EXHIBIT 10.21
EXECUTION COPY
LOAN AGREEMENT
THIS LOAN AGREEMENT, made as of the 28th day of May, 1997, by and
among The Colonel's International, Inc., a Michigan corporation
("International"), The Colonel's, Inc., a Michigan Corporation
("Colonel's"), Brainerd International Raceway, Inc., a Minnesota
corporation, and The Colonel's Truck Accessories, Inc., a Michigan
corporation (collectively identified as "Companies" and individually as a
"Company") and COMERICA BANK, a Michigan banking corporation of Detroit,
Michigan (herein called "Bank");
RECITALS:
A. Companies desire to obtain certain credit facilities from Bank.
B. Bank is willing to extend such credit facilities on the terms and
conditions hereinafter set forth.
NOW, THEREFORE, Companies and Bank agree as follows:
WITNESSETH:
1. DEFINITIONS
For the purposes of this Agreement the following terms will have the
following meanings:
"Account" shall mean any right of Companies to payment for goods sold
or leased or for services rendered, whether or not such right to payment
has been earned by performance, excluding all interest and service charges
thereon.
"Account Debtor" shall mean the party who is obligated on any Account.
"Advance" shall mean a borrowing requested by Companies and made by
Bank under Section 2 of this Agreement, including any refunding or
conversions of such borrowings pursuant to Section 2.7 hereof, and shall
include a Eurodollar-based Advance and a Prime-based Advance.
"Affiliate" shall mean, with respect to any Person, any other Person
directly or indirectly controlling (including but not limited to all
directors and executive officers of such person), controlled by, or under
direct or indirect common control with such person. A Person shall be
deemed to control a corporation for the purposes of this definition if such
Person possesses, directly or indirectly, the power (i) to vote 10% or more
of the securities having ordinary voting power for the election of
directors of such corporation or (ii) to direct or cause the direction of
the management and policies of such corporation, whether through the
ownership of voting securities, by contract or otherwise.
"Alternate Base Rate" shall mean for any day a rate per annum (rounded
upwards, if necessary, to the next higher 1/16 of 1%) equal to the Federal
Funds Effective Rate in effect on such day plus one percent (1%).
"Applicable Interest Rate" shall mean with respect to Advances, the
Eurodollar-based Rate or the Prime-based Rate, as selected by Companies
from time to time subject to the terms and conditions of this Agreement.
"Business Day" shall mean any day on which commercial banks are open
for domestic and international business (including dealings in foreign
exchange) in Detroit, London and New York.
"Capital Expenditure" shall mean, without duplication, any payment
made directly or indirectly for the purpose of acquiring or constructing
fixed assets, real property or equipment which in accordance with generally
accepted accounting principles would be added as a debit to the fixed asset
account of the person making such expenditure, including, without
limitation, amounts paid or payable under any conditional sale or other
title retention agreement or under any lease or other periodic payment
arrangement which is of such a nature that payment obligations of the
lessee or obligor thereunder would be required by GAAP to be capitalized
and shown as liabilities on the balance sheet of such lessee or obligor.
"Current Assets" shall mean the current assets of International and
its consolidated Subsidiaries, as determined in accordance with GAAP.
"Current Liabilities" shall mean the current liabilities of
International and its consolidated Subsidiaries as determined in accordance
with GAAP.
"Current Ratio" shall mean as of any date of determination, a ratio
the numerator of which is Current Assets as of such date and the
denominator of which is Current Liabilities as of such date.
"EBITDA" shall mean for any date of determination, the sum of (a) Net
Income (or loss) for the four preceding fiscal quarters, plus (b) to the
extent deducted in the computation of Net Income (or loss), the amount of
interest, depreciation and amortization expense and all accrued income
taxes for such period, all as determined in accordance with GAAP.
"Event of Default" shall mean any of the Events of Default specified
in Section 8 hereof.
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"Eurodollar-based Advance" shall mean an Advance which bears interest
at the Eurodollar-based Rate.
"Eurodollar-based Rate" shall mean a per annum interest rate which is
two and one half percent (2-1/2%) plus the quotient of:
(a) the per annum interest rate at which Bank's Eurodollar Lending
Office offers deposits to prime banks in the eurodollar market in
an amount comparable to the relevant Eurodollar-based Advance
with respect to which the Applicable Interest Rate is the
Eurodollar-based Rate and for a period equal to the relevant
Interest Period at approximately 11:00 A.M. Detroit time two (2)
Business Days prior to the first day of such Interest Period;
divided by
(b) a percentage equal to 100% minus the maximum rate on such date at
which Bank is required to maintain reserves on "Euro-currency
Liabilities" as defined in and pursuant to Regulation D of the
Board of Governors of the Federal Reserve System or, if such
regulation or definition is modified, and as long as Bank is
required to maintain reserves against a category of liabilities
which includes Eurodollar deposits or includes a category of
assets which includes Eurodollar loans, the rate at which such
reserves are required to be maintained on such category.
"Eurodollar Lending office" shall mean Bank's office located at Grand
Cayman, British West Indies or such other branch of Bank, domestic or
foreign, as it may hereafter designate as its Eurodollar Lending office by
notice to Companies.
"Eligible Accounts" shall mean trade Accounts arising in the ordinary
course of the business of Companies which meet the following requirements:
(a) it is not owing more than ninety (90) days after the date of the
original invoice or other writing evidencing such Account;
(b) it is not owing by an Account Debtor who has failed to pay
twenty-five percent (25%) or more of the aggregate amount of its
Accounts owing to any or all of the Companies within ninety (90)
days after the date of the respective invoices or other writings
evidencing such Accounts;
(c) it arises from the sale or lease of goods and such goods have
been shipped or delivered to the Account Debtor under such
Account, or it arises from services rendered and such services
have been performed;
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(d) it is evidenced by an invoice, dated not later than the date of
shipment or performance, rendered to such Account Debtor or some
other evidence of billing acceptable to Bank;
(e) it is not evidenced by any note, trade acceptance, draft or other
negotiable instrument or by any chattel paper, unless such note
or other document or instrument previously has been endorsed and
delivered by the applicable Company to Bank;
(f) it is a valid, legally enforceable obligation of the Account
Debtor thereunder and is not subject to any counterclaim or other
defense on the part of such Account Debtor or to any claim on the
part of such Account Debtor denying liability thereunder in whole
or in part;
(g) it is not subject to any sale of accounts, any rights of offset,
assignment, lien or security interest whatsoever other than to
Bank;
(h) it is not owing by a subsidiary or affiliate of any of the
Companies, nor by an Account Debtor which (i) does not maintain
its chief executive office in the United States of America, (ii)
is not organized under the laws of Canada or the United States of
America, or any state or province thereof, or (iii) is the
government of any foreign country or sovereign state, or of any
state, province, municipality or other instrumentality thereof;
(i) it is not an account owing by the United States of America or any
state or political subdivision thereof, or by any department,
agency, public body corporate or other instrumentality of any of
the foregoing, unless all necessary steps are taken to comply
with the Federal Assignment of Claims Act of 1940, as amended, or
with any comparable state law, if applicable, and all other
necessary steps are taken to perfect Bank's security interest in
such account;
(j) it is not owing by an Account Debtor for which any of the
Companies has received a notice of (i) the death of the Account
Debtor or any partner of the Account Debtor, (ii) the
dissolution, liquidation, termination of existence, insolvency or
business failure of the Account Debtor, (iii) the appointment of
a receiver for any part of the property of the Account Debtor, or
(iv) an assignment for the benefit of creditors, the filing of a
petition in bankruptcy, or the commencement of any proceeding
under any bankruptcy or insolvency laws by or against the Account
Debtor;
(k) it is not an account billed in advance, payable on delivery, for
consigned goods, for guaranteed sales, for unbilled sales, for
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progress xxxxxxxx, payable at a future date in accordance with
its terms, subject to a retainage or holdback by the Account
Debtor or insured by a surety company; and
(1) it is not owing by any Account Debtor whose obligations Bank,
acting in its sole discretion, shall have notified Companies are
not deemed to constitute Eligible Accounts.
"Eligible Inventory" shall be valued at the lesser of cost or present
market value in accordance with generally accepted accounting principles,
consistently applied, and shall mean all of the Inventory of each of the
Companies which is in good and merchantable condition, is not obsolete or
discontinued, and which would properly be classified as "raw materials", or
as "finished goods inventory" under generally accepted accounting
principles, consistently applied, excluding (a) work-in-process, consigned
goods and inventory located outside the United States of America, (b)
inventory covered by or subject to a seller's right to repurchase, or any
consensual or nonconsensual lien or security interest (including without
limitation purchase money security interests) other than in favor of Bank,
whether senior or junior to Bank's security interest, and (c) inventory
that Bank, acting in its reasonable discretion, after having notified
companies, excludes. Inventory which is at any time Eligible Inventory,
but which subsequently fails to meet any of the foregoing requirements,
shall forthwith cease to be Eligible Inventory.
