Exhibit 2
[CHANCELLOR LETTERHEAD]
LOAN TERM-OUT AGREEMENT
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As of January 31, 1996
To the Lenders who are signatory to the Moratorium Agreement referred to below:
Ladies and Gentlemen:
Reference is made to that certain Loan Agreement dated as of April 6, 1990,
and that certain Forbearance Agreement dated as of April 6, 1990 and that
certain Moratorium Agreement dated as of October 29, 1993, each as previously
amended from time to time (collectively the "Governing Documents"). We hereby
request that you agree as follows, and that you indicate your agreement to the
following terms by counter-executing this letter:
1. All capitalized terms used and not otherwise defined herein shall have
the meanings ascribed to them in the Moratorium Agreement, except that the term
"Event of Default" shall also mean and include any breach of any representation,
warranty, covenant or agreement set forth in this Agreement, any failure to
satisfy any obligations set forth in this Agreement, or any event or condition,
which, with the passage of time, giving of notice or otherwise would constitute
such a breach.
2. The Borrowers acknowledge and agree that Exhibit A attached hereto is
a true, accurate and complete description of the principal amount of the
indebtedness outstanding on account of the Old Debt, the New Loan and the
Deferred Payment Notes as of December 26, 1995, and that all such indebtedness
is due and owing as of the date hereof.
3. Subject to the terms and conditions set forth in this Loan Term-Out
Agreement, the Lender and the Participants who are signatories hereto agree to
extend the due date of the Old Debt, the Deferred Payment Notes and the New Loan
until the earlier of (i) December 31, 1996 and (ii) the date of any Event of
Default. Subject to the terms and conditions set forth in this letter, provided
that all indebtedness and other amounts outstanding on account of principal,
interest and other charges due with respect to the New Loan are paid in full on
or before December 31, 1996, the Lender and the Participants who are signatories
[CHANCELLOR LETTERHEAD]
hereto agree to extend the due date of the Old Debt and the Deferred Payment
Notes until the earlier of (x) September 25, 1997 and (y) the date of any Event
of Default.
4. Provided that no Event of Default has occurred and is continuing (or
no Event of Default would be caused thereby) and subject further to the terms
and conditions of the Governing Documents, during the period beginning on
February 1, 1996 and ending on December 31, 1996 (which period shall be extended
until September 25, 1997 if the due date of the Old Debt is extended as set
forth in Section 3 above), the Lender agrees to make available to the Borrowers
from the Collateral Account to the extent of collected funds available in such
account (i) on a monthly basis the amount of $450,000 for working capital
purposes and (ii) on an as-available basis, the amount of Net Proceeds of Equity
Issuances (hereafter defined), provided that all of such Net Proceeds of Equity
Issuances are used solely for capital expenditures of Chancellor Corporation.
"Equity Issuance" shall mean any issuance by Chancellor Corporation (other
than an issuance to any subsidiary, or any issuance pursuant to employee,
director or consultant stock options) of (i) any of its capital stock, or (ii)
any warrants or options exercisable with respect to its capital stock.
"Net Proceeds" of any Equity Issuance shall mean in each case as set forth
in a statement in reasonable detail delivered by the Borrowers to the Lender,
the gross cash proceeds received by Chancellor Corporation from such Equity
Issuance less all legal fees and expenses, discounts and commissions and other
fees and expenses incurred or to be incurred in connection with such issuance
and all federal, state, local and foreign taxes assessed or to be assessed in
connection therewith.
5. Loan Payments, etc.
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On or before the twenty-fifth (25th) day of each month commencing in the
month of February, 1996, the Borrowers shall make mandatory payments of
principal on the Old Debt in the amount of One Hundred and Nine Thousand Dollars
($109,000) per month and the Borrowers shall also pay all interest on the New
Loan, the Old Debt and the Deferred Payment Notes accrued through and including
the date of such payment. All principal payments received in 1996 shall be
applied by the Lender to the Old Debt. In the event that the Old Debt and the
Deferred Payment Notes are extended as set forth in Section 3 above, then in
1997 the Lender shall apply principal payments first to the Old Debt until it is
paid in full and then to the Deferred Payment Notes.
