Exhibit 1
CREDIT AGREEMENT
This Credit Agreement (the "Agreement") is entered into as of the 30th day
of April, 2001, by and between MERRYMEETING, INC., a Delaware corporation
("Borrower"); FIFTH THIRD BANK (NORTHEASTERN OHIO), an Ohio banking corporation
located at 0000 Xxxx Xxxxx Xxxxxx, Xxxxxxxxx, Xxxx 00000 ("Senior Bank"), and
FIFTH THIRD BANK, an Ohio banking corporation, located at 00 Xxxxxxxx Xxxxxx
Xxxxx, Xxxxxxxxxx, Xxxx 00000 ("Junior Bank") (Senior Bank and Junior Bank being
referred to herein collectively as the "Bank".)
Section 1. DEFINITIONS.
Certain capitalized terms have the meanings set forth on Exhibit 1 hereto.
All financial terms used in this Agreement but not defined on Exhibit 1 have the
meanings given to them by generally accepted accounting principles as in effect
on the date hereof. All other undefined terms have the meanings given to them in
the Ohio Uniform Commercial Code.
Section 2. LOANS.
2.1 TERM LOAN.
(a) Senior Bank agrees, subject to the terms and conditions hereinafter
set forth, to make two term loans to Borrower (the "Senior Term
Loans") on the date of this Agreement in the amount of $4,000,000
("Senior Note I") and in the amount of $1,000,000 ("Senior Note II")
(collectively, the "Senior Term Notes"). Borrower's obligation to pay
the Senior Term Loans will be evidenced by promissory notes in
substantially the form of Exhibit 2.1(a) attached hereto. The Senior
Term Notes will be dated as of the date of this Agreement. Senior Note
I and Senior Note II will be secured by collateral as set forth in the
security documents as further described in Section 2.5 hereof. The
Senior Term Notes shall have priority of payment over the Junior Term
Note (as defined below) and the Shareholder Loan (as defined below).
(Collectively, the Senior Term Notes and the Junior Term Note are the
"Term Notes".)
(b) Junior Bank agrees, subject to the terms and conditions hereinafter
set forth, to make a term loan (the "Junior Term Loan") to Borrower on
the date of this Agreement in the amount of $3,000,000.00.
(Collectively, the Senior Term Loans and the Junior Term Loan are the
"Term Loans".) Borrower's obligation to pay the Junior Term Loan will
be evidenced by its promissory note (the "Junior Term Note") in
substantially the form of Exhibit 2.1(b) attached hereto. The Junior
Term Note will be dated the date of this Agreement. The Junior Term
Note shall be subordinate in payment to the Senior Term Notes.
(c) Principal payments on the Senior Term Notes shall be due and payable
in equal monthly installments in immediately available funds at the
principal office of the Senior Bank in the last day of each month in
arrears, beginning on February 28, 2002 with a final payment of
principal due on April 30, 2006. Interest will accrue on the principal
amount of Senior Note I at the Prime Rate plus 125 basis points and on
Senior Note II at the Prime Rate plus 175 basis points, unless
increased or decreased pursuant to the terms thereof. Interest
payments will be made in immediately available funds at the principal
office of the Senior Bank in the last day of each month in arrears,
beginning the first calendar month subsequent to the calendar month in
which this Agreement is executed and continuing during the term
hereof. The entire principal amount of the Senior Term Notes, plus all
accrued and unpaid interest and any other charges, advances, or fees
required to be paid hereunder, will be due and payable on April 30,
2006.
(d) Interest will accrue on the principal amount of the Junior Term Note
at the rate of 21% per annum. Interest payments will be made in
immediately available funds at the principal office of the Junior Bank
on the last day of each month in arrears, beginning on the last day of
the calendar month subsequent to the calendar month in which this
Agreement is executed and continuing during the term hereof. The
entire principal amount of the Junior Term Note, plus all accrued and
unpaid interest and any other charges, advances or fees required to be
paid hereunder, will be due and payable on October 30, 2003.
(e) The proceeds of the Term Loans will be used for the acquisition of the
stock of Frontier Adjusters of America, Inc. ("Frontier") to be
purchased pursuant to that certain Stock Purchase Agreement dated
April 30th, 2001 by and among Borrower and United Financial Adjusting
Company, Inc. (such stock, the "Frontier Stock") (such agreement, the
"Stock Purchase Agreement").
(f) The indebtedness evidenced by the Junior Term Note is expressly
subordinated and is junior, to the extent and in the manner set forth
therein, in right of payment to the prior payment in full of all the
"Senior Indebtedness." As used herein, "Senior Indebtedness" means all
obligations of Borrower to Fifth Third Bancorp and any Bank Affiliate,
(and their successors and assigns and any successor senior lender to
Senior Bank), including but not limited to obligations in favor of
Fifth Third Bank (Northeastern Ohio) represented by those certain
Senior Term Notes executed on even date.
2.2 TIME OF PAYMENT. All payments of principal and interest made by
Borrower shall be made no later than 2:00 P.M. on the Business Day such payments
are due. All amounts paid after such time will be credited on the following
date.
2.3 PREPAYMENT. Borrower may prepay any portion of the Senior Term Loans in
whole or in part at any time without premium or penalty. Borrower may prepay the
Junior Term loan only upon the terms and conditions set forth herein, and set
forth in the Junior Term Note.
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2.4 FEES.
(a) With regard to Senior Note I, Borrower will pay to Senior Bank, a
one-time, non-refundable closing fee equal to $50,000.00, as well as a
note processing fee of $1,000.00. With regard to Senior Note II,
Borrower will pay to Senior Bank, a one-time, non-refundable closing
fee equal to $10,000.00. The fees described herein shall be due and
payable upon funding of the Term Loans.
(b) Borrower will pay to Junior Bank, a one-time, non-refundable closing
fee equal to $60,000.00, as well as a note processing fee of $1,000.00
both of which shall be due and payable upon funding of the Term Loans.
The fees to be paid pursuant to subsections (a) and (b) hereof
collectively are the "Closing Fees".
(c) On the date hereof, Borrower will pay to each of Senior Bank and
Junior Bank a fee intended to reimburse them for their reasonable
costs and expenses incurred in negotiating, reviewing and preparing
this Agreement, the Term Notes, the Security Agreement, the Pledge
Agreement, the Unlimited Personal Guaranty, and the other Loan
Documents and all other documents required to consummate the
transactions contemplated hereby.
2.5 COLLATERAL AND SECURITY. This Agreement as it relates to Senior Note I
is secured by the Collateral as described in that certain Security Agreement
(the "Security Agreement") and that certain Pledge Agreement (the "Pledge
Agreement"), both entered on even date. Senior Note II is secured by the
Collateral as described in the Security Agreement.
Section 3. REPRESENTATIONS AND WARRANTIES.
Borrower hereby warrants and represents to Bank the following:
3.1 ORGANIZATION AND QUALIFICATION. Borrower is a duly organized, validly
existing corporation in good standing under the laws of the State of Delaware,
its state of incorporation, has the power and authority (corporate and
otherwise) to carry on its business and to enter into and perform this
Agreement, the Security Agreement, the Pledge Agreement, the Term Notes, and the
other Loan Documents, is qualified and licensed to do business in each
jurisdiction in which such qualification or licensing is required and in which
the failure to be so qualified would have a material adverse effect on the
Borrower, taken as a whole. All information provided to Bank with respect to
Borrower and its operations is true and correct in all material respects.
3.2 DUE AUTHORIZATION. The execution, delivery and performance by Borrower
of this Agreement, the Security Agreement, the Pledge Agreement, the Term Notes
and the other Loan Documents have been duly authorized by all necessary
corporate action, and will not contravene any law or any governmental rule or
order binding on Borrower, or the articles of incorporation, code of regulations
or bylaws of Borrower, nor violate any agreement or instrument by which Borrower
is bound nor result in the creation of a Lien on any assets of Borrower (other
than the Liens in favor of Bank. Borrower has duly executed and delivered this
Agreement, the Term Note and the other Loan Documents and they are valid and
binding obligations of Borrower enforceable according to their respective terms
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except as limited by equitable principles and by bankruptcy, insolvency or
similar laws affecting the rights of creditors generally. Except for filings
required with the Securities and Exchange Commission and applicable state
securities and franchise agencies in connection with the acquisition of the
Frontier Stock, no notice to or consent by any governmental body is needed in
connection with this transaction.
3.3 LITIGATION. There are no suits or proceedings pending or to the
knowledge of Borrower threatened against or affecting Borrower, and no
proceedings before any governmental body are pending or threatened against
Borrower.
3.4 MARGIN STOCK. Except for the acquisition of the Frontier Stock, no part
of the Term Loans will be used to purchase or carry, or to reduce or retire or
refinance any credit incurred to purchase or carry, any margin stock (within the
meaning of Regulations U and X of the Board of Governors of the Federal Reserve
System) or to extend credit to others for the purpose of purchasing or carrying
any margin stock. If requested by Senior Bank, Borrower will furnish to Senior
Bank statements in conformity with the requirements of Federal Reserve Form U-1.
3.5 BUSINESS. Except for the Stock Purchase Agreement, Borrower is not a
party to or subject to any agreement or restriction which, in the opinion of
Borrower's management, if terminated, would have a material adverse effect on
Borrower's business, properties or prospects.
3.6 LICENSES, ETC. Borrower has obtained any and all material licenses,
permits, franchises, governmental authorizations, patents, trademarks,
copyrights or other rights necessary for the ownership of its properties and the
advantageous conduct of its business as conducted by Borrower on the date
hereof. Borrower possesses adequate licenses, patents, patent applications,
copyrights, trademarks, trademark applications, and trade names to continue to
conduct its business as heretofore conducted by it, without any conflict with
the rights of any other person or entity. All of the foregoing are in full force
and effect and none of the foregoing are in known conflict with the rights of
others.
