1
EXHIBIT 10(j)
AMENDED AND RESTATED
LOAN FACILITY AGREEMENT
AND GUARANTY
by and among
XXXXX RENTS, INC.,
SUNTRUST BANK, ATLANTA, as Servicer
and
EACH OF THE PARTICIPANTS PARTY HERETO
Dated as of November 3, 1999
2
Table of Contents
1. DEFINITIONS........................................................................................... 1
1.1 Definitions......................................................................................... 1
1.2 Accounting Terms and Determination.................................................................. 18
1.3 Other Definitional Terms............................................................................ 18
1.4 Exhibits and Schedules.............................................................................. 18
2. LOAN FACILITY......................................................................................... 18
2.1 Establishment of Commitments; Terms of Loans........................................................ 18
2.2 Conveyance of Participant's Interest................................................................ 21
2.3 Funding of Advances; Swing Line; Funding of Participant's Interest in Loans......................... 22
2.4 Commitment Fees..................................................................................... 24
2.5 Interest on Funded Participant's Interest........................................................... 25
2.6 Default Interest.................................................................................... 26
2.7 Voluntary Reduction of the Unutilized Commitment.................................................... 26
2.8 Extension of Commitments............................................................................ 26
2.9 Wind-Down Events.................................................................................... 28
2.10 Reserve Requirements; Change in Circumstances; Change in Lending Offices............................ 28
2.11 Pro Rata Treatment.................................................................................. 30
2.12 Payments............................................................................................ 30
2.13 Sharing of Setoffs.................................................................................. 30
3. SERVICER'S SERVICING OBLIGATIONS; DISTRIBUTION OF PAYMENTS............................................ 31
3.1 Servicer's Obligations with Respect to Loans; Collateral; Non-Recourse.............................. 31
3.2 Application of Payments............................................................................. 33
3.3 Monthly Servicing Report and Quarterly Servicing Report............................................. 34
4. LOAN DEFAULT; RIGHT TO MAKE GUARANTY DEMAND........................................................... 35
4.1 Notice Of Loan Default.............................................................................. 35
4.2 Waiver or Cure By The Sponsor....................................................................... 35
4.3 Defaulted Loan Guaranty Demand...................................................................... 36
4.4 No Waiver or Cure Available......................................................................... 37
5. REPRESENTATIONS AND WARRANTIES........................................................................ 37
5.1 Organization and Qualification...................................................................... 37
5.2 Sponsor's Powers.................................................................................... 37
5.3 Enforceability of Agreement and Other Operative Documents........................................... 38
5.4 Consent............................................................................................. 38
5.5 Statutes, Judgments................................................................................. 38
5.6 Financial Statements................................................................................ 38
5.7 Actions Pending..................................................................................... 39
(i)
3
5.8 Outstanding Debt.................................................................................... 39
5.9 Title to Properties................................................................................. 39
5.10 Taxes............................................................................................... 39
5.11 Regulation U, Etc................................................................................... 40
5.12 No Credit Event; Unmatured Credit Event or Change of Control........................................ 40
5.13 ERISA............................................................................................... 40
5.14 Pollution and Environmental Control................................................................. 40
5.15 Possession of Franchises, Licenses, Etc............................................................. 41
5.16 Contingent Liabilities.............................................................................. 41
5.17 Compliance with Laws................................................................................ 41
5.18 Representations and Warranties with Respect to Specific Loans....................................... 41
6. AFFIRMATIVE COVENANTS................................................................................. 42
6.1 Financial Statements, Reports and Other Financial Data.............................................. 42
6.2 Inspection of Property.............................................................................. 44
6.3 Maintenance of Insurance............................................................................ 44
6.4 Funded Debt Ratio................................................................................... 44
6.5 Leverage Ratio...................................................................................... 44
6.6 Fixed Charge Coverage............................................................................... 44
6.7 Account Verification................................................................................ 45
6.8 ERISA............................................................................................... 45
6.9 Payment............................................................................................. 45
6.10 Notice of Credit Event, Unmatured Credit Event or Change of Control................................. 45
6.11 Corporate Existence................................................................................. 45
6.12 Compliance with Laws, Etc........................................................................... 46
6.13 Additional Guarantors............................................................................... 46
7. NEGATIVE COVENANTS.................................................................................... 46
7.1 Liens............................................................................................... 46
7.2 Minimum Net Worth................................................................................... 47
7.3 Loans, Advances, Investments and Contingent Liabilities............................................. 48
7.4 Sale of Stock and Debt of Subsidiaries.............................................................. 49
7.5 Merger and Sale of Assets........................................................................... 49
7.6 Additional Negative Pledges......................................................................... 49
8. CREDIT EVENTS AND REMEDIES............................................................................ 50
9. CHANGE OF CONTROL; CASH COLLATERAL ACCOUNT............................................................ 53
9.1 Change of Control; Deposit In Cash Collateral Account............................................... 53
9.2 Obligations with Respect to Defaulted Loans......................................................... 53
9.3 Effect of Credit Event Following Change of Control.................................................. 54
9.4 Deposit of Maximum Qualified Franchisee Recourse Amount Following Credit
Event............................................................................................... 54
(ii)
4
10. GUARANTY.............................................................................................. 55
10.1 Unconditional Guaranty.............................................................................. 55
10.2 Limitation on Guaranty of Startup Franchisee Loans.................................................. 55
10.3 Obligations of Sponsor With Respect to Established Franchisee Loans................................. 56
10.4 Continuing Guaranty................................................................................. 57
10.5 Waivers............................................................................................. 57
10.6 Additional Actions.................................................................................. 58
10.7 Additional Waivers.................................................................................. 58
10.8 Postponement of Obligations......................................................................... 59
10.9 Effect on Additional Guaranties..................................................................... 59
10.10 Reliance on Guaranty and Purchase Obligation; Disclaimer of Liability............................... 59
10.11 Reinstatement of Obligations........................................................................ 60
10.12 Right to Bring Separate Action...................................................................... 60
10.13 Subordination of Liens.............................................................................. 61
10.14 Exercise of Remedies With Respect to Collateral..................................................... 61
10.15 Rights Of Sponsor Upon Payment; Cooperation By Servicer............................................. 63
11. INDEMNIFICATION....................................................................................... 63
11.1 Indemnification..................................................................................... 64
11.2 Notice Of Proceedings; Right To Defend.............................................................. 65
11.3 Third Party Beneficiaries........................................................................... 66
12. SURVIVAL OF LOAN FACILITY............................................................................. 66
13. CONDITIONS PRECEDENT.................................................................................. 66
13.1 Receipt of Documents................................................................................ 66
14. THE SERVICER.......................................................................................... 67
14.1 Appointment of Servicer as Agent.................................................................... 68
14.2 Nature of Duties of Servicer........................................................................ 68
14.3 Lack of Reliance on the Servicer.................................................................... 68
14.4 Certain Rights of the Servicer...................................................................... 69
14.5 Reliance by Servicer................................................................................ 69
14.6 Indemnification of Servicer......................................................................... 69
14.7 The Servicer in its Individual Capacity............................................................. 70
14.8 Holders of Participation Certificates............................................................... 70
15. MISCELLANEOUS......................................................................................... 70
15.1 Notices............................................................................................. 70
15.2 Amendments, Etc..................................................................................... 71
15.3 No Waiver; Remedies Cumulative...................................................................... 71
15.4 Payment of Expenses, Etc............................................................................ 72
(iii)
5
15.5 Right of Setoff..................................................................................... 72
15.6 Benefit of Agreement; Assignments; Participations................................................... 72
15.7 Governing Law; Submission to Jurisdiction........................................................... 75
15.8 Counterparts........................................................................................ 75
15.9 Severability........................................................................................ 75
15.10 Independence of Covenants........................................................................... 76
15.11 No Joint Venture.................................................................................... 76
15.12 Repurchase Right.................................................................................... 76
15.13 Effect on Existing Facility Agreement; Execution of New Loan Documents.............................. 76
15.14 Confidentiality..................................................................................... 77
15.15 Headings Descriptive; Entire Agreement............................................................. 78
EXHIBITS
Exhibit A - Form of Assignment and Acceptance Agreement
Exhibit B - Form of Established Franchisee Loan Agreement
Exhibit C - Form of Guaranty Agreement
Exhibit D - Form of Participation Certificate
Exhibit E - Form of Startup Franchisee Loan Agreement
Exhibit F - Form of Monthly Servicing Report
Exhibit G - Form of Quarterly Servicing Report
(iv)
6
AMENDED AND RESTATED
LOAN FACILITY AGREEMENT AND GUARANTY
THIS AMENDED AND RESTATED LOAN FACILITY AGREEMENT AND GUARANTY (the
"Agreement") made as of this 3rd day of November, 1999, by and among XXXXX
RENTS, INC., a Georgia corporation having its principal place of business and
chief executive office at 1100 Xxxxx Building, 000 Xxxx Xxxxx Xxxxx Xxxx, X.X.,
Xxxxxxx, Xxxxxxx 00000 ("Sponsor"), SUNTRUST BANK, ATLANTA ("SunTrust") and each
of the other lending institutions listed on the signature pages hereto
(SunTrust, such lenders, together with any assignees thereof becoming
"Participants" pursuant to the terms of this Agreement, the "Participants") and
SUNTRUST BANK, ATLANTA, a banking corporation organized and existing under the
laws of Georgia having its principal office in Atlanta, Georgia, as Servicer and
agent for the Participants (in such capacity, the "Servicer").
W I T N E S S E T H:
WHEREAS, Sponsor has established franchise relationships with certain
rental store operators (the "Franchisees") across the United States to own and
operate rental stores under the "Aaron's Rental Purchase" franchise;
WHEREAS, in connection therewith, Sponsor has established a loan
program with the Servicer pursuant to that certain Loan Facility Agreement and
Guaranty, dated as of January 20, 1998, as amended by that certain Amendment No.
1 to Loan Facility Agreement and Guaranty, dated as of March 13, 1998, and that
certain Amendment No. 2 to Loan Facility Agreement and Guaranty, dated July 31,
1998, by and among the Sponsor, the Servicer and the Participants (the "Existing
Facility Agreement"), to provide lines of credit to the Franchisees for business
purposes arising in connection with the acquisition of such franchise rights and
the opening of rental stores and ongoing inventory financing in connection
therewith;
WHEREAS, Sponsor, Servicer and the Participants wish to amend and
restate the Existing Facility Agreement in the manner set forth below;
THEREFORE, upon the terms and conditions hereinafter stated, and in
consideration of the mutual premises set forth above and other adequate
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties, intending to be legally bound, hereby agree that the Existing Facility
Agreement is amended and restated in its entirety as follows:
1. DEFINITIONS
1.1 Definitions. In addition to the other terms defined herein, the
following terms used herein shall have the meanings herein specified
(such meanings to be equally applicable to both the singular and plural
forms of the terms defined):
7
"Adjusted LIBO Rate" shall mean, with respect to each Payment Period,
the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%)
determined pursuant to the following formula:
"Adjusted LIBO Rate" = LIBOR
------------
1.00 - LIBOR Reserve Percentage
As used herein, LIBOR Reserve Percentage shall mean, for any Payment Period for
any Funded Participant's Interest outstanding hereunder, the reserve percentage
(expressed as a decimal) equal to the then stated maximum rate of all reserve
requirements (including, without limitation, any marginal, emergency,
supplemental, special or other reserves) applicable to any member bank of the
Federal Reserve System in respect of Eurocurrency liabilities as defined in
Regulation D (or against any successor category of liabilities as defined in
Regulation D).
"Advance" shall mean a funding of an advance to a Borrower by the
Servicer pursuant to such Borrower's Loan Commitment.
"Affiliate" of any Person shall mean any other Person directly or
indirectly controlling, controlled by, or under common control with, such
Person, whether through the ownership of voting securities, by contract or
otherwise. For purposes of this definition, "control" (including with
correlative meanings, the terms "controlling", "controlled by", and "under
common control with") as applied to any Person, means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of that Person.
"Agreement" shall mean this Amended and Restated Loan Facility
Agreement and Guaranty, as amended, restated, supplemented or modified from time
to time.
"Amortization Period" shall mean (x) 18 months with respect to any
Advance to a Startup Franchisee Borrower other than an Electronic Equipment
Advance and (y) 24 months with respect to any Electronic Equipment Advance;
provided, however, in the event any Startup Franchisee Loan Commitment to a
Startup Franchisee Borrower is terminated upon 90 days' notice from the
Servicer, all amounts due and payable with respect to Electronic Equipment
Advances shall be due and payable in full no later than the 18-month anniversary
of the termination of the Startup Franchisee Loan Commitment.
"Asset Disposition" shall mean (i) all sales of Merchandise; (ii) all
Rental/Purchase Contracts with respect to Merchandise with a "same as cash
option" regardless of term (i.e., 90, 120, 180 days); (iii) all Merchandise
which is determined to have been stolen; (iv) all Merchandise that is destroyed,
lost or otherwise removed from the premises of Borrower other than pursuant to a
Rental/Purchase Contract or by outright sale or for repair work; and (v) all
"skipped" Merchandise which is Merchandise subject to a Rental/Purchase
Contract.
2
8
"Assignment and Acceptance" shall mean an assignment and acceptance
entered into by a Participant and an Eligible Assignee in accordance with the
terms of this Agreement and substantially in the form of Exhibit A.
"ATAC System" shall mean the Sponsor's proprietary software system, as
modified from time to time, used by the Sponsor and its franchisees.
"Authorized Signatory" shall mean each officer of Sponsor specified
from time to time in an appropriate certificate to the Servicer as authorized to
execute Funding Approval Notices and other such documents relating to the Loan
Documents.
"Bankruptcy Code" shall mean The Bankruptcy Code of 1978, as amended
and in effect from time to time (11 U.S.C.Section 101 et seq.).
"Borrower" shall mean either an Established Franchisee Borrower or a
Startup Franchisee Borrower, as the case may be.
"Borrower Group" shall mean, for any Borrower, collectively, such
Borrower and each other Person directly or indirectly controlling, controlled
by, or under common control with, such Borrower, whether through the ownership
of voting securities, by contract or otherwise. For purposes of this definition,
"control" of any person or entity means the possession, directly or indirectly,
of the right to vote at least 25% of the issued and outstanding shares of voting
securities policies of that person or entity.
"Borrower Rate" shall mean, with respect to each Loan, the Prime Rate
per annum plus any additional margin per annum specified for such Loan by
Sponsor in the applicable Funding Approval Notice, such margin not to exceed ten
percent (10.0%) per annum; provided that, at no time may there be more than two
different Borrower Rates applicable to the Startup Franchisee Loans or more than
two different Borrower Rates applicable to the Established Franchisee Loans.
"Business Day" shall mean any day excluding Saturday, Sunday and any
other day on which banks are required or authorized to close in Atlanta, Georgia
or New York, New York and, if the applicable Business Day relates to Adjusted
LIBOR, on which trading is not carried on by and between banks in the London
interbank market.
"Cash Collateral Account" shall have the meaning set forth in Section
9.1.
"Change in Control" shall mean (i) any person or group of persons
(other than the Xxxxxxxxxx Family) (within the meaning of Section 13 or 14 of
the Securities Exchange Act of 1934, as amended) shall have acquired beneficial
ownership (within the meaning of Rule 13d-3 promulgated by the SEC under said
Act) of 50% or more in voting power of the outstanding Voting Stock of the
Sponsor or (ii) members of the Board of Directors of the Sponsor on the date
3
9
hereof, plus any additional members of such Board whose nomination for election
or election to such Board is recommended or approved by the then current members
of such Board or by Xxxxxx Xxxxxxx Xxxxxxxxxx, Xx., shall at any time fail to
constitute a majority of such Board.
"Change in Control Date" shall mean a date on which a Change in Control
occurs.
"Closing Date" shall mean, for any Loan, the date upon which the Loan
Documents with respect to such Loan are executed and delivered and the Loan
Commitment is established thereunder.
"Collateral" shall mean, with respect to any Loan, all property of the
Borrower and all guarantors obligated with respect to such Loan that secures
such Loan, which property shall be designated by the Sponsor and may include all
accounts receivable, inventory, Rental/Purchase Contracts and other business
assets of such Borrower and guarantors.
"Collateral Agreement" shall mean an agreement executed by a Borrower
and any other Persons primarily or secondarily liable for all or part of the
Loan or granting a security interest to the Servicer in specified Collateral as
security for such Loan, including without limitation, any Loan Agreements and
any Personal Guaranties.
"Commitments" shall mean, collectively, the Startup Franchisee
Commitment and the Established Franchisee Commitment.
"Commitment Fee" shall have the meaning set forth in Section 2.4.
"Commitment Termination Date" shall have the meaning set forth in
Section 2.1(a).
"Consolidated Companies" shall mean, collectively, Sponsor and all of
its Subsidiaries.
"Consolidated Net Worth" shall mean, as of the date of determination,
the Sponsor's total shareholders' equity, determined on a consolidated basis in
accordance with GAAP.
"Credit Event" shall have the meaning set forth in Article 8 of this
Agreement.
"Credit Parties" shall mean, collectively, each of the Sponsor and the
Guarantors.
"Default Waiver Request" shall mean a request by Sponsor that the
Servicer waive a Loan Default with respect to a Loan, such request to be
substantially in the form required in the Servicing Agreement.
"Defaulted Borrower" shall mean a Borrower under a Defaulted Loan.
4
10
"Defaulted Loan" shall mean a Loan evidenced by Loan Documents under
the terms of which exist one or more Loan Defaults which have not been cured or
waived as permitted herein.
"Dollar" and "U.S. Dollar" and the sign "$" shall mean lawful money of
the United States of America.
"Effective Date" shall mean the date upon which all conditions
precedent to the effectiveness of this Agreement have been satisfied.
"Electronic Equipment" shall mean all computers, computer equipment,
big screen televisions and any other types of inventory designated by the
Sponsor from time to time.
"Electronic Equipment Advances" shall mean all advances under Startup
Franchisee Loan Commitments made to purchase Electronic Equipment for which the
Sponsor and the Startup Franchisee Borrower have agreed that the Amortization
Period shall be 24 months.
"Electronic Equipment Asset Dispositions" shall mean all Asset
Dispositions of Electronic Equipment for which the Sponsor and the Startup
Franchisee Borrower have agreed that the Amortization Period shall be 24 months.
"Electronic Rental Revenue" shall mean, with respect to any Borrower
for any period, the gross revenues of such Borrower from rentals to the public
of such Borrower's Electronic Equipment, including without limitation, all
customer deposits, advance rental payments, waiver fees, late fees, delivery
fees, nonsufficient funds fees, reinstatement fees, but excluding all retail
sales proceeds and sales taxes.
"Eligible Assignee" shall mean (i) a commercial bank organized under
the laws of the United States or any state thereof having total assets in excess
of $1,000,000,000.00 or any commercial finance or asset-based lending Affiliate
of any such commercial bank and (ii) any Participant.
"Environmental Laws" shall mean all federal, state, local and
applicable foreign statutes and codes or regulations, rules or ordinances
issued, promulgated, or approved thereunder, now or hereafter in effect
(including, without limitation, those with respect to asbestos or asbestos
containing material or exposure to asbestos or asbestos containing material),
relating to pollution or protection of the environment and relating to public
health and safety, relating to (i) emissions, discharges, releases or threatened
releases of pollutants, contaminants, chemicals or industrial toxic or hazardous
constituents, substances or wastes, including without limitation, any Hazardous
Substance, petroleum including crude oil or any fraction thereof, any petroleum
product or other waste, chemicals or substances regulated by any Environmental
Law into the environment (including, without limitation, ambient air, surface
water, ground water, land surface or subsurface strata), or (ii) the
manufacture, processing, distribution, use, generation, treatment, storage,
disposal, transport or handling of any Hazardous Substance, petroleum
5
11
including crude oil or any fraction thereof, any petroleum product or other
waste, chemicals or substances regulated by any Environmental Law, and (iii)
underground storage tanks and related piping, and emissions, discharges and
releases or threatened releases therefrom, such Environmental Laws to include,
without limitation (a) the Clean Air Act (42 U.S.C. Section 7401 et seq.), (b)
the Clean Water Act (33 U.S.C. Section 1251 et seq.), (c) the Resource
Conservation and Recovery Act (42 U.S.C. Section 6901 et seq.), (d) the Toxic
Substances Control Act (15 U.S.C. Section 2601 et seq.), (e) the Comprehensive
Environmental Response Compensation and Liability Act, as amended by the
Superfund Amendments and Reauthorization Act (42 U.S.C. Section 9601 et seq.),
and (f) all applicable national and local laws or regulations with respect to
environmental control.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended and in effect from time to time, and any regulations promulgated
thereunder.
"ERISA Affiliate" shall mean, with respect to any Person, each trade or
business (whether or not incorporated) which is a member of a group of which
that Person is a member and which is under common control within the meaning of
the regulations promulgated under Section 414 of the Tax Code.
"Established Franchisee" shall mean a Franchisee that (x) has been a
Franchisee for at least 18 months; (y) has had at least two Xxxxx Rents' stores
open for a minimum of 12 months; and (z) has at least four Xxxxx Rents' stores
open or under executed area development agreements.
"Established Franchisee Borrower" shall mean an Established Franchisee
who is primarily liable for repayment of an Established Franchisee Loan as a
result of having executed Loan Documents as maker, or its permitted assignee.
"Established Franchisee Borrowing Base" shall mean, with respect to
each Established Franchisee Borrower, on any date of determination, the sum of:
(i) $300,000 for each Xxxxx Rents franchisee store operated by
such Borrower where less than 7 calendar months have elapsed since the
Opening Date of such store, plus
(ii) an amount equal to 5.5 multiplied by the sum of (x) the
Rental Revenue from the most recently ended calendar month for all
Xxxxx Rents franchisee stores operated by such Borrower where at least
6 calendar months but less than 12 calendar months have elapsed since
the Opening Date of each such store, plus (y) the average monthly
Rental Revenue for the three most recently ended calendar months from
all Xxxxx Rents franchisee stores operated by such Borrower where at
least 12 calendar months have elapsed since the Opening Date of each
such store, in each case as reported to Servicer by Sponsor pursuant to
the Servicing Agreement, plus
6
12
(iii) an amount equal to 11.0 multiplied by the sum of (x) the
Electronic Rental Revenues from the most recently ended calendar month
for all franchisee stores operated by such Borrower where at least 6
calendar months but less than 12 calendar months have elapsed since the
Opening Date of each such store, plus (y) the average monthly
Electronic Rental Revenues for the three most recently ended calendar
months from all Xxxxx Rents franchisee stores operated by such Borrower
where at least 12 calendar months have elapsed since the Opening Date
of such store, in each case as reported to Servicer by Sponsor pursuant
to the Servicing Agreement.
"Established Franchisee Commitment" shall have the meaning set forth in
Section 2.1(b).
"Established Franchisee Loan" shall mean the aggregate Advances made to
an Established Franchisee Borrower under its Established Franchisee Loan
Commitment.
"Established Franchisee Loan Agreement" shall mean a Line of Credit and
Security Agreement setting forth the terms and conditions, as between an
Established Franchisee Borrower and the Servicer, under which the Servicer has
established a Loan Commitment to make Advances to such Established Franchisee
Borrower pursuant to the Established Qualified Franchisee Loan Commitment,
substantially in the form of Exhibit B, with such changes as the Sponsor and the
Servicer shall agree to, subject to Section 3.1(b); provided, however, that any
Established Franchisee Loan Agreement executed prior to the Effective Date shall
be substantially in the form required under the Existing Facility Agreement.
"Established Franchisee Loan Commitment" shall mean a commitment to
make Established Franchisee Loans to an Established Franchisee Borrower pursuant
to an Established Franchisee Loan Agreement.
"Established Franchisee Master Note" shall mean that certain Master
Note, executed by an Established Franchisee Borrower in favor of the Servicer,
evidencing such Established Franchisee Borrower's obligation to repay all
Advances made to it pursuant to an Established Franchisee Loan Commitment,
substantially in the form of Exhibit A to the Established Franchisee Loan
Agreement, with such changes as the Sponsor and the Servicer shall agree to,
subject to Section 3.1(b); provided, however, that any Established Franchisee
Master Note executed prior to the Effective Date shall be substantially in the
form required under the Existing Facility Agreement.
"Executive Officer" shall mean, with respect to any Person, the
President, any Vice President, Chief Financial Officer, Treasurer, Secretary and
any Person holding comparable offices or duties.
"Existing Facility Agreement" shall have the meaning set forth in the
recitals hereof.
7
13
"Existing Loan Agreement" shall mean that certain Second Amended and
Restated Revolving Credit and Term Loan Agreement dated as of January 5, 1995,
by and among Sponsor, SunTrust, individually and as agent, and the other lenders
named therein, as amended, restated, modified or supplemented from time to time.
"Facility" shall mean either the loan facility established pursuant to
the Startup Franchisee Commitment or the loan facility established pursuant to
the Established Franchisee Commitment, as the case may be.
"Facility Fee" shall have the meaning set forth in Section 2.4.
"Federal Funds Rate" shall mean, for any day, the weighted average of
the rates on overnight federal funds transactions with members of the Federal
Reserve System arranged by federal funds brokers, as published on the next
succeeding Business Day by the Federal Reserve Bank of Atlanta, or, if such rate
is not so published for any day that is a Business Day, the average quotations
for the day of such transactions received by the Servicer from three federal
funds brokers of recognized standing selected by it.
"Fee Letter" shall mean that certain letter agreement dated as of even
date herewith, by and between the Sponsor and the Servicer, setting forth
certain fees applicable to the loan facility described herein, either as
originally executed or as hereafter amended or modified.
"Final Termination Date" shall mean the date which is ninety (90) days
after the last Maturity Date of the Loans.
"Financial Covenant Loan Default" shall mean the failure of a Borrower
to comply with the financial covenants set forth in Section 6 of such Borrower's
Loan Agreement.
"Financing Statement" shall mean, with respect to a Loan, a document
which among other things, describes the Borrower and the Collateral, the proper
filing of which perfects a security interest in the Collateral described therein
under the laws of the state in which such document is filed.
"Franchise Agreement" shall mean the written agreement between Sponsor
and a Franchisee whereby the Franchisee is authorized to establish an "Aaron's
Rental Purchase" franchise.
"Franchisee" shall have the meaning set forth in the recitals hereof.
"Franchisee Loan Program" shall mean the transaction evidenced by (i)
this Agreement wherein the Sponsor has guaranteed, to the extent set forth
herein, certain obligations of Franchisees of the Sponsor, and (ii) the other
"Operative Documents" (as such term is defined herein) executed by the
Consolidated Companies in connection herewith and therewith.
8
14
"Funded Debt" shall mean all indebtedness for money borrowed, plus
purchase money mortgages, capitalized leases, conditional sales contracts and
similar title retention debt instruments (including any current maturities of
such debt) which by its terms matures more than one year from the date of the
calculation hereof and/or which is renewable or extendable for such a period.
"Funded Debt Ratio" shall mean, as to the Sponsor for any period, a
ratio of (i) its Funded Debt to (ii) the sum of its net income before income
taxes, plus interest expense for such period.
"Funded Established Franchisee Participant's Interest" shall mean the
aggregate outstanding amount of Advances made by a Participant hereunder with
respect to the Established Franchisee Loans, and shall include, with respect to
SunTrust, the aggregate outstanding amount of Swing Line Advances made with
respect to Established Franchisee Loans.
"Funded Participant's Interest" shall mean, with respect to any
Participant, the sum of such Participant's Funded Startup Franchisee
Participant's Interest plus such Participant's Funded Established Franchisee's
Participant's Interest.
"Funded Startup Franchisee Participant's Interest" shall mean the
aggregate outstanding amount of Advances made by a Participant hereunder with
respect to the Startup Franchisee Loans, and shall include, with respect to
SunTrust, the aggregate outstanding amount of Swing Line Advances made with
respect to Startup Franchisee Loans.
"Funding Approval Notice" shall mean a written notice to the Servicer
from Sponsor setting forth the conditions of a proposed Loan Commitment,
consistent with the requirements therefor as set forth in this Agreement, and
containing such information and in substantially such form as shall be agreed to
by Servicer and Sponsor pursuant to the Servicing Agreement.
"GAAP" shall mean generally accepted accounting principles set forth in
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or, if no such
statements are promulgated, then such other statements by such other entity as
may be approved by a significant segment of the accounting profession, which are
applicable to the circumstances as of the date of determination.
"Guaranteed Obligations" shall mean the aggregate amount of all Loan
Indebtedness of all Borrowers outstanding under all Loan Documents to include,
without limitation (i) all principal, interest and commitment fees due with
respect to all Loans, including post-petition interest in any proceeding under
federal bankruptcy laws, (ii) all fees, expenses, and amounts payable by all
Borrowers for reimbursement or indemnification under the terms of all Loan
Agreements and all other Loan Documents executed in connection with the Loan to
such
9
15
Borrower, (iii) all amounts advanced by Servicer to protect or preserve the
value of any security for the Loans, and (iv) all renewals, extensions,
modifications, and refinancings (in whole or in part) of any of the amounts
referred to in clauses (i) and (ii) above).
"Guarantors" shall mean, collectively, Xxxxx Investment Company and all
other subsidiaries of the Sponsor that from time to time become parties to the
Guaranty Agreement and their respective successors and permitted assigns.
"Guaranty Agreement" shall mean the Guaranty Agreement executed by each
of the Subsidiaries of the Sponsor in favor of the Servicer and the
Participants, substantially in the form of Exhibit C, as the same may be
amended, restated, supplemented or otherwise modified from time to time
"Hazardous Substances" shall have the meaning assigned to that term in
the Comprehensive Environmental Response Compensation and Liability Act of 1980,
as amended by the Superfund Amendments and Reauthorization Acts of 1986.
"LIBOR" shall mean, for each Payment Period, the offered rate for
deposits in U.S. Dollars, for a period of one month and in an amount comparable
to the aggregate outstanding Funded Participant's Interests as of the first day
of such Payment Period, appearing on Telerate Page 3750 as of 11:00 A.M.
