EXHIBIT 10.50
AMENDED AND RESTATED
LOAN AGREEMENT
BETWEEN
STANDARD FEDERAL BANK
AND
MCCLAIN GROUP LEASING, INC.
THIS AMENDED AND RESTATED LOAN AGREEMENT is made and delivered this ___
day of June, 2001 by and between McClain Group Leasing, Inc., a Michigan
corporation ("Borrower"), whose address/principal office is 6200 Elmridge,
Sterling Heights, Michigan 48310, and Standard Federal Bank, a federal savings
bank ("Standard Federal"), whose address is 2600 West Big Beaver Road, Troy,
Michigan 48084.
RECITALS:
A. Borrower and Standard Federal entered into a Loan Agreement
dated as of July 17, 1996, as amended by five amendments
("Existing Agreement").
B. Borrower, McClain Group (defined below) and Standard Federal
entered into an Amendment and Forbearance Agreement of even
date ("Forbearance Agreement"). This Amended and Restated Loan
Agreement is required under the Forbearance Agreement.
C. McClain Industries, Inc. is a guarantor of the obligations of
Borrower to Standard Federal. Under the Forbearance Agreement,
McClain Group is required to execute and deliver to Standard
Federal a guaranty of the obligations of Borrower to Standard
Federal.
D. Borrower and Standard Federal desire to amend and restate the
Existing Agreement in its entirety.
NOW, THEREFORE, in reliance upon the representations herein provided
and in consideration of the premises and the mutual promises herein contained,
the Borrower and Standard Federal hereby agree that the Existing Agreement is
amended and restated in its entirety as follows:
SECTION 1. DEFINITIONS
1.1 The following terms shall have the meanings stated below when
used in this Loan Agreement:
"Amortization Amount" shall mean with respect to any assets subject to
an Eligible Lease the amount determined by multiplying the number of whole or
partial months since the date of the applicable lease by the product of the
purchase price of the applicable assets by a fraction equal to one over the
number of months in the original lease term. For example if the cost of the
assets is $100,000 and the original lease term is 60 months and five months have
elapsed since the date of the lease, then the Amortization Amount would be
$100,000 x 5 x 1/60 = $8,333.33.
"Base Tangible Net Worth" shall initially mean $2,500,000. On September
30 of each year, beginning September 30, 2001, Base Tangible Net Worth shall
increase by 80% of Borrower's net income for the fiscal year then ended. If net
income is less than $0 for any fiscal year, it shall be deemed to be $0 for such
fiscal year for purposes of this definition.
"Borrowing" shall mean an advance of all or any portion of the Line of
Credit or the Swing Line of Credit.
"Borrowing Base" shall mean the sum of (a) the lesser of (i) 80% of
Eligible Lease Receivables and (ii) $19,500,000 and (b) 95% of the Unamortized
Cost of Eligible Leased Assets under Eligible Leases.
"Borrowing Notice" shall mean a notice by Borrower to Standard Federal
that Borrower wishes to make a Borrowing.
"Business Day" shall mean a day on which the main office of Standard
Federal is open for business.
"Credit Limit" shall mean (A) the lesser of: (a) Twenty Million and
00/100 Dollars ($20,000,000.00), or (b) an amount equal to the Borrowing Base,
minus (B) principal amounts outstanding under the Swing Line of Credit.
"Current" means with respect to any lease that no payment due under
such lease is more than 45 (or, beginning March 31, 2002, 30) days past due.
"Effective Date" shall mean the date designated by Borrower in a
Borrowing Notice as the date the Borrowing covered by such Borrowing Notice
shall be funded and shall also mean, where applicable, the first day of the
Interest Period applicable to a LIBOR Borrowing. An Effective Date for a Prime
Rate Borrowing must be a Business Day. An Effective Date for a LIBOR Borrowing
must be a London Business Day.
"Eligible Lease Receivables" shall mean lease receivables arising under
leases entered
into on or before March 31, 2001 which are less than 90 days (or, beginning
March 31, 2002 60 days) old and are not doubtful as to collectability or
disputed as to existence or amount or subject to offset, contra-indebtedness or
return, exclusive of discounts and rebates, and are otherwise acceptable to
Standard Federal in its sole discretion, and may include up to $382,000.00 in
lease receivables from McClain Galion, Inc. but shall not otherwise be
intra-company or owing from any affiliated or related company or other entity,
as such lease receivables are disclosed in the statements timely furnished to
Standard Federal pursuant to Section 3 below. Eligible Lease Receivables shall
include (a) receivables under consolidated leases for the same lessee provided
that payments under all of the consolidated leases are Current and the
amortization of the combined leases is not extended more than six months, (b)
receivables under leases assumed by another lessee of the Borrower provided that
the new lessee is Current with respect to all of its existing leases with the
Borrower and (c) receivables under leases which have been extended provided that
the applicable lease has not been extended, the extension is for 60 days or
less, the reason for the extension has been provided to Standard Federal and is
acceptable to Standard Federal and the lessee is Current with respect to all of
its existing leases with the Borrower.
"Eligible Leases" means leases entered into in the ordinary course of
Borrower's business which do not have any lease payments more than 60 days past
due and are not doubtful as to collectability or disputed as to existence or
amount or subject to offset, contra-indebtedness or return and are otherwise
acceptable to Standard Federal in its sole discretion but shall not include
intra- company or owing from any affiliated or related Company or other entity.
In addition, with respect to combined, assumed or extended leases, the
requirements set forth under the definition of Eligible Lease Receivables must
be satisfied.
"Line of Credit Maturity Date" shall mean May 1, 2002, or any extension
or renewal thereof.
"Line of Credit Note" shall mean the Promissory Note, dated July 17,
1996, as amended, and all renewals and amendments thereof, evidencing the Line
of Credit.
"McClain Group" shall mean individually and collectively McClain
Industries, Inc.; McClain E-Z Pack, Inc.; McClain Galion, Inc.; Shelby Steel
Processing Company; McClain Tube Company d/b/a Quality Tube; McClain
International FSC and McClain Southland Co.
