EXECUTION COPY
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LOAN AND SECURITY AGREEMENT
BETWEEN
Travelers Acquisition Corporation,
as Borrower,
AND
BHC Interim Funding, L.P.,
as Lender.
Dated as of October 29, 1999
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TABLE of CONTENTS
SECTION 1 DEFINITIONS.................................................................................................. Page 2
1.1 Certain Defined Terms..................................................................................... Page 2
1.2 Accounting Terms.......................................................................................... Page 8
1 3 Other Definitional Provisions............................................................................. Page 9
SECTION 2 TERM LOAN AND COLLATERAL ............................................................................ Page 9
2.1 Term Loan............................................................................................ Page 9
2.2 Interest............................................................................................. Page 9
2.3 Fees................................................................................................ Page 10
2.4 Payments and Prepayments............................................................................ Page 11
(A) Manner and Time of Payment ..................................................................... Page 11
(B) Payments on Business Days....................................................................... Page 11
(C) Voluntary Prepayment............................................................................ Page 11
(D) Mandatory Repayment............................................................................. Page 11
2.5 Grant of Security Interest.......................................................................... Page 11
2.6 Preservation of Collateral and Perfection of Security Interests Therein . .......................... Page 11
2.7 Possession of Collateral and Related Matters........................................................ Page 12
SECTION3 CONDITIONS TO TERM LOAN...................................................................................... Page 12
3.1 Conditions to Term Loan............................................................................. Page 12
(A) Closing Deliveries......................................................................... Page 12
(B) Security Interests; Guarantees; Stock Pledges.............................................. Page 12
(C) Representations and Warranties ............................................................ Page 13
(D) Fees....................................................................................... Page 13
(E) No Default................................................................................. Page 13
(F) Performance of Agreements.................................................................. Page 13
(G) No Prohibition............................................................................. Page 13
(H) No Litigation.............................................................................. Page 13
(I) Warrants................................................................................... Page 13
(J) Confession of Judgment..................................................................... Page 13
(K) Acquisition Consummated.................................................................... Page 13
(L) Sellers Subordination...................................................................... Page 13
SECTION 4 BORROWER'S REPRESENTATIONS AND WARRANTIES .......................................................... Page 14
4.1 Organization, Powers, Capitalization................................................................ Page 14
(A) Organization and Powers........................................................... Page 14
(B) Capitalization.................................................................... Page 14
4.2 Authorization of Borrowing, No Conflict ............................................................ Page 14
4.3 Financial Condition................................................................................. Page 15
4.4 Indebtedness and Liabilities ....................................................................... Page 15
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4.5 Account Warranties ................................................................................. Page 15
4.6 Names .............................................................................................. Page 15
4.7 Locations; FEIN..................................................................................... Page 15
4.8 Title to Properties; Liens.......................................................................... Page 15
4.9 Litigation; Adverse Facts........................................................................... Page 16
4.10 Payment of Taxes.................................................................................... Page 16
4.11 Performance of Agreements........................................................................... Page 16
4.12 Employee Benefits Plans............................................................................. Page 16
4.13 Intellectual Property............................................................................... Page 16
4.14 Broker's Fees....................................................................................... Page 16
4.15 Environmental Compliance............................................................................ Page 17
4.16 Solvency............................................................................................ Page 17
4.17 Disclosure.......................................................................................... Page 17
4.18 Insurance........................................................................................... Page 17
4.19 Compliance with laws................................................................................ Page 17
4.20 Bank Accounts....................................................................................... Page 18
4.21 Subsidiaries........................................................................................ Page 18
4.22 Employee Matters.................................................................................... Page 18
SECTION 5 AFFIRMATIVE COVENANTS............................................................................... Page 18
5.1 Financial Statements and Other Reports.............................................................. Page 18
(A) Monthly Financials......................................................................... Page 19
(B) Quarterly Financials....................................................................... Page 19
(C) Year-End Financials........................................................................ Page 19
