Exhibit 99.1
BUSINESS LOAN AGREEMENT
Agreement by and between Monroe Bank & Trust, of 000 X. Xxxxx Xxxxxx,
Xxxxxx, Xxxxxxxx 00000 (herein termed "Bank"), and N-Viro International
Corporation, a Delaware corporation of 0000 X. Xxxxxxx Xxx. Xxxxx 000 Xxxxxx, XX
00000 (herein termed "Borrower").
Borrower understands and agrees that: (A) in granting, renewing, or
extending any Loan, Bank is relying upon Borrower's representations, warranties,
and agreements as set forth in this Agreement, and (B) all such Loans shall be
and remain subject to the terms and conditions of this Agreement.
This Agreement shall be effective as of February 26, 2003, and shall
continue in full force and effect until such time as all of Borrower's Loans or
indebtedness in favor of Bank have been paid in full, including principal,
interest, costs, expenses, attorneys' fees and other fees and charges, or until
such time as the parties may agree in writing to terminate this Agreement.
In consideration of the mutual promises set forth herein and the
extension(s) of credit and subject to Borrower's satisfactory fulfillment of all
conditions precedent to the borrowing, Bank and Borrower agree as follows:
ARTICLE I - DEFINITIONS
The following terms shall have the following meanings in this
Agreement:
1.1 All Accounting terms not specifically defined herein shall have the
meaning of such terms as used in accordance with generally accepted accounting
principals. In the event of a dispute relative to the meaning of an accounting
term, the determination thereof by an independent certified public accountant,
chosen by the Borrower, and acceptable to the Bank shall be controlling.
1.2 "INDEBTEDNESS" means and includes:
(a) All indebtedness and liabilities of whatsoever kind, nature and
description owned to Bank by Borrower, whether direct or indirect, absolute or
contingent, due or to become due or whether now existing or hereafter arising,
and howsoever evidenced or acquired, and whether joint or several, and
including, without limitation,
(b) All future advances which the Bank at any time may, but shall not
be required to make for the protection or preservation of the Bank's rights and
interests arising hereunder, including, without limitation, advances for taxes,
levies, assessments, insurance and reasonable attorney's fees, and
(c) All costs and expenses incurred by the Bank in the protection and
preparation for sale of any of its collateral including, without limitation,
attorney's fees and court costs.
1.3 "GRANTOR" means each and all of the persons or entities granting a Security
Interest in any Collateral for the Loan, including without limitation all
Borrowers granting such a Security Interest.
1.4 "NOTE" shall mean any promissory note of the Borrower evidencing any loan or
advance or extension or renewal thereof made by the Bank to the Borrower, or any
indebtedness, plus interest thereon, as well as all claims by Bank against
Grantor, or any one or more of them, whether existing now or hereafter arising,
together with all renewals of, extensions of, modifications of, refinancing of,
consolidations of, and substitutions for the note(s) or credit agreement(s).
1.5 PERSON" shall mean and include an individual, partnership, corporation,
trust, unincorporated organization, government or any department or agency
thereof.
1.6 "RELATED PERSON" shall include, but shall not be confined to, any Person
related to Borrower by common control or ownership.
1.7 "SUBORDINATED DEBT" shall mean indebtedness of the Borrower owed to any
officer, employee, director, shareholder or Related Person which is subordinated
to all Indebtedness, of the Borrower to the Bank under the terms and conditions
approved in writing by the Bank.
ARTICLE II - REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants that:
2.1 It is a duly organized, legally existing corporation in good standing under
the laws of the State of Delaware and qualified to do business in any other
state of which it conducts its business.
2.2 It has the power and is duly authorized to enter this Agreement and to
execute and deliver to the Bank, now and from time to time hereafter, additional
instruments, resolutions, agreements and other instruments or documents relating
to the borrowing of moneys from the Bank. It has, by proper action, authorized
and empowered those persons whose signatures appear on this Agreement, and any
instruments, documents and exhibits that have been delivered in connection
herewith, to execute the same for and on its behalf.
