FINANCING AGREEMENT EXHIBIT 10.1
THIS FINANCING AGREEMENT, dated as of December 3, 1997, is by and
between XXXXXX MANUFACTURING, INC., a Minnesota corporation (the "Borrower"),
and U.S. BANK NATIONAL ASSOCIATION, a national banking association (the
"Lender").
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
Section 1.1 DEFINED TERMS. As used in this Agreement the following
terms shall have the following respective meanings:
"ACCOUNTS": Each and every right to payment of Borrower, whether such
right to payment arises out of a sale or lease of goods by Borrower, or other
disposition of goods or other property of Borrower, out of a rendering of
services by Borrower, out of a loan by Borrower, out of damage to or loss of
goods in the possession of a railroad or other carrier or any other bailee, out
of overpayment of taxes or other liabilities of Borrower, or which otherwise
arises under any contract or agreement, or from any other cause, whether such
right to payment now exists or hereafter arises and whether such right to
payment is or is not yet earned by performance and howsoever such right to
payment may be evidenced, together with all other rights and interest (including
all liens and security interests) which Borrower may at any time have by law or
agreement against any account debtor (as defined in the Uniform Commercial Code
in effect in the State of Minnesota) or other obligor obligated to make any such
payment or against any of the property of such account debtor or other obligor;
specifically (but without limitation), the term includes all present and future
instruments, documents, chattel papers, accounts and contract rights of
Borrower.
"ACCOUNTS ADVANCE": As defined in Section 2.1(a).
"ADVANCE": An Accounts Advance, an Inventory Advance, an Existing
Equipment Advance and/or an Over Advance, as the context may require.
"AFFILIATE": When used with reference to any Person, (a) each Person
that, directly or indirectly, controls, is controlled by or is under common
control with, the Person referred to, (b) each Person which beneficially owns or
holds, directly or indirectly, five percent or more of any class of voting stock
of the Person referred to (or if the Person referred to is not a corporation,
five percent or more of the equity interest), (c) each Person, five percent or
more of the voting stock (or if such Person is not a corporation, five percent
or more of the equity interest) of which is beneficially owned or held, directly
or indirectly, by the Person referred to, and (d) each of such Person's
officers, directors, joint venturers and partners. The term control (including
the terms "controlled by" and "under common control with") means the possession,
directly, of the power to direct or cause the direction of the management and
policies of the Person in question.
"BORROWING BASE CERTIFICATE": As defined in Section 2.2.
"BUSINESS DAY": Any day (other than a Saturday, Sunday or legal
holiday in the State of where the Lender is located).
"CHANGE IN CONTROL": The occurrence, after the Closing Date, of any
one entity owning, directly or indirectly, securities of the Borrower
representing 10% of the securities of the Borrower entitled to vote in the
election of directors.
"CLOSING DATE": The date of this Agreement; PROVIDED that all the
conditions precedent to the making of the initial Advance, as set forth in
Article III, have been, or, on such Closing Date, will be, satisfied. The
Borrower shall give the Lender not less than one Business Day's prior notice of
the day selected as the Closing Date.
"ELIGIBLE ACCOUNTS": Accounts owned by the Borrower which the Lender,
in its sole and absolute discretion, deems eligible for Advances, but which, at
a minimum, are subject to a first priority perfected security interest in favor
of the Lender and not subject to any assignment, claim or Lien other than the
Lien in favor of the Lender and other Liens consented to by the Lender in
writing, but specifically excluding (a) Accounts which are not earned;
(b) Accounts which are unpaid more than ninety (90) days after the original
invoice date; (c) Accounts owed by debtors 25% or more of whose Accounts owed
are otherwise ineligible; (d) Accounts representing progress xxxxxxxx, or
retainages, or for work covered by any payment or performance bond; (e) Accounts
owed by any of the Borrower's Affiliates; (f) Accounts owed by debtors not
located in the United States, unless supported by a letter of credit issued by a
U.S. bank in favor of the Borrower which has been delivered to the Lender;
(g) Accounts as to which any warranty or representation contained in any
security agreement or other agreement of the Borrower with or given to the
Lender with respect to any such Receivable is untrue in any material respect;
(h) Accounts as to which the account debtor has disputed liability, or made any
claim with respect to any other Account due from such account debtor to the
Borrower; (i) Accounts subject to setoff; (j) Accounts as to which the account
debtor has filed a petition for bankruptcy or any other petition for relief
under the Bankruptcy Code, assigned any assets for the benefit of creditors, or
if any petition or other application for relief under the Bankruptcy Code has
been filed against the account debtor, or if the account debtor has failed,
suspended business, become insolvent, or has had or suffered a receiver or a
trustee to be appointed for all or a significant portion of its assets or
affairs; (k) Accounts owed by any government or government agency; (l) Accounts
evidenced by a promissory note or other instrument; and (m) Accounts as to which
the Lender reasonably believes that collection of any such Receivable is
insecure or that any such Receivable may not be paid by reason of the account
debtor's financial inability to pay.