(D) Accountants' Certification and Reports..................................................... Page 20
(E) Management Report.......................................................................... Page 20
(F) Government Notices......................................................................... Page 20
(G) Events of Default, etc. .................................................................. Page 20
(H) Trade Names................................................................................ Page 20
(I) Locations ................................................................................ Page 20
(J) Bank Accounts ............................................................................. Page 21
(K) Litigation ............................................................................... Page 21
(L) Other Information.......................................................................... Page 21
5.2 Access to Accountants............................................................................... Page 21
5.3 Inspection ........................................................................................ Page 21
5.4 Collateral Records ................................................................................ Page 21
5.5 Account Covenants; Verification ................................................................... Page 21
5.6 Endorsement ....................................................................................... Page 22
5.7 Corporate Existence ............................................................................... Page 22
5.8 Payment of Taxes.................................................................................... Page 22
5.9 Maintenance of Properties; Insurance................................................................ Page 22
5.10 Compliance with Laws ............................................................................... Page 22
5.11 Further Assurances ................................................................................. Page 23
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5.12 Collateral Locations ............................................................................... Page 23
5.13 Bailees ............................................................................................ Page 23
5.14 Use of Proceeds and Margin Security................................................................. Page 23
5.15 Observer Rights .................................................................................... Page 23
5.16 Financial Covenants. ............................................................................... Page 23
SECTION 6 NEGATIVE COVENANTS ................................................................................. Page 24
6.1 Indebtedness and Liabilities........................................................................ Page 24
6.2 Guaranties.......................................................................................... Page 94
6.3 Transfers, Liens and Related Matters................................................................ Page 24
6.4 Restricted Junior Payments ......................................................................... Page 25
6.5 Restriction on Fundamental Changes.................................................................. Page 25
6.6 Transactions with Affiliates........................................................................ Page 25
6.7 Environmental Liabilities........................................................................... Page 25
6.8 Conduct of Business................................................................................. Page 25
6.9 Compliance with ERISA............................................................................... Page 25
6.10 Subsidiaries........................................................................................ Page 26
6.11 Fiscal Year......................................................................................... Page 26
6.12 Press Release; Public Offering Materials............................................................ Page 26
6.13 Bank Accounts....................................................................................... Page 26
6.14 Charter Documents................................................................................... Page 26
SECTION 7 DEFAULT, RIGHTS AND REMEDIES........................................................................ Page 26
7.1 Event of Default.................................................................................... Page 26
(A) Payment.................................................................................... Page 26
(B) Default in Other Agreements................................................................ Page 26
(C) Breach of Certain Provisions............................................................... Page 26
(D) Breach of Warranty......................................................................... Page 26
(E) Other Defaults Under Loan Documents........................................................ Page 27
(F) Involuntary Bankruptcy; Appointment of Receiver, etc ...................................... Page 27
(G) Voluntary Bankruptcy; Appointment of Receiver, etc ........................................ Page 27
(H) Liens .................................................................................... Page 27
(I) Judgment and Attachments ................................................................. Page 27
(J) Dissolution .............................................................................. Page 28
(K) Solvency ................................................................................. Page 28
(L) Injunction ................................................................................ Page 28
(M) Invalidity of Loan Documents ............................................................. Page 28
(N) Failure of Security ...................................................................... Page 28
(O) Licenses and Permits ..................................................................... Page 28
(P) Forfeiture ............................................................................... Page 28
7.2 Acceleration ...................................................................................... Page 28
7.3 Remedies............................................................................................ Page 29
7.4 Appointment of Attorney-in-Fact..................................................................... Page 29
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7.5 Limitation on Duty of Lender with Respect to Collateral ............................................ Page 30
7.6 Application of Proceeds ........................................................................... Page 30
7.7 License of Intellectual Property.................................................................... Page 30
