Exhibit 10.1
LOAN AND SECURITY AGREEMENT
This Loan and Security Agreement (this "Agreement") is entered into by and
between RDO Construction Equipment Co. ("Borrower") and CitiCapital
Commercial Corporation ("CitiCapital") as of October 23, 2002.
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The date upon which this Agreement and all documents, instruments,
certificates and other agreements required to be executed or delivered
pursuant to the terms of this Agreement are executed or delivered is
referred to in this Agreement as the "Closing Date". For mutual
consideration, the receipt and sufficiency of which is hereby acknowledged
by Borrower and CitiCapital, Borrower and CitiCapital hereby agree to the
following terms and conditions:
1. CREDIT FACILITIES
1.1 LINE OF CREDIT. CitiCapital, in its sole discretion and subject to the
terms and conditions of this Agreement, agrees to make loans to Borrower
during the period from the Closing Date up to and including the last day of
September, 2003 in an amount not to exceed, in the aggregate at any one
time outstanding, the "Line of Credit" which will be an amount equal to the
lesser of (a) the Maximum Line of Credit (as defined below) or (b) the
Borrowing Base (as defined below).
1.2 MAXIMUM LINE OF CREDIT. The "Maximum Line of Credit" means, at any time, an
amount equal to $30,000,000 minus the aggregate unpaid balance of (i) that
certain Loan and Security Agreement of even date herewith by and between
RDO Agriculture Equipment Co. ("RDOA") and CitiCapital, and (ii) that
certain Loan and Security Agreement of even date herewith by and between
RDO Material Handling Co. ("RDOM") and CitiCapital, which shall not exceed
$9,000,000. RDOA and RDOM will be individually and collectively referred to
herein as the "Affiliates".
1.3 BORROWING BASE. The "Borrowing Base" means, at any time, an amount, as
determined by CitiCapital in its sole discretion, equal to 95% of the net
book value of Eligible Inventory calculated in accordance with GAAP (as
defined below).
1.4 ELIGIBLE INVENTORY. "Eligible Inventory" shall mean the net book value of
Borrower's inventory of construction equipment or machinery, which are
listed on a Borrowing Base Certificate, or any attachment thereto or which
form the basis for Eligible Inventory.
1.5 BORROWING BASE CERTIFICATE. Borrower must provide, on or before the 15th
day of each month and also on the day of each request for each Advance
hereunder, which request is in excess of $2,000,000, Borrower must provide
a Borrowing Base Certificate in form as provided on the attached Exhibit A
and in content acceptable to CitiCapital and all other worksheets,
certificates and schedules relating to the Borrowing Base Certificate as
shall be required by CitiCapital in its sole discretion. Borrowing Base
Certificates shall be mailed to the following address or such address as
CitiCapital may specify in the future: CitiCapital Commercial Corporation,
000 Xxxx Xxxx Xxxxxxxxx Xxxxxxx, Xxxxxx, Xxxxx 00000, Attn: Wholesale
Credit, 4 Xxxxxx.
2. SECURITY INTEREST AND DOCUMENTATION
2.1 SECURITY INTEREST. In order to secure the payment and performance of all
absolute and all contingent obligations and liabilities of Borrower to
CitiCapital now existing or hereafter arising under this Agreement,
Borrower hereby grants to CitiCapital a security interest in and to the
following described collateral (all herein referred to as the
"Collateral"): all present and future inventory of construction equipment
or machinery or other goods together with all attachments, accessories,
exchanges, replacement parts, repairs and additions thereto, and all
chattel paper, documents, general intangibles, instruments, accounts and
contract rights now existing or hereafter arising with respect to any
thereof and the cash and non-cash proceeds (including, without limitation,
proceeds of proceeds) of any of the foregoing. In the event of default and
upon the request of CitiCapital, Borrower will promptly (a)
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deliver to CitiCapital all Collateral required by CitiCapital, (b) xxxx all
chattel paper, documents and instruments and Borrower's books of account,
ledger cards and other records relative to the Collateral with a notation
satisfactory to CitiCapital disclosing that they are subject to
CitiCapital's security interest, (c) execute and deliver to CitiCapital
such instruments, Uniform Commercial Code financing statements, statements
and agreements as CitiCapital may request to further evidence each advance
or loan hereunder and the security interests granted under this Agreement,
provided, however, Borrower's failure to comply with such request shall not
affect or limit CitiCapital's security interest or other rights in and to
the Collateral, and (d) permit CitiCapital or its representatives to
examine the Collateral and Borrower's books and records at any and all
reasonable times.
2.2 STATUS OF COLLATERAL. The Collateral is now, and at all times will be owned
by Borrower free and clear of all liens, security interests, claims and
encumbrances except for (i) the security granted to CitiCapital herein (ii)
the security interest granted to Deere & Company, Deere Credit Services,
Inc. and Xxxx Deere Construction Equipment Company, which must at all times
be subject to an inter-creditor agreement acceptable in form and content to
CitiCapital, or (iii) as specifically agreed to in writing by CitiCapital;
and the interest of CitiCapital in the Collateral hereunder is and shall at
all times be a valid, perfected, security interest therein.
3. ADVANCES, PAYMENTS AND INTEREST
3.1 ADVANCES. Subject to CitiCapital's discretion and the restrictions
contained in this Agreement, Borrower may request and receive a loan or
advance pursuant to this Agreement at any time when the aggregate
outstanding advances to Borrower hereunder are less than the then specified
Line of Credit. The minimum amount of any such advance is $100,000.
CitiCapital will remit advances pursuant to the Line of Credit by wire
transfer or automated clearinghouse payment. All proceeds of any loan or
advance made by CitiCapital to or on behalf of Borrower under this
Agreement must be used by Borrower in the continued operation of Borrower's
business solely for internal business purposes and not for payment of
dividends, loans, or acquisitions by any entity other than the Borrower.
