Exhibit 10(g)
CREDIT AGREEMENT
between
ARCTIC CAT INC.
and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
Closing Date: June 6, 1997
$75,000,000 Revolving Credit Facility
TABLE OF CONTENTS
ARTICLE I Definitions . . . . . . . . . . . . . . . . . . . .-1-
Section 1.1 Definitions. . . . . . . . . . . . . . . . .-1-
ARTICLE II Amount and Terms of the Loans; Letters of Credit .-7-
Section 2.1 Facilities . . . . . . . . . . . . . . . . .-7-
Section 2.2 Procedures Applicable to Advances. . . . . .-8-
Section 2.3 Procedures Applicable to Letters of Credit .-9-
Section 2.4 Interest . . . . . . . . . . . . . . . . . -10-
Section 2.5 Termination of the Facilities. . . . . . . -11-
Section 2.6 Voluntary Prepayments. . . . . . . . . . . -11-
Section 2.7 Computation of Interest and Fees . . . . . -11-
Section 2.8 Payment. . . . . . . . . . . . . . . . . . -11-
Section 2.9 Payment on Nonbusiness Days. . . . . . . . -11-
Section 2.10 Fees on Fixed Rate Advances and Indemnity -11-
ARTICLE III Documents . . . . . . . . . . . . . . . . . . . -12-
Section 3.1 Documents. . . . . . . . . . . . . . . . . -12-
ARTICLE IV Representations and Warranties . . . . . . . . . -13-
Section 4.1 Corporate Existence and Power. . . . . . . -13-
Section 4.2 Authorization of Borrowing; No Conflict as -13-
to Law or Agreements
Section 4.3 Legal Agreements . . . . . . . . . . . . . -13-
Section 4.4 Subsidiaries . . . . . . . . . . . . . . . -13-
Section 4.5 Financial Condition. . . . . . . . . . . . -14-
Section 4.6 Adverse Change . . . . . . . . . . . . . . -14-
Section 4.7 Litigation . . . . . . . . . . . . . . . . -14-
Section 4.8 Hazardous Substances . . . . . . . . . . . -14-
Section 4.9 Regulation U . . . . . . . . . . . . . . . -14-
Section 4.10 Taxes . . . . . . . . . . . . . . . . . . -14-
Section 4.11 Titles and Liens. . . . . . . . . . . . . -15-
Section 4.12 ERISA . . . . . . . . . . . . . . . . . . -15-
ARTICLE V Affirmative Covenants . . . . . . . . . . . . . . -15-
Section 5.1 Financial Statements . . . . . . . . . . . -15-
Section 5.2 Books and Records; Inspection and Examination-17-
Section 5.3 Compliance with Laws . . . . . . . . . . . -17-
Section 5.4 Payment of Taxes and Other Claims. . . . . -17-
Section 5.5 Maintenance of Properties. . . . . . . . . -17-
Section 5.6 Insurance. . . . . . . . . . . . . . . . . -18-
Section 5.7 Preservation of Corporate Existence. . . . -18-
Section 5.8 Interest Coverage Ratio. . . . . . . . . . -18-
Section 5.9 Leverage Ratio . . . . . . . . . . . . . . -18-
Section 5.10 Tangible Net Worth. . . . . . . . . . . . -18-
ARTICLE VI Negative Covenants . . . . . . . . . . . . . . . -18-
Section 6.1 Liens. . . . . . . . . . . . . . . . . . . -18-
Section 6.2 Indebtedness . . . . . . . . . . . . . . . -19-
Section 6.3 Guaranties . . . . . . . . . . . . . . . . -20-
Section 6.4 Investments. . . . . . . . . . . . . . . . -20-
Section 6.5 Sale of Assets . . . . . . . . . . . . . . -21-
Section 6.6 Restrictions on Issuance and Sale of Subsidiary Stock-21-
Section 6.7 Consolidation and Merger . . . . . . . . . -21-
Section 6.8 Sale and Leaseback . . . . . . . . . . . . -21-
Section 6.9 Hazardous Substances . . . . . . . . . . . -22-
Section 6.10 Restrictions on Nature of Business. . . . -22-
ARTICLE VII Critical Events; Rights and Remedies. . . . . . -22-
Section 7.1 Critical Events. . . . . . . . . . . . . . -22-
Section 7.2 Rights and Remedies. . . . . . . . . . . . -23-
Section 7.3 Pledge of L/C Cash Collateral Account. . . -24-
ARTICLE VIII Miscellaneous. . . . . . . . . . . . . . . . . -24-
Section 8.1 No Waiver; Cumulative Remedies . . . . . . -24-
Section 8.2 Amendments, Etc. . . . . . . . . . . . . . -24-
Section 8.3 Notice . . . . . . . . . . . . . . . . . . -24-
Section 8.4 Participations . . . . . . . . . . . . . . -25-
Section 8.5 Disclosure of Information. . . . . . . . . -25-
Section 8.6 Costs and Expenses . . . . . . . . . . . . -25-
Section 8.7 Indemnification by Borrower. . . . . . . . -25-
Section 8.8 Execution in Counterparts. . . . . . . . . -26-
Section 8.9 Binding Effect, Assignment . . . . . . . . -26-
Section 8.10 Governing Law . . . . . . . . . . . . . . -26-
Section 8.11 Waiver of Jury Trial. . . . . . . . . . . -26-
Section 8.12 Severability of Provisions. . . . . . . . -26-
Section 8.13 Prior Agreements. . . . . . . . . . . . . -26-
Section 8.14 Headings. . . . . . . . . . . . . . . . . -27-
CREDIT AGREEMENT
Dated as of June 6, 1997
Arctic Cat Inc., a Minnesota corporation (the "Borrower"), and Norwest
Bank Minnesota, National Association, a national banking association (the
"Bank"), agree as follows:
ARTICLE I
Definitions
Section 1.1 Definitions. For all purposes of this Agreement, except
as otherwise expressly provided or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings assigned to
them in this Article, and include the plural as well as the singular; and
(b) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles.
"Advance" means an advance by the Bank to the Borrower pursuant to
Article II.
"Agreement" means this Credit Agreement.
"Bank Business Day" means a day other than a Saturday, Sunday, United
States national holiday or other day on which banks in Minnesota or New
York are permitted or required by law to close.
"Base Rate" means the rate of interest publicly announced from time
to time by the Bank as its "prime" or "base" rate or, if the Bank ceases
to announce a rate so designated, any similar successor rate designated by
the Bank.
"Compliance Certificate" means a certificate in substantially the
form of Exhibit B, or such other form as the Borrower and the Bank may
from time to time agree upon in writing, executed by the chief financial
officer of the Borrower, stating (i) that any financial statements
delivered therewith have been prepared in accordance with generally
accepted accounting principles applied on a basis consistent with the
accounting practices reflected in the annual financial statements referred
to in Section 4.5, subject to year-end adjustments, (ii) whether or not
such officer has knowledge of the occurrence of any Critical Event not
theretofore reported and remedied and, if so, stating in reasonable detail
the facts with respect thereto and (iii) if such statements are made as of
the end of a fiscal quarter of the Borrower, all relevant facts in
reasonable detail to evidence, and the computations as to, whether or not
the Borrower is in compliance with the Financial Covenants.
"Covenant Termination Date" means the later of (i) the Facility
Termination Date, or (ii) the date on which no indebtedness remains
outstanding under the Note and no Facility A Documentary L/C Outstandings,
Facility A Standby L/C Outstandings or Facility B Standby L/C Outstandings
remain outstanding.
"Critical Event" has the meaning specified in Section 7.1.
"Dealer Finance Agreements" means (i) the Retail Financing Program
Agreement dated May 12, 1997 among the Borrower, the Guarantor and General
Electric Capital Corporation, and (ii) the Consumer Credit Card Program
Agreement dated May 12, 1997 among the Borrower, the Guarantor and
Monogram Credit Card Bank of Georgia, but not amendment to or restatement
of such agreements entered into without the prior written consent of the
Bank if such amendment or restatement would change the nature of the
obligations of the Borrower or any Subsidiary thereunder in a manner
adverse to the Borrower or such Subsidiary.
"EBIT" means, as of any date, pre-tax net income during the one-year
period ending on that date, excluding extraordinary items, together with
all Interest Expense recognized by the Borrower with respect to that
period and deducted in determining the Borrower s net income, all
determined with respect to the Borrower and its Subsidiaries on a
consolidated basis in accordance with generally accepted accounting
principles consistently applied.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) that is, along with the Borrower, a member of a controlled
group of corporations or a controlled group of trades or businesses, as
described in sections 414(b) and 414(c), respectively, of the Internal
Revenue Code of 1986, as amended.