"Prime-Based Rate" shall mean a rate per annum equal to the Wall Street
Journal Prime Rate plus one-half percentage points (0.5%), which rate shall
increase or decrease automatically when and to the extent that the Wall Street
Journal Prime Rate shall be increased or decreased, plus one-half percent.
"Prime Rate Borrowing" shall mean the principal amount of any portion
of any Borrowing bearing interest at the Prime-Based Rate.
"Revolving Credit Period" means the period from the date of this Loan
Agreement through the Line of Credit Maturity Date.
"Tangible Net Worth" shall mean total assets of Borrower as defined in
accordance with generally accepted accounting principles consistently applied.
"Unamortized Cost of Leased Assets" shall mean with respect to each
Eligible Lease entered into after March 31, 2001, the purchase price to the
Borrower for the assets subject to the lease (including sales tax) less the
Amortization Amount with respect to such assets.
"Unused Line" shall mean the amount available for draw but not advanced
from time to time on the Line of Credit or the Swing Line of Credit.
"Unused Line Fee" shall mean a fee in the amount of 0.25% per annum of
the Unused Line. The amount of the Unused Line Fee payable on the first day of
each month will be determined by multiplying the average daily balance of the
Unused Line for the calendar month which ends one month prior to the due date of
such Unused Line Fee by .020833%.
"Wall Street Journal Prime Rate" shall mean the "Prime Rate" published
by the Wall Street Journal as the base rate on corporate loans posted by at
least 75% of the nation's 30 largest banks as the same may be changed from time
to time. If more than one Prime Rate is published, the highest rate published
shall be deemed the Wall Street Journal Prime Rate. If the publishing of the
Wall Street Journal Prime Rate is discontinued, then the Prime-Based Rate shall
be based upon the index which is published by The Wall Street Journal in
replacement thereof based on similar base rates on corporate loans or, if no
such replacement index is published, the index which, in Standard Federal's sole
determination, most nearly corresponds to the Wall Street Journal Prime Rate.
Section 2. Equipment Lease Line of Credit
2.1 Standard Federal hereby extends the Line of Credit to the
Borrower, which shall not exceed at any one time outstanding the Credit Limit.
2.2 The Borrower shall be obligated to repay all advances made
hereunder with respect to any lease which becomes 90 days (or, beginning March
31, 2002 60 days) or more delinquent and such repayment shall be due and payable
15 days after the lease receivable statement which discloses such delinquency is
timely furnished to Standard Federal pursuant to Section 3 below.
2.3 The Line of Credit herein extended shall be subject to the
terms and conditions of the Line of Credit Note. This Loan Agreement and the
Line of Credit Note are of equal materiality and shall each be construed in such
manner as to give full force and effect to all provisions of both documents.
2.4 Standard Federal shall, from time to time during the term
hereof, make advances to Borrower under the Line of Credit upon request therefor
by Borrower, provided that upon giving effect to such advance no Event of
Default (as defined in the Line of Credit Note or this Agreement) and no event
which with notice and/or the passage of time would become an Event of Default
shall exist at the time the advance is to be made; and provided further that
upon giving
effect to such advance and at the time the advance is to be made all of the
representations and warranties of Borrower contained in this Agreement and all
other documents executed in connection with the Line of Credit are true and
correct in all material respects; and provided further that at the time the
advance is to be made Standard Federal shall not have previously or concurrently
declared all amounts owing under the Line of Credit Note to be immediately due
and payable; and provided further the amount requested shall not cause the total
amount outstanding under the Line of Credit to exceed the Credit Limit.
2.5 Borrowings under the Line of Credit shall bear interest at the
Prime-Based Rate. Interest shall be calculated on the basis of a year of 360
days for the actual number of days amounts are outstanding. In the event of
default or an Event of Default by Borrower under this Loan Agreement or any
document executed under this Loan Agreement, then interest shall accrue at the
rate otherwise provided in this paragraph plus two percentage points (2.0%).
2.6 If at any time the amount outstanding under the Line of Credit
shall exceed the Credit Limit, Borrower shall, on demand, forthwith pay to
Standard Federal such sums as are necessary to reduce the amount outstanding to
an amount not greater than the Credit Limit.
2.7 Borrower shall pay to Standard Federal, on the first day of
each month, commencing on the first payment date after the date hereof, and
continuing on the same day of each consecutive month thereafter until the
termination of the Line of Credit and all sums owing for principal and interest
with respect to the Line of Credit are paid in full, the Unused Line Fee.
2.8 In all events, unless earlier terminated, the Line of Credit
shall terminate on the Line of Credit Maturity Date. Upon termination, Borrower
shall forthwith pay to Standard Federal all sums owing for principal and
interest with respect to the Line of Credit.
2.9 To effect a Borrowing under the Line of Credit, Borrower shall
give Standard Federal a Borrowing Notice.
2.10 A Borrowing Notice may be made in writing, by telefacsimile or
by telephone by an authorized representative of the Borrower and shall specify
the aggregate amount of the requested Borrowing and the Effective Date of the
Borrowing. Any Borrowing Notice by telephone may be recorded by Standard Federal
for accuracy.
2.11 If Standard Federal shall determine that the adoption,
amendment or revision of any applicable law, rule or regulation affecting
Standard Federal's capital requirements or adequacy, or the interpretation or
administration thereof by any governmental authority or regulatory agency,.
central bank or other comparable authority, or compliance by Standard Federal
with any applicable law, rule or regulation affecting Standard Federal's capital
requirements or adequacy, or any request, interpretation or directive (whether
or not having the force of law) of any governmental authority or regulatory
agency, central bank or other comparable authority which affects Standard
Federal's capital requirements, has; or would have the effect of reducing the
rate of return on Standard Federal's capital to a level below the rate of return
Standard Federal would have realized in the absence of such adoption, amendment,
revision, interpretation, administration or compliance (taking into account
Standard Federal's policies with respect to capital adequacy) by an amount
considered by Standard Federal to be material, then, beginning five (5) days
after demand by Standard Federal, Borrower shall pay to Standard Federal as
additional interest or as fees, as determined by Standard Federal in its sole
discretion, such additional amount or amounts as will compensate Standard
Federal for such reduction in its rate of return. Such adjustments in interest
or fees shall be imposed effective five (5) days after Standard Federal's demand
and shall apply to the then outstanding principal balance of the Line of Credit
and to subsequent advances under this Loan Agreement. In determining such amount
or amounts, Standard Federal may use any reasonable averaging and attribution
methods. Standard Federal will promptly notify the Borrower of any event of
which it has knowledge, occurring after the date hereof, which will entitle
Standard Federal to compensation pursuant to this Section. A certificate of
Standard Federal claiming compensation under this Section and setting forth the
additional amount or amounts to be paid to it hereunder shall be conclusive in
the absence of manifest error. Standard Federal will, on request, provide
evidence supporting such certificate.