7.8 Waivers, Non-Exclusive Remedies..................................................................... Page 30
SECTION 8 MISCELLANEOUS....................................................................................... Page 31
8.1 Assignments and Participations...................................................................... Page 31
8.2 Set Off............................................................................................. Page 31
8.3 Expenses and Attorneys' Fees ....................................................................... Page 31
8.4 Indemnity........................................................................................... Page 32
8.5 Amendments and Waivers ............................................................................. Page 32
8.6 Notices............................................................................................. Page 32
8.7 Survival of Warranties and Certain Agreements....................................................... Page 33
8.8 Indulgence Not Waiver............................................................................... Page 34
8.9 Marshaling; Payments Set Aside...................................................................... Page 34
8.10 Entire Agreement ................................................................................... Page 34
8.11 Independence of Covenants........................................................................... Page 34
8.12 Severability ....................................................................................... Page 34
8.13 Headings ........................................................................................... Page 34
8.14 APPLICABLE LAW...................................................................................... Page 35
8.15 Successors and Assigns.............................................................................. Page 35
8.16 No Fiduciary Relationship; Limitation of Liabilities................................................ Page 35
8.17 CONSENT TO JURISDICTION............................................................................. Page 35
8.18 WAIVER OF JURY TRIAL................................................................................ Page 35
8.19 Construction........................................................................................ Page 36
8.20 Counterparts; Effectiveness......................................................................... Page 36
8.21 No Duty............................................................................................. Page 36
SECTION 9 SUBORDINATION....................................................................................... Page 36
9.1 Obligations Subordinate to Senior Indebtedness ..................................................... Page 36
9.2 Payment Over of Proceeds Upon Dissolution........................................................... Page 37
9.3 No Payment in Certain Circumstances................................................................. Page 38
9.4 Acceleration Rights; Remedies....................................................................... Page 39
9.5 Payment Otherwise Permitted......................................................................... Page 39
9.6 Subrogation to Rights of Holders of Senior Indebtedness............................................. Page 39
9.7 Provisions Solely to Define Relative Rights......................................................... Page 40
9.8 No Waiver of Subordination Provisions; Amendment.................................................... Page 40
9.9 Reliance on Judicial Order or Certificate of Liquidating Agent...................................... Page 41
9.10 Turnover. Miscellaneous Subordination Provisions.................................................... Page 41
Exhibits and Schedules
Exhibit A -- Form of Warrants
Exhibit B -- Confession of Judgment
Schedule 1.1 (A)...................................................... Page 7
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Schedule 1.1 (B)........................................................ Page 7
Schedule 3.1 (A)....................................................... Page 13
Schedule 4.1 (B)....................................................... Page 14
Schedule 4.6 .......................................................... Page 15
Schedule 4.7........................................................... Page 15
Schedule 4.13.......................................................... Page 16
Schedule 4.20.......................................................... Page 18
Schedule 4.21 ......................................................... Page 18
Schedule 4.22 ......................................................... Page 18
Schedule 4.24.......................................................... Page 19
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EXECUTION COPY
LOAN AND SECURITY AGREEMENT
This LOAN AND SECURITY AGREEMENT is dated as of October 29, 1999, and
entered into by and between TRAVELERS ACQUISITION CORPORATION, a Florida
corporation (hereinafter "TAC" or the "Borrower"), with its principal place of
business at 0000 Xxxxxxx Xxxxxx, Xxxxx X, Xxxxxxxx, Xxxxxxxxx 00000, and BHC
[NTERIM FUNDING, L.P., a Delaware limited partnership (hereinafter "Lender"),
with offices at 000 Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 1 ()()22
RECITALS
WHEREAS, TAC has entered into a Stock Purchase Agreement dated as of
September 30, 1999 (as the same may be amended, modified or restated, the "Stock
Purchase Agreement") among TAC, as purchaser, and Xxxx Xxxxx, Xxxxxx Xxxxx,
Xxxxx Family Trust, Xxxxxxx Xxxx, X.X. Xxxxxx, X.X. Xxxxxx Voting Trust flb/o
Xxxxx Xxxxx, X.X. Xxxxxx Voting Trust flb/o Xxxxx Xxxxxx, Xxxxx XxXxxxx, Xxxxx
XxXxxxx, XxXxxxx Children's Trust, Xxx Xxxxxxxx, Xxxxxxxx Xxxxxxxx, Xxxxxx and
Xxxxxxxx X. Xxxxx Family Trust, Xxxxxx Xxxxxx, Xxxxxx Xxxxxxxx, Xxxx and Xxxx
Xxxxxx Family Trust, Xxxxx Xxxxxx, Xxxxx Xxx Xxxxxx-Xxxxxxx Family Trust, Xxxxxx
Xxx Xxxxxx Family Trust, and Xxxxxx Trust (Xxx Xxxxxx), as sellers (the
"Sellers") and Travelers Investment Corporation, a California corporation
("TIC") for the acquisition of 100% of the authorized, issued and outstanding
common shares of TIC; and
WHEREAS, pursuant to the Stock Purchase Agreement, TAC will acquire
from the Sellers, and Sellers shall sell to TAC, all of the authorized, issued
and outstanding common shares of TIC consisting of 442,312 shares (the "Shares")
on the terms and conditions contained in the Stock Purchase Agreement; and
WHEREAS, Borrower has requested Lender to assist Borrower by providing
a portion of the financing needed to consummate the purchase of the Shares; and
WHEREAS, Borrower desires to secure its obligations under the Loan
Documents (as defined in Section 1 hereof) by granting to Lender a security
interest in and lien upon Borrower's property; and
WHEREAS, Borrower desires to further secