LOAN AGREEMENT
(Loan No. ________________ )
THIS LOAN AGREEMENT ("this Agreement") is made and entered into this ____ day
of _________ , _______ , by and between ______________________________ , a _________
corporation ("Lender"), with its Home Office in _________ , _________ County, _________ ,
and _________ , ("Borrower"), a general partnership formed under _________ law composed of
_________ (" _________ "), a Mississippi corporation, and _________ (" _________ "), a
_________ corporation.
W I T N E S S E T H :
WHEREAS, _________ , a _________ corporation, owns a _________ ("the
" _________ ") located on a _________ acre site in _________ Mississippi, which _________
manufactures _________ ; and
WHEREAS, in order to obtain funds to be used in the acquisition of said _________ and
the thirty-one acre site on which the ______________ is located, Borrower has accepted, and
Lender has agreed, subject to the terms and conditions of this Loan Agreement, to make
contemporaneously with the execution of this Loan Agreement, a secured loan ("the Loan") in
the principal amount of ______________ Dollars ($ ______________ ) to be advanced in one
installment upon satisfaction of certain express conditions;
NOW, THEREFORE, in consideration of the mutual promises set forth herein and in
consideration of the extension of credit to the Borrower and of the promises and undertakings
herein set forth, the parties hereto agree as follows, it being expressly understood that all
covenants, terms, conditions and undertakings set forth in this Agreement will survive and
remain in full force and effect until such time as the principal amount of and all interest on any
indebtedness owing by the Borrower to the Lender shall have been repaid in full and no
additional extensions or advances have been requested.
ARTICLE I
Terms and Definitions
As used in this Agreement, the following terms shall have the meaning set forth opposite each of
them:
(a) Assets : Anything owned by Borrower and/or any right or interest therein of Borrower
that would be shown on a consolidated balance sheet of Borrower prepared in accordance with
GAAP.
(b) Borrower : _________ , a partnership formed under the laws of the State of
_________ .
(c) Business Day ; Any day other than a Saturday, Sunday or other day on which Lender
is closed at its home office in Boston, ______________.
(d) Cash Flow Available for _________ : At the end of each fiscal year the net income of
Borrower as shown on the audited financial statements prepared in accordance with Paragraph
4.01 (d) hereof, before any deduction with respect to interest, or federal and state income taxes,
or financial accounting depreciation, all as determined on a Consolidated Basis in
accordance with GAAP.
(e) Cash Flow Coverage Ratio : The ratio of Cash Flow Available for _________ to
_________ .
(f) Closing : The execution and delivery of this Loan Agreement and the Security
Documents, certificates, instruments and agreements contemplated to be executed
contemporaneously with this Loan Agreement.
(g) Commitment Letter : That certain commitment letter, dated __________ ____ ,
_____ , from Lender to _________ and _________ as extended by letter dated __________ ____ ,
_____ , from Lender to _________ and _________ .
(h) Consolidated Basis : Assets, liabilities, and equities of Borrower and any Subsidiary
shall be deemed to be one for accounting purposes in calculating the various ratios and
requirements used herein. Whenever any financial requirement imposed on Borrower under this
Loan Agreement is required to be determined on a "Consolidated Basis", assets, liabilities and
equities of Borrower and all Subsidiaries shall be classified and included in the consolidated
financial statements of Borrower in accordance with GAAP applied on a basis consistent with
those used in the preparation of the financial statements listed in Paragraph 4.01(d) hereof.
(i) Current Assets : Assets owned by Borrower which in Borrower's ordinary and normal
course of business will be converted into cash within a year, determined on a Consolidated Basis
in accordance with GAAP.
(j) Current Liabilities : Debts, liabilities or other obligations of Borrower which must be
paid or satisfied within a year, determined on a Consolidated Basis in accordance with GAAP.
(k) Current Ratio : Ratio of Current Assets to Current Liabilities.
(1) Deed of Trust and Security Agreement : That certain Deed of Trust and Security
Agreement of even date herewith, executed by Borrower to Lender, conveying certain real
property in _________ County, Mississippi, to _________ , Trustee, as security for the
obligations, and granting security interests in all machines, equipment, and other personal
property of Borrower (with the exception of inventory, accounts receivable, and cash which does
not constitute proceeds secured by said Security Agreement) as further security for the
Obligations, together with all renewals, extensions, amendments, institutions or other
modifications thereto.
(m) Default(s) ; Any event or condition, the occurrence of which is, or which would, with
the lapse of time or the giving of notice or both, become an Event of Default.
(n) ERISA: The Employment Retirement Income Security Act of 1974, as amended, and
any successor statute of similar import, and regulations thereunder, in each case as in effect from
time to time.
(o) Event(s) of Default: See Paragraph 7.01 hereof.
(p) Financing Statements : The Financing Statements filed pursuant to the Uniform
Commercial Code of the State of Mississippi for the purpose of perfecting Lender's security
interests in and to that portion of the Security which is personal property or fixtures.
(q) Funded Debt or Long Term Debt : Any loans, indebtedness for borrowed money,
liabilities or other obligations for borrowed money of Borrower which by its terms matures at or
is extendable or renewable at the option of the Borrower to a date more than twelve months after
the date of its creation, excluding operating leases, any Subordinated Debt, and deferred taxes.
(r) GAAP : Generally accepted accounting principles in the United States of America (as
such principles may change from time to time) applied on a consistent basis (except for changes
in application in which Borrower's independent certified public accountants concur), applied
both to classification of items and amounts.
(s) Governmental Authority : Any and all courts, boards, agencies, commissions,
offices, or authorities of any nature whatsoever for any governmental unit (federal, state, county,
district, municipal, city, or otherwise) whether now or hereafter in existence.
(t) Hazardous Substances : All hazardous and toxic substances, wastes or materials, any
pollutants or contaminants (including asbestos and raw materials which include hazardous
constituents), or any other similar substances, or materials which are included under or regulated
by any Legal Requirement or (any local, state or federal law, rule or regulation pertaining to
environmental regulation, contamination or clean-up, including "CERCLA", "RCRA", or state
lien or state superlien or environmental clean-up statutes, or state underground storage tank
statutes or regulations, (all such Legal Requirements, laws, rules, and regulations are hereinafter
referred to collectively as "Environmental Laws").