Section 2A. Conditions to Opening Line of Credit
2A.1 The following are conditions precedent to continuing Line of
Credit, as amended under this Loan Agreement:
2A.l(a) The Borrower shall have delivered or shall have had delivered
to Standard Federal, in form and substance satisfactory to Standard Federal and
its counsel, each of the following:
a. A duly executed copy of this Loan Agreement and the
Forbearance Agreement and all documents required under that
Forbearance Agreement;
b. A duly executed copy of the Line of Credit Note, and such
other loan documents as Standard Federal shall require to
evidence and document the Line of Credit (the "Loan
Documents");
c. Such credit applications, financial statements,
authorizations, and such information concerning the Borrower
and its business, operations, and condition (financial and
otherwise) as Standard Federal may reasonably request;
d. Certified copies of resolutions of the Board of Directors of
the Borrower approving the execution and delivery of the Loan
Documents required hereunder;
e. A certificate of the Secretary or an Assistant Secretary of
the Borrower certifying the names and true signatures of the
officers of the Borrower authorized to sign the Loan Documents
required hereunder;
f. Copies of the Articles of Incorporation of the Borrower,
certified by the Secretary of State of Michigan as of a recent
date;
g. Copies of the Articles of Incorporation and Bylaws of the
Borrower, certified by the Secretary or an Assistant Secretary
of the Borrower as of the date of this Agreement as being
accurate and complete;
h. Certificate of good standing of the Borrower from the
Secretary of State of Michigan as of a recent date;
i. Certificates of authority and good standing of the Borrower
for each state in which the Borrower is qualified to do
business;
j. A certificate of compliance of the chief financial officer or
treasurer of the Borrower in form satisfactory to Standard
Federal dated as of the date of this Agreement;
k. Such certificates, binders or other evidence of all insurance
required of the Borrower under this Loan Agreement as Standard
Federal may reasonably require; and
l. Acknowledgment copies of all UCC-1 financing statements filed
with respect to the Collateral accompanied by a search report
showing such financing statements as duly filed and evidencing
that the security interest of Standard Federal in the
Collateral is prior to all other security interests of record.
m. Payment of a non-refundable amendment fee in the amount of
$20,000.
2A.l(b) All acts and conditions (including, without limitation, the
obtaining of any necessary regulatory approvals and the making of any required
filings, recordings, or registrations) required to be done and performed and to
have happened precedent to the execution, delivery, and performance of the Loan
Documents required hereunder and to constitute the same legal, valid, and
binding obligations, enforceable in accordance with their respective terms,
shall have been done and performed and shall have happened in due and strict
compliance with all applicable laws.
2A.l(c) All documentation, including, without limitation,
documentation for corporate and legal proceedings in connection with the
transactions contemplated by the Loan Documents shall be satisfactory in form
and substance to Standard Federal and its counsel and all fees and charges,
including recording and filing fees, shall have been paid as required hereunder.
2A.2 As conditions precedent to Standard Federal's obligation to fund
any request for an advance under the Line of Credit, at and as of the date of
the funding thereof and except as amended by this Agreement;
a. The representations and warranties of the Borrower contained
in the Loan Documents shall be accurate and complete in all
respects as if made on and as of such date;
b. The Borrower shall have paid all fees and expenses, including
any recording fees and charges, required hereunder;
c. There shall not have occurred an Event of Default or any event
which with the passage of time of the giving of notice or both
would constitute an Event of Default; and
d. Following the making of such loan or advance, the aggregate
principal amount outstanding will not exceed the limitations
described in Section 2 or Section 3A, as applicable.
Section 3. Representations and Warranties
The Borrower represents and warrants to Standard Federal that as of the
date of acceptance of this Agreement, as of the time any advance is to be made
hereunder and, unless expressly provided otherwise herein or agreed to by a
writing signed by Standard Federal, at all times any amounts are outstanding
hereunder:
3.1 The Borrower and each of its subsidiaries, if any, are
corporations duly organized, validly existing and in good standing under the
laws of the state of their incorporation; the Borrower and each of its
subsidiaries (if any) have the legal power and authority to own their properties
and assets and to carry out their business as now being conducted and each is
qualified to do business in the state of its incorporation and in every
jurisdiction where the nature of its business or the property owned or operated
by it makes such qualification necessary and is otherwise in compliance with all
applicable laws, statutes, regulations, rules and requirements of any federal,
state, judicial, regulatory or administrative body having jurisdiction of the
Borrower or any of its assets; the Borrower has the legal power and authority to
execute and perform this Agreement, to borrow money in accordance with its
terms, to execute and deliver the Line of Credit Note and other documents
contemplated hereby, to grant to Standard Federal security interests in the
Collateral, as hereby contemplated, and to do any and all other things required
of it hereunder; and this Agreement, the Line of Credit Note, and all other
documents contemplated hereby, when executed by the Borrower's duly authorized
officers will constitute its valid and binding legal obligations enforceable in
accordance with their terms.