"Environmental Law" means the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. 9601 et seq., the Resource
Conservation and Recovery Act, 42 U.S.C. 6901 et seq., the Hazardous
Materials Transportation Act, 49 U.S.C. 1802 et seq., the Toxic
Substances Control Act, 15 U.S.C. 2601 et seq., the Federal Water
Pollution Control Act, 33 U.S.C. 1252 et seq., the Clean Water Act, 33
U.S.C. 1321 et seq., the Clean Air Act, 42 U.S.C. 7401 et seq., and
any other federal, state, county, municipal, local or other statute, law,
ordinance or regulation which may relate to or deal with human health or
the environment, all as may be from time to time amended.
"Facility A" means the revolving credit facility established under
Section 2.1(a).
"Facility A Amount" means $30,000,000, unless said amount is reduced
pursuant to Section 2.5, in which event it means the amount to which said
amount is reduced.
"Facility A Documentary L/C Outstandings" means the sum of (i) the
aggregate face amount of all issued and outstanding documentary Facility
A Letters of Credit, and (ii) amounts drawn under documentary Facility A
Letters of Credit for which the Bank has neither been reimbursed nor made
any Advance.
"Facility A Letter of Credit" means a Letter of Credit issued
pursuant to Section 2.1(b).
"Facility A Note" means the Borrower s promissory note in the form of
Exhibit A.
"Facility A Outstandings" means the sum of (i) the principal balance
of the Facility A Note, (ii) the aggregate face amount of all issued and
outstanding Facility A Letters of Credit, and (iii) amounts drawn under
Facility A Letters of Credit for which the Bank has neither been
reimbursed nor made any Advance.
"Facility A Standby L/C Outstandings" means the sum of (i) the
aggregate face amount of all issued and outstanding standby Facility A
Letters of Credit, and (ii) amounts drawn under standby Facility A Letters
of Credit for which the Bank has neither been reimbursed nor made any
Advance.
"Facility B" means the revolving documentary letter of credit
facility established under Section 2.1(b).
"Facility B Amount" means $45,000,000, unless said amount is reduced
pursuant to Section 2.5, in which event it means the amount to which said
amount is reduced.
"Facility B Letter of Credit" means a Letter of Credit issued
pursuant to Section 2.1(b).
"Facility B Outstandings" means the sum of (i) the aggregate face
amount of all issued and outstanding Facility B Letters of Credit, and
(ii) amounts drawn under Facility B Letters of Credit for which the Bank
has neither been reimbursed nor made any Advance.
"Facility Termination Date" means July 31, 1998, or the earlier date
of the termination of the Facilities pursuant to Section 2.5 or 7.2.
"Federal Funds Rate" means at any time an interest rate per annum
equal to the weighted average of the rates for overnight federal funds
transactions with members of the Federal Reserve System arranged by
federal funds brokers, as published for such day by the Federal Reserve
Bank of New York, or, if such rate is not so published for any day which
is a Bank Business Day, the average of the quotations for such day for
such transactions received by the Bank from three federal funds brokers of
recognized standing selected by it, it being understood that the Federal
Funds Rate for any day which is not a Bank Business Day shall be the
Federal Funds Rate for the next preceding Bank Business Day.
"Financial Covenant" means any of the Borrower s obligations set
forth in Sections 5.8, 5.9 and 5.10 of this Agreement
"Floating Rate" means , at any time, an annual rate equal to the
greater of:
(i) the Base Rate; or
(ii) the Federal Funds Rate, plus 50 basis points (0.50%).
The Floating Rate shall change when and as the Base Rate or Federal Funds
Rate changes.
"Fixed Rate" means the annual rate equal to the sum of (i) the rate
determined by the Bank, in its sole and absolute discretion, to be its
cost of funds with respect to a hypothetical borrowing in an amount
approximately equal to the amount for which a Fixed Rate quotation has
been requested under Section 2.4(b) to be issued on the day specified by
the Borrower in its request for such quotation and maturing at the end of
the Interest Period specified in such quotation, and (iii) one and one-
quarter percent (1.25%).
"Fixed Rate Amount" means any portion of the principal balance of the
Note bearing interest at a Fixed Rate.
"Funded Debt" means (without duplication) (i) all indebtedness of the
Borrower or any Subsidiary for borrowed money; (ii) the deferred and
unpaid balance of the purchase price owing by the Borrower or any
Subsidiary on account of any goods or services purchased (other than trade
payables and other accrued liabilities incurred in the ordinary course of
business that are not more than 60 days past due) if such purchase price
is (A) due more than 60 days from the date of incurrence of the obligation
in respect thereof or (B) evidenced by a note or a similar written
instrument; (iii) all capitalized lease obligations; (iv) all indebtedness
secured by a Lien on any property owned by the Borrower or any Subsidiary,
whether or not such indebtedness has been assumed by the Borrower or any
Subsidiary or is nonrecourse to the Borrower or any Subsidiary; (v) notes
payable and drafts accepted representing extensions of credit, whether or
not representing obligations for borrowed money (other than such notes or
drafts for the deferred purchase price of assets or services to the extent
such purchase price is excluded from clause (ii) above); (vi) indebtedness
evidenced by bonds, notes or similar written instrument; (vii) the face
amount of all letters of credit and bankers acceptances issued for the
account of the Borrower or any Subsidiary, and without duplication, all
drafts drawn thereunder (other than such letters of credit, bankers
acceptances and drafts for the deferred purchase price of assets or
services to the extent such purchase price is excluded from clause (ii)
above); (viii) all net obligations of the Borrower or any Subsidiary under
interest rate agreements or currency agreements; (ix) guaranty obligations
of the Borrower or any Subsidiary with respect to indebtedness for
borrowed money of another person or entity (including affiliates), all
determined on a consolidated basis in accordance with generally accepted
accounting principles consistently applied.
"Guarantor" means Arctic Cat Sales Inc., a Minnesota corporation.
"Guaranty" means a guaranty agreement of the Guarantor, acceptable to
the Bank in form and substance, guarantying all present and future debt of
the Borrower to the Bank.
"Hazardous Substance" means any asbestos, urea-formaldehyde,
polychlorinated biphenyls ("PCBs"), nuclear fuel or material, chemical
waste, radioactive material, explosives, known carcinogens, petroleum
products and by-products and other dangerous, toxic or hazardous
pollutants, contaminants, chemicals, materials or substances listed or
identified in, or regulated by, any Environmental Law.
"Interest Coverage Ratio" means, as of the end of any fiscal quarter
of the Borrower, the ratio of (i) EBIT of the Borrower and its
Subsidiaries during the four-quarter period ending on that quarter-end, to
(ii) Interest Expense of the Borrower and its Subsidiaries during the
four-quarter period ending on that quarter-end, all determined on
a consolidated basis in accordance with generally accepted accounting
principles consistently applied.
"Interest Expense" means, for any period of calculation and without
duplication, all interest, whether paid in cash, accrued as a liability or
capitalized, on indebtedness during such period, all calculated for such
period for the Borrower and its Subsidiaries on a consolidated basis in
accordance with generally accepted accounting principles consistently
applied.
"Interest Period" means a period of not less than 1 day and not more
than 30 days.
"L/C Cash Collateral Account" means an account maintained with the
Bank in which funds are deposited pursuant to Section 2.3(e) or Section
7.2.
"Letter of Credit" means a standby or documentary letter of credit
issued for the account of the Borrower pursuant to this Agreement. For
purposes of this Agreement, the term "Letter of Credit" shall also include
all letters of credit issued by the Bank for the account of the Borrower
on or before the date hereof and outstanding on the date hereof.
"Leverage Ratio" means, at any time, the ratio of Funded Debt to
Total Capital, all determined with respect to the Borrower and its
Subsidiaries on a consolidated basis in accordance with generally accepted
accounting principles consistently applied.
"Lien" means any mortgage, deed of trust, lien, pledge, security
interest or other charge or encumbrance, of any kind whatsoever, including
but not limited to the interest of the lessor or titleholder under any
capitalized lease, title retention contract or similar agreement.
"Loan Documents" means this Agreement and the Note.
"Multiemployer Plan" means a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA.
"Note" has the meaning set forth in Section 2.1.
"Person" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political
subdivision thereof.
"Plan" means an employee benefit plan or other plan maintained for
employees of the Borrower or any Subsidiary or ERISA Affiliate and covered
by Title IV of ERISA.
"Reportable Event" means (i) a "reportable event" described in
Section 4043 of ERISA and the regulations issued thereunder, (ii) a
withdrawal from any Plan, as described in Section 4063 of ERISA, (iii) an
action to terminate a Plan for which a notice is required to be filed
under Section 4041 of ERISA, (iv) any other event or condition that might
constitute grounds for termination of, or the appointment of a trustee to
administer, any Plan, or (v) a complete or partial withdrawal from a
Multiemployer Plan as described in Sections 4203 and 4205 of ERISA.