(u) Improvements : The Improvements located or to be located on the Land, including all
buildings, together with all fixtures, fixed equipment and machinery attached to, installed in, or
used in connection with the operation of the _________ and Land.
(v) Indebtedness : The principal of, interest on, and all other amounts, payments, and
premiums due under or secured by the security Documents.
(w) Internal Revenue Code : The Internal Revenue Code of 1986, as amended, and any
successor statutes of similar import, and the regulations thereunder, in each case as in effect from
time to time.
(x) Investment: Any advance, loan of capital, contribution by or any other investment of
funds by Borrower.
(y) Land : The real estate or interest therein described in Exhibit "A" attached hereto, all
fixtures and improvements situated thereon, and rights, titles and interests appurtenant thereto.
(z) Legal Requirements : (i) Any and all present and future judicial decisions, statutes,
rulings, rules, regulations, permits, certificates, or ordinances of any Governmental Authority in
any way applicable to Borrower, or the Mortgaged Property, including the ownership, use,
construction, occupancy, possession, operation, maintenance, alteration, repair, or reconstruction
thereof, (ii) any and all covenants, conditions, and restrictions contained in any deed or other
form of conveyance or in any other instrument of any nature that relate in any way or are
applicable to the Mortgaged Property or the ownership, use or occupancy thereof, (iii)
Borrower's or Partners' presently or subsequently effective by-laws and articles of incorporation
or partnership, limited partnership, joint venture, trust, or other form of business association
agreement, and (iv) any and all leases and other contracts (written or oral) that relate in any way
to the Mortgaged Property.
(aa) Lender: _________ and/or its successors or assigns.
(bb) Liabilities : Any debt, liability or other obligation of Borrower, determined on a
Consolidated Basis in accordance with GAAP.
(cc) Loan : The loan of $ _________ to be made by Lender in accordance with the terms
of the Agreement, comprising the loan evidenced by the Note.
(dd) Loan Agreement : This Loan Agreement, as executed by and between Borrower and
Lender, together with all renewals, extensions, amendments, or modifications thereto.
(ee) Material Supply Agreement : An agreement to be entered into by _________
Corporation and Borrower concerning the purchase by _________ Corporation of certain
products produced by the Borrower, such agreement to be in the form attached hereto as
Appendix 1.
(ff) Mortgaged Property : The Land and Improvements and all other property (real,
personal or mixed) that is conveyed by the Deed of Trust and Security Agreement or in which a
security interest is therein created and all other property (real, personal or mixed) on which a lien
or security interest is placed or granted to secure the repayment of the Indebtedness or the
performance and discharge of the Obligations.
(gg) Net Income : The Net Income of the Borrower as determined on a consolidated basis
in accordance with GAAP.
(hh) Net Tangible Assets : Tangible Assets less Current Liabilities.
(ii) Net Worth : All Assets less all Liabilities.
(jj) Note : That certain Promissory Note of even date herewith executed by Borrower to
the order of the Lender in the principal amount of _________ Dollars ($ _________ ), together
with all renewals, extensions, amendments, substitutions and/or other modifications thereto.
(kk) Obligations : The obligation of Borrower to: (1) pay the principal and interest on the
Note in accordance with the terms thereof, and to satisfy all of Borrower's other liabilities or
obligations to Lender, under this Loan Agreement, the Deed of Trust and Security Agreement, or
any other Security Document, whether now existing or hereafter incurred, matured or unmatured,
direct or contingent, joint or several, including any extensions, amendments, modifications,
renewals or increases thereof; (2) repay to Lender all amounts advanced by Lender under this
Loan Agreement, the Deed of Trust and Security Agreement, or any other Security Document on
behalf of Borrower, including, without limitation, advances for principal or interest payments to
prior secured parties, mortgagees or lenders or for taxes, levees, insurance, rent, repairs, to or
maintenance or storage of any of the Security; and (3) reimburse Lender, on demand, for all of
Lender's expenses and costs, including the reasonable fees and expenses of Lender's outside
counsel, in connection with the preparation, administration, amendment, modification or
enforcement of this Loan Agreement and other Security Documents or agreements executed in
connection therewith, including, without limitation any proceeding brought or threatened to
enforce payment of any of the obligations referred to herein.
(ll) Partners : _________ and _________ .
(mm) Permitted Encumbrances : The liens, security interests and equipment leases
described in Exhibit "B" attached hereto.
(nn) Person : An individual; a trust; an estate; a Governmental Authority; or a
partnership, joint venture, corporation, company, firm, or any other entity whatsoever.
(oo) Reportable Event: (1) A reportable event as described in Paragraph 4043 of
ERISA, (2) a withdrawal by a substantial employer from a plan to which more than one
employer contributes, as referred to in Paragraph 4063(b) of ERISA, or (3) a cessation of
operations of a facility causing more than 20% of plan participants to be separated from
employment as referred to in Paragraph 4062(f) of ERISA.
(pp) Security : The items of real and personal property and Assets of Borrower which
have been deeded, mortgaged, pledged, assigned or conveyed, or agreed so to be, to secure
payment of the obligations and which are more particularly described in the Deed of Trust and
Security Agreement.
(qq) Security Documents : This Agreement, the Note, Deed of Trust and Security
Agreement, the Financing Statements, the Credit Support Agreement, and any and all other
documents now or hereafter executed by Borrower to evidence or secure the payment of the
Indebtedness or the performance and discharge of the obligations.
(rr) Hancock Debt : All indebtedness owed by Borrower to Lender under the Loan.
(ss) Hancock Debt Service : All cash interest and principal payments on _________
Debt.
(tt) Subordinated Debt : All claims or liabilities of Borrower to its Partners which are
subordinate to the Hancock Debt (including the indebtedness represented by the Subordinated
Note of even date herewith of _________ to _________ , in the amount of $ _________ , and any
other indebtedness of Borrower for borrowed money which is subordinate to the _________
Debt, provided, that Borrower shall not incur any such other indebtedness without Lender's prior
written approval of the terms thereof, including the terms of subordination, the creditor, the
amount, and the interest rate, which approval shall not be unreasonably withheld.