3.7 LAWS AND TAXES. Borrower is in compliance with all laws, regulations,
rulings, orders, injunctions, decrees, conditions or other requirements
applicable to or imposed upon Borrower by any law or by any governmental
authority, court or agency, which if violated would have a material adverse
effect on Borrower's business, properties or prospects. Borrower has filed all
required tax returns and reports that are now required to be filed by it in
connection with any federal, state and local tax, duty or charge levied,
assessed or imposed upon Borrower or its assets, including unemployment, social
security, and real estate taxes. Borrower has paid all taxes which are now due
and payable. No taxing authority has asserted or assessed any additional tax
liabilities against Borrower which are outstanding on the date of this
Agreement, and Borrower has not filed for any extension of time for the payment
of any tax or the filing of any tax return or report.
3.8 FINANCIAL CONDITION. Taken as a whole, the historical financial
information relating to Borrower (excluding projections, forecasts and other
forward-looking information) (the "Financial Information") which has been or may
hereafter be delivered by Borrower or on its behalf to Bank is true and correct
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in all material respects. All Financial Information in the form of annual,
quarterly or monthly financial statements has been prepared in accordance with
generally accepted accounting principles consistently applied (except as noted
in the notes to such financial statements). Borrower has no material obligations
or liabilities of any kind required to be set forth in audited financial
statements (or notes thereof) not disclosed in the Financial Information
(considered as a whole). There has been no material adverse change in the
financial condition of Borrower nor has borrower suffered any damage,
destruction or loss which has adversely affected its business or assets since
the submission of the most recent Financial Information to Bank. Notwithstanding
the foregoing, Bank acknowledges that Borrower was recently formed and has no
operating history and thus Financial Information of Borrower is limited to the
period from its initial organization and formation.
3.9 TITLE. Borrower has good and marketable title to the assets reflected
on the most recent balance sheet submitted to Bank, free and clear from all
liens and encumbrances of any kind, except for (collectively, the "Permitted
Liens"): (a) current taxes and assessments not yet due and payable; (b) liens
and encumbrances, if any, reflected or noted on such balance sheet or notes
thereto; (c) assets disposed of in the ordinary course of business; (d) Liens
granted by Borrower under purchase money financing arrangements for the purchase
of real property and/or equipment reasonably required to conduct its business in
the ordinary course; (e) as set forth in Schedule 3.9 attached hereto; (f) Liens
imposed by law which secure amounts not at the time due and payable; and (g)
Liens in favor of Bank and any Bank Affiliate.
3.10 DEFAULTS. Borrower is in compliance with all agreements applicable to
it and there does not now exist any default or violation by Borrower of or under
any of the terms, conditions or obligations of (a) its Articles of Incorporation
or Regulations/Bylaws, or (b) any indenture, mortgage, deed of trust, franchise,
permit, contract, agreement or other instrument to which Borrower is a party or
by which it is bound, and, under which a default would have a material adverse
effect on Borrower's business, properties or prospects; and the consummation of
the transactions contemplated by this Agreement will not result in such default
or violation.
3.11 ENVIRONMENTAL LAWS.
(a) Borrower has obtained all permits, licenses and other authorizations
or approvals which are required under Environmental Laws and Borrower
is in compliance in all material respects with all terms and
conditions of the required permits, licenses, authorizations and
approvals, and is also in compliance in all material respects with all
other limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in the
Environmental Laws.
(b) Borrower is not aware of, and has not received notice of, any past,
present or future events, conditions, circumstances, activities,
practices, incidents, actions or plans which may interfere with or
prevent compliance or continued compliance, in any material respect,
with Environmental Laws, or may give rise to any material common law
or legal liability, or otherwise form the basis of any material claim,
action, demand, suit, proceeding, hearing, study or investigation,
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based on or related to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling or the emission,
discharge, release or threatened release into the environment, of any
pollutant, contaminant, chemical, or industrial, toxic or hazardous
substance or waste.
(c) There is no civil, criminal or administrative action suit, demand,
claim, hearing, notice or demand letter, notice of violation,
investigation or proceeding pending or threatened against Borrower,
relating in any way to Environmental Laws.
3.12 SUBSIDIARIES AND PARTNERSHIPS. Except as set forth on Schedule 3.12,
Borrower has no subsidiaries and is not a party to any partnership agreement or
joint venture agreement.
3.13 ERISA. Borrower and all individuals or entities along with Borrower
would be treated as a single employer under ERISA or the Internal Revenue Code
of 1986, as amended (an "ERISA Affiliate"), are in compliance in all material
respects with all of their obligations to contribute to any "employee benefit
plan" as that term is defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, and any regulations promulgated thereunder from time to
time ("ERISA"). Borrower and each of its ERISA Affiliates are in compliance in
all material respects with ERISA, and there exists no event described in Section
4043(b) thereof ("Reportable Event").
Section 4. AFFIRMATIVE COVENANTS.
4.1 BOOKS AND RECORDS. Borrower will maintain proper books of account and
records and enter therein complete and accurate entries and records of all of
its transactions in accordance with generally accepted accounting principles and
give representatives of Bank access thereto at all reasonable times, including
permission to examine, copy and make abstracts from any such books and records
and such other information which might be helpful to Bank in evaluating the
status of the Loans as it may reasonably request from time to time.
4.2 FINANCIAL STATEMENTS. Borrower will maintain a standard and modern
system for accounting and will furnish to Senior Bank and Junior Bank:
(a) Within forty (40) days after the end of each month, a copy of
Borrower's consolidated financial statements for that month and for
the year to date (with a comparison to the budget of Borrower and to
the prior year results for the same period) in a form reasonably
acceptable to Bank, prepared and certified as complete and correct in
all material respects, subject to changes resulting from year-end
adjustments, by the principal financial officer of Borrower;
(b) Within one hundred twenty (120) days after the end of each fiscal
year, a copy of Borrower's consolidated financial statements for that
year audited by a firm of independent certified public accountants
acceptable to Bank (which acceptance will not be unreasonably
withheld), and accompanied by a standard audit opinion of such
accountants without qualification;
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(c) All of the statements referred to in (a), and (b) above shall be in
conformance with generally accepted accounting principles;
(d) Within forty (40) days of the close of each month, a report reflecting
the volume of billed claims processed by each licensee and/or
franchisee of Borrower and any operating subsidiary thereof, in form
acceptable to Bank.;
(e) Within forty (40) days of the close of each fiscal quarter, a
certificate signed by the principal financial officer of Borrower (i)
stating he is familiar with all documents relating to Bank and that no
Event of Default specified in this Agreement or in any other
Obligation, nor any event which upon notice or lapse of time, or both
would constitute such an Event of Default, has occurred, or if any
such condition or event existed or exists, specifying it and
describing what action Borrower has taken or proposes to take with
respect thereto, and (ii) setting forth, in summary form, figures
showing the financial status of Borrower in respect of the financial
restrictions contained in this Agreement;
(f) Prior to the end of each fiscal year, a projected balance sheet,
projected income statement and projected statement of cash flow for
the subsequent fiscal year in form acceptable to Bank;
(g) Within forty (40) days of the close of each fiscal quarter, a
year-to-date report of all gross xxxxxxxx by each office of Borrower,
along with accompanying margin information, in form acceptable to
Bank;
(h) Within three (3) days after any officer of Borrower obtains knowledge
of any condition or event which constitutes or, after notice or lapse
of time or both, constitutes an Event of Default under this Agreement
or any other Obligation, a certificate of such person specifying the
nature and period of the existence thereof, and what action Borrower
has taken or is taking or proposes to take in respect thereof;
(i) Upon request, copies of all federal, state and local income tax
returns and such other information as Bank may reasonably request;
(j) Intentionally Omitted.
(k) Within forty (40) days of the close of each fiscal quarter, Borrower
shall deliver to Senior Bank and Junior Bank a Compliance Certificate
in the form attached hereto as Exhibit 4.2(k) confirming, in addition
to the other information set forth therein, the Borrower's compliance
with the financial covenants set forth herein and that no Event of
Default has occurred.
If at any time Borrower has any additional subsidiaries which have
financial statements that could be consolidated with those of Borrower under
generally accepted accounting principles, the financial statements required by
subsections (a) and (b) above will be the financial statements of Borrower and
all such subsidiaries prepared on a consolidated and consolidating basis.
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4.3 CONDITION AND REPAIR. Borrower will maintain its assets taken as a
whole in good repair and working order (making allowances for obsolescence in
the ordinary course and normal wear and tear) and will make all appropriate
repairs and replacements thereof.
4.4 INSURANCE. Borrower will insure its properties and business against
loss or damage of the kinds and in the amounts customarily insured against by
corporations with established reputations engaged in the same or similar
business as Borrower, and shall further maintain a "key-man" policy of insurance
upon the life of its president Xxxx X. Xxxxxx with a minimum death benefit of
$8,000,000 ("Key Man Policy"), with the beneficiary of said policy being the
Borrower, and the requisite proceeds being assigned to Senior Bank and Junior
Bank in amounts relative to the outstanding balance due of the Term Notes. All
such policies will (a) be issued by financially sound and reputable insurers,
(b) name Senior Bank and Junior Bank as additional insureds and, where
applicable, as loss payees under a lender loss payable endorsement satisfactory
to Bank, and (c) will provide for thirty (30) days written notice to Senior Bank
and Junior Bank before such policy is altered or canceled. Compliance with this
subsection shall be evidenced by a collateral assignment delivered to Senior
Bank and Junior Bank by Borrower within ninety (90) days from the execution of
this Agreement. If such collateral assignment is not delivered within such
90-day period, the interest rate on the Senior Term Notes shall increase 25
basis points until such collateral assignment is provided.
4.5 TAXES. Borrower will pay when due all taxes, assessments and other
governmental charges imposed upon it or its assets, franchises, business, income
or profits before any penalty or interest accrues thereon, and all claims
(including, without limitation, claims for labor, services, materials and
supplies) for sums which by law might be a lien or charge upon any of its
assets, provided that (unless any material item or property would be lost,
forfeited or materially damaged as a result thereof) no such charge or claim
need be paid if it is being diligently contested in good faith, if Senior Bank
and Junior Bank are notified in advance of such contest and if Borrower
establishes an adequate reserve or other appropriate provision required by
generally accepted accounting principles and deposits with Senior Bank and
Junior Bank cash or bond in an amount acceptable to Senior Bank and Junior Bank.
