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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15 (d) of The Securities
Exchange Act of 1934
For the fiscal quarter ended November 29, 1997
Commission File Number 0-4173
DMI FURNITURE, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 41-0678467
(State of incorporation) (IRS employer ID number)
One Oxmoor Place, 101 Bullitt Lane, Louisville, Kentucky 40222
(Address of principal executive offices)
Registrant's telephone number with area code: (502) 426-4351 Ext.227
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes __X__ No _____
Indicate the number of shares outstanding of each of the Registrant's classes
of Common Stock as of the last practicable date.
Class - Common Stock, Par Value $.10 per Share
Outstanding at November 30, 1997 - 3,164,251
1
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INDEX
Part I. Financial Information Page
Consolidated Balance Sheets - November 29, 1997
and August 30, 1997 3, 4
Consolidated Statements of Operations - Three Months
Ended November 29, 1997 and November 30, 1996 5
Consolidated Statements of Cash Flows - Three
Months Ended November 29, 1997 and
November 30, 1996 6, 7
Notes to Consolidated Financial Statements 8-11
Management's Discussion and Analysis
of Financial Condition and Results
of Operations 12-13
Part II.Other Information 14-15
Index to Exhibits
10. Amended and Restated Credit Agreement 16-81
11. Calculations of Earnings Per Share 82
27. Financial Data Schedule 83
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PART I. FINANCIAL INFORMATION
DMI FURNITURE, INC.
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
ASSETS Nov. 29, Aug. 30,
-------- 1997 1997
---------- ----------
Current assets:
Cash $313 $512
Restricted cash for debt payments 1,291 1,080
Accounts receivable - net 11,649 9,149
Inventories (Note 4) 11,972 12,262
Other current assets 375 363
Current portion of deferred income taxes (Note 2) 747 792
---------- ----------
Total current assets 26,347 24,158
Property, plant and equipment - at cost (Note 1) 21,290 20,436
Less accumulated depreciation 9,783 9,479
---------- ----------
Net property, plant and equipment 11,507 10,957
Other assets:
Intangible pension asset 296 296
Other 133 140
---------- ----------
429 436
---------- ----------
$38,283 $35,551
======= =======
See accompanying notes.
3
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DMI FURNITURE, INC.
CONSOLIDATED BALANCE SHEETS
(Continued)
(Amounts in thousands)
Nov. 29, Aug. 30,
LIABILITIES AND STOCKHOLDERS' EQUITY 1997 1997
- ----------------------------------- --------- ---------
Current liabilities:
Trade accounts payable $2,895 $2,890
Accrued liabilities (Note 7) 3,101 2,719
Accrued dividends on preferred
stock (Note 6) 519 399
Long-term debt due within one year 2,056 2,012
---------- ----------
Total current liabilities 8,571 8,020
Long-term liabilities:
Long-term debt 14,407 12,846
Accrued pension costs 508 601
Deferred compensation 310 321
Deferred income taxes (Note 2) 502 502
---------- ----------
15,727 14,270
Stockholders' equity:
Series C convertible preferred stock,
$2 par value, 1,995,050 authorized
and outstanding 3,990 3,990
Common stock 316 315
Additional paid-in capital 15,374 15,341
Retained deficit (5,695) (6,385)
---------- ----------
Total stockholders' equity 13,985 13,261
---------- ----------
$38,283 $35,551
======= =======
See accompanying notes.
4
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DMI FURNITURE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands)
(Unaudited)
THREE MONTHS ENDED
---------------------------
Nov. 29, Nov. 30,
1997 1996
---------- ----------
Net sales $17,439 $15,789
Cost of sales 13,304 12,011
---------- ----------
Gross profit 4,135 3,778
Selling, general and
administrative expenses 2,570 2,216
Plant closing reserve (Note 7) - (118)
---------- ----------
Operating profit 1,565 1,680
Interest expense (net) (259) (292)
---------- ----------
Income before provision for income taxes 1,306 1,388
Provision for income taxes (Note 2) (496) (527)
---------- ----------
Net income (Note 7) $810 $861
====== ======
Net income applicable to common stock $690 $676
====== ======
Earnings per common share (Notes 3 and 7) $.13 $.15
====== ======
See accompanying notes.
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DMI FURNITURE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
THREE MONTHS ENDED
---------------------------
Nov. 29, Nov. 30,
1997 1996
---------------------------
Cash flows from operating activities:
Net income (Note 7) $810 $861
Adjustments to reconcile net income to
net cash provided (used) by
operating activities:
Depreciation and amortization 304 263
Deferred income taxes (Note 2) 45 482
Pension costs (93) (55)
Deferred compensation (11) (15)
Changes in assets and liabilities:
Accounts receivable (2,500) (2,655)
Inventories 290 (993)
Other assets (5) 150
Trade accounts payable 5 246
Accrued liabilities (Note 7) 382 108
---------- ----------
Total adjustments (1,583) (2,469)
---------- ----------
Net cash used by
operating activities (773) (1,608)
---------- ----------
Cash flows provided (used) by
investing activities:
Capital expenditures (854) (96)
Proceeds from sale of asset 0 124
---------- ----------
Cash provided (used) by investing
activities (854) 28
---------- ----------
See accompanying notes.
6
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DMI FURNITURE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(continued)
(Amounts in thousands)
(Unaudited)
THREE MONTHS ENDED
----------------------------
Nov. 29, Nov. 30,
1997 1996
---------------------------
Cash flows provided (used) by
financing activities:
Borrowings from line of credit $6,650 $4,950
Payments on line of credit (4,650) (2,800)
Payments on long term debt (395) (560)
Restricted cash (211) 0
Proceeds from stock options exercised 34 0
---------- ----------
Cash provided by
financing activities 1,428 1,590
---------- ----------
Increase (decrease) in cash (199) 10
Cash- beginning of period 512 97
---------- ----------
Cash- end of period $313 $107
====== ======
Cash paid for:
Interest $235 $287
====== ======
Income taxes $300 $69
====== ======
See accompanying notes.
7
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DMI FURNITURE, INC.
Notes to Consolidated Financial Statements
(1) FINANCIAL STATEMENTS AND ORGANIZATION
The consolidated financial statements include DMI Furniture, Inc. and
its wholly owned subsidiary, DMI Management, Inc. ("Company"). The financial
statements included herein at November 29, 1997 and for the three months
ended November 29, 1997 and November 30, 1996 are unaudited but include all
adjustments which are, in the opinion of management, necessary to a fair
presentation of the results of operations and financial position for the
periods covered herein. These financial statements should be read in
conjunction with the financial statements and notes thereto included in the
Company's latest annual report on Form 10-K.
The results of operations for the interim periods are not necessarily an
indication of the results to be expected for the full 1998 fiscal year.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
The specific useful lives of property, plant, and equipment are as follows:
Building and Leasehold Improvements 8 - 35 yrs.
Machinery and Equipment 3 - 13 yrs.
(2) INCOME TAXES
Income tax expense (benefit) consisted of the following (in thousands):
Three Months Ended
Nov. 29, Nov. 30,
1997 1996
--------- --------
Current $451 $45
Deferred 45 482
----- ----
Total $496 $527
==== ====
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The provision for income taxes differs from that computed at the federal
statutory corporate tax rate as follows (in thousands):
Three Months Ended
Nov. 29, Nov. 30,
1997 1996
-------- --------
Tax at 34% statutory rate $444 $472
State income taxes 52 55
-------- --------
Income Taxes $496 $527
======== ========
(3) EARNINGS PER COMMON SHARE
Earnings per common share are based on the weighted average number of
common and common equivalent shares outstanding during the period, and
assumes the conversion of the Series C Preferred Stock into common stock. See
Exhibit 11 for more information.
In March 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS No.
128"). This standard modifies disclosure requirements for companies required
to report earnings per share ("EPS") to include presentations of Basic EPS
(which includes no dilution of common stock equivalents) and, if applicable,
Diluted EPS (which reflects the potential dilution of common stock
equivalents). The standard will not be effective for the Company until the
completion of its fiscal 1998 second quarter. The pro forma Basic and
Diluted EPS for the three months periods of fiscal 1998 and 1997,
respectively, assuming the application of SFAS No. 128 at the beginning of
those periods, is as follows:
Three Months Ended
Nov. 29, Nov. 30,
1997 1996
------- --------
Earnings per share:
Basic $.22 $.22
Diluted $.13 $.15
Average shares outstanding:
Basic 3,156,406 3,056,212
Diluted 6,077,292 5,856,080
Number of common stock
equivalents in diluted shares
outstanding 2,920,886 2,799,868
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(4) INVENTORIES
Inventories were comprised of the following at November 29, 1997 and
August 30, 1997:
Nov. 29, 1997 August 30, 1997
------------- ---------------
Finished Products $6,282,000 $6,789,000
Work in Process 514,000 514,000
Raw Materials 5,177,000 4,959,000
----------- -----------
$11,972,000 $12,262,000
----------- -----------
----------- -----------
(5) OTHER MATTERS
The Company is currently subject to claims under federal and state
environmental laws based on allegations that the Company had hazardous
substances disposed of at three waste disposal sites. After depositing
$57,000 in a trust fund under the terms of a tentative settlement of claims
arising from one site and paying its portion of preliminary investigation and
remediation costs at the other two sites, the Company retains a reserve of
approximately $45,000 against potential environmental liabilities. Due to
the limited nature of the Company's involvement in these environmental
proceedings, the availability of certain defenses, and the involvement of
many other parties with substantial financial resources in the proceedings,
the Company does not anticipate, based on currently available information,
that potential environmental liabilities arising from these proceedings are
likely to exceed the amount of the Company's reserve by an amount that would
have a material effect on the Company's financial condition, results of
operations or cash flows. Expenses for the year to date were not material.
(6) DIVIDENDS
The dividends on Series C Preferred Stock accrued in a fiscal year are not
payable until the following fiscal year.
(7) PLANT CLOSING
The Company permanently closed its Gettysburg, Pennsylvania manufacturing
plant and warehouse facilities and consolidated the production and distribution
activities of those operations into its Huntingburg, Indiana facilities during
the second quarter of fiscal 1996. Consolidation of production and warehousing
into the Indiana facilities resulted in lower manufacturing and warehousing
overhead and plant administrative costs. During the first quarter of fiscal 1997
the Company sold the Gettysburg, Pennsylvania warehouse and realized gross
proceeds of approximately $130,000. Based upon this transaction approximately
$118,000 of the book provision related to the initial recording of property,
plant and equipment was not needed.
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(8) LONG-LIVED ASSETS
In March 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of" (SFAS No. 121).
This standard establishes accounting standards for evaluating the potential
impairment of long-lived assets, certain identifiable intangibles and goodwill.
The Company adopted the provisions of SFAS No. 121 in the first quarter of
fiscal 1997 and the application of the standard has not resulted in an
impairment loss.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Revenue - Net sales for the first quarter of fiscal 1998 increased $1,650,000 or
10.5% over the first quarter of fiscal 1997. This increase was the result of
increased sales of commercial office furniture, home office furniture, and
other residential furniture including desks, desk chairs, wall systems,
occasional tables, and increased sales of lumber and wood parts by the Company's
sawmill/dimension plant to outside trade customers. The increase was partially
offset by lower sales of promotional bedroom furniture. Office furniture sales
increased 13%; sales of home office furniture and other residential furniture
including desks, desk chairs, wall systems, and occasional tables increased
60%; sales to outside trade customers of lumber and fabricated wood parts by
the Company's sawmill/dimension parts plant increased 16%; sales of certain
residential desks decreased 70% which was due to the Company's decision to
devote less production to these products due to their lower profit margin; and
promotional bedroom sales decreased by 16%.
Gross Margin - The Company's gross margin in the first quarter of fiscal 1998
was 23.7% compared to 23.9% in the first quarter of fiscal 1997. The slight
reduction in gross profit margin was primarily a result of lower operating
results by the Company's internal supplier plants as a result of decreased
sales to the Company's furniture plants.
Selling, General and Administrative (S,G&A) Expense - For the first quarter of
fiscal 1998, S,G&A expense amounted to $2,570,000 or 14.7% of sales compared to
$2,216,000 or 14.0% of sales for the first fiscal quarter of 1997. This
increase is primarily due to sales and marketing related start-up expenses for
the Company's new Wynwood division. On September 4, 1997 the Company announced
the formation of the Wynwood division to market better quality imported wood
furniture. The sales and marketing related start-up expenses totaled
approximately $210,000 during the first quarter of fiscal 1998. These expenses
had the affect of lowering earnings per common share by $.02 for the first
quarter of fiscal 1998.
Interest Expense - For the first quarter of fiscal 1998, net interest was
$259,000 compared to $292,000 for the first quarter of fiscal 1997, or a
decrease of 11% This decrease was primarily the result of lower borrowing
rates resulting from the Company's amended credit arrangements.
The Company permanently closed its Gettysburg, Pennsylvania manufacturing
plant and warehouse facilities and consolidated the production and distribution
activities of those operations into its Huntingburg, Indiana facilities during
the second quarter of fiscal 1996. Consolidation of production and warehousing
into the Indiana facilities resulted in lower manufacturing and warehousing
overhead and plant administrative costs. During the first quarter of fiscal 1997
the Company sold the Gettysburg, Pennsylvania warehouse and realized gross
proceeds of approximately $130,000. Based upon this transaction approximately
$118,000 of the book provision related to the initial recording of property,
plant and equipment was not needed.
Liquidity and Capital Resources - Demands for funds relate to payments for
raw materials and other operating costs, debt obligations, accrued preferred
stock dividends and capital
12
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expenditures. The Company's ability to generate cash adequate to meet short
and long term needs is dependent on the collection of accounts receivable and
from its ability to borrow funds. The Company's days of sales outstanding of
accounts receivable averaged 56 days for the first three months of fiscal
1998 compared to 58 days for the three months of fiscal 1997. The Company's
average days of inventory on hand averaged 85 days for the first three
months of fiscal 1998 compared to 81 days for the first three months of
fiscal 1997.
Key elements of the Consolidated Statements of Cash Flows:
Three Months
1998 1997
---------- -----------
Net cash used by operating activities $(773,000) $(1,608,000)
Cash provided (used) for investing activities (854,000) 28,000
---------- -----------
Net cash flows from operating and investing activities (1,627,000) (1,580,000)
Cash provided by financing activities 1,428,000 1,590,000
---------- -----------
Net change in cash and cash equivalents $(199,000) $10,000
========== ==========
During the first three months of fiscal 1998 , the Company used cash
flows for operating activities of $773,000 compared to cash flows used of
$1,608,000 for the three month period in fiscal 1997. The operating cash
flows used in the current year are lower than funds used the previous year
primarily due to the success of the Company's inventory control. Investing
activities required $854,000 during the first three months of fiscal 1998
primarily to continue construction of the new 100,000 square foot facility in
Huntingburg, Indiana for the new Wynwood division. Financing activities
provided $1,428,000 during the first three months of fiscal 1998 compared to
funds provided of $1,590,000 the previous year both of which came primarily
from borrowings on the revolving line of credit.
The Company is currently subject to claims under federal and state
environmental laws based on allegations that the Company had hazardous
substances disposed of at three waste disposal sites. After depositing
$57,000 in a trust fund under the terms of a tentative settlement of claims
arising from one site and paying its portion of preliminary investigation and
remediation costs at the other two sites, the Company retains a reserve of
approximately $45,000 against potential environmental liabilities. Due to
the limited nature of the Company's involvement in these environmental
proceedings, the availability of certain defenses, and the involvement of
many other parties with substantial financial resources in the proceedings,
the Company does not anticipate, based on currently available information,
that potential environmental liabilities arising from these proceedings are
likely to exceed the amount of the Company's reserve by an amount that would
have a material effect on the Company's financial condition, results of
operations or cash flows. Expenses for the year to date were not material.
See "Item 3. Legal Proceedings".
The Company does not believe any events are probable which would
materially change its present liquidity position, which is adequate to
satisfy known demands for funds for operations and to pay bank and other
debt.
13
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PART II. OTHER INFORMATION
Item 3. Legal Proceedings
The Company is currently subject to claims under federal and state
environmental laws based on allegations that the Company had hazardous
substances disposed of at three waste disposal sites. After depositing
$57,000 in a trust fund under the terms of a tentative settlement of claims
arising from one site and paying its portion of preliminary investigation and
remediation costs at the other two sites, the Company retains a reserve of
approximately $45,000 against potential environmental liabilities. Due to
the limited nature of the Company's involvement in these environmental
proceedings, the availability of certain defenses, and the involvement of
many other parties with substantial financial resources in the proceedings,
the Company does not anticipate, based on currently available information,
that potential environmental liabilities arising from these proceedings are
likely to exceed the amount of the Company's reserve by an amount that would
have a material effect on the Company's financial condition, results of
operations or cash flows. Expenses for the year to date were not material.
The Company is also a defendant in various lawsuits arising in the
normal course of business, including two other environmental matters. In
management's opinion, these lawsuits are not material to the results of
operations or financial position of the Company, or are adequately covered
by insurance.
14
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Item 6. Exhibits and Reports on Form 8-K
(a) EXHIBITS
10. Amended and Restated Credit Agreement between Bank One, Indiana,
NA and DMI Furniture, Inc. dated October 3, 1997.
11. Calculations of earnings per share.
27. Financial Data Schedule
(b) REPORTS ON FORM 8-K
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DMI FURNITURE, INC.
(Registrant)
Date: January 12, 1998 /s/Joseph G. Hill
------------------------
Joseph G. Hill
Vice President-Finance,
Chief Financial Officer,
Secretary & Treasurer
15
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AMENDED AND RESTATED CREDIT AGREEMENT
THIS AMENDED AND RESTATED CREDIT AGREEMENT is executed this 3rd day of
October, 1997 ("CLOSING DATE"), between DMI FURNITURE, INC., a Delaware
corporation (the "COMPANY"), and BANK ONE, INDIANA, NA, a national banking
association with its principal office in Indianapolis, Indiana (the "BANK").
RECITALS
1. The Company and the Bank are parties to a certain Amended and
Restated Credit Agreement, dated June 9, 1994, as amended by a First Amendment
to Amended and Restated Credit Agreement, dated October 11, 1994, a Second
Amendment to Amended and Restated Credit Agreement, dated January 10, 1995, a
Third Amendment to Amended and Restated Credit Agreement, dated March 10, 1995,
a Fourth Amendment to Amended and Restated Credit Agreement, dated September 20,
1995, effective as of August 15, 1995, a Fifth Amendment to Amended and Restated
Credit Agreement, dated November 1, 1995, a Sixth Amendment to Amended and
Restated Credit Agreement, dated January 11, 1996, a Seventh Amendment to
Amended and Restated Credit Agreement, dated July 17, 1996, and by an Eighth
Amendment to Credit Agreement, effective as of March 1, 1997 (as so amended, and
as the same may have been further amended, modified and supplemented prior to
the Closing Date and as in effect immediately prior to the execution of this
Agreement, the "ORIGINAL AGREEMENT").
2. The Company has request the Bank to amend, and as so amended,
restate, the Original Agreement, subject to and in accordance with the terms of
this Agreement.
AGREEMENT
NOW THEREFORE, in consideration of the premises, the mutual covenants
and agreements herein, and each act performed and to be performed hereunder, the
Bank and the Company agree to amend, and as so amended, restate, the Original
Agreement as follows:
ARTICLE I
DEFINITION OF TERMS
SECTION 1.01. ACCOUNTING TERMS -- DEFINITIONS. All accounting and
financial terms used in this Agreement are used with the meanings such terms
would be given in accordance with GAAP except as may be otherwise specifically
provided in this Agreement. The following terms have the meanings indicated
when used in this Agreement with the initial letter capitalized:
"ADVANCE" means a disbursement of proceeds of the Revolving Loan or a Term
Loan Construction Advance.
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"AFFILIATE" means, with respect to any Person, any officer, shareholder or
director of such Person and any Person or group acting in concert in
respect of the Person in question that, directly or indirectly, controls or
is controlled by or is under common control with such Person.
"AGENT" means Fifth Third Bank of Kentucky, Inc., a Kentucky banking
corporation acting in its capacity as the Agent under each of the Escrow
Agreements, and any successor thereto in such capacity.
"AGREEMENT" means this Amended and Restated Credit Agreement, as amended,
modified, supplemented and/or restated from time to time and at any time.
"APPLICABLE CREDIT ENHANCEMENT LETTER OF CREDIT COMMISSION RATE" means the
rate per annum at which the commission due on each Commission Due Date for
each Credit Enhancement Letter of Credit will be calculated, which rate
shall be determined by reference to the Ratio of Total Funded Debt to
EBITDA in accordance with the following table:
Ratio of Total Applicable Credit
Funded Debt Enhancement Letter of
To EBITDA Credit Commission Rate
--------- ----------------------
3.00 and above 1 1/4%
2.50 to 2.99 1 1/4%
2.00 to 2.49 1%
1.50 to 1.99 1%
1.00 to 1.49 3/4%
less than 1.00 3/4%
The Applicable Credit Enhancement Letter of Credit Commission Rate shall be
determined on the Closing Date on the basis of the Ratio of Total Funded
Debt to EBITDA in effect on the Closing Date (which the Company and the
Bank agree for purposes of the Applicable Credit Enhancement Letter of
Credit Commission Rate shall be between 2.50 and 2.99 as of the Closing
Date) and shall be redetermined and adjusted as of the close of each fiscal
quarter of the Company thereafter, concurrently with any adjustment to the
Ratio of Total Funded Debt to EBITDA (as provided in the definition of
Ratio of Total Funded Debt to EBITDA in this Agreement), with such
redetermined Applicable Credit Enhancement Letter of Credit Commission Rate
to be effective for the entire fiscal quarter of the Company which
immediately follows each such fiscal quarter.
"APPLICABLE DOCUMENTARY LETTER OF CREDIT COMMISSION RATE" means the rate
per annum at which the commission due upon the issuance of each Documentary
Letter of Credit will be calculated, expressed as a percentage of the
maximum amount which may be
-17-
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drawn under the Documentary Letter of Credit, which rate shall be
determined by reference to the Ratio of Total Funded Debt to EBITDA in
accordance with the following table:
Ratio of Total Applicable Documentary
Funded Debt Letter of Credit
To EBITDA Commission Rate
--------- ---------------
3.00 and above 1/2%
2.50 to 2.99 1/2%
2.00 to 2.49 3/8%
1.50 to 1.99 1/4%
1.00 to 1.49 1/4%
less than 1.00 1/4%
The Applicable Documentary Letter of Credit Commission Rate shall be
determined on the Closing Date on the basis of the Ratio of Total Funded
Debt to EBITDA in effect on the Closing Date (which the Company and the
Bank agree for purposes of the Applicable Documentary Letter of Credit
Commission Rate shall be between 2.50 and 2.99 as of the Closing Date) and
shall be redetermined and adjusted as of the close of each fiscal quarter
of the Company thereafter, concurrently with any adjustment to the Ratio of
Total Funded Debt to EBITDA (as provided in the definition of Ratio of
Total Funded Debt to EBITDA in this Agreement), with such redetermined
Applicable Documentary Letter of Credit Commission Rate to be effective for
the entire fiscal quarter of the Company which immediately follows each
such fiscal quarter.