(uu) Subsidiary: Any corporation, partnership, joint venture or other business entity in
which a majority of the securities (or other evidences of ownership) which have voting power are
owned by Borrower. For the purpose of this Loan Agreement, a corporation, partnership, joint
venture or other business entity in which a majority of the securities (or other evidences of
ownership) which have voting power are owned by a Subsidiary, as defined by the preceding
sentence, shall also be deemed to be a Subsidiary. The word "Affiliate" with respect to any
Person, as defined herein, means a Person, or entity that directly controls, is controlled by, or is
under common control with such Person, whether through the ownership of voting securities, by
contract or otherwise.
(vv) Tangible Assets : All Assets, except intangible Assets such as goodwill, patents and
similar assets of an intangible nature.
(ww) Total Capital : The sum of Net Worth, Subordinated Debt, and Funded Debt, as
determined on a consolidated basis in accordance with GAAP and shown on the Financial
Statements prepared in accordance with Paragraph 4.01(d) hereof.
(xx) Working Capital : Current Assets less Current Liabilities.
(yy) Working Capital Facility : A loan secured by the inventory and/or accounts
receivable of Borrower.
(zz) Hancock Funded Debt : That portion of the Hancock Debt which constitutes Funded
Debt.
ARTICLE II
Disbursement of the Loan and the Note
2.01 Disbursement. ______________ Dollars ($ _________ ) of the Loan shall be
disbursed subject to and in accordance with the following conditions and limitations at the
Closing, but no later than August 23, 1991; provided, however, the obligation of the Lender to
make the Loan to Borrower at Closing, or at any time thereafter, is subject to the conditions
precedent that Lender has received on or before the closing date in form and substance
satisfactory to Lender's counsel, such assurances and evidence as Lender may require of the
performance by the Borrower of all its agreements theretofore to be performed hereunder, and
subject to the accuracy of Borrower's representations herein contained and further subject to the
satisfaction, at or prior to closing, of the following further conditions:
(a) Lender has received an ALTA Mortgagee Title Insurance Policy in the full
amount of the Loan current through the date the Loan is made, in form and substance and with
insurer(s) acceptable to Lender insuring that the Deed of Trust and Security Agreement creates
valid and enforceable first and prior lien on the properties therein described in favor of Lender,
subject only to the Permitted Encumbrances described in said Deed of Trust and such other
exceptions or endorsements as Lender shall permit or request;
(b) Lender has received a survey of the Mortgaged Property satisfactory to Lender
showing the location of the Mill and all other Improvements and showing all easements, licenses,
restrictions and encroachments, if any, on the Mortgaged Property, and showing that the
Improvements are entirely within the property lines of the Land and do not encroach upon,
breach, or violate any building line, easements, or property line.
(c) Borrower shall have caused to be released any mortgage, deed of trust, lien,
pledge, security interest, encumbrance, or charge asserted against any of the Mortgaged Property
(other than the Permitted Encumbrances).
(d) There shall exist no unrepaired damage to the applicable Improvements, and no
Events of Default and Borrower shall be in compliance with the financial covenant provisions of
Paragraph 4.01 herein (computed for these purposes as if, immediately prior to Closing, the
applicable Loan funds had been advanced and the proceeds applied toward payment of
applicable closing costs and the release of any liens required to be released at Closing).
(e) Borrower has paid all fees and expenses incurred by Lender in connection with
the transactions described in this Agreement (including legal fees and disbursements of Lender's
counsel).
(f) Lender has received a Uniform Commercial Code search evidencing that no Person
has been granted any security interest in any of the Mortgaged Property (other than the security
interests being released contemporaneously therewith and the Permitted Encumbrances).
(g) Lender has received all resolutions, certificates, and other documents as Lender
may reasonably require evidencing Borrower's authority to execute and deliver the Security
Documents.
(h) All of the Security Documents have been duly authorized, executed and recorded
or filed in accordance with applicable Legal Requirements and original counterparts thereof
delivered to Lender.
(i) Lender has received a Certificate of Borrower satisfactory to Lender, substantially in
the form set forth in Exhibit "E" hereto.
(j) Lender has received, if requested by Lender, lien waivers or releases (in
recordable form) from all contractors, subcontractors, and materialmen employed
or furnishing materials in connection with the construction of any improvements
on the Land.
(k) Lender has received an opinion of counsel for Borrower satisfactory to Lender,
substantially in the form set forth in Exhibit "C" hereto.
(1) Lender has received an environmental audit, satisfactory to Lender, of the real
estate comprising the Mortgaged Property from an engineer satisfactory to Lender showing that
there are no Hazardous Substances or environmental problems on the applicable Land or in the
applicable Improvements.
(m) Lender has received the original policies of insurance as required under the terms
of the Deed of Trust and Security Agreement.
(n) Lender has received certified copies of all approvals or authorizations by, or
consents of, or notices to, or registrations with, any governmental body or agency required by
law for Borrower to enter into and perform the Loan Agreement, including, without limitation,
applicable zoning ordinances and building, safety and environmental codes.
(o) Lender has received a Certificate of the secretary or an assistant secretary of each
of the Partners of Borrower certifying the names and true signatures of the officers authorized
to sign this Loan Agreement and any other Security Documents.
(p) Lender has received a Certificate of good Standing for each of the Partners of
Borrower from the jurisdiction of its incorporation.
(g) Lender has received executed originals of the Security Documents and all other
instruments, agreements, certificates or documents required by Lender hereunder.
(r) Borrower has paid all fees and expenses payable under Paragraphs 6.01 and 9.02 of
this Loan Agreement.
(s) Lender has received copies of the Articles of Incorporation and By—Laws of each of
the Partners of Borrower, certified by the Secretary of State of the jurisdiction of its
incorporation for the Articles and the secretary or assistant secretary of the Partners of Borrower
for the By-Laws.