"ELIGIBLE INVENTORY": Inventory of the Borrower which the Lender, in
its sole and absolute discretion, deems eligible for Advances, but which meets
the following minimum requirements: (a) it is owned by the Borrower, is subject
to a first priority perfected security interest in favor of the Lender, and is
not subject to any assignment, claim or Lien other than (i) a Lien in favor of
the Lender and (ii) Liens consented to by the Lender in writing; (b) it consists
of raw materials; (c) if held for sale or lease or furnishing under contracts of
service, it is (except as the Lender may otherwise consent in writing) new and
unused; (d) except as the Lender may otherwise consent, it is not stored with a
bailee, warehouseman or similar party; if so stored with the Lender's consent,
such bailee, warehouseman or similar party has issued and delivered to the
Lender, in form and substance acceptable to the Lender, such documents and
agreements as the Lender may require, including, without limitation, warehouse
receipts therefor in the Lender's name; (e) the Lender has determined, in its
sole and absolute discretion, that it is not unacceptable due to age, type,
category, quality and/or quantity; (f) it is not held by the Borrower on
consignment and is not subject to any other repurchase or return agreement; (g)
it is not held by a customer of the Borrower or any other Person on consignment;
(h) it complies in all material respects with all standards imposed by any
governmental agency having regulatory authority over such goods and/or their
use, manufacture or sale; and (i) the warranties, representations and covenants
contained in any security agreement or other agreement of the Borrower with or
given to the Lender relating directly or indirectly to the Borrower's Inventory
are applicable to it in all material respects without exception.
"EXISTING EQUIPMENT ADVANCE": As defined in Section 2.1(c).
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"GAAP": Generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession, which are applicable to the circumstances as of any date of
determination.
"INVENTORY": Any and all of the Borrower's goods, including, without
limitation, goods in transit, wherever located which are or may at any time be
leased by the Borrower to a lessee, held for sale or lease, furnished under any
contract of service or held as raw materials, work in process, or supplies or
materials used or consumed in the Borrower's business, or which are held for use
in connection with the manufacture, packing, shipping, advertising, selling or
finishing of such goods, and all goods, the sale or other disposition of which
has given rise to a Receivable, which are returned to and/or repossessed and/or
stopped in transit by the Borrower or the Lender, or at any time hereafter in
the possession or under the control of the Borrower or the Lender, or any agent
or bailee of either thereof, and all documents of title or other documents
representing the same.
"INVENTORY ADVANCE": As defined in Section 2.1(b).
"LOAN DOCUMENTS": This Agreement, the Security Agreement, the
Mortgage, and any documents described in Section 3.1(a).
"LIEN": With respect to any Person, any security interest, mortgage,
pledge, lien, charge, encumbrance, title retention agreement or analogous
instrument or device (including the interest of each lessor under any
capitalized lease), in, of or on any assets or properties of such Person, now
owned or hereafter acquired, whether arising by agreement or operation of law.
"OVER ADVANCE": As defined in Section 2.1(d).
"PERSON": Any natural person, corporation, partnership, limited
partnership, joint venture, firm, association, trust, unincorporated
organization, government or governmental agency or political subdivision or any
other entity, whether acting in an individual, fiduciary or other capacity.
"REFERENCE RATE": The rate of interest from time to time publicly
announced by U.S. Bank National Association as its "reference rate"; U.S. Bank
National Association may lend to its customers at rates that are at, above or
below the Reference Rate. For purposes of determining any interest rate
hereunder which is based on the Reference Rate, such interest rate shall change
as and when the Reference Rate changes.
"SECURITY AGREEMENT": That Security Agreement to be executed by the
Borrower in form and substance satisfactory to the Lender.
Section 1.2 ACCOUNTING TERMS AND CALCULATIONS. Except as may be
expressly provided to the contrary herein, all accounting terms used herein
shall be interpreted and all accounting determinations hereunder shall be made
in accordance with GAAP.
Section 1.3 OTHER DEFINITIONAL TERMS,TERMS OF CONSTRUCTION. The words
"hereof", "herein" and "hereunder" and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not to any particular
provision of this Agreement. References to Sections, Exhibits, Schedules and
the like references are to Sections, Exhibits, Schedules and the like of this
Agreement unless otherwise expressly provided. The words "include", "includes"
and "including" shall be deemed to be followed by the phrase "without
limitation". Unless the context
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in which used herein otherwise clearly requires, "or" has the inclusive meaning
represented by the phrase "and/or". All incorporations by reference of
covenants, terms, definitions or other provisions from other agreements are
incorporated into this Agreement as if such provisions were fully set forth
herein, and include all necessary definitions and related provisions from such
other agreements. All covenants, terms, definitions and other provisions from
other agreements incorporated into this Agreement by reference shall survive any
termination of such other agreements until the obligations of the Borrower under
this Agreement are irrevocably paid in full.
ARTICLE II
TERMS OF LENDING
Section 2.1 THE ADVANCES. On the terms and subject to the conditions
hereof, at the Borrower's request, the Lender, in its absolute and sole
discretion and without any commitment to do so, may make the following Advances
available to the Borrower:
2.1(a) up to eighty-five percent (85%) of the net amount of
Eligible Accounts which are listed in the Borrower's most current Borrowing Base
Certificate and which are deemed eligible for advances by the Lender, or such
greater or lesser percentage at the Lender's sole and absolute discretion, not
to exceed a maximum amount of $5,000,000 (the "Accounts Advances");
2.1(b) up to fifty percent (50%) of the net amount of Eligible
Inventory which is listed in the Borrower's most current Borrowing Base
Certificate and which is deemed eligible for advances by the Lender, or such
greater or lesser percentage at the Lender's sole and absolute discretion, not
to exceed a maximum amount of $300,000 (the "Inventory Advances");
2.1(c) up to ninety percent (90%) of the appraised auction value
of the Borrower's existing equipment, and which is deemed eligible for advance
by the Lender, or any greater or lesser percentage at the Lender's absolute and
sole discretion, not to exceed a maximum amount of $1,700,000 (the "Existing
Equipment Advances").