(Atlanta, Georgia time) on such date. If two or more of such rates appear on
Telerate Page 3750, the rate for that Payment Period shall be the arithmetic
mean of such rates. If the foregoing rate is unavailable from Telerate Page 3750
for any reason, then such rate shall be determined by the Servicer from the
Reuters Screen LIBO Page or, if such rate is also unavailable on such service,
then on any other interest rate reporting service of recognized standing
designated in writing by the Servicer to Sponsor; in any such case rounded, if
necessary, to the next higher 1/100 of 1.0%, if the rate is not such a multiple.
"Lien" shall mean any mortgage, pledge, security interest, encumbrance,
lien, charge, hypothecation, assignment, deposit arrangement, title retention,
preferential property right, trust or other arrangement having the practical
effect of the foregoing (including any agreement to give any of the foregoing,
any conditional sale or other title retention agreement, any lease in the nature
thereof, including any lease or similar arrangement with a public authority
executed in connection with the issuance of industrial revenue bonds or
pollution control revenue bonds, and the filing of or agreements to give any
financing statement under the Uniform Commercial Code of any jurisdiction).
"Loan" shall mean either a Startup Franchisee Loan or an Established
Franchisee Loan, as the case may be.
"Loan Agreement" shall mean either a Startup Franchisee Loan Agreement
or an Established Franchisee Loan Agreement as the case may be.
10
16
"Loan Commitment" shall mean the commitment to make Advances
established by the Servicer in favor of any Borrower in the amount not
exceeding, and upon the terms described in, the applicable Funding Approval
Notice and the applicable Loan Documents, which Loan Commitment may be either a
Startup Franchisee Loan Commitment or an Established Franchisee Loan Commitment.
"Loan Default" shall mean an occurrence with respect to a Loan which is
defined by the applicable Loan Documents to be an event of default (including
but not limited to a Loan Payment Default and a Financial Covenant Loan
Default).
"Loan Documents" shall mean, with respect to any Loan, the Loan
Agreement, the Master Note, any Personal Guaranty, any Spousal Consent, the
Collateral Agreements, in each case relating to such Loan, any other documents
relating to such Loan delivered by any Borrower or any guarantor or surety
thereof to the Servicer and any amendments thereto (provided that such
amendments are made with the consent of Sponsor, where such consent is required
under this Agreement).
"Loan Indebtedness" shall mean all amounts due and payable by a
Borrower under the terms of the Loan Documents governing the Loan to such
Borrower, including, without limitation, outstanding principal, accrued
interest, any commitment fees, and all reasonable costs and expenses of any
legal proceeding brought by the Servicer to collect any of the foregoing
(including without limitation, reasonable attorneys' fees actually incurred).
"Loan Payment Default" shall mean the failure of a Borrower to make a
payment of principal, accrued interest thereon or any other amounts, within the
cure period following the due date therefor, as provided under the applicable
Loan Documents.
"Loan Term" shall mean, with respect to any Loan, the prescribed term
of the Loan Commitment relating to such Loan, as documented in the applicable
Loan Documents, and any term-out period thereafter; provided, however, that the
Loan Term shall not exceed (x) in the case of any Startup Franchisee Loan
Commitment, one (1) year subject to extension in accordance with the terms of
the applicable Startup Franchisee Loan Agreement, plus, in the event that the
Startup Franchisee Loan Commitment is terminated upon ninety (90) days' prior
notice from the Servicer, the Amortization Period and (y) in the case of an
Established Franchisee Loan Commitment, four (4) years.
"Xxxxxxxxxx Family" shall mean, collectively, Xxxxxx Xxxxxxx
Xxxxxxxxxx, Xx., his spouse, his children, his grandchildren and any trust which
may be now or hereafter established for the sole benefit of any of the foregoing
persons.
"Margin Regulations" shall mean Regulation T, Regulation U and
Regulation X of the Board of Governors of the Federal Reserve System, as the
same may be in effect from time to time.
11
17
"Master Note" shall mean either a Startup Franchisee Master Note or an
Established Franchisee Master Note, as the case may be.
"Materially Adverse Effect" shall mean any materially adverse change in
(i) the business, results of operations, financial condition, assets or
prospects of the Sponsor and its Subsidiaries, taken as a whole, (ii) the
ability of the Sponsor to perform its obligations under this Agreement, or (iii)
the ability of the Guarantors (taken as a whole) to perform their respective
obligations under the Guaranty Agreement.
"Maturity Date" shall mean, with respect to any Loan, the date set
forth under the applicable Loan Documents when the related Loan Commitment has
terminated and all principal and interest with respect to such Loan shall become
due and payable in full; provided that, each Maturity Date shall be a Payment
Date.
"Maximum Amount" shall have the meaning set forth in Section 10.2.
"Maximum Commitment Amount" shall mean $52,000,000, as such amount may
be reduced pursuant to Section 2.7, Section 2.8 or Section 15.2.
"Maximum Established Franchisee Recourse Amount" shall mean the greater
of (x) $11,000,000 and (y) two (2) times the largest aggregate amount committed
or loaned to any Borrower Group under the Franchisee Loan Program, in each case
as reduced by any amounts paid by Sponsor pursuant to Section 10.3(c).
"Merchandise" shall mean goods distributed or sold to Franchisees
through Sponsor.
"Minimum Purchase Price" shall mean, with respect to any Established
Franchisee Loan, the lesser of (x) the outstanding Loan Indebtedness thereof and
(y) the sum of (i) the Established Franchisee Borrowing Base in effect on the
date of the occurrence of the relevant Loan Default, or if greater, during the
last full calendar month preceding the date of the occurrence of the relevant
Loan Default, plus (ii) all advances made between the date that such Established
Franchisee Borrowing Base is reported to the Servicer by the Sponsor and the
date which is two Business Days thereafter.
"Monthly Deposit Amount" shall have the meaning set forth in Section
9.1.
"Monthly Servicing Report" shall have the meaning set forth in Section
3.3.
"Multiemployer Plan" shall have the meaning set forth in Section
4001(a)(3) of ERISA.
12
18
"Opening Date" shall mean, with respect to each store location, the
date determined by the Sponsor to be the opening date of such location in
accordance with its standard practice, as notified to the Servicer in accordance
with the terms hereof.
"Operative Documents" shall mean this Agreement, the Guaranty
Agreement, the Servicing Agreement, the Fee Letter and any other documents
delivered by Sponsor or any Guarantor to the Servicer or the Participants in
connection herewith or therewith.
"Participant" shall mean SunTrust, the other lending institutions
listed on the signature pages hereof and each assignee thereof, if any, pursuant
to the terms hereof.
"Participating Commitment" shall mean the commitment of each
Participant to fund its Pro Rata Share of outstanding Loans in an amount not to
exceed such Participant's Participating Commitment Amount.
"Participating Commitment Amount" shall mean the amount set forth
opposite each Participant's name on the signature pages hereof, as such amount
may be modified by assignment pursuant to the terms hereof; provided that,
following the termination of the Commitments, each Participant's Participating
Commitment Amount shall be deemed to be its Pro Rata Share of the aggregate
principal amount of all Loan Commitments.
"Participant Funding" shall mean a funding by the Participants of their
respective Pro Rata Shares of Advances or Loans outstanding under either or both
Facilities.
"Participant's Interest" shall have the meaning set forth in Section
2.2.
"Participant's Unused Commitment" shall mean, with respect to any
Participant, the difference between such Participant's Participating Commitment
Amount and such Participant's Funded Participant's Interest.
"Participation Certificate" shall mean a certificate issued by the
Servicer to a Participant, substantially in the form of Exhibit D attached
hereto, evidencing such Participant's ownership interest conveyed hereunder.
"Payment Date" shall mean the 20th day of each calendar month;
provided, however, if such day is not a Business Day, the next succeeding
Business Day.
"Payment Period" shall mean a period of one (1) month; provided that
(i) the first day of a Payment Period must be a Business Day, (ii) any Payment
Period that would otherwise end on a day that is not a Business Day shall be
extended to the next succeeding Business Day, (iii) the first Payment Period
hereunder shall commence on the date hereof and shall end on the last day of the
next succeeding calendar month and (iv) the first day of any succeeding Payment
Period
13
19
shall be the last day of the preceding Payment Period and shall end on the last
day of the next succeeding calendar month.
"PBGC" shall mean the Pension Benefit Guaranty Corporation, or any
successor thereto.
"Person" shall mean any individual, partnership, firm, corporation,
association, joint venture, trust or other entity, or any government or
political subdivision or agency, department or instrumentality thereof.
"Personal Guaranty" shall mean any guaranty from a principal of a
Borrower substantially in the form required by the Servicing Agreement.
"Plan" shall mean any "employee benefit plan" (as defined in Section
3(3)f ERISA), including, but not limited to, any defined benefit pension plan,
profit sharing plan, money purchase pension plan, savings or thrift plan, stock
bonus plan, employee stock ownership plan, Multiemployer Plan, or any plan,
fund, program, arrangement or practice providing for medical (including
post-retirement medical), hospitalization, accident, sickness, disability, or
life insurance benefits.
"Prime Rate" shall mean the per annum rate of interest designated from
time to time by the Bank to be its prime rate. The Prime Rate is a reference
rate and does not necessarily represent the lowest or best rate of interest that
is being offered by the Bank to its borrowers.
"Pro Rata Share" shall mean, with respect to each of the Participants,
the percentage designated as such Participant's Pro Rata Share on the signature
pages hereof, as such percentage may change from time to time as a result of
assignments or amendments pursuant to this Agreement.
"Quarterly Date" shall have the meaning set forth in Section 2.4.
"Quarterly Servicing Report" shall have the meaning set forth in
Section 3.3(b).
"Regulation D" shall mean Regulation D of the Board of Governors of the
Federal Reserve System, as the same may be in effect from time to time.
"Release" shall mean any release, spill, emission, leaking, pumping,
injection, deposit, disposal (including the abandonment or discarding of
barrels, containers, or other closed receptacles), discharge, dispersal,
leaching or migration into the indoor or outdoor Environment or into or out of
any property, including the movement of Hazardous Substances through or in the
air, soil, surface water, ground water or property.
"Remedial Action" shall mean all actions reasonably necessary, whether
voluntary or involuntary, to (a) clean up, remove, treat or in any other way
adjust Hazardous Substances in
14
20
the indoor or outdoor Environment; (b) prevent the Release or further movement
of Hazardous Substances so that they do not migrate or endanger or threaten to
endanger public health or welfare or the indoor or outdoor Environment; or (c)
perform remedial studies, investigations, restoration and post-remedial studies,
investigations and monitoring on, about or in the Property, assets, equipment or
facilities
"Rental/Purchase Contract" shall mean a contract between a Franchisee
and a customer to rent Merchandise in the form approved by the Sponsor (and
which may included purchase options).
"Rental Revenue" shall mean, with respect to any Borrower for any
period, the gross revenues of such Borrower from rentals to the public of such
Borrower's furniture inventory and rental equipment, including without
limitation, all customer deposits, advance rental payments, waiver fees, late
fees, delivery fees, nonsufficient funds fees, reinstatement fees, but excluding
all Electronic Rental Revenues, all retail sales proceeds and sales taxes.
"Reportable Event" shall have the meaning assigned to such term in
ERISA.
"Required Participants" shall mean (x) at any time prior to termination
of the Commitments, Participants holding at least 66 2/3% of the sum of (x) the
aggregate Funded Participant's Interests, plus (y) the Participant's Unused
Commitments, and (y) at any time on and after the termination of the
Commitments, Participants holding at least 66 2/3% of the aggregate outstanding
Funded Participant's Interests at such time.
"Requirement of Law" for any person shall mean the articles or
certificate of incorporation and by-laws or other organizational or governing
documents of such Person, and any law, treaty, rule or regulation, or
determination of an arbitrator or a court or other governmental authority, in
each case applicable to or binding upon such Person or any of its property or to
which such Person or any of its property is subject.
"Response Period" shall mean (i) with respect to any Loan Default,
other than a Financial Covenant Loan Default, arising under the Loan Documents
for any Startup Franchise Loan, a period of seventy (70) days commencing on the
day next succeeding the day on which the Sponsor receives a notice from the
Servicer of such Loan Default, and (ii) with respect to any Loan Default, other
than a Financial Covenant Loan Default, arising under the Loan Documents for any
Established Franchisee Loan, a period of five (5) Business Days commencing on
the day next succeeding the day on which the Sponsor receives a notice from the
Servicer of such Loan Default, provided, however, that no Response Period shall
extend beyond the Final Termination Date.
"Reuters Screen" shall mean, when used in connection with any
designated page and LIBOR, the display page so designated on the Reuters Monitor
Money Rates Service (or such
15
21
other page as may replace that page on that service for the purpose of
displaying rates comparable to LIBOR).
"Revolving Credit Agreement" shall mean that certain Second Amended and
Restated Revolving Credit and Term Loan Agreement by and among the Sponsor,
SunTrust, as a lender and as Agent, The First National Bank of Chicago and
SouthTrust Bank dated as January 6, 1995, as amended.
"Servicing Agreement" shall have the meaning set forth in the recitals
hereof.
"Servicing Fee" shall mean the fee payable to the Servicer pursuant to
the terms of the Servicing Agreement.
"Servicer" shall mean SunTrust Bank, Atlanta and its successors and
assigns.
"Sponsor's Fee" shall have the meaning set forth in the Servicing
Agreement.
"Spousal Consent" shall mean any agreement provided by the spouse of
any Person executing a Guaranty to the extent such spouse has not personally
executed a Guaranty, to be substantially in the form provided by the Servicer.
"Startup Franchisee Borrower" shall mean a Franchisee who is primarily
liable for repayment of a Startup Franchisee Loan as a result of having executed
Loan Documents as maker, or its permitted assignee.
"Startup Franchisee Commitment" shall have the meaning set forth in
Section 2.1(a).
"Startup Franchisee Loan" shall mean the aggregate Advances made to a
Startup Franchisee Borrower under its Startup Franchisee Loan Commitment.
"Startup Franchisee Loan Agreement" shall mean a Line of Credit and
Security Agreement setting forth the terms and conditions, as between a Startup
Franchisee Borrower and the Servicer, under which the Servicer has established a
Startup Franchisee Loan Commitment to make Advances to the Startup Franchisee
Borrower, substantially in the form of Exhibit E, with such changes as the
Sponsor and the Servicer shall agree to, subject to Section 3.1(b); provided,
however, that any Startup Franchisee Loan Agreement executed prior to the
Effective Date shall be substantially in the form required under the Existing
Facility Agreement.
"Startup Franchisee Loan Commitment" shall mean a commitment to make
Startup Franchisee Loans extended to a Startup Franchisee Borrower pursuant to a
Startup Franchisee Loan Agreement.
16
22
"Startup Franchisee Master Note" shall mean that certain Master Note,
executed by a Startup Franchisee Borrower in favor of the Servicer, evidencing
such Startup Franchisee Borrower's obligation to repay all Advances made to it
pursuant to a Startup Franchisee Loan Commitment, substantially in the form of
Exhibit A to the Startup Franchisee Loan Agreement, with such changes as the
Sponsor and the Servicer shall agree to, subject to Section 3.1(b); provided,
however, that any Startup Franchisee Master Note executed prior to the Effective
Date shall be substantially in the form required under the Existing Facility
Agreement.
"Store Opening Information Sheet" shall have the meaning assigned to
such term in the Servicing Agreement.
"Subordinated Debt" shall have the meaning set forth in Section 10.8.
"Subsidiary" shall mean, with respect to any Person, any corporation or
other entity (including, without limitation, partnerships, joint ventures, and
associations) regardless of its jurisdiction of organization or formation, at
least a majority of the total combined voting power of all classes of voting
stock or other ownership interests of which shall, at the time as of which any
determination is being made, be owned by such Person, either directly or
indirectly through one or more other Subsidiaries.
"Swing Line Advances" shall have the meaning set forth in Section 2.3.
"Synthetic Lease Documents" shall mean, collectively, the Master
Agreement, dated as of September 30, 1996, among the Sponsor, SunTrust Banks,
Inc., as lessor (the "Lessor"), SunTrust Bank, Atlanta and SouthTrust Bank of
Georgia, N.A., as lenders, and SunTrust Bank, Atlanta, as agent, the Lease
Agreement, dated as of September 30, 1996, between the Lessor and the Sponsor
and any supplements thereto, the Construction Agency Agreement, dated as of
September 30, 1996, among the Lessor and the Sponsor, the Guaranty, dated as of
September 30, 1996, executed by the Sponsor in favor of the Funding Parties (as
defined therein), and any and all Security Agreements and Assignments
(Construction Contract, Architect's Agreement, Permits, Licenses and
Governmental Approvals, and Plans and Specifications and Drawings) executed from
time to time by the Sponsor in favor of the Lessor, and any modifications of or
replacements for any or all of the foregoing.
"Tax Code" shall mean the Internal Revenue Code of 1986, as amended and
in effect from time to time.
"Taxes" shall mean any present or future taxes, levies, imposts,
duties, fees, assessments, deductions, withholdings or other charges of whatever
nature, including without limitation, income, receipts, excise, property, sales,
transfer, license, payroll, withholding, social security and franchise taxes now
or hereafter imposed or levied by the United States, or any state, local or
foreign government or by any department, agency or other political subdivision
or taxing
17
23
authority thereof or therein and all interest, penalties, additions to tax and
similar liabilities with respect thereto.
"Telerate" shall mean, when used in connection with any designated page
and LIBOR, the display page so designated on the Dow Xxxxx Telerate Service (or
such other page as may replace that page on that service for the purpose of
displaying rates comparable to LIBOR).
"Unmatured Credit Event" shall mean any condition or event which, with
notice or the passage of time or both, would constitute a Credit Event.
"Voting Stock" shall mean securities of any class or classes, the
holders of which are entitled to elect all of the corporate directors (or
Persons performing similar functions).
"Wind-Down Event" shall mean either (i) the event that the Commitments
are not extended for any reason and the Commitment Termination Date occurs or
(ii) the event that the Maximum Established Franchisee Recourse Amount is, at
any date of determination, less than $10,000,000.
1.2 Accounting Terms and Determination.
Unless otherwise defined or specified herein, all accounting terms
shall be construed herein, all accounting determinations hereunder
shall be made, all financial statements required to be delivered
hereunder shall be prepared, and all financial records shall be
maintained in accordance with, GAAP.
1.3 Other Definitional Terms.
The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement, and
Article, Section, Schedule, Exhibit and like references are to this
Agreement unless otherwise specified.
1.4 Exhibits and Schedules.
All Exhibits and Schedules attached hereto are by reference made a part
hereof.
2. LOAN FACILITY
2.1 Establishment of Commitments; Terms of Loans.
(a) Startup Franchisee Commitment. Subject to and upon the
terms and conditions set forth in this Agreement and the other
Operative Documents, and in reliance
18
24
upon the guaranty and other obligations of the Sponsor set forth
herein, the Servicer hereby establishes a commitment to the Sponsor to
establish Startup Franchisee Loan Commitments and to make Advances
thereunder to such Startup Franchisees as may be designated by the
Sponsor in its Funding Approval Notices during a period commencing on
the date hereof and ending on November 1, 2000 (as such period may be
extended for one or more subsequent 364-day periods pursuant to Section
2.8, the "Commitment Termination Date") in an aggregate committed
amount at any one time outstanding not to exceed FIFTY-TWO MILLION AND
NO/100 DOLLARS ($52,000,000) (the "Startup Franchisee Commitment");
provided that, notwithstanding any provision of this Agreement to the
contrary, at no time shall the sum of aggregate committed amounts of
all Loan Commitments outstanding pursuant to the Commitments, or,
following the termination of any such Loan Commitment, Advances
outstanding thereunder, exceed the Maximum Commitment Amount.
(b) Established Franchisee Commitment. Subject to and upon the
terms and conditions set forth in this Agreement and the other
Operative Documents, and in reliance upon the guaranty and other
obligations of the Sponsor set forth herein, the Servicer hereby
establishes a commitment to the Sponsor to establish Established
Franchisee Loan Commitments and to make Advances thereunder to such
Established Franchisees as may be designated by the Sponsor in its
Funding Approval Notices during a period commencing on the date hereof
and ending on the Commitment Termination Date in an aggregate committed
amount at any one time outstanding not to exceed THIRTY-SEVEN MILLION
AND NO/100 DOLLARS ($37,000,000) (the "Established Franchisee
Commitment"); provided that, notwithstanding any provision of this
Agreement to the contrary, at no time shall the sum of aggregate
committed amounts of all Loan Commitments outstanding pursuant to the
Commitments, or, following the termination of any such Loan Commitment,
Advances outstanding thereunder, exceed the Maximum Commitment Amount.
(c) Authorization of Loan Commitments Pursuant to Startup
Franchisee Commitment; Loan Terms. Within the limits of the Startup
Franchisee Commitment and in accordance with the procedures set forth
in this Agreement and the Servicing Agreement, the Sponsor may
authorize the Servicer to establish a Startup Franchisee Loan
Commitment pursuant to the Startup Franchisee Commitment in favor of a
Franchisee who meets the credit criteria established by the Sponsor.
The amount of each Startup Franchisee Loan Commitment shall be
determined by the Sponsor but shall not be less than $100,000 for any
Franchisee. Pursuant to the Startup Franchisee Loan Commitment, the
Servicer shall agree to make Advances to the Startup Franchisee
Borrower thereunder. Each Startup Franchisee Loan shall bear interest
at the Borrower Rate designated by Sponsor in the applicable Funding
Approval Notice, and interest shall be payable on each Payment Date and
on the Maturity Date of such Startup Franchisee Loan when all principal
and interest shall be due and payable in full. Each Startup Franchisee
Loan may be prepaid in full or in part on any Business Day, without
premium
19
25
or penalty. The Loan Term of each Startup Franchisee Loan Commitment
shall be, initially, one year, but shall automatically renew unless
terminated by ninety (90) days' prior written notice by Servicer to the
Startup Franchisee Borrower prior to the first anniversary date and may
thereafter be terminated at any time by Servicer upon ninety (90) days'
prior written notice by Servicer to the Startup Franchisee Borrower;
provided that the amounts outstanding thereunder shall be allowed to
term out over the Amortization Period as provided below. The proceeds
of each Advance made pursuant to the Startup Franchisee Loan
Commitments shall be used solely to purchase inventory, and to the
extent permitted by Sponsor, to pay state sales and use taxes and
freight charges. At the end of each month, the aggregate Advances
(other than Electronic Equipment Advances) made to each Startup
Franchisee Borrower during such month (net of any prepayments during
such month other than Electronic Equipment Asset Disposition proceeds
to the extent applied to offset Electronic Equipment Advances as
provided below) shall be amortized (in accordance with a straight-line
amortization schedule) over the Amortization Period. At the end of the
month, the aggregate Electronic Equipment Advances made to each Startup
Franchisee Borrower during such month (net of proceeds of Electronic
Equipment Asset Dispositions received during such month) shall be
amortized (in accordance with a straight-line amortization schedule)
over the Amortization Period. In the event that the Startup Franchisee
Loan Commitment of any Startup Franchisee Borrower is terminated by the
Servicer as provided above, such Startup Franchisee Borrower shall,
notwithstanding the other provisions of this Section 2.1(c), amortize
all outstanding Advances over the Amortization Period (in accordance
with a straight-line amortization schedule), with all Electronic
Equipment Advances due and payable in full no later than 18 months
after termination. In the event that the Startup Franchisee Borrower
terminates the Startup Franchisee Loan Commitment, all amounts advanced
to such Startup Franchisee Borrower shall be due and payable in full on
the termination date, together with all accrued and unpaid interest
thereon. With respect to each Startup Franchisee Loan Agreement
executed after January 20, 1998, each Startup Franchisee Borrower shall
agree to pay a commitment fee on its unused Startup Franchisee Loan
Commitment in an amount to be determined by the Sponsor, such
commitment fee to be paid quarterly, in arrears.
(d) Authorization of Loan Commitments Pursuant to Established
Franchisee Commitment; Loan Terms. Within the limits of the Established
Franchisee Commitment and in accordance with the procedures set forth
in this Agreement and the Servicing Agreement, the Sponsor may
authorize the Servicer to establish an Established Franchisee Loan
Commitment pursuant to the Established Franchisee Commitment in favor
of an Established Franchisee who meets the credit criteria established
by the Sponsor. The amount of each Established Franchisee Loan
Commitment shall be determined by the Sponsor, but shall not be less
than $100,000. Pursuant to the Established Franchisee Loan Commitment,
the Servicer shall agree to make Advances to the Established Franchisee
Borrower thereunder. Each Established Franchisee Loan shall bear
interest at the Borrower Rate designated by Sponsor in the applicable
Funding
20
26
Approval Notice, and interest shall be payable on each Payment Date and
on the Maturity Date of such Established Franchisee Loan when all
principal and interest shall be due and payable in full. Each
Established Franchisee Loan may be prepaid in full or in part on any
Business Day, without premium or penalty. The Loan Term of each
Established Franchisee Loan shall not exceed four years. The proceeds
of each Advance made pursuant to the Established Franchisee Loan
Commitments shall be used for general corporate purposes. Each
Established Franchisee Borrower shall agree to pay a commitment fee on
the unused Established Franchisee Loan Commitment in an amount to be
determined by the Sponsor but in any event not to exceed 0.5% per
annum, such commitment fee to be paid quarterly, in arrears. At no
time, except as otherwise provided in the form of Established
Franchisee Loan Agreement, shall the aggregate outstanding principal
amount of any and all Established Franchisee Loans made to any Borrower
exceed the Established Franchisee Borrowing Base of such Borrower as in
effect at such time.
(e) Conditions to Obligation of Servicer to Establish Loan Commitments.
Servicer's obligation to establish each Loan Commitment under the
Operative Documents is subject to the fulfillment of the following
conditions as of the Closing Date of such Loan:
(ii) this Agreement and each of the other Operative
Documents shall be in full force and effect;
(iii) the representations and warranties of the
Sponsor contained in Article 5 shall be true and correct in all
material respects with the same effect as though such representations
and warranties had been made on the Closing Date of such Loan;
(iv) the Servicer shall have received from the
Sponsor a Funding Approval Notice authorizing such Loan Commitment and
a Store Opening Information Sheet;
(v) all precedents and conditions to the Loan
Commitment specified in the Servicing Agreement, together with such
additional precedents and conditions as may, at Sponsor's election, be
included in the applicable Funding Approval Notice, shall have been
completed to the Servicer's reasonable satisfaction; and
(vi) no Credit Event, Unmatured Credit Event, Change
of Control or Wind-Down Event shall have occurred and be continuing.
2.2 Conveyance of Participant's Interest.
(a) The Servicer hereby sells, assigns, transfers and conveys
to the Participants, without recourse or warranty, and each Participant
hereby purchases from
21
27
the Servicer, an undivided percentage ownership interest (which
percentage shall be equal to each Participant's Pro Rata Share) in (i)
the Commitments, (ii) the Loan Commitments, (iii) the Loans, (iv) the
Collateral, (v) all rights against any guarantor of any Loan, including
the Sponsor, (vi) the Loan Documents, (vii) all rights pursuant to the
Guaranty Agreement and (viii) all right, title and interest to any
payment or right to receive payment with respect to the foregoing
(collectively, the "Participant's Interest"). Notwithstanding the
foregoing, each Participant's right to receive payments of interest,
commitments fees or other fees with respect to the Commitment, the Loan
Commitments and the Loans shall not exceed the amounts which such
Participant is entitled to receive pursuant to the terms of this
Agreement.
(b) In consideration of the entry by each Participant into this Agreement
and the obligation of each Participant hereunder, the Servicer shall
issue to each Participant on the Closing Date, a Participation
Certificate. Each Participation Certificate shall be in an amount equal
to the relevant Participant's Participating Commitment Amount, and the
Funded Participant's Interest outstanding thereunder shall bear
interest as hereinafter set forth and shall be payable as hereinafter
set forth.
(c) In accordance with the terms and conditions hereof, and in
consideration of the sale of the Participant's Interest to such
Participant, each Participant severally agrees from time to time,
during the period commencing on the Effective Date and ending on the
Final Termination Date, to fund its Pro Rata Share of outstanding Loans
made by the Servicer to the Borrowers in an aggregate amount at any one
outstanding not to exceed such Participant's Participating Commitment
Amount (subject to each Participant's obligations pursuant to Section
2.3(d)).
2.3 Funding of Advances; Swing Line; Funding of Participant's Interest in
Loans.
(a) Funding of Advances. The Servicer shall fund Advances
requested by the Borrowers in accordance with the terms of the
applicable Loan Documents and the Servicing Agreement. On the date of
any such funding, the Servicer shall elect whether or not to require
the Participants to fund their respective Pro Rata Share of the
Advances to be made on such date. In the event that the Servicer elects
not to require the Participants to fund their Pro Rata Share of the
Advances to be made on such date, the Servicer shall make such Advances
(each, a "Swing Line Advance") to the Borrowers for the account of the
Servicer; provided that, the aggregate amount of Swing Line Advances
outstanding on any date shall not exceed $5,000,000 and further
provided that the sum of (x) the aggregate outstanding Swing Line
Advances plus (y) the aggregate outstanding Funded Participant's
Interests (exclusive of the Swing Line Advances) shall not exceed the
Maximum Commitment Amount. If (i) any Credit Event, Change of Control
or Wind-Down Event shall have occurred, (ii) after giving effect to any
requested Advance, the aggregate Swing Line Advances outstanding
hereunder would exceed $5,000,000, or (iii) the Servicer otherwise
determines in its sole discretion to request a Participant
22
28
Funding hereunder, then the Servicer shall notify the Participants
pursuant to subsection (b) requesting a Participant Funding.
(b) Notification of Participant Funding. In the event that the
Servicer desires that the Participants fund their respective Pro Rata
Shares of Advances or Loans made or outstanding pursuant to the Loan
Documents, the Servicer shall deliver written or telecopy notice to the
Participants (or telephonic notice promptly confirmed in writing or by
telecopy) (a "Participant Funding Request") by no later than 10:00 a.m.
(Atlanta, Georgia time) on the date which is the requested date of the
Participant Funding which shall specify (x) the date of the Participant
Funding, which shall be a Business Day, and (y) each Participant's Pro
Rata Share of the Advances or Loans outstanding to be funded in
connection with such Participant Funding.
(c) Each Participant shall make available its Pro Rata Share
of the requested Participant Funding on the proposed date thereof by
wire transfer of immediately available funds to the Servicer in
Atlanta, Georgia by not later than 2:00 P.M. (Atlanta, Georgia time).