"APPLICABLE SPREAD I" means that number of percentage points to be taken
into account in determining the rate per annum at which interest will
accrue on the Revolving Loan, which shall be determined by reference to the
Ratio of Total Funded Debt to EBITDA in accordance with the following
table:
If determining
Ratio of Total a LIBOR-based
Funded Debt Rate on the
To EBITDA Revolving Loan
--------- --------------
3.00 and above 1 3/4%
2.50 to 2.99 1 3/4%
2.00 to 2.49 1 1/2%
1.50 to 1.99 1 1/4%
1.00 to 1.49 1%
less than 1.00 3/4%
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Applicable Spread I shall be determined on the Closing Date on the basis of
the Ratio of Total Funded Debt to EBITDA in effect on the Closing Date
(which the Company and the Bank agree for purposes of Applicable Spread I
shall be between 2.50 and 2.99 as of the Closing Date) and shall be
redetermined and adjusted as of the close of each fiscal quarter of the
Company thereafter, concurrently with any adjustment to the Ratio of Total
Funded Debt to EBITDA (as provided in the definition of Ratio of Total
Funded Debt to EBITDA in this Agreement), with such redetermined Applicable
Spread I to be effective for the entire fiscal quarter of the Company which
immediately follows each such fiscal quarter.
"APPLICABLE SPREAD II" means that number of percentage points to be taken
into account in determining the rate per annum at which interest will
accrue on the Term Loan, which shall be determined by reference to the
Ratio of Total Funded Debt to EBITDA in accordance with the following
table:
If determining
Ratio of Total a LIBOR-based
Funded Debt Rate on the
To EBITDA Term Loan
--------- --------------
3.00 and above 2%
2.50 to 2.99 2%
2.00 to 2.49 1 3/4%
1.50 to 1.99 1 1/2%
1.00 to 1.49 1 1/4%
less than 1.00 1%
Applicable Spread II shall be determined on the Closing Date on the basis
of the Ratio of Total Funded Debt to EBITDA in effect on the Closing Date
(which the Company and the Bank agree for purposes of Applicable Spread II
shall be between 2.50 and 2.99 as of the Closing Date) and shall be
redetermined and adjusted as of the close of each fiscal quarter of the
Company thereafter, concurrently with any adjustment to the Ratio of Total
Funded Debt to EBITDA (as provided in the definition of Ratio of Total
Funded Debt to EBITDA in this Agreement), with such redetermined Applicable
Spread II to be effective for the entire fiscal quarter of the Company
which immediately follows each such fiscal quarter.
"APPLICABLE UNUSED COMMITMENT FEE PERCENTAGE" means the percentage
determined by reference to the Ratio of Total Funded Debt to EBITDA in
accordance with the following table:
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Ratio of Total Applicable
Funded Debt Unused Commitment
To EBITDA Percentage Fee
-------------- --------------
3.00 and above 1/4%
2.50 to 2.99 1/4%
2.00 to 2.49 1/4%
1.50 to 1.99 3/16%
1.00 to 1.49 3/16%
less than 1.00 1/8%
The Applicable Unused Commitment Fee Percentage shall be determined on the
Closing Date on the basis of the Ratio of Total Funded Debt to EBITDA in
effect on the Closing Date (which the Company and the Bank agree for
purposes of determining the Applicable Unused Commitment Fee Percentage is
between 2.50 and 2.99 as of the Closing Date) and shall be redetermined and
adjusted as of the close of each fiscal quarter of the Company thereafter,
concurrently with any adjustment to the Ratio of Total Funded Debt to
EBITDA (as provided in the definition of Ratio of Total Funded Debt to
EBITDA in this Agreement), with such redetermined Applicable Unused
Commitment Fee Percentage to be effective for the entire fiscal quarter of
the Company which immediately follows each such fiscal quarter.
"APPLICATION FOR ADVANCE" means a written application of the Company for an
Advance substantially in the form of EXHIBIT "A" attached hereto.
"AUTHORIZED OFFICER" means the President or the Chief Financial Officer of
the Company or such other officer whose authority to perform acts to be
performed only by an Authorized Officer under the terms of this Agreement
is evidenced to the Bank by a certified copy of an appropriate resolution
of the Board of Directors of the Company.
"BANK" has the meaning ascribed to such term in the preamble to this
Agreement.
"BANKING DAY" means a day on which the principal office of the Bank in the
City of Indianapolis, Indiana, is open for the purpose of conducting
substantially all of the Bank's business activities.
"BOND DOCUMENT" means any of the 1993 Bond Documents or any of the 1994
Refunding Bond Documents as the context requires, and when used in the
plural form, refers to all or any combination of the Bond Documents as the
context requires.
"BONDS" means any of the 1993 Bonds or any of the 1994 Refunding Bonds or,
if the context requires, all or any combination of them.
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"BUSINESS DAY" is used as defined in each of the Credit Enhancement Letters
of Credit, as the context requires.
"CAPITAL EXPENDITURES" means for any period the aggregate amount of all
expenditures (whether paid in cash or accrued as a liability and including
without limitation freight, installation costs, taxes and other related
costs) of the Company, during such period that to the extent required by
GAAP are required to be included in or reflected as property, plant or
equipment or similar fixed asset account in any financial statements of the
Company, including any acquisition, construction or installation of
properties or for any additions, improvements or major repair thereto or
any replacement thereof, and the amount capitalized under any Capital
Lease.
"CAPITAL LEASE" means any lease of property (whether real, personal or
mixed) which, to the extent required by GAAP, is to be capitalized on the
balance sheet of the Company.
"CASH CAPITAL EXPENDITURES" means those Capital Expenditures that are not
financed with new Debt (including Debt incurred under this Agreement) or
through Capital Leases.
"CHANGE IN CONTROL" means the occurrence of any of the following:
(a) Any "person", as such term is used in Sections 13(d) and
14(d)(2) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act") (other than the Company, any trustee or
other fiduciary holding securities under an employee benefit
plan of the Company, or any corporation owned, directly or
indirectly, by the shareholders of the Company in
substantially the same proportions as their ownership of
stock of the Company, or any of the existing Series C
Preferred shareholders), is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, ov securities of the Company
representing 40% or more of the combined voting power of the
Company's then outstanding securities.
(b) During any period of two consecutive years (not including
any period ending prior July 17, 1996), individuals who at
the beginning of such period constitute the Board of
Directors of the Company cease to constitute at least a
majority thereof. If the election or nomination for
election by the Company's shareholders of a new director
(other than a director designated by a person who has
entered into an agreement with the Company to effect a
transaction described in clause (a), (c) or (d) of this
definition) was approved by a vote of at least two-thirds of
the directors then still in office who either were directors
at the beginning of the period or whose election or
nomination for election was previously so
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approved, that director shall not be counted for purposes of
the preceding sentence.
(c) The shareholders of the Company approve a merger or
consolidation of the Company with any other corporation,
other than (A) a merger or consolidation which would result
in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting
securities of the surviving entity) more than 80% of the
combined voting power of the voting securities of the
Company or such surviving entity outstanding immediately
after such merger or consolidation, or (B) a merger or
consolidation effected to implement a recapitalization of
the Company (or similar transaction) in which no "person"
(as hereinabove defined) acquires more than 50% of the
combined voting power of the Company's then outstanding
securities.
(d) The shareholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale of
disposition by the Company of all or substantially all of
the Company's asset.
(e) Any other transaction which is of a nature that would be
require to be reported in response to Item 6(e) of Schedule
14A of Regulation 14A promulgated under the Exchange Act
occurs.
"CHANGE IN MANAGEMENT" means either (i) Donald D. Dreher is no longer the
Chairman, President and Chief Executive Officer of the Company, or
(ii) Joseph G. Hill is no longer the Vice President-Finance and Chief
Financial Officer of the Company.
"CITY" means the City of Huntingburg, Indiana.
"CLOSING DATE" has the meaning ascribed to such term in the preamble to
this Agreement.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMERCIAL LC MASTER REIMBURSEMENT AGREEMENT" means the undated Commercial
Letter of Credit Master Agreement, between the Company and Banc One
International Corporation, as the same has been and hereafter may be
amended, modified, extended, renewed, supplemented, replaced and/or
restated from time to time and at any time.
"COMMISSION DUE DATE" is used as defined in Section 3.01(a)(3) or in
Section 3.01(b)(3) of this Agreement, as the context requires."
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"COMMITMENTS" means, collectively, the Revolving Loan Commitment and the
commitment of the Bank to make Term Loan Construction Advances as provided
in this Agreement.
"COMPANY" has the meaning ascribed to such term in the preamble to this
Agreement.
"COMPANY'S AUDITORS" means one of the six (6) largest independent certified
public accounting firms in the U.S.
"CONSTRUCTION AVAILABILITY" has the meaning ascribed to such term in
Section 2.04(a).
"CONSTRUCTION PERIOD" means a period of six (6) months after the earlier of
(i) the date of the first Term Loan Construction Advance, and (ii) October
31, 1997.
"CREDIT ENHANCEMENT LETTER OF CREDIT" means the 1993 Direct-Pay Letter of
Credit or the 1994 Refunding Direct-Pay Letter of Credit as the context
requires, and when used in the plural form, refers to both of them.
"DEBT" means, as of any date a determination thereof is made, all of the
following described indebtedness, liabilities and obligations of the
Company, as determined in accordance with GAAP, without
duplication: (a) all indebtedness, liabilities and obligations of the
Company for borrowed money; (b) all obligations of the Company as lessee
under any Capital Lease; (c) all obligations, indebtedness and liabilities
which are secured by any Lien on any asset of the Company, whether or not
the obligation, indebtedness or liability secured thereby shall have been
assumed by the Company; and (d) all obligations, indebtedness and
liabilities of others similar in character to those described in clauses
(a) through (c) of this definition for which the Company is liable,
contingently or otherwise, as obligor, guarantor or in any other capacity,
or in respect of which obligations, indebtedness or liabilities the Company
assures a creditor against loss or agrees to take any action to prevent any
such loss (other than endorsements of negotiable instruments for collection
in the ordinary course of business), including without limitation all
reimbursement obligations of the Company in respect of letters of credit,
surety bonds or similar obligations and all obligations of the Company to
advance funds to, or to purchase assets, property or services from, any
other Person in order to maintain the financial condition of such other
Person, excluding documentary letters of credit issued by the Bank to the
Company in connection with importing property in the ordinary course of
business.
"DESIGNATED ACCOUNT" is used as defined in Section 3.01(a) of this
Agreement.
"DOCUMENTARY LETTER OF CREDIT" is used as defined in Section 2.03(a), and
when used in the plural form, means all of the Documentary Letters of
Credit or any combination of them as the context requires.
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"DOCUMENTARY LETTER OF CREDIT EXPOSURE" means, as of the date such amount
is to be determined, the sum of:
(a) the aggregate face amounts of all Documentary Letters of Credit
that have not expired by their terms or have not been surrendered
by the beneficiary prior to the expiration thereof (including the
face amounts of any Documentary Letters of Credit that have
expired by their terms but have not been surrendered by the
beneficiary and as to which the beneficiary asserts a right to
present and/or have honored Drafts); LESS any portion of such
face amounts that has been exhausted by the payment or acceptance
of Drafts thereunder or otherwise; PLUS
(b) the total dollar amount of (1) the amount of all Drafts under
Documentary Letters of Credit which have been honored by the Bank
or which the Bank has otherwise been required to pay but with
respect to which the Bank has not yet received reimbursement from
the Company, including without limitation, the principal amounts
of all outstanding Documentary Letter of Credit Loans, and (2)
the amount of all Drafts under Documentary Letters of Credit
which have been presented to the Bank but not honored by the
Bank, which the Bank (in its sole discretion) determines it may
yet honor or be required to honor or the amount of which it may
otherwise be required to pay.
"DOCUMENTARY LETTER OF CREDIT LOAN" has the meaning ascribed to such term
in Section 2.03(d) of this Agreement.
"DRAFT" shall mean a drawing or other demand (or presentment of documents)
for payment under a Documentary Letter of Credit.
"DRAWING" means an Interest Drawing, a Principal Drawing or a Remarketing
Drawing as the context requires, and when used in the plural form, means
all or any combination of them as the context requires.
"EBITDA" means for any fiscal period of the Company, the Net Income for
such period (minus or plus, to the extent included in the determination of
such Net Income, any gain or loss (i) which must be treated as an
extraordinary item under GAAP or (ii) realized upon the sale or other
disposition of any real property or equipment that is not sold in the
ordinary course of business), PLUS (without duplication and only to the
extent deducted in determining such Net Income and all as determined in
accordance with GAAP), the sum of (a) Interest expense, (b) federal, state,
and local income tax expense, and (c) depreciation and amortization
expense.
"ELIGIBLE FUNDS" is used as defined in the 1993 Trust Indenture or the 1994
Refunding Trust Indenture, as the context requires.
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"ENVIRONMENTAL LAWS" means all federal, state and local laws and
implementing regulations, now or hereafter effective during the term of
this Agreement, relating to pollution or protection of the environment,
including laws or regulations relating to or permitting emissions,
discharges, releases or threatened releases of pollutants, contaminants,
chemicals, or industrial, toxic or hazardous substances or wastes into the
environment (including without limitation ambient air, surface water,
ground water, or land), or to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport, or handling of pollutants,
contaminants, chemicals, industrial wastes, or hazardous substances. Such
laws shall include, but not be limited to: (a) the Comprehensive
Environmental Response, Compensation and Liability Act, as amended,
42 U.S.C. Section 9601 ET SEQ.; (b) the Resource Conservation and Recovery
Act, as amended, 42 U.S.C. Section 6901 ET SEQ., including the statutes
regulating underground storage tanks, 42 U.S.C. 6991-6991h; (c) the Clean
Air Act, as amended, 42 U.S.C. 7401 ET SEQ.; (d) the Federal Water
Pollution Control Act, as amended, 33 U.S.C. Section 1251 ET SEQ.,
including the statute regulating the National Pollutant Discharge
Elimination System, 33 U.S.C. Section 1342; and (e) Indiana Code, Title 13
Environment, as amended.
"ENVIRONMENTAL REPORTS" means each of the environmental reports previously
furnished to the Bank pursuant to Section 6.b(iii), Section 6.c(iii),
Section 6.d(iii) or Section 6.e(iii) of the Original Agreement, as the
context requires, and when used in the plural form refers to all of the
Environmental Reports or any combination of them as the context requires.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ESCROW AGREEMENT" means either the Escrow Agreement (Dreher) or the Escrow
Agreement (Hill), as the context requires, and when used in the plural form
refers to both of the Escrow Agreements.
"ESCROW AGREEMENT (DREHER)" means the Escrow Agreement, dated as of July 9,
1996, among the Company, the Bank, Donald D. Dreher and the Agent, as the
same has been and hereafter may be amended, modified, supplemented and/or
restated from time to time and at any time.
"ESCROW AGREEMENT (HILL)" means the Escrow Agreement, dated as of July 9,
1996, among the Company, the Bank, Joseph G. Hill and the Agent, as the
same has been and hereafter may be amended, modified, supplemented and/or
restated from time to time and at any time.
"EVENT OF DEFAULT" means any of the events described in Section 8.01 of
this Agreement.
"FINANCIAL STATEMENTS" includes, but is not limited to, balance sheets,
profit and loss statements, and cash flow statements, prepared in
accordance with GAAP.
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"FIXED CHARGE COVERAGE RATIO" means, with respect to the Company for any
period, a ratio of EBITDA of the Company to Fixed Charges.
"FIXED CHARGES" means, with respect to the Company for any period, the sum
of interest which was due and payable in cash or was paid in cash during
such period, plus Cash Capital Expenditures made during such period, plus
scheduled payments of Debt of the Company which were due and payable in
cash or were paid during such period, plus income taxes which were due or
paid during such period, plus dividends that were paid in cash during such
period.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect from time to time, which shall include the official
interpretations thereof by the Financial Accounting Standards Board,
consistently applied (from and after the Closing Date) and for the period
as to which such accounting principles are to apply. Except as otherwise
provided in this Agreement, to the extent applicable, all computations and
determinations as to accounting or financial matters and all Financial
Statements to be delivered pursuant to this Agreement shall be made and
prepared in accordance with GAAP (including principles of consolidation
where appropriate), and, to the extent applicable, all accounting or
financial terms shall have the meanings ascribed to such terms by GAAP.
"GOVERNMENT ACTS" has the meaning ascribed to such term in Section 2.03(e)
of this Agreement.
"GUARANTOR" means DMI Management, Inc., a Kentucky corporation.
"GUARANTY" means the Guaranty Agreement, dated June 9, 1994, executed by
Guarantor in favor of the Bank, as the same has been or hereafter may be
amended, modified, supplemented, affirmed, reaffirmed and/or restated from
time to time and at any time.
"HAZARDOUS SUBSTANCE" means any hazardous or toxic substance regulated by
any Environmental Laws, including but not limited to the Comprehensive
Environmental Response, Compensation and Liability Act, the Resource
Conservation and Recovery Act and the Toxic Substance Control Act, or by
any federal, state or local governmental agencies having jurisdiction over
the control of any such substance including but not limited to the United
States Environmental Protection Agency.
"INTEREST" means for any period and for any Person, the interest expense of
such Person for that period, determined in accordance with GAAP.
"INTEREST DRAWING" is used as defined in each of the Credit Enhancement
Letters of Credit, as the context requires.
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"INTEREST PAYMENT DATE" is used as defined in the 1993 Trust Indenture or
the 1994 Refunding Trust Indenture, as the context requires.
"INTERIM FINANCIAL STATEMENTS" means the interim financial statements of
the Company furnished to the Bank pursuant to Section 6.02(b) of this
Agreement for each successive 4-week or 5-week period comprising a fiscal
quarter of the Company, and, when used in reference to a fiscal quarter or
a period of fiscal quarters of the Company, means all of the Interim
Financial Statements for each of the 4-week and 5-week periods comprising
such fiscal quarter or period of fiscal quarters.
"LETTER OF CREDIT" means any of the Credit Enhancement Letters of Credit or
any of the Documentary Letters of Credit as the context requires, and when
used in the plural form, means all of the Letters of Credit or any
combination of them as the context requires.
"LIBOR-BASED RATE" means a variable rate at which interest may accrue on
all or a portion of any of the Loans under the terms of this Agreement,
which rate is determined by reference to the London Interbank Offered Rate.
"LIEN" and "lien" each means any mortgage, pledge, security interest,
encumbrance, lien, charge or deposit arrangement of any kind (including,
without limitation, any conditional sale or other title retention agreement
or lease in the nature thereof, any sale of accounts with recourse against
the seller, any filing or agreement to file a financing statement as debtor
under the Uniform Commercial Code or any similar statute other than to
reflect ownership by third party of property leased to the Person under a
lease which is not in the nature of a conditional sale or title retention
agreement, and any subordination arrangement in favor of another Person).
"LOAN" means the Revolving Loan, the Term Loan, any Remarketing
Reimbursement Loan-1993 Bonds, or any Remarketing Reimbursement Loan-1994
Refunding Bonds, as the context requires, and when used in the plural form
refers to all of the Loans or any combination of them, as the context
requires.
"LOAN DOCUMENTS" means, collectively, this Agreement, the Revolving Note,
the Term Note, the Security Agreement, the Mortgages, the Mortgage
Amendments, the Guaranty, the Reimbursement Agreements and all other
instruments, agreements and documents executed and delivered or to be
delivered by the Company pursuant to or by virtue of this Agreement, as
each may be amended, modified, extended, renewed, supplemented and/or
restated from time to time and at any time, and when used in the singular
form, means any of the Loan Documents, as the context requires.
"LONDON INTERBANK OFFERED RATE" means the per annum rate of interest, as
determined by the Bank, at which dollar deposits in immediately available
funds are offered to the principal banks in the London interbank market by
other principal banks in that market two Banking Days prior to the
commencement of a period of either one month, two
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months, three months or six months for which the Company shall have
requested a quotation of the rate in amounts equal to the amount for
which the Company shall have requested a quotation of the rate.
"MAXIMUM AVAILABILITY" means, subject to the terms of Section 2.06: (i)
from and after the Closing Date to and including May 30, 1998, $13,500,000;
(ii) from and after May 31, 1998, to and including May 30, 1999,
$15,500,000; and (iii) from and after May 31, 1999 until the Scheduled
Revolving Loan Maturity Date, $17,000,000.
"MAXIMUM AVAILABLE CREDIT" means the sum of (i) the 1993 Maximum Available
Credit, plus (ii) the 1994 Maximum Available Credit.
"MORTGAGE" means the 1992 Huntingburg Mortgage, the 1993 Huntingburg
Mortgage-Warehouse, the 1993 Huntingburg Mortgage-Mfg. and the "1997
Project Mortgage" (as such term is defined in Schedule 1 attached hereto)
as the context requires, and when used in the plural form, means all of the
Mortgages or any combination of them as the context requires.
"MORTGAGE AMENDMENTS" has the meaning ascribed to such term in Section
5.01(b) of this Agreement.
"NET INCOME" means for any period the net income of the Company for such
period, determined in accordance with GAAP.
"NOTE" means the Revolving Note, the Term Note, any Remarketing
Reimbursement Note-1993 Bonds, or any Remarketing Reimbursement Note-1994
Refunding Bonds, as the context requires, and when used in the plural form
refers to all of the Notes or any combination of them, as the context
requires.
"OBLIGATIONS" means all present and future indebtedness, obligations and
liabilities, and all renewals and extensions thereof, now or hereafter owed
to the Bank by the Company, whether arising under, by virtue of or pursuant
to any of this Agreement, the Notes, the Reimbursement Agreements, any
other Loan Documents or otherwise, together with all costs, expenses and
reasonable attorneys' fees (including the reasonable allocated costs of
staff counsel) incurred by the Bank in the enforcement or collection
thereof, whether such indebtedness, obligations and liabilities are direct,
indirect, fixed, contingent, liquidated, unliquidated, joint, several,
joint and several, now exist or hereafter arise, or were prior to
acquisition thereof by the Bank owed to some other Person.