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[CHANCELLOR LETTERHEAD]
During the period beginning on February 1, 1996, interest on the New Loan,
the Old Debt and Deferred Payment Notes shall accrue and be paid at an annual
rate equal to the Prime Rate plus two percent (2%). "Prime Rate" shall mean the
rate of interest announced by Fleet Bank of Massachusetts, N.A. in Boston from
time to time as its "Prime Rate." Such Prime Rate shall be reset automatically,
from time to time as said Prime Rate changes. The interest rate shall
automatically change as the Prime Rate changes. Interest shall be calculated on
the basis of actual days elapsed and a 360-day year.
During the continuance of any Event of Default and following any
termination of this Agreement, the interest rate on the Old Debt, the New Loan
and the Deferred Payment Notes shall be as set forth in Section 8 of the
Moratorium Agreement.
The Borrowers hereby direct the Lender to debit all of the foregoing
amounts from the Collateral Account on such date and the Borrowers agree that an
Event of Default shall occur if collected funds are not then on deposit in the
Collateral Account on any such date to make such payments, if such payments are
not made, or if as a result of the making of such payments, the covenants set
forth in Section 6(a) or 6(b) below is breached.
The Borrowers, the Lender and the Participants who are signatories hereto
acknowledge that the Participants, if any, who are not signatories hereto have
not agreed to any extension of or moratorium with respect to their Old Debt. The
parties agree that all principal payments by the Borrowers on the Old Debt
pursuant to this Loan Term-Out Agreement shall nevertheless be applied pari
passu to reduce the outstanding principal balance on the Old Debt unless and
until such time, if any, that all affected parties agree to a different
treatment of such payments.
6. The Borrowers hereby covenant and agree that:
(a) at all times the ratio of (x) the Net Realizable Value (hereafter
defined) to (y) the outstanding principal balance of the Old Debt (including the
Deferred Payment Notes) shall not at the end of any month be less than 2 to 1.
Not later than the tenth (10th) day after the end of each calendar month, the
Borrowers shall provide the Lender and each Participant with a written report
(the "Borrowers Update Report") in reasonable detail and such other materials
required for the Lender to determine the Borrowers' compliance or non-compliance
with the preceding covenant, together with a certification of Chancellor
Corporation that all materials submitted are true, correct and complete in all
respects.
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[CHANCELLOR LETTERHEAD]
"Net Realizable Value" shall mean the present value, utilizing a ten
percent (10%) discount rate, of the Borrowers' interest in the residual value of
the trusts, operating leases and direct finance leases listed on the Appraisal
provided by Equipment Leasing Services, Inc. on December 19, 1995 ("Appraisal")
and any similar assets acquired after the date hereof, in each case utilizing
the lesser of (a) the amount set forth in the Appraisal, (b) the amount set
forth in Borrowers Update Report (which amounts the Borrowers represent will be
estimated in good faith utilizing the value set forth in the Appraisal with
respect to equipment specified therein, and with respect to equipment not
evaluated in the Appraisal utilizing a value which the Borrowers believe in good
faith is consistent with the values in the Appraisal), (c) such lesser value of
any such asset as the Borrowers may determine from time to time (Chancellor
Corporation hereby agreeing to conduct a periodic review of the value of such
assets and to reduce the value of any such asset as reasonably required under
the circumstances including as a result of its annual audit), and (d) the value
of any such asset determined from time to time by an independent appraiser
selected by the Lender, in each case net of all indebtedness associated with
such assets.
(b) Notwithstanding any other provision of the Governing Documents to
the contrary, the Borrowers agree that the sum of (i) the immediately available
cash balance in the Collateral Account, (ii) an amount equal to the purchase
price of equipment to the extent purchased with monies from the Collateral
Account (less all rental payments received by any Borrower with respect to such
equipment) and in which the Lender has a first priority security interest, and
(iii) withdrawals which have been used to fund "residuals" pursuant to Section 7
of Amendment No. 1 to the Loan Agreement with respect to equipment not
refinanced or sold (less all rental payments received with respect to such
equipment) shall, at all times, not be less than the then-outstanding principal
balance of the New Loan.
(c) In the event that the covenants set forth in Section 6 are not
satisfied, an Event of Default shall be deemed to exist.
