all attorney fees and expenses
incurred by Bank in connection herewith, as previously agreed to by Top Air.
10. To induce Bank to enter this Agreement, Top Air:
a. Warrants that it has no existing defenses or right of offset against
the Note, New Notes, Term Notes, Loan Agreement or any other document
executed in connection therewith;
b. Reaffirms all of its obligations under the Loan Agreement, Note New
Notes, Term Notes and any other documents executed in connection
therewith;
c. Warrants that since the Note, New Notes, Term Notes and Loan
Agreement were signed by Top Air, the ownership of the property
securing the Note, New Notes and Term Notes has not been altered nor
has any lien or claim been filed or threatened to be filed against the
property securing Top Air's obligations to Bank;
d. For itself, its successors and assigns, hereby irrevocably and
unconditionally releases and forever discharges Bank, its employees,
officers, attorneys, representatives and assigns from any and all
claims and defenses with respect to the Note, New Notes, Term Notes,
Loan Agreement and any other documents executed in connection therewith
that have been or could be asserted against Bank as of the date of this
Agreement.
11. Each party is executing this Agreement solely in reliance upon
their own knowledge, belief and judgment and not upon the representations made
by any other party or others on their behalf.
12. This Agreement shall be binding upon and inure to the benefit of
and shall be enforceable by the parties hereto, their respective personal
representatives, heirs, administrators, successors and assigns.
13. Except as modified by this Agreement, all of the terms and
conditions of the Note, New Notes, Term Notes and Loan Agreement remain
unchanged and in full force and effect.
14. No delay or failure by Bank to exercise any right under this
Agreement, and no partial or single exercise of that right, shall constitute a
waiver of that or any other right, unless otherwise express provided by Bank.
15. No further modifications of any kind, whether oral or written,
shall be made or accepted with respect to any of Top Air's obligations to the
Bank, except as may be agreed to and confirmed in writing between the parties'
attorneys.
16. Top Air acknowledges receiving a copy of this Agreement.
IMPORTANT: READ BEFORE SIGNING.
THE TERMS OF THIS AGREEMENT SHOULD BE READ CAREFULLY BECAUSE ONLY THOSE
TERMS IN WRITING ARE ENFORCEABLE. NO OTHER TERMS OR ORAL PROMISES NOT
CONTAINED IN THIS WRITTEN CONTRACT MAY BE LEGALLY ENFORCED. YOU MAY
CHANGE THE TERMS OF THIS AGREEMENT ONLY BY ANOTHER WRITTEN AGREEMENT.
TOP AIR MANUFACTURING, INC. MERCANTILE BANK MIDWEST
By: /s/ Xxxxxx X. Xxxx By:
------------------------------- ------------------------------
XXXXXX INDUSTRIES, INC.
By: /s/ Xxxxxx X. Xxxx
-------------------------------
XXXXXX ACQUISITION SUB, INC.
By: /s/ Xxxxxx X. Xxxx
--------------------------------
EXHIBIT 2
To
Forbearance Agreement
Between
Firstar Bank, N.A. & Top Air Manufacturing, Inc.
Peoples Implement Co.
18359 XX 00 Xxxx
X X Xxx 00
Xxxxx, XX 00000
X.X. Xxxxxxxxx Equipment, LTD
0000 Xxxxxxxx Xxxxxx
X X Xxx 000
Xxxxxxx, Xxxxxxx X0X 0X0
Chief Equipment
0000 Xxxxx Xxxxxxxx Xxxxxx
Xxxxxxx, XX 00000
