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EXHIBIT 10.12
LOAN AGREEMENT
THIS LOAN AGREEMENT, made and entered into this 5th day of June, 1995,
by and between RADIO SYSTEMS CORPORATION, a Tennessee corporation, of Xxxx
County, Tennessee ("Borrower"), and BANKFIRST of Knoxville, Tennessee, a banking
corporation organized and existing under the laws of the State of Tennessee,
with offices and place of business in Xxxx County, Tennessee ("BANKFIRST").
WITNESSETH:
WHEREAS, Borrower desires to purchase new computers and software for
the business, and to refinance equipment leases (the "Project"); and
WHEREAS, in order to loan funds to Borrower to be used in the Project,
BANKFIRST enters into this Loan Agreement with Borrower for the purposes herein
contained; and
WHEREAS, the loan made hereunder will be secured by the Continuing
Guaranty of Xxxxxx X. Xxxx (the "Guarantors") and a Security Interest on the
personal property, improvements, machinery and equipment comprising Project,
including all new equipment purchased from the loan proceeds.
NOW, THEREFORE, for and in consideration of the premises, the sum of
One ($1.00) Dollar and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
ARTICLE I
AMOUNT AND TERMS OF LOAN
1.1 LOAN AND NOTE. The term "Loan" herein shall refer to the
indebtedness of Borrower to BANKFIRST evidenced by a Promissory Note in the
original principal amount of Three Hundred Twenty Thousand Dollars ($320,000.00)
in form satisfactory to BANKFIRST (the "Note"). A copy of the Note is appended
hereto as Exhibit "A", and incorporated herein by reference, as though more
fully set out. Concurrent with the execution and delivery of the Note, BANKFIRST
will, upon the terms and conditions of this Agreement, lend to the Borrower the
sum of Three Hundred Twenty Thousand Dollars ($320,000.00).
1.2 INTEREST AND REPAYMENT. The Note shall bear interest at
eleven and one-half (11.5%) percent per annum, on the aggregate unpaid principal
amount of the Loan in accordance with the terms of the Note. Payment of the Note
shall be made at BANKFIRST'S office at Post Office Box 10, Knoxville, Tennessee,
unless otherwise directed in writing by BANKFIRST. Borrower will punctually pay
all amounts due and owing in accordance with the terms of the Note.
1.3 PREPAYMENTS. Borrower shall have the right to prepay all
or any part of the indebtedness evidenced by the Note at any time without
premium or fee. Any prepayment received by BANKFIRST from Borrower, regardless
of the source thereof, shall be applied by BANKFIRST to payments due on the Note
being prepaid in inverse order of their due dates, and no such prepayment shall
postpone the due date of any subsequent monthly installment or change the amount
of any such installment, unless BANKFIRST shall otherwise expressly agree in
writing.
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1.4 USE OF PROCEEDS. Loan proceeds will be used for the
Project and for no personal, household, family or any other use.
ARTICLE II
CONDITION OF LENDING
2.1 CONDITIONS PRECEDENT TO THE LOAN. As a condition
precedent to BANKFIRST making the Loan, the Borrower shall deliver to BANKFIRST
on or before the date of the Loan closing, the following, in form and substance
satisfactory to BANKFIRST:
(a) Certified copy of Resolution of Borrower's Board of
Directors authorizing Borrower to enter into the
transaction anticipated by this Agreement;
(b) The Note;
(c) The Guaranty of each Guarantor;
(d) Security Agreement;
(e) UCC-I Financing Statements;
(f) Evidence satisfactory to BANKFIRST of ownership of
the Collateral by Borrower free and clear of
encumbrances of any kind; and
(g) Such other documents as reasonably may be required by
BANKFIRST or BANKFIRST'S Counsel.
The Loan documents as provided above, when prepared, shall set
forth the matters contained in this Loan Agreement and contain such other
provisions as are deemed necessary or desirable by BANKFIRST. The form and
substance of all such documents must be satisfactory to BANKFIRST prior to
disbursement by BANKFIRST of any of the proceeds of the Loan.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BORROWER
The Borrower represents and warrants to, and agrees with
BANKFIRST as follows:
3.1 ORGANIZATION AND IN GOOD STANDING. Borrower is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Tennessee, and is duly qualified as a foreign corporation in all
jurisdictions wherein the business transacted makes such qualification
necessary.
3.2 POWER AND AUTHORIZATION.
(a) The Board of Directors of Borrower has authorized the
execution and delivery of the Note and all other documents contemplated
by this Loan Agreement, and such execution and delivery will not
violate any law, or the Borrower's charter or bylaws, or any other
agreement to which Borrower is a party.
