EXHIBIT 10.10
GENERAL CREDIT AND SECURITY AGREEMENT
THIS AGREEMENT, dated as of the 3rd day of June, 1998, between First
American Bank, National Association, a national banking association, having its
mailing address and principal place of business at 000 Xxxxx Xxxxxxx Xxxxxx,
Xxxxx Xx. Xxxx, XX 00000 (herein called "Lender"), and Canterbury Park Holding
Corporation, a Minnesota corporation, having offices at 0000 Xxxxxxxxxx Xxxx,
Xxxxxxxx, Xxxxxxxxx 00000, (herein called "Borrower").
1. AGREEMENT. This Agreement states the terms and conditions under which
Borrower may obtain certain loans from Lender.
2. CERTAIN DEFINITIONS. For purposes of this Agreement, the following
terms shall have the following meanings:
"ADVANCE(S)" shall have the meaning provided in Paragraph
4A(a).
"AFFILIATE" shall include, with respect to any party, any
Person which directly or indirectly controls, is controlled by, or is
under common control with such party and, in addition, in the case of
Borrower, each officer, director or shareholder of Borrower, and each
joint venturer and partner of Borrower.
"ASSIGNMENT OF RENTS" shall mean the Assignment of Leases and
Rents to be made by the Borrower in favor of the Lender covering the
Mortgaged Property and securing the Term Loan, as originally executed
and as it may be amended, modified, supplemented, restated or replaced
from time to time.
"BORROWER" shall have the meaning provided in the preamble
hereto.
"BUSINESS DAY" shall mean any day on which commercial banks in
Minneapolis, Minnesota are open for the transaction of business of the
kind contemplated by this Agreement.
"CASH MANAGEMENT AGREEMENT" shall have the meaning provided in
Paragraph 4A. (b).
"CHANGE OF CONTROL" shall mean the occurrence after the date
of this Agreement of any event where: (a) Xxxxxx X. Xxxxxxx, Xxxxxxx X.
Xxxxxxx and Xxxx Xxxxxxxx shall cease to respectively own 35%, 5% and
15% of the aggregate voting power of all classes of the Borrower's
stock entitled to vote generally in the election of the Borrower's
directors; or (b) Xxxxxx X. Xxxxxxx, Xxxxxxx X. Xxxxxxx and Xxxx
Xxxxxxxx, acting
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individually or in concert, shall cease to control the election of a
majority of the Borrower's board of directors or the direction of the
Borrower's management policies.
"CHATTEL PAPER" shall have the meaning ascribed to such term
in Article 9 of the Commercial Code.
"CLOSING DATE" shall mean the day specified by Borrower on
which all of the conditions precedent specified in Paragraphs 21 and 23
shall have been satisfied; and, if the Term Loan is then being
obtained, all of the conditions precedent specified in Paragraph 22
shall also have been satisfied.
"COLLATERAL" shall have the meaning provided in Paragraph 3.
"COMMERCIAL CODE" shall mean the Uniform Commercial Code as
enacted in the State of Minnesota, as amended from time to time.
"CONTINGENT OBLIGATIONS" shall mean, with respect to any
Person, all of such Person's liabilities and obligations which are
contingent upon and will not mature unless and until the occurrence of
some event or circumstance and which are not included within the
definition of Liabilities of such Person.
"DEFAULT" shall mean any event which, with the giving of
notice or passage of time, or both, would constitute an Event of
Default.
"DEFAULT RATE" shall mean a fluctuating rate per annum equal
at all times to the sum of the Reference Rate PLUS 2.00% per annum.
"EQUIPMENT" shall have the meaning provided in Paragraph 3(c).
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as the same may from time to time be amended, and the rules
and regulations promulgated thereunder by any governmental agency or
authority, as from time to time in effect.
"ERISA AFFILIATE shall mean, with respect to any Person, any
trade or business (whether or not incorporated) which is a member of a
group of which such Person is a member and which is under common
control within the meaning of Section 414 of the Code, as amended from
time to time, and the regulations promulgated and rulings issued
thereunder.
"ERISA EVENT" shall mean: (a) a Reportable Event described in
Section 4043 of ERISA and the regulations issued thereunder (other than
a Reportable Event not subject to the provision for 30-day notice to
the PBGC under such regulations); (b) the
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withdrawal of Borrower or any ERISA Affiliate from a Plan during a plan
year in which it was a "substantial employer" as defined in Section
4001(a)(2) of ERISA; (c) the filing of a notice of intent to terminate
a Plan or the treatment of a Plan amendment as a termination under
Section 4041 of ERISA; (d) the institution of proceedings to terminate
a Plan by the PBGC under Section 4042 of ERISA; or (e) any other event
or condition that might reasonably be expected to constitute grounds
under Section 4042 of ERISA for the termination of, or the appointment
of a trustee to administer, any Plan.
"EVENT OF DEFAULT" shall have the meaning provided in
Paragraph 20.
"GAAP" shall mean generally accepted accounting principles
consistently applied and maintained throughout the period indicated and
consistent with the audited financial statements delivered to Lender
pursuant to Paragraph 15(h). Whenever any accounting term is used
herein which is not otherwise defined, it shall be interpreted in
accordance with GAAP.
"GENERAL INTANGIBLES" shall have the meaning provided in
Paragraph 3(d).
"INDEMNITY" shall mean the Environmental and ADA Indemnity
Agreement to be made by the Borrower in favor of the Lender, as
originally executed and as amended, modified, restated or replaced from
time to time.
"INDEPENDENT PUBLIC ACCOUNTANTS" shall mean Deloitte & Touche
or any other firm of independent public accountants which is acceptable
to Lender.
"INVENTORY" shall have the meaning provided in Paragraph 3(b).
"LETTERS OF CREDIT" shall have the meaning provided in Section
2C(a).
"LETTER OF CREDIT APPLICATION(S)" shall have the meaning
provided in Section 2C(b).
"LETTER OF CREDIT COMMISSION" shall have the meaning provided
in Section 2.6(e).
"LETTER OF CREDIT COMMITMENT" shall mean, at any date, the
maximum amount of Letter of Credit Obligations which may from time to
time be outstanding hereunder and under the Letter of Credit
Applications, being initially $150,000.00 and, as the context may
require, the agreement of Lender to issue the Letters of Credit for the
account of Borrower subject to the terms and conditions of this
Agreement.
"LETTER OF CREDIT OBLIGATIONS" on any date shall mean the sum
of: (a) the aggregate amount available to be drawn on the Letters of
Credit on such date; PLUS (b) the
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aggregate amount owed by Borrower to Lender on such date as a result of
draws on the Letters of Credit for which Borrower has not reimbursed
Lender.
"LETTER OF CREDIT COMMITMENT TERMINATION DATE" shall mean the
Revolving Credit Termination Date.
"LIABILITIES" of any Person shall mean those items which, in
accordance with GAAP, appear as liabilities on a balance sheet.
"LOAN(S)" shall mean the Revolving Credit Loan and the Term
Loan.
"LOAN DOCUMENT(S)" shall mean individually or collectively, as
the case may be, this Agreement, the Notes, the Mortgage, the
Assignment of Rents, the Indemnity Agreement, the Letter of Credit
Applications and any and all other documents executed, delivered or
referred to herein or therein, as originally executed and as amended,
modified or supplemented from time to time.
"MATERIAL ADVERSE OCCURRENCE" shall mean any occurrence of
whatsoever nature (including, without limitation, any adverse
determination in any litigation, arbitration or governmental
investigation or proceeding) which Lender shall determine, in its sole
discretion, could adversely affect the present or prospective financial
condition or operations of Borrower or impair the ability of Borrower
to perform its obligations under this Agreement or any other Loan
Document.
"MATURITY DATE" shall mean, with respect to: (a) the Revolving
Credit Loan, the earliest of (i) March 31, 1999, or (ii) the date upon
which the obligations are declared to be due and payable (or
automatically become due and payable) upon the occurrence of an Event
of Default as provided in Paragraph 20, or (iii) the date upon which
this Agreement terminates as provided in Paragraph 24; or (b) the Term
Loan, the earliest of (i) the day prior to the fifth annual anniversary
date of the closing of the Term Loan or (ii) the date upon which the
obligations are declared to be due and payable (or automatically become
due and payable) upon the occurrence of an Event of Default as provided
in Paragraph 20, or (iii) the date upon which this Agreement terminates
as provided in Paragraph 24.
"MONTHLY PAYMENT DATE" shall mean the first day of each month.
"MORTGAGE" shall mean the Combination Mortgage, Security
Agreement, Assignment of Leases and Rents and Fixture Financing
Statement to be made by the Borrower in favor of the Bank covering the
Mortgaged Property and securing the Term Loan, as originally executed
and as amended, modified, supplemented, restated or replaced from time
to time.
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"MORTGAGED PROPERTY" shall have the meaning provided in the
Mortgage.
"MULTIEMPLOYER PLAN" shall mean a "multiemployer plan" as
defined in Section 4001(a)(3) of ERISA to which Borrower is making or
accruing an obligation to make contributions, or has within any of the
preceding three plan years made or accrued an obligation to make
contributions.
"NET INCOME" for any period shall mean net income for such
period, determined in accordance with GAAP excluding, however, (i)
extraordinary gains, and (ii) gains (whether or not extraordinary) from
sales or other dispositions of assets other than the sale of Inventory
in the ordinary course of Borrower's business.
"NOTE(S)" shall mean the Revolving Credit Note and the Term
Note. "OBLIGATIONS" shall have the meaning provided in Paragraph 3.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or
any successor board, authority, agency, officer or official of the
United States administering the principal functions assigned on the
date hereof to the Pension Benefit Guaranty Corporation under ERISA.
"PARTICIPANT" shall mean each Person who purchases a
participation interest from Lender in the obligations.
"PERSON" shall mean any natural person, corporation, firm,
partnership, association, government, governmental agency or any other
entity, whether acting in an individual, fiduciary or other capacity.
"PLAN" shall mean each employee benefit plan or other class of
benefits covered by Title IV of ERISA, in either case whether now in
existence or hereafter instituted, of Borrower or any of its
Subsidiaries.
"QUARTERLY PAYMENT DATE" shall mean the last day of each
March, June, September and December.
"RECEIVABLES" shall have the meaning provided in Paragraph
3(a).
"REFERENCE RATE" shall mean the publicly announced base rate
(or other publicly announced reference rate) charged by Xxxxxx
Financial Corporation; Borrower acknowledges that the Reference Rate
may not be the lowest rate made available by Lender to its customers
and that Lender may lend to its customers at rates that are at, above
or below the Reference Rate.
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"REPORTABLE EVENT" shall have the meaning given to that term
in Title IV of ERISA.
"REVOLVING CREDIT COMMITMENT" shall mean $2,250,000.00 and, as
the context may require, the agreement of the Lender to make Advances
to the Borrower up to the Revolving Credit Commitment subject to the
terms and conditions of this Agreement.
"REVOLVING CREDIT LOAN" shall mean, at any date of
determination, the aggregate outstanding principal amount of all
Advances.
"REVOLVING CREDIT NOTE" shall mean promissory note in the form
of EXHIBIT A attached hereto and made a part hereof made by Borrower
payable to the order of Lender to evidence the Advances and each
renewal, replacement or substitute note therefor.
"REVOLVING CREDIT TERMINATION DATE" shall mean the Maturity
Date of the Revolving Credit Loan.
"SECURITY INTEREST" shall mean any lien, pledge, mortgage,
encumbrance, charge or security interest of any kind whatsoever
(including, without limitation, the lien or retained security title of
a conditional vendor) whether arising under a security instrument or as
a matter of law, judicial process or otherwise or the agreement by
Borrower to grant any lien, security interest or pledge, mortgage or
encumber any asset.