3.2 The execution, delivery and performance of this Agreement, the
borrowings hereunder and the execution and delivery of the Line of Credit Note,
and other documents contemplated hereby (a) have been duly authorized by all
requisite corporate action, (b) do not require governmental approval or the
approval of any person not a party to this Agreement, (c) will not result (with
or without notice and/or the passage of time) in any conflict with or breach or
violation of or default under, any provision of law, the Articles of
Incorporation or Bylaws of the Borrower or any indenture, agreement or other
instrument to which the Borrower is a party, or by which it or any of its
properties or assets are bound, and (d) will not result in the creation or
imposition of any lien, charge or encumbrance of any nature whatsoever upon any
of the properties or assets of the Borrower other than in favor of Standard
Federal and as contemplated hereby.
3.3 There is not pending or, to the best of the knowledge of the
Borrower, threatened, any litigation, proceeding or governmental investigation
which could materially and adversely affect the business of the Borrower or its
subsidiaries, if any, or its ability to perform its covenants hereunder.
3.4 Borrower has good and marketable title to its properties given
as security as herein described, and, except for liens in favor of Standard
Federal, liens for taxes not delinquent or being contested in good faith and
liens created in connection with worker's compensation, unemployment insurance
and social security, or to secure the performance of bids, tenders or contracts
(other than for the repayment of borrowed money), leases, statutory
obligations, surety and appeal bonds, and other obligations of like nature made
in the ordinary course of business, none of the Borrower's or any of its
subsidiaries, (if any) assets are subject to any mortgage,
pledge, lien, security interest, or other encumbrance of any kind or character
except as have been disclosed to Standard Federal in writing. The Borrower owns
all material patents, trademarks, service marks, trade names, copyrights,
licenses and other rights, free from any material restrictions, that are
necessary for the operation of its business as presently conducted.
3.5 All financial data which has been or shall hereafter be
furnished to Standard Federal for the purposes of, or in connection with, this
Agreement, including particularly, but without limitation, the audited
consolidated financial statements of McClain Industries, Inc. and the Form
10-Q's filed with the Securities and Exchange Commission by McClain Industries,
Inc. pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, and
the transactions contemplated hereby has been and/or shall be prepared in
accordance with generally accepted accounting principles consistently applied,
and does or will fairly present the financial condition of the Borrower as of
the dates, and the results of its operations for the periods, for which the same
is furnished to Standard Federal.
3.6 [Reserved].
3.7 [Reserved]
3.8 Borrower has filed all reports and tax returns required by
governmental authority to be filed by it prior to the date hereof and Borrower
has received no notice that such reports or returns have been rejected, declared
insufficient, or otherwise challenged by such governmental authority.
3.9 The principal officers of the Borrower ("Principal Officers")
are as follows:
Chairman of the Board Kenneth D. McClain
President Peter Beale
Secretary Carl L. Jaworski
3.10 The Borrower is a wholly-owned subsidiary of McClain
Industries, Inc., a Michigan corporation, and has no subsidiaries.
3.11 None of the proceeds of the Line of Credit will be used for
the purpose of purchasing or carrying any "margin stock" as defined in
Regulation U or G of the Board of Governors of the Federal Reserve System (12
C.F.R. Part 221 and 207), or for the purpose of reducing or retiring any
indebtedness which was originally incurred to purchase or carry a margin stock
or for any other purpose which might constitute this transaction a "purpose
credit" within the meaning of such Regulation U or G. Borrower is not engaged in
the business of extending credit for the purpose of purchasing or carrying
margin stocks. Neither Borrower nor any person acting on behalf of Borrower has
taken or will take any action which might cause the Line of Credit Note, or any
of the other documents executed in conjunction therewith, including this
Agreement, to violate Regulations U or G or any other regulations of the Board
of Governors of the Federal Reserve System or to violate Section 7 of the
Securities Exchange Act of 1934 or any rule or regulation thereunder, in each
case as now in effect or as the same may
hereinafter be in effect. Borrower and its subsidiaries, if any, own no "margin
stock" except for that described in the financial statements provided to
Standard Federal and, as of the date hereof, the aggregate value of all "margin
stock" owned by Borrower and its subsidiaries, if any, does not exceed 25% of
all of the value of all of Borrower's and its subsidiaries', if any, assets.
3.12 Other than as disclosed to Lender in writing by Borrower to
Lender prior to the date of this Agreement, neither the Borrower nor, to the
best of Borrower's knowledge after due inquiry, any other person or entity, has
caused or permitted any waste, oil, pesticides, or any substance or material of
any kind which is currently known or suspected to be toxic or hazardous,
including but not limited to any substance defined as a "Hazardous Waste" in
Title 40, Part 261 of the Code of Federal Regulations, (hereinafter referred to
as "Hazardous Material") to be discharged, dispersed, released, disposed of, or
allowed to escape on, under or at any property owned, occupied or operated by
any Borrower in violation of any Hazardous Materials Laws (as hereinafter
defined), nor has any property owned, occupied or operated by any Borrower, or
any part thereof, ever been used by the Borrower or, to the best of Borrower's
knowledge after due inquiry, any prior owner or any other person, as a dump,
storage or disposal site for any Hazardous Material, nor has there occurred any
other violation of the federal Comprehensive Environmental Response,
Compensation and Liability Act of 1980, 42 U.S.C. ss.9601 et seq., or any other
federal, state or local statute, law, ordinance, code, rule, regulation, order
or decree regulating, relating to or imposing liability or standards of conduct
concerning, any Hazardous Material ("Hazardous Materials Laws") with respect to
any property owned, occupied or operated by any Borrower. No asbestos or
asbestos-containing materials have been installed, used, incorporated into, or
disposed of on any property owned, occupied or operated by any Borrower. No
polychlorinated biphenyls ("PCBs") are located on or in any property owned,
occupied or operated by any Borrower, in the form of electrical transformers,
fluorescent light fixtures with ballasts, cooling oils, or any other device or
form. All underground storage tanks located on any property owned, occupied or
operated by any Borrower have been installed and are being operated in full
compliance with all applicable Hazardous Materials Laws. The Borrower: (a) has
not received any notice of any release, threatened release, escape, seepage,
leakage, spillage, discharge or emission of any Hazardous Materials in, under or
upon any property owned, occupied or operated by any Borrower or of any
violation of any Hazardous Materials Law, and (b) does not know of any basis for
any such notice or violation.