2.1(d) from the date of this Agreement through June 30, 1999, up
to $500,000 or any greater or lesser amount at the Lender's absolute and sole
discretion (any such amounts to the extent not available under 2.1(a), 2.1(b),
2.1(c) the "Over Advances").
Notwithstanding the preceding clauses 2.1(a), 2.1(b), 2.1(c) and
2.1(d), the maximum aggregate amount advanced against all Eligible Accounts,
Eligible Inventory and Existing Equipment plus Over Advances shall not exceed
$5,000,000.
Loans for additional sums requested by the Borrower may be made at the Lender's
sole discretion based upon the Lender's valuation of the Borrower's collateral
or other factors. The Borrower acknowledges and agrees that the Lender may from
time to time, for the Lender's convenience, segregate or apportion the
Borrower's collateral for purposes of determining the amounts and maximum
amounts of Advances which may be made hereunder. Nevertheless, the Lender's
security interest in all such collateral, and any other collateral rights,
interests and properties which may now or hereafter be available to the Lender,
shall secure and may be applied to the payment of any and all Advances and other
indebtedness secured by the Lender's security interest, in any order or manner
of application and without regard to the method by which the Lender determines
to make Advances hereunder.
Section 2.2 PROCEDURE FOR ADVANCES; WIRE TRANSFER FEES. Any request
by the Borrower for an Advance shall be in writing and must be given so as to be
received by the Lender
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not later than 10:30 a.m. Central time on the requested Advance date, or such
later time as may be acceptable to the Lender in its sole discretion. Each
request for an Advance shall be irrevocable and shall be deemed a representation
by the Borrower that on the requested Advance date and after giving effect to
such Advance the applicable conditions specified in Article III have been and
will continue to be satisfied and the representations and warranties set forth
in Article IV will continue to be true. Each request for an Advance shall
specify the requested Advance date (which must be a Business Day) and the amount
of such Advance. Each request for an Advance shall be accompanied by a
Borrowing Base Certificate signed by a duly authorized officer of the Borrower
in form and substance satisfactory to the Lender (the "Borrowing Base
Certificate"). If the Lender determines, in its absolute and sole discretion,
to make the requested Advance, the Lender will wire transfer to the Borrower's
Account on the requested Advance date the amount of the requested Advance. The
Borrower will pay to the Lender a wire transfer fee of $15 per wire transfer of
any Advance to the Borrower's account.
Section 2.3 INTEREST RATES AND INTEREST PAYMENTS. Interest shall
accrue (i) on the unpaid balance of the Accounts Advances, Inventory Advances
and Existing Equipment Advances at a floating rate per annum equal to the sum of
the Reference Rate plus 1.35% (the "Blended Rate"); which Blended Rate Borrower
acknowledges to a combination of the interest rates charged by Lender (equal to
the sum of the Reference Rate plus .45%) and its participant, Republic
Acceptance Corporation ("RAC") (equal to the sum of the Reference Rate plus
2.25%), with both of Lender and RAC participating equally in the Accounts
Advances, Inventory Advances and Existing Equipment Advances, Borrower further
acknowledges and agrees that in the event that RAC's participation in the
Accounts Advances, Inventory Advances and Existing Equipment Advances exceeds
fifty percent (50%) of the total of the Accounts Advances, Inventory Advances
and Existing Equipment Advances outstanding then the Blended Rate shall increase
and be equal to RAC's percentage of the Accounts Advance, Inventory Advances and
Existing Equipment Advances multiplied by 2.25% PLUS Lender's percentage of the
Accounts Advance, Inventory Advances and Existing Equipment Advances multiplied
by .45% and (ii) on the unpaid balance of the Over Advances at a floating rate
equal to the sum of the Reference Rate plus 2.5% (the "Over Advance Rate") and
shall be due and payable monthly in arrears on the last day of each calendar
month; PROVIDED, HOWEVER, that in the event that Borrower's performance for
fiscal year end December 31, 1998 (as reported in the Borrower's audited
financial statements for fiscal year end December 31, 1998 as required by and
prepared in accordance with, Section 5.1 (a)), exceeds 75% of the projections
dated October 13, 1997 provided to Lender by Borrower, as determined by Lender
in its sole discretion, based on a review by Lender of Borrower's financial
statements, the projections dated October 13, 1997 and other factors determined
relevant by Lender, then Interest shall accrue on the Accounts Advances,
Inventory Advances and Existing Equipment Advances at a floating rate per annum
equal to the sum of the Reference Rate plus .50% from and after the first day of
the first calendar month following the date of Lender's receipt of the December
31, 1998 audited financial statements; PROVIDED FURTHER, that upon the
occurrence and during the continuance of any failure by the Borrower to comply
with any agreement or covenant of the Borrower under any Loan Document, the
unpaid balance of the Advances shall thereafter bear interest at a floating rate
equal to the sum of (a) the Blended Rate or the Over Advance Rate, whichever is
applicable plus (b) 2% and shall be due and payable on demand; AND PROVIDED
FURTHER that the minimum amount of interest due and payable in any month shall
not be less than $25,000; AND PROVIDED FURTHER that any interest due and paid in
any month in excess of $25,000 may be used to reduce the minimum interest due
and payable in any future month within twelve months after such month if the
amount of interest due and payable in any such future month would be less than
$25,000 but for the inclusion of this provision; AND PROVIDED FURTHER that
minimum interest due and payable in any consecutive 12 month period during the
term hereof shall not be less than $300,000(or such lesser amount as corresponds
to the term hereof if less than 12 months).
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Section 2.4 REPAYMENT AND PREPAYMENT.
