1
Exhibit 4.27
Dated as of July 23, 1999
LOAN AGREEMENT
THIS AGREEMENT made on July 23, 1999, by and between SUN HYDRAULICS
CORPORATION, a Florida corporation ("Borrower"), and NORTHERN TRUST BANK OF
FLORIDA, N.A. ("Lender").
W I T N E S S E T H :
WHEREAS, Borrower has requested Lender to make a loan to Borrower in
the amount of $7,500,000.00 ("Loan"), and
WHEREAS, Lender is willing to make the Loan on the conditions herein
and in other Loan Documents.
NOW, THEREFORE, in consideration of the premises and of the covenants
and agreements herein contained and the agreement by Lender to make the Loan,
the parties hereto agree as follows:
1. LOAN TO BORROWER; EXECUTION OF LOAN DOCUMENTS. Lender agrees, in
accordance with the terms of this Agreement, to make the Loan to Borrower.
Concurrently herewith, Borrower has executed a note in the amount of the Loan
("Note"), a security agreement ("Security Agreement") to secure the Loan,
encumbering certain personal property owned by Borrower ("Collateral"), and
other documents related to the Loan (the Note, Security Agreement, this
Agreement and other documents are collectively referred to herein as the "Loan
Documents").
2. COSTS AND EXPENSES. Borrower shall pay all costs and expenses
incurred in connection with preparation for, closing, and servicing the Loan
including, without limitation, any legal fees, including the fees of Lender's
counsel, intangible taxes, documentary taxes, recording costs, and document
preparation fees.
3. REPRESENTATIONS AND WARRANTIES. To induce Lender to make the Loan,
Borrower makes the following representations and warranties:
A. The financial information for Borrower and each guarantor or
other obligor furnished to Lender in connection with Borrower's application for
the Loan is complete and accurate. There has been no material nor adverse
change in the financial condition of either Borrower or any guarantor or other
obligor of the Loan from that reflected on such financial information.
2
B. Borrower is a duly organized corporation, existing and in good
standing under the laws of the State of Florida, has corporate power to carry
on the business in which it is engaged, and the obtaining and performing of the
Loan has been duly authorized by all necessary actions of the board of
directors and shareholders of the corporation under applicable law, and do not
and will not violate any provisions of law or any of its organizational
documents.
C. The obtaining and performing of the Loan does not and will not
result in a breach of, constitute a default under, require any consent under,
or result in the creation of any lien, charge, or encumbrance upon any property
of Borrower pursuant to any instrument, order, or other agreement to which
Borrower is a party or by which Borrower, any of its officers as such, or any
of its property is bound.
D. There are no judgments, liens, encumbrances, or other security
interests outstanding against Borrower or any of its subsidiaries, or any of
their properties other than those disclosed to Lender in connection with
Borrower's request for the Loan, nor is there any pending or threatened
litigation that could or will give rise to any such judgment, lien or
encumbrance.
E. Neither Borrower nor any of its subsidiaries have incurred any
debts, liabilities, or obligations (whether direct or contingent) nor committed
themselves to incur any debts, liabilities, or obligations other than those
disclosed to Lender in connection with Borrower's request for the Loan or shown
on the financial statements submitted to Lender.
F. Neither Borrower nor any of its subsidiaries have made any
assignment for the benefit of their creditors, admitted in writing their
inability to pay their debts as they become due, filed a petition of bankruptcy
or been adjudicated bankrupt or insolvent, or filed a petition seeking any
reorganization, arrangement, composition, readjustment, liquidation,
dissolution, receivership or similar relief under any statute, law or
regulation.
G. There are no actions, suits or proceedings pending or,
threatened against or affecting Borrower or any of its subsidiaries, the
Collateral or any guarantor or obligor on the Loan, or involving the validity
or enforceability of the Security Agreement or the priority of the lien
thereof, at law or in equity, or before or by any governmental authorities, and
neither Borrower nor any of its subsidiaries is in default with respect to any
order, writ, injunction, decree or demand of any court or any governmental
authority.
H. The obtaining of the Loan and the consummation of all other
transactions contemplated by the Loan Documents, and performance under the Loan
Documents, will not result in any breach of, or constitute a default under, any
mortgage, indenture, security agreement, lease, loan, credit agreement or any
other contract or instrument to which the Borrower or any of its subsidiaries
is a party or by which their properties may be bound or affected.
4. AFFIRMATIVE COVENANTS. Borrower will:
A. Preserve and keep in force all licenses, permits, and franchises
necessary for the proper conduct of its business and duly pay and discharge all
taxes, assessments, and
2
3
governmental charges upon Borrower or against Borrower's property before the
date on which penalties attach thereto, unless and to the extent only that the
same shall be contested in good faith and by appropriate proceedings.