4.6 EXISTENCE; BUSINESS. Subject to Schedule 4.6, Borrower will (a)
maintain its existence, (b) engage primarily in business of the same general
character as that now conducted, and (c) refrain from entering into any lines of
business substantially different from the business or activities in which
Borrower is presently engaged.
4.7 COMPLIANCE WITH LAWS. Borrower will comply in all material respects
with all federal, state and local laws, regulations and orders applicable to
Borrower or its assets including but not limited to all Environmental Laws, in
all respects material to Borrower's business, assets or prospects and will
immediately notify Senior Bank and Junior Bank of any violation of any rule,
regulation, statute, ordinance, order or law relating to the public health or
the environment and of any complaint or notifications received by Borrower
regarding to any environmental or safety and health rule, regulation, statute,
ordinance or law.
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4.8 NOTICE OF DEFAULT. Borrower will, within three (3) days of its
knowledge thereof, give written notice to Senior Bank and Junior Bank of: (a)
the occurrence of any event or the existence of any condition which would be,
after notice or lapse of applicable grace periods, an Event of Default under
this Agreement or any other Obligation, and (b) the occurrence of any event or
the existence of any condition which would prohibit Borrower from continuing to
make the representations set forth in this Agreement.
4.9 COSTS. Borrower will pay to Bank its fees, reasonable out-of-pocket
costs and expenses (including, without limitation, reasonable attorneys' fees,
other professionals' fees, appraisal fees, environmental assessment fees
(including Phase I assessments), expert fees, court costs, litigation and other
expense (collectively, "Costs") reasonably incurred or paid by Bank in
connection with the negotiating, documenting, administering and enforcing, the
Term Loan and the Loan Documents and the defense, preservation and protection of
Bank's rights and remedies thereunder, whether incurred in bankruptcy,
insolvency, foreclosure or other litigation or proceedings or otherwise. The
Costs will be due and payable upon demand by Bank. If Borrower fails to pay the
Costs when due within ten (10) business days after demand, Bank is entitled to
disburse such sums as an advance under the Term Loan. Thereafter, the Costs will
bear interest from the date incurred or disbursed at the highest rate set forth
in the Term Notes. This provision will survive the termination of this Agreement
and/or the repayment of any amounts due or the performance of any Obligation.
4.10 DEPOSITORY/BANKING SERVICES. So long as this Agreement is in effect,
Bank or any Bank Affiliate will be the principal depository in which all of
Borrower's funds are deposited, and the principal bank of account of Borrower;
provided, however, Borrower may maintain cash accounts with other depository
bank so long as Bank has a perfected lien on such accounts through a deposit
account control agreement of similar agreement in form acceptable to Bank and
such account is not a principal depository account.
4.11 OTHER AMOUNTS DEEMED LOANS. If Borrower fails to pay any tax,
assessment, governmental charge or levy or to maintain insurance within the time
permitted or required by this Agreement, or to discharge any Lien prohibited
hereby, or to comply with any other Obligation, Bank may, but shall not be
obligated to, pay, satisfy, discharge or bond the same for the account of
Borrower, and to the extent permitted by law and at the option of Bank, all
monies so paid by Bank on behalf of Borrower will be deemed Loans and
Obligations.
4.12 NON-INTEREST BEARING ACCOUNT. For a period of one year from the date
hereof, Borrower shall maintain a non-interest bearing deposit account with a
minimum balance of $250,000.00 at Senior Bank.
Section 5. NEGATIVE COVENANTS.
5.1 INDEBTEDNESS. Except as set forth on attached Schedule 5.1, Borrower
will not incur, create, assume or permit to exist any additional Indebtedness
for borrowed money (other than the Obligations) or Indebtedness on account of
deposits, advances or progress payments under contracts, notes, bonds,
debentures or similar obligations or other indebtedness evidenced by notes,
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bonds, debentures, capitalized leases or similar obligations, in excess of the
aggregate sum of $250,000 during such time as any of the Obligations are
outstanding, all of which shall be subordinate to the Obligations.
5.2 PREPAYMENTS. Borrower will not voluntarily prepay any Indebtedness
owing by Borrower prior to the stated maturity date thereof other than (i) the
Obligations and (ii) Indebtedness to trade creditors where the prepayment will
result in a discount on the amount due.
5.3 LEASES. Except for the Operating Leases, and as otherwise set forth in
Section 5.4 hereof, Borrower will not enter into any lease of real or personal
property as lessee without the prior written consent of Senior Bank.
5.4 CAPITAL EXPENDITURES. Borrower will not make any plant or fixed capital
expenditure, or any commitment therefor, or obtain equipment subject to a
purchase money security interest, trust deed or lease, exceeding the aggregate
sum of $1,000,000 during such time as any of the Obligations are outstanding.
5.5 PLEDGE OR ENCUMBRANCE OF ASSETS. Other than the Permitted Liens,
Borrower will not create, incur, assume or permit to exist, arise or attach any
Lien in any present or future asset, except for Liens to Bank, Liens existing on
the date of this Agreement which have been disclosed to and approved by Bank and
Liens imposed by law which secure amounts not at the time due and payable.
5.6 GUARANTEES AND LOANS. Borrower will not enter into any direct or
indirect guarantees other than by endorsement of checks for deposit or other
than in the ordinary course of business nor make any advance or loan other than
in the ordinary course of business as presently conducted, including, without
limitation, loans and advances to employees of Borrower.
5.7 CAPITAL STOCK; DIVIDENDS. Borrower will not issue any additional shares
of its capital stock, nor grant any warrants, options or other rights to
purchase such stock. Borrower will not (a) declare or pay any dividend or
distributions on its capital stock; (b) make any payments of any kind to its
shareholders (including, without limitation, debt repayments, payments for goods
or services or otherwise, but excluding ordinary salary payments to shareholders
employed by Borrower) or (c) redeem any shares of its capital stock in any
fiscal year.
NOTE: The following financial covenants 5.8-5.14 shall be based on
Borrower's consolidated financial statements, including Frontier Adjusters of
America, Inc. and any other majority owned subsidiaries, before giving effect to
minority shareholder interests. It is hereby agreed that the bank fees and
transaction costs associated with Borrower's acquisition of Frontier Adjusters
of America, Inc. will be excluded from the computations of the financial
covenants 5.8-5.14 as described below:
5.8 MAXIMUM SENIOR INDEBTEDNESS TO EBITDA RATIO. Borrower shall not permit
the ratio of its Senior Indebtedness to EBITDA to exceed 2.25:1.00 at any time
for a period of twenty-four months following the execution of this Agreement,
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and 2.00:1.00 at any time thereafter, as measured on a rolling four quarter
basis.
5.9 MAXIMUM INDEBTEDNESS TO EBITDA. Borrower shall not permit the ratio of
its Indebtedness to EBITDA to exceed 2.85:1.00 at any time, as measured on a
rolling four quarter basis.
5.10 MINIMUM EBIT TO INTEREST EXPENSE. Borrower shall maintain a minimum
ratio of EBIT to Interest Expense of 2.0:1.00 at all times, as measured on a
rolling four quarter basis.
5.11 DEBT SERVICE COVERAGE RATIO. Borrower shall maintain a minimum Debt
Service Coverage Ratio of 1.15:1.00 at all times, as measured at the end of each
fiscal quarter for the preceding four fiscal quarters. This covenant shall not
apply to the fiscal quarter in which the Term Loan is repaid, and the succeeding
three fiscal quarters thereafter.
5.12 MERGER; DISPOSITION OF ASSETS. Except as set forth on Schedule 5.12,
Borrower will not (a) change its capital structure, (b) merge or consolidate
with any corporation, (c) amend or change its Articles of Incorporation or Code
of Regulations\Bylaws or (d) sell, transfer, lease or otherwise dispose of all
or any part of its assets, whether now owned or hereafter acquired, or dispose
of its stock in any Subsidiary, whether now owned or hereafter acquired,
excepting asset or stock of Subsidiaries of Borrower leased, transferred, or
sold in the normal course of Borrower's business the value of which do not
exceed in the aggregate an amount equal to five percent (5%) of the total assets
of the Borrower at any time that any of the Obligations remain outstanding.
5.13 MINIMUM TANGIBLE NET WORTH. As measured at the close of the fiscal
quarter ended December 31, 2001, Borrower's Minimum Tangible Net Worth shall be
not less than ($4,000,000) (with "( )" denoting negative amounts). At the close
of each subsequent fiscal quarter, Borrower shall not permit its Minimum
Tangible Net Worth to be less than the sum of (i) its Tangible Net Worth as
measured at the close of the immediately preceding fiscal quarter PLUS (ii) an
amount equal to fifty percent (50%) of its net income for the preceding fiscal
quarter.
5.14 INVESTMENTS. Except as set forth on Schedule 5.14, Borrower will not
purchase or hold beneficially any stock, securities or evidences of indebtedness
of, or make any investment or acquire any interest in, any other firm,
partnership, corporation or entity other than short term investments of excess
working capital in one or more of the following: (a) investments (of one year or
less) in direct or guaranteed obligations of the United States, or any agencies
thereof; and (b) investments (of one year or less) in certificates of deposit of
banks or trust companies organized under the laws of the United States or any
jurisdiction thereof, provided that such banks or trust companies are insured by
the Federal Deposit Insurance Corporation and have capital in excess of
$25,000,000.
5.15 PAYMENT ON SUBORDINATED DEBT. Borrower shall make no payment,
principal, interest, or otherwise, upon the Subordinated Debt while the Term
Loans are outstanding. Borrower's Subordinated Debt shall not at any time exceed
in the aggregate $1,000,000 during the existence of the Obligations without the
prior written consent of Bank.
11
5.16 TRANSACTIONS WITH AFFILIATES. Except as set forth on Schedule 5.16,
Borrower will not (a) directly or indirectly issue any guarantee for the benefit
of any of its Affiliates other than the Obligations, (b) directly or indirectly
make any loans or advances to or investments in any of its Affiliates, (c) enter
into any transaction with any of its Affiliates, other than transactions entered
into on an arm's length basis in the normal course of Borrower's business, (d)
divert (or permit anyone to divert) any of its business opportunities to any
Affiliate or any other corporate or business entity in which Borrower or its
shareholders holds a direct or indirect interest, or (e) make any other payment
to any Affiliate.
