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EXHIBIT 10.33
LOAN AGREEMENT
BETWEEN
STANDARD FEDERAL BANK
AND
MCCLAIN INDUSTRIES, INC., MCCLAIN OF ALABAMA, INC., MCCLAIN OF
GEORGIA, INC., MCCLAIN OF OHIO, INC., MCCLAIN OF OKLAHOMA,
INC., MCCLAIN EPCO, INC., SHELBY STEEL PROCESSING COMPANY,
MCCLAIN TUBE COMPANY D/B/A QUALITY TUBE, GALION HOLDING
COMPANY, MCCLAIN E-Z PACK INC., GALION DUMP BODIES, INC.,
MCCLAIN GROUP SALES, INC., AND MCCLAIN GROUP SALES OF FLORIDA,
INC.
THIS AMENDED AND RESTATED LOAN AGREEMENT is made and delivered this
16th day of April, 1998, by and among McClain Industries, Inc., a Michigan
corporation; McClain of Alabama, Inc., a Michigan corporation; McClain of
Georgia, Inc., a Georgia corporation; McClain of Ohio, Inc., a Michigan
corporation; McClain of Oklahoma, Inc., a Michigan corporation; McClain Epco,
Inc., a New York corporation; Shelby Steel Processing Company, a Michigan
corporation; McClain Tube Company d/b/a Quality Tube, a Michigan corporation
(the foregoing are herein referred to as the "McClain Group"); Galion Holding
Company, a Michigan corporation; McClain E-Z Pack Inc., a Michigan corporation;
Galion Dump Bodies, Inc., a Michigan corporation; McClain Group Sales, Inc., a
Michigan corporation; and McClain Group Sales of Florida, Inc., a Florida
corporation (collectively, "Borrowers") (the Borrowers not included in the
McClain Group are herein referred to as the "Galion Group"), 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. The McClain Group entered into an Amended and Restated Loan
Agreement, dated July 17, 1996, as modified August 29, 1996 and amended April
28, 1997, with Standard Federal, pursuant to which Standard Federal made
available to the McClain Group the following credit facilities:
Loan Number Type of Facility Principal Amount Date of Promissory Note
----------- ---------------- ---------------- -----------------------
Loan No. 0250006199 Line of Credit $11,000,000.00 April 28, 1997
Loan No. 0250024109 Term Loan $ 3,465,888.23 July 17, 1996
Loan No. 0250024076 Line of Credit/Term $ 1,000,000.00 July 17, 1996
Loan No. 0250025206 Line of Credit/Term $ 1,000,000.00 April 28, 1997
Loan No. 0250017724 Term Loan $ 2,000,000.00 February 6, 1995
Loan No. 0250006389 Term Loan $ 615,000.00 October 13, 1988, as
amended
Loan No. 0250006272 Term Loan $ 350,000.00 September 26, 1988, as
amended
B. The loans described in Recital A above are secured by a Security
Agreement, dated
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September 15, 1994, and a Security Agreement, dated July 19, 1995 (the "McClain
Security Agreements"), and by a Commercial Mortgage, dated September 26, 1988,
covering property located in River Rouge, Michigan (the "River Rouge Mortgage"),
a Real Estate Mortgage with Power of Sale, dated October 13, 1988, covering
property located in Cleveland County, Oklahoma (the "Oklahoma Mortgage"), a
Commercial Mortgage, Assignment of Lease and Rents, Security Agreement and
Financing Statement, dated February 6, 1995, covering property located in
Sterling Heights, Michigan (the "Sterling Heights Mortgage"), and a Commercial
Mortgage, Assignment of Lease and Rents, Security Agreement and Financing
Statement, dated February 6, 1995, covering property located in Comstock
Township, Michigan (the "Comstock Township Mortgage") .
C. The Galion Group entered into a First Amended and Restated Loan
Agreement, dated October 2, 1995, as modified August 29, 1996, with Standard
Federal, pursuant to which Standard Federal made available to the Galion Group
the following credit facilities:
Loan Number Type of Facility Original Principal Date of Promissory Note
----------- ---------------- ------------------ -----------------------
Loan No. 0250012691 Line of Credit $10,000,000.00 April 28, 1997
Loan No. 0250194514 Demonstrator Line $ 1,500,000.00 April 28, 1997
Loan No. 0250016750 Term Loan $ 2,000,000.00 September 15, 1994, as
amended
D. The Galion Group also entered into a Loan Agreement, dated February
6, 1995, as modified August 29, 1996, with Standard Federal, pursuant to which
Standard Federal made available to the Galion Group the following credit
facilities:
Loan Number Type of Facility Original Principal Date of Promissory Note
----------- ---------------- ------------------ -----------------------
Loan No. 0250017683 Line of Credit/Term $ 800,000.00 February 6, 1995, as
amended
Loan No. 0250017732 Line of Credit/Term $ 800,000.00 February 6, 1995, as
amended
E. The loans described in Recitals C and D above are secured by a
Security Agreement, dated September 15, 1994, and a Security Agreement, dated
June 22, 1995 (the "Galion Security Agreements"), and by an Open-End Commercial
Mortgage and Assignment of Lease and Rents, dated June 29, 1993, as amended,
covering property located in Winesburg, Ohio (the "Winesburg Mortgage"), and an
Open-End Commercial Mortgage and Assignment of Lease and Rents, dated June 29,
1993, as amended, covering property located in Galion, Ohio (the "Galion
Mortgage").
F. The Borrowers have requested that the credit facilities described
above, together with additional credit facilities, be consolidated and
restructured into the new credit facilities described in this Loan Agreement,
and Standard Federal is willing to supply such financing subject to the terms
and conditions set forth in this Loan Agreement.
NOW, THEREFORE, in reliance upon the representations herein provided
and in consideration of the premises and the mutual promises herein contained,
the Borrowers and Standard Federal hereby agree as follows:
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SECTION 1. DEFINITIONS
1.1 The following additional terms shall have the meanings stated below
when used in this Loan Agreement:
"Base LIBOR Rate" shall mean, with respect to a LIBOR Borrowing for an
Interest Period, LIBOR as of 11:00 a.m. two (2) London Business Days prior to
the first day of such Interest Period for deposits with maturities approximately
equal to such Interest Period and in an amount approximately equal to the amount
of such LIBOR Borrowing.
"Borrowing" shall mean an advance of all or any portion of the Line of
Credit or the Equipment Line of Credit and any principal amount outstanding
under the Term Loan and the Equipment Line of Credit.
"Borrowing Notice" shall mean a notice by Borrowers to Standard Federal
that Borrowers wish to make a Borrowing.
"Business Day" shall mean a day on which the main office of Standard
Federal is open for business.
"Consolidated Funded Debt" shall mean, as of any date, the sum of the
following (without duplication): (i) all Indebtedness of the Borrowers as of
such date, other than Consolidated Current Liabilities, (ii) all Indebtedness
which would be classified as "funded indebtedness" or "long-term indebtedness"
on a consolidated balance sheet of the Borrowers prepared as of such date in
accordance with generally accepted accounting principles, (iii) all
Indebtedness, whether secured or unsecured, of Borrowers, having a final
maturity (or which is renewable or extendable at the option of the obligor for a
period ending) more than one year after the date of creation thereof,
notwithstanding the fact that payments in respect thereof (whether installment,
serial maturity or sinking fund payments, or otherwise) are required to be made
by the obligor less than one year after the date of the creation thereof and
notwithstanding the fact that any amount thereof is at the time included also in
current liabilities of such obligor, (iv) all Indebtedness of the Borrowers
outstanding under a revolving credit or similar agreement providing for
borrowings (and renewals and extensions thereof) over a period of more than one
year, notwithstanding the fact that any such Indebtedness is created within one
year of the expiration of such agreement, (v) the present value (discounted at
the implicit rate, if known, or 10% per annum otherwise) of all obligations is
respect of Capital Leases of the Borrowers and (vi) all obligations under
Guaranties of Borrowers. "Indebtedness" shall mean all indebtedness, obligations
and liabilities, including, without limitation, all "liabilities" which would be
reflected on a balance sheet prepared in accordance with generally accepted
accounting principles, all obligations in respect of any Guaranty and all
obligations in respect of any Capital Lease. "Consolidated Current Liabilities"
shall mean, as of any date, the current liabilities which would be reflected on
a consolidated balance sheet of the Borrowers prepared as of such date in
accordance with generally accepted accounting principles, but excluding current
maturities of Consolidated Funded Debt. "Capital Lease" shall mean, as of any
date, any lease of property, real or personal, which would be capitalized on a
balance sheet of the lessee prepared as of such date in accordance with
generally accepted accounting principles, together with any other lease by such
lessee which is in substance a financing lease, including without limitation,
any lease under which (i) such lessee has or will have an option to purchase the
property subject thereto at a nominal amount or an amount less than a reasonable
estimate of the fair market value of such property as of the date such lease is
entered into or (ii) the term of the lease approximates or exceeds the expected
useful life of the property leased thereunder. "Guaranty" shall mean any
contract, agreement or understanding pursuant to which any Indebtedness of
another person or entity is guaranteed or in effect guaranteed in any manner,
whether directly or indirectly.
