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10.1. BANK LENDING AGREEMENT, AMENDED AND RESTATED JUNE 29, 1998
SECOND AMENDED AND RESTATED REVOLVING CREDIT/TERM LOAN AGREEMENT
This SECOND AMENDED AND RESTATED REVOLVING CREDIT/TERM LOAN AGREEMENT is made
and entered into to be effective this 29th day of June, 1998, by and between
STAR BANK, N.A., a national banking corporation, with an address at 000 Xxxxx
Xxxxx Xxxxxx, 0xx Xxxxx, Xxxxxxxx, Xxxx 00000 (hereafter referred to as the
"Bank"), and PH GROUP, INC., an Ohio corporation formerly known as Resource
General Corporation and successor by merger to PH Hydraulics and Automation,
Inc., whose address is 0000 Xxxxxx Xxxxxx Xxxxx, Xxxxxxxx, Xxxx 00000 (hereafter
referred to as the "Company").
RECITALS
I. The Company and the Bank entered into an "Amended and Restated Revolving
Credit/Term Loan Agreement" dated April 28, 1997. This agreement amended and
restated a letter agreement dated November 6, 1995, referred to therein as the
Revolving Credit/Term Loan Agreement, as it was amended by letter agreements
dated March 25, 1996, December 2, 1996 and March 3, 1997 (hereafter referred to
as the "Credit Agreement");
II. The Credit Agreement provided for a revolving line of credit in the amount
of, $2,500,000.00 (hereafter referred to as the "Line of Credit"), a term loan
in the amount of $500,000.00 (hereafter referred to as the "First Term Loan")
and a term loan in the amount of $600,000.00 (hereafter referred to as the
"Second Term Loan"); and each secured by Security Agreements executed by the
Company and/or PH Hydraulics and Automation, Inc. dated November 6, 1995 and
April 28, 1997 (hereafter collectively referred to as the "Security Agreements")
granting a security interest in the collateral provided therein and such other
collateral as may have been required by the Bank; including, a first priority
security in the assets acquired in the St. Xxxxxxxx Press acquisition, a first
mortgage lien on approximately 505 acres of real property owned by the Company
in Perry County, Ohio, the unlimited guaranty of Phoenix Management, Ltd., an
Ohio limited liability company and the $600,000.00 limited guaranty of Xxxxxxx
X. Xxxxxxx, an individual Ohio resident (hereafter collectively referred to as
the "Guarantors") each provided to the Bank by executed Agreements dated April
28, 1997.
III. The Company has requested that the Line of Credit now be increased to
$3,500,000.00 and asked for the existing First Term Loan and Second Term Loan,
along with approximately $500,000.00 of the Line of Credit outstanding balance
be consolidated into one $1,200,000.00 consolidated term loan (hereafter
referred to as the "Consolidation Term Loan".)
IV. To induce the Bank to grant the extensions of credit, and in addition to all
existing collateral for all indebtedness owing to the Bank, the Company has
agreed to provide to the Bank the revision of various covenants in the Credit
Agreement and agrees to permit the Bank to perform a one-time Asset Based
Lending Audit.
V. The parties agree that all indebtedness of the Company to the Bank shall be
cross-collateralized and cross-defaulted.
NOW, THEREFORE, in consideration of the mutual promises contained herein, the
Company and the Bank agree to amend and restate the Credit Agreement as follows:
CONSOLIDATION TERM LOAN
Subject to there being no event of default (or circumstances which would, with
the passage of time or the giving of notice, become an event of default), the
Bank agrees to lend the Company $1,200,000.00 from the date of this Agreement
through June 30, 2005 (hereafter referred to as the "Consolidation Term Loan
Maturity Date"). The Consolidation Term Loan is evidenced by a promissory note
in the form attached hereto as Exhibit A (hereafter referred to as the
"Consolidation Term Loan Note"). The Consolidation Term Loan Note shall bear
interest and be paid as provided therein. Upon the injection of equity into the
Company, the term loan shall require a minimum repayment of a $500,000. This may
be from a combination of equity proceeds
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and/or the sale of real property in Perry County, Ohio.
LINE OF CREDIT
Subject to there being no event of default (or circumstance which would, with
the passage of time or the giving of notice, become an event of default) the
Bank agrees to make a revolving credit loan to the Company (as described below)
from the date of this Agreement through the earlier of: a) a demand for payment
in accordance with the terms of a revolving promissory note in the form attached
hereto as Exhibit B (hereafter referred to as the "Line of Credit Note"); or b)
June 30, 2000 (hereafter referred to as the "Line of Credit Maturity Date").
Under the Line of Credit Note, the Company may borrow, repay, and reborrow up to
the "Maximum Amount" which shall be the lesser of: a) the sum of 80% of accounts
receivable acceptable to the Bank which are outstanding less than 90 days from
the date of invoice, plus 50% of raw materials, plus 35% of work-in-process (up
to a maximum work-in-process advance of $250,000.00), plus $500,000.00 for fixed
assets availability, less a reserve amount of the outstanding balance of the
Consolidation Term Loan, the reserve amount will be reduced by the monthly
principal payments as further described in the Consolidation Term Loan section
above (the sum of which shall be called the "Borrowing Base"); or b)
$3,500,000.00. Should the total amount outstanding under the Line of Credit Note
at any time exceed the Maximum Amount, the Company shall, upon notification,
reduce the amount outstanding to an amount that is less than or equal to the
Maximum Amount. The Line of Credit shall bear interest and be paid as provided
in the Line of Credit Note.
If at any time, equity is injected into the Company, and the Leverage Ratio, as
hereafter defined, is not greater than 2.0:1, the interest rate on the Line of
Credit Note will be reduced to the Prime Commercial Rate of the Bank. The
interest rate reduction will only occur if all financial covenants as described
in this Agreement are being met and maintained. Furthermore, the Borrower shall
have the added interest rate option of LIBOR, London Inter Bank Offered Rate,
plus 275 basis points per annum. As Tangible Net Worth and Cash Flow Coverage
ratios continues to improve the applicable margin per the covenant matrix as set
forth in Schedule B shall determine LIBOR interest rate benefits. Additionally,
at such time a minimum of $3,000,000.00 equity is injected into the Company, the
limited Personal Guaranty of Xxxxxxx X. Xxxxxxx shall be released by the Bank.
Line of Credit Loan Interest Options
(a) Interest Rate Options: Borrower shall pay Bank interest on tile unpaid
balance of tile Revolving Loan on the earlier of a monthly basis or, if
applicable, the maturity date of a contract for a LIBOR Rate Advance (as
hereafter defined). Interest on the Revolving Loan shall be payable pursuant to
Borrower's option as set forth below:
(i) Prime Interest Rate: Unless Borrower elects the LIBOR Interest Rate,
Borrower agrees to pay to Bank monthly interest on the unpaid balance of the
Revolving Loan at a variable rate of interest (the "Prime Interest Rate") equal
to the Prime Commercial Rate of Bank from time to time in effect plus .50%
(9.00%) reducing to Prime (8.50%) as shareholder equity increases by at least
$3,000,000 and Leverage Ratio, hereafter defined, is 2:1 or less. Each change in
the Prime Commercial Rate automatically and immediately changing the interest
rate on tile Revolving Loan without notice to Borrower. "Prime Commercial Rate"
as used herein shall mean the rate published by Bank front time to time as its
Prime Commercial Rate based on its consideration of economic money market,
business and competitive factors, and it is not necessarily Bank's most favored
rate. Interest shall be calculated on a three hundred sixty (360) day year basis
and shall be based on the actual number of days which elapse during the interest
calculation period. The Prime Interest Rate shall be applicable at all times
prior to the Termination Date to all of the unpaid principal balance of the
Revolving Loan that is not subject to the alternative interest rate option
elected in the manner hereinafter provided. "Prime Interest Rate Advance" shall
mean any amount borrowed as part of the Revolving Loan that bears interest at
the Prime interest Rate.
(ii) LIBOR Interest Rate: Borrower may from time to time prior to the
Termination Date elect to have interest accrue on all or part of the outstanding
principal balance of the Revolving Loan at a rate of interest equal to 275 basis
points plus the LIBOR Rate, or plus the then applicable margin based on the
covenant matrix set forth in Schedule B.
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In the event Borrower for any reason causes a LIBOR contract to be broken,
Borrower shall pay any resulting penalty incurred by Bank thereof. "Libor Rate"
shall mean, with respect to any LIBOR Rate Advance and the related Interest
Period (as hereinafter defined), the per annum rate that is equal to the
quotient of:
(x) the actual or estimated arithmetic mean of the per annum rates of interest
at which deposits in U.S. dollars for the related Interest Period and in an
aggregate amount comparable to the amount of such LIBOR Rate Advance are being
offered to U.S. banks by one or more prime banks in the London interbank market,
as determined by Bank in its discretion based upon reference to information
appearing on the display designated as page "LIBOR" on the Reuters monitor
money Rate Service (or such other page as may replace the LIBOR page on that
service for the purpose of displaying London interbank offered rates of major
banks) or any comparable index selected by Bank, the obtaining of rate
quotation, or any other reasonable procedure, at approximately 11:00 a.m.
London, England, time, on the second LIBOR business day prior to the first day
of the related Interest Period; all as determined by Bank, such sum to be
rounded up, if necessary, to the nearest whole multiple of one-sixteenth (1/16)
of one percent (1%); divided by
(y) a percentage equal to one hundred percent (100%) minus the rate (expressed
as a percentage), if any, at which reserve requirements are imposed on Bank, on
the second LIBOR business days prior to the first day of the related Interest
Period, with respect to all "Eurocurrency? liabilities" under Regulation D of
the Board of Governors of the Federal Reserve S3~stcni or any other regulations
of any governmental authority having jurisdiction with respect thereto
(including, without limitation, any marginal, emergency, supplemental, special
or other reserves) for a term comparable to such Interest Period. This provision
is for the benefit of Bank and is not intended to increase the expected yield to
Bank above the rates of interest provided for in this Loan Agreement.
"LIBOR Rate Advance" shall mean any amount borrowed as part of the Revolving
Loan that bears interest at a rate calculated with reference to the LIBOR Rate.
All LIBOR Rate Advances shall be for a principal amount not less than Five
Hundred Thousand Dollars ($500,000.00) and in increments of One Hundred Thousand
Dollars ($100,000.00) for all greater amounts. "LIBOR business day" shall mean,
with respect to any LIBOR Rate Advance, a day which is both a day on which
Bank is open for business and a day on which dealings in U.S. dollar deposits
are carried out in the London interbank market.
(b) Notice of Election. Borrower may initially elect to request an Advance of
any type, continue an Advance of one type as an Advance of the then existing
type or convert an Advance of one type to an Advance of another type, by giving
notice thereof to Bank in writing in the form prescribed by Bank not later than
10:00 a.m. New York time, three (3) LIBOR business days prior to the date any
such initial request, continuation of or conversion to a LIBOR Rate Advance is
to be effective, provided, that an outstanding Advance may only be converted on
the last day of the then current Interest Period (if applicable) with respect
to such Advance, and provided, further, that upon the continuation or conversion
of an Advance such notice shall also specify the Interest Period (if applicable)
to be applicable thereto upon such continuation or conversion. If Borrower shall
fail to timely deliver such a notice with respect to any outstanding Advance,
Borrower shall be deemed to have elected to convert such Advance to a Prime
Interest Rate Advance on the last day of the then current Interest Period with
respect to such Advance.