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(b) This Loan Agreement constitutes, and upon execution and
delivery thereof, the Note, the Security Agreement, and the other
ancillary documents will constitute, legal, valid and binding
obligations of the Borrower enforceable against the Borrower.
3.3 FINANCIAL CONDITION. The reports and financial statements
of Borrower and Guarantor, submitted to BANKFIRST in connection with the Loan
have been prepared from Borrower's books and records in accordance with
generally accepted accounting principles and practices, consistently applied,
and fairly reflect the financial condition of Borrower and Guarantor for the
periods therein defined. No material adverse changes have since occurred.
Except as disclosed in the aforesaid reports and financial statements, Borrower
and Guarantor:
(a) Have not incurred any debts, liabilities or other
obligations, nor committed to incur any debts, liabilities or
obligations;
(b) Have no liabilities, direct or contingent;
(c) Have made no investments in, advances to, or guarantees or
obligations of any other company, person, firm, corporation, or other
entity;
(d) Are not subject to any judgment, nor are there any, liens,
encumbrances or security interests outstanding against Borrower or any
of its properties.
3.4 LITIGATION. There is no litigation, proceeding, claim or
dispute pending or threatened against Borrower, the adverse determination of
which would materially affect Borrower's ability to repay the Loan or otherwise
perform hereunder.
ARTICLE IV
COVENANTS BY BORROWER
Until all the obligations of Borrower under this Agreement
have been performed and paid in full, Borrower covenants and agrees as follows:
4.1 INSURANCE. Borrower shall maintain or require Guarantor to
maintain insurance on the Collateral as described in Article VII hereof in such
amounts and against such hazards and liabilities as is customarily maintained by
other companies in the same geographical area operating similar businesses, or
as may be otherwise requested by BANKFIRST. All such policies of insurance shall
be in form and substance and with insurance companies satisfactory to BANKFIRST,
and Borrower shall exhibit the same or deliver evidence thereof to BANKFIRST
upon request. Further, upon request, BANKFIRST shall be designated as loss payee
or as an additional insured under any such policies, as its interests may
appear.
4.2 MAINTENANCE OF BUSINESS AND CORPORATE EXISTENCE. Borrower
will maintain its corporate existence, shall comply with all valid and
applicable statutes, ordinances, rules and regulations and shall keep in force
and effect all licenses, permits, bonds and franchises necessary for the proper
conduct of its business.
4.3 ADVERSE CHANGES AND LITIGATION. Borrower shall immediately
inform BANKFIRST of any material adverse change in its financial condition, or
the financial condition of Guarantor, and shall promptly inform BANKFIRST of any
litigation or threatened litigation or of the occurrence of any other event or
circumstance which might substantially affect the financial condition or
business of Borrower or Guarantor.
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4.4 MANAGEMENT AND OWNERSHIP. No material change shall be made
in the management or ownership of Borrower, or in the manner in which its
business is conducted. Borrower will not merge or consolidate with or into any
corporation.
4.5 FINANCIAL STATEMENTS. Within thirty (30) days after the
end of each calendar quarter, Borrower shall furnish or cause to be furnished to
BANKFIRST a copy of Borrower's current financial statement and those of each
Guarantor, (provided, however, that with respect to Guarantors, only annual
financial statements need to be provided.) Borrower's financial statements shall
contain a balance sheet, profit and loss statement and aging of accounts
receivable and account payable, all in reasonable detail, prepared in accordance
with generally accepted accounting principles, consistently applied. Each set of
financial statements shall be prepared by a certified public. accountant
acceptable to BANKFIRST and certified by Borrower to be correct and accurate.
Borrower shall also furnish a copy of its income tax returns, and such other or
additional financial information as BANKFIRST may from time to time request.
Notwithstanding any term or provision to the contrary herein
or in the Note, or otherwise, in the event of a failure to provide financial
statements or income tax returns as required herein, the effective interest rate
to the loan, for a period beginning three (3) days after written notice of such
failure and ending upon the curing of said noticed failure, shall increase one
quarter of one percent (.25%) for the first thirty (30) days of said failure,
and increase an additional one quarter of one percent (.25%) during each thirty
(30) day period thereafter during which the noticed failure continues. Upon the
remedy of the noticed failure, the interest rate on the Loan shall revert to the
initially agreed-upon interest rate, effective on the date on which the failure
is remedied. Borrower acknowledges that such increased interest rate is intended
to compensate BANKFIRST for the potentially higher credit risk and increased
administrative costs associated with such failure to furnish timely financial
information.