"SUBORDINATED DEBT" shall mean indebtedness of Borrower for
borrowed money which is subordinated to the Obligations on terms
satisfactory to Lender in its sole discretion.
"TANGIBLE NET WORTH" shall mean, at any date of determination,
the difference between: (a) the total assets appearing on the
Borrower's balance sheet at such date prepared in accordance with GAAP
after deducting adequate reserves in each case where, in accordance
with GAAP, a reserve is proper; and (b) the total liabilities appearing
on such balance sheet (the "Total Liabilities"); EXCLUDING, HOWEVER,
from the determination of total assets: (i) goodwill, organizational
expenses, research and development expenses, trademarks, trade names,
copyrights, patents, patent applications, licenses and rights in any
thereof, covenants not to compete, training costs and other similar
intangibles; (ii) all deferred charges or unamortized debt discount and
expense other than deferred income taxes; (iii) securities which are
not readily marketable; (iv) any write-up in the book value of any
assets resulting from a re-evaluation thereof subsequent to the date of
Borrower's annual financial statement described in Section 15(h); (v)
amounts due from officers or Affiliates; and (vi) any asset acquired
subsequent to the date of this Agreement which the Lender, in its
reasonable business judgment, determines to be an intangible asset.
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"TERM LOAN" shall mean the loan described in Paragraph 4B.
"TERM LOAN COMMITMENT" shall mean $750,000.00 and, as the
context may require, the agreement of the Lender to make the Term Loan
subject to the terms and conditions of this Agreement.
"TERM LOAN COMMITMENT TERMINATION DATE" shall mean the earlier
of: (a) March 31, 1999; or (b) the Maturity Date of the Term Loan.
"TERM NOTE" shall mean promissory note in the form of EXHIBIT
B attached hereto and made a part hereof made by Borrower payable to
the order of Lender to evidence the Term Loans and each renewal,
replacement or substitute note therefor.
"TOTAL USAGE" shall mean, at any date of determination, the
sum of the Revolving Credit Loan and the Letter of Credit Obligations.
3. SECURITY. As security for all present and future sums loaned or
advanced by Lender to Borrower and for all other obligations now or hereafter
chargeable to Borrower's loan account hereunder, and all other obligations and
liabilities of any and every kind of Borrower to Lender, due or to become due,
direct or indirect, absolute or contingent, joint or several, howsoever created,
arising or evidenced, now existing or hereafter at any time created, arising or
incurred including, without limitation, the Loans and the Letter of Credit
Obligations (herein called "Obligations'), Borrower hereby grants to Lender a
security interest in and to the following property:
(a) All Receivables of Borrower now owned or hereafter acquired or
arising, together with all customer lists, original books and records,
ledger and account cards, computer tapes, discs, printouts and records,
whether now in existence or hereafter created. "Receivables" means all
rights of Borrower to the payment of money, whether or not earned and
howsoever evidenced or arising, including (without limitation) all
present and future "Accounts", "Chattel Paper", "Instruments", and
rights to payment which are "General Intangibles" (as those terms are
used in the Commercial Code), all security therefor and all of
Borrower's rights as an unpaid seller of goods (including rescission,
replevin, reclamation and stopping in transit) and all of Borrower's
rights to any goods represented by any of the foregoing including
returned or repossessed goods;
(b) All Inventory of Borrower, whether now owned or hereafter acquired
and wherever located. "Inventory" includes all Goods (as defined in
Article 9 of the Commercial Code) intended for sale or lease or to be
furnished under contracts of service, all raw materials and work in
process therefor, all finished goods thereof, all materials and
supplies of every nature used or usable or consumed or consumable in
connection with the manufacture, packing, shipping, advertising,
selling, leasing or furnishing of
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such Goods, and all accessories thereto and all documents of title
therefor evidencing the same;
(c) All Equipment of Borrower, whether now owned or hereafter acquired
and wherever located. "Equipment" includes all of Borrower's Goods
other than Inventory, all replacements and substitutions therefor and
all accessions thereto, and specifically includes, without limitation,
all present and future machinery, equipment, vehicles, manufacturing
equipment, shop equipment, office and record keeping equipment,
furniture, fixtures, parts, tools and all other Goods (except
Inventory) used or acquired for use by Borrower for any business or
enterprise;
(d) All General Intangibles (as defined in Article 9 of the Commercial
Code) of Borrower, whether now owned or hereafter acquired, including
(without limitation) all present and future purchase money security
interests (more fully described in paragraph 16(j) below), domestic and
foreign patents, patent applications, trademarks, trademark
applications, copyrights, trade names, trade secrets, patent and
trademark licenses (whether Borrower is licensor or licensee), shop
drawings, engineering drawings, blueprints, specifications, parts
lists, manuals, operating instructions, customer and supplier lists,
licenses, permits, franchises, the right to use Borrower's corporate
name and the goodwill of Borrower's business; and
(e) All products and proceeds of any and all of the foregoing and all
products and proceeds of any other Collateral (as hereinafter defined)
including the proceeds of any insurance covering any of the Collateral.
All such Receivables, Inventory, Equipment, General Intangibles, products and
proceeds, together with all other assets and properties of Borrower in or on
which Lender is now or hereafter granted a security interest, mortgage, lien or
encumbrance pursuant to this Agreement or otherwise, are hereinafter sometimes
referred to as "Collateral".
4. TERMS OF LENDING; ETC.
1.
4A. ADVANCES.
(a) At the request of Borrower, Lender agrees, subject to the
terms and conditions of this Agreement, to make loans (each such loan
being herein sometimes called individually an "Advance" and
collectively the "Advances") to Borrower from time to time on any
Business Day during the period from the date hereof and ending on the
Revolving Credit Termination Date; PROVIDED, HOWEVER, that Lender shall
not be required to make any Advance if, after giving effect to such
Advance, the Total Usage would exceed the Revolving Credit Commitment.
The amount of each such Advance shall be charged to Borrower's loan
account.
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(b) In order to obtain an Advance, Borrower shall give written
or telephonic notice to Lender, by not later than 1:00 p.m.
(Minneapolis time) on the date the requested Advance is to be made
Lender, shall make such Advance by transferring the amount thereof in
immediately available funds for credit to an account (other than a
payroll account) of Borrower at Lender, as specified in such notice;
PROVIDED, HOWEVER, that no request for an Advance shall be required if
such Advance is to be made under that certain Execusweep-Loan Sweep
Agreement dated as of June ___, 1998 (the "Cash Management Agreement")
between Borrower and Lender and each such Advance shall deemed to have
been requested by Borrower under this Agreement. At the request of
Lender, Borrower shall confirm in writing any telephonic notice.
(c) The obligation of Lender to make Advances shall terminate
on the Revolving Credit Termination Date.
(d) Borrower agrees that, on the Maturity Date of the
Revolving Credit Loan, it will repay the entire outstanding principal
balance of the Revolving Credit Loan together with accrued interest
thereon and all accrued fees without presentment or demand for payment,
notice of dishonor, protest or notice of protest, all of which are
hereby waived.
(e) The Advances shall be evidenced by the Revolving Credit
Note made by Borrower payable to the order of Lender; SUBJECT, HOWEVER,
to the provisions of such Note to the effect that the principal amount
payable thereunder at any time shall not exceed the then unpaid
principal amount of the Revolving Credit Loan made by Lender. Borrower
hereby irrevocably authorizes Lender to make or cause to be made, at or
about the time of each Advance made by Lender, an appropriate notation
on the records of Lender, reflecting the principal amount of such
Advance, and Lender shall make or cause to be made, on or about the
time of receipt of payment of any principal of the Revolving Credit
Note, an appropriate notation on its records reflecting such payment.
The aggregate amount of all Advances set forth on the records of Lender
shall be rebuttable presumptive evidence of the principal amount owing
and unpaid on the Revolving Credit Note.
4B. TERM LOAN
(a) At the request of Borrower made prior to the Term Loan
Commitment Termination Date, Lender agrees, subject to the terms and
conditions of this Agreement, to make a term loan (the "Term Loan") to
Borrower in an amount up to the Term Loan Commitment.
(b) In order to obtain the Term Loan, Borrower shall give
written or telephonic notice to Lender, by not later than close of
Lender's business at least ten (10)
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Business Days prior to the date on which Borrower desires that the Term
Loan be made. Such notice shall be accompanied by the documents
described in Paragraph 22(j) and EXHIBIT D attached hereto. On the
requested date but subject to the terms and conditions of this
Agreement, Lender shall make the Term Loan by transferring the amount
thereof in immediately available funds to the Title Company closing
Borrower's acquisition of the Mortgaged Property.
(c) The obligation of Lender to make the Term Loan shall
terminate on the Term Loan Commitment Termination Date.
(d) The Term Loan shall be evidenced by the Term Note made by
Borrower payable to the order of Lender; SUBJECT, HOWEVER, to the
provisions of such Note to the effect that the principal amount payable
thereunder at any time shall not exceed the then unpaid principal
amount of the Term Loan made by Lender. Borrower hereby irrevocably
authorizes Lender to make or cause to be made, at or about the time on
which the Term Loan is made by Lender, an appropriate notation on the
records of Lender, reflecting the principal amount of the Term Loan,
and Lender shall make or cause to be made, on or about the time of
receipt of payment of any principal of the Term Note, an appropriate
notation on its records reflecting such payment. The outstanding
principal amount of the Term Loan set forth on the records of Lender
shall be rebuttable presumptive evidence of the principal amount owing
and unpaid on the Term Note.
4C. LETTERS OF CREDIT
(a) Subject to the terms and conditions of this Agreement,
Lender agrees to issue stand-by letters of credit (the "Letters of
Credit") from time to time on terms acceptable to Lender on any
Business Day during the period from the date hereof and ending on the
Letter of Credit Commitment Termination Date; PROVIDED, HOWEVER, that
Lender shall not be required to issue any Letter of Credit if, after
giving effect to such issuance, either: (i) the Total Usage would
exceed the Revolving Credit Commitment; or (ii) the Letter of Credit
Obligations would exceed the Letter of Credit Commitment.
(b) In order to obtain a Letter of Credit, Borrower shall
appropriately complete, duly execute and deliver to Lender an
application for a Letter of Credit in form acceptable to Lender (the
"Letter of Credit Application(s)") by no later than the close of
Lender's business at least five (5) Business Days prior to the date on
which Borrower desires that the Letter of Credit be issued.
Notwithstanding anything to the contrary set forth in this Agreement or
any other Loan Document, no Letter of Credit shall have an expiry date
later than the Letter of Credit Commitment Termination Date.
(c) The obligation of Lender to issue Letters of Credit shall
terminate on the Letter of Credit Commitment Termination Date.
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(d) Borrower agrees to pay to Lender on demand: (i) the amount
of each draft or other request for payment drawn under any Letter of
Credit (whether drawn before or on its stated expiry date) issued by
Lender; and (ii) interest on all amounts referred to in clause (i)
above from the date of such draw until payment in full at a fluctuating
rate per annum at all times equal to the Reference Rate PLUS 2.00% per
annum.