(t) Lender has received Borrower’s instructions for disbursements.
(u) Lender has received a certificate signed by the chief financial officer or treasurer of
each of the Partners of Borrower stating that no Default or Event of Default exists and that all
representations of Borrower herein are true and correct when made.
(v) Lender has received such other documents, instruments, certificates and approvals as
Lender may reasonably request from Borrower prior to disbursement.
2.02 The Note . The Loan shall be evidenced by a promissory note (the “Note’) of even
date herewith executed by the Borrower and payable to the order of Lender setting forth an
indebtedness in the principal amount of ______________ Dollars ($ ______________ ). The Note
shall: (i) bear interest as provided for in Section 2.03; (ii) be payable in one hundred eighty (180)
consecutive monthly installments of principal and interest in the amounts set forth in the Note;
and (iii) be substantially in the form of Exhibit “D” attached hereto with any blanks
approximately completed in conformity herewith.
2.03 Interest . The interest rate on the unpaid principal balance of the Note shall be
10.07% per annum so long as the Note is not in default. Interest on the Note shall be calculated
on the basis of a 360 day year, composed of twelve months containing thirty days each, provided
that such method of calculation does not cause the effective rate of interest on the Loan to exceed
the maximum lawful rate of interest applicable thereto as if calculated on the basis of a 365 or
366 day year. Should Borrower default in the payment of any of the indebtedness or in the
performance of any of its obligations under any of the Security Documents, after the entire
principal amount of such indebtedness shall have become due and payable, whether by
acceleration, at maturity or otherwise, the entire unpaid indebtedness shall bear interest at the
lesser of 13.07% and the maximum finance charge allowed by applicable law. Except as
otherwise provided in the Note, all payments made on the Note shall be applied first to the
payment of all interest accrued hereon to the date of such payment and the balance, if any, shall
be applied on the principal hereof. Any prepaid principal applied to the principal balance of the
Note shall be applied to the principal installments due hereunder in the inverse order of maturity
of such installments. All sums called for, payable, or to be paid under the Note or under the other
Security Documents shall be paid to Lender at its loan servicing center at P.O. Box 250,
Champaign, Illinois 61820—0250, or at such other place as the holder of said Note may from
time to time designate in writing to Borrower.
2.04 Use of Proceeds . The proceeds disbursed pursuant to this Loan Agreement shall be
used solely to finance the purchase of the Mill and Land.
2.05 Prepayment . Except as otherwise set forth in this Agreement, Borrower may not
prepay this Note in full or in part. Borrower shall have the right to prepay this Note in full, or to
make partial prepayments of principal of not less than $100,000, and in additional even
increments of $50,000, by delivering to Lender written notice setting forth Borrower’s intention
to make such prepayment and specifying (a) the amount of principal being prepaid and (b) the
prepayment date, which shall be no fewer than 30 days and no greater than 90 days after the
effective date of such notice, and which shall coincide with a regular payment date; however, it
shall be a condition concurrent to such prepayment right that Borrower simultaneously pay to
Lender the Prepayment Premium (hereinafter described) for this Note. If Borrower delivers such
prepayment notice to Lender, then on the prepayment date, Borrower shall be obligated to pay to
Lender the prepaid principal, all accrued and unpaid interest on the prepaid principal, and the
Prepayment Premium.
This Agreement and all of the Security Documents are intended to be performed in
accordance with, and only to the extent permitted by, all applicable Legal Requirements. It is
expressly stipulated and agreed to be the intent of Borrower and Lender at all times to comply
with the applicable Mississippi law governing the maximum rate or amount of interest and/or
finance charge payable on or in connection with the Indebtedness (or applicable United States
federal law to the extent that it permits Lender to contract for, charge, take, reserve or receive a
greater amount of interest and/or finance charge than under Mississippi law). If the applicable
law is ever judicially interpreted so as to render usurious any amount called for under the
security Documents or contracted for, charged, taken, reserved, or received with respect to the
Indebtedness, or if the acceleration of the maturity of the Indebtedness or if any prepayment by
Borrower results in Borrower having paid any interest and/or finance charge in excess of that
permitted by applicable law, then it is Borrower's and Lender's express intent that all excess
amounts theretofore collected by Lender be credited on the principal balance of the Note (or, if
the Note and all other Indebtedness have been or would thereby be paid in full, refunded to
Borrower), and the provisions of the Security Documents immediately be deemed reformed and
the amounts thereafter collectible thereunder reduced, without the necessity of the execution of
any new documents, so as to comply with the applicable law, but so as to permit the recovery of
the fullest amount otherwise called for hereunder and thereunder. The right to accelerate maturity
of the Indebtedness does not include the right to accelerate any interest which has not otherwise
accrued on the date of such acceleration, and Lender does not intend to collect any unearned
interest or finance charge in the event of acceleration. All sums paid or agreed to be paid to
Lender for the use, forbearance or detention of the Indebtedness shall, to the extent permitted by
applicable law, be amortized, prorated, allocated and spread throughout the full term of such
Indebtedness until payment in full so that the rate or amount of interest and finance charge on
account of such Indebtedness does not exceed the applicable usury ceiling. "Maximum Rate"
means the maximum nonusurious rate of finance charge which may be lawfully contracted for,
charged, taken, reserved or received by Lender from Borrower in connection with the
Indebtedness under applicable Mississippi law (or applicable United States federal law to the
extent that it permits Lender to contract for, charge, take, reserve or receive a greater amount of
finance charge than under Mississippi law).
The Prepayment Premium shall be equal to the net present value (if positive) of the
difference between (i) all future interest payments Lender would have received (on that portion
of the Loan being prepaid) under the Note over its stated term, and (ii) the interest payments
Lender would receive at a rate ("treasury rate") equal to the yield on United States Treasury
Securities with a maturity date closest to the remaining average life of the Loan, (iii) discounted
at said treasury rate. The treasury rate shall be determined as of the latest Business Day
preceding the principal prepayment date for which such yields shall have been reported in
Federal Reserve Statistical Release H. 15 (519) (or any comparable successor publication) and
shall be determined from such publication. All prepayments, other than premiums (if any), shall
be applied first to unpaid fees, costs or expenses due Lender, then to accrued interest and
thereafter to principal payments in inverse order of maturity.