Unless the Servicer shall have received notice from a Participant prior
to the date of any Participant Funding that such Participant will not
make available to the Servicer such Participant's Pro Rata Share of
such Participant Funding, the Servicer may assume that the Participant
has made such portion available to the Servicer on the date of such
Participant Funding in accordance with this subsection (c) and the
Servicer may, in reliance on such assumption, make available to the
Borrowers a corresponding amount or credit the same to Swing Line
Advances. If and to the extent that such Participant shall not have
made such portion available to the Servicer, such Participant and the
Sponsor shall severally agree to repay the Servicer forthwith (on
demand in the case of the Participant and within three (3) days of such
demand in the case of the Sponsor), without duplication, such amount
with interest at the Federal Funds Rate plus 2% per annum and, until
such time as such Participant has repaid to the Servicer such amount,
such Participant shall (i) have no right to vote regarding any issue on
which voting is required or advisable under this Agreement or the other
Operative Documents, and (ii) shall not be entitled to receive any
payments of interest, fees or repayment of the principal amount of such
Advance or Loan which the Participant has failed to pay to the
Servicer. If such Participant shall repay to the Servicer such amount,
then such amount shall constitute part of such Participant's Funded
Participant's Interest.
(d) Each Participant's obligations to fund its Pro Rata Share
of any requested Participant Funding shall be absolute and
unconditional and shall not be affected by any circumstance, including,
without limitation, (i) any setoff, counterclaim, recoupment, defense,
or other right which such Participant may have against the Servicer,
the Sponsor, any Borrower or any other Person for any reason
whatsoever, (ii) the occurrence of any Credit Event, Unmatured Credit
Event, Change of Control or Wind-Down Event, (iii) the occurrence of
any Loan Default, (iv) any adverse change in the condition (financial
or otherwise) of the Sponsor or any other Credit Party or any Borrower,
(v) the acceleration
23
29
or maturity of any Loan or the Sponsor's obligations hereunder or the
termination of the Commitments, Loan Commitments or the Participating
Commitments after the making of any Swing Line Advance, (vi) any breach
of this Agreement by the Sponsor or any other Participant, or (vii) any
other circumstance, happening or event whatsoever, whether or not
similar to any of the foregoing.
(e) Notwithstanding the foregoing provisions of this Section
2.3, no Participant shall be required to fund its Pro Rata Share of any
requested Participant Funding for purposes of refunding a Swing Line
Advance pursuant to subsection (d) above if a Loan Default with respect
to the relevant Loan has occurred and is continuing and, prior to the
making by the Servicer of such Swing Line Advance, the Servicer had
received written notice from Sponsor, the relevant Borrower or any
Participant specifying that such Loan Default had occurred and was
continuing (and identifying the same as a Loan Default, as the case may
be) which has not been cured or waived; provided that, in the case of a
Loan Default arising from an Unmatured Credit Event or Credit Event
where the Participants are not pursuing remedies, the Participants will
be obligated to fund their respective Pro Rata Shares of Swing Line
Advances as long as the aggregate amount of such Swing Line Advances
does not exceed $2,000,000.
2.4 Commitment Fees.
(a) Each Participant will receive, from amounts paid by the
Borrowers under the Loan Documents and the Sponsor under the Operative
Documents, a commitment fee (the "Commitment Fee") with respect to the
average daily amount of each Participant's Unused Commitment, for the
period commencing on the Effective Date and ending on the Final
Termination Date, or such earlier date as the Participating Commitments
shall expire or terminate, equal to 0.125% per annum, such Commitment
Fee to be payable in arrears on each third Payment Date (a "Quarterly
Date") commencing on October 20, 1999, for the preceding Payment
Period, calculated on the basis of a 360-day year and the actual number
of days elapsed.
(b) All Commitment Fees shall be paid on the dates due, in
immediately available funds, to the Participants by the Servicer from
amounts received from the Borrowers and Sponsor.
(c) In the event that the commitment fees received by the
Servicer from the Borrowers and the Sponsor are not sufficient on any
Quarterly Date to pay the Commitment Fees to the Participants required
pursuant hereto, the Sponsor shall, upon demand of the Servicer,
immediately fund such difference to the Servicer (with such payment
allocated to specific Loan Payment Defaults as agreed by Sponsor and
Servicer, if applicable) and either, at the election of the Sponsor,
(x) the Sponsor shall be reimbursed by the Servicer upon receipt of
such amount from the Borrower, (y) the Loan Indebtedness shall be
deemed to be reduced by such amount for purposes of a repayment
24
30
or purchase of such Defaulted Loan by Sponsor in accordance with the
terms of this Agreement or (z) if elected by Sponsor and if such amount
is sufficient to cure any Loan Payment Default such amount shall be
deemed to have satisfied Sponsor's obligation to cure such Loan Payment
Default hereunder.
2.5 Interest on Funded Participant's Interest.
(a) Funded Startup Franchisee Participant's Interest. Subject
to the provisions of Section 2.6, each Participant's Funded Startup
Franchisee Participant's Interest shall bear interest (computed on the
basis of the actual number of days elapsed over a year of 360 days) at
rate per annum equal to the Adjusted LIBO Rate for the Payment Period
in which such Funded Startup Franchisee Participant's Interest is
outstanding (with the Adjusted LIBO Rate applicable to all amounts
outstanding during any Payment Period being automatically reset on the
first day of each Payment Period regardless of the date of any
Participant Funding hereunder) plus an additional one and one quarter
of one percent (1.25%) per annum.
(b) Funded Established Franchisee Participant's Interest.
Subject to the provisions of Section 2.6, each Participant's Funded
Established Franchisee Participant's Interest shall bear interest
(computed on the basis of the actual number of days elapsed over a year
of 360 days) at rate per annum equal to the Adjusted LIBO Rate for the
Payment Period in which such Funded Established Franchisee
Participant's Interest is outstanding (with the Adjusted LIBO Rate
applicable to all amounts outstanding during any Payment Period being
automatically reset on the first day of each Payment Period regardless
of the date of any Participant Funding hereunder) plus an additional
one and one half of one percent (1.50%) per annum.
(c) Payment of Interest. Interest on each Participant's Funded
Participant's Interest shall be payable by the Servicer to the
Participants on each Payment Date from interest payments received on
the Loans under such Facility on such Payment Date for the preceding
Payment Period and from other amounts received from the Sponsor.
(d) Sponsor's Obligation. In the event that the interest
received by the Servicer from the Borrowers on any Payment Date is not
sufficient to pay the interest to the Participants required pursuant
hereto, the Sponsor shall, upon demand of the Servicer, immediately
fund such difference to the Servicer (with such payment allocated to
specific Loan Payment Defaults as agreed by Sponsor and Servicer) and
if such shortfall results from Loan Payment Defaults rather than
interest rate variances, either, at the election of the Sponsor, (x)
the Sponsor shall be reimbursed by the Servicer upon receipt of such
amount from the applicable Borrower, (y) the Loan Indebtedness of such
Borrower shall be deemed to be reduced by such amount for purposes of a
repayment or purchase of such Defaulted Loan by Sponsor in accordance
with the terms of this Agreement or (z) if elected by Sponsor and if
such amount is sufficient to cure any Loan Payment Default,
25
31
such amount shall be deemed to have satisfied Sponsor's obligation to
cure such Loan Payment Default hereunder.
(e) In the event that LIBOR is not determinable by the Bank or
it becomes impossible or illegal for the Bank to determine the Funded
Participants Interest based upon LIBOR, the parties agree that in such
event the Funded Participants Interest shall bear interest at a rate
per annum equal to the Prime Rate plus a mutually agreed upon spread
based upon current market conditions.
2.6 Default Interest.
If any amount payable to the Servicer or the Participants by the
Sponsor under the Operative Documents is not paid on the date due
hereunder, such amount shall bear interest (to the extent permitted by
law) for each day from such date up to (but not including) the date of
actual payment (after as well as before judgment) at a rate per annum
(computed on the basis of the actual number of days elapsed over a year
of 360 days) equal to the rate set forth in Section 2.5 for each
Facility plus an additional one percent (1.0%) per annum.
2.7 Voluntary Reduction of the Unutilized Commitment.
Upon at least three (3) Business Days' prior telephonic notice
(promptly confirmed in writing) to the Servicer, Sponsor shall have the
right, without premium or penalty, to terminate the Commitments, in
part or in whole, provided that (i) any such termination shall apply to
proportionately and permanently reduce each Facility, (ii) any such
termination shall apply to proportionately and permanently reduce the
Participating Commitments of each of the Participants, (ii) any partial
termination pursuant to this Section 2.7 shall be in an amount of at
least $5,000,000 and integral multiples of $1,000,000, and (iii) the
Commitments may not be reduced if, as a result thereof, the amount of
either Facility is less than the aggregate sum of all outstanding Loan
Commitments pursuant to such Facility.
2.8 Extension of Commitments.
(a) The Sponsor may, by written notice to the Servicer (which
shall promptly deliver a copy to each of the Participants), given not
more than sixty (60) days prior to any anniversary of the date of this
Agreement while the Commitments are effect, request that the
Participants extend the then scheduled Commitment Termination Date (the
"Existing Date") for an additional 364-day period. Each Participant
shall, by notice to the Sponsor and the Servicer given within fifteen
(15) Business Days after receipt of such request, advise the Sponsor
and the Servicer whether or not such Participant consents to the
extension request (and any Participant which does not respond during
such 15-day period shall be deemed to have advised the Sponsor and the
Servicer that it will not agree to such extension).
26
32
(b) In the event that, on the 15th Business Day after receipt
of the notice delivered pursuant to subsection (a) above, all of the
Participants shall have agreed to extend their respective Participating
Commitments, the Commitment Termination Date shall be deemed to have
been extended, effective as of the Existing Date, to the date which is
364 days thereafter.
(c) In the event that, on the 15th Business Day after receipt
of the notice delivered pursuant to subsection (a) above, all of the
Participants shall not have agreed to extend their respective
Participating Commitments, the Sponsor and the Servicer shall notify
the consenting Participants ("Consenting Participants") of the
aggregate Participating Commitment Amounts of the non-extending
Participants ("Non-Consenting Participants") and such Consenting
Participants shall, by notice to the Sponsor and the Servicer given
within ten (10) Business Days after receipt of such notice, advise the
Servicer and Sponsor whether or not such Participant wishes to purchase
all or a portion of the Participating Commitments of the Non-Consenting
Participants (and any Participant which does not respond during such
10-Business Day period shall be deemed to have rejected such offer). In
the event that more than one Consenting Participant agrees to purchase
all or a portion of such Participating Commitments, the Sponsor and the
Servicer shall allocate such Participating Commitments among such
Consenting Participants so as to preserve, to the extent possible, the
relative pro rata shares of the Consenting Participants of the
Participating Commitments prior to such extension request. If
Consenting Participants do not elect to assume all of the Participating
Commitments of the Non-Consenting Participants, the Sponsor shall have
the right, subject to the terms and conditions of Section 15.6, to
arrange for one or more banks (any such bank being called a "New
Participant") to purchase the Participating Commitment of any
Non-Consenting Participant. Each Non-Consenting Participant shall
assign its Participating Commitment and its Participant's Interest
outstanding hereunder to the Consenting Participant or New Participant
purchasing such Participating Commitment in accordance with Section
15.6, in return for payment in full of all principal, interest and
other amounts owing to such Non-Consenting Participant hereunder, on or
before the Existing Date and, as of the effective date of such
assignment, shall no longer be a party hereto, provided that each New
Participant shall be subject to the approval of the Servicer (which
approval shall not be unreasonably withheld). If (and only if)
Participants (including New Participants) holding Participating
Commitments representing at least an amount equal to the greater of (x)
the sum of all outstanding Loan Commitments under both Facilities and
(y) 85% of the aggregate Participating Commitments on the date of such
extension request shall have agreed to such extension by the Existing
Date (the "Continuing Participants"), then (i) the Commitment
Termination Date shall be extended for an additional 364-day period and
(ii) the Participating Commitment of any Non-Consenting Participant
which has not been assigned to a Consenting Participant or a New
Participant shall terminate (with the result that the amount of the
Commitments shall be decreased proportionately by the amount of such
Participating Commitment), and all
27
33
amounts owing to such Non-Consenting Participant shall become due and
payable, together with all interest accrued thereon and all other
amounts owed to such Non-Consenting Participant hereunder, on the
Existing Date applicable to such Participant without giving effect to
any extension of the Commitment Termination Date.
2.9 Wind-Down Events.
(a) In the event that the Commitments are not extended for any
reason and the Commitment Termination Date occurs, then (x) the Sponsor
shall not have the right to request that any further Loan Commitments
be established, and (y) the Servicer shall, within a reasonable period
of time and in any event no later than thirty (30) days after the
Commitment Termination Date, give notice to each of the Startup
Franchisee Borrowers terminating the Startup Franchisee Loan
Commitments as of the date which is ninety (90) days after delivery of
such notice, subject, in each case, to the right of the Startup
Franchisee Borrowers to term out the amounts outstanding under their
Loan Commitments as set forth in Section 2.1(c); provided, however,
that the occurrence of such Wind-Down Event shall not affect the
obligation of (i) the Servicer to make Advances pursuant to existing
Startup Franchisee Loan Commitments, except to the extent that the
Startup Franchisee Loan Commitments are terminated pursuant to clause
(y) above, (ii) the Participants to fund their Participant's Interest
as provided herein, except to the extent that the Startup Franchisee
Loan Commitments are terminated pursuant to clause (y) above or (iii)
the Credit Parties under the Operative Documents.
(b) In the event that the Maximum Established Franchisee
Recourse Amount is, at any date of determination, less than
$10,000,000, then the Sponsor shall not have the right to request that
any further Established Franchisee Loan Commitments be established;
provided, however, that the occurrence of such Wind-Down Event shall
not affect the obligation of (x) the Servicer to make Advances pursuant
to existing Established Franchisee Loan Commitments, (y) the
Participants to fund their Participant's Interest as provided herein,
or (z) the Credit Parties under the Operative Documents.
2.10 Reserve Requirements; Change in Circumstances; Change in Lending
Offices.
28
34
(a) Notwithstanding any other provision herein, if, by reason
of (i) after the date hereof, the introduction of or any change
(including any change by way of imposition or increase of reserve
requirements) in or in the interpretation of any law or regulation, or
(ii) the compliance with any guideline or request from any central bank
or other governmental authority or quasi-governmental authority
exercising control over banks or financial institutions generally
(whether or not having the force of law), any reserve (including any
imposed by the Federal Reserve Board), special deposit or similar
requirement (including a reserve, special deposit or similar
requirement that takes the form of a tax) against assets of, deposits
with or for the account of, or credit extended by, any Participant's
office through which it funds its obligations hereunder shall be
imposed or deemed applicable or any other condition affecting its
obligation to make or maintain its Funded Participant's Interest at a
rate based upon the Adjusted LIBO Rate shall be imposed on any
Participant or its office through which it funds its obligations
hereunder or the interbank Eurodollar market; and as a result thereof
there shall be any increase in the cost to such Participant of agreeing
to make or making, funding or maintaining funds its obligations
hereunder (except to the extent already included in the determination
of the applicable Adjusted LIBO Rate), or there shall be a reduction in
the amount received or receivable by that Participant or its office
through which it funds its obligations hereunder, then the Sponsor
shall from time to time, upon written notice from and demand by the
Participant (with a copy of such notice and demand to the Servicer),
pay to the Servicer for the account of that Participant within five
Business Days after the date specified in such notice and demand,
additional amounts sufficient to indemnify that Participant against
such increased cost. A certificate as to the amount of such increased
cost submitted to the Sponsor and the Servicer by that Participant,
shall, except for manifest error, be final, conclusive and binding for
all purposes.
(b) If while the Commitments or any Loan Commitments are
outstanding, any Participant (including any the Servicer) determines
that the adoption of any law, rule or regulation regarding capital
adequacy or capital maintenance, or any change in any of the foregoing
or in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by any
Participant (or any lending office of such Participant) or any
Participant's holding company with any request or directive regarding
capital adequacy or capital maintenance (whether or not having the
force of law) of any such authority, central bank or comparable agency,
has or would have the effect of reducing the rate of return on such
Participant's capital or on the capital of such Participant's holding
company, if any, as a consequence of this Agreement, the Loan Documents
or the purchases made by such Participant pursuant hereto to a level
below that which such Participant or such Participant's holding company
could have achieved but for such adoption, change or compliance (taking
into consideration such Participant's policies and the policies of such
Participant's holding company with respect to capital adequacy) by an
amount reasonably deemed by such Participant to be material, then from
time to time, within 15 days after written demand by such Participant,
the Sponsor pay to
29
35
such Participant such additional amount or amounts as will compensate
such Participant or such Participant's holding company for such
reduction. A certificate as to the amount of any such additional amount
or amounts, submitted to the Sponsor and the Servicer by such
Participant, shall, except for manifest error, be final, conclusive and
binding for all purposes.
(c) Each Participant agrees that, if requested by the Sponsor,
it will use reasonable efforts (subject to overall policy
considerations of such Participant) to designate an alternate lending
office with respect to any of its Funded Participant's Interest
affected by the matters or circumstances described above to reduce the
liability of the Sponsor or avoid the results provided thereunder, so
long as such designation is not disadvantageous to such Participant as
determined by such Participant, which determination if made in good
faith, shall be conclusive and binding on all parties hereto. Nothing
in this Section 2.10(c) shall affect or postpone any of the obligations
of the Sponsor or any right of any Participant provided hereunder.
2.11 Pro Rata Treatment.
Subject to the application of payments pursuant to Article 3 and except
as specifically provided therein, each payment of principal of any
Funded Participant's Interest, each payment of interest with respect to
the Funded Participant's Interest, each payment of the Commitment Fees
and each reduction of the Commitments shall be allocated pro rata among
the Participants in accordance with their respective applicable Pro
Rata Share of the applicable Facility or Commitments, as appropriate.
Each Participant agrees that in computing such Participant's portion of
any Funded Participant's Interest to be made hereunder, the Servicer
may, in its discretion, round each Participant's percentage of such
Participant Funding Request to the next higher or lower whole dollar
amount.
2.12 Payments.
(a) The Sponsor shall make each payment required to be made by
Sponsor hereunder and under any other Operative Document to any
Participant or the Servicer not later than 1:00 p.m. (Atlanta, Georgia
time), on the date when due in dollars to the Servicer at its offices
in Atlanta, Georgia in immediately available funds.
(b) Whenever any payment hereunder or under any other
Operative Document shall become due, or otherwise would occur, on a day
that is not a Business Day, such payment may be made on the next
succeeding Business Day, and such extension of time shall in such case
be included in the computation of interest or Commitment Fees, if
applicable.
2.13 Sharing of Setoffs.
30
36
Each Participant agrees that if it shall, in accordance with applicable
law, through the exercise of a right of banker's lien, setoff or
counterclaim against the Sponsor or any Borrower, or pursuant to a
secured claim under Section 506 or Title 11 of the United States Code
or other security or interest arising from, or in lieu of, such secured
claim, received by the Participant under any applicable bankruptcy,
insolvency or other similar law or otherwise, or by any other means,
obtain payment (voluntary or involuntary) in respect of any Funded
Participant's Interest under this Agreement as a result of which the
unpaid principal portion of its Funded Participant's Interest shall be
proportionately less than the unpaid principal portion of the Funded
Participant's Interest of any other Participant, it shall be deemed
simultaneously to have purchased from such other Participant at face
value, and shall promptly pay to such other Participant the purchase
price for, a participation in the Funded Participant's Interest of such
other Participant, so that the aggregate unpaid principal amount of the
Funded Participant's Interest and participations in Funded
Participant's Interests held by each Participant shall be in the same
proportion to the aggregate unpaid principal amount of all Funded
Participant's Interests then outstanding as the principal amount of its
Purchases prior to such exercise of banker's lien, setoff or
counterclaim or other event was to the principal amount of all Funded
Participant's Interests outstanding prior to such exercise of banker's
lien, setoff or counterclaim or other event; provided, however, that,
if any such purchase or purchases or adjustments shall be made pursuant
to this Section and the payment giving rise thereto shall thereafter be
recovered, such purchase or purchases or adjustments shall be rescinded
to the extent of such recovery and the purchase price or prices or
adjustment restored without interest. The Servicer and each Participant
hereby further agrees that any set-off amount received with respect to
any Borrower, the Sponsor or any Guarantor shall first be applied to
amounts outstanding under the Franchisee Loan Program prior to
application to any other obligations of any such Person to the Servicer
or such Participant. The Sponsor expressly consents to the foregoing
arrangements and agrees, to the extent permitted by applicable law,
that any Participant holding a Funded Participant's Interest or a
participation in a Funded Participant's Interest deemed to have been so
purchased may exercise any and all rights of banker's lien, setoff or
counterclaim with respect to any and all moneys owing by the Sponsor to
such Participant by reason thereof.
3. SERVICER'S SERVICING OBLIGATIONS; DISTRIBUTION OF PAYMENTS
3.1 Servicer's Obligations with Respect to Loans; Collateral; Non-Recourse.
(a) The Servicer shall, for itself and the benefit of all of
the Participants and the Sponsor, (i) document, close, manage,
administer and collect the Loans in accordance with the terms of this
Agreement and the Servicing Agreement and exercise all discretionary
powers involved in such management, administration and collection and
(ii) shall distribute the funds received with respect to the Loans and
from the Sponsor in accordance with the terms of this Agreement. The
Servicer agrees that it will exercise the
31
37
same care in administering the Loans as it exercises with respect to
loans of similar size and type in which no participations are allocated
and in accordance with the terms of the Servicing Agreement and Section
10.14 hereto.
(b) The forms of Loan Agreement and Master Note used by the
Servicer as documentation for each Loan on and after the Effective Date
shall be substantially in the forms attached hereto. The Sponsor shall
have the right to direct the Servicer to make modifications to such
forms and amendments thereto from time but the Sponsor may not direct
the Servicer to revise or amend such forms so as to be inconsistent
with the terms of Section 2.1 (c) and (d).
(c) Notwithstanding anything in this Agreement to the
contrary, each of the Participants acknowledges and agrees that the
Servicer shall have no obligation to the Participants with respect to
the obtaining or retention of any guaranties required by the Sponsor
(other than to distribute any proceeds therefrom in accordance with the
terms of this Article 3). The Participants acknowledge and agree that
the Sponsor has the right to release or modify the terms of, or not
require, any Personal Guaranty or any Spousal Consent.
(d) In addition, each of the Participants acknowledges and
agrees that the obligations of the Servicer with respect to the
Collateral shall be expressly limited to the filing of financing
statements (but not fixture filings) in the locations indicated in the
applicable Funding Approval Notice for each Borrower and filing
continuation statements with respect thereto and taking enforcement
action in accordance with Section 10.14 hereto.
(e) Each of the Participants acknowledges and agrees that all
payments made to the Participants pursuant to this Agreement by the
Servicer shall be made solely from amounts received from the Sponsor,
the Borrowers and other obligors or Collateral under the applicable
Loan Documents and the Servicer shall have no personal liability for
any amounts payable to the Participants hereunder. Each of the
Participants acknowledges and agrees that the Servicer shall be relying
solely upon the Sponsor for purposes of calculating and ensuring
compliance by Established Franchisee Borrowers with the Established
Franchisee Borrowing Base for each Established Franchisee Loan.
(f) Each of the Participants acknowledges and agrees that any
payments of delinquent payment fees received from the Borrowers
pursuant to the Loan Agreements shall be for the sole account of the
Sponsor and that the Participants shall have no right to receive such
payments unless a Credit Event has occurred and is continuing; provided
that, with respect to any payments received from a Borrower, such
payments shall be first applied to pay all accrued but unpaid interest
and principal and other fees due and owing from such Borrower before
application of such payment to any delinquent payment fees.
32
38
(g) Each Participant hereby acknowledges and agrees that the
Servicer has no ability to halt an ACH transfer upon the inputting of
such transfer request by Sponsor from the ATAC System into the ACH
system (other than the ability to retrieve ACH transfers which are sent
to the wrong party or otherwise manifestly erroneous as provided in the
ACH Agreement with Sponsor), and Sponsor hereby accepts full
responsibility for any overadvance created by such inputting of
information and shall indemnify the Servicer and the Participants
therefor as provided herein.
3.2 Application of Payments.
(a) The Servicer and the Sponsor shall instruct each Borrower
to make payments with respect to Loans and the Loan Commitments
directly to the Servicer, either by mail, wire transfer or debit
pursuant to an ACH Authorization.
(b) On each Quarterly Date, all payments of Commitment Fees
shall be distributed by the Servicer to the Participants pro rata in
accordance with Section 2.4, with any remainder to be applied as set
forth in the Servicing Agreement.
(c) On each Payment Date, all payments of interest received by
the Servicer from the Borrowers under each Facility and from the
Sponsor pursuant to its guaranty of each Facility contained herein with
respect to the Loans and not previously distributed by the Servicer,
shall be applied to pay all accrued but unpaid interest on the Funded
Participant's Interest under the applicable Facility pursuant to this
Agreement, then to pay all accrued but unpaid Servicing Fees and then
to pay the Sponsor's Fee, in accordance with the terms of the Servicing
Agreement and Fee Letter.
(d) On any Business Day on which the Servicer shall receive
any payment in respect of the principal amount of any Loan, whether
from a Borrower, the Sponsor pursuant to its guaranty contained herein,
or any other obligor with respect thereto, the Servicer may elect, in
its sole discretion to (i) apply such principal payment to fund any
requested Advances, (ii) apply such amount to repay any outstanding
Swing Line Advances, or (iii) to either (x) distribute such amount to
the Participants to reduce each Participant's Funded Participant's
Interest under such Facility or (y) apply such amount to SunTrust's
Funded Participant's Interest under such Facility only (with the
understanding that the Funded Participant's Interest of each
Participant shall not be deemed to have been repaid until such amount
is actually received by such Participant); provided that, in the event
that the Servicer elects to apply any repayment to reduce SunTrust's
Funded Participant's Interest without a corresponding reduction of the
other Participant's Funded Participant's Interest, SunTrust shall be
obligated to make a payment to each Participant equal to such
Participant's Pro Rata Share of such payment upon the earlier of (i)
the next Payment Date and (ii) the occurrence of a Credit Event
hereunder.
33
39
(e) If during any period when no Credit Event has occurred and
is continuing, amounts received by Servicer are not capable of being
allocated to any specific Loan or, in the case of amounts allocable to
a specific Loan, are not sufficient to repay all obligations then due
and owing with respect thereto, such amounts shall be applied by the
Servicer as follows: (i) first, to the payment of Commitment Fees owing
to the Participants hereunder, (ii) second, to the payment of accrued
interest on the Funded Participant's Interest hereunder, pro rata
between the two Facilities, (iii) third, to the payment of the
Servicing Fees owing under the Servicing Agreement, (iv) fourth, to the
repayment of the Funded Participant's Interests outstanding hereunder
pro rata between the two Facilities, (v) fifth, to the payment of all
other amounts owing to the Servicer or any Participant hereunder, and
(vi) sixth, if all obligations of the Sponsor pursuant to the Operative
Documents have been satisfied in full, to the Sponsor.
(f) During any period when a Credit Event has occurred and is
continuing, any amounts received by Servicer with respect to the Loans
shall be applied, after deduction of any expenses incurred in the
collection of any such amounts, as follows (i) first, to the payment of
any accrued and unpaid Servicing Fee, (ii) second, to each Participant
in accordance with Pro Rata Share, and (iii) thereafter, to such
Persons as may be legally entitled thereto.
(g) If not sooner repaid, all amounts due and payable to the
Servicer and the Participants under the Operative Documents shall be
due and payable in full on the Final Termination Date.
3.3 Monthly Servicing Report and Quarterly Servicing Report.
(a) On each Payment Date, the Servicer shall telecopy to the
Sponsor and each Participant a servicing report in the form of Exhibit
F (the "Monthly Servicing Report") setting forth the following
information with respect the Loans:
(i) the aggregate principal balance of the Loans
under each Facility as of the close of business on the last
day of the preceding Payment Period and on such Payment Date;
(ii) the aggregate amount of Loans repurchased by the
Sponsor or amounts collected with respect to the Collateral
for the Loans with respect to each Facility since the last
Payment Date;
(iii) the aggregate Loan Commitments under each
Facility as of the close of business on the last Business Day
of the preceding Payment Period and on such Payment Date;
34
40
(iv) each Loan which is past due (including the past
due amount and the number of days past due) under each
Facility;
(v) if a Change of Control has occurred, the amount
on deposit in the Cash Collateral Account; and
(vi) the amount of the Maximum Established Franchisee
Recourse Amount as of such date.
(b) No later than fifty (50) days after the end of each
calendar quarter, the Servicer shall provide to the Sponsor and each
Participant a quarterly servicing report in the form of Exhibit G (the
"Quarterly Servicing Report") setting forth the information required
therein.
4. LOAN DEFAULT; RIGHT TO MAKE GUARANTY DEMAND
4.1 Notice Of Loan Default.
The Servicer shall notify the Sponsor and the relevant Borrower of a
Loan Payment Default within fifteen (15) Business Days following the
occurrence thereof and of any other Loan Default of which the Servicer
has actual knowledge in accordance with the terms of the Servicing
Agreement.
4.2 Waiver or Cure By The Sponsor.
Unless a Credit Event, an Unmatured Credit Event or a Change of Control
has occurred and is continuing, within the Response Period, the Sponsor
shall be entitled (but not obligated) to:
(a) in the case of a Loan Default, other than a Loan Payment
Default, waive such Loan Default by sending to the Servicer a Default
Waiver Request, except as set forth in Section 4.4; provided however,
that the Sponsor shall not request a waiver of (A) more than three (3)
such Loan Defaults in any one year period with respect to any Loan; (B)
more than two (2) consecutive Financial Covenant Loan Defaults; or (C)
compliance by any Established Franchisee Borrower with the applicable
Established Franchisee Borrowing Base (except to the extent that the
Sponsor may cure a Loan Payment Default caused by a failure to make any
required prepayment as a result of an overadvance to the extent
permitted by subsection (b) of this Section 4.2); or
(b) in the case of a Loan Payment Default, to waive and cure
such Loan Payment Default (including a Loan Payment Default resulting
from the failure of a Borrower to remain in compliance with the
borrowing base requirements of the applicable Established Franchisee
Loan Agreement); provided, however, that Sponsor shall not waive and
cure
35
41
more than two (2) consecutive Loan Payment Defaults nor waive and cure
more than a total of four (4) Loan Payment Defaults in any four year
period, with respect to any Loan.
During a Response Period, the Servicer shall refrain from
taking any legal action against the Defaulted Borrower under the
Defaulted Loan which is the subject of such Response Period, and from
accelerating payment of the Loan Indebtedness under such Defaulted Loan
but the Servicer shall cease funding any further Advances pursuant to
the Loan Commitment. If the Sponsor waives any Loan Default (other than
a Loan Payment Default) or waives and cures any Loan Payment Default
(subject to Section 4.4) prior to the expiration of a Response Period,
then as to each Loan Default so waived or waived and cured, the
Defaulted Borrower's and the Servicer's respective rights and
obligations under the Loan Documents shall be restored to the same
status as if such waived Loan Default never occurred. In addition, if
the Sponsor takes over the operation of the business of an Established
Franchisee Borrower as provided in Article 10, the Servicer shall
refrain from exercising remedies against such Borrower for as long as
the Sponsor is complying with Section 10.3, unless a Credit Event has
occurred and is continuing or the Required Participants otherwise
agree.
4.3 Defaulted Loan Guaranty Demand.
(a) In the event that following the end of a Response Period, a
Loan Payment Default is not cured or in the event that any
other Loan Default is not then waived, the Servicer shall have
the right at any time thereafter to demand that Sponsor comply
with its obligations with respect to such Defaulted Loan set
forth in Article 10.
(b) In the event that the Sponsor is not obligated to repay the
Loan Indebtedness with respect to a Defaulted Loan pursuant to
the Article 10 or in the event that a Credit Event has
occurred and is continuing and Sponsor has not purchased all
outstanding Startup Franchisee Loans hereunder and fully
cash-collateralized the Maximum Established Franchisee
Recourse Amount, the Sponsor agrees that the Servicer shall be
released from its obligations to the Sponsor hereunder with
respect to administering and enforcing all Loans and may
administer and enforce such Loans as it deems appropriate,
without regard to any limitations or restrictions set forth
herein (but subject to Article 3 in all events) or in any
other Operative Document.
4.4 No Waiver or Cure Available.
Notwithstanding anything contained in this Article to the contrary, the
Sponsor shall, within five (5) Business Days of its receipt of a
written demand from the Servicer instructing it to do so, purchase the
Loan Indebtedness of any Loan and assume the Loan Commitment with
respect to a Defaulted Borrower whose Loan Default either arises from
the bankruptcy or insolvency of such Borrower or the termination of the
Franchise Agreement to which such Borrower is a party; provided that,
with respect to an
36
42
Established Franchisee Loan, the Servicer, at its option, with the
approval of the Required Participants, may require that the Sponsor
exercise any or all of the remedies set forth in Section 10.3 with
respect to such Defaulted Loan except to the extent prohibited by
applicable law in the case of the bankruptcy of the Borrower.
Notwithstanding any other provision of the Operative Documents to the
contrary, the repurchase by the Sponsor of any Loan or Loan Commitment
upon termination (or failure to renew) of the relevant Borrower's
Franchise Agreement by the Sponsor for any reason other than default
thereunder by such Borrower shall not be deemed to be a payment
pursuant to Article 10 and shall not reduce the Maximum Amount or the
Maximum Established Franchisee Recourse Amount thereunder.
5. REPRESENTATIONS AND WARRANTIES
The Sponsor (as to itself and each of the Consolidated Companies)
hereby represents and warrants to the Servicer and each of the
Participants that:
5.1 Organization and Qualification.
The Sponsor and its Subsidiaries are corporations duly organized,
validly existing and in good standing under the laws of the State of
Georgia and the State of Delaware, as applicable; the Sponsor and its
Subsidiaries have the corporate power to own their property and to
carry on their business as now being conducted; and the Sponsor and its
Subsidiaries are duly qualified as foreign corporations to do business
and are in good standing in every jurisdiction in which the nature of
the business conducted by them makes such qualification necessary and
where failure to qualify would have a Materially Adverse Effect.
5.2 Sponsor's Powers.
The execution, delivery and performance of this Agreement, the Guaranty
Agreement and each other Operative Document required hereunder are
within the Sponsor's or the Guarantors' corporate powers, as the case
may be, have been duly authorized by all necessary shareholder or
corporate action, and do not and will not contravene or conflict with
the terms of any charter, by-law or other organizational papers of the
Sponsor or any of its Subsidiaries, or any indenture, agreement or
undertaking to which the Sponsor or any of its Subsidiaries is a party
or by which the Sponsor or any of its Subsidiaries is bound or
affected.
5.3 Enforceability of Agreement and Other Operative Documents.
37
43
This Agreement is a legal, valid and binding agreement of the Sponsor,
enforceable against the Sponsor in accordance with its terms, and each
other Operative Document and any other instrument or agreement required
hereunder, when executed and delivered, will be similarly legal, valid,
binding and enforceable against the Sponsor and its Subsidiaries, as
applicable, in accordance with their respective terms.
5.4 Consent.
No consent, permission, authorization, order or license of any
governmental authority is necessary in connection with the execution,
delivery, performance or enforcement of this Agreement, the Guaranty
Agreement, any other Operative Document or any other instrument or
agreement required hereunder, except as may have been obtained and
certified copies of which have been delivered to each Participant.
5.5 Statutes, Judgments.
There is no law, statute, rule or regulation, nor is there any
judgment, decree or order of any court or agency binding on the Sponsor
or any of its Subsidiaries, which would be contravened by the
execution, delivery or performance of this Agreement, the Guaranty
Agreement, any other Operative Document or any other instrument or
agreement required hereunder.
5.6 Financial Statements.
The Sponsor has furnished each Participant with the following financial
statements, identified by a principal financial officer of the Sponsor:
Audited Consolidated Financial and Operating Statements for
the Consolidated Companies for the years ended December 31,
1998, December 31, 1997, December 31, 1996 and December 31,
1995, and audit opinions with respect to such statements of
Ernst & Young LLP; and unaudited financial and operating
statements for the six-month period ended June 30, 1999.
The above financial statements (including any related schedules and/or
notes) are true and correct in all material respects and have been
prepared in accordance with generally accepted accounting principles
consistently followed throughout the periods involved and show all
known liabilities, direct and contingent, of the entities covered
thereby required to be shown in accordance with such principles. The
balance sheets fairly present the condition of the entities covered
thereby as at the dates thereof, and the profit and loss and surplus
statements fairly present the results of the operations of the entities
covered thereby for the periods indicated. There has been no material
adverse change in the business, condition or operations (financial or
otherwise) of the Consolidated Companies since December 31, 1998.
38
44
5.7 Actions Pending.
There is no action, suit, investigation or proceeding pending or, to
the knowledge of the Sponsor, threatened against or affecting the
Sponsor or any of its Subsidiaries, or any properties or rights of the
Sponsor or any of its Subsidiaries, before any court, arbitrator or
administrative or governmental body which is reasonably likely to
result in any Materially Adverse Effect.
5.8 Outstanding Debt.
Neither the Sponsor nor any of its Subsidiaries has outstanding any
indebtedness except debt permitted hereunder or permitted under the
Revolving Credit Agreement. There exists no default under the
provisions of any instrument evidencing such indebtedness or of any
agreement relating thereto.
5.9 Title to Properties.
The Sponsor and each of its Subsidiaries have good and marketable title
to their respective real properties, subject only to Liens permitted
under Section 7.1, and good title to all of its other respective
properties and assets, including the properties and assets reflected in
the balance sheet as of December 31, 1996 hereinabove described (other
than properties and assets disposed of in the ordinary course of
business), subject to no Lien of any kind except Liens permitted under
Section 7.1. The Sponsor and its Subsidiaries enjoy full and
undisturbed possession of all leases necessary in any material respect
for the operation of their respective properties and assets, none of
which contains any unusual or burdensome provisions which might
materially affect or impair the operation of such properties and
assets. All such leases are valid and subsisting and are free from
defaults by the Sponsor or respective landlords and in full force and
effect.
5.10 Taxes.
The Sponsor has and each of its Subsidiaries has filed all federal and
state income tax returns which, to the best knowledge of the officers
of the Sponsor, are required to be filed, and each has paid all taxes
as shown on said returns and on all assessments received by it to the
extent such taxes have become due, except to the extent expressly
permitted by Section 7.1(a).
5.11 Regulation U, Etc.
Neither the Sponsor nor any of its Subsidiaries own or have any present
intention of acquiring any "margin security" as defined in Regulation U
of the Board of Governors of the Federal Reserve System (herein called
a "margin security"). None of the proceeds of
39
45
any Advance will be used, directly or indirectly, for the purpose of
purchasing or carrying any margin security or for the purpose of
reducing or retiring any indebtedness which was originally incurred to
purchase or carry a margin security or for any other purpose which
might constitute this transaction a "purpose credit" within the meaning
of said Regulation U.
5.12 No Credit Event; Unmatured Credit Event or Change of Control.
No Credit Event, Unmatured Credit Event or Change of Control, has
occurred and is continuing or will occur as a result of the incurring
of any obligation under this Agreement.
5.13 ERISA.
No fact or circumstance, including but not limited to any Reportable
Event, exists in connection with any Plan of the Sponsor or its
Subsidiaries which might constitute grounds for the termination of any
such Plan by the PBGC or for the appointment by the appropriate United
States District Court of a trustee to administer any such Plan. For
purposes of this representation and warranty, if the Sponsor is not the
Plan administrator, it shall nonetheless be deemed to have knowledge of
all facts attributable to the Plan administrator designated pursuant to
ERISA.
5.14 Pollution and Environmental Control.
Each of the Sponsor and its Subsidiaries has obtained all permits,
licenses and other authorizations which are required under, and is in
material compliance with, all federal, state, and local laws and
regulations relating to pollution, reclamation, or protection of the
environment, including laws relating to emissions, discharges, releases
or threatened releases of pollutants, contaminants, or hazardous or
toxic materials or wastes into air, water, or land, or otherwise
relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport, or handling of pollutants, contaminants
or hazardous or toxic materials or wastes.
5.15 Possession of Franchises, Licenses, Etc.
The Sponsor and its Subsidiaries possess all franchises, certificates,
licenses, permits and other authorizations from governmental political
subdivisions or regulatory authorities, and all patents, trademarks,
service marks, trade names, copyrights, licenses and other rights, free
from burdensome restrictions, that are necessary for the ownership,
maintenance and operation of any of their respective properties and
assets, and neither the Sponsor nor any of its Subsidiaries is in
violation in any material respect of any thereof.
5.16 Contingent Liabilities.
40
46
After due inquiry, there exists no material contingent liability or
obligation assertable against the Sponsor or its Subsidiaries that is
not identified and disclosed to the Participants in the consolidated
financial statements delivered pursuant to Sections 5.6 or 6.1 or in
Schedule 5.16 attached hereto.
5.17 Compliance with Laws.
Each of the Sponsor and its Subsidiaries is in compliance in all
material respects with all applicable federal, state and local laws,
rules, regulations and orders, including, without limitation, all
federal, state and local laws, rules, regulations and orders relating
to pollution, reclamation or protection of the environment, including
laws relating to emissions, discharges, releases or threatened releases
of pollutants, contaminants, or hazardous or toxic materials or wastes
into air, water, or land, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport,
or handling of pollutants, contaminants or hazardous or toxic materials
or wastes, and all federal, state and local laws, rules, regulations
and orders relating to franchising activities.
5.18 Representations and Warranties with Respect to Specific Loans.
The Sponsor represents and warrants to the Servicer and each
Participant with respect to each Loan Commitment established and each
Advance made pursuant to the Operative Documents that:
(a) The Franchise Agreement, the Master Note, the Loan
Agreement and each other Loan Document executed in connection with such
Loan Commitment each constitutes a valid and binding agreement of each
Borrower or guarantor party thereto and is enforceable against each
such party in accordance with its terms.
(b) The Master Note and accompanying Loan Documents executed
in connection with such Loan and delivered to the Servicer are the only
contracts evidencing the transaction described therein and constitute
the entire agreement of the parties thereto with respect to such
transaction and Sponsor has not made any other promises, agreements or
representations and warranties with respect to the transactions
evidenced by such Master Note.
(c) The Master Note and each accompanying Loan Document
executed in connection with such Loan is genuine and all signatures,
names, amounts and other facts and statements therein and thereon are
true and correct.
(d) All disclosures required to be made under applicable
federal and state law in connection with such Loan have been properly
and completely made with respect to
41
47
each Master Note, the other Loan Documents and the Loan and each such
Master Note, other Loan Documents and Loan is in full compliance with
all applicable federal and state laws, including without limitation,
applicable state and federal usury laws and regulations.
(e) The proceeds of each Master Note will be solely for the
purpose of financing the acquisition and expansion of stores franchised
by the Sponsor and operated by the relevant Borrower, for the
acquisition of inventory and equipment with respect to the ongoing
operations thereof, for Sponsor-approved payment of state use tax and
freight charges and, in the case of Established Franchisee Borrowers,
for Sponsor-approved working capital purposes, but excluding in all
cases any non-business purposes.
6. AFFIRMATIVE COVENANTS
The Sponsor covenants and agrees that it will, as long as either of the
Commitments is in effect or the Servicer is committed to make Advances under any
Loan Documents and thereafter so long as any Loans remain outstanding under this
Agreement or Sponsor has any other unsatisfied obligations under the Operative
Documents:
6.1 Financial Statements, Reports and Other Financial Data.
The Sponsor will deliver to the Servicer (for further delivery to each
Participant):
(a) as soon as practicable and in any event within forty-five
(45) days after the end of each calendar quarter (other than the last
calendar quarter) in each fiscal year, consolidated statements of
income, cash flow and retained earnings of the Sponsor and its
Subsidiaries for the period from the beginning of the current fiscal
year to the end of such calendar quarter, and consolidated balance
sheets of the Sponsor and its Subsidiaries as at the end of such
calendar quarter, setting forth in each case in comparative form
figures for the corresponding period in the preceding fiscal year, all
in reasonable detail and certified by the Chief Financial Officer of
the Sponsor, subject to changes resulting from year-end adjustments;
(b) as soon as practicable and in any event within 90 days
after the end of each fiscal year (or as soon as made available by the
Sponsor's independent public accountants if availability is delayed
beyond such 90-day period for reasons beyond the Sponsor's control)
audited consolidated statements of income, cash flow and retained
earnings of the Sponsor and its Subsidiaries for such year, and an
audited consolidated balance sheet of the Sponsor and its Subsidiaries
as at the end of such year, setting forth in each case in comparative
form corresponding figures from the preceding annual statements, all in
reasonable detail and reasonably satisfactory in scope to Participants,
and the consolidated financial statements shall be certified by
independent public
42
48
accountants of recognized standing, selected by the Sponsor, whose
report shall be in scope and substance reasonably satisfactory to
Participants, and shall be certified by the Chief Financial Officer of
the Sponsor;
(c) along with the quarterly and annual reports required by
clauses (a) and (b) above, a certificate of the Chief Financial Officer
of the Sponsor certifying that no Event of Default exists and that no
event exists which with notice or the lapse of time or both would
become such an Event of Default, which certificate shall also
demonstrate in reasonable detail, with respect to both quarterly
reports and annual reports, the Sponsor's compliance with the covenants
set out in Sections 6.4, 6.5, 6.6, 7.2 and 7.3;
(d) promptly upon receipt thereof, copies of any detailed
reports submitted to the Sponsor by its independent public accountants
in connection with each annual audit or interim review of the books of
the Sponsor or its Subsidiaries made by such accountants;
(e) promptly upon transmission thereof, copies of all
financial statements, proxy statements, notices and reports as the
Sponsor shall send to its shareholders and of all regular or periodic
reports which it is or may be required to file with the Securities and
Exchange Commission or any governmental department, bureau, commission
or agency succeeding to the functions of the Securities and Exchange
Commission; and
(f) with reasonable promptness, such other financial data as
any Participant, through the Servicer, may reasonably request.
6.2 Inspection of Property.
The Sponsor will permit any Person designated by a Participant in
writing, to visit and inspect any of the properties, corporate books
and financial records of the Sponsor and its Subsidiaries and to make
copies thereof and take extracts therefrom and to discuss the affairs,
finances and accounts of any such corporations with the principal
officers of the Sponsor or its Subsidiaries, all at such reasonable
times and as often as such Participant may reasonably request, subject
in all cases to the confidentiality requirements of Section 15.11.
6.3 Maintenance of Insurance.
The Sponsor and each Subsidiary will maintain insurance in such amounts
and against such liabilities and hazards as customarily is maintained
by other companies operating similar businesses.
6.4 Funded Debt Ratio.
43
49
The Sponsor shall maintain and operate its business in a manner to
insure that its Funded Debt Ratio, measured as of the last day of each
fiscal quarter for the four immediately preceding quarters ending on
such date, is less than 4.00:1.00.
6.5 Leverage Ratio.
The Sponsor shall maintain and operate its business in such a manner to
insure that its ratio, measured as of the last day of each fiscal
quarter, of (i) Funded Debt to (ii) the sum of Funded Debt plus the
Consolidated Net Worth of the Sponsor and its Subsidiaries, is less
than 0.50:1.00.
6.6 Fixed Charge Coverage.
The Sponsor will operate its business in such a manner to insure that
the sum of its (i) consolidated net income before income taxes, plus
(ii) interest expense, plus (iii) rental and lease expense are greater
than 150% of the sum of (i) interest expense, plus (ii) rental and
lease expense, all determined on a consolidated basis for the Sponsor
and its Subsidiaries. Compliance with the aforementioned fixed charge
coverage ratio will be determined at the end of each fiscal quarter of
the Sponsor and taking into account operations during the four
consecutive fiscal quarters ending on such date. The following
mathematical formula illustrates the Sponsor's fixed charge coverage
obligation:
Pretax Net Interest Rental and Lease
Income + Expense + Expense > 1.50
---------------------------------------------------- -
Interest Expense + Rental and Lease
Expense
6.7 Account Verification.
Upon the request of any Participant, made at reasonable intervals and
on a reasonable basis, the Sponsor will mail letters to selected lease
customers or account debtors requesting them to verify the status of
their leases or accounts, with responses to be returned directly to the
Servicer.
6.8 ERISA.
The Sponsor and each Subsidiary will:
(a) At all times, make prompt payment of contributions
required to meet the minimum funding standard set forth in ERISA with
respect to its Plans;
(b) Notify Participants and the Servicer immediately of any
fact, including, but not limited to, any Reportable Event arising in
connection with any of its Plans which
44
50
might constitute grounds for termination thereof by the PBGC or for the
appointment by the appropriate United States District Court of a
trustee to administer such Plan, together with a statement, if
requested by Participants, as to the reasons therefor and the action,
if any, which the Sponsor or any of its Subsidiaries proposes to take
with respect thereto; and
(c) Furnish to Participants or the Servicer, upon request,
such additional information concerning any of its Plans as may be
reasonably requested.
6.9 Payment.
The Sponsor will pay all sums due under this Agreement and the other
Operative Documents according to the terms hereof.
6.10 Notice of Credit Event, Unmatured Credit Event or Change of Control.
The Sponsor will immediately give notice to the Servicer and each
Participant of any Credit Event, Unmatured Credit Event or Change of
Control.
6.11 Corporate Existence.
Except as expressly permitted by Section 7.5, the Sponsor will maintain
and will cause each Subsidiary to maintain its corporate existence and
good standing in the jurisdiction of its incorporation, and the Sponsor
will qualify and will cause each Subsidiary to qualify and remain
qualified to do business as a foreign corporation in each jurisdiction
in which the nature of the business conducted by it or its ownership of
property makes such qualification necessary and where failure to
qualify would have a Materially Adverse Effect.
6.12 Compliance with Laws, Etc.
The Sponsor will comply, and cause each of its Subsidiaries to comply,
in all material respects with all applicable federal, state, and local
laws, rules, regulations and orders, including, without limitation, all
federal, state and local laws, rules, regulations and orders relating
to pollution, reclamation, or protection of the environment, including
laws relating to emissions, discharges, releases or threatened releases
of pollutants, contaminants, or hazardous or toxic materials or wastes
into air, water, or land, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport,
or handling of pollutants, contaminants or hazardous or toxic materials
or wastes, and all federal, state and local law, rules, regulations and
orders relating to franchising activities.
6.13 Additional Guarantors.
45
51
Promptly after any Person which is not a Subsidiary as of the Effective
Date becomes a Subsidiary of the Sponsor, the Sponsor shall cause such
Person to execute and deliver to the Servicer a Supplement to the
Guaranty Agreement, in the form of Exhibit 1 to the Guaranty Agreement,
together with related corporate authorization documents, organizational
documents, secretary's certificates and opinions, all in form and
substance satisfactory to the Servicer and the Required Participants.
7. NEGATIVE COVENANTS
The Sponsor covenants and agrees that so long as either of the
Commitments remains outstanding or any Loans remain outstanding or the Sponsor
has any obligations under the Operative Documents, and until the full and final
payment of all indebtedness of all Borrowers incurred pursuant to the Loan
Documents and unless otherwise consented to in writing by the Required
Participants:
7.1 Liens.
The Sponsor will not and will not permit any of its Subsidiaries to
create, assume or suffer to exist any Lien upon any of its property or
assets, whether now owned or hereafter acquired, except:
(a) Liens for taxes not yet due or which are being actively
contested in good faith by appropriate proceedings;
(b) other Liens incidental to the conduct of its business or
the ownership of its property and assets which were not incurred in
connection with the borrowing of money or the obtaining of advances or
credit, and which do not in the aggregate materially detract from the
value of its property or assets or materially impair the use thereof in
the operation of its business;
(c) Liens on property or assets of a Subsidiary to secure
obligations of such Subsidiary to the Sponsor or another Subsidiary;
(d) Liens on insurance policies owned by the Sponsor on the
lives of its officers securing policy loans obtained from the insurers
under such policies, provided that (A) the aggregate amount borrowed on
each policy shall not exceed the loan value thereof, and (B) the
Sponsor shall not incur any liability to repay any such loan;
(e) Liens on real property or equipment acquired by the
Sponsor to secure (i) all or any portion of the purchase price thereof
or the financing of the purchase price thereof, provided that the
aggregate principal amount of equipment loans secured by such
46
52
Liens shall be limited to $500,000 in aggregate or (ii) the costs of
improvements being constructed thereon or on real property leased by
the Sponsor for use by the Sponsor as stores or warehouses or as a part
thereof or the financing of such costs;
(f) Liens existing on the date hereof as set forth on
Schedule 7.1 attached hereto and incorporated herein;
(g) easements, rights of way, restrictive covenants and
similar encumbrances on or exceptions to title to real property which
do not materially and adversely affect the value or the utility of the
real property involved;
(h) Liens granted under the Synthetic Lease Documents in the
real or personal property financed thereunder and in certain related
rights of the Sponsor to secure the Sponsor's indebtedness and
liabilities under the Synthetic Lease Documents to the extent permitted
under Section 7.3(h); and
(i) Liens assigned and granted by the Sponsor to the Servicer
pursuant to the Operative Documents.
7.2 Minimum Net Worth.
The Sponsor will not permit its Consolidated Net Worth as of the last
day of any fiscal quarter, commencing with the fiscal quarter ending
September 30, 1999, to be less than the sum of (a) $112,000,000 plus
(b) 50% of the Sponsor's consolidated net income after taxes (but not
loss) (as determined in accordance with generally accepted accounting
principles) for the period beginning July 1, 1999 and ending on the
last day of such fiscal quarter.
7.3 Loans, Advances, Investments and Contingent Liabilities.
The Sponsor will not and will not permit any of its Subsidiaries to
make or permit to remain outstanding any loan or advance to, or extend
credit to, or guarantee, endorse or otherwise be or become contingently
liable, directly or indirectly, in connection with the obligations,
stock or dividends of, or own, purchase or acquire any stock,
obligations or securities of, or any other interest in, or make any
capital contributions to, any Person, except that the Sponsor or any of
its Subsidiaries may:
(a) create, incur, assure or suffer to exist, debt evidenced
by the Operative Documents or the Existing Credit Agreement;
(b) suffer to exist unsecured current liabilities (not
resulting from borrowing) incurred in the ordinary cause of business
for current purposes and not represented by a promissory note or other
evidence of indebtedness;
47
53
(c) permit to remain outstanding loans or advances to or
investments in any of its Subsidiaries existing on the date of this
Agreement;
(d) own, purchase or acquire stock, obligations or securities
of a Subsidiary or of a corporation which immediately after such
purchase or acquisition will be a Subsidiary or will be merged with
Sponsor, provided, however, written consent of the Participants, which
any of them may withhold in their sole discretion, is required for
purchases and acquisitions with (A) a cash purchase price greater than
or equal to $10,000,000, or (B) a total purchase price (including cash,
stock of the Sponsor and any of its Subsidiaries and any other
consideration) greater than or equal to $15,000,000;
(e) acquire and own stock, obligations or securities received
in settlement of debts (created in the ordinary course of business)
owing to the Sponsor or any of its Subsidiaries;
(f) own, purchase or acquire (i) prime commercial paper and
certificates of deposit in United States commercial banks (whose
long-term debt is rated "A" or better by Xxxxx'x Investors Service or
Standard and Poor's Corporation) (issued by banks having capital
resources in excess of $50,000,000), in each case due within one year
from the date of purchase and payable in the United States in dollars,
direct obligations of the United States Government or any agency
thereof, or obligations fully guaranteed as to principal and interest
by the United States Government or any agency thereof, in each case
maturing within one year from the date of creation of such obligation
or (ii) up to an additional $500,000 of other securities or investments
at any one time;
(g) endorse negotiable instruments for collection in the
ordinary course of business;
(h) incur or guaranty indebtedness or contingent liability
under the Synthetic Lease Documents provided that the aggregate
outstanding principal amount of all such indebtedness or liabilities
does not exceed $20,000,000 at any one time; and
(i) make or permit to remain outstanding loans or advances to
officers, stockholders, employees and directors of the Sponsor,
provided that the aggregate principal amount of such loans and advances
shall not exceed $350,000 at any time outstanding for the Sponsor and
all Subsidiaries, and further provided that no Subsidiary shall make
any loan or advance to, or acquire any stock, obligations or securities
of, the Sponsor; and
(j) guarantee in the ordinary course of business up to
$26,000,000 of indebtedness or obligations of any franchise operators.
48
54
7.4 Sale of Stock and Debt of Subsidiaries.
The Sponsor will not sell or otherwise dispose of, or part with control
of, any shares of stock or debt of any of its Subsidiaries of the
Sponsor without the prior written consent of the Required Participants.
7.5 Merger and Sale of Assets.
The Sponsor will not merge or consolidate with any other corporation or
sell, lease or transfer or otherwise dispose of all or a substantial
part of its assets or the assets of a Subsidiary, or assets which shall
have contributed a substantial part of consolidated net earnings for
any of the three fiscal years then most recently ended, to any Person,
except that any of its Subsidiaries may merge with or liquidate into
the Sponsor (provided that the Sponsor shall be the continuing or
surviving corporation) or merge with any one or more other
Subsidiaries, provided that immediately after giving effect to such
merger or liquidation no Credit Event or Unmatured Credit Event shall
exist.
7.6 Additional Negative Pledges.
The Sponsor shall not, and shall not permit any of its Subsidiaries to,
create or otherwise cause or suffer to exist or become effective,
directly or indirectly, any prohibition or restriction on the creation
or existence of any Lien upon any assets of the Sponsor or any of its
Subsidiaries, other than pursuant to (a) Section 7.1, (b) the terms of
any agreement, instrument or other document pursuant to which any debt
permitted by Section 7.1(e) is incurred by the Sponsor or any of its
Subsidiaries, so long as such prohibition or restriction applies only
to the property or asset being financed by such debt, (c) the terms of
the Existing Loan Agreement and the terms of the Synthetic Lease
Documents, and (d) any requirement of applicable law or any regulatory
authority having jurisdiction over the Sponsor or any of its
Subsidiaries.
