1
EXHIBIT 10.54
LOAN AGREEMENT
BETWEEN
STANDARD FEDERAL BANK
AND
XXXXXXX INDUSTRIES, INC., XXXXXXX OF GEORGIA, INC.,
SHELBY STEEL PROCESSING COMPANY,
XXXXXXX TUBE COMPANY D/B/A QUALITY TUBE,
XXXXXXX INDUSTRIES OF OHIO, INC.,
XXXXXXX EPCO, INC. AND XXXXXXX OF ALABAMA, INC.
THIS LOAN AGREEMENT is made and delivered this 29th day of August 29,
1996, by and between XxXxxxx Industries, Inc., a Michigan corporation, XxXxxxx
of Georgia, Inc., a Georgia corporation, Shelby Steel Processing Company, a
Michigan corporation, XxXxxxx Tube Company d/b/a Quality Tube, a Michigan
corporation, XxXxxxx Industries of Ohio, Inc., a Michigan corporation, XxXxxxx
Epco, Inc., a New York corporation, and XxXxxxx of Alabama, Inc., a Michigan
corporation (collectively, "Borrower"), whose address/principal office is 6200
Elmridge, Xxxxxxxx Xxxxxxx, Xxxxxxxx 00000, and Standard Federal Bank, a
federal savings bank ("Standard Federal"), whose address is 0000 Xxxx Xxx
Xxxxxx Xxxx, Xxxx, Xxxxxxxx 00000.
RECITALS:
A. The Borrower has requested a term loan in the principal amount of
$5,300,000.00, and Standard Federal is willing to supply such financing subject
to the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in reliance upon the representations herein provided and
in consideration of the premises and the mutual promises herein contained, the
Borrower and Standard Federal hereby agree as follows:
SECTION 1. TERM LOAN
1.1 Standard Federal hereby extends to the Borrower a term loan (the "Term
Loan") in the principal amount of Five Million Three Hundred Thousand and 00/100
Dollars ($5,300,000.00).
1.2 The Term Loan herein extended shall be subject to the terms and
conditions of a Promissory Note (Term Loan) of even date herewith and all
renewals and amendments thereof (the "Note"). The Term Loan shall be payable
and shall bear interest as set forth in the Note. This Loan Agreement and the
Note are of equal materiality and shall each be construed in such manner as to
give full force and effect to all provisions of both documents.
2
SECTION 1A. CONDITIONS TO MAKING LOANS
1A.1 The following are conditions precedent to the obligation of Standard
to make the Term Loan hereunder:
1A.1(a) The Borrower shall have delivered or shall have had delivered to
Standard Federal, in form and substance satisfactory to Standard Federal and its
counsel, each of the following:
a. A duly executed copy of this Loan Agreement;
b. A duly executed copy of the Note and such other loan
documents as Standard Federal shall require to evidence and document
the Term Loan (the "Loan Documents");
c. Such credit applications, financial statements,
authorizations, and such information concerning the Borrower and its
business, operations, and condition (financial and otherwise) as
Standard Federal may reasonably request;
d. Certified copies of resolutions of the Boards of Directors of
the Borrower approving the execution and delivery of the Loan
Documents required hereunder;
e. A certificate of the Secretary or an Assistant Secretary of
the Borrower certifying the names and true signatures of the
officers of the Borrower authorized to sign the Loan Documents
required hereunder;
f. Copies of each of the Articles of Incorporation of the
Borrower, certified by the Secretary of State of Michigan as of a
recent date;
g. Copies of each of the Articles of Incorporation and Bylaws of
the Borrower, certified by the Secretary or an Assistant Secretary
of the Borrower as of the date of this Agreement as being accurate
and complete;
h. Certificate of good standing of the Borrower from the
Secretary of State of Michigan as of a recent date;
i. Certificates of authority and good standing of the Borrower
for each state in which the Borrower is qualified to do business;
j. A certificate of compliance of the chief financial officer or
treasurer of the Borrower in form satisfactory to Standard Federal
dated as of the date of this Agreement;
k. Such certificates, binders or other evidence of all insurance
required of the Borrower under this Loan Agreement as Standard
Federal may reasonably require; and
l. Acknowledgement copies of all UCC-1 financing statements
filed with respect to the Collateral accompanied by a search report
showing such financing statements as duly filed and evidencing that
the security interest of Standard Federal in the Collateral is prior
to all other security interests of record.
2
3
1A.1(b) All acts and conditions (including, without limitation, the obtaining
of any necessary regulatory approvals and the making of any required filings,
recordings, or registrations) required to be done and performed and to have
happened precedent to the execution, delivery, and performance of the Loan
Documents required hereunder and to constitute the same legal, valid, and
binding obligations, enforceable in accordance with their respective terms,
shall have been done and performed and shall have happened in due and strict
compliance with all applicable laws.
1A.1(c) All documentation, including, without limitation, documentation for
corporate and legal proceedings in connection with the transactions contemplated
by the Loan Documents shall be satisfactory in form and substance to Standard
Federal and its counsel and all fees and charges, including recording and filing
fees, shall have been paid as required hereunder.
1A.2 As conditions precedent to Standard Federal's obligation to make the
Term Loan:
a. The representations and warranties of the Borrower contained
in the Loan Documents shall be accurate and complete in all respects
as if made on and as of such date;
b. The Borrower shall have paid all fees and expenses, including
any recording fees and charges, required hereunder; and
c. There shall not have occurred an Event of Default or any
event which with the passage of time of the giving of notice or both
would constitute an Event of Default.
SECTION 2. REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to Standard Federal that as of
the date of acceptance of this Agreement, as of the time any advance is to be
made hereunder and, unless expressly provided otherwise herein or agreed to by a
writing signed by Standard Federal, at all times any amounts are outstanding
hereunder:
2.1 The Borrower and each of its subsidiaries, if any, are corporations
duly organized, validly existing and in good standing under the laws of the
state of their incorporation; the Borrower and each of its subsidiaries (if any)
have the legal power and authority to own their properties and assets and to
carry out their business as now being conducted and each is qualified to do
business in the state of its incorporation and in every jurisdiction where the
nature of its business or the property owned or operated by it makes such
qualification necessary and is otherwise in compliance with all applicable laws,
statutes, regulations, rules and requirements of any federal, state, judicial,
regulatory or administrative body having jurisdiction of the Borrower or any of
its assets; the Borrower has the legal power and authority to
3
4
execute and perform this Agreement, to borrow money in accordance with its
terms, to execute and deliver the Note and other documents contemplated hereby,
to grant to Standard Federal mortgages and security interests in the
Collateral, as hereby contemplated, and to do any and all other things required
of it hereunder; and this Agreement, the Note and all other documents
contemplated hereby, when executed by the Borrower's duly authorized officers
will constitute its valid and binding legal obligations enforceable in
accordance with their terms.
2.2 The execution, delivery and performance of this Agreement, the
borrowings hereunder and the execution and delivery of the Note and other
documents contemplated hereby (a) have been duly authorized by all requisite
corporate action, (b) do not require governmental approval or the approval of
any person not a party to this Agreement, (c) will not result (with or without
notice and/or the passage of time) in any conflict with or breach or violation
of or default under, any provision of law, the Articles of Incorporation or
Bylaws of the Borrower or any indenture, agreement or other instrument to which
the Borrower is a party, or by which it or any of its properties or assets are
bound, and (d) will not result in the creation or imposition of any lien, charge
or encumbrance of any nature whatsoever upon any of the properties or assets of
the Borrower other than in favor of Standard Federal and as contemplated hereby.
2.3 There is not pending or, to the best of the knowledge of the Borrower,
threatened, any litigation, proceeding or governmental investigation which could
materially and adversely affect the business of the Borrower or its
subsidiaries, if any, or its ability to perform its covenants hereunder.
2.4 Borrower has good and marketable title to its properties given as
security as herein described, and, except for liens in favor of Standard
Federal, liens for taxes not delinquent or being contested in good faith and
liens created in connection with worker's compensation, unemployment insurance
and social security, or to secure the performance of bids, tenders or contracts
(other than for the repayment of borrowed money), leases, statutory obligations,
surety and appeal bonds, and other obligations of like nature made in the
ordinary course of business, none of the Borrower's or any of its subsidiaries'
(if any) assets are subject to any mortgage, pledge, lien, security interest, or
other encumbrance of any kind or character except as have been disclosed to
Standard Federal in writing. The Borrower owns all material patents,
trademarks, service marks, trade names, copyrights, licenses and other rights,
free from any material restrictions, that are necessary for the operation of its
business as presently conducted.
2.5 All financial data which has been or shall hereafter be furnished to
Standard Federal for the purposes of, or in connection
4
5
with, this Agreement, including particularly, but without limitation, the
audited consolidated financial statements of XxXxxxx Industries, Inc. and the
Form 10-Q's filed with the Securities and Exchange Commission by XxXxxxx
Industries, Inc. pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934, and the transactions contemplated hereby has been and/or shall be
prepared in accordance with generally accepted accounting principles
consistently applied, and does or will fairly present the financial condition
of the Borrower as of the dates, and the results of its operations for the
periods, for which the same is furnished to Standard Federal.
2.6 There has been no material adverse change in the business, properties or
condition (financial or otherwise) of the Borrower or its subsidiaries (if any)
since the date of the latest financial statements provided to Standard Federal
and there are no material debts, liabilities or obligations (absolute or
contingent) of the Borrower except as reflected in such financial statements
(or in the notes thereto).
2.7 The Borrower is not in default in the repayment of any indebtedness for
money borrowed by it nor has there occurred any event which, with or without
notice or the passage of time or both, would constitute a default by the
Borrower under any agreement or instrument pertaining to any indebtedness for
money borrowed by it.
2.8 Borrower has filed all reports and tax returns required by governmental
authority to be filed by it prior to the date hereof and Borrower has received
no notice that such reports or returns have been rejected, declared
insufficient, or otherwise challenged by such governmental authority.
2.9 The principal officers of the Borrower ("Principal Officers") are as
follows:
XxXxxxx Industries, Inc.:
Chairman of the Board Xxxxxxx X. XxXxxxx
--------------------
Senior Vice President Xxxxxx X. XxXxxxx
--------------------
Secretary Xxxx X. Xxxxxxxx
--------------------
XxXxxxx of Georgia, Inc.:
President Xxxxxxx X. XxXxxxx
--------------------
Senior Vice President Xxxxxx X. XxXxxxx
--------------------
Secretary Xxxx X. Xxxxxxxx
--------------------
5
6
Shelby Steel Processing Company:
President Xxxxxx X. XxXxxxx
--------------------
Vice President Xxxxxxx X. XxXxxxx
--------------------
Secretary Xxxx X. Xxxxxxxx
--------------------
XxXxxxx Tube Company d/b/a Quality Tube:
President Xxxxxxx X. XxXxxxx
--------------------
Secretary Xxxx X. Xxxxxxxx
--------------------
XxXxxxx Industries of Ohio, Inc.:
President Xxxxxxx X. XxXxxxx
--------------------
Vice President Xxxxxx X. XxXxxxx
--------------------
Secretary Xxxxxxxx Xxxxx
--------------------
XxXxxxx Epco, Inc.:
President Xxxxxxx X. XxXxxxx
--------------------
Vice President Xxxxxx X. XxXxxxx
--------------------
Secretary Xxxxxxxx Xxxxx
--------------------
XxXxxxx of Alabama, Inc.:
President Xxxxxxx X. XxXxxxx
--------------------
Secretary Xxxx X. Xxxxxxxx
--------------------
2.10 XxXxxxx of Georgia, Inc., a Georgia corporation, Shelby Steel
Processing Company, a Michigan corporation, XxXxxxx Tube Company d/b/a Quality
Tube, a Michigan corporation, XxXxxxx Industries of Ohio, Inc., a Michigan
corporation, XxXxxxx Epco, Inc., a New York corporation, XxXxxxx of Alabama,
Inc., a Michigan corporation, and Southfield Quality Leasing Company, a Michigan
corporation, are each wholly-owned subsidiaries of XxXxxxx Industries, Inc., a
Michigan corporation, and have no subsidiaries. XxXxxxx Group Leasing
Corporation, a Michigan corporation, and Galion Holding Company, a Michigan
corporation, are also wholly-owned subsidiaries of XxXxxxx Industries, Inc.
