EXHIBIT 4
TERM PROMISSORY NOTE
______________, 2005 $16,000,000
THIS NOTE is made in Peoria, Illinois as of _______________, 2005, for
Sixteen Million Dollars ($16,000,000), with interest as provided herein.
RECITALS:
A. This Note is made by Pioneer Railcorp. ("Borrower"), and is payable
to the order of National City Bank of the Midwest ("Lender"). The holder from
time to time of this Note is referred to as "Payee."
B. This Note evidences the obligation of Borrower to pay to Lender the
principal amount of Sixteen Million Dollars ($16,000,000), with interest on the
balance remaining from time to time unpaid at the "Interest Rate" (as
hereinafter defined) on the basis hereinafter set forth. The Loan evidenced by
this Note is referred to herein as the "Loan."
▇. ▇▇▇▇▇▇ and Borrower have entered into a Loan Agreement of even date
herewith (the "Loan Agreement") with respect to the Loan and other borrowings.
D. Payment of this Note is secured by the Loan Documents, as that term
is defined in the Loan Agreement. Reference is made to the Loan Documents for a
description of the property and the rights of Payee with respect to such
security. All of the agreements, conditions, covenants, provisions and
stipulations contained in the Loan Documents are hereby made a part of this Note
to the same extent and with the same force and effect as if they were fully set
forth herein and Borrower covenants and agrees to keep and perform them, or
cause them to be kept and performed, strictly in accordance with their
respective terms.
1. Payment.
(a) Borrower hereby promises to pay to the order of Payee the principal
sum of Sixteen Million Dollars ($16,000,000), or, if less, the aggregate unpaid
principal amount, with interest thereon at the Interest Rate, as follows:
(i) Commencing _____________, 2005 and on the first day of each month
thereafter to and including ______________, 2010, a payment of
principal and interest in the amount of $229,921; provided, however,
that on _______________, 2006 and on the same day of each year
thereafter until _________________, 2009, the payment amount shall
be recalculated to equal the amount necessary to repay the
outstanding principal balance due hereunder in equal monthly
payments of principal and interest over a seven (7) year period from
the date hereof at the Interest Rate in effect on such recalculation
date;
(ii) All outstanding principal and interest remaining unpaid, and all
other sums then due to Payee with respect to the Loan, on
______________, 2010.
(b) The term "Interest Rate" means the interest rate from time to time
announced by Lender as its prime rate for commercial loans (which may or may not
be the lowest rate charged by Lender. Borrower shall have the option, however,
to elect that any portion of the Loan of at least $250,000 and in increments of
$100,000 thereafter shall bear interest at the Libor Interest Rate. "Libor
Interest Rate" means the rate per annum (rounded upwards, if necessary, to the
next higher 1/16 of 1%) determined by Lender and equal to the average rate per
annum at which deposits (denominated in United States dollars) in an amount
similar to the principal amount of the Loan and with a maturity equal to the
applicable Interest Period are offered to Lender at 11:00 A.M. London time (or
as soon thereafter as practicable) on the date of reference by banking
institutions in the London, United Kingdom market, as such interest rate is
referenced and reported by the British Bankers Association in the Bridge
Financial Telerate system "Page 3570" report or, if the same is unavailable, any
other generally accepted authoritative source of such interest rate as Lender
may reference from time to time, plus the Applicable Margin set forth on the
attached Applicable Margin Grid. "Interest Period" shall mean one, two, three,
or six months. Principal and interest accrued on LIBOR Interest Rate borrowings
shall be repaid on the last day of the applicable Interest Period. No Interest
Period on any LIBOR Interest Rate borrowing shall extend beyond Maturity Date.
(c) The term "Maturity Date" shall mean _______________, 2010, subject
to the acceleration provisions of this Note.
(d) In the event any installment of principal or interest hereunder
shall become overdue for a period in excess of ten (10) days, Borrower shall pay
to the Payee a "late charge" equal to five percent (5%) of the amount unpaid or
$25.00, whichever is greater, up to a maximum amount of $250 per payment.
(e) Payment of all amounts due under this Note shall be made at the
office of Lender at ▇▇▇ ▇. ▇. Adams Street, Peoria, Illinois 61602, or such
other place as Payee may from time to time designate in writing.
(f) This Note may be prepaid, in whole or in part, without prepayment or
penalty; provided, however, that no portion of this Note for which ▇▇▇▇▇▇▇▇ has
elected a LIBOR Interest Rate tranche may be prepaid before the end of the
applicable Interest Period.
(g) The obligations of Borrower on this Promissory Note shall be
absolute and unconditional in any and all circumstances, and shall not be
affected by any circumstances of any character, including, but not limited to
any set-off, counterclaim, recoupment, real or personal defense or other right
which Borrower may have against the Lender, its successors and assigns, or
anyone else for any reason whatsoever.
(h) Notwithstanding any provisions of this Note or any instrument
securing payment of the indebtedness evidenced by this Note to the contrary, it
is the intent of Borrower and Payee that Payee shall never be entitled to
receive, collect or apply, as interest on principal of the indebtedness, any
amount in excess of the maximum rate of interest permitted to be charged by
applicable law; and if under any circumstance whatsoever, fulfillment of any
provision of this Note, at the time performance of such provision shall be due,
shall involve transcending the limit of validity prescribed by applicable law,
then the obligation to be fulfilled shall be reduced to the limit of such
validity; and in the event Payee ever receives, collects or applies as interest
any such excess, such amount which would be excess interest shall be deemed a
permitted partial prepayment of principal and treated hereunder as such; and if
the principal of the indebtedness secured hereby is paid in full, any remaining
excess funds shall forthwith be paid to Borrower. In determining whether or not
interest of any kind payable hereunder, under any specific contingency, exceeds
the highest lawful rate, Borrower and Payee shall, to the maximum extent
permitted under applicable law, (1) characterize any non-principal payment as an
expense, fee or premium rather than as interest and (2) amortize, prorate,
allocate and spread to the end that the interest on account of such indebtedness
does not exceed the maximum amount permitted by applicable law; provided that if
the amount of interest received for the actual period of existence thereof
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exceeds the maximum lawful rate, Payee shall refund to Borrower the amount of
such excess. Payee shall not be subject to any penalties provided by any laws
for contracting for, charging or receiving interest in excess of the maximum
lawful rate.
(i) Upon the occurrence of an Event of Default, including failure to pay
upon final maturity, Lender, at its option, may also, if permitted under
applicable law, do one or both of the following: (1) increase the applicable
interest rate on this Note 2.00 percentage points, and (b) add any unpaid
accrued interest to principal and such sum will bear interest therefrom until
paid at the rate provided in this Note (including any increased rate). The
interest rate will not exceed the maximum rate permitted by applicable law.
(j) Unless otherwise agreed to, in writing, or otherwise required by
applicable law, payments will be applied first to accrued, unpaid interest, then
to principal, and any remaining amount to any unpaid collection costs, late
charges and other charges; provided, however, upon the occurrence of an Event of
Default, or at any time after the acceleration of any of the Indebtedness (as
defined in the Loan Agreement),Lender reserves the right to apply payments among
principal, interest, late charges, collection costs and other charges at its
discretion. After the occurrence of an Event of Default, or at any time after
the acceleration of any of the Indebtedness (as defined in the Loan Agreement),
all prepayments shall be applied to the indebtedness owing hereunder in such
order and manner as Lender may from time to time determine in its sole
discretion.
2. Default and Remedies.
(a) If an Event of Default shall occur under and as defined in any of
the Notes, the Loan Agreement or any Loan Document (collectively, "Events of
Default"), Payee shall have the option, without demand or notice, to declare the
unpaid principal of this Note, together with all accrued interest and other sums
owing hereunder, at once due and payable. Upon the occurrence of an Event of
Default, Lender may exercise any and all other rights and remedies available in
any Loan Document or at law or in equity.
(b) The remedies of Payee, as provided herein, shall be cumulative and
concurrent, and may be pursued singularly, successively or together, at the sole
discretion of Payee, and may be exercised as often as occasion therefor shall
arise. No act of omission or commission of Payee, including specifically any
failure to exercise any right, remedy or recourse, shall be deemed to be a
waiver or release of the same, such waiver or release to be effected only
through a written document executed by ▇▇▇▇▇ and then only to the extent
specifically recited therein. A waiver or release with reference to any one
event shall not be construed as continuing, as a bar to, or as a waiver or
release of, any subsequent right, remedy or recourse as to a subsequent event.
3. Costs and Attorneys' Fees.
▇▇▇▇▇▇▇▇ promises to pay all costs of collection of every kind, including but
not limited to all reasonable attorneys' fees, court costs, and expenses of
every kind, incurred by Payee in connection with such collection or the
protection or enforcement of any or all of the security for this Note, whether
or not any lawsuit is filed with respect thereto.
4. Waiver.
Except as otherwise provided herein, each maker, surety, guarantor and endorser
hereon waives grace, notice, notice of intent to accelerate, notice of default,
protest, demand, presentment for payment and diligence in the collection of this
Note, and in the filing of suit hereon, and agrees that his or its liability and
the liability of his or its heirs, beneficiaries, successors and assigns for the
payment hereof shall not be affected or impaired by
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any release or change in the security or by any increase, modification, renewal
or extension of the indebtedness or its mode and time of payment. It is
specifically agreed by the undersigned that the Payee shall have the right at
all times to decline to make any such release or change in any security given to
secure the payment hereof and to decline to make any such increase,
modification, renewal or extension of the indebtedness or its mode and time of
payment. This Note shall constitute a joint and several obligation when signed
by more than one party.
5. Nonpermitted Transfers.
The Credit Documents provide that any sale, transfer or other alienation of the
property securing this Note, or any portion thereof or interest therein, other
than as expressly permitted therein, constitutes an Event of Default thereunder
and permits the holder of this Note to invoke any remedies therein provided.
6. Notices.
All notices or other communications required or permitted hereunder shall be (a)
in writing and shall be deemed to be given (i) when delivered in person, (ii)
when received after deposit in a regularly maintained receptacle of the United
States mail as registered or certified mail, postage prepaid, (iii) when
received if sent by private courier service, or (iv) on the day on which the
party to whom such notice is addressed refuses delivery by mail or by private
courier service and (b) addressed as follows:
If to Lender:
National City Bank of the Midwest
▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇, ▇▇▇▇▇▇▇ ▇-▇▇▇-22
PO Box 749
Peoria, IL 61652-0749
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
with copy to:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
If to Debtor:
Pioneer Railcorp
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-1130
Attn: ▇. ▇▇▇▇▇▇▇ ▇▇▇▇
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with copy to:
_________________________
_________________________
_________________________
_________________________
or to each such party at such other addresses as such party may designate in a
written notice to the other parties.
7. Miscellaneous.
(a) The headings of the paragraphs of this Note are inserted for
convenience only and shall not be deemed to constitute a part hereof.
(b) All payments under this Note shall be payable in lawful money of the
United States which shall be legal tender for public and private debts at the
time of payment. Each payment of principal or interest under this Note shall be
paid not later than 2:00 P.M. Peoria, Illinois time on the date due therefor and
funds received after that hour shall be deemed to have been received by Payee on
the following day. Except as otherwise provided herein, all payments (whether of
principal, interest or other amounts) which are applied at any time by Payee to
indebtedness evidenced by this Note may be allocated by Payee to principal,
interest or other amounts as Payee may determine in ▇▇▇▇▇'s sole discretion.
Lender shall notify Borrower when it allocates payments other than to interest
and principal.
(c) This Note shall be governed by and construed under the laws of the
State of Illinois.
8. Severability.
If any provision of this Note or any payments pursuant to the terms hereof shall
be invalid or unenforceable to any extent, the remainder of this Note and any
other payments hereunder shall not be affected thereby and shall be enforceable
to the greatest extent permitted by law.
9. Transfer by Holder.
Payee may assign or sell all of its interest in this Note and all of its rights
and security hereunder.
IN WITNESS WHEREOF, ▇▇▇▇▇▇▇▇ has executed and delivered this Note as of
the date and year first above written.