(e) Borrower agrees to pay to Lender a commission (the "Letter
of Credit Commission") of 1.5% per annum upon the undrawn face amount
of each Letter of Credit issued by Lender outstanding from time to
time. The Letter of Credit Commission for each Letter of Credit shall
be payable in advance: (1) on the date of issuance of such Letter of
Credit for the initial period from the date of issuance through, to and
including the day preceding the immediately following Quarterly Payment
Date; and (2) on each Quarterly Payment Date following such issuance
date for the following quarter (or, any lesser period if the relevant
Letter of Credit is scheduled to expire prior to the end of such
quarter). Borrower further agrees to pay to Lender all reasonable and
customary charges, fees and expenses which Lender may generally assess
to its customers in connection with, and any and all expenses which
Lender may pay or incur in connection with, the issuance, extension,
amendment or payment of any Letter of Credit.
(f) The rights of Lender against Borrower hereunder shall be
in addition to all rights under (and shall control over any conflict
under) any Letter of Credit Application.
5. INTEREST. Borrower agrees to pay interest on the outstanding
principal amount of each Loan at the rates and at the times specified in the
Note evidencing such Loan. Each change in the interest rates due to a change in
the Reference Rate shall take effect simultaneously with the corresponding
change in the Reference Rate. Interest may be charged to Borrower's loan account
as an Advance at Lender's option, whether or not Borrower then has a right to
obtain an Advance pursuant to the terms of this Agreement.
6. SET-OFF; ETC. Upon the occurrence of a Default or an Event of
Default, Lender is hereby authorized at any time and from time to time, without
notice to Borrower (any such notice being expressly waived by Borrower), to set
off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and other indebtedness at any time owing
by Lender or any Participant to or for the credit or the account of Borrower,
any amounts held in any account maintained at Lender or any Participant, against
any and all amounts which may be owed to Lender or any Participant by Borrower
whether in connection with this Agreement or otherwise and irrespective of
whether Borrower shall have made any requests under this Agreement.
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7. COLLECTION.
(a) At any time after the occurrence of an Event of Default,
Lender may notify account debtors on the Receivables (the "Customers")
at any time that Receivables have been assigned to Lender and collect
them directly in Lender's own name but unless and until Lender does so
or gives Borrower other instructions, Borrower shall make collection
for Lender at Borrower's sole cost and expense. Following the
occurrence of an Event of Default, Borrower shall deliver to Lender all
full and partial payments arising from the sale or other disposition of
Collateral received by Borrower their original form, except for
endorsement where necessary. Until such payments are so delivered to
Lender, such payments shall be held in trust by Borrower for and as
Lender's property and shall not be commingled with any funds of
Borrower. The net amount received by Lender as proceeds arising from
the sale or other disposition of Collateral will be credited by Lender
to Borrower's loan account (subject to final collection thereof) after
allowing the number of days required by the applicable bank for
collection of checks and other instruments.
8. WARRANTY AS TO COLLATERAL. Borrower warrants that:
(a) All Receivables listed in Borrower's financial statements
or schedules will, when Borrower delivers such financial statements or
the schedules to Lender, be bona fide existing obligations created by
the sale and actual delivery of goods or the rendition of services to
Customers in the ordinary course of business, which Borrower then owns
free of any Security Interest except for the Security Interest in favor
of Lender created by this Agreement and which are then unconditionally
owing to Borrower without defense, offset or counterclaim; and
(b) all Inventory and Equipment is and shall be owned by
Borrower, free of any Security Interest except for the Security
Interest of Lender created by this Agreement or Security Interests
permitted by Paragraph 18(c).
Lender's rights to and security interest in the Collateral will not be impaired
by the ineligibility of any such Collateral for Advances and will continue to be
effective until all Obligations chargeable to Borrower's loan account have been
fully satisfied.
9. POWER OF ATTORNEY. Borrower appoints Lender, or any other person
whom Lender may from time to time designate, as Borrower's attorney with power:
(a) to endorse Borrower's name on any checks, notes, acceptances, drafts or
other forms of payment or security that may come into Lender's possession; (b)
to sign Borrower's name on any invoice or xxxx of lading relating to any
Receivables, on drafts against Customers, on schedules and confirmatory
assignments of Receivables, on notices of assignment, financing statements and
amendments under the Commercial Code and other public records, on verifications
of accounts and on notices
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to Customers; (c) to notify the post office authorities to change the address
for delivery of Borrower's mail to an address designated by Lender; (d) to
receive, open and dispose of all mail addressed to Borrower; (e) to send
requests for verification of accounts to Customers; and (f) to do all things
necessary to carry out this Agreement; PROVIDED, HOWEVER, that the powers
specified in clauses (c) and (d) above may be exercised only after the
occurrence of an Event of Default. Borrower ratifies and approves all acts of
the attorney taken within the scope of this power of attorney. Neither Lender
nor the attorney will be liable for any acts of commission or omission nor for
any error in judgment or mistake of fact or law. This power, being coupled with
an interest, is irrevocable so long as any Receivable in which Lender has a
security interest or any Obligation remains unpaid. Borrower waives presentment
and protest of all instruments and notice thereof, notice of default and
dishonor and all other notices to which Borrower may otherwise be entitled.
10. LOCATION OF COLLATERAL. Borrower warrants that its chief executive
office is at the address stated in the opening paragraph of this Agreement and
that its books and records concerning Receivables are located there. Borrower's
Inventory, Equipment and other goods are at the location or locations as
designated on SCHEDULE A annexed hereto. Borrower shall immediately notify
Lender if any additional locations for Collateral are subsequently established.
Borrower shall not change the location of its chief executive office, the place
where it keeps its books and records, or the location of any Collateral (except
for sales of Inventory or obsolete Equipment in the ordinary course of business)
until Borrower has obtained the written consent of Lender and all necessary
filings have been made and other actions taken to continue the perfection of
Lender's Security Interest in such new location. Lender's Security Interest
attaches to all the Collateral wherever located, and the failure of Borrower to
inform Lender of the location of any item or items of Collateral shall not
impair Lender's Security Interest therein.
11. OWNERSHIP AND PROTECTION OF COLLATERAL. Borrower warrants,
represents and covenants to Lender that the Collateral is now and, so long as
Borrower is obligated to Lender, will be, owned by Borrower free and clear of
all Security Interests except for the Security Interest in favor of Lender
created by this Agreement and except the Security Interests, if any, permitted
by Paragraph 18(c). Borrower will not sell, lease or otherwise dispose of the
Collateral, or attempt so to do (except for sales in the ordinary course of
business of Inventory or obsolete Equipment) without the prior written consent
of Lender and unless the proceeds of any such sale (including, without
limitation, sales in the ordinary course of business of Inventory or obsolete
Equipment) are deposited in Borrower's "Main Operating Account" described in the
Cash Management Agreement. After the occurrence of a Default or an Event of
Default, Lender will at all times have the right to take physical possession of
any tangible Collateral and to maintain such possession on Borrower's premises
or to remove the same or any part thereof to such other places as Lender may
wish. If Lender exercises Lender's right to take possession of such Collateral,
Borrower shall on Lender's demand, assemble the same and make it available to
Lender at a place reasonably convenient to Lender. Borrower shall at all times
keep the Equipment constituting Collateral in good condition and repair. All
expenses of protecting,
52
storing, warehousing, insuring, handling and shipping of the Collateral, all
costs of keeping the Collateral free of any Security Interests prohibited by
this Agreement and of removing the same if they should arise, and any and all
excise, property, sales and use taxes imposed by any state, federal or local
authority on any of the Collateral or in respect of the sale thereof, shall be
borne and paid by Borrower and if Borrower fails to promptly pay any thereof
when due, Lender may, at its option, but shall not be required to, pay the same
and charge Borrower's loan account therefor. Borrower agrees to renew all
insurance required by this Paragraph 11 or Paragraph 13 at least 30 days prior
to its expiration.
12. PERFECTION OF SECURITY INTEREST. Borrower agrees to execute such
financing statements together with any and all other instruments or documents
and take such other action, including delivery, as may be required to create,
evidence, perfect and maintain Lender's Security Interest in the Collateral and
Borrower shall not in any manner do any act or omit to do any act which would in
any manner impair or invalidate Lender's Security Interest in the Collateral or
the perfection thereof.
13. INSURANCE. Borrower shall maintain insurance coverage on any
Collateral including Receivables and other rights to payment with such
companies, against such hazards, and in such amounts as may from time to time be
acceptable to Lender and shall deliver such policies or copies thereof to Lender
with satisfactory lender's loss payable endorsements naming Lender. Each policy
of insurance shall contain a clause requiring the insurer to give not less than
30 days prior written notice to Lender in the event of any anticipated
cancellation of the policy for any reason and a clause that the interest of
Lender shall not be impaired or invalidated by any act or neglect of Borrower
nor by the occupation of the premises wherein such Collateral is located for
purposes more hazardous than are permitted by said policy. Borrower will
maintain, with financially sound and reputable insurers, insurance with respect
to its properties and business against such casualties and contingencies of such
types (which may include, without limitation, public and product liability,
larceny, embezzlement, or other criminal misappropriation insurance) and in such
amounts as may from time to time be required by Lender.
14. BORROWER'S LOAN ACCOUNT. Lender may charge to Borrower's loan
account at any time the amounts of all Obligations (and interest, if
any, thereon) owing by Borrower to Lender, including (without
limitation) loans, Advances, the Term Loan, the Letters of Credit
Obligations, debts, liabilities, obligations acquired by purchase,
assignment or participation and all other obligations, whenever
arising, whether absolute or contingent and whether due or to become
due; also the amount of all costs and expenses and all attorneys' fees
and legal expenses incurred in
53
connection with efforts made to enforce payment of such obligations, or
to obtain payment of any Receivables, or the foreclosure of any
Collateral or in the prosecution or defense of any actions or
proceedings relating in any way to this Agreement whether or not suit
is commenced, including reasonable attorneys' fees and legal expenses
incurred in connection with any appeal of a lower court's order or
judgment; and also the amounts of all unpaid taxes and the like, owing
by Borrower to any governmental authority or required to be deposited
by Borrower, which Lender pays or deposits for Borrower's account. All
sums at any time standing to Borrower's credit on Lender's books and
all of Borrower's property at any time in Lender's possession or upon
or in which Lender has a Security Interest, may be held by Lender as
security for all obligations which are chargeable to Borrower's loan
account. Subject to the foregoing, Lender, at Borrower's request, will
remit to Borrower any net balance standing to Borrower's credit on
Lender's books. Lender will account to Borrower monthly and each
monthly accounting will be fully binding on Borrower, unless, within
sixty (60) days thereafter, Borrower gives Lender specific written
notice of exceptions. All debit balances in Borrower's loan account
will bear interest as provided in Paragraph 5 of this Agreement.
15. PARTICIPATIONS. If any Person shall acquire a participation in any
Loan or the Letters of Credit Obligations made to Borrower hereunder, Borrower
hereby grants to any such Person holding a participation, and such Person shall
have and is hereby given a continuing Security Interest in any money, securities
and other property of Borrower in the custody or possession of such Participant,
including the right of set-off as fully as if such Participant had lent directly
to Borrower the amount of such participation.
16. GENERAL REPRESENTATIONS AND WARRANTIES. To induce Lender to make
Advances and the Term Loan hereunder, Borrower makes the following
representations and warranties, all of which shall survive the initial Advance:
1.
(a) Borrower is a corporation duly organized, existing, and in
good standing under the laws of the State of Minnesota, has power to
own its property and to carry on its business as now conducted, and is
duly qualified to do business in all states in which the nature of its
business requires such qualification.
(b) The execution and delivery of this Agreement and the other
Loan Documents and the performance by Borrower of its obligations
hereunder and thereunder do not and will not conflict with any
provision of law, or of the charter or bylaws of Borrower, or of any
agreement binding upon Borrower.