ALL ADVANCES SHALL BE DUE AND PAYABLE ON DEMAND; PROVIDED HOWEVER, that (y)
if demand for payment of the Existing Equipment Advances is not sooner made, the
outstanding amount of the Existing Equipment Advances shall be reduced in sixty
(60) equal monthly installments, commencing on January 1, 1998 and continuing on
the first day of each month thereafter until such time that the Existing
Equipment Advances are paid in full, and (z) if demand for payment of the Over
Advances is not sooner made, the outstanding amount of the Over Advances as of
June 30, 1999 shall be reduced in full in eighteen (18) equal monthly
installments, commencing on August 1, 1999 and continuing on the first day of
each month thereafter until such time that the Over Advances are paid in full,
AND PROVIDED FURTHER that the inclusion of the foregoing provisions for the
periodic reduction of the outstanding amounts of the Existing Equipment Advances
and the Over Advances is solely to provide terms for repayment in the absence of
actual demand and does not affect or impair the Lender's absolute right to
demand payment at any time for any reason. NOTHING SET FORTH IN THIS AGREEMENT,
THE SECURITY AGREEMENT OR ANY OTHER AGREEMENT BETWEEN THE BORROWER AND THE
LENDER SHALL IN ANY WAY LIMIT THE LENDER'S RIGHT TO DEMAND PAYMENT OF THE
ADVANCES IN WHOLE OR IN PART.
Section 2.5 COMPUTATION. Interest on the Advances shall be computed
on the basis of actual days elapsed and a year of 360 days.
Section 2.6 FACILITY FEE. The Borrower shall pay to the Lender a
facility fee in an amount equal to $25,000 (the "Facility Fee"). The Facility
Fee shall be payable on the Closing Date.
ARTICLE III
CONDITIONS PRECEDENT
Section 3.1 CONDITIONS PRECEDENT. No Advances shall be made
hereunder except upon the prior or simultaneous fulfillment of each of the
following conditions:
3.1(a) DOCUMENTS. The Lender shall have received the following:
(i) This Agreement executed by a duly authorized officer (or
officers) of the Borrower and dated the Closing Date.
(ii) A copy of the corporate resolutions of the Borrower
authorizing the execution, delivery and performance of this Agreement
and containing an incumbency certificate showing the names and titles,
and bearing the signatures of, the officers of the Borrower authorized
to execute this Agreement, certified as of the Closing Date by the
Secretary or an Assistant Secretary of the Borrower.
(iii) A copy of the Articles of Incorporation of the Borrower
with all amendments thereto, certified by the appropriate governmental
official of the jurisdiction of its incorporation as of a recent date
acceptable to Lender and its counsel.
(iv) A certificate of good standing for the Borrower in the
jurisdiction of its incorporation, certified by the appropriate
governmental officials as of a recent date acceptable to Lender and
its counsel.
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(v) A copy of the bylaws of the Borrower, certified as of the
Closing Date by the Secretary or an Assistant Secretary of the
Borrower.
(vi) The Security Agreement, duly executed by the Borrower.
(vii) An initial Borrowing Base Certificate.
(viii) Evidence of insurance required to be maintained under
Section 5.3, naming the Lender as loss payee in form and substance
satisfactory to the Lender.
(ix) The opinion of counsel to the Borrower covering such
matters as the Lender may request.
3.1(b) OTHER MATTERS. All organizational and legal proceedings
relating to the Borrower and all instruments and agreements in connection with
the transactions contemplated by this Agreement shall be satisfactory in scope,
form and substance to the Lender and its counsel, and the Lender shall have
received all information and copies of all documents, including records of
corporate proceedings, which it may reasonably have requested in connection
therewith, such documents where appropriate to be certified by proper Borrower
or governmental authorities.
3.1(c) FEES AND EXPENSES. The Lender shall have received all
fees and other amounts due and payable by the Borrower on or prior to the
Closing Date, including the reasonable fees (not to exceed $5,000) and expenses
of counsel to the Lender payable pursuant to Section 8.2.
3.1(d) PERFECTION. The Security Agreement and/or any and all
financing statements with respect thereto shall have been appropriately filed to
the satisfaction of the Lender; the Lender shall have received UCC searches
and/or other Lien searches satisfactory to the Lender; and the priority and
perfection of the Lien created thereby shall have been established to the
satisfaction of the Lender.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Lender:
Section 4.1 ORGANIZATION, STANDING, ETC. The Borrower is a
corporation duly incorporated and validly existing and in good standing under
the laws of the jurisdiction of its incorporation and has all requisite
corporate power and authority to carry on its business as now conducted, to
enter into this Agreement and to perform its obligations hereunder and
thereunder. This Agreement has been duly authorized by all necessary corporate
action and when executed and delivered will be the legal and binding obligations
of the Borrower. The execution and delivery of this Agreement will not violate
the Borrower's Articles of Incorporation or bylaws or any law applicable to the
Borrower. No governmental consent or exemption is required in connection with
the Borrower's execution and delivery of this Agreement.
Section 4.2 FINANCIAL STATEMENTS AND NO MATERIAL ADVERSE CHANGE. The
Borrower's audited financial statements as at December 31, 1996 and its
unaudited financial statements as at September 30, 1997, as heretofore furnished
to the Lender, have been prepared in accordance with GAAP (subject in the case
of the September 30, 1997 statements to year end adjustments and footnotes).
The Borrower has no material obligation or liability not disclosed in
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such financial statements, and there has been no material adverse change in the
condition of the Borrower since the date of the latest of such financial
statements.
