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Exhibit 10(f)
NORWEST BANKS STATIONERY
February 28, 1995
Steve Lind, President
Top Air Manufacturing, Inc.
Highway 20
Parkersburg, IA 50665
Dear Steve:
Per our discussions, our bank is happy to provide you with the
following commitment which includes financing for your existing
term loan, the acquisition of the Clay Equipment assets, and a
revolving line of credit. Two copies of this commitment letter are
included allowing you to accept the terms by signing where
indicated.
Terms for the proposed loans to Top Air Manufacturing, Inc. would
be as follows:
A1. $1,500,000 term loan due 5 years from closing date, amortized
over 10 years with monthly principal and interest payments.
Priced at 1/2% over Norwest Bank's base rate, floating. This
would equate to a current rate of 9.5%.
Collateral would be a blanket security agreement on all assets
of Top Air Manufacturing to include assets purchased from Clay
Equipment. In addition, the loan would be secured by a first
mortgage on the two parcels of real estate in Parkersburg
currently used by Top Air for manufacturing and warehousing.
The purpose of this loan is the refinancing of existing
equipment debt owed to Norwest by Top Air Manufacturing, and
refinancing of liabilities of Clay Equipment as part of the
acquisition.
A2. $500,000 term loan due 5/31/97. A principal payment of
$250,000 will be due on 5/31/96 with the balance due at
maturity. Interest collected monthly, priced at 1/2% over
Norwest Bank's base rate, floating. This equates to a current
rate of 9.5%.
The purpose of this loan is also to finance the Clay Equipment
acquisition, specifically to cover the amount of the
acquisition that will be repaid by condemnation proceeds Clay
is to receive from the City of Cedar Falls.
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A3. $3,000,000 revolving line of credit due 10/1/95. Interest
payable monthly, priced at Norwest Bank Iowa's base rate,
floating. This equates to a current rate of 9.0%.
Collateral will be a blanket security agreement on all assets
of Top Air Manufacturing including assets purchased from Clay
Equipment.
Purpose is to fund inventory and accounts receivable. A
borrowing base would be utilized allowing borrowings no
greater than the total of 50% of inventory and 75% of eligible
accounts receivable. Eligible accounts receivable are defined
as those accounts with an aging of 90 days or less from due
date.
The three notes outlined above will be governed by a loan
agreement which will include the following terms:
A. Minimum Working Capital. The Borrower will maintain at
all times an excess of current assets over current
liabilities of not less than $1,750,000.
B. Minimum Tangible Net Worth. The Borrower will maintain
a tangible net worth of not less than $2,500,000 at
fiscal year end.
C. Capital Expenditures. The borrower will not make any
expenditures for fixed or capital assets which would
cause the aggregate of all such expenditures made by the
Borrower to exceed $250,000 during any fiscal year of the
borrower without written consent of Norwest Bank.
Approval of the expenditures for the Clay acquisition is
hereby given.
D. Current Ratio. For fiscal year end May 31, 1995,
Borrower will have a ratio of current assets to current
liabilities not less than 1.9-1. The Borrower will
maintain after that date, a ratio of current assets to
current liabilities not less than 2.0 to 1.0 at each FYE.
E. Leverage Ratio. For fiscal year end May 31, 1995,
Borrower will have a ratio of total liabilities to
Tangible Net Worth of not greater than 1.3 to 1.0. The
Borrower will maintain after that date at all times a
ratio of total liabilities to Tangible Net Worth of not
greater than 1.25 to 1.0 at each FYE.
F. Cleanup Requirement. For a period of 30 consecutive days
each year, the Company will have no outstandings on the
line of credit.
G. Financial Statements. Monthly internally prepared
balance sheet and income statement within 30 days of
month end. Annual audited statements prepared by a
certified public accountant within 120 days of FYE.
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H. All condemnation proceeds received by Clay/Top Air will
be applied 100% to principal on first note A2 then note
A1. 100% of the proceeds received from the sale of
Parkersburg real estate will be applied in the same
fashion.
I. Beginning May 31, 1997 and each year thereafter, the
Company will be required to apply up to 50% of "free
operating cash flow" to note A2 and then to note A1. The
annual maximum requirement for pay down will be the
amount needed to bring the term debt to the equivalent of
a seven year amortization assuming an original balance of
$1,500,000.
Free operating cash flow is defined as follows: Net cash
from operating activities minus capital expenditures, per
GAAP standards.
J. Borrower is to maintain all deposit accounts at Norwest
Bank, Cedar Valley as part of this loan agreement.
Steve, I believe this commitment meets the financing needs of Top
Air Manufacturing and I hope you find it acceptable. On behalf of
Norwest, thank you for your existing business and the opportunity
to provide additional financing to you. I enjoy working with you
and look forward to your response. Please call me with any
questions.
Sincerely,
/s/Cathy A. Rottinghaus
Cathy A. Rottinghaus
Assistant Vice President
Accepted By:
Top Air Manufacturing, Inc.
/s/Steven R. Lind 3-1-95
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Steven Lind, President Date