"Subsidiary" means (i) any corporation of which more than 50% of the
outstanding shares of capital stock having general voting power under
ordinary circumstances to elect a majority of the board of directors of
such corporation, irrespective of whether or not at the time stock of
any other class or classes shall have or might have voting power by reason
of the happening of any contingency, is at the time directly or indirectly
owned by the Borrower, by the Borrower and one or more other Subsidiaries,
or by one or more other Subsidiaries, (ii) any partnership of which 50% or
more of the partnership interests therein are directly or indirectly owned
by the Borrower, by the Borrower and one or more other Subsidiaries, or by
one or more other Subsidiaries, and (iii) any limited liability company or
other form of business organization the effective control of which is held
by the Borrower, the Borrower and one or more other Subsidiaries, or by
one or more other Subsidiaries.
"Tangible Net Worth" means stockholders equity, less intangible
assets included in calculating such stockholders equity, all determined
with respect to the Borrower and its Subsidiaries on a consolidated basis
in accordance with generally accepted accounting principles consistently
applied. For purposes of the foregoing calculation, intangible assets
shall include but not be limited to the value of patents, trademarks,
trade names, copyrights, licenses, goodwill, prepaid expenses and deferred
charges.
"Total Capital" means the sum of retained earnings, stockholders
equity (including preferred stock), and Funded Debt, all determined with
respect to the Borrower and its Subsidiaries on a consolidated basis in
accordance with generally accepted accounting principles consistently
applied.
"Welfare Plan" means a "welfare plan" as defined in Section 3(1) of
ERISA.
ARTICLE II
Amount and Terms of the Loans; Letters of Credit
Section 2.1 Facilities.
(a) Facility A. The Bank shall consider making Advances to the
Borrower and issuing documentary and standby Letters of Credit for the
account of the Borrower from the date hereof through the Facility
Termination Date. The credit facility established under this paragraph
(a) is revolving; subject always to the Bank s discretion and the limits
set forth below, the Borrower may continue to request Advances and Letters
of Credit through the Facility Termination Date so long as no Advance or
Letter of Credit causes the dollar limits set forth below to be exceeded.
The Borrowers obligation to repay Advances made under this paragraph will
be evidenced by and payable on demand with interest in accordance with the
Borrower s promissory note in the form of Exhibit A hereto (the "Note").
(b) Facility B. The Bank shall consider issuing documentary Letters
of Credit for the account of the Borrower from the date hereof through the
Facility Termination Date. The credit facility established under this
paragraph (b) is revolving; subject always to the Banks discretion and the
limits set forth below, the Borrower may continue to request Letters of
Credit through the Facility Termination Date so long as no Letter of
Credit causes the dollar limits set forth below to be exceeded.
(c) Limitations. In no event shall:
(i) The Facility A Outstandings at any one time exceed the Facility
A Amount.
(ii) The Facility A Standby L/C Outstandings at any one time exceed
$5,000,000.
(iii) The Facility B Outstandings at any one time exceed the
Facility B Amount.
(d) Discretion. The decision to make each individual Advance and
issue each Letter of Credit hereunder will always be at the sole
discretion of the Bank. Nothing herein should be interpreted as a promise
to make any one or more Advances or to issue any one or more Letters of
Credit.
(e) Purpose. The Borrower may use up to $10,000,000 in Advances for
the repurchase or redemption of the Borrower s stock. The proceeds of all
other Advances, and each Letter of Credit, shall be used by the Borrower
for the Borrower s general corporate purposes.
(f) Representations. Any request for an Advance or a Letter of
Credit, whether written or telephonic, shall be deemed to be a
representation that, as of the date of such Advance or Letter of Credit:
(i) the representations and warranties contained in Article IV are
correct on and as of the date of such Advance or Letter of
Credit as though made on and as of such date, except to the
extent that such representations and warranties relate solely to
an earlier date; and
(ii) no event has occurred and is continuing, or would result from
such Advance or Letter of Credit, which constitutes a Critical
Event.
Section 2.2 Procedures Applicable to Advances. The Borrower shall
request each Advance by written notice from the Borrower to the Bank or
telephonic request from any person purporting to be authorized to request
Advances on behalf of the Borrower, which notice or request shall specify the
date of the requested Advance and the amount thereof. Each Advance shall be in
the amount of $100,000 or a multiple thereof. If the Bank (in its sole
discretion) elects to make such Advance, the Bank shall disburse the amount
of the requested Advance by crediting the same to the Borrower s demand deposit
account maintained with the Bank or in such other manner as the Bank and the
Borrower may from time to time agree. The Borrower shall promptly confirm each
telephonic request for an Advance by executing and delivering an appropriate
confirmation certificate to the Bank. The Borrower shall be obligated to repay
all Advances notwithstanding the failure of the Bank to receive such
confirmation and notwithstanding the fact that the person requesting same was
not in fact authorized to do so.
Section 2.3 Procedures Applicable to Letters of Credit.
(a) Procedures; Governing Documents. The Borrower shall request
each Letter of Credit on at least five Bank Business Days prior written
notice from the Borrower to the Bank. All decisions as to whether to issue
any Letter of Credit, the form of any Letter of Credit and the term of any
Letter of Credit shall be made by the Bank in its sole discretion. Prior
to the issuance of any Letter of Credit, the Borrower will execute such
letter of credit applications and other documents as the Bank deems
necessary. The rights and obligations of the Borrower and the Bank with
respect to each Letter of Credit shall be governed by (among other things)
(i) this Credit Agreement, (ii) any such separate letter of credit
application, and (iii) the Master Security Agreement for Irrevocable
Documentary Letters of Credit dated September 1, 1993, executed by the
Borrower, or the Master Security Agreement for Irrevocable Standby Letter
of Credit dated September 1, 1993, executed by the Borrower, as the case
may be. To the extent that the terms of this Agreement are different from
or in addition to the terms of any other document identified in the
preceding sentence, the terms of this Agreement shall govern.
(b) Applicable Facility. All standby Letters of Credit issued
hereunder shall be deemed to be Facility A Letters of Credit. All
documentary Letters of Credit issued hereunder shall be deemed Facility A
Letters of Credit or Facility B Letters of Credit by the Bank in its sole
discretion.
(c) Fees.
(i) Standby Letters of Credit. An issuance fee shall be due and
payable in connection with the issuance of any standby Letter of
Credit. Such fee shall be calculated at the rate of one and
one-quarter percent (1.25%) per annum on the face amount of such
standby Letter of Credit. Such fee shall be paid in full in
advance upon issuance of any standby Letter of Credit maturing
90 days or less after its issuance. In all other cases, the
amount of such fee accruing through the end of the fiscal
quarter in which the standby Letter of Credit is issued shall be
paid in advance upon issuance of such Letter of Credit, and the
remainder of the fee shall be paid quarterly in advance
thereafter. In no event shall the issuance fee be less than
$250 with respect to any standby Letter of Credit.
(ii) Documentary Letters of Credit. An examination fee shall be due
and payable upon any draw under any documentary Letter of Credit
. The examination fee shall be equal to one-eighth of one
percent of the amount so drawn, except that in no event shall
such examination fee be less than $50 or greater than $2,500.
(iii) Discretion to Change Fees. The Bank reserves the right, in
its sole discretion, to increase or decrease the amount of
its issuance fees and examination fees at any time and from
time to time upon reasonable notice to the Borrower.
(d) Obligation of Reimbursement. The Borrower shall pay the amount
of each draft drawn under any Letter of Credit to the Bank on demand,
together with interest at the Floating Rate from the date that such draft
is paid by the Bank until payment of such amount in full. The Bank may
(at its option) charge any deposit account maintained by the Borrower with
the Bank for the amount of any draft drawn under a Letter of Credit or
make an Advance under Facility A in the amount of the draft and apply such
Advance to satisfy the Borrower s obligation to reimburse the Bank on
account of such draft, all without notice to or consent of the Borrower.
(e) Term; L/C Cash Collateral Account. Unless otherwise approved by
the Bank, no Letter of Credit shall have an initial or any renewal term of
more than one year or a term (including renewals thereof) extending beyond
the Facility Termination Date. Unless otherwise agreed by the Bank in
writing, the Borrower shall deposit in the L/C Cash Collateral Account, on
the Facility Termination Date, an amount equal to the aggregate face
amount of all Letters of Credit then outstanding, less the balance (if
any) then outstanding in the L/C Cash Collateral Account.
Section 2.4 Interest.
(a) Floating Rate. Unless the Borrower elects a Fixed Rate pursuant
to this Section, the principal balance of the Note shall bear interest at
the Floating Rate.