8. CREDIT EVENTS AND REMEDIES
In the event that:
8.1 The Sponsor defaults in the payment of any amount due hereunder; or
8.2 The Sponsor or any of its Subsidiaries defaults in any payment of
principal of or interest on any other obligation for a material amount
of money borrowed (or any material obligation under conditional sale or
other title retention agreement or any material obligation secured by a
purchase money mortgage or any material obligation under notes payable
or drafts accepted representing extensions of credit) or defaults in
the performance of any other agreement, term or condition contained in
any agreement under which any such material obligation is created (or
if any other default under any such
49
55
agreement shall occur and be continuing) if the effect of such default
is to cause, or to permit the holder or holders of such obligation (or
a trustee on behalf of such holder or holders) to cause, such
obligation to become due prior to its stated maturity (for purposes of
this Section 8.2, an obligation shall be material if the amount owed
thereunder exceeds $250,000); or
8.3 Any representation or warranty made by the Sponsor or any of its
Subsidiaries herein or in any writing furnished in connection with or
pursuant to this Agreement or other Operative Document shall be false
or misleading in any material respect on the date as of which made; or
8.4 The Sponsor defaults in the performance or observance of any covenant
or agreement contained in Sections 6.4, 6.5, 6.6 or Article 7; or
8.5 The Sponsor defaults in the performance or observance of any other
agreement, term or condition contained herein and such default shall
continue for 30 days after the Sponsor knows or has reason to know of
any such default; or
8.6 The Sponsor or any of its Subsidiaries makes an assignment for the
benefit of creditors or fails to pay its debts generally as they become
due; or
8.7 Any order, judgment or decree is entered under any bankruptcy,
reorganization, compromise, arrangement, insolvency, readjustment of
debt, dissolution or liquidation or similar law (herein called the
"Bankruptcy Law") of any jurisdiction adjudicating the Sponsor or any
of its Subsidiaries bankrupt or insolvent; or
8.8 The Sponsor or any of its Subsidiaries petitions or applies to any
tribunal for, or consents to, the appointment of, or taking possession
by, a trustee, receiver, custodian or liquidator or similar official of
the Sponsor or any of its Subsidiaries, or of any substantial part of
the assets of the Sponsor or any of its Subsidiaries, or commences any
proceedings (other than proceedings for the voluntary liquidation and
dissolution of a Subsidiary) relating to the Sponsor or any of its
Subsidiaries under the Bankruptcy Law of any jurisdiction, whether now
or hereafter in effect, or any such petition or application is filed,
or any such proceedings are commenced, against the Sponsor or any of
its Subsidiaries and the Sponsor or such Subsidiary by any act
indicates its approval thereof, consent thereto or acquiescence
therein, or an order for relief is entered in an involuntary case under
the federal bankruptcy laws, as now or hereafter constituted, or an
order, judgment or decree is entered appointing any such trustee,
receiver, custodian, liquidator or similar official, or approving the
petition in any such proceedings, and such order judgment, or decree
remains unstayed and in effect for more than 60 days; or
50
56
8.9 Any order, judgment or decree is entered in any proceedings against the
Sponsor decreeing the dissolution of the Sponsor and such order,
judgment or decree remains unstayed and in effect for more than 60
days; or
8.10 Any order, judgment or decree is entered in any proceedings against the
Sponsor or any of its Subsidiaries decreeing a split-up of the Sponsor
or such Subsidiary which requires the divestiture of a substantial
part, or the divestiture of assets, or stock of a Subsidiary, which
shall have contributed a substantial part of consolidated net earnings
for any of the three fiscal years most recently ended, and such order,
judgment or decree remains unstayed and in effect for more than 60
days; or
8.11 Any Reportable Event shall have occurred, or any finding or
determination shall be made with respect to a Plan under Section
4041(c) or (e) of ERISA, or any fact or circumstance shall occur with
respect to a Plan which, in the opinion of the Required Participants,
provides grounds for the commencement of any proceeding under Section
4042 of ERISA, or any proceeding shall be commenced with respect to a
Plan under Section 4042 of ERISA; or
8.12 There shall exist or occur any default as provided under the terms of
any other Operative Document, or any Operative Document ceases to be in
full force and effect or the validity or enforceability thereof is
disaffirmed by or on behalf of Sponsor or any other Credit Party, or at
any time it is or becomes unlawful for Sponsor or any other Credit
Party to perform or comply with its obligations under any Operative
Document, or the obligations of Sponsor or any other Credit Party under
any Operative Document are not or cease to be legal, valid and binding
on Sponsor or any such Credit Party; or
8.13 The Sponsor or any of its Subsidiaries shall fail to make any payment
as and when such payment is due under the Synthetic Lease Documents, or
any other default, event or condition shall have occurred or exist
under the Synthetic Lease Documents, the effect of which is to cause,
or to permit the holder of the obligations of the Sponsor or any such
Subsidiary under the Synthetic Lease Documents to cause, the
obligations of the Sponsor or any of its Subsidiaries, or any portion
thereof, to become due prior to its stated maturity date or prior to
its regularly scheduled date of payment;
then upon the occurrence and during the continuation of any such event
(each, a "Credit Event"):
the Servicer may, with the consent of the Required Participants, and
upon the written request of the Required Participants, shall, take any
or all of the following actions, without prejudice to the rights of the
Servicer or any Participant to enforce its claims against Sponsor, any
other Credit Party, any Borrower or other obligor with respect to any
Loan: (i) declare the Commitments terminated, whereupon the Commitments
shall terminate immediately and any unpaid Commitment Fee shall
forthwith become due and
51
57
payable without any other notice of any kind (with the express
understanding that such termination of the Commitments shall not result
in a termination of the Participating Commitments of each Participant
or of the obligation of the Servicer to fund any Loan Commitment); (ii)
demand that the Sponsor purchase specified or all outstanding Startup
Franchisee Loans and Startup Franchisee Loan Commitments by paying to
the Servicer the Loan Indebtedness of each such Startup Franchisee Loan
and assuming the Servicer's obligations under each Startup Franchisee
Loan Commitment, whereupon such amount shall become, forthwith due and
payable without presentment, demand, protest or other notice of any
kind, all of which are hereby waived by the Sponsor (with the express
understanding the limitations on Sponsor's guaranty obligations set
forth in Article 10 shall not apply); (iii) demand that the Sponsor
immediately deposit into the Cash Collateral Account, in immediately
available funds, an amount equal to the Maximum Established Franchisee
Recourse Amount (without relieving Sponsor of its obligations pursuant
to Section 10.3(a) and (b)); and (iv) take any other action and
exercise any other remedy available by contract or at law; provided,
that, if a Credit Event specified in Sections 8.6, 8.7 or 8.8 shall
occur, the result which would occur upon the giving of notice by the
Servicer to any Credit Party, shall occur automatically without the
giving of any such notice.
In addition, the Servicer may, with the consent of the Required
Participants and shall, upon the written request of the Required
Participants, (A) to the extent authorized to do so pursuant to the
Established Franchisee Loan Agreements (which authorization is limited
to certain specified Credit Events), (x) cease funding further Advances
pursuant to the Established Franchisee Loan Commitments and (y) declare
all Loan Indebtedness outstanding pursuant to the Established
Franchisee Loan Commitments to be immediately due and payable in
accordance with the terms of the applicable Loan Documents and exercise
all rights and remedies provided under the Loan Documents, and (B) give
notice to the Startup Franchisee Borrowers that the Startup Franchisee
Loan Commitments shall be terminated upon the date which is ninety (90)
days after receipt by each such Startup Franchisee Borrower of such
notice of termination, subject to such Startup Franchisee Borrower's
right to term out advances for the Amortization Period.
9. CHANGE OF CONTROL; CASH COLLATERAL ACCOUNT
9.1 Change of Control; Deposit In Cash Collateral Account.
In the event of the occurrence of a Change of Control, (x) the
Commitments shall automatically terminate on the Change of Control Date
(with the express understanding that such termination of the
Commitments shall not result in a termination of the Participating
Commitments of each Participant or of the obligation of the Servicer to
fund any Loan Commitment) and (y) the Sponsor shall immediately deposit
with the Servicer, for the benefit of the Participants, a cash amount,
in immediately available funds, equal to 1/24th of the aggregate
outstanding amount of the Loan Commitments on such date (the
52
58
"Monthly Deposit Amount"). The Servicer shall deposit such amount into
an interest bearing account with the Servicer subject to the sole
dominion and control of the Servicer (the "Cash Collateral Account").
On each Payment Date thereafter, the Sponsor shall deposit with the
Servicer, for the benefit of the Participants, an amount equal to the
original Monthly Deposit Amount (regardless of any interim reduction of
the Loan Commitments). On the earliest of (x) the Payment Date on which
the aggregate amount on deposit in the Cash Collateral Account equals
or exceeds the aggregate outstanding Loan Indebtedness pursuant to the
Franchisee Loan Program and (y) the 23rd Payment Date, the Servicer
shall (i) assign all Loans and Loan Commitments to the Sponsor, and the
Sponsor shall assume the obligations of the Servicer thereunder, and
(ii) disburse all amounts held in the Cash Collateral Account to repay
the Funded Participant's Interest to each Participant in full, together
with all Commitment Fees, interest and other amounts owing to the
Participants hereunder and all Servicing Fees and other amounts owing
to the Servicer pursuant to the Operative Documents, and shall return
any excess amounts to the Sponsor.
9.2 Obligations with Respect to Defaulted Loans.
Notwithstanding the amount on deposit in the Cash Collateral Account,
following the occurrence of a Change of Control, the Sponsor shall
continue to honor its obligations pursuant to the Operative Documents
to repurchase Defaulted Loans and take the other actions required
hereunder with respect thereto, including without limitation, the
obligations of the Sponsor set forth in Section 10.3(a) and (b), with
the express understanding that the Sponsor shall be required to make
cash payments to the Servicer with respect to such obligations
regardless of the amount on deposit in the Cash Collateral Account.
9.3 Effect of Credit Event Following Change of Control.
Nothing set forth in this Article 9 shall be deemed to affect the
Sponsor's obligation upon the occurrence of a Credit Event to
immediately repurchase all Startup Franchisee Loans and Startup
Franchisee Loan Commitments and to immediately deposit an amount equal
to the Maximum Established Franchisee Recourse Amount with the Servicer
to be placed in the Cash Collateral Account and to continue to comply
with the provisions of Section 10.3(a) and (b) with respect thereto.
Following the occurrence of a Credit Event, the Servicer shall continue
to make the payments required pursuant to Section 9.1 and upon such
time as the total amounts on deposit in the Cash Collateral Account
(including the Maximum Established Franchisee Recourse Amount) equals
or exceeds the aggregate Loan Indebtedness, the Servicer shall assign
the Loans and Loan Commitments to the Sponsor as provided in Section
9.1.
9.4 Deposit of Maximum Established Franchisee Recourse Amount Following
Credit Event.
53
59
In the event of the occurrence of a Credit Event where a Change of
Control has not occurred, the Sponsor shall deposit the Maximum
Established Franchisee Recourse Amount in the Cash Collateral Account
as required by Article 8. Thereafter, the Servicer shall apply amounts
on deposit in the Cash Collateral Account to satisfy Sponsor's
obligations pursuant to Section 10.3(c) and Sponsor shall have no
further obligation with respect thereto but the Servicer shall continue
to have the option to require the Sponsor to satisfy its obligations
pursuant to Section 10.3(a) and (b).
10. GUARANTY
In addition to its obligations upon the occurrence of a Credit Event or
a Change of Control and its other obligations pursuant to the Operative
Documents, the Sponsor hereby agrees as follows:
10.1 Unconditional Guaranty.
The Sponsor hereby unconditionally and irrevocably guarantees to the
Servicer, each Participant and any transferee of the Participants, the
full and prompt payment of all of the Guaranteed Obligations relating
to the Loans and all costs, charges and expenses (including reasonable
attorneys' fees) actually incurred or sustained by the Servicer or any
Participant in enforcing the obligations of the Sponsor hereunder or
the obligations of the Borrowers under the applicable Loan Documents,
subject, in the case of the Loans outstanding pursuant to the Startup
Franchisee Commitment, to the limitations set forth in Section 10.2
below and subject, in the case of Loans outstanding pursuant to the
Established Franchisee Commitment, to the limitations set forth in
Section 10.3 below. If any portion of the Loan Indebtedness with
respect to any Defaulted Loan is not paid by the date specified herein,
Sponsor hereby agrees to and will immediately pay the same, without
resort by Servicer or any Participant to any other person or party. The
obligation of Sponsor to Servicer and the Participants hereunder is
primary, absolute and unconditional, except as may be specifically set
forth herein. This is a guaranty of payment and not of collection. The
obligations of the Sponsor pursuant to this Article 10 constitute a
guarantee which is continuing in nature.
The Servicer may, with the consent of the Required Participants and
shall, upon the written request of the Required Participants, in the
event that the obligations of the Sponsor with respect to a Defaulted
Loan have arisen hereunder, request that the Sponsor purchase the
Defaulted Loan from the Servicer prior to the acceleration of the
Defaulted Loan pursuant to the terms of the applicable Loan Documents
for an amount equal to the Loan Indebtedness with respect to such
Defaulted Loan and such purchase by the Sponsor shall be deemed to be a
payment hereunder in such amount.
10.2 Limitation on Guaranty of Startup Franchisee Loans.
54
60
The obligation of the Sponsor pursuant to this Article 10 with respect
to the Startup Franchisee Loans shall be limited, as of any date of
determination, to an amount (the "Maximum Amount") equal to the greater
of (a) fifty percent (50%) of the aggregate outstanding principal
amount of the Startup Franchisee Loans on such date (after giving
effect to any payments, recoveries on Collateral or other recoveries
made by the Servicer or any Participant on such date with respect to
the Startup Franchisee Loans), (b) three (3) times the largest
aggregate amount of all Loan Commitments (or if the Loan Commitments
have been terminated, all outstanding Loans) made to any Startup
Franchisee Borrower and its Borrower Group and (c) $7,000,000; provided
that, the Maximum Amount shall not on any date of determination exceed
the aggregate outstanding Loan Indebtedness of the Startup Franchisee
Loans. As a material inducement to the Servicer's and each
Participant's entering into this Agreement, the parties hereto
expressly agree that the Maximum Amount shall be redetermined (and the
obligation of the Sponsor to pay such replenished Maximum Amount shall
be enforceable by the Servicer and the Participants hereunder) on each
day that any Loan Indebtedness remains outstanding pursuant to any
Startup Franchisee Loan regardless of (i) any previous payments made by
the Sponsor hereunder on any prior date, whether or not constituting
the Maximum Amount payable on such prior date, or (ii) the number of
prior demands made by the Servicer or the Participants hereunder;
provided that, for purposes of calculating the Maximum Amount, (x) any
Defaulted Loan for which a demand has previously been made, or deemed
to have been made, pursuant to this Section 10.2 shall not be deemed to
be outstanding and (y) demand shall be deemed to have been made with
respect to each Defaulted Loan on the date on which the Servicer is
authorized to make a demand on the Sponsor with respect to such
Defaulted Loan pursuant to Section 4.3 or Section 4.4 of this Agreement
unless such Loan Default arises solely from the occurrence of a Credit
Event in which case demand shall be deemed to be made only upon receipt
of written request from the Servicer.
The foregoing limitation shall not in any way limit the obligation of
the Sponsor with respect to the Established Franchisee Loans or the
obligation of the Sponsor to purchase the Startup Franchisee Loans and
assume the Loan Commitments relating thereto upon the occurrence of a
Credit Event without regard to any limitations set forth in this
Article 10.
10.3 Obligations of Sponsor With Respect to Established Franchisee Loans.
(a) During any Response Period for an Established Franchisee
Loan of a Defaulted Borrower, the Sponsor may elect either to (i) waive
or cure any Loan Payment Default, or waive any other Loan Default, with
respect to such Established Franchisee Loan pursuant to Section 4.2 of
this Agreement, or (ii) use its reasonable efforts to exercise its
rights pursuant to the applicable Franchise Agreement with such
Defaulted Borrower to assume the operation of the stores of such
Defaulted Borrower. During any
55
61
period that Sponsor operates the stores of any Defaulted Borrower,
Sponsor shall make all payments due and owing to the Servicer pursuant
to the applicable Loan Documents.
(b) If the Sponsor assumes operation of the stores of any
Defaulted Borrower, the Sponsor will use its reasonable efforts to
locate a purchaser for such stores. In the event that the Sponsor has
not resold the franchise and inventory of such Defaulted Borrower within
sixty (60) days after assuming operation thereof in accordance with the
terms to the applicable Franchise Agreement for a purchase price equal
to or in excess of the Minimum Purchase Price (which amount shall be
paid directly to the Servicer in return for the assignment to the
Sponsor of the Defaulted Loan, the related Loan Commitment and the Liens
of the Servicer thereon, and applied by the Servicer to the Sponsor's
purchase of the outstanding Loan Indebtedness of such Defaulted Loan,
with any deficiency recovered pursuant to the next paragraph), Sponsor
shall purchase the outstanding Loan Indebtedness of such Defaulted Loan
and any related Loan Commitment from the Servicer for the Minimum
Purchase Price and any deficiency amount may be collected by the
Servicer, for the benefit of the Participants, pursuant to subsection
(c) below.
(c) In the event that (i) during the Response Period for any
Established Franchisee Loan of a Defaulted Borrower, the Sponsor has not
waived or cured any Loan Payment Default, or waived any other Loan
Default, and has not assumed the operation of the stores of the
Defaulted Borrower, or (ii) the Sponsor has not resold the franchise and
inventory of the Defaulted Borrower within sixty (60) days after
assuming operation of the stores of the Defaulted Borrower in accordance
with the terms of the applicable Franchise Agreement, then the Sponsor
will purchase, upon demand by the Servicer, the Established Franchisee
Loan and the related Loan Commitment of such Defaulted Borrower for an
amount equal to the outstanding Loan Indebtedness of the Defaulted Loan
pursuant to its guaranty set forth above; provided, however, that the
aggregate amount paid by the Sponsor pursuant to this Section 10.3(c)
with respect to all Defaulted Loans outstanding pursuant to the
Established Franchisee Commitment shall not exceed the Maximum
Established Franchisee Recourse Amount.
(d) Notwithstanding the foregoing, to the extent that the
Sponsor is prohibited by applicable law, court order or other legal
impediment from exercising the options set forth in subsection (a) or
(b) above, the Servicer may, with the consent of the Required
Participants and shall, upon the written request of the Required
Participants, require that the Sponsor repurchase the Loan pursuant to
subsection (c) above.
10.4 Continuing Guaranty.
The obligations of the Sponsor pursuant to this Article 10 constitute a
guarantee which is continuing in nature and shall be effective with
respect to the full amount outstanding
56
62
under all Guaranteed Obligations, now existing or hereafter made or
extended, regardless of the amount, subject only to the limitations set
forth in the preceding Sections 10.2 and 10.3.
10.5 Waivers.
The Sponsor hereby waives notice of Servicer's and each Participant's
acceptance of this Agreement and the creation, extension or renewal of
any Loans or other Guaranteed Obligations. Sponsor hereby consents and
agrees that, at any time or times, without notice to or further
approval from Sponsor, and without in any way affecting the obligations
of Sponsor hereunder, Servicer and the Participants may, with or
without consideration (i) release, compromise with, or agree not to
xxx, in whole or in part, any Borrower or any other obligor, guarantor,
endorser or surety on any Loans or any other Guaranteed Obligations,
(ii) renew, extend, accelerate, or increase or decrease the principal
amount of any Loans or other Guaranteed Obligations, either in whole or
in part, (iii) amend, waive, or otherwise modify any of the terms of
any Loans or other Guaranteed Obligations or of any mortgage, deed of
trust, security agreement, or other undertaking of any of the Borrowers
or any other obligor, endorser, guarantor or surety in connection with
any Loans or other Guaranteed Obligations, and (iv) apply any payment
received from Borrowers or from any other obligor, guarantor, endorser
or surety on the Loans or other Guaranteed Obligations to any of the
liabilities of Borrowers or of such other obligor, guarantor, endorser,
or surety which Servicer may choose, subject, however, to the rights of
Sponsor to bring a separate action for any breach of the Operative
Documents pursuant to Section 10.12.
10.6 Additional Actions.
Subject to Section 10.12, Sponsor hereby consents and agrees that the
Servicer may at any time or times, either with or without
consideration, surrender, release or receive any property or other
Collateral of any kind or nature whatsoever held by it or for its
account securing any Loans or other Guaranteed Obligations, or
substitute any Collateral so held by Servicer for other Collateral of
like or different kind, without notice to or further consent from
Sponsor, and such surrender, receipt, release or substitution shall not
in any way affect the obligations of Sponsor hereunder. Subject to
Section 10.12, Servicer shall have full authority to adjust,
compromise, and receive less than the amount due upon any such
Collateral, and may enter into any accord and satisfaction agreement
with respect to the same as Servicer may deem advisable without
affecting the obligations of Sponsor hereunder. Servicer shall be under
no duty to undertake to collect upon such Collateral or any part
thereof, and Sponsor's obligations hereunder shall not be affected by
Servicer's alleged negligence or mistake in judgment in handling,
disposing of, obtaining, or failing to collect upon or perfect a
security interest in, any such Collateral.
10.7 Additional Waivers.
57
63
Sponsor hereby waives presentment, demand, protest, and notice of
dishonor of any of the liabilities guaranteed hereby. Neither Servicer
nor any Participant shall have any duty or obligation (i) to proceed or
exhaust any remedy against any Borrower, any other obligor, guarantor,
endorser, or surety on any Loans or other Guaranteed Obligations, or
any other security held by Servicer or any Participant for any Loans or
other Guaranteed Obligations, or (ii) to give any notice whatsoever to
Borrowers, Sponsor, or any other obligor, guarantor, endorser, or
surety on any Loans or other Guaranteed Obligations, before bringing
suit, exercising rights to any such security or instituting proceedings
of any kind against Sponsor, any Borrower, or any of them, and Sponsor
hereby waives any requirement for such actions by Servicer or any
Participant. Upon default by any Borrower and Servicer's demand to
Sponsor hereunder, Sponsor shall be held and bound to Servicer and each
Participant directly as principal debtor in respect of the payment of
the amounts hereby guaranteed, such liability of Sponsor being joint
and several with each Borrower and all other obligors, guarantors,
endorsers and sureties on the Loans or other Guaranteed Obligations,
subject, however, to the rights of Sponsor to bring a separate action
for any breach of the Operative Documents pursuant to Section 10.12.
10.8 Postponement of Obligations.
Until the Loan and other Guaranteed Obligations of any Borrower to the
Servicer and the Participants have been paid in full (i) all present
and future indebtedness of such Borrower to Sponsor (the "Subordinated
Debt") is hereby postponed to the present and future indebtedness of
such Borrower to Servicer and each Participant, and all monies received
from such Borrower or for its account by Sponsor with respect to such
Subordinated Debt shall be received in trust for Servicer and the
Participants, and promptly upon receipt, shall be paid over to Servicer
for distribution to the Participants in accordance herewith until such
Borrower's indebtedness to Servicer and the Participants is fully paid
and satisfied, all without prejudice to and without in any way
affecting the obligations of Sponsor hereunder; provided that unless a
Loan Default or Loan Payment Default has occurred and is continuing,
the Sponsor may accept and retain any payments made by any Borrower to
the Sponsor in the ordinary course of business, and (ii) Sponsor shall
not have any rights of subrogation or otherwise to participate in any
security held by the Servicer for any Loan to such Borrower or any
other Guaranteed Obligations arising therefrom, and Sponsor hereby
waives such rights until such time as such Loan and other Guaranteed
Obligations have been paid in full to the Servicer and each Participant
(whether by repurchase by the Sponsor, pursuant to this Article 10 or
otherwise).
10.9 Effect on Additional Guaranties.
The obligations of the Sponsor pursuant to this Article 10 are in
addition to, and are not intended to supersede or be a substitute for
any other guarantee, suretyship agreement, or
58
64
instrument which Servicer may hold in connection with any Loans or
other Guaranteed Obligations.
10.10 Reliance on Guaranty and Purchase Obligation; Disclaimer of Liability.
Sponsor expressly acknowledges and agrees that each of the Servicer and
the Participants, in making its credit decision with regard to the
funding of the Loans, will rely solely upon the guaranty and purchase
obligation of Sponsor set forth above and in Article 10 and that
neither the Servicer nor any Participant is under any obligation or
duty to perform any credit analysis or investigation with regard to the
creditworthiness of any Borrower. In addition, the Servicer expressly
disclaims any responsibility or liability for the authenticity of
signatures on any of the Loan Documents (other than the Servicer's),
the authority of the Persons executing the Loan Documents (other than
the Servicer) or the enforceability or compliance with laws of any of
the Loan Documents.
SPONSOR EXPRESSLY ACKNOWLEDGES AND AGREES THAT SPONSOR'S GUARANTY
OBLIGATIONS TO PURCHASE LOANS UNDER THIS AGREEMENT ARE ABSOLUTE AND
UNCONDITIONAL. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING,
SPONSOR'S OBLIGATION SHALL NOT BE AFFECTED BY THE EXISTENCE OF ANY
DEFAULT BY ANY BORROWER UNDER THE APPLICABLE LOAN DOCUMENTS, ANY
EXCHANGE, RELEASE OR NONPERFECTION OF ANY LIEN WITH RESPECT TO ANY
COLLATERAL SECURING PAYMENT OF ANY LOAN, THE SUBSTITUTION OR RELEASE OF
ANY ENTITY PRIMARILY OR SECONDARILY LIABLE FOR ANY LOAN, ANY LACK OF
ENFORCEABILITY OF ANY LOAN DOCUMENT, ANY LAW, REGULATION, OR ORDER OF
ANY JURISDICTION AFFECTING ANY LOAN OR LOAN DOCUMENT OR THE RIGHTS OF
THE HOLDER THEREOF, ANY CHANGE IN THE CONDITION OR PROSPECTS OF THE
BORROWER, INCLUDING WITHOUT LIMITATION, INSOLVENCY, BANKRUPTCY,
REORGANIZATION OR SIMILAR PROCEEDING, OR ANY OTHER CIRCUMSTANCE WHICH
MIGHT, BUT FOR THE PROVISIONS OF THIS PARAGRAPH, CONSTITUTE A LEGAL OR
EQUITABLE DISCHARGE OF SPONSOR'S OBLIGATIONS HEREUNDER. SPONSOR'S
OBLIGATIONS HEREUNDER SHALL NOT BE AFFECTED BY ANY SET-OFF OR CLAIM
WHICH IT MIGHT HAVE AGAINST THE SERVICER OR ANY PARTICIPANT, WHETHER
ARISING OUT OF THIS AGREEMENT OR OTHERWISE, BUT SUBJECT TO SECTION
10.12 BELOW.
10.11 Reinstatement of Obligations.
The obligations of the Sponsor pursuant to the Operative Documents
shall continue to be effective or be reinstated, as the case may be, if
at any time payment or any part thereof, of principal of, interest on
or any other amount with respect to any Loan or any obligation
59
65
of Sponsor pursuant to the Operative Documents is rescinded or must
otherwise be restored by the Servicer or any Participant upon the
bankruptcy or reorganization of Sponsor, any Borrower or any guarantor
or otherwise.
10.12 Right to Bring Separate Action.
Nothing contained in this Article 10 shall be construed to affect any
other right that Sponsor may otherwise have under this Agreement, or
any Operative Document or Loan Documents, at law or in equity to
institute an action or assert a claim against the Servicer or any
Participant based upon a breach of Servicer's or such Participant's
obligations set forth in the Operative Documents or Loan Documents or
to assert a compulsory counterclaim with respect thereto and any waiver
of notice or other matter set forth in this Article 10 shall not affect
Sponsor's right to seek damages arising from the failure of the
Servicer to give such notice otherwise required by the terms of the
Operative Documents or Loan Documents.
10.13 Subordination of Liens.
The Sponsor hereby subordinates the lien and priority of the Sponsor's
existing and future liens and other interests, if any, in and to the
Collateral to the Servicer's existing and future interest in the
Collateral under the Loan Documents notwithstanding the time of
attachment of the interests of the Sponsor or the Servicer or the time
the Loan Indebtedness or the Subordinated Debt is incurred.
Notwithstanding anything to the contrary contained in this Agreement,
under applicable law or otherwise, in the event that the liens of the
Servicer are at any time unperfected with respect to any or all of the
Collateral, the lack of perfection by the Servicer as to any such
Collateral shall not affect the validity, enforceability or priority of
any lien on the Collateral in favor of the Sponsor. In any such event,
the liens of the Sponsor shall have priority over any and all other
Liens in favor of any third party with respect to the Collateral
(including, but not limited to any trustee under the Bankruptcy Code)
and the Sponsor shall be, and is hereby constituted, as the Servicer's
agent and bailee for purposes of perfection of the Liens of the
Servicer in the Collateral such that the Lien in favor of the Sponsor
shall be held by the Sponsor for the benefit of the Servicer and the
proceeds of any disposition of the Collateral of any Borrower shall be
and are in all respects subject to the priority of right to payment and
satisfaction of first, the Loan Indebtedness of such Borrower and then,
the Subordinated Debt with respect to such Borrower. The lien
priorities provided in this Section shall not be altered or otherwise
affected by any amendment, modification, supplement, extension,
renewal, restatement or refinancing of either the applicable Loan
Indebtedness or the Subordinated Debt, nor by any action or inaction
which either the Servicer or the Sponsors may take or fail to take in
respect of the Collateral, except as otherwise provided above in this
subsection.
10.14 Exercise of Remedies With Respect to Collateral.
60
66
(a) Until the Loan Indebtedness of any Borrower has been
fully and indefeasibly paid in cash, the Sponsor shall not, without the
prior written consent of the Servicer, ask, demand, assign, declare a
default under, xxx for, liquidate, sell, foreclose, set off, collect,
accept a surrender, petition, commence or otherwise initiate any
bankruptcy action (or join any other Person in so doing) against the
Borrower or its assets or otherwise realize or seek to realize upon all
or any part of the Collateral without the prior written consent of the
Servicer or as expressly authorized hereunder. In the event that
following the occurrence of a Loan Default, the Servicer may from time
to time execute releases, partial releases, terminations,
reconveyances, subordinations or other documents releasing or otherwise
limiting the Servicer's interests in the Collateral in connection with
the exercise of the Servicer's remedies or the refinancing of the
Defaulted Loan, the Sponsor agrees to execute and deliver at such time
such further documents as the Servicer may require to effect a
corresponding change to the Sponsor's position in the same Collateral.
(b) In the event that the Loan Indebtedness of any
Defaulted Loan is not repaid or repurchased by the Sponsor as set forth
herein, the Servicer, on behalf of the Participants, shall have the
exclusive right to exercise and enforce all privileges and rights with
respect to the Collateral according to the Servicer's discretion and
the exercise of its business judgment, including, without limitation,
the exclusive right to take or retake control or possession of such
Collateral and to hold, prepare for sale, process, sell, lease, dispose
of, or liquidate such Collateral.
(c) Only the Servicer, acting on behalf of the
Participants, shall have the right to restrict or permit, or approve or
disapprove, the sale, transfer or other disposition of Collateral
following the occurrence of a Loan Default where the Loan Indebtedness
is not repaid or repurchased by the Sponsor in accordance with the
terms hereof. In the event the Servicer releases its Liens on all or
any part of the Collateral, the Sponsor will, immediately upon the
request of the Servicer, release its Liens upon the same Collateral,
but only to the extent such Collateral is sold or otherwise disposed of
by the Borrower with the consent of the Servicer or in a commercially
reasonable manner by the Servicer or its agents. The Sponsor will
immediately deliver such releases, acknowledgments and other documents
as the Servicer may require in connection therewith.
(d) (i) In exercising its rights pursuant to this Section
10.14, the Servicer agrees that it will not release Liens or Collateral
or commence enforcement actions under the Loan Documents without the
direction of the Required Participants. The Servicer agrees to
administer the Loan Documents and the Collateral and to make such
demands and give such notices thereunder as the Required Participants
may request and to take such action to enforce the Loan Documents and
to realize upon, collect and dispose of the Collateral as the Required
Participants may direct. The Servicer shall not be required to take any
action that is, in its opinion, contrary to law or the terms of the
Loan Documents
61
67
or the Operative Documents or that would, in the opinion of the
Servicer, subject it or any of its officers, employees, agents or
directors to liability and the Servicer shall not be required to take
any action unless and until it is indemnified to its satisfaction by
the Participants for any loss, cost or liability resulting from any
required action.