XxXxxxx Industries, Inc. also holds one-third of the outstanding capital stock
of M.E.G. Equipment Sales, Inc., Michigan corporation, of which M.E.G. Equipment
Sales of Florida, Inc., a Florida corporation, is a wholly-owned subsidiary.
XxXxxxx Industries, Inc., as of the date of this Loan Agreement, owns no other
subsidiaries.
6
7
2.11 None of the proceeds of the Term Loan will be used for the purpose of
purchasing or carrying any "margin stock" as defined in Regulation U or G of the
Board of Governors of the Federal Reserve System (12 C.F.R. Part 221 and 207),
or for the purpose of reducing or retiring any indebtedness which was originally
incurred to purchase or carry a margin stock or for any other purpose which
might constitute this transaction a "purpose credit" within the meaning of such
Regulation U or G. Borrower is not engaged in the business of extending credit
for the purpose of purchasing or carrying margin stocks. Neither Borrower nor
any person acting on behalf of Borrower has taken or will take any action which
might cause the Note or any of the other documents executed in conjunction
therewith, including this Agreement, to violate Regulations U or G or any other
regulations of the Board of Governors of the Federal Reserve System or to
violate Section 7 of the Securities Exchange Act of 1934 or any rule or
regulation thereunder, in each case as now in effect or as the same may
hereinafter be in effect. Borrower and its subsidiaries, if any, own no "margin
stock" except for that described in the financial statements provided to
Standard Federal and, as of the date hereof, the aggregate value of all "margin
stock" owned by Borrower and its subsidiaries, if any, does not exceed 25% of
all of the value of all of Borrower's and its subsidiaries', if any, assets.
2.12 Except as disclosed in the environmental report(s), copies of which the
Borrower has furnished to Standard Federal, neither the Borrower nor, to the
best of Borrower's knowledge after due inquiry, any other person or entity, has
caused or permitted any waste, oil, pesticides, or any substance or material of
any kind which is currently known or suspected to be toxic or hazardous,
including but not limited to any substance defined as a "Hazardous Waste" in
Title 40, Part 261 of the Code of Federal Regulations, (hereinafter referred to
as "Hazardous Material") to be discharged, dispersed, released, disposed of, or
allowed to escape on, under or at any property owned, occupied or operated by
any Borrower in violation of any Hazardous Materials Laws (as hereinafter
defined), nor has any property owned, occupied or operated by any Borrower, or
any part thereof, ever been used by the Borrower or, to the best of Borrower's
knowledge after due inquiry, any prior owner or any other person, as a dump,
storage or disposal site for any Hazardous Material, nor has there occurred any
other violation of the federal Comprehensive Environmental Response,
Compensation and Liability Act of 1980, 42 U.S.C. Section 9601 et seq., or any
other federal, state or local statute, law, ordinance, code, rule, regulation,
order or decree regulating, relating to or imposing liability or standards of
conduct concerning, any Hazardous Material ("Hazardous Materials Laws") with
respect to any property owned, occupied or operated by any Borrower. No
asbestos or asbestos-containing materials have been installed, used,
incorporated into, or disposed of on any property owned, occupied or operated by
any Borrower. No polychlorinated biphenyls ("PCBs") are located on or in any
property owned,
7
8
occupied or operated by any Borrower, in the form of electrical transformers,
fluorescent light fixtures with ballasts, cooling oils, or any other device or
form. All underground storage tanks located on any property owned, occupied or
operated by any Borrower have been installed and are being operated in full
compliance with all applicable Hazardous Materials Laws. The Borrower: (a) has
not received any notice of any release, threatened release, escape, seepage,
leakage, spillage, discharge or emission of any Hazardous Materials in, under
or upon any property owned, occupied or operated by any Borrower or of any
violation of any Hazardous Materials Law, and (b) does not know of any basis
for any such notice or violation.
2.13 No "reportable event," as defined in the Employee Retirement Income
Security Act of 1974 and any amendments thereto ("ERISA"), has occurred and is
continuing with respect to any employee pension and/or profit sharing benefit
plan maintained by or on behalf of the Borrower for the benefit of any of its
employees. The Pension Benefit Guaranty Corporation ("PBGC") has not
instituted proceedings to terminate any such employee pension and/or profit
sharing plan or to appoint a trustee to administer such plan. The Borrower
has maintained and funded and caused each of its subsidiaries, if any, to
maintain and fund all employee pension and/or profit sharing plans in
accordance with their terms and with all applicable provisions of ERISA.
Neither the Borrower nor any duly appointed administrator of any employee
pension and/or profit sharing plan: (a) has incurred any liability to PBGC with
respect to any such plan other than for premiums not yet due or payable, (b)
has instituted or intends to institute proceedings to terminate any such plan
under Section 4042 or 4041A of Erisa, or (c) has withdrawn from any
Multi-Employer Pension Plan (as that term is defined in Section 3(37) of
ERISA).