"OFFICER'S CERTIFICATE" means a certificate in the form included as a part
of EXHIBIT "B " attached hereto signed by the President or Chief Financial
Officer of the Company, confirming that all of the representations and
warranties contained in Section 4.01 of this Agreement are true and correct
as of the date of such certificate except as specified therein and with the
further exceptions that: (i) the representation contained in Section
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4.01(d) of this Agreement shall be construed so as to refer to the latest
Financial Statements which have been furnished to the Bank as of the date
of any such certificate, (ii) the representations contained in Section
4.01(k) (with respect to Hazardous Substances) will be construed so as to
apply not only to the Company, but also to any Subsidiaries, whether now
owned or hereafter acquired, (iii) the representation contained in Section
4.01(l) of this Agreement shall be deemed to be amended to reflect the
existence of any Subsidiary hereafter formed or acquired by the Company
with the consent of the Bank, and (iv) all other representations will be
construed to have been amended to conform with any changes of which the
Company shall have previously given the Bank notice in writing. The
Officer's Certificate shall further confirm that no Event of Default or
Unmatured Event of Default shall have occurred and be continuing as of the
date of the Officer's Certificate or shall describe any such event which
shall have occurred and be then continuing and the steps being taken by the
Company to correct it.
"ORIGINAL AGREEMENT" has the meaning ascribed to such term in the Recitals
to this Agreement.
"PERMITTED LIENS" means those liens, encumbrances and security interests
described in Sections 6.02(b)(1) through (7) of this Agreement.
"PERSON" shall mean an individual, a corporation, a limited or general
partnership, a limited liability company, a joint venture, a trust or
unincorporated organization, a joint stock company or other similar
organization, a government or any political subdivision thereof, a court,
or any other legal entity, whether acting in an individual, fiduciary or
other capacity.
"PLAN" means an employee pension benefit plan as defined in ERISA.
"PLEDGED BONDS" is used as defined in Section 5.01(h).
"PREPAYMENT PREMIUM" means the excess, if any, as determined by the Bank
of: (i) the present value at the time of prepayment of the interest
payments which would have been payable on account of an amount prepaid from
the date of prepayment until the end of the period during which interest
would have accrued at a LIBOR-based Rate but for prepayment over (ii) the
present value at the time of prepayment of interest payments calculated at
the rate (the "REINVESTMENT RATE") which the Bank then estimates it would
receive upon reinvesting the principal amount of the prepayment in an
obligation which presents a credit risk substantially similar (as
determined in accordance with the commercial credit rating system then used
by the Bank) to that which is then presented by the Loan for a period
approximately equal to the balance of the period during which interest
would accrue on the portion of the Loan prepaid at a LIBOR-based Rate, but
for prepayment. The discount rate used by the Bank in determining such
present values shall be the Reinvestment Rate.
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"PRIME-BASED RATE" means any variable rate at which interest may accrue on
all or a portion of either of the Loans under the terms of this Agreement,
which rate is determined by reference to the Prime Rate.
"PRIME RATE" means a variable per annum interest rate equal at all times to
the rate of interest established and quoted by the Bank as its prime rate,
such rate to change contemporaneously with each change in such established
and quoted rate, provided that it is understood that the Prime Rate shall
not necessarily be representative of the rate of interest actually charged
by the Bank on any loan or class of loans.
"PRINCIPAL DRAWING" is used as defined in each of the Credit Enhancement
Letters of Credit, as the context requires.
"RATIO OF TOTAL FUNDED DEBT TO EBITDA" means, with respect to any period,
the ratio of Total Funded Debt at the close of that period to EBITDA of the
Company for that period. For purposes of determining the Applicable Unused
Commitment Fee Percentage, the Applicable Credit Enhancement Letter of
Credit Commission Rate, the Applicable Documentary Letter of Credit
Commission Rate, Applicable Spread I and Applicable Spread II, the Ratio of
Total Funded Debt to EBITDA shall be redetermined as of the close of each
fiscal quarter of the Company ending after the Closing Date on the basis of
the Interim Financial Statements for such fiscal quarter and the most
recent three preceding fiscal quarters of the Company (a "Quarterly
Adjustment"), provided that, the Applicable Unused Commitment Fee
Percentage, the Applicable Credit Enhancement Letter of Credit Commission
Rate, the Applicable Documentary Letter of Credit Commission Rate,
Applicable Spread I and Applicable Spread II in all events shall be the
higher of the percentages as determined by the Ratio of Total Funded Debt
to EBITDA as of the close of the fiscal quarter of the Company most
recently ended and the percentages as determined as of the close of the
immediately preceding fiscal quarter. No Quarterly Adjustment shall be
effective as to any LIBOR-based Rate until the expiration of the period of
time for which such LIBOR-based Rate shall have been selected by the
Company. The Ratio of Total Funded Debt to EBITDA shall be adjusted on the
last Banking Day of the calendar month in which the Bank receives the most
recent Interim Financial Statements upon which such adjustment is based.
Notwithstanding the foregoing, in the event that the Company fails to
deliver any Interim Financial Statements when due as required by this
Agreement and fails to cure such default within ten (10) days after notice
of such default to the Company by the Bank, then the Applicable Unused
Commitment Fee Percentage, the Applicable Credit Enhancement Letter of
Credit Commission Rate, the Applicable Documentary Letter of Credit
Commission Rate, Applicable Spread I and Applicable Spread II shall be
adjusted (without further notice by the Bank) to the largest number shown
in the table applicable to such definition from such due date until the
first interest payment date which follows such delivery to the Bank of such
Interim Financial Statements. It is noted that the tables shown in the
definitions of the terms Applicable Credit Enhancement Letter of Commission
Rate, Applicable Documentary Letter of Credit Commission Rate, Applicable
Unused
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Commitment Fee Percentage, Applicable Spread I and Applicable Spread
II may provide for a Ratio of Total Funded Debt to EBITDA greater than that
which will be permissible under the terms of Section 6.01(g)(3) . For the
avoidance of doubt, it is agreed that it is the intent of the parties that
the Bank shall be free to exercise all remedies otherwise provided for in
this Agreement in the event of the violation by the Company of the covenant
stated in Section 6.01(g)(3), notwithstanding those tables.
"REAL ESTATE" means the 1992 Huntingburg Real Estate, the 1993 Huntingburg
Real Estate-Warehouse, the 1993 Huntingburg Real Estate-Mfg., and the 1997
Project Real Estate, or all or any combination of them, as the context
requires.
"REIMBURSEMENT AGREEMENTS" means, collectively, the Commercial LC Master
Reimbursement Agreements and the Standby LC Reimbursement Agreements, and
the term "REIMBURSEMENT AGREEMENT" means any of the Reimbursement
Agreements.
"REINVESTMENT RATE" has the meaning ascribed to such term in the text of
the definition of "Prepayment Premium" in this Section.
"REMAINING AVAILABILITY" means, at any time a determination thereof is to
be made, that amount which results by subtracting from the Maximum
Availability the sum of (i) the principal balance of the Revolving Loan
outstanding at such time, and (ii) the aggregate Documentary Letter of
Credit Exposure at such time.
"REMARKETING AGENT" is used (i) in reference to the 1993 Bonds, as such
term is defined in the 1993 Trust Indenture, and (ii) in reference to the
1994 Refunding Bonds, as such term is defined in the 1994 Refunding Trust
Indenture.
"REMARKETING DRAWING" is used as defined in each of the Credit Enhancement
Letters of Credit, as the context requires.
"REMARKETING REIMBURSEMENT LOAN-1993 BONDS" is used as defined in Section
3.01(a)(4) of this Agreement.
"REMARKETING REIMBURSEMENT LOAN-1994 REFUNDING BONDS" is used as defined in
Section 3.01(b)(4) of this Agreement.
"REMARKETING REIMBURSEMENT NOTE-1993 BONDS" is used as defined in Section
3.01(a)(4) of this Agreement.
"REMARKETING REIMBURSEMENT NOTE-1994 REFUNDING BONDS" is used as defined in
Section 3.01(b)(4) of this Agreement.
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"REVOLVING LOAN" has the meaning ascribed to such term in Section 2.02(a)
of this Agreement.
"REVOLVING LOAN COMMITMENT" means the agreement of the Bank to extend the
Revolving Loan to the Company until the Revolving Loan Maturity Date.
"REVOLVING LOAN MATURITY DATE" means the earlier of (i) the Scheduled
Revolving Loan Maturity Date, and (ii) that date upon which the Bank
accelerates payment of the Revolving Loan in accordance with Section 8.02
of this Agreement.
"REVOLVING NOTE" has the meaning ascribed to such term in Section 2.02(b)
of this Agreement.
"SECURITY AGREEMENT" means the Security Agreement, dated June 9, 1994,
executed by the Company and delivered to the Bank, as the same has been and
hereafter may be amended, modified, supplemented and/or restated from time
to time and at any time.
"SCHEDULE OF EXCEPTIONS" means the schedule of exceptions attached hereto
and made a part hereof for all purposes as EXHIBIT "C".
"SCHEDULED REVOLVING LOAN MATURITY DATE" means January 31, 2000, or such
subsequent date to which the Revolving Loan Commitment may be extended by
the Bank pursuant to the terms of Section 2.02(d) of this Agreement.
"SCHEDULED TERM LOAN MATURITY DATE" means January 31, 2003, or such
subsequent date to which the extend the Scheduled Term Loan Maturity Date
pursuant to the terms of Section 2.04(e) of this Agreement.
"STANDBY LC REIMBURSEMENT AGREEMENT" has the term ascribed to it in Section
2.03(a) of this Agreement, and when used in the plural form refers to all
of the Standby LC Reimbursement Agreements, or any combination of them, as
the context requires.
.
"SUBSIDIARY" means any corporation, partnership, joint venture or other
business entity over which the Company exercises control, provided that it
shall be conclusively presumed that the Company exercises control over any
such entity 51% or more of the equity interest in which is owned by the
Company, directly or indirectly.
"TANGIBLE NET WORTH" means the shareholders' equity of the Company, less
any allowance for goodwill, patents, trademarks, trade secrets, and any
other assets which would be classified as intangible assets under GAAP, and
less the Company's deferred tax asset arising from the recognition of its
net operating loss carry forward.
"TERM LOAN" has the meaning ascribed to such term in Section 2.04(a) of
this Agreement.
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"TERM LOAN CONSTRUCTION ADVANCE" has the meaning ascribed to such term in
Section 2.04(a).
"TERM LOAN MATURITY DATE" means the earlier of (i) the Scheduled Term Loan
Maturity Date, and (ii) that date upon which the Bank accelerates payment
of the Term Loan in accordance with Section 8.02 of this Agreement.
"TERM NOTE" has the meaning ascribed to such term in Section 2.04(b) of
this Agreement.
"TOTAL FUNDED DEBT" means, as of any date a determination thereof is made,
all of the Debt of the Company that is interest-bearing.
"TOWN" means the Town of Ferdinand (Dubois County), Indiana.
"TRUST INDENTURE" means the 1993 Trust Indenture or the 1994 Refunding
Trust Indenture and, when used in the plural form, refers to both of the
Trust Indentures.
"TRUSTEE" means the 1993 Trustee or the 1994 Refunding Trustee and, when
used in the plural form, refers to both of the Trustees.
"UNMATURED EVENT OF DEFAULT" means any event specified in Section 8.01 of
this Agreement, which is not initially an Event of Default, but which
would, if uncured, become an Event of Default with the giving of notice or
the passage of time or both.
"1992 HUNTINGBURG MORTGAGE" means a Mortgage, Security Agreement,
Assignment of Rents and Fixture Filing dated December 4, 1992, and recorded
on December 7, 1992, as Document No. 168207 in Mortgage Book 281, Page 97,
as amended by a First Amendment to Mortgage, Security Agreement, Assignment
of Rents and Fixture Filing effective as of November 12, 1993, and recorded
on November 12, 1993, as Document No. 174844, in Mortgage Book 304, Page
390, and by a Second Amendment to Mortgage, Security Agreement, Assignment
of Rents and Fixture Filling dated June 9, 1994, and recorded on June 13,
1994, as Document No. 178773 in Mortgage book 318, Page 25, and by a Third
Amendment to Mortgage, Security Agreement, Assignment of Rents and Fixture
Filing, dated as of October 11, 1994, recorded on October 28, 1994, as
Document No. 181216, in Mortgage Book 325, Page 158, with all recording
occurring in the Office of the Recorder of Dubois County, Indiana, as the
same has been or hereafter may be amended, modified, supplemented and/or
restated from time to time and at any time.
"1992 HUNTINGBURG REAL ESTATE" means the real estate in Dubois County,
Indiana, owned by the Company, which is the subject of the 1992 Huntingburg
Mortgage.
"1993 BOND DOCUMENTS" means the 1993 Bonds, the 1993 Trust Indenture, the
1993 Loan Agreement and any other documents or agreement executed by the
Company as an
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incident to the issuance of the 1993 Bonds other than the Loan Documents,
as the same have been and hereafter may be amended, modified,
supplemented and/or restated from time to time and at any time.
"1993 BONDS" means the $3,420,000 in original principal amount of City of
Huntingburg, Indiana, Adjustable Rate Economic Development Revenue Bonds,
(DMI Furniture, Inc. Project) Series 1993 issued by the City pursuant to
the 1993 Trust Indenture, as the same have been and hereafter may be
amended, modified, supplemented and/or restated from time to time and at
any time.
"1993 DIRECT-PAY LETTER OF CREDIT" is used as defined in Section 3.01(a) of
this Agreement.
"1993 LOAN AGREEMENT" means the Loan Agreement dated as of October 1, 1993,
between the Company and the City as an incident to the issuance of the 1993
Bonds, as the same has been and hereafter may be amended, modified,
supplemented and/or restated from time to time and at any time.
"1993 MAXIMUM AVAILABLE CREDIT" meant initially the sum of $3,462,750.00,
and thereafter shall mean the maximum amount available to be drawn by the
1993 Trustee under the 1993 Direct-Pay Letter of Credit for payment of
principal and interest due on the 1993 Bonds, whether such payments become
due as scheduled, upon mandatory or optional redemption of the 1993 Bonds,
or on account of acceleration of the 1993 Bonds following the occurrence of
an "Event of Default" as defined in the 1993 Trust Indenture.
"1993 TRUST INDENTURE" means the Trust Indenture entered into by the City
and the 1993 Trustee dated as of October 1, 1993 pursuant to which the City
issued the 1993 Bonds, as the same has been and hereafter may be amended,
modified, supplemented and/or restated from time to time and at any time.
"1993 TRUSTEE" means PNC Bank, Indiana, Inc., in its capacity as Trustee
under the 1993 Trust Indenture, or any successor Trustee under the 1993
Trust Indenture.
"1993 HUNTINGBURG MORTGAGE-WAREHOUSE" means a Mortgage, Security
Agreement, Assignment of Rents and Fixture Filing dated November 10, 1993,
and recorded on November 12, 1993, as Document No. 17845, in Mortgage book
304, Page 393, as amended by a First Amendment to Mortgage, Security
Agreement, Assignment of Rents and Fixture Filing dated June 9, 1994, and
recorded on June 14, 1994, as Document No. 178806, in Mortgage Book 318,
Page 108, and by a Second Amendment to Mortgage, Security Agreement,
Assignment of Rents and Fixture Filing, dated as of October 10, 1994,
recorded on October 28, 1994, as Document No. 181214 in Mortgage Book 325,
Page 152, with all recording occurring in the Office of the Recorder of
Dubois County, Indiana, as the same has been and hereafter may be amended,
modified, supplemented and/or restated from time to time and at any time.
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"1993 HUNTINGBURG MORTGAGE-MFG." means a Mortgage, Security Agreement,
Assignment of Rents and Fixture Filing dated December 15, 1993, and
recorded on December 16, 1993, as Document No. 175583 in Mortgage Book 307,
Page 154, as amended by a First Amendment to Mortgage, Security Agreement,
Assignment of Rents and Fixture Filing dated June 9, 1994, and recorded on
June 14, 1994, as Document No. 178807, in Mortgage book 318, Page 111, and
by a Second Amendment to Mortgage, Security Agreement, Assignment of Rents
and Fixture Filing, dated as of October 11, 1994, recorded on October 28,
1994, as Document No. 181215, in Mortgage Book 325, Page 155, with all
recording occurring in the Office of the Recorder of Dubois County,
Indiana, as the same has been and hereafter may be amended, modified,
supplemented and/or restated from time to time and at any time.
"1993 HUNTINGBURG REAL ESTATE-WAREHOUSE" means the real estate in Dubois
County, Indiana, owned by the Company, on which the Company constructed
warehouse facilities with proceeds of the 1993 Bonds, which is the subject
of the 1993 Huntingburg Mortgage-Warehouse.
"1993 HUNTINGBURG REAL ESTATE-MFG." means the real estate in Dubois County,
Indiana, owned by the Company, on which manufacturing operations of the
Company are conducted, which is the subject of the 1993 Huntingburg
Mortgage-Mfg.
"1994 REFUNDING BOND DOCUMENTS" means the 1994 Refunding Bonds, the 1994
Refunding Trust Indenture, the 1994 Refunding Loan Agreement and any other
document or agreement executed by the Company as an incident to the
issuance of the 1994 Refunding Bonds other than the Loan Documents, as the
same have been and hereafter may be amended, modified, supplemented and/or
restated from time to time and at any time.
"1994 REFUNDING BONDS" means the $2,940,000 in original principal amount of
City of Huntingburg, Indiana, Adjustable Rate Economic Development Revenue
Refunding Bonds, (DMI Furniture, Inc. Project) Series 1994, issued by the
City pursuant to the 1994 Refunding Trust Indenture, as the same have been
and hereafter may be amended, modified, supplemented and/or restated from
time to time and at any time.
"1994 REFUNDING LOAN AGREEMENT" means the Loan Agreement dated as of June
1, 1994, between the Company and the City as an incident to the issuance of
the 1994 Refunding Bonds, as the same has been and hereafter may be
amended, modified, supplemented and/or restated from time to time and at
any time.
"1994 REFUNDING DIRECT-PAY LETTER OF CREDIT" is used as defined in Section
3.04(b) of this Agreement.
"1994 REFUNDING MAXIMUM AVAILABLE CREDIT" means initially the sum of
$2,976,750, and thereafter shall mean the maximum amount available to be
drawn by the 1994 Refunding
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Trustee under the 1994 Refunding Direct-Pay Letter of Credit for principal
and interest due on account of the 1994 Refunding Bonds upon (i) mandatory
or optional redemption of the 1994 Refunding Bonds, or (ii) on account of
acceleration of the 1994 Refunding Bonds following the occurrence of an
"Event of Default" as defined in the 1994 Refunding Trust Indenture.
"1994 REFUNDING TRUST INDENTURE" means the Trust Indenture entered into
between the City and the 1994 Refunding Trustee dated as of June 1, 1994,
pursuant to which the City is issuing the 1994 Refunding Bonds, as the same
has been and hereafter may be amended, modified, supplemented and/or
restated from time to time and at any time.
"1994 REFUNDING TRUSTEE" means PNC Bank, Indiana, Inc., in its capacity as
Trustee under the 1994 Refunding Trust Indenture, or any successor Trustee
under the 1994 Refunding Trust Indenture.
"1997 PROJECT" has the meaning ascribed to such term in Section 2.04(a) of
this Agreement.
"1997 PROJECT REAL ESTATE" means the real estate more particularly
described on EXHIBIT "D".
ARTICLE II
THE LOANS
SECTION 2.01. GENERAL STATEMENT. Subject to and in accordance with
the terms of this Agreement, and in reliance upon the representations,
warranties, covenants and agreements of the Company made in this Agreement and
the other Loan Documents, the Bank will make the Loans and issue the Documentary
Letters of Credit described in this Article II.
SECTION 2.02. THE REVOLVING LOAN.
(a) THE REVOLVING LOAN COMMITMENT -- USE OF PROCEEDS. The Bank
agrees to make Advances to the Company on a revolving basis (collectively, the
"REVOLVING LOAN") from time to time from and after the Closing Date until the
Revolving Loan Maturity Date, in an amount not exceeding in the aggregate at any
time outstanding the Maximum Availability, provided that all of the conditions
of lending stated in Section 7.01 of this Agreement as being applicable to the
Revolving Loan have been fulfilled at the time of each such Advance.
Proceeds of the Revolving Loan from and after the Closing Date may be
used by the Company only to fund working capital requirements.
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The Revolving Loan under this Agreement is a continuation, on amended
terms, of the "Revolving Loan" extended to the Company by the Bank under the
Original Agreement (the "PRIOR REVOLVING LOAN") and the Company affirms,
acknowledges and agrees that the principal balance of the Prior Revolving Loan
as of October 1, 1997 was $8,219,619.30.
(b) METHOD OF BORROWING. The obligation of the Company to repay the
Revolving Loan shall be evidenced by a promissory note executed by the Company
to the Bank in the form of EXHIBIT "E" attached hereto (as the same may be
amended, modified, extended, renewed, supplemented, replaced and/or restated
from time to time and at any time, the "REVOLVING NOTE"). So long as no Event
of Default or Unmatured Event of Default shall have occurred and be continuing
and until the Revolving Loan Maturity Date, the Company may borrow, repay
(subject to the requirements of Section 2.06 of this Agreement) under the
Revolving Note on any Banking Day, provided that the Company hall not be
entitled to receive and the Bank shall not be obligated to make any Advance
under the Revolving Loan: (i) if the making of such Advance would cause or
result in an Event of Default or an Unmatured Event of Default; or (ii) if after
making such Advance the principal balance of the Revolving Loan would exceed the
Maximum Availability.