Section 6. EVENTS OF DEFAULT AND REMEDIES.
6.1 EVENTS OF DEFAULT. Any of the following events will be an Event of
Default ("Event of Default"):
(a) Any representation or warranty made by Borrower herein or in any of
the Loan Documents is incorrect when made or reaffirmed; or
(b) Borrower fails to make payment of any principal or interest on any
Obligation within five (5) Business Days after such payment is due and
payable, by acceleration or otherwise; or
(c) A default occurs under any non-monetary Obligation and such default is
not cured within five (5) Business Days after notice from either
Senior Bank or Junior Bank; or
(d) A court enters a decree or order for relief with respect to Borrower,
or any guarantor of the Obligations in an involuntary case under any
applicable bankruptcy, insolvency or other similar law then in effect,
or appoints a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or other similar official) of Borrower or Guarantor or
for any substantial part of its property, or orders the wind-up or
liquidation of its affairs; or a petition initiating an involuntary
case under any such bankruptcy, insolvency or similar law is filed and
is pending for sixty (60) days without dismissal; or
(e) Borrower or Guarantor commences a voluntary case under any applicable
bankruptcy, insolvency or other similar law in effect, or makes any
general assignment for the benefit of creditors, or fails generally to
pay its debts as such debts become due, or takes corporate action in
furtherance of any of the foregoing; or
(f) Borrower defaults under the terms of any Indebtedness (other than
loans owing by Borrower to its shareholders which are subordinated to
payment of the Obligations hereunder) or lease involving total payment
obligations of Borrower in excess of $300,000 and such default gives
any creditor or lessor the right to accelerate the maturity of any
such Indebtedness or lease payments which right is not contested by
12
Borrower or is determined by any court of competent jurisdiction to be
valid; or
(g) Final judgment of the payment of money in excess of $150,000 is
rendered against Borrower and remains undischarged for thirty (30)
days during which execution is not effectively stayed; or
(h) An Event of Default or default after giving effect to any applicable
grace or cure periods occurs under any Loan Document, or any guarantor
of any of the Obligations denies his obligation to guaranty any
Obligations then existing or attempts to limit or terminate his
obligation to guaranty any future Obligations, including future Term
Loans; or
(i) The dissolution of Borrower or the death of Guarantor; or
(j) The commencement of any foreclosure proceedings, proceedings in aid of
execution, attachment actions, levies against, or the filing by any
taxing authority of a lien against any of the Collateral or any
property securing the repayment of any of the Obligations, which has
not been dismissed within 60 days of commencement; or
(k) The loss, theft or substantial damage to the Collateral or any
property securing the repayment of the Obligations if the result of
such occurrence will be, in Senior Bank's commercially reasonable
judgment, the failure or inability of Borrower to continue
substantially normal operation of its business within thirty (30) days
of the date of such occurrence; or
(l) Bank ceases to be Borrower's (i) principal depository Bank in which
all of Borrower's funds are deposited (except as otherwise permitted
hereunder), and (ii) principal bank of account; or
(m) A Reportable Event (as defined in ERISA) occurs with respect to any
employee benefit plan maintained by Borrower for its employees other
than a Reportable Event caused solely by a decrease in employment; or
a trustee is appointed by a United States District Court to administer
any employee benefit plan; or the Pension Benefit Guaranty Corporation
institutes proceedings to terminate any of Borrower's employee benefit
plans; or
(n) [Intentionally omitted.]
(o) Any event occurs which might, in Senior Bank's commercially reasonable
opinion, have a material adverse effect on the Collateral or on
Borrower's financial condition, operations, assets or prospects, or on
any other property securing the repayment of the Obligations; or
13
(p) A change occurs in the ownership of Borrower's common stock so that
more than 20% of the outstanding common stock of Borrower is no longer
owned by those parties owning such stock on the date of this Agreement
or entities controlled by those parties; or
(q) The default by any party under any subordination agreement
subordinating the payment of any indebtedness of Borrower to that owed
to Bank or the priority of any liens held by such party in Collateral
securing such indebtedness to the liens of Bank therein, or Borrower
makes any payment on such subordinated debt that is not permitted by
the terms of the subordination or by this Agreement; or
(r) (i) Any of the Loan Documents or the authority of any party thereto to
carry out the intent of the Loan Documents are deemed invalid or
ineffective by a court of competent jurisdiction; (ii) any party
executing any of the Loan Documents asserts that any of such Loan
Documents is not a legal, valid and binding obligation of the party
thereto enforceable in accordance with its terms; (iii) the security
interest or Lien purporting to be created by any of the Loan Documents
will for any reason cease to be a valid, perfected lien subject to no
other liens other than Liens permitted by the terms of this Agreement;
or (iv) any Loan Document is amended, hypothecated, subordinated,
terminated or discharged, or if any person is released from any of its
covenants or obligations under any of the Loan Documents, except as
permitted by Bank in writing; or
(s) [Intentionally omitted.]
(t) Bank in the exercise of its commercially reasonable judgment deems
itself insecure or there has been a material adverse change in the
financial status of Borrower; or
(u) The filing of any lien or charge against the Collateral or any part
thereof in excess of $10,000 which is not removed to the satisfaction
of Senior Bank within a period of 30 days thereafter; or
(v) The abandonment by Borrower of all or any part of the Collateral; or
(w) The failure of Borrower to own 80% or more of the outstanding shares
of Frontier by February 28, 2002;
(x) Borrower's failure to enter into an Amended and Restated Credit
Agreement and associated Loan Documents upon Borrower's becoming an
80% or greater shareholder of Frontier in which Borrower has caused
Frontier to execute in favor of Bank or assume one or more Unlimited
Guarantys of the Obligations, and has caused Frontier to grant to Bank
a first and best security interest in and lien upon all assets of
Frontier to secure the Obligations.
14
(y) Borrower's failure to deliver to Senior Bank all share certificates
representing the Frontier stock, executed in blank, within twenty-four
hours of Borrower's receipt of same.
6.2 REMEDIES. If any Event of Default occurs, Bank may (i) cease advancing
money hereunder, (ii) declare all Obligations to be immediately due and payable,
whereupon such Obligations will immediately become due and payable, (iii)
exercise any and all rights and remedies provided by applicable law and the Loan
Documents, (iv) proceed to realize upon the Collateral or any property securing
the Obligations, including, without limitation, causing all or any part of the
Collateral to be transferred or registered in its name or in the name of any
other person, firm or corporation, with or without designation of the capacity
of such nominee, all without presentment, demand, protest, or notice of any
kind, each of which are hereby expressly waived by Borrower. Borrower shall be
liable for any deficiency remaining after disposition of any Collateral, and
waives all valuation and appraisement laws.
6.3 SETOFF. If any Event of Default will occur, Bank is authorized, without
notice to Borrower, to offset and apply to all or any part of the Obligations
all moneys, credits and other property of any nature whatsoever of Borrower now
or at any time hereafter in the possession of, in transit to or from, under the
control or custody of, or on deposit with (whether held by Borrower individually
or jointly with another party), Bank, including but not limited to certificates
of deposit.
6.4 DEFAULT RATE. After the occurrence of an Event of Default, all amounts
of principal outstanding as of the date of the occurrence of such Event of
Default will accrue interest at the Default Rate, in Bank's sole discretion,
without notice to Borrower. This provision does not constitute a waiver of any
Events of Default or an agreement by Bank to permit any late payments
whatsoever.
6.5 LATE PAYMENT PENALTY. If any payment of principal is not paid when due
(whether at maturity, by acceleration or otherwise after the expiration of any
applicable notice, grace and cure periods), Borrower agrees to pay to Bank a
late payment fee equal to five percent (5%) of the payment amount then due.
6.6 NO REMEDY EXCLUSIVE. No remedy set forth herein is exclusive of any
other available remedy or remedies, but each is cumulative and in addition to
every other remedy available under this Agreement, the Loan Documents or as may
be now or hereafter existing at law, in equity or by statute. Borrower waives
any requirement of marshaling of assets which may be secured by any of the Loan
Documents.
6.7 EFFECT OF TERMINATION. The termination of this Agreement will not
affect any rights of either party or any obligation of either party to the
other, arising prior to the effective date of such termination, and the
provisions hereof shall continue to be fully operative until all transactions
entered into, rights created or obligations incurred prior to such termination
have been fully disposed of, concluded or liquidated.
15
6.8 NO ADEQUATE REMEDY AT LAW. Borrower recognizes that in the event
Borrower fails to pay, perform, observe or discharge any of its obligations
under this Agreement, the Note or the other Loan Documents, no remedy at law
will provide adequate relief to Bank and Borrower agrees that Bank shall be
entitled to temporary and permanent injunctive relief in any such case without
the necessity of proving that it has incurred actual damages.
Section 7. CONDITIONS PRECEDENT.
7.1 CONDITIONS TO THE LOAN. Bank will have no obligation to make or advance
the Term Loans until Borrower and/or Guarantors have delivered to Bank at or
before the closing date, in form and substance satisfactory to Bank:
(a) Executed versions of the Loan Documents.
(b) A Certificate of Borrower in the form of Exhibit 7.1(b) and all
attachments thereto.
(c) A Certificate of MM Merger Corporation in the form of Exhibit 7.1(b)
and all attachments thereto.
(d) A favorable opinion of counsel to Borrower, in form acceptable to
Bank.
(e) A favorable opinion of counsel to MM Merger Corporation, in form
acceptable to Bank.
(f) The Loan Documentation Fee and Closing Fee have been paid in full.
(g) Certificate of Insurance relating to loss and damage to Borrower's
properties and business as described in Section 4.4 hereof, if
applicable.
(h) Xxxx X. Xxxxxx and Xxxxx X. Xxxxxx shall have delivered to Senior Bank
an Unlimited Payment Guaranty of all of the Obligations in the form
attached as Exhibit 7.1(h).
(i) MM Merger Corporation shall have delivered to Senior Bank an Unlimited
Payment Guaranty of all of the Obligations in the form attached as
Exhibit 7.1(i).
(j) UCC-1 Financing Statements of Borrower and MM Merger Corporation.
(k) Such additional information and materials as Bank may reasonably
request.