2.3 The execution by it of this Agreement or any other agreements, instruments,
or documents which may, from time to time hereafter, be executed in respect
hereto and delivered to Bank, shall not constitute a breach of any provisions
contained in its articles of incorporation, or any agreements to which it is now
a party and that the performance by it of its obligations hereunder or any
agreements executed by it and delivered hereunder shall not constitute an event
of default under any other agreement to which it is now a party.
2.4 The financial statements of the Borrower delivered to the Bank accurately
state the financial condition of the Borrower as of the date of such statements.
The Borrower has disclosed to the Bank in writing all of its known material
liabilities, direct or contingent. None of the statements representations or
warranties (financial or otherwise) furnished by the Borrower to the Bank in
connection with this Agreement contain any untrue statements, nor omit a
material fact necessary to make the statements contained therein or herein, in
light of the circumstances when made, not misleading. There is in no fact which
the Borrower has not
disclosed to the Bank in writing which has a material adverse effect on the
properties, business or condition (financial or otherwise) of the Borrower, or
of the ability of the Borrower to fully perform its obligations under this
Agreement.
2.5 The Borrower is in compliance with all known applicable requirements of all
governmental authorities (federal, state, and local), including without
limitation, the payment of taxes, the filing of tax returns and reports and is
complying with all environmental laws, ordinances, rules and regulations. The
Borrower possesses such franchises, licenses, permits, patents, copyrights,
trademarks and consents of appropriate governmental bodies to own its property
and are necessary or useful to carry on its ordinary course of business.
2.6 There is no litigation undisclosed to the Bank, legal or administrative
proceedings, investigations or other action of any nature, pending or, to its
knowledge, threatened against or affecting it, which involves the possibility of
any judgment or liability which may materially or adversely affect any of the
Borrower's property or its right to carry on its business as now conducted.
Details of all litigation, legal or administrative proceedings, investigation or
other action of similar nature, pending or threatened against it, at any time
during the term of this Agreement, will be brought to the attention of Bank, in
writing forthwith.
2.7 It has good and valid title to all of its property and assets free of any
adverse lien, security interest or incumbrance, except liens, security interests
and encumbrances disclosed to Bank by Borrower in writing prior to the date
hereof.
2.8 All of the funds lent to it pursuant to this Loan Agreement have been or
will be used exclusively in Borrower's business operation and will not be
diverted or used in any other manner.
2.9 All representations and warranties in this Agreement and any agreement given
by Borrower to Bank pursuant to this Agreement are true and correct and no
material fact has been omitted.
2.10 If real estate or any interest therein has been mortgaged, conveyed, or
assigned by Borrower to Bank as security for payment of the Indebtedness,
Borrower has no knowledge of any violations or notices of violations of any
federal or state law or any ordinance, regulation or requirement of the state or
governmental authority, including, but not limited to, any environmental law,
ordinance or regulation, which affects the mortgaged, conveyed, or assigned
premises or the use of such premises by the Borrower.
ARTICLE III - SECURITY
3.1 SECURITY. As security for the Indebtedness, Borrower hereby grants to
Bank, to include without limitation:
(a) A security interest in all deposits, accounts, instruments,
letter of credit, negotiable documents, chattel paper or any other
property in which the Borrower has rights and which are at any time in
possession or control of the Bank;
(b) Include all types of collateral security, present and future,
whether in the form of a lien, charge, encumbrance, mortgage, deed of
trust, security deed, assignment, pledge, crop pledge, chattel
mortgage, collateral chattel mortgage, chattel trust, factor's lien,
equipment trust, conditional sale, trust receipt, lien or title
retention contract, lease or consignment intended as a security device,
or any other security or lien interest whatsoever whether created by
law, contract, or otherwise.
3.2 It is further agreed that any security agreement, mortgage or other document
previously or hereafter executed by the Borrower in favor of Bank shall secure
repayment of all Indebtedness, whether or not presently contemplated by the
parties and that the security described above shall secure repayment of the
Indebtedness whether or not presently contemplated by the parties, that a
default in the terms of any note, security agreement, mortgage or other
agreement from Borrower to Bank shall constitute a default of all notes,
security agreements, mortgages other agreements, and that Bank may, as its
option, proceed in exercising its rights thereunder in any order or manner it
may choose, the purpose of this Agreement being to cross-collateralize all
Indebtedness.