Each Advance under the Revolving Loan shall be conditioned upon
receipt by the Bank from the Company of an Application for an Advance and an
Officer's Certificate, provided that the Bank may, at its discretion, make a
disbursement upon the oral request of the Company made by an Authorized Officer,
or upon a request transmitted to the Bank by telecopy or by any other form of
written electronic communication (all such requests for Advances being hereafter
referred to as "INFORMAL REQUESTS"). In so doing, the Bank may rely on any
informal request which shall have been received by it in good faith from a
Person reasonably believed to be an Authorized Officer. Each informal request
shall be promptly confirmed by a duly executed Application for an Advance and
Officer's Certificate if the Bank so requires and shall in and of itself
constitute the representation of the Company that no Event of Default or
Unmatured Event of Default has occurred and is continuing or would result from
the making of the requested Advance, that the requested Advance would not exceed
the Remaining Availability, and that the making of the requested Advance would
not cause the principal balance of the Revolving Loan to exceed the Maximum
Availability. All borrowings and reborrowings and all repayments shall be in
amounts of not less than Fifty Thousand Dollars ($50,000), except for repayment
of the entire principal balance of the Revolving Loan and except for special
prepayments of principal required under the terms of Section 2.06 of this
Agreement. Upon receipt of an Application for an Advance, or at the Bank's
discretion upon receipt of an informal request for an Advance and upon
compliance with any other conditions of lending stated in Section 7.01 of this
Agreement applicable to the Revolving Loan, the Bank shall disburse the amount
of the requested Advance to the Company. All Advances by the Bank and payments
by the Company shall be recorded by the Bank on its books and records, and the
principal amount outstanding from time to time, plus interest payable thereon,
shall be determined by reference to the books and records of the Bank. The
Bank's books and records shall be presumed PRIMA FACIE to be correct as to such
matters.
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(c) INTEREST ON THE REVOLVING LOAN. The principal amount of the
Revolving Loan outstanding from time to time shall bear interest until the
Revolving Loan Maturity Date at a rate per annum equal to the Prime Rate, except
that at the option of the Company, exercised from time to time as provided in
Section 2.05(c) of this Agreement, interest may accrue prior to maturity on any
Advance or on the entire outstanding balance of the Revolving Loan as to which
no LIBOR-based Rate previously elected remains in effect, at a LIBOR-based Rate
for a period of one month, two months, three months or six months plus, plus
Applicable Spread I, provided that an election of a LIBOR-based Rate for a
period extending beyond the Scheduled Revolving Loan Maturity Date shall be
permitted only at the discretion of the Bank. From and after the Revolving Loan
Maturity Date, and until paid in full, the Revolving Loan shall bear interest at
a per annum rate equal to the Prime Rate plus two percent (2%) per annum, except
that as to any portion of the Revolving Loan for which the Company may have
elected a LIBOR-based Rate for a period of time that has not expired at the
Revolving Loan Maturity Date, such portion shall, during the remainder of such
period, bear interest at the greater of the Prime Rate plus two percent (2%) per
annum or the LIBOR-based Rate then in effect, plus Applicable Spread I, plus two
percent (2%) per annum. Accrued interest shall be due and payable monthly on
the last Banking Day of each month prior to the Revolving Loan Maturity Date.
After the Revolving Loan Maturity Date, interest which accrues on the Revolving
Loan shall be payable as accrued and without demand.
(d) EXTENSIONS OF SCHEDULED REVOLVING LOAN MATURITY DATE. The Bank
may, upon the request of the Company, but at the Bank's sole discretion, extend
the Scheduled Revolving Loan Maturity Date from time to time to such date or
dates as the Bank may elect by notice in writing to the Company, and upon any
such extension, the date to which the Scheduled Revolving Loan Maturity Date is
then extended will become the "Scheduled Revolving Loan Maturity Date" for
purposes of this Agreement.
(e) UNUSED COMMITMENT FEE. In addition to interest on the Revolving
Loan, the Company shall pay to the Bank an unused commitment fee for each
partial or full fiscal quarter during which the Revolving Loan Commitment is
outstanding equal to the Applicable Unused Commitment Fee Percentage in effect
at the close of such partial or full fiscal quarter TIMES the daily average
"Unused Revolving Loan Commitment" (as defined in the following sentence) for
such partial or full fiscal quarter multiplied by a fraction, the numerator of
which shall be the number of calendar days in such partial or full fiscal
quarter and the denominator of which is 360. As used herein, the term "UNUSED
REVOLVING LOAN COMMITMENT" means, as of the close of each calendar day for which
a determination thereof is to be made, the positive difference, if any, which
results from subtracting from the Maximum Availability, the outstanding
principal balance of the Revolving Loan and the outstanding amount of the
Documentary Letters of Credit at the close of such calendar day. Unused
commitment fees for each fiscal quarter shall be due and payable within ten (10)
days following the Bank's submission, following the close of such quarter, of a
statement of the amount due. Such fees may be debited by the Bank when due to
any demand deposit account of the Company carried with the Bank without further
authority, notice or demand.
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SECTION 2.03. DOCUMENTARY LETTERS OF CREDIT.
(a) DOCUMENTARY LETTERS OF CREDIT -- GENERAL. At any time that the
Company is entitled to an Advance under the Revolving Loan, the Bank agrees,
subject to the terms and conditions of this Agreement, to issue upon the
application of the Company and for the account of the Company documentary
commercial and standby letters of credit for general business purposes (each a
"DOCUMENTARY LETTER OF CREDIT"), PROVIDED THAT:
(1) The Company shall not request and the Bank shall have no
obligation to issue any Documentary Letter of Credit: (i) at any time any
Event of Default or Unmatured Event Default shall have occurred and be
continuing; (ii) at any time after the Revolving Loan Maturity Date; or
(iii) if, after giving effect to such issuance, the aggregate Documentary
Letter of Credit Exposure would exceed the Remaining Availability;
(2) The Bank in no event shall be obligated to issue any
Documentary Letter of Credit: (i) having an expiration date beyond the
Scheduled Revolving Loan Maturity Date; or (ii) if the issuance of such
Documentary Letter of Credit on the terms requested would be contrary to,
or in violation of the policies of the Bank or any requirement of
applicable law;
(3) The form of the requested Documentary Letter of Credit shall
be satisfactory to the Bank in the reasonable exercise of the Bank's
discretion; and
(4) (i) With respect to a commercial Documentary Letter of
Credit, the Bank shall have received from the Company a written or
electronically transmitted application for the Documentary Letter of Credit
in form and substance satisfactory to the Bank in all respects, duly
executed or authorized by an Authorized Officer, pursuant to and in
accordance with the terms of the Commercial LC Master Reimbursement
Agreement; and (ii) With respect to a standby Documentary Letter of Credit,
the Bank shall have received from the Company an application and
reimbursement agreement for the Documentary Letter of Credit in form and
substance satisfactory to the Bank in all respects, duly executed by an
Authorized Officer (as the same may be amended, modified, extended,
renewed, supplemented, replaced and/or restated from time to time and at
any time, "STANDBY LC REIMBURSEMENT AGREEMENT").
.
(b) DOCUMENTARY LETTER OF CREDIT PROCEDURES. Whenever the Company
desires the issuance of a Documentary Letter of Credit, it shall deliver to the
Bank not later than 11:30 a.m. (Dallas, Texas time) at least three Banking Days
(or such shorter period as may be agreed to by the Bank in any particular
instance) in advance of the proposed date of issuance an application duly
executed or authorized by an Authorized Officer for such Documentary Letter of
Credit, which application shall include a precise description of the documents
and the verbatim text of any certificate to be presented by the proposed
beneficiary with, or as a part of any Draft (and in all events shall be in
accordance with the requirements of the Commercial LC Master
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Reimbursement Agreement if a commercial Documentary Letter of Credit is to
be issued) and; provided that the Bank, in its sole judgment, may require
changes in the description of any such documents and the text of such
certificates; and provided further that, at the discretion of the Bank, each
Documentary Letter of Credit shall provide that payment against a conforming
Draft is not required to be made thereunder prior to the close of business on
the third Banking Day following presentment of such Draft.
(c) DRAWS UNDER DOCUMENTARY LETTERS OF CREDIT. Upon presentation of
a Draft under any Documentary Letter of Credit by the beneficiary thereof, the
Bank shall notify the Company of the receipt thereof ("DRAFT NOTICE") not later
than one Banking Day prior to the date on which the Bank intends to honor such
Draft. The Draft Notice may be given by telephone or telecopy. Failure to give
the Draft Notice or to give the Draft Notice in a timely manner shall not in any
way affect or limit the payment obligation of the Company hereunder. Upon
receipt of the Draft Notice, the Company shall make or cause to be made an
irrevocable deposit with the Bank, or provide to the Bank a direction that an
Advance be made under the Revolving Loan, not later than 1:00 p.m., Dallas,
Texas, time, one (1) Banking Day prior to the day on which the Draft is to be
honored, in an amount equal to the full amount which is to be paid under such
Draft, in good and collected funds (the "REIMBURSEMENT AMOUNT"), specifying that
it is depositing such money for the sole purpose of funding the payment of such
Draft.
In determining whether to honor any Draft, the Bank shall be
responsible only to determine that the documents and certificates required to be
delivered with such Draft under the appropriate Documentary Letter of Credit
have been delivered and that on their faces they are in substantial compliance
with the requirements of that Documentary Letter of Credit. In the event of any
conflict between the terms of any Reimbursement Agreement and the terms of this
Agreement, the terms of this Agreement shall control; and the terms of the
Reimbursement Agreement shall not be deemed to be in conflict with the terms of
this Agreement solely by reason of the fact that it addresses one or more
subject matters that are addressed by this Agreement and contains provisions
that are different from those set forth in this Agreement.
(d) REIMBURSEMENT OBLIGATIONS OF THE COMPANY. The Company hereby
agrees to reimburse the Bank, on demand, the amount paid by the Bank to settle
its obligations in respect of each Draft under each Documentary Letter of Credit
(whether such amount is paid by virtue of the Bank's honor of any Draft or
otherwise) to the extent that a Reimbursement Amount is not available to the
Bank for that purpose, which reimbursement obligation shall be immediate and
automatic, without the necessity of any further act or the execution of any
additional document, instrument, or agreement. Any Reimbursement Amount that is
not paid in full when due shall be deemed to be and shall constitute a demand
loan made to the Company by the Bank on such due date in the principal amount of
the unpaid Reimbursement Amount (each such loan being referred to herein as a
"DOCUMENTARY LETTER OF CREDIT LOAN", and collectively as "DOCUMENTARY LETTER OF
CREDIT LOANS"), which Documentary Letter of Credit Loans shall bear interest,
until paid in full, at a per annum rate equal to the Prime Rate plus Two Percent
(2%). A demand for payment of each Reimbursement Amount and Documentary Letter
of Credit Loan shall be deemed to have been made by the Bank on the date of the
corresponding payment by the
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Bank to settle its obligations under a Draft. Nothing herein is intended to
preclude the Company from requesting an Advance under the Revolving Loan to
the extent available to pay any Reimbursement Amount.
The obligation of the Company to reimburse the Bank in respect of
drawings made under the Documentary Letters of Credit shall be unconditional and
irrevocable and shall be paid strictly in accordance with the terms of this
Agreement and the applicable Reimbursement Agreement (if and to extent the terms
of the Reimbursement Agreement do not conflict with this Agreement) under all
circumstances, and notwithstanding any of the following circumstances:
(1) any lack of validity or enforceability of any Documentary
Letter of Credit;
(2) the existence of any claim, set-off, defense or other right
which the Company may have at any time against a beneficiary or any
transferee of any Documentary Letter of Credit or (or any Persons for whom
any such transferee may be acting), or any other Person, whether in
connection with this Agreement, the transactions contemplated herein or any
unrelated transaction (including any underlying transaction between the
Company and the beneficiary of any Documentary Letter of Credit;
(3) any draft, demand, certificate or any other document
presented under any Documentary Letter of Credit proving to be forged,
fraudulent, invalid or insufficient in any respect or any statement therein
being untrue or inaccurate in any respect;
(4) payment by the Bank under any Documentary Letter of Credit
against presentation of a demand, draft or certificate or other document
which does not comply with the terms of such Documentary Letter of Credit;
(5) any other circumstance or happening whatsoever which is
similar to any of the foregoing; or
(6) the fact that an Event of Default or Unmatured Event of
Default shall have occurred and be continuing;
PROVIDED HOWEVER, that the Company shall not be obligated to reimburse the Bank
for any wrongful payment or disbursement made or to be made by the Bank under
any Documentary Letter of Credit as a result of acts or omissions constituting
gross negligence or willful misconduct on the part of the Bank. Payment of a
Draft that does not comply with the terms of the Documentary Letter of Credit
against which it is presented shall not in any event be deemed to be wrongful or
an act or omission constituting gross negligence or willful misconduct on the
part of the Bank if such payment is made at the specific written request of the
Company in which the Company waives the non-compliance of the Draft.
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Upon a written request by the Company made in accordance with the
terms of Section 9.02 of this Agreement, the Bank will undertake to provide to
the Company copies of all instruments and documents constituting a Draft with
the Draft Notice, and in the event the Company has any knowledge (however
obtained) of any claim of non-compliance with the Company's instructions or with
the terms of the Documentary Letter of Credit, or of discrepancies or other
irregularities, the Company shall immediately notify the Bank thereof in
writing, and the Company shall be deemed to have waived any such claim or
defense against the Bank related thereto or arising therefrom unless such notice
is given. The Company shall be deemed to have knowledge of any such claim that
is apparent on the face of copies of instruments and documents constituting a
Draft that are provided to the Company pursuant to the preceding sentence.
Unless specified to the contrary in the applicable Reimbursement
Agreement for a Documentary Letter of Credit, or any amendment to a Documentary
Letter of Credit, the Company agrees that the Bank and its correspondents may
receive and accept any Draft drawn or presented under such Documentary Letter of
Credit or other document otherwise in order, issued or purportedly issued by an
agent, executor, trustee in bankruptcy, receiver or other representative of the
party who is authorized under such Documentary Letter of Credit to issue such
Draft or other document, as complying with the terms of such Documentary Letter
of Credit.
(e) INDEMNITY. The Company agrees to protect, indemnify and save the
Bank harmless from and against any and all claims, demands, liabilities,
damages, losses, costs, charges and expenses (including reasonable attorneys'
fees and allocated costs of internal counsel) which the Bank may incur or be
subject to as a consequence, direct or indirect, of (a) the issuance of the
Documentary Letters of Credit, other than as a result of the negligence or
willful misconduct of the Bank, as determined by a court of competent
jurisdiction, or (b) the failure of the Bank to honor a drawing under any
Documentary Letter of Credit as a result of any act or omission, whether
rightful or wrongful, of any present or future DE JURE or DE FACTO government or
governmental authority (all such acts or omissions herein called "GOVERNMENT
ACTS").
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As between the Company, on the one hand, and the Bank, on the other,
the Company assume all risks of the acts and omissions of, or misuse of the
Documentary Letters of Credit by the respective beneficiaries of such
Documentary Letters of Credit. In furtherance and not in limitation of the
foregoing, the Bank shall not be responsible and shall have no liability (a) for
the form, validity, sufficiency, accuracy, genuineness or legal effect of any
document submitted by any party in connection with the application for and
issuance of such Documentary Letters of Credit, even if it should in fact prove
to be in any or all respects invalid, insufficient, inaccurate, fraudulent or
forged; (b) for the validity or sufficiency of any instrument transferring or
assigning or purporting to transfer or assign any such Documentary Letter of
Credit or the rights or benefits thereunder or proceeds thereof, in whole or in
part, which may prove to be invalid or ineffective for any reason; (c) for
failure of the beneficiary of any such Documentary Letter of Credit to comply
fully with the terms and conditions of the agreement pursuant to which the
Documentary Letter of Credit was procured and pursuant to which the beneficiary
is entitled to draw upon such Documentary Letter of Credit; (d) for errors,
omissions, interruptions or delays in transmission or delivery of any messages,
by mail, cable, telegraph, telex or otherwise, whether or not they be in cipher;
(e) for errors in interpretation of technical terms; (f) for any loss or delay
in the transmission or otherwise of any document required in order to make a
Draft under any such Documentary Letter of Credit or of the proceeds thereof;
(g) for the misapplication by the beneficiary of any such Documentary Letter of
Credit of the proceeds of any Draft under such Documentary Letter of Credit;
(h) for any consequences arising from causes beyond the control of the Bank,
including, without limitation, any Government Acts; and (i) for any action taken
or omitted by the Bank under or in connection with the Documentary Letters of
Credit, if taken or omitted in good faith. None of the above shall affect,
impair, or prevent the vesting of any of the Bank's rights or powers hereunder.
Following the occurrence of an Event of Default or an Unmatured Event
of Default which is continuing, the Company agrees that any action taken by the
Bank, if taken in good faith, under or in connection with any of the Documentary
Letters of Credit, the Reimbursement Agreements and Drafts, shall be binding on
the Company and shall not subject the Bank to any resulting liability to the
Company. In furtherance thereof, the Bank shall have the full right and
authority, following an Event of Default or Unmatured Event of Default which is
continuing, to (i) clear and resolve any questions of non-compliance of
documents, (ii) to give any instructions as to acceptance or rejection of any
documents or goods, and (iii) to grant any extensions of the maturity of, time
of payment for, or time of presentation of, any drafts, acceptances, or
documents.
(f) DOCUMENTARY LETTER OF CREDIT FEES. The Company covenants and
agrees to pay to the Bank, concurrently with the issuance of each Documentary
Letter of Credit, a commission equal to the Applicable Documentary Letter of
Credit Fee Percentage times the maximum amount available to be drawn under the
Documentary Letter of Credit as of the date such commission is due. The
commission shall be deemed fully earned and nonrefundable when due. The Company
shall pay the Bank's standard transaction fees with respect to any transactions
occurring on account of any Documentary Letter of Credit. Transaction fees
shall be payable upon completion of the transaction as to which they are
charged. All such commissions
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and fees may be debited by the Bank to any deposit account of the Company
carried with the Bank without further authority, and in any event, shall be
paid by the Company within ten (10) days following billing.
SECTION 2.04 THE TERM LOAN.
(a) THE TERM LOAN -- GENERAL. The Bank agrees, subject to the terms
and conditions of this Agreement, to loan to the Company the maximum principal
amount of Three Million Seventy-Six Thousand Nine Hundred Seventy-Five and 61/00
Dollars ($3,076,975.61) for the term period beginning on the Closing Date and
ending on the Term Loan Maturity Date (the "TERM LOAN"). The Term Loan under
this Agreement is a continuation, on amended terms, of the "Term Loan" extended
to the Company by the Bank under the Original Agreement (the "PRIOR TERM LOAN")
and the Company affirms, acknowledges and agrees that the principal balance of
the Term Loan as of the Closing Date, being the unpaid principal amount of the
Prior Term Loan, is $1,576,975.61.
The Bank agrees, subject to the terms and conditions of this
Agreement, to make Advances to the Company under the Term Loan during the
Construction Period (the "TERM LOAN CONSTRUCTION ADVANCES"), provided that the
first Term Loan Construction Advance must be made on or before October 31, 1997,
in a principal amount not to exceed the aggregate of $1,500,000 (the
"CONSTRUCTION AVAILABILITY") to be used in their entirety by the Company as
follows: (A) to purchase equipment and furnishings to be used in the 1997
Project (as hereafter defined); and (B) to pay cost of construction of
improvements on the 1997 Project Real Estate in accordance with plans and
specifications previously furnished by the Company to the Bank (the construction
of such improvements and the purchase of the equipment and furnishings are
collectively referred to as the "1997 PROJECT"). The Company shall not be
entitled to any Term Loan Construction Advances if the First Term Loan
Construction Advance is not made on or before October 31, 1997.
(b) METHOD OF BORROWING CONSTRUCTION ADVANCES. So long as no Event
of Default or Unmatured Event of Default shall have occurred and be continuing,
the Company request Term Loan Construction Advances in accordance with the terms
of Section 2.04(a) above (subject to the requirements of Section 2.06 of this
Agreement on any Banking Day, provided that the Company shall not be entitled to
receive and the Bank shall not be obligated to make any Term Loan Construction
Advance under the Term Loan: (i) if the making of such Term Loan Construction
Advance would cause or result in an Event of Default or an Unmatured Event of
Default; or (ii) if after making such Term Loan Construction Advance the
principal balance of the Term Loan would exceed $3,076,975.61.
Each Term Loan Construction Advance under the Term Loan shall be
conditioned upon receipt by the Bank from the Company of an Application for
Advance and an Officer's Certificate, and satisfaction of each of the conditions
described in Section 7.01(d) of this Agreement. Upon receipt of an Application
for Advance, or at the Bank's discretion upon receipt of an informal request for
a Term Loan Construction Advance, and upon compliance with any
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other conditions of lending stated in Section 7.01(d) of this Agreement
applicable to Term Loan Construction Advances, the Bank shall disburse the
amount of the requested Term Loan Construction Advances to the Company. All
Term Loan Construction Advances by the Bank and payments by the Company shall
be recorded by the Bank on its books and records, and the principal amount
outstanding from time to time, plus interest payable thereof, shall be
determined by reference to the books and records of the Bank. The Bank's
books and records shall be presumed PRIMA FACIE to be correct as to such
matters.
(c) THE TERM NOTE/PAYMENTS. The obligation of the Company to repay
the Term Loan shall be evidenced by a promissory note executed by the Company to
the Bank in the form of EXHIBIT "F" attached hereto (as the same may be amended,
modified, extended, renewed, supplemented, replaced and/or restated from time to
time and at any time, the "TERM NOTE"). The principal of the Term Loan shall be
repayable in equal monthly installments: (i) from and after the Closing Date
until the earlier of the Term Loan Maturity Date or the expiration of the
Construction Period, each in an amount equal to $33,333.00; and (ii) from and
after the expiration of the Construction Period until the Term Loan Maturity
Date, each in an amount equal to $58,333.00. Such monthly installments shall be
due and payable on the last Banking Day of October, 1997, and on the last
Banking Day of each successive calendar month thereafter until the Term Loan
Maturity Date, at which time the entire principal balance of the Term Loan and
all unpaid, accrued interest thereon, shall be due and payable in full without
demand. Subject to the contemporaneous payment of any Prepayment Premium which
would become due on account of any proposed prepayment, the principal of the
Term Loan may be prepaid at any time in whole or in part, provided that any
partial prepayment shall be in an amount which is an integral multiple of Fifty
Thousand Dollars ($50,000) and provided further that all partial prepayments
shall be applied to the latest maturing installments of principal payable under
the Term Loan in inverse order of maturity.