(b) Fixed Rates. On any Bank Business Day between 8:30 a.m. and
2:00 p.m., the Borrower may request telephonically that the Bank quote the
Fixed Rate that would be applicable to the Fixed Rate Amount and for the
Interest Period specified in such request. Each Fixed Rate Amount must be
equal to $100,000 or an integral multiple thereof. The Bank may, in its
sole discretion, choose to quote such a Fixed Rate to the Borrower.
Immediately upon receipt of such quotation from the Bank, the Borrower may
telephonically accept the Fixed Rate, whereupon the Fixed Rate Amount
shall from the date the quotation is made bear interest at the Fixed Rate
so selected (and the remaining part of the principal balance of the Note,
if any, shall continue to bear interest at the rate or rates previously
applicable to such amounts). Acceptance of any Fixed Rate quotation
shall be irrevocable. Failure immediately to accept such a quotation
shall be deemed to be a rejection of such quotation. At the termination
of each Interest Period, the interest rate with respect to the applicable
Fixed Rate Amount shall revert to the Floating Rate unless a new Fixed
Rate quotation is requested and accepted by the Borrower. Absent manifest
error, the records of the Bank shall be conclusive as to any Fixed Rate
Amount and the Fixed Rate and Interest Period applicable thereto.
Section 2.5 Termination of the Facilities. The Borrower may at any
time and from time to time upon three Bank Business Days prior notice to the
Bank permanently terminate the Facilities in whole, without penalty or premium
, provided that the Facilities may not be terminated while any Advance or
Letter of Credit remains outstanding.
Section 2.6 Voluntary Prepayments. The Borrower may prepay the Note
in whole or in part, without penalty or premium, at any time and from time to
time; provided that (i) no prepayment may be applied to any portion of the
principal balance of the Note which, at the time of such prepayment, bears
interest at a Fixed Rate, and (ii) each partial prepayment of the Note shall
be in the principal amount of $100,000 or a multiple thereof.
Section 2.7 Computation of Interest and Fees. Interest under the
Note and the fees hereunder shall be computed on the basis of actual number of
days elapsed in a year of 360 days.
Section 2.8 Payment. All payments of principal and interest under
the Note and of the fees hereunder shall be made to the Bank in immediately
available funds. Payments received after noon on any day shall be deemed
received on the next succeeding Bank Business Day. The Borrower agrees that
the amount shown on the books and records of the Bank as being the principal
balance of the Note shall be prima facie evidence of such principal amount.
The Borrower hereby authorizes the Bank to charge against the Borrower share
account with the Bank an amount equal to the accrued interest and fees from
time to time due and payable to the Bank under the Note or hereunder, or (at
the option of the Bank) to make an Advance in such amount, all without receipt
of any request for such charge or Advance.
Section 2.9 Payment on Nonbusiness Days. Whenever any payment to be
made hereunder or under the Note shall be stated to be due on a day other than
a Bank Business Day, such payment may be made on the next succeeding Bank
Business Day, and such extension of time shall in each case be included in the
computation of payment of interest on such Note or the fees hereunder, as the
case may be.
Section 2.10 Fees on Fixed Rate Advances and Indemnity. In addition
to any interest payable on Advances made hereunder and any fees or other
amounts payable hereunder, the Borrower shall compensate the Bank, upon written
request by the Bank (which request shall set forth the basis for requesting
such amounts), for all losses and expenses in respect of any interest or other
consideration paid by the Bank to lenders of funds borrowed by it or deposited
with it to maintain any Fixed Rate Amount at a Fixed Rate which the Bank may
sustain to the extent not otherwise compensated for hereunder and not mitigated
by the reemployment of such funds if any prepayment of any such Fixed Rate
Amount occurs on a date that is not the expiration date of the applicable
Interest Period. A certificate as to any such loss or expense (including
calculations, in reasonable detail, showing how the Bank computed such loss or
expense) shall be promptly submitted by the Bank to the Borrower and shall, in
the absence of manifest error, be conclusive and binding as to the amount
thereof.
ARTICLE III
Documents
Section 3.1 Documents. On or before the date of the first Advance or
Letter of Credit, the Borrower shall deliver to the Bank each of the following,
each in form and substance satisfactory to the Bank:
(a) The Note, properly executed on behalf of the Borrower.
(b) Current searches of appropriate filing offices showing that (i)
no state or federal tax liens have been filed and remain in effect against
the Borrower or any Subsidiary, and (ii) no financing statements have been
filed and remain in effect against the Borrower or any Subsidiary except
financing statements perfecting only Liens permitted under Section 6.1.
(c) The Guaranty, duly executed by the Guarantor.
(d) A certificate of the secretary of the Borrower and each
Subsidiary (i) certifying that the execution, delivery and performance of
the Loan Documents and other documents contemplated hereunder to which
such corporation is a party have been duly approved by all necessary
action of the Board of Directors of the Borrower or such Subsidiary, as
the case may be, and attaching true and correct copies of the applicable
resolutions granting such approval, (ii) certifying that attached to such
certificate are true and correct copies of the articles of incorporation
and bylaws of the Borrower or such Subsidiary, as the case may be,
together with such copies, and (iii) certifying the names of the officers
of the Borrower and its Subsidiaries that are authorized to sign the Loan
Documents and other documents contemplated hereunder, including requests
for Advances, together with the true signatures of such officers. The Bank
may conclusively rely on such certificate until it receives a further
certificate of the Secretary or Assistant Secretary of the Borrower
canceling or amending the prior certificate and submitting the signatures
of the officers named in such further certificate.
(e) Certificates of good standing of the Borrower and its
Subsidiaries, dated not more than ten days before such date.
(f) A signed copy of an opinion of counsel for the Borrower,
addressed to the Bank as to matters referred to in Sections 4.1, 4.2, 4.3
and 4.7, and as to such other matters as the Bank may reasonably request,
with that opinion being acceptable to the Bank s counsel. In the case of
Section 4.7, the opinion may be to the best knowledge of such counsel and
may be made without regard to products liability and intellectual property
litigation, and, in the case of Section 4.3, insofar as it relates to
enforcement of remedies, it may be subject to applicable bankruptcy,
insolvency, reorganization or similar laws affecting the rights of
creditors generally from time to time, and to usual equity principles.
ARTICLE IV
Representations and Warranties
The Borrower represents and warrants to the Bank as follows:
Section 4.1 Corporate Existence and Power. The Borrower and its
Subsidiaries are each corporations duly incorporated, validly existing and in
good standing under the laws of their respective jurisdictions of incorporation
, and are each duly licensed or qualified to transact business in all
jurisdictions where the character of the property owned or leased or the nature
of the business transacted by them makes such licensing or qualification
necessary. The Borrower has all requisite power and authority, corporate or
otherwise, to conduct its business, to own its properties and to execute and
deliver, and to perform all of its obligations under, the Loan Documents.
Section 4.2 Authorization of Borrowing; No Conflict as to Law or
Agreements. The execution, delivery and performance by the Borrower of the
Loan Documents and the borrowings from time to time hereunder have been duly
authorized by all necessary corporate action and do not and will not (i)
require any consent or approval of the stockholders of the Borrower, or any
authorization, consent or approval by any governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, (ii) violate any
provision of any law, rule or regulation (including, without limitation,
Regulation X of the Board of Governors of the Federal Reserve System) or of any
order, writ, injunction or decree presently in effect having applicability to
the Borrower or of the Articles of Incorporation or Bylaws of the Borrower,
(iii) result in a breach of or constitute a default under any indenture or
loan or credit agreement or any other agreement, lease or instrument to which
the Borrower is a party or by which it or its properties may be bound or
affected, or (iv) result in, or require, the creation or imposition of any Lien
or other charge or encumbrance of any nature upon or with respect to any
of the properties now owned or hereafter acquired by the Borrower.
Section 4.3 Legal Agreements. This Agreement and the other Loan
Documents constitute, the legal, valid and binding obligations of the Borrower
enforceable against the Borrower in accordance with their respective terms.
Section 4.4 Subsidiaries. Schedule 4.4 hereto is a complete and
correct list of all present Subsidiaries and of the percentage of the ownership
of the Borrower or any other Subsidiary in each as of the date of this
Agreement. Except as otherwise indicated in that Schedule, all shares of each
Subsidiary owned by the Borrower or by any such other Subsidiary are validly
issued and fully paid and nonassessable.
Section 4.5 Financial Condition. The Borrower has heretofore
furnished to the Bank its audited financial statement as of March 31, 1996, and
its unaudited interim financial statement as of March 31, 1997. Those
financial statements fairly present the financial condition of the Borrower and
its Subsidiaries on the dates thereof and the results of their operations and
cash flows for the periods then ended, and were prepared in accordance with
generally accepted accounting principles.