7.2 CONDITIONS TO TERM LOAN. On the date of the Term Loan, the following
statements will be true:
16
(a) All of the representations and warranties contained herein and in the
Loan Documents will be correct in all material respects as though made
on such date except for those changes permitted under this Agreement;
(b) No event will have occurred and be continuing, or would result from
such Term Loan, which constitutes an Event of Default, or would
constitute an Event of Default but for the requirement that notice be
given or lapse of time or both;
The acceptance by Borrower of the proceeds of the Term Loan will be deemed
to constitute a representation and warranty by Borrower that the conditions in
Section 7.2 of this Agreement, other than those that have been waived in writing
by Bank, have been satisfied.
Section 8. MISCELLANEOUS PROVISIONS.
8.1 MISCELLANEOUS. This Agreement, the exhibits and the other Loan
Documents are the complete agreement of the parties hereto and supersede all
previous understandings relating to the subject matter hereof. This Agreement
may be amended only in writing signed by the party against whom enforcement of
the amendment is sought. This Agreement may be executed in counterparts. If any
part of this Agreement is held invalid, illegal or unenforceable, the remainder
of this Agreement will not in any way be affected. This Agreement is and is
intended to be a continuing agreement and will remain in full force and effect
until the Loans are finally and irrevocably paid in full and the Term Loan is
terminated.
8.2 WAIVER BY BORROWER. Borrower waives notice of non-payment, demand,
presentment, protest or notice of protest of any Accounts or other Collateral,
and all other notices (except those notices specifically provided for in this
Agreement).
8.3 BINDING EFFECT. This Agreement will be binding upon and inure to the
benefit of the respective legal representatives, successors and assigns of the
parties hereto; however, Borrower may not assign or transfer any of its rights
or delegate any of its obligations under this Agreement or under any of the Loan
Documents, by operation of law or otherwise. Senior Bank and/or Junior Bank (and
any subsequent assignee) may transfer and assign any of its rights or delegate
any of its duties under this Agreement or may transfer or assign partial
interests or participation in the Loans to other persons. Senior Bank and Junior
Bank may disclose to all prospective and actual assignees and participants all
financial, business and other information about Borrower which Senior Bank or
Junior Bank may possess at any time.
8.4 SUBSIDIARIES. If Borrower has any additional wholly-owned Subsidiaries
at any time during the term of this Agreement, the term "Borrower" in each
representation, warranty and covenant herein will mean "Borrower" and each
Subsidiary individually and in the aggregate, and Borrower will cause each
Subsidiary to be in compliance therewith.
8.5 SECURITY. The Obligations are secured as provided herein, in this
Agreement, the Security Agreement attached hereto as Exhibit 8.5, in the Loan
Documents and in each other document or agreement which by its terms secures the
repayment or performance of the Obligations
17
8.6 SURVIVAL. All representations, warranties, covenants and agreements
made by Borrower herein and in the Loan Documents will survive the execution and
delivery of this Agreement, the Loan Documents and the issuance of the Term
Note.
8.7 DELAY OR OMISSION. No delay or omission on the part of Senior Bank or
Junior Bank in exercising any right, remedy or power arising from any Event of
Default will impair any such right, remedy or power or any other right remedy or
power or be considered a waiver or any right, remedy or power or any Event of
Default nor will the action or omission to act by Senior Bank or Junior Bank
upon the occurrence of any Event of Default impair any right, remedy or power
arising as a result thereof or affect any subsequent Event of Default of the
same or different nature.
8.8 NOTICES. Any notices under or pursuant to this Agreement will be deemed
duly sent when delivered in hand or when mailed by registered or certified mail,
return receipt requested, addressed as follows:
To Borrower: Merrymeeting, Inc.
c/o 0000 Xxxx 0xx Xxxxxx, Xxxxx 000
Xxxxxxxxx, Xxxx 00000
Attention: Xxxx Xxxxxx, President
Copy to: Xxxxx & Berne LLP
0000 Xxxx Xxxxx Xx., Xxxxx 000
Xxxxxxxxx, Xxxx 00000
Attn: Xxxxxxx Xxxxxx
To Junior Bank: The Fifth Third Bank
00 Xxxxxxxx Xxxxxx Xxxxx
Xxxxxxxxxx, Xxxx 00000
Attention: Commercial Loan Department
Copy to: Xxxx X. Xxxxxxx
Statman, Harris, Xxxxxx & Xxxxxx, LLC
2900 Chemed Center
000 Xxxx Xxxxx Xxxxxx
Xxxxxxxxxx, Xxxx 00000
To Senior Bank: Fifth Third Bank (Northeastern Ohio)
0000 Xxxx Xxxxx Xxxxxx
Xxxxxxxxx, Xxxx 00000
Attn: Commercial Loan Department
18
Copy to: Xxxxxxx, Xxxxx, Gerlack & Xxxxx Co., LPA
00 Xxxxxx Xxxxxx, #0000
Xxxxxxxxx, Xxxx 00000-0000
Attn: Xxxxxxx X. Xxxxx
Either party may change such address by sending written notice of the change to
the other party.
8.9 NO PARTNERSHIP. Nothing contained herein or in any of the Loan
Documents is intended to create or will be construed to create any partnership,
joint venture or other relationship between Bank and Borrower other than as
expressly set forth herein or therein and will not create any joint venture,
partnership or other relationship.
8.10 INDEMNIFICATION. If after receipt of any payment of all or part of the
Obligations, Bank is for any reason compelled to surrender such payment to any
person or entity, because such payment is determined to be void or voidable as a
preference, impermissible setoff, or diversion of trust funds, or for any other
reason, this Agreement will continue in full force and effect and Borrower will
be liable to, and will indemnify, save and hold Bank, its officers, directors,
attorneys, and employees harmless of and from the amount of such payment
surrendered. The provisions of this Section will be and remain effective
notwithstanding any contrary action which may have been taken by Bank in
reliance on such payment, and any such contrary action so taken will be without
prejudice to Bank's rights under this Agreement and will be deemed to have been
conditioned upon such payment becoming final, indefeasible and irrevocable. In
addition, Borrower will indemnify, defend, save and hold Bank, its officers,
directors, attorneys, and employees harmless of, from and against all claims,
demands, liabilities, judgments, losses, damages, costs and expenses, joint or
several (including all accounting fees and attorneys' fees reasonably incurred),
that Bank or any such indemnified party may incur arising out of this Agreement,
any of the Loan Documents or any act taken by Bank hereunder except for the
willful misconduct or gross negligence of such indemnified party. The provisions
of this Section will survive the termination of this Agreement.
8.11 GOVERNING LAW; JURISDICTION. This Agreement, the Note and the other
Loan Documents will be governed by the domestic laws of the State of Ohio.
Borrower agrees that the state and federal courts in Cuyahoga or Xxxxxxxx
County, Ohio, or any other court in which Bank initiates proceedings have
exclusive jurisdiction over all matters arising out of this Agreement, and that
service of process in any such proceeding will be effective if mailed to
Borrower at its address described in the Notices section of this Agreement. BANK
AND BORROWER HEREBY WAIVE THE RIGHT TO TRIAL BY JURY OF ANY MATTERS ARISING OUT
OF THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
8.12 WARRANT OF ATTORNEY: The undersigned, jointly and severally,
authorizes any attorney-at-law to appear in any court of record after maturity
of this note, whether by acceleration or otherwise, waive the issuance and
service of process and to confess judgment against them in favor of the Bank for
the principal sum due hereon together with interest, charges, court costs and
attorney's fees, and to waive and release all errors, rights of appeal,
exemptions and stays of execution. The undersigned also agrees that the attorney
19
acting for the undersigned as set forth in this paragraph may be compensated by
Bank for such services, and the undersigned waive any conflict of interest
caused by such representation and compensation arrangement. This warrant of
attorney to confess judgment shall be construed under the laws of the State of
Ohio.
(THIS SPACE INTENTIONALLY LEFT BLANK.)
20
IN WITNESS WHEREOF, Borrower and Bank have executed this Agreement by their
duly authorized officers as of the date first above written.
--------------------------------------------------------------------------------
WARNING - BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT
TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR
RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT,
OR ANY OTHER CAUSE.
--------------------------------------------------------------------------------
MERRYMEETING, INC.
By: /s/ XXXX X. XXXXXX
----------------------------------------
Print Name: XXXX X. XXXXXX
--------------------------------
Its: PRESIDENT
---------------------------------------
FIFTH THIRD BANK
By: /s/ XXXXXX X. XXXXXXXX
----------------------------------------
Print Name: XXXXXX X. XXXXXXXX
--------------------------------
Its: VICE PRESIDENT
---------------------------------------
FIFTH THIRD BANK (NORTHEAST OHIO)
By: /s/ XXXXX X. XXXXXXXX
------------------------------------
Print Name: XXXXX X. XXXXXXXX
--------------------------------
Its: VICE PRESIDENT
---------------------------------------
21
EXHIBITS
TO
CREDIT AGREEMENT
BETWEEN
MERRYMEETING, INC.
AND
FIFTH THIRD BANK
Exhibit 1 Definitions
Exhibit 2.1(a) Senior Term Notes
Exhibit 2.1(b) Junior Term Note
Exhibit 4.2(k) Financial Certificate of Borrower
Exhibit 7.1(b)(1) Certificate of Borrower
Exhibit 7.1(b)(2) Certificate of MM Merger Corporation
Exhibit 7.1(h) Unlimited Payment Guaranty of Xxxx X. Xxxxxx and
Xxxxx X. Xxxxxx
Exhibit 7.1(i) Unlimited Payment Guaranty of MM Merger Corporation
Exhibit 8.5(a) Security Agreement of Borrower
Exhibit 8.5(b) Security Agreement of MM Merger Corporation
22
EXHIBIT 1
DEFINITIONS
1. "Accounts" has the meaning assigned to that term in the Security Agreement.
2. "Affiliate" means, as to Borrower, (a) any person or entity which, directly
or indirectly, is in control of, is controlled by or is under common
control with, Borrower, or (b) any person who is a director, officer or
employee (i) of Borrower or (ii) of any person described in the preceding
clause (a).
3. "Bank Affiliate" means Fifth Third Bancorp and any person or entity which,
directly or indirectly, is in control of, is controlled by or is under
common control with Bank or Fifth Third Bancorp.