3.13 No "reportable event," as defined in the Employee Retirement
Income Security Act of 1974 and any amendments thereto ("ERISA"), has occurred
and is continuing with respect to any employee pension and/or profit sharing
benefit plan maintained by or on behalf of the Borrower for the benefit of any
of its employees. The Pension Benefit Guaranty Corporation ("PBGC") has not
instituted proceedings to terminate any such employee pension and/or profit
sharing plan or to appoint a trustee to administer such plan. The Borrower has
maintained and funded and caused each of its subsidiaries, if any, to maintain
and fund all employee pension and/or profit sharing plans in accordance with
their terms and with all applicable provisions of ERISA. Neither the Borrower
nor any duly appointed administrator of any employee pension and/or profit
sharing plan: (a) has incurred any liability to PBGC with respect to any such
plan other than for premiums not yet due or payable, (b) has instituted or
intends to institute proceedings to terminate any such plan under Section 4042
or 4041A of ERISA, or (c) has
withdrawn from any Multi-Employer Pension Plan (as that term is defined in
Section 3(37) of ERISA).
3.14 There is no material fact that the Borrower has not disclosed
to Standard Federal which could have a material adverse effect on the
properties, business, prospects or condition (financial or otherwise) of the
Borrower or any of its subsidiaries. For purposes of this Section 3.14, a
"material adverse effect" means any circumstance or event which (a) could have
any adverse effect whatsoever upon the validity, performance or enforceability
of any material provision of the Loan Documents, (b) is or might be material and
adverse to the financial condition or business operations of the Borrower or any
subsidiary, (c) could impair the ability of the Borrower to fulfill its
obligations under the Loan Documents, or (d) causes an Event of Default or any
event which, with notice or lapse of time or both, could become an Event of
Default. Neither the financial statements referred to in Section 3.5 hereof, nor
any certificate or statement delivered herewith or heretofore by Borrower in
connection with the negotiations of this Loan Agreement, contains any untrue
statement of a material fact or omits to state any material fact necessary to
keep the statements contained herein or therein, under the circumstances in
which they were made, from being misleading.
3.15 Each request for an advance under the Line of Credit shall
constitute, without the necessity of specifically containing a written
statement, a representation and warranty by Borrower that no Event of Default
exists and that all representations and warranties contained in this Section 3
or in any mortgage, guaranty, security agreement or other document given to
secure or relating to the Line of Credit Note, the Swing Line of Credit Note or
this Agreement are true and correct at and as of the time the advance is to be
made.
Section 4. Affirmative Covenants of Borrower
4.1 Prior to Standard Federal's disbursement of any advances under
the Line of Credit, the Borrower shall; (a) furnish to Standard Federal, if
Standard Federal so requires, certified copies of its Articles of Incorporation,
Bylaws and Certificate of Good Standing, which Articles of Incorporation and
Good Standing Certificate are to be certified by the appropriate official of the
Borrower's state of incorporation; (b) furnish to Standard Federal if Standard
Federal so requires a statement of the Borrower and the chief financial officer
of Borrower certifying that they are unaware of the occurrence of an Event of
Default or of any event which with notice and/or the passage of time could
become an Event of Default other than as disclosed in this Agreement; and (c)
furnish Standard Federal such other instruments, documents, opinions or
certificates as Standard Federal or its counsel shall reasonably require. All
actions, proceedings, instruments and documents required or requested hereunder
shall be satisfactory to and approved by Standard Federal and/or its counsel
prior to the disbursement of advances under the Line of Credit.
4.2 From the date hereof until all amounts owing under the Line of
Credit are paid in full and all obligations under the Line of Credit Note, this
Loan Agreement and all other documents executed in connection with the Line of
Credit or this Loan Agreement are fully paid, performed and satisfied and so
long as Standard Federal has any commitment to make advances
hereunder, the Borrower covenants and agrees it will:
4.2(a) Furnish to Standard Federal as soon as available and, in any
event, within 120 days after the close of each fiscal year of McClain
Industries, Inc., a Michigan corporation ("McClain"), or, in the event McClain
obtains an extension of the filing date from the Securities Exchange Commission,
by such extended date, detailed financial statements of McClain as of the close
of such fiscal year, containing a consolidated balance sheet of McClain and its
subsidiaries, and statements of income and cash flows of McClain and its
subsidiaries for such fiscal year prepared in accordance with generally accepted
accounting principles and in a manner consistent with prior such statements
containing an analysis of sources and uses of funds and such other comments and
financial details as are usually included in similar reports. Such statements
shall be accompanied by an opinion thereon (which shall not be qualified by
reason of any limitation imposed by McClain) of independent certified public
accountants selected by McClain and acceptable to Standard Federal as to the
fairness of the statements included in the report and to the effect that the
examination of such accounts in connection with such financial statements has
been made in accordance with generally accepted auditing standards and,
accordingly, includes such tests of the accounting records and such other
auditing procedures as were considered necessary in the circumstances.
4.2(b) Furnish to Standard Federal as soon as available and, in any
event, within 90 days after the close of each fiscal year, detailed financial
statements of the Borrower as of the close of such fiscal period containing a
consolidated balance sheet of the Borrower and its subsidiaries, if any, and
statements of income and cash flows of the Borrower and its subsidiaries, if
any, for such fiscal period and for the portion of the fiscal year ending with
such period in reasonable detail and form acceptable to Standard Federal and
certified by the chief financial officer of the Borrower as being true and
correct and as having been prepared in accordance with generally accepted
accounting principles consistently applied, subject to year-end adjustments, if
any.
4.2(c) Furnish to Standard Federal, within a reasonable time not to
exceed 15 days after the end of each calendar month, a statement of lease
receivables, in a form acceptable to Standard Federal, certified as correct by
Borrower or a principal officer of Borrower showing the agings thereof and the
payment, write-off or other disposition of former lease receivables the
disposition of which has not previously been reported to Standard Federal, and
such other information and data as Standard Federal may reasonably require.
Borrower will further specifically disclose any facts known to Borrower which
facts would tend to render doubtful the collectability of any lease receivable
disclosed in such statements or which would indicate that the existence or
amount of such receivable is disputed by the lessee thereon.