ARTICLE IV - AFFIRMATIVE COVENANTS
The Borrower covenants and agrees that so long as any Indebtedness is
outstanding or so long as this Agreement is in effect, the Borrower shall:
4.1 Maintain insurance against fire, theft and other casualty on its insurable
real and personal property to their full replacement costs with companies
acceptable to the Bank against liability on account of damage to persons or
property and as required under all applicable Workmen's Compensation laws.
Furthermore, Borrower shall maintain any other insurance as may from time to
time be reasonably requested by the Bank, and shall insert a joint loss payee
clause naming Bank in all fire and extended coverage policies on property that
is security for the Indebtedness and shall deliver certified copies of all such
insurance policies to Bank.
4.2 Maintain, preserve, and keep its buildings and properties and every part
thereof in good repair, working order, and condition and from time to time make
all necessary and proper repairs, renewals, replacements, additions,
betterment's, and improvements thereto, so that all times the efficiency thereof
shall be fully preserved and maintained.
4.3 Duly pay and discharge or cause to be paid and discharged all taxes,
assessments, and other governmental charges imposed upon it and its properties
or any part thereof or upon the income or profits therefrom, as well as all
claims for labor, materials, or supplies, which if unpaid could become a lien or
charge upon its property, except such items as are being in good faiths
appropriately contested and for which the Borrower has provided adequate
reserves.
4.4 Carry on and conduct its business in substantially the same manner and in
substantially the same fields as such business is now and has previously been
carried on, and maintain its legal existence, and comply with all valid and
applicable statutes, rules and regulations.
4.5 Maintain a standard, modern system of accounting in accordance with
generally accepted accounting principles (GAAP); deliver to Bank financial
reports in a form satisfactory to Bank as
Bank may request from time to time; permit the duly authorized
representative(s) of Bank at all reasonable times to examine and inspect the
books and records of Borrower or any related business entity of Borrower, and to
make abstracts and copies thereof, and to visit and inspect any of the
Borrower's property wherever same be located.
4.6 Borrower shall comply with all applicable federal, state and local laws,
ordinances, rules and regulations, including, but not limited to, all
environmental laws, ordinances, rules and regulations and shall keep any real
property or interest therein mortgaged, conveyed, or assigned to secure payment
of the Indebtedness free and clear of any liens imposed pursuant to such laws,
ordinances, rules and regulations, and deliver to Bank such information and
reports in form satisfactory to Bank as Bank may request from time to time to
establish compliance with such Laws.
4.7 Borrower shall comply with all applicable federal, state and local laws,
ordinances, rules and regulations concerning wage payments, minimum wages,
overtime laws and payment of withholding taxes, and deliver to Bank such reports
and information in form satisfactory to Bank as Bank may request from time to
time to establish compliance with such laws.
4.8 If real estate or any interest therein is mortgaged, conveyed or assigned by
the Borrower to the Bank as security for payment of the Indebtedness, Borrower
shall comply with all warranties, covenants and representations of such
mortgage, conveyance or assignment which warranties, covenants and
representations are incorporated by reference herein in their entirety.
ARTICLE V - NEGATIVE COVENANTS
Borrower covenants and agrees that so long as any Indebtedness is
outstanding or so long as this Agreement is in effect, Borrower shall not
without prior written consent of Bank:
5.1 Incur indebtedness for borrowed money, other than to Bank, or act as
guarantor for any indebtedness of others, or lend money.
5.2 Mortgage, pledge, assign, hypothecate, encumber or grant a security interest
in any of its assets except to Bank nor sell, transfer or assign any of its
assets, properties or business except in the ordinary course of business. For
the purpose hereof sale of accounts receivable or entering into capital leases
of personal property, or both, shall be deemed the incurring of indebtedness for
borrowed money.