Section 4.3 LITIGATION. There are no actions, suits or proceedings
pending or, to the knowledge of the Borrower, threatened against or affecting
the Borrower which, if determined adversely to the Borrower, would have, a
material adverse effect on the condition of the Borrower. The Borrower is not
in violation of any law or regulation (including environmental laws and
regulations and laws relating to employee benefit plans) where such violation
could reasonably be expected to impose a material liability on the Borrower.
Section 4.4 TAXES. The Borrower has filed all federal, state and
local tax returns required to be filed and has paid or made provision for the
payment of all taxes due and payable pursuant to such returns and pursuant to
any assessments made against it or any of its property (other than taxes, fees
or charges the amount or validity of which is currently being contested in good
faith by appropriate proceedings and with respect to which reserves in
accordance with GAAP have been provided on the books of the Borrower).
Section 4.5 SUBSIDIARIES. The Borrower has no subsidiaries except
for EPR, Inc. and Xxxxxx Recycling of Florida, Inc.
ARTICLE V
AFFIRMATIVE COVENANTS
Until this Agreement shall have expired or been terminated and all of
the Borrower's other obligations to the Lender under this Agreement shall have
been paid in full, unless the Lender shall otherwise consent in writing:
Section 5.1 FINANCIAL STATEMENTS AND REPORTS. The Borrower will
furnish to the Lender:
5.1(a) As soon as available and in any event within 120 days
after the end of each fiscal year of the Borrower, financial statements of the
Borrower consisting of at least statements of income, cash flow and changes in
stockholders' equity, and a balance sheet as at the end of such year, setting
forth in each case in comparative form corresponding figures from the previous
annual audit, certified by independent certified public accountants selected by
the Borrower and acceptable to the Lender.
5.1(b) As soon as available and in any event within 30 days
after the end of each fiscal month, unaudited financial statements for the
Borrower for such month and for the period from the beginning of such fiscal
year to the end of such month.
5.1(c) Concurrently with each request for an Advance, and in any
event not less than weekly, a Borrowing Base Certificate.
5.1(d) As soon as practicable and in any event within fifteen
days of the end of each month, (i) a listing of all Accounts, together with an
aging of all Accounts and a reconciliation of such Accounts against the listing
submitted pursuant hereto for the immediately preceding month, (ii) a
certificate of raw materials inventory levels, and (iii) a listing of all
accounts payable, together with an aging of all accounts payable all in form and
substance satisfactory to the Lender.
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5.1(e) Within five days after the due date, proof of payment or
deposit, when due, of all withholding and F.I.C.A. taxes owing by the Borrower
from time to time, in form and substance satisfactory to the Lender by a payroll
service satisfactory to the Lender and whose services the Borrower shall at all
times retain.
5.1(f) From time to time, such other information regarding the
business, operation and financial condition of the Borrower as the Lender may
reasonably request.
Section 5.2 CORPORATE EXISTENCE. The Borrower will maintain its
corporate existence in good standing under the laws of its jurisdiction of
incorporation and its qualification to transact business in each jurisdiction
where failure so to qualify would permanently preclude the Borrower from
enforcing its rights with respect to any material asset or would expose the
Borrower to any material liability.
Section 5.3 INSURANCE. The Borrower will maintain with financially
sound and reputable insurance companies such insurance as may be required by law
and such other insurance in such amounts and against such hazards as is
customary in the case of reputable corporations engaged in the same or similar
business and similarly situated, including without limitation such insurance as
may be required under the Security Agreement.
Section 5.4 PAYMENT OF TAXES AND CLAIMS. The Borrower will file all
tax returns and reports which are required by law to be filed by it and will pay
before they become delinquent, all taxes, assessments and governmental charges
and levies imposed upon it or its property and all claims or demands of any kind
(including those of suppliers, mechanics, carriers, warehousemen, landlords and
other like Persons) which, if unpaid, might result in the creation of a Lien
upon its property.
Section 5.5 INSPECTION. The Borrower will permit any Person
designated by the Lender to visit and inspect any of the properties, books and
financial records of the Borrower, to examine and to make copies of the books of
accounts and other financial records of the Borrower, and to discuss the
affairs, finances and accounts of the Borrower with its officers at such
reasonable times and intervals as the Lender may designate. The Lender will
endeavor to give reasonable notice of such visits and inspections. The Borrower
shall also allow the Lender and its agents to conduct periodic collateral audits
of the Borrower's assets at such intervals as the Lender may choose, and the
Borrower shall pay to Lender a fee in the amount of $750 per day per collateral
audit, plus out-of-pocket costs and expenses incurred in connection with such
collateral audits, (provided that so long as no Event of Default (as that term
is defined in the Security Agreement) has occurred under the Security Agreement
and is continuing, the Borrower shall not be required to pay for more than two
(2) collateral audits in any calendar year).
Section 5.6 MAINTENANCE OF PROPERTIES. The Borrower will maintain
its properties in good condition, repair and working order, and supplied with
all necessary equipment, and make all necessary repairs, renewals, replacements,
betterments and improvements thereto, all as may be necessary so that the
business carried on in connection therewith may be properly and advantageously
conducted at all times.
Section 5.7 BOOKS AND RECORDS. The Borrower will keep adequate and
proper records and books of account in which full and correct entries will be
made of its dealings, business and affairs.
Section 5.8 COMPLIANCE. The Borrower will comply in all material
respects with all laws, rules and regulations to which it may be subject.
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Section 5.9 NOTICE OF LITIGATION. The Borrower will give prompt
written notice to the Lender of the commencement of any action, suit or
proceeding affecting the Borrower.
Section 5.10 PLANS. The Borrower will maintain any employee benefit
plans in compliance with all material requirements of applicable laws and
regulations.