4.2(d) Furnish to Standard Federal as soon as available and, in any
event, within 30 days after the close of each quarter of each fiscal year, and
in each case in form acceptable to Standard Federal, (i) a listing of
conditional sales contracts and TRAC leases with any payments that are more than
180 days past due, (ii) a listing of all lease accounts (TRAC and conditional
sales contracts) that were re-written, modified, assumed, extended or
consolidated with other lease schedules during the applicable fiscal quarter,
(iii) a doubtful accounts reserve schedule indicating the reserve balance as of
quarter end and a summary of non-accrual and charged-off
accounts, (iv) detailed financial statements for the applicable fiscal quarter,
containing a balance sheet of Borrower, statements of income and cash flow for
such fiscal period and for the portion of the fiscal year then ended in
reasonable detail and form acceptable to Standard Federal and certified by the
chief financial officers of the Borrower as being true and correct and as having
been prepared in accordance with generally accepted accounting principles
consistently applied, subject to year-end adjustments, if any.
4.2(e) Promptly inform Standard Federal of the occurrence of any Event
of Default or of any event (including without limitation any pending or
threatened litigation or other proceedings before any governmental body or
agency) which could have a materially adverse effect upon the Borrower's
business, properties, financial condition or ability to comply with its
obligations hereunder or under the Line of Credit Note.
4.2(f) The Borrower shall allow Standard Federal and its participants
in the Line of Credit and staff or independent accountants or auditors selected
by Standard Federal and its participants to conduct, at Borrowers expense, a
full audit of the Collateral and the Borrower's financial statements and its
books and records, semi-annually (or more frequently in the sole discretion of
Standard Federal) during the term of the Line of Credit. Standard Federal shall
schedule such audits during normal business hours of the Borrower and shall
provide Borrower not less than two (2) business days notice of the commencement
of each audit. The Borrower shall make adequate facilities available on their
premises at Borrower's expense to enable Standard Federal to conduct the audits
herein described and shall make available all of its books, records and other
documents and information as may be reasonably requested to facilitate the
audits.
4.2(g) Maintain adequate insurance with responsible companies in such
amounts and against such risks and hazards as are normally insured against by
similar businesses, and provide Standard Federal evidence of such insurance upon
request; policies of casualty insurance shall contain a customary mortgagee
clause requiring payment of proceeds to Borrower and to Standard Federal as
their interests may appear and all other insurance shall contain a customary
loss payable clause requiring payment of proceeds to Borrower and to Standard
Federal as their interests may appear and all insurance policies shall provide
that no cancellation, reduction in amount, change in coverage or expiration
thereof shall be effective until at least 30 days prior written notice has been
given by the insurer to Standard Federal; and pay when due all taxes,
assessments, fees and similar charges of every kind and nature lawfully assessed
upon the Borrower and/or its property, except to the extent being contested in
good faith; and in the event the Borrower fails to maintain such insurance or to
pay promptly any taxes or charges when due, then and in such event Standard
Federal, in its sole discretion, may, but shall not be required to, pay the same
and any amounts expended by Standard Federal for such purpose shall become a
part of the Line of Credit and shall bear interest at the rate applicable to the
outstanding principal balance owing under the Line of Credit Note.
4.2(h) Preserve and keep in full force and effect its own and its
material, operating subsidiaries' (if any) corporate existence in good standing
and maintain voting control in its present controlling shareholder's); keep
current all filings of assumed name certificates for each
name under which and each county in which the Borrower does business and
promptly inform Standard Federal of any assumed names under which it does
business which were not used by the Borrower on the date of this Agreement;
continue to conduct and operate its business substantially as presently
conducted and operated in accordance with all applicable laws and regulations;
maintain and protect all franchises and trade names and preserve all the
remainder of its property used or useful in the conduct of its business and keep
the same in good repair and condition; pay its indebtedness and obligations when
due under normal terms and maintain proper books of record and account, and;
otherwise remain in compliance with all applicable laws, statutes, regulations,
rules and requirements of any federal, state, judicial, regulatory or
administrative body having jurisdiction of the Borrower or any of its assets,
except to the extent noncompliance is immaterial and would not have a material
adverse effect on Borrower.
4.2(i) At all times meet and cause each of its subsidiaries, if any,
to meet the minimum funding requirements of ERISA with respect to all employee
pension and/or profit sharing plans subject to ERISA and, with respect to any
such employee benefit plan, promptly notify Standard Federal in writing of any
reportable event, as defined in ERISA, or any proposed termination (voluntary or
otherwise) which could give rise to material termination liability within the
meaning of ERISA ss.4062.
4.3 The Borrower will not make any change in its accounting
policies or financial reporting practices and procedures, except changes in
accounting policies which are required or permitted by generally accepted
accounting principles and changes in financial reporting practices and
procedures which are required or permitted by generally accepted accounting
principles.
4.4 The Borrower shall use the monies loaned hereunder solely for
working capital purposes.
4.5 Maintain as of the end of each month Tangible Net Worth of not
less than the Base Tangible Net Worth.
4.6 The Borrower will not permit its allowance for doubtful
accounts to be less than $350,000 through September 29, 2001 and not less than
$600,000 beginning September 30, 2001 and thereafter.
4.7 The Borrower shall maintain total funded TRAC leases plus
unfunded availability of TRAC leases of not more than $24,000,000. Financing for
such TRAC leases may be through Bank One under the existing facilities with that
bank or under (i) modified facilities with that bank or (ii) facilities with a
replacement lender, either of which must be on terms acceptable to Standard
Federal. As used in this Section "TRAC" shall mean terminal residual adjustment
clause.
4.8 The Borrower shall not permit guaranties of TRAC facilities to
exceed 8% of residual values.
4.9 Beginning September 30, 2001, the Borrower shall not permit
the aggregate amount of gross leases with any payments past due more than 180
days plus non-accrual amounts to exceed 175% of the Borrower's allowance for
doubtful accounts or to exceed 150% of such allowance beginning March 31, 2002
and thereafter.