PIONEER RAILCORP
BY:________________________________
ITS:_______________________________
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EXHIBIT A
APPLICABLE MARGIN GRID
(Basis points per annum)
BASIS FOR PRICING LEVEL I LEVEL II LEVEL III LEVEL IV
--------------------------------------------------------------------------------------------------------------
Funded Debt/EBITDA > or = 3.0:1.0 > or = 2.5:1.0 > or = 2.0:1.0 < 2.0:1.0
Ratio* But < 3.0:1.0 But < 2.5:1.0
--------------------------------------------------------------------------------------------------------------
LIBOR Margin 275.00 250.00 225.00 200.00
--------------------------------------------------------------------------------------------------------------
* As defined in Section 1 of the Loan Agreement.
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PLEDGE AND
SECURITY AGREEMENT
THIS PLEDGE AND SECURITY AGREEMENT is dated as of ______________, 2005,
between Pioneer Railcorp ("Borrower") and National City Bank of the Midwest
("Bank").
1. Grant of Security Interest. Borrower hereby pledges and grants to
Bank a security interest in the following described property and all additions,
accessions and substitutions thereto or therefor ("Collateral"):
a. The following investment property owned by Borrower:
- ___ shares of common stock of Alabama Railroad Co.;
- ___ shares of common stock of Decatur Junction Railway Co.;
- ___ shares of common stock of Elkhart & Western Railroad Co.;
- ___ shares of common stock of Fort ▇▇▇▇▇ Railroad Co.;
- ___ shares of common stock of The Garden City Western Railway
Co.;
- ___ shares of common stock of Gettysburg and Northern Railroad
Co.;
- ___ shares of common stock of Indiana Southwestern Railway Co.;
- ___ shares of common stock of Kendalville Terminal Railway Co.;
- ___ shares of common stock of Keokuk Junction Railway Co.;
- ___ shares of common stock of Michigan Southern Railroad Co.;
- ___ shares of common stock of Mississippi Central Railroad Co.;
- ___ shares of common stock of Pioneer Industrial Railway Co.;
- ___ shares of common stock of Shawnee Terminal Railway Co.;
- ___ shares of common stock of Vandalia Railroad Co.; and
- ___ shares of common stock of West Michigan Railroad Co.;
b. All present and future dividends, distributions, cash
instruments, proceeds, including insurance proceeds, and products
received, and all other right, title and interest of Borrower, with
respect to (a) above.
2. Obligations. Bank and Borrower have entered into a Loan Agreement of
even date herewith (the "Loan Agreement") providing for certain loans from Bank
to Borrower. Bank has required, as a condition to its execution of the Loan
Agreement and its disbursement of said loan, that Borrower grant a security
interest in the Collateral to secure said loans. Accordingly, the security
interest granted hereby is to secure the payment and performance of all of the
liabilities and obligations of Borrower to Bank hereunder and all obligations of
Borrower to Bank described in the Loan Agreement or any other document executed
in connection therewith (all hereinafter called "Obligations").
3. Warranties. Borrower represents and warrants as follows:
a. Borrower is duly organized and existing under the laws of the
jurisdiction of its formation and is duly qualified and in
good standing in every other state in which it is doing
business.
b. The execution, delivery and performance hereof are within
▇▇▇▇▇▇▇▇'s organizational powers, have been duly authorized,
are not in contravention of law or the terms of Borrower's
organizational documents, or of any indenture, agreement or
undertaking to which Borrower is a party or by which it is
bound.
c. Borrower's (i) sole place of business (or its chief executive
office, if it has more than one place of business); and (ii)
the office where it keeps its records concerning the
Collateral is at the address stated in Section 16 of this
Agreement.
d. The Borrower is the sole and absolute owner of the Collateral
free and clear of liens and encumbrances of every kind and
nature except only the lien and encumbrance hereby granted and
created, other liens and encumbrances to Bank and other liens
and encumbrances disclosed in writing to Bank by Borrower.
e. The Borrower has signed no financing statements covering the
above described property, except the financing statements
signed with respect to this Security Agreement, other
financing statements in favor of Bank and the other financing
statements disclosed in writing to Bank by ▇▇▇▇▇▇▇▇.
f. The officer of the Borrower executing this Security Agreement
has been duly elected and qualified and has been duly
authorized and empowered so to execute and deliver this
Security Agreement on behalf of the Borrower.
4. Records. Borrower will at all reasonable times and from time to time
allow Bank by or through any of its officers, agents, employees, attorneys or
accountants, to examine and inspect and make extracts or copies from Borrower's
books and other records to arrange for verification of the Collateral, directly
with account debtors or by other methods. Borrower will furnish to Bank upon
request statements of any account, together with all notes or other papers
evidencing the same and any guaranties, securities or other documents and
information relating thereto; and generally at all times and from time to time
furnish to Bank such statements and information as it may reasonably request.
5. Covenants. The Borrower hereby covenants and agrees with Bank that
so long as the Borrower shall owe any amounts under any of the Obligations to
Bank, the Borrower will from time to time at the request of Bank, do, make,
execute and deliver all such additional and further acts, things, deeds,
assurances and instruments as Bank may require, to more completely vest in and
assure to Bank its rights hereunder and in or to the Collateral and the proceeds
thereof.
6. Financing Statements. At the request of Bank, ▇▇▇▇▇▇▇▇ execute one
or more financing statements pursuant to the Illinois Commercial Code in a form
satisfactory to Bank and will pay the
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cost of filing the same in all public offices wherever filing is deemed by Bank
to be necessary or desirable. Without the written consent of Bank, Borrower will
not allow any financing statement covering any Collateral, proceeds thereof or
any of Borrower's inventory to be on file in any public office. The Borrower
will pay all costs of filing any financing, continuation or termination
statements with respect to the security interest created by this Security
Agreement.
7. Certificates. Borrower warrants that all of the Collateral is
evidenced by certificates which have been delivered to the Bank, and the number
of shares listed for each corporation in Section 1 above constitutes all of the
outstanding shares of capital stock of such company.
8. Control. ▇▇▇▇▇▇▇▇ agrees to take all steps necessary for Bank to
obtain "control" of the Collateral as defined in Section 8-106 of the Illinois
Uniform Commercial Code (810 ILCS 5/8-106), and agrees that it will not allow
any other party to obtain "control" over all or any part of the Collateral.
9. Taxes. All taxes that may be assessed upon or paid by Bank with
respect to any of the Collateral shall be charged to and paid by the Borrower
who agrees to indemnify Bank against loss by reason of any such taxes. The
Borrower will make due and timely payment or deposit of all federal, state and
local taxes, assessments or contributions required of the Borrower by law, and
will execute and deliver to Bank, on demand, appropriate certificates attesting
to the payment or deposit thereof.
10. Proceeds. The proceeds from the sale or other disposition of the
Collateral that are delivered by Borrower to Bank, or the net sums collected
directly by Bank, after first deducting all costs of collection, shall be
credited against the amount owed by ▇▇▇▇▇▇▇▇.
11. Default.
a. If Borrower fails to pay when due to Bank any amount payable
on any Obligations, or fails to observe or perform any of the
covenants and warranties in this Security Agreement, or if an
event of default occurs under the Loan Agreement or any
document or agreement executed in connection therewith,
Borrower shall be in default.
b. In addition, at the election of Bank and without necessity of
demand or notice, all or any part of the indebtedness of
Borrower secured hereby shall become immediately due and
payable, irrespective of any agreed maturity date, on the
occurrence of any of the following events of default:
(i) Any warranty, representation, financial statement, or
other information made, given, or furnished to Bank by
or on behalf of Borrower shall prove to have been untrue
in any material respect when made, given, or furnished;
or
(ii) The issuance or filing of any attachment, levy,
garnishment, or other judicial process of or on Borrower
or any of the Collateral; or
(iii) The sale or other disposition by Borrower of any
substantial portion of its assets or property, except in
the ordinary course of business; or, dissolution,
termination of existence, insolvency, business failure,
or assignment for the benefit of creditors of or by
Borrower; or commencement of any proceedings under any
state or federal bankruptcy or insolvency laws by or
against Borrower; or the
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appointment of a receiver or trustee for all or any
party of the property of ▇▇▇▇▇▇▇▇.
12. Remedies. On any such default or election by Bank under this
agreement, and at any time thereafter:
a. Bank may declare all Obligations secured under this Security
Agreement immediately due and payable and may proceed to
enforce payment and exercise any and all of the rights and
remedies provided by the Illinois Commercial Code, as well as
any and all other rights and remedies possessed by Bank.
b. Bank shall have the right to take immediate possession of the
Collateral, and for that purpose may pursue the same wherever
the Collateral may be found.
c. Bank may sell at public or private sale, for such price as
Bank may deem fair, any and all of the Collateral and any
other security or property held by Bank. Bank may be the
purchaser of the Collateral or other property or security so
sold and may hold the Collateral thereafter in its own right
absolutely against any claims of Borrower or right of
redemption.
d. In the case of public sale, notice shall be deemed to be
adequate and reasonable if such notice appears three (3) times
in a newspaper published in the City or County wherein the
sale is to be held, the first such publication being at least
ten (10) days before such sale. In the case of a private sale,
notice shall be deemed to be adequate and reasonable if such
notice is mailed to the Borrower at its last known address at
least ten (10) days before such sale.
e. The net proceeds of any sale or sales shall be applied against
the amount owed Bank by Borrower and any other indebtedness of
Borrower to Bank. Borrower shall forthwith pay to Bank any
deficiency on demand of Bank and shall be entitled to any
surplus resulting from such sale or sales. Demand of
performance, advertisement, and presence of the Collateral at
sale are hereby waived by Borrower. All demands and
presentments of every kind or nature are expressly waived by
▇▇▇▇▇▇▇▇.
f. Bank may require Borrower to assemble the Collateral at a
place mutually convenient to Bank and Borrower at the expense
of Borrower.
13. Expenses. Borrower shall pay to Bank on demand any and all expenses,
including legal expenses and reasonable attorneys' fees, reasonably incurred or
expended by Bank in the recovery and sale or attempted recovery and sale of
Collateral and in protecting and enforcing the Obligations and other rights of
Bank hereunder.
14. Termination. This Security Agreement shall be terminable only by the
filing of a termination statement in accordance with applicable provisions of
the Illinois Commercial Code. Until terminated, the security interest created
hereunder shall continue in full force and effect and shall secure and be
applicable to all advances now or hereafter made by Bank to Borrower, whether or
not Borrower is indebted to Bank immediately prior to the time of any such
advance. Any termination of this Security Agreement by either party shall not
affect the obligation of Borrower or Bank with respect to accounts assigned by
Borrower to Bank prior to such termination.
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15. Applicable Law.
a. The validity of this Security Agreement and any provision
hereof shall be determined under and shall be construed
according to the Illinois Commercial Code and other applicable
laws of the State of Illinois, and all duties of the parties
created under this Security Agreement are performable in the
State of Illinois.
b. Unless otherwise defined, all terms used in this Security
Agreement that are defined in the Illinois Commercial Code
shall have the same meaning in this Security Agreement as
therein defined.
16. Notices. All notices provided for herein shall be in writing and
shall be deemed to have been given when delivered personally or when deposited
in the United States mail, postage prepaid, addressed as follows, or to such
other address as may hereafter be designated in writing by the respective
parties hereto:
If to Lender:
National City Bank of the Midwest
▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇, ▇▇▇▇▇▇▇ ▇-▇▇▇-22
PO Box 749
Peoria, IL 61652-0749
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
with copy to:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
If to Debtor:
Pioneer Railcorp
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-1130
Attn: ▇. ▇▇▇▇▇▇▇ ▇▇▇▇
with copy to:
__________________________________
__________________________________
__________________________________
__________________________________
17. No Waiver. The failure of Bank to exercise any right or remedy,
including acceptance by Bank of partial or delinquent payments, shall not
constitute a waiver of any obligation from Borrower or right of Bank or
constitute a waiver of any other similar default occurring subsequently.
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18. Intent. This Security Agreement expresses the entire understanding
of the parties and may not be altered or amended except with the written consent
of each of the parties and except as provided in any other written document
signed and delivered by Borrower to Bank.
