LOAN AGREEMENT
SBA Debenture No. COC L 837046 3001 MN
To induce TWIN CITIES-METRO CERTIFIED DEVELOPMENT COMPANY (hereinafter
called "CDC") to make, and in consideration of the making of a loan or any
part thereof (hereinafter called "Loan") to Paper Warehouse, Inc.
(hereinafter "Borrower") of the proceeds of a Debenture issued by the CDC and
pursuant to Authorization and Debenture Guaranty of Small Business
Administration (which Authorization and all amendments thereof, heretofore
and hereafter issued, are hereinafter collectively called "Authorization"),
Borrower hereby represents, and warrants to and agrees with, CDC, its
successors and assigns, and each of them that:
1. NOTICE. The loan shall be evidenced by a Note dated August 15, 1995
executed by the Borrower, in proper form, and such Note and all provisions
thereunder shall be wholly incorporated into this Agreement and made a part
hereof. The Note shall provide the CDC with total funds not to exceed those
necessary to: repay the principal and interest on the aforementioned Debenture
and recover expenses related to servicing the Loan. The Loan Interest Rate
shall be derived by computing the sum of the Debenture Interest Rate, the
Issuer's Servicing Fee, the Fiscal Agent's Servicing Fee, and a factor to
account for different frequencies of repayment as between the Loan and
Debenture. The Issuer's Servicing Fee shall be 1/2 percent per annum of the
unpaid balance of Debenture and may not exceed this rate. The Fiscal Agent's
Servicing Fee shall be set by the Servicing Agency Agreement referred to in
Section 2, supra.
2. SERVICE AGENT AGREEMENT. The CDC and Borrower shall execute a
Servicing Agent Agreement (hereinafter called "SAA") which shall provide for
lending and repayment of debenture proceeds to be handled through an escrow
arrangement with Xxxxxx Services Corp. (hereinafter called "Xxxxxx"). The CDC
shall prepare the SAA, including therein all known information, and the SAA
shall be subject to the terms of the Master Servicing Agency Agreement between
the United States Small Business Administration (hereinafter called "SBA") and
Xxxxxx. The SAA and all provisions thereunder shall be wholly incorporated into
this agreement and made a part hereof, and a breach of the underlying SAA, shall
be construed as breach of this Agreement.
3. LOAN PROCESSING FEE. The Loan Processing Fee shall be a one-time
charge assessed by the CDC, payable to CDC from the proceeds of the Debenture,
of no more than 1.5 percent of the face amount of the Debenture, which shall be
used to cover the following allowable costs: general administration and
overhead expenses, contractual expenses (i.e., staff services) and expenses
related to the preparation of the application. The CDC shall provide an
itemized justification for the fee assessed and the fee shall be subject to
review and approval by SBA.
4. DEBENTURE PROCEEDS. If the proceeds of the Debenture are insufficient
to cover all disbursements required by the terms of the SAA, Borrower shall be
solely responsible for providing whatever additional funds may be needed to
comply with the SAA. These disbursements, which
shall be specified in the SAA, may include, without being limited to,
principal and accrued interest of interim lender, the Reserve Fund, the
Processing Fee of CDC and the initial fee of the Servicing Agent.
5. INJECTED FUNDS. The CDC shall inject One Hundred Five Thousand and
No/100----- dollars ($105,000.00) into the project prior to any disbursement
of debenture proceeds, in the form of cash or kind, acceptable to SBA; if any
of said funds are borrowed by CDC, repayment terms must be for a term equal,
at least, to the terms of the Debenture, and any collateral subordinate to
the liens securing the Debenture or the Loan. If any portion of said funds
are borrowed, the CDC will supply to SBA copies of debt instruments. This
CDC injection may not be repaid at a rate faster than the Debenture.
Borrower to provide to the CDC, on or before the final closing date, those
funds referenced above to be injected by the CDC into the project.
6. REIMBURSABLE EXPENSES. In addition to all costs evidenced by the
Note, the Borrower shall, on demand, reimburse CDC for all expenses incurred, or
which may be hereafter incurred, by CDC in connection with or associated with
the closing of this Loan. Such reasonable costs may include, without being
limited to, site survey, plant survey, title company reports, filing, recording
fees and legal fees. These costs shall be paid by Borrower from its own funds
(not from injection in the project cost) and are not part of project costs.
7. CHANGE OF OWNERSHIP. Borrower hereby agrees that any sale, transfer,
assignment or delivery, for collateral or any other purposes, of all or any xxx
of the shares of capital stock of Borrower sufficient to effect a change of
ownership or control of the business, without prior written consent of SBA,
shall constitute a default under the Note, which has been wholly incorporated
into this Agreement. The entire unpaid balance of principal and interest shall
upon any such sale, transfer, assignment or delivery, and at the CDC's or SBA's
option, become immediately due and payable, without notice or demand.