Section 5. Security
5.1 In order to secure: (1) the full and timely performance of the
Borrower's covenants set forth herein and in the Line of Credit Note and the
Swing Line of Credit Note, (2) the repayment of any and all indebtedness of the
Borrower to Standard Federal arising pursuant to the Line of Credit Note and the
Swing Line of Credit Note (including any renewals or substitutions thereof),
this Agreement and any mortgage, guaranty, security agreement or other document
given to secure or relating to the Line of Credit Note, the Swing Line of Credit
Note or this Agreement, and (3) all other indebtedness and liabilities of the
Borrower to Standard Federal arising under this Agreement, or the Line of Credit
Note or the Swing Line of Credit Note, whether direct or indirect, absolute or
contingent, due or to become due, now existing or hereafter arising:
5.1(a) The Borrower hereby grants unto Standard Federal a security
interest in the following property and the proceeds thereof: (i) any and all
securities or other property received by the Borrower with respect to, on
account of or in exchange for any item of Collateral; (ii) all stock and/or
liquidating dividends (whether the same be in the form of cash or other
property) paid upon, on account of or with respect to any item of Collateral;
and (iii) all bank deposits, instruments, negotiable documents, chattel paper
and any and all other property of the Borrower of any kind whatsoever which
shall at any time be in the possession or under the control of Standard Federal;
5.1(b) The Borrower will grant to Standard Federal a security
interest of first priority in certain equipment leases and the equipment
described therein as provided in an Assignment of Equipment Leases and Security
Agreement dated July 17, 1996, as amended, from the Borrower to Standard
Federal, and all schedules thereto, the provisions of which are hereby
incorporated herein by reference; and
5.1(c) The Borrower will cause McClain Industries, Inc. to assign to
Standard Federal as collateral security a life insurance policy on the life of
Kenneth D. McClain in the face amount of $2,000,000.00 (herein, together with
the property described in Sections 5.1(a) (i), (ii) and (iii) and 5.1(b) above,
referred to as the "Collateral" or "item(s) of Collateral").
5.2 The Borrower shall execute and deliver to Standard Federal any
and all documents (including financing statements) as Standard Federal may
require to insure the perfection and priority of its liens and security
interests in the Collateral and furnish, if Standard Federal so requires, proof
of hazard insurance policies, in accordance with Section 4.2(g) above, relating
to the Collateral.
Section 6. Events of Default
The occurrence of any of the events enumerated in Sections 6.l to 6.11
below shall constitute an Event of Default for purposes of this Agreement:
6.1 Failure to Pay Monies Due. If any indebtedness of the Borrower
to Standard Federal on the Line of Credit is not paid when due, regardless of
whether such indebtedness has arisen pursuant to the terms of the Line of Credit
Note or the Swing Line of Credit Note, this Agreement or any mortgage, security
agreement, guaranty, instrument or other agreement executed in conjunction
herewith.
6.2 Misrepresentation. If any warranty or representation made by
or for the Borrower and/or any endorser or guarantor of the Line of Credit Note
or the Swing Line of Credit Note in connection with the loan(s) evidenced
thereby, or if any financial data or any other information now or hereafter
furnished to Standard Federal by or on behalf of the Borrower and/or any
endorser or guarantor of the Line of Credit Note or the Swing Line of Credit
Note shall prove to be false, inaccurate or misleading in any material respect.
6.3 Noncompliance with Affirmative Covenants and other Agreements.
If the Borrower shall fail to perform any of its obligations and covenants under
Section 4 of this Agreement, or shall fail to comply with any of the other
provisions of this Agreement, the Line of Credit Note or any other agreement
with Standard Federal to which it may be a party, other than the payment of
principal and interest.
6.4 Business Suspension. If the Borrower and/or any endorser or
guarantor of the Line of Credit Note or the Swing Line of Credit Note shall
voluntarily suspend transaction of its business.
6.5 Bankruptcy, Etc. If the Borrower and/or any endorser or
guarantor of the Line of Credit Note: (a) makes a general assignment for the
benefit of creditors; (b) shall file a voluntary petition in bankruptcy or for a
reorganization to effect a plan or other arrangement with creditors; or shall
file an answer to a creditor's petition or other petition against Borrower
and/or any endorser or guarantor of the Line of Credit Note for relief in
bankruptcy or for a reorganization which answer admits the material allegations
thereof; or if any order for relief shall be entered by any court of bankruptcy
jurisdiction with respect to the Borrower and/or any endorser or guarantor of
the Line of Credit Note, or if bankruptcy, reorganization or liquidation
proceedings are instituted against Borrower and/or any endorser or guarantor of
the Line of Credit Note and remain undismissed for 60 days; (c) has entered
against it any order by any court approving a plan for the reorganization of the
Borrower or any endorser or guarantor of the Line of Credit Note or any other
plan or arrangement with creditors of the Borrower or any endorser or guarantor
of the Line of Credit Note; (d) shall apply for or permit the appointment of a
receiver, trustee or custodian for any substantial portion of the Borrower's
and/or any endorser's or guarantor's properties or assets; or (e) becomes unable
to meet its debts as they mature or becomes insolvent.
6.6 Judgments and Writs. If there shall be entered against the
Borrower and/or any endorser or guarantor of the Line of Credit Note one or more
judgments or decrees which are not
insured against or satisfied or appealed from and bonded within the time or
times limited by applicable rules of procedure for appeal as of right or if a
writ of attachment or garnishment against the Borrower and/or any endorser or
guarantor of the Line of Credit Note shall be issued and levied in an action
claiming $100,000.00 or more and not released, bonded or appealed from within 30
days after the levy thereof.
6.7 Merger. If the Borrower shall merge or consolidate with
another entity.
6.8 Change of Control or Management. If the Borrower or a
controlling portion of its voting stock or a substantial portion of its assets
comes under the practical, beneficial or effective control of any person or
persons other than those having such control as of the date of execution of the
Line of Credit Note, whether by reason of merger, consolidation, sale or
purchase of stock or assets or otherwise, if any such change of control, in the
sole and absolute discretion of Standard Federal, adversely impacts upon the
ability of the Borrower to carry on its business as theretofore conducted.