(ii) The Servicer may at any time request directions
from the Required Participants as to any course of action or other
matter relating hereto or relating to any of the Loan Documents. Except
as otherwise provided in this Agreement, directions of the Required
Participants shall be binding on all Participants hereunder.
(iii) Nothing set forth in this Section 10.14 shall
modify the rights of the Servicer set forth in Section 3.1.
10.15 Rights Of Sponsor Upon Payment; Cooperation By Servicer.
Upon receipt by the Servicer of payment in full of the Loan
Indebtedness of a Defaulted Loan by Sponsor, Sponsor shall be
subrogated to the rights of the Servicer with respect to the Loan and
the Servicer shall be deemed to have assigned to Sponsor, and Sponsor
shall, to the extent permitted by applicable law, automatically,
immediately and without further action by any Person, be entitled to,
all rights and remedies that the Servicer may have had against the
Defaulted Borrower and any other Persons primarily or secondarily
liable on such Defaulted Loan, including without limitation the right
to resort to any and all Collateral which secures the Defaulted Loan.
The Servicer agrees that, upon receipt of payment in full of the Loan
Indebtedness, the Servicer shall:
(a) execute on a timely basis, without recourse,
representation or warranty of any kind (except as to its own title),
all such instruments and documents as are reasonably requested in order
to evidence Sponsor's rights hereunder or permit Sponsor to exercise
such rights;
(b) permit Sponsor at reasonable times and as often as may
be reasonably requested to discuss with appropriate Servicer employees
and officers the Servicer's experience, relationships, books, accounts
and files and to review the Servicer's loan files relating to the
purchased Defaulted Loan (and Sponsor hereby agrees to keep all such
information confidential); and
(c) otherwise reasonably cooperate with Sponsor in the
exercise of Sponsor's rights.
Sponsor shall reimburse the Servicer for its expenses reasonably and
actually incurred in complying with this Section.
62
68
11. INDEMNIFICATION
11.1 Indemnification.
(a) In addition to the other rights of the Servicer and the
Participants hereunder, Sponsor hereby agrees to protect, indemnify and
save harmless the Servicer, each Participant, and the officers,
directors, shareholders, employees, agents and representatives thereof
(each an "Indemnified Party") from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits,
costs (including, without limitation, reasonable attorney's fees and
costs actually incurred), expenses or disbursements of any kind or
nature whatsoever, whether direct, indirect, consequential or
incidental, with respect to or in connection with or arising out of (i)
the execution and delivery of this Agreement, any other Operative
Document or any agreement or instrument contemplated hereby or thereby,
including without limitation, the Loan Documents, the performance by
the parties hereto or thereto of their respective obligations hereunder
or thereunder or the consummation of the transactions contemplated
hereby, (ii) the making or administration of the Loan Commitments, the
Loans or any of them, including any violation of federal or state usury
or other laws, provided that with respect to clauses (i) and (ii),
Sponsor shall have no obligation to indemnify the Servicer and all
Participants for more than one (1) counsel's reasonable fees and
expenses, (iii) the enforcement, performance and administration of this
Agreement or the Loan Documents or any powers granted to the Servicer
hereunder or under any Loan Documents, (iv) any misrepresentation of
the Sponsor hereunder, (v) any matter arising pursuant to any
Environmental Laws as a result of the Collateral or (vi) any actual or
prospective claim, litigation, investigation or proceeding relating to
any of the foregoing, whether based on contract, tort or any other
theory, whether or not the Indemnified Party is a named party thereto,
except to the extent that such losses, claims, damages, liabilities or
related expenses are determined by a court of competent jurisdiction by
final and nonappealable judgment to have resulted from the gross
negligence or willful misconduct of such Indemnified Party or arise
solely from the nonpayment of any Loan Indebtedness notwithstanding the
performance by Sponsor of all of its obligations under the Operative
Documents relating to such Loan Indebtedness.
(b) Without limiting the generality of the foregoing, and
separate and apart from any obligation of Sponsor pursuant to Article
10, Sponsor agrees to indemnify and hold harmless each Indemnified
Party from and against, and on demand will pay or reimburse any
Indemnified Party for, any and all (i) liabilities arising from a
breach of any representation or warranty made by Sponsor hereunder
(whether or not Sponsor's obligations under Article 10 have been
satisfied), (ii) any breach by Sponsor of its agreements with the
Borrowers, (iii) any overadvance to any Borrower caused by the transfer
of ACH transfer instructions from the ATAC System to the Servicer by
Sponsor resulting in aggregate advances to such Borrower in excess of
the Loan Commitment to
63
69
such Borrower, and (iv) any breach by Sponsor of the terms of its
MicroACH Service Agreement with the Servicer or any failure by Sponsor
to maintain such agreement in full force and effect.
(c) This indemnity shall survive the termination of this
Agreement.
11.2 Notice Of Proceedings; Right To Defend
(a) Any Person with an indemnification claim (or potential
claim) pursuant to Section 11.1 ("Potential Indemnitee") agrees to
notify Sponsor (the "Potential Indemnitor") in writing within a
reasonable time after receipt by it of written notice of the
commencement of any administrative, legal or other proceeding, suit or
action by a Person (other than Indemnitee or an affiliate thereof), if
a claim for indemnification may be made by the Potential Indemnitee
against the Potential Indemnitor under this Article 11.
(b) Following receipt by the Potential Indemnitor of any
such notice from a Potential Indemnitee, (an "Indemnity Notice"), the
Potential Indemnitor shall be entitled at its own cost and expense to
investigate and participate in the proceeding, suit or action referred
to in the Indemnity Notice. At such time as the Potential Indemnitor
shall have acknowledged in writing to the Potential Indemnitee that it
will pay any judgment, damages, or losses incurred by the Potential
Indemnitee in the proceeding, suit or action referred to in the
Indemnity Notice other than those for gross negligence or willful
misconduct on the part of the Potential Indemnitee (at which time the
"Potential Indemnitor" shall be deemed to be the "Indemnitor" and the
"Potential Indemnitee" shall be deemed to be the "Indemnitee"), the
Indemnitor shall be entitled, to the extent that it shall desire, to
assume the defense of such proceeding, suit or action, with counsel
reasonably satisfactory to the Indemnitee. If the Indemnitor shall so
assume the defense of such proceeding, suit or action, the Indemnitor
shall conduct such defense with due diligence and at its own cost and
expense.
(c) In the event that the Indemnitor so assumes the defense
of such proceeding, suit or action, the Indemnitor shall not be
entitled to settle such proceeding, suit or action without the written
consent of the Indemnitee, provided that in the event that the
Indemnitee does not consent to such settlement not to be unreasonably
withheld or delayed (i) the Indemnitor's indemnification liability in
connection with such proceeding, suit or action shall not exceed the
amount of such proposed settlement and (ii) Indemnitee shall assume and
pay all costs and expenses, including reasonable attorneys' fees,
incurred by Indemnitor from the date that the Indemnitor presented the
Indemnitee the terms of the proposed settlement. An Indemnitor shall
not be liable to an Indemnitee for any settlement of a claim in any
proceeding, suit or other action referred to in an Indemnity Notice,
consented to by the Indemnitee without the consent of the Indemnitor.
64
70
(d) A Potential Indemnitor shall be liable to a Potential
Indemnitee for a settlement of a claim in any proceeding, suit or other
action referred to in an Indemnity Notice consented to by such
Potential Indemnitee only if (i) such Potential Indemnitor first had a
reasonable opportunity to investigate such claim and participate in
such proceeding, suit or action, (ii) the Potential Indemnitee gave the
Potential Indemnitor at least ten (10) Business Days notice of the
proposed terms of such settlement prior to entering into such
settlement and (iii) the Potential Indemnitor did not acknowledge in
writing to the Potential Indemnitee, by the expiration of such ten (10)
Business Days period, or such longer period as may be agreed to by the
Potential Indemnitee and Potential Indemnitor that it would pay any
judgment, damages or losses incurred by the Potential Indemnitee in
such proceeding suit or action.
11.3 Third Party Beneficiaries
No Persons shall be deemed to be third party beneficiaries of this
Agreement. Except as expressly otherwise provided in this Agreement,
this Agreement is solely for the benefit of Sponsor and the Servicer,
the Participants and their respective successors and permitted assigns,
and no other Person shall have any right, benefit, priority or interest
under, or because of the existence of, this Agreement.
12. SURVIVAL OF LOAN FACILITY
The terms of this Loan Facility Agreement shall survive the termination
of the Commitments hereunder and the termination of any Loan Commitment
established pursuant the terms hereof until the indefeasible payment in full of
each of the Loans outstanding hereunder and Article 11 shall survive the
termination of this Agreement upon such repayment.
13. CONDITIONS PRECEDENT
The effectiveness of this Agreement and the amendment and restatement
of the Existing Facility Agreement, as well as the obligation of the Servicer to
establish the initial Loan Commitment pursuant to this Agreement, is subject to
satisfaction of the following conditions:
13.1 Receipt of Documents.
The Servicer shall have received the following, each dated as of the
Effective Date, in form and substance satisfactory to the Servicer and
(except in the case of the Fee Letter) the Participants:
65
71
(a) Duly executed counterparts of this Agreement.
(b) Duly executed counterparts of the Servicing Agreement and the Fee
Letter.
(c) Duly executed counterparts of the Guaranty Agreement.
(d) A duly executed closing certificate of Sponsor, in form and
substance satisfactory to the Servicer and each Participant.
(e) A duly executed certificate of Sponsor identifying the Authorized
Signatories, in form and substance satisfactory to the Servicer and each
Participant;
(f) Copies of the organizational papers of Sponsor and each Guarantor,
certified as true and correct by the Secretaries of State of their respective
States of incorporation, and certificates from the Secretaries of State of such
States of incorporation certifying Sponsor's and each Guarantor's good standing
as a corporation in such State.
(g) A certificate of the Secretary or Assistant Secretary of each of
Sponsor and each Guarantor certifying (i) the names and true signatures of the
officers of Sponsor and each Guarantor authorized to execute the Guaranty
Agreement, this Agreement, the Servicing Agreement and the other Operative
Documents to be delivered hereunder to which each is a party, (ii) the bylaws of
Sponsor and each Guarantor, respectively, and (iii) the resolutions of the Board
of Directors of each of Sponsor and each Guarantor, respectively, approving the
Operative Documents to which each is a party and the transactions contemplated
hereby.
(h) A favorable written opinion of Xxxxxxxxxx Xxxxxxxx, LLP, counsel
for Sponsor and Guarantors, in a form satisfactory to the Servicer and each
Participant and covering such matters relating to the transactions contemplated
hereby as the Servicer may reasonably request.
(i) All corporate and other proceedings taken or to be taken in
connection with the transactions contemplated hereby and all documents incident
hereto or delivered in connection therewith shall be satisfactory in form and
substance to the Servicer and the Participants.
(j) In addition, each of the Participants shall have received a duly
executed Participation Certificate from the Servicer.
14. THE SERVICER
66
72
14.1 Appointment of Servicer as Agent.
To the extent of its ownership interest in the Loans, each Participant
hereby designates Servicer as its agent to administer all matters
concerning the Loans and to act as herein specified. Each Participant
hereby irrevocably authorizes the Servicer to take such actions on its
behalf under the provisions of this Agreement, the other Operative
Documents, and all other instruments and agreements referred to herein
or therein, and to exercise such powers and to perform such duties
hereunder and thereunder as are specifically delegated to or required
of the Servicer by the terms hereof and thereof and such other powers
as are reasonably incidental thereto. The Servicer may perform any of
its duties hereunder by or through its agents or employees.
14.2 Nature of Duties of Servicer.
The Servicer shall have no duties or responsibilities except those
expressly set forth in this Agreement and the other Operative
Documents. None of the Servicer nor any of its respective officers,
directors, employees or agents shall be liable for any action taken or
omitted by it as such hereunder or in connection herewith, unless
caused by its or their gross negligence or willful misconduct. The
Servicer shall not have by reason of this Agreement a fiduciary
relationship in respect of any Participant; and nothing in this
Agreement, express or implied, is intended to or shall be so construed
as to impose upon the Servicer any obligations in respect of this
Agreement or the other Operative Documents except as expressly set
forth herein.
14.3 Lack of Reliance on the Servicer.
(a) Independently and without reliance upon the Servicer, each
Participant, to the extent it deems appropriate, has made and shall
continue to make (i) its own independent investigation of the financial
condition and affairs of the Credit Parties in connection with the
taking or not taking of any action in connection herewith, and (ii) its
own appraisal of the creditworthiness of the Credit Parties, and,
except as expressly provided in this Agreement, the Servicer shall have
no duty or responsibility, either initially or on a continuing basis,
to provide any Participant with any credit or other information with
respect thereto, whether coming into its possession before the making
of the Loans or at any time or times thereafter.
(b) The Servicer shall not be responsible to any Participant
for any recitals, statements, information, representations or
warranties herein or in any document, certificate or other writing
delivered in connection herewith or for the execution, effectiveness,
genuineness, validity, enforceability, collectibility, priority or
sufficiency of this Agreement, the Guaranty Agreement, and Loan
Document or any other documents contemplated hereby or thereby, or the
financial condition of the Credit Parties or any
67
73
Borrower, or be required to make any inquiry concerning either the
performance or observance of any of the terms, provisions or conditions
of this Agreement, the Guaranty Agreement or the other documents
contemplated hereby or thereby, or the financial condition of the
Credit Parties or any Borrower, or the existence or possible existence
of any Unmatured Credit Event or Credit Event.
14.4 Certain Rights of the Servicer.
If the Servicer shall request instructions from the Required
Participants with respect to any action or actions (including the
failure to act) in connection with this Agreement, the Servicer shall
be entitled to refrain from such act or taking such act, unless and
until the Servicer shall have received instructions from the Required
Participants; and the Servicer shall not incur liability in any Person
by reason of so refraining. Without limiting the foregoing, no
Participant shall have any right of action whatsoever against the
Servicer as a result of the Servicer acting or refraining from acting
hereunder in accordance with the instructions of the Required
Participants.
14.5 Reliance by Servicer.
The Servicer shall be entitled to rely, and shall be fully protected in
relying, upon any note, writing, resolution, notice, statement,
certificate, telex, teletype or telecopier message, cable gram,
radiogram, order or other documentary, teletransmission or telephone
message believed by it to be genuine and correct and to have been
signed, sent or made by the proper Person. The Servicer may consult
with legal counsel (including counsel for any Credit Party),
independent public accountants and other experts selected by it and
shall not be liable for any action taken or omitted to be taken by it
in good faith in accordance with the advice of such counsel,
accountants or experts.
14.6 Indemnification of Servicer.
To the extent the Servicer is not reimbursed and indemnified by the
Credit Parties, each Participant will reimburse and indemnify the
Servicer, ratably according to the respective Pro Rata Shares, in
either case, for and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses
(including counsel fees and disbursements) or disbursements of any kind
or nature whatsoever which may be imposed on, incurred by or asserted
against the Servicer in performing its duties hereunder, in any way
relating to or arising out of this Agreement or the other Operative
Documents; provided that no Participant shall be liable to the Servicer
for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements
resulting from the Servicer's gross negligence or willful misconduct.
14.7 The Servicer in its Individual Capacity.
68
74
With respect to its obligations under this Agreement and the amounts
advanced by it, the Servicer shall have the same rights and powers
hereunder as any other Participant and may exercise the same as though
it were not performing the duties specified herein; and the terms
"Participants", "Required Participants", or any similar terms shall,
unless the context clearly otherwise indicates, include the Servicer in
its individual capacity. The Servicer may accept deposits from, lend
money to, and generally engage in any kind of banking, trust, financial
advisory or other business with the Consolidated Companies or any
affiliate of the Consolidated Companies as if it were not performing
the duties specified herein, and may accept fees and other
consideration from the Consolidated Companies for services in
connection with this Agreement and otherwise without having to account
for the same to the Participants.
14.8 Holders of Participation Certificates.
The Servicer may deem and treat the payee of any Participation
Certificate as the owner thereof for all purposes hereof unless and
until a written notice of the assignment or transfer thereof shall have
been filed with the Servicer. Any request, authority or consent of any
Person who, at the time of making such request or giving such authority
or consent, is the holder of any Participation Certificate shall be
conclusive and binding on any subsequent holder, transferee or assignee
of such Participation Certificate or of any Participation Certificate
or Certificates issued in exchange therefor.
15. MISCELLANEOUS
15.1 Notices.
All notices, requests and other communications to any party hereunder
shall be in writing (including bank wire, telex, telecopy or similar
teletransmission or writing) and shall be given to such party at its
address or applicable teletransmission number set forth on the
signature pages hereof, or such other address or applicable
teletransmission number as such party may hereafter specify by notice
to the Servicer and Sponsor. Each such notice, request or other
communication shall be effective (i) if given by telex, when such telex
is transmitted to the telex number specified in this Section and the
appropriate answerback is received, (ii) if given by mail, 72 hours
after such communication is deposited in the mails with first class
postage prepaid, addressed as aforesaid, (iii) if given by telecopy,
when such telecopy is transmitted to the telecopy number specified in
this Section and the appropriate confirmation is received, or (iv) if
given by any other means (including, without limitation, by air
courier), when delivered or received at the address specified in this
Section; provided that notices to the Servicer shall not be effective
until received.
69
75
15.2 Amendments, Etc.
No amendment or waiver of any provision of this Agreement or the other
Operative Documents, nor consent to any departure by any Credit Party
therefrom, shall in any event be effective unless the same shall be in
writing and signed by the Required Participants (and in the case of any
amendment, the applicable Credit Party), and then such waiver or
consent shall be effective only in the specific instance and for the
specific purpose for which given; provided that no amendment, waiver or
consent shall, unless in writing and signed by all the Participants do
any of the following: (i) waive any of the conditions specified in
Section 2.1 or 11.1, (ii) increase the Participating Commitment Amounts
or contractual obligations of the Participants to Servicer or Sponsor
under this Agreement, (iii) reduce the principal of, or interest on,
the Participation Certificates or any fees hereunder, (iv) postpone any
date fixed for the payment in respect of principal of, or interest on,
the Participation Certificates or any fees hereunder, (v) agree to
release any Guarantor from its obligations under any Guaranty Agreement
or the Sponsor from its obligations pursuant to this Agreement, (vi)
modify the definition of "Required Participants," or (vii) modify
Section 2.9, Article 4, Article 9, Article 10 or this Section 15.2.
Notwithstanding the foregoing, no amendment, waiver or consent shall,
unless in writing and signed by the Servicer in addition to the
Participants required hereinabove to take such action, affect the
rights or duties of the Servicer under this Agreement or under any
other Operative Document or Loan Document. In addition, notwithstanding
the foregoing, the Servicer and the Sponsor may, without the consent of
or notice to the Participants, enter into amendments, modifications or
waivers with respect to the Servicing Agreement and the Fee Letter as
long as such amendments or modifications do not conflict with the terms
of this Agreement.
15.3 No Waiver; Remedies Cumulative.
No failure or delay on the part of the Servicer or any Participant in
exercising any right or remedy hereunder or under any other Operative
Document, and no course of dealing between any Credit Party and the
Servicer or any Participant shall operate as a waiver thereof, nor
shall any single or partial exercise of any right or remedy hereunder
or under any other Operative Document preclude any other or further
exercise thereof or the exercise of any other right or remedy hereunder
or thereunder. The rights and remedies herein expressly provided are
cumulative and not exclusive of any rights or remedies which the
Servicer or any Participant would otherwise have. No notice to or
demand on any Credit Party not required hereunder or under any other
Operative Document in any case shall entitle any Credit Party to any
other or further notice or demand in similar or other circumstances or
constitute a waiver of the rights of the Servicer or the Participants
to any other or further action in any circumstances without notice or
demand.
15.4 Payment of Expenses, Etc. Sponsor shall:
70
76
(a) whether or not the transactions hereby contemplated are
consummated, pay all reasonable, out-of-pocket costs and expenses of
the Servicer in the administration (both before and after the execution
hereof and including reasonable expenses actually incurred relating to
advice of counsel as to the rights and duties of the Servicer and the
Participants with respect thereto) of, and in connection with the
preparation, execution and delivery of, preservation of rights under,
enforcement of, and, after a Unmatured Credit Event or Credit Event,
refinancing, renegotiation or restructuring of, this Agreement and the
other Operative Documents and the documents and instruments referred to
therein, and any amendment, waiver or consent relating thereto
(including, without limitation, the reasonable fees actually incurred
and disbursements of counsel for the Servicer), and in the case of
enforcement of this Agreement or any Operative Document after an Credit
Event, all such reasonable, out-of-pocket costs and expenses
(including, without limitation, the reasonable fees actually incurred
and reasonable disbursements and changes of counsel), for any of the
Participants; and
(b) Pay and hold the Servicer and each of the Participants
harmless from and against any and all present and future stamp,
documentary, and other similar Taxes with respect to this Agreement,
the Participation Certificates, the Loan Documents and any other
Operative Documents, any collateral described therein, or any payments
due thereunder, and save the Servicer and each Participant harmless
from and against any and all liabilities with respect to or resulting
from any delay or omission to pay such Taxes.
15.5 Right of Setoff.
In addition to and not in limitation of all rights of offset that any
Participant may have under applicable law, each Participant shall, upon
the occurrence of any Credit Event and whether or not such Participant
has made any demand or any Credit Party's obligations have matured,
have the right to appropriate and apply to the payment of any Credit
Party's obligations hereunder and under the other Operative Documents,
all deposits of any Credit Party (general or special, time or demand,
provisional or final) then or thereafter held by and other indebtedness
or property then or thereafter owing by such Participant or other
holder to any Credit Party, whether or not related to this Agreement or
any transaction hereunder.
15.6 Benefit of Agreement; Assignments; Participations.
(a) This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the respective successors and assigns
of the parties hereto, provided that Sponsor may not assign or transfer
any of its interest hereunder without the prior written consent of the
Participants.
(b) Any Participant may make, carry or transfer Loans at,
to or for the account of, any of its branch offices or the office of an
Affiliate of such Participant.
71
77
(c) Each Participant may assign all of its interests,
rights and obligations under this Agreement (including all of its
Participating Commitments and the Funded Participant's Interest at the
time owing to it and the Participation Certificates held by it) to any
Eligible Assignee; provided, however, that (i) the Sponsor and the
Servicer shall each have given its prior written consent to such
assignment (which consent shall not be unreasonably withheld or
delayed) unless such assignment is an Affiliate of the assigning
Participant or, in the case of the Sponsor, unless a Credit Event has
occurred and is continuing hereunder, (ii) unless the Participant is
assigning its entire Participating Commitment, the Participating
Commitment Amount of the assigning Participant subject to each
assignment (determined as of the date the assignment and acceptance
with respect to such assignment is delivered to the Servicer) shall not
be less than the lesser of (x) 50% of the amount of its Original
Participating Commitment or (y) $5,000,000 and shall be divided pro
rata between the two Facilities, and (iii) the parties to each such
assignment shall execute and deliver to the Servicer an Assignment and
Acceptance, together with the Participation Certificate subject to such
assignment and, unless such assignment is to an Affiliate of such
Participant, a processing and recordation fee of $2,500. Within ten
(10) Business Days after receipt of the notice and the Assignment and
Acceptance, Servicer shall execute and deliver, in exchange for the
surrendered Participation Certificate, a new Participation Certificate
to the order of the assignor and such assignee in a principal amount
equal to the applicable Participating Commitment Amount retained and
assumed by it, respectively, pursuant to such Assignment and
Acceptance. Such new Participation Certificate shall be in an aggregate
principal amount equal to the aggregate principal amount of such
surrendered Participation Certificate, shall be dated the date of the
surrendered Participation Certificate which it replaces, and shall
otherwise be in substantially the form attached hereto.
(d) Each Participant may, without the consent of Sponsor or
the Servicer, sell participations to one or more banks or other
entities in all or a portion of its rights and obligations under this
Agreement (including all or a portion of its Participating Commitment
and the Funded Participant's Interest owing to it), provided, however,
that (i) no Participant may sell a participation in its Participating
Commitment (after giving effect to any permitted assignment hereof)
unless it retains an aggregate exposure of 25% of its original
Participating Commitment Amount, provided, however, sales of
participations to an Affiliate of such Participant shall not be
included in such calculation; provided, however, no such maximum amount
shall be applicable to any such participation sold at any time there
exists an Credit Event hereunder, (ii) such Participant's obligations
under this Agreement shall remain unchanged, (iii) such Participant
shall remain solely responsible to the other parties hereto for the
performance of such obligations, and (iv) the participating bank or
other entity shall not be entitled to the benefit (except through its
selling Participant) of the cost protection provisions contained in
Article 2 of this Agreement, and (v) Sponsor, Servicer and the other
Participants shall continue to deal solely and directly with each
Participant in connection
72
78
with such Participant's rights and obligations under this Agreement and
the other Operative Documents, and such Participant shall retain the
sole right to enforce the obligations of Sponsor relating to the Loans
and to approve any amendment, modification or waiver of any provisions
of this Agreement (other than an amendment requiring approval of 100%
of the Participants). Each Participant shall promptly notify in writing
the Servicer and the Sponsor of any sale of a participation hereunder
and shall certify to Sponsor and Servicer its compliance with the terms
hereof.
(e) Any Participant or participant may, in connection with
the assignment or participation or proposed assignment or
participation, pursuant to this Section, disclose to the assignee or
participant or proposed assignee or participant any information
relating to Sponsor or the other Consolidated Companies furnished to
such Participant by or on behalf of Sponsor or any other Consolidated
Company. With respect to any disclosure of confidential, non-public,
proprietary information, such proposed assignee or participant shall
agree to use the information only for the purpose of making any
necessary credit judgments with respect to this credit facility and not
to use the information in any manner prohibited by any law, including
without limitation, the securities laws of the United States. The
proposed participant or assignee shall agree not to disclose any of
such information except (i) to directors, employees, auditors or
counsel to whom it is necessary to show such information, each of whom
shall be informed of and shall acknowledge the confidential nature of
the information, (ii) in any statement or testimony pursuant to a
subpoena or order by any court, governmental body or other agency
asserting jurisdiction over such entity, or as otherwise required by
law (provided prior notice is given to Sponsor and the Servicer unless
otherwise prohibited by the subpoena, order or law), and (iii) upon the
request or demand of any regulatory agency or authority with proper
jurisdiction. The proposed participant or assignee shall further agree
to return all documents or other written material and copies thereof
received from any Participant, the Servicer or Sponsor relating to such
confidential information unless otherwise properly disposed of by such
entity.
(f) Any Participant may at any time assign all or any
portion of its rights in this Agreement to a Federal Reserve Bank;
provided that no such assignment shall release the Participant from any
of its obligations hereunder.
(g) Notwithstanding any provision of this Agreement to the
contrary, the Servicer, together with its Affiliates, shall at all
times retain a Participating Commitment in an amount at least equal to
25% of the aggregate principal amount of all outstanding Loan
Commitments.
15.7 Governing Law; Submission to Jurisdiction.
(a) THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE
73
79
WITH AND BE GOVERNED BY THE LAW (WITHOUT GIVING EFFECT TO THE CONFLICT
OF LAW PRINCIPLES THEREOF) OF THE STATE OF GEORGIA.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS
AGREEMENT OR ANY OTHER OPERATIVE DOCUMENT MAY BE BROUGHT IN THE
SUPERIOR COURT OF XXXXXX COUNTY, GEORGIA, OR ANY OTHER COURT OF THE
STATE OF GEORGIA OR OF THE UNITED STATES OF AMERICA FOR THE NORTHERN
DISTRICT OF GEORGIA, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT,
SPONSOR HEREBY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY,
GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID
COURTS. THE PARTIES HERETO HEREBY IRREVOCABLY WAIVE TRIAL BY JURY, AND
SPONSOR HEREBY IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING, WITHOUT
LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE
GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO
THE BRINGING OF ANY SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE
JURISDICTIONS.
(c) Nothing herein shall affect the right of the Servicer, any
Participant, or any Credit Party to commence legal proceedings or
otherwise proceed against Sponsor in any other jurisdiction.
15.8 Counterparts.
This Agreement may be executed in any number of counterparts and by the
different parties hereto on separate counterparts, each of which when
so executed and delivered shall be an original, but all of which shall
together constitute one and the same instrument.
15.9 Severability.
In case any provision in or obligation under this Agreement or the
other Operative Documents shall be invalid, illegal or unenforceable,
in whole or in part, in any jurisdiction, the validity, legality and
enforceability of the remaining provisions or obligations, or of such
provision or obligation in any other jurisdiction, shall not in any way
be affected or impaired thereby.
15.10 Independence of Covenants.
All covenants hereunder shall be given independent effect so that if a
particular action or condition is not permitted by any of such
covenants, the fact that it would be permitted by
74
80
an exception to, or be otherwise within the limitation of, another
covenant, shall not avoid the occurrence of a Unmatured Credit Event or
an Credit Event if such action is taken or condition exists.
15.11 No Joint Venture.
Nothing in this Agreement, the Servicing Agreement or any of the Loan
Documents shall be construed as constituting Sponsor and the Servicer
or any Participant as partners or joint venturers or as creating the
relationship of employer and employee, master and servant, principle
and agent, or franchisor or franchisee between Sponsor and the Servicer
or any Participant. Neither Sponsor nor Servicer or any Participant
shall have any right or authority to bind the other party or to assume
or create any obligation or responsibility, express or implied, on
behalf of the other party or in the other party's name. All rights,
duties and obligations under this Agreement and the Operative Documents
are exclusively for the benefit of Sponsor and the Servicer and
Participants, as the case may be, and shall not be deemed to affect any
agreement between either of such parties and any third party
(including, without limitation, any Borrower).
15.12 Repurchase Right.
Sponsor may at any time (upon thirty (30) days' prior written notice to
Servicer) purchase from Servicer all Loans and Loan Commitments and all
rights, titles and interests of the Servicer and the Participants in
and to the Loan Documents and the Collateral relating thereto for a
purchase price (payable in immediately available funds) equal to the
aggregate Loan Indebtedness, plus all amounts otherwise owing by the
Sponsor pursuant to the Operative Documents, and the Servicer shall
assign, without recourse, representation or warranty (except as to its
own title), its right, title and interest therein to Sponsor upon the
Servicer's receipt of such purchase price. Thereafter, Servicers shall
have no responsibility with respect to any Loans or Loan Commitments.