2.14 There is no material fact that the Borrower has not disclosed to
Standard Federal which could have a material adverse effect on the properties,
business, prospects or condition (financial or otherwise) of the Borrower or any
of its subsidiaries. For purposes of this Section 2.14, a "material adverse
effect" means any circumstance or event which (a) could have any adverse effect
whatsoever upon the validity, performance or enforceability of any material
provision of the Loan Documents, (b) is or might be material and adverse to the
financial condition or business operations of the Borrower or any subsidiary,
(c) could impair the ability of the Borrower to fulfill its obligations under
the Loan Documents, or (d) causes an Event of Default or any event which, with
notice or lapse of time or both, could become an Event of Default. Neither the
financial statements referred to in Section 2.5 hereof, nor any certificate or
statement delivered herewith or heretofore by Borrower in connection with the
negotiations of this Loan Agreement, contains any untrue statement of a material
fact or omits to state any material fact necessary to
8
9
keep the statements contained herein or therein, under the circumstances in
which they were made, from being misleading.
SECTION 3. AFFIRMATIVE COVENANTS OF BORROWER
3.1 Prior to closing of the Term Loan, the Borrower shall; (a) furnish to
Standard Federal, if Standard Federal so requires, certified copies of its
Articles of Incorporation, Bylaws and Certificate of Good Standing, which
Articles of Incorporation and Good Standing Certificate are to be certified by
the appropriate official of the Borrower's state of incorporation; (b) furnish
to Standard Federal if Standard Federal so requires a statement of the Borrower
and the chief financial officer of Borrower certifying that they are unaware of
the occurrence of an Event of Default or of any event which with notice and/or
the passage of time could become an Event of Default; and (c) furnish Standard
Federal such other instruments, documents, opinions or certificates as Standard
Federal or its counsel shall reasonably require. All actions, proceedings,
instruments and documents required or requested hereunder shall be satisfactory
to and approved by Standard Federal and/or its counsel prior to closing of the
Term Loan.
3.2 From the date hereof until all amounts owing under the Term Loan are
paid in full and all obligations under the Note, this Agreement and all other
documents executed in connection with the Term Loan are fully paid, performed
and satisfied and so long as Standard Federal has any commitment to make
advances hereunder, the Borrower covenants and agrees it will:
3.2(a) Furnish to Standard Federal as soon as available and, in any event,
within 120 days after the close of each fiscal year of the Borrower, or, in the
event the Borrower obtains an extension of the filing date from the Securities
Exchange Commission, by such extended date, detailed financial statements of
the Borrower as of the close of such fiscal year, containing a consolidated
balance sheet of the Borrower and its subsidiaries, if any, and statements of
income and cash flows of the Borrower and its subsidiaries, if any, for such
fiscal year prepared in accordance with generally accepted accounting
principles and in a manner consistent with prior such statements containing an
analysis of sources and uses of funds and such other comments and financial
details as are usually included in similar reports. Such statements shall be
accompanied by an opinion thereon (which shall not be qualified by reason of
any limitation imposed by Borrower) of independent certified public accountants
selected by Borrower and acceptable to Standard Federal as to the fairness of
the statements included in the report and to the effect that the examination of
such accounts in connection with such financial statements has been made in
accordance with generally accepted auditing standards and, accordingly,
includes such tests of the accounting records and such other auditing
procedures as were considered necessary in the circumstances.
9
10
3.2(b) Furnish to Standard Federal as soon as available and, in any event,
within 90 days after the close of each quarter of each fiscal year, or, in the
event the Borrower obtains an extension of the filing date from the Securities
Exchange Commission, by such extended date, detailed financial statements of
the Borrower as of the close of such fiscal period containing a consolidated
balance sheet of the Borrower and its subsidiaries, if any, and statements of
income and cash flows of the Borrower and its subsidiaries, if any, for such
fiscal period and for the portion of the fiscal year ending with such period in
reasonable detail and form acceptable to Standard Federal and certified by the
chief financial officer of the Borrower as being true and correct and as having
been prepared in accordance with generally accepted accounting principles
consistently applied, subject to year-end adjustments, if any.
3.2(c) Furnish to Standard Federal, within a reasonable time not to exceed
20 days after the end of each calendar month, a statement of accounts
receivable, in a form acceptable to Standard Federal, certified as correct by
Borrower or a principal officer of Borrower showing the agings thereof and the
payment, write-off or other disposition of former accounts receivable the
disposition of which has not previously been reported to Standard Federal, and
such other information and data as Standard Federal may reasonably require.
Borrower will further specifically disclose any facts known to Borrower which
facts would tend to render doubtful the collectibility of any account receivable
disclosed in such statements or which would indicate that the existence or
amount of such account is disputed by the debtor thereon.
3.2(d) Furnish to Standard Federal, within a reasonable time not to exceed
20 days after the end of each calendar month, a statement of accounts payable,
in a form acceptable to Standard Federal, certified as correct by Borrower or a
principal officer of Borrower, showing the agings thereof and such other
information and data as Standard Federal may reasonably require.
3.2(e) Furnish to Standard Federal, within a reasonable time not to exceed
20 days after the end of each calendar month, a statement of inventory of the
Borrower, in a form acceptable to Standard Federal, certified as correct by
Borrower or a principal officer of Borrower showing the method of reporting and
all additions to and dispositions of inventory since the previous inventory
report and such other information and data as Standard Federal may reasonably
require.
3.2(f) Furnish to Standard Federal, promptly after sending, filing or
publishing the same, copies of all proxy statements, financial statements and
reports that the Borrower sends to its public shareholders and copies of all
regular, periodic and special reports and all registration statements and
amendments thereto that the Borrower files with the Securities and Exchange
Commission or
10
11
any other governmental authority and any Exchange, and copies of all press
releases issued by Borrower.
3.2(g) Promptly inform Standard Federal of the occurrence of any Event of
Default or of any event (including without limitation any pending or threatened
litigation or other proceedings before any governmental body or agency) which
could have a materially adverse effect upon the Borrower's business,
properties, financial condition or ability to comply with its obligations
hereunder or under the Note.