Section 4.6 Adverse Change. There has been no material adverse
change in the business, properties or condition (financial or otherwise) of the
Borrower or any Subsidiary since the date of the latest financial statement
referred to in Section 4.5.
Section 4.7 Litigation. There are no actions, suits or proceedings
pending or, to the knowledge of the Borrower, threatened against or affecting
the Borrower or any Subsidiary or the properties of the Borrower or any
Subsidiary before any court or governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, which, if determined
adversely to the Borrower or that Subsidiary, would have a material adverse
effect on the financial condition, properties, or operations of the Borrower or
any Subsidiary.
Section 4.8 Hazardous Substances. To the best of the Borrower s
knowledge after reasonable inquiry, neither the Borrower nor any Subsidiary nor
any other Person has ever caused or permitted any Hazardous Substance to be
disposed of in any manner which might result in any material liability to the
Borrower or any Subsidiary on, under or at any real property which is operated
by the Borrower or any Subsidiary or in which the Borrower or any Subsidiary
has any interest; and no such real property has ever been used (either by the
Borrower, by any Subsidiary or by any other Person) as a dump site or permanent
or temporary storage site for any Hazardous Substance (other than the temporary
storage of products used or consumed in the ordinary course of the Borrower s
business in accordance with all applicable Environmental Laws).
Section 4.9 Regulation U. The Borrower is not engaged in the
business of extending credit for the purpose of purchasing or carrying margin
stock (within the meaning of Regulation U of the Board of Governors of the
Federal Reserve System), and no part of the proceeds of any Advance will be
used to purchase or carry any margin stock or to extend credit to others for
the purpose of purchasing or carrying any margin stock.
Section 4.10 Taxes. The Borrower and its Subsidiaries have each
paid or caused to be paid to the proper authorities when due all federal, state
and local taxes required to be withheld by them. The Borrower and its
Subsidiaries have each filed all federal, state and local tax returns which to
the knowledge of the officers of the Borrower are required to be filed, and
the Borrower and its Subsidiaries have each paid or caused to be paid to the
respective taxing authorities all taxes as shown on said returns or on any
assessment received by them to the extent such taxes have become due, other
than taxes whose amount, applicability or validity is being contested in good
faith by appropriate proceedings and for which the Borrower or the applicable
Subsidiary has provided adequate reserves in accordance with generally accepted
accounting principles.
Section 4.11 Titles and Liens. The Borrower or one of its
Subsidiaries has good title to each of the properties and assets reflected in
the latest balance sheet referred to in Section 4.5 (other than any sold, as
permitted by Section 6.5), free and clear of all Liens and encumbrances, except
for Liens permitted by Section 6.1 and covenants, restrictions, rights,
easements and minor irregularities in title which do not materially interfere
with the business or operations of the Borrower or such Subsidiary as presently
conducted. No financing statement naming the Borrower or any Subsidiary as
debtor is on file in any office except to perfect only Liens permitted by
Section 6.1.
Section 4.12 ERISA. No Plan established or maintained by the
Borrower, any Subsidiary or any ERISA Affiliate that is subject to Part 3 of
Subtitle B of Title I of ERISA had an accumulated funding deficiency (as such
term is defined in Section 302 of ERISA) in excess of $1,000,000 as of the last
day of the most recent fiscal year of such Plan ended prior to the date hereof,
and no liability to the Pension Benefit Guaranty Corporation or the Internal
Revenue Service in excess of such amount has been, or is expected by the
Borrower, any Subsidiary or any ERISA Affiliate to be, incurred with respect
to any Plan of the Borrower, any Subsidiary or any ERISA Affiliate. The
Borrower has no contingent liability with respect to any post-retirement
benefit under a Welfare Plan, other than liability for continuation coverage
described in Part 6 of Subtitle B of Title I of ERISA.
ARTICLE V
Affirmative Covenants
At all times through and including the Covenant Termination Date, the
Borrower will comply with the following requirements, unless the Bank shall
otherwise consent in writing:
Section 5.1 Financial Statements. The Borrower will deliver to the
Bank:
(a) As soon as available, and in any event within 90 days after the
end of each fiscal year of the Borrower, a copy of the annual audit
report of the Borrower prepared on a consolidated basis with the
unqualified opinion of independent certified public accountants
selected by the Borrower and acceptable to the Bank, which annual
report shall include the consolidated balance sheet of the Borrower
and its Subsidiaries as at the end of such fiscal year and the
related consolidated statements of income, shareholders equity and
cash flows of the Borrower and its Subsidiaries for the fiscal year
then ended, all in reasonable detail and all prepared in accordance
with generally accepted accounting principles applied on a basis
consistent with the accounting practices applied in the annual
financial statements referred to in Section 4.5, together with a
copy of such accountants management letter issued to the Borrower for
such year.
(b) As soon as available and in any event within 45 days after the
end of each fiscal quarter of the Borrower, consolidated balance sheets of
the Borrower and its Subsidiaries as at the end of such quarter and
related consolidated statements of earnings and cash flows of the Borrower
and its Subsidiaries for such quarter and for the year to date, in
reasonable detail and stating in comparative form the figures for the
corresponding date and period in the previous year, all prepared in
accordance with generally accepted accounting principles applied on a
basis consistent with the accounting practices reflected in the annual
financial statements referred to in Section 4.5, and certified by the
chief financial officer of the Borrower, subject to year-end audit
adjustments.
(c) Concurrent with the delivery of any financial statements under
paragraph (a) or (b), a Compliance Certificate, duly executed by the chief
financial officer of the Borrower.
(d) Promptly upon their distribution, copies of all financial
statements, reports and proxy statements which the Borrower or any
Subsidiary shall have sent to its stockholders.
(e) Promptly after the sending or filing thereof, copies of all
regular and periodic financial reports which the Borrower or any
Subsidiary shall file with the Securities and Exchange Commission or any
national securities exchange.
(f) Immediately after the commencement thereof, notice in writing of
all litigation and of all proceedings before any governmental or
regulatory agency affecting the Borrower or any Subsidiary of the type
described in Section 4.7.
(g) As promptly as practicable (but in any event not later than five
business days) after the chief executive officer or the chief financial
officer of the Borrower obtains knowledge of the occurrence of any
Critical Event, notice of such occurrence, together with a detailed
statement by a responsible officer of the Borrower or the appropriate
Subsidiary of the steps being taken by the Borrower or the appropriate
Subsidiary to cure the effect of such event.
(h) Promptly upon becoming aware of any Reportable Event or any
prohibited transaction (as defined in Section 4975 of the Internal Revenue
Code or Section 406 of ERISA) in connection with any Plan or any trust
created thereunder, a written notice specifying the nature thereof, what
action the Borrower has taken, is taking or proposes to take with respect
thereto, and, when known, any action taken or threatened by the Internal
Revenue Service, the Pension Benefit Guaranty Corporation or the
Department of Labor with respect thereto.
(i) Promptly upon their receipt or filing, copies of (i) all notices
received by the Borrower, any Subsidiary or any ERISA Affiliate of the
Pension Benefit Guaranty Corporation s intent to terminate any Plan or to
have a trustee appointed to administer any Plan, and (ii) all notices
received by the Borrower, any Subsidiary or any ERISA Affiliate from a
Multiemployer Plan concerning the imposition or amount of withdrawal
liability pursuant to Section 4202 of ERISA.
(j) Upon request of the Bank, copies of the most recent annual
report (Form 5500 Series), including any supporting schedules, filed by
the Borrower, any Subsidiary or any ERISA Affiliate with the Internal
Revenue Service with respect to any Plan.
(k) Such other information respecting the financial condition and
results of operations of the Borrower or any Subsidiary as the Bank may
from time to time reasonably request.
Section 5.2 Books and Records; Inspection and Examination. The
Borrower will keep, and will cause each Subsidiary to keep, accurate books of
record and account for itself in which true and complete entries will be made
in accordance with generally accepted accounting principles consistently
applied and, upon request of the Bank, will give any representative of the
Bank access to, and permit such representative to examine, copy or make
extracts from, any and all books, records and documents in its possession, to
inspect any of its properties and to discuss its affairs, finances and accounts
with any of its principal officers, all at such times during normal business
hours and as often as the Bank may reasonably request.
Section 5.3 Compliance with Laws. The Borrower will, and will cause
each Subsidiary to, comply with the requirements of applicable laws and
regulations, the noncompliance with which would materially and adversely affect
its business or the consolidated financial condition of the Borrower and its
Subsidiaries.