4. "Business Day" means any day which the Bank and the Federal Reserve Bank of
Cleveland is open for business.
5. "Collateral" has the meaning assigned to that term in any Security
Agreement.
6. "Current Assets" means all assets which may properly be classified as
current assets in accordance with generally accepted accounting principles,
provided that for the purpose of determining the Current Assets of Borrower
(a) notes and accounts receivable will be included only if good and
collectible and payable on demand or within twelve (12) months from the
date as of which Current Assets are to be determined (and if not directly
or indirectly renewable or extendible, at the option of the debtors, by
their terms or by the terms of any instrument or agreement relating
thereto, beyond such twelve (12) months) and will be taken at their face
value less reserves determined to be sufficient in accordance with
generally accepted accounting principles, and (b) the cash surrender value
of life insurance policies will be excluded.
7. "Current Liabilities" means all Indebtedness maturing on demand or within
twelve (12) months from the date as of which Current Liabilities are to be
determined (including, without limitation, liabilities, including taxes
accrued as estimated, accounts payable, and all current liabilities as may
properly be classified as current liabilities in accordance with generally
accepted accounting principles), and excluding intercompany liabilities.
Page 1 of 5
8. "Current Maturities of Long Term Debt" means that portion of the principal
amount of Long Term Debt which must be paid during the twelve fiscal months
following the date such determination is to be made.
9. "Debt Service Coverage Ratio" means the ratio of (a) the sum of Borrower's
consolidated net income (net of expenses) for a fiscal year before minority
interests, before taxes, depreciation, amortization and interest expense
(excluding non-cash interest regarding shareholder subordinated debt), less
distributions, dividends and capital expenditures and other extraordinary
items to (b) the sum of Borrower's interest expense (excluding non-cash
interest regarding shareholder subordinated debt), Current Maturities of
Long Term Debt, capital expenditures, capital distributions, taxes actually
paid, and capital lease obligations for such fiscal year.
10. "Default Rate" means three percent (3%) in excess of the interest rate
otherwise in effect under amounts outstanding under the Note. In no event
will the interest rate accruing under such Note be increased to be in
excess of the maximum interest rate permitted by applicable state or
federal usury laws then in effect.
11. "EBIT" means Borrower's consolidated net income (net of expenses) before
interest expenses and taxes.
12. "EBITDA" means Borrower's consolidated net income (net of expenses) before
interest expense, taxes, depreciation, amortization of goodwill.
13. "Environmental Laws" means all federal, state, local and foreign laws
relating to pollution or protection of the environment, including laws
relating to emissions, discharges, releases or threatened releases of
pollutants, contaminants, chemicals, or industrial toxic or hazardous
substances or wastes into the environment (including without limitation
ambient air, surface water, ground water or land), or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of pollutants, contaminants, chemicals or
industrial, toxic or hazardous substances or wastes, and any and all
regulations, codes, plans, orders, decrees, judgments, injunctions, notices
or demand letters issued, entered promulgated or approved thereunder.
14. "ERISA" means the Federal Employee Retirement Income Security Act of 1974.
15. "Event(s) of Default" will have the meaning set forth in Section 6.1 of the
Agreement.
Page 2 of 5
16. "Guarantors" shall mean, individually or collectively, Xxxx X. Xxxxxx,
Xxxxx X. Xxxxxx, and MM Merger Corporation.
17. "Indebtedness" means (a) all items (except items of capital stock, of
capital surplus, of general contingency reserves or of retained earnings,
deferred income taxes, and amount attributable to minority interests, if
any) which in accordance with generally accepted accounting principles
would be included in determining total liabilities on a consolidated basis
as shown on the liability side of a balance sheet as at the date as of
which Indebtedness is to be determined, (b) all indebtedness secured by any
mortgage, pledge, lien or conditional sale or other title retention
agreement to which any property or asset owned or held is subject, whether
or not the indebtedness secured thereby will have been assumed (excluding
non-capitalized leases which may amount to title retention agreements but
including capitalized leases), and (c) all indebtedness of others which
Borrower or any Subsidiary has directly or indirectly guaranteed, endorsed
(otherwise than for collection or deposit in the ordinary course of
business), discounted or sold with recourse or agreed (contingently or
otherwise) to purchase or repurchase or otherwise acquire, or in respect of
which Borrower or any Subsidiary has agreed to apply or advance funds
(whether by way of loan, stock purchase, capital contribution or otherwise)
or otherwise to become directly or indirectly liable.
18. "Lien" means any security interest, mortgage, pledge, assignment, lien or
other encumbrance of any kind, including interests of vendors or lessors
under conditional sale contracts and capitalized leases.
19. "Loan Documents" means this Agreement, the Term Notes, the Security
Agreement executed by Borrower in favor of Fifth Third Bank, Northern Ohio
dated April 30, 2001, the Pledge Agreement, the Standby and Subordination
Agreement, the Unlimited Payment Guarantys, and every other document or
agreement executed by any party relating to or evidencing, guarantying or
securing any of the Obligations; and "Loan Document" means any one of the
Loan Documents.
20. "Loans" means the Term Loans.
21. "Long Term Debt" means Indebtedness which, by its terms, is not payable in
full within one year from the date incurred, or the repayment of which may,
at the option of Borrower, be extended for a period more than one year from
the date incurred.
22. "Mortgage[s]" means all mortgages, deeds of trust or trust deeds executed
by Borrower encumbering real property of Borrower to secure the repayment
of the Obligations.
Page 3 of 5
23. "Notes" means the Term Notes.
24. "Obligation(s)" means all loans, advances, indebtedness, liabilities and
obligations of Borrower owed to Bank and all Bank Affiliates, and
specifically including but not limited to Fifth Third Bank (Northeastern
Ohio), of every kind and description whether now existing or hereafter
arising including without limitation, those owed by Borrower to others and
acquired by Bank or any Bank Affiliate, by purchase, assignment or
otherwise, and whether direct or indirect, primary or as guarantor or
surety, absolute or contingent, liquidated or unliquidated, matured or
unmatured, whether or not secured by additional collateral, and including
without limitation all liabilities, obligations and indebtedness arising
under this Agreement, the Note and the other Loan Documents, all
obligations to perform or forbear from performing acts, all amounts
represented by letters of credit now or hereafter issued by Bank for the
benefit of or at the request of Borrower, and all expenses and attorneys'
fees incurred by Bank and any Bank Affiliate under this Agreement or any
other document or instrument related to any of the foregoing.
25. "Operating Leases" means such real property and equipment leases as to
which Borrower is a party as lessee that do not in the aggregate exceed
$10,000 per month.
26. "Permitted Liens" has the meaning assigned thereto as set forth in Section
3.9 hereof.
27. "Prime Rate" means the rate of interest per annum announced to be its prime
rate from time to time by Bank at its principal office in Cincinnati, Ohio
whether or not Bank will at times lend to borrowers at lower rates of
interest or, if there is no such prime rate, then its base rate or such
other rate as may be substituted by Bank for the prime rate.
28. "Security Agreement" means any Security Agreement executed between Borrower
and Bank or Bank Affiliate, including but not limited to Fifth Third Bank,
Northeastern Ohio, securing the Obligations.
29. "Senior Indebtedness" means the all obligations to Fifth Third Bancorp and
any Bank Affiliate other than the Junior Term Note.
30. "Subordinated Debt" means any and all obligations for borrowed money
incurred by the Borrower to the shareholders or any person or entity other
than Bank at the time that any Obligations remain outstanding.
31. "Subsidiary" means any corporation of which Borrower directly or indirectly
owns or controls at the time outstanding stock having under ordinary
circumstances (not depending on the happening of a contingency) voting
power to elect a majority of the board of directors of said corporation.
Page 4 of 5
32. "Tangible Net Worth" shall mean the aggregate sum of shareholders' equity
less notes to shareholders (unless the payment of such notes has been
subordinated to payment of the Obligations), less advances to shareholders,
goodwill, and all intangibles, and plus that debt as described in the
Standby and Subordination Agreement dated of even date.
33. "Term Loan" has the meaning assigned to that term in Section 2.1 of this
Agreement.
34. "Term Note" has the meaning assigned to that term in Section 2.1 of this
Agreement.
35. "Total Funded Debt" means any and all Obligations owed to Bank or any Bank
Affiliate.
Page 5 of 5
EXHIBIT 2.1(A)
TERM NOTES
NOTE 1:
[LOGO] FIFTH THIRD BANK (NORTHEASTERN OHIO) 1
SECURED TERM
| | |
| | | NOTE
--------------------------------------------
$ 4,000,000 April 30, 2001
Cleveland, Ohio (Effective Date)
On or before the Due Date below, the undersigned corporation, for value
received, promises to pay to the order of Fifth Third Bank (Northeastern Ohio),
0000 Xxxx Xxxxx Xxxxxx, Xxxxxxxxx, Xxxx 00000 (hereinafter referred to as
"Bank") the sum of FOUR MILLION AND 00/100 ----- Dollars, plus interest per
annum at a rate of PRIME PLUS 125 BASIS POINTS. In the event of a change in said
Prime Rate, the rate on this note shall change immediately.
Interest shall be computed on a year of 360 days and charged for the actual
number of days elapsed.
This note is payable as follows:
Principal shall be due and payable in installments in the amount of $ 55,555.55
and shall be due on the last day of each month beginning 02/28/2002 with a final
payment on April 30, 2006 of the principal amount then owing plus all interest
due thereon.
Interest shall be due and payable on the last day of each month beginning May
31, 2001.
Principal and interest payments shall be made at the Bank's address above unless
otherwise designated by Bank in writing.
To secure repayment of this note and all modifications, extensions and renewals
thereof, the undersigned has granted to Bank a security interest in: (i) certain
collateral described pursuant to the terms and conditions of that certain
Security Agreement of even date herewith by Borrower in favor of Bank; (ii)
certain collateral consisting of 5,258,513 shares of stock of Frontier Adjusters
of America, Inc. pursuant to the terms and conditions of that certain Pledge
Agreement of even date herewith by Borrower in favor of Bank (collectively, the
"Collateral"). The undersigned agrees to immediately deliver such additional
dividends, warrants, securities, or other property or rights thereto to Bank
immediately upon receipt as additional Collateral and until delivery to hold
same in trust for Bank. All documents executed in connection with this Note and
all Collateral, including without limitation the following, further secure the
Obligations: a blanket lien on all business assets as described in the Security
Agreement entered on even date and the securities of the Borrower as pledged
under the Pledge Agreement entered on even date.