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"Earnings Before Interest and Taxes Plus Depreciation and Amortization"
shall mean the Borrowers' net income, computed in accordance with generally
accepted accounting principles as in effect as of the date hereof consistently
applied, before provision for federal and state income taxes, plus interest,
depreciation and amortization expense, as reflected in the financial statements
to be furnished as required herein.
"Effective Date" shall mean the date designated by Borrowers 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 Accounts Receivable" shall mean accounts receivable of the
Borrowers less than 90 days old, not doubtful as to collectibility or disputed
as to existence or amount or subject to offset, contra- indebtedness or return
and not intra-company or owing from any affiliated or related company or other
entity, or any debtor which does not maintain its principal office in the
continental United States, exclusive of any account receivable arising under a
government contract, the assignment of which is subject to the Assignment of
Claims Act of 1940, as amended, or any other similar federal or state statute or
regulation governing the assignment of contracts with a governmental agency.
"Equipment Credit Limit" shall mean the principal amount of One Million
Five Hundred Thousand and 00/100 Dollars ($1,500,000.00).
"Equipment Line of Credit" shall mean the revolving line of credit
converting to a term loan made available by Standard Federal to the Borrowers on
the terms and conditions contained in this Loan Agreement.
"Equipment Line of Credit Note" shall mean the Promissory Note (Line of
Credit Converting to Term Loan)(Equipment Line of Credit) of even date herewith
and all renewals and amendments thereof, evidencing the Equipment Line of
Credit.
"Funded Debt Ratio" shall mean the ratio of the Borrowers' Consolidated
Funded Debt to Earnings Before Interest and Taxes Plus Depreciation and
Amortization as of the end of each quarter of each fiscal year of the Borrowers,
rounded to two decimal places.
"Interest Period" shall mean, with respect to a Line LIBOR Borrowing, a
period of one (1) month, two (2) months or three (3) months, commencing on the
Effective Date with respect to such Line LIBOR Borrowing. With respect to a Term
LIBOR Borrowing, "Interest Period" shall mean a period of three (3) months,
commencing on the Effective Date with respect to such Term LIBOR Borrowing. If
any Interest Period would otherwise end on a day which is not a London Business
Day, such Interest Period shall be extended to end on the next succeeding London
Business Day.
"Interest Rate Selection Notice" shall mean a notice in the form
attached to this Loan Agreement as Exhibit A, by which the Borrowers shall
notify Standard Federal that a Borrowing hereunder shall be a LIBOR Borrowing,
specifying the Interest Period and Effective Date applicable to such LIBOR
Borrowing and the principal amount of the LIBOR Borrowing.
"LIBOR" shall mean, with respect to an Interest Period, the British
Bankers' Association ("BBA") interest settlement rate based on an average of
rates quoted by BBA designated banks as being, in BBA's
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view, the offered rate at which deposits in U.S. Dollars are being quoted to
prime banks in the London interbank market at 11:00 a.m. (London time) two (2)
London Business Days prior to the first day of such Interest Period, such
deposits being for a period of time equal or comparable to such Interest Period
and in an amount equal or comparable to the principal amount of the Borrowing to
which the Interest Period relates, as such rates are determined by the BBA and
displayed on the Reuter's Screen.
"LIBOR Borrowing" shall mean a Line LIBOR Borrowing or a Term LIBOR
Borrowing.
"LIBOR Borrowing Fail" shall mean a LIBOR Borrowing which is not made
on the date specified in a Borrowing Notice for any reason other than default by
Standard Federal in funding the Borrowing.
"LIBOR Rate" shall mean, with respect to an Interest Period, the
quotient of: (i) the Base LIBOR Rate applicable to that Interest Period, divided
by (ii) one (1) minus the Reserve Requirement (expressed as a decimal)
applicable to the Interest Period. The LIBOR Rate shall be rounded up to 4
decimal places where the fifth decimal place is 5 or more.
"Line LIBOR Borrowing" shall mean the principal amount of any portion
of any Borrowing bearing interest at the Line of Credit LIBOR Rate.
"Line of Credit" shall mean the revolving line of credit made available
by Standard Federal to the Borrowers on the terms and conditions contained in
this Loan Agreement.
"Line of Credit LIBOR Rate" shall mean, with respect to a Line LIBOR
Borrowing and an Interest Period, a rate per annum determined in accordance with
the following table:
Funded Debt Ratio Line of Credit LIBOR Rate
----------------- -------------------------
4.25 to 1.00 or greater Add 2.15 (215 basis points) to the LIBOR Rate
3.50 to 1.00 up to 4.24 to 1.00 Add 2.00 (200 basis points) to the LIBOR Rate
3.00 to 1.00 up to 3.49 to 1.00 Add 1.75 (175 basis points) to the LIBOR Rate
2.99 to 1.00 or less Add 1.50 (150 basis points) to the LIBOR Rate
"Line of Credit Limit" shall mean the lesser of: (a) Twenty Million and
00/100 Dollars ($20,000,000.00), or (b) an amount equal to the sum of: (i) an
amount equal to 80% of Eligible Accounts Receivable, less a Six Hundred Thousand
and 00/100 Dollar ($600,000.00) static reserve, plus (ii) an amount equal to the
lesser of: (1) Twelve Million Five Hundred Thousand and 00/100 Dollars
($12,500,000.00), or (2) an amount equal to 50% of Qualified Inventory, less
(iii) a reserve of Four Million Eight Hundred Thousand and 00/100 Dollars
(4,800,000.00).
"Line of Credit Maturity Date" shall mean March 1, 2000, or any
extension or renewal thereof.
"Line of Credit Note" shall mean the Promissory Note of even date
herewith and all renewals and amendments thereof, evidencing the Line of Credit.
"Loan Documents" shall mean this Loan Agreement, the Line of Credit
Note, the Term Note, the Equipment Line of Credit Note, the McClain Security
Agreements, the Galion Security Agreements, the River Rouge Mortgage, the
Oklahoma Mortgage, the Sterling Heights Mortgage, the Comstock Township
Mortgage, the Winesburg Mortgage, the Galion Mortgage, and amendments thereto,
and such other loan documents
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as Standard Federal shall require to evidence, secure and document the Line of
Credit, the Term Loan and the Equipment Line of Credit.
"London Business Day" shall mean a Business Day on which dealings in
dollar deposits are carried out in the London Interbank market and on which
banks, generally, in New York, New York are open for business.
"Prepayment Premium" shall mean a premium payable in connection with a
Principal Prepayment or a LIBOR Borrowing Fail. In the case of a Principal
Prepayment, the Prepayment Premium shall be an amount equal to the positive
difference, if any, between (i) the aggregate amount of interest which would
otherwise be payable on the prepaid principal amount during the Prepayment
Interest Period, as herein defined, and (ii) the aggregate amount of interest
Standard Federal would earn if the prepaid principal amount were reinvested for
the Prepayment Interest Period at the Treasury Rate. In the case of a LIBOR
Borrowing Fail, the Prepayment Premium shall be an amount equal to the positive
difference, if any, between (i) the aggregate amount of interest which would
otherwise be payable on the principal amount of the LIBOR Borrowing during the
Prepayment Interest Period, and (ii) the aggregate amount of interest Standard
Federal would earn if the principal amount of the LIBOR Borrowing were
reinvested for the Prepayment Interest Period at the Treasury Rate. In the case
of a Principal Prepayment, the term "Prepayment Interest Period" shall mean the
period from the prepayment date to the last day of the current Interest Period
applicable to the prepaid Borrowing. In the case of a LIBOR Borrowing Fail, the
term "Prepayment Interest Period" shall mean the period from the Effective Date
specified in the Borrowing Notice applicable to the LIBOR Borrowing to the last
day of the Interest Period specified in such Borrowing Notice. The term
"Treasury Rate" means the yield on U.S. Treasury securities at constant maturity
as interpolated by the U.S. Treasury from the daily yield curve, based on the
closing market bid yields on actively-traded U.S. Treasury securities in the
over-the-counter market, as such yields are stated under the heading referred to
as "U.S. Government Securities, Treasury Constant Maturities" in Document
H.15(519), presently published by the Board of Governors of the Federal Reserve
System and titled "Federal Reserve Statistical Release." The Treasury Rate used
to calculate a Prepayment Premium shall be the constant maturity yield value
read from the yield curve at the fixed maturity which is the same as, or is the
next closest period which is longer than the Prepayment Interest Period. If the
publishing of the Treasury Rate is discontinued during the term of the Line of
Credit, then the Treasury Rate shall be based upon the index which is published
by the Board of Governors of the Federal Reserve System in replacement thereof
or, if no such replacement index is published, the index which, in Standard
Federal's sole determination most nearly corresponds to the Treasury Rate. The
Treasury Rate used to calculate a Prepayment Premium shall be computed utilizing
the Treasury Rate for the day which is two Business Days prior to the due date
of the Prepayment Premium.
"Prime-Based Rate" shall mean a rate per annum equal to the Wall Street
Journal Prime Rate, which rate shall increase or decrease automatically when and
to the extent that the Wall Street Journal Prime Rate shall be increased or
decreased.
"Prime Rate Borrowing" shall mean the principal amount of any portion
of any Borrowing bearing interest at the Prime-Based Rate.
"Principal Prepayment" shall mean a payment of principal with respect
to a LIBOR Borrowing on a day which is not the last day of an Interest Period
applicable to such LIBOR Borrowing.
"Qualified Inventory" shall mean the raw material and finished goods
inventory of Borrowers in which Standard Federal holds a perfected first
security interest exclusive of any returned or damaged items and
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work-in-process.
"Rate Conversion Date" shall mean the date on which a Prime Rate
Borrowing shall convert to a LIBOR Borrowing.
"Regulation D" shall mean Regulation D of the Board of Governors of the
Federal Reserve System from time to time in effect and shall include any
successor or other regulation or official interpretation of the Board of
Governors relating to reserve requirements applicable to member banks of the
Federal Reserve System.
"Reserve Requirement" shall mean, with respect to an Interest Period,
the daily average during such Interest Period of the aggregate reserve
requirement (including all basic, supplemental, marginal and other reserves and
taking into account any transitional adjustments or other scheduled changes in
reserve requirements during such Interest Period) which may be imposed on
Standard Federal under Regulation D on Eurocurrency liabilities, in the case of
LIBOR Borrowings.
"Reuter's Screen" means the display designated as page "LIBO" on the
Reuter Monitor System or such other display on the Reuter Monitor System as
shall display LIBOR.
"Revolving Credit Period" means the period from the date of this Loan
Agreement through the Line of Credit Maturity Date.
"Term Date" shall mean May 15, 1999.
"Term LIBOR Borrowing" shall mean the principal amount of any portion
of any Borrowing bearing interest at the Term LIBOR Rate.
"Term LIBOR Rate" shall mean, with respect to a Term LIBOR Borrowing
and an Interest Period, a rate per annum determined in accordance with the
following table:
Funded Debt Ratio Term LIBOR Rate
----------------- ---------------
4.25 to 1.00 or greater Add 2.45 (245 basis points) to the LIBOR Rate
3.50 to 1.00 up to 4.24 to 1.00 Add 2.30 (230 basis points) to the LIBOR Rate
3.00 to 1.00 up to 3.49 to 1.00 Add 2.05 (205 basis points) to the LIBOR Rate
2.99 to 1.00 or less Add 1.80 (180 basis points) to the LIBOR Rate
"Term Loan" shall mean the term loan extended by Standard Federal to
the Borrowers in the principal amount of Fifteen Million and 00/100 Dollars
($15,000,000.00) on the terms and conditions contained in this Loan Agreement.
"Term Note" means the Promissory Note (Term Loan) of even date herewith
and all renewals and amendments thereof, evidencing the Term Loan.
"Unused Line" shall mean the amount available for draw but not advanced
from time to time on the Line of Credit.
"Unused Line Fee" shall mean a fee in the amount of 0.25% per annum of
the Unused Line. The
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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. LINE OF CREDIT
2.1 Standard Federal hereby makes available the Line of Credit to the
Borrowers, which shall not exceed at any one time outstanding the Line of Credit
Limit.
2.2 The Line of Credit herein extended shall be subject to the terms
and conditions of the Line of Credit Note. Notwithstanding the principal amount
of the Line of Credit Note as stated on the face thereof, the amount of
principal actually owing on the Line of Credit Note at any given time shall be
the aggregate of all advances theretofore made to the Borrowers hereunder, less
all payments of principal theretofore made by the Borrowers to Standard Federal
hereunder. The books and records of Standard Federal shall be presumptive
evidence of the amount of principal and interest owing hereunder at any time in
the absence of manifest error. 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.
2.3 Standard Federal shall, from time to time during the Revolving
Credit Period, make advances to Borrowers under the Line of Credit upon request
therefor by Borrowers made in accordance with the requirements of this Loan
Agreement, provided that upon giving effect to such advance no Event of Default
(as defined in the Line of Credit Note or this Loan 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 Borrowers contained in this Loan
Agreement and all other documents executed in connection with the Line of Credit
are true and correct; 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. During the
Revolving Credit Period, the Line of Credit shall be a revolving credit so that
the Borrowers may borrow, re-pay and re-borrow principal amounts under the
provisions of this Section.
2.4 Line LIBOR Borrowings under the Line of Credit shall bear interest
at the Line of Credit LIBOR Rate and Prime Rate Borrowings under the Line of
Credit shall bear interest at the Prime-Based Rate. Borrowers shall have the
option to designate whether Borrowings shall consist of Line LIBOR Borrowings or
Prime Rate Borrowings, to be exercised as hereinafter described. Interest shall
be calculated on the basis of a year of 360 days for the actual number of days
amounts are outstanding.
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2.5 As provided in the Line of Credit Note, interest accrued on Prime
Rate Borrowings and Line LIBOR Borrowings as of the end of each month during the
Revolving Credit Period shall be payable monthly, in arrears, on the first day
of the following month.
2.6 If at any time the amount outstanding under the Line of Credit
shall exceed the Credit Limit, Borrowers 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 Borrowers 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 terminated earlier in accordance with the
provisions of this Loan Agreement, the Line of Credit shall terminate on the
Line of Credit Maturity Date. Standard Federal and the Borrowers may, but shall
not be obligated to, agree to extend the Line of Credit Maturity Date and any
extension thereof, upon a review of the Line of Credit. If, at the time of any
review of the Line of Credit, the Borrowers and Standard Federal do not mutually
agree to extend the Line of Credit Maturity Date, the Line of Credit Maturity
Date shall not be extended and the entire outstanding principal balance under
the Line of Credit Note, together with all accrued interest and any other
amounts which are payable under the Line of Credit, shall be due and payable in
full on the Line of Credit Maturity Date.
2.9 Borrowers acknowledge and agree that in making, extending or
renewing the Line of Credit, Standard Federal is relying on the representations,
covenants and agreements of the Borrowers contained in this Loan Agreement and
such Line of Credit shall be subject to the terms and provisions hereof.
SECTION 3. TERM LOAN
3.1 Standard Federal hereby extends to the Borrowers the Term Loan.
3.2 The Term Loan herein extended shall be subject to the terms and
conditions of the Term Note. The Term Loan shall be payable and shall bear
interest as set forth in the Term Note. This Loan Agreement and the Term 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.
3.3 Term LIBOR Borrowings under the Term Loan shall bear interest at
the Term LIBOR Rate and Prime Rate Borrowings under the Term Loan shall bear
interest at the Prime-Based Rate. Borrowers shall have the option to designate
whether Borrowings shall consist of Term LIBOR Borrowings or Prime Rate
Borrowings, to be exercised as hereinafter described. Interest shall be
calculated on the basis of a year of 360 days for the actual number of days
amounts are outstanding.
SECTION 4. EQUIPMENT PURCHASE LINE OF CREDIT
4.1 Standard Federal hereby extends to the Borrowers the Equipment Line
of Credit which shall not exceed at any one time outstanding the Equipment
Credit Limit.
4.2 The Equipment Line of Credit herein extended shall be subject to
the terms and conditions of the Equipment Line of Credit Note. The Equipment
Line of Credit shall be payable and shall bear interest
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as set forth in the Equipment Line of Credit Note. This Loan Agreement and the
Equipment 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.
4.3 The Equipment Line of Credit Note shall provide that Standard
Federal shall, from time to time prior to the Term Date, make advances to
Borrowers upon request by Borrowers, made in accordance with the provisions of
and subject to the terms and conditions contained in the Equipment Line of
Credit Note.
4.4 Accrued interest shall be payable monthly until the Term Date. From
and after the Term Date, Standard Federal shall make no further advances of
principal and the Equipment Line of Credit shall convert to a term loan. The
outstanding principal balance outstanding as of the Term Date shall be repaid in
consecutive monthly payments of principal, each in the amount determined by
dividing the outstanding principal balance as of the Term Date by Sixty (60),
plus interest accrued to the due date of each such payment, and a final payment
on the maturity date in an amount equal to the then unpaid principal and accrued
interest.
4.5 If at any time the amount outstanding under the Equipment Line of
Credit shall exceed the Equipment Credit Limit, Borrowers 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 Equipment Credit Limit.
4.6 Each advance under the Equipment Line of Credit shall be used
solely for the purchase of equipment. Each advance shall be in an amount not in
excess of Eighty-Five percent (85.0%) of the cost to the Borrowers of the
equipment to be purchased with such advance. Standard Federal shall make
advances under the Equipment Line of Credit only upon receipt by it in a form
satisfactory to it of a true and authentic copy of the dealer invoice for the
equipment purchased or to be purchased with the advance.
4.7 Prior to the Term Date, principal amounts outstanding under the
Equipment Line of Credit shall consist of either Line LIBOR Borrowings or Prime
Rate Borrowings, at Borrowers' option to be exercised as herein provided. On and
after the Term Date, principal amounts outstanding under the Equipment Line of
Credit shall consist of either Term LIBOR Borrowings or Prime Rate Borrowings,
at Borrowers' option to be exercised as herein provided. Line LIBOR Borrowings
under the Equipment Line of Credit shall bear interest at the Line of Credit
LIBOR Rate. Term LIBOR Borrowings under the Equipment Line of Credit shall bear
interest at the Term LIBOR Rate. Prime Rate Borrowings under the Equipment Line
of Credit shall bear interest at the Prime-Based Rate. Borrowers shall have the
option to designate whether Borrowings shall consist of LIBOR Borrowings or
Prime Rate Borrowings, to be exercised as hereinafter described. Interest shall
be calculated on the basis of a year of 360 days for the actual number of days
amounts are outstanding.