3.2(h) Furnish such other information as Standard Federal may reasonably
request and permit Standard Federal and its agents, attorneys and employees to
inspect all of the books, records and properties of the Borrower at any
reasonable time.
3.2(i) Maintain adequate insurance with responsible companies in such
amounts and against such risks and hazards as are normally insured against by
similar businesses, and provide Standard Federal evidence of such insurance upon
request, or maintain adequate self-insurance programs which are reasonably
satisfactory to Standard Federal; policies of casualty insurance shall contain a
customary mortgagee clause requiring payment of proceeds to Borrower and to
Standard Federal as their interests may appear and all other insurance shall
contain a customary loss payable clause requiring payment of proceeds to
Borrower and to Standard Federal as their interests may appear and all insurance
policies shall provide that no cancellation, reduction in amount, change in
coverage or expiration thereof shall be effective until at least 30 days prior
written notice has been given by the insurer to Standard Federal; and pay when
due all taxes, assessments, fees and similar charges of every kind and nature
lawfully assessed upon the Borrower and/or its property, except to the extent
being contested in good faith; and in the event the Borrower fails to maintain
such insurance or to pay promptly any taxes or charges when due, then and in
such event Standard Federal, in its sole discretion, may, but shall not be
required to, pay the same and any amounts expended by Standard Federal for such
purpose shall be due and payable in full immediately and shall bear interest at
the rate applicable to the outstanding principal balance owing under the Note.
3.2(j) Preserve and keep in full force and effect its own and its material,
operating subsidiaries' (if any) corporate existence in good standing and
maintain voting control in its present controlling shareholder(s); keep current
all filings of assumed name certificates for each name under which and each
county in which the Borrower does business and promptly inform Standard Federal
of any assumed names under which it does business which were not used by the
Borrower on the date of this Agreement; continue to conduct and operate its
business substantially as presently conducted and operated in accordance with
all applicable laws and regulations; maintain and protect all franchises and
trade
11
12
names and preserve all the remainder of its property used or useful in the
conduct of its business and keep the same in good repair and condition; pay its
indebtedness and obligations when due under normal terms and maintain proper
books of record and account, and; otherwise remain in compliance with all
applicable laws, statutes, regulations, rules and requirements of any federal,
state, judicial, regulatory or administrative body having jurisdiction of the
Borrower or any of its assets, except to the extent noncompliance is immaterial
and would not have a material adverse effect on Borrower.
3.2(k) Maintain on a consolidated statement basis "Tangible Net Worth" of
not less than the amounts specified below as of the end of each fiscal quarter
during the fiscal years ending on the dates specified below:
Minimum
"Tangible
Fiscal Year-End Net Worth"
--------------- --------------
09/30/96 $21,000,000
09/30/97 $23,000,000
"Tangible Net Worth" shall mean total assets less trademarks, franchises,
copyrights, licenses, goodwill, similar intangible assets and all liabilities
(excluding debt subordinated to Standard Federal upon terms and conditions
acceptable to Standard Federal) of the Borrower.
3.2(l) Maintain on a consolidated statement basis the ratio of "Current
Assets" to "Current Liabilities" of not less than the ratios specified below as
of the end of each fiscal quarter during the fiscal years ending on the dates
specified below:
Fiscal Year-End Minimum Current Ratio
--------------- ---------------------
09/30/96 2.35 to 1.00
09/30/97 2.40 to 1.00
"Current Assets" shall include all assets considered current in accordance
with generally accepted accounting principles as in effect as of the date of
this Agreement, consistently applied, less all amounts due Borrower from any of
its directors, officers, employees, its shareholders, or any company controlled
by any of its shareholders. "Current Liabilities" shall include all
liabilities considered current in accordance with generally accepted accounting
principles as in effect as of the date of this Agreement, consistently applied.
3.2(m) On a consolidated statement basis maintain the ratio of "Liabilities"
to "Tangible Net Worth" of not more than the ratios
12
13
specified below as of the end of each fiscal quarter during the fiscal years
ending on the dates specified below:
Fiscal Year-End Maximum Liabilities-to-Worth Ratio
--------------- ----------------------------------
09/30/96 2.85 to 1.00
09/30/97 2.75 to 1.00
"Liabilities" shall mean all liabilities of the Borrower and its
consolidated subsidiaries, if any, as defined in accordance with generally
accepted accounting principles as in effect as of the date of this Agreement,
consistently applied.
"Tangible Net Worth" shall mean total assets less trademarks, franchises,
copyrights, licenses, goodwill, similar intangible assets and all liabilities
(excluding debt subordinated to Standard Federal upon terms and conditions
acceptable to Standard Federal) of the Borrower.
3.2(n) On a consolidated statement basis, maintain an Interest Coverage
Ratio of not less than 2.00 to 1.00 as of the end of each quarter of each fiscal
year. The "Interest Coverage Ratio" shall be defined as the ratio of the
Borrower's net income, plus interest charges, income and other taxes and
amortization and depreciation for the period of four consecutive quarters ending
with the quarter at the end of which the Interest Coverage Ratio is being
measured to all interest expense of the Borrower for such period, as determined
in accordance with generally accepted accounting principles.
3.2(o) On a consolidated statement basis, maintain a Fixed Charge Coverage
Ratio of not less than 1.75 to 1.00 as of the end of each quarter of each
fiscal year. The "Fixed Charge Coverage Ratio" shall be defined as the ratio
of the Borrower's net income, plus amortization and depreciation for the period
of four consecutive quarters ending with the quarter at the end of which the
Fixed Charge Coverage Ratio is being measured to current maturities of long
term debt, as determined in accordance with generally accepted accounting
principles.
3.2(p) At all times meet and cause each of its subsidiaries, if any, to meet
the minimum funding requirements of ERISA with respect to all employee pension
and/or profit sharing plans subject to ERISA and, with respect to any such
employee benefit plan, promptly notify Standard Federal in writing of any
reportable event, as defined in ERISA, or any proposed termination (voluntary
or otherwise) which could give rise to material termination liability within
the meaning of ERISA Section 4062.