The undersigned certifies that the proceeds of this loan are to be used for
business purposes. If this note is a renewal, in whole or in part, of a previous
Obligation, the acceptance by Bank of this note shall not effectuate a payment
but rather a continuation of the previous Obligation.
Bank may charge and the undersigned agrees to pay, on the above Effective Date,
a note processing fee in an amount determined by Bank.
Events of Default are as described in the Credit Agreement entered on even date.
In addition to any other remedy permitted by law, the Bank may at any time after
the occurrence of Event of Default and expiration of applicable cure period, if
any, without notice, apply the Collateral to this note and Bank may, at its
option, proceed to enforce and protect its rights by an action at law or in
equity or by any other appropriate proceedings. Notwithstanding any other legal
or equitable rights of Bank, Bank, in the Event of Default, is (a) hereby
irrevocably appointed and constituted attorney in fact, with full power of
substitution, to exercise all rights of ownership with respect to Collateral and
(b) is hereby given full power to collect, sell, assign, transfer and deliver
all of said Collateral or any part thereof, or any substitutes therefor, or any
additions thereto, through any private or public sale without either demand or
notice to the undersigned, or any advertisement, the same being hereby expressly
waived, at which sale Bank is authorized to purchase said property or any part
thereof, free from any right of redemption on the part of the undersigned, which
is hereby expressly waived and released. In the case of any sale, the
undersigned agrees to be and remains liable to Bank for any and every deficiency
after application as aforesaid upon the Obligation evidenced by this Note. The
undersigned shall pay all costs of collection incurred by Bank, including its
attorney's fees, if this note is referred to an attorney for collection, whether
or not payment is obtained before entry of judgment, which costs and fees are
Obligations secured by the Collateral.
If any payment is not paid when due (whether by acceleration or otherwise) or
within 10 days thereafter, undersigned agrees to pay to Bank a late payment fee
as provided for in any loan agreement or 5% of the payment amount, whichever is
greater with a minimum fee of $20.00. After an Event of Default, the undersigned
agrees to pay to Bank a fixed charge of $25.00, or the undersigned agrees that
Bank may, without notice, increase the above stated interest rate by three
percent (3%), whichever is greater. Under no circumstances shall said interest
rate be raised to a rate which shall be in excess of the maximum rate of
interest allowable under the state and/or federal usury laws in force at the
time of such change.
The undersigned may prepay all or part of this note without premium or penalty,
which prepaid amounts shall be applied to the amounts due in reverse order of
their due dates. Partial prepayments shall not excuse any subsequent payment
due.
ENTIRE AGREEMENT: The undersigned agrees that there are no conditions or
understandings which are not expressed in this note and the documents referred
to herein.
WAIVER: No failure on the part of the Bank to exercise any of its rights
hereunder shall be deemed a waiver of any such rights or of any default. Demand,
presentment, protest, notice of dishonor, notice of protest and notice of
default are hereby waived. Each of the undersigned, including but not limited to
all co-makers and accommodation makers of this note, hereby waives all
suretyship defenses including but not limited to all defenses based upon
impairment of collateral and all suretyship defenses described in Section 3-605
of the Uniform Commercial Code, as revised in 1990 (the "UCC"). Such waiver is
entered to the full extent permitted by Section 3-605(i) of the UCC.
Page 1 of 5
This note is being delivered in, is intended to be performed in, will be
construed and enforceable in accordance with, and be governed by the laws of the
State of Ohio, without regard to conflict of law principles. Borrower agrees
that the state and federal courts in Cuyahoga County, Ohio or any other court in
which the Bank initiates proceedings, shall have exclusive jurisdiction over all
matters arising out of this Note, and that service of process in any such
proceeding will be effective if mailed to the undersigned corporation at its
address described in the Notices section of the Credit Agreement entered on even
date.
JURY WAIVER: THE UNDERSIGNED, AND ANY ENDORSER OR GUARANTOR HEREOF, WAIVE THE
RIGHT TO A TRIAL BY JURY OF ANY MATTERS ARISING OUT OF THIS NOTE OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
The declaration of invalidity of any provision of this note shall not affect any
part of the remainder of the provisions.
This note is supplemented by the terms and conditions of the Credit Agreement
dated of even date between the undersigned and Bank.
Warrant of attorney: The undersigned, jointly and severally, authorizes any
attorney-at-law to appear in any court of record after maturity of this note,
whether by acceleration or otherwise, waive the issuance and service of process
and to confess judgment against them in favor of the Bank for the principal sum
due hereon together with interest, charges, court costs and attorney's fees, and
to waive and release all errors, rights of appeal, exemptions and stays of
execution. The undersigned also agrees that the attorney acting for the
undersigned as set forth in this paragraph may be compensated by Bank for such
services, and the undersigned waive any conflict of interest caused by such
representation and compensation arrangement. This warrant of attorney to confess
judgment shall be construed under the laws of the State of Ohio.
--------------------------------------------------------------------------------
WARNING - BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT
TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR
RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT,
OR ANY OTHER CAUSE.
--------------------------------------------------------------------------------
Borrower: MERRYMEETING, INC.
DUE DATE: APRIL 30, 2006 /s/ XXXX X. XXXXXX
-------------------- -------------------------------------
Xxxx X. Xxxxxx, President
ADDRESS: 0000 Xxxxxxxx Xxxxx
Xxxxxxxxxxx, Xxxx 00000
Page 2 of 5
EXHIBIT 2.1(A)
TERM NOTES
NOTE 1:
[LOGO] FIFTH THIRD BANK (NORTHEASTERN OHIO) 1
SECURED TERM
| | |
| | | NOTE
--------------------------------------------
$ 1,000,000 April 30, 2001
Cleveland, Ohio (Effective Date)
On or before the Due Date below, the undersigned corporation, for value
received, promises to pay to the order of Fifth Third Bank (Northeastern Ohio),
0000 Xxxx Xxxxx Xxxxxx, Xxxxxxxxx, Xxxx 00000 (hereinafter referred to as
"Bank") the sum of ONE MILLION AND 00/100 ------------------ Dollars plus
interest per annum at a rate of PRIME PLUS 175 BASIS POINTS. In the event of a
change in said Prime Rate, the rate on this note shall change immediately. In
addition, after the Borrower becomes the 80% owner of Frontier Adjusters of
America, Inc., the interest rate will be reduced to Prime Rate plus 125 basis
points. However, if the contemplated merger does not occur by September 30,
2001, then the interest rate will be increased to 21%. If the merger is
consummated after September 30, 2001, Bank will review the creditworthiness of
Borrower to determine if the interest rate of 21% should be decreased.
Interest shall be computed on a year of 360 days and charged for the actual
number of days elapsed.
This note is payable as follows:
Principal shall be due and payable in installments in the amount of $13,888.89
and shall be due on the last day of each MONTH beginning 02/28/2002 with a final
payment on April 30, 2006 of the principal amount then owing plus all interest
due thereon.
Interest shall be due and payable at maturity on the LAST day of each month
beginning May 31, 2001.
Principal and interest payments shall be made at the Bank's address above unless
otherwise designated by Bank in writing.
To secure repayment of this note and all modifications, extensions and renewals
thereof, the undersigned has granted to Bank a security interest in certain
collateral described pursuant to the terms and conditions of that certain
Security Agreement of even date herewith by Borrower in favor of Bank. All
documents executed in connection with this Note and all Collateral, including
without limitation the following, further secure the Obligations: a blanket lien
on all business assets as described in the Security Agreement entered on even
date.
The Obligations secured by the Collateral (herein, the "Obligations") shall
include this note and each and every liability of the undersigned jointly or
severally to Bank and all affiliates of Fifth Third Bancorp however created,
direct or contingent, due or to become due, whether now existing or hereafter
arising, participated in whole or in part, created by trust agreement, lease,
overdraft, agreement, or otherwise, in any manner by the undersigned.
The undersigned certifies that the proceeds of this loan are to be used for
business purposes. If this note is a renewal, in whole or in part, of a previous
Obligation, the acceptance by Bank of this note shall not effectuate a payment
but rather a continuation of the previous Obligation.
Bank may charge and the undersigned agrees to pay, on the above Effective Date,
a note processing fee in an amount determined by Bank.
Events of Default are as defined in the Credit Agreement entered on even date.
In addition to any other remedy permitted by law, the Bank may at any time after
the occurrence of Event of Default and expiration of applicable cure period, if
any, without notice, apply the Collateral to this note and Bank may, at its
option, proceed to enforce and protect its rights by an action at law or in
equity or by any other appropriate proceedings. Notwithstanding any other legal
or equitable rights of Bank, Bank, in the Event of Default, is (a) hereby
irrevocably appointed and constituted attorney in fact, with full power of
substitution, to exercise all rights of ownership with respect to Collateral and
(b) is hereby given full power to collect, sell, assign, transfer and deliver
all of said Collateral or any part thereof, or any substitutes therefor, or any
additions thereto, through any private or public sale without either demand or
notice to the undersigned, or any advertisement, the same being hereby expressly
waived, at which sale Bank is authorized to purchase said property or any part
thereof, free from any right of redemption on the part of the undersigned, which
is hereby expressly waived and released. In the case of any sale, the
undersigned agrees to be and remains liable to Bank for any and every deficiency
after application as aforesaid upon the Obligation evidenced by this Note. The
undersigned shall pay all costs of collection incurred by Bank, including its
attorney's fees, if this note is referred to an attorney for collection, whether
or not payment is obtained before entry of judgment, which costs and fees are
Obligations secured by the Collateral.