6.9 Other Defaults. If the Borrower and/or any endorser or
guarantor of the Line of Credit Note or the Swing Line of Credit Note shall
default in the due payment of any material indebtedness to whomsoever owed, or
shall default in the observance or performance of any material term, covenant or
condition in any mortgage, security agreement, guaranty, instrument, lease or
agreement to which the Borrower and/or any endorser or guarantor of the Line of
Credit Note or the Swing Line of Credit Note is a party.
6.10 Reportable Event. If there shall occur any "reportable event",
as defined in the Employee Retirement Income Security Act of 1974 and any
amendments thereto, which is determined to constitute grounds for termination by
the Pension Benefit Guaranty Corporation of any employee pension benefit plan
maintained by or on behalf of the Borrower for the benefit of any of its
employees or for the appointment by the appropriate United States District Court
of a trustee to administer such plan and such reportable event is not corrected
and such determination is not revoked within 30 days after notice thereof has
been given to the plan administrator or the Borrower; or the institution of
proceedings by the Pension Benefit Guaranty Corporation to terminate any such
employee benefit pension plan or to appoint a trustee to administer such plan;
or the appointment of a trustee by the appropriate United States District Court
to administer any such employee benefit pension plan.
6.11 Forbearance Agreement. In the event Borrower, McClain Group or
any of them shall default under the Forbearance Agreement.
Section 7. Remedies Upon Event of Default
7.1 Upon the occurrence of any Event of Default described in
Sections 6.2, 6.3 or 6.9 hereof which is not cured or waived in writing by
Standard Federal within 15 days after written notice to the Borrower of such
default; or upon the occurrence of any Event of Default described in Section 6.1
which continues unremedied for 10 days, or upon the occurrence of any Event of
Default described in Sections 6.4, 6.5, 6.6, 6.7, 6.8, 6.10 or 6.11, Standard
Federal's commitment
to lend hereunder, if any, shall terminate and Standard Federal may, without
notice, declare the entire unpaid and outstanding principal balance of the Line
of Credit and all accrued interest to be due and payable in full forthwith,
without presentment, demand or notice of any kind, all of which are hereby
expressly waived by Borrower, and thereupon Standard Federal shall have and may
exercise any one or more of the rights and remedies provided herein or in the
Line of Credit Note or in any mortgage, guaranty, security agreement or other
document relating hereto or granted secured parties under the Michigan Uniform
Commercial Code, including the right to take possession of and dispose of the
Collateral, or otherwise provided by applicable law, and to offset against the
Line of Credit any amount owing by Standard Federal to the Borrower.
Section 8. Miscellaneous
8.1 No default shall be waived by Standard Federal except in
writing and a waiver of any default shall not be a waiver of any other default
or of the same default on a future occasion. No single or partial exercise of
any right, power or privilege hereunder, or any delay in the exercise hereof,
shall preclude other or further exercise of the rights of the parties to this
Agreement.
8.2 No forbearance on the part of Standard Federal in enforcing
any of its rights under this Agreement, nor any renewal, extension or
rearrangement of any payment or covenant to be made or performed by the Borrower
hereunder shall constitute a waiver of any of the terms of this Agreement or of
any such right.
8.3 This Agreement shall be construed in accordance with the law
of the State of Michigan.
8.4 All covenants, agreements, representations and warranties made
in connection with this Agreement and any document contemplated hereby shall
survive the borrowing hereunder and shall be deemed to have been relied upon by
Standard Federal. All statements contained in any certificate or other document
delivered to Standard Federal at any time by or on behalf of the Borrower
pursuant hereto shall constitute representations and warranties by the Borrower.
8.5 The Borrower agrees that it will pay all costs and expenses
incurred by Standard Federal in the consummation and closing of this Agreement
and in protecting or in enforcing Standard Federal's rights under this Agreement
and the documents contemplated hereby, including without limitation any and all
reasonable fees and disbursements of legal counsel to Standard Federal.
8.6 This Agreement shall inure to the benefit of and shall be
binding upon the parties hereto and their respective heirs, personal
representatives, successors and assigns; provided, however, that the Borrower
shall not assign or transfer its rights or obligations hereunder without the
prior written consent of Standard Federal.
8.7 If any provision of this Agreement shall be held or deemed to
be or shall, in fact,
be inoperative or unenforceable as applied in any particular case in any or all
jurisdictions, or in all cases because it conflicts with any other provision or
provisions hereof or any constitution or statute or rule of public policy, or
for any other reason, such circumstances shall not have the effect of rendering
the provision in question inoperative or unenforceable in any other case or
circumstance, or of rendering any other provision or provisions herein contained
invalid, inoperative, or unenforceable to any extent whatever. The invalidity of
any one or more phrases, sentences, clauses or sections contained in this
Agreement, shall not affect the remaining portions of this Agreement, or any
part thereof.
Section 9. Additional Provisions
9.1 In addition to the terms, covenants and conditions set forth
above, the parties hereto hereby agree as follows:
9.1(a) Borrower shall cause McClain and each of its Subsidiaries to
execute and deliver to Standard Federal an unlimited payment guaranty of the
obligations of Borrower under the Line of Credit in form and substance
acceptable to Standard Federal.
(b) A default by McClain Group, or any of them, under any loan
documents or agreements with Standard Federal, including the Forbearance
Agreement, shall be a default under this Agreement.
(c) To the extent any provision of this Amended and Restated Loan
Agreement is not consistent with the Forbearance Agreement, the Forbearance
Agreement shall govern.
IN WITNESS WHEREOF, the Borrower and Standard Federal have caused this
Amended and Restated Loan Agreement to be executed as of the day and year first
written above.
Borrower:
MCCLAIN GROUP LEASING, INC., a
Michigan corporation
____________________________________ By:
---------------------------------
Peter Beale
Its: President
38-2969462
Taxpayer Identification Number
Standard Federal:
STANDARD FEDERAL BANK, a federal
savings bank
By:
---------------------------------
Its:
--------------------------------