3.3 The Borrower will not make any change in its accounting policies or
financial reporting practices and procedures, except
13
14
changes in accounting policies which are required or permitted by generally
accepted accounting principles and changes in financial reporting practices and
procedures which are required or permitted by generally accepted accounting
principles.
3.4 The Borrower shall use the monies loaned hereunder only for the
purpose(s) set forth in the preamble hereto.
3.5 The Borrower shall allow Standard Federal's participant in the Term Loan
and staff or independent accountants or auditors selected by Standard Federal's
participant to conduct a full audit of the Borrower's financial statements and
its books and records twice during the first year of the term of the Term Loan
and once in each of the second and third years of the term of the Term Loan.
Standard Federal's participant shall schedule such audits during normal business
hours of the Borrower and shall provide Borrower not less than two (2) business
days notice of the commencement of each audit. The Borrower shall make adequate
facilities available on its premises at Borrower's expense to enable Standard
Federal's participant to conduct the audits herein described and shall make
available all of its books, records and other documents and information as may
be reasonably requested to facilitate the audits. The Borrower agrees to pay to
Standard Federal's participant an audit fee of $3,000.00 plus travel expenses
for each audit so conducted by the participant.
SECTION 4. NEGATIVE COVENANTS
4.1 From the date hereof until all amounts owing under the Term Loan are
paid in full and all obligations under the Note, this Agreement and all other
documents executed in connection with the Term Loan are fully paid, performed
and satisfied and so long as Standard Federal has any commitment to make
advances hereunder, the Borrower covenants and agrees that it will not do and
will not permit any subsidiary, if any, to do any of the following without the
prior written approval of Standard Federal:
4.1(a) Create, incur, assume or permit to exist (a) any mortgage, pledge,
security interest, lien or charge of any kind upon any of its property or assets
whether now owned or hereafter acquired other than in favor of Standard Federal,
except as required or permitted by Standard Federal, or (b) any indebtedness or
liability for borrowed money, except indebtedness to Standard Federal or
indebtedness subordinated to the prior payment in full of the Borrower's
indebtedness to Standard Federal which is approved in writing by Standard
Federal, except as otherwise required or permitted in writing by Standard
Federal.
4.1(b) Make loans, advances or extensions of credit to any Entity (which in
this Agreement means any individual, partnership, corporation or other legal
entity), other than a parent or subsidiary of the Borrower, in excess of
$100,000.00 in principal
14
15
amount, except for sales on open account and in ordinary course of business; or
guarantee or in any way become responsible for obligations of any other Entity
except by endorsement of negotiable instruments for deposit or collection in
the ordinary course of business; or subordinate any indebtedness due it from an
Entity to indebtedness of any other creditor of such Entity.
4.1(c) Sell, lease or transfer, during any fiscal year, except inventory in
the ordinary course of business, any substantial portion of its assets; or
consolidate with or merge into any other Entity, or permit another to merge into
it; or acquire by lease or purchase all or substantially all the business or
assets of any Entity; or enter into any lease-back arrangement with any Entity.
4.1(d) Acquire or expend for, by lease, purchase or otherwise, during any
fiscal year, fixed assets in excess of $4,500,000.
SECTION 5. SECURITY
5.1 In order to secure: (1) the full and timely performance of the
Borrower's covenants set forth herein and in the Note, (2) the repayment of any
and all indebtedness of the Borrower to Standard Federal arising pursuant to the
Note (including any renewals or substitutions thereof), this Agreement and any
mortgage, guaranty, security agreement or other document given to secure or
relating to the Note or this Agreement, and (3) all other indebtedness and
liabilities of the Borrower to Standard Federal arising under this Agreement,
the Note, whether direct or indirect, absolute or contingent, due or to become
due, now existing or hereafter arising:
5.1(a) The Borrower hereby grants unto Standard Federal a security interest in
the following property and the proceeds thereof: (i) any and all securities or
other property received by the Borrower with respect to, on account of or in
exchange for any item of Collateral; (ii) all stock and/or liquidating
dividends (whether the same be in the form of cash or other property) paid
upon, on account of or with respect to any item of Collateral; and (iii) all
bank deposits, instruments, negotiable documents, chattel paper and any and all
other property of the Borrower of any kind whatsoever which shall at any time
be in the possession or under the control of Standard Federal; and
5.1(b) The Borrower has granted to Standard Federal a security interest of
first priority in all personal property of the Borrower as provided in a
certain Security Agreement dated September 15, 1994, and a Security Agreement
dated July 19, 1995, and a mortgage of even date herewith, from the Borrower to
Standard Federal, the provisions of which are hereby incorporated herein by
reference; and
15
16
5.1(c) The Borrower will cause XxXxxxx Industries, Inc. to assign to Standard
Federal as collateral security a life insurance policy on the life of Xxxxxxx X.
XxXxxxx in the face amount of $2,000,000.00 (herein, together with the property
described in Sections 5.1(a) (i), (ii) and (iii) and 5.1(b) above, referred to
as the "Collateral" or "item(s) of Collateral").
5.2 The Borrower shall execute and deliver to Standard Federal any and all
documents (including financing statements) as Standard Federal may require to
insure the perfection and priority of its liens and security interests in the
Collateral and furnish, if Standard Federal so requires, proof of hazard
insurance policies, in accordance with Section 3.2(g) above, relating to the
Collateral.
SECTION 6. EVENTS OF DEFAULT
The occurrence of any of the events enumerated in Sections 6.1 to 6.11 below
shall constitute an Event of Default for purposes of this Agreement:
6.1 FAILURE TO PAY MONIES DUE. If any indebtedness of the Borrower to
Standard Federal on the Term Loan is not paid when due, regardless of whether
such indebtedness has arisen pursuant to the terms of the Note, this Agreement
or any mortgage, security agreement, guaranty, instrument or other agreement
executed in conjunction herewith.