(d) INTEREST ON THE TERM LOAN. The principal amount of the Term Loan
outstanding from time to time shall bear interest until the Term Loan Maturity
Date at a rate per annum equal to the Prime Rate, except that at the option of
the Company, exercised from time to time as provided in Section 2.05 of this
Agreement, interest may accrue prior to maturity on any Term Loan Construction
Advance or on the entire outstanding balance of the Term Loan as to which no
LIBOR-based Rate previously elected remains in effect, at a LIBOR-based Rate for
a period of one month, two months, three months or six months, plus Applicable
Spread II, provided that an election of a LIBOR-based Rate for a period
extending beyond the Scheduled Term Loan Maturity Date shall be permitted only
at the discretion of the Bank. From and after the Term Loan Maturity Date, and
until paid in full, the Term Loan shall bear interest at a per annum rate equal
to the Prime Rate plus two percent (2%) per annum, except that as to any portion
of the Term Loan for which the Company may have elected a LIBOR-based Rate for a
period of time that has not expired at the Term Loan Maturity Date, such portion
shall, during the remainder of such period, bear interest at the greater of the
Prime Rate plus two percent (2%) per annum or the LIBOR-based Rate then in
effect, plus Applicable Spread II, plus two percent (2%) per annum. Accrued
interest shall be due and payable monthly on the last Banking Day of each
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month prior to the Term Loan Maturity Date. From and after the Term Loan
Maturity Date, interest on the Term Loan shall be payable as accrued and
without demand.
SECTION 2.05. PROVISIONS APPLICABLE TO BOTH OF THE LOANS. The
following provisions are applicable to both of the Loans:
(a) CALCULATION OF INTEREST AND FEES. Interest on each of the Loans
shall be calculated on the basis that an entire year's interest is earned in
360 days.
(b) MANNER OF PAYMENT -- APPLICATION. All payments of principal,
interest and fees on the Loans shall be payable at the principal office of the
Bank in Indianapolis, Indiana, in funds available for the Bank's immediate use
in that city and no payment will be considered to have been made until received
in such funds. All amounts payable on account of any of the Loans may be
debited by the Bank when due to any demand deposit account of the Company
carried with the Bank without further authority. Unless otherwise agreed to, in
writing, or otherwise required by applicable law, payments will be applied first
to accrued, unpaid interest, then to principal, and any remaining amount to any
unpaid collection costs, late charges and other charges, provided, however, upon
delinquency or other default, the Bank reserves the right to apply payments
among principal, interest, late charges, collection costs and other charges at
its discretion. All prepayments shall be applied to the Obligations in such
order and manner as the Bank may from time to time determine in its sole
discretion.
(c) PROCEDURES FOR ELECTING LIBOR-BASED RATES -- CERTAIN EFFECTS OF
ELECTION. LIBOR-based Rates may be elected only in accordance with the
following procedures, shall be subject to the following conditions and the
election of a LIBOR-based Rate shall have the following consequences in addition
to other consequences stated in this Agreement:
(1) No LIBOR-based Rate may be elected at any time that an Event
of Default or Unmatured Event of Default has occurred and is continuing. A
LIBOR-based Rate may be elected only for Loans or portions of Loans in a
minimum amount of $1,000,000.00.
(2) Voluntary prepayment prior to scheduled maturity of all
or any portion of a Loan on which interest is accruing at a LIBOR-based
Rate shall be subject to contemporaneous payment of the Prepayment
Premium if, at the time of prepayment, the Reinvestment Rate is less
than the LIBOR-based Rate at which interest accrues on the Loan. A
Prepayment Premium shall also be due and payable on prepayment of all or
any portion of any Loan prior to scheduled maturity because of
acceleration of maturity on account of an Event of Default if, at the
time of acceleration of maturity, the Reinvestment Rate is less than the
LIBOR-based Rate at which interest is accruing on the Loan. If at the
time of any voluntary or mandatory prepayment of any portion of the
principal of any Loan, interest accrues at both a LIBOR-based Rate or
Rates and at a Prime-based Rate on portions of the Loan, then any
prepayment of principal will be applied first to
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the portion of the Loan on which interest accrues at the Prime-based
Rate and next to the portion or portions at which interest accrues at a
LIBOR-based Rate or Rates, and if interest accrues on the Loan at more
than one LIBOR-based Rate, first to that portion or those portions on
which interest accrues at a Rate or Rates which results in no Prepayment
Premium or the lowest Prepayment Premium or Premiums.
(3) On any Banking Day, the Company may request a quotation
of the LIBOR-based Rates then in effect from the Bank. As soon as
possible, and in any event before the close of business on the next
following Banking Day, the Bank shall quote such LIBOR-based Rates.
The Company shall then have until the end of the Banking Day on which
such quotation is given or within such longer time as the Bank may
specify, to exercise its option to elect any LIBOR-based Rate quoted,
subject to all other conditions and limitations stated in this
Agreement. The period for which any LIBOR-based Rate is effective
shall begin on the second Banking Day following the day on which the
quotation is given.
(4) An election of a LIBOR-based Rate may be communicated
to the Bank on behalf of the Company only by an Authorized Officer.
Such election may be communicated by telephone or by telephone
facsimile (fax) machine or any other form of written electronic
communication, or by a writing delivered to the Bank. At the request
of the Bank, the Company shall confirm any election in writing and
such written confirmation shall be signed by an Authorized Officer.
The Bank shall be entitled to rely on any oral or employee from anyone
reasonably believed in good faith by LIBOR-based Rate which is
received by an appropriate Bank such employee to be an Authorized
Officer.
(5) Notwithstanding any other provision of this Agreement,
the Bank may elect not to quote a LIBOR-based Rate on any day on which
the Bank has determined that it is not practical to quote such rate
because of the unavailability of approximating the relevant London
Interbank Offered Rate, or because of legal or regulatory changes
which make it impractical or burdensome for the Bank to lend money at
a LIBOR-based Rate.
(6) If, as a result of any regulatory change, the basis of
taxation of payments to the Bank of the principal of or any interest on any
Loan bearing interest at a LIBOR-based Rate or any other amounts payable
hereunder in respect thereof, other than taxes imposed on the overall net
income of the Bank, is changed, or any reserve, special deposit, or similar
requirement relating to any extensions of credit or other assets of or any
deposits with or other liabilities of the Bank are imposed, modified, or
deemed applicable, and the Bank reasonably determines that, by reason
thereof, the cost to it of making, issuing, or maintaining any Loan at a
LIBOR-based Rate is increased by an amount deemed by it to be material,
then the Company shall pay promptly upon demand
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to the Bank such additional amounts as the Bank reasonably determines
will compensate for such increased costs.
SECTION 2.06. MANDATORY PREPAYMENT. If at any time a determination
thereof is to be made, the sum of (a) the principal balance of the Revolving
Loan outstanding at such time, PLUS (b) the aggregate Documentary Letter of
Credit Exposure existing at such time, exceeds the Maximum Availability, the
Company shall immediately repay the Revolving Note in an aggregate principal
amount, together with such additional amount as may be necessary, equal to such
excess. If at any time a determination thereof is to be made, the principal
balance of the Term Loan outstanding at such time exceeds $3,076,975.61, the
Company shall immediately repay the Term Note in an aggregate principal amount,
together with such additional amount as may be necessary, equal to such excess.
If an Event of Default or an Unmatured Event of Default has occurred and is
continuing and the Bank shall have notified the Company of its election to take
any action specified in Section 8.02 of this Agreement, the Maximum Availability
and the Construction Availability shall be automatically reduced to $0 without
any action on the part of or the giving of notice to the Company by the Bank.
ARTICLE III
CREDIT ENHANCEMENT LETTERS OF CREDIT
SECTION 3.01. THE CREDIT ENHANCEMENT LETTERS OF CREDIT. Subject to
all of the terms and conditions of this Agreement, the Bank will maintain the
Credit Enhancement Letters of Credit described in this Section previously issued
by the Bank for the account of the Company.
(a) THE 1993 DIRECT-PAY LETTER OF CREDIT. The Bank previously opened
and delivered its Letter of Credit No. ST04689 (as the same has been or
hereafter may be amended, modified, extended, supplemented and/or restated from
time to time and at any time, the "1993 DIRECT-PAY LETTER OF CREDIT") in the
original principal amount of $3,462,750.00 in favor of the 1993 Trustee. The
1993 Direct-Pay Letter of Credit secures payment of the 1993 Bonds and is
subject to the terms stated therein. The 1993 Direct-Pay Letter of Credit is
subject to the following terms and conditions and all other terms and conditions
of this Agreement concerning the Company's obligations with respect to the 1993
Direct-Pay Letter of Credit:
(1) REIMBURSEMENT. So long as the 1993 Direct-Pay Letter of
Credit is outstanding, the Company will maintain a demand deposit
account with the Bank (the "DESIGNATED ACCOUNT") which the Company shall
designate as the account through which the transactions described in
this Section 3.01 will regularly be accomplished. On the Business Day
of each calendar month which is two (2) Business Days prior to an
Interest Payment Date for the 1993 Bonds, the Company will deposit into
the Designated Account such amount as may be necessary to cause the
balance of the Designated
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Account to be not less than the sum of (i) the anticipated amount of
interest that will be due on account of the 1993 Bonds at the next
Interest Payment Date for the 1993 Bonds, plus (ii) the aggregate amount
of principal calculated in accordance with Section 3.01(a)(2), plus
(iii) the amount of the transaction fee provided for in Section
3.01(a)(3) which will be due upon the Bank's payment of the related
Drawing or Drawings under the 1993 Direct-Pay Letter of Credit, plus
(iv) any balance required under other provisions of this Agreement.
Only after honoring a Drawing, the Bank shall be entitled, without
further authorization from the Company, to charge the amount of such
Drawing and the related transaction fee to the Designated Account or, to
the extent that the balance of the Designated Account is insufficient to
cover such Drawing and the related transaction fee, to any other deposit
account maintained by the Company with the Bank. Should the Company's
deposit balances with the Bank be insufficient to reimburse the Bank for
any Drawing under the 1993 Direct-Pay Letter of Credit, together with
the related transaction fee, then the Company shall pay to the Bank
immediately and unconditionally upon demand, an amount equal to the
unreimbursed portion of such Drawing and the related transaction fee,
together with interest on such amount at the Prime Rate plus two percent
(2%) per annum from the date of payment of such Drawing until the amount
thereof is reimbursed to the Bank. Upon being reimbursed in full with
interest as provided in this Agreement for any Remarketing Drawing, the
Bank shall deliver any Pledged Bonds that were purchased by the 1993
Trustee with the proceeds of such Remarketing Drawing, and which shall
not have previously been delivered by the Bank upon sale by the
Remarketing Agent, to the 1993 Trustee for cancellation pursuant to the
terms of the 1993 Trust Indenture. As used in this paragraph, the term
"REMARKETING PROCEEDS" means proceeds from the resale of Pledged Bonds
by the Remarketing Agent, which Pledged Bonds shall have been tendered
or deemed tendered to the 1993 Trustee for repurchase pursuant to the
terms of the 1993 Trust Indenture.
(2) PRINCIPAL DEPOSITS IN DESIGNATED ACCOUNT. From and after
the Closing Date, the Company shall exercise its option to cause the 1993
Trustee to redeem principal of the 1993 Bonds in amounts not less than the
amounts shown in the following table on the Interest Rate Adjustment Date
nearest to, but not later than the dates indicated in the table:
MINIMUM
DATE OF OPTIONAL
REDEMPTION REDEMPTION
October 1, 1997 $315,000
October 1, 1998 $330,000
October 1, 1999 $345,000
October 1, 2000 $365,000
October 1, 2001 $380,000
October 1, 2002 $395,000
October 1, 2003 $415,000
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As used herein in this Section 3.01(a)(2), the term "REDEMPTION
DATE" means a date shown in the above table. On the Business Day of each
calendar month which is two (2) Business Days prior to an Interest Payment
Date for the 1993 Bonds, the Company shall deposit into the Designated
Account, in addition to all other amounts required to be deposited into the
Designated Account under the terms of this Agreement, an amount equal to
one-twelfth (1/12) of the principal amount of 1993 Bonds that the Company
will be required to redeem on the next following Redemption Date. The fact
that the above table provides minimum redemption amounts for dates beyond
the initial expiration date of the 1993 Direct-Pay Letter of Credit shall
not be construed as commitment on the part of the Bank to extend the 1993
Direct-Pay Letter of Credit beyond its original or any subsequent
expiration date.
(3) COMMISSION AND TRANSACTION FEES. On the first Banking Day
of November of each year from and after the Closing Date (each of which
days is hereafter referred to in this Section 3.01(a)(3) as a
"COMMISSION DUE DATE"), the Company shall pay to the Bank a commission
for maintaining the 1993 Direct-Pay Letter of Credit, computed on the
adjusted 1993 Maximum Available Credit at a rate per annum equal to the
Applicable Credit Enhancement Letter of Credit Commission Rate in effect
for each such Commission Due Date, for the period beginning on the
Commission Due Date and ending on the next following Commission Due
Date. As used in the preceding sentence, the term "ADJUSTED 1993
MAXIMUM AVAILABLE CREDIT" means the 1993 Maximum Available Credit as it
is scheduled to increase and decrease during the period beginning on a
Commission Due Date and ending on the following Commission Due Date by
reason of anticipated draws for scheduled payments of principal and
interest on the 1993 Bonds, and assuming the reinstatement of the
availability of all Interest Drawings to the extent provided for in the
1993 Direct-Pay Letter of Credit, provided that for purposes of
computing each annual commission, the amount of an Interest Drawing
which is subject to automatic reinstatement will be considered to be
reinstated as of the date of such Drawing. There shall be no reduction
in the amount of commission due and payable on any Commission Due Date,
nor shall any refund of commission be due the Company on account of full
or partial prepayment of the 1993 Bonds or because of the cancellation
of the Pledged Bonds purchased with the proceeds of a Remarketing
Drawing during the year following the Commission Due Date as of which
the amount of such commission is established or on account of the
election of the Bank not to restore the availability of any Interest
Drawing. The amount of commission due and payable as of any Commission
Due Date shall not be reduced, nor shall any refund of the commission be
due because of cancellation or termination of the 1993 Direct-Pay Letter
of Credit for whatever reason, except that, so long as the Company's
fiscal year ends in August, upon delivery to the Bank by the Company of
the Company's annual audited Financial Statements for the Company's
fiscal year ended prior to any Commission Due Date in any calendar year,
the commission due on that Commission Due Date shall be recalculated on
the basis of the Ratio of Total Funded Debt to EBITDA as indicated by
such audited Financial
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Statements. If the amount of the commission as so recalculated is
greater or less than the amount of commission paid on such Commission
Due Date, then the Bank will refund to the Company the excess of the
amount of the commission paid on such Commission Due Date over the
commission determined in accordance with such recalculation, or the
Company will pay to the Bank the excess of the commission determined in
accordance with such recalculation over the commission paid on such
Commission Due Date, such refund or such payment of additional
commission to be due within ten (10) days following delivery of such
annual audited Financial Statements. A transaction fee shall be payable
by the Company to the Bank for each Drawing under the 1993 Direct-Pay
Letter of Credit in the amount of one-eighth of one percent (1/8%) of
the amount of the Drawing or Sixty-Five Dollars ($65.00), whichever is
greater. Transaction fees on account of Drawings shall be due on the
day when the Drawing is paid by the Bank. On the Banking Day preceding
each Commission Due Date, the Company shall deposit into the Designated
Account such amount as may be necessary to cause the balance of the
Designated Account to be not less than the amount of commission due on
such Commission Due Date, plus any other amounts required to be on
deposit in the Designated Account on such date pursuant to other
provisions of this Agreement. The Bank shall be entitled, without
further authorization from the Company, to charge the amount of the
commission due on each Commission Due Date to the Designated Account,
and if the balance of the Designated Account is insufficient to satisfy
the entire amount then due to the Bank on account of the commission, the
Bank may, without further authorization of the Company, charge such
deficiency to any other deposit account of the Company maintained with
the Bank. All commissions and fees payable under the terms of this
Section 3.01(a)(3) shall be payable with interest at the Prime Rate plus
two percent (2%) per annum from the date due until paid. If the 1993
Direct-Pay Letter of Credit is transferred to a new beneficiary pursuant
to the terms thereof, then the Company covenants and agrees to pay to
the Bank promptly upon its demand a transfer fee in the amount then
customarily assessed by the Bank for transfers of letters of credit of
the same type and amount as the 1993 Direct-Pay Letter of Credit.
(4) REMARKETING REIMBURSEMENT LOAN-1993 BONDS. At the option of
the Company exercised by a written notice to the Bank given not less than
ten (10) days prior to the expiration of a period of ninety (90) days
following a Remarketing Drawing on the 1993 Direct-Pay Letter of Credit
(which expiration date is hereafter referred to in this subsection as the
"REIMBURSEMENT DUE DATE"), the Bank will make a loan (a "REMARKETING
REIMBURSEMENT LOAN-1993 BONDS") to the Company on the reimbursement due
date, provided that the 1993 Direct-Pay Letter of Credit as it may have
been extended from time to time shall not then have expired or been
terminated, and provided further that no Event of Default or Unmatured
Event of Default shall have occurred and is then continuing. Each
Remarketing Reimbursement Loan-1993 Bonds shall be in an amount not in
excess of the amount due to the Bank from the Company on the related
reimbursement due date on account of the portion of the Remarketing Drawing
representing the Principal Amount. The term "PRINCIPAL AMOUNT" is used in
the preceding sentence as that term is defined in the 1993 Direct-Pay
Letter of Credit.
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Proceeds of the Remarketing Reimbursement Loan-1993 Bonds shall be used
solely to reimburse the Bank for all or a portion of the Principal
Amount of the related Remarketing Drawing for the 1993 Bonds which have
not been sold by the Remarketing Agent subsequent to the Remarketing
Drawing. Each Remarketing Reimbursement Loan-1993 Bonds shall be
represented by the promissory note of the Company (a "REMARKETING
REIMBURSEMENT NOTE-1993 BONDS"), delivered to the Bank contemporaneously
with the making of the Loan, with each such Note substantially in the
form of the Term Note, with the following exceptions:
(i) No Remarketing Reimbursement Loan-1993 Bonds will be made
after the earlier of the expiration or termination of the
1993 Direct-Pay Letter of Credit;
(ii) The final maturity of such Remarketing Reimbursement Note-
1993 Bonds shall be a date which is the earlier of (1) 288
days after the date the Loan evidence by such Note was made,
or (2) the date that the 1993 Direct-Pay Letter of Credit
(as it may have been extended from time to time in the
Bank's sole discretion) expires or is terminated;
(iii)Each Remarketing Reimbursement Note-1993 Bonds shall
bear interest prior to maturity at a per annum rate
equal to the Prime Rate plus one percent (1%) and after
maturity at a per annum rate equal to the Prime Rate
plus three percent (3%) per annum;
(iv) All accrued interest on the outstanding principal balance of
the Remarketing Reimbursement Loan-1993 Bonds is due and
payable prior to maturity on the last Banking Day of each
calendar month, and after maturity, all interest is due and
payable as accrued and without demand; and
(v) The principal of each Remarketing Reimbursement Note-1993
Bonds shall be payable prior to maturity on the same dates
as the scheduled principal payments under the 1993 Bonds
purchased with the related Remarketing Drawing would have
become due and payable, and the principal amount payable on
each such date shall be equal to the principal payments
scheduled to have been paid on the same date on the 1993
Bonds redeemed with the related Remarketing Drawing.
(b) THE 1994 REFUNDING DIRECT-PAY LETTER OF CREDIT. The Bank
previously opened and delivered its Letter of Credit No. its Letter of Credit
No. ST04846 (as the same has been or hereafter may be amended, modified,
extended, supplemented and/or restated from time to time and at any time, the
"1994 REFUNDING DIRECT-PAY LETTER OF CREDIT") in the original
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principal amount of $2,976,750 in favor of the 1994 Refunding Trustee for the
account of the Company. The 1994 Refunding Direct-Pay Letter of Credit secures
payment of the 1994 Refunding Bonds and is subject to the terms stated therein.
The 1994 Refunding Direct-Pay Letter of Credit is subject to the following
terms and conditions, and all other terms and conditions of this Agreement
concerning the Company's obligations with respect to the 1994 Refunding Direct-
Pay Letter of Credit:
(1) REIMBURSEMENT. So long as the 1994 Refunding Direct-Pay
Letter of Credit is outstanding, the Company will maintain the Designated
Account through which the transactions described in this Section 3.01(b)
will regularly be accomplished. On the Business Day of each calendar month
which is two (2) Business Days prior to an Interest Payment Date for the
1994 Refunding Bonds, the Company will deposit into the Designated Account
such amount as may be necessary to cause the balance of the Designated
Account to be not less than the sum of (i) the anticipated amount of
interest that will be due on account of the 1994 Refunding Bonds at the
next Interest Payment Date for the 1994 Refunding Bonds, plus (ii) the
aggregate amount of principal calculated in accordance with
Section 3.01(b)(2), plus (iii) the amount of the transaction fee provided
for in Section 3.01(b)(3) which will be due upon the Bank's payment of the
related Drawing or Drawings under the 1994 Refunding Direct-Pay Letter of
Credit, plus (iv) any balance required under other provisions of this
Agreement. After and only after honoring a Drawing, the Bank shall be
entitled, without further authorization from the Company, to charge the
amount of such Drawing and the related transaction fee to the Designated
Account or, to the extent that the balance of the Designated Account is
insufficient to cover such Drawing and the related transaction fee, to any
other deposit account maintained by the Company with the Bank. Should the
Company's deposit balances with the Bank be insufficient to reimburse the
Bank for any Drawing under the 1994 Refunding Direct-Pay Letter of Credit,
together with the related transaction fee, then the Company shall pay to
the Bank immediately and unconditionally upon demand, an amount equal to
the unreimbursed portion of such Drawing and the related transaction fee,
together with interest on such amount at the Prime Rate plus three and two
percent (2%) per annum from the date of payment of such Drawing until the
amount thereof is reimbursed to the Bank. In the case of any Remarketing
Drawing, the Company shall unconditionally pay to the Bank on the ninetieth
(90th) day following payment by the Bank of such Drawing, or if such
ninetieth day is not a Banking Day, then on the next following Banking Day,
any balance of the amount of such Drawing which shall not then have been
reimbursed to the Bank by the payment of remarketing proceeds to the Bank
or otherwise, together with interest on such portions of such Remarketing
Drawing as shall not, From time to time, have been reimbursed to the Bank,
accrued at the Prime Rate plus one percent (1%) per annum, and with
interest thereafter accrued at the Prime Rate plus three percent (3%) per
annum. Upon being reimbursed in full with interest as provided in this
Agreement for any Remarketing Drawing, the Bank shall deliver appropriate
instructions, with respect to any Pledged Bonds that were purchased by the
1994 Refunding Trustee with the proceeds of such Remarketing Drawing, and
which shall not have previously been delivered by the Bank upon sale by the
Remarketing Agent, to the
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1994 Refunding Trustee for cancellation pursuant to the terms of the
1994 Refunding Trust Indenture. As used in this paragraph, the term
"REMARKETING PROCEEDS" means proceeds from the resale of Pledged Bonds
by the Remarketing Agent, which Pledged Bonds shall have been tendered
or deemed tendered to the 1994 Refunding Trustee for repurchase pursuant
to the terms of the 1994 Refunding Trust Indenture.