If any payment is not paid when due (whether by acceleration or otherwise) or
within 10 days thereafter, undersigned agrees to pay to Bank a late payment fee
as provided for in any loan agreement or 5% of the payment amount, whichever is
greater with a minimum fee of $20.00. After an Event of Default, the undersigned
agrees to pay to Bank a fixed charge of $25.00, or the undersigned agrees that
Bank may, without notice, increase the above stated interest rate by three
percent (3%), whichever is greater. Under no circumstances shall said interest
rate be raised to a rate which shall be in excess of the maximum rate of
interest allowable under the state and/or federal usury laws in force at the
time of such change.
The undersigned may prepay all or part of this note without premium or penalty,
which prepaid amounts shall be applied to the amounts due in reverse order of
their due dates. Partial prepayments shall not excuse any subsequent payment
due.
ENTIRE AGREEMENT: The undersigned agrees that there are no conditions or
understandings which are not expressed in this note and the documents referred
to herein.
WAIVER: No failure on the part of the Bank to exercise any of its rights
hereunder shall be deemed a waiver of any such rights or of any default. Demand,
presentment, protest, notice of dishonor, notice of protest and notice of
default are hereby waived. Each of the undersigned, including but not limited to
all co-makers and accommodation makers of this note, hereby waives all
suretyship defenses including but not limited to all defenses based upon
Page 3 of 5
impairment of collateral and all suretyship defenses described in Section 3-605
of the Uniform Commercial Code, as revised in 1990 (the "UCC"). Such waiver is
entered to the full extent permitted by Section 3-605(i) of the UCC.
This note is being delivered in, is intended to be performed in, will be
construed and enforceable in accordance with, and be governed by the laws of the
State of Ohio, without regard to conflict of law principles. Borrower agrees
that the state and federal courts in Cuyahoga County, Ohio or any other court in
which the Bank initiates proceedings, shall have exclusive jurisdiction over all
matters arising out of this Note, and that service of process in any such
proceeding will be effective if mailed to the undersigned corporation at its
address described in the Notices section of the Credit Agreement entered on even
date.
JURY WAIVER: THE UNDERSIGNED, AND ANY ENDORSER OR GUARANTOR HEREOF, WAIVE THE
RIGHT TO A TRIAL BY JURY OF ANY MATTERS ARISING OUT OF THIS NOTE OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
The declaration of invalidity of any provision of this note shall not effect any
part of the remainder of the provisions.
This note is supplemented by the terms and conditions of the Credit Agreement
dated of even date between the undersigned and Bank.
Warrant of attorney: The undersigned, jointly and severally, authorizes any
attorney-at-law to appear in any court of record after maturity of this note,
whether by acceleration or otherwise, waive the issuance and service of process
and to confess judgment against them in favor of the Bank for the principal sum
due hereon together with interest, charges, court costs and attorney's fees, and
to waive and release all errors, rights of appeal, exemptions and stays of
execution. The undersigned also agrees that the attorney acting for the
undersigned as set forth in this paragraph may be compensated by Bank for such
services, and the undersigned waive any conflict of interest caused by such
representation and compensation arrangement. This warrant of attorney to confess
judgment shall be construed under the laws of the State of Ohio.
--------------------------------------------------------------------------------
WARNING - BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT
TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR
RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT,
OR ANY OTHER CAUSE.
--------------------------------------------------------------------------------
Borrower: MERRYMEETING, INC.
DUE DATE: APRIL 30, 2006 /s/ XXXX X. XXXXXX
-------------------- -------------------------------------
Xxxx X. Xxxxxx, President
ADDRESS: 0000 Xxxxxxxx Xxxxx
Xxxxxxxxxxx, Xxxx 00000
Page 4 of 5
EXHIBIT 2.1(B)
TERM NOTE
$3,000,000.00
Cincinnati, Ohio
April 30, 2001
MERRYMEETING, INC., a Delaware corporation (the "Borrower"), for value received,
hereby promises to pay to the order of FIFTH THIRD BANK, an Ohio banking
corporation (the "Bank"), at its offices located at 00 Xxxxxxxx Xxxxxx Xxxxx,
Xxxxxxxxxx, Xxxx 00000, in lawful money of the United States of America, the
principal sum of Three Million Dollars ($3,000,000.00) together with interest as
set forth herein. Interest on the outstanding principal balance of this Note
will accrue at a rate per annum equal to 21% per annum. Interest will be
calculated on the basis of a year of 360 days and charged for the actual number
of days elapsed. Interest will be payable in immediately available funds at the
principal office of Bank on the first day of each calendar month. After
maturity, whether by acceleration, notice of intention to prepay or otherwise,
this Note will bear interest (computed and adjusted in the same manner, and with
the same effect, as interest hereon prior to maturity), payable on demand, at a
rate per annum equal to the Default Rate, until paid, and whether before or
after the entry of judgment hereon.
Accrued and unpaid interest will only be due and payable monthly commencing on
the last day of May, 2001 and continuing on the last day of each month
thereafter during the term hereof.
The entire principal amount and all accrued and unpaid interest due and of this
Note will be due and payable on October 30, 2003.
This Note is the Term Note referred to in the Credit Agreement between Borrower
and Bank of even date herewith, as it may be amended from time to time (the
"Agreement"), and is entitled to the benefits, and is subject to the terms, of
the Agreement. Capitalized terms used but not otherwise defined herein will have
the meanings attributed thereto in the Agreement. The principal of this Note is
pre-payable in the amounts and under the circumstances, and its maturity is
subject to acceleration upon the terms, set forth in this Agreement. Except as
otherwise expressly provided in the Agreement, if any payment on this Note
becomes due and payable on a day other than one on which Bank is open for
business (a "Business Day"), the maturity thereof will be extended to the next
Business Day, and interest will be payable at the rate specified during the
extension period.
In addition to any other limitations set forth herein, no payment of principal,
interest or any other amount due with respect to this Note shall be made, and
the holder shall not exercise any right of set-off or recoupment with respect to
this Note, until all of the Senior Indebtedness (as defined in the Agreement) is
paid in full; provided, that Borrower may make and the holder may receive
Page 1 of 5
payments of principal and interest on account of this Note in accordance with
its terms and may prepay the whole or any part hereof so long as no breach or
default or event of default exists or would result therefrom with respect to the
Senior Indebtedness. All payments permitted hereunder shall be final in amounts
so received shall not thereafter be subject to these subordination provisions.
If any payment not permitted hereunder is received by the holder on account of
this Note before all of the Senior Indebtedness is paid in full, such payment
may not be commingled with any asset of holder, shall be held in trust by holder
for the benefit of the holders of the Senior Indebtedness and shall be paid over
to such holders or their designated representatives, for application to the
payment of the Senior Indebtedness then remaining unpaid, until all of the
Senior Indebtedness is paid in full and according to their respective interests.
After the occurrence of an Event of Default, all amounts of principal
outstanding as of the date of the occurrence of such Event of Default will bear
interest at the Default Rate, in Bank's sole discretion, without notice to
Borrower. This provision does not constitute a waiver of any Events of Default
or an agreement by Bank to permit any late payments whatsoever.
If any payment of principal is not paid when due (whether by acceleration or
otherwise after the expiration of applicable notice grace and cure periods, if
any), Borrower agrees to pay to Bank a late payment fee equal to five percent
(5%) of the payment amount then due.
Borrower may prepay any portion of this Note in part at any time without premium
or penalty. Any prepayments under this Note in advance of any amortized payments
will be applied to reduce the outstanding principal amount of this Note in the
inverse chronological order of maturity.
In no event will the interest rate on this Note exceed the highest rate
permissible under any law which a court of competent jurisdiction will, in a
final determination, deem applicable hereto. In the event that a court
determines that Bank has received interest and other charges under this Note in
excess of the highest permissible rate applicable hereto, such excess will be
deemed received on account of, and will automatically be applied to reduce the
amounts due to Bank from Borrower under this Note, other than interest in the
inverse order of maturity, and the provisions hereof will be deemed amended to
provide for the highest permissible rate. If there are no such amounts
outstanding, Bank will refund to Borrower such excess.
All payments received by Bank will be applied first to payment of amounts
advanced by Bank on behalf of Borrower, which may be due for insurance, taxes
and attorneys' fees or other charges to be paid by Borrower pursuant to the
Agreement and the Loan Documents (as defined herein), then to accrued interest
due on this Note, then to the principal, which will be repaid in the inverse
order of maturity.
Borrower and all endorsers, sureties, guarantors and other persons liable on
this Note hereby waive presentment for payment, demand, notice of dishonor,
protest, notice of protest and all other demands and notices in connection with
the delivery, performance and enforcement of this Note, and one or more
extensions and renewals of this Note.
This Note may not be changed orally, but only by an instrument in writing.
Page 2 of 3
This Note is being delivered in, is intended to be performed in, will be
construed and enforceable in accordance with, and be governed by the internal
laws of, the State of Ohio without regard to principles of conflict of laws.
Borrower agrees that the State and federal courts in Xxxxxxxx County, Ohio, or
any other court in which Bank initiates proceedings, have exclusive jurisdiction
over all matters arising out of this Note, and that service of process in any
such proceeding will be effective if mailed to Borrower at its address described
in the Notices section of the Agreement. BORROWER HEREBY WAIVES THE RIGHT TO
TRIAL BY JURY OF ANY MATTERS ARISING OUT OF THIS NOTE.
WARRANT OF ATTORNEY: The undersigned, jointly and severally, authorizes any
attorney-at-law to appear in any court of record after maturity of this note,
whether by acceleration or otherwise, waive the issuance and service of process
and to confess judgment against them in favor of the Bank for the principal sum
due hereon together with interest, charges, court costs and attorney's fees, and
to waive and release all errors, rights of appeal, exemptions and stays of
execution. The undersigned also agrees that the attorney acting for the
undersigned as set forth in this paragraph may be compensated by Bank for such
services, and the undersigned waive any conflict of interest caused by such
representation and compensation arrangement. This warrant of attorney to confess
judgment shall be construed under the laws of the State of Ohio.
--------------------------------------------------------------------------------
WARNING - BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT
TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR
RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT,
OR ANY OTHER CAUSE.
--------------------------------------------------------------------------------
WITNESSES: MERRYMEETING, INC.
XXXXX X. X'XXXXX WITNESS /s/ XXXX X. XXXXXX
------------------------ ----------------------------------------
Xxxx X. Xxxxxx, President
Page 3 of 3