6.2 MISREPRESENTATION. If any warranty or representation made by or for
the Borrower and/or any endorser or guarantor of the Note in connection with the
loan(s) evidenced thereby, or if any financial data or any other information now
or hereafter furnished to Standard Federal by or on behalf of the Borrower
and/or any endorser or guarantor of the Note shall prove to be false, inaccurate
or misleading in any material respect.
6.3 NONCOMPLIANCE WITH AFFIRMATIVE COVENANTS AND OTHER AGREEMENTS. If the
Borrower shall fail to perform any of its obligations and covenants under
Section 3 of this Agreement, or shall fail to comply with any of the other
provisions of this Agreement, other than under Section 4 hereof, or the Note, or
any other agreement with Standard Federal to which it may be a party, other than
the payment of principal and interest.
6.4 NONCOMPLIANCE WITH NEGATIVE COVENANTS. If the Borrower shall fail to
perform any of its obligations and covenants described in Section 4 of this
Agreement.
6.5 BUSINESS SUSPENSION. If the Borrower and/or any endorser or guarantor
of the Note shall voluntarily suspend transaction of its business.
16
17
6.6 BANKRUPTCY, ETC. If the Borrower and/or any endorser or guarantor of
the Note: (a) makes a general assignment for the benefit of creditors; (b) shall
file a voluntary petition in bankruptcy or for a reorganization to effect a plan
or other arrangement with creditors; or shall file an answer to a creditor's
petition or other petition against Borrower and/or any endorser or guarantor of
the Note for relief in bankruptcy or for a reorganization which answer admits
the material allegations thereof; or if any order for relief shall be entered by
any court of bankruptcy jurisdiction with respect to the Borrower and/or any
endorser or guarantor of the Note, or if bankruptcy, reorganization or
liquidation proceedings are instituted against Borrower and/or any endorser or
guarantor of the Note and remain undismissed for 60 days; (c) has entered
against it any order by any court approving a plan for the reorganization of the
Borrower or any endorser or guarantor of the Note or any other plan or
arrangement with creditors of the Borrower or any endorser or guarantor of the
Note; (d) shall apply for or permit the appointment of a receiver, trustee or
custodian for any substantial portion of the Borrower's and/or any endorser's or
guarantor's properties or assets; or (e) becomes unable to meet its debts as
they mature or becomes insolvent.
6.7 JUDGMENTS AND WRITS. If there shall be entered against the Borrower
and/or any endorser or guarantor of the Note one or more judgments or decrees
which are not insured against or satisfied or appealed from and bonded within
the time or times limited by applicable rules of procedure for appeal as of
right or if a writ of attachment or garnishment against the Borrower and/or any
endorser or guarantor of the Note shall be issued and levied in an action
claiming $100,000.00 or more and not released, bonded or appealed from within 30
days after the levy thereof.
6.8 MERGER. If the Borrower shall merge or consolidate with another entity.
6.9 CHANGE OF CONTROL OR MANAGEMENT. If the Borrower or a controlling
portion of its voting stock or a substantial portion of its assets comes under
the practical, beneficial or effective control of any person or persons other
than those having such control as of the date of execution of the Note, whether
by reason of merger, consolidation, sale or purchase of stock or assets or
otherwise, if any such change of control, in the sole and absolute discretion of
Standard Federal, adversely impacts upon the ability of the Borrower to carry on
its business as theretofore conducted.
6.10 OTHER DEFAULTS. If the Borrower and/or any endorser or guarantor of the
Note shall default in the due payment of any material indebtedness to whomsoever
owed, or shall default in the observance or performance of any material term,
covenant or condition in any mortgage, security agreement, guaranty,
17
18
instrument, lease or agreement to which the Borrower and/or any endorser or
guarantor of the Note is a party.
6.11 REPORTABLE EVENT. If there shall occur any "reportable event", as
defined in the Employee Retirement Income Security Act of 1974 and any
amendments thereto, which is determined to constitute grounds for termination by
the Pension Benefit Guaranty Corporation of any employee pension benefit plan
maintained by or on behalf of the Borrower for the benefit of any of its
employees or for the appointment by the appropriate United States District Court
of a trustee to administer such plan and such reportable event is not corrected
and such determination is not revoked within 30 days after notice thereof has
been given to the plan administrator or the Borrower; or the institution of
proceedings by the Pension Benefit Guaranty Corporation to terminate any such
employee benefit pension plan or to appoint a trustee to administer such plan;
or the appointment of a trustee by the appropriate United States District Court
to administer any such employee benefit pension plan.
SECTION 7. REMEDIES UPON EVENT OF DEFAULT
7.1 Upon the occurrence of any Event of Default described in Sections 6.2,
6.3 or 6.10 hereof which is not cured or waived in writing by Standard Federal
within 15 days after written notice to the Borrower of such default; or upon the
occurrence of any Event of Default described in Section 6.1 which continues
unremedied for 10 days, or upon the occurrence of any Event of Default described
in Sections 6.4, 6.5, 6.6, 6.7, 6.8, 6.9 or 6.11, Standard Federal's commitment
to lend hereunder, if any, shall terminate and Standard Federal may, without
notice, declare the entire unpaid and outstanding principal balance of the Term
Loan and all accrued interest to be due and payable in full forthwith, without
presentment, demand or notice of any kind, all of which are hereby expressly
waived by Borrower, and thereupon Standard Federal shall have and may exercise
any one or more of the rights and remedies provided herein or in the Note or in
any mortgage, guaranty, security agreement or other document relating hereto or
granted secured parties under the Michigan Uniform Commercial Code, including
the right to take possession of and dispose of the Collateral, or otherwise
provided by applicable law, and to offset against the Term Loan any amount owing
by Standard Federal to the Borrower.