"Federal Funds Effective Rate" shall mean, for any day, a fluctuating
interest rate per annum equal to the weighted average of the rates on
overnight Federal funds transactions with members of the Federal Reserve
System arranged by Federal funds brokers, as published for such day (or, if
such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for
any day which is a Business Day, the average of the quotations for such day
on such transactions received by Bank from three Federal funds brokers of
recognized standing selected by it.
"Fixed Charge Coverage Ratio" shall mean as of any date of
determination a ratio, the numerator of which is Net Income for the four
preceding fiscal quarters ending on such date of determination, PLUS, to
the extent deducted in determining Net Income, depreciation, and
amortization during such period, LESS dividends during such period, and the
denominator of which is all payments of principal with respect to
indebtedness of Companies and Capital Leases due during such period, all as
determined in accordance with GAAP.
"Funded Debt" shall mean as of any date of determination, the sum of
(a) the outstanding principal balance of the Term Loan and the commitment
amount of the Line of Credit as of such date, plus (b) the outstanding
balance of all long term and short term indebtedness for borrowed money of
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Companies as of such date (excluding debt which has been subordinated to
the Bank pursuant to a written subordination agreement satisfactory to the
Bank), plus (c) all outstanding capital lease obligations as of such date.
"Funded Debt/EBITDA Ratio" shall mean as of any date of determination,
a ratio, the numerator of which shall be Funded Debt on such date and the
denominator of which shall be equal to EBITDA for the preceding four fiscal
quarters.
"GAAP" shall mean, as of any applicable date of determination,
generally accepted accounting principles consistently applied, as in effect
on the date of this Agreement.
"Guarantors" shall mean Xxxxxx X. Xxxxxxxxxx and Xxxxx X. Xxxxxxxxxx.
"Guaranty" shall mean the Guaranty dated May ___, 1997 from the
Guarantors to Bank in the form attached hereto as Exhibit "A", as the same
may be amended from modified from time to time.
"Indebtedness" shall mean all loans, advances, indebtedness,
obligations and liabilities of Companies (or any of them) to Bank under
this Agreement, together with all other indebtedness, obligations and
liabilities whatsoever of Companies (or any of them) to Bank arising under
or in connection with this Agreement, whether matured or unmatured,
liquidated or unliquidated, direct or indirect, absolute or contingent,
joint or several, due or to become due, now existing or hereafter arising.
"Interest Period" shall mean a period as selected by Companies
pursuant to the provisions of this Agreement commencing on the day a
Eurodollar-based Advance is made, or the Eurodollar-based Rate is selected
as the Applicable Interest Rate.
"Inventory" shall have the meaning ascribed to such term in the
Michigan Uniform Commercial Code, as in effect from time to time.
"Leverage Ratio" shall mean as of any date of determination, a ratio
the numerator of which is Debt as of such date and the denominator of which
is Net Worth as of the date.
"Line of Credit Maturity Date" shall mean May 1, 1998.
"Line of Credit Note" shall mean the Note described in Section 2.1
hereof made by Companies to Bank in the form attached to this Agreement as
Exhibit "B".
"Net Income" shall mean for any period of determination, the net
income (or loss) of International and its consolidated Subsidiaries,
excluding extraordinary items for such period, determined in accordance
with GAAP.
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"Net Worth" shall mean as of any date of determination the
stockholders' equity of International and its consolidated Subsidiaries as
of such date, as determined in accordance with GAAP.
"Notes" shall mean the Line of Credit Note and the Term Note, and
"Note" shall refer to each of them.
"Permitted Acquisitions" shall mean any acquisition by any Company of
all or substantially all of the assets of another Person, or of a division
or line of business of another Person or shares of stock or other ownership
interests of another Person which satisfies and/or is conducted in
accordance with the following requirements:
(i) each such acquisition shall, under GAAP be required to be
consolidated by International, and not treated by International as an
equity investment;
(ii) on the date of any such acquisition, all necessary
governmental, quasi-governmental, agency, regulatory or similar
approvals of applicable jurisdictions (or the respective agencies,
instrumentalities or political subdivisions, as applicable, of such
jurisdictions) and all necessary non-governmental and other third-
party approvals which, in each case, are material to such acquisition
have been obtained and are in effect, and companies are in compliance
thereunder in all material respects, and all necessary declarations,
registrations or other filings with any court, governmental or
regulatory authority, securities exchange or any other person have
been made;
(iii) the acquisition target must have derived more than seventy
five percent (75%) of its revenues during its two (2) immediately
preceding fiscal years from a line of business in which a Company
currently is engaged;
(iv) if an acquisition of stock of an acquisition target, the
acquisition shall have been approved by the Board of Directors or
substantially all of the shareholders of such acquisition target not
later than the date any Request for Advance is delivered to Bank in
connection with an Advance to be used to pay a portion of the
acquisition consideration and as of such date, no claim or challenge
has been asserted or threatened by any shareholder, director, officer
or employee of the acquisition target or by any other person which
might reasonably be expected to have a material adverse effect on the
Companies;
(v) not less than thirty (30) days prior to the date of such
acquisition, the Companies provide to Bank Pro Forma Combined
Projected Financial Information; and
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(vi) both before and after such acquisition, no Default or Event
of Default (whether or not related to such acquisition), has occurred
and is continuing under this Agreement, or any of the other Loan
Documents as evidenced by a certificate of an authorized officer of
Companies.
"Prime-based Advance" shall mean an Advance which bears interest at
the Prime-based Rate.
"Prime-based Rate" shall mean a per annum interest rate which is the
greater of (i) the Prime Rate or (ii) the Alternate Base Rate.
"Prime Rate" shall mean the per annum interest rate established by
Bank as its prime rate for its borrowers as such rate may vary from time to
time, which rate is not necessarily the lowest rate on loans made by Bank
at any such time.
"Pro Forma Combined Projected Financial Information" shall mean, as to
any acquisition, pro forma combined projected financial information for
International and its consolidated Subsidiaries and the acquisition
candidate, consisting of projected consolidated balance sheets as at the
end of at least the next succeeding two (2) fiscal years of International
following the acquisition and projected consolidated statements of income for
each of those years, including sufficient detail to permit calculation
of the amounts and ratios described in Sections 5.11 through 5.15,
inclusive, as projected for those years and accompanied by (i) a statement
setting forth a calculation of the ratios described in Sections 5.11
through 5.15, inclusive, and (ii) a statement in reasonable detail
specifying all material assumptions underlying the projections.
"Request for Advance" shall mean a Request for Advance issued by
Companies under this Agreement in the form attached to this Agreement as
Exhibit "C".
"Subsidiary" shall mean a corporation of which more than fifty percent
(50%) of the outstanding voting stock is owned by International, either
directly or indirectly through one or more intermediaries.
"Term Loan" shall mean the term loan made by Bank to Companies under
Section 2.A of this Agreement.
"Term Loan Maturity Date" shall mean November 1, 2000.
"Term Note" shall mean the term note issued by Companies under Section
2.A.1 of this Agreement in the form annexed to this Agreement as Exhibit
"D".
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"Uniform Commercial Code" or "UCC" shall mean the Uniform Commercial
Code of any applicable state, and, unless specified otherwise the Uniform
Commercial Code as in effect in the State of Michigan.
2. THE INDEBTEDNESS: LINE OF CREDIT
2.1 Bank may make Advances to Companies and Companies jointly and
severally may borrow at any time and from time to time from the effective
date hereof until the Line of Credit Maturity Date, not to exceed Six
Million Dollars ($6,000,000) in aggregate principal amount at any one time
outstanding. All of the Advances under this Section 2 shall be evidenced
by the Line of Credit Note, under which Advances, repayments and readvances
may be made, subject to the terms and conditions of this Agreement;
provided, however, Bank shall not be obligated to make any Advances to
Companies. In addition to direct Advances under the Line of Credit Note to
be provided to Companies by Bank under and pursuant to this Section 2.1,
Bank further agrees to issue, or commit to issue, from time to time,
standby and import letters of credit ("Letters of Credit") for the account
of Companies in aggregate undrawn amounts not to exceed Five Hundred
Thousand Dollars ($500,000) at any one time outstanding; PROVIDED, however,
that the sum of the aggregate amount of Advances under the Line of Credit
Note plus the aggregate undrawn amount of Letters of Credit (and the unpaid
amount of any draws or other demands for payment under any Letters of
Credit) shall not exceed Six Million Dollars ($6,000,000) at any one time;
and PROVIDED further that no Letter of Credit shall, by its terms, have an
expiration date which extends beyond the Line of Credit Maturity Date. In
addition to the terms and conditions of this Agreement, the issuance of any
Letters of Credit shall also be subject to the terms and conditions of any
letter of credit applications and agreements executed and delivered by
Companies to Bank with respect thereto.