SECTION 5. MANNER OF EFFECTING BORROWINGS
5.1 To effect a Borrowing under the Line of Credit or the Equipment
Line of Credit, Borrowers shall give Standard Federal a Borrowing Notice.
5.2 A Borrowing Notice may be made in writing, by telefacsimile or by
telephone by an authorized representative of the Borrowers 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. A Borrowing Notice for a LIBOR Borrowing must be accompanied by
one
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or more Interest Rate Selection Notices, specifying the principal amount and the
Interest Period applicable to each LIBOR Borrowing.
5.3 To effect a LIBOR Borrowing, the Borrowers must furnish Standard
Federal an Interest Rate Selection Notice.
5.4 Interest Rate Selection Notices must be given no later than 11:00
a.m. Detroit time on a day which is at least two (2) London Business Days prior
to the Effective Date of a LIBOR Borrowing. A Borrowing Notice for a Prime Rate
Borrowing must be given no later than 3:00 p.m. Detroit time on the Effective
Date of such Borrowing.
5.5 Prior to making a Request for Borrowing or giving an Interest Rate
Selection Notice, the Borrowers may (without specifying whether the anticipated
Borrowing will be a Prime Rate Borrowing or a LIBOR Borrowing) request that
Standard Federal provide the Borrowers with the most recent LIBOR available to
Standard Federal for each Interest Period requested by Borrowers. Standard
Federal shall endeavor to provide such quoted rates to the Borrowers on the date
of the request.
5.6 LIBOR Borrowings shall be made only in minimum increments of Five
Hundred Thousand and 00/100 Dollars ($500,000.00).
5.7 If the Borrowers wish to roll a LIBOR Borrowing into anther LIBOR
Borrowing at the end of the Interest Period applicable to such LIBOR Borrowing,
they shall give Standard Federal an Interest Rate Selection Notice no later than
11:00 a.m. Detroit time on the day which is two (2) London Business Days prior
to the termination of the applicable Interest Period. The Interest Rate
Selection Notice shall specify the Interest Period(s) to be applicable to
principal amounts which will continue as LIBOR Borrowings. Each Interest Rate
Selection Notice shall be irrevocable and effective upon the giving thereof to
Standard Federal. If the Borrowers shall fail to give Standard Federal an
Interest Rate Selection Notice by 11:00 a.m. Detroit time on the day which is
two (2) London Business Days prior to the termination of an Interest Period with
respect to any LIBOR Borrowing, specifying the interest option to be applicable
to such Borrowing as of the end of such Interest Period, the LIBOR Borrowing
shall convert to a Prime Rate Borrowing at the end of the Interest Period.
5.8 The Borrowers may convert Prime Rate Borrowings to LIBOR Borrowings
at any time by giving an Interest Rate Selection Notice to Standard Federal
specifying the Rate Conversion Date. The Interest Rate Selection Notice must be
given no later than 11:00 a.m. Detroit time on the day which is two (2) London
Business Days prior to the Rate Conversion Date. Each Interest Rate Selection
Notice shall specify the principal amount of the Prime Rate Borrowing to be
converted to a LIBOR Borrowing and the Interest Period to be applicable to such
LIBOR Borrowing. Each Interest Rate Selection Notice shall be irrevocable and
effective upon the giving thereof to Standard Federal.
SECTION 6 SPECIAL PRICING AND PROTECTION PROVISIONS
6.1 If the Borrowers make a Principal Prepayment or a LIBOR Borrowing
Fail occurs, Borrowers will pay to Standard Federal the Prepayment Premium. In
the case of a Principal Prepayment, the Prepayment Premium shall be due at the
time the Principal Prepayment is made. In the case of a LIBOR Borrowing Fail,
the Prepayment Premium shall be due on the Effective Date specified in the
applicable Borrowing Notice.
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6.2 If, with respect to an Interest Period for any LIBOR Borrowing,
Standard Federal determines, in its sole discretion, that, by reason of
circumstances affecting the interbank Eurodollar market generally, deposits in
United States dollars (in the applicable amounts) are not being offered to banks
in the interbank Eurodollar market for such Interest Period, or the Line of
Credit LIBOR Rate will not adequately and fairly reflect the cost to Standard
Federal of maintaining or funding the LIBOR Borrowing for such Interest Period,
Standard Federal shall promptly give notice thereof to Borrowers. Thereafter,
until Standard Federal gives notice to the Borrowers that such circumstances no
longer exist, (a) the obligation of Standard Federal to fund LIBOR Borrowings
shall be suspended and (b) the Borrowers shall either (i) repay in full the
then-outstanding principal amount of LIBOR Borrowings, together with accrued
interest thereon on the last day of the then-current Interest Period applicable
to such LIBOR Borrowings, or (ii) convert such LIBOR Borrowings to Prime Rate
Borrowings on the last day of the then-current Interest Period applicable to
each LIBOR Borrowing.
6.3 If, after the date of this Loan Agreement, the adoption of any
applicable law, rule or regulation, or any change therein, or any change in the
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by Standard Federal with any request or directive
(whether or not having the force of law) of any such authority, central bank or
comparable agency shall make it unlawful or impossible for Standard Federal to
make, maintain or fund LIBOR Borrowings, Standard Federal shall promptly give
notice thereof to the Borrowers. Thereafter, (a) the obligation of Standard
Federal to fund LIBOR Borrowings shall be suspended and (b) the Borrowers shall
either (i) repay in full the then-outstanding principal amount of LIBOR
Borrowings, together with accrued interest thereon, or (ii) convert such LIBOR
Borrowings to Prime Rate Borrowings, either: (1) on the last day of the
then-current Interest Period applicable to such LIBOR Borrowings, if Standard
Federal may lawfully continue to maintain and fund such LIBOR Borrowings until
such date, or (2) immediately, if Standard Federal may not lawfully continue to
fund and maintain such LIBOR Borrowings until such date, in which case Borrowers
will pay the Prepayment Premium.
6.4 If any governmental authority or regulatory agency, central bank or
other comparable authority, shall at any time impose, modify or deem applicable
any reserve (including, without limitation, the Reserve Requirement or any other
reserve imposed by the Board of Governors of the Federal Reserve System),
special deposit or similar requirement against assets of, deposits with or for
the account of, or credit extended by, Standard Federal, or shall impose on
Standard Federal or the interbank Eurodollar market any other condition,
guideline or request affecting LIBOR Borrowings, the Note or Standard Federal's
obligation to make advances of LIBOR Borrowings, and the result of any of the
foregoing, in the reasonable judgment of Standard Federal shall be to increase
the cost to Standard Federal of making or maintaining LIBOR Borrowings, or to
reduce the amount of any sum received or receivable by Standard Federal under
this Loan Agreement, or under the Note, by an amount deemed by Standard Federal
to be material, then, within five (5) days after demand by Standard Federal,
Borrowers shall pay to Standard Federal as additional interest such additional
amount or amounts as will compensate Standard Federal for such increased cost or
reduction. Standard Federal will promptly notify the Borrowers 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. If Standard Federal demands compensation
under this Section, then Borrowers may at any time, upon at least five (5) days
prior notice to Standard Federal, either (i) pay such compensation to Standard
Federal, (ii) repay in full the then outstanding LIBOR Borrowings of Standard
Federal, together with accrued interest thereon to the date of prepayment, or
(iii) convert such LIBOR Borrowings to Prime Rate Borrowings in accordance with
the
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provisions of this Loan Agreement; provided, however, that if the Borrowers
prepay or convert LIBOR Borrowings they shall be liable for any applicable
Prepayment Premium. Standard Federal's determination of amounts payable under
this Section shall be calculated as though Standard Federal funded the
applicable LIBOR Borrowings through the purchase of a eurodollar deposit of the
type, maturity and amount corresponding to the deposit used as a reference in
determining the Base LIBOR Rate with respect to such LIBOR Borrowing, whether or
not Standard Federal in fact purchased such deposit. If the additional amounts
payable under this Section shall be construed or so operate as to require the
Borrowers to pay, or be charged, interest at a rate which is in excess of the
maximum allowed by applicable law, then any and all such excess shall be and the
same is hereby waived by Standard Federal, and any and all such excess paid
shall be automatically credited against and in reduction of the principal
outstanding under the Note, as applicable. In such event, Standard Federal shall
have the option to immediately terminate Borrowers' right to request LIBOR
Borrowings, and the unpaid balance of any outstanding LIBOR Borrowings, with
accrued interest at the highest rate permitted to be charged by stipulation in
writing between Standard Federal and Borrowers, at the option of Standard
Federal, shall immediately become due and payable. The obligations of the
Borrowers under this Section shall survive payment of the Line of Credit and
termination of this Loan Agreement.