5.3 Invest in, organize or participate in the organization or in the creation of
any other business entity, or merge or consolidate with or into any other
entity.
5.4 If Borrower is a corporation, release, redeem, retire, purchase, or
otherwise acquire directly or indirectly any of its capital stock, or make any
change in its capital structure, or pay or declare any dividends, in cash or
other property, upon its capital stock.
ARTICLE VI - ADDITIONAL COVENANTS
Borrower agrees that each additional covenant listed below, is fully applicable
if marked by an "X" or check in the applicable box or boxes; if the information
necessary to complete same is typed or written in the appropriate space
provided, and if each is initialized by Borrower or its duly authorized officer
or representative.
6.1 X GUARANTY. Borrower shall deliver to the Bank the Guaranty of Xxxxxx
X. Xxxxxxxxx Trust (limited to $100,000 mortgage on 00000 Xxxxxxxxx Xxxxx,
Xxxxxxx, Xxxxxxxx) in form and content acceptable to the Bank which Guaranty
shall provide for liability of the Guarantor(s) for payment of the
Indebtedness.
6.2 X FINANCIAL REPORTS. Borrower covenants in accordance with
paragraph 4.5 that it will deliver to Bank:
X (a) Within 120 days after the end of each fiscal year, Borrower's
annual financial report, prepared on an compiled basis in accordance with
generally accepted accounting chosen principles (GAAP) by a certified public
accountant chosen by Borrower and acceptable to Bank which shall include a
balance sheet, statement of income, statement of reconciliation of net worth,
statement of changes in financial position and notes to financial statements,
and
X (b) Within 120 days after the end of each fiscal year, Borrower's
annual financial report prepared on a basis and in form acceptable to Bank to
include, but not limited to: Federal Tax Return.
X (c) Within 30 days after the end of each monthly period, Borrower's
interim financial reports prepared by Internally , which shall include a balance
sheet at the end of each such period and an income statement for the period
beginning of the current fiscal year to the end of such period. These statements
shall be prepared on substantially the same accounting basis as the statements
required in Section 6.2 (a) or (b) above and the accuracy of the statements
(subject to audit and year-end adjustments) shall be certified by the Borrower
or if a corporation, its chief financial officer or president.
6.3 ___________ DEBT/WORTH. Borrower agrees to maintain a Debt to Tangible
Net Worth Ratio of not less than 2.0 to 1, beginning with changes
shown on financial statements dated __________________ .
6.4 X TANGIBLE NET WORTH. Borrower agrees that for the first year of this
Agreement to maintain Tangible Net Worth of not less than ten thousand dollars
($10,000.00) Dollars. Borrower agrees to increase Tangible Net Worth by fifty
thousand dollars ($50,000.00) each calendar year. Tangible Net Worth will be
determined on 6/30 and 12/31 of each year.
"Tangible Net Worth" shall include the amount of total assets excluding the
amount of Intangible Assets minus the amount of total liabilities, exclusive of
Subordinated Debt, if any. "Intangible assets" shall include a book value,
without limitation, leasehold improvements, goodwill, patents, copyrights,
secret process, deferred expenses relating to sales, general administrative,
research and development expense, and all amounts due from any officer,
employee, director, shareholder or Related Person. "Debt" means all liabilities
including but not limited to accruals, deferrals, and capitalized leases, less
Subordinated Debt, if any.
6.5 ______________ WORKING CAPITAL. Borrower agrees to maintain net working
capital (excess of Current Assets of Current Liabilities) of not less
than _______ ($ ) DOLLARS and a Current Ratio (Current Assets divided
by Current Liabilities) of not less than 1.0 to 1, beginning with changes shown
on financial statements dated _________, 2003.
"CURRENT ASSETS" shall mean the sum of cash, marketable securities, inventory at
lower cost or market, and ordinary trade accounts receivable excluding any
amount due from any officer, employee, director, shareholder or Related Person.
In the event of a dispute relative to the carrying value of said inventory or
accounts receivable, the determination thereof by an independent Certified
Public Accountant chosen by Borrower and acceptable to the Bank shall be
controlling.