Section 5.11 SPECIAL AGREEMENTS REGARDING ACCOUNTS.
5.11(a) Collection of Accounts and all other amounts due to the
Borrower shall be subject to the provisions of paragraphs 5 and 6 of the
Security Agreement concerning the Lockbox and Collateral Account (as those terms
are defined in the Security Agreement). The Borrower shall provide to the
Lender a daily collection report of all Accounts collected. All collections
received in the Collateral Account and reported to Lender before 8:00 a.m.
(Central time) on any Business Day that is a Monday through Thursday, or before
2:00 p.m. (Central time) on any Business Day that is a Friday, shall be applied
to the payment of the Advances (in such order of application as the Lender may
determine) on the day so received, or if received later, on the next Business
Day; PROVIDED HOWEVER, that for purposes of determining the interest due and
payable on the unpaid balance of the Advances under Section 2.3, all collections
received in the Collateral Account shall be applied to the unpaid balance of the
Advances when such collections become finally collected funds after allowing not
less than two (2) Business Days for collection. At Lender's request, the
Borrower will deliver all customer billing statements to the Lender for
examination and for mailing in the Borrower's stamped and addressed envelopes.
5.11(b) Subject to the rights granted to the Lender in paragraph
5 of the Security Agreement, all ledger sheets or cards, invoices, shipping
records, correspondence, and other writings relating to Accounts shall, until
delivered to the Lender or removed by the Lender from the Borrower's premises,
be kept on the Borrower's premises without cost to the Lender in appropriate
containers in safe places.
5.11(c) Upon the Lender's demand for payment, the Lender may
remove from the Borrower's premises all books and records, correspondence,
documents and files relating to Accounts; and the Lender may without cost or
expense to the Lender use such of the Borrower's personnel, supplies, space and
equipment at the Borrower's place of business as the Lender may reasonably
desire without undue disruption to the Borrower's business or operations, for
the handling of collections. The Borrower will pay any and all out of pocket
expenses and cost of collection (including reasonable attorney fees) incurred by
the Lender in the Lender's handling of or effort to enforce collections.
5.11(d) The Borrower warrants that, except as may be disclosed in the
lists of Accounts furnished to the Lender: each customer billing statement
correctly states the subject matter and terms of sale; the merchandise conforms
thereto and is in all respects acceptable to the customer; the date of the
billing statement is not prior to the date of shipment; the Account is not
subject to any dispute, defense, offset or counterclaim; the account debtor is
not a subsidiary or Affiliate of the Borrower; and the Borrower has no reason to
believe the Account will not be paid in the regular course of business. The
Borrower will notify the Lender promptly of any event, circumstance or
communication with respect to any Account that is inconsistent with the
foregoing representation.
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ARTICLE VI
NEGATIVE COVENANTS
Until this Agreement shall have expired or been terminated and all of
the Borrower's other obligations to the Lender under this Agreement shall have
been paid in full, unless the Lender shall otherwise consent in writing:
Section 6.1 MERGER. The Borrower will not merge or consolidate or
enter into any analogous reorganization or transaction with any Person or
liquidate, wind up or dissolve itself (or suffer any liquidation or
dissolution).
Section 6.2 SALE OF ASSETS. The Borrower will not sell, transfer,
lease or otherwise convey all or any substantial part of its assets except for
sales and leases of inventory in the ordinary course of business.
Section 6.3 DIVIDENDS. The Borrower will not pay any dividends or
otherwise make any distributions on, or redemptions of, any of its outstanding
stock.
Section 6.4 INVESTMENTS. The Borrower will not make any loans,
advances or extensions of credit to any other Person (except for trade and
customer accounts receivable for inventory sold or services rendered in the
ordinary course of business and payable in accordance with customary trade
terms) or purchase or acquire any stock or other debt or equity securities of or
any interest in any other Person or any integral part of any business or the
assets comprising such business or part thereof, except for:
6.4(a) Investments in readily marketable direct obligations
issued or unconditionally guaranteed by the United States government or any
agency thereof and supported by the full faith and credit of the United States.
6.4(b) Certificates of deposit or bankers' acceptances issued by
any commercial Bank organized under the laws of the United States or any State
thereof which has (i) combined capital and surplus of at least $100,000,000, and
(ii) a credit rating with respect to its unsecured indebtedness from a
nationally recognized rating service that is satisfactory to the Lender.
6.4(c) Commercial paper given the highest rating by a nationally
recognized rating service.
6.4(d) Repurchase agreements relating to securities of the kind
described in Section 6.4 (a).
6.4(e) Other readily marketable investments in debt securities
which are reasonably acceptable to the Lender.
6.4(f) Travel advances to officers and employees in the ordinary
course of business.
6.4(g) Advances or loans to Hill Bio Science, not to exceed an
aggregate amount of $75,000.
Any investments under clauses (a), (b), (c) or (d) above must mature within one
year of the acquisition thereof by the Borrower.
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Section 6.5 INDEBTEDNESS. The Borrower will not borrow any money or
issue any bonds, debentures or other debt securities or otherwise become
obligated on any interest-bearing indebtedness except, (i) for the Advances
under this Agreement; (ii) existing indebtedness as disclosed on the most recent
financial statement of the Borrower referred to in Section 4.1, and (iii) in
amounts not to exceed $250,000 in the aggregate in any calendar year for the
purchase of equipment secured by a purchase money security interest or for a
capitalized lease obligation. In addition, Borrower may purchase equipment
secured by a purchase money security interest or incur indebtedness for a
capitalized lease obligation in excess of $250,000 in the aggregate in any
calendar year with the written consent of Lender, which consent shall not be
unreasonably withheld.