(2) PRINCIPAL DEPOSITS IN DESIGNATED ACCOUNT. From and after
the Closing Date, the Company shall exercise its option to cause the 1994
Refunding Trustee to redeem principal of the 1994 Refunding Bonds in
amounts not less than the amounts shown in the following table on the
Interest Rate Adjustment Date nearest to, but not later than the dates
indicated in the table:
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MINIMUM
DATE OF OPTIONAL
REDEMPTION REDEMPTION
---------- ----------
June 1, 1998 $255,000
June 1, 1999 $275,000
June 1, 2000 $300,000
June 1, 2001 $320,000
June 1, 2002 $345,000
June 1, 2003 $375,000
June 1, 2004 $405,000
As used in this Section 3.01(b)(2), the term "REDEMPTION DATE"
means a date shown in the above table. On the Business Day of each
calendar month which is two (2) Business Days prior to an Interest Payment
Date for the 1994 Refunding Bonds, the Company shall deposit into the
Designated Account, in addition to all other amounts required to be
deposited into the Designated Account under the terms of this Agreement, an
amount equal to one-twelfth (1/12) of the principal amount of the 1994
Refunding Bonds that the Company will be required to redeem on the next
following Redemption Date. The fact that the above table provides minimum
redemption amounts for dates beyond the initial expiration date of the 1994
Refunding Letter of Credit shall not be construed as commitment on the part
of the Bank to extend the 1994 Refunding Letter of Credit beyond its
original or any subsequent expiration date.
(3) COMMISSION AND TRANSACTION FEES. On the first Banking Day of
May from and after the Closing Date (each of which days is hereafter
referred to in this Section 3.01(b)(3) as a "COMMISSION DUE DATE"), the
Company shall pay to the Bank a commission maintaining the 1994 Refunding
Direct-Pay Letter of Credit, computed on the adjusted 1994 Refunding
Maximum Available Credit at a rate per annum equal to the Applicable Credit
Enhancement Letter of Credit Commission Rate in effect for each Commission
Due Date thereafter, for the period beginning on the Commission Due Date
and ending on the next following Commission Due Date. As used in the
preceding sentence, the term "ADJUSTED 1994 REFUNDING MAXIMUM AVAILABLE
CREDIT" means the 1994 Refunding Maximum Available Credit as it is
scheduled to increase and decrease during the period beginning on a
Commission Due Date and ending on the following Commission Due Date by
reason of anticipated draws for scheduled payments of principal and
interest on the 1994 Refunding Bonds, and assuming the reinstatement of the
availability of all Interest Drawings to the extent provided for in the
1994 Refunding Direct-Pay Letter of Credit, provided that for purposes of
computing each annual commission, the amount of an Interest Drawing which
is subject to automatic reinstatement will be considered to be reinstated
as of the date of such drawing. There shall be no reduction in the amount
of commission due and payable on any Commission
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Due Date, nor shall any refund of commission be due the Company on
account of full or partial prepayment of the 1994 Refunding Bonds or
because of the cancellation of the Pledged Bonds purchased with the
proceeds of a Remarketing Drawing during the year following the
Commission Due Date as of which the amount of such commission is
established or on account of the election of the Bank not to restore the
availability of any Interest Drawing. The amount of the commission due
and payable as of any Commission Due Date shall not be reduced, nor
shall any refund of the commission be due because of cancellation or
termination of the 1994 Refunding Direct-Pay Letter of Credit for
whatever reason nor shall the amount of the commission due and payable
as of any Commission Due Date be reduced or refunded for any other
reason, except that, so long as the Company's fiscal year ends in
August, upon delivery to the Bank by the Company of the Company's annual
audited Financial Statements for the Company's fiscal year ended prior
to any Commission Due Date in any calendar year, the commission due on
that Commission Due Date shall be recalculated on the basis of the ratio
of the Ratio of Total Funded Debt to EBITDA as indicated by such audited
Financial Statements. If the amount of commission as so recalculated is
greater or less than the amount of commission paid on such Commission
Due Date, then the Bank will refund to the Company the excess of the
amount of the commission paid on such Commission Due Date over the
commission determined in accordance with such recalculation, or the
Company will pay to the Bank the excess of the commission determined in
accordance with such recalculation over the commission paid on such
Commission Due Date, such refund or such payment of additional
commission to be due within ten (10) days following delivery of such
annual audited financial statements. A transaction fee shall be payable
by the Company to the Bank for each Drawing under the 1994 Refunding
Direct-Pay Letter of Credit in the amount of one-eighth of one percent
(1/8%) of the amount of the Drawing or Sixty-Five Dollars ($65.00),
whichever is greater. Transaction fees on account of Drawings shall be
due on the day when the Drawing is paid by the Bank. On the Banking Day
preceding each Commission Due Date, the Company shall deposit into the
Designated Account, such amount as may be necessary to cause the balance
of the Designated Account to be not less than the amount of commission
due on such Commission Due Date, plus any other amounts required to be
on deposit in the Designated Account on such date pursuant to other
provisions of this Agreement. The Bank shall be entitled, without
further authorization from the Company, to charge the amount of the
commission due on each Commission Due Date to the Designated Account,
and if the balance of the Designated Account is insufficient to satisfy
the entire amount then due to the Bank on account of the commission, the
Bank may, without further authorization of the Company, charge such
deficiency to any other deposit account of the Company maintained with
the Bank. All commissions and fees payable under the terms of this
Section 3.01(b)(3) shall be payable with interest at the Prime Rate plus
two percent (2%) per annum from the date due until paid. If the 1994
Refunding Direct-Pay Letter of Credit is transferred to a new
beneficiary pursuant to the terms thereof, then the Company covenants
and agrees to pay to the Bank promptly upon its demand a transfer fee in
the amount then customarily assessed by the Bank for transfers of
letters of credit of the same type and amount as the 1994 Refunding
Direct-Pay Letter of Credit.
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(4) REMARKETING REIMBURSEMENT LOAN-1994 REFUNDING BONDS. At the
option of the Company exercised by a written notice to the Bank given not
less than ten (10) days prior to the expiration of a period of ninety (90)
days following a Remarketing Drawing on the 1994 Direct-Pay Letter of
Credit (which expiration date is hereafter referred to in this subsection
as the "REIMBURSEMENT DUE DATE"), the Bank will make a loan (a "REMARKETING
REIMBURSEMENT LOAN-1994 REFUNDING BONDS") to the Company on the
reimbursement due date, provided that the 1994 Refunding Direct-Pay Letter
of Credit as it may have been extended from time to time shall not then
have expired or been terminated, and provided further that no Event of
Default or Unmatured Event of Default shall have occurred and is then
continuing. Each Remarketing Reimbursement Loan-1994 Refunding Bonds shall
be in an amount not in excess of the amount due to the Bank from the
Company on the related reimbursement due date on account of the portion of
the Remarketing Drawing representing the Principal Amount. The term
"PRINCIPAL AMOUNT" is used in the preceding sentence as that term is
defined in the 1994 Direct-Pay Letter of Credit. Proceeds of the
Remarketing Reimbursement Loan-1994 Refunding Bonds shall be used solely to
reimburse the Bank for all or a portion of the Principal Amount of the
related Remarketing Drawing for the 1994 Refunding Bonds which have not
been sold by the Remarketing Agent subsequent to the Remarketing Drawing.
Each Remarketing Reimbursement Loan-1994 Refunding Bonds shall be
represented by the promissory note of the Company (a "REMARKETING
REIMBURSEMENT NOTE-1994 REFUNDING BONDS"), delivered to the Bank
contemporaneously with the making of the Loan, with each such Note
substantially in the form of the Term Note, with the following exceptions:
(i) No Remarketing Reimbursement Loan-1994 Refunding Bonds will
be made after the earlier of the expiration or termination
of the 1994 Refunding Direct-Pay Letter of Credit;
(ii) The final maturity of such Remarketing Reimbursement Note-
1994 Refunding Bonds shall be a date which is the earlier of
(1) 288 days after the date the Loan evidence by such Note
was made, or (2) the date that the 1994 Refunding Direct-Pay
Letter of Credit (as it may have been extended from time to
time in the Bank's sole discretion) expires or is
terminated;
(iii)Each Remarketing Reimbursement Note-1994 Refunding
Bonds shall bear interest prior to maturity at a per
annum rate equal to the Prime Rate plus one percent
(1%) and after maturity at a per annum rate equal to
the Prime Rate plus three percent (3%) per annum;
(iv) All accrued interest on the outstanding principal balance of
the Remarketing Reimbursement Loan-1994 Refunding Bonds is
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due and payable prior to maturity on the last Banking Day of
each calendar month, and after maturity, all interest is due
and payable as accrued and without demand; and
(v) The principal of each Remarketing Reimbursement Note-1994
refunding Bonds shall be payable prior to maturity on the
same dates as the scheduled principal payments under the
1994 Refunding Bonds purchased with the related Remarketing
Drawing would have become due and payable, and the principal
amount payable on each such date shall be equal to the
principal payments scheduled to have been paid on the same
date on the 1994 Refunding Bonds redeemed with the related
Remarketing Drawing.
(c) PROVISIONS APPLICABLE TO ALL OF THE CREDIT ENHANCEMENT LETTERS OF
CREDIT. The following provisions are applicable to all of the Credit
Enhancement Letters of Credit:
(1) ADDITIONAL AMOUNTS PAYABLE. If any change in or the
enactment, adoption or judicial or administrative interpretation of any
law, regulation, treaty, guideline or directive (including, without
limitation, Regulation D of the Board of Governors of the Federal Reserve
System) either (A) subjects the Bank to any additional tax, duty, charge,
deduction or withholding with respect to any of the Credit Enhancement
Letters of Credit or any amount paid by the Bank thereunder or received by
the Bank under this Agreement (other than a tax measured by the net or
gross income of the Bank), or (B) imposes or increases any reserve, special
deposit, or similar requirement on account of any of the Credit Enhancement
Letters of Credit, or (C) imposes increased minimum capital requirements on
the Bank on account of its issuing any of the Credit Enhancement Letters of
Credit, and if any of the foregoing (i) results in an increase to the Bank
in the cost of maintaining any of the Credit Enhancement Letters of Credit
or making any payment on account of any of the Credit Enhancement Letters
of Credit, (ii) reduces the amount of any payment receivable by the Bank
under this Agreement, (iii) requires the Bank to make any payment
calculated by reference to the gross amount of any sum received or paid by
the Bank pursuant to any of the Credit Enhancement Letters of Credit or
this Agreement (other than a tax measured by the Bank's gross or net
income) or (iv) reduces the rate of return on the Bank's capital, the
Company shall pay to the Bank, as additional commission for the Credit
Enhancement Letters of Credit, such amount as will compensate the Bank for
such increased cost, payment or reduction. Any such payment shall be made
to the Bank within ten (10) days of demand and presentation of a
certificate to the Company containing a statement of the cause of such
increased cost, payment or reduction and a calculation of the amount
thereof, which statement and calculation shall be deemed facie to be
correct.
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(2) PLACE AND APPLICATION OF PAYMENTS -- CALCULATION OF INTEREST
AND FEES. All payments required to be made under this Section 3.01 shall
be made to the Bank at its principal office in Indianapolis, Indiana, in
funds available for the Bank's immediate use at that city and no such
payment will be considered to have been made until received in such funds.
All interest and fees due under any provision of this Section 3.01
shall be calculated on the basis of a year of 360 days, and on the actual
number of days elapsed.
(3) PRESENTMENT AND COLLECTION. The beneficiaries of the Credit
Enhancement Letters of Credit shall be deemed for purposes of this
Agreement to be the agents of the Company and the Company assumes all risks
of their acts, omissions or misrepresentations. Neither the Bank nor any
of its affiliates or correspondents shall be responsible for the validity,
sufficiency, truthfulness or genuineness of any document required to draw
under any of the Credit Enhancement Letters of Credit even if such document
should in fact prove to be in any or all respects invalid, insufficient,
fraudulent or forged, provided only that the document appears on its
face to be in accordance with the terms of the related Credit
Enhancement Letter of Credit, or for failure of any draft to bear reference
or adequate reference to any of the related Credit Enhancement Letters of
Credit or failure of any person to note the amount of any draft on any of
the Credit Enhancement Letters of Credit or to surrender or take up any of
the Credit Enhancement Letters of Credit, each of which provisions may be
waived by the Bank, or for errors, omissions, interruptions, or delays in
transmission or delivery of any messages or documents. Without limiting
the generality of the foregoing, any action taken by the Bank or any of its
correspondents under or in connection with any of the Credit Enhancement
Letters of Credit, if taken in good faith, shall be binding upon the
Company and shall not put the Bank or any such correspondent under any
resulting liability to the Company and the Company makes like agreement as
to any omission unless in breach of good faith. The Bank is expressly
authorized to honor any request for payment which is made under and in
compliance with the terms of any of the Credit Enhancement Letters of
Credit without regard to and without any duty on its part to inquire into
the existence of any disputes or controversies between the Company and the
beneficiaries of any of the Credit Enhancement Letters of Credit or any
other person, firm or corporation or into the respective rights, duties or
liabilities of any of them or whether any facts or occurrences represented
in any of the documents presented under any of the Credit Enhancement
Letters of Credit are true and correct.
(4) CHANGE IN INTEREST RATE MODES. The Company shall not
change the Interest Rate Mode to a Six Month Interest Rate Mode, a One
Year Interest Rate Mode, a Five Year Interest Rate Mode or a Fixed
Interest Rate Mode without the prior written consent of the Bank. As used
in this subsection, the terms "INTEREST RATE MODE", "SIX MONTH INTEREST
RATE MODE", "ONE YEAR INTEREST RATE MODE", "FIVE YEAR INTEREST RATE MODE"
and "FIXED INTEREST RATE MODE" are used as defined in the corresponding
Trust Indenture, as the context requires.
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(5) MONIES IN THE DESIGNATED ACCOUNT. All amounts deposited
into the Designated Account shall be held by the Bank as cash collateral
for all of the Obligations. The Designated Account shall be used by the
Company only for the purposes provided for in this Agreement, and the terms
of the Designated Account shall be such that it shall be a "blocked"
account, so that transfers of funds from the Designated Account may be
made only by the Bank or by the Company with the concurrence of the
Bank.
(6) ANNUAL ADMINISTRATIVE FEES. From and after the Closing
Date, on each anniversary date of the issuance of any Credit Enhancement
Letter of Credit, the Company shall pay the Bank a processing and
administration fee of $125 for such Credit Enhancement Letter of Credit.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. REPRESENTATIONS AND WARRANTIES. To induce the Bank to make
the Loans and to issue the Letters of Credit, the Company represents and
warrants to the Bank that:
(a) ORGANIZATION OF THE COMPANY. The Company is a corporation
organized, existing and in good standing under the laws of the State of
Delaware. The Company is qualified to do business in every jurisdiction in
which: (i) the nature of the business conducted or the character or location of
properties owned or leased, or the residences or activities of employees make
such qualification necessary; and (ii) failure so to qualify might impair the
title of the Company to material properties or the Company's right to enforce
material contracts or result in exposure of the Company to liability for
material penalties in such jurisdiction. No jurisdiction in which the Company
is not qualified to do business has asserted that the Company is required to be
qualified therein. The principal office and chief executive office of the
Company is located at One Oxmoor Place, 101 Bullitt Lane, Louisville, Kentucky
40222. The Company does not conduct any material operations or keep any
material amounts of property at any location other than the locations specified
in the Security Agreement. The Company has not done business under any name
other than its present corporate name at any time during the six years preceding
the Closing Date except as disclosed in the Security Agreement.
(b) AUTHORIZATION; NO CONFLICT. The execution and delivery of this
Agreement, the borrowings hereunder, the execution and delivery of all of the
other Loan Documents and the Bond Documents and the performance by the Company
of its obligations under this Agreement and all of the other Loan Documents and
the Bond Documents are within the Company's corporate powers, have been duly
authorized by all necessary corporate action, have received any required
governmental or regulatory agency approvals and do not and will not contravene
or conflict with any provision of law or of the articles of incorporation or
bylaws of the Company or of any agreement binding upon the Company or its
properties.
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(c) VALIDITY AND BINDING NATURE. This Agreement and all of the other
Loan Documents and the Bond Documents are the legal, valid and binding
obligations of the Company, enforceable against the Company in accordance with
their respective terms, except to the extent that enforcement thereof may be
limited by bankruptcy, insolvency, reorganization, moratorium and other laws
enacted for the relief of debtors generally and other similar laws affecting the
enforcement of creditors' rights generally or by equitable principles which may
affect the availability of specific performance and other equitable remedies.
(d) FINANCIAL STATEMENTS. The Company has delivered to the Bank its
audited Financial Statements as of August 31, 1996, and for the fiscal year of
the Company then ended and its unaudited interim Financial Statements as of
August 2, 1997, and for the fiscal quarter and partial fiscal year then ended,
which Financial Statements have been prepared in accordance with GAAP except, as
to the interim statements, for the absence of a statement of cash flows,
footnotes and adjustments normally made at year end which are not material in
amount. Such Financial Statements present fairly the financial position of the
Company as of the dates thereof and the results of its operations for the
periods covered and since the date of the most current Financial Statements
provided by the Company to the Bank there has been no material adverse change in
the financial position of the Company or in the results of its operations.
(e) LITIGATION AND CONTINGENT LIABILITIES. No litigation,
arbitration proceedings or governmental proceedings are pending or to the best
of the Company's knowledge threatened against the Company which would, if
adversely determined, materially and adversely affect its financial position or
continued operations. The Company has no material contingent liabilities not
provided for or disclosed in the Financial Statements referred to in Section
4.01(d) of this Agreement or on the Schedule of Exceptions.
(f) LIENS. None of the assets of the Company are subject to any
mortgage, pledge, title retention lien, or other lien, encumbrance or security
interest except for liens and security interests described in Section 6.02(b)(1)
through (7) of this Agreement.
(g) EMPLOYEE BENEFIT PLANS. Each Plan maintained by the Company is
in material compliance with ERISA, the Code, and all applicable rules and
regulations adopted by regulatory authorities pursuant thereto, and the Company
has filed all reports and returns required to be filed by ERISA, the Code and
such rules and regulations. No Plan maintained by the Company and no trust
created under any such Plan has incurred any "accumulated funding deficiency"
within the meaning of Section 412(c)(1) of the Code, and the present value of
all benefits vested under each Plan did not exceed, as of the last annual
valuation date, the value of the assets of the respective Plans allocable to
such vested benefits. The Company has no knowledge that any "reportable event"
as defined in ERISA has occurred with respect to any Plan.
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(h) PAYMENT OF TAXES. The Company has filed all federal, state and
local tax returns and tax related reports which the Company is required to file
by any statute or regulation and all taxes and any tax related interest payments
and penalties that are due and payable have been paid, except for such as are
being contested in good faith and by appropriate proceedings and as to which
appropriate reserves have been established. Adequate provision has been made
for the payment when due of all tax liabilities which have been incurred, but
are not as yet due and payable.
(i) INVESTMENT COMPANY ACT. The Company is not an "investment
company" or a company "controlled" by an "investment company" within the meaning
of the Investment Company Act of 1940, as amended.
(j) REGULATION U. The Company is not engaged principally, or as one
of its important activities, in the business of extending credit for the purpose
of purchasing or carrying margin stock within the meaning of Regulation U of the
Board of Governors of the Federal Reserve System. Not more than twenty-five
percent (25%) of the assets of the Company consists of margin stock, within the
contemplation of Regulation U, as amended.
(k) HAZARDOUS SUBSTANCES. Except as disclosed in the Environmental
Reports furnished to the Bank, to the best knowledge of the Company after due
inquiry and investigation, there are no underground storage tanks of any kind
on any premises owned or occupied by or under lease to the Company and there
are no tanks, drums, or other containers of any kind on premises owned or
occupied by or under lease to the Company, the contents of which are unknown
to the Company. Except as disclosed in the Environmental Reports furnished to
the Bank, to the best knowledge of the Company after due inquiry and
investigation, no premises owned or occupied by or under lease to the Company
have ever been used, and as of the Closing Date, no such premises are being
used for any activities involving the use, treatment, transportation,
generation, storage or disposal of any Hazardous Substances in reportable
quantities and no Hazardous Substances in reportable quantities have been
released on any such premises nor is there any threat of release of any
Hazardous Substances in reportable quantities on any such premises.
(l) SUBSIDIARIES. The Company has no Subsidiaries as of the Closing
Date other than Guarantor.
ARTICLE V
SECURITY FOR OBLIGATIONS
SECTION 5.01. COLLATERAL FOR THE OBLIGATIONS. Until paid in full,
all of the Obligations will be secured by the following:
(a) SECURITY AGREEMENT. The Obligations will be secured by a first
priority security interest and lien in favor of the Bank in and to all of the
assets of the Company created by the Security Agreement, subject only to
Permitted Liens. The Company hereby affirms and
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acknowledges that the Security Agreement secures all of the Obligations. The
Company and the Bank agree that effective as of the Closing Date, Section 1(e)
of the Security Agreement is amended by replacing the definition of the term
"Credit Agreement" in its entirety as follows:
"(e) "Credit Agreement" means the Amended and Restated Credit
Agreement, dated October 3, 1997, between the Company and the Bank, as
the same may be amended, modified, supplemented, extended and/or
restated from time to time and at any time."
(b) MORTGAGES. The Obligations will further be secured by a first
priority mortgage lien and security interest in favor of the Bank on the Real
Estate and related property created by the Mortgages, subject only to Permitted
Liens. Pursuant to Section 7.01 of this Agreement, each of the 1992 Huntingburg
Mortgage, the 1992 Huntingburg Mortgage-Warehouse and the 1992 Huntingburg
Mortgage-Mfg. shall be amended concurrently with the execution of this Agreement
to provide that each such Mortgage secures all of the Obligations, which
amendments shall be in form and substance the same as attached hereto as
EXHIBITS "G-1", "G-2", AND "G-3" (collectively, the "MORTGAGE AMENDMENTS").