19. Successors and Assigns. This Security Agreement shall be binding
upon and inure to the benefit of the Borrower and Bank and their respective
successors and assigns.
NATIONAL CITY BANK OF THE MIDWEST PIONEER RAILCORP
BY:__________________________________ BY:_________________________
ITS:_________________________________ ITS:________________________
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GUARANTY
THIS GUARANTY is dated as of ___________________, 2005 by
_________________ ("Guarantor"), in favor of National City Bank of the Midwest
("Lender").
R E C I T A L S:
WHEREAS, on or as of the date hereof, ▇▇▇▇▇▇ has made two loans (the
"Loans") to Pioneer Railcorp ("Borrower"), one a term loan in the amount of
$16,000,000 and the other a revolving credit facility in the amount of
$2,000,000, both evidenced by promissory notes of even date herewith (the
"Notes"), all pursuant to a Loan Agreement between Borrower and Lender of even
date herewith (the "Loan Agreement"); and
WHEREAS, ▇▇▇▇▇▇▇▇ is the owner of 100% of the capital stock of Guarantor;
and
WHEREAS, the execution of the Loan Agreement and the disbursement of the
Loans will benefit Guarantor by _________________________________; and
WHEREAS, as a material inducement to Lender to make the Loans, Guarantor
has agreed to make this Guaranty;
NOW, THEREFORE, in consideration of the foregoing premises, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Guarantor hereby agrees as follows:
1. Guaranty. Guarantor hereby absolutely and unconditionally guarantees
the punctual payment when due, whether at stated maturity, by acceleration or
otherwise, of the aggregate outstanding unpaid principal amount of the Notes
together with all accrued and unpaid interest on the Notes and all other amounts
due to Lender under the Notes, under the Loan Agreement or under any other
documents and instruments executed and delivered to Lender in order to evidence
or secure the Loans (the "Collateral Documents"), and any and all extensions,
renewals or modifications of any of the foregoing (such principal, interest and
other amounts are hereinafter referred to collectively as the "Obligations"). In
addition, Guarantor shall pay any and all fees, costs and expenses (including
attorneys' fees) incurred by ▇▇▇▇▇▇, at any time prior or subsequent to default,
whether litigation is involved or not, and if involved, whether at the trial or
appellate levels or in pre- or post-judgment or bankruptcy proceedings, in
enforcing or realizing upon the obligations of Guarantor hereunder. The
Obligations, Notes, Loan Agreement, Collateral Documents and any instrument,
document or agreement, express or implied, which has been or may hereafter be
made or entered into by the Borrower or the Guarantor in reference to the
Obligations shall all be hereinafter collectively referred to as the "Terms."
2. Guaranty Absolute. Guarantor guarantees that the Obligations will be
paid and performed strictly in accordance with the terms and provisions of the
Terms, regardless of any law, regulation, order or judgment now or hereafter in
effect in any jurisdiction affecting any of the Terms or the rights of Lender
with respect thereto. The liability of Guarantor under this Guaranty shall
continue and be absolute and unconditional irrespective of:
(a) Any lack of validity or enforceability of any of the Terms;
(b) Any change in the time, manner or place of payment of, or in
any other term, including the applicable rate of interest, of, all or any
of the Terms, or any other renewal, extension, amendment, modification or
waiver of or any consent to departure from any of the Terms;
(c) Any act or omission of Lender of any nature whatsoever,
excluding any willful or wanton misconduct or gross negligence on the part
of Lender;
(d) With respect to the Guarantor, the Borrower or any other
person or entity liable in respect of the Borrower, any failure to obtain
required authorization by all necessary corporate or other action relating
to the incurring by the Borrower of the Obligations or to the execution,
delivery, or performance of any of the Terms, or to any violation of any
provision of any organizational documents, or any other document,
instrument or agreement occasioned by the incurring of the Terms, by the
execution, delivery or performance of any of the Terms, or by any failure
of same to have been duly authorized by all necessary corporate or other
action;
(e) Any release (other than a release of Guarantor from this
Guaranty), amendment, waiver, modification, extension or renewal of or
consent to departure from or forbearance of any other action or inaction
under or in respect of this Guaranty or any other of the Terms;
(f) Any exchange, release, forbearance or surrender of or any
other action or inaction with respect to any collateral at any time and
from time to time now or hereafter securing any or all of the Obligations
or Terms or the liability of the Borrower, the Guarantor or any other
person or entity in respect of all or any of the Terms or any failure to
perfect or continue as perfected any security interest or other lien with
respect to any such collateral, or any loss or destruction of any such
collateral, or any matter impairing the value of such collateral as
security for all or any of the Terms or the liability of the Guarantor or
any other person or entity in respect of all or any of the Obligations or
Terms; or
(g) Any other circumstance or matter of any nature whatsoever that
might otherwise constitute a defense (other than payment) available to, or
a discharge of, the Borrower, the Guarantor or any other person or entity
liable to Lender in respect of any of the Terms which arises out of the
bankruptcy or insolvency of the Borrower. This Guaranty shall continue to
be effective or shall be reinstated, as the case may be, regardless of
whether any payment of any of the Obligations is rescinded or must
otherwise be returned by Lender upon the insolvency, bankruptcy or
reorganization of any person or entity or for any reason whatsoever, all
as though such payment had not been made. The Obligations of Guarantor
hereunder shall be absolute and primary, shall be complete and binding as
to Guarantor upon its execution of this Guaranty, shall be subject to no
conditions precedent, and shall be independent of and cumulative to any
other of the Terms, and Lender may exercise any of its rights and remedies
under this Guaranty, any other of the Terms or otherwise singly or
concurrently.
3. Waiver; No Duties. Guarantor waives: (a) all statutes of limitations
as a defense to any action brought against Guarantor by Lender; (b) any defense
based upon any legal disability of the Borrower or any discharge or limitation
of the liability of the Borrower to Lender, whether consensual or arising by
operation of law or any bankruptcy, insolvency or debtor-relief proceeding, or
from any other cause; (c) promptness, diligence, presentment, demand, protest
and notice of any kind; (d) any defense based upon or arising out of any defense
which the Borrower may have to the payment or performance of any part of the
Obligations which arises out of the bankruptcy or insolvency of the Borrower;
and (e) all rights of subrogation and all rights to participate in any security
held by Lender for the Obligations, until
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the Obligations have been paid in full. Lender shall not be obligated to exhaust
any right or take any action against the Borrower or any other person or entity
or any collateral for the Terms prior to the enforcement of its rights
hereunder. Lender shall not be required to obtain the consent of the Guarantor
with respect to any matter.
4. Warranties. Guarantor makes the following representations and
warranties to Lender:
(a) Ownership. Borrower is the record and beneficial owner of 100%
of the capital stock of Guarantor, and there are no other shareholders of
Guarantor or persons or entities which have any rights to become
shareholders of Guarantor.
(b) Authorization and Validity. Guarantor has all necessary power
and authority to make, execute, deliver and consummate this Guaranty, and
to perform his obligations, undertakings and agreements to be observed and
performed hereunder.
(c) No Conflict. The execution and delivery of this Guaranty by
Guarantor does not, and the consummation by Guarantor of the transactions
contemplated hereby will not, violate or result, with the giving of notice
or the lapse of time or both, in a violation of any provisions of, or
result in the acceleration of or entitle any party to accelerate (whether
after the giving of notice, or lapse of time or both) any obligation under
any mortgage, lien, lease, agreement, license, instrument, law, ordinance,
regulation, order, arbitration award, judgment or decree to which
Guarantor is a party, and the same does not and will not constitute an
event permitting termination of any lease, agreement, license or
instrument to which Guarantor is a party which will materially affect the
performance of Guarantor's obligations hereunder.
(d) Litigation. There are no actions, suits or proceedings
pending, or to the knowledge of Guarantor threatened against or adversely
affecting Guarantor at law or in equity or before or by a governmental
agency or instrumentality, domestic or foreign, which involve any of the
transactions herein contemplated, or the possibility of any judgment or
liability which may result in any material and adverse change in the
financial condition of Guarantor. Guarantor is not in default with respect
to any judgment, order, writ, injunction, decree, rule or regulation of
any court or governmental agency.
(e) Enforceability. This Guaranty is a legal, valid and binding
obligation of Guarantor, enforceable in accordance with its terms, except
as enforceability may be limited by applicable bankruptcy, insolvency or
similar laws affecting the rights of creditors generally.
(f) Financial Statements. The financial statements and other
financial information furnished by Guarantor to Lender are correct and
complete and accurately present the financial condition of Guarantor at
and for the periods covered therein; said financial statements have been
prepared in conformity with generally accepted accounting principles
applied on a consistent basis except as indicated on said financial
statements; and since the respective periods covered by such financial
statements, there has been no material adverse change in the financial
condition of Guarantor.
5. Delivery of Financial Statements. Guarantor covenants and agrees
that from the date hereof and so long as any of the Obligations remains
outstanding and unpaid and unperformed, Guarantor will furnish to Lender as soon
as available, but in any event no later than April 1 of each year, a copy of the
current financial statements of Guarantor as of the end of the last calendar
year, certified to be true and correct by Guarantor, and in form and substance
acceptable to Lender.
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6. Notices. All notices or other communications required or permitted
hereunder shall be (a) in writing and shall be deemed to be given (i) when
delivered in person; (ii) when received after deposit in a regularly maintained
receptacle of the United States mail as registered or certified mail, postage
prepaid; (iii) when received if sent by private courier service; or (iv) on the
day on which the party to whom such notice is addressed refuses delivery by mail
or by private courier service; and (b) addressed as follows:
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If to Lender:
National City Bank of the Midwest
▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇, ▇▇▇▇▇▇▇ ▇-▇▇▇-22
PO Box 749
Peoria, IL 61652-0749
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
with copy to:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
If to Debtor:
Pioneer Railcorp
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-1130
Attn: ▇. ▇▇▇▇▇▇▇ ▇▇▇▇
with copy to:
____________________________
____________________________
____________________________
____________________________
or to any such other address as any party hereto shall designate in a written
notice to the other parties hereto.
7. No Waiver; Cumulative Remedies. Lender may, at any time and from
time to time, waive or not insist on strict compliance with any one or more of
the provisions contained in this Guaranty or any document relating to this
Guaranty, but any such waiver or non-insistence shall not be considered a waiver
or non-insistence of such provision in any other instance or any other
circumstance, OR AS CREATING A REQUIREMENT THAT LENDER MUST, AS A RESULT OF A
PREVIOUS WAIVER OR NON-INSISTENCE, THEREAFTER GIVE NOTICE TO THE BORROWER,
GUARANTOR, OR ANY OTHER PERSON OR ENTITY THAT IT DOES NOT INTEND TO GIVE A
FURTHER WAIVER OR NOT INSIST UPON STRICT PERFORMANCE BEFORE LENDER CAN EXERCISE
ANY RIGHTS OR REMEDIES UNDER ANY DOCUMENT OR BEFORE ANY EVENTS OF DEFAULT OR
DEFAULTS CAN OCCUR, WHETHER OCCASIONED BY THE PROVISION PREVIOUSLY WAIVED OR NOT
INSISTED UPON OR OTHERWISE, OR AS ESTABLISHING A COURSE OF DEALING FOR
INTERPRETING THE EXPRESSIONS AND OTHER CONDUCT BETWEEN LENDER AND THE BORROWER,
GUARANTOR OR ANY OTHER PERSON OR ENTITY. The remedies provided herein and in the
other documents executed contemporaneously herewith and referred to herein shall
be
5
cumulative, may be exercised from time to time, singularly or concurrently or in
any combination, without Lender being obligated to exercise any such right in
any other circumstance, and are not exclusive of any remedies provided by law.