8. CDC OWNERSHIP OR INTERESTS. If, during the term of the Note, the
Borrower or its affiliates acquire, directly or indirectly, in excess of 10
percent ownership or interest in the CDC, the Note shall immediately become due
and payable.
9. BOOKS, RECORDS, AND REPORTS. Borrower shall at all times keep proper
books of account in a manner satisfactory to the CDC and SBA. Borrower hereby
authorizes the CDC or SBA to reasonably make or cause to be made, at Borrower's
expense and in such manner and at such times as the CDC or SBA may require, (a)
inspections and audits of any books, records and papers in the custody or
control of Borrower or others, relating to Borrower's financial or business
conditions, including the making of copies thereof and extracts therefrom, and
(b) inspections and appraisals of any of Borrower's assets. Borrower hereby
authorizes all Federal, State and Municipal authorities (a) to furnish reports
of examinations, records, and other information relating to the conditions and
affairs of Borrower and any desired information or reports, returns, files, and
records of such authorities upon request therefor by the CDC or SBA, and (b) to
permit representatives of the CDC or SBA to have full access from time to time,
and make copies of any extracts from, any and all
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reports or returns by, or with respect to Borrower, and all reports of
examiners or other information concerning Borrower contained in the files and
records of examiners or other information concerning Borrower contained in
the files and records of such authorities. The record books documented and
accounting procedures and practices of the Borrower relating to this
agreement shall be subject to audit examination by the CDC.
10. DISTRIBUTION. Borrower will not, without the prior written consent of
the CDC and SBA, declare or pay any dividend or make any distribution upon its
capital stock, or purchase or retire any of its capital stock, or consolidate,
or merge with any other company, or give any preferential treatment, make any
advance, directly or indirectly, by way of loan, gift, bonus or otherwise, to
any company directly or indirectly controlling or affiliated with or controlled
by SBC, or to any officer, director or employee of SBA or of any such company;
provided, however, that if the SBC has elected to be taxed under Subchapter S of
the Internal Revenue Code, the SBC shall be permitted, notwithstanding the
foregoing, to annually distribute cash dividends to all the then shareholders of
SBC in an amount equal to the combined federal and state income tax liability
(if any) of the shareholders arising from their respective allocable share of
the earnings and profits of the SBC for such year, with each shareholder's
federal and state income tax liability, including any minimum tax liability, to
be computed on the basis of the highest marginal tax rate for individuals under
the Internal Revenue Code of 1986, as amended, and relevant state law (provided
such distributions shall be made in accordance with the law and in proportion to
the record date for distributions shall be made on a quarterly basis in such a
manner as to allow the shareholders of SBC to make timely quarterly payments of
estimated liability, and in no event shall such distributions be made later than
the date prescribed by law for filing of individual tax returns) and further
provided that the foregoing prohibitions shall not apply to sale of product or
other transactions with affiliates of SBC in the normal course of business nor
to any salary or bonus paid to any employee, officer or director of the Company
in accordance with annual compensation applicable to said employees, officers
and/or directors.
11. UNANTICIPATED EXPENSES. The Borrower shall be solely responsible to
provide for additional equity funds to cover additional project costs incurred
as result of overruns or unanticipated expenses in financing the project.
12. AUTHORIZATION AND DEBENTURE GUARANTY. The Authorization and Debenture
Guaranty ("Authorization") issued by the Small Business Administration,
Minneapolis District Office, on May 25. 1995 and acknowledged and accepted by
the CDC and Borrower, in a timely fashion, shall be wholly incorporated into
this Agreement and made a part hereof. Any discrepancies or inconsistencies
arising between the provisions of the Authorization and this Agreement shall be
construed in favor of the interpretation given the Authorization which shall be
controlling.
13. PARTIES AFFECTED. This Agreement shall be binding upon Borrower and
Borrower's successors and assigns and shall inure to the benefit of the CDC and
its successors and assigns.
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14. INDEMNIFICATION. The Borrower agrees to indemnify and save the CDC or
its assigns harmless against any and all liability with respect to, or resulting
from any delay in discharging any obligation of the Borrower.
IN WITNESS WHEREOF, Borrower has executed or caused to duly executed this
Agreement on this 15th day of August, 1995.
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Paper Warehouse, Inc.
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Borrower
Attest: By:
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TWIN CITIES-METRO
CERTIFIED DEVELOPMENT COMPANY
Attest: By:
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Assistant President President
Prepared by: Twin Cities-Metro Certified Development Company
0000 Xxxxxxxxx Xxxxxx Xxxxx, Xxxxx 000
Xxxxx Xxxxx, XX 00000
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