(c) Interest Calculation and Interest Payment Date. "Interest Period" shall
mean:
(1) With respect to any LIBOR Rate Advance under the Revolving Loan, an initial
period commencing, as the case may be, on the day such an Advance shall be made
by Bank, or on the day of conversion of any then outstanding Advance to an
Advance of such type, and ending thirty (30), sixty (60) or ninety (90) days
thereafter, all as Borrower may elect pursuant to this Loan Agreement, provided,
that (a) any Interest Period with respect to a LIBOR Rate Advance that shall
commence on the last LIBOR business day of the calendar month (or on the
immediately preceding day if such day is a day for which there is no
numerically corresponding day in the appropriate subsequent calendar month)
shall end on the last LIBOR business day of the appropriate subsequent calendar
month; and (b) each Interest Period with respect to a LIBOR Rate Advance that
would otherwise end on a day which is not a LIBOR business day shall end on the
next succeeding LIBOR business day or, if such next succeeding LIBOR business
day falls in the next succeeding calendar month, on the next preceding LIBOR
business day.
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(2) With respect to a Prime Interest Rate Advance for the Revolving Loan, the
initial period commencing, as the case may be, on the day such an Advance shall
be made by Bank, or on the day of conversion of any then outstanding Advance to
an Advance of such type, and ending on the day of conversion to an Advance of a
different type.
Notwithstanding the provisions of (1) and (2) above, no Interest Period shall be
permitted which would end after the Termination Date.
Interest for LIBOR Rate Advances shall be calculated on a three hundred sixty
(360) day year basis and shall be based on the actual number of days which
elapse during the interest calculation period. Interest shall be due and payable
on each Interest Payment Date. "Interest Payment Date" shall mean (a) the last
day of each Interest Period in the case of a LIBOR Rate Advance; and (b) in the
case of a Prime Interest Rate Advance under the Revolving Loan, the first
business day of each month and on the date of conversion from a Prime Interest
Rate Advance to a LIBOR Rate Advance, said Interest Payment Date also serving
from time to time as the date of conversion from a Prime Interest Rate Advance
to a LIBOR Rate Advance as Borrower may so elect pursuant to the terms and
conditions this Loan Agreement.
(d) Additional Costs. In the event that any applicable law, treaty, rule or
regulation (whether domestic or foreign) now or hereafter in effect, or any
interpretation or administration thereof by any governmental authority charged
with the interpretation or administration thereof, or compliance by Bank with
any request or directive of any such authority (whether or not having the force
of law, shall (i) affect the basis of taxation of payments to Bank of any
amounts payable by Borrower for LIBOR Rate Advances under this Loan Agreement
(other than taxes imposed on the overall net income of Bank by the jurisdiction,
or by any political subdivision or taxing authority of any such jurisdiction, in
which Bank has its principal office), or (ii) shall impose, modify or deem
applicable any reserve, special deposit or similar requirement against assets
of, deposits with or for the account of, or credit extended by Bank, or (iii)
shall impose any other condition, requirement or charge with respect to this
Loan Agreement or the Revolving Loan (including, without limitation, any capital
adequacy requirement, any requirement which affects the manner in which Bank
allocates capital resources to its commitments or any similar requirement), and
the result of any of the foregoing is to increase the cost to Bank of making or
maintaining the Revolving Loan or any Advance thereunder, to reduce the amount
of any sum receivable by Bank thereon, or to reduce the rate of return on Bank's
capital, then Borrower shall pay to Bank, from time to time, upon request of
Bank, additional amounts sufficient to compensate Bank for such increased cost,
reduced sum receivable or reduced rate of return to the extent Bank is not
compensated therefor in the computation of the interest rates applicable to the
Revolving Loan. A detailed statement as to the amount of such increased cost,
reduced sum receivable or reduced rate of return, prepared in good faith and
submitted by Bank to Borrower, shall be considered binding for all purposes
relative to Bank, subject to manifest error in computation. Bank shall promptly
notify Borrower of any event occurring after the date of this Loan Agreement
that entitles Bank to additional compensation pursuant to this Paragraph.
(e) Limitations on Requests and Elections. Notwithstanding any other provision
of this Loan Agreement to the contrary, if, upon receiving a request for an
Advance or a request for a continuation of an Advance as an Advance of the then
existing type or conversion of an Advance to an Advance of another type (i) in
the case of any LIBOR Rate Advance, deposits in dollars for periods comparable
to the Interest Period elected by Borrower are not available to Bank in the
London interbank or secondary market, or (ii) by reason of national or
international financial, political or economic conditions or by reason of any
applicable law, treaty, rule or regulation (whether domestic or foreign) now or
hereafter in effect, or the interpretation or administration thereof by any,
governmental authority charged with the interpretation or administration
thereof, or compliance by Bank with any request or directive of such authority
(whether or not having the force of 1,?\\-), including without limitation
exchange controls, it is unlawful or impossible for Bank (x) to make the
relevant LIBOR Rate Advance or 0-) to continue such Advance as a LIBOR Rate
Advance or (z) to convert an Advance to a LIBOR Rate Advance, then Borrower
shall not be entitled, so long as such circumstances continue, to request a
LIBOR Rate Advance or a continuation of or conversion to such Advances from
Bank. In the event that such circumstances no longer exist, Bank shall again
consider requests for LIBOR Rate Advances of the affected type and requests for
continuations of and conversions
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to such Advances of the affected type.