Section 5.4 Payment of Taxes and Other Claims. The Borrower will
pay or discharge, and will cause each Subsidiary to pay or discharge, when due,
(a) all taxes, assessments and governmental charges levied or imposed upon it
or upon its income or profits, or upon any properties belonging to it, prior to
the date on which penalties attach thereto, (b) all federal, state and local
taxes required to be withheld by it, and (c) all lawful claims for labor,
materials and supplies which, if unpaid, might by law become a Lien or charge
upon any properties of the Borrower or any Subsidiary; provided, that neither
the Borrower nor any Subsidiary shall be required to pay any such tax,
assessment, charge or claim whose amount, applicability or validity is being
contested in good faith by appropriate proceedings and for which the Borrower
or such Subsidiary has provided adequate reserves in accordance with generally
accepted accounting principles.
Section 5.5 Maintenance of Properties. The Borrower will keep and
maintain, and will cause each Subsidiary to keep and maintain, all of its
properties necessary or useful in its business in good condition, repair and
working order; provided, however, that nothing in this Section shall prevent
the Borrower or any Subsidiary from discontinuing the operation and
maintenance of any of its properties if such discontinuance is, in the
judgment of the Borrower or the appropriate Subsidiary, desirable in the
conduct of its business and not disadvantageous in any material respect to the
Bank as holder of the Note.
Section 5.6 Insurance. The Borrower will, and will cause each
Subsidiary to, obtain and maintain insurance with insurers believed by the
Borrower to be responsible and reputable, in such amounts and against such
risks as is usually carried by companies engaged in similar business and owning
similar properties in the same general areas in which the Borrower or such
Subsidiary operates.
Section 5.7 Preservation of Corporate Existence. The Borrower will,
and will cause each Subsidiary to, preserve and maintain its corporate
existence and all of its rights, privileges and franchises; provided, however,
that neither the Borrower nor any Subsidiary shall be required to preserve any
of its rights, privileges and franchises if its Board of Directors shall
determine that the preservation thereof is no longer desirable in the conduct
of the business of the Borrower or the appropriate Subsidiary and that the loss
thereof is not disadvantageous in any material respect to the Bank as a holder
of the Note.
Section 5.8 Interest Coverage Ratio. The Borrower will at all times
maintain its Interest Coverage Ratio, determined at the end of each fiscal
quarter of the Borrower, at not less than 6.00 to 1.
Section 5.9 Leverage Ratio. The Borrower will at all times maintain
its Leverage Ratio, determined as at the end of each fiscal quarter of the
Borrower, at not more than 0.30 to 1.
Section 5.10 Tangible Net Worth. The Borrower will maintain
Consolidated Tangible Net Worth at all times in an amount not less than
$120,000,000.
ARTICLE VI
Negative Covenants
At all times through and including the Covenant Termination Date, the
Borrower agrees that, without the prior written consent of the Bank:
Section 6.1 Liens. The Borrower will not, and will not permit any
Subsidiary to, create, incur, assume or suffer to exist any Lien or other
charge or encumbrance of any nature on any of its assets, now owned or
hereafter acquired, or assign or otherwise convey any right to receive income
or give its consent to the subordination of any right or claim of the Borrower
or any Subsidiary to any right or claim of any other Person; excluding,
however, from the operation of the foregoing:
(a) Liens for taxes or assessments or other governmental charges to
the extent not required to be paid by Section 5.4.
(b) Materialmen s, merchants , carriers worker s, repairer s, or
other like liens arising in the ordinary course of business to the extent
not required to be paid by Section 5.4.
(c) Pledges or deposits to secure obligations under worker s
compensation laws, unemployment insurance and social security laws, or to
secure the performance of bids, tenders, contracts (other than for the
repayment of borrowed money) or leases or to secure statutory obligations
or surety or appeal bonds, or to secure indemnity, performance or other
similar bonds in the ordinary course of business.
(d) Zoning restrictions, easements, licenses, restrictions on the
use of real property or minor irregularities in title thereto, which do not
materially impair the use of such property in the operation of the business of
the Borrower or any Subsidiary or the value of such property for the purpose of
suchbusiness.
(e) Purchase money Liens, so long as the aggregate amount of all
debts secured by such mortgages, liens or security interests (including
capitalized leases) does not exceed $500,000 at any one time outstanding.
(f) Liens created by any Subsidiary as security for debt owing to
the Borrower or to another Subsidiary.
(g) Liens on any property of the Borrower or any Subsidiary (other
than those described in subsection (e) and (f)) securing any indebtedness for
borrowed money in existence on the date hereof and listed in Schedule 6.1
hereto.
(h) Liens granted under the Dealer Finance Agreements to General
Electric Capital Corporation and Monogram Credit Card Bank of Georgia, but only
so long as (i) such Liens secure only obligations described in and permitted
under Sections 6.2(e) and 6.3(c), and (ii) such Liens cover only the right,
title and interest (if any) of the Borrower and the Guarantor in the
obligations of purchasers of the Borrower s products which obligations are
acquired or held by General Electric Capital Corporation or Monogram Credit
Card Bank of Georgia pursuant to the Dealer Finance Agreements.
Section 6.2 Indebtedness. The Borrower will not, and will not
permit any Subsidiary to, incur, create, assume or permit to exist any
indebtedness or liability on account of deposits or advances or any
indebtedness for borrowed money, or any other indebtedness or liability
evidenced by notes, bonds, debentures or similar obligations, except:
(a) Indebtedness to the Bank.
(b) Indebtedness of the Borrower or any Subsidiary in existence on
the date hereof and listed in Schedule 6.2 hereto, but not including any
extensions or renewals thereof.
(c) Indebtedness of a Subsidiary to the Borrower or another
Subsidiary on account of borrowings, or indebtedness of the Borrower to a
Subsidiary on account of borrowings from that Subsidiary.
(d) Purchase money indebtedness of the Borrower or any Subsidiary
secured by Liens permitted by subsection 6.1(e).
(e) Obligations of the Borrower and the Guarantor under the Dealer
Finance Agreements.
Section 6.3 Guaranties. The Borrower will not, and will not permit
any Subsidiary to, assume, guarantee, endorse or otherwise become directly or
contingently liable in connection with any obligations of any other Person,
except:
(a) The endorsement of negotiable instruments by the Borrower or any
Subsidiary for deposit or collection or similar transactions in the ordinary
course of business.
(b) Guaranties, endorsements and other direct or contingent
liabilities in connection with the obligations of other Persons in existence on
the date hereof and listed in Schedule 6.3 hereto.
(c) Obligations of the Borrower and the Guarantor under the Dealer
Finance Agreements.
Section 6.4 Investments. The Borrower will not, and will not permit
any Subsidiary to, purchase or hold beneficially any stock or other securities
or evidence of indebtedness of, make or permit to exist any loans or advances
to, or make any investment or acquire any interest whatsoever in, any other
Person, except:
(a) Investments in (i) direct obligations of the United States of
America or any agency or instrumentality thereof whose obligations constitute
full faith and credit obligations of the United States of America, (ii)
commercial paper issued by U.S. corporations rated "A-1" by Standard & Poors
Corporation or "P1" by Xxxxx s Investors Service, (iii) certificates of deposit
or bankers acceptances having a maturity of one year or less issued by members
of the Federal Reserve System having deposits in excess of $100,000,000, or
(iv) tax exempt securities rated A or better by Standard & Poors Corporation or
M1G1 by Xxxxx s Investors Service.
(b) Any existing investment by the Borrower or any other Subsidiary
in the stock of any Subsidiary.
(c) Travel advances to officers and employees of the Borrower or any
Subsidiary in the ordinary course of business.
(d) Advances in the form of progress payments, prepaid rent or
security deposits.
Section 6.5 Sale of Assets. The Borrower will not, and will not
permit any Subsidiary to, sell, lease, assign, transfer or otherwise dispose of
all or a substantial part of its assets (whether in one transaction or in a
series of transactions) to any other Person other than in the ordinary course
of business, except for the sale of inventory in the ordinary course of the
Borrower s business. For purposes of this Section, "substantial part" means 10%
or more of the assets of the Borrower, as determined in accordance with
generally accepted accounting principles.
Section 6.6 Restrictions on Issuance and Sale of Subsidiary Stock.
The Borrower will not:
(a) permit any Subsidiary to issue or sell any shares of stock of
any class of such Subsidiary to any other Person (other than the Borrower or a
wholly-owned Subsidiary of the Borrower), except for the purpose of qualifying
directors or of satisfying pre-emptive rights or of paying a common stock
dividend on, or splitting, common stock of such Subsidiary; or
(b) sell, transfer or otherwise dispose of any shares of stock of any
class (except to a wholly-owned Subsidiary of the Borrower) of any Subsidiary
or permit any Subsidiary to sell, transfer or otherwise dispose of (except to
the Borrower or a wholly-owned Subsidiary of the Borrower or for the purpose of
qualifying directors) any shares of stock of any class of any other Subsidiary.
Section 6.7 Consolidation and Merger. The Borrower will not, and
will not permit any Subsidiary to, consolidate with or merge into any Person,
or permit any other Person to merge into it, or acquire (in a transaction
analogous in purpose or effect to a consolidation or merger) all or
substantially all of the assets of any other Person; provided, however, that
the restrictions contained in this Section shall not apply to or prevent the
consolidation or merger of a Subsidiary with, or a conveyance or transfer of
its assets to, the Borrower (if the Borrower shall be the continuing or
surviving corporation) or another then-existing wholly-owned Subsidiary of the
Borrower.
Section 6.8 Sale and Leaseback. The Borrower will not, and will not
permit any Subsidiary to, enter into any arrangement, directly or indirectly,
with any other Person whereby the Borrower or such Subsidiary shall sell or
transfer any real or personal property, whether now owned or hereafter
acquired, and then or thereafter rent or lease as lessee such property or any
part thereof or any other property which the Borrower or such Subsidiary, as
the case may be, intends to use for substantially the same purpose or purposes
as the property being sold or transferred.
Section 6.9 Hazardous Substances. The Borrower will not, and will
not permit any Subsidiary to, cause or permit any Hazardous Substance to be
disposed of, in any manner which might result in any material liability to the
Borrower or any Subsidiary, on, under or at any real property which is operated
by the Borrower or any Subsidiary or in which the Borrower or any Subsidiary
has any interest.
Section 6.10 Restrictions on Nature of Business. The Borrower will
not, and will not permit any Subsidiary to, engage in any line of business
materially different from that presently engaged in by the Borrower or such
Subsidiary.
ARTICLE VII
Critical Events; Rights and Remedies
Section 7.1 Critical Events. "Critical Event", wherever used
herein, means any one of the following events:
(a) Failure to make any scheduled payment of interest on the Note
when the same becomes due and payable.
(b) Default in the performance, or breach, of any covenant or
agreement on the part of the Borrower contained in this Agreement.
(c) A default under any bond, debenture, note or other evidence of
indebtedness of the Borrower or under any indenture or other instrument under
which any such evidence of indebtedness has been issued or by which it is
governed and the expiration of the applicable period of grace, if any,
specified in such evidence of indebtedness, indenture or other instrument.
(d) A petition naming the Borrower or the Guarantor as debtor shall
be filed by or against the Borrower or the Guarantor under the United
States Bankruptcy Code.
(e) A writ of attachment, garnishment, levy or similar process shall
be issued against or served upon the Bank with respect to any property of
the Borrower in the possession of the Bank or any indebtedness of the Bank
to the Borrower having a value in excess of $250,000.
(f) The Guarantor shall repudiate, purport to revoke, or fail to
perform any of that Guarantor s obligations under his Guaranty.
(g) Any Plan shall have been terminated, or a trustee shall have
been appointed by an appropriate United States District Court to
administer any Plan, or the Pension Benefit Guaranty Corporation shall
have instituted proceedings to terminate any Plan or to appoint a trustee
to administer any Plan, or withdrawal liability shall have been asserted
against the Borrower, any Subsidiary or any ERISA Affiliate by a
Multiemployer Plan; or the Borrower, any Subsidiary or any ERISA Affiliate
shall have incurred liability to the Pension Benefit Guaranty Corporation,
the Internal Revenue Service, the Department of Labor or Plan participants
in excess of $1,000,000 with respect to any Plan; or any Reportable Event
that the Bank may determine in good faith might constitute grounds for the
termination of any Plan, for the appointment by the appropriate United
States District Court of a trustee to administer any Plan or for the
imposition of withdrawal liability with respect to a Multiemployer Plan,
shall have occurred and be continuing 30 days after written notice to such
effect shall have been given to the Borrower by the Bank.
Section 7.2 Rights and Remedies. At any time and for any reason,
whether arising before, on or after the date hereof, whether or not the
Borrower is in compliance with the covenants contained herein, and whether or
not a Critical Event has occurred hereunder, or for no reason at all, the Bank
may (i) demand payment of the Note, and/or (ii) require the Borrower to deposit
in the L/C Cash Collateral Account immediately available funds equal to the sum
of the Facility A Standby L/C Outstandings, the Facility A Documentary L/C
Outstandings and the Facility B Outstandings. Upon the failure of the Borrower
to pay the Note or make such deposit in full on the date set forth in the
applicable notice of demand, or at any time thereafter until such payment and
deposits are made, the Bank may exercise any or all of the following rights and
remedies:
(a) The Bank may, by notice to the Borrower, declare the Facilities
to be terminated, whereupon the same shall forthwith terminate.
(b) The Bank may, without notice to the Borrower and without further
action, apply any and all money owing by the Bank to the Borrower to the
payment of the Note, including interest accrued thereon, and of all other
sums then owing by the Borrower hereunder, including the deposits required
to be made under Section 7.3.
(c) The Bank may exercise any other rights and remedies available to
it by law or agreement.
Notwithstanding the foregoing, upon the occurrence of a Critical Event
described in Section 7.1(d) hereof, the entire unpaid principal amount of the
Note, all interest accrued and unpaid thereon, and all other amounts payable
under this Agreement shall be immediately due and payable without presentment,
demand, protest or notice of any kind.
Section 7.3 Pledge of L/C Cash Collateral Account. The Borrower
hereby pledges, and grants the Bank a security interest in, all sums held in
the L/C Cash Collateral Account from time to time and all proceeds thereof as
security for the payment of all amounts due and to become due from the Borrower
to the Bank pursuant to this Agreement, including but not limited to both
principal of and interest on the Note and all renewals, extensions and
modifications thereof and any notes issued in substitution therefor, and
specifically including the Borrower s obligation to reimburse the Bank for any
amount drawn under any Letter of Credit, whether such reimbursement obligation
arises directly under this Agreement or under a separate reimbursement
agreement. Upon request of the Borrower, the Bank shall permit the Borrower
to withdraw from the L/C Cash Collateral Account the lesser of (i) the amount
by which the balance of the L/C Cash Collateral Account exceeds the aggregate
amount secured by the sums held in the L/C Cash Collateral Account, or (ii) the
balance of the L/C Cash Collateral Account. The Bank shall have full ownership
and control of the L/C Cash Collateral Account, and, except as set forth above,
the Borrower shall have no right to withdraw the funds maintained in the L/C
Cash Collateral Account.
ARTICLE VIII
Miscellaneous
Section 8.1 No Waiver; Cumulative Remedies. No failure or delay on
the part of the Bank in exercising any right, power or remedy under the Loan
Documents shall operate as a waiver thereof; nor shall the Bank s acceptance of
payments following any demand for payment of the Note or for a deposit in the
L/C Cash Collateral Account operate as a waiver of such demand, or any right,
power or remedy under the Loan Documents; nor shall any single or partial
exercise of any such right, power or remedy preclude any other or further
exercise thereof or the exercise of any other right, power or remedy under
the Loan Documents. The remedies provided in the Loan Documents are cumulative
and not exclusive of any remedies provided by law.
Section 8.2 Amendments, Etc. No amendment, modification,
termination or waiver of any provision of any Loan Document or consent to any
departure by the Borrower therefrom shall be effective unless the same shall be
in writing and signed by the Bank and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given. No notice to or demand on the Borrower in any case shall entitle the
Borrower to any other or further notice or demand in similar or other
circumstances.
Section 8.3 Notice. Except as otherwise expressly provided herein,
all notices and other communications hereunder shall be in writing and shall be
(i) personally delivered, (ii) transmitted by registered mail, postage
prepaid, (iii) sent by Federal Express or similar expedited delivery service,
or (iv) transmitted by telecopy, in each case addressed to the party to whom
notice is being given at its address as set forth by its signature below, or,
if telecopied, transmitted to that party at its telecopier number set forth by
its signature below; or, as to each party, at such other address or telecopier
number as may hereafter be designated in a notice by that party to the other
party complying with the terms of this Section. All such notices or other
communications shall be deemed to have been given on (i) the date received if
delivered personally or by mail, (ii) the date of receipt, if delivered by
Federal Express or similar expedited delivery service, or (iii) the date of
transmission if delivered by telecopy, except that notices or requests to the
Bank pursuant to any of the provisions of Article II shall not be effective
until received.
Section 8.4 Participations. The Bank may grant participations in
the Facilities to any institutional investor without the consent of the
Borrower. The Borrower shall assist the Bank in granting any such
participations.