2.06 Commitment Fee . In consideration for Lender's commitment to make the Loan
to Borrower, Borrower has paid to Lender, upon issuance of the Commitment Letter, a
commitment fee of $72,500.00. The commitment fee has been earned by Lender by the issuance
of the Commitment Letter and subsequent acceptance of said Commitment Letter by Borrower,
and is not refundable. Notwithstanding the foregoing, if the Loan does not close as a result of
Lender's refusal to make said Loan, the said commitment fee shall be refunded to Borrower.
2.07 Offset . Upon the occurrence of any Event of Default and during the continuance
thereof, Lender is hereby authorized from time to time, to the fullest extent permitted by law, to
set-off and apply any and all monies, deposits or other indebtedness at any time owing by Lender
to or for the credit or account of Borrower against any and all obligations of Borrower now or
hereafter existing. In furtherance hereto, Borrower hereby grants Lender a security interest in and
to (a) all monies or funds held in escrow pursuant to the Security Documents and (b) any
other monies, goods (excluding inventory), contract rights (excluding accounts receivable),
general intangibles, instrument, documents, or other properties now or hereafter in the possession
of Lender. This right of set off and security interest is in addition to any others at law or in
equity.
2.08 Good Year - Bad Year Provisions.
(a) Good Year Prepayment. Within ninety (90) days following the end of each
fiscal year, Borrower shall determine the amount, if any, by which Borrower's net income
determined in accordance with GAAP exceed $3.0 million. After a determination has been made
that there has been a fiscal year (a "Good Year") in which there is such an excess (the "Good
Year Amount") Borrower shall prepay, without a prepayment premium, principal in the amount
(the "Good Year Prepayment") equal to the lesser of (i) the Good Year Amount or (ii)
$500,000.00. The Good Year Prepayment shall be made in four equal installments due on the
next four principal installment payment dates under the Note following the date on which Lender
has notified Borrower of (i) the determination that there has been a Good Year, and (ii) the
amount of the required Good Year Prepayment. Said prepayment of principal shall be in addition
to the principal and interest payments due under the Note.
(b) Bad Year Deferral . If Borrower's net income determined in accordance with
GAAP are less than ______________ Dollars ($ ______________ ) for any fiscal year (a "Bad
Year"), then Borrower shall have the option of postponing principal payments during the twelve
month period following the determination that there has been a Bad Year (i.e., only making
interest payment due under said Note) in an amount not to exceed, in the aggregate, the total
previous Good Year prepayments. Following the determination that there has been a Bad Year,
Borrower shall give notice to Lender if it elects to postpone any such principal payments, with
such notice identifying the amount of such payments to be postponed and the applicable
principal payment dates when such reductions in payments will apply.
(c) Limitation on Good Year Prepayments . Borrower shall have no obligation to
make a Good Year Prepayment at any time that the aggregate amount of Good Year
Prepayments exceeds the aggregate amount of Bad Year Deferrals by $500,000.
ARTICLE III
Warranties and Representations
3.01 Warranties and Representations of Borrower. In order to induce Lender to make the
Loan, Borrower represents and warrants to Lender as of the Closing the following:
(a) Organization of Borrower . Neither Partner of Borrower nor Borrower has any
Subsidiaries. Each Partner of Borrower is duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation, and is duly qualified to do business in
all other places where such qualification is necessary; and each Partner of Borrower and
Borrower have full legal power and authority to own its properties and assets in the manner in
which such properties or assets are presently or proposed to be owned, and to conduct and
engage in its businesses as presently conducted. Borrower has the full legal power and authority
to enter into the Note, this Loan Agreement, the Deed of Trust and Security Agreement and all
other Security Documents, instruments, agreements and certificates and full power and authority
to consummate the transactions entered into contemporaneously with this Loan Agreement and
contemplated by this Loan Agreement and the other documents, instruments and certificates
executed in connection with the Closing.
(b) Authorization and Binding Effect . All corporate and partnership action necessary
and/or appropriate on the part of Borrower, and each Partner of Borrower, to authorize the
execution and delivery of, and the performance under, this Loan Agreement, the Note, the Deed
of Trust and Security Agreement, and any and all other Security Documents, certificates,
instruments or agreements provided for herein or executed in connection with the Closing have
been lawfully taken. This Loan Agreement, the Note, the Deed of Trust and Security Agreement,
and any and all other instruments, Security Documents, certificates or agreements provided for
herein or executed in connection with the Closing constitute valid and binding obligations of
Borrower enforceable against it in accordance with their respective terms.
(c) No Breach of Charter, By-Laws or other Agreements . The execution and
delivery of, and the performance under, this Loan Agreement, the Note, Deed of Trust and
Security Agreement, and any and all other instruments, Security Documents, certificates, or
agreements provided for herein or executed in connection with the closing will not violate or
conflict with any provision of the charter or By-Laws of either Partner of Borrower nor with the
partnership agreement of Borrower, nor conflict with or result in the breach of any provision of,
or constitute a default under, or give rise to any circumstances which, with the passage of time or
the giving of notice or both, would constitute a default under, any Legal Requirements, or other,
agreement, document or instrument of any nature to which Borrower, or either Partner of
Borrower, is a party or by which Borrower, or either Partner of Borrower, or the Mortgaged
Property may be bound or affected.
(d) Financial Statements . Lender has been furnished with selected unaudited
summary pre-tax profit schedules of the ______________ operations from __________ ____ ,
_____ , through __________ ____ , _____ , and unaudited summary net asset schedules of the
______________ as of __________ ____ , _____ , and __________ ____ , _____ . To the best of
Borrower's and each of the Partner's knowledge, information and belief, said schedules: (1) were.
prepared from the books and records of _________ of _________ and its affiliates; (2) fairly
represent the results of operations and the net book value of working capital (defined as the
Accounts Receivable, Inventories, Prepaid Expenses, Accounts Payable and Accrued Liabilities)
and Net Property, Plant and Equipment of the ______________ for the respective periods and as
of the respective dates; and (3) do not reflect any material, special or nonrecurring items of
income or charges against income which are not specifically shown and identified.