7. Obligors; Confirmation of Obligations. Chancellor Corporation and
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each of the other entities identified on the first two signature pages to this
letter agreement (each, an "Obligor") ratify and confirm that they are and agree
to be parties to each of the Loan Documents, are and agree to be bound by all
covenants and agreements of the Borrowers, Guarantors and Debtors thereunder,
and are and agree to be jointly and severally liable for all Obligations
thereunder, all as if the undersigned were original parties to the Loan
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[CHANCELLOR LETTERHEAD]
Documents as of the date of such Loan Documents.
Without limiting the generality of the foregoing, each Obligor hereby: (i)
agrees to perform all obligations and duties required of a Borrower under the
Loan Agreement; (ii) agrees to be jointly and severally liable as a maker under
the Note; (iii) confirms that its property is part of the Collateral under the
Security Agreement, and grants, as a Debtor under the Security Agreement, a
continuing first priority security interest in and to all of the Obligor's
right, title and interest in and to the property described as collateral under
the Security Agreement to the Lender, as agent for the Participants, and agrees
to execute all documents and instruments, including without limitation,
financing statements as may be requested by the Lender to evidence and perfect
the Lender's security interest in such property; (iv) joins as a Guarantor and
guarantees the "Indebtedness" under and in accordance with Article V of the
Forbearance Agreement, and agrees to perform all obligations and duties of a
Guarantor under the Forbearance Agreement; and (v) agrees to abide by and
otherwise be bound by all provisions of each Loan Document as if it were an
original Borrower, Guarantor or Debtor thereunder.
Chancellor Corporation represents and warrants that each Obligor is wholly
owned by it, and that such Obligors are all of Chancellor Corporation's direct
and indirect subsidiaries.
8. The Lender's and the Participants' agreements herein are subject to
the Borrowers and the Guarantors delivering to the Lender the following items,
in form and substance satisfactory to the Lender and its counsel and the
Participants and their respective counsel:
(a) Resolutions of the Boards of the Directors of the Borrowers and the
Guarantors authorizing the execution and delivery by the Borrowers and the
Guarantors of this Loan Term-Out Agreement and of the other documents and
instruments referred to herein; and
(b) such other documents, instruments, opinions of counsel and other
materials that the Lender, any Participant, or their respective counsel may
reasonably require.
The Borrowers agree that an Event of Default shall occur if any of the
foregoing conditions are not satisfied.
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[CHANCELLOR LETTERHEAD]
9. Except as explicitly set forth above, the Moratorium Agreement as
previously amended is hereby ratified and confirmed and remains in full force
and effect.
10. By agreeing to the terms of this Loan Term-Out Agreement, neither the
Lender nor the Participants shall be deemed to have waived any defaults which
may exist under the Loan Documents or to have in any manner agreed to consider
or grant any further extensions of the Borrowers' absolute and unconditional
obligation to repay all of the principal, interest, fees, costs and other
expenses on the Old Debt, the New Loan, the Deferred Payment Notes or otherwise
under the Loan Documents, or to consider or grant or extend any other or further
accommodations to the Borrowers on account of the Old Debt, the New Loan, the
Deferred Payment Notes, the Loan Documents or otherwise.
11. Nothing in this Loan Term-Out Agreement, nor any communication between
any Lender or any Participant and the Borrowers shall be deemed a waiver of any
right or remedy of the Lender or any Participant, each Participant and the
Lender hereby reserving all of its rights and remedies under the Loan Documents,
this Agreement and applicable law.
12. This Loan Term-Out Agreement may be executed in any number of
counterparts and by the different parties on separate counterparts, each of
which shall be deemed an original, but all such counterparts shall together
constitute one and the same instrument.
13. The term "the Lender" shall mean Fleet National Bank of Massachusetts,
whose address until further notice is as follows:
Fleet Bank
One Federal Street, MAOF3101
Boston, MA 02211
Atten: Mr. Robert L. Bice, II
[INTENTIONALLY LEFT BLANK]
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[CHANCELLOR LETTERHEAD]
Very truly yours,
CHANCELLOR CORPORATION
By: /s/Stephen G. Morison
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Name: Stephen G. Morison
Title: President and C.E.O.
CHANCELLOR FLEET CORPORATION, for itself
and as Trustee of the Trusts listed below
By: /s/Stephen G. Morison
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Name: Stephen G. Morison
Title: President and C.E.O.