8. Continuing Guaranty; Transfer. This Guaranty is a continuing
guaranty and shall:
(a) Remain in full force and effect until the Obligations have
been fully discharged at which time this Guaranty shall terminate;
(b) Be binding upon Guarantor, and its successors and assigns,
provided, however, Guarantor may not assign any of its rights and
obligations hereunder without the prior written consent of ▇▇▇▇▇▇; and
(c) Inure to the benefit of and be enforceable by ▇▇▇▇▇▇ and its
successors, transferees, participants, and assigns. Without limiting the
generality of this clause, Lender may assign or otherwise transfer any of
the Obligations (in compliance with the terms of the Notes) and/or any of
the Terms to any other person or entity, and such other person or entity
shall thereupon become vested with all the rights in respect thereof
granted to Lender herein or otherwise.
9. Governing Law. This Guaranty shall be governed by, and construed in
accordance with, the laws of the State of Illinois without regard to principles
of conflict of laws. Guarantor hereby waives any plea of jurisdiction or venue
as not being a resident of Peoria County, Illinois and hereby specifically
authorizes any action brought by Lender upon this Guaranty to be instituted and
prosecuted in either the Circuit Court of Peoria County, Illinois or in the
United States District Court for the Central District of Illinois, at the
election of Lender. Guarantor hereby irrevocably authorizes service of process
to be made upon it at the address given and in the manner provided in Paragraph
6 above, in any action which may be instituted against it arising out of or
relating to this Guaranty.
10. Headings. Paragraph headings in this Guaranty are included herein
for convenience of reference only and shall not constitute a part of this
Guaranty for any other purpose.
IN WITNESS WHEREOF, ▇▇▇▇▇▇▇▇▇ has caused this Guaranty to be executed and
delivered on the date and year first above written.
________________________________
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SECURITY AGREEMENT
This Security Agreement is dated as of ______________, 2005 between
_______________, a ____________________ ("Debtor"), and National City Bank of
the Midwest ("Lender").
1. Description of Collateral. Debtor hereby grants to Lender a security
interest in the following described assets and any and all additions, accessions
and substitutions thereto or therefor (collectively referred to as the
"Collateral").
a. All equipment, machinery, furniture, furnishings, and any and
all other tangible personal property, and all additions, accessions and
substitutions thereto or therefor now owned or hereafter acquired by the
Borrower (collectively referred to as "Equipment");
b. All accounts receivable, contract rights, chattel paper,
documents, instruments, general intangibles, as such term is defined in
the Illinois Uniform Commercial Code (810 ILCS 5/1-101 et. seq.) as in
effect from time to time, all accounts, as such term is defined in the
Illinois Uniform Commercial Code as in effect from time to time, and other
forms of obligation and other rights to the payment of money, now owned or
which may hereafter arise in favor of the Borrower (hereinafter called
"Accounts");
c. All of the Borrower's inventory, including all goods,
merchandise, materials, raw materials, work in process, finished goods and
other tangible personal property now owned or hereafter acquired and held
for sale or lease or furnished or to be furnished under contracts of
services or used or consumed in the Borrower's business, and any documents
of title representing any thereof (hereinafter called "Inventory");
d. All fixtures, fittings, appliances, apparatus, equipment,
machinery, furniture and furnishings, and all other personal property now
owned or hereafter acquired or at any time hereafter annexed, affixed or
attached to any of the real property described in Exhibit A (hereinafter
called "Fixtures");
e. All deposit accounts of Debtor with ▇▇▇▇▇▇; and
f. All proceeds, including insurance proceeds, and products of
(a), (b), (c), (d) and (e) above.
2. Obligations. The security interest granted hereby is to secure the
payment and performance of all of the liabilities and obligations of Debtor to
Lender hereunder and also any and all other obligations of Pioneer Railcorp
("Pioneer") to Lender described in the Loan Agreement between Pioneer and Lender
of even date herewith (all hereinafter called "Obligations").
3. Warranties. Debtor represents and warrants as follows:
a. Debtor is duly organized and existing under the laws of the
State of its incorporation and is duly qualified and in good standing in
every other state in which it is doing business. The exact name of ▇▇▇▇▇▇
is correctly stated in the first paragraph of this Agreement.
b. The execution, delivery and performance hereof are within
Debtor's corporate powers, have been duly authorized, are not in
contravention of law or the terms of Debtor's
organizational documents, or of any indenture, agreement or undertaking to
which Debtor is a party or by which it is bound.
c. Debtor's (i) sole place of business (or its chief executive
office, if it has more than one place of business); and (ii) the office
where it keeps its records concerning the Collateral is at the address
stated in Section 17 of this Agreement.
d. The Debtor is the sole and absolute owner of the Collateral
free and clear of liens and encumbrances of every kind and nature except
only the lien and encumbrance hereby granted and created, other liens and
encumbrances to Lender and other liens and encumbrances disclosed in
writing to Lender by Debtor.
e. The Debtor has signed no financing statements covering the
above described property, except the financing statements signed with
respect to this Security Agreement, other financing statements in favor of
▇▇▇▇▇▇ and the other financing statements disclosed in writing to Lender
by ▇▇▇▇▇▇.
f. The officers of the Debtor executing this Security Agreement
have been duly elected and qualified and have been duly authorized and
empowered so to execute and deliver this Security Agreement on behalf of
the Debtor.
4. Records. Debtor will at all reasonable times and from time to time
allow Lender by or through any of its officers, agents, employees, attorneys or
accountants, to examine and inspect and make extracts or copies from Debtor's
books and other records to arrange for verification of the Collateral, directly
with account debtors or by other methods. Debtor will furnish to Lender upon
request statements of any account, together with all notes or other papers
evidencing the same and any guaranties, securities or other documents and
information relating thereto; and generally at all times and from time to time
furnish to Lender such statements and information as it may reasonably request.
5. Covenants. The Debtor hereby covenants and agrees with Lender that
so long as the Debtor shall owe any amounts under any of the Obligations to
Lender, the Debtor will:
a. Maintain the Collateral in good working order, condition and
repair;
b. Keep the Collateral in its possession and control, and within
the continental United States;
c. Provide to Lender from time to time, upon the request of the
Lender, a listing of the Collateral specifying the physical location and
the then condition of each item thereof;
d. From time to time at the request of ▇▇▇▇▇▇, do, make, execute
and deliver all such additional and further acts, things, deeds,
assurances and instruments as Lender may require, to more completely vest
in and assure to Lender its rights hereunder and in or to the Collateral
and the proceeds thereof;
e. Immediately notify Lender in writing of the opening of any new
office or place of business or the closing of any of its existing offices
or places of business and of any change in the location of its chief
executive office or the places where its records concerning the Collateral
are kept; and
f. Maintain the existence of Debtor as described in Section 3a
above, and not change any of the matters stated in said Section without
the written consent of ▇▇▇▇▇▇.
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6. Financing Statements. At the request of ▇▇▇▇▇▇, Debtor shall execute
one or more financing statements pursuant to the Illinois Commercial Code in a
form satisfactory to Lender and will pay the cost of filing the same in all
public offices wherever filing is deemed by Lender to be necessary or desirable.
Without the written consent of Lender, Debtor will not allow any financing
statement covering any Collateral, proceeds thereof or any of Debtor's inventory
to be on file in any public office. The Debtor will pay all costs of filing any
financing, continuation or termination statements with respect to the security
interest created by this Security Agreement.
7. Accounts.
a. ▇▇▇▇▇▇ authorizes Debtor to collect any and all amounts owing
on all Accounts subject to this agreement, and Debtor shall use its best
efforts to effect the prompt collection of such Accounts. The Lender may,
at its election, notify any debtor on any Account of the assignment
thereof and effect collection of any Account directly from the debtor
obligated thereon. Lender shall have full power to collect, compromise,
endorse, sell or otherwise deal with the accounts or proceeds thereof in
its own name or that of Debtor.
b. Debtor hereby irrevocably appoints Lender, or any person
designated by Lender, its attorney in fact to receive, open and dispose of
all mail addressed to Debtor, to endorse the name of Debtor on any notes,
acceptances, checks, drafts, money orders or other remittances, to endorse
the name of Debtor on any invoice, freight or express bill or bill of
lading, storage receipt, warehouse receipt or other instrument or document
in respect to any account subject to this agreement, to sign the name of
▇▇▇▇▇▇ to drafts against account debtors, assignments or verifications of
Accounts subject to this agreement and notices to account debtors, and to
do all other acts and things necessary to carry out the intent of this
Security Agreement. The authority granted Lender shall remain in full
force and effect until all Accounts subject to this Security Agreement
have been paid in full.
c. Upon request of Lender at any time, ▇▇▇▇▇▇ will notify such
account debtors and will indicate on all ▇▇▇▇▇▇▇▇ to such account debtors
that the Accounts are payable to Lender. Any proceeds of Accounts
thereafter received by Debtor shall be turned over to Lender daily in the
exact form in which they are received.
d. The Debtor will not, without the written consent of Lender,
grant any extension of the time of payment of the Accounts, compromise,
compound and settle the same for less than the full amount thereof,
release, wholly or partly, any person liable for the payment thereof or
allow any credit or discount whatsoever thereon, other than trade
discounts specifically noted at the time of assignment.
e. The Debtor will deliver to Lender all original and other
documents evidencing, and relating to, the sale and delivery of
merchandise or the performance of labor or services which created the
Accounts, including, but not limited to, all original orders, invoices and
shipping receipts.
f. Lender shall have the right, at the Debtor's expense, to make
test verifications of all Accounts in any manner and through any medium
Lender considers advisable, and the Debtor agrees to furnish all such
assistance and information as Lender may require in connection therewith.
g. The Debtor will furnish to Lender, at the Debtor's expense,
the following reports: reconciliation of all Accounts; an aging of all
Accounts; trial balances; a test
3
verification of all Accounts; and such other reports and information
relating to the Accounts as Lender may request. All reports shall be in
form satisfactory to Lender and shall be furnished to Lender at such times
as Lender may request.
h. The Debtor will stamp, in form and manner satisfactory to
Lender, the Debtor's accounts ledger and other books and records
pertaining to the Accounts with an appropriate reference to the fact that
the Accounts and the proceeds thereof have been assigned to Lender.
8. Inventory. Lender shall have the right at all times to immediate
possession of all Inventory and its products and proceeds, and to inspect the
Inventory and the Debtor's records pertaining thereto. None of the Inventory
shall be removed or disposed without ▇▇▇▇▇▇'s written consent, except to bona
fide purchasers thereof in the ordinary course of the Debtor's business. Upon
▇▇▇▇▇▇'s request, the Debtor will:
a. From time to time, at the Debtor's expense, pledge and deliver
the Inventory to Lender or to a third party as ▇▇▇▇▇▇'s bailee; to hold
the same in trust for ▇▇▇▇▇▇'s account; or store the same in a warehouse
or warehouses in Lender's name; or deliver to Lender documents of title
representing the same; or evidence ▇▇▇▇▇▇'s security interest in the
Inventory and the proceeds and products thereof in such other manner as
may be acceptable to Lender.
b. Remove or dispose of Inventory (whether or not to bona fide
purchasers in the ordinary course of the Debtor's business) only on orders
approved by ▇▇▇▇▇▇ in writing.
c. Report all sales of Inventory to Lender in a form satisfactory
to Lender at such times as Lender may request.
9. Insurance. The Debtor shall insure at its expense, and keep insured
by solvent insurers, all Collateral in such amounts as similar goods are usually
insured by companies similarly situated, against loss or damage of the kinds
usually insured against by companies similarly situated, and upon Lender's
request, the policies evidencing such insurance shall be duly endorsed in
Lender's favor and certificates evidencing such insurance shall be provided to
Lender. If the Debtor defaults in this regard, Lender shall have the right to
insure and charge the cost to the Debtor. Lender assumes no risk or
responsibility in connection with the payment or non-payment of losses, the only
responsibility of Lender being to credit the Debtor with any insurable payments
received on account of losses.
10. Taxes. All taxes that may be assessed upon or paid by ▇▇▇▇▇▇ with
respect to any of the Collateral shall be charged to and paid by the Debtor who
agrees to indemnify Lender against loss by reason of any such taxes. The Debtor
will make due and timely payment or deposit of all federal, state and local
taxes, assessments or contributions required of the Debtor by law, and will
execute and deliver to Lender, on demand, appropriate certificates attesting to
the payment or deposit thereof.
11. Proceeds. The proceeds from the sale or other disposition of the
Collateral that are delivered by Debtor to Lender, or the net sums collected
directly by ▇▇▇▇▇▇, after first deducting all costs of collection, shall be
credited against the amount owed by ▇▇▇▇▇▇.
12. Default.
a. If Debtor fails to pay when due to Lender any amount payable
on any Obligations, or fails to observe or perform any of the covenants
and warranties in this Security Agreement or in any loan agreement with
Lender, Debtor shall be in default.
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b. In addition, at the election of Lender and without necessity
of demand or notice, all or any part of the indebtedness of Debtor secured
hereby shall become immediately due and payable, irrespective of any
agreed maturity date, on the occurrence of any of the following events of
default:
(i) Any warranty, representation, financial statement, or
other information made, given, or furnished to Lender by or on
behalf of Debtor shall prove to have been untrue in any material
respect when made, given, or furnished; or
(ii) The issuance or filing of any attachment, levy,
garnishment, or other judicial process of or on Debtor or any of the
Collateral; or
(iii) The sale or other disposition by Debtor of any
substantial portion of its assets or property, except in the
ordinary course of business; or, dissolution, termination of
existence, insolvency, business failure, or assignment for the
benefit of creditors of or by Debtor; or commencement of any
proceedings under any state or federal Bankruptcy or insolvency laws
by or against Debtor; or the appointment of a receiver or trustee
for all or any party of the property of Debtor.
13. Remedies. On any such default or election by ▇▇▇▇▇▇ under this
agreement, and at any time thereafter:
a. Lender may declare all Obligations secured under this Security
Agreement immediately due and payable and may proceed to enforce payment
and exercise any and all of the rights and remedies provided by the
Illinois Commercial Code, as well as any and all other rights and remedies
possessed by ▇▇▇▇▇▇.
b. Lender shall have the right to take immediate possession of
the Collateral, and for that purpose may pursue the same wherever the
Collateral may be found, and may enter upon any of the premises of the
Debtor with or without force or process of law, wherever the Collateral
may be or may be supposed to be, and search for the same, and, if found,
take possession of and remove the Collateral, or any part thereof. The
Debtor shall, upon ▇▇▇▇▇▇'s request, assemble the Collateral and make the
Collateral available to Lender at any place designated by Lender which is
reasonably convenient to the Debtor.
c. Lender may sell at public or private sale, for such price as
Lender may deem fair, any and all of the Collateral and any other security
or property held by Lender. Lender may be the purchaser of the Collateral
or other property or security so sold and may hold the Collateral
thereafter in its own right absolutely against any claims of Debtor or
right of redemption.
d. In the case of public sale, notice shall be deemed to be
adequate and reasonable if such notice appears three (3) times in a
newspaper published in the City or County wherein the sale is to be held,
the first such publication being at least ten (10) days before such sale.
In the case of a private sale, notice shall be deemed to be adequate and
reasonable if such notice is mailed to the Debtor at its last known
address at least ten (10) days before such sale.
e. The net proceeds of any sale or sales shall be applied against
the amount owed Lender by Debtor and any other indebtedness of Debtor to
Lender. Debtor shall forthwith pay to Lender any deficiency on demand of
Lender and shall be entitled to any surplus resulting from such sale or
sales. Demand of performance, advertisement, and presence of the
Collateral
5
at sale are hereby waived by ▇▇▇▇▇▇. All demands and presentments of every
kind or nature are expressly waived by ▇▇▇▇▇▇.
f. Lender may require Debtor to assemble the Collateral at a
place mutually convenient to Lender and Debtor at the expense of Debtor.
14. Expenses. Debtor shall pay to Lender on demand any and all expenses,
including legal expenses and reasonable attorneys' fees, reasonably incurred or
expended by ▇▇▇▇▇▇ in the recovery and sale or attempted recovery and sale of
Collateral and in protecting and enforcing the Obligations and other rights of
Lender hereunder.
15. Termination. This Security Agreement shall be terminable only by the
filing of a termination statement in accordance with applicable provisions of
the Illinois Commercial Code. Until terminated, the security interest created
hereunder shall continue in full force and effect and shall secure and be
applicable to all advances now or hereafter made by Lender to Debtor, whether or
not Debtor is indebted to Lender immediately prior to the time of any such
advance. Any termination of this Security Agreement by either party shall not
affect the obligation of Debtor or Lender with respect to accounts assigned by
Debtor to Lender prior to such termination.
16. Applicable Law.
a. The validity of this Security Agreement and any provision
hereof shall be determined under and shall be construed according to the
Illinois Commercial Code and other applicable laws of the State of
Illinois, and all duties of the parties created under this Security
Agreement are performable in the State of Illinois.
b. Unless otherwise defined, all terms used in this Security
Agreement that are defined in the Illinois Commercial Code shall have the
same meaning in this Security Agreement as therein defined.
17. Notices. All notices provided for herein shall be in writing and
shall be deemed to have been given when delivered personally or when deposited
in the United States mail, postage prepaid, addressed as follows, or to such
other address as may hereafter be designated in writing by the respective
parties hereto:
If to Lender:
National City Bank of the Midwest
▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇, ▇▇▇▇▇▇▇ ▇-▇▇▇-22
PO Box 749
Peoria, IL 61652-0749
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
with copy to:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
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If to Debtor:
Pioneer Railcorp
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-1130
Attn: ▇. ▇▇▇▇▇▇▇ ▇▇▇▇
with copy to:
_____________________________
_____________________________
_____________________________
_____________________________
18. No Waiver. The failure of Lender to exercise any right or remedy,
including acceptance by Lender of partial or delinquent payments, shall not
constitute a waiver of any obligation from Debtor or right of Lender or
constitute a waiver of any other similar default occurring subsequently.
19. Intent. This Security Agreement expresses the entire understanding
of the parties and may not be altered or amended except with the written consent
of each of the parties and except as provided in any other written document
signed and delivered by Debtor to Lender.
20. Successors and Assigns. This Security Agreement shall be binding
upon and inure to the benefit of the Debtor and ▇▇▇▇▇▇ and their respective
successors and assigns.
____________________________________ NATIONAL CITY BANK OF THE MIDWEST
BY:_________________________________ BY:______________________________
ITS:________________________________ ITS:_____________________________
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LOAN AGREEMENT
This Loan Agreement is dated as of _________________, 2005 between
National City Bank of the Midwest ("Bank") and Pioneer Railcorp, an Iowa
corporation ("Pioneer"); and is acknowledged by Alabama Railroad Co., an
________________ corporation ("ALAB"), Decatur Junction Railway Co., an
________________ corporation ("DT"), Elkhart & Western Railroad Co., an
________________ corporation ("EWR"), Fort ▇▇▇▇▇ Railroad Co., an
________________ corporation ("FSR"), The Garden City Western Railway Co., an
________________ corporation ("GCW"), Gettysburg and Northern Railroad Co., an
________________ corporation ("GET"), Indiana Southwestern Railway Co., an
________________ corporation ("ISW"), Kendalville Terminal Railway Co., an
________________ corporation ("KTR"), Keokuk Junction Railway Co., an
________________ corporation ("KJRY"), Michigan Southern Railroad Co., an
________________ corporation ("MSO"), Mississippi Central Railroad Co., an
________________ corporation ("MSCI"), Pioneer Industrial Railway Co., an
________________ corporation ("PRY"), Shawnee Terminal Railway Co., an
________________ corporation ("STR"), Vandalia Railroad Co., an ________________
corporation ("VRRC"), West Michigan Railroad Co., an ________________
corporation ("WMI") and Pioneer Railroad Equipment Co., Ltd., an ______________
corporation ("PRE") (collectively, the "Guarantors"). Pioneer and the Guarantors
are collectively referred to as the "Borrowers".
ARTICLE I
THE LOANS
Section 1.01: Agreement to Borrow and Lend. Bank agrees to extend to
Pioneer, and Pioneer agrees to accept from the Bank, the obligations described
in Sections 1.02 and 1.03 of this Agreement, all on the terms and conditions set
forth in this Agreement.
Section 1.02: Term Loan. Upon the execution of this Agreement, and
on the terms and subject to the conditions set forth herein and in the Term
Note, Bank shall make the Term Loan to Pioneer in the amount of $16,000,000. The
Term Loan shall bear interest and shall be repaid as set forth in the Term Note.
Section 1.03: Revolving Credit Facility. Upon the execution of this
Agreement, and on the terms and subject to the conditions set forth herein and
in the Revolving Credit Note, Bank shall make the Revolving Credit Facility
available to Pioneer in the amount of $2,000,000. The Revolving Credit Facility
shall bear interest and shall be repaid as set forth in the Revolving Credit
Note.
Section 1.04: Definitions. As used herein, the following terms shall
have the following meanings for the purpose of this Agreement and the documents
related hereto unless the context in which such term is used clearly requires
otherwise:
Applicable Margin Grid: the Applicable Margin Grid attached hereto
and made a part hereof as Exhibit A.
LIBOR Rate: the rate per annum (rounded upwards, if necessary, to
the next higher 1/16 of 1%) determined by Administrative Agent and equal
to the average rate per annum at which deposits (denominated in United
States dollars) in an amount similar to the principal amount of the Loan
and with a maturity equal to the applicable Interest Period are offered to
Lender at 11:00 A.M. London time (or as soon thereafter as practicable) on
the date of reference by banking institutions in the
London, United Kingdom market, as such interest rate is referenced and
reported by the British Bankers Association in the Bridge Financial
Telerate system "Page 3570" report or, if the same is unavailable, any
other generally accepted authoritative source of such interest rate as
Lender may reference from time to time, plus the Applicable Margin set
forth on the Applicable Margin Grid. "Interest Period" shall mean one,
two, three, or six months.
Loans: the Revolving Credit Facility and the Term Loan.
Note and Notes: the Term Note and the Revolving Credit Note.
Obligations: each and every obligation described in Sections 1.02
and 1.03 above and the Guaranty executed by each Guarantor of even date
herewith.
Revolving Credit Facility: the $2,000,000 secured revolving credit
facility provided to Borrower by the Bank pursuant to this Agreement, as
described in Section 1.03 of this Agreement.
Revolving Credit Note: the Revolving Credit Promissory Note of even
date herewith in the face principal amount of $2,000,000 evidencing the
Revolving Credit Facility.
Term Loan: the $16,000,000 secured term loan provided to Borrower by
Bank pursuant to this Agreement, as described in Section 1.02 of this
Agreement.
Term Note: the Term Promissory Note of even date herewith in the
face principal amount of $16,000,000 evidencing the Term Loan.
Section 1.05: Prepayment. The Loans may be prepaid as set forth in
the Notes.
Section 1.06: Use of Term Loan Proceeds. Pioneer shall use the
proceeds of the Term Loan as follows: up to $7,000,000 to refinance existing
debt of Pioneer to Bank, up to $4,000,000 to finance the acquisition of the west
end of the Toledo, Peoria and Western Railway Corporation and up to $5,000,000
to finance the repurchase of equity interests in Pioneer pursuant to its
privatization strategy.
Section 1.07: Non-Use Fee. Borrower shall pay to the Bank a non-use
fee of twenty five (25) basis points as applied to the average daily unused
amount of the Revolving Credit Facility for each fiscal quarter of Pioneer. The
non-use fee shall be calculated for each fiscal quarter beginning with the
quarter ended _____________, 2005 and continuing until __________, 2007. For
purposes of calculating usage under this Section for any day, the Revolving
Credit Facility shall be deemed used on such day to extent of the principal
amount of all outstanding loans under the Revolving Credit Facility on such day.
Such non-use fee shall be payable in arrears on the last day of each calendar
quarter and on ______________, 2007, for any period then ending for which such
non-use fee shall not have previously been paid. The non-use fee shall be
computed for the actual number of days elapsed on the basis of a year of 360
days.