Notwithstanding the foregoing, it is understood and agreed by and between the parties that
regarding the representations set forth in this subparagraph "d" concerning said schedules: (i) No
provisions have been made for federal, state, or local income taxes; (ii) Accounting for Pensions
is not in accordance with Statement of Financial Accounting Standards No. 87; and (iii)
Inventories and costs of sales have been determined utilizing the first-in, first-out
("FIFO") cost flow assumption. The projections previously delivered to Lender, which are
hereafter described, were made _________ , on a commercially reasonable basis based on
business conditions at the time the projections were made and in good faith. The following
projections have been delivered to Lender:
(1) Salomon Brothers Confidential Descriptive Memorandum dated
__________ ____ , _____ ;
(2) Salomon Brothers Case Four Projection dated _______ ____ , _____ ; and
(3) Letter from __________ to __________ , __________ ____ , _____ .
(e) No Adverse Changes . Since __________ ____ , _____ , there has been no change in
the assets, liabilities, business or financial condition of the ______________ other than changes
which have not, in any case or in the aggregate, been materially adverse. The operations of the
______________ have not been materially adversely affected in any way as the result of any
legislative or regulatory change, or any revocation of license or right to do business.
(f) Litigation , There is no action, suit or proceeding pending, or to the knowledge of
Borrower after due inquiry, threatened, against or affecting Borrower or the ______________
operations, at law or in equity or before any governmental or public body, instrumentality or
authority which might result in any material adverse change in the business, operations,
prospects, properties, or assets, or in the condition (financial or otherwise) of Borrower or the
______________ operations.
(g) Operation in Accordance with Law . Neither the business nor any of the
activities of the ______________ or the Borrower conducted on or which are otherwise
connected with any and all of the Mortgaged Property violate any Legal Requirements. In
connection with such business and activities, all required licenses, approvals, registrations,
permits and other authorizations have been obtained and are now in full force and effect. In
particular, but without limiting the generality of the foregoing, Borrower warrants that such
business and activities are in compliance with all Legal Requirements, including, but not limited
to, all applicable federal, state and local occupational safety laws and all applicable zoning, land
use and building ordinances, codes and regulations. Notwithstanding the foregoing, in the event
of a violation of any Legal Requirement which does not have a materially adverse effect on the
operation of the ______________ , Lender shall not exercise the default remedies available under
the Security Documents by reason of such a violation if Borrower promptly commences to cure
such violation upon the earlier of: (1) receipt of notice of such violation from the appropriate
governmental authority; or (2) actual knowledge of such violation; and Borrower therefore
diligently and continuously performs the necessary actions to cure such violation within sixty
(60) days after such notice or knowledge, or, subject to the approval of Lender which shall not be
unreasonably withheld, within a reasonably longer period if it is not practical to cure such
violation within such sixty (60) day period. Borrower shall notify Lender of any violation by
Borrower of any Legal Requirement that has a materially adverse effect on the operation of the
______________ .
(h) Condemnation . There is no pending or threatened condemnation or eminent domain
proceeding affecting all or part of the Mortgaged Property.
(i) Title to Mortgaged Property. Borrower has good and marketable title to the
Mortgaged Property, free and clear of all deeds of trust, mortgages, liens, encumbrances,
pledges, security interests, leases, encroachments, easements, restrictions, covenants, contracts
and rights of third parties, except for the Permitted Encumbrances described in Exhibit "B"
attached hereto. No other encumbrances shall be deemed to be permitted unless listed and
described in Exhibit "B."
(j) Priority of Lender's Security Interest . The Deed of Trust and Security
Agreement, when filed for record in Stone County, Mississippi, will establish a valid and binding
and perfected first and senior security interest in favor of Lender in all Mortgaged Property
except as described in Exhibit "B." the Financing Statements executed contemporaneously
herewith pursuant to the Uniform Commercial Code as in effect in the State of Mississippi, when
filed in the appropriate public records of Mississippi will perfect a valid, binding and first
security interest in favor of Lender in all personal property included as part of the Mortgaged
Property.
(k) Regulation G: Use of Proceeds . Neither the Borrower nor either Partner of Borrower
owns or has any present intention of acquiring any "margin stock" as defined in Regulation G
(12 C.F.R., Chapter II, Part 207) of the Board of Governors of the Federal Reserve System
(herein called "margin stock"). No part of the proceeds from the issuance of the Note will be
used by the Borrower, directly or indirectly, for the purpose of purchasing or carrying any
margin stock or for the purpose of reducing or retiring any indebtedness which was originally
incurred to purchase or carry margin stock or for any other purpose which might constitute this
transaction a "purpose credit" within the meaning of said Regulation G. Neither the Borrower nor
its Partners nor any agent acting on their behalf has taken or will take any action which might
cause the transaction contemplated herein to violate said Regulation G, Regulation T (12 C.F.R.,
Chapter II, Part 220) or Regulation X (12 C.F.R., Chapter II, Part 224) or any other regulation of
the Board of Governors of the Federal Reserve System or to violate the Securities Exchange Act
of 1934, in each case as now in effect or as the same may hereafter be in effect.
(l) Governmental Consent, etc. No consent, approval, order or authorization of any
governmental or public body, instrumentality or authority (except as such approvals as have
been obtained by Borrower) is required in connection with the execution and delivery of or the
performance under, this Loan Agreement, the Deed of Trust and Security Agreement, the Note,
or any other instruments, certificates, Security Document or agreements contemplated hereby or
executed in connection with the Closing.
(m) Business Names. Borrower only does business as _________ .
(n) Tax Returns . Borrower does not know of any proposed tax assessment against it
or either of its Partners. Borrower has remitted all withholding taxes and complied with all other
governmental requirements relating to Borrower's employees. No income tax liability of
Borrower has been asserted by the Internal Revenue service for taxes in excess of those already
paid.