2.2 The Line of Credit Note shall mature on the Line of Credit
Maturity Date and each Advance from time to time outstanding thereunder
shall bear interest at its Applicable Interest Rate. The amount and date
of each Advance, its Applicable Interest Rate, its Interest Period, and the
amount and date of any repayment shall be noted on Bank's records, which
records will be conclusive evidence thereof absent demonstrable error in
computation.
2.3 Companies may request an Advance under this Section 2 upon the
delivery to Bank of a Request for Advance executed by an authorized officer
of a Company, subject to the following:
(a) each such Request for Advance shall set forth the information
required on the Request for Advance form annexed hereto as
Exhibit "C";
(b) each such Request for Advance shall be delivered to Bank by noon
three (3) Business Days prior to the proposed date of Advance,
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except in the case of a Prime-based Advance, for which the
Request for Advance must be delivered by 11 a.m. on such proposed
date;
(c) the principal amount of each Eurodollar-based Advance, plus the
amount of any outstanding indebtedness to be then combined
therewith having the same Interest Period, if any, shall be at
least $500,000;
(d) a Request for Advance, once delivered to Bank, shall not be
revocable by Companies.
2.4 Companies may prepay all or part of the outstanding balance of
the Prime-based Advance(s) under Line of Credit Note at any time. Upon
three (3) Business Days prior notice to Bank, Companies may prepay all or
part of any Eurodollar-based Advance on the last day of the Interest Period
therefor, provided that the amount of any such partial prepayment shall be
at least $500,000 and the unpaid portion of such Advance which is refunded
or converted under Section 2.7 shall be subject to the limitations of
Section 2.3(c) hereof. Any prepayment made in accordance with this Section
shall be without premium, penalty or prejudice to Companies's right to
reborrow under the terms of this Agreement. Any other prepayment shall be
restricted by Section 2.10 hereof.
2.5 The Line of Credit Note and the Advances thereunder shall bear
interest from the date thereof on the unpaid principal balance thereof from
time to time outstanding, at a rate per annum equal to the Prime-based Rate
or the Eurodollar-based Rate, as the Companies may elect subject to the
provisions of this Agreement. Interest shall be payable monthly on the
first Business Day of each month, commencing on the first Business Day of
the month following the month in which such Advance is made, and at
maturity. Notwithstanding the foregoing, from and after the occurrence of
any Event of Default and during the continuation thereof, the Advances
shall bear interest, payable on demand, at a rate per annum equal to: (i)
in the case of Prime-based Advances, three percent (3%) above the Prime-
based Rate; and (ii) in the case of a Eurodollar-based Advance, three
percent (3%) above the rate which would otherwise be applicable under this
Section until the end of the then current Interest Period, at which time
such Advance shall bear interest at the rate provided for in clause (i) of
this Section. Interest on all Advances shall be calculated on the basis of
a 360 day year for the actual number of days elapsed. The interest rate
with respect to any Prime-based Advance shall change on the effective date
of any change in the Prime-based Rate.
2.6 Each Interest Period for a Eurodollar-based Advance shall
commence on the date such Eurodollar-based Advance is made or is converted
from an Advance of another type pursuant to Section 2.7 hereof or on the
last day of the immediately preceding Interest Period for such Eurodollar-
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based Advance, and shall end on the date one, two, three or six months
thereafter, as the Companies may elect as set forth below, subject to the
following:
(i) no Interest Period shall extend beyond the Line of Credit
Maturity Date;
(ii) any Interest Period which would otherwise end on a day which
is not a Business Day shall be extended to the next succeeding
Business Day unless the next succeeding Business Day falls in another
calendar month, in which case such Interest Period shall end on the
immediately preceding Business Day, and when an Interest Period begins
on a day which has no numerically corresponding day in the calendar
month during which such Interest Period is to end, it shall end on the
last Business Day of such calendar month.
Companies shall elect the initial Interest Period applicable to a
Eurodollar-based Advance by their notice of borrowing given to the Bank
pursuant to Section 2.3 or by their notice of conversion given to the Bank
pursuant to Section 2.7, as the case may be. Provided that no Default or
Event of Default shall have occurred and be continuing, companies may elect
to continue an Advance as a Eurodollar-based Advance by giving irrevocable
written or telephonic notice thereof to the Bank, on or before the last day
of the then current Interest Period applicable to such Eurodollar-based
Advance, specifying the duration of the succeeding Interest Period
therefor. If the Bank does not receive timely notice of the election and
the Interest Period elected by Companies, Companies shall be deemed to have
elected to convert such Eurodollar-based Advance to a Prime-based Advance
at the end of the then current Interest Period. Subject to the terms
hereof, no more than three (3) Interest Periods shall be in effect at any
one time with respect to Line of Credit Note.
2.7 Provided that no Default or Event of Default shall have occurred
and be continuing, Companies may, on any Business Day, convert any
outstanding Advance into an Advance of another type in the same aggregate
principal amount, provided that any conversion of a Eurodollar-based
Advance shall be made only on the last Business Day of the then current
Interest Period applicable to such Advance. If Companies desire to convert
an Advance, they shall give the Bank prior written or telephonic notice,
specifying the date of such conversion, the Advances to be converted, the
type of Advance elected and, if the conversion is into a Eurodollar-based
Advance, the duration of the first Interest Period therefor.
2.8 Bank shall not be obligated to make any Advance if at the time of
such Request for Advance, the sum of (i) the Advances outstanding under
this Section 2 and (ii) the undrawn amount of Letters of Credit added to
the amount requested should exceed the sum of (a) seventy-five (75%) of the
sum of the Companies' Eligible Accounts and (b) the lesser of (i) fifty
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percent (50%) of Companies' Eligible inventory and (ii) $3,500,000. In
addition, the sum of the aggregate principal amount at any one time
outstanding under the Line of Credit Note and the undrawn amount of any
Letters of Credit (and all unpaid reimbursement obligations with respect to
Letters of Credit) shall never exceed the formula set forth in this Section
2.8. Companies shall immediately make all payments necessary to comply
with this provision.
2.9 The proceeds of the initial Advance under Line of Credit Note
shall be used solely for working capital purposes and to refinance
Companies' existing indebtedness to Bank.
2.10 If Companies make any payment of principal with respect to any
Eurodollar-based Advance on any day other than the last day of the Interest
Period applicable thereto (whether voluntarily, by acceleration, or
otherwise), or if Companies fail to borrow any Eurodollar-based Advance
after notice has been given by Companies to Bank in accordance with the
terms hereof requesting such Advance, or if Companies fail to make any
payment of principal or interest in respect of a Eurodollar-based Advance
when due, Companies shall reimburse Bank on demand for any resulting loss,
cost or expense incurred by Bank as a result thereof, including, without
limitation, any such loss, cost or expense incurred in obtaining,
liquidating, employing or redeploying deposits from third parties, whether
or not Bank shall have funded or committed to fund such Advance. Such
amount payable by Companies to Bank may include, without limitation, an
amount equal to the excess, if any, of (a) the amount of interest which
would have accrued on the amount so prepaid, or not so borrowed, refunded
or converted, for the period from the date of such repayment or of such
failure to borrow, refund or convert, through the last day of the relevant
Interest Period, at the applicable rate of interest for said Advance(s)
provided under this Agreement, over (b) the amount of interest (as
reasonably determined by Bank) which would have accrued to Bank on such
amount by placing such amount on deposit for a comparable period with
leading banks in the interbank eurodollar market. Calculation of any
amounts payable to Bank under this paragraph shall be made as though Bank
shall have actually funded or committed to fund the relevant Eurodollar-
based Advance through the purchase of an underlying deposit in an amount
equal to the amount of such Advance and having a maturity comparable to
the relevant Interest Period; PROVIDED, however, that Bank may fund any
Eurodollar-based Advance in any manner it deems fit and the foregoing
assumptions shall be utilized only for the purpose of the calculation of
amounts payable under this paragraph. Upon the written request of
Companies, Bank shall deliver to Companies a certificate setting forth the
basis for determining such losses, costs and expenses, which certificate
shall be conclusively presumed correct, absent manifest error.
2.11 For any Interest Period for which the Applicable Interest Rate is
the Eurodollar-based Rate, if Bank shall designate a Eurodollar Lending
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Office which maintains books separate from those of the rest of Bank, Bank
shall have the option of maintaining and carrying the relevant Advance on
the books of such Eurodollar Lending Office.
2.12 If with respect to any Interest Period Bank reasonably determines
that, by reason of circumstances affecting the foreign exchange and
interbank markets generally, deposits in Eurodollars in the applicable
amounts are not being offered to the Bank for such Interest Period, then
Bank shall forthwith give notice thereof to Companies. Thereafter, until
Bank notifies Companies that such circumstances no longer exist, the
obligation of Bank to make Eurodollar-based Advances, and the right of
Companies to convert an Advance to or refund an Advance as a Eurodollar-
based Advance shall be suspended and the Applicable Interest Rate will be
the Prime-based Rate; PROVIDED, however, this provision shall not impair
any right of Companies hereunder to prepay an affected Advance.
2.13 If, after the date hereof, the introduction or implementation of,
or any change in, any applicable law, rule or regulation or in the
interpretation or administration thereof by any governmental authority
charged with the interpretation or administration thereof, or compliance by
Bank (or its Eurodollar Lending Office) with any request or directive
(whether or not having the force of law) of any such authority, shall make
it unlawful or impossible for the Bank (or its Eurodollar Lending Office)
to honor its obligations hereunder to make or maintain any Eurodollar-based
Advance, Bank shall forthwith give notice thereof to Companies. Thereafter
(a) the obligations of Bank to make Eurodollar-based Advances and the right
of Companies to convert an Advance or refund an Advance as a Eurodollar-
based Advance shall be suspended and thereafter the Applicable Interest
Rate will be the Prime-based Rate, and (b) if Bank may not lawfully
continue to maintain an Advance to the end of the then current Interest
Period applicable thereto, the Prime-based Rate shall be the Applicable
interest Rate for the remainder of such Interest Period.
2.14 If the adoption or implementation after the date hereof, or any
change after the date hereof in, any applicable law, rule or regulation of
any governmental authority, central bank or comparable agency charged with
the interpretation or administration thereof, or compliance by Bank (or its
Eurodollar Lending Office) with any request or directive (whether or not
having the force of law) made by any such authority, central bank or
comparable agency after the date hereof:
(a) shall subject Bank (or its Eurodollar Lending Office) to any tax,
duty or other charge with respect to any Advance or the Line of
Credit Note or shall change the basis of taxation of payments to
Bank (or its Eurodollar Lending Office) of the principal of or
interest on any Advance or the Line of Credit Note or any other
amounts due under this Agreement in respect thereof (except for
changes in the rate of tax on the overall net income of Bank or
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its Eurodollar Lending Office imposed by the jurisdiction in
which Bank's principal executive office or Eurodollar Lending
office is located); or
(b) shall impose, modify or deem applicable any reserve (including,
without limitation, any imposed by the Board of Governors of the
Federal Reserve System), special deposit or similar requirement
against assets of, deposits with or for the account of, or credit
extended by Bank (or its Eurodollar Lending office) or shall
impose on Bank (or its Eurodollar Lending Office) or the foreign
exchange and interbank markets any other condition affecting any
Advance or the Line of Credit Note;
and the result of any of the foregoing is to increase the costs to Bank of
maintaining any part of the indebtedness hereunder or to reduce the amount
of any sum received or receivable by Bank under this Agreement, or under
the Line of Credit Note, by an amount deemed by the Bank to be material,
then Bank shall promptly notify Companies of such fact and demand
compensation therefor and, within fifteen days after demand by Bank,
Companies agrees to pay to Bank such additional amount or amounts as will
compensate Bank for such increased cost or reduction. Bank will promptly
notify Companies of any event of which it has knowledge which will entitle
Bank to compensation pursuant to this Section. A certificate of Bank
setting forth the basis for determining such additional amount or amounts
necessary to compensate Bank shall be conclusively presumed to be correct
save for manifest error.
2.15 In the event that at any time after the date of this Agreement
any change in law such as described in Section 2.14, hereof, shall, in the
reasonable opinion of Bank require that the credit provided under this
Agreement be treated as an asset or otherwise be included for purposes of
calculating the appropriate amount of capital to be maintained by Bank or
any corporation controlling Bank and such change has or would have the
effect of reducing the rate of return on Bank's or Bank's parent's capital
or assets as a consequence of the Bank's obligations hereunder to a level
below that which Bank or Bank's parent would have achieved but for such
change, then Bank shall notify Companies and demand compensation therefor
and, within fifteen days after demand by Bank, Companies agree to pay to
Bank such additional amount or amounts as will compensate Bank for such
reduction. Bank will promptly notify Companies of any event of which it
has knowledge which will entitle Bank to compensation pursuant to this
Section. A certificate of Bank setting forth the basis for determining
such additional amount or amounts necessary to compensate Bank shall be
conclusively presumed to be correct save for manifest error.
2.A. THE INDEBTEDNESS: TERM CREDIT
2.A.1 Bank agrees to loan to Companies and Companies agree to
borrow, upon execution of this Agreement, the sum of Seven Million Dollars
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($7,000,000). At the time of borrowing, companies agree to execute the
Term Note as evidence of the Indebtedness under this Section 2.A.l. The
loan under this Section 2.A.1 shall be subject to the terms and conditions
of this Agreement.
2.A.2 The principal indebtedness represented by the Term Note
shall be payable in monthly installments of One Hundred Sixty Seven
Thousand and 00/100 Dollars ($167,000) each on the first day of each month
commencing June 1, 1997, until the Term Loan Maturity Date, when the entire
unpaid balance of principal and interest thereon shall be due and payable.
Companies shall pay interest on the indebtedness outstanding under the Term
Note from time to time outstanding at a per annum rate equal to one quarter
of one percent (1/4%) above Bank's Prime Rate. Upon the occurrence of any
Event of Default hereunder interest shall accrue on the unpaid principal
balance at a per annum rate of three percent (3%) above the rate otherwise
in effect. Interest shall be computed on a daily basis using a year of 360
days and assessed for the actual number of days elapsed. Interest shall be
payable monthly on the first day of each month, commencing June 1, 1997.
2-A-3 Companies, or any of them, may prepay the Term Note, in
whole or in part without premium or penalty. All prepayments of the Term
Loan shall be applied to payments due under the Term Note in the inverse
order of their maturity.
2-A-4 The proceeds of the Term Note shall be used solely to
refinance Companies existing indebtedness to Bank and shall be applied in
the order and manner as determined by Bank.
3. CONDITIONS AND SECURITY
3.1 Companies agree to furnish Bank, prior to the initial borrowing
hereunder, in form to be satisfactory to Bank, with (i) certified copies of
resolutions of the Board of Directors of each of the companies evidencing
approval of the borrowings hereunder, (ii) certified copies of each of the
Companies' Articles of Incorporation and Bylaws, and (iii) a certificate of
good standing from each jurisdiction in which any company conducts business
or in which any Company's activities require it to be qualified to do
business.
3.2 As security for all indebtedness of Companies to Bank hereunder
and under the Notes as herein provided, Companies agree to furnish, execute
and deliver to Bank or cause to be furnished, executed and delivered to
Bank prior to or simultaneously with the initial borrowing hereunder, in
form to be satisfactory to Bank and supported by appropriate resolution in
certified form, authorizing same, the following:
(a) Security Agreements granting to Bank security interests in all of
each of the Companies, tangible and intangible personal property,
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whether now owned or hereafter acquired, including, without
limitation, all Accounts, equipment, inventory, general
intangibles and chattel paper;
(b) The Guaranty;
(c) Financing Statements required or requested by Bank to perfect all
security interests to be conferred upon Bank under this Agreement
and to accord Bank a perfected security position under the
Uniform Commercial Code.
To the extent that any of the Companies has heretofore given a security
interest to Bank to certain of the foregoing and such documents and
agreements comply with the requirements of this Agreement, it is hereby
agreed that such documents and agreements shall remain in full force and
effect for the purposes of this Agreement, but Bank may, if it deems it
necessary or desirable, require execution of a new agreement or agreements
or amendments to such agreements.
4. REPRESENTATIONS AND WARRANTIES
Each of the Companies represents and warrants and such representations
and warranties shall be deemed to be continuing representations and
warranties during the entire life of this Agreement:
4.1 It is a corporation duly organized and existing in good standing
under the laws of the jurisdiction of its incorporation or formation, as
applicable, and is duly qualified to do business and in good standing in
every jurisdiction in which such qualification is material to its business
and operation or the ownership or lease of its properties; execution,
delivery and performance of this Agreement and other documents and
instruments required under this Agreement, and the issuance of the Notes by
Companies are within its corporate or limited liability company, as
applicable, powers, have been duly authorized, are not in contravention of
law or the terms of its Articles of Incorporation or Bylaws or other
constituent documents, as applicable, and do not require the consent or
approval of any governmental body, agency or authority; and this Agreement
and the other documents and instruments required under this Agreement and
the Notes, when issued and delivered, will be valid and binding in
accordance with their terms.
4.2 The execution, delivery and performance of this Agreement and any
other documents and instruments required under this Agreement, and the
issuance of the Notes by Companies are not in contravention of the unwaived
terms of any indenture, agreement or undertaking to which any Company is a
party or by which any Company is bound.