CitiCapital will in no event be obligated to make any loan or advance to or
for the benefit of Borrower if (a) Borrower is then or has in the past been
in default under the terms of this Agreement or any other agreement between
Borrower and CitiCapital or between Borrower and any affiliate of
CitiCapital, (b) guarantor, if any, terminates or attempts to terminate its
guaranty of the obligations of Borrower, (c) the requested loan or advance
would increase the amount outstanding under this Agreement to an amount in
excess of the applicable Line of Credit on the date the loan or advance is
made, (d) CitiCapital has not received a written request for such advance
in form and content acceptable to CitiCapital and signed by an authorized
officer or employee of Borrower by 12:00 p.m. one day prior to the
requested funding date of such advance, or (e) there shall have been a
material adverse change in the financial condition of Borrower or any
guarantor from the Closing Date. All of Borrower's representations and
warranties must be true and accurate on the date of any advance and the
request for any such advance will constitute a re-issuance of such
representations and warranties by Borrower on the date of the advance.
3.2 PAYMENTS. If, at any time, the aggregate principal amount of all loans
outstanding under this Agreement exceeds the Line of Credit, Borrower will
immediately pay CitiCapital the amount necessary to reduce the aggregate
principal outstandings to an amount not exceeding the Line of Credit. Any
payments made by Borrower to CitiCapital pursuant to this Agreement may be
applied, at the option of CitiCapital, first to the payment of accrued but
unpaid interest and then to reduce the principal balance of any then
outstanding loan or advance. Any payments made by Borrower to CitiCapital
pursuant to this Agreement may be applied, at the option of CitiCapital,
first to indebtedness under this Agreement that is not secured, then to
delinquency charges, then to the payment of accrued but unpaid interest,
then to insurance payments, then to any other fees or other amounts payable
hereunder other than indebtedness secured by a purchase money security
interest in the Collateral, until all of such indebtedness is paid in full,
and then to the indebtedness secured by a purchase money security interest
in the Collateral in the order in which that indebtedness was incurred.
CitiCapital's books and records will be prima facie evidence of the amount
from time to time owing hereunder.
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3.3 INTEREST AND RETURNED CHECKS. Borrower agrees to pay CitiCapital interest
charges promptly as billed by the 15th of each month for such charges that
have accrued during the prior month. Interest charges for each loan or
advance which was outstanding pursuant to this Agreement during the prior
month shall be computed and accrued at the lesser of (a) the Applicable
Rate (as defined below) which is in effect during such month or (b) the
lawful maximum rate, if any, in effect from time to time in the applicable
jurisdiction for loans to borrowers of the type, in the amount, for the
purposes, and otherwise of the kind contemplated. However, the Applicable
Rate will not be less than 5.0% per annum unless prohibited by law.
The "Applicable Rate" shall be the Libor Rate, as defined below, in effect
on the last business day of the prior month for interest charges accruing
during such month (as used herein "business day" shall mean any day that is
not a Saturday, Sunday or other day in which banking institutions in
Dallas, Texas are generally authorized or required by law or executive
order to close), plus 3.0% per annum, provided, however, that the
Applicable Rate, as calculated on the date of this Agreement, shall not
increase by more than 5.0% per annum.
The "Libor Rate" shall mean the highest of the London Interbank Offered
Rates published in the Money Rates section of The Wall Street Journal as
the average of Interbank offered rates for one month dollar deposits in the
London market based upon quotations from major banks effective as to
contracts entered into two days prior to publication by The Wall Street
Journal. In the event the Libor Rate, as published in The Wall Street
Journal ceases to exist, or The Wall Street Journal ceases publishing a
Libor Rate, CitiCapital will substitute a comparable index that is outside
the control of CitiCapital. In the event of an error by The Wall Street
Journal, the "Libor Rate" will be based upon the Libor Rate as corrected.
Borrower agrees to reimburse CitiCapital immediately upon demand for any
amount charged to CitiCapital by any depository institution because a
check, draft or other order made or drawn by or for the benefit of Borrower
is returned unpaid for any reason and, if allowed by law, to pay
CitiCapital an additional handling charge in the amount of $25.00 or in the
event applicable law limits or restricts the amount of such reimbursement
or handling charge, the amounts chargeable under this provision will be
limited and/or restricted in accordance with applicable law.
Time is of the essence hereof. If any payment is not received when due, the
undersigned agrees to pay to the holder a delinquency charge calculated
thereon at the rate of one and one-half percent (1 1/2%) per month for the
period of the delinquency or, at CitiCapital's option, five percent (5%) of
such payment, provided that such a delinquency charge is not prohibited by
law, otherwise at the highest rate that the Borrower can legally obligate
itself to pay and/or CitiCapital can legally collect.
3.4 TERM. The Line of Credit shall terminate on September 30, 2003. On the
termination date, all amounts owing under the Line of Credit shall be due
and payable in cash. CitiCapital shall also have the right to terminate
this Agreement at any time without notice because of the occurrence of an
Event of Default, in which event all advances and interest charges relating
thereto shall be due and payable immediately upon demand. No termination
hereunder shall in any way affect or impair any right of CitiCapital
arising prior thereto or by reason thereof, nor shall any such termination
relieve Borrower or any other party primarily or secondarily liable as to
the advances until all of the advances and interest charges relating
thereto are fully paid.