15.13 Effect on Existing Facility Agreement; Execution of New Loan Documents.
Upon the Effective Date, all "Franchisee Loans" and related "Loan
Commitments" (as defined under the Existing Facility Agreement)
outstanding pursuant to the Existing Facility Agreement shall be deemed
to be Startup Franchisee Loans and Startup Franchisee Loan Commitments
outstanding hereunder pursuant to the Startup Franchisee Commitment,
all "Qualified Franchisee Loans" and related "Loan Commitments" (as
defined under the Existing Facility Agreement) outstanding pursuant to
the Existing Facility Agreement shall be deemed to be Established
Franchisee Loans and Established Franchisee Loan Commitments
outstanding hereunder pursuant to the Established Franchisee
Commitment, and the Existing Facility Agreement shall be of no further
force and effect, except to the extent that certain indemnities set
forth therein are deemed to expressly survive the termination thereof.
75
81
15.14 Confidentiality.
Each Participant agrees that it will maintain in confidence and will
not disclose, publish or disseminate, to any Person, any confidential
information which it has or shall acquire during the term of this
Agreement relating to the business, operations and condition, financial
or otherwise of the Sponsor or any Borrower, except that such
information may be disclosed by such Participant if and to the extent
that:
(i) such information is in the public domain at the time of
disclosure;
(ii) such information is required to be disclosed by subpoena
or similar process of applicable law or regulations;
(iii) such information is required to be disclosed to any
regulatory or administrative body or commission to whose jurisdiction
such Participant or any of its Affiliates may be subject;
(iv) such information is disclosed to counsel, auditors or
other professional advisors to such Participant or to affiliates of
such Participant provided that such affiliates agree to keep such
information confidential as set forth herein;
(v) such information is disclosed with the prior written
consent of the Sponsor or the relevant Borrower, as the case may be,
which consent shall not be unreasonably withheld or delayed;
(vi) such information is disclosed in connection with any
litigation or dispute between such Participant and the Sponsor or any
Borrower concerning the Operative Documents or the Loan Documents of
such Borrower;
(vii) such information is disclosed in connection with a
prospective assignment, grant of a participation interest in or other
transfer by such Participant of any of its interest in the Operative
Documents, provided that the Person to whom such information shall be
disclosed shall have agreed to keep such information confidential as
set forth herein;
(viii) such information was in the possession of such Person
or such Person's affiliates without obligation of confidentiality prior
to such Participant furnishing it to such Person; or
(ix) such information is received by such Participant, without
restriction as to its disclosure or use, from a Person, who, to such
Participant's knowledge or reasonable belief, was not prohibited from
disclosing it by any duty of confidentiality.
76
82
Each Participant agrees to use its best efforts to give the Sponsor
prompt notice of any subpoena or similar process referred to in clause
(ii) above, provided that such Participant shall have no liability in
event such notice is not given.
15.15 Headings Descriptive; Entire Agreement.
The headings of the several sections and subsections of this Agreement
are inserted for convenience only and shall not in any way affect the
meaning or construction of any provision of this Agreement. This
Agreement, the other Operative Documents, and the agreements and
documents required to be delivered pursuant to the terms of this
Agreement constitute the entire agreement among the parties hereto and
thereto regarding the subject matters hereof and thereof and supersede
all prior agreements, representations and understandings related to
such subject matters.
[Signatures Set Forth on Next Page]
77
83
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
Address for Notices: XXXXX RENTS, INC.
000 Xxxx Xxxxx Xxxxx Xxxx, XX By:____________________________________
Xxxxxxx, Xxxxxxx 00000 Xxxxxxx X. Xxxxxxxxx
Attn: Xxxxxxx X. Xxxxxxxxx Executive Vice President and
Telecopy: 000-000-0000 Chief Financial Officer
Attest:________________________________
Name: __________________________
Title: _________________________
[Corporate Seal]
78
84
Address for Notices: SUNTRUST BANK, ATLANTA, as
Servicer
000 Xxxxxxxxx Xxxxxx XX, 0xx Xxxxx
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxx Rents Program Manager By:____________________________________
Telecopy No. (000) 000-0000 Title:
with a copy to:
000 Xxxxxxxxx Xxxxxx XX, 0xx Xxxxx
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxxxx Xxxxxx
Telecopy No. (000) 000-0000
79
85
Address for Notices: SUNTRUST BANK, ATLANTA
000 Xxxxxxxxx Xxxxxx, XX, 0xx Xxxxx
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxx Rents Program Manager By:____________________________________
Telecopy No.: (000) 000-0000 Name:
Title:
with a copy to:
000 Xxxxxxxxx Xxxxxx XX, 0xx Xxxxx
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
Participating Commitment: $14,000,000
Pro Rata Share: 26.9231%
80
86
Address for Notices: BANK ONE, NA
1 Bank Xxx Xxxxx
Xxxxx Xx. 0000, 00xx Xxxxx
Xxxxxxx, Xxxxxxxx 00000 By:___________________________________
Attn: Xx. Xxxxxx X. Price Title:
Telecopy: (000) 000-0000
Participating Commitment Amount: $12,666,667
Pro Rata Share: 24.3590%
81
87
Address for Notices: FIRST UNION NATIONAL BANK
000 Xxxxxxxxx Xxxxxx
00xx Xxxxx
Xxxxxxx, Xxxxxxx 00000
Attention: Xxx Xxxxx By:__________________________________
Telecopy: (000) 000-0000 Title:
Participating Commitment Amount: $12,666,667
Pro Rata Share: 24.3590%
82
88
Address for Notices: SOUTHTRUST BANK, N.A.
000 Xxxx Xxxxxxxxx Xxxxxx
00xx Xxxxx
Xxxxxxx, Xxxxxxx 00000 By:__________________________________
Attention: Xxxxxx Xxxxxxxx Title:
Telecopy: (000) 000-0000
Participating Commitment Amount: $12,666,667
Pro Rata Share: 24.3590%
83
89
SERVICING AGREEMENT
THIS SERVICING AGREEMENT (this "Servicing Agreement") dated as of this
3rd day of November, 1999, by and between XXXXX RENTS, INC., a Georgia
corporation ("Sponsor"), and SUNTRUST BANK, ATLANTA, a Georgia banking
corporation (the "Servicer").
PREAMBLE
WHEREAS, Sponsor and Servicer, in order to make available a loan
facility to certain franchisees of Sponsor, entered into that certain Amended
and Restated Loan Facility Agreement and Guaranty, dated as of November 3, 1999
(as hereafter amended or modified, the "Loan Facility Agreement"), by and among
Sponsor, Servicer and the other financial institutions from time to time party
thereto (the "Participants");
WHEREAS, in order to expedite the ongoing operations of the loan
facility, Sponsor and Servicer wish to enter into an agreement to set forth
certain procedures and other operational matters, as well as certain agreements
regarding fees;
WHEREAS, Sponsor and Servicer wish to enter into this Agreement to set
forth their understandings regarding such matters, all as more particularly set
forth below;
NOW, THEREFORE, upon the terms and conditions hereinafter stated, the
parties, intending to be legally bound, hereby agree as follows:
1. DEFINITIONS
In addition to the other terms defined herein, the following terms used
herein shall have the meanings herein specified (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"ACH Authorization" means an authorization from a Borrower to
automatically debit Loan payments from a deposit account of such
Borrower, substantially in the form of Exhibit A.
"Agreement" means this Servicing Agreement, either as
originally executed or as it may hereafter be amended, modified or
supplemented from time to time.
"Approved Invoice" means an invoice for the aggregate purchase
price of Merchandise purchased by a Franchisee Borrower with a purchase
order approved by the Sponsor as provided in this Agreement.
90
"Asset Disposition Invoice" shall have the meaning set forth
in Section 2.5 hereof.
"ATAC System" means Sponsor's proprietary software accounting
system, as modified from time to time, used by Sponsor and the
Borrowers.
"Authorized Signatory" means an officer of the Sponsor named
in the most recent Certificate Regarding Authorized Signatories
delivered to Servicer.
"Calculation Period" means, initially, the period commencing
on June 30, 1999 and ending on September 30, 1999 and thereafter, the
period commencing on the last day of the preceding Calculation Period
and ending on the third Payment Date thereafter.
"Commitment Letter" means a letter from Servicer to a
Franchisee named in a Funding Approval Notice, substantially in the
form of Exhibit B, in the case of a Startup Franchisee Loan Commitment,
whereby Servicer agrees to establish a Loan Commitment in favor of such
Franchisee upon the terms and conditions set forth therein and in the
Operative Documents.
"Corporate Authorization" means, with respect to any Borrower
which is a corporation, certifications as to authorized signatories and
corporate action with respect to the Loan in the form attached hereto
as Exhibit C.
"Debt" means (i) indebtedness for borrowed money or for the
deferred purchase price of property or services (other than trade
accounts payable on customary terms in the ordinary course of
business), (ii) financial obligations evidenced by bonds, debentures,
notes or other similar instruments, (iii) financial obligations as
lessee under leases which shall have been or should be, in accordance
with GAAP, recorded as capital leases, and (iv) obligations under
direct or indirect guaranties in respect of, and obligations
(contingent or otherwise) to purchase or otherwise acquire, or
otherwise to assure a creditor against loss in respect of, indebtedness
or financial obligations of others of the kinds referred to in clauses
(i) through (iii) above.
"Debt Service" means, for any particular Borrower and period,
the total required payments of principal, interest and fees made by
such Borrower with respect to its Debt during such period to the extent
that such Debt arises pursuant to such Borrower's Loan Agreement or any
other financing arrangement with respect to Merchandise.
"Default Interest Rate" means the annual percentage interest
rate applied to any principal amount outstanding pursuant to a Loan
Commitment not paid when due under the terms of the applicable Loan
Documents, which rate shall equal the sum of 2% per annum above the
Borrower Rate.
"Default Waiver Request" means written instructions to
Servicer from Sponsor, in substantially the form set forth as Exhibit D
hereto, requiring Servicer to waive a Loan
2
91
Default which is not a Loan Payment Default or a Loan Default described
in Section 4.2 or Section 4.4 of the Loan Facility Agreement as not
being subject to waiver by Sponsor, any such waiver to be limited to
the specific time and circumstances set forth in such instructions,
unless otherwise expressly provided in such instructions.
"EBIT" means, with respect to Borrower, for any period, (i)
net income of Borrower for such period, plus (ii) to the extent
deducted in determining net income, interest and taxes based on income
for such period, each as determined in accordance with GAAP
consistently applied.
"Financing Statement" means, with respect to a Loan, a
document which among other things, describes the Borrower and the
Collateral, the proper filing of which perfects a security interest in
the Collateral described therein under the laws of the state in which
such document is filed.
"Funding Approval Notice" means a written notice to Servicer
from Sponsor setting forth the conditions of a proposed Loan
Commitment, consistent with the requirements therefor as set forth in
this Agreement, and containing such information and in substantially
such form as Exhibit E attached hereto.
"Legal Forms" shall have the meaning set forth in Section 2.2.
"Loan Account" means the internal bank loan account
established by Servicer for each Franchisee Borrower.
"Net Book Value" means, for any item of Merchandise, the cost
of such Merchandise less accumulated depreciation as calculated in
accordance with the ATAC System.
"Personal Guaranty" means any guaranty from a principal or
member of a Borrower substantially in the form of Exhibit F attached
hereto.
"Prime Rate" means the per annum rate of interest designated
from time to time by Servicer to be its prime rate, with any change in
the rate of interest resulting from a change in the Prime Rate to be
effective as of the opening of business of Servicer on the day of such
change. The Prime Rate is a reference rate and does not necessarily
represent the lowest or best rate of interest that is being offered by
Servicer to its borrowers.
"Servicing Fee" shall have the meaning set forth in Section
2.14 hereof.
"Sponsor's Fee" shall have the meaning set forth in Section
2.14 hereof.
"Spousal Consent" shall mean any agreement provided by the
spouse of any Person executing a Guaranty to the extent such spouse has
not personally executed a Guaranty, to be substantially in the form
provided by the Servicer.
3
92
"State" means any State of the United States of America and
the District of Columbia.
"Store Opening Information Sheet" shall mean a document
substantially in the form of Exhibit G, completed by Xxxxx with respect
to a Borrower.
"Subordination Agreement" shall have the meaning set forth in
Section 2.2(e) hereof.
"Tangible Net Worth" means, with respect to any Borrower as of
any date of determination, the excess of the total assets of such
Borrower over the Total Liabilities of such Borrower, determined in
accordance with GAAP consistently applied, excluding from the
calculation of total assets the notes receivables from shareholders of
such Borrower and including in such calculation of total assets the
franchise fees, as shown on the balance sheet of such Borrower as of
such date.
"Total Liabilities" means, with respect to any Borrower, as of
any date of determination, total liabilities determined in accordance
with GAAP consistently applied, but excluding therefrom, Debt of such
Borrower which is subordinated to the Loan Indebtedness owing to
Servicer pursuant to a Subordination Agreement.
"UCC" means the Uniform Commercial Code of the relevant State,
as the same may be amended from time to time.
The above definitions apply equally to both the singular and the plural
of the terms defined. All terms used herein and not otherwise shall have the
meaning ascribed to such terms in the Loan Facility Agreement.
2. PRE-FUNDING MATTERS; CLOSING OF LOANS
2.1 Approval Process.
(a) In the event that Sponsor desires that Servicer establish
a Loan Commitment under the Operative Documents, Sponsor shall forward
to Servicer an appropriate Funding Approval Notice no later than thirty
(30) days prior to the anticipated Closing Date of such Loan
Commitment. Such Funding Approval Notice shall indicate whether the
requested Loan Commitment is a Startup Franchisee Loan Commitment or an
Established Franchisee Loan Commitment and shall contain the following
information:
(i) the Franchisee's legal name;
(ii) the amount of the Loan Commitment;
4
93
(iii) a copy of the Franchisee's executed franchise
application authorizing release of all information set forth therein
or delivered in connection therewith to Servicer;
(iv) a copy of the Franchisee's executed Franchise
Agreement;
(v) the Franchisee's federal tax identification
number or social security number;
(vi) pro forma financial statements for the
Franchisee for the next 2 years, in form satisfactory to Servicer and
if available, historical annual financial statements for the
Franchisee for each of the last three years;
(vii) the legal address(es) (including county) of the
Franchisee's residence or principal place of business, each store
location, and the site(s) where any Collateral to be pledged as
security for the Loan is stored, together with any other corporate or
d/b/a names used by the Franchisee in the last five (5) years;
(viii) copies of the filed income tax returns of the
Franchisee and any proposed Guarantor for the two (2) years most
recently ended and copies of all credit bureau reports obtained by
Sponsor with respect to the Franchisee and any Guarantor;
(ix) if the proposed Borrower is a corporation,
copies of the Borrower's Articles or Certificate of Incorporation,
certified by the Secretary of State of its incorporation, copies of
the Borrower's by-laws and current incumbency certificate, if the
Borrower is a partnership, a copy of the current partnership
agreement, if the Borrower is a limited liability company, a copy of
the current operating or limited liability company agreement and if
the Borrower is a sole proprietor, a Statement of Sole Proprietorship
in the form provided by Servicer;
(x) good standing certificate from the Secretary of
State in which the Borrower is organized or formed; and
(xi) for any Established Franchisee Loan Commitment,
a detailed description of the financial covenants to be included in
the Established Franchisee Loan Agreement, including any defined
terms used in such financial covenants;
(xii) such other information as Servicer shall
reasonably request.
The Funding Approval Notice shall contain a statement that Sponsor has
approved the Franchisee for a franchise license and for participation
in the Franchisee Loan Program and shall also state that the Sponsor
consents to the liens in favor of Servicer provided for therein.
(b) Upon receipt of the Funding Approval Notice, Servicer shall:
5
94
(i) as soon as practicable, notify Sponsor if the
Funding Approval Notice fails to contain any of the items described in
the preceding Section, or if it has any questions relating to such
Funding Approval Notice or the information submitted therewith; and
(ii) endeavor to send to the Franchisee that is not
currently a Borrower, within three (3) Business Days of its receipt of
a completed Funding Approval Notice with respect to a Startup
Franchisee Loan Commitment, a Commitment Letter which shall provide
that the applicable Franchisee must sign and return the Commitment
Letter within fourteen (14) days after the date of such Commitment
Letter.
(c) Sponsor shall forward to Servicer a completed Store
Opening Information Sheet (i) together with the Funding Approval Notice
with respect to any Startup Franchisee or Established Franchisee that
already a Borrower and (ii) at least ten (10) Business Days prior to
the anticipated Closing Date with respect to any Startup Franchisee or
Established Franchisee that is not presently is a Borrower, in each
case together with the following additional documents:
(1) a duly executed Landlord's Waiver for each leased location
listed on the Store Opening Information Sheet where the
financed Merchandise is located, substantially in the form of
Exhibit H;
(2) complete legal descriptions for each leased location
listed on the Store Opening Information Sheet where the
financed Merchandise is located; and
(3) complete copies of the leases for each leased location
listed on the Store Opening Information Sheet where the
financed Merchandise is located.
2.2 Loan Documentation; Collateral.
Upon receipt of a completed Store Opening Information Sheet, Servicer
shall proceed to document the Loan and shall forward such documentation
to the Borrower for signature within ten (10) Business Days after
receipt of the Store Opening Information. Each Loan made pursuant to
this Agreement shall be evidenced by the following documentation in
such form as is set forth in the Exhibits to the Operative Documents
for the applicable Facility (the "Legal Forms"), with such
modifications as Sponsor and Servicer may agree upon from time to time
in accordance with the terms hereof:
(a) the Loan Agreement;
(b) the Master Note;
6
95
(c) a Personal Guaranty of each Person specified as a
Guarantor in the Funding Approval Notice for such Loan, and, if
requested and to the extent not prohibited by law, the spouse of such
Person; provided, however, that if such spouse is not providing a
Personal Guaranty, a validly executed copy of a Spousal Consent;
(d) a Subordination Agreement from each other debtholder of
the Franchisee substantially in the form of Exhibit I (each, a
"Subordination Agreement");
(e) suitable Financing Statements to enable Servicer to
perfect the security interest granted to it under the Loan Agreement;
and
(f) a Certificate of Borrowing Authority in the form provided
by Servicer duly executed by the Franchisee.
To the extent that any of the foregoing items (other than the Loan
Agreement or Master Note) have been provided by the relevant Franchisee
in connection with a prior Loan, Servicer may waive the requirement
that such documents be reexecuted. In addition, Servicer shall engage a
nationally recognized service to perform searches of the Uniform
Commercial Code jurisdictions as are set forth in the Funding Approval
Notice. Prior to the Closing Date, Servicer shall prepare appropriate
UCC-1 financing statements to be filed in connection with the Loan and
forward the same to the Franchisee for execution. The Franchisee shall
promptly execute and return such financing statements to Servicer for
filing and, if requested by Sponsor in writing, Servicer, prior to
making the initial Advance pursuant to the Master Note of such
Franchisee, shall conduct lien searches in the jurisdictions noted on
the Funding Approval Notice to confirm that Servicer's UCC-1 financing
statements have been properly recorded and that no prior UCC-1
financing statements or other liens or encumbrances are of record with
respect to such Franchisee unless the applicable secured party has
executed a Subordination Agreement.
Servicer shall prepare and distribute the Loan Documents to the
Borrower who shall execute the same, shall obtain the signatures of any
Guarantor(s) on the documentation and shall forward duly executed Loan
Documents to Servicer prior to the funding of the initial Advance. Upon
receipt, Servicer shall execute the Loan Documents where required and
forward copies of the executed documents to the Franchisee and, if
requested by Sponsor, to Sponsor. In addition, Sponsor shall cause the
Borrower to forward or to have forwarded to Servicer a Certificate of
Insurance from an insurer acceptable to Servicer in form acceptable to
Servicer evidencing the Borrower's ownership of adequate liability
insurance and of property and casualty insurance in an amount not less
than the greater of (i) the Loan Commitment, or (ii) the full
replacement cost of the Collateral, which certificate shall name
Servicer as sole loss payee and additional insured and shall also
provide that Servicer shall receive thirty (30) days' prior written
notice at
7
96
SunTrust Bank, Atlanta
Strategic Partners Program
Attn: Xxxxx Rents Program Manager
XX Xxx 0000
Mail Code 1923
Xxxxxxx, XX 00000
of any lapse, termination or cancellation of the insurance policies
referenced on such certificate.
2.3 Interest on Loans; Terms of Loan Agreements.
(a) Each of the Loans shall bear interest at the Borrower Rate
specified by the Sponsor in the applicable Funding Approval Notice and
interest on the Loans shall be calculated based upon the actual number
of days elapsed in a 365 or 366 day year.
(b) Each of the Startup Franchisee Loan Agreements shall
require that the applicable Startup Franchisee Borrower thereunder
comply with the following financial covenants:
(i) Rental Revenue to Debt Service. Commencing on the
first day of the calendar quarter in which the first day of the 13th
month following the Opening Date of the first store location of
Borrower occurs and measured as of the last day of the calendar quarter
in which such 13th month occurs and on the last day of each calendar
quarter thereafter, the ratio of the Borrower's Rental Revenue to Debt
Service for such quarter shall not be less than 2.2:1.0;
(ii) Debt to Rental Revenue. Commencing on the first
day of the calendar quarter in which the first day of the 19th month
following the Opening Date of the first store location of any Borrower
occurs and measured as of the last day of the calendar quarter in which
such 19th month occurs and on the last day of each calendar quarter
thereafter, the ratio of the Borrower's Debt to the Borrower's Rental
Revenue, shall not exceed 5.5:1.0; and
(iii) Total Liabilities to Tangible Net Worth.
Commencing on the first day of the 13th month following the Opening
Date of the first store location of any Borrower, measured as of the
last day of the calendar quarter in which such 13th month occurs and on
the last day of each calendar quarter thereafter, the ratio of
Borrower's Total Liabilities to Tangible Net Worth, shall not exceed
6.5:1.0.
With respect to the financial covenants set forth above in
subsections (i) and (ii), which are calculated based upon the Opening
Date of a store location, the financial information from store
locations that have not reached the Opening Date anniversary
incorporated into such covenants shall be excluded from such
calculations. Debt Service and Debt attributable to such locations and
deducted from the final calculations shall be
8
97
deducted on a pro rata basis calculated by dividing such stores'
aggregate Net Book Value of Merchandise by the Net Book Value of
Merchandise for all store locations. The financial covenant set forth
in subsection (iii) above shall not be applicable to any Startup
Franchisee Borrower until the first store location operated by such
Startup Franchisee Borrower has been operating for 12 months. The
financial covenants otherwise shall be calculated on a consolidated
basis as to all store locations.
(c) Each Established Franchisee Loan Agreement shall require
that the applicable Established Franchisee Borrower thereunder comply
either with the financial covenants specified by Sponsor in the Funding
Approval Notice or with the following financial covenants at the levels
specified by Sponsor in the Funding Approval Notice:
(i) Debt to EBIT. Commencing on the first day of
calendar quarter in which the first day of the 19th month
following the Opening Date of the first store of such
Established Franchisee Borrower occurs and measured on the
last day of the calendar quarter in which such 19th month
occurs and on the last day of each calendar quarter
thereafter, the ratio of such Established Franchisee
Borrower's Debt to EBIT for such calendar quarter shall not
exceed 16:1.0;
(ii) Debt to Rental Revenue. Commencing on the
first day of the calendar quarter in which the first day of
the 19th month following the Opening Date of the first store
location of any Established Franchisee Borrower occurs and
measured as of the last day of the calendar quarter in which
such 19th month occurs and on the last day of each calendar
quarter thereafter, the ratio of such Established Franchisee
Borrower's Debt to the Borrower's Rental Revenue, shall not
exceed 5.5:1.0; and
(iii) Total Liabilities to Tangible Net Worth.
Commencing on the first day of the 13th month following the
Opening Date of the first store location of any Borrower,
measured as of the last day of the calendar quarter in which
such 13th month occurs and on the last day of each calendar
quarter thereafter, the ratio of Borrower's Total Liabilities
to Tangible Net Worth, shall not exceed 5.5:1.0.
With respect to the financial covenants set forth above in subsections
(i) and (ii), which are calculated based upon the Opening Date of a
store location, the financial information from store locations that
have not reached the Opening Date anniversary incorporated into such
covenants shall be excluded from such calculations. Debt attributable
to such locations and deducted from the final calculations shall be
deducted on a pro rata basis calculated by dividing such stores'
aggregate Net Book Value of Merchandise by the Net Book Value of
Merchandise for all store locations. The financial covenants shall
otherwise be calculated on a consolidated basis as to all store
locations.
In addition, each Established Franchisee Loan Agreement shall provide
that the aggregate outstanding principal amount of all Advances made by
Servicer with respect to any
9
98
Established Franchisee Loan Commitment shall not at any time exceed an
amount equal to the relevant Established Franchisee Borrowing Base.
To the extent that the financial covenants and definitions are set
forth by Sponsor in the Funding Approval Notice in lieu of specifying
only the levels at which to set the financial covenants listed in
clauses (i) through (iii) above, then the Established Franchisee
Borrower shall be required to pay at closing an upfront fee of $5,000,
of which $2,500 shall be remitted upon closing to Sponsor and $2,500
shall be retained by Servicer, in addition to the closing fee of $500
per store.
(d) Each of the Loan Agreements shall also provide that the
applicable Borrower will submit to Servicer and Sponsor on a quarterly
basis a Compliance Certificate, in the form attached as Exhibit C to
the Loan Agreement, presenting the calculation of the financial
covenants set forth above. The Borrowers shall also be required to
submit to Servicer monthly, quarterly and annual financial statements,
and personal financial statements of all Guarantors.
(e) The Sponsor shall deliver to the Servicer (x) a quarterly
inventory reconciliation report showing the amount of Inventory of each
Borrower by store as of the last day of each calendar quarter and (y) a
quarterly revenue report showing the monthly and quarterly revenues of
each Borrower by store during each calendar quarter.
2.4 Use of Loan Proceeds; Mechanics of Loan Program for Startup Franchisee
Loans.
(a) No later than fifteen (15) days after Servicer's receipt
of the executed Loan Documents, Servicer shall establish a DDA Account
for the Franchisee and shall also establish Loan Account for the
Franchisee.
(b) Upon establishment of the above-referenced accounts and
receipt of the above-referenced Loan Documents, duly executed by the
Startup Franchisee Borrower and each Guarantor, and if requested by
Sponsor in writing, confirmation by Servicer of its first-priority
security interest in the Collateral, Servicer shall notify the Startup
Franchisee Borrower and Sponsor that the Startup Franchisee Borrower
may request Advances pursuant to the Loan Commitment; provided,
however, that the minimum amount of each Advance shall be $500. Each
Advance shall be made by Servicer for the sole purpose of honoring
requests from the Startup Franchisee Borrower, made through the ATAC
System, for ACH transfers to suppliers of Merchandise in payment of
Approved Invoices, for payment of state sales and use taxes and for
payment of freight charges. The Startup Franchisee Borrowers shall not
be authorized to use the DDA Account for any other purpose.
(c) No more frequently than twice each calendar week, each
Startup Franchisee Borrower will submit purchase order requests for
Merchandise to Sponsor. In the event that the purchase order is
authorized pursuant to the Franchise Agreement, Sponsor will prepare
the purchase order and submit the same to the appropriate supplier
10
99
requested by the Startup Franchisee Borrower. The supplier will be
instructed to ship all Merchandise directly to the Startup Franchisee
Borrower and the Startup Franchisee Borrower will be responsible for
inspecting all Merchandise and resolving all disputes regarding the
Merchandise with such supplier. The supplier will invoice the Startup
Franchisee Borrower for such Merchandise in accordance with normal
industry practice. When the Startup Franchisee Borrower wishes to pay
such invoice, the Startup Franchisee Borrower, subject to availability
of its Loan Commitment and the minimum borrowing threshold, shall pay
such invoice by directing Servicer, through the ATAC System, to pay
such invoice by means of an ACH transfer from its DDA Account. Any
directions for ACH transfers inputted by the Startup Franchisee
Borrowers into the ATAC System prior to 12:00 Midnight (Atlanta,
Georgia time) on any Business Day, shall be forwarded to Servicer
pursuant to Sponsor's existing ACH access by 3:30 p.m. (Atlanta,
Georgia time) on the next Business Day and, if properly forwarded to
Servicer by Sponsor shall be paid by Servicer no later than the second
Business Day thereafter, unless Sponsor is otherwise notified by
Servicer.
(d) Sponsor hereby acknowledges and agrees that Servicer has
no ability to halt an ACH transfer upon the inputting of such transfer
request by Sponsor from the ATAC System into the ACH system (other than
the ability to retrieve ACH transfers which are sent to the wrong party
or otherwise manifestly erroneous as provided in the ACH Agreement with
Sponsor) and Sponsor accepts full responsibility for any overadvance
created by such inputting of information. Upon receipt of the request
for an ACH transfer, Servicer shall honor such request by making an
Advance pursuant to the Loan Commitment in the amount of such request
into the Startup Franchisee Borrower's DDA Account and automatically
forwarding such amount to the supplier by means of an ACH transfer in
accordance with the instructions of the Startup Franchisee Borrower
passed onto Servicer by Sponsor.
(e) Nothing set forth herein shall be deemed to vary the terms
and conditions of the MicroACH Service Agreement by and between
Servicer and Sponsor.
2.5 Tracking of Collateral for Startup Franchisee Borrowers; Asset
Dispositions of Startup Franchisee Borrowers.
All Merchandise financed by Servicer must be serialized via the ATAC
System for appropriate reconciliation of Advances and receipt of
Merchandise and for purposes of tracking Asset Dispositions. Each
Startup Franchisee Borrower shall be obligated to furnish serial
numbers for all Merchandise purchased, excluding all Electronic
Equipment purchased, directly to Sponsor on a monthly basis (and, if
available, on a weekly basis) by transmittal of Startup Franchisee
Borrower's receiving report (containing ATAC numbers) directly to
Sponsor on the ATAC System. Each Startup Franchisee Borrower shall be
obligated to furnish serial numbers for all Electronic Equipment
purchased, directly to Sponsor on a bi-monthly basis (and, if
available, on a monthly basis) no later than the fifth business day of
each month by transmittal of such Startup Franchisee Borrower's
receiving report (containing ATAC numbers) directly to
11
100
Sponsor on the ATAC System. As set forth more fully below, Sponsor will
maintain and track such information as agent for Servicer, and Servicer
shall at all times have access to such information.