(c) The execution and delivery of this Agreement and the other
Loan Documents have been duly authorized by all necessary official
action by the Board of Directors and shareholders of Borrower; and this
Agreement and the other Loan Documents have in fact been duly executed
and delivered by Borrower and constitute its lawful and binding
obligations, legally enforceable against it in accordance with their
respective terms.
54
(d) There is no action, suit or proceeding at law or equity,
or before or by any federal, state, local or other governmental
department, commission, board, bureau, agency or instrumentality,
domestic or foreign, pending or, to the knowledge of Borrower,
threatened against Borrower or the property of Borrower which, if
determined adversely, would be a Material Adverse Occurrence or would
affect the ability of Borrower to perform its obligations under the
Loan Documents; and the Borrower is not in default with respect to any
final judgment, writ, injunction, decree, rule or regulation of any
court or federal, state, local or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or
foreign, where the effect of such default would be a Material Adverse
Occurrence.
(e) The authorization, execution and delivery of this
Agreement, and the payment of the Loans and interest thereon, is not,
and will not be, subject to the jurisdiction, approval or consent of
any federal, state or local regulatory body or administrative agency.
(f) Except as set forth on SCHEDULE B attached hereto, all of
the assets of Borrower are free and clear of Security Interests.
(g) Borrower has filed all federal, state and local tax
returns which, to the knowledge of Borrower, are required to be filed,
and Borrower has paid all taxes shown on such returns and all
assessments which are due. Borrower has made all required withholding
deposits. Federal income tax returns of Borrower have been examined and
approved or adjusted by the applicable taxing authorities or closed by
applicable statutes for any fiscal years prior to and including the
fiscal year ended on December 31, 1991 . Borrower does not have
knowledge of any objections to or claims for additional taxes by
federal, state or local taxing authorities for subsequent years which
would be a Material Adverse Occurrence.
(h) Borrower has furnished to Lender the financial statements
described on SCHEDULE C attached hereto. These statements were prepared
in accordance with GAAP and present fairly the financial condition of
Borrower and its consolidated Subsidiaries. There has been no material
adverse change in the condition of Borrower, financial or otherwise,
since the date of the most recent of such financial statements.
(i) The value of the assets and properties of Borrower at a
fair valuation and at their then present fair salable value is and,
after giving effect to any pending Advance and the application of the
amount advanced, will be materially greater than its total liabilities,
including Contingent Obligations, and Borrower has (and has no reason
to believe that it will not have) capital sufficient to pay its
liabilities, including Contingent Obligations, as they become due.
55
(j) Borrower is in compliance with all requirements of law
relating to pollution control and environmental regulations in the
respective jurisdictions where Borrower is presently doing business or
conducting operations.
(k) All amounts obtained pursuant to Advances will be used for
Borrower's working capital purposes and to finance capital expenditures
permitted to made pursuant hereto. The Term Loan will be used to
partially finance Borrower's acquisition of the Mortgaged Property. No
part of any Loan shall be used at any time by Borrower to purchase or
carry margin stock (within the meaning of Regulation U promulgated by
the Board of Governors of the Federal Reserve System) or to extend
credit to others for the purpose of purchasing or carrying any margin
stock. Borrower is not engaged principally, or as one of its important
activities, in the business of extending credit for the purposes of
purchasing or carrying any such margin stock. No part of the proceeds
of any Loan will be used by Borrower for any purpose which violates, or
which is inconsistent with, any regulations promulgated by the Board of
Governors of the Federal Reserve System.
(l) Except for the trademarks, patents, copyrights and
franchise rights listed on SCHEDULE D attached hereto, Borrower is not
the owner of any patent, trademark, copyright or franchise rights.
Borrower is not an "investment company", or an "affiliated person" of,
or a "promoter" or "principal underwriter" for, an "investment
company", as such terms are defined in the Investment Company Act of
1940, as amended. The making of the Loans, the application of the
proceeds and repayment thereof by Borrower and the performance of the
transactions contemplated by this Agreement will not violate any
provision of said Act, or any rule, regulation or order issued by the
Securities and Exchange Commission thereunder.
(m) (i) Each Plan is in compliance in all material respects
with all applicable provisions of ERISA and the Code; (ii) the
aggregate present value of all accrued vested benefits under all Plans
(calculated on the basis of the actuarial assumptions specified in the
most recent actuarial valuation for such Plans) did not exceed as of
the date of the most recent actuarial valuation for such Plans the fair
market value of the assets of such Plans allocable to such benefits;
(iii) Borrower is not aware of any information since the date of such
valuations which would materially affect the information contained
therein; (iv) no Plan which is subject to Part 3 of Subtitle B of Title
I of ERISA or Section 412 of the Code has incurred an accumulated
funding deficiency, as that term is defined in Section 302 of ERISA or
Section 412 of the Code (whether or not waived); (v) no liability to
the PBGC (other than required premiums which have become due and
payable, all of which have been paid) has been incurred with respect to
any Plan, and there has not been any Reportable Event which presents a
material risk of termination of any Plan by the PBGC; and (vi) Borrower
has not engaged in a transaction which would subject it to tax, penalty
or liability for prohibited transactions imposed by ERISA or the
56
Code. Borrower does not contribute to any Multiemployer Plan.
(n) The number of shares and classes of the capital stock of
Borrower and the ownership thereof are accurately set forth on SCHEDULE
E attached hereto. Borrower has not: (i) issued any unregistered
securities in violation of the registration requirements of Section 5
of the Securities Act of 1933, as amended, or any other law; or (ii)
violated any rule, regulation or requirement under the Securities Act
of 1933, as amended, or the Securities Exchange Act of 1934, as
amended, in either case where the effect of such violation would be a
Material Adverse Occurrence. No proceeds of the Advances will be used
to acquire any security in any transaction which is subject to Section
13(d) or 14(d) of the Securities Exchange Act of 1934, as amended.
(o) Except as set forth on SCHEDULE F attached hereto,
Borrower does not have any Contingent Obligations.
(p) Borrower has conducted a comprehensive review and
assessment of its computer applications and has made inquiry of
Borrower's material suppliers, vendors and customers with respect to
the Year 2000 Problem and, based upon such review, Borrower reasonably
believes that the Year 2000 Problem will not result in a material
adverse change in Borrower's business, condition (financial or
otherwise), operations, properties or prospects, or ability to repay
the Obligations. Year 2000 Problem means the risk that computer
applications used by any Person may be unable to recognize the perform
properly date-sensitive functions involving certain dates prior to and
any date after December 31, 1999.
(q) All factual information heretofore or herewith furnished
by or on behalf of Borrower to Lender for purposes of or in connection
with this Agreement or any transaction contemplated hereby is, and all
other such factual information hereafter furnished by or on behalf of
Borrower to Lender will be, true and accurate in every material respect
on the date as of which such information is dated or certified and no
such information contains any material misstatement of fact or omits to
state a material fact or any fact necessary to make the statements
contained therein not misleading.
(r) Each representation and warranty shall be deemed to be
restated and reaffirmed to Lender on and as of the date of the making
of each Advance and the Term Loan and of the issuing of each Letter of
Credit, as the case may be, under this Agreement except that any
reference to the financial statements referred to in Paragraph 16(h)
shall be deemed to refer to the financial statements then most recently
delivered to Lender pursuant to Paragraphs 17(a)(i) and (ii).
17. AFFIRMATIVE COVENANTS. Borrower agrees that it will do all of the
following:
57
(a) Furnish to Lender in form satisfactory to Lender:
(i) Within 90 days after the end of each fiscal year of
Borrower, a complete audited financial report prepared and certified
without qualification or explanatory language by Independent Public
Accountants on a Consolidated and consolidating basis for Borrower and
any Consolidated Subsidiaries of Borrower; together with a copy of the
management letter or memorandum, if any, delivered by such Independent
Public Accountants to Borrower and Borrower's response thereto. If
Borrower shall fail to supply the report within such time limit, Lender
shall have the right (but not the duty) to employ certified public
accountants acceptable to Lender to prepare such report at Borrower's
expense.
(ii) Within 45 days after the end of each fiscal quarter, a
balance sheet and operating figures as to that quarter and year-to date
prepared in accordance with GAAP on a Consolidated and consolidating
basis for Borrower and any Consolidated Subsidiaries of Borrower and
certified as correct by the chief financial officer or treasurer of
Borrower but subject to adjustments as to inventories or other items to
which an officer of Borrower directs attention in writing.
(iii) With the financial statements described in Paragraph
17(a)(i) and (ii), a compliance certificate in the form attached as
EXHIBIT C certified as true and accurate by the chief financial officer
or treasurer of Borrower.
(iv) By no later than 45 days after the beginning of any of
the Borrower's fiscal years, projections for Borrower's then current
fiscal year consisting of projected month-end balance sheets and
month-end and year-to-date statements of earnings and cash flows, all
in a form acceptable to Lender and certified by Borrower's chief
financial officer or treasurer as having been prepared in good faith
and representing the most probable course of Borrower's business during
such fiscal year.
(v) Immediately upon and in any event within five (5) days
after any officer of Borrower becomes aware of any Default or Event of
Default, a notice describing the nature thereof and what action
Borrower proposes to take with respect thereto
(vi) As soon as available and in event within ten (10) days
after the filing thereof, a copy of each report filed with the
Securities and Exchange Commission.
58
(vii) Immediately upon becoming aware of the occurrence, with
respect to any Plan, of any Reportable Event or any "prohibited
transaction" (as defined in Section 4975 of the Code), a notice
specifying the nature thereof and what action the Borrower proposes to
take with respect thereto, and, when received, copies of and notice
from PBGC of intention to terminate or have a trustee appointed for any
Plan.
(viii) From time to time, at Lender's request, any and all
other material, reports, information, or figures required by Lender.
(b) Permit Lender and its representatives access to, and the
right to make copies of, the books, records, and properties of Borrower
at all reasonable times; and permit Lender and its representatives to
discuss Borrower's financial matters with officers of Borrower and with
its independent certified public accountant (and, by this provision,
Borrower authorizes its independent certified public accountant to
participate in such discussions).
(c) Pay when due all taxes, assessments, and other liabilities
against it or its properties except those which are being contested in
good faith and for which an adequate reserve has been established;
Borrower shall make all withholding payments when due.
(d) Promptly notify Lender in writing of any substantial
change in present management of Borrower.
(e) Pay when due all amounts necessary to fund in accordance
with its terms any Plan;
(f) Comply in all material respects with all laws, acts,
rules, regulations and orders of any legislative, administrative or
judicial body or official applicable to Borrower's business operation
or Collateral or any part thereof; PROVIDED, HOWEVER, that Borrower may
contest any such law, act, rule, regulation or order in good faith by
appropriate proceedings so long as (i) Borrower first notifies Lender
of such contest, and (ii) such contest does not, in Lender's sole
discretion, adversely affect Lender's right or priority in the
Collateral or impair Borrower's ability to pay the Obligations when
due.
(g) Promptly notify Lender in writing of: (x) any litigation
which: (i) involves an amount in dispute in excess of $50,000.00 which
is not covered by insurance or, if covered by insurance, the insurer
has failed to accept defense of the litigation or has done so under a
reservation of rights; (ii) relates to the matters which are the
subject of this Agreement; or (iii) if determined adversely to Borrower
would be a Material Adverse Occurrence; and (y) any adverse development
in any litigation described in clause (x) which could cause a Material
Adverse Occurrence.
59
(h) Maintain all of Borrower's primary operating accounts at
Lender.
(i) At all times, maintain the ratio of: (i) Borrower's
Liabilities; to (ii) Tangible Net Worth at not greater than 1.15 to
1.0.