ARTICLE II
SECURITY
Section 2.01: Security. ▇▇▇▇▇▇▇▇▇ agree to grant to the Bank the
following security interests as security for the Obligations:
- Security Agreements - A security interest in all personal property
of ▇▇▇▇▇▇▇▇▇, evidenced by a security agreement from each Borrower
and perfected by appropriate financing statements;
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- Pledge Agreements - A pledge by Pioneer of its ownership interests
in all other Borrowers, evidenced by a pledge agreement from Pioneer
and perfected by appropriate financing statements and/or possession;
and
- Guaranties - Guaranties from each Guarantor.
The documents evidencing the security interests described above, together with
this Agreement, the Notes and all other documents and agreements executed in
connection with the Obligations, are hereinafter referred to as the "Collateral
Documents."
ARTICLE III
CLOSING
Prior to or at closing, the Borrowers shall deliver to the Bank the
following:
- all documents reasonably requested by Bank to evidence and
secure the Obligations, including without limitation the
Collateral Documents.
- a certificate of good standing for each Borrower and a
certified copy of the organizational document (with all
amendments) of each Borrower from the Secretary of State of
each Borrower's state of organization.
- a certified copy of the By-Laws of each Borrower.
- a certificate of incumbency for each Borrower.
- a certified copy of resolutions of the board of directors of
each Borrower approving this Agreement and the transactions
described herein.
- such other documents as the Bank may reasonably request.
ARTICLE IV
FINANCIAL MANAGEMENT, STATEMENTS AND COVENANTS
Section 4.01: Financial Management. The Borrower's financial
management system shall be structured to provide for accurate, current and
complete disclosure of the financial results of the Borrower's operations.
Section 4.02: Annual Financial Statements and Tax Returns. Furnish
to the Bank the following:
(a) within one hundred twenty (120) days after the end of each
fiscal year of the Pioneer, audited financial statements of Pioneer,
on a consolidated basis, including a balance sheet as of the close
of such fiscal year and related statement of income for such year,
setting forth in each case in comparative form corresponding figures
from the preceding annual financial statements, all in reasonable
detail and satisfactory in scope to the Bank, prepared in accordance
with GAAP applied on a consistent basis. Each such annual statement
shall be accompanied by the certificate of an authorized officer of
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Pioneer acceptable to Bank certifying that he has no knowledge of
any Default or Event of Default or, if he has obtained knowledge of
any Default or Event of Default, he shall disclose such Default or
Event of Default;
(b) within twenty (20) days of filing, a photocopy of each
▇▇▇▇▇▇▇▇'s executed federal income tax returns (exclusive of wage
information) (with all forms and schedules attached) for the year to
which the filed return relates, certified to be true, correct and
complete by an appropriate officer of each Borrower acceptable to
Bank.
Section 4.03: Interim Financial Statements; Covenant Compliance
Worksheets and Reports. Furnish to the Bank the following:
(a) within forty-five (45) days after the end of each quarter
of each fiscal year of Pioneer, a balance sheet of Pioneer, on a
consolidated basis, as of the end of each such quarter and a related
statement of income for the period from the beginning of the fiscal
year to the end of such quarter, prepared in the manner set forth in
Section 4.02(a) above for the annual statements, subject to normal
year-end adjustments, certified by an authorized officer of Pioneer.
(b) Other Financial Information. Furnish to the Bank copies of
such other financial information as the Bank may from time to time
reasonably request.
Section 4.04: Financial Covenants. So long as any portion of the
Obligations shall remain outstanding, the Borrowers shall comply with the
following financial covenants:
- Minimum Tangible Net Worth - The Tangible Net Worth of Pioneer
shall not be less than $4,500,000 at the end of any fiscal
quarter of Pioneer. Beginning March 31, 2005, and on the last
day of each fiscal quarter of Pioneer thereafter, the Minimum
Tangible Net Worth amount shall be increased by fifty percent
(50%) of after-tax net income of Pioneer, on a consolidated
basis, during said fiscal quarter. The Minimum Tangible Net
Worth amount shall not be reduced due to any net losses of
Pioneer or otherwise.
- Maximum Funded Debt/EBITDA Ratio - The Funded Debt/EBITDA
Ratio for Pioneer shall be not more than 3.5:1.0 at the end of
any fiscal quarter of Pioneer, calculated in each instance for
the previous four fiscal (4) quarters. Beginning June 30,
2006, the Funded Debt/EBITDA Ratio maximum level shall be
decreased to 3.0:1.0. [NOTE - ADJUSTMENT NECESSARY TO ACCOUNT
FOR ACQUISITION.]
- Minimum Fixed Charge Coverage Ratio - The Fixed Charge
Coverage Ratio for Pioneer shall be not less than 1.10:1.00 at
the end of any fiscal quarter of Pioneer, calculated in each
instance for the previous four fiscal (4) quarters. Beginning
June 30, 2006, the Fixed Charge Coverage Ratio minimum level
shall be increased to 1.15:1.00.
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Section 4.05: Financial Definitions.
- Tangible Net Worth shall mean the amount of total assets of
the Pioneer, on a consolidated basis, excluding the amount of
intangible assets of the Pioneer, on a consolidated basis,
minus the amount of total liabilities of the Pioneer, on a
consolidated basis, exclusive of subordinated debt, if any.
Intangible assets shall include, at book value, without
limitation, leasehold improvements, goodwill, patents,
copyrights, secret processes, deferred expenses related to
sales, general administrative, research and development
expenses, and all amounts due from any officer, employee,
director, or related person.
- Funded Debt/EBITDA Ratio shall mean the ratio of Funded Debt
to earnings before interest, taxes, depreciation and
amortization. "Funded Debt" shall mean all interest-bearing
debt plus capitalized leases.
- Fixed Charge Coverage Ratio shall mean the ratio of net income
of Pioneer, on a consolidated basis, plus depreciation and
interest, less dividends and cash capital expenditures, to the
sum of scheduled principal payments made on senior term debt
plus interest expense.
Each of the covenants described, and any term used but not defined, in this
Section 4.05 shall be determined and defined in accordance with GAAP applied on
a consistent basis.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
To induce the Bank to enter into the Agreement, the Borrowers represent
and warrant as follows:
Section 5.01: Duly Organized. Each Borrower is duly organized under
the laws of the State of its organization, and is duly qualified to do business
and in good standing in each jurisdiction where the operation of their
respective businesses makes qualification necessary. Each has the power to enter
into this Agreement and to borrow hereunder, and each has obtained all licenses
necessary for the conduct of its business.
Section 5.02: Duly Authorized. The making and performance by the
Borrowers of this Agreement and the execution and delivery of all documents
hereunder have been duly authorized by all necessary action and will not violate
any law, rule, regulation, order, judgment, decree, determination or award
presently in effect having applicability to the Borrower or any provision of the
organizational documents of any Borrower, or result in a breach of or constitute
a default under any indenture, bank loan, credit agreement or any other
agreement or instrument to which any Borrower is a party or by which it or its
property may be bound or affected.
Section 5.03: No Legal Suits. There are no legal actions, suits or
proceedings pending, or to the knowledge of any Borrower, threatened against any
Borrower or otherwise relating to any of its business properties before any
court or administrative agency, which, if determined adversely to the Borrower,
would have a material adverse effect on the financial condition or business of
any Borrower.
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Section 5.04: Not in Default. No Borrower is in default of any
obligation, covenant or condition contained in any bond, debenture, note, other
evidence of indebtedness or any mortgage or collateral instrument securing the
same or any other material agreement.
Section 5.05: Taxes are Paid. Each Borrower has filed all tax
returns which are required and has paid or made provision for the payment of all
taxes, including real estate taxes, which have or may become due pursuant to
said returns or pursuant to any assessments levied against any Borrower or its
personal or real property by any taxing agency, federal, state or local, and
shall continue to do so throughout the term of this Agreement. No tax liability
has been asserted by the Internal Revenue Service or other taxing agency,
federal or state, or local, for taxes materially in excess of those already
provided for and no Borrower knows of any basis for any such deficiency
assessment.
Section 5.06: No Adverse Change. There has been no adverse change
since the date of loan application in the financial condition, organization,
operation, business prospects, fixed properties or personnel of any Borrower.
Section 5.07: Governmental Approval. The Borrowers have secured all
necessary approvals or consents for their operations, if required, of (i) any
mortgagor, creditor or other party having any financial interest in any
Borrower, or (ii) governmental bodies having jurisdiction with respect to this
transaction or any use of these proceeds.
Section 5.08: Financial Information. Subject to any limitations
stated therein or in connection therewith, all balance sheets, earning
statements, and other financial data which have been or may hereafter be
furnished to the Bank with respect to any Borrower do or shall fairly present
the financial condition of each Borrower as of their respective dates and the
results of its operations for the periods for which the same are furnished, and
all other information, reports, and other papers and data furnished to the Bank
are or shall be, at the time the same are so furnished, accurate and correct in
all material respects and complete insofar as completeness may be necessary to
give the Bank a true and accurate knowledge of the subject matter.
Section 5.09: Compliance with Environmental Laws. The Borrowers
hereby represent and warrant to Bank as follows:
(a) Each Borrower is now and will remain in compliance with all
applicable laws and regulations, including, without
limitation, all Laws (as hereinafter defined);
(b) All required governmental permits, licenses and, agreements
for the use and operation of the Borrowers' business
properties are now and will remain in effect, and the
Borrowers' business properties, their use and operation do now
and will in the future comply with all such permits, licenses
and agreements;
(c) There are and will be no Hazardous or Toxic Material (as
hereinafter defined) existing on or under the surface of any
of the Borrowers' business properties or in any surface waters
or ground waters on or under said properties and no escape,
seepage, spillage, discharge, emission or release of any
Hazardous or Toxic Material shall occur on, under, above or
emanate from, said properties;
(d) There are no pending, or to the best knowledge of the
Borrowers, threatened or anticipated suits, actions,
proceedings or notices from any governmental or
6
quasi-governmental agency with respect to any of ▇▇▇▇▇▇▇▇'s
business properties any Borrower.
For purposes of this Agreement, the term Hazardous or Toxic Material shall
be defined to include: (i) asbestos or any material composed of or containing
asbestos in any form and of any type, or (ii) any hazardous, toxic or dangerous
waste, substance, material, smoke, gas or particulate matter, as from time to
time defined by or for purposes of the Comprehensive Environmental Response
Compensation and Liability Act, any law commonly referred to as of the date
hereof as "Superfund" or "Superlien" or any successor to such laws, or any other
federal, state or local environmental, health or safety statute, law, ordinance,
code, rule, regulation, order or decree regulating, relating to, or imposing
liability or standards concerning or in connection with hazardous, toxic or
dangerous waste, substance, material, smoke, gas or particulate matter, as now
or any time hereinafter in effect (collectively, the "Laws").
Section 5.10: Statements not Misleading. No document, agreement or
certificate furnished to Bank by any Borrower in connection with the Obligations
contains any untrue statement of a material fact or omits any material fact
necessary to make any other statements not misleading. There is no fact known to
any Borrower which may adversely affect any Borrower that has not been disclosed
to Bank in writing.
ARTICLE VI
AFFIRMATIVE COVENANTS
Section 6.01: Delivery of Loan Documents. The Borrowers will deliver
to the Bank originals of this Agreement and all documents reasonably requested
by Bank to evidence or secure the Obligations, including without limitation the
Collateral Documents.
Section 6.02: Payment of the Obligations. The Borrowers shall pay
punctually all principal and interest on the Obligations according to their
respective terms and conditions and shall pay punctually any other amounts that
may become due and payable to the Bank under or pursuant to the terms of this
Agreement or otherwise. Moreover, the Borrowers agree to pay punctually all
principal and interest due on any other indebtedness now or hereafter assumed by
the Borrowers.
Section 6.03: Maintain and Insure Property. Each Borrower agrees at
all times to maintain its business properties in such condition and repair that
the Bank's security will be adequately protected. Each Borrower shall also keep
its business properties fully insured with:
(i) comprehensive public liability insurance insuring the Borrower
against claims, demands and actions with respect to bodily
injury, death or property damage, with minimum limits of
coverage, at levels appropriate for ▇▇▇▇▇▇▇▇'s business;
(ii) fire and casualty insurance on each of Borrower's business
properties, and contents, in an amount equal to the full
replacement value thereof.