4.3 No litigation or other proceeding before any court or
administrative agency is pending, or to the knowledge of its officers is
-16-
threatened against Companies or any Subsidiary of any of the Companies, the
outcome of which could materially impair any of the Companies, or any
Subsidiary's financial condition or their ability to carry on their
businesses taken as a whole.
4.4 There are no security interests in, liens, mortgages, or other
encumbrances on any of Companies, or any Subsidiary's assets, except to
Bank, or as permitted in this Agreement.
4.5 None of the Companies nor any Subsidiary maintains or contributes
to any employee pension benefit plan subject to title IV of the "Employee
Retirement Income Security Act of 1974" (herein called "ERISA"). There is
no unfunded past service liability of the pension plan and there is no
accumulated funding deficiency within the meaning of ERISA, or any existing
material liability with respect to any pension plan owed to the Pension
Benefit Guaranty Corporation ("PBGC") or any successor thereto, except any
funding deficiency for which an application to the PBGC for waiver is
pending or for which a waiver has been granted by the PBGC.
4.6 The financial statements of Companies dated December 31, 1996,
previously furnished Bank, are complete and correct in all material
respects and fairly present the financial condition of Companies and their
consolidated Subsidiaries; since said date there has been no material
adverse change in the financial condition of any of the Companies or any of
the Subsidiaries; to the knowledge of its officers, none of the Companies
nor any of the Subsidiaries has any contingent obligations (including any
liability for taxes) not disclosed by or reserved against in said financial
statements and at the present time there are no material unrealized or
anticipated losses from any present commitment of any of the Companies or
Subsidiaries.
4.7 Except as disclosed in attached Schedule 4.7, all tax returns and
tax reports of Companies and each Subsidiary required by law to have been
filed have been duly filed or extensions obtained, and all taxes,
assessments and other governmental charges or levies (other than those
presently payable without penalty and those currently being contested in
good faith for which adequate reserves have been established) upon
Companies or any Subsidiary (or any of its properties) which are due and
payable have been paid for which the failure to pay would materially
adversely affect its business or the value of its property or assets (taken
as a whole). The charges, accruals and reserves on the books of Companies
and the Subsidiaries in respect of the Federal income tax for all periods
are adequate in the opinion of Companies.
4.8 There are no subsidiaries of any Company, except those described
in attached Schedule 4.8.
4.9 Except as set forth in attached Schedule 4.9, each Company and
its Subsidiaries are, in the conduct of their business, in compliance in
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all material respects with all federal, state or local laws, statutes,
ordinances and regulations applicable to any of them, the enforcement of
which, if such Company or any Subsidiary were not in compliance, would
reasonably be expected to materially adversely affect its business or the
value of its property or assets (taken as a whole). Each Company and its
Subsidiaries have all approvals, authorizations, consents, licenses, orders
and other permits of all governmental agencies and authorities, whether
federal, state or local, required to permit the operation of their business
as presently conducted, except such approvals, authorizations, consents,
licenses, orders and other permits with respect to which the failure to
have would reasonably be expected to materially adversely affect its
business or the value of its property or assets (taken as a whole).
4.10 Except as set forth in attached Schedule 4.9, none of the
Companies nor any Subsidiary is party to any litigation or administrative
proceeding, nor so far as is known by it is any litigation or
administrative proceeding threatened against it or any other Company or
Subsidiary, which in either case (A) asserts or alleges that any of the
Companies or any Subsidiary violated Environmental Laws (as defined
herein), (B) asserts or alleges that any of the Companies or any Subsidiary
is required to clean up, remove, or take remedial or other response action
due to the disposal, depositing, discharge, leaking or other release of any
hazardous substances or materials, or (C) asserts or alleges that any of
the Companies or any Subsidiary is required to pay all or a portion of the
cost of any past, present, or future cleanup, removal or remedial or other
response action which arises out of or is related to the disposal,
depositing, discharge, leaking or other release of any hazardous substances
or materials by any of the Companies or any Subsidiary.
4.11 Except as set forth in attached Schedule 4.9, to the best of its
knowledge, after due inquiry, except as otherwise previously disclosed in
writing by Companies to Bank, there are no conditions existing currently or
likely to exist during the term of this Agreement which would subject any
of the Companies or any Subsidiary to material damages, penalties,
injunctive relief or cleanup costs under any applicable Environmental Laws
or which require or are likely to require material cleanup, removal,
remedial action or other response pursuant to applicable Environmental Laws
by any of the Companies or any Subsidiary.
4.12 Except as set forth in attached Schedule 4.9, none of the
Companies nor any Subsidiary is subject to any judgment, decree, order or
citation related to or arising out of applicable Environmental Laws and to
the best of its knowledge, after due inquiry, except as otherwise
previously disclosed in writing to the Bank, neither of the Companies nor
any Subsidiary has been named or listed as a potentially responsible party
by any governmental body or agency in a matter arising under any applicable
Environmental Laws.
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4.13 Except as set forth in attached Schedule 4.9, each of the
Companies and the Subsidiaries have all material permits, licenses and
approvals required under applicable Environmental Laws.
4.14 None of the Companies is an "investment company" within the
meaning of the Investment Company Act of 1940, as amended. None of the
Companies is engaged principally, or as one of its important activities,
directly or indirectly, in the business of extending credit for the purpose
of purchasing or carrying margin stock, and none of the proceeds of any of
the loans hereunder will be used, directly or indirectly, for any purpose
which would violate the provisions of Regulation U or X of the Board of
Governors of the Federal Reserve System. Terms for which meanings are
provided in Regulation U of the Board of Governors of the Federal Reserve
System or any regulations substituted therefor, as from time to time in
effect, are used in this paragraph with such meanings.
4.15 Each Company has good and valid title to the property pledged,
mortgaged or otherwise encumbered or to be encumbered by it under the loan
documents to which such Company is a party.
5. AFFIRMATIVE COVENANTS
Each of the Companies covenants and agrees that it will, and will
cause each of its Subsidiaries to, so long as any Indebtedness remains
outstanding under this Agreement:
5.1 Preserve and maintain their corporate existence and such of their
rights, licenses and privileges as are material to their business and
operations; and qualify and remain qualified to do business in each
jurisdiction in which such qualification is material to their business and
operations or the ownership of their properties.
5.2 Comply in all material respects with all applicable laws, rules,
regulations and orders of any governmental authority, noncompliance with
which could materially and adversely affect the financial condition or
operations of any of the Companies or any Subsidiary.
5.3 Maintain adequate insurance (and increase such insurance coverage
in such manner and to such extent as prudent business judgment and present
practice would dictate) with responsible insurance companies or
associations in such amounts and covering such risks as is customary with
companies engaged in similar businesses and having similar properties
similarly situated. In the case of all insurance policies covering
property mortgaged or pledged to the Bank or property in which the Bank
shall have a security interest, other than those policies protecting
against casualty liability to strangers, all such insurance policies shall
provide that the loss payable thereunder shall be payable to the applicable
Company or Subsidiary and the Bank as their respective interests may
-19-
appear; all said policies or copies thereof, including all endorsements, to
be deposited with the Bank. If any of the Companies or any Subsidiary
shall fail to maintain such insurance, the Bank shall have the option to do
so, and if it so does Companies agree to repay the Bank, with interest at
the Default Interest Rate.
5.4 Permit the Bank, through its authorized attorneys, accountants,
and representatives, to examine each of the Companies' and Subsidiaries'
books, accounts, records, ledgers and assets of every kind and description
at all reasonable times upon oral or written request of the Bank, including
collateral audits, in each case at the expense of the Companies.
5.5 Keep proper books of record and account, in which full and
correct entries shall be made of all financial transactions and the assets
and business of each of the Companies and Subsidiaries so as to permit each
of the Companies to present financial statements prepared in accordance
with generally accepted accounting principles consistently applied.
5.6 Furnish to the Bank the following:
(a) prompt notification of any condition or event which
constitutes or with the running of time and/or the giving of
notice would constitute an Event of Default under this
Agreement, and promptly inform the Bank of any material
adverse change in any of the Companies, or any Subsidiary's
financial condition;
(b) as soon as available and in any event within 45 days after
the end of each fiscal quarter of International, the
consolidated and consolidating balance sheets and statements
of profit and loss and surplus of International and its
consolidated Subsidiaries at the end of such fiscal quarter,
duly certified (subject to year-end audit adjustments) by
the chief financial officer of each of the Companies as
having been prepared in accordance with GAAP consistent with
those applied in the preparation of the financial statements
referred to in Section 4.6;
(c) as soon as available and in any event within 120 days after
the end of each fiscal year of International, consolidated
and consolidating audited financial statements of
International and its consolidated Subsidiaries for such
year, including a balance sheet as of the close of such
fiscal year, statements of income and retained earnings and
changes in financial position for such year, prepared in
accordance with GAAP and certified by independent certified
public accountants acceptable to the Bank;
-20-
(d) within fifteen (15) days after and as of the end of each
month, a detailed aging of Accounts and accounts payable, an
Inventory report and a borrowing base report each in form
acceptable to Bank, certified by an officer of each of the
Companies; and
(e) promptly, and in form to be satisfactory to Bank, such other
information as Bank may reasonably request from time to
time.