(j) Maintain Borrower's Tangible Net Worth at not less than:
(i) $5,000,000.00 at all times other than at its fiscal year-end; or
(ii) $5,500,000.00 at each of its fiscal year-ends.
18. NEGATIVE COVENANTS. Borrower agrees that it will not do any of the
following, without first obtaining Lender's prior written consent:
(a) Purchase or redeem any shares of Borrower's capital stock;
or declare or pay any dividends (other than dividends payable in
capital stock); or make any distribution to stockholders of any assets
of Borrower except that so long as no Default or Event of Default has
occurred and is continuing at the time of any of the following
described payments or would result therefrom, Borrower may pay
dividends payable from Borrower's net income.
(b) Incur or permit to exist any interest-bearing
indebtedness, secured or unsecured, including without limitation,
indebtedness for money borrowed or capitalized leases, except (i)
borrowings under this Agreement; (ii) borrowings, if any, which are
existing on the date of this Agreement and which are disclosed on
SCHEDULE G attached hereto; (iii) borrowing from the Minnesota
Horesman's Benevolent & Protective Association, Inc. so long as the
aggregate outstanding principal amount of such borrowings does not
exceed $750,000.00 at any time and such borrowings are unsecured and do
not have any priority of payment over the Obligations upon the
occurrence of any Default or Event of Default described in Paragraph
20(d), (e), (f), (g) or (h); (iv) capital leases permitted by Paragraph
18(l) and then only so long as the aggregate balance sheet amount, as
determined in accordance with GAAP, does not exceed $250,000.00 at any
time; or (v) purchase money indebtedness incurred in connection with
capital expenditures permitted by Paragraph 18(l)(ii) so long as the
aggregate outstanding principal balance thereof does not exceed
$250,000.00 at any time.
(c) Create or permit to exist any Security Interest on any of
Borrower's assets now owned or hereafter acquired except: (i) those
created in Lender's favor and held by Lender; (ii) liens of current
taxes not delinquent or taxes which are being contested in good faith
for which an adequate reserve has been established; (iii) Security
Interests disclosed on SCHEDULE B attached hereto and in the case of
Security Interests disclosed in Part II of SCHEDULE B, securing only
debt outstanding on the date of this Agreement and disclosed on
SCHEDULE G; PROVIDED, HOWEVER, that Security Interests disclosed in
Part I of
60
SCHEDULE B are permitted only so long as: (A) Borrower's title to its
property is not materially adversely affected; (B) its use of such
property in the ordinary course of its business is not materially
interfered with; (C) adequate reserves with respect thereto have been
set aside on the Borrower's books in accordance with GAAP; and (D) in
all events, the Borrower shall pay or cause to be paid all such secured
amounts forthwith upon the commencement of foreclosure of any such
Security Interest; or (iv) security interests created in connection
with purchase money indebtedness incurred in connection with the
capital expenditures permitted by Paragraph 18(l)(ii), but only to the
extent that: (A) such security interest attaches only to the equipment
then being acquired by the Borrower, did not and does not attach to the
Borrower's current assets and does not secure any other indebtedness;
(B) no Default or Event of Default has occurred and is continuing at
the time of the proposed creation of such security interest or would
result therefrom; and/or (C) no portion of the purchase price of the
relevant equipment has been funded by the trade-in or available
proceeds arising from the sale or other disposition of any of the
Borrower's then, or previously, owned equipment.
(d) Effect any recapitalization; or be a party to any merger
or consolidation; or sell, transfer, convey or lease all, or any
substantial part, of its property where "substantial" means property
having an aggregate book value (as measured by Borrower's then most
recent audited financial statements delivered to Lender) of at least
$100,00.00 for any single transaction (or related series of
transactions) or aggregate book value of at least $500,000.00 for all
transactions in any fiscal year ; or sell or assign (except to Lender),
with or without recourse, any Receivables or General Intangibles.
(e) Enter into a new business or purchase or otherwise acquire
any business enterprise or any substantial assets of any person or
entity; or make any loans to any person or entity except for loans and
advances to officers for expenses to be incurred in the ordinary course
of business so long as the aggregate outstanding principal amount
thereof does not exceed $10,000.00 at any time; or purchase any shares
of stock of, or similar investment in, any entity.
(f) Become a guarantor or surety or pledge its credit or its
assets on any undertaking of another.
(g) Make any substantial change in present management or
policy or in its present business or enter into a new business.
(h) Enter into any agreement providing for the leasing by
Borrower of property which has been or is to be sold or transferred by
Borrower to the lessor thereof, or which is substantially similar in
purpose to the property so sold or transferred.
(i) Change its fiscal year.
61
(j) (i) Permit or suffer any Plan maintained for employees of
Borrower or any commonly controlled entity to engage in any transaction
which results in a liability of Borrower under Section 409 or 502(i) of
ERISA or Section 4975 of the Code; (ii) permit or suffer any such Plan
to incur any "accumulated funding deficiency" (within the meaning of
Section 302 of ERISA and Section 412 of the Code), whether or not
waived; (iii) terminate, or suffer to be terminated, any Plan covered
by Title IV of ERISA maintained by Borrower or any commonly controlled
entity or permit or suffer to exist a condition under which PBGC may
terminate any such Plan; or (iv) permit to exist the occurrence of any
Reportable Event (as defined in Title IV of ERISA) which represents
termination by the PBGC of any Plan.
(k) Enter into any agreement containing any provision which
would be violated or breached by Borrower under any Loan Document or by
the performance by Borrower of its obligations under any Loan Document.
(l) Make capital expenditures (including without limitation by
way of capitalized leases) except for replacement and repair of
Borrower's existing Equipment or for acquisition of new Equipment
consistent with Borrower's present business practices and then, only so
long as the aggregate amount of all such capital expenditures made
during any of Borrower's fiscal years does not exceed the sum of: (i)
the amount of capital leases permitted by Paragraph 18(b); PLUS (ii) an
aggregate amount of $250,000.00 for other capital expenditures.
19. AVAILABILITY OF COLLATERAL. Intentionally Deleted.
20. DEFAULT AND REMEDIES. It shall be an Event of Default under this
Agreement if:
(a) Borrower fails to make any payment required under this
Agreement or any present or future supplements hereto or under any
other agreement between Borrower and Lender when due, or if payable
upon demand, upon demand and such failure shall remain unremedied for
five (5) days; or
(b) Borrower fails to perform or observe any covenant,
condition or agreement contained in this Agreement or any Loan Document
on its part to be performed (other than those failures covered by other
subparagraphs of this Paragraph) and such default shall continue for a
period of 30 days after written notice thereof from Lender to Borrower;
or
(c) Any warranty, representation or statement made or
furnished to Lender by or on behalf of Borrower proves to have been
false in a material respect when made; or
62
(d) A proceeding seeking an order for relief under the
Bankruptcy Code is commenced by or against Borrower and, if commenced
against Borrower, remains undismissed for 60 days; or
(e) Borrower becomes insolvent or generally fails to pay, or
admit in writing its or his inability to pay, its or his debts as they
become due; or
(f) Borrower applies for, consents to, or acquiesces in, the
appointment of a trustee, receiver or other custodian for it or him or
for any of its or his property, or makes a general assignment for the
benefit of creditors; or, in the absence of such application, consent
or acquiescence, a trustee, receiver or other custodian is appointed
for Borrower or for a substantial part of Borrower's property; or
(g) Any other reorganization, debt arrangement, or other case
or proceeding under any bankruptcy or insolvency law, or any
dissolution or liquidation proceeding is commenced in respect of
Borrower; or
(h) Borrower takes any action to authorize, or in furtherance
of, any of the events described in the foregoing clauses (d) through
(g); or
(i) Any judgments, writs, warrants of attachment, executions
or similar process (not covered by insurance) is issued or levied
against Borrower or any of its assets in excess of an aggregate amount
of $100,00.00 for any or all of such judgments, writs, warrants,
executions or similar process and is not released, vacated or fully
bonded prior to any sale and in any event within 90 days after its
issue or levy; or
(j) Borrower shall fail to comply with Xxxxxxxxx 00, xxx xx
Xxxxxxxxxx 00 (x), (x) or (j) or any of Paragraphs 18(a) through (l)
(both inclusive); or
(k) The maturity of any Indebtedness of the Borrower (other
than Indebtedness under this Agreement or the other Loan Documents) in
the aggregate amount of more than $500,000.00 for Borrower shall be
accelerated, or Borrower shall fail to pay any such Indebtedness when
due or, in the case of such Indebtedness payable on demand; or
(l) Any Change of Control shall occur.
Upon the occurrence of any Event of Default described in Paragraphs 20(d), (e),
(f), (g) or (h), all Obligations shall be and become immediately due and payable
without any declaration, notice, presentment, protest, demand or dishonor of any
kind (all of which are hereby waived) and Borrower's ability to obtain any
additional Advance, the Term Loan or any additional Letter of Credit under this
Agreement shall be immediately and automatically terminated. Upon the
63
occurrence of any other Event of Default, Lender, without notice to Borrower,
may terminate Borrower's ability to obtain any additional Advance, the Term Loan
or any additional Letter of Credit under this Agreement and may declare all or
any portion of the Obligations to be due and payable, without notice,
presentment, protest or demand or dishonor of any kind (all of which are hereby
waived), whereupon the full unpaid amount of the obligations which shall be so
declared due and payable shall be and become immediately due and payable. Upon
the occurrence of an Event of Default, Lender shall have all the rights and
remedies of a secured party under the Commercial Code and may require Borrower
to assemble the Collateral and make it available to Lender at a place designated
by Lender, and Lender shall have the right to take immediate possession of the
Collateral and may enter any of the premises of Borrower or wherever the
Collateral is located with or without process of law and to keep and store the
same on said premises until sold (and if said premises be the property of
Borrower, Borrower agrees not to charge Lender or a purchaser from Lender for
storage thereof for a period of at least 90 days). Upon the occurrence of an
Event of Default, Lender, without further demand, at any time or times, may sell
and deliver any or all of the Collateral at public or private sale, for cash,
upon credit or otherwise, at such prices and upon such terms as Lender deems
advisable, at its sole discretion. Any requirement under the Commercial Code or
other applicable law of reasonable notice will be met if such notice is mailed
to Borrower at its address set forth in the opening paragraph of this Agreement
at least ten (10) days before the date of sale. Lender may be the purchaser at
any such sale, if it is public. The proceeds of sale will be applied first to
all expenses of retaking, holding, preparing for sale, selling and the like,
including attorneys' fees and legal expenses (whether or not suit is commenced)
including, without limitation, reasonable attorneys' fees and legal expenses
incurred in connection with any appeal of a lower court's order or judgment and
second to the payment (in whatever order Lender elects) of all other obligations
chargeable to Borrower's loan account hereunder. Subject to the provisions of
the Commercial Code, Lender will return any excess to Borrower and Borrower
shall remain liable to Lender for any deficiency. Borrower agrees to give Lender
immediate notice of the existence of any Default or Event of Default.
Borrower agrees that if the Obligations become immediately due and
payable in full at a time when one or more Letters of Credit are outstanding,
the Borrower shall thereupon automatically be obligated to pay to Lender, in
addition to all other amounts owing under this Agreement, the aggregate face
amount of all Letters of Credit then outstanding. The foregoing obligation to
pay in advance for amounts which Lender may later have to pay pursuant to the
Letters of Credit is and shall at all times constitute a part of the
"Obligations". Amounts paid by Borrower pursuant to this paragraph shall be made
directly to an interest-bearing collateral account maintained at Lender for
application to Borrower's reimbursement obligations under Xxxxxxxxx 0X(x) as
payments are made on the Letters of Credit, with the balance, if any, to be
applied to the other Obligations
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21. CONDITIONS PRECEDENT TO INITIAL ADVANCE. The obligation of Lender
to make the initial Advance is subject to the condition precedent that Lender
shall have received on or before the date of the initial Advance copies of all
of the following, unless waived by Lender:
(a) A favorable opinion of counsel to Borrower in form and
substance satisfactory to Lender;
(b) UCC-1 Financing Statements in a form acceptable to Lender
appropriately completed and duly executed by Borrower;
(c) Recent UCC searches from the filing offices in all states
required by Lender which reflect that no other Person holds a Security
Interest in any Collateral of Borrower, except for Security Interests
permitted by Paragraph 18(c);
(d) The Revolving Credit Note, in form and substance
satisfactory to Lender, appropriately completed and duly executed by
the Borrower;
(e) A certified copy of all documents evidencing any necessary
consent or governmental approvals (if any) with respect to the Loan
Documents or any other documents provided for in this Agreement;
(f) A certificate by the Secretary or any Assistant Secretary
of Borrower certifying as to: (i) attached resolutions of Borrower's
Board of Directors authorizing or ratifying the execution, delivery and
performance of the Loan Documents to which Borrower is a party and any
other documents provided for by this Agreement, (ii) the names of the
officers of Borrower authorized to sign the Loan Documents together
with a sample of the true signature of such officers, and (iii)
attached bylaws of Borrower;
(g) A copy of Borrower's articles of incorporation certified
by the Secretary of State;
(h) Certificates of Good Standing for Borrower issued by its
state of incorporation and by those states requested by Lender;
(i) Evidence of insurance for all insurance required by the
Loan Documents;
(j) An officer certificate, in form and substance satisfactory
to Lender, executed by the President of Borrower; and
(k) Such other approvals, opinions or documents as Lender may
require.
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22. CONDITIONS PRECEDENT TO TERM LOAN. The obligation of Lender to make
the Term Loan is subject to the condition precedent that Lender shall have
received on or before the date on which the Term Loan is to made copies of all
of the following, unless waived by Lender:
(a) A favorable opinion of counsel to Borrower in form and
substance satisfactory to Lender;
(b) The Term Note, in form and substance satisfactory to
Lender, appropriately completed and duly executed by Borrower;
(c) The Mortgage, the Assignment of Rents and the Indemnity,
in each case appropriately completed and duly executed by Borrower;
(d) UCC-1 Financing Statements in a form acceptable to Lender
appropriately completed and duly executed by Borrower;
(c) Recent UCC searches from the filing offices in all states
required by Lender which reflect that no other Person holds a Security
Interest in any Collateral of Borrower, except for Security Interests
permitted by Paragraph 18(c);
(d) A certified copy of all documents evidencing any necessary
consent or governmental approvals (if any) with respect to the Loan
Documents or any other documents provided for in this Agreement;
(e) A certificate by the Secretary or any Assistant Secretary
of Borrower certifying as to: (i) attached resolutions of Borrower's
Board of Directors authorizing or ratifying the execution, delivery and
performance of the Loan Documents to which Borrower is a party and any
other documents provided for by this Agreement, (ii) the names of the
officers of Borrower authorized to sign the Loan Documents together
with a sample of the true signature of such officers, and (iii)
attached bylaws of Borrower;
(f) A copy of Borrower's articles of incorporation certified
by the Secretary of State;
(g) Certificates of Good Standing for Borrower issued by its
state of incorporation and by those states requested by Lender;
(h) Evidence of insurance for all insurance required by the
Loan Documents;
(i) An officer certificate, in form and substance satisfactory
to Lender, executed by the President of Borrower;
66
(j) The documents described on EXHIBIT D attached hereto by no
later than ten (10) days prior to the closing date for the Term Loan;
and
(k) Such other approvals, opinions or documents as Lender may
require.
23. CONDITIONS PRECEDENT TO ALL ADVANCES; ETC. The obligation of Lender
to make any Advance (including the initial Advance), the Term Loan or to issue
any Letters of Credit (including the initial Letter of Credit) shall be subject
to the satisfaction of each of the following conditions, unless waived in
writing by Lender:
(a) the representations and warranties of Borrower set forth
in this Agreement are true and correct on the date of such credit
extension (and after giving effect to these then being made);
(b) No Default, no Event of Default and no Material Adverse
Occurrence shall then have occurred and be continuing on the date of
such credit extension or result therefrom;
24. TERMINATION. Subject to automatic termination of Borrower's ability
to obtain additional Advances, the Term Loan or any Letters of Credit under this
Agreement upon the occurrence of any Event of Default specified in Paragraphs
20(d), (e), (f), (g) or (h) and to Lender's right to terminate Borrower's
ability to obtain additional Advances, the Term Loan or any Letters of Credit
under this Agreement upon the occurrence of any other Event of Default, this
Agreement shall have a term ending on March 31, 1999, with respect to the
Revolving Credit Commitment and/or the day prior to the fifth annual anniversary
date of the closing of the Term Loan with respect to the Term Loan. Lender's
rights with respect to outstanding Obligations owing on or prior to the
Termination Date will not be affected by termination and all of said rights
including (without limitation) Lender's Security Interest in the Collateral
existing on such Termination Date or acquired by Borrower thereafter.
25. GRANT OF LICENSE TO USE PATENTS AND TRADEMARKS COLLATERAL. For the
purpose of enabling Lender to exercise rights and remedies under this Agreement,
Borrower hereby grants to Lender and irrevocable, non-exclusive license
(exercisable without payment of royalty or other compensation to Borrower) to
use, license or sublicense any patent or trademark now owned or hereafter
acquired by Borrower and wherever the same may be located, and including in such
license reasonable access to all media in which any of the licensed items may be
recorded or stored and to all computer and automatic machinery software and
programs used for the compilation or printout thereof.
26. MISCELLANEOUS.
(a) The performance or observance of any affirmative or
negative covenant or
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other provision of this Agreement and any supplement hereto may be
waived by Lender in a writing signed by Lender but not otherwise. No
delay on the part of Lender in the exercise of any remedy, power or
right shall operate as a waiver thereof, nor shall any single or
partial exercise of any remedy, power or right preclude other or
further exercise thereof or the exercise of any other remedy, power or
right. Each of the rights and remedies of Lender under this Agreement
will be cumulative and not exclusive of any other right or remedy
which Lender may have hereunder or as allowed by law.
(b) Any notice, demand or consent authorized by this Agreement
to be given to Borrower shall be deemed to be given when transmitted by
telex or telecopier or personally delivered, or three days after being
deposited in the U.S. mail, postage prepaid, or one day after delivery
to Federal Express or other overnight courier service, in each case
addressed to Borrower at its address shown in the opening paragraph of
this Agreement, or at such other address as Borrower may, by written
notice received by Lender, designate as Borrower's address for purposes
of notice hereunder. Any notice or request authorized by this Agreement
to be given to Lender shall be deemed to be given when transmitted by
telex or telecopier or personally delivered, or three days after being
deposited in the U.S. mail, postage prepaid, or one day after delivery
to Federal Express or other overnight courier, in each case addressed
to Lender at its address shown in the opening paragraph of this
Agreement, or at such other address as Lender may, by written notice
received by Borrower, designate as Lender's address for purposes of
notice hereunder; PROVIDED, HOWEVER, that any notice to Lender given
pursuant to Paragraph 4A(b); 4B(b) or 4C(b) shall not be deemed given
until received.
(c) This Agreement, including exhibits and schedules and other
agreements referred to herein, is the entire agreement between the
parties supersedes and rescinds all prior agreements relating to the
subject matter herein, cannot be changed, terminated or amended orally,
and shall be deemed effective as of the date it is accepted by Lender.
(d) Borrower agrees to pay and will reimburse Lender on demand
for all out-of-pocket expenses incurred by Lender arising out of this
transaction including without limitation filing and recording fees and
attorneys' fees and legal expenses (whether or not suit is commenced)
incurred in the protection and perfection of Lender's security interest
in the Collateral, in the enforcement of any of the provisions of this
Agreement or of Lender's rights and remedies hereunder and against the
Collateral, in the defense of any claim or claims made or threatened
against Lender arising out of this transaction or otherwise, including,
without limitation, in each instance, all reasonable attorneys' fees
and legal expenses incurred in connection with any appeal of a lower
court's order or judgment; PROVIDED, HOWEVER, that Lender agrees that
Borrower's obligations to reimburse Lender for its attorneys' fees and
legal expenses incurred in connection with the preparation of this
Agreement and the other Loan Documents shall be limited to the sum of
$2,000.00 plus its out-of-pocket expenses.
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(e) Borrower hereby agrees to indemnify, exonerate and hold
Lender and its officers, directors, employees and agents (the
"Indemnified Parties") free and harmless from and against any and all
actions, causes of action, suits, losses, liabilities and damages, and
expenses in connection therewith including, without limitation,
reasonable attorneys' fees and disbursements (the 'Indemnified
Liabilities"), incurred by the Indemnified Parties or any of them as a
result of, or arising out of, or relating to:
(1) any transaction financed or to be financed
in whole or in part directly or indirectly
with proceeds of any Credit extension
hereunder, or
(2) the execution, delivery, performance or
enforcement of this Agreement or any
document executed pursuant hereto by any of
the Indemnified Parties
except for any such Indemnified Liabilities arising on account of any
Indemnified Party's gross negligence or willful misconduct.
If and to the extent that the foregoing undertaking may be
unenforceable for any reason, Borrower hereby agrees to make the
maximum contribution to the payment and satisfaction of each of the
Indemnified Liabilities which is permissible under applicable law. The
provisions of this Paragraph shall survive termination of this
Agreement.
(f) This Agreement is made under and shall be governed by and
interpreted in accordance with the internal laws of the State of
Minnesota, except to the extent that the perfection of the Security
Interest hereunder, or the enforcement of any remedies hereunder with
respect to any particular Collateral, shall be governed by the laws of
a jurisdiction other than the State of Minnesota. Captions herein are
for convenience only and shall not be deemed part of this Agreement.
(g) This Agreement shall be binding upon Borrower and Lender
and their respective successors, assigns, heirs, and personal
representatives and shall inure to the benefit of Borrower, Lender and
the successors and assigns of Lender, except that Borrower may not
assign or transfer its rights hereunder without the prior written
consent of Lender, and any assignment or transfer in violation of this
provision shall be null and void. In connection with the actual or
prospective sale by Lender of any interest or participation in the
obligations, Borrower authorizes Lender to furnish any information in
its possession, however acquired, concerning Borrower or any of its
Affiliates to any person or entity.
(h) Borrower hereby irrevocably submits to the jurisdiction of
any Minnesota
69
state court or federal court sitting in Minneapolis or St. Xxxx,
Minnesota, over any action or proceeding arising out of or relating to
the Agreement, and Borrower hereby irrevocably agrees that all claims
in respect of such action or proceeding may be heard and determined in
such Minnesota State or Federal court. Borrower hereby irrevocably
waives, to the fullest extent it may effectively do so, the defense of
an inconvenient forum to the maintenance of such action or proceeding.
Borrower irrevocably consents to the service of copies of the summons
and complaint and any other process which may be served in any such
action or proceeding by the mailing by United States certified mail,
return receipt requested, of copies of such process to Borrower's
address stated in the preamble hereto and addressed to Borrower's
President by title. Borrower agrees that judgment final by appeal, or
expiration of time to appeal without an appeal being taken, in any such
action or proceeding shall be conclusive and may be enforced in any
other jurisdictions by suit on the judgment or in any other manner
provided by law. Nothing in this Paragraph shall affect the right of
Lender to serve legal process in any other manner permitted by law or
affect the right of Lender to bring any action or proceeding against
Borrower or its property in the courts of any other jurisdiction.