All such policies shall be from carriers and in form and amount satisfactory to
Bank. Each Borrower shall provide Bank with certificates of insurance evidencing
such coverage, naming Bank as an additional insured and providing that Bank will
be given thirty (30) days notice prior to cancellation.
7
Section 6.04: Workers' Compensation, Social Security,
Retirement and Health Insurance Benefits, and Taxes. Each Borrower shall provide
Workers' Compensation insurance where the same is required, and shall accept
full responsibility for the payment of unemployment insurance, premiums for
Workers' Compensation, Social Security and retirement and health insurance
benefits, as well as all income tax deductions and any other taxes or payroll
deductions required by law for its employees.
Section 6.05: Compliance with Laws; Payment of Taxes and Other
Liabilities. Each Borrower will maintain its corporate existence, and will
comply with all applicable statutes, laws and regulations and will pay all
taxes, assessments, charges, claims for labor, supplies, rent and other
obligations which if unpaid might become a lien against any Borrower or its
property. Each Borrower will timely pay all taxes assessed on or against its
income, unless, and to the extent that, such taxes are being contested in good
faith and by appropriate litigation or other proceedings, if the books of the
Borrower reflect the maintenance of reasonable reserves therefor.
Section 6.06: Right to Inspection. Each Borrower agrees to grant the
Bank, until the Obligations have been fully repaid, the right at all reasonable
hours free access to any of its business properties for the purpose of
inspection to determine the condition of said properties. Each Borrower will as
often as deemed necessary by the Bank, permit the Bank, or its duly authorized
representatives to have full access to and the right to examine any pertinent
books, documents, papers and records until the Obligations are fully repaid.
Section 6.07: Damage or Destruction of the Property. In the event of
any damage to or destruction of any of the Borrowers' business properties or any
part thereof, the Borrowers will either (i) promptly cause the same to be
restored, replaced or rebuilt as nearly as possible to their value, condition
and character immediately prior to such damage or destruction; or (ii) pay to
Bank all insurance proceeds received by any Borrower on account of such damage
or destruction, to be applied to the balance due on the Obligations. The
Borrowers shall immediately notify Bank of the occurrence of any such damage or
destruction, and shall, within thirty (30) days thereafter, notify Bank whether
or not it intends to rebuild.
Section 6.08: Indemnification. Each Borrower shall indemnify and
hold Bank harmless from and against all claims arising from any breach or
default in any covenant, warranty, representation or in the performance of any
obligation on any Borrower's part to be performed under the terms of this
Agreement or any agreement executed pursuant hereto, or arising from any
negligence of any Borrower, or any Borrower's agents, contractors or employees,
and from and against all costs, attorney's fees, expenses and liabilities
incurred in the defense of any such claim or any action or proceeding brought
thereon. In case any action or proceeding is brought against Bank by reason of
any claim described above, the Borrowers shall defend the same at Borrowers'
expense by counsel satisfactory to Bank.
Section 6.09: Notice of Litigation. Promptly after receiving notice
or otherwise acquiring knowledge thereof, the Borrowers will advise Bank, in
writing, of the filing or commencement of litigation or proceedings wherein any
Borrower is named as a defendant, if the amount of damages claimed against said
▇▇▇▇▇▇▇▇ exceeds the sum of Five Thousand Dollars ($5,000).
Section 6.10: Change in Financial Condition: No Borrower will suffer
or allow any substantial or materially adverse change in the financial condition
of any Borrower to occur.
Section 6.11: Attorney-In-Fact. Each Borrower hereby irrevocably
designates and appoints Bank as its attorney-in-fact to perform in its name any
acts Bank reasonably deems necessary to implement the provisions of this
Agreement in the event of the failure, refusal or inability of any
8
Borrower to act, and each Borrower will indemnify Bank with respect to any
costs, expenses, damages or liabilities (including attorney's fees) incurred by
the Bank in connection therewith.
ARTICLE VII
NEGATIVE COVENANTS OF THE BORROWERS
Section 7.01: Non-Breach of Agreement. Each Borrower covenants and
agrees that, from the date hereof until repayment in full of the Obligations, it
will not enter into any agreement or other commitment the performance of which
would constitute a breach of any of the covenants and agreements contained in
this Agreement or any document or agreement executed in connection herewith.
Section 7.02: Additional Indebtedness. No Borrower will accept or
enter into any secondary financing or incur or permit any existing indebtedness
to continue in excess of $250,000, in the aggregate, except for indebtedness (i)
outstanding on the date of this Agreement and disclosed on Schedule 1 attached
hereto; and (ii) indebtedness owed to Bank.
Section 7.03: Dividends or Distributions. No Borrower shall pay any
distributions or dividends to its shareholders or members in excess of the
amount of tax liability of any stockholder or member with respect to the
stockholder's or member's interest in the Borrower, nor shall any Borrower
repurchase any of its stock or other ownership interests, without the prior
consent of Bank, expressed in writing.
Section 7.04: Encumber Property. No Borrower will create or permit
any mortgage, pledge, lien, charge or encumbrance, including liens arising from
judgments, on any Borrower's real or personal property, except for any such
liens in favor of Bank or approved by Bank.
Section 7.05: Sell Property. No Borrower will, other than in the
ordinary course of its business, sell, convey or suffer to be conveyed, assign,
transfer, relinquish possession or otherwise dispose of any of its business
properties unless approved in writing by the Bank.
Section 7.06: Benefit Plans. No Borrower will establish subsequent
to the date of this Agreement any employee benefit plans, including, without
limitation, stock purchase plans, stock option plans, deferred compensation
plans, pension or profit-sharing plans or similar bonus or retirement plans,
without the prior consent of Bank.
Section 7.07: Changes in Business Structure. Without the written
permission of the Bank, there will be no change in the ownership structure,
control or operation of any Borrower, including but not limited to (i) merger
into or consolidation with any other entity; (ii) issuance of any shares of its
capital stock; (iii) changing the nature of its business as carried on at the
date hereof; (iv) substantial distribution, liquidation or other disposal of the
assets of Borrower to its stockholders or (v) changing the officers or directors
of any Borrower.
Section 7.08: Intercompany Transactions. No Borrower shall make any
loans to, or borrow any funds from any other Borrower, or any other affiliated
entities except in the ordinary course of business. In the event that Bank
consents to any loans among any Borrowers, the debt of any Borrower to any other
Borrower shall be subordinate to all debt owed to Bank. No Borrower shall enter
into any other transactions with affiliated entities except in the ordinary
course of business and on reasonable terms and conditions.
9
Section 7.09: Guaranties. No Borrower will guaranty any indebtedness
of any other person or entity without the prior written consent of Bank, except
for (i) guaranties of debt to Bank and (ii) guaranties existing on the date of
this Agreement and disclosed in writing to Bank.
Section 7.10: Investments. No Borrower shall acquire or dispose of
any interest in any non-publicly traded company without the prior written
consent of Bank.
Section 7.11: Negative Pledge: Real Estate. No Borrower shall create
or permit to exist any mortgage or other lien on any real estate owned by the
Borrower.
ARTICLE VIII
EVENTS OF DEFAULT
The entire unpaid principal of the Obligations, and the interest
then accrued thereon, shall become and immediately due and payable upon the
written demand of the Bank, without any other notice or demand of any kind or
presentment of protest, if any one of the following events (hereafter an "Event
of Default") shall occur and be continuing at the same time of such demand,
whether voluntarily or involuntarily, with or without limitation, occurring or
brought about by the operation of law or pursuant to or in compliance with
regulations of any administrative or governmental body.
Section 8.01: Non-payment of Obligations. If the Borrower shall fail
to make payment when due of any installment of principal on the Obligations, or
interest accrued thereon.
Section 8.02: Non-payment of Other Indebtedness. If default shall be
made in the payment when due of any installment of principal or of interest on
any Borrower's other indebtedness.
Section 8.03: Incorrect Representation or Warranty. If any
representation or warranty contained in, or made in connection with the
execution and delivery of, this Agreement, any Collateral Document or in any
agreement, certificate or other document furnished pursuant thereto, shall prove
to have been incorrect when made in any material respect.
Section 8.04: Default in Covenants. If any Borrower shall default in
the performance of any non-monetary term, covenant or agreement contained in any
Collateral Document or any other document executed in connection therewith or
otherwise, and such default shall continue for thirty (30) days after either (i)
it becomes known to Borrower or (ii) written notice thereof shall have been
given to any Borrower by the Bank; provided, however, that if the default is of
such nature that it can be corrected but not within said period, the cure period
shall be extended so long as Borrower initiates curative action within such
period and diligently pursues that action to completion.
Section 8.05: Voluntary Insolvency. If any Borrower shall become
insolvent or shall cease to pay its debts as they mature or shall voluntarily
file a petition seeking reorganization, or the appointment of a receiver,
trustee or liquidator for it or a substantial portion of its assets or to effect
a plan or other arrangement with creditors, or shall be adjudicated bankrupt, or
shall make a voluntary assignment for the benefit of creditors.
Section 8.06: Involuntary Insolvency. If an involuntary petition
shall be filed against any Borrower under any bankruptcy, insolvency or similar
law or seeking reorganization or the appointment of any receiver, trustee or
liquidator for any Borrower of a substantial part of the property of any
Borrower or a writ or warrant of attachment or similar process shall be issued
against a substantial part of
10
the property of any Borrower and such petition shall not be dismissed, or such
writ or warrant of attachment or similar process shall not be released or
bonded, within thirty days after filing or levy.
Section 8.07: Judgments. If any final judgment for the payment of
money that is not fully covered by liability insurance and is in excess of Ten
Thousand Dollars ($10,000) shall be rendered against any Borrower, and within
thirty days, shall not be discharged, or an appeal therefrom taken and execution
thereon effectively stayed pending such appeal, and, if such judgment be
affirmed on such appeal, and the same shall not be discharged within thirty
days.
Section 8.08: Dissolution, Merger or Consolidation. If any Borrower
is dissolved, merged or consolidated with any entity, or the transfer of a
substantial part of the ownership or assets of any Borrower is made.
Section 8.09: Termination of Business. If any Borrower shall
terminate the operation of its business, or materially change the manner of
operation of such business.
ARTICLE IX
REMEDIES
Section 9.01: Note Remedies. Upon the occurrence of any Event of
Default and at any time thereafter until such Event of Default is cured, the
Bank shall have, in addition to all other rights and remedies, all remedies
provided in any Collateral Document or any other documents executed in
connection therewith or otherwise.
Section 9.02: Offset. Upon the occurrence of an Event of Default,
Bank shall have the right to apply any funds held by Bank on behalf of any
Borrower to offset any of the indebtedness hereby secured.
Section 9.03: Waivers. Each Borrower waives demand, notice, protest,
notice of acceptance of this Agreement, notice of loans made, credit extended,
collateral received or delivered, or other action taken in reliance hereon and
all other demands and notices of any description unless otherwise required
herein. With respect to the Obligations, each Borrower agrees to any extension
or postponement of the time of payment or any other indulgence, to any
substitution, exchange or release of collateral, to the addition or release of
any party or person primarily or secondarily liable, to the acceptance of
partial payments thereon and the settlement, compromising, or adjusting of any
thereof, all in such manner and at such time or times as the Bank may deem
advisable. The Bank shall have no duty as to the collection or protection of
collateral or any income thereon, nor as to the preservation of any rights
pertaining thereto beyond the safe custody thereof. The Bank may exercise its
rights with respect to collateral without resorting or regard to other
collateral or source of reimbursement. The Bank shall not be deemed to have
waived any of its rights under the Collateral Documents or any other document
executed in connection therewith or otherwise unless such waiver is in writing
and signed by the Bank. No delay or omission on the part of the Bank in
exercising any right shall operate as a waiver of such rights or any other
right. A waiver on any one occasion shall not be construed as a bar to or waiver
of any right on any future occasion. All rights and remedies of the Bank under
the Collateral Documents or any other document executed in connection therewith
or otherwise shall be cumulative and may be exercised singularly or
concurrently.