4.6 FINANCIAL COVENANTS.
(a) Current Ratio. Borrower shall at all times maintain a
ratio of current assets to current liabilities of not less than 1.25 to
1.0. For purposes of this covenant, "current assets" shall refer to
cash, inventory, accounts receivable, marketable securities, notes
receivable (other than notes receivable from employees and shareholders
of Borrower) and deferred taxes, and "current liabilities" shall refer
to any indebtedness due and payable within one fiscal year from the
date of Borrower's most recent balance sheet (excluding indebtedness of
Borrower to Sirrom Capital Corporation), all determined in accordance
with generally accepted accounting principles consistently applied.
(b) Net Worth Requirements. Borrower shall at all times
maintain a minimum tangible net worth of $2,200,000.00 from the date
hereof through May 31, 1995; $2,500,000.00 from June l, 1995 through
November 30, 1995; and $3,750,000.00 thereafter. For purposes of this
covenant, "tangible net worth" shall refer to Borrower's total assets
minus total liabilities minus prepaids, intangibles and amounts due
from affiliates ~ any debt subordination to indebtedness of Borrower to
BANKFIRST pursuant to subordination agreements satisfactory to
BANKFIRST, all determined in accordance with generally accepted
accounting principles consistently applied.
(c) Debt to Worth Ratio. Borrower shall at all times maintain
a ratio of total liabilities (exclusive of any debt subordinated to
indebtedness of Borrower to BANKFIRST pursuant to subordination
agreements satisfactory to BANKFIRST) to tangible net worth of not more
than 2.0 to 1.0 for the month ending February 28, 1995; 3.0 to 1.0 from
March 1, 1995, through June 30, 1995; 3.5 to 1.0 from July 1, 199S,
through November 30, 1995; and 1.75 to 1.0 thereafter. For purposes of
this covenant, "tangible net worth" shall have the meaning set forth in
Section 6.2 hereof.
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(d) Interest Coverage Ratio. Borrower shall maintain a ratio
of income before interest and taxes to interest expense, all determined
in accordance with generally accepted accounting principles
consistently applied, calculated annually as of Borrower's fiscal
year-end, of not less than 1.30 to 1.0.
4.7 OTHER DEBTS. Borrower shall not directly or indirectly
incur, create, assume or permit to exist any obligation for payment of borrowed
money in excess of $25,000.00, excepting only unsecured current liabilities
incurred in the ordinary course of business and obligations contemplated by this
Agreement, nor enter into any leases, nor initiate any new investments of its
funds or assets without the express written consent of BANKFIRST, which consent
shall not be unreasonably withheld. Further, Borrower shall not guarantee the
obligations of any person or entity, excepting only obligations contemplated by
this Agreement.
4.8 SALE OF COLLATERAL. Borrower shall not sell, lease,
transfer or otherwise dispose of any of the Collateral as described in ARTICLE
VII hereof, other than in the ordinary course of Borrower's business. If
Borrower should desire to sell any of the Collateral, a release price therefore
will be determined at the sole discretion of BANKFIRST, and upon the sale of
that Collateral, the release price will be paid over by Borrower to BANKFIRST
and applied by BANKFIRST to payments due on the Note, in inverse order of the
due dates, and BANKFIRST shall thereupon release its lien or security interest
upon the Collateral sold.
4.9 BULK SALE. The Borrower shall not, without the prior
written consent of BANKFIRST, sell, transfer or convey all or any part of its
interest in its assets to another entity.
4.l0 ENCUMBRANCES. Borrower shall not incur or permit to exist
nor allow Guarantor to incur or permit to exist any encumbrance, pledge
or lien upon or against any of the Collateral, except:
(a) Liens or security interests required or expressly
contemplated or permitted by this Agreement;
(b) Liens for taxes, assessments and other governmental
charges not yet due; and liens of carriers, warehousemen, mechanics and
materialmen incurred in the ordinary course of business for sums not
yet due; and
(c) Tax liens which are being contested in good faith.
4.11 TAXES. Borrower shall pay promptly, when due, all taxes,
assessments and governmental charges or levies imposed upon the Borrower or upon
the income or any property of the Borrower, as well as all claims of any kind
(including claims for labor, material, supplies or rent) which, if unpaid, might
become a lien upon any or all of the Collateral.