Section 8.5 Disclosure of Information. The Borrower authorizes the
Bank to disclose to any participant or assignee (each, a "Transferee") and any
prospective Transferee any and all financial and other information in the Bank
s possession concerning the Borrower which has been delivered to the Bank by
the Borrower pursuant to this Agreement or which has been delivered to the
Bank by the Borrower in connection with the Bank s credit evaluation of the
Borrower before entering into this Agreement; provided, however, that prior to
disclosing such information to a Transferee or prospective Transferee, the Bank
shall obtain from such Transferee or prospective Transferee a confidentiality
agreement agreeing that such information shall be used only in connection with
such Person s evaluation and, if applicable, administration of its interest in
this Agreement and the loans hereunder, and shall not be disclosed to any other
person, subject to exceptions permitting disclosure to regulators and auditors,
disclosure as required by law or judicial process, and disclosure under such
other limited circumstances as the Bank and such Transferee or prospective
Transferee may reasonably agree.
Section 8.6 Costs and Expenses. The Borrower agrees to pay on
demand all reasonable costs and expenses incurred by the Bank in connection
with the negotiation, preparation, execution, administration, amendment or
enforcement of the Loan Documents and the other instruments and documents to
be delivered hereunder and thereunder, including the reasonable fees and
reasonable out-of-pocket expenses of counsel for the Bank with respect thereto,
whether paid to outside counsel or allocated to the Bank by in-house counsel.
The Borrower also agrees to pay and reimburse the Bank for all of its out-of
-pocket and allocated costs incurred in connection with each audit or
examination conducted by the Bank, its employees or agents, which audits and
examinations shall be for the sole benefit of the Bank.
Section 8.7 Indemnification by Borrower. The Borrower hereby agrees
to indemnify the Bank and each officer, director, employee and agent thereof
(herein individually each called an "Indemnitee" and collectively called the
"Indemnitees") from and against any and all losses, claims, damages, reasonable
expenses (including, without limitation, reasonable attorneys fees) and
liabilities (all of the foregoing being herein called the "Indemnified
Liabilities") incurred by an Indemnitee in connection with or arising out of
the execution or delivery of this Agreement or any agreement or instrument
contemplated hereby, the performance by the parties hereto of their respective
obligations hereunder or the use of the proceeds of any Advance or Letter of
Credit hereunder (including but not limited to any such loss, claim, damage,
expense or liability arising out of any claim in which it is alleged that any
Environmental Law has been breached with respect to any activity or property of
the Borrower), except for any portion of such losses, claims, damages, expenses
or liabilities incurred solely as a result of the gross negligence or willful
misconduct of the applicable Indemnitee. If and to the extent that the
foregoing indemnity may be unenforceable for any reason, the 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. All
obligations provided for in this Section shall survive any termination of this
Agreement.
Section 8.8 Execution in Counterparts. This Agreement and the other
Loan Documents may be executed in any number of counterparts, each of which
when so executed and delivered shall be deemed to be an original and all of
which counterparts of this Agreement or such other Loan Document, as the case
may be, taken together, shall constitute but one and the same instrument.
Section 8.9 Binding Effect, Assignment. The Loan Documents shall be
binding upon and inure to the benefit of the Borrower and the Bank and their
respective successors and assigns, except that the Borrower shall not have the
right to assign its rights thereunder or any interest therein without the prior
written consent of each of the Bank.
Section 8.10 Governing Law. The Loan Documents shall be governed by
, and construed in accordance with, the laws of the State of Minnesota.
Section 8.11 Waiver of Jury Trial. THE BORROWER AND THE BANK
HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING,
DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT,
CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR
CONNECTED WITH THIS AGREEMENT AND THE NOTE OR THE
RELATIONSHIPS ESTABLISHED HEREUNDER.
Section 8.12 Severability of Provisions. Any provision of this
Agreement which is prohibited or unenforceable shall be ineffective to the
extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof.
Section 8.13 Prior Agreements. This Agreement and the other Loan
Documents and related documents described herein restate and supersede in their
entirety any and all prior agreements and understandings, oral or written,
between the Bank and the Borrower.
Section 8.14 Headings. Article and Section headings in this
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized as of the
date first above written.
Address:
Xxxx Xxxxxx Xxx 000
Xxxxx Xxxxx Xxxxx, Xxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx
Telecopier: 000-000-0000
ARCTIC CAT INC.
By____________________________
Its______________________
Address:
Xxxxx Xxxxxx xxx Xxxxxxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000-0000
Attention: Xxxx X. Xxxxx
Telecopier: 000-000-0000
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
By_____________________
Xxxx X. Xxxxx
Its Vice President
EXHIBITS AND SCHEDULES
Exhibit A Note
Exhibit B Form of Compliance Certificate
------------------------------
Schedule 4.4 Subsidiaries
Schedule 6.1 Permitted Liens
Schedule 6.2 Permitted Indebtedness
Schedule 6.3 Permitted Guaranties
REVOLVING NOTE
$30,000,0000
Minneapolis, Minnesota
June 6, 1997
For value received, Arctic Cat Inc., a Minnesota corporation (the
"Borrower"), promises to pay to the order of Norwest Bank Minnesota, National
Association, a national banking association (the "Bank"), at its main office
in Minneapolis, Minnesota, ON DEMAND, the principal sum of Thirty Million
Dollars ($30,000,000), or, if less, the aggregate unpaid principal amount of
all advances made by the Bank to the Borrower pursuant to Section 2.1(a) of
the Credit Agreement dated June 6, 1997 between the Borrower and the Bank
(together with all amendments, modifications and restatements thereof, the
"Credit Agreement"), and to pay interest on the principal balance of this
Note outstanding from time to time at the rate or rates determined pursuant
to the Credit Agreement.
Terms defined in the Credit Agreement and not otherwise defined herein
shall have the meanings given them in the Credit Agreement.
Interest accruing on the principal balance of this Note each month at the
Floating Rate shall be due and payable on the last day of each month,
commencing on the last day of the month hereof, and on demand. Interest
accruing on any Fixed Rate Amount shall be due and payable on the last day of
the Interest Period applicable thereto.
This Note is issued pursuant to, and is subject to, the Credit Agreement.
The Borrower shall pay all costs of collection, including reasonable
attorneys fees and legal expenses, if this Note is not paid when due, whether
or not legal proceedings are commenced.
Presentment or other demand for payment, notice of dishonor and protest
are expressly waived.
The Borrower acknowledges that in accepting this Note the Bank has not
undertaken any obligation to make any advance to the Borrower and that the
Bank may refuse to make any advance requested by the Borrower and may demand
payment of advances that it has made under this Note at any time, with or
without notice (except as expressly provided in the Credit Agreement) and for
any reason, whether arising before, on or after the date hereof, whether or
not the Borrower is in compliance with the terms of this Note and the Credit
Agreement, or for no reason at all.
ARCTIC CAT INC.
By________________________
Its__________________
COMPLIANCE CERTIFICATE
__________________________, ______
Norwest Bank Minnesota, National Association
Xxxxx Xxxxxx xxx Xxxxxxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000-0000
Compliance Certificate
Ladies and Gentlemen:
Reference is made to the Credit Agreement (the "Credit Agreement")
dated June 6, 1997 entered into between Norwest Bank Minnesota, National
Association and Arctic Cat Inc. (the "Borrower").
All terms defined in the Credit Agreement and not otherwise defined
herein shall have the meanings given them in the Credit Agreement.
This is a Compliance Certificate submitted in connection with the
Borrower s financial statements (the "Statements") as of _____________________,
_______ (the "Effective Date").
I hereby certify to you as follows:
1. I am the _________________________ of the Borrower, and I am familiar
with the financial statements and financial affairs of the Borrower.
2. The Statements, and the computations below, have been prepared in
accordance with generally accepted accounting principles applied on a
basis that is consistent with the accounting practices reflected in
the annual financial statements of the Borrower previously delivered
to you.
3. If the Effective Date is the last day of a fiscal quarter of the
Borrower, the following computations set forth the Borrower s
compliance or non-compliance with the requirements set forth in
Sections 5.8, 5.9 and 5.10 of the Credit Agreement as of the
Effective Date:
Actual Required
INTEREST COVERAGE RATIO
EBIT $___________
$___________
Interest Expense
EBIT:Interest Expense __________________ >= 6.00:1
LEVERAGE RATIO
Indebtedness $__________
+ Letters of $__________
Credit
= Funded Debt $__________
Funded Debt $__________
+ Equity $__________
= Total Capital $__________
Funded Debt : Total Capital __________________ <= 0.30:1
Tangible Net Worth
Equity
- Intangible $__________
Assets $__________
Tangible Net
Worth $_________________ >= $120,000,000
Attached hereto are all relevant facts in reasonable detail to
evidence, and the computations of, the financial covenants referred to above.
4. I have no knowledge of the occurrence of any breach of the Credit
Agreement or other Critical Event, except as set forth in the attachments, if
any, hereto.
Very truly yours,
ARCTIC CAT INC.
By________________________
Its_______________________