6.5 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, Borrowers 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 Borrowers 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 7. CONDITIONS TO MAKING LOANS
7.1 The following are conditions precedent to the obligation of
Standard to make the Line of Credit, the Term Loan and the Equipment Line of
Credit and hereunder:
7.1.1 The Borrowers 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:
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7.1.1.1 A duly executed copy of this Loan Agreement;
7.1.1.2 A duly executed copy of the Loan Documents;
7.1.1.3 Such credit applications, financial
statements, authorizations, and such information concerning
the Borrowers and its business, operations, and condition
(financial and otherwise) as Standard Federal may reasonably
request;
7.1.1.4 Certified copies of resolutions of the Boards
of Directors of the Borrowers approving the execution and
delivery of the Loan Documents required hereunder;
7.1.1.5 A certificate of the Secretary or an
Assistant Secretary of the Borrowers certifying the names and
true signatures of the officers of the Borrowers authorized to
sign the Loan Documents required hereunder;
7.1.1.6 Copies of each of the Articles of
Incorporation of the Borrowers, certified by the Secretary of
State of each Borrower's state of incorporation as of a recent
date;
7.1.1.7 Copies of each of the Articles of
Incorporation and Bylaws of the Borrowers, certified by the
Secretary or an Assistant Secretary of the Borrowers as of the
date of this Loan Agreement as being accurate and complete;
7.1.1.8 Certificates of good standing of the
Borrowers from the Secretary of State of each of the
Borrowers' state of incorporation as of a recent date;
7.1.1.9 Certificates of authority and good standing
of the Borrowers for each state in which the Borrowers are
qualified to do business;
7.1.1.10 A certificate of compliance of the chief
financial officer or treasurer of the Borrowers in form
satisfactory to Standard Federal dated as of the date of this
Loan Agreement;
7.1.1.11 Such certificates, binders or other evidence
of all insurance required of the Borrowers under this Loan
Agreement as Standard Federal may reasonably require; and
7.1.1.12 Acknowledgement 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.
7.1.2 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.
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7.1.3 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.
7.2 As conditions precedent to Standard Federal's obligation to make
the Term Loan and to fund any request for an advance under the Line of Credit or
the Equipment Line of Credit, at and as of the date of the funding thereof:
7.2.1 The representations and warranties of the Borrowers
contained in the Loan Documents shall be accurate and complete in all
respects as if made on and as of such date;
7.2.2 The Borrowers shall have paid all fees and expenses,
including any recording fees and charges, required hereunder;
7.2.3 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.
SECTION 8. REPRESENTATIONS AND WARRANTIES
The Borrowers represent and warrant to Standard Federal that as of the
date of acceptance of this Loan 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:
8.1 The Borrowers 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 Borrowers 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
Borrowers or any of its assets; the Borrowers have the legal power and authority
to execute and perform this Loan Agreement, to borrow money in accordance with
its terms, to execute and deliver the Line of Credit Note, the Term Note, the
Equipment Line of Credit Note and other documents contemplated hereby, to grant
to Standard Federal mortgages and security interests in the Collateral, as
hereby contemplated, and to do any and all other things required of it
hereunder; and this Loan Agreement, the Line of Credit Note, the Term Note, the
Equipment Line of Credit Note and all other documents contemplated hereby, when
executed by the Borrowers duly authorized officers will constitute its valid and
binding legal obligations enforceable in accordance with their terms.
8.2 The execution, delivery and performance of this Loan Agreement, the
borrowings hereunder and the execution and delivery of the Line of Credit Note,
the Term Note, the Equipment 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 Loan 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 Borrowers or any indenture, agreement or other instrument to which the
Borrowers are a party, or by which it or any
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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 Borrowers other than in favor of Standard
Federal and as contemplated hereby.
8.3 There is not pending or, to the best of the knowledge of the
Borrowers, threatened, any litigation, proceeding or governmental investigation
which could materially and adversely affect the business of the Borrowers or its
subsidiaries, if any, or its ability to perform its covenants hereunder.
8.4 Borrowers have 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 Borrowers' 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 Borrowers own 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.
8.5 All financial data which has been or shall hereafter be furnished
to Standard Federal for the purposes of, or in connection with, this Loan
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 Borrowers as of
the dates, and the results of its operations for the periods, for which the same
is furnished to Standard Federal.
8.6 There has been no material adverse change in the business,
properties or condition (financial or otherwise) of the Borrowers or their
subsidiaries (if any) since the date of the latest financial statements provided
to Standard Federal and there are no material debts, liabilities or obligations
(absolute or contingent) of the Borrowers except as reflected in such financial
statements (or in the notes thereto).
8.7 The Borrowers are not in default in the repayment of any
indebtedness for money borrowed by any of them nor has there occurred any event
which, with or without notice or the passage of time or both, would constitute a
default by the Borrowers under any agreement or instrument pertaining to any
indebtedness for money borrowed by any of them.
8.8 Borrowers have filed all reports and tax returns required by
governmental authority to be filed by them prior to the date hereof and
Borrowers have received no notice that such reports or returns have been
rejected, declared insufficient, or otherwise challenged by such governmental
authority.
8.9 McClain of Alabama, Inc., a Michigan corporation; McClain of
Georgia, Inc., a Georgia corporation; McClain of Michigan, Inc., a Michigan
corporation; McClain of Ohio, Inc., a Michigan corporation; McClain of Oklahoma,
Inc., a Michigan corporation; McClain Epco, Inc., a New York corporation; Shelby
Steel Processing Company, a Michigan corporation; McClain International FSC,
Inc., a Virgin Islands corporation; and McClain Tube Company d/b/a Quality Tube,
a Michigan corporation, are each wholly-owned subsidiaries of McClain
Industries, Inc., a Michigan corporation, and have no subsidiaries. McClain
Group
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Leasing, Inc., a Michigan corporation, and Galion Holding Company, a Michigan
corporation, are also wholly-owned subsidiaries of McClain Industries, Inc.
McClain E-Z Pack Inc., a Michigan corporation, and Galion Dump Bodies, Inc., a
Michigan corporation, are each wholly-owned subsidiaries of Galion Holding
Company. McClain Industries, Inc., McClain E-Z Pack, Inc., and Galion Dump
Bodies, Inc. each hold one-third of the outstanding capital stock of McClain
Group Sales, Inc., a Michigan corporation, of which McClain Group Sales of
Florida, Inc., a Florida corporation, is a wholly-owned subsidiary. McClain
Industries, Inc. and Galion Holding Company, as of the date of this Loan
Agreement, own no other subsidiaries.
8.10 None of the proceeds of the Line of Credit, the Term Loan or the
Equipment 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.
Borrowers are not engaged in the business of extending credit for the purpose of
purchasing or carrying margin stocks. Neither Borrowers nor any person acting on
behalf of Borrowers have taken or will take any action which might cause the
Line of Credit Note, the Term Note, the Equipment Line of Credit Note or any of
the other documents executed in conjunction therewith, including this Loan
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. Borrowers 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 Borrowers and its
subsidiaries, if any, does not exceed 25% of all of the value of all of
Borrowers' and its subsidiaries', if any, assets. Neither the Borrowers nor any
affiliate of any of the Borrowers shall use any portion of the proceeds of the
Loans, nor have any letter of credit issued by Standard Federal, either directly
or indirectly, for the purpose of purchasing any securities underwritten by ABN
AMRO Chicago Corporation, an affiliate of Standard Federal.
8.11 Except as disclosed in the environmental reports listed in
attached schedule 8.11, copies of which the Borrowers have previously furnished
to Standard Federal, neither the Borrowers nor, to the best of Borrowers'
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 of the Borrowers in
violation of any Hazardous Materials Laws (as hereinafter defined), nor has any
property owned, occupied or operated by any of the Borrowers, or any part
thereof, ever been used by the Borrowers or, to the best of Borrowers' 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 of the Borrowers. No asbestos or
asbestos-containing materials have been installed, used, incorporated into, or
disposed of on any property owned, occupied or operated by any of the Borrowers.
No polychlorinated biphenyls ("PCBs") are located on or in any property owned,
occupied or operated by any of the Borrowers, 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
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operated by any of the Borrowers have been installed and are being operated in
full compliance with all applicable Hazardous Materials Laws. The Borrowers: (a)
have 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 of the Borrowers
or of any violation of any Hazardous Materials Law, and (b) do not know of any
basis for any such notice or violation.
8.12 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 Borrowers 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 Borrowers have
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 Borrowers
nor any duly appointed administrator of any employee pension and/or profit
sharing plan: (a) have incurred any liability to PBGC with respect to any such
plan other than for premiums not yet due or payable, (b) have instituted or
intends to institute proceedings to terminate any such plan under Section 4042
or 4041A of Erisa, or (c) have withdrawn from any Multi- Employer Pension Plan
(as that term is defined in Section 3(37) of ERISA).
8.13 There is no material fact that the Borrowers have not disclosed to
Standard Federal which could have a material adverse effect on the properties,
business, prospects or condition (financial or otherwise) of the Borrowers or
any of its subsidiaries. For purposes of this Section, 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 Borrowers or any subsidiary,
(c) could impair the ability of the Borrowers to fulfill their 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 furnished by the Borrowers, nor any certificate or
statement delivered herewith or heretofore by Borrowers 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.