(f) Illegality and Impossibility. In the event that any applicable law, treaty,
rule or regulation (whether domestic or foreign) now or hereafter in effect, or
any interpretation or administration thereof by any governmental authority
charged with the interpretation or administration thereof, or compliance by Bank
with any request or directive of such authority (whether or not having the force
of law), including without limitation exchange controls, shall make it unlawful
or impossible for Bank to maintain any Advance under this Loan Agreement,
Borrower shall as soon as possible following receipt of notice thereof from
Bank, repay in full the then outstanding principal amount of all Advances made
by Bank together with all accrued interest thereon to the date of payment and
all amounts due to Bank under Paragraphs (d) and/or (g) of this Section 1.3, (i)
on the last day of the then current Interest Period, if any, applicable to such
Advance, if Bank may lawfully continue to maintain such Advance to such day, or
(ii) immediately if Bank may not continue to maintain such Advance to such day.
This provision is for the benefit of Bank and is not intended to increase the
yield to Bank above the rates of interest provided for in this Loan Agreement.
This section shall apply only as long as such illegality exists. Bank shall use
reasonable, lawful efforts to avoid the impact of such law, treaty, rule or
regulation. Bank shall use reasonable efforts to convert such Advance to a
lawful type of Advance in the event such illegality exists.
(g) Indemnification. If Borrower makes any payment of principal with respect to
any Advance on any other date than the last day of an Interest Period applicable
thereto or if Borrower fails to borrow any Advance after notice has been given
to Bank in accordance herewith, or fails to make any payment of principal or
interest in respect of an Advance when due or at the Termination Date or the
Maturity Date, Borrower shall reimburse Bank on demand for any resulting loss or
expense incurred by Bank, determined in Bank's reasonable opinion, including
without limitation any loss incurred in obtaining, liquidating or employing
deposits from third parties. A detailed statement as to the amount of such loss
or expense, prepared in good faith and submitted by Bank to Borrower shall be
considered binding for all purposes subject to manifest error in computation.
Bank shall promptly notify Borrower of any event occurring after the date of
this Loan Agreement that entitles Bank to reimbursement pursuant to this
Paragraph.
(h) Survival of Obligations. The provisions of Paragraphs (d) and (g) of this
Section 1.3 shall survive the termination of this Loan Agreement and the payment
in full of all promissory notes outstanding pursuant hereto. Upon request, Bank
shall provide written notice to Borrower at the time of termination of this Loan
Agreement of any claims under Paragraphs (d) or (g) hereof which exist to Bank's
knowledge at the time of such request.
(i) Prepayment. Borrower may, on any payment due date, upon payment of all
accrued interest, fees and other amounts then due and payable to the Bank and
upon at least five (5) business days written notice to the Bank, elect to prepay
all or part of the principal outstanding balance of the Revolving Loan or the
Term Loan, provided, however, that if such prepayment occurs during an Interest
Period subject to a LIBOR Rate Advance or any other type of fixed rate of
interest, any such prepayment shall be in an amount equal to the sum of (i) the
amount of the prepayment; (ii) all accrued interest to the date of such
prepayment; (iii) any late charges or charge then due and owing; and (iv) the
Prepayment Fee, which shall be equal to the maximum of (i) zero, or (ii) the Net
Present Value Adjustment.
The following definitions shall be used for purposes of calculating the
Prepayment
(i) Matched Maturity Rate. The rate per annum, determined solely by Bank in the
exercise of its commercially reasonably discretion, on the first day of the
Interest Period for LIBOR advances, as the rate in which Bank would be able to
borrow funds in Money Markets for the amount of such LIBOR Rate advance and with
an interest payment frequency and principal repayment schedule equal to such
advance and for a term as may be arranged and agreed upon by Borrower and Bank.
Such a rate shall include FDIC insurance, reserve requirements and other
explicit or implicit costs levied by any regulatory agency. Borrower
acknowledges that Bank is under no obligation to actually purchase and/or match
funds for the Matched Maturity Rate of all or any portion of this Loan.
(ii) Money Markets. One or more wholesale funding markets available to Bank,
including negotiable certificates of deposit, eurodollar deposits, bank notes,
fed funds or others.
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(iii) Net Present Value Adjustment. The amount, calculated on any Prepayment
Date, which is derived by subtracting; (i) the principal amount of the Loan or
portion of the Loan to be prepaid as of such Prepayment Date, from (ii) the Net
Present Value of the Loan or portion of the Loan to be prepaid on such
Prepayment Date.
(iv) Prepayment Date. For this Loan, that Business Day the Bank receives from
Borrower an unscheduled principal payment amount.
(v) Business Day. The day other than a Saturday, Sunday or Holiday on which
banks in the State of Ohio are authorized by law to close.
(vi) Net Present Value. The amount, calculated on any Prepayment Date, which is
derived by summing the present values of each prospective payment of principal
and interest which, without such full or partial prepayment, could otherwise
have been received by Bank over the remaining contractual life of the subject
LIBOR Interest Period, if Bank had instead invested the loan proceeds on the
Loan Origination Date at the Initial Matched Maturity Rate. The individual
discount rate used to value each prospective payment of interest and/or
principal shall be the Current Matched Maturity Rate for the maturity matching
that of each specific payment of principal and/or interest.
(vii) Initial Matched Maturity Rate. That zero coupon rate calculated on the day
any LIBOR advance is requested by Borrower for all or a portion of the Loan,
determined solely by Bank, as the rate in which Bank is able to borrow funds in
Money Markets for the amount so requested by Borrower and matching the maturity
of the Interest Period requested by Borrower. Such rate shall include FDIC
insurance, reserve requirements and other explicit or implicit costs levied by
any regulatory agency.
(viii) Current Matched Maturity Rate. That zero-coupon rate, calculated on the
Prepayment Date, and determined solely by the Bank, as the rate in which the
Bank would be able to borrow funds in Money Markets for the prepayment amount
matching the maturity for the corresponding Interest Period for a LIBOR Rate
advance. Such a rate shall include FDIC insurance, reserve requirements and
other explicit or implicit costs levied by any regulatory agency. A separate
Current Matched Maturity Rate will be calculated for each prospective interest
and/or principal payment date, or for each LIBOR contract outstanding and
subject to prepayment.
(ix) Loan Origination Date. The date that the Initial Matched Maturity Rate is
accepted and funds are drawn.
In calculating the amount of such a Prepayment Fee, Bank is hereby authorized by
Borrower to make such assumptions regarding the source of funding, redeployment
of funds and other related matters as Bank may reasonably deem appropriate. If
Borrower fails to pay any Prepayment Fee when due, the amount of such prepayment
fee shall thereafter bear interest until paid at the default rate (as defined in
Section 7 hereof).
Any prepayment of principal shall be accompanied by a payment of interest
accrued to date thereon; and said prepayment shall be applied to the principal
installments in the inverse order of their maturities.
ADDITIONAL EXTENSIONS OF CREDIT
This Agreement governs all extensions of credit from the Bank to the Company,
whether now existing or hereafter arising, either created by the Company alone
or together with another or others, primary or secondary, secured or unsecured,
absolute or contingent, liquidated or unliquidated, direct or indirect.
REPRESENTATIONS & WARRANTIES
To induce the Bank to enter into this Agreement and to agree to make the Loans,
as hereafter defined, to the Company, the Company represents and warrants that;
(A) Corporate Existence. It is a corporation duly existing under the laws of the
State of Ohio, is qualified to do business in all states where failure to be so
qualified would have a material adverse effect on the Company, and has
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all requisite power and authority to own its property and carry on its business
as now being conducted.
(B) Borrowing Authorization. The execution by the Company and the delivery and
performance of this Agreement, the Consolidation Term Note, the Line of Credit
Note, and such other notes as many evidence extensions of credit under this
Agreement (hereafter collectively referred to as the "Notes"), and other
documents (including, without limitation, the Security Agreements, hereafter
collectively referred to as the "Loan Documents") executed in connection with
the First Term Loan, the Second Term Loan, the Consolidation Term Loan, the Line
of Credit or other extensions of credit under this Agreement (hereafter
collectively referred to as the "Loans"), have been authorized by all necessary
corporate action and will not violate: 1) any provision of law; 2) the Articles
of Incorporation or By-laws of the Company; or 3) any agreement binding on the
Company.
(C) Financial Statements. Its interim financial statements dated April 30, 1998
(a copy of which have been previously furnished to the Bank) have been prepared
in conformity with generally accepted accounting principles consistently
applied, and fairly present the financial condition of the Company and its
operation as of the date of the statements, and since such date there has been
no material adverse change in its financial condition other than as disclosed on
Schedule A attached hereto.
(D) Actions Pending. There are no legal actions pending or threatened against or
affecting the Company before any court or agency, or any contingent liabilities
that are not provided for in the financial statements referred to in subsection
(C) Financial Statements above.
(E) Liens. None of the assets of the Company are subject to any mortgage,
pledge, security interest, lien, or other encumbrance except for those noted in
the financial statements referred to in subsection (C) Financial Statements.
(F) Environmental Matters. All operations and property of the Company are in
full compliance with all federal, state, and local statutes, rules, and
regulations relating to air and water pollutants and hazardous waste disposal.
There is no judicial or administrative proceeding pending or threatened against
or affecting the Company with respect to such environmental matters.
(G) Compliance. The Company is in compliance in all material respects with all
statutes, rules, and regulations applicable to it. No default (or event which
with notice or lapse of time, or both, would constitute a default) exists under
any agreement or instrument for borrowed money to which the Company is a party
or pursuant to which any property of the Company is encumbered.
(H) Liabilities. All taxes, assessments, and other liabilities which are due
have been paid in full and in a timely manner, except for those taxes and
assessments which the Company is contesting in good faith and with respect to
which the Company has taken proper steps to perfect its appeal and which have
not resulted in liens on the Company's property which materially diminishes the
value of the Collateral, as hereafter defined, and delinquent taxes on the
Company's real estate in Perry County, Ohio.
(I) Millennium Compliance. Borrower has undertaken a specific plan of action to
ensure that its computer hardware, computer software, and all other systems and
devices whether in use by the Company or for resale (herein collectively
referred to as "Computer Systems") will achieve Millennium Compliance. As used
herein, "Millennium Compliance" means that the Computer Systems are capable of
the following, before, during and after January 2000: (i) handling date
information involving any and all dates before, during and after January 1,
2000, including accepting input, providing output and performing date
calculations in whole or in part; (ii) operating, accurately without
interruption on and in respect of any and all dates before, during and/or after
January 1, 2000 and without any changes in performance; (iii) responding to and
processing two digit year input without creating ambiguity as to the century;
and (iv) storing and providing date input information without creating any
ambiguity as to the century.
COLLATERAL
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All Obligations, as hereafter defined, shall be secured by the following
(collectively called the "Collateral"):
(A) A first priority security interest in the Company's Accounts Receivable,
Inventory, Equipment, Fixtures and Furniture, as such terms are defined in the
Security Agreements, now owned or hereafter acquired, their proceeds (cash or
non-cash) and any insurance proceeds related thereto-
(B) A first Collateral Assignment of Life Insurance in the amount of $500,000 on
the life of Xxxxxxx X. Xxxxxxx-
(C) A first mortgage lien on approximately 505 acres of real property owned by
the Company in Perry County, Ohio;
(D) All Obligations shall be cross collateralized and cross defaulted to all
existing Bank debt
The Collateral and all documentation with respect thereto shall be in a form
satisfactory to the Bank, and the Company agrees to execute any and all
documents necessary to assure the protection, perfection, and/or enforcement of
the Bank's security interest in the Collateral.
The security interests in the Collateral are to secure the prompt and full
payment and complete performance of all Obligations of the Company to the Bank.
The word "Obligations" is used in its most comprehensive sense and includes,
without limitation, all indebtedness, debts and liabilities (including
principal, interest, late charges, collection costs, attorneys' fees and the
like) of the Company to the Bank, whether now existing or hereafter arising,
either created by the Company alone or together with another or others, primary
or secondary, secured or unsecured, absolute or contingent, liquidated or
unliquidated, direct or indirect, whether evidenced by note, draft, lease,
application for letter of credit or otherwise, and any and all renewals of or
substitutes therefor, including all indebtedness owed by the Company to the Bank
in connection with the Loans.
COVENANTS
In consideration of the Bank's promise to make the Loans, the Company agrees
that, from the date of this Agreement until the Notes are paid in full, it
shall:
(A) Financial Statement. Furnish the Bank: 1) a copy of the Company's audited
financial statements, prepared in conformity with generally accepted accounting
principles applied on a basis consistent with the preceding years by independent
certified public accountants acceptable to the Bank within 90 days of the
Company's fiscal year end; 2) a copy of its unaudited financial statements,
similarly prepared, in a form satisfactory to the Bank within 30 days of the end
of each of its fiscal month certified as to accuracy by an executive officer of
the Company.
(B) Periodic Reports. Provide the Bank 1) an aging of accounts receivable, a
work in process breakdown and the accounts payable aging in a form satisfactory
to the Bank within 30 days of the end of each fiscal month of the Company; 2) a
calculation of the Borrowing Base, in the form attached hereto as Exhibit C and
a "no-default" certification, Exhibit D, signed by an executive officer of the
Company within 30 days of the end of each fiscal month of the Company; and 3)
other reports and information as the Bank may reasonably request.
(C) Insurance. Maintain insurance on all real and personal property with
carriers acceptable to the Bank in an amount sufficient to repay the outstanding
balance of all Loans and against hazards and liabilities as is common with other
companies in similar situations. The policies shall show the Bank as "name
insured" and "loss payee." The Company shall provide the Bank with certificates
of insurance or other satisfactory evidence upon request.
(D) Taxes. Pay all taxes, assessments, and other liabilities when due, except
for those which are contested in good faith or subject to a payment plan with
the taxing authority.
(E) Notice. Give the Bank prompt notice of any: (i) default of this or any other
agreement or contract under which the Company is liable; (ii) environmental or
labor disputes; (iii) lawsuit filed naming the Company as a
9
defendant; (iv) reportable event under ERISA; or (v) material change in the
Company's business prospects or financial condition.
(F) Corporate Existence and Status. Maintain its corporate existence and remain
in good standing under the laws of each jurisdiction where the Company is duly
qualified to conduct its business.
(G) Maintain of Property. Maintain Company property in good condition and
repair, and not commit or permit any action that may impair the value of the
property or the Bank's Collateral.
(H) Leverage Ratio. Maintain a leverage ratio, defined as Total Liabilities
divided by Tangible Net Worth (as defined below) of not greater than 5.00:1,
decreasing to 4.00:1 by December 31, 1998 and decreasing to 3.25:1 by December
31, 1999 and thereafter. As at least $3,000,000.00 of equity is potentially
injected into the Company, this ratio shall then not be greater than 2:1 at the
fiscal year-end period immediately following the injection, and thereafter.
(I) Cash Flow Coverage Ratio. Maintain a cash flow coverage ratio of at least
1.25x at all times. This ratio will be tested on a quarterly basis based upon
the trailing four (4) quarters. "Cash Flow Coverage" ratio shall be calculated
as follows:
Net Income + Non-Cash Charges + Interest Expense - Dividends
Current Portion of Long Term Debt + Interest expense
As at least $3,000,000.00 of equity is potentially injected into the Company,
this ratio shall then not be less than 1.4x at each fiscal quarter thereafter.
(J) Tangible Net Worth. Not permit its Tangible Net Worth to be less than
$1,150,000.00 as of date hereof and increasing to $1,500,000.00 as of December
31, 1998 and $1,800,000.0 by December 31, 1999 and for each fiscal year
thereafter. "Tangible Net Worth" shall mean, as of any date, the sum of the
Company's total equity, including redeemable common stock, plus debts
subordinated to the Bank minus any intangible assets. All financial terms in
this Agreement shall have the meanings given them under generally accepted
accounting principles. The Tangible Net Worth requirement shall be increased
dollar for dollar for each increase in subordinated debt or for proceeds from
the sale of Company stock. As at least $3,000,000.00 of equity is potentially
injected into the Company, Tangible Net Worth shall then not be less than
$4,500,000.00 at the fiscal year-end period immediately following the injection
and thereafter.
(K) Indebtedness. Not incur or permit to exist any indebtedness, other than that
indebtedness which exists on balance sheet as of date hereof, except: (i) the
borrowings evidenced by this Agreement; (ii) favorable short-term unsecured
trade credit granted in the ordinary course of business.
(L) Liens. Not create or permit to exist any mortgage, pledge, security
interest, or other encumbrance with respect to any assets now owned or hereafter
acquired other than that indebtedness which existed on balance sheet as of the
date hereof, except for (i) lines created in favor of the Bank hereunder; or
(ii) purchase money interests created in up to $20,000.00 in connection with the
acquisition of property acquired after the date of this Agreement which attaches
specifically to the property acquired.
(M) Guaranties. Not guaranty any obligation or indemnify any other person or
enterprise except for the personal liability from the Company's own officers',
directors', or employees' own actions on behalf of the Company.
(N) Merger, Sale or Transfer of Assets. Not be a party to any merger,
consolidation, transfer or reorganization without the consent of the Bank
(including, but not limited to, the purchase of all or substantially all of the
equity or assets of any other enterprise).
(0) Investments. Not invest in, loan, or make advances to any other enterprises,
except for (i) obligations of the United States Treasury and agencies thereof,
(ii) commercial paper maturing within one-year and rated "A-I P-I or
10
better," or (iii) Certificates of Deposit of the Bank.
(P) Restricted Payments. Do not declare nor pay any dividend to shareholders or
redeem any of the Put Options in the St. Xxxxxxxx Press Asset Purchase Agreement
unless all financial covenants are in compliance.
(Q) Franklin County Property. The land held in Franklin County will not be held
as collateral, but if and when the property is sold, all proceeds must be
applied against the Consolidation Term Loan. Said property must remain free of
any liens during the term of all Obligations.
(R) Depository Accounts. The Bank shall be the primary depository bank of the
Company. A lock box account will be used to handle all of the Company's accounts
receivable collections.
(S) Negative Covenants. The Company shall not; 1) change the type or character
of its business; or 2) change any executive management personnel without the
Bank's prior written consent.
(T) Subordination. All notes/accounts payable due to shareholders shall be
subordinated to the Bank. All payments due to the Sellers in the St. Xxxxxxxx
Press Asset Purchase for Put Options shall be subordinated to the Bank. All
subordinated debtors shall sign the Bank's standard subordination agreement.
(U) Waiver. Any variance from these covenants shall be permitted only with the
prior written consent and/or waiver of the Bank. Any such waiver shall not
preclude the exercise of any power or right under this Agreement by the Bank.
(V) Stock Purchases. Not redeem any of its common stock other than the
redemption's provided in the St. Xxxxxxxx Press Asset Purchase Agreement and
otherwise in accordance with this Agreement.
W) Capital Expenditures. Not make capital expenditures during any fiscal year in
excess of $200,000.00.
CLOSING CONDITIONS
The obligation of the Bank to make the Loans is subject to the satisfaction of
each of the following conditions:
(A) Resolutions. The Company shall have delivered to the Bank a copy of the
resolution of the Company's Board of Directors authorizing the Loans, certified
by an executive officer of the Company, and the execution and delivery of this
Agreement, the Notes, and such Loan Documents as the Bank deems necessary.
Phoenix Management, Ltd. shall have delivered to the Bank a copy of the
resolution of a majority of the Percentage Interests, as such term is defined in
its Operating Agreement, of its members authorizing the unlimited guaranty of
the loans.
(B) Other Documents: Inspection. The Company shall have delivered to the Bank
such other documents as the Bank may request prior to the date of this
Agreement. The Bank or its designated representative shall have the continuing
right to inspect and review all the Company's records, documents, and assets,
whether or not directly related to the Obligations or the Collateral.
(C) Default. Before and after giving effect to the loans, no event of default
(as defined below) or event which would with the passage of time or the giving
of notice mature into an event of default shall have occurred and/or be
continuing.
(D) Warranties. Before and after giving effect to the Loans, the representations
and warranties noted above shall be true and correct on the date of this
Agreement and on the date of each extension of credit under this Agreement.
(E) Fees and Expenses. The Company agrees to pay the Bank a one-time fee of
$6,000.00 plus any out-of-pocket expenses incurred by the Bank (including
reasonable attorneys' fees, legal expenses, filing fees, etc.) in entering into
and closing this Agreement.
EVENTS OF DEFAULT
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Upon the occurrence of any of the following events and following five (5)
business days prior written notice to the Company, and an additional five (5)
business day default cure period, the Bank may declare the Notes due and
immediately payable and shall have all rights to realize on the Collateral. To
the extent the Maximum Amount on the Line of Credit is not being utilized by the
Company, the Bank may upon such declaration of default terminate any unused
balance:
(A) Non-payment of principal or interest on the Notes when due and following any
applicable notice or cure period; or
(B) Non-payment of principal or interest on any other borrowed money obligation
when due or the holder of such obligation declares the obligation due prior to
it stated maturity unless the obligation is disputed in good faith; or
(C) Any representation or warranty of the Company in this or any other of the
Loan Documents is false; or
(D) The Company violates any covenant or condition of this or any other of the
Loan Documents; or
(E) The Company is unable to pay its business debts as they become due or the
Company's consolidated financial statement indicates an insolvency or deficit
net worth; or
(F) The Company applies for the appointment of a trustee or receiver of any part
of the assets of the Company or commences any proceedings relating to the
Company under any bankruptcy, reorganization, arrangement insolvency,
readjustment of debt, dissolution, or other liquidation law of any jurisdiction;
or
(G) Any such application, if filed, or any such proceedings are commenced
against the Company, and the Company indicates its approval, consent, or
acquiescence; or an order is entered appointing such trustee or receiver, or
adjudicating the Company bankrupt or insolvent, or approving the petition in any
such proceedings, and such order remains in effect for thirty (30) days; or
(H) A material part of the Company's operations shall cease for a period of
thirty (30) days, other than temporary or seasonal cessations which are
simultaneously experienced by other companies in the Company's line of business
(which, if continued, would not have a material adverse effect on the Company's
operations or financial conditions); or
(I) Failure of the Company to provide, either (i) release of the Citibank, N.A.
mortgage on the Perry County property, or (ii) affirmative title insurance
coverage against the Citibank, N.A. mortgage on the Perry County Property.
(J) If, in the reasonable opinion of the Bank, there has been a material adverse
change in the financial affairs or operating condition of the Company, the
Guarantors or in the value of the Collateral which, in the reasonable judgment
of Bank, materially imperils the Company's ability to repay or secure its
obligations to the Bank under this Agreement.
OTHER DOCUMENTATION
The terms hereof requiring (5) day prior written notice and an additional five
(5) day opportunity to cure prior to the Bank's having any right to declare the
Notes due and payable, or any right to pursue the Collateral following the
occurrence of an event of default, shall also be applicable with respect to any
and all events of default specified in any and all other Loan Documents.
LAW/JURISDICTION
This Agreement, the Loans, the Notes and the other Loan Documents shall be
deemed made in Ohio, and all the
12
rights and obligations of the parties hereunder shall in all respects be
governed by the construed in accordance with the laws of the State of Ohio,
including all matters of construction, validity, and performance Without
limitation on the ability of the Bank to exercise all its rights as to the
Collateral security for any loan or note, or to initiate and prosecute actions
for repayment in any applicable jurisdiction, the Bank and the Company agree
that any action or proceeding commenced by or on behalf of the parties relating
to this Agreement, the Loans, the Notes or the other Loan Documents shall be
commenced and maintained exclusively in courts of applicable jurisdiction
located in Franklin County, Ohio. This document, in conjunction with the other
Loan Documents, memorializes the entire Agreement between parties, and any
amendment to this Agreement, may only be made in writing and signed by all
parties.
WARRANT OF ATTORNEY
The Company hereby authorizes any attorney-at-law to appear in any court of
record in any county in the State of Ohio or wherever the Company may have a
place of business, have signed the Notes or can be found, after the Bank
declares an event of default and accelerates the balances due under the Notes,
to waive the issuance of service of process and confess judgment against the
Company in favor of the Bank for the amounts then appearing due, together with
the costs of suit, and thereupon to release all errors and waive all rights of
appeal and stays of execution; but no such judgment or judgments against the
Company shall be a bar to a subsequent judgment or judgments against the
Company. The Company agrees and consents that the attorney confessing judgment
on behalf of the Company hereunder may also be counsel to the Bank or its
affiliates, waives any conflict of interest which might otherwise arise, and
consents to the Bank paying such confessing attorney a legal fee or allowing
such attorney's fees to be paid from any proceeds of collection of the Notes or
Collateral.
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JURY WAIVER
THE BANK AND THE COMPANY ACKNOWLEDGE AND AGREE THAT THERE MAY BE A
CONSTITUTIONAL RIGHT TO A JURY TRIAL IN CONNECTION WITH ANY CLAIM, DISPUTE OR
LAWSUIT ARISING BETWEEN OR AMONG THEM, BUT THAT SUCH RIGHT MAY BE WAIVED.
ACCORDINGLY, THE PARTIES AGREE THAT NOTWITHSTANDING SUCH CONSTITUTIONAL RIGHT,
IN THIS COMMERCIAL MATTER THE PARTIES BELIEVE AND AGREE THAT IT SHALL BE IN
THEIR BEST INTEREST TO WAIVE SUCH RIGHT, AND, ACCORDINGLY, HEREBY WAIVE SUCH
RIGHT TO A JURY TRIAL, AND FURTHER AGREE THAT THE BEST FORUM FOR HEARING ANY
CLAIM, DISPUTE OR LAWSUIT, IF ANY, ARISING IN CONNECTION WITH THIS AGREEMENT,
ANY LOAN DOCUMENTS OR THE RELATIONSHIP AMONG THE BANK AND THE COMPANY SHALL BE A
COURT OF COMPETENT JURISDICTION SITTING WITHOUT A JURY.
WARNING- BY SIGNING THIS PAPER, YOU GIVE UP YOUR RIGHTS TO NOTICE AND COURT
TRIAL. IF YOU DO NOT PAY ON TIME, A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR
RETURNED GOODS, FAULTY GOODS, FAILURE OF HIS PART OF COMPLY WITH THE AGREEMENT,
OR ANY OTHER CAUSE. (Sec. 2323.13 O.R.C.)
Accepted this 29 day of June, 1998.
Borrower PH GROUP, INC.
By: /s/ Xxxxxxx X. Xxxxxxx
-----------------------------
Xxxxxxx X. Xxxxxxx, President
Guarantor: PHOENIX MANAGEMENT LTD
By: /s/ Xxxxxxx X. Xxxxxxx
-----------------------------
Xxxxxxx X. Xxxxxxx, Member
Guarantor Xxxxxxx X Xxxxxxx Individual
By: /s/ Xxxxxxx X. Xxxxxxx
-----------------------------
Xxxxxxx X. Xxxxxxx, Individual
STAR BANK, N.A.
BY: /s/ Xxxxx X. Xxxxxxx
--------------------------------
Xxxxx X. Xxxxxxx, Vice President