(o) Leases . Borrower enjoys peaceful and undisturbed possession of all leases
necessary in any material respect for the operation of its properties and Assets. All such leases
are valid, subsisting and in full force and effect, and true and correct copies of such leases have
been provided to Lender.
(p) ERISA . Borrower has no plans under ERISA or which should be under ERISA,
provided that following the Closing Borrower may establish a Section 401(k) plan or a defined
contribution plan to be qualified under Sections 401 and 501 of the internal Revenue Code.
3.02 Disclosure by Borrower to Lender . An act, event, state of fact, circumstance or
thing shall be deemed disclosed to Lender for purposes of Paragraph 3.01 of this Loan
Agreement or any provision of said paragraph only if disclosed in a writing delivered at or before
the Closing.
ARTICLE IV Covenants
4.01 Affirmative Covenants . Borrower covenants and agrees that, for so long as any
obligation remains unpaid, Borrower will do or cause to be done the following:
(a) Payment of Taxes. Borrower will pay before the same become delinquent or any penalty
attaches thereto for non-payment, or late payment, all taxes, assessments, water, sewer and other
rents, charges, excises, levies, license fees, permit fees and all other charges (in each case,
whether general or special, ordinary or extraordinary, or foreseen or unforeseen) of every
character (including all penalties or interest thereon) now or hereafter levied, assessed,
confirmed or imposed on, or in respect of, or which may be a lien upon the Mortgaged Property
or any part thereof, or any estate, right or interest therein, or upon the rents, issues, income or
profits thereof, and will submit to Lender such evidence of the due and punctual payment of all
such taxes, assessments and charges as Lender may require. Borrower will also pay all taxes,
assessments or charges which may be levied on the Note or the Deed of Trust and Security
Agreement, excepting any income tax imposed under the laws of the United States of America,
the State of Mississippi, or any municipality, by reason of the receipt by Lender of interest on the
Note; provided, however, Borrower shall reimburse Lender for payment by Lender of all such
State income taxes pursuant to the Tax Reimbursement Agreement as set forth in Appendix III.
Notwithstanding the foregoing provisions of this Paragraph 4.01(a), Borrower, at its expense,
may contest, after prior written notice to Lender, by appropriate legal proceedings conducted in
good faith and with due diligence, the amount, validity or application of any tax, assessment or
charge referred to in this Paragraph 4.01(a), provided that (1) Borrower shall first make all
contested payments, under protest if it desires, unless such proceedings shall have the effect of
suspending the enforcement and collection of any such tax, assessment or charge, in which event
Borrower shall pay over such contested payments to Lender to be held in escrow until such time
as such proceedings have terminated, (2) neither the Mortgaged Property nor any part thereof
shall be in any danger of being sold, forfeited, lost or interfered with, and (3) Borrower shall
have furnished to Lender such additional security, if any, as may be reasonably requested by
Lender.
(b) Legal Actions to which Lender Made Party . If any action or proceeding be
commenced, including, without limiting the generality of the foregoing, any condemnation
action or proceeding, to which action or proceeding Lender is made a party or appears as a party
plaintiff or defendant by reason of its status as holder of the Note, Deed of Trust and Security
Agreement, this Loan Agreement, or any other Security Document, instrument, certificate or
agreement now or hereafter evidencing, securing or in any other manner relating to the debt
which is the subject of this Loan Agreement, or in which Lender deems it necessary to defend or
protect its security title, lien and/or interest under the Deed of Trust and Security Agreement or
the validity or priority thereof or the possession of all or any of the Mortgaged Property, all sums
paid by Lender for all reasonable out-of-pocket expenses incurred in any such action or
proceeding, including attorneys' fees reasonably and actually incurred, shall be repaid to Lender
by Borrower, and such sums, with interest thereon at the rate provided in the Note, shall be
immediately due and payable.
(c) No Other Liens . Except as listed on Exhibit "B, "Borrower shall not (without
prior written consent of Lender) consent to or permit to arise or continue in existence, any deed
of trust, mortgage, pledge, lien, security interest or other encumbrance on the Mortgaged
Property or any portion thereof (other than those which arise out of the Loan). Borrower will pay
all sums which if unpaid may result in the acquisition of a lien prior to the lien of Lender in the
Mortgaged Property (except as set forth in Exhibit "B") or which if unpaid may result in
conferring upon a tenant of any part of the Mortgaged Property a right to recover such sums as
prepaid rent, or as a credit or offset against any future rental obligations.
(d) Financial Statements . Borrower shall furnish to Lender as soon as practical after
the end of each fiscal year, and in any event within ninety (90) days thereafter, audited financial
statements for such year including without limitation balance sheets and statements of income
and expense prepared in accordance with GAAP consistently throughout the periods indicated,
and certified, at Borrower's expense, by an independent certified public accountant reasonably
acceptable to Lender who is a member of the American Institute of Certified Public Accountants.
Such financial statements shall be accompanied by a certificate of such accountant stating that he
is familiar with the financial requirements of the Loan Agreement, the Note, and the other
Security Documents, instruments, certificates and agreements referred to in, or contemplated by,
the Loan Agreement and whether his examination of the financial records of Borrower has
disclosed the existence of any Default or Event of Default, and further specifying the nature and
period of any such Default or Event of Default that has been discovered. In addition, Lender and
its representatives shall have the right to inspect all books and records of Borrower (and to make
copies of extracts therefrom).Borrower shall also furnish to Lender within forty-five (45) days
after the end of each quarter annual period of each fiscal year of Borrower, quarterly unaudited
financial statements, prepared in accordance with generally accepted accounting principles.
(e) Current Ratio . Borrower shall have a current Ratio of at least 1.5 to one as of the end
of each fiscal year (as determined from the audited financial statements of Borrower for such
year).
(f) Cash Flow Coverage Ratio . Borrower shall have a Cash Flow Coverage Ratio of
at least 1.75:1 as of the end of each fiscal year (as determined from the audited financial
statements of Borrower for such year).