4. FINANCIAL AND ORGANIZATIONAL COVENANTS AND INFORMATION
4.1 CORPORATE AUTHORIZATION AND ORGANIZATION. Borrower hereby warrants and
agrees as follows:
(a) Borrower warrants and agrees that the execution of and performance by
Borrower under the terms of this Agreement have been approved for
Borrower by all necessary corporate action and by Borrower's
shareholders and that Borrower is and will continue to be a
corporation validly existing under the laws of the state of North
Dakota and is and will continue to be qualified and
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licensed to do business in all jurisdictions in which the nature of
Borrower's business requires Borrower to be qualified or licensed;
(b) So long as any amount remains unpaid under this Agreement, the
Borrower will not take any action or allow any party to take any
action to liquidate or dissolve Borrower, or make or allow any
material change in the nature of its business as presently conducted,
or acquire substantially all of the membership interests or assets of,
or consolidate or merge with, any other firm, company or corporation
without the prior written consent of CitiCapital; and
4.2 FINANCIAL INFORMATION AND REPORTS.
(a) Borrower represents that the fiscal year of Borrower currently ends
January 31. Borrower agrees to notify CitiCapital in writing of any
change in the fiscal year of Borrower at least 90 days prior to
effectuating any such change. Borrower agrees to provide financial
statements and such other information with respect to the business and
operations of Borrower as CitiCapital may from time to time reasonably
request. Without request, Borrower shall furnish to CitiCapital the
following:
(i) As soon as available, and in any event within 125 days after the
end of each annual fiscal year of RDO Equipment Co. ("Guarantor")
and its Subsidiaries (as defined below), a copy of the complete
audit report for such fiscal period and accompanying financial
statements (including balance sheet, statement of cash flow and
profit and loss statement) of Guarantor and its Subsidiaries as
prepared in accordance with GAAP (as defined below) and certified
by independent certified public accountants of recognized
standing selected by Guarantor.
The term "Subsidiaries" of Guarantor means any corporation,
partnership, limited liability company or other business entity
of which an aggregate of more than fifty percent (50%) of the
outstanding stock is, at the time, directly or indirectly, owned
or controlled by Guarantor and/or one or more Subsidiaries of
Guarantor.
The term "GAAP" means generally accepted accounting principles in
the United States of America as in effect from time to time set
forth in the opinions and pronouncements of the Accounting
Principles Board and the American Institute of Certified Public
Accountants and the statements and pronouncements of the
Financial Accounting Standards Board, or in such other statements
by such other entity as may be in general use by significant
segments of the accounting profession, which are applicable to
the circumstances as of the date of determination.
(ii) As soon as available, and in any event within 50 days after the
end of each fiscal quarter period of Borrower a copy of the
balance sheet and profit and loss statement of Borrower for such
period, signed by a duly authorized officer of Borrower, in
reasonable detail, prepared by Borrower in accordance with GAAP.
(b) Borrower represents and warrants that all data and statements of fact
furnished by Borrower and Guarantor to CitiCapital with respect to the
business and financial condition of Borrower, Guarantor and its
Subsidiaries were and continue to be true, accurate and correct and
any such information hereafter furnished will be true, accurate and
correct as of the date when such data or statement is furnished.
(c) So long as any amount remains unpaid under this Agreement, Borrower
will permit CitiCapital or CitiCapital's representatives to enter, at
all reasonable times and during normal business hours, upon Borrower's
premises or any other premises where the Collateral may then be
located to inspect the Collateral and to inspect, examine and audit
Borrower's books and records with respect to the Collateral. Borrower
agrees to pay to CitiCapital the greater of CitiCapital's
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standard fee or actual costs relating to such examinations immediately
upon receipt of CitiCapital's invoice therefor. Provided that Borrower
is not in default in any of its obligations to CitiCapital,
CitiCapital agrees that (i) it will audit Borrower's books and records
with respect to the Collateral no more than twice a year and (ii) the
fees and costs payable by Borrower and the Affiliates for such
examinations will not exceed an aggregate of $10,000 per year.
(d) Borrower covenants and agrees that, unless the taxing authority to
which the tax is owed agrees to accept payment at a later date without
the imposition of a lien on any of the assets of Borrower, Borrower
will pay all local, state and federal taxes (including withholding
taxes) on or before the date when the same become due. The Federal
Taxpayer Identification Number of Borrower is 00-0000000.
4.3 Financial Covenants. The following covenants must be satisfied at all times
throughout the term of this Agreement:
(a) Guarantor must maintain an Adjusted Net Worth greater than an amount
equal to $60,000,000 plus seventy-five percent (75%) of the positive
Consolidated Net Income for the previous fiscal year. The first
measurement period, for calculation of Consolidated Net Income, will
commence on January 31, 2002.
"Adjusted Net Worth" shall mean Tangible Net Worth plus Subordinated
Indebtedness.
The term "Tangible Net Worth" shall mean the excess of all tangible
assets of the Guarantor and its Subsidiaries over all liabilities of
the Guarantor and its Subsidiaries. For these purposes, the term
"tangible assets" shall mean such of Guarantor's and its Subsidiaries'
assets which have intrinsic and marketable value or collectability,
such as real estate, plant and equipment, inventory, accounts
receivable, money, negotiable instruments, marketable securities and
the like, but shall not include:
o the amount, if any, by which the Guarantor's and its
Subsidiaries' inventory exceeds the lower of cost or market value
thereof, or the value of any inventory which is obsolete or
damaged or is otherwise deemed by CitiCapital not to be of a
marketable quality commensurate with Guarantor's and its
Subsidiaries' inventory as a whole;
o accounts receivable which are deemed by Guarantor or CitiCapital
to be uncollectable or which should be subject to a reserve for
bad debts in accordance with generally accepted accounting
principles, or which are subject to potential claims or setoffs;
o any asset which is intangible or lacks intrinsic and marketable
value or collectability, including but not limited to goodwill,
patents, copyrights, trademarks, franchises, organization or
research and development costs.