If an Asset Disposition occurs, the Startup Franchisee Borrower shall
immediately report such Asset Disposition to Sponsor by means of the
ATAC System, such information to include the ATAC numbers, and if
assigned, the serial numbers of the Merchandise subject to the Asset
Disposition, the Net Book Value of such Merchandise and the proceeds
received by the Startup Franchisee Borrower therefrom and whether or
not such Asset Disposition constituted an Electronic Equipment Asset
Disposition. Sponsor on a monthly basis, shall transmit all such
information to Servicer in summary form to be received by Servicer no
later than the fifth Business Day of each month. In addition, the
Sponsor shall transmit to the Servicer the date and dollar amount each
Advance during the preceding month which constituted an Electronic
Equipment Advance. Based solely on such information provided by Sponsor
to Servicer, Servicer shall prepare and forward to each Startup
Franchisee Borrower, on a monthly basis, an invoice for payment of the
aggregate outstanding amount of the Franchisee Loan in an amount equal
to the Net Book Value of the Asset Dispositions during the preceding
month not applied to Advances made during such month (the "Asset
Disposition Invoice"), unless Sponsor notifies the Bank in writing that
it wishes to waive the payment reflected in the Asset Disposition
Invoice, which notice must be received by the Bank at least five (5)
Business Days prior to the date that the Asset Disposition Invoice is
sent. If the Bank receives such notice in writing from Sponsor at least
five (5) Business Days prior to the date that the Asset Disposition
Invoice is otherwise to be sent, the Bank agrees to notify the
applicable Borrower that the "Asset Disposition Prepayment" required
under its Loan Agreement is waived. Otherwise, the Asset Disposition
Invoice shall be forwarded to the Startup Franchisee Borrowers by
Servicer by the 10th day of each calendar month and payment thereof
shall be due on the next succeeding Payment Date.
Based solely on such information provided by Xxxxx, the Bank will
notify Borrower on a monthly basis, of the amount of the required
prepayment (the "Asset Disposition Prepayment") of the aggregate
outstanding amount of the Loan due on the next Payment Date which
amount shall be equal to the Net Book Value of the Asset Dispositions
during the preceding month not applied to Advances made during such
month as set forth above, unless otherwise agreed to by the Bank. The
Borrower shall be notified by the Bank by the 10th day of each calendar
month of the Asset Disposition Prepayment and payment thereof shall be
due on the next succeeding Payment Date.
2.6 Amortization and Payment of Startup Franchisee Loans.
No more than five (5) Business Days after the last day of each calendar
month, Sponsor shall determine and report to Servicer the aggregate
amount of (i) Electronic Equipment Advances made to each Startup
Franchisee Borrower during such month, (ii) the Asset Dispositions made
by each Startup Franchisee Borrower during such month and (iii) the
Electronic Equipment Asset Dispositions made by each Startup Franchisee
Borrowing
12
101
during such month. Upon receipt of the foregoing report, Servicer shall
determine the aggregate amount of Advances made to each Startup
Franchisee Borrower during such month and shall subtract therefrom (i)
the Electronic Equipment Advances made to such Startup Franchisee
Borrower, (ii) payments received by Servicer from such Startup
Franchisee Borrower with respect to Asset Dispositions (other than
Electronic Equipment Asset Dispositions) made since the cut-off date
for the last monthly invoice to such Startup Franchisee Borrower and
(iii) the Excess Electronic Equipment Proceeds (as defined below). The
remaining principal amount of Advances made during such month shall be
amortized (in accordance with a straight-line amortization schedule),
into eighteen (18) equal payments of principal due and payable on the
Payment Dates. On the last day of each calendar month, Servicer shall
subtract the payments received by Servicer from each Startup Franchisee
Borrower with respect to Electronic Equipment Asset Dispositions made
since the cut-off date for the last monthly invoice to such Startup
Franchisee Borrower from the aggregate amount of Electronic Equipment
Advances made to each Startup Franchisee Borrower (as reported by
Sponsor) during such month. The remaining principal amount of
Electronic Equipment Advances made during such month shall be amortized
(in accordance with a straight-line amortization schedule), into
twenty-four (24) equal payments of principal due and payable on the
Payment Dates provided however that in the event Servicer terminates
the Startup Franchisee Loan Commitment of such Franchisee Borrower, the
remaining amount of such Startup Electronic Equipment Advances shall be
due and payable on the eighteenth Payment Date thereafter. In the event
that the amount of proceeds of Electronic Equipment Asset Dispositions
received by Servicer during any month exceeds the amount of Electronic
Equipment Advances made during such month, ("Excess Electronic
Equipment Proceeds") such Excess Electronic Equipment Proceeds shall be
applied to the outstanding Advances. On the tenth (10th) day of each
calendar month, Servicer shall mail to each Startup Franchisee Borrower
a detailed xxxx setting forth the total amount of principal and
interest due and summarizing all account activity during the preceding
month. Payments of such principal and interest amount shall be due and
payable on the Payment Dates. Servicer shall have the exclusive right
to collect and receive all such payments on the Loans from the Startup
Franchisee Borrowers which are due and owing to Servicer. In the event
that Sponsor receives any such payment with respect to the Loans
pursuant to the Program (other than with respect to Loans purchased by
Sponsor or where Sponsor has been subrogated to the rights of Servicer
pursuant to the terms of the Sponsor Guaranty), such payments shall be
accepted by Sponsor as agent for Servicer and Sponsor shall immediately
endorse and forward the same to Servicer.
2.7 Prepayment of Startup Franchisee Loans.
Each Startup Franchisee Borrower shall have the right to prepay its
Loan in whole or in part upon at least two (2) Business Days' prior
notice to Servicer. Partial prepayments of any Loan (other than
proceeds of Asset Dispositions which shall be applied as set forth in
the preceding Section) shall be applied to reduce the current month's
Advance(s) to such Startup Franchisee Borrower with any excess
prepayment applied to unpaid principal payments of the Loan in inverse
order of maturity.
13
102
2.8 Use of Loan Proceeds; Mechanics of Loan Program for Established
Franchisee Loans.
(a) Following the receipt of the executed Loan Documents with
respect to a proposed Established Franchisee Borrower, but prior to the
Closing Date of the proposed Loan Commitment, Servicer shall establish
a DDA Account for the Franchisee and shall also establish Loan Account
for the Franchisee.
(b) Upon establishment of the above-referenced accounts and
receipt of the above-referenced Loan Documents, duly executed by the
Established Franchisee Borrower and each Guarantor, and if requested by
Sponsor, confirmation by Servicer of its first-priority security
interest in the Collateral, Servicer shall notify the relevant
Established Franchisee Borrower and Sponsor that the Established
Franchisee Borrower may request Advances pursuant to the Loan
Commitment; provided, however, that the minimum amount of each Advance
shall be $500. Each Advance shall be made by Servicer for the sole
purposes of (i) honoring requests from the Established Franchisee
Borrower, made through the ATAC System, for ACH transfers to suppliers
of Merchandise in payment of Approved Invoices, and (ii) honoring
requests from the Established Franchisee Borrower for Advances made via
ACH transfers to an operating account or other location specified by
such Established Franchisee Borrower (and granted a vendor
identification number by Sponsor) for working capital purposes. The
Established Franchisee Borrowers shall not be authorized to use the DDA
Account for any other purpose.
(c) No more frequently than twice each calendar week, each
Established Franchisee Borrower will submit purchase order requests for
Merchandise to Sponsor. In the event that the purchase order is
authorized pursuant to the Franchise Agreement, Sponsor will prepare
the purchase order and submit the same to the appropriate supplier
requested by the Established Franchisee Borrower. The supplier will be
instructed to ship all Merchandise directly to the Established
Franchisee Borrower and the Established Franchisee Borrower will be
responsible for inspecting all Merchandise and resolving all disputes
regarding the Merchandise with such supplier. The supplier will invoice
the Established Franchisee Borrower for such Merchandise in accordance
with normal industry practice. When the Established Franchisee Borrower
wishes to pay such invoice, the Established Franchisee Borrower,
subject to availability of its Loan Commitment and the minimum
borrowing threshold, shall pay such invoice by directing Servicer,
through the ATAC System, to pay such invoice by means of an ACH
transfer from its DDA Account. Any directions for ACH transfers
inputted by the Established Franchisee Borrowers into the ATAC System
prior to 12:00 Midnight (Atlanta, Georgia time) on any Business Day,
shall be forwarded to Servicer pursuant to Sponsor's existing ACH
access by 3:30 p.m. (Atlanta, Georgia time) on the next Business Day
and, if properly forwarded to Servicer by Sponsor shall be paid by
Servicer no later than the second Business Day thereafter, unless
Sponsor is otherwise notified by Servicer.
14
103
(d) Sponsor hereby acknowledges and agrees that Servicer has
no ability to halt an ACH transfer upon the inputting of such transfer
request by Sponsor from the ATAC System into the ACH system (other than
the ability to retrieve ACH transfers which are sent to the wrong party
or otherwise manifestly erroneous as provided in the ACH Agreement with
Sponsor) and Sponsor accepts full responsibility for any overadvance
created by such inputting of information and has agreed to indemnify
Servicer and Participants therefore pursuant to the terms of the Loan
Facility Agreement. Upon receipt of the request for an ACH transfer,
Servicer shall honor such request by making an Advance pursuant to the
Loan Commitment in the amount of such request into the Established
Franchisee Borrower's DDA Account and automatically forwarding such
amount to the supplier by means of an ACH transfer in accordance with
the instructions of the Established Franchisee Borrower passed onto
Servicer by Sponsor.
(e) Nothing set forth herein shall be deemed to vary the terms
and conditions of the MicroACH Service Agreement by and between
Servicer and Sponsor.
2.9 Tracking of Collateral for Established Franchisee Borrowers.
All Merchandise financed by Servicer must be serialized via the ATAC
System for appropriate reconciliation of Advances and receipt of
Merchandise and for purposes of tracking Asset Dispositions. Each
Established Franchisee Borrower shall be obligated to furnish serial
numbers for all Merchandise purchased directly to Sponsor on a weekly
basis by transmittal of the Established Franchisee Borrower's weekly
(or, if available, daily) receiving report (containing ATAC numbers)
directly to Sponsor on the ATAC System. As set forth more fully below,
Sponsor will maintain and track such information as agent for Servicer,
and Servicer shall at all times have access to such information.
2.10 Payments of Established Franchisee Loans; Borrowing Base.
All outstanding Advances with respect to each Established Franchisee
Loan shall be due and payable in full on the Maturity Date of such
Loan, if not sooner accelerated in accordance with the terms of the
applicable Loan Documents. In addition, the outstanding Advances
pursuant to each Established Franchisee Loan shall not exceed the
Established Franchisee Borrowing Base for such Established Franchisee
Borrower, as determined by Sponsor on the fifth Business Day of each
month (as determined on the last day of the preceding calendar month)
and reported to Servicer on such date. Servicer shall be entitled to
rely upon the calculation of the Established Franchisee Borrowing Base
for each Established Franchisee Borrower submitted by Sponsor for all
purposes hereunder. Upon receipt of the Established Franchisee
Borrowing Base, Servicer shall input such information into Servicer's
loan records to be effective as of the date which is two Business Days
after receipt of such information. The statements prepared to be
delivered to each Established Franchisee Borrower with respect to the
next Payment Date shall be prepared requiring a repayment of any
Advances outstanding on the fifth Business Day of such month in excess
of relevant Established Franchisee Borrowing Base as delivered to
Servicer by Sponsor on such date. In addition, however, Servicer,
15
104
on the date which is two Business Days after receipt of such
calculation from Sponsor, shall notify the Established Franchisee
Borrowers in writing (including facsimile) of the new Established
Franchisee Borrowing Base for such Borrower and shall require that such
Established Franchisee Borrower repay on the next Payment Date any
additional Advances made since the date of the preparation of the
statement for such Payment Date if necessary to avoid any overadvance
as of such date. On the next Payment Date, each Established Franchisee
Borrower shall prepay its outstanding Advances in excess of the
relevant Established Franchisee Borrowing Base.
2.11 Prepayment of Established Franchisee Loans.
Each Established Franchisee Borrower shall have the right to prepay its
Loan in whole or in part upon at least two (2) Business Days' prior
notice to Servicer. Voluntary partial prepayments of any Loan
(expressly excluding mandatory prepayments required in connection with
the reduction of the applicable Established Franchisee Borrowing Base)
must be in a minimum amount of $1,000.
2.12 Default Rate of Interest.
If any Borrower shall fail to pay on the due date therefor (subject to
any applicable grace period), whether by acceleration or otherwise, any
principal owing by such Borrower under any of the Loan Documents, then
interest shall accrue on such unpaid principal from the due date until
and including the date on which such principal is paid in full at a
rate of interest equal to the Default Rate.
2.13 Legal Expenses
In the event that any requested Loan does not close, Servicer shall
charge Sponsor for its reasonable out-of-pocket expenses arising from
its review or preparation of the initial draft of the Loan Documents,
Financing Statement filings and searches. In the event the Loan closes,
Servicer shall be entitled to charge the Borrower for its reasonable
out-of-pocket expenses incurred in connection with the closing of the
Loan, including all documentary stamp tax, filing fees, UCC search
costs and recording costs, and such amounts may be deducted from the
initial Advance of such Loan. In the event that Servicer has not
received payment from any Borrower for the expenses permitted in this
Section 2.14 after diligent collection efforts, Sponsor shall pay
Servicer such expenses, and Servicer shall assign to Sponsor any rights
it may have against such Borrower for the payment of such expenses.
2.14 Servicing Fee and Sponsor's Fee.
Servicer shall be entitled to a servicing fee for each Payment Period
equal to the amount specified in the Fee Letter ("Servicing Fee"), and
Sponsor shall be entitled to the amount specified in the Fee Letter
(the "Sponsor's Fee") to the extent received by Servicer.
16
105
3. SERVICING OF LOANS
3.1 Borrower Financial Statements
Within twenty (20) days after each Reporting Date with respect to each
Borrower's calendar year-end and first, second and third calendar
quarters, (or, where Borrower does not provide such information by the
applicable Reporting Date and such default is waived by Sponsor, after
receipt) Sponsor shall (a) review the compliance certificate sent to it
by each Borrower pursuant to the terms of such Borrower's Loan
Documents, (b) review such Borrower's financial statements to verify
the accuracy of the compliance certificate, (c) perform all
calculations (based upon such financial statements) necessary to
determine whether such Borrower is in compliance with the financial
covenants contained in such Borrower's Loan Documents and (d) forward
to Servicer the compliance certificate and Sponsor's calculations of
the financial covenants contained in such Borrower's Loan Documents.
3.2 Notice of Loan Defaults
(a) Within fifteen (15) days after the occurrence of a Loan
Payment Default or after Servicer obtains actual knowledge of any other
Loan Default, Servicer shall send a notice of Loan Default to the
applicable Borrower pursuant to Section 3.3(f) and notice to Sponsor
pursuant to Section 3.3(i).
(b) Following the sending of such notice of Loan Default,
Servicer shall as soon as is practicable, provide Sponsor with such
other information relating to the Defaulted Borrower and the Defaulted
Loan as Sponsor requests.
(c) Servicer shall not be required to take any remedial action
against any Defaulted Borrower under a Defaulted Loan and shall not be
entitled to take any remedial action during any applicable Response
Period except as expressly provided in the Loan Facility Agreement or
hereunder.
3.3 Servicing and Administration of Loans
Servicer shall service and administer the Loans in accordance with the
terms of this Agreement and its usual practices and procedures for
loans of similar size and structure as determined by Servicer in its
sole and absolute discretion. Notwithstanding the foregoing, so long as
Sponsor is not in default hereunder and has a continuing obligation
pursuant to the Loan Facility Agreement and this Agreement, Servicer
shall be responsible for the following duties in connection with the
service and administration of the Loans:
(a) making of Advances pursuant to each Loan Commitment as set
forth above;
17
106
(b) review of the Loan files and forwarding the notices to
Sponsor of the missing Loan Documents as set forth above and
maintenance of the Loan files containing the Loan Documents forwarded
to Servicer by Sponsor or a Borrower;
(c) receipt of loan payments via check or ACH wire transfer
from the Borrowers and maintenance of adequate records of such payments
(with the understanding that any ACH debit made by Servicer which is
rejected will be reinitiated only once);
(d) notification to each Borrower, by deposit into regular
U.S. Mail, ten (10) days prior to each Payment Date, of a notice that
the installment is coming due on such Payment Date, if any, and the
amount of interest due on such date (or the amount that will be debited
in the case of a Borrower who has authorized ACH debits);
(e) notification to such Borrower, by deposit into regular
U.S. Mail, ten (10) days after the Payment Date with respect to any
installment, of a reminder notice that installment has not been
received;
(f) within five (5) days from the date an installment is
thirty (30) days delinquent, notification to such Borrower, by mailing
by registered U.S. Mail, of a letter demanding immediate payment of the
past due amount of principal and interest to avoid further collection
action, with a copy of such letter to be simultaneously delivered to
Sponsor;
(g) on each Business Day on which an Advance is made,
notification to Sponsor by telecopy, of a report at the end of such
Business Day summarizing the loan activity on such day and setting
forth the available balance of the relevant Loan Commitment;
(h) notification to Sponsor on weekly basis of all Defaulted
Loans pursuant to a weekly delinquency report in the form of Exhibit J,
with such report to list all Loans which are fifteen (15) days or more
past due and provide (1) the amount past due, (2) the total principal
outstanding, and (3) the number of days past due;
(i) notification to Sponsor of any Loan Default (other than a
Loan Payment Default) of which Center 1923 of Servicer has actual
knowledge;
(j) delivery to the Established Franchisee Borrowers, within
two Business Days after receipt of the calculation of the Established
Franchisee Borrowing Base from Sponsor, of the amount of such
Established Franchisee Borrowing Base and any additional required
payments by the Borrower on the next Payment Date; and
18
107
(k) delivery to Sponsor of the "Quarterly Servicing Report"
required by the Fee Letter and delivery to the Sponsor and the
Participants of the Monthly Servicing Report and the Quarterly
Servicing Report required by the Loan Facility Agreement.
3.4 Monthly Reporting Requirements of Servicer to Borrowers.
Servicer shall generate, at the end of each calendar month, a monthly
DDA Account statement in the form customarily used by Servicer for its
commercial customers and a loan account statement which shall be sent
to each Borrower.
3.5 Preservation of Lien Priorities; Assignment of Rights
Until the earlier of Servicer's receipt of payment in full of a Loan
and termination of the applicable Loan Commitment or the purchase by
Sponsor of a Loan pursuant to the terms of the Loan Facility Agreement,
Servicer shall, if the Loan is secured, (i) prepare and forward to the
Borrowers or other required signatories for execution amendments to
Financing Statements promptly upon receipt of written notice of change
of name or address or location of debtors or the Collateral thereunder
and file such amendments or a new financing statement, in the case of a
change in the debtor's location or the location of the Collateral, in
the appropriate location based on the information contained in such
notice promptly upon return thereof by the debtor, provided, however,
that Servicer shall use its reasonable efforts to obtain and file such
amendments and any such new financing statement in a timely manner;
(ii) timely file continuation statements pertaining to such Financing
Statements; and (iii) take all other reasonable action requested by
Sponsor to protect the priority of liens or security interests with
respect to the Collateral securing each Loan. Upon the purchase by
Sponsor of a Loan pursuant to the terms of the Loan Facility Agreement,
or in the event that Sponsor reimburses Servicer or otherwise becomes
obligated to Servicer for expenses (including without limitation,
funding losses) of Servicer incurred in connection with a proposed loan
which was never consummated that have not been reimbursed by the
applicable Borrower, Servicer shall be deemed to have assigned to
Sponsor all rights and remedies that Servicer may have had against the
Borrower in accordance with and subject to the limitations of Section
10.15 of the Loan Facility Agreement. Accordingly, Servicer agrees to
execute on a timely basis all such instruments and documents as are
reasonably requested in order to evidence Sponsor's rights or to permit
Sponsor to exercise such rights, including without limitation, forms of
assignments, all without recourse, representation or warranty.
19
108
3.6 Amendments to Loan Documents; Further Documentation
Except to correct an immaterial ambiguity or manifest error, Servicer
shall not agree to any amendment of the applicable Loan Documents after
closing of any Loan without the prior written approval of Sponsor
unless a Credit Event has occurred and is continuing or the Sponsor has
no further obligations pursuant to its guaranty obligations with
respect to such Loan. Upon receipt of either such approval, or written
instructions from Sponsor directing Servicer to do so, Servicer shall
timely prepare written amendments to the Loan Documents or other
documents relating to the Loan in accordance with such approval or
instructions, and shall use its reasonable efforts to obtain on a
timely basis the signatures of the Borrower and/or other appropriate
signatories to such Loan Documents or other documents; provided that,
such amendments are not inconsistent with the terms of the Operative
Documents (with the express understanding that to the extent that
Servicer has any questions regarding such consistency, Servicer shall
be entitled to refuse to prepare or execute such amendments until
receipt of approval from the Participants pursuant to the Loan Facility
Agreement). Within fifteen (15) days after obtaining such signatures,
Servicer shall send Sponsor photocopies of the original fully executed
documents. Servicer shall be entitled to charge Sponsor, or upon
Sponsor's written instructions, the applicable Borrower, reasonable
attorneys' fees actually incurred and other expenses relating to the
preparation of such amendments or other documents.
3.7 Actions by Servicer
Unless a Credit Event has occurred and is continuing or the Sponsor has
no further obligation pursuant to its guaranty set forth in the Loan
Facility Agreement, Servicer shall at all times endeavor to comply with
the instructions of Sponsor and with the requirements set forth in this
Servicing Agreement and the Loan Facility Agreement, provided that
Servicer shall not be required to take any action which it reasonably
determines would expose Servicer to unreasonable risk of liability or
which is contrary to applicable law or which is contrary to the terms
of the Operative Documents.
4. SPONSOR'S AUDIT AND REPORTING OBLIGATIONS WITH RESPECT TO
FRANCHISEE LOANS.
Each Startup Franchisee Loan Agreement shall authorize Servicer or
representatives of Servicer, including Sponsor, to conduct periodic
field audits of each Startup Franchisee Borrower. Unless otherwise
instructed by Servicer, Sponsor hereby covenants and agrees with
Servicer to audit each Startup Franchisee Borrower no less than once
per each six
20
109
month period and more frequently at the reasonable request of Servicer
with respect to any Startup Franchisee Borrower as to whom a Loan
Default has occurred (whether or not waived by Sponsor). In conducting
the field audits of the Startup Franchisee Borrowers, Sponsor will
examine the payment receipts, bank statements, loan statements,
Rental/Purchase Contracts, inventory on hand, computer-generated
reports of Asset Dispositions, Rental Revenue and other financial data
necessary to determine the accuracy and validity of the reports,
compliance certificates, financial reports and other information
forwarded to either of Servicer or Sponsor by the Startup Franchisee
Borrowers in connection with the Startup Franchisee Loans.
At the request of Servicer, within thirty (30) Business Days of the
completion of each field audit, Sponsor shall forward to Servicer a
written audit report detailing the scope of Sponsor's audit, any
discrepancies or other misstatements or misrepresentations of the
relevant Startup Franchisee Borrower discovered in the course of the
audit and containing a clear concise statement as to whether or not
Sponsor believes that such Startup Franchisee Borrower is in compliance
with the terms of the Loan Documents to which it is a party and if not,
the nature of any default known to Sponsor and the course of action
planned by the Startup Franchisee Borrower to remedy such default. The
delivery of each field audit to Servicer by Sponsor shall constitute a
representation and warranty by Sponsor that the information set forth
therein is true and correct in all material respects to the best of
Sponsor's knowledge and that Servicer shall be authorized to rely on
such information in continuing to make Advances to such Startup
Franchisee Borrower.
Notwithstanding the foregoing, Servicer, in its sole discretion, may
(at Servicer's expense, unless a Credit Event has occurred and is
continuing and then at Sponsor's expense) at any time and from time to
time, undertake to perform an independent field audit of any or all of
the Startup Franchisee Borrowers (with such audit to be performed by
officers or employees of Servicer or other persons retained by Servicer
for such purpose). Sponsor shall cooperate fully with Servicer in
connection with any such independent audit.
5. MISCELLANEOUS
5.1 Communications
Unless otherwise provided in the Loan Facility Agreement or under this
Servicing Agreement, all communications under this Servicing Agreement
shall be sent in accordance with the notice procedures set forth in
Section 15.1 of the Loan Facility Agreement.
5.2 Waivers.
No party hereto shall be deemed to have waived any of its rights under
this Servicing Agreement unless such waiver is in writing and signed by
the party for whose benefit
21
110
such provision was intended. No delay or omission on the part of any
party hereto in exercising any right shall operate as a waiver of such
right 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.
5.3 Governing Law.
THIS SERVICING AGREEMENT SHALL BE CONSTRUED AND GOVERNED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF GEORGIA (WITHOUT GIVING EFFECT TO THE
CONFLICT OF LAWS PROVISIONS THEREOF).
5.4 Successors and Assigns.
This Servicing Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and assigns.
Neither party may assign its rights or obligations hereunder without
the prior written consent of the other party hereto.
5.5 Amendments; Consents.
No amendment, modification, supplement, termination, or waiver of any
provision of this Servicing Agreement and no consent to any departure
by Sponsor therefrom, may in any event be effective unless in writing
signed by Servicer, and then only in the specific instance and for the
specific purpose given.
5.6 Indemnification by Servicer.
Without limiting any other rights which Sponsor may have under the
Operative Documents or under applicable law, and subject to the notice
and other procedural requirements of Section 11.2 of the Loan Facility
Agreement, Servicer hereby agrees to indemnify upon demand and hold
Sponsor harmless from and against all damages, losses, claims,
liabilities and related costs and expenses, including reasonable
attorneys' fees actually incurred and disbursements as and when
incurred, awarded against or incurred by Sponsor, which directly arise
out of Servicer's gross negligence or willful misconduct in connection
with its administration of the Franchisee Loan Program.
Sponsor expressly acknowledges and agrees that Servicer shall exercise
with respect to the Franchisee Loan Program the same standard of care
and diligence in the performance of its duties, responsibilities and
obligations under the Operative Documents as it generally exercises
with respect to the loans in its own portfolio. Notwithstanding the
foregoing, neither Servicer nor any of its directors, officers, agents
or employees shall have any duty to ascertain, inquire into or verify
(i) any statement, warranty or representation made in connection with
the Operative Documents (other than any of the foregoing made by any of
them), any Loan Document or any borrowing hereunder or thereunder, (ii)
the performance or observance of any of the covenants or agreements of
any Borrower, beyond the examination of periodic financial statements
and compliance
22
111
certificates received pursuant to the Loan Agreements; (iii) the
satisfaction of any condition specified in Article 4 of the Loan
Agreements, except receipt of items required to be delivered to
Servicer; or (iv) the validity, effectiveness or genuineness of the
Operative Documents or any of the Loan Documents or any other
instrument or writing furnished in connection herewith or therewith,
provided, however, that in each case Servicer, its directors, officers,
agents and employees are acting in good faith and without actual
knowledge of a defect in or invalidity of any of the foregoing; or if
Servicer, its directors, officers, agents or employees do have
knowledge of any such defect or invalidity, provided that Sponsor: (x)
has been promptly notified by Servicer of such defect or invalidity;
and (y) has expressly consented to any and all actions to be taken by
Servicer, its directors, officers, agents or employees as a result of,
which is attributable to, or otherwise relates to, such defect or
invalidity. Servicer shall not incur any liability by acting in
reliance upon any notice, consent, certificate, statement or other
writing (which may be a wire, telex or similar writing) given in
accordance with other provisions of this Agreement reasonably believed
by it to be genuine or is otherwise in accordance with the instructions
of Sponsor.
5.7 Entire Agreement.
This Servicing Agreement and the other Operative Documents executed and
delivered contemporaneously herewith, together with the exhibits and
schedules attached hereto and thereto, constitute the entire
understanding of the parties with respect to the subject matter hereof,
and any other prior or contemporaneous agreements, whether written or
oral, with respect thereto are expressly superseded hereby. The
execution of this Servicing Agreement and the other Operative Documents
by Sponsor was not based upon any facts or materials provided by
Servicer, nor was Sponsor induced to execute this Servicing Agreement
or any other related document by any representation, statement or
analysis made by Servicer.
5.8 Captions.
The captions in this Servicing Agreement are included for convenience
only and shall not in any way affect the interpretation or construction
of any of the provisions hereof.
5.9 Severability.
If any one or more parts, terms, provisions, paragraphs, or Sections of
this Servicing Agreement shall be held to be illegal or in conflict
with state or federal law, the remaining shall continue in full force
and effect.
5.10 Counterparts.
This Servicing Agreement may be signed in any number of counterparts,
each of which shall be an original, with the same effect as if the
signatures thereto and hereto where upon the same instrument.
23
112
WITNESS WHEREOF, the parties hereto have caused this Servicing
Agreement to be duly executed as of the day and year first above
written. XXXXX RENTS, INC.
By: /s/ Xxxxxxx X. Xxxxxxxxx
_____________________________________
Xxxxxxx X. Xxxxxxxxx
Executive Vice President and
Chief Financial Officer
SUNTRUST BANK, ATLANTA, as
Servicer
By:_____________________________________
Title:_______________________________
24
113
Exhibits to Servicing Agreement
Exhibit A - Form of ACH Authorization
Exhibit B - Form of Commitment Letter for Startup Franchisee Loans
Exhibit C - Form of Corporate Authorization
Exhibit D - Form of Default Waiver Request
Exhibit E - Form of Funding Approval Notice
Exhibit F - Form of Personal Guaranty
Exhibit G - Form of Store Opening Information Sheet
Exhibit H - Form of Landlord Waiver
Exhibit I - Form of Subordination Agreement
Exhibit J - Form of Weekly Delinquent Report
25