(g) Net Tangible Assets to Hancock Funded Debt Ratio . Borrower shall have, as of
the end of each fiscal year (as determined from the audited financial statements of Borrower for
such year), minimum Net Tangible Assets to Hancock Funded Debt ratio as follows:
(1) As of __________ ____ , _____ , a ratio of _____ ;
(2) As of __________ ____ , _____ , a ratio of _____ ;
(3) As of __________ ____ , _____ , a ratio of _____ ;
(4) As of __________ ____ , _____ , a ratio of _____ ; and
(5) As of __________ ____ , _____ , and each __________ ____ thereafter
until the Loan is paid in full, a ratio of ______ .
(h) Net Worth and Restrictions on Distributions . As of the end of each fiscal year,
starting with __________ ____ , _____ , the sum of (i) Net Worth and (ii) Subordinated Debt
shall be equal to or greater than the sum of (i) $ __________ , (ii) ___ % of the cumulative net
income of Borrower from the date hereof through the end of such fiscal year, and (iii) the amount
of accrued but unpaid interest on the Subordinated Debt. All such amounts shall be determined
from the applicable audited financial statements of the Borrower. The requirement in the first
sentence of this subparagraph (h) shall expire at such time as total Net Worth plus Subordinated
Debt of Borrower equals the amount outstanding on this Loan. Also, until such time, Borrower
will provide to Lender the credit support as described in the Credit Support Agreement referred
to in Paragraph 6.14 hereafter. After that time, the Borrower must maintain at all times Total Net
Worth plus Subordinated Debt at least equal to the unpaid Loan amount and the obligation to
provide such credit support will end. Borrower may make quarterly distributions to the Partners
in an amount not to exceed ____ of Borrower's net income for the quarter with respect to which
such distribution is made. After such time as Net Worth plus Subordinated Debt first equals or
exceeds the unpaid Loan amount, distributions to Partners shall be prohibited only to the extent
that such distributions would cause the Borrower to breach any of the covenants contained in
subparagraphs (e), (f), (g), and (h) of this paragraph 4.01.
(i) Limitation on Debt. Borrower shall acquire no indebtedness for borrowed
money, other than (1) the Loan, (2) a Working capital Facility, pursuant to which borrowing is
limited to 85% of the value of eligible accounts receivable and 601 of the value of eligible
inventory, (3) Subordinated Debt, and (4) debt(s) (not to exceed a total of $ __________
outstanding at any one time) secured by purchase money security interest(s) on any capital asset
of Borrower, other than Land, and which purchase money security interest attaches to such
capital asset concurrently with the acquisition thereof, and if the debt secured by such purchase
money security interest does not exceed ____ % of the lesser of the cost or fair market value as of
the time of acquisition of the asset covered thereby.
(j) No Change in Subordinated Debt Terms or in Ownership . Except as allowed
by Paragraph 4.01(1) below, Borrower agrees that no changes will be made in either the terms of
the Subordinated Debt or the ownership of the Partnership during the first five years of the
Partnership without the approval of Lender. After five years, any change would still require
Lender's approval, unless, after such changes:
(1) The minimum Net Worth plus Subordinated Debt
test is still met; and
(2) The Material Supply Agreement is to stay in effect
for an additional five years; and
(3) Any change in ownership is among the two original
Partners or affiliates thereof; and
(4) The majority shareholder in each Partner as of the date of this Loan has
not changed.
(k) Lease Obligations . Borrower shall enter into no lease agreements of any type,
whether as lessor or lessee, and no sale and leaseback arrangements of any kind, except that in
the event the annual lease payments do not in the aggregate exceed 5% of the Net Tangible
Assets (as of the end of the previous fiscal quarter].
(l) Merger or Consolidation . Partners and/or Borrower shall not merge or
consolidate with any other partnership (or corporation) which is not affiliated with either Partner,
without the prior written consent of Lender, which shall not be unreasonably withheld.
(m) Transfer of Security . If Borrower, whether voluntarily or by operation of law,
sells or otherwise transfers the security or any portion thereof without the prior written consent
of Lender (except for transfers of personalty in the ordinary course of business as permitted by
the Deed of Trust and Security Agreement), then Lender, at its option, shall have the right to
declare the Loan immediately due and payable.
(n) Encumbrances . Borrower shall not at any time, whether voluntarily or by operation
of law, without the prior written consent of Lender, mortgage, pledge, or otherwise encumber or
place any lien, or permit same, on the Security or any portion thereof except as set forth on
Exhibit "B." Liens on accounts receivable and inventory are acceptable.
(o) Payments on Loans to Partners . Borrower shall not make any payment on any
existing loan to any Partner if after giving effect to such payment, the Credit Support Agreement
or the Loan would be in default in any respect, without the prior written consent of Lender.
(p) Material Supply Agreement . A Material Supply Agreement concerning the
purchase by __________ Corporation of certain products produced by Borrower shall be in
effect at Closing in the form attached hereto as Appendix I.
(q) Other Data . Promptly upon becoming aware thereof, the Borrower shall give
Lender notice of any material adverse change in its business, operations, condition, financial or
otherwise. Promptly upon becoming aware thereof, Borrower shall give Lender notice of the
commencement, existence or threat of any proceeding by or before any court, arbitrator or other
official body against or effecting Borrower which, if adversely decided, would have a material
adverse effect on the business, operations or financial condition of Borrower or on the ability of
Borrower to perform its obligations under the Loan Agreement, Note, or any other Security
Document. With reasonable promptness, Borrower shall furnish to Lender such additional
financial or other data as Lender may reasonably request.
(r) Partnership and Corporate Existence, etc. Borrower shall conduct continuously
and operate actively its business, and shall keep in full force and effect its partnership existence,
and each Partner shall keep in full force and effect their corporate existence, and comply with all
the laws and regulations governing the conduct of its and their business and activities to be
conducted on or which are otherwise connected with any or all of the real and personal property
included as part of the Security. Borrower and each Partner further will make all such reports and
pay all such franchise and license fees and do all other such acts and things as may be lawfully
required to maintain its rights, licenses, leases, powers and franchises under the laws of the
United State and of the states or local jurisdictions in which it does business. Notwithstanding
the foregoing, in the event of a violation of any Legal Requirement which does not have a
materially adverse effect on the bu