5.7 Pay and discharge all taxes and other governmental charges and
all contractual obligations calling for the payment of money, before the
same shall become overdue, unless and to the extent only that such payment
is being contested in good faith.
5.8 At all times meet the minimum funding requirements of ERISA with
respect to its and its Subsidiaries' employee benefit plans subject to such
Act; as soon as possible and in any event within thirty (30) days after it
knows or has reason to know:
(a) of the occurrence of any event which would constitute a
reportable event under Section 4043(b) of Title IV of ERISA;
(b) that the PBGC or such Company (or any Subsidiary) has
instituted or will institute proceedings under such Title to
terminate an employee pension plan;
(c) of the appointment of a trustee by a United States District
Court to administer an employee pension plan;
(d) of the withdrawal of such Company or any Subsidiary from any
employee pension plan; or
(e) of the failure of such Company's or any Subsidiary's pension
plans to satisfy the minimum funding requirements for any
plan year as established in the Internal Revenue Code of
1986, as amended;
deliver to the Bank a certificate of the chief financial officer of such
Company setting forth details as to such reportable event or events and the
action it (or any Subsidiary) proposes to take with respect thereto,
together with a copy of any notice of such reportable event or events which
may be required to be filed with the PBGC, or any intent to institute such
proceedings, or any notice to the PBGC that the plan is to be terminated,
as the case may be. (For all purposes of this Section, each of Companies
(and each Subsidiary) shall be deemed to have knowledge of all facts
attributable to the plan administrator under such Title); and furnish to
the Bank (or cause the plan administrator to furnish the Bank) a copy of
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the annual return (including all schedules and attachments) for each plan
covered by Title IV, and filed with the Internal Revenue Service by either
of the Companies (or any Subsidiary), not later than ten (10) days after
such report has been so filed.
5.9 Maintain all principal bank accounts with the Bank.
5.10 Furnish to the Bank concurrently with the delivery of each of the
financial statements required by Section 5.6(c) and, within 45 days after
the end of each of Companies' fiscal quarters, a statement in the form of
Exhibit "F" prepared and certified by the chief financial officer of each of
the Companies (or in such officer's absence, a responsible senior officer
of each of the Companies) (a) setting forth all computations necessary to
show compliance, by Companies with each of the financial covenants
contained in Sections 5.11, 5.12, 5.13, 5.14 and 5.15 of this Agreement,
(b) stating that to the best of such officer's knowledge as of the date
thereof, no condition or event which constitutes an Event of Default
hereunder or which with the running of time and/or the giving of notice
would constitute an Event of Default hereunder has occurred and is
continuing or exists, or if such exists, specifying in detail the nature
and period of existence thereof and any action taken with respect thereto
or contemplated to be taken by Companies, and (c) stating that the signers
have personally reviewed this Agreement and that such certificate is based
on an examination sufficient to assure that such certificate is accurate.
5.11 Maintain as of the end of each of International's fiscal quarters
a Net Worth of not less than the base Net Worth. Base Net Worth shall
initially be Fifteen Million Dollars ($15,000,000). On December 31 of each
year (commencing December 31, 1997) base Net Worth shall increase by Two
Million Dollars ($2,000,000).
5.12 Maintain as of the end of each fiscal year of International, a
Funded Debt/EBITDA Ratio of not more than 3.0 to 1.0.
5.13 Maintain as of the end of each fiscal quarter of International, a
Leverage Ratio of not more than 3.0 to 1.0.
5.14 Maintain as of the end of each fiscal quarter of International, a
Current Ratio of not less than .8 to 1.0.
5.15 Maintain as of the end of each fiscal year of International, a
Fixed Charge Coverage Ratio of not less than 1.5 to 1.0.
6. NEGATIVE COVENANTS
Each of the Companies covenants and agrees that, so long as any
Indebtedness remains outstanding under this Agreement, it will not, and
will cause its subsidiaries not to, without the prior written consent of
Bank and until the Term Loan has been paid in full:
-22-
6.1 Affirmatively pledge or mortgage any of its assets, whether now
owned or hereafter acquired, or create, suffer or permit to exist any lien,
security interest in, or encumbrance thereon, except:
(a) to the Bank;
(b) Permitted encumbrances as set forth in Exhibit "E" annexed
hereto; and
(c) purchase money security interests (and interests of lessors
under Capital Leases) in fixed assets to secure the
indebtedness permitted in Section 6.5(c) below to the extent
created substantially contemporaneously with the acquisition
of such fixed assets and the extent encumbering only the
fixed assets so acquired.
6.2 Purchase, acquire or redeem any of its capital stock or make any
material change in its capital structure or general business objects or
purpose.
6.3 Enter into any merger or consolidation or sell, lease, transfer,
or dispose of any part of its assets, except sales of inventory in the
ordinary course of its business.
6.4 Guarantee, endorse, or otherwise become secondarily liable for or
upon the obligations of others, except for the following:
(a) by endorsement for deposit in the ordinary course of
business; and
(b) guaranties to the Bank.
6.5 Become or remain obligated for any indebtedness for borrowed
money, or for any indebtedness incurred in connection with the acquisition
of any property, real or personal, tangible or intangible, except:
(a) current unsecured trade, utility or nonextraordinary
accounts payable arising in the ordinary course of any
Company's or its Subsidiaries' business;
(b) to Bank;
(c) purchase money indebtedness (including obligations under
Capital Leases) for the acquisition of fixed assets in an
amount not to exceed $250,000 (on a combined basis) in the
aggregate during any fiscal year.
6.6 Except for Permitted Acquisitions, purchase or otherwise acquire
or become obligated for the purchase of all or substantially all of the
-23-
assets or business interests of any person, firm or corporation or any
shares of stock of any corporation, trusteeship or association or in any
other manner effectuate or attempt to effectuate an expansion of the
present business by acquisition.
6.7 Declare or pay any dividends on, or make any other distribution
(whether by reduction of capital or otherwise) with respect to any shares
of its capital stock if at the time such dividend is declared or paid or if
after giving effect thereto there shall have occurred and be continuing an
Event of Default.
6.8 Make or allow to remain outstanding any investment (whether such
investment shall be of the character of investment in shares of stock,
evidences of indebtedness or other securities or otherwise) in, or any
loans or advances to, any person, firm, corporation or other entity or
association, except:
(a) advances made for expenses or purchases in the ordinary
course of business; and
(b) loans or advances made to officers, directors, or employees
of any of the Companies, not to exceed in the aggregate One
Hundred Thousand Dollars ($100,000) at any one time
outstanding (determined on a combined basis for Companies).
6.9 Allow any fact, condition or event to occur or exist with respect
to any employee pension and/or profit sharing plan of any of the Companies
or any Subsidiaries, which shall constitute grounds for termination of
such plan by the PBGC or for the appointment by a United States District
Court of a trustee to administer any such plan.
6.10 Sell, assign or confer a security interest in any account,
contract, note, trade acceptance or other receivable, except to Bank.
6.11 Make any Capital Expenditure during any calendar year if, after
giving effect thereto, the aggregate amount of all Capital Expenditures
made by Companies (on a combined basis) during such period would exceed
$5,000,000.
6.12 Enter into any transaction or series of transactions with any
Affiliate other than on terms and conditions as favorable to Companies or
the Subsidiary (as applicable) as would be obtainable in a comparable
arm's-length transaction with a person other than an Affiliate.
7. ENVIRONMENTAL PROVISIONS
7.1 For the purposes of this Agreement the term "Environmental Laws"
shall mean all federal, state and local laws including statutes,
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regulations, ordinances, codes, rules, and other governmental restrictions
and requirements, relating to environmental pollution, contamination or
other impairment of any nature, any hazardous or other toxic substances of
any nature, whether liquid, solid and/or gaseous, including smoke, vapor,
fumes, soot, acids, alkalis, chemicals, wastes, by-products, and recycled
materials. These Environmental Laws shall include but not be limited to
the Federal Solid Waste Disposal Act, the Federal Clean Air Act, the
Federal Clean Water Act, the Federal Resource Conservation and Recovery Act
of 1976, the Federal Comprehensive Environmental Response, Compensation and
Liability Act of 1980, the Federal Superfund Amendments and Reauthorization
Act of 1986, regulations of the Environmental Protection Agency,
regulations of the Nuclear Regulatory Agency, regulations of any state
department of natural resources or state environmental protection agency
now or at any time hereafter in effect and local health department
ordinances.
7.2 Each of the Companies shall timely comply in all material
respects with all applicable Environmental Laws.
7.3 Each of the Companies shall provide to the Bank, immediately upon
receipt, copies of any correspondence, notice, pleading, citation,
indictment, complaint, order, decree, or other document from any source
asserting or alleging a circumstance or condition which requires or may
require a financial contribution by any of the Companies or any Subsidiary
or a cleanup, removal, remedial action, or other response by or on the part
of either of the Companies or any Subsidiary under applicable Environmental
Laws or which seeks damages or civil, criminal or punitive penalties from
either Company or any Subsidiary for an alleged violation of Environmental
Laws.
7.4 Each of the Companies shall promptly notify the Bank in writing
as soon as it becomes aware of any condition or circumstance which makes
the environmental warranties contained in this Agreement incomplete or
inaccurate in any material respect as of any date.
7.5 In the event of any condition or circumstance that makes any
environmental warranty, representation and/or agreement incomplete or
inaccurate in any material respect as of any date, Companies shall, at
their sole expense, if reasonably requested by Bank, retain an
environmental professional consultant, reasonably acceptable to Bank, to
conduct a thorough and complete environmental audit regarding the changed
condition and/or circumstance and any environmental concerns arising from
that changed condition and/or circumstance. A copy of the environmental
consultant's report will be promptly delivered to both Bank and Companies
upon completion.
7.6 At any time either of the Companies, directly or indirectly
through any professional consultant or other representative, determines to
-25-
undertake an environmental audit, assessment or investigation, it shall
promptly provide the Bank with written notice of the initiation of the
environmental audit, fully describing the purpose and intended scope of the
environmental audit. Upon receipt, Companies will promptly provide to the
Bank copies of all final findings and conclusions of any such environmental
investigation. Preliminary findings and conclusions shall be provided if
final reports have not been completed and delivered to the Bank within 60
days following completion of the preliminary findings and conclusions.
7.7 Each of the Companies hereby indemnifies, saves and holds the
Bank and any of its past, present and future officers, directors,
shareholders, employees, representatives and consultants harmless from any
and all loss, damages, suits, penalties, costs, liabilities and expenses
(including but not limited to reasonable investigation, environmental
audit(s), and legal expenses) arising out of any claim, loss or damage of
any property, injuries to or death of persons, contamination of or adverse
affects on the environment, or any violation of any applicable
Environmental Laws, caused by or in any way related to any property owned,
leased or operated by Companies, or due to any acts of either of the
Companies, its officers, directors, shareholders, employees, consultants
and/or representatives. In no event shall either of the Companies be
liable hereunder for any loss, damages, suits, penalties, costs,
liabilities or expenses (i) arising from any act of gross negligence of the
Bank, or its agents or employees or (ii) arising from any action taken by
Bank while it is in sole possession of any such property.
It is expressly understood and agreed that the indemnifications
granted herein are intended to protect the Bank, its past, present and
future officers, directors, shareholders, employees, consultants and
representatives from any claims that may arise by reason of the security
interest, liens and/or mortgages granted to the Bank, or under any other
document or agreement given to secure repayment of any indebtedness from
either of the Companies, whether or not such claims arise before or after
the Bank has foreclosed upon and/or otherwise become the owner of any such
property. All obligations of indemnity as provided hereunder shall be
secured by the collateral documents.
It is expressly agreed and understood that the provisions hereof shall
and are intended to be continuing and shall survive the repayment of any
indebtedness from Companies to the Bank.
7.8 Each of the Companies and its Subsidiaries have and shall
maintain all permits, licenses and approvals required under applicable
Environmental Laws.
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8. DEFAULTS
8.1 Upon non-payment of any installment of the principal or interest
on either Note when due in accordance with the terms thereof, the Notes
shall automatically become immediately due and payable.
8.2 Upon occurrence of any of the following events:
(a) default by any company in the observance or performance of
any of the covenants or agreements of Companies set forth in
Sections 5.3, 5.4, 5.6, 5.10 through 5.15 or Section 6 (in
its entirety);
(b) default in the observance or performance of any of the other
covenants or agreements of any of the Companies herein set
forth, and continuance thereof for thirty (30) days after
notice to Companies by Bank;
(c) any representation or warranty made by any of the Companies
herein, or in any instrument submitted pursuant hereto shall
prove to be incorrect in any material respect;
(d) default by any of the Companies or any Subsidiary in the due
payment, after expiration of any applicable grace period, of
any other amounts owing to Bank from time to time;
(e) default by any of the Companies or any Subsidiary in the due
payment of any of its indebtedness to Bank, or in the
observance or performance of any term, covenant or
condition in any agreement or instrument evidencing,
securing or relating to such indebtedness, and such default
shall be continued for a period sufficient to permit
acceleration of such indebtedness;
(f) default by any of the Companies or any Subsidiary in the due
payment of any of its indebtedness (other than that owed to
Bank) in the principal amount of $10,000.00 or more, or in
the observance or performance of any term, covenant or
condition in any agreement or instrument evidencing,
securing or relating to such indebtedness, and such default
shall be continued for a period sufficient to permit
acceleration of such indebtedness;
(g) default in the observance or performance of any of the
covenants or agreements of any of the Companies or any other
person set forth in any collateral document of security
given to secure the indebtedness hereunder, and continuation
of such default beyond any period of grace specified in any
such document;
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(h) the entry against any of the Companies or any Subsidiary of
one or more judgments or decrees involving an aggregate
liability of $100,000.00 or more, which has or have become
non-appealable and shall remain undischarged, unsatisfied by
insurance and unstayed for more than 30 days, whether or not
consecutive; or the issuance and levy of a writ of
attachment or garnishment against the property of any of the
Companies or any Subsidiary in an action claiming
$100,000.00 or more, and which is not released or appealed
and bonded in a manner satisfactory to Bank;
(i) if any of the Companies or subsidiary shall fail to meet its
minimum funding requirements under ERISA with respect to any
employee benefit plan established or maintained by such
Company (or any appointment of a receiver, or trustee or
custodian for any of its property or assets; or such
receiver, trustee or custodian shall have been appointed for
any of its property or assets (otherwise than upon
application or consent of any of the Companies, any
subsidiary, or any Guarantor as applicable) and such
receiver, trustee or custodian so appointed shall not have
been discharged within forty five (45) days after the date
of his appointment, or if an order shall be entered, and
shall not be dismissed or stayed within forty five (45) days
from its entry, approving any petition for reorganization of
any of the Companies, any Subsidiary or any Guarantor; then
the Notes and all indebtedness then outstanding hereunder
shall automatically become immediately due and payable.
8.4 Upon the occurrence and during the continuance of an Event of
Default, unless all of the Indebtedness is then immediately fully paid,
Bank shall have and may exercise any one or more of the rights and remedies
for which provision is made for a secured party under the UCC, under the
Security Agreements or under any other document contemplated hereby or for
which provision is provided by law or in equity, including, without
limitation, the right to take possession and sell, lease or otherwise
dispose of any or all of the collateral and to set off against the
Indebtedness any amount owing by Bank to Companies (or any of them) and/or
any property of Companies (or any of them) in possession of Bank.
Companies agree, upon request of Bank, to assemble the collateral and make
it available to Bank at any place designated by Bank which is reasonably
convenient to Bank and Companies.
8.5 All of the Indebtedness shall constitute one loan secured by
Bank's security interest in the collateral and by all other security
interests, mortgages, liens, claims, and encumbrances now and from time to
time hereafter granted from Companies to Bank. Upon the occurrence and
during the continuance of an Event of Default which is not cured within the
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cure period, if any, provided hereunder, Bank may in its sole discretion
apply the collateral to any portion of the Indebtedness. The proceeds of
any sale or other disposition of the collateral authorized by this
Agreement shall be applied by Bank, first upon all expenses authorized by
the Michigan Uniform Commercial Code (or other applicable law) or otherwise
in connection with the sale and all reasonable attorneys' fees and legal
expenses incurred by Bank; the balance of the proceeds of such sale or
other disposition shall be applied in the payment of the Indebtedness,
first to interest, then to principal, then to other Indebtedness and the
surplus, if any, shall be paid over to Companies or to such other Person or
Persons as may be entitled thereto under applicable law. Companies shall
remain liable for any deficiency, which Companies shall pay to Bank
immediately upon demand.
8.6 The remedies provided for herein are cumulative to the remedies
for collection of the Indebtedness as provided by law, in equity or by any
mortgage, security agreement or other document contemplated hereby.
Nothing herein contained is intended, nor shall it be construed, to
preclude Bank from pursuing any other remedy for the recovery of any other
sum to which Bank may be or become entitled for the breach of this
Agreement by Companies.
8.7 Upon the occurrence and during the continuance of any Event of
Default, Companies shall immediately upon demand by Bank deposit with Bank
cash collateral in the amount equal to the maximum amount available to be
drawn at any time under any Letter of Credit then outstanding.