8.14 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 Borrowers that no Event of Default
exists and that all representations and warranties contained in this Section or
in any mortgage, guaranty, security agreement or other document given to secure
or relating to the Line of Credit Note, the Term Note, the Equipment Line of
Credit Note or this Loan Agreement are true and correct at and as of the time
the advance is to be made.
SECTION 9. AFFIRMATIVE COVENANTS OF BORROWERS
9.1 Prior to Standard Federal's disbursement of any advances under the
Line of Credit or the Equipment Line of Credit, or closing of the Term Loan, the
Borrowers shall; (a) furnish to Standard Federal, if Standard Federal so
requires, certified copies of their Articles of Incorporation, Bylaws and
Certificates of Good Standing, which Articles of Incorporation and Good Standing
Certificates are to be certified by the appropriate officials of the Borrowers'
states of incorporation; (b) furnish to Standard Federal if Standard Federal so
requires a statement of the Borrowers and the chief financial officers of the
Borrowers certifying
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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;
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 or the Equipment
Line of Credit or closing of the Term Loan.
9.2 From the date hereof until all amounts owing under the Line of
Credit, the Term Loan and the Equipment Line of Credit are paid in full and all
obligations under the Line of Credit Note, the Term Note, the Equipment Line of
Credit Note, this Loan Agreement and all other documents executed in connection
with the Line of Credit, the Term Loan and the Equipment Line of Credit are
fully paid, performed and satisfied and so long as Standard Federal has any
commitment to make advances hereunder, the Borrowers covenant and agree they
will:
9.2.1 Furnish to Standard Federal as soon as available and, in
any event, within 120 days after the close of each fiscal year of the
Borrowers, or, in the event the Borrowers obtain an extension of the
filing date from the Securities Exchange Commission, by such extended
date, detailed financial statements of the Borrowers as of the close of
such fiscal year, containing a consolidated balance sheet of the
Borrowers and their subsidiaries, if any, and statements of income and
cash flows of the Borrowers and their subsidiaries, if any, for such
fiscal year prepared in accordance with generally accepted accounting
principles and in a manner consistent with prior such statements
containing such 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 Borrowers) of independent certified public accountants
selected by Borrowers 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.
9.2.2 Furnish to Standard Federal as soon as available and, in
any event, within 90 days after the close of each quarter of each
fiscal year, or, in the event the Borrowers obtain an extension of the
filing date from the Securities Exchange Commission, by such extended
date, detailed financial statements of the Borrowers as of the close of
such fiscal period containing a consolidated balance sheet of the
Borrowers and its subsidiaries, if any, and statements of income and
cash flows of the Borrowers 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 officers of the Borrowers 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.
9.2.3 Furnish to Standard Federal, within a reasonable time
not to exceed 20 days after the end of each calendar month, a statement
of accounts receivable, in a form acceptable to Standard Federal,
certified as correct by Borrowers or a principal officer of Borrowers
showing the agings thereof and the payment, write-off or other
disposition of former accounts receivable the disposition of which has
not previously been reported to Standard Federal, and such other
information and data as Standard Federal may reasonably require.
Borrowers will further specifically disclose any facts known to
Borrowers which facts would tend to render doubtful the collectibility
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of any account receivable disclosed in such statements or which would
indicate that the existence or amount of such account is disputed by
the debtor thereon.
9.2.4 Furnish to Standard Federal, within a reasonable time
not to exceed 20 days after the end of each calendar month, a statement
of accounts payable, in a form acceptable to Standard Federal,
certified as correct by Borrowers or a principal officer of Borrowers,
showing the agings thereof and such other information and data as
Standard Federal may reasonably require.
9.2.5 Furnish to Standard Federal, within a reasonable time
not to exceed 20 days after the end of each calendar month, a statement
of inventory of the Borrowers, in a form acceptable to Standard
Federal, certified as correct by Borrowers or a principal officer of
Borrowers showing the method of reporting and all additions to and
dispositions of inventory since the previous inventory report and such
other information and data as Standard Federal may reasonably require.
9.2.6 Furnish to Standard Federal, within 60 days after the
close of each quarter of each fiscal year, a covenant compliance
report, in a form prepared by and acceptable to Standard Federal,
certified as correct by Borrower or a principal officer or general
partner of Borrower, containing a certification of the Borrowers'
compliance with the financial covenants contained herein as of the
close of such fiscal period.
9.2.7 Furnish to Standard Federal, promptly after sending,
filing or publishing the same, copies of all proxy statements,
financial statements and reports that the Borrowers send to its public
shareholders and copies of all regular, periodic and special reports
and all registration statements and amendments thereto that the
Borrowers file with the Securities and Exchange Commission or any other
governmental authority and any Exchange, and copies of all press
releases issued by Borrowers.
9.2.8 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 Borrowers' business, properties, financial condition or
ability to comply with its obligations hereunder or under the Line of
Credit Note, the Term Note or the Equipment Line of Credit Note.
9.2.9 Furnish such other information as Standard Federal may
reasonably request and permit Standard Federal and its agents,
attorneys and employees to inspect all of the books, records and
properties of the Borrowers at any reasonable time.
9.2.10 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 Borrowers 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 Borrowers 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 Borrowers and/or its
property, except to the extent being contested in good faith; and in
the event the Borrowers fail to maintain such
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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.
9.2.11 Preserve and keep in full force and effect their own
and their material, operating subsidiaries' (if any) corporate
existence in good standing and maintain voting control in their present
controlling shareholders; keep current all filings of assumed name
certificates for each name under which and each county in which the
Borrowers do business and promptly inform Standard Federal of any
assumed names under which they do business which were not used by the
Borrowers on the date of this Loan Agreement; continue to conduct and
operate their businesses 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 their property used or useful in the conduct of their
business and keep the same in good repair and condition; pay their
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 Borrowers or any of their assets, except to
the extent noncompliance is immaterial and would not have a material
adverse effect on Borrowers.
9.2.12 Maintain on a consolidated statement basis "Tangible
Net Worth" of not less than the amounts specified below as of the end
of each fiscal quarter during the fiscal years ending on the dates
specified below:
Minimum
"Tangible
Fiscal Year-End Net Worth"
--------------- ----------
09/30/97 $22,000,000
09/30/98 $23,000,000
09/30/99 $25,000,000
"Tangible Net Worth" shall mean total assets less trademarks,
franchises, copyrights, licenses, prepaids, goodwill, similar
intangible assets and all liabilities (excluding debt subordinated to
Standard Federal upon terms and conditions acceptable to Standard
Federal) of the Borrowers.
9.2.13 On a consolidated statement basis maintain the ratio of
"Liabilities" to "Tangible Net Worth" of not more 3.00 to 1.00, as of
the end of each quarter of each fiscal year. "Liabilities" shall mean
all liabilities of the Borrowers and their consolidated subsidiaries,
if any, as defined in accordance with generally accepted accounting
principles as in effect as of the date of this Loan Agreement,
consistently applied.
9.2.14 On a consolidated statement basis, maintain an Interest
Coverage Ratio of not less than 2.00 to 1.00 as of the end of each
quarter of each fiscal year. The "Interest Coverage Ratio" shall mean
the ratio of the Borrowers' Earnings Before Interest and Taxes Plus
Depreciation and Amortization to Interest Expense, for the four fiscal
quarters preceding the end of the fiscal quarter as of which the
Interest Coverage Ratio is measured; provided, however, any fiscal
quarter ending on or before September 30, 1997 shall not be considered
in such calculation. "Earnings Before
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Interest and Taxes Plus Depreciation and Amortization" shall mean the
Borrowers' net income, computed in accordance with generally accepted
accounting principles as in effect as of the date hereof consistently
applied, before provision for federal and state income taxes, plus
interest, depreciation and amortization expense, as reflected in the
financial statements to be furnished as required herein. "Interest
Expense" shall mean the Borrowers' interest expense, as determined in
accordance with generally accepted accounting principles.
9.2.15 On a consolidated statement basis, maintain a Debt
Service Coverage Ratio of not less than 1.50 to 1.00, as of the end of
each fiscal quarter. The term "Debt Service Coverage Ratio" shall mean
the ratio of the Borrowers' Earnings Before Interest and Taxes Plus
Depreciation and Amortization to Debt Service Expense, for the four
fiscal quarters preceding the end of the fiscal quarter as of which the
Debt Service Coverage Ratio is measured; provided, however, any fiscal
quarter ending on or before September 30, 1997 shall not be considered
in such calculation. "Earnings Before Interest and Taxes Plus
Depreciation and Amortization" shall mean the Borrowers' net income,
computed in accordance with generally accepted accounting principles as
in effect as of the date hereof consistently applied, before provision
for federal and state income taxes, plus interest, depreciation and
amortization expense, as reflected in the financial statements to be
furnished as required herein. "Debt Service Expense" shall mean the
Borrowers' interest expense, plus the current portion of any long-term
debt, plus the portion attributable to principal of all payments on
Capital Leases (computed at the implicit rate, if known, or 10% per
annum otherwise), computed in accordance with generally accepted
accounting principles as in effect as of the date hereof consistently
applied. "Capital Lease" shall mean, as of any date, any lease of
property, real or personal, which would be capitalized on a balance
sheet of the lessee prepared as of such date in accordance with
generally accepted accounting principles, together with any other lease
by such lessee which is in substance a financing lease, including
without limitation, any lease under which (i) such lessee has or will
have an option to purchase the property subject thereto at a nominal
amount or an amount less than a reasonable estimate of the fair market
value of such property as of the date such lease is entered into or
(ii) the term of the lease approximates or exceeds the expected useful
life of the property leased thereunder.