(c) GUARANTY. The Obligations will further be secured by the
unconditional, continuing guaranty of Guarantor in favor of the Bank pursuant
to the Guaranty. By its execution of the Consent and Acknowledgment below,
Guarantor hereby acknowledges and affirms to, and agrees with, Bank as
follows: (i) the Guaranty is in full force and effect in accordance with its
terms; (ii) the Guaranty does and shall guarantee and secure all of the
Obligations; (iii) all of the representations and warranties contained in the
Guaranty are still true and accurate, and the execution of this Agreement and
the other Loan Documents to be executed in connection herewith shall not
affect, impair, discharge or release the obligations of the undersigned under
the Guaranty; (iv) the Guarantor hereby represents, warrants and agrees that
there are no offsets, counterclaims or defenses to the Guarantor's
obligations under the Guaranty and expressly waives any and all such offsets,
counterclaims and defenses arising out of any acts, transactions or omissions
on the part of Bank, the Company or any third party; and (v) Paragraph 1 of
the Guaranty hereby is amended and replaced in its entirety as follows:
"1. DEFINITIONS. As used in this Guaranty, the term (i) "Credit
Agreement" means the Amended and Restated Credit Agreement, dated October
3, 1997, between the Company and the Bank, as the same may be amended,
modified, supplemented, extended and/or restated from time to time and at
any time; (ii) "Obligations"means all present and future indebtedness,
obligations and liabilities, and all renewals and extensions thereof, now
or hereafter owed to the Bank by the Borrower, whether arising under,
together with all costs, expenses and reasonable attorneys' fees (including
the reasonable allocated costs of staff counsel) incurred by the Bank in
the enforcement or collection thereof, whether such indebtedness,
obligations and liabilities are direct, indirect, fixed, contingent,
liquidated, unliquidated, joint, several, joint and several, now exist or
hereafter arise, or were prior to acquisition thereof by the Bank owed to
some other Person, including, without limitation, all of the "Obligations"
(as such term is defined in the Credit Agreement); (iii) "Default" means an
"Event of Default" (as such term is defined in the Credit Agreement).
Capitalized terms used in this but not defined herein shall have the
meanings ascribed to such terms in the Credit Agreement."
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(d) PLEDGED BONDS. In addition to all other collateral for the
Obligations, the Obligations will further be secured by a first priority pledge
of and a security interest in favor of the Bank in any 1993 Bonds, any 1994
Refunding Bonds and in any 1994 Equipment Bonds and in any Beneficial ownership
Interests (as that term is defined in the Trust Indenture) for any Bonds which,
in any case, are purchased with the proceeds of any Remarketing Drawing (the
"PLEDGED BONDS"), which pledge and security interest the Company hereby grants
to the Bank, subject only to Permitted Liens. As soon as possible following any
Remarketing Drawing, and in any event within ten (10) days of the date of such
Drawing, the Company shall take such acts and execute such documents as the Bank
may require to perfect and maintain the perfection of the Bank's pledge of and
security interest in and to the Pledged Bonds under applicable law, including to
the extent applicable, Articles 8.1 and 9 of the Indiana Uniform Commercial
Code, and the Company hereby authorizes the Bank to file on behalf of the
Company without the Company's signatures such financing statements, amendments
and continuations in such filing offices as the Bank deems necessary to effect
same.
ARTICLE VI
AFFIRMATIVE AND
NEGATIVE COVENANTS OF BORROWER
SECTION 6.01. AFFIRMATIVE COVENANTS OF THE COMPANY. Until all
Obligations of the Company terminate or are paid and satisfied in full, and for
so long as Borrower is entitled to receive any Advance or any Letters of Credit
are outstanding, the Company shall strictly observe the following covenants:
(a) CORPORATE EXISTENCE. The Company shall preserve its corporate
existence.
(b) REPORTS, CERTIFICATES AND OTHER INFORMATION. The Company shall
furnish to the Bank copies of the following Financial Statements, certificates
and other information:
(1) ANNUAL STATEMENTS. As soon as available and in any event
within one hundred and twenty (120) days after the close of each fiscal
year of the Company, annual audited Financial Statements for the Company,
audited by the Company's Auditors, showing its financial condition and
results of operations as at the close of such fiscal year and for such
fiscal year, all prepared in accordance with GAAP, accompanied by an
opinion of the Company's Auditors, which opinion shall be without
qualification (and the "management letter" if issued) and shall state that
such audited Financial Statements present fairly the financial position of
the Company as of the date of such Financial Statements and the results of
its operations and changes in its financial position for the period covered
thereby, and that their examination in connection with such Financial
Statements has been made in accordance with GAAP.
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(2) INTERIM STATEMENTS. As soon as available and in any event
within thirty (30) days after the end of each successive 4-week or 5-week
period comprising a fiscal quarter of the Company, a copy of the interim
financial statements of the Company, consisting at a minimum of:
(i) the balance sheet of the Company as of the end of such
period, and
(ii) statement of income for such period and for the partial or
full fiscal year ended as of the end of such period,
all in reasonable detail and accompanied by the written representation of
the chief financial officer of the Company that such financial statements
have been prepared in accordance with GAAP (except that they need not
include a statement of cash flows and footnotes and need not reflect
adjustments normally made at year end, if such adjustments are not material
in amount), consistently applied, (except for changes in which the
independent accountants of the Company concur) and present fairly the
financial position of the Company and the results of its operation as of
the dates of such statements and for the periods then ended.
(3) CERTIFICATES. Contemporaneously with the furnishing of each
set of Financial Statements provided for in Sections 6.01(b)(1) and (2) of
this Agreement, an Officer's Certificate.
(4) ORDERS. Prompt notice of any orders in any material
proceedings to which the Company is a party, issued by any court or
regulatory agency, federal or state, and if the Bank should so request, a
copy of any such order.
(5) NOTICE OF DEFAULT OR LITIGATION. Immediately upon learning
of the occurrence of an Event of Default or Unmatured Event of Default, or
the institution of or any adverse determination in any litigation,
arbitration proceeding or governmental proceeding which is material to the
Company, or the occurrence of any event which could have a material adverse
effect upon the Company, written notice thereof describing the same and the
steps being taken with respect thereto.
(6) COMPLIANCE CERTIFICATES. Within thirty (30) days after the
end of each calendar month ending after the Closing Date, a certificate of
the Chief Financial Officer or other appropriate officer of the Company
demonstrating compliance with the financial covenants stated in Section
6.01(g) of this Agreement and compliance with the covenant limiting capital
expenditures of the Company stated in Section 6.02(k) of this Agreement.
Such certificate shall relate the covenants to the month-end figures and
shall otherwise be in such form and provide such detail as may be
reasonably satisfactory to the Bank.
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(7) REGISTRATION STATEMENTS AND REPORTS. Promptly upon filing
with the Securities and Exchange Commission or any other Federal agency
from time to time administering the Securities Act of 1933, as amended, or
any state securities regulatory authority, copies of all registration
statements and all periodic and special reports required or permitted to be
filed under federal or state securities laws and regulations.
(8) OTHER INFORMATION. From time to time such other information
concerning the Company as the Bank may reasonably request.
(c) BOOKS, RECORDS AND INSPECTIONS. The Company shall maintain
complete and accurate books and records, and permit access thereto by the Bank
for purposes of inspection, copying and audit, and the Company shall permit the
Bank to inspect its properties and operations at all reasonable times.
(d) INSURANCE. In addition to any insurance required by any other
Loan Documents and any Bond Documents, the Company shall maintain such insurance
as may be required by law and such other insurance, to such extent and against
such hazards and liabilities, as is customarily maintained by companies
similarly situated. The Company agrees to name the Bank as additional insured
and lender's loss payee on any such insurance policy under a standard lender's
loss payable clause and to provide a copy of any such policy to the Bank.
(e) TAXES AND LIABILITIES. The Company shall pay when due all taxes,
license fees, assessments and other liabilities except such as are being
contested in good faith and by appropriate proceedings and for which appropriate
reserves have been established.
(f) COMPLIANCE WITH LEGAL AND REGULATORY REQUIREMENTS. The Company
shall maintain material compliance with the applicable provisions of all
federal, state and local statutes, ordinances and regulations and any court
orders or orders of regulatory authorities issued thereunder.
(g) FINANCIAL COVENANTS. The Company shall observe each of the
following financial covenants:
(1) TANGIBLE NET WORTH. The Company shall at all times from and
after the Closing Date maintain its Tangible Net Worth at a level not less
than (i) $10,000,000, PLUS (ii) Fifty Percent (50%) of the cumulative Net
Income of the Company for each fiscal year of the Company ending after
Closing Date, provided, that, such amount shall in no event be less than
zero.
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(2) FIXED CHARGE COVERAGE RATIO. As of the close of each fiscal
quarter of the Company ending after the Closing Date, the Company, for the
period of the four consecutive fiscal quarters which end on such close,
shall have a Fixed Charge Coverage Ratio of not less than 1.25 to 1.00.
(3) RATIO OF TOTAL FUNDED DEBT TO EBITDA. As of the close of
each fiscal quarter of the Company ending after the Closing Date, the
Company, for the period of the four consecutive fiscal quarters which end
on such close, shall have a Ratio of Total Funded Debt to EBITDA of not
greater than (i) 3.00:1.00 until August 28, 1998; (ii) 2.50 from August 29,
1998, and thereafter.
(h) PRIMARY BANKING RELATIONSHIP. The Company shall maintain its
primary concentration and deposit accounts with the Bank, provided, that, the
Company shall use its best effort to effect same prior to such date.
(i) EMPLOYEE BENEFIT PLANS. The Company shall maintain and shall
cause any Subsidiary to maintain any Plan in material compliance with ERISA, the
Code, and all rules and regulations of regulatory authorities pursuant thereto
and shall file and shall cause any Subsidiary to file all reports required to be
filed pursuant to ERISA, the Code, and such rules and regulations.
(j) HAZARDOUS SUBSTANCES. If the Company or any Subsidiary should
commence the use, treatment, transportation, generation, storage or disposal of
any Hazardous Substance in reportable quantities in its operations in addition
to those noted in the Environmental Reports or in the Schedule of Exceptions,
the Company shall immediately notify the Bank of the commencement of such
activity with respect to each such Hazardous Substance. The Company shall cause
any Hazardous Substances which are now or may hereafter be used or generated in
the operations of the Company or any Subsidiary in reportable quantities to be
accounted for and disposed of in compliance with all Environmental Laws and
other applicable federal, state and local laws and regulations. The Company
shall notify the Bank immediately upon obtaining knowledge that:
(1) any premises which have at any time been owned or occupied
by or have been under lease to the Company or any Subsidiary are the
subject of an environmental investigation by any federal, state or local
governmental agency having jurisdiction over the regulation of any
Hazardous Substances, the purpose of which investigation is to quantify the
levels of Hazardous Substances located on such premises, or
(2) the Company or any Subsidiary has been named or is
threatened to be named as a party responsible for the possible
contamination of any real property or ground water with Hazardous
Substances, including, but not limited to the contamination of past and
present waste disposal sites.
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If the Company or any Subsidiary is notified of any event described in
Sections 6.01(j)(1) or (2) above in addition to the events noted in any of the
Environmental Reports or in the Schedule of Exceptions, the Company shall
immediately engage or cause the Subsidiary to engage a firm or firms of
engineers or environmental consultants appropriately qualified to determine as
quickly as practical the extent of contamination and the potential financial
liability of the Company or the Subsidiary with respect thereto, and the Bank
shall be provided with a copy of any report prepared by such firm or by any
governmental agency as to such matters as soon as any such report becomes
available to the Company, and Company shall immediately establish reserves in
the amount of the potential financial liability of the Company or the Subsidiary
identified by such environmental consultants or engineers. The selection of any
engineers or environmental consultants engaged pursuant to the requirements of
this Section 6.01(j) shall be subject to the approval of the Bank, which
approval shall not be unreasonably withheld. The Company shall provide an
adequate reserve for the payment of all potential financial liability not
covered by insurance upon the occurrence of any event described in this Section
6.01(j).
SECTION 6.02. NEGATIVE COVENANTS OF THE COMPANY. Until all
Obligations of the Company terminate or are paid and satisfied in full, and so
long as Borrower is entitled to receive any Advance or any Letter of Credit
exists, the Company shall strictly observe the following covenants:
(a) RESTRICTED PAYMENTS. The Company shall not purchase or redeem
any shares of the capital stock of the Company or declare or pay any dividends
thereon except for dividends payable entirely in capital stock. The Company
shall not make any other distributions to shareholders as shareholders, or set
aside any funds for any such purpose, or prepay, purchase or redeem any
subordinated indebtedness of the Company. Notwithstanding any other provision
of this Section 6.02(a), the Company may pay dividends or make other
distributions from net income for the immediately preceding fiscal year to
shareholders of the Company's Series C preferred stock as required by the
agreements between the Company and such shareholders governing such stock, but
only if no Event of Default or Unmatured Event of Default has occurred and is
continuing at the time of such payment or would result from such payment.
(b) LIENS. The Company shall not create or permit to exist any
mortgage, pledge, title retention lien, or other lien, encumbrance or security
interest with respect to any property or assets now owned or hereafter acquired,
including, without limitation any of the Company's rights, title and interests
in and to any Real Estate, whether leased or owned, except:
(1) liens in favor of the Bank created pursuant to the
requirements of this Agreement or otherwise;
(2) any lien or deposit with any governmental agency required or
permitted to qualify the Company to conduct business or exercise any
privilege, franchise or license, or to maintain self-insurance or to obtain
the benefits of or secure obligations under any law pertaining to worker's
compensation, unemployment insurance, old age pensions, social security or
similar matters, or to obtain any stay or discharge in any legal or
administrative proceedings, or any similar lien or deposit arising in the
ordinary course of business;
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(3) any mechanic's, worker's, repairmen's, carrier's,
warehousemen's or other like liens arising in the ordinary course of
business for amounts not yet due and for the payment of which adequate
reserves have been established, or deposits made to obtain the release of
such liens;
(4) easements, licenses, minor irregularities in title or minor
encumbrances on or over any real property which do not, in the judgment of
the Bank, materially detract from the value of such property or its
marketability or its usefulness in the business of the Company;
(5) liens for taxes and governmental charges which are not yet
due or which are being contested in good faith and by appropriate
proceedings and for which appropriate reserves have been established;
(6) liens created by or resulting from any litigation or legal
proceeding which is being contested in good faith and by appropriate
proceedings and for which appropriate reserves have been established;
(7) those specific liens now existing described on the Schedule
of Exceptions.
(c) GUARANTIES. The Company shall not be a guarantor or surety of,
or otherwise be responsible in any manner with respect to any undertaking of any
other person or entity, whether by guaranty agreement or by agreement to
purchase any obligations, stock, assets, goods or services, or to supply or
advance any funds, assets, goods or services, or otherwise, except for:
(1) guaranties in favor of the Bank;
(2) guaranties by endorsement of instruments for deposit
made in the ordinary course of business; and
(3) those specific existing guaranties listed on the
Schedule of Exceptions.
(d) LOANS OR ADVANCES. The Company shall not make or permit to exist
any loans or advances to any other person or entity, except for:
(1) extensions of credit or credit accommodations to customers
or vendors made by the Company in the ordinary course of its business as
now conducted;
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(2) reasonable salary advances to non-executive employees, and
other advances to agents and employees for anticipated expenses to be
incurred on behalf of the Company in the course of discharging their
assigned duties;
(3) the specific items listed on the Schedule of Exceptions.
(e) MERGERS, CONSOLIDATIONS, SALES, ACQUISITION OR FORMATION OF
SUBSIDIARIES. The Company shall not be a party to any consolidation or to any
merger and shall not purchase the capital stock of or otherwise acquire any
equity interest in any other business entity other than New Acquisitions. The
Company shall not acquire any material part of the assets of any other business
entity, except in the ordinary course of business. The Company shall not sell,
transfer, convey or lease all or any material part of its assets, except in the
ordinary course of business, or sell or assign with or without recourse any
receivables. The Company shall not cause to be created or otherwise acquire any
Subsidiaries without the prior written consent of the Bank.
(f) MARGIN STOCK. The Company shall not use or cause or permit the
proceeds of the Loans or any of the Bonds to be used, either directly or
indirectly, for the purpose, whether immediate, incidental or ultimate, of
purchasing or carrying any margin stock within the meaning of Regulation U of
the Board of Governors of the Federal Reserve System, as amended from time to
time.
(g) OTHER AGREEMENTS. The Company shall not enter into any agreement
containing any provision which would be violated or breached in material respect
by the performance of its obligations under this Agreement or under any other
Loan Documents or any of the Bond Documents.
(h) JUDGMENTS. The Company shall not permit any uninsured judgment
or monetary penalty rendered against it in any judicial or administrative
proceeding to remain unsatisfied for a period in excess of forty-five (45) days
unless such judgment or penalty is being contested in good faith by appropriate
proceedings and execution upon such judgment has been stayed, and unless an
appropriate reserve has been established with respect thereto.
(i) PRINCIPAL OFFICE. The Company shall not change the location of
its principal office unless it gives not less than ten (10) days prior written
notice of such change to the Bank.
(j) HAZARDOUS SUBSTANCES. The Company shall not allow or permit to
continue the release or threatened release of any Hazardous Substance on any
premises owned or occupied by or under lease to the Company or any Subsidiary.
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(k) CAPITAL EXPENDITURES LIMITATION. The Company shall not make
Capital Expenditures in any fiscal year of the Company which in the aggregate
exceed the amount of depreciation expense of the Company for the immediately
preceding fiscal year of the Company, excluding (i) the amount of Capital
Expenditures incurred by the Company in connection with the acquisition and
construction of the 1997 Project, not to exceed in the aggregate $1,500,000, and
(ii) the amount of Capital Expenditures incurred by the Company for leasehold
improvements to a showroom to be leased in High Point, North Carolina, not to
exceed in the aggregate $250,000.
(1) LEASE OBLIGATIONS. The Company shall not incur obligations under
any Capital Leases.
(m) ADDITIONAL DEBT. The Company shall not create, incur, assume or
suffer to exist any Debt or liability on account of deposits or advances or for
borrowed money or for the deferred purchase price of any property or services or
for Capital Lease obligations, except those disclosed on the Schedule of
Exceptions.
(n) FUNDING OF ESCROW AGREEMENTS. The Company shall not deposit with
the Agent more than $649,834.33 for the Escrow Agreement (Dreher), nor deposit
with the Agent more than $350,165.67 for the Escrow Agreement (Hill).
(o) OBLIGATIONS UNDER THE BOND DOCUMENTS. The Company will fully and
timely pay and perform all of its obligations under those Bond Documents to
which it is a party.
ARTICLE VII
LENDING CONDITIONS
SECTION 7.01. CONDITIONS OF LENDING. The obligation of the Bank to
make any Advance, to make the Term Loan and to issue any Letters of Credit shall
be subject to fulfillment of each of the following conditions precedent:
(a) NO DEFAULT. No Event of Default or Unmatured Event of Default
shall have occurred and be continuing, and the representations and warranties of
the Company contained in Section 4.01 of this Agreement shall be true and
correct as of the Closing Date and as of the date of each Advance, except that
after the Closing Date: (i) the representations contained in Section 4.01(d) of
this Agreement will be construed so as to refer to the latest Financial
Statements furnished to the Bank by the Company pursuant to the requirements of
this Agreement, (ii) the representations contained in Section 4.01(k) (with
respect to Hazardous Substances) will be construed so as to apply not only to
the Company, but also to any Subsidiaries, (iii) the representation contained in
Section 4.01(l) of this Agreement will be construed so as to except any
Subsidiary which may hereafter be formed or acquired by the Company with the
consent of the Bank, and (iv) all other representations will be construed to
have been amended to conform with any changes of which the Bank shall previously
have been given notice in writing by the Company.
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(b) DOCUMENTS AND OTHER ITEMS TO BE FURNISHED AT CLOSING. The Bank
shall have received contemporaneously with the execution of this Agreement, the
following, each duly executed, currently dated (as applicable) and in form and
substance satisfactory to the Bank:
(1) The Revolving Note and the Term Note.
(2) The Mortgage Amendments.
(3) Certified copies of the Resolutions of the respective Boards
of Directors of the Company and the Guarantor authorizing the execution,
delivery and performance, respectively, of this Agreement and the other
Loan Documents provided for in this Agreement to which each of the Company
and the Guarantor, respectively is a party.
(4) Certificates of the respective Secretaries of the Company
and the Guarantor certifying the names of the officer or officers
authorized to sign this Agreement and the other Loan Documents provided for
in this Agreement to which each of the Company and the Guarantor,
respectively, is a party, together with a sample of the true signature of
each such officer.
(5) Copies of the respective file-marked Articles of
Incorporation of the Company and the Guarantor certified as complete and
correct by the respective Secretaries of State of Delaware and Kentucky,
and copies of the respective By-Laws of the Company and the Guarantor,
certified as complete and correct by the respective Secretaries of the
Company and the Guarantor.
(6) Currently dated certificates of existence of the Company
issued by the Secretary of State of Delaware and of the Guarantor issued by
the Secretary of State of Kentucky, and certificates of good standing for
the Company and the Guarantor for each other state in which the Company and
the Guarantor, respectively, engages in business.
(7) The opinion of counsel for the Company addressed to the
Bank to the effect that the representations stated in Sections 4.01(a),
(b), (c), (i), (j) and (l) of this Agreement are correct, and otherwise in
such form as may be reasonably acceptable to the Bank.
(8) Within thirty (30) days after the Closing Date, at the
Company's expense endorsements to the title policies previously provided to
the Bank with regard to the 1992 Huntingburg Real Estate, the 1993
Huntingburg Real Estate-Warehouse and the 1993 Huntingburg Real Estate-Mfg.
(i) advancing the effective dates of such policies to the date of recording
of the Mortgage Amendments, (ii) providing that the insured mortgages are
the 1992 Huntingburg Mortgage, the 1993 Huntingburg Mortgage-Warehouse, the
1993 Huntingburg Mortgage-Mfg., respectively, as amended by the
corresponding Mortgage Amendments, and (iii) insuring the contiguity of
such adjacent parcels of Real Estate as the Bank may request.
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(9) Certificates evidencing the existence of all insurance
required under the terms of this Agreement or any other Loan Documents or
the Bond Documents.
(10) Payment to the Bank of a commitment fee of $7,500 for its
commitment to make Term Loan Construction Advances
(11) Such other documents as the Bank may reasonably require.