Section 9.04: Right of Bank to Make Advances to Cure Events of
Default. In the event that any Borrower shall fail to perform any covenant or
agreement contained in this Agreement or any
11
other Collateral Document, or fail to make any payments required by this
Agreement or any other Collateral Document, Bank may (but shall not be obligated
to) perform any one or all of such covenants or agreements, make any such
payments (including those due Bank) or advance funds in excess of the face
amount of any obligation, and any amounts expended by Bank in so doing, plus
interest thereon at the default interest rate, shall be due and payable by
Borrowers to Bank, on demand.
Section 9.05: Expenses and Proceeds of Collateral. Each Borrower
agrees to pay to the Bank on demand any and all expenses, including reasonable
counsel fees, incurred or paid by the Bank in protecting or enforcing its rights
upon or under this Agreement. After deducting all such expenses, the residue of
any proceeds of sale of liabilities or property shall be applied to the payment
of principal or interest on the Obligations in such order of preference as the
Bank may determine, proper allowance for interest on the Obligations not then
due being made, and any excess shall be returned to the Borrowers and the
Borrowers shall remain liable for any deficiency.
ARTICLE X
INDEMNIFICATION
Borrowers agree to exonerate, indemnify, pay and protect, defend (with
counsel reasonably approved by Bank) and save Bank and the directors, officers,
shareholders, employees and agents of Bank harmless from and against any claims
(including without limitation third party claims for personal injury or real or
personal property damage), actions, administrative proceedings (including
informal proceedings), judgments, damages, punitive damages, penalties, fines,
costs, liabilities (including sums paid in settlement of claims), interest or
losses, including reasonable attorneys' and paralegals' fees and expenses,
investigation and remediation costs, consultant fees, and expert fees, together
with all other costs and expenses of any kind or nature (collectively, the
"Costs") that arise directly or indirectly from or in connection with this
Agreement and the other Collateral Documents. The indemnification provided in
this Article X shall specifically apply to and include claims or actions brought
by or on behalf of employees of Borrowers. In the event Bank shall suffer or
incur any Costs, Borrowers shall pay to Bank the total of all such Costs
suffered or incurred by Bank upon demand therefor by Bank. Without limiting the
generality of the foregoing, the indemnification provided in this Article X
shall specifically cover Costs, including capital, operating, supervision and
maintenance costs, incurred in connection with any investigation or monitoring
of site conditions, any clean-up, containment, remedial, removal or restoration
work required or performed by any federal, state or local governmental agency or
political subdivision or performed by any nongovernmental entity or person
because of the presence, suspected presence, release or suspected release of any
hazardous materials in or into the air, soil, groundwater or surface water at,
on, about, under or within any real estate owned or operated by the Borrowers,
or elsewhere in connection with the transportation of hazardous materials to or
from any such real estate and any claims of third parties for loss or damage due
to such hazardous materials; provided that, only to the extent prohibited by
law, this indemnity shall not be sought for damages that result from the gross
negligence or wilful misconduct of the Bank.
ARTICLE XI
MISCELLANEOUS
Section 11.01: Notices. All notices, consents, requests, demands and
other communications hereunder shall be in writing and shall be deemed to have
been duly given to a party hereto if mailed to the Bank at its address set forth
below, and to the Borrower at the address set forth below or at such other
addresses as any party has designated in writing to any other party hereto.
12
IF TO LENDER: IF TO THE BORROWERS:
National City Bank of the Midwest Pioneer Railcorp
▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇, ▇▇▇▇▇▇▇ ▇-▇▇▇-22 ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇
▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-1130
Peoria, IL 61652-0749 Attn: ▇. ▇▇▇▇▇▇▇ ▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
with copy to: with copy to:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ _______________________
▇▇▇▇▇, Meginnes, ▇▇▇▇▇▇ & Seghetti _______________________
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, Suite 1400 _______________________
Peoria, IL 61602 _______________________
Section 11.02: Survival of Representations and Warranties. All
agreements, representations and warranties made by the Borrowers herein or any
other document or certificate delivered to the Bank in connection with the
transaction contemplated by this Agreement shall continue in full force and
effect so long as any Obligations are outstanding.
Section 11.03: Successors and Assigns. This Agreement shall be
binding upon the Borrowers, their successors and assigns, except that the
Borrowers may not assign or transfer its rights without prior written consent of
the Bank. This Agreement shall inure to the benefit of the Bank, its successors
and assigns, and, except as otherwise expressly provided in particular
provisions hereof, all subsequent holders of the Obligations.
Section 11.04: Counterparts. This Agreement may be executed in any
number of counterparts, each which will deemed an original, but all of which
together shall constitute one and the same instrument.
Section 11.05: Article and Section Headings. Headings used in this
Agreement are for convenience only and shall not affect the construction of this
Agreement.
Section 11.06: Monitoring and Evaluation. The Bank will monitor and
evaluate the Borrowers' performance under this Agreement. The Borrowers will be
monitored for compliance with rules, regulations and requirements applicable to
this Agreement.
Section 11.07: Severance Clause. The Borrowers agree that in the
event that any provision of this Agreement or any other instrument executed at
closing, or the application thereof to any person or circumstances, shall be
declared null and void, invalid, or held for any reason to be unenforceable by a
Court of competent jurisdiction, the remainder of such Agreement shall
nevertheless remain in full force and effect, and to this end, the provisions of
all covenants, conditions and agreements described herein are deemed separate.
Section 11.08: Integration Clause. It is agreed between the parties
that this Agreement, with attachments, as written, is the full and complete
agreement between the parties and that there are no oral agreements or
understandings between the parties other than what has been reduced to writing
herein.
13
Section 11.09: Notice of Default. Each Borrower agrees to give
written notice to the Bank within 15 days of any event which constitutes an
Event of Default under this Agreement as described in Article VIII herein or
that would, with notice or lapse of time or both, constitute and Event of
Default under this Agreement.
Section 11.10: Expenses of Collection or Enforcement. Each Borrower
agrees to pay the Bank or its assigns, in addition to any other amounts that may
be due from the Borrowers, an amount equal to the costs and expenses of
collection, enforcement or correction or waiver of any default by any Borrower
incurred by the Bank or its assigns with such collection, enforcement,
correction or waiver of default, including, without limitation, reasonable
attorneys fees.
Section 11.11: Prohibition Against Assignment. The Borrowers may not
assign or, in any way, transfer its rights and benefits under this Agreement
without the prior, written permission of the Bank.
Section 11.12: Waiver of Jury Trial. THE BORROWERS AND THE BANK
HEREBY KNOWINGLY AND VOLUNTARILY WAIVE THE RIGHT EACH OF THEM MAY HAVE TO A JURY
TRIAL WITH RESPECT TO ANY ACTION OR CLAIM BASED ON OR ARISING OUT OF OR IN
CONNECTION WITH THIS AGREEMENT OR ANY OTHER COLLATERAL DOCUMENT, ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ANY OTHER
ACTION OF EITHER PARTY. THIS PROVISION IS A MATERIAL INDUCEMENT TO THE BANK TO
ENTER INTO THIS AGREEMENT.
Section 11.13: Arbitration. Bank and the Borrowers agree that upon
the written demand of either party, whether made before or after the institution
of any legal proceedings, but prior to the rendering of any judgment in that
proceeding, all disputes, claims and controversies between them, whether
individual, joint, or class in nature, arising from this Agreement or any
document or agreement executed in connection herewith or otherwise, including
without limitation contract disputes and tort claims, shall be resolved by
binding arbitration pursuant to the Commercial Rules of the American Arbitration
Association. Any arbitration proceeding held pursuant to this arbitration
provision shall be conducted in the city nearest the Borrowers' address having
an AAA regional office, or at any other place selected by mutual agreement of
the parties. No act to take or dispose of any collateral shall constitute a
waiver of this arbitration provision or be prohibited by this arbitration
provision. This arbitration provision shall not limit the right of either party
during any dispute, claim or controversy to seek, use, and employ ancillary, or
preliminary rights and/or remedies, judicial or otherwise, for the purposes of
realizing upon, preserving, protecting, foreclosing upon or proceeding under
forcible entry and detainer for possession of, any real or personal property,
and any such action shall not be deemed an election of remedies. Such remedies
include, without limitation, obtaining injunctive relief or a temporary
restraining order, invoking a power of sale under any deed of trust or mortgage,
obtaining a writ of attachment or imposition of a receivership, or exercising
any rights relating to personal property, including taking or disposing of such
property with or without judicial process pursuant to Article 9 of the Uniform
Commercial Code or when applicable, a judgment by confession of judgment. Any
disputes, claims or controversies concerning the lawfulness or reasonableness of
an act, or exercise of any right or remedy concerning any collateral, including
any claim to rescind, reform, or otherwise modify any agreement relating to the
collateral, shall also be arbitrated; provided, however, that no arbitrator
shall have the right or the power to enjoin or restrain any act of either party.
Judgment upon any award rendered by any arbitrator may be entered in any court
having jurisdiction. Nothing in this arbitration provision shall preclude either
party from seeking equitable relief from a court of competent jurisdiction. The
statute of limitations, estoppel, waiver, laches and similar doctrines which
would otherwise be
14
applicable in an action brought by a party shall be applicable in any
arbitration proceeding, and the commencement of an arbitration proceeding shall
be deemed the commencement of any action for these purposes. The Federal
Arbitration Act (Title 9 of the United States Code) shall apply to the
construction, interpretation, and enforcement of this arbitration provision.
NATIONAL CITY BANK OF THE MIDWEST PIONEER RAILCORP
BY:_______________________________ BY:_______________________________
ITS:_____________________________ ITS:_____________________________
The following Guarantors of the Obligations of Pioneer under the foregoing
Agreement hereby acknowledge and consent to the provisions of said Agreement.
ALABAMA RAILROAD CO. DECATUR JUNCTION RAILWAY CO.
BY:_______________________________ BY:_______________________________
ITS:_____________________________ ITS:_____________________________
ELKHART & WESTERN RAILROAD CO. FORT ▇▇▇▇▇ RAILROAD CO.
BY:_______________________________ BY:_______________________________
ITS:_____________________________ ITS:_____________________________
THE GARDEN CITY WESTERN RAILWAY CO. GETTYSBURG AND NORTHERN RAILROAD CO.
BY:_______________________________ BY:_______________________________
ITS:_____________________________ ITS:_____________________________
15
INDIANA SOUTHWESTERN RAILWAY CO. KENDALVILLE TERMINAL RAILWAY CO.
BY:_______________________________ BY:_______________________________
Its:_____________________________ ITS:_____________________________
KEOKUK JUNCTION RAILWAY CO. MICHIGAN SOUTHERN RAILROAD CO.
BY:_______________________________ BY:_______________________________
ITS:_____________________________ ITS:_____________________________
MISSISSIPPI CENTRAL RAILROAD CO. PIONEER INDUSTRIAL RAILWAY CO.
BY:_______________________________ BY:_______________________________
ITS:_____________________________ ITS:_____________________________
SHAWNEE TERMINAL RAILWAY CO. VANDALIA RAILROAD CO.
BY:_______________________________ BY:_______________________________
ITS:_____________________________ ITS:_____________________________
WEST MICHIGAN RAILROAD CO. PIONEER RAILROAD EQUIPMENT CO., LTD
BY:_______________________________ BY:_______________________________
ITS:_____________________________ ITS:_____________________________
16
EXHIBIT A
APPLICABLE MARGIN GRID
(Basis points per annum)
BASIS FOR PRICING LEVEL I LEVEL II LEVEL III LEVEL IV
-------------------------------------------------------------------------------------------------------
Funded Debt/EBITDA > or = 3.0:1.0 > or = 2.5:1.0 > or = 2.0:1.0 < 2.0:1.0
Ratio* But < 3.0:1.0 But < 2.5:1.0
-------------------------------------------------------------------------------------------------------
LIBOR Margin 275.00 250.00 225.00 200.00
-------------------------------------------------------------------------------------------------------
* As defined in Section 1 of the Loan Agreement.
17