8.8 A late payment charge equal to 5% of each late payment due under
the Notes may be charged on any payment not received by Bank within fifteen
(15) days after the due date thereof, but acceptance of this charge shall
not be waive any default under this Agreement.
9. MISCELLANEOUS
9.1 When used in this Agreement, the term "Companies" shall mean all
or any of them. The obligations and liabilities of Companies under this
Agreement are joint and several. This Agreement shall be binding upon and
shall inure to the benefit of Companies and Bank and their respective
successors and assigns.
9.2 No delay or failure of Bank in exercising any right, power or
privilege hereunder shall affect such right, power or privilege, nor shall
any single or partial exercise thereof preclude any further exercise
thereof, or the exercise of any other power, right or privilege. The
rights of Bank under this Agreement are cumulative and not exclusive of any
right or remedies which Bank would otherwise have.
9.3 All notices with respect to this Agreement shall be deemed to be
completed upon mailing by certified mail as follows:
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To Companies:
000 X. Xxxxx
Xxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx Xxxxxxxxxxx
To Bank:
One Detroit Center
000 Xxxxxxxx Xxxxxx, 0xx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Metropolitan Banking A
9.4 Companies shall pay all reasonable closing costs and expenses,
including, by way of description and not limitation, outside attorney fees,
and lien search fees incurred by Bank in connection with the commitment,
consummation and closing of this Agreement. All of said amounts required
to be paid by Companies may, at Bank's option, be charged by Bank as an
advance against the proceeds of the Line of Credit Note. All reasonable
costs, including attorney fees, incurred by Bank in reviewing, revising,
protecting or enforcing any of its or any of the Bank's rights against
Companies or defending Bank from any claims or liabilities by any party or
otherwise incurred by Bank in connection with an Event of Default or the
enforcement of this Agreement or the related documents, including by way of
description and not limitation, such charges in any court or bankruptcy
proceedings or arising out of any or action by any person against Bank
which would not have been asserted were it not for Bank's relationship with
Companies hereunder or otherwise, shall also be paid by Companies.
9.5 This Agreement shall become effective upon the execution hereof
by Bank and each of the Companies.
9.6 On any event of default or default as described in this Agreement
or any default in payment of any liability above mentioned, Bank may,
without notice to anyone, declare the Notes due forthwith, take all action,
remedial and otherwise, as provided herein or in the Security Agreements or
other document, instrument, or agreement of security or of collateral, and
collect, deal with and dispose of all or any part of any security without
notice in any manner permitted or authorized by the Michigan Uniform
Commercial Code or other applicable law. Bank may apply the proceeds and
any deposits or credits in part or full payment of any of said liabilities
(including reasonable attorneys' fees and expenses), whether due or not, in
any manner or other Bank elects.
9.7 No amendments or waiver of any provision of this Agreement nor
consent to any departure by any of the Companies therefrom shall in any
event be effective unless the same shall be in writing and signed by the
Bank, and then such amendment, waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given. No
amendment, waiver or consent with respect to any provision of this
Agreement shall affect any other provision of this Agreement.
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9.8 Where the character or amount of any asset or liability or item
of income or expense is required to be determined or any consolidation or
other accounting computation is required to be made for the purposes of
this Agreement, it shall be done in accordance with GAAP.
9.9 All sums payable by Companies to Bank under this Agreement or the
other documents contemplated hereby shall be paid directly to Bank at its
principal office set forth in Section 9.3 hereof in immediately available
United States funds, without set off, deduction or counterclaim. In its
sole discretion, Bank may charge any and all deposit or other accounts
(including without limit an account evidenced by a certificate of deposit)
of Companies (or any of them) with Bank for all or a part of any
Indebtedness then due; provided, however, that this authorization shall not
affect Companies' obligation to pay, when due, any Indebtedness whether or
not account balances are sufficient to pay amounts due.
9.10 Any payment of the Indebtedness made by mail will be deemed
tendered and received only upon actual receipt by Bank at the address
designated for such payment, whether or not Bank has authorized payment by
mail or any other manner, and shall not be deemed to have been made in a
timely manner unless received on the date due for such payment, time being
of the essence. Companies expressly assume all risks of loss or liability
resulting from nondelivery or delay of delivery of any item bf payment
transmitted by mail or in any other manner. Acceptance by Bank of any
payment in an amount less than the amount then due shall be deemed an
acceptance on account only, and the failure to pay the entire amount then
due shall be and continue to be an Event of Default, and at any time
thereafter and until the entire amount then due has been paid, Bank shall
be entitled to exercise any and all rights conferred upon it herein upon
the occurrence of an Event of Default. Upon the occurrence and during the
continuance of an Event of Default, Companies waive the right to direct the
application of any and all payments at any time or times hereafter received
by Bank from or on behalf of Companies. Upon the occurrence and during the
continuance of an Event of Default, Companies agree that Bank shall have
the continuing exclusive right to apply and to reapply any and all payments
received at any time or times hereafter against the Indebtedness in such
manner as Bank may deem advisable, notwithstanding any entry by Bank upon
any of its books and records. Companies expressly agree that to the extent
that Bank receives any payment or benefit and such payment or benefit, or
any part thereof, is subsequently invalidated, declared to be fraudulent or
preferential, set aside or is required to be repaid to a trustee, receiver,
or any other party under any bankruptcy act, state or federal law, common
law or-equitable cause, then to the extent of such payment or benefit, the
Indebtedness or part thereof intended to be satisfied shall be revived and
continued in full force and effect as if such payment or benefit had not
been made and, further, any such repayment by Bank, to the extent that Bank
did not directly receive a corresponding cash payment, shall be added to
and be additional Indebtedness payable upon demand by Bank.
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9.11 THE COMPANIES AND BANK ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY
JURY IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED. EACH PARTY, AFTER
CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF THEIR
CHOICE, KNOWINGLY AND VOLUNTARILY, AND FOR THEIR MUTUAL BENEFIT, WAIVES ANY
RIGHT TO TRIAL BY JURY IN THE EVENT OF LITIGATION REGARDING THE PERFORMANCE
OR ENFORCEMENT OF, OR IN ANY WAY RELATED TO, THIS AGREEMENT OR THE NOTES.
9.12 Bank agrees that it will not disclose without the prior consent
of Companies (other than to its employees or to its auditors or counsel)
any information with respect to Companies which is furnished pursuant to
this Agreement or any of the Loan Documents and specifically designated in
writing by Companies as confidential information; provided that Bank may
disclose any such information (a) as has become generally available to the
public or has been lawfully obtained by Bank from any third party under no
duty of confidentiality to Companies, (b) as may be required or appropriate
in any report, statement or testimony submitted to, or in respect to any
inquiry, by, any municipal, state or federal regulatory body having or
claiming to have jurisdiction over Bank, including the Board of Governors
of the Federal Reserve Board, the Office of the Comptroller of the Currency
or the Federal Deposit Insurance Corporation or similar organizations
(whether in the United States or elsewhere) or their successors, (c) as may
be required or appropriate in respect to any summons or subpoena or in
connection with any litigation, (d) in order to comply with any law, order,
regulation or ruling applicable to Bank, and (e) to any transferee or
assignee or to any participant of, or with respect to, the Notes.
9.13 This Agreement and the Notes shall be governed by and construed
in accordance with Michigan law, and Companies submit, in any legal
proceeding related to this Agreement or the Notes, to the nonexclusive in
personam jurisdiction of any court of competent jurisdiction sitting the
State of Michigan and agree to a suit being brought in any such court;
waive any objection that it may now have or hereafter have to the venue of
such proceeding in any such court or that such proceeding was brought in an
inconvenient court; agree that service of process and any such legal
proceeding may be made, and shall be conclusively deemed sufficient and
adequate, by mailing of copies thereof (by registered or certified mail, if
practicable) postage prepaid, or by teletransmission to each Company at its
address set forth herein or such other address of which the Bank shall be
notified in writing, in which event, service shall be deemed complete upon
the filing with the court of a copy of the process mailed or sent and an
affidavit attesting the mailing or sending. Companies agree that nothing
herein shall affect the Bank's right to affect service or process in any
other manner permitted by law.
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WITNESS the due execution hereof as of the day and year first above
written.
COMERICA BANK THE COLONEL'S INTERNATIONAL, INC.
By: /S/ By: /S/ XXXXXXX XXXXXXXXXXX
Its Vice President Its: CHIEF FINANCIAL OFFICER
THE COLONEL'S, INC.
By: /S/ XXXXXXX XXXXXXXXXXX
Its: CHIEF FINANCIAL OFFICER
BRAINERD INTERNATIONAL RACEWAY,
INC.
By: /S/ XXXXXXX XXXXXXXXXXX
Its: CHIEF FINANCIAL OFFICER
THE COLONEL'S TRUCK ACCESSORIES,
INC.
By: /S/ XXXXXXX XXXXXXXXXXX
Its: CHIEF FINANCIAL OFFICER
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