4.12 EXAMINATION OF RECORDS. Borrower shall permit any
representative of BANKFIRST to examine and to audit any or all of Borrower's
books and records and to copy portions thereof, and to visit and inspect any of
the Collateral upon receipt of reasonable notification and request.
4.13 ERISA. Borrower is in compliance with the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), has not incurred
any material funding deficiency within the meaning of ERISA, and has not
incurred any material liability to the Pension Benefit Guaranty Corporation in
connection with any employee benefit plan established or maintained by Borrower.
4.14 DIVIDENDS. DISTRIBUTIONS. REDEMPTIONS AND SALARIES.
Borrower will not declare or pay any dividend, purchase, redeem, or otherwise
acquire for value any
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of its stock now or hereafter outstanding, return any capital to its
stockholders, or make any distribution of its assets to its stockholders as
such. Borrower shall not increase the aggregate compensation paid to its
officers as of the date of this Agreement without the prior consent of
BANKFIRST.
ARTICLE V
EVENTS OF DEFAULT
The occurrence of any one or more of the following shall
constitute an "Event of Default":
(a) Nonpayment, when due, of any principal, accrued interest,
premium, fee or other charge due under the Note.
(b) Default by Borrower in the due observance or performance
of any term, covenant, condition or agreement on its part to be
performed under this Loan Agreement, the Note, or under any other
document contemplated by this Loan Agreement.
(c) If Borrower shall:
(1) Make a general assignment for the benefit of its
creditors;
(2) File a voluntary petition in bankruptcy;
(3) Be adjudicated as bankrupt or insolvent;
(4) File any petition or answer seeking, consenting to, or
acquiescing in, reorganization, arrangement, composition,
liquidation, dissolution or similar relief, under any
present or future statute, law or regulation;
(5) File an answer admitting or failing to deny the
material allegations of the petition against it for any
such relief;
(6) Admit in writing its inability to pay its debts as
they mature;
(7) Discontinue business; or
(8) Be unable to pay its debts as they become due.
(d) Borrower fails to have vacated or set aside within thirty
(30) days of its entry any court order appointing a receiver or trustee
for all or a substantial portion of the Borrower's property.
(e) Any warranty, representation or statement made or
furnished to BANKFIRST by Borrower in connection with the Loan or in
connection with this Agreement (including any warranty, representation
or statement in the application of Borrower for the Loan or in any
accompanying financial statements) or to induce BANKFIRST to make the
Loan, proves to be untrue, misleading or false in any material respect.
(f) Borrower suffers or permits any lien, encumbrance or
security interest to attach to any of its property, except as herein
otherwise expressly permitted, or if any judgment shall be entered
against Borrower or any attachment shall be made against any
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property of Borrower, which judgment or attachment shall remain
undischarged, unbonded or undismissed for a period of thirty (30) days.
(g) Borrower defaults in the payment of any principal or
interest on any obligation to BANKFIRST or to any other creditor.
(h) Borrower shall sell, lease or otherwise transfer or convey
any of the Collateral, or any interest therein without BANKFIRST'S
prior written approval, except as herein otherwise expressly permitted.
(i) BANKFIRST deems itself insecure or that its prospects for
payment of the Note are impaired.
ARTICLE VI
REMEDIES ON EVENT OF DEFAULT
6.1 DECLARE NOTE DUE. Upon the occurrence of any Event of
Default as defined in this Agreement, the Note, the Security Agreement, or any
other document contemplated by this Agreement; then in any such event, BANKFIRST
at its option, may declare the entire unpaid balance of the Note to be forthwith
due and payable, and thereupon such balance shall become so due and payable
without presentment, protest or further demand or notice of any kind, all of
which are hereby expressly waived, and Borrower will forthwith pay to BANKFIRST
the entire principal of and interest accrued on the Note.
6.2 OTHER REMEDIES. Upon the occurrence or discovery of an
Event of Default, BANKFIRST shall, in addition to its option to declare the
entire unpaid amount of the Note due and payable, at its option:
(a) Move to protect its rights and remedies as a secured party
under the Security Agreement, by extrajudicial authority as set forth
in that instrument, by action at law or equity, or by any other lawful
remedy to enforce payment.
(b) Apply the proceeds from any disposition of the Collateral
to the satisfaction of the following items in the order in which they
are listed:
(1) The expenses of taking, preserving, insuring,
repairing, holding and selling the Collateral, including
any legal costs and attorney's fees. If any of the Note
shall be referred to an attorney for collection, Borrower
and all others liable on the Note, jointly and severally
agree to pay reasonable attorney's fees and all costs of
collection.