Borrower agrees that, if it brings any action or proceeding arising out
of or relating to this Agreement, it shall bring such action or
proceeding in Hennepin County or Xxxxxx County, Minnesota.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
LENDER:
FIRST AMERICAN BANK, NATIONAL ASSOCIATION
By: /S/ XXXXXX X. XXXXXX
--------------------
Its: SENIOR VICE PRESIDENT
---------------------
BORROWER:
CANTERBURY PARK HOLDING CORPORATION
By: /S/ XXXXXXX X. XXXXXXX
----------------------
Its: PRESIDENT
---------
70
REVOLVING CREDIT NOTE
$2,250,000.00 MINNEAPOLIS,
MINNESOTA
JUNE 3, 1998
FOR VALUE RECEIVED, the undersigned, CANTERBURY PARK HOLDING
CORPORATION, a Minnesota corporation (the "Borrower"), promises to pay to the
order of FIRST AMERICAN BANK, NATIONAL ASSOCIATION, a national banking
association (the "Lender"), on the Revolving Credit Termination Date, the
principal sum of Two Million Two Hundred Fifty Thousand and No/100ths Dollars
($2,250,000.00) or, if less, the then aggregate unpaid principal amount of the
Advances as may be borrowed by the Borrower under the Credit Agreement and are
outstanding on the Revolving Credit Termination Date. All Advances and all
payments of principal shall be recorded by the Lender in its records which
records shall be conclusive evidence of the subject matter thereof, absent
manifest error.
The Borrower further promises to pay to the order of the Lender
interest on each Advance from time to time outstanding from the date hereof
until paid in full at a fluctuating annual rate equal to the Reference Rate;
PROVIDED, HOWEVER, that, notwithstanding anything to the contrary contained
herein, upon the occurrence and during the continuance of any Event of Default,
the rate of interest hereunder shall be 2.0% per annum above the Reference Rate.
Interest shall be due and payable on the first day of each calendar month,
starting on April 1, 1998, and at maturity. Interest payable after maturity
shall be payable on demand. The term "Reference Rate" shall mean the publicly
announced base rate (or other publicly announced reference rate) charged by
Xxxxxx Financial Corporation; Borrower acknowledges that the Reference Rate may
not be the lowest rate made available by Lender to its customers and that Lender
may lend to its customers at rates that are at, above or below the Reference
Rate. Each change in the fluctuating interest rate shall take effect
simultaneously with the corresponding change in the Reference Rate.
All payments of principal and interest under this Note shall be made in
lawful money of the United States of America in immediately available funds to
the Lender at the Lender's office at 000 Xxxxx Xxxxxxx Xxxxxx, Xxxxx Xx, Xxxx,
XX 00000, or at such other place as may be designated by the Lender to the
Borrower in writing.
This Note is the Revolving Credit Note referred to in, and evidences
indebtedness incurred under, a General Credit and Security Agreement dated as of
June 3, 1998 (herein, as it may be amended, modified or supplemented from time
to time, called the "Credit Agreement;" capitalized terms not otherwise defined
herein being used herein as therein defined) between the Borrower and the
Lender, to which Credit Agreement reference is made for a statement of the terms
and provisions thereof, including those under which the Borrower is permitted
and required to make prepayments and repayments of principal of such
71
indebtedness and under which such indebtedness may be declared to be immediately
due and payable.
All parties hereto, whether as makers, endorsers or otherwise,
severally waive presentment, demand, protest and notice of dishonor in
connection with this Note.
This Note is made under and governed by the internal laws of the State
of Minnesota.
CANTERBURY PARK HOLDING CORPORATION
By: /S/ XXXXXXX X. XXXXXXX
----------------------
Its: PRESIDENT
---------
72
LIST OF EXHIBITS
Exhibit A Form of Revolving Credit Note
Exhibit B Form of Term Note
Exhibit C Form of Compliance Certificate
Exhibit D Term Loan Documents
LIST OF SCHEDULES
Schedule A Locations
Schedule B Existing Security Interests
Schedule C Financial Statements
Schedule D Intellectual Property
Schedule E Shareholders
Schedule F Contingent Obligations
Schedule G Existing Indebtedness
73
EXHIBIT A
REVOLVING CREDIT NOTE
$2,250,000.00 MINNEAPOLIS, MINNESOTA
JUNE 3, 1998
FOR VALUE RECEIVED, the undersigned, CANTERBURY PARK HOLDING
CORPORATION, a Minnesota corporation (the "Borrower"), promises to pay to the
order of FIRST AMERICAN BANK, NATIONAL ASSOCIATION, a national banking
association (the "Lender"), on the Revolving Credit Termination Date, the
principal sum of Two Million Two Hundred Fifty Thousand and No/100ths Dollars
($2,250,000.00) or, if less, the then aggregate unpaid principal amount of the
Advances as may be borrowed by the Borrower under the Credit Agreement and are
outstanding on the Revolving Credit Termination Date. All Advances and all
payments of principal shall be recorded by the Lender in its records which
records shall be conclusive evidence of the subject matter thereof, absent
manifest error.
The Borrower further promises to pay to the order of the Lender
interest on each Advance from time to time outstanding from the date hereof
until paid in full at a fluctuating annual rate equal to the Reference Rate;
PROVIDED, HOWEVER, that, notwithstanding anything to the contrary contained
herein, upon the occurrence and during the continuance of any Event of Default,
the rate of interest hereunder shall be 2.0% per annum above the Reference Rate.
Interest shall be due and payable on the first day of each calendar month,
starting on April 1, 1998, and at maturity. Interest payable after maturity
shall be payable on demand. The term "Reference Rate" shall mean the publicly
announced base rate (or other publicly announced reference rate) charged by
Xxxxxx Financial Corporation; Borrower acknowledges that the Reference Rate may
not be the lowest rate made available by Lender to its customers and that Lender
may lend to its customers at rates that are at, above or below the Reference
Rate. Each change in the fluctuating interest rate shall take effect
simultaneously with the corresponding change in the Reference Rate.
All payments of principal and interest under this Note shall be made in
lawful money of the United States of America in immediately available funds to
the Lender at the Lender's office at 000 Xxxxx Xxxxxxx Xxxxxx, Xxxxx Xx, Xxxx,
XX 00000, or at such other place as may be designated by the Lender to the
Borrower in writing.
This Note is the Revolving Credit Note referred to in, and evidences
indebtedness incurred under, a General Credit and Security Agreement dated as of
June 3, 1998 (herein, as it may be amended, modified or supplemented from time
to time, called the "Credit Agreement;" capitalized terms not otherwise defined
herein being used herein as therein defined) between the Borrower and the
Lender, to which Credit Agreement reference is made for a statement of the
74
terms and provisions thereof, including those under which the Borrower is
permitted and required to make prepayments and repayments of principal of such
indebtedness and under which such indebtedness may be declared to be immediately
due and payable.
All parties hereto, whether as makers, endorsers or otherwise,
severally waive presentment, demand, protest and notice of dishonor in
connection with this Note.
This Note is made under and governed by the internal laws of the State
of Minnesota.
CANTERBURY PARK HOLDING CORPORATION
By:________________________________
Its:_______________________________
75
EXHIBIT B
TERM NOTE
$750,000.00 MINNEAPOLIS, MINNESOTA
___________, 1998
FOR VALUE RECEIVED, the undersigned, CANTERBURY PARK HOLDING
CORPORATION, a Minnesota corporation (the
"Borrower"), promises to pay to the order of
FIRST AMERICAN BANK, NATIONAL ASSOCIATION, a
national banking association (the "Lender"),
the principal sum of Seven Hundred Fifth
Thousand and No/100ths Dollars ($750,000.00)
together with interest accruing on the
unpaid principal balance hereof at a
fluctuating annual rate equal to the
Reference Rate in:
(a) 59 consecutive monthly combined installments of principal and
interest in the initial amount of $ ______, commencing on
_______________, 1998 and continuing through, to and including
_______________ , 2003; PROVIDED, HOWEVER, that, since the
Term Loan accrues interest at a floating rate, the principal
and interest payment will be adjusted on last day of
______________ of each year, commencing ______________, 199_
for the following twelve (12) installments and shall be equal
to the amount necessary to fully amortize the Term Loan
balance on such date accruing interest at the rate in effect
on that date over the remaining portion of a hypothetical 180
month amortization period, commencing on _______________, 199_;
and
(b) All remaining principal and accrued interest are due and
payable on _____________, 200_;
.PROVIDED, HOWEVER, that, notwithstanding anything to the contrary contained
herein, upon the occurrence and during the continuance of any Event of Default.
Interest payable after maturity shall be payable on demand The term "Reference
Rate" shall mean the publicly announced base rate (or other publicly announced
reference rate) charged by Xxxxxx Financial Corporation;
76
Borrower acknowledges that the Reference Rate may not be the lowest rate made
available by Lender to its customers and that Lender may lend to its customers
at rates that are at, above or below the Reference Rate.. Each change in the
fluctuating interest rate shall take effect simultaneously with the
corresponding change in the Reference Rate.
All payments of principal and interest under this Note shall be made in
lawful money of the United States of America in immediately available funds at
the Lender's office at 000 Xxxxx Xxxxxxx Xxxxxx, Xxxxx Xx. Xxxx, XX 00000, or at
such other place as may be designated by the Lender to the Borrower in writing.
All payments shall be applied first to accrued interest and then to principal.
This Note is the Term Note referred to in, and evidences indebtedness
incurred under, a General Credit and Security Agreement dated as of June 3, 1998
(herein, as it may be amended, modified or supplemented from time to time,
called the "Credit Agreement;" capitalized terms not otherwise defined herein
being used herein as therein defined) between the Borrower and the Lender, to
which Credit Agreement reference is made for a statement of the terms and
provisions thereof, including those under which the Borrower is permitted and
required to make prepayments and repayments of principal of such indebtedness
and under which such indebtedness may be declared to be immediately due and
payable.
All parties hereto, whether as makers, endorsers or otherwise,
severally waive presentment, demand, protest and notice of dishonor in
connection with this Note.
This Note is made under and governed by the internal laws of the State
of Minnesota.
CANTERBURY PARK HOLDING CORPORATION
By:________________________________
Its:_______________________________
77
EXHIBIT C
COMPLIANCE CERTIFICATE
Pursuant to Section 17 (a)(iii) of the General Credit and Security
Agreement dated as of June 3, 1998 (the General Credit and Security Agreement as
it may be amended, modified, supplemented or restated from time to time being
the "Credit Agreement"; the terms defined therein being used herein as therein
defined) by and between the undersigned and FIRST AMERICAN BANK, NATIONAL
ASSOCIATION (the "Bank"), the undersigned certifies to the Lender as follows:
1. The financial statements of the Borrower attached hereto for the
period ending ______________, 19__ (the "Financial Statements") have been
prepared in accordance with GAAP applied on a consistent basis subject only to
non-accrual of bonuses, other variations from GAAP which in the aggregate are
not material, year-end adjustments which in the aggregate are not expected to be
materially adverse and the omission of footnotes.
2. The representations and warranties contained in Section 16 of the
Credit Agreement are true and correct as of the date hereof as though made on
that date except that the representations and warranties set forth in Section
16(h) to the financial statements of the Borrower shall be deemed a reference to
the audited and unaudited financial statements of the Borrower, as the case may
be, then most recently delivered to the Lenders pursuant to Section 17(a)(i) or
(ii), as the case may be.