B. Furnish to Lender (i) within 90 days after the close of each
fiscal year a consolidated annual profit and loss statement and balance sheet
on Borrower and its subsidiaries reviewed by an independent certified public
accountant who is satisfactory to Lender; (ii) within 30 days after filing each
year, an executed copy of Borrower's Federal income tax return, and if any
extensions have been filed, copies of each Extension Notice shall be furnished
to Lender within 30 days of filing; and (iii) such other information reflecting
the financial condition of Borrower and/or its subsidiaries as Lender may
request from time to time.
C. Permit any representative or agent of Lender to examine and
audit any or all of Borrower's books and records when requested by Lender.
D. Inform Lender immediately of any material adverse change in the
financial condition of Borrower or any of its subsidiaries. Borrower will also
promptly inform Lender of any litigation or threatened litigation which might
substantially affect Borrower's financial condition.
E. Maintain Borrower's property and equipment in a state of good
repair.
F. Maintain Borrower's net working capital, on a consolidated basis
("Net Working Capital") in an amount not less than $2,000,000.00 and a current
ratio ("Current Ratio") of not less than 1.2:1.0 at all times during the term
of this Agreement. For the purposes of this Agreement, Net Working Capital
shall mean the excess of Borrower's current assets over current liabilities, on
a consolidated basis with its subsidiaries, which shall be determined in
accordance with generally accepted accounting principles as consistently
applied in the preparation of Borrower's previous financial statements, and
Current Ratio shall mean the quotient of current assets divided by current
liabilities, on a consolidated basis with its subsidiaries.
G. Maintain Borrower's maximum total liabilities to net worth
ratio, on a consolidated basis with its subsidiaries ("Tangible Net Worth")
throughout the term of the Loan at a minimum of 0.85:1.0 at all times during
the term of this Agreement. For the purposes of this Agreement, Tangible Net
Worth shall mean (i) the aggregate amount of assets shown on the balance sheet
of Borrower at any particular date (but excluding from such assets capitalized
organization and development costs, capitalized interest, debt discount and
expense, goodwill, patents, trademarks, copyrights, franchises, licenses,
amounts due from officers, directors, stockholders and affiliates, and such
other assets as are properly classified "intangible assets" under generally
accepted accounting principles) less (ii) liabilities at such date, all
computed in accordance with generally accepted accounting principles applied on
a consistent basis.
H. Maintain Borrower's debt service coverage ratio, on a
consolidated basis with its subsidiaries ("Debt Service Coverage Ratio")
throughout the term of the Loan at a minimum of 1.2:1.0 on a calendar year
basis for all operations of the Borrower and its
3
4
subsidiaries, computed as follows: net profits plus interest, plus
depreciation, all divided by interest plus current maturities of long term debt
and capitalized leases, plus unfunded capital expenditures and
advances/withdrawals made to shareholders of Borrower and/or its subsidiaries.
5. NEGATIVE COVENANTS. Neither Borrower nor any of its subsidiaries
will, without prior written consent of Lender:
A. Collaterally assign, mortgage, pledge, encumber or grant any
security interest in any of its assets, whether now owned or hereafter
acquired.
B. Enter into any merger or consolidation, or sell, lease,
transfer, or otherwise dispose of all or any substantial part of its assets,
whether now owned or hereafter acquired.
C. Change the name in which it does business.
D. Move its principal place of business without giving written
notice thereof to Lender at least 30 days prior thereto.
E. Incur any new debt whether secured or unsecured, except trade
debt for the purchase of equipment which does not exceed $100,000.00 for any
item of equipment, and trade debt for the purchase of inventory.
F. Execute any guarantees or assumptions of any debt, or endorse
any obligations, except that Borrower may guaranty any trade debt for the
purchase of equipment which does not exceed $100,000.00 for any item of
equipment, and trade debt for the purchase of inventory which is incurred by a
subsidiary of Borrower.
G. Enter into any asset sale/leaseback arrangement.
H. Cause or permit any change in management of Borrower's
operations.
6. EVENTS OF DEFAULT. The Lender shall have the option to declare the
entire unpaid balance due on the Loan without notice of any kind, if any of the
following events occur:
A. Failure or omission to pay, within fifteen (15) days after
payment is due, the Note (or any installment of principal or interest
thereunder).
B. Default in the payment (other than payment of principal and
interest) or performance of any obligation, covenant, agreement or liability
contained or referred to in the Security Agreement, Note, or any other Loan
Document, or upon the existence or occurrence of any circumstance or event
deemed a default under the Note or any other Loan Document.
C. Any warranty, representation or statement made or furnished by
Borrower for the purpose of inducing Lender to make the Loan proves to have
been false in any material respect when made or furnished.