(2) The expenses of liquidating or satisfying any liens,
security interest or encumbrances on or in the Collateral
which may be prior to the lien or security interest of
BANKFIRST therein.
(3) The unpaid amount of any interest due on the Note, and
all other expenses of BANKFIRST.
(4) The unpaid principal amounts of the Note.
(5) Any other indebtedness of Borrower to BANKFIRST.
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(6) The remainder, if any, to Borrower, it being
understood and agreed that if the proceeds realized from
the disposition of the Collateral shall fail to satisfy
items (1) through (5) above, Borrower shall forthwith pay
any such deficiency to BANKFIRST upon demand.
(d) Exercise any and all rights of setoff which BANKFIRST may
have against any account, fund or property of any kind, tangible or
intangible, belonging to Borrower and which shall be in BANKFIRST'S
possession or under BANKFIRST'S control.
ARTICLE VII
COLLATERAL
Borrower's obligation for payment of the Note shall be
collateralized by the following (the "Collateral"):
7.1 GUARANTY. The Unlimited and Continuing Guaranty of Xxxxxx
X. Xxxx.
7.2 SECURITY INTEREST. A security interest in and upon the
personal property of Borrower, including a first priority security interest in
all new equipment purchased from the loan proceeds.
ARTICLE VIII
MISCELLANEOUS
8.1 CLOSING. The Loan shall be closed on or before the 10th
day of June, 1995. However, BANKFIRST shall not be obligated to make the Loan or
advance any funds until Borrower has fully met all requirements herein set forth
to be met by Borrower, and until Borrower has paid to BANKFIRST and any other
parties entitled thereto, all fees and other charges due in connection with the
Loan.
8.2 AMENDMENTS. No amendment of any provisions of this Loan
Agreement, nor consent to any departure of Borrower therefrom, shall in any
event be effective unless the same shall be in writing and signed by BANKFIRST
and then such waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given.
8.3 NOTICES. All notices and other communications provided for
hereunder shall be in writing and mailed or telegraphed or delivered.
If to Borrower:
Radio Systems Corporation
0000 Xxxxxxxx Xxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxxxx X. Xxxx
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If to BANKFIRST:
XXXXXXXXX
Xxxx Xxxxxx Xxx 00
Xxxxxxxxx, Xxxxxxxxx 00000-0000
8.4 WAIVER OF JURY. Borrower hereby unconditionally and
irrevocably waives any and all right to trial by jury in any action, suit,
counterclaim or cross claim arising in connection with, out of or otherwise
relating to the Loan Agreement, any other documentation relating to the Loan, or
any transaction arising therefrom or related thereto.
8.5 GOVERNING LAW AND PARTIES BOUND. This Agreement and the
Note shall be governed by and construed in accordance with the laws of the State
of Tennessee and shall be binding upon and shall inure to the benefit of the
parties hereto, their successors and assigns.
8.6 ATTORNEY'S FEES AND EXPENSES. If BANKFIRST shall incur
any cost or expense, including, without limitation, reasonable attorney's fees,
in connection with this Agreement, the Note or the Loan, in any manner
whatsoever, direct or indirect, whether with regard to the collection of amounts
due, protection of Collateral, defense of BANKFIRST or otherwise, upon demand by
BANKFIRST, Borrower shall pay the same or shall reimburse BANKFIRST therefor in
full.
8.7 ASSIGNMENT BY BORROWER. No commitment issued by BANKFIRST
to Borrower for the Loan nor any of Borrower's rights hereunder shall be
assignable by Borrower without the prior written consent of BANKFIRST.
8.8 NO WAIVER: REMEDIES. No failure on the part of
BANE(FIRST, and no delay in exercising any right under this Loan Agreement,
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right under this Loan Agreement preclude any other or further exercise
thereof or the exercise of any other right.
8.9 SEVERABILITY. In the event that any clause or provisions
of this Loan Agreement or any document or instrument contemplated by this
Agreement shall be held to be invalid by any court of competent jurisdiction,
the invalidity of such clause or provision shall not affect any of the remaining
portions or provisions of this Loan Agreement.
8.10 TIME. TIME IS OF THE ESSENCE of this Agreement.
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IN WITNESS WHEREOF, the parties have executed this Loan
Agreement as of the date first above written.
RADIO SYSTEMS CORPORATION
By: /s/ Xxxxx Xxxx
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Its: President
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BANKFIRST
By: /s/ Xxxxxxx X. Xxxxxx
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Its: Senior Vice-President
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