"CURRENT LIABILITIES" shall include all indebtedness normally held as due within
one (1) year (exclusive of Subordinated Debt, if any), and any insubordinate
debt due to any officer, employee, director, shareholder or Related Person.
6.6 ____ CAPITAL EXPENDITURES. Borrower agrees not to purchase lease or
otherwise acquire or enter into any commitment to purchase, lease or
otherwise acquire additional capital assets where the aggregate liability or
expenditure therefore exceeds in any one year ___________% of depreciation for
the most recent prior fiscal year, commencing with fiscal year ______________,
except with prior written consent by Bank.
6.7 ____ OWNERS WITHDRAWAL OR CORPORATE OFFICER'S SALARIES. Borrower
agrees, except with prior written consent of Bank, that salary, withdrawals,
bonuses and al other compensation paid in cash or otherwise, by Borrower shall
not exceed the following aggregate amounts for the persons indicated, nor will
aggregate amounts in excess of the limits indicated be paid to any other person.
(Name) (Monthly Aggregate Amount)
6.8 _____ LIFE INSURANCE. Borrower shall obtain, maintain and assign to the
Bank life insurance upon the life or lives of _________________________ in the
amount of ___________($ )Dollars. Borrower shall continue and insurance or
cause it to be maintained and continue and assigned to Bank until all
Indebtedness has been paid in full or so long as this Agreement is in effect.
6.9 _____ SUBORDINATION OF DEBT. Any officer, employee, director, shareholder or
Related Person of Borrower shall subordinate all indebtedness including interest
thereon (herein termed "Junior Indebtedness"), which may at any time now or
hereafter be owed to any officer, employee, director, shareholder or Related
Person by the Borrower in favor of all Indebtedness, including interest thereon
(herein termed "Senior Indebtedness"). Borrower shall obtain and deliver to Bank
subordination agreements from said officers, employees, directors, shareholders
or Related Persons for said Junior Indebtedness in form and content acceptable
to Bank. Upon the occurrence of a default under this Agreement, Borrower shall
without notice from Bank immediately cease payment of any fees or advances to
any officer, employee, director, shareholder or Related Person and shall also
cease payment of the sum, if any allowed to be paid by the terms of the
Subordination Agreement(s).
6.10 X DEPOSIT ACCOUNTS. Borrower shall establish and maintain its principal
deposit accounts at the Bank for so long as any Indebtedness remains outstanding
or so long as this agreement remains in effect.
6.11 ____ COMPENSATION BALANCE REQUIREMENT. Borrower agrees to maintain an
aggregate annual average collection demand deposit account balance equal to the
sum of not less than _________% its line of credit plus__________% of the annual
average used portion of the line of credit. In the event that the Borrower shall
fail to maintain such account balances, the interest rate payable on the
Indebtedness may, at the option of the Bank, be increased by ______% per annum.
6.12 X LOAN COMMITMENT. All provisions of the Loan Commitment Letter dated
February 12, 2003, except as herein expressly modified, remain in full force and
effect and are incorporated herein by reference.
6.13 X DEBT SERVICE. Borrower agrees to maintain a Debt Service Coverage
Ratio of not less than 1.2:1. Debt Service Coverage Ratio is defined as:
Earnings before interest and taxes plus Depreciation and amortization less any
dividends divided by all principal and interest obligations.
6.14 X VENUE. Borrower acknowledges that all documents are being delivered in
Monroe County, Monroe, Michigan. Borrower stipulates that the Monroe County
Circuit Court is the proper venue to hear any claims by either party relative to
this agreement or any loan documents contemplated hereby.
6.15 X WAIVER OF JURY TRIAL. The Bank and the Borrower, after consulting or
having had the opportunity to consult with counsel, knowingly, voluntarily and
intentionally waive any right either of them may have to a trial by jury in any
litigation based upon or arising out of this agreement or related instrument of
agreement, or any of the transactions contemplated by this agreement, or any
course of conduct, dealing, statements (whether oral or written), or actions of
either of them. Neither the Bank nor the Borrower shall seek to consolidate, by
counterclaim or otherwise, any action in which a jury trial has been waived with
any other action in which a jury cannot be or has not been waived. These
provisions shall not be deemed to have been modified in any respect or
relinquished by either the Bank or the Borrower except by a written instrument
executed by both of them.