9.2.16 Maintain on a consolidated statement basis the ratio of
"Current Assets" to "Current Liabilities" of not less than 2.25 to
1.00, as of the end of each fiscal quarter. "Current Assets" shall
include all assets considered current in accordance with generally
accepted accounting principles as in effect as of the date of this Loan
Agreement, consistently applied, less all amounts due Borrowers from
any of their directors, officers, employees, shareholders, or any
company controlled by any of their shareholders. "Current Liabilities"
shall include all liabilities considered current in accordance with
generally accepted accounting principles as in effect as of the date of
this Loan Agreement, consistently applied.
9.2.17 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
Section 4062.
The parties hereto acknowledge that the financial covenants set forth in
subsections 9.2.12 thru 9.2.16 above, are based on the financial statements of
McClain Industries, Inc. and all of its subsidiaries.
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9.3 The Borrowers will not make any change in their accounting policies
or financial reporting practices and procedures, except changes in accounting
policies which are required or permitted by generally accepted accounting
principles and/or the United States Securities and Exchange Commission and
changes in financial reporting practices and procedures which are required or
permitted by generally accepted accounting principles.
9.4 The Borrowers shall allow Standard Federal and its participants in
the Line of Credit, the Term Loan and the Equipment 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 Borrowers' financial statements and their books and records,
semi-annually during the term of the Line of Credit, the Term Loan and the
Equipment Line of Credit. Standard Federal shall schedule such audits during
normal business hours of the Borrowers and shall provide Borrowers not less than
two (2) business days notice of the commencement of each audit. The Borrowers
shall make adequate facilities available on their premises at Borrowers' expense
to enable Standard Federal to conduct the audits herein described and shall make
available all of their books, records and other documents and information as may
be reasonably requested to facilitate the audits.
SECTION 10. NEGATIVE COVENANTS
10.1 From the date hereof until all amounts owing under the Line of
Credit, the Term Loan and the Equipment Line of Credit are paid in full and all
obligations under the Line of Credit Note, the Term Note and the Equipment Line
of Credit Note, this Loan Agreement and all other documents executed in
connection with the Line of Credit, the Term Loan and the Equipment Line of
Credit are fully paid, performed and satisfied and so long as Standard Federal
has any commitment to make advances hereunder, the Borrowers covenant and agree
that they will not do and will not permit any subsidiary, if any, to do any of
the following without the prior written approval of Standard Federal:
10.1.1 Create, incur, assume or permit to exist (a) any
mortgage, pledge, security interest, lien or charge of any kind upon
any of their property or assets whether now owned or hereafter acquired
other than in favor of Standard Federal, except as required or
permitted by Standard Federal, or (b) any indebtedness or liability for
borrowed money, except indebtedness to Standard Federal or indebtedness
subordinated to the prior payment in full of the Borrowers'
indebtedness to Standard Federal which is approved in writing by
Standard Federal, except as otherwise required or permitted in writing
by Standard Federal.
10.1.2 Make loans, advances or extensions of credit to any
Entity (which in this Loan Agreement means any individual, partnership,
corporation or other legal entity), other than a parent or subsidiary
of the Borrowers, in excess of $100,000.00 in principal amount, except
for sales on open account and in ordinary course of business; or
guarantee or in any way become responsible for obligations of any other
Entity except by endorsement of negotiable instruments for deposit or
collection in the ordinary course of business; or subordinate any
indebtedness due it from an Entity to indebtedness of any other
creditor of such Entity.
10.1.3 Sell, lease or transfer, during any fiscal year, except
inventory in the ordinary course of business, any substantial portion
of its assets; or consolidate with or merge into any other Entity, or
permit another to merge into it; or acquire by lease or purchase all or
substantially all the business or assets of any Entity; or enter into
any lease-back arrangement with any Entity.
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10.1.4 Permit the aggregate amount of all Capital Expenditures
made by the Borrowers during any fiscal year ending after the date
hereof to exceed $3,000,000.00. "Capital Expenditures" shall mean any
expenditure for an asset which will be used in a year or years
subsequent to the year in which the expenditure is made and which asset
is properly classifiable in relevant financial statements as property,
equipment or improvements, fixed assets, or a similar type of
capitalized assets in accordance with generally accepted accounting
principles.
SECTION 11. SECURITY
11.1 In order to secure: (1) the full and timely performance of the
Borrowers' covenants set forth herein and in the Line of Credit Note, the Term
Note and the Equipment Line of Credit Note, (2) the repayment of any and all
indebtedness of the Borrowers to Standard Federal arising pursuant to the Line
of Credit Note, the Term Note, the Equipment Line of Credit Note (including any
renewals or substitutions thereof), this Loan Agreement and any mortgage,
guaranty, security agreement or other document given to secure or relating to
the Line of Credit Note, the Term Note, the Equipment Line of Credit Note or
this Loan Agreement, and (3) all other indebtedness and liabilities of the
Borrowers to Standard Federal arising under this Loan Agreement, the Line of
Credit Note, the Term Note or the Equipment Line of Credit Note, whether direct
or indirect, absolute or contingent, due or to become due, now existing or
hereafter arising:
11.1.1 The Borrowers hereby grant 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 Borrowers
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 Borrowers of any kind whatsoever which shall at any
time be in the possession or under the control of Standard Federal; and
11.1.2 The Borrowers have granted to Standard Federal a
security interest of first priority in all personal property of the
Borrowers as provided in the McClain Security Agreements and the Galion
Security Agreements, the provisions of which are hereby incorporated
herein by reference; and
11.1.3 The Borrowers have granted to Standard Federal mortgage
interests, as provided in the River Rouge Mortgage, the Oklahoma
Mortgage, the Sterling Heights Mortgage, the Comstock Township
Mortgage, the Winesburg Mortgage, and the Galion Mortgage, the
provisions of which are hereby incorporated herein by reference
(herein, together with the property described above, referred to as the
"Collateral" or "item(s) of Collateral"). The Borrowers shall execute
and deliver to Standard Federal, in conjunction with the execution of
this Loan Agreement, such amendment to the foregoing Collateral
documents as Standard Federal and its counsel may determine are
necessary or appropriate to confirm that such collateral properly
secures the credit facilities provided for herein.
11.2 The Borrowers 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 relating to the Collateral.
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SECTION 12. EVENTS OF DEFAULT
The occurrence of any of the events enumerated below shall constitute
an Event of Default for purposes of this Loan Agreement:
12.1 FAILURE TO PAY MONIES DUE. If any indebtedness of the Borrowers to
Standard Federal on the Line of Credit, the Term Loan and the Equipment 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, the Term Note, the Equipment
Line of Credit Note, this Loan Agreement or any mortgage, security agreement,
guaranty, instrument or other agreement executed in conjunction herewith.
12.2 MISREPRESENTATION. If any warranty or representation made by or
for the Borrowers and/or any endorser or guarantor of the Line of Credit Note,
the Term Note or the Equipment 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 Borrowers
and/or any endorser or guarantor of the Line of Credit Note, the Term Note or
the Equipment Line of Credit Note shall prove to be false, inaccurate or
misleading in any material respect.
12.3 NONCOMPLIANCE WITH AFFIRMATIVE COVENANTS AND OTHER AGREEMENTS. If
the Borrowers shall fail to perform any of its obligations and covenants under
Section 9 of this Loan Agreement, or shall fail to comply with any of the other
provisions of this Loan Agreement, other than under Section 10 hereof, or the
Line of Credit Note, the Term Note, the Equipment 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.
12.4 NONCOMPLIANCE WITH NEGATIVE COVENANTS. If the Borrowers shall fail
to perform any of its obligations and covenants described in Section 10 of this
Loan Agreement.
12.5 BUSINESS SUSPENSION. If the Borrowers and/or any endorser or
guarantor of the Line of Credit Note, the Term Note or the Equipment Line of
Credit Note shall voluntarily suspend transaction of its business.
12.6 BANKRUPTCY, ETC. If the Borrowers and/or any endorser or guarantor
of the Line of Credit Note, the Term Note or the Equipment 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 Borrowers and/or any endorser or guarantor of
the Line of Credit Note, the Term Note or the Equipment 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 Borrowers and/or any endorser or
guarantor of the Line of Credit Note, the Term Note or the Equipment Line of
Credit Note, or if bankruptcy, reorganization or liquidation proceedings are
instituted against Borrowers and/or any endorser or guarantor of the Line of
Credit Note, the Term Note or the Equipment 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 Borrowers or any endorser or
guarantor of the Line of Credit Note, the Term Note or the Equipment Line of
Credit Note or any other plan or arrangement with creditors of the Borrowers or
any endorser or guarantor of the Line of Credit Note, the Term Note or the
Equipment Line of Credit Note; (d) shall apply for or permit the appointment of
a receiver, trustee or custodian for any substantial portion of the Borrowers'
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.