Section 6.6 LIENS. The Borrower will not create, incur, assume or
suffer to exist any Lien, or enter into any arrangement for the acquisition of
any property through conditional sale, lease-purchase or other title retention
agreements except:
6.6(a) Liens granted to the Lender.
6.6(b) Liens existing on the date of this Agreement and
disclosed in those UCC or other Lien searches referred to in Section 3.1(d).
6.6(c) Deposits or pledges to secure payment of workers'
compensation, unemployment insurance, old age pensions or other social security
obligations arising in the ordinary course of business of the Borrower.
6.6(d) Liens for taxes, fees, assessments and governmental
charges not delinquent.
6.6(e) Liens of carriers, warehousemen, mechanics and
materialmen, and other like Liens arising in the ordinary course of business,
for sums not due.
6.6(f) Liens incurred or deposits or pledges made or given in
connection with, or to secure payment of, indemnity, performance or other
similar bonds.
6.6(g) Encumbrances in the nature of zoning restrictions,
easements and rights or restrictions of record on the use of real property and
landlord's Liens under leases on the premises rented, which do not materially
detract from the value of such property or impair the use thereof in the
business of the Borrower.
6.6(h) Purchase money Liens or capitalized lease obligations
not to exceed $250,000 in the aggregate in any calendar year. In addition,
Borrower may incur a purchase money security interest Lien or a capitalized
lease obligation in excess of $250,000 in the aggregate in any calendar year
with the written consent of Lender, which consent shall not be unreasonably
withheld.
Section 6.7 CONTINGENT OBLIGATIONS. The Borrower will not guarantee
or otherwise become liable on the indebtedness of any other Person.
Section 6.8 CHANGE IN CONTROL. The Borrower will not allow a Change
in Control to occur.
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ARTICLE VII
TERMINATION BY BORROWER
This agreement shall continue in effect until terminated upon not less
than 30 days' prior written notice delivered by the Borrower certified mail to
Lender by certified mail. Termination shall not impair or affect the Lender's
rights existing as of the time notice of Termination is given. Borrowers
obligations with respect to payment of any Termination fee shall be fixed and
owing as of date such notice is given and not when such notice becomes
effective.
In the event that the Borrower gives notice to the Lender of the
termination of this Agreement under Section VII hereof at any time prior to the
second anniversary of the date of this Agreement, the Borrower will pay to the
Lender a prepayment charge, as additional compensation for the Lender's costs of
entering into this Agreement, in the amount of (i) three percent (3%) of the
maximum aggregate amount of the Advances if the notice of termination occurs
prior to the first anniversary of the date of this Agreement; and (ii) two
percent (2%) of the maximum aggregate amount of the Advances if the notice of
termination occurs after the first anniversary, but prior to the second
anniversary, of the date of this Agreement unless the outstanding amount of our
obligations hereunder are refinanced in full by an affiliate of U.S. Bancorp.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 MODIFICATIONS. Notwithstanding any provisions to the
contrary herein, any term of this Agreement may be amended with the written
consent of the Borrower; PROVIDED that no amendment, modification or waiver of
any provision of this Agreement or consent to any departure by the Borrower
therefrom shall in any event be effective unless the same shall be in writing
and signed by the Lender, and then such amendment, modifications, waiver or
consent shall be effective only in the specific instance and for the purpose for
which given.
Section 8.2 COSTS AND EXPENSES. Whether or not the transactions
contemplated hereby are consummated, the Borrower agrees to reimburse the Lender
upon demand for all reasonable out-of-pocket expenses paid or incurred by the
Lender (including filing and recording costs and fees and expenses of Xxxxxx &
Xxxxxxx LLP, counsel to the Lender) in connection with the negotiation,
preparation, approval, review, execution, delivery, amendment, modification,
interpretation, collection and enforcement of this Agreement including all fees
due Lender incurred pursuant to this Agreement. For the purpose of this
Agreement the fees of Xxxxxx & Whitney LLP shall be limited to $ 5,000 not
including out of pocket fees and expenses. This limitation shall not be
applicable to any subsequent transaction, subsequent modification or the
exercise of any right or remedy under this or any related agreement.The
obligations of the Borrower under this Section shall survive any termination of
this Agreement. In the event such costs, fees or expenses are not promptly paid
by Borrower on demand Lender may set off the amount of any such costs, fees or
expenses from funds available to Borrower. If the Borrower elects, the Borrower
may treat the amount of any such costs, fees or expenses as an Advance
hereunder.
Section 8.3 WAIVERS, ETC. No failure on the part of the Lender to
exercise and no delay in exercising any power or right hereunder shall operate
as a waiver thereof; nor shall any single or partial exercise of any power or
right preclude any other or further exercise thereof or the exercise of any
other power or right. The rights and remedies of the Lender hereunder are
cumulative and not exclusive of any right or remedy the Lender otherwise has.
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Section 8.4 NOTICES. Except when telephonic notice is expressly
authorized by this Agreement, any notice or other communication to any party in
connection with this Agreement shall be in writing and shall be sent by manual
delivery, telegram, telex, facsimile transmission, overnight courier or United
States mail (postage prepaid) addressed to such party at the address specified
on the signature page hereof, or at such other address as such party shall have
specified to the other party hereto in writing. All periods of notice shall be
measured from the date of delivery thereof if manually delivered, from the date
of sending thereof if sent by telegram, telex or facsimile transmission, from
the first Business Day after the date of sending if sent by overnight courier,
or from four days after the date of mailing if mailed; PROVIDED, HOWEVER, that
any notice to the Lender under Article II hereof shall be deemed to have been
given only when received by the Lender.