6.16 X CROSS-COLLATERALIZE AND CROSS-DEFAULT. It is the expressed intent of
Lender to cross-collateralize and cross-default any and all borrowings or
indebtedness of N-Viro International Corporation and all related entities to
Lender, as well as all claims by Lender against Grantor, or any one or more of
them, whether now or hereafter existing. The breach of terms of any Note,
Security Agreement, Mortgage, Pledge or Loan Agreement of whatsoever nature
between Borrower(s) and or Grantor(s) and the Lender, shall constitute default
and breach of all such agreements, including this Agreement.
6.17 X BORROWING BASE CERTIFICATE. The allowance of future advances by Bank
is discretionary upon request. The Borrowing Base shall be as follows: the
principal balance is not to exceed the value of 80% of Current Account
Receivables. Current Account Receivables are defined as those account
receivables which are less than 90 days old. Borrower shall provide to
Bank a Borrowing Base Certificate on a monthly basis, in a written form
satisfactory to Bank. Borrower shall provide to Bank Accounts Receivable Aging
Reports on a quarterly basis, in a written form satisfactory to Bank.
ARTICLE VII - DEFAULT AND REMEDIES
7.1 The Borrower shall be in default hereunder upon the happening of any of
the following:
(a) The occurrence of a default under the terms of any promissory notes
(s) , security agreement(s), mortgage(s) or other agreement(s) executed in
connection herewith, including any and all renewals, extensions or modifications
thereof; or
(b) Nonpayment when due of any Indebtedness; or
(c) Nonperformance of any covenant or agreement contained or referred
to herein, or contained in any other agreement with Bank, whether now existing
or hereafter arising; or
(d) If any warranty, representation or statement made or furnished to
Bank by or on behalf of Borrower, in connection with this Agreement, or to
induce Bank to make a loan to Borrower, proves to have been false in any
material respect when made or furnished; or
(e) Death, dissolution, termination of existence, insolvency,
appointment of a receiver for any part of the property of, assignment for the
benefit of creditors by, or the commencement of any proceeding under any
bankruptcy or insolvency laws by or against Borrower or any endorser, guarantor
or surety for the Borrower.
7.2 Upon the occurrence of default, described above, the Bank may, at its
option, declare that principal and accrued interest, thereon of all Indebtedness
to be immediately due and payable forthwith, without presentation, demand,
protest or notice of any kind, all of which are hereby expressly waived. Bank
shall have all the rights and remedies of a Secured Party under the Uniform
Commercial Code, as enacted in Michigan. Bank may set off any of the Borrower's
deposits or accounts, including any balances evidenced by a certificate of
deposit and any other indebtedness of the Bank to Borrower against the
Indebtedness, without first looking to any collateral securing payment thereof.
7.3 Acceptance of payment or waiver of any default shall not operate as a waiver
of later defaults, nor of any other rights of the Bank.
ARTICLE VIII - SALE OF BORROWER
The entire amount of unpaid principal and accrued interest shall become
due and payable forthwith at the option of the Bank if control of the Borrower
shall be sold to any other person, firm or corporation, whether for cash or by
merger or consolidation, or if the assets of the Borrower shall be sold or
transferred to any other person, firm or corporation. The Bank shall be the sole
judge as to the occurrence of the foregoing, which judgment shall be binding
upon the parties hereto.
BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS BUSINESS LOAN
AGREEMENT AND BORROWER AGREES TO ITS TERMS. THIS BUSINESS LOAN AGREEMENT IS
DATED FEBRUARY 26, 2003.
Monroe Bank & Trust BORROWER:
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000 X. Xxxxx Xxxxxx
Xxxxxx, XX 00000
By: /s/ Xxxxxx X. Xxxx /s/ Xxxxx X. XxXxxx
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By
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Its: Loan Officer Its Chief Financial Officer
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