4
5
D. A default under any other mortgage on the Collateral (whether
such other mortgage be held by Lender or by a third party).
E. The institution of foreclosure proceedings of another mortgage
or lien of any kind on the Collateral (whether such other mortgage or lien be
held by Lender or by a third party).
F. The default by Borrower or any party obligated under the Note or
any guaranty thereof in the payment or performance of any obligation, covenant,
agreement, or liability contained in any other mortgage, note, obligation or
agreement held by Lender, including but not limited to that certain revolving
line of credit loan in the amount of $5,000,000.00 made by Lender to Borrower
and evidenced by Renewal Master Note of even date hereof.
G. The death, dissolution, termination of existence, insolvency, or
business failure of Borrower or any party obligated under the Note or any
guaranty thereof.
H. The appointment of a receiver of any part of the Collateral.
I. The assignment for the benefit of creditors or the commencement
of any proceedings in bankruptcy or insolvency by or against Borrower or by or
against any person obligated under the Note or any guaranty thereof.
J. The determination by Lender that a material adverse change has
occurred in the financial condition of Borrower or any person obligated under
the Note or any guaranty thereof, from the conditions set forth in the most
recent financial statement of such person heretofore furnished to Lender or
from the condition of such person as heretofore most recently disclosed to
Lender in any manner.
K. The failure by Borrower or any party obligated under the Note or
any guaranty thereof to make any payment of principal or interest when due
under any obligation to any other creditor, if such failure continues beyond
any applicable grace period.
L. Any substantial part of the inventory, equipment, or other
property of Borrower, real or personal, is damaged or destroyed and the damage
or destruction is not covered by collectible insurance.
M. Borrower suffers or permits any lien, encumbrance, or security
interest to arise or attach to any of Borrower's property, which is not
satisfied within 30 days.
N. Any judgment is entered against Borrower that is not satisfied
or appealed within 30 days.
5
6
O. Falsity in any material respect of, or any material omission in,
any representation or statement made to Lender by or on behalf of Borrower or
any person obligated under the Note or any guaranty thereof, in connection with
the Loan.
7. REMEDIES UPON DEFAULT. Upon the occurrence, or the discovery by
Lender of the occurrence, of any of the foregoing events, circumstances, or
conditions of default, Lender shall have, in addition to its option to
accelerate to maturity the full unpaid balance of the Loan, all of the rights
and remedies under applicable law, and in addition shall have the following
specific rights and remedies:
A. To exercise Lender's right of set-off against any account, fund,
or property of any kind, tangible or intangible, belonging to Borrower which
shall be in Lender's possession or under its control.
B. To cure such defaults, with the result that all costs and
expenses incurred or paid by Lender in effecting such cure shall be additional
charges on the Loan, shall bear interest at the highest rate permitted by law,
and shall be payable upon demand, and shall be secured by the Security
Agreement and other Loan Documents.
8. ATTORNEYS' FEES AND COSTS. Borrower promises and agrees to pay all
costs of collection and attorneys' fees, including fees for appellate
proceedings, bankruptcy proceedings or otherwise, incurred or paid by Lender in
enforcing this Agreement or preserving any right or interest of Lender
hereunder.
9. WAIVER. No failure or delay on the part of Lender in exercising any
power or right hereunder, and no failure of Lender to give Borrower notice of a
default hereunder, shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right or power preclude any other or further
exercise thereof or the exercise of any other right or power hereunder. No
modification or waiver of any provision of this Agreement or any instrument
executed pursuant hereto or consent to any departure by Borrower from this
Agreement or such instrument shall in any event be effective unless the same
shall be in writing, and such waiver or consent shall be effective only in the
specific instance and for the particular purpose for which given.
10. BENEFIT. This Agreement shall be binding upon and inure to the
benefit of Borrower and Lender and their respective successors and assigns.
Lender may assign this Agreement in whole or in part. Borrower may not assign
this Agreement or its obligations hereunder without Lender's written consent.
11. GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of Florida, and any litigation arising
out of or relating to this Agreement or the Loan shall be commenced and
conducted in the courts of the State of Florida or in the federal courts of the
State of Florida.
6
7
IN WITNESS WHEREOF, the parties hereto have executed this Loan
Agreement on the day and year first above written.
SUN HYDRAULICS CORPORATION,
a Florida corporation
By: /s/ Xxxxxxx X. Xxxxxx
--------------------------------
Xxxxxxx X. Xxxxxx
As its Chief Financial Officer
BORROWER
NORTHERN TRUST BANK OF FLORIDA, N.A.
By: /s/ Xxxxxxx X. XxXxxxxx
--------------------------------
Xxxxxxx X. XxXxxxxx
As its Vice President
LENDER
7