SECTION 8. MISCELLANEOUS.
8.1 No default shall be waived by Standard Federal except in writing and a
waiver of any default shall not be a waiver of any other default or of the same
default on a future occasion. No single or partial exercise of any right, power
or privilege hereunder, or any delay in the exercise hereof, shall preclude
18
19
other or further exercise of the rights of the parties to this Agreement.
8.2 No forbearance on the part of Standard Federal in enforcing any of its
rights under this Agreement, nor any renewal, extension or rearrangement of any
payment or covenant to be made or performed by the Borrower hereunder shall
constitute a waiver of any of the terms of this Agreement or of any such right.
8.3 This Agreement shall be construed in accordance with the law of the
State of Michigan.
8.4 All covenants, agreements, representations and warranties made in
connection with this Agreement and any document contemplated hereby shall
survive the borrowing hereunder and shall be deemed to have been relied upon by
Standard Federal. All statements contained in any certificate or other document
delivered to Standard Federal at any time by or on behalf of the Borrower
pursuant hereto shall constitute representations and warranties by the Borrower.
8.5 The Borrower agrees that it will pay all costs and expenses incurred by
Standard Federal in enforcing Standard Federal's rights under this Agreement and
the documents contemplated hereby, including without limitation any and all
reasonable fees and disbursements of legal counsel to Standard Federal.
8.6 This Agreement shall inure to the benefit of and shall be binding upon
the parties hereto and their respective heirs, personal representatives,
successors and assigns; provided, however, that the Borrower shall not assign or
transfer its rights or obligations hereunder without the prior written consent
of Standard Federal.
8.7 If any provision of this Agreement shall be held or deemed to be or
shall, in fact, be inoperative or unenforceable as applied in any particular
case in any or all jurisdictions, or in all cases because it conflicts with any
other provision or provisions hereof or any constitution or statute or rule of
public policy, or for any other reason, such circumstances shall not have the
effect of rendering the provision in question inoperative or unenforceable in
any other case or circumstance, or of rendering any other provision or
provisions herein contained invalid, inoperative, or unenforceable to any extent
whatever. The invalidity of any one or more phrases, sentences, clauses or
sections contained in this Agreement, shall not affect the remaining portions of
this Agreement, or any part thereof.
19
20
SECTION 9. ADDITIONAL PROVISIONS
9.1 In addition to the terms, covenants and conditions set forth above,
the parties hereto hereby agree as follows:
9.1(a) Borrower shall cause Galion Holding Company, a Michigan corporation;
XxXxxxx E-Z Pack, Inc., a Michigan corporation; Galion Dump Bodies, Inc., a
Michigan corporation; and XxXxxxx Group Sales of Florida, Inc., a Florida
corporation, to execute and deliver to Standard Federal an unlimited payment
guaranty of the obligations of Borrower under the Term Loan in form and
substance acceptable to Standard Federal.
IN WITNESS WHEREOF, the Borrower and Standard Federal have caused this
Loan Agreement to be executed as of the day and year first written above.
BORROWER:
XXXXXXX INDUSTRIES, INC., a Michigan
corporation
/s/ Xxxxxx X. Xxxxxx
----------------------------- By: /s/ Xxxx X. Xxxxxxxx
Xxxxxx X. Xxxxxx -------------------------------
Xxxx X. Xxxxxxxx
Its: Secretary
-----------------------
00-0000000
Taxpayer Identification Number
XXXXXXX OF GEORGIA, INC., a Georgia
corporation
/s/ Xxxxxx X. Xxxxxx
---------------------------- By: /s/ Xxxx X. Xxxxxxxx
Xxxxxx X. Xxxxxx ---------------------------------
Xxxx X. Xxxxxxxx
Its: Secretary
----------------------------
00-0000000
-------------------------------------
Taxpayer Identification Number
20
21
SHELBY STEEL PROCESSING COMPANY, a
Michigan corporation
/s/ Xxxxxx X. Xxxxxx
--------------------------- By: /s/ Xxxx X. Xxxxxxxx
Xxxxxx X. Xxxxxx ---------------------------------
Xxxx X. Xxxxxxxx
Its: Secretary
-------------------------
00-0000000
------------------------------------
Taxpayer Identification Number
XXXXXXX TUBE COMPANY d/b/a QUALITY
TUBE, a Michigan corporation
/s/ Xxxxxx X. Xxxxxx
--------------------------- By: /s/ Xxxx X. Xxxxxxxx
Xxxxxx X. Xxxxxx ---------------------------------
Xxxx X. Xxxxxxxx
Its: Secretary
------------------------------------
Taxpayer Identification Number
XXXXXXX INDUSTRIES OF OHIO, INC., a
Michigan corporation
/s/ Xxxxxx X. Xxxxxx
--------------------------- By: /s/ Xxxx X. Xxxxxxxx
Xxxxxx X. Xxxxxx ---------------------------------
Xxxx X. Xxxxxxxx
Its: Treasurer
Taxpayer Identification Number
XXXXXXX EPCO, INC., a New York
corporation
/s/ Xxxxxx X. Xxxxxx
--------------------------- By: /s/ Xxxx X. Xxxxxxxx
Xxxxxx X. Xxxxxx ---------------------------------
Xxxx X. Xxxxxxxx
Its: Treasurer
38-
------------------------------------
Taxpayer Identification Number
21
22
XXXXXXX OF ALABAMA, INC., a
Michigan corporation
/s/ Xxxxxx X. Xxxxxx
-------------------------- By: /s/ Xxxx X. Xxxxxxxx
Xxxxxx X. Xxxxxx -----------------------------
Xxxx X. Xxxxxxxx
Its: Treasurer
---------------------
00-0000000
---------------------------------
Taxpayer Identification Number
STANDARD FEDERAL BANK, a
federal savings bank
By: Xxxxx X. Xxxxxxxx
-------------------------------
Its: Vice President
---------------------------
22