(c) DOCUMENTS TO BE FURNISHED AT TIME OF EACH ADVANCE UNDER THE
REVOLVING LOAN. The Bank shall have received the following prior to making any
Advance under the Revolving Loan, each duly executed and currently dated, unless
waived at the Bank's discretion as provided in Section 2.02(b) of this
Agreement:
(1) An Application for an Advance.
(2) An Officer's Certificate.
(3) Such other information, reports and documents as the Bank
may reasonably require, including, without limitation at the option of the
Bank, the items set forth on Schedule 1 attached hereto respecting the 1997
Real Estate.
(d) DOCUMENTS TO BE FURNISHED AT TIME OF EACH TERM LOAN CONSTRUCTION
ADVANCE. The Bank shall have received the following prior to making each Term
Loan Construction Advance, each duly executed and currently dated, unless waived
at the Bank's discretion as provided in Section 2.04(b) of this Agreement:
(1) An Application for an Advance.
(2) An Officer's Certificate.
(3) All of the items described in Section 7.01(c)(3) above as
the Bank at its option may require.
(4) Upon request of the Bank, a list of actual expenditures for
which the Term Loan Construction Advance is to be used;
(5) Upon request of the Bank, an endorsement to the title policy
described on Schedule 1 attached hereto: (i) containing affirmative
coverage against unrecorded mechanic's liens through and including the date
of such Term Loan Construction Advance; (ii) indicating that since the date
of the preceding Term Loan Construction Advance there has been no change in
the state of title and that the 1997 Project Real Estate has not become
subject to any further lien or encumbrance excepting Permitted Liens; and
(iii) updating the title policy to the date of such Term Loan Construction
Advance;
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(6) Upon request of the Bank, to the extent necessary to obtain
the endorsement to the title policy described on Schedule 1 attached
hereto: (i) paid invoices, progressive lien waivers and other proof of
payment made by the Company for the amount of each of the expenditures; and
(ii) current invoices, due but unpaid, with progressive lien waivers
effective upon receipt of payment.
(7) Such other documents as the Bank may require to establish
that the Bank will have and will continue to have a first mortgage lien on
the 1997 Project Real Estate, subject only to Permitted Liens.
ARTICLE VIII
EVENTS OF DEFAULT--ACCELERATION
SECTION 8.01. EVENTS OF DEFAULT. Each of the following shall
constitute an Event of Default under this Agreement:
(a) NONPAYMENT OF THE LOANS. Default in the payment when due of any
amount payable under the terms of either of the Notes, or otherwise payable to
the Bank or any other holder of the Notes under the terms of this Agreement.
(b) NONPAYMENT OF OTHER DEBT. Default by the Company in the payment
when due, whether by acceleration or otherwise, of any other material Debt for
borrowed money, or default in the performance or observance of any obligation or
condition with respect to any such other Debt if the effect of such default is
to accelerate the maturity of such other Debt or to permit the holder or holders
thereof, or any trustee or agent for such holders, to cause such Debt to become
due and payable prior to its scheduled maturity, unless the Company is
contesting the existence of such default in good faith and by appropriate
proceedings.
(c) OTHER MATERIAL OBLIGATIONS. Subject to the expiration of any
applicable grace period, default by the Company in the payment when due, or in
the performance or observance of any material obligation of, or condition agreed
to by the Company with respect to any material purchase or lease of goods,
securities or services except only to the extent that the existence of any such
default is being contested in good faith and by appropriate proceedings and that
appropriate reserves have been established with respect thereto.
(d) BANKRUPTCY, INSOLVENCY, ETC. The Company admitting in writing
its inability to pay its debts as they mature or an administrative or judicial
order of dissolution or determination of insolvency being entered against the
Company; or the Company applying for,
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consenting to, or acquiescing in the appointment of a trustee or receiver for
the Company or any property thereof, or the Company making a general
assignment for the benefit of creditors; or, in the absence of such
application, consent or acquiescence, a trustee or receiver being appointed
for the Company or for a substantial part of its property and not being
discharged within sixty (60) days; or any bankruptcy, reorganization, debt
arrangement, or other proceeding under any bankruptcy or insolvency law, or
any dissolution or liquidation proceeding being instituted by or against the
Company, and, if involuntary, being consented to or acquiesced in by the
Company or remaining for sixty (60) days undismissed.
(e) WARRANTIES AND REPRESENTATIONS. Any warranty or representation
made by the Company in this Agreement proving to have been false or misleading
in any material respect when made, or any schedule, certificate, financial
statement, report, notice, or other writing furnished by the Company to the Bank
proving to have been false or misleading in any material respect when made or
delivered.
(f) VIOLATIONS OF NEGATIVE AND FINANCIAL COVENANTS. Failure by the
Company to comply with or perform any covenant stated in Section 6.02 or 6.01(g)
of this Agreement.
(g) CHANGE IN CONTROL PLUS CHANGE IN MANAGEMENT. If (i) a Change in
Control occurs, and (ii) a Change in Management occurs.
(h) NONCOMPLIANCE WITH OTHER PROVISIONS OF THIS AGREEMENT. Failure
of the Company to comply with or perform any covenant or other provision of this
Agreement or to perform any other Obligation (which failure does not constitute
an Event of Default under any of the preceding provisions of this Section 8.01)
and continuance of such failure for thirty (30) days after notice thereof to the
Company from the Bank.
SECTION 8.02. EFFECT OF EVENT OF DEFAULT. When any Event of Default
has occurred and is continuing, the Bank may take any or all of the following
actions:
(a) ACCELERATION OF LOANS. If any Event of Default described in
Section 8.01(d) shall occur, maturity of the Loans shall immediately be
accelerated and the Notes and the Loans evidenced thereby, and all other
indebtedness and any other payment Obligations of the Company to the Bank shall
become immediately due and payable, and the Commitments shall immediately
terminate, all without notice of any kind. When any other Event of Default has
occurred and is continuing, the Bank or any other holder of the Notes may
accelerate payment of the Loans and declare the Notes and all other payment
Obligations due and payable, whereupon maturity of the Loans shall be
accelerated and the Notes and the Loans evidenced thereby, and all other payment
Obligations shall become immediately due and payable and the Commitments shall
immediately terminate, all without notice of any kind. The Bank or such other
holder shall promptly advise the Company of any such declaration, but failure to
do so shall not impair the effect of such declaration.
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(b) REFUSAL TO REINSTATE AN INTEREST DRAWING. The Bank may refuse to
reinstate any Interest Drawing under any of the Credit Enhancement Letters of
Credit by giving notice to the appropriate Trustee of such refusal in the manner
and within the time provided under the terms of the appropriate Credit
Enhancement Letter of Credit and the Bank may direct such Trustee to accelerate
the maturity of the Bonds secured by such Credit Enhancement Letter of Credit as
provided under the terms of the appropriate Trust Indenture.
(c) BOND DOCUMENT REMEDIES. The Bank may notify each of the Trustees
of the Event of Default with the result that the Trustees will, as required by
the appropriate Trust Indenture, declare the principal of all the Bonds and the
interest accrued thereon to be immediately due and payable and the Bank may
exercise any other remedy available to the Bank under any of the Bond Documents.
(d) DEPOSIT TO SECURE PAYMENT OF THE REIMBURSEMENT OBLIGATIONS. The
Bank may demand that the Company immediately pay to the Bank an amount equal to
the Maximum Available Credit. Such amount shall be due and payable to the Bank
immediately upon demand. the company grants to the Bank a pledge of and
security interest in any and all funds (hereafter referred to in this Section
8.02(d) as a "SPECIAL COLLATERAL ACCOUNT") paid by the Company to the Bank,
pursuant to the demand of the Bank made pursuant to this Section 8.02(d). Such
pledge and security interest shall secure to the Bank all of the Obligations.
The Company acknowledges that the Bank would not have adequate remedies at law
for failure of the Company to honor any demand made pursuant to this Section
8.02(d) and, therefore, the Bank shall have the right to require the Company
specifically to perform such undertaking whether or not any amounts are then due
and payable by the Company to the Bank on account of its reimbursement
obligation with respect to Drawings made under any of the Credit Enhancement
Letters of Credit. In the event the Bank makes a demand pursuant to this
Section 8.02(d) and the Company pays the funds demanded, the Bank will hold any
Special Collateral Account without liability for interest thereon, provided that
the Bank will, at the direction of the Company and for the account and risk of
the Company, invest the funds of a Special Collateral Account in U.S. Treasury
Bills with 30 days or less remaining until maturity. Any earnings from such
investment may, at the discretion of the Bank, be released to the Company.
After the Credit Enhancement Letters of Credit have expired and all of the
Obligations have been satisfied, the Bank shall return to the Company any
balance remaining in any Special Collateral Account established pursuant to the
requirements of this Section 8.02(d).
(e) OTHER REMEDIES. The Bank may pursue any other remedies available
to it under any Credit Document or any Bond Document. The Bank may bring any
other action available at law or in equity to enforce payment and performance or
otherwise to collection the Obligations.
(f) DEMAND OF FUNDS DEPOSITED PURSUANT TO ESCROW AGREEMENTS. The
Bank may notify the Agent of the Event of Default (other than an Event of
Default under Section 8.01(g) of this Agreement) with the result that the Agent
will, as required by the Escrow Agreements, distribute to the Bank all "Escrowed
Funds" (as that term is defined in each of the
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Escrow Agreements). The Bank shall be entitled, in its sole discretion, to
use all or any portion of the Escrowed Funds to repay Obligations then
outstanding in any order as the Bank in its sole discretion determines, or to
deposit all or any portion of the Escrowed Funds in the Special Collateral
Account established pursuant to Section 8.02(d) of this Agreement, with any
funds that are deposited into the Special Collateral Account under the
authority of this Section 8.02(f) subject, after deposit, to the pledge and
other provisions of Section 8.02(d).
The remedies enumerated in this Section 8.02 are not intended to be
exclusive, but shall be in addition to any other statutory, equitable or
contractual remedies available to the Bank.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. LETTER OF CREDIT PAYMENTS FROM BANK FUNDS. The Bank
agrees for the benefit of each Trustee that all payments made in satisfaction of
the Drawings under any of the Credit Enhancement Letters of credit will be made
from funds of the Bank and not from funds of the Company.
SECTION 9.02. WAIVER -- AMENDMENTS. No delay on the part of the
Bank, or any holder of the Notes in the exercise of any right, power or remedy
shall operate as a waiver thereof, nor shall any single or partial exercise by
any of them of any right, power or remedy preclude any other or further exercise
thereof, or the exercise of any other right, power or remedy. No amendment,
modification or waiver of, or consent with respect to any of the provisions of
this Agreement or the other Loan Documents or otherwise of the Obligations shall
be effective unless such amendment, modification, waiver or consent is in
writing and signed by the Bank.
SECTION 9.03. NOTICES. Any notice given under or with respect to
this Agreement to the Company or the Bank shall be in writing and, if delivered
by hand or sent by overnight courier service, shall be deemed to have been given
when delivered and, if mailed, shall be deemed to have been given five (5) days
after the date when sent by registered or certified mail, postage prepaid, and
addressed to the Company or the Bank (or other holder of the Notes) at its
address shown below, or at such other address as any such party may, by written
notice to the other party to this Agreement, have designated as its address for
such purpose. The addresses referred to are as follows:
The Company: DMI Furniture, Inc.
One Oxmoor Place
101 Bullitt Lane
Louisville, Kentucky 40222
Attention: Joseph G. Hill, Vice President - Finance
-77-
<PAGE>
The Bank: Bank One, Indiana, National Association
Bank One Center/Tower - Suite 1911
lll Monument Circle
P.O. Box 7700
Indianapolis, Indiana 46277-0119
Attention: Manager, Indiana Corporate Financial
Services
SECTION 9.04. COSTS, EXPENSES AND TAXES. The Company agrees to
pay (without duplication), all of the following fees, costs and expenses
incurred by the Bank: (i) all reasonable costs and expenses in connection
with the negotiation, preparation, printing, typing, reproduction, execution
and delivery of the Loan Documents and any and all other documents furnished
pursuant hereto or in connection herewith, and all investigation of and due
diligence regarding the Company and the security for the Obligations
undertaken and performed with respect thereto, including without limitation
the reasonable fees and out-of-pocket expenses of Messrs. Baker & Daniels,
special counsel to the Bank (or, but not as well as the reasonable allocated
costs of staff counsel) as well as the fees and out-of-pocket expenses of
counsel, independent public accountants and other outside experts retained by
the Bank, and in connection with the foregoing and the administration of this
Agreement, (ii) all reasonable costs and expenses in connection with the
negotiation, preparation, printing, typing, reproduction, execution and
delivery of any amendments or modifications of (or supplements to) any of the
foregoing and any and all other documents furnished pursuant thereto or in
connection therewith, and all investigation of and due diligence regarding
the Company and the security for the Obligations undertaken and performed
with respect thereto, including without limitation the reasonable fees and
out-of-pocket expenses of counsel retained by the Bank relative thereto (or,
but not as well as the reasonable allocated costs of staff counsel) as well
as the fees and out-of-pocket expenses of counsel, independent public
accountants and other outside experts retained by the Bank, and in connection
with the foregoing and the administration of this Agreement, (iii) all search
fees, appraisal fees and expenses, title insurance policy fees, costs and
expenses and filing and recording fees and taxes and, (iv) all costs and
expenses (including, without limitation, reasonable attorneys' fees and
expenses of the Bank), if any, in connection with the enforcement of this
Agreement, any Note and/or any other Loan Documents or other agreement
furnished pursuant hereto or thereto or in connection herewith or therewith.
In addition, the Company shall pay any and all stamp, transfer and other
similar taxes payable or determined to be payable in connection with the
execution and delivery of this Agreement, or any of the other Loan Documents
or the issuance of any Note or the making of any of the Loans, and agrees to
save and hold the Bank harmless from and against any and all liabilities with
respect to or resulting from any delay in paying, or omission to pay, such
taxes. Any portion of the foregoing fees, costs and expenses which remains
unpaid following the Bank's statement and request for payment thereof shall
bear interest from the date of such statement and request to the date of
payment at a per annum rate equal to the Prime Rate plus Two Percent (2%).
-78-
<PAGE>
SECTION 9.05. SEVERABILITY. If any provision of this Agreement or
any other Loan Document is determined to be illegal or unenforceable, such
provision shall be deemed to be severable from the balance of the provisions of
this Agreement or such Document and the remaining provisions shall be
enforceable in accordance with their terms.
Section 9.06. CAPTIONS. Section captions used in this Agreement are
for convenience only and shall not affect the construction of this Agreement.
SECTION 9.07 GOVERNING LAW/VENUE. Except as may otherwise be
expressly provided in any other Loan Document, this Agreement and all other
Loan Documents are made under and will be governed in all cases by the
substantive laws of the State of Indiana, notwithstanding the fact that
Indiana conflicts of law rules might otherwise require the substantive rules
of law of another jurisdiction to apply. THE COMPANY WAIVES PERSONAL SERVICE
OF ANY AND ALL PROCESS UPON THE COMPANY AND AGREES THAT ALL SERVICE OF
PROCESS MAY BE MADE BY MESSENGER, BY CERTIFIED MAIL, RETURN RECEIPT
REQUESTED, OR BY REGISTERED MAIL DIRECTED TO THE COMPANY AT THE ADDRESS
STATED IN SECTION 9.03 OF THIS AGREEMENT. NOTHING CONTAINED IN THIS SECTION
SHALL AFFECT THE RIGHT OF THE BANK TO SERVE LEGAL PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW. THE COMPANY AGREES THAT THE COURTS OF THE STATE OF INDIANA
LOCATED IN INDIANAPOLIS, INDIANA, AND THE FEDERAL COURTS LOCATED IN THE
SOUTHERN DISTRICT OF INDIANA, MARION COUNTY, HAVE JURISDICTION OVER ANY AND
ALL ACTIONS AND PROCEEDINGS INVOLVING THIS AGREEMENT AND ANY OTHER LOAN
DOCUMENT OR AGREEMENT MADE IN CONNECTION HEREWITH AND THE COMPANY HEREBY
IRREVOCABLY AND UNCONDITIONALLY AGREES TO SUBMIT TO THE JURISDICTION OF SUCH
COURTS FOR PURPOSES OF ANY SUCH ACTION OR PROCEEDING. THE COMPANY HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY OBJECTION THAT THE COMPANY MAY NOW
OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING, INCLUDING
ANY CLAIM THAT SUCH COURT IS AN INCONVENIENT FORUM, AND CONSENTS TO SERVICE
OF PROCESS PROVIDED THE SAME IS IN ACCORDANCE WITH THE TERMS HEREOF. FINAL
JUDGMENT IN ANY SUCH PROCEEDING AFTER ALL APPEALS HAVE BEEN EXHAUSTED OR
WAIVED SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT
ON THE JUDGMENT.
SECTION 9.08. PRIOR AGREEMENTS, ETC. This Agreement supersedes all
previous agreements and commitments made by the Bank and the Company with
respect to the Loans and all other subjects of this Agreement, including,
without limitation, any oral or written proposals or commitments made or issued
by the Bank.
SECTION 9.09. SUCCESSORS AND ASSIGNS. This Agreement and the other
Loan Documents shall be binding upon and shall inure to the benefit of the
Company and the Bank and their respective successors and assigns, provided that
the Company's rights under this Agreement shall not be assignable without the
prior written consent of the Bank.
-79-
<PAGE>
SECTION 9.10. WAIVER OF JURY TRIAL. THE COMPANY AND THE BANK HEREBY
VOLUNTARILY, KNOWINGLY, IRREVOCABLY AND UNCONDITIONALLY
WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE (WHETHER
BASED UPON CONTRACT, TORT OR OTHERWISE) BETWEEN OR AMONG THE COMPANY AND THE
BANK ARISING OUT OF OR IN ANY WAY RELATED TO THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT. THIS PROVISION IS A MATERIAL INDUCEMENT TO THE BANK TO PROVIDE THE
FINANCING DESCRIBED HEREIN OR IN THE OTHER LOAN DOCUMENTS.
SECTION 9.11. ARBITRATION. The Bank and the Company agree that upon
the written demand of either party, whether made before or after the
institution of any legal proceedings, but prior to the rendering of any judgment
in that proceeding, all disputes, claims and controversies between them, whether
individual, joint, or class in nature, arising from this Agreement, any other
Loan Document or otherwise, including without limitation contract disputes and
tort claims, shall be resolved by binding arbitration pursuant to the Commercial
Rules of the American Arbitration Association. Any arbitration proceeding held
pursuant to this arbitration provision shall be conducted in the city nearest
the Company's address having an AAA regional office, or at any other place
selected by mutual agreement of the parties. No act to take or dispose of any
collateral shall constitute a waiver of this arbitration agreement or be
prohibited by this arbitration agreement. This arbitration provision shall not
limit the right of either party during any dispute, claim or controversy to
seek, use, and employ ancillary, or preliminary rights and/or remedies,
judicial or otherwise, for the purposes of realizing upon, preserving,
protecting, foreclosing upon or proceeding under forcible entry and detainer for
possession of, any real or personal property, and any such action shall not be
deemed an election of remedies. Such remedies include, without limitation,
obtaining injunctive relief or a temporary restraining order, invoking a power
of sale under any deed of trust or mortgage, obtaining a writ of attachment or
imposition of a receivership, or exercising any rights relating to personal
property, including taking or disposing of such property with or without
judicial process pursuant to Article 9 of the Uniform Commercial Code or when
applicable, a judgment by confession of judgment. Any disputes, claims or
controversies concerning the lawfulness or reasonableness of an act, or exercise
of any right or remedy concerning any collateral, including any claim to
rescind, reform, or otherwise modify any agreement relating to the collateral,
shall also be arbitrated; provided, however that no arbitrator shall have the
right or the power to enjoin or restrain any act of either party. Judgment upon
any award rendered by any arbitrator may be entered in any court having
jurisdiction. Nothing in this arbitration provision shall preclude either party
from seeking equitable relief from a court of competent jurisdiction. The
statute of limitations, estoppel, waiver, laches and similar doctrines which
would otherwise be applicable in an action brought by a party shall be
applicable in any arbitration proceeding, and the commencement of an arbitration
proceeding shall be deemed the commencement of any action for these purposes.
The Federal Arbitration Act (Title 9 of the United States Code) shall apply to
the construction, interpretation, and enforcement of this arbitration provision.
-80-
<PAGE>
IN WITNESS WHEREOF, the Bank and the Company have by their duly
authorized officers executed this Agreement on the date first set forth above.
DMI FURNITURE, INC.,
a Delaware corporation
By:_______________________________
Printed:__________________________
Title:____________________________
(the "COMPANY")
BANK ONE, INDIANA, NATIONAL
ASSOCIATION
By:________________________________
Printed:___________________________
Title:_____________________________
(the "BANK")
CONSENT AND ACKNOWLEDGMENT
The undersigned consents to the execution and performance of the above
Amended and Restated Credit Agreement and by its execution below agrees to be
bound by the terms of Section 5.01(c) above.
DMI MANAGEMENT, INC.
By:________________________________
Printed:____________________________
Title:______________________________
Date:______________________________
(the "GUARANTOR")
-81-
<PAGE>
EXHIBIT 11.
DMI FURNITURE, INC.
CALCULATIONS OF EARNINGS PER SHARE
THREE MONTHS ENDED
----------------------------
Nov. 29, Nov. 30,
1997 1996
---------- ---------
Net income (loss) (Note 7) $810,000 $861,000
========= =========
Average shares of common stock
and common equivalents
outstanding:
Average common shares
outstanding 3,156,406 3,056,212
Common stock equivalents--
dilutive options and convertible
preferred stock(a) 2,920,886 2,799,868
---------- ---------
Average shares of common
stock and common stock
equivalents outstanding 6,077,292 5,856,080
========= =========
Earnings (loss) per common share (Notes 3 and 7) $0.13 $0.15
===== =====
82
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-29-1998
<PERIOD-START> AUG-31-1997
<PERIOD-END> NOV-29-1997
<CASH> 1,604
<SECURITIES> 0
<RECEIVABLES> 11,809
<ALLOWANCES> 173
<INVENTORY> 11,972
<CURRENT-ASSETS> 26,392
<PP&E> 21,290
<DEPRECIATION> 9,783
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<CURRENT-LIABILITIES> 8,650
<BONDS> 14,406
0
3,990
<COMMON> 315
<OTHER-SE> 9,646
<TOTAL-LIABILITY-AND-EQUITY> 38,328
<SALES> 17,308
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