Section 8.5 SUCCESSORS AND ASSIGNS; DISPOSITION OF LOANS. This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns, except that the Borrower may not
assign its rights or delegate its obligations hereunder without the prior
written consent of the Lender. The Lender may at any time sell, assign,
transfer, grant participations in, or otherwise dispose of any portion of the
Advances to banks or other financial institutions. The Lender may disclose any
information regarding the Borrower in the Lender's possession to any prospective
buyer or participant.
Section 8.6 OFFSET. The Borrower hereby irrevocably authorizes the
Lender to set off all sums owing by the Borrower to the Lender against all
deposits and credits of the Borrower with, and any and all claims of the
Borrower against, the Lender. The Borrower further agrees that any bank
participating with the Lender in Advances hereunder may exercise any and all
rights of setoff with respect to such participation as fully as if such
participant had lent directly to the Borrower the amount of such participation.
SECTION 8.7 GOVERNING LAW AND CONSTRUCTION. THE VALIDITY,
CONSTRUCTION AND ENFORCEABILITY OF THIS AGREEMENT SHALL BE GOVERNED BY THE
INTERNAL LAWS OF THE STATE OF MINNESOTA, WITHOUT GIVING EFFECT TO CONFLICT OF
LAWS PRINCIPLES THEREOF.
SECTION 8.8 CONSENT TO JURISDICTION. AT THE OPTION OF THE LENDER,
THIS AGREEMENT MAY BE ENFORCED IN ANY FEDERAL COURT OR MINNESOTA STATE COURT
SITTING IN HENNEPIN COUNTY, MINNESOTA; AND THE BORROWER CONSENTS TO THE
JURISDICTION AND VENUE OF ANY SUCH COURT AND WAIVES ANY ARGUMENT THAT VENUE IN
SUCH FORUMS IS NOT CONVENIENT. IN THE EVENT THE BORROWER COMMENCES ANY ACTION
IN ANOTHER JURISDICTION OR VENUE UNDER ANY TORT OR CONTRACT THEORY ARISING
DIRECTLY OR INDIRECTLY FROM THE RELATIONSHIP CREATED BY THIS AGREEMENT, THE
LENDER AT ITS OPTION SHALL BE ENTITLED TO HAVE THE CASE TRANSFERRED TO ONE OF
THE JURISDICTIONS AND VENUES ABOVE-DESCRIBED, OR IF SUCH TRANSFER CANNOT BE
ACCOMPLISHED UNDER APPLICABLE LAW, TO HAVE SUCH CASE DISMISSED WITHOUT
PREJUDICE.
SECTION 8.9 WAIVER OF JURY TRIAL. EACH OF THE BORROWER AND THE
LENDER IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE ADVANCES AND ANY
OTHER
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LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
Section 8.10 INDEMNIFICATION. The Borrower hereby agrees to defend,
protect, indemnify and hold harmless the Lender and its affiliates and the
directors, officers, employees, attorneys and agents of the Lender and its
affiliates (each of the foregoing being an "Indemnitee" and all of the foregoing
being collectively the "Indemnitees") from and against any and all claims,
actions, damages, liabilities, judgments, costs and expenses (including all
reasonable fees and disbursements of counsel which may be incurred in the
investigation or defense of any matter) imposed upon, incurred by or asserted
against any Indemnitee, whether direct, indirect or consequential and whether
based on any federal, state, local or foreign laws or regulations (including
securities laws, environmental laws, commercial laws and regulations), under
common law or on equitable cause, or on contract or otherwise: (a) by reason
of, relating to or in connection with the execution, delivery, performance or
enforcement of any Loan Document, any commitments relating thereto, or any
transaction contemplated by any Loan Document; or (b) by reason of, relating to
or in connection with any credit extended or used under the Loan Documents or
any act done or omitted by any Person, or the exercise of any rights or remedies
thereunder, including the acquisition of any collateral by the Lender by way of
foreclosure of the Lien thereon, deed or xxxx of sale in lieu of such
foreclosure or otherwise; provided, however, that the Borrower shall not be
liable to any Indemnitee for any portion of such claims, damages, liabilities
and expenses resulting from such Indemnitee's negligence or willful misconduct.
In the event this indemnity is unenforceable as a matter of law as to a
particular matter or consequence referred to herein, it shall be enforceable to
the full extent permitted by law.
Section 8.11 CAPTIONS. The captions or headings herein and any table
of contents hereto are for convenience only and in no way define, limit or
describe the scope or intent of any provision of this Agreement.
Section 8.12 ENTIRE AGREEMENT. This Agreement and the other Loan
Documents embody the entire agreement and understanding between the Borrower and
the Lender with respect to the subject matter hereof and thereof. This Agreement
supersedes all prior agreements and understandings relating to the subject
matter hereof.
Section 8.13 COUNTERPARTS. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same instrument, and either of the parties hereto may execute this Agreement by
signing any such counterpart.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the date first above written.
XXXXXX MANUFACTURING, INC.
By /s/ Xxxxx X. Xxxxxx
------------------------
Print Name Xxxxx X. Xxxxxx
Title President
Borrower's Address:
000 00xx Xxxxxx Xxxxx
Xxxxxxx, XX 00000
U.S. BANK NATIONAL ASSN.
By /s/ Xxxxx X. Xxxxxxxx
Print Name Xxxxx X. Xxxxxxxx
------------------------
Title Vice President
Lender's Address:
0000 Xxxxxxx Xxxxxx XX, Xxxxx 000
Xxxxxxxxxxx, XX 00000
Fax: (000) 000-0000
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