Alco 474N Trust
Cains 931D Trust
Cains 931E Trust
Dallas 38329 Trust
Farmland 982A Trust
H.E. Butt 796C Trust
Kraft 79328 Trust
Kraft 993A Trust
PIC B03D Trust
Tyler 3110 Trust
Whirlpool 49434 Trust
Chrysler B04A Trust
Chrysler B04B Trust
Saturn B06A Trust
CHANCELLOR FINANCIAL SALES
AND SERVICES, INC.
By: /s/Stephen G. Morison
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Name: Stephen G. Morison
Title: President and C.E.O.
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[CHANCELLOR LETTERHEAD]
CHANCELLOR ASSET CORPORATION
By: /s/Stephen G. Morison
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Name: Stephen G. Morison
Title: President and C.E.O.
CHANCELLOR DATACOMM, INC.
By: /s/Stephen G. Morison
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Name: Stephen G. Morison
Title: President and C.E.O.
CHANCELLOR FINANCIALEASE, INC.
By: /s/Stephen G. Morison
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Name: Stephen G. Morison
Title: President and C.E.O.
VALMONT FINANCIAL CORPORATION
By: /s/Stephen G. Morison
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Name: Stephen G. Morison
Title: President and C.E.O.
CHANCELLOR FLEET REMARKETING, INC.
By: /s/Stephen G. Morison
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Name: Stephen G. Morison
Title: President and C.E.O.
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TERMS SET FORTH IN PARAGRAPHS 1-13 ABOVE
ARE ACCEPTED AND AGREED:
FLEET BANK OF MASSACHUSETTS, N.A. -Corporate
Trust Division, as agent for the Participants
By: /s/Robert L. Bice II
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Name: Robert L. Bice II
Title: Vice President
NORTHWESTERN NATIONAL LIFE INSURANCE COMPANY
By: /s/ Gary L. Jacobson
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Gary L. Jacobson
Authorized Representative
FARM BUREAU LIFE INSURANCE COMPANY OF
MICHIGAN
By: /s/ Steven R. Harkness
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F.B. ANNUITY COMPANY
By: /s/ Steven R. Harkness
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FARM BUREAU MUTUAL INSURANCE COMPANY OF
MICHIGAN
By: /s/ Steven R. Harkness
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FLEET NATIONAL BANK OF MASSACHUSETTS
Equipment Leasing Division
By: /s/ Cynthia G. Stannard, V.P.
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ATLANTIC BANK OF NEW YORK
By: /s/ Charles J. Margiotti, III
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Charles J. Mariotti, III
Vice President
THE DAIWA BANK, LIMITED
By: /s/ Yoshiaki Kawakami
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By: /s/ Yoshijuro Yoshida
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THE CIT GROUP/EQUIPMENT FINANCING, INC.
By: /s/ Thomas L. Abbate
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FEDERAL DEPOSIT INSURANCE CORPORATION
In its capacity as receiver for First
Mutual Bank
By:
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AMRESCO NEW HAMPSHIRE, INC.
(Successor to FIRST NH BANK, N.A.)
By: /s/ Daniel Chapa
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Daniel Chapa
Vice President
T3/598180.1
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Exhibit A
CHANCELLOR CORPORATION AND AFFILIATES OUTSTANDING PRINCIPAL INDEBTEDNESS AS OF
12/26/95
DEFERRED
OLD DEBT NEW DEBT PAYMENT NOTES
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NORTHWESTERN NATL LIFE INS. CO. $867,103.01 $740,697.85 $86,701.50
THE DAIWA BANK, LTD $389,028.96 $332,316.78 -
SHAWMUT BANK, N.A. $247,703.66 $211,627.99 $23,128.74
ATLANTIC BANK OF NEW YORK $165,632.29 $141,085.28 -
THE CIT GROUP/EQUIPMENT FIN. $159,294.78 $136,500.04 $20,668.95
AMRESCO FIRST N.H. BANK N.A. $123,201.70 $105,241.77 -
FDIC/FIRST MUTUAL $ 66,395.33 $ 56,716.28 -
FB ANNUITY COMPANY $ 41,290.72 $ 52,906.97 $ 3,854.79
FARM BUREAU MUTUAL INS./MICHIGAN $ 41,290.72 - $ 3,854.79
FARM BUREAU LIFE INS/MICHIGAN $ 41,290.72 $ 52,906.97 $ 3,854.79
TOTAL: $2,142,231.89 $1,829,999.93 $142,063.56
T3/598180.1