The term "Subordinated Indebtedness" means all Indebtedness of
Guarantor and its Subsidiaries the repayment of which has been
subordinated to Indebtedness owing to CitiCapital.
"Indebtedness" of the Guarantor means without duplication (a) all
indebtedness of Guarantor and its Subsidiaries for borrowed money
(including reimbursement and all other obligations with respect to
letters of credit, bankers' acceptances, surety bonds and performance
bonds, whether or not matured) or for the deferred purchase price of
property or services, (b) all obligations of Guarantor and its
Subsidiaries evidenced by notes, bonds, debentures or similar
instruments, (c) all indebtedness of Guarantor and its Subsidiaries
created or arising under any conditional sale or other title retention
agreement with respect to property acquired by Guarantor or its
Subsidiaries (even though the rights and remedies of the seller or
lender under such agreement in the event of default are limited to
repossession or sale of such property), (d) the capitalized amount of
all obligations of Guarantor or its Subsidiaries under any lease of
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property by Guarantor or any of its Subsidiaries as lessee which would
be accounted for as a capital lease on a balance sheet of Guarantor or
its Subsidiaries, as determined on a consolidated basis in conformity
with GAAP, (e) all guaranty obligations of Guarantor and its
Subsidiaries, (f) all obligations of Guarantor or its Subsidiaries to
purchase, redeem, retire, defease or otherwise acquire for value any
stock or stock equivalents of Guarantor or any of its Subsidiaries,
valued, in the case of redeemable preferred stock, at the greater of
its voluntary or involuntary liquidation preference plus accrued and
unpaid dividends, and (g) all Indebtedness referred to above secured
by (or for which the holder of such Indebtedness has an existing
right, contingent or otherwise, to be secured by) any lien upon or in
property (including accounts and general intangibles) owned by the
Guarantor or any of its Subsidiaries, even though the Guarantor or its
Subsidiaries has not assumed or become liable for the payment of such
Indebtedness.
"Consolidated Net Income" means the net income (or loss) of Guarantor
and its Subsidiaries for a particular period, determined on a
consolidated basis in conformity with GAAP.
(b) Guarantor must maintain a maximum ratio for any period of Consolidated
Total Liabilities for such period minus Subordinated Indebtedness for
such period to Adjusted Net Worth for such period of 4.5 to 1.0. This
ratio shall be measured on a quarterly basis.
The term "Consolidated Total Liabilities" means the total liabilities
of Guarantor and its Subsidiaries for a particular period, determined
on a consolidated basis in conformity with GAAP.
(c) Guarantor must maintain a minimum Interest Coverage Ratio measured on
a quarterly basis as follows:
2Q03 3Q03 4Q03 2004 through end of term
-0.75 to 1 -0.25 to 1 1 to 1 1.5 to 1
The term "Interest Coverage Ratio" for any period means the ratio of
the rolling four quarter (i.e., the most recent and three prior) EBIT
of Guarantor and its Subsidiaries for such period to the Interest
Expense of Guarantor and its Subsidiaries for such period.
The term "EBIT" means an amount equal to (a) Consolidated Net Income
of Guarantor and its Subsidiaries for such period plus (b) the sum of,
in each case to the extent included in the calculation of Consolidated
Net Income of Guarantor and its Subsidiaries for such period in
accordance with GAAP, but without duplication, (i) any provision for
income taxes and (ii) interest expense.
The term "Interest Expense" means, for any period, the difference
between the total interest expense of Guarantor and its Subsidiaries
for such period determined on a consolidated basis in conformity with
GAAP minus any interest income of the Guarantor and its Subsidiaries
for such period determined on a consolidated basis in conformity with
GAAP.
5. REPRESENTATION, WARRANTIES AND ADDITIONAL AGREEMENTS
5.1 ADDITIONAL WARRANTIES AND AGREEMENTS. Borrower warrants and agrees that:
the Collateral is currently and, subject to ordinary use, will continue to
be maintained in good operating condition and repair, and is currently and
will continue to be used and operated with care only by personnel
experienced in the use of such Collateral in the regular course of
Borrower's business and in substantial compliance with all applicable
governmental laws and regulations, manufacturer's specifications and the
restrictions contained in any insurance policy insuring the Collateral;
and, the Collateral is not currently and will not be used in conjunction
with the storage, transportation or disposal of substances considered
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to be toxic or hazardous, as defined in applicable environmental laws, or
in conjunction with any activity that would be illegal or would subject the
Collateral to confiscation by any governmental entity.
Borrower further warrants and agrees that: the security interest in the
Collateral granted to or retained by CitiCapital is and will continue to be
superior to any title to or interest in the Collateral now or hereafter
held or claimed by any other party except as specifically agreed to in
writing by CitiCapital; the Collateral is free from and will be kept free
from all liens, claims, security interests and encumbrances (whether
superior or inferior to the interests of CitiCapital) other than that
created by this Agreement and except as specifically agreed to in writing
by CitiCapital; Borrower will not and will not allow any other party to
consign, sell, encumber, pledge, transfer, secrete or otherwise dispose of
any of the Collateral without CitiCapital's prior written consent except
for sales in the ordinary course of business by Borrower; Borrower will
take such action as CitiCapital reasonably requests to perfect or preserve
the interests granted to CitiCapital under this Agreement and the first
priority of such interests; any Manufacturer's Statement or Certificate of
Origin or Certificate of Title relating to the Collateral shall be
immediately delivered to CitiCapital in the event of default and, if a
Certificate of Title or registration is required for any item of
Collateral, Borrower will cooperate with CitiCapital in obtaining the
Certificate of Title or registration disclosing the interests of Borrower
and CitiCapital in the Collateral; Borrower will defend any action,
proceeding or claim affecting the Collateral or the interests of
CitiCapital in the Collateral; Borrower shall promptly pay all amounts
payable in conjunction with the storage, maintenance or repair of the
Collateral and all taxes, assessments, license fees and other public or
private charges levied or assessed in conjunction with the operation or use
of the Collateral or levied or assessed against the Collateral or this
Agreement except for those which are being contested by Borrower in good
faith by appropriate proceedings and which do not constitute a lien or
encumbrance upon the Collateral.
Borrower's obligations and liabilities to CitiCapital are absolute and
unconditional under all circumstances and regardless of any failure of
operation or Borrower's loss of possession of any item of Collateral or the
cessation or interruption of Borrower's business for any reason whatsoever.
Borrower agrees to notify CitiCapital in writing in the event that Borrower
anticipates removing any item of Collateral from the states of Arizona,
California, Minnesota, Montana, Nebraska, North Dakota, south Dakota,
Texas, Oregon, Nevada, Wisconsin, or Washington for a period in excess of
30 days.
5.2 INSURANCE AND RISK OF LOSS. Borrower will at all times bear all risk of
loss of, damage to or destruction of the Collateral. Borrower agrees to
immediately procure and maintain insurance on the Collateral for the full
insurable value thereof and for the life of this Agreement, containing the
same or similar provisions as the insurance policies in place on the
Closing Date in the form of "All Risk" or similar insurance (insuring the
Collateral for fire, extended coverage, vandalism, theft and collision and
containing only those exclusions from coverage which are acceptable to
CitiCapital) plus such other insurance as CitiCapital may specify from time
to time, all in form and amount and with such insurers satisfactory to
CitiCapital. Borrower agrees to deliver promptly to CitiCapital
certificates or, if requested, policies of insurance satisfactory to
CitiCapital, each with a standard long-form loss-payable endorsement naming
CitiCapital or its assigns as loss payee and providing that CitiCapital's
rights under such policy will not be invalidated by any act, omission or
neglect of anyone other than CitiCapital, and containing the insurer's
agreement to give 30 days prior written notice to CitiCapital before any
cancellation of or material change in the policy(s) will be effective as to
CitiCapital, whether such cancellation or change is at the direction of
Borrower or insurer. CitiCapital's acceptance of policies in lesser amounts
or risks will not be a waiver of Borrower's obligation to procure insurance
complying with the provisions hereof promptly after notice from
CitiCapital. Borrower assigns to CitiCapital all proceeds of any physical
damage or credit insurance that is maintained by Borrower in accordance
herewith, including returned and unearned premiums, up to the amount owing
hereunder by Borrower. Borrower directs all insurers to pay such proceeds
solely to the order of CitiCapital for application to Borrower's
indebtedness to CitiCapital in a manner determined by CitiCapital in its
sole discretion.
5.3 PERFORMANCE BY CITICAPITAL. If Borrower fails to perform any of Borrower's
obligations under this Agreement, CitiCapital may perform the same for the
account of Borrower. Any such action by
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CitiCapital will be in CitiCapital's sole discretion and CitiCapital will
not be obligated in any way to do so. CitiCapital's performance on behalf
of Borrower will not obligate CitiCapital to perform the same or any
similar act in the future and will not cure or waive Borrower's failure of
performance as an event of default hereunder. All sums advanced or costs
and expenses incurred by CitiCapital pursuant to this Paragraph, including
the reasonable fees of any attorney retained by CitiCapital, will be for
the account of Borrower, will constitute indebtedness secured by
CitiCapital's security interest in the Collateral, will bear interest at
the highest rate allowed by law and will be immediately due and payable,
unless CitiCapital, in CitiCapital's sole discretion, agrees otherwise in
writing.
5.4 DOCUMENTATION. Prior to any advance hereunder:
(a) Borrower must have executed and delivered to CitiCapital this
Agreement and other documents or instruments as CitiCapital requires
to grant, evidence, perfect or record the first priority security
interest or lien of CitiCapital in and to the Collateral described in
this Agreement.
(b) Guarantor must have executed and delivered to CitiCapital Guarantor's
unconditional continuing guaranty of the payment and performance by
Debtor of all of its obligations to CitiCapital (the "Guaranty").
(c) CitiCapital must have received all documents, instruments, agreements
and other items required to be executed or delivered pursuant to this
Agreement.
In the event that the Guarantor notifies CitiCapital of its intention not
to guaranty any future advances under this Agreement, CitiCapital will not
be obligated to make any such future advances. All documentation and the
validity of all phases of the transactions contemplated by this Agreement,
including but not limited to the validity and enforceability of any
guaranty delivered pursuant to or in conjunction with this Agreement or the
Collateral, must be satisfactory and acceptable to counsel for CitiCapital
prior to the making of any loan or advance to Debtor.
5.5 DOCUMENTATION FEE. Borrower agrees to pay for CitiCapital's out-of-pocket
expenses incurred in connection with the transactions contemplated by this
Agreement including, without limitation, filing and recording fees, title
searches and the cost of any legal service.
6. DEFAULT
6.1 EVENTS OF DEFAULT. Time is of the essence. An event of default will occur
if:
(a) Borrower fails to pay, within five business days of CitiCapital's
notice thereof, any amount owed by it to CitiCapital or any affiliate
(including, without limitation, any direct or indirect parent,
subsidiary or sister entity), successor or assignee of CitiCapital
under this Agreement or if Borrower fails to pay when due any amount
owed by it to CitiCapital or any affiliate (including, without
limitation, any direct or indirect parent, subsidiary or sister
entity), successor or assignee of CitiCapital under any other
document, agreement or instrument;(including, without limitation, any
direct or indirect parent, subsidiary or sister entity), successor or
assignee of CitiCapital or otherwise acquired by CitiCapital or any
affiliate of CitiCapital;
(b) Borrower fails to comply, within five business days of CitiCapital's
notice thereof, with any of its agreements hereunder or any warranty
made by Borrower in this Agreement, or if Borrower fails to perform or
observe any term or provision to be performed or observed by it under
any other document, instrument or agreement furnished by Borrower to
CitiCapital or any affiliate of CitiCapital or otherwise acquired by
CitiCapital or any affiliate of CitiCapital;
(c) The Affiliates or RDO Financial Services Co. fails to pay, within five
business days of CitiCapital's notice thereof, when due any amount
owed by it to CitiCapital or any affiliate
34
(including, without limitation, any direct or indirect parent,
subsidiary or sister entity), successor or assignee of CitiCapital
under this Agreement or if the Affiliates or RDO Financial Services
Co. fails to pay when due any amount owed by it to CitiCapital or any
affiliate(including, without limitation, any direct or indirect
parent, subsidiary or sister entity), successor or assignee of
CitiCapital under any other document, agreement or instrument;
(d) The Affiliates or RDO Financial Services Co. fails to perform or
observe, within five business days of CitiCapital's notice thereof,
any term or provision to be performed or observed by it under any
other document, instrument or agreement furnished by the Affiliates or
RDO Financial Services Co. to CitiCapital or any affiliate of
CitiCapital (including, without limitation, any direct or indirect
parent, subsidiary or sister entity), successor or assignee of
CitiCapital or otherwise acquired by CitiCapital or any affiliate of
CitiCapital;
(e) any information, representation, or warranty furnished by Borrower to
CitiCapital or to any affiliate of CitiCapital is materially
inaccurate or incorrect as determined by CitiCapital in its sole
discretion;
(f) Borrower becomes insolvent, or ceases to do or is prohibited by any
court order or governmental action from conducting business as a going
concern;
(g) any surety or bonding company assumes any of Borrower's
responsibilities under any contract or job where such contract or job
has a value in excess of $250,000 as a result of Borrower's default in
its obligations to such surety or bonding company and Borrower has not
cured such default within 30 days of such occurrence;
(h) Collateral with an aggregate book value equal to or greater than
$250,000 is lost, stolen or destroyed and Borrower has not cured such
default within 30 days of such occurrence;
(i) there shall occur an (i) appropriation, (ii) confiscation, (iii)
retention, or (iv) seizure of control, custody or possession of
Collateral with an aggregate book value equal to or greater than
$100,000 by any governmental agency including, without limitation, any
municipal, state, federal or other governmental entity or any
governmental agency or instrumentality (all such entities, agencies
and instrumentalities shall hereinafter be referred to as
"Governmental Authority") and Borrower has not cured such default
within 30 days of such occurrence;
(j) if anyone in the control, custody or possession of the Collateral or
the Borrower is accused or alleged or charged (whether or not
subsequently arraigned, indicted or convicted) by any Governmental
Authority to have used the Collateral in connection with the
commission of any crime (other than a misdemeanor moving violation)
and such allegation relates to Collateral with an aggregate book value
equal to or greater than $250,000, and Borrower has not cured such
default within 30 days of such occurrence;
(k) if Borrower attempts to consign or sell any of the Collateral outside
of the ordinary course of Borrower's business without the prior
written consent of CitiCapital or allows another to do so;
(l) Borrower files a petition in bankruptcy, or for an arrangement,
reorganization, or similar relief, or makes an assignment for the
benefit of creditors, or applies for the appointment of a receiver or
trustee for a substantial part of its assets or for any of the
Collateral, or attempts to take advantage of any process or proceeding
for the relief of debtors;
(m) or if any action described in subparagraph (l) above is taken against
Borrower and such action or proceeding is not promptly contested by
appropriate proceedings or is not dismissed within 60 days;
35
(n) any other party attempts to attach, repossess or execute upon
Collateral with an aggregate book value equal to or greater than
$100,000 and Borrower has not cured such default within 30 days of
such occurrence;
(o) Borrower ceases to exist as a legal entity, or Borrower or any party
in control of Borrower takes any action looking to dissolution of
Borrower as a legal entity;
(p) if there is a material change in ownership, management or control of
Borrower without the prior written consent of CitiCapital;
(q) if there shall be a material adverse change in any of the (i)
condition (financial or otherwise), business, performance, prospects,
operations or properties of the Borrower, (ii) legality, validity or
enforceability of this Agreement, (iii) perfection or priority of the
lien granted in favor of CitiCapital pursuant to this Agreement, (iv)
ability of the Borrower to repay the indebtedness or perform its
obligations under this Agreement or (v) rights and remedies of
CitiCapital; or
(r) except for the security interest, lien or reservation of title in
favor of CitiCapital or as otherwise granted herein or as specifically
agreed to in writing by CitiCapital, there shall be any lien, claim or
encumbrance on any of the Collateral.
CitiCapital's inaction with respect to an event of default will not be a
waiver of such default and CitiCapital's waiver of any default will not be
a waiver of any other default.
6.2 REMEDIES UPON DEFAULT. Upon the occurrence of an event of default, and at
any time thereafter as long as the default continues, CitiCapital may, at
its option, with or without notice to Borrower:
(a) declare this Agreement to be in default;
(b) declare the indebtedness hereunder to be immediately due and payable;
(c) declare all other debts then owing by Borrower to CitiCapital or any
affiliate (including, without limitation, any direct or indirect
parent, subsidiary or sister entity), successor or assignee of
CitiCapital to be immediately due and payable;
(d) cancel any insurance and credit any refund to the indebtedness; and
(e) exercise all of the rights and remedies of a secured party under the
Uniform Commercial Code and any other applicable laws, including,
without limitation, the right to require Borrower to assemble the
Collateral and deliver it to CitiCapital at a place to be designated
by CitiCapital which is reasonably convenient to both parties, and to
lawfully enter any premises where the Collateral may be without
judicial process and take possession thereof.
Acceleration of any or all indebtedness, if so elected by CitiCapital, will
be subject to all applicable laws including those pertaining to refunds and
rebates of unearned charges. Any property other than the Collateral that is
in or upon the Collateral at the time of repossession may be taken and held
without liability until its return is requested by Borrower. Any sale or
other disposition of any of the Collateral may be made at public or private
sale or through public auction at the option of CitiCapital. CitiCapital
may buy at any sale and become the owner of the Collateral. CitiCapital may
sell the Collateral without giving any warranties as to the Collateral.
CitiCapital may disclaim any warranties of title, possession, quiet
enjoyment, or the like. This procedure will not be considered to adversely
affect the commercial reasonableness of any sale of the Collateral. Unless
otherwise provided by law, any requirement of reasonable notice which
CitiCapital may be obligated to give regarding the sale or other
disposition of Collateral will be met if such notice is given to Borrower
at least ten days before the time of sale or other disposition. Borrower
agrees that CitiCapital may bring any legal proceedings it deems necessary
to enforce the payment and performance of Borrower's obligations hereunder
in any court in the state of
36
North Dakota, or Texas. The filing by CitiCapital of any action or
proceeding with respect to the Collateral or any of Borrower's obligations
hereunder will not constitute an election by CitiCapital of CitiCapital's
remedies or a waiver of CitiCapital's rights to take possession of the
Collateral as provided above. Expenses of retaking, holding, preparing for
sale, selling and the like will include (a) the reasonable fees of any
attorneys retained by CitiCapital, (b) any amounts advanced or expenses
incurred by CitiCapital pursuant hereto, and (c) all other legal and other
expenses incurred by CitiCapital. Borrower agrees that they will continue
to be liable for and will promptly pay any deficiency remaining after any
disposition of Collateral after default and all costs and expenses,
including the reasonable fees of any attorney, incurred by CitiCapital in
the collection of any such deficiency.
7. NOTICES
Any notices or consents required or permitted by the terms of this
Agreement will be in writing and will be deemed delivered if (a) delivered
in person, (b) sent by certified or registered mail, postage prepaid,
return receipt requested, (c) sent by means of an overnight carrier such as
Federal Express with a delivery receipt required or (d) transmitted by
facsimile machine with receipt of such facsimile transmission confirmed, to
the such address or fax number as the recipient designates in writing.
Notices delivered in person or sent by overnight carrier will be deemed
delivered at the time of delivery. Notices sent by mail in accordance with
this paragraph will be deemed delivered on the third business day after the
deposit of such notice with the United States Post Office. If a notice is
sent by facsimile transmission prior to 3:00 p.m. (recipient's time) on a
day, which is a normal business day for the recipient, it will be deemed
delivered on the date upon which receipt of the transmission by the
recipient is confirmed. Any other notice sent by facsimile transmission
will be deemed delivered normal business day of the recipient which
immediately follows the date upon which receipt of the transmission by the
recipient is confirmed.
8. GENERAL PROVISIONS
8.1 POWER OF ATTORNEY. Borrower hereby appoints CitiCapital or any officer,
employee or designee of CitiCapital or any assignee of CitiCapital (or any
designee of such assignee) as Borrower's attorney-in-fact, to, in the event
of default, and acting in Borrower's or CitiCapital's name: (a) prepare,
execute and submit any notice or proof of loss in order to realize the
benefits of any insurance policy insuring the Collateral, and (b) prepare,
execute and file any agreement, document, financing statement, instrument
(or any other writing or record) that, in CitiCapital's opinion, is
necessary to perfect and/or give public notice of the interests of
CitiCapital in any collateral that secures or may secure any obligations or
indebtedness of Borrower to CitiCapital, and (c) endorse Borrower's name on
any remittance representing proceeds of any insurance relating to the
Collateral or the proceeds of the sale or other disposition of any of the
Collateral (whether or not such disposition is a default hereunder).
Borrower agrees to execute and deliver to CitiCapital, upon CitiCapital's
request, such documents, writings, records and assurances as CitiCapital
deems necessary or advisable for the confirmation or perfection of the
security interest in the Collateral and CitiCapital's rights hereunder,
including such documents, writings, records and assurances as CitiCapital
may require for filing or recording. Borrower authorizes CitiCapital or any
officer, employee or designee of CitiCapital or any assignee of CitiCapital
(or any designee of such assignee) to file a financing statement describing
the Collateral as well as any assets of the Borrower other than the
Collateral described herein. These powers are coupled with an interest and
are irrevocable so long as any indebtedness secured hereunder remains
unpaid.
8.2 ASSIGNMENT. Borrower will not assign this Agreement without the prior
written consent of CitiCapital. CitiCapital, or any assignee or successor
of CitiCapital shall have the right to transfer, sell or assign all or any
portion of this Agreement or the indebtedness or obligations hereunder,
with notice, but without acknowledgment or consent from Borrower. Upon
assignment, the term "CitiCapital" shall mean and refer to any assignee who
is the holder of this Agreement. The assignor will not be the assignee's
agent for any purpose. Borrower waives and will not assert against any
assignee of Borrower any claims, counterclaims, claims in recoupment,
abatement, reduction, defenses or set-offs for breach of warranty or for
any other reason that Borrower could assert against CitiCapital, except
defenses that cannot be
37
waived under the Uniform Commercial Code. Upon full payment of all
obligations secured by this Agreement, the assignee may deliver all
original papers to the assignor for Borrower.
8.3 PRIVACY WAIVER. CitiCapital may receive from and disclose to any
individual, corporation, business trust, association, company, partnership,
joint venture, or other entity (herein collectively, the "Entity"),
including, without limiting the generality of the foregoing, CitiCapital's
parent or any affiliate or any subsidiary of CitiCapital and any credit
reporting agency or other entity whether or not related to CitiCapital for
any purpose SOLELY RELATED TO THE EXTENSION OF CREDIT TO BORROWER HEREUNDER
OR THE OBLIGATIONS OF PARTIES UNDER THIS AGREEMENT, information about
Borrower's accounts, credit application and credit experience with
CitiCapital and Borrower authorizes any Entity to release to CitiCapital
any information related to Borrower's accounts, credit experience and
account information regarding the Borrower. This shall be continuing
authorization for all present and future disclosures of Borrower's account
information, credit application and credit experience on Borrower made by
CitiCapital, or any Entity requested to release such information to
CitiCapital.
8.4 LOCATION OF BORROWER. (i) If Borrower is a corporation, limited liability
company, limited partnership or other registered organization, its state of
incorporation is in the state set forth immediately below its signature on
the last page of this Agreement; (ii) if Borrower is an individual, his/her
principal place of residence is at the address set forth immediately below
his/her signature on the last page of this Agreement; (iii) if Borrower is
an organization, its place of business or if it has more than one place of
business its chief executive office, is located at the address set forth
immediately below its signature on the last page of this Agreement.
Borrower agrees that it will not, without the prior written consent of
CitiCapital, change its state of organization if it is a corporation,
limited liability company, limited partnership or other registered
organization or the location of its chief executive office or its place of
business if it is an organization. If Borrower is an individual, Borrower
must notify CitiCapital in writing of a change in his/her principal place
of residence 30 days prior to such change.
8.5 PAYMENT PROCESSING. Borrower hereby agrees that any payments made by
Borrower hereunder by check and received by CitiCapital at an address other
than the address specified on the related invoice may be replaced by
CitiCapital with a substitute instrument of equal amount and presented to
Borrower's financial institution for payment from the account referenced on
the check from Borrower. If Borrower sends any payment hereunder by check
to CitiCapital at an address other than the one specified on the related
invoice, then Borrower shall be deemed to have authorized CitiCapital to
substitute such check with an instrument of equal amount and present the
substitute instrument to CitiCapital's financial institution for payment
from the account referenced on Borrower's check.
8.6 MISCELLANEOUS.
(a) All of CitiCapital's rights hereunder are cumulative and not
alternative.
(b) All of the terms and provisions hereof will apply to and be binding
upon Borrower, and their representatives, successors and assigns and
will inure to the benefit of CitiCapital, its successors and assigns.
(c) BORROWER AND CITICAPITAL HEREBY WAIVE ANY RIGHT TO TRIAL BY JURY IN
ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR THE TRANSACTION
CONTEMPLATED HEREBY.
(d) BORROWER HEREBY EXPRESSLY WAIVES NOTICE OF NONPAYMENT, PRESENTMENT,
PROTEST, DISHONOR, DEFAULT, INTENT TO ACCELERATE THE MATURITY HEREOF
AND OF ACCELERATION OF THE MATURITY HEREOF.
(e) No waiver or change in this Agreement or in any related note will be
binding upon CitiCapital, or CitiCapital's assignee, unless such
waiver or change is in writing and signed by one of its officers and
any such waiver or change will then be effective only upon the terms
and to the extent provided in such writing.
38
(f) The acceptance by CitiCapital of any remittance from a party other
than the obligor on the related indebtedness will in no way constitute
CitiCapital's consent to the transfer of any of the Collateral to such
party.
(g) Any captions or headings included in this Agreement are for
convenience of reference only and will not limit or otherwise affect
the meaning of any provision contained in this Agreement.
(h) Any provision contained herein which is contrary to, prohibited by or
invalid under applicable laws or regulations will be deemed
inapplicable and omitted from this Agreement, but will not invalidate
the remaining provisions hereof.
INSURANCE
PHYSICAL DAMAGE INSURANCE COVERING THE COLLATERAL IS REQUIRED. BORROWER CAN
FURNISH THIS INSURANCE THROUGH AN AGENT OR BROKER OF BORROWER'S CHOICE.
BORROWER HEREBY AUTHORIZES CITICAPITAL AND ANY ASSIGNEE TO RELEASE TO ANY
INSURANCE COMPANY AFFILIATED WITH CITICAPITAL ANY INFORMATION RELATING TO A
CONTRACT OR POLICY OF INSURANCE, WHICH IS PROVIDING OR MAY PROVIDE
INSURANCE COVERAGE AGAINST PHYSICAL DAMAGE TO THE COLLATERAL.
THIS WRITTEN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES
AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
THIS AGREEMENT WILL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF NORTH DAKOTA.
RDO CONSTRUCTION EQUIPMENT CO. CITICAPITAL COMMERCIAL CORPORATION
By: /s/ Xxxxxx X. Xxxxxx By: /s/ Xxxxx X. Xxxxxxx
------------------------------------ ------------------------------
Title: CFO Title: VP
-------------------------------- ---------------------------
State of Organization: North Dakota
-----------------
Chief Executive Office:
0000 Xxxxx Xxxxxxxxxx Xxxxx
----------------------------------------
Xxxxx, XX 00000
----------------------------------------
Acknowledged and agreed to this 25th day
----
of October, 2002
-------------
RDO EQUIPMENT CO.
By: /s/ Xxxxxx X. Xxxxxx
------------------------------------
Title: CFO
---------------------------------
AD102180 (Rev. 10/14/02)
39