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12.7 JUDGMENTS AND WRITS. If there shall be entered against the
Borrowers and/or any endorser or guarantor of the Line of Credit Note, the Term
Note or the Equipment 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 Borrowers and/or any endorser or
guarantor of the Line of Credit Note, the Term Note or the Equipment 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.
12.8 MERGER. If the Borrowers shall merge or consolidate with another
entity without the prior written consent of Standard Federal.
12.9 CHANGE OF CONTROL OR MANAGEMENT. If the Borrowers 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, the Term Note and the Equipment 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 Borrowers to carry on its business as
theretofore conducted.
12.10 OTHER DEFAULTS. If the Borrowers and/or any endorser or guarantor
of the Line of Credit Note, the Term Note or the Equipment 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 Borrowers and/or any endorser or guarantor of
the Line of Credit Note, the Term Note or the Equipment Line of Credit Note is a
party.
12.11 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 Borrowers 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 Borrowers; 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.
SECTION 13. REMEDIES UPON EVENT OF DEFAULT
13.1 Upon the occurrence of any Event of Default described in Sections
12.2, 12.3 or 12.10 hereof which is not cured or waived in writing by Standard
Federal within 15 days after written notice to the Borrowers of such default; or
upon the occurrence of any Event of Default described in Section 12.1 which
continues unremedied for 10 days, or upon the occurrence of any Event of Default
described in Sections 12.4, 12.5, 12.6, 12.7, 12.8, 12.9 or 12.11, 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, the Term Loan and the Equipment 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 Borrowers, and thereupon Standard Federal shall have and may exercise
any
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one or more of the rights and remedies provided herein or in the Line of Credit
Note, the Term Note or the Equipment 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, the Term Loan and the
Equipment Line of Credit any amount owing by Standard Federal to the Borrowers.
SECTION 14. MISCELLANEOUS.
14.1 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 Loan
Agreement.
14.2 No forbearance on the part of Standard Federal in enforcing any of
its rights under this Loan Agreement, nor any renewal, extension or
rearrangement of any payment or covenant to be made or performed by the
Borrowers hereunder shall constitute a waiver of any of the terms of this Loan
Agreement or of any such right.
14.3 This Loan Agreement shall be construed in accordance with the law
of the State of Michigan.
14.4 All covenants, agreements, representations and warranties made in
connection with this Loan 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 Borrowers
pursuant hereto shall constitute representations and warranties by the
Borrowers.
14.5 The Borrowers agree that it will pay all costs and expenses
incurred by Standard Federal in enforcing Standard Federal's rights under this
Loan Agreement and the documents contemplated hereby, including without
limitation any and all reasonable fees and disbursements of legal counsel to
Standard Federal.
14.6 This Loan 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 Borrowers
shall not assign or transfer its rights or obligations hereunder without the
prior written consent of Standard Federal.
14.7 If any provision of this Loan 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 Loan Agreement, shall not affect the
remaining portions of this Loan Agreement, or any part thereof.
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IN WITNESS WHEREOF, the Borrowers and Standard Federal have caused this
Loan Agreement to be executed as of the day and year first written above.
BORROWERS:
MCCLAIN INDUSTRIES, INC., a Michigan
corporation
[SIG] By: Mark S. Mikelait
- ---------------------------- -------------------------------------------
Mark S. Mikelait
Its: Treasurer
---------------------------------
38-1867649
----------------------------------------------
Taxpayer Identification Number
MCCLAIN OF ALABAMA, INC., a Michigan
corporation
[SIG] By: Mark S. Mikelait
- ---------------------------- -------------------------------------------
Mark S. Mikelait
Its: Treasurer
---------------------------------
----------------------------------------------
Taxpayer Identification Number
MCCLAIN OF GEORGIA, INC., a Georgia
corporation
[SIG] By: Mark S. Mikelait
- ---------------------------- -------------------------------------------
Mark S. Mikelait
Its: Treasurer
---------------------------------
58-1738825
----------------------------------------------
Taxpayer Identification Number
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MCCLAIN OF OHIO, INC., a Michigan corporation
[SIG] By: Mark S. Mikelait
- ---------------------------- -------------------------------------------
Mark S. Mikelait
Its: Treasurer
---------------------------------
----------------------------------------------
Taxpayer Identification Number
MCCLAIN OF OKLAHOMA, INC., a Michigan
corporation
[SIG] By: Mark S. Mikelait
- ---------------------------- -------------------------------------------
Mark S. Mikelait
Its: Treasurer
---------------------------------
----------------------------------------------
Taxpayer Identification Number
MCCLAIN EPCO, INC., a New York corporation
[SIG] By: Mark S. Mikelait
- ---------------------------- -------------------------------------------
Mark S. Mikelait
Its: Treasurer
---------------------------------
----------------------------------------------
Taxpayer Identification Number
SHELBY STEEL PROCESSING COMPANY, a
Michigan corporation
[SIG] By: Mark S. Mikelait
- ---------------------------- -------------------------------------------
Mark S. Mikelait
Its: Treasurer
---------------------------------
38-2205216
----------------------------------------------
Taxpayer Identification Number
29
30
MCCLAIN TUBE COMPANY d/b/a QUALITY TUBE,
a Michigan corporation
[SIG] By: Mark S. Mikelait
- ---------------------------- -------------------------------------------
Mark S. Mikelait
Its: Treasurer
---------------------------------
----------------------------------------------
Taxpayer Identification Number
GALION HOLDING COMPANY, a Michigan
corporation
[SIG] By: Mark S. Mikelait
- ---------------------------- -------------------------------------------
Mark S. Mikelait
Its: Treasurer
---------------------------------
38-3060196
----------------------------------------------
Taxpayer Identification Number
MCCLAIN E-Z PACK INC., a Michigan corporation
[SIG] By: Mark S. Mikelait
- ---------------------------- -------------------------------------------
Mark S. Mikelait
Its: Treasurer
---------------------------------
----------------------------------------------
Taxpayer Identification Number
GALION DUMP BODIES, INC., a Michigan
corporation
[SIG] By: Mark S. Mikelait
- ---------------------------- -------------------------------------------
Mark S. Mikelait
Its: Treasurer
---------------------------------
----------------------------------------------
Taxpayer Identification Number
30
31
MCCLAIN GROUP SALES, INC., a Michigan
corporation
[SIG] By: Mark S. Mikelait
- ---------------------------- -------------------------------------------
Mark S. Mikelait
Its: Treasurer
---------------------------------
59-3241829
----------------------------------------------
Taxpayer Identification Number
MCCLAIN GROUP SALES OF FLORIDA, INC., a
Florida corporation
[SIG] By: Mark S. Mikelait
- ---------------------------- -------------------------------------------
Mark S. Mikelait
Its: Treasurer
---------------------------------
----------------------------------------------
Taxpayer Identification Number
STANDARD FEDERAL:
STANDARD FEDERAL BANK, a federal savings
bank
[SIG] By: [SIG]
- ---------------------------- -------------------------------------------
Its: Vice President
---------------------------------
31
32
EXHIBIT A
[FORM OF INTEREST RATE SELECTION NOTICE]
- --------------------------------------------------------------------------------
STANDARD FEDERAL BANK
Member ABN AMRO Group
2600 West Big Beaver Road
P.O. Box 3703
Troy, Michigan 48007-3703
248/643-9600
Loan No.:
-----------------
Borrowing No.:
-----------------
INTEREST RATE SELECTION NOTICE
TO: STANDARD FEDERAL BANK
In accordance with the provisions of the Loan Agreement, dated ________
(the "Loan Agreement"), executed in connection with the referenced loan, the
undersigned hereby notifies you that it has selected the Interest Period
commencing on the Effective Date stated below with respect to the Borrowing
outstanding under the referenced Borrowing No. in the principal amount indicated
below (capitalized terms used in this notice shall have the meanings given such
terms in the Loan Agreement):
Interest Period:
--------------------------
Effective Date:
--------------------------
Principal Amount:
--------------------------
LIBOR:
--------------------------
LIBOR Rate:
--------------------------
Last Day of Interest Period:
--------------------------
BORROWER:
McClain Industries, Inc., and
subsidiaries
By: EXHIBIT - DO NOT SIGN
----------------------------
Its:
---------------------------
32
33
Schedule 8.11
1. Final Report Phase I Environmental Assessment Peabody-Galion
Corporation, Winesburg, Holmes County, Ohio, prepared by
Stearns & Wheler, Environmental Engineers and Scientists,
dated February, 1993, Project No. 2471.
2. Final Report Phase II Site Investigation, Galion Site,
Winesburg, Ohio, prepared by Stearns & Wheler, Environmental
Engineers and Scientists, dated September, 1993, Project No.
2471.
3. Phase II Site Investigation Peabody-Galion Site, Galion, Ohio,
prepared by Stearns & Wheler, Environmental Engineers and
Scientists, dated January, 1993, Project No.
2429.
33