3. As of _________, 199_, (the "Measurement Date") no Default or Event
of Default has occurred and is continuing [except (DESCRIBE HERE ANY DEFAULT OR
EVENT OF DEFAULT AND THE ACTION WHICH THE UNDERSIGNED PROPOSES TO TAKE WITH
RESPECT THERETO.)].
4. SECTION 17(i). The undersigned's minimum required ratio of
Liabilities to Tangible Net Worth was not less than 1.15 to 1.00 and the
undersigned's actual ratio at such Measurement Date was ________ to 1.00 and was
computed in accordance with the Credit Agreement.
5. SECTION 17(j). The undersigned's minimum required Tangible Net Worth
was not less than $_________ and the undersigned's actual Tangible Net Worth at
such Measurement Date was $________ and was computed in accordance with the
Credit Agreement.
Dated ____________, 19__. CANTERBURY PARK HOLDING CORPORATION
BY __________________________________
Its __________________________________
78
EXHIBIT D
ADDITIONAL TERM LOAN DOCUMENTS
1. A title insurance commitment in accordance with EXHIBIT D-1 from a
title insurance company acceptable to Lender ("Title Company").
2. Three (3) copies of a current (within thirty (30) days prior to
submission) certified ALTA/ACSM Mortgaged Property TITLE SURVEY of the
Mortgaged Property which also meets the requirements set forth on
EXHIBIT D-2.
3. A written environmental review, audit, assessment or report
("Environmental Audit") addressed to Lender (or if to the Borrower,
accompanies by a reliance letter addressed to the Lender), setting
forth the results of an investigation of the Mortgaged Property,
showing that no hazardous or toxic substance, waste, or material, or
any other pollutant or contaminant (including but not limited to
gasoline, asbestos, urea-formaldehyde and polychlorinated biphenyls),
as those terms are defined or used in any applicable statute,
ordinance, code or regulation ("Pollutant"), is present above, on, in
or under the Mortgaged Property, including an historical investigation
of the uses and ownership of the Mortgaged Property, contacts with
appropriate governmental agencies, soil borings and tests, chemical
tests, and such other tests and analyses (hereafter collectively
referred to as "Tests") as may be requested by Lender, conducted by a
competent environmental engineer or consultant that is acceptable to
Lender and is licensed, bonded and insured in accordance with all
applicable statutes, ordinances, codes and regulations, and all
reports, data and other information produced in connection with the
Tests. Lender shall be notified in advance of the date and time of
conducting any Tests and Lender's representatives shall have the right
to observe such Tests. The Environmental Audit shall also specify
whether or not any environmental assessment, study or statement with
respect to the Mortgaged Property is required by any applicable
federal, state, statute, ordinance or governmental regulation. If such
an assessment, study or statement is so required, Borrower shall
provide a copy thereof to Lender, and, if none is so required, Borrower
shall provide Lender with an appropriate declaration of environmental
nonsignificance relating to the Mortgaged Property.
4. A copy of Borrower's purchase agreement for the Mortgaged Property
certified by Borrower's chief financial officer or treasurer to be a
true, correct and complete copy thereof.
5. A current appraisal of the Mortgaged Property, addressed to Lender,
prepared in substantial conformance with (1) Title XI of the Financial
Institution Reform, Recovery and Enforcement Act of 1989 (FIRREA); (2)
the [OCC APPRAISAL STANDARDS OF 12 CFR, PART 34]; and (3) the Code of
Professional Ethics and Standards of Professional Practice and the
American Institute of Real Estate Appraisers and the
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Guidelines for Real Estate Appraisal Policies and Review Procedures
adopted by the Lender supervision offices of the Federal Deposit
Insurance Corporation, the Board of Governors of the Federal Reserve
System and the Office of the Comptroller of the Currency as of December
9, 1987. The appraisal report must also contain a Statement of
Assumptions and Limiting Conditions, as well as a dated and signed
Certification in accordance with Standard Rule 2-3 of the Uniform
Standards of Professional Appraisal Practices of the Appraisal
Foundation, and Supplement Standards of Professional Practice of the
American Institute of Real Estate Appraisers. The appraisal must be
signed by an appraiser acceptable to Lender.
6. Evidence that the Mortgaged Property does not lie in the 100-year flood
plain zone.
EXHIBIT D-1
As a pre-closing requirement, Borrower must submit a title
insurance commitment or preliminary title report, issued by a reputable,
commercial title insurance company acceptable to Bank, agreeing to issue a 1970
ALTA form of loan policy of title insurance ("Policy"), in the amount of the
Term Loan, insuring to Lender and its assigns that:
1. The fee owner of the Mortgaged Property is the Borrower.
2. The Mortgage is a first lien upon the Mortgaged Property
and any improvements thereon or to be erected thereon.
3. The Mortgaged Property is free and clear of all other
liens, charges and encumbrances not approved by Lender.
4. All possible contractor and supplier mechanic's and
materialmen's lien claims, rights of parties in
possession and matters which could be shown by an
adequate survey are unconditionally insured against.
- The commitment or report should be accompanied by complete copies
of all recorded instruments referred to therein.
- The commitment or report and Policy shall include these
endorsements.
1. ALTA Form No. 100 (Comprehensive).
2. Zoning.
3. Other endorsements required by Lender.
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EXHIBIT D-2
SURVEY REQUIREMENTS
A. BOUNDARY SURVEY
These items are to be included and shown on the Boundary Survey:
1. The complete and correct legal description of the Mortgaged Property as shown
on the title insurance commitment or preliminary title report. (Note: It must be
possible to trace the legal description of the Mortgaged Property on the survey
by following the bearings and dimensions around the boundaries of the Mortgaged
Property.)
2. The location of all recorded easements and of all unrecorded easements
ascertainable by an inspection of the Mortgaged Property, which benefit or
burden the Mortgaged Property. (Note: All recorded easements are to be
identified by a document recording number or other document reference.)
3. All areas affected by any recorded restrictions or access limitations. (Note:
All such areas are to be identified by a document recording number or other
document reference.)
4. The location of all adjoining streets, roads, highways and alleys, with
names, rights-of-way widths and distances from the Mortgaged Property noted. If
none adjoin the Mortgaged Property, then the location of the nearest public
street, road or highway and its distance from the Mortgaged Property.
5. The location of public access to the Mortgaged Property and of all entrance
drives and curb cuts.
6. A directional indicator showing North.
7. The street address of any existing improvements.
8. The dimensions of the Mortgaged Property and the locations of existing
improvements as measured in both directions from property lines.
9. The perimeter dimensions of existing improvements.
10. Interior lot lines, if any.
11. All applicable building setback lines.
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12. The location of existing connections and on-site utility and service lines
for natural gas, electricity, water, and sanitary and storm sewers.
13. The area of the Mortgaged Property.
14. Any portion of the Mortgaged Property which is located in a flood plain or
in any other flood hazard or flood danger area as designated by any governmental
authority claiming jurisdiction over the Mortgaged Property.
The following certification of surveyor.
"I hereby certify to First American Bank, National Association,
Canterbury Park Holding Corporation and ________________Title
Insurance Company and to their heirs, successors and assigns,
that I have surveyed, on the ground, the property legally
described hereon; that this plat of survey is a true, correct
and accurate drawing and representation of said property and of
the size, location, exterior dimensions and boundaries thereof;
that the street addresses, locations and dimensions of all
buildings, and the locations of all parking areas, of any
buildings or other improvements upon said property, of all
fences thereon, of all recorded and/or visible easements, of all
streets, roads, means of public access, utility lines (from each
building to their points of connection with the public systems)
and rights-of-way which affect, benefit or burden said property,
and of all building setback lines which affect said property are
correctly and accurately shown hereon; that there are no
discrepancies, conflicts, gaps, boundary disputes, shortages in
area, encroachments of improvements over boundary lines from or
onto said property or upon easements, overlapping of
improvements, visible easements, overlapping of easements,
roads, alleys, rights-of-way or building set back lines which
affect said property, except as shown hereon; that there are no
fences, light posts or other improvements appurtenant to said
property which are located within the boundary lines of
adjoining properties, except as shown hereon; that the legal
description of said property, as set out hereon, is correct,
complete and accurate; a guaranty that no portion of said
property is located in a flood plain or in any other flood
hazard or flood danger area, as designated by applicable
governmental authorities, except as shown and identified as such
hereon; and that this plat of survey and the survey on which it
is based were made in accordance with "Minimum Standard Detail
Requirements and Classification for ALTA/ACSM Mortgaged Property
Title Surveys," as jointly established and adopted by ALTA and
ASCM in 1992 and meets the requirements of an Urban Survey, as
defined therein."
Dated this __ day of ____________________, 19__.
---------------------------------
[LICENSED SURVEYOR'S SIGNATURE]
[NAME OF SURVEYOR]
Registration Number:
82
SCHEDULE A
LOCATIONS
0000 Xxxxxxxxxx Xxxx
Xxxxxxxx, XX 00000
SCHEDULE B
EXISTING SECURITY INTERESTS
Part I. General Security Interests.
The following Security Interests are permitted:
(a) Deposits of pledges tosecure payment of workers'
compensation, unemployment insurance, old age pensions or
other social security obligations, in the ordinary course of
business of the Borrower;
(b) Security Interests for taxes, fees, asessments and
governmental charges no delinquent or to the extent that
payments therefor shall not at the time be required to be made
in accordance with the provisions of Paragraph 17(C);
(c) Security Interests of carriers, warehousemen, mechanics
and materialmen, and other like Security Interests arising in
the ordinary course of business, for sums not due or to the
extent that the secured amounts are being contested in good
faith by appropriate proceedings;
(d) Deposits to secure the performance of bids, trade
contracts, leases, statutory obligations and other obligations
of a like nature incurred in the ordinary course of business;
and
(e) Zoning restrictions, easements, licenses, restrictions of
the use of real property or irregularities in title thereto,
which do not materially impari the use of such property in the
operation of Borrower's business or the value of such property
for the purpose of such business.
Part II: Specific Security Interests.
See attached search by U.S. Corporate Services, Inc.
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SCHEDULE C
FINANCIAL STATEMENTS
See attached Form 1-KSB for the fiscal year ended December
31, 1997.
See Attached Form 10-QSB for the quarter ended March
31, 1998.
SCHEDULE D
INTELLECTUAL PROPERTY
None.
SCHEDULE E
SHAREHOLDERS
Refer to attached Canterbury Park Holding
Corporation Notice of Annual Meeting of
Shareholders and Proxy Statement dated
April 29, 1998.
SCHEDULE F
CONTINGENT OBLIGATIONS
Refer to Financial Statement Footnote #8 in Form 10-KSB p. 29
(atatched to schedule C) for discussion of the JRI Earn Out
Promissory Note.
84
SCHEDULE G
EXISTING INDEBTEDNESS
As of Close of Business on June 4, 1998
ACCRUED TOTAL
BALANCE INTEREST INDEBTEDNESS
XXXXXX X. XXXXXXX
STATE BANK & TRUST COMPANY
NEW ULM MINNESOTA
LINE OF CREDIT 222541 $760,000.00 $16,308.19 $776,308.19
XXXXXX X. XXXXXXX
STATE BANK & TRUST COMPANY
NEW ULM MINNESOTA
COMMERCIAL LOAN 218695 134,083.86 794.20 134,878.06
HORSEMEN'S BENEVOLENT &
PROTECTIVE ASSOCIATION 499,269.23 32,146.35 531,415.58
TOTAL EXISTING INDEBTEDNESS $1,393,353.09 $49,248.74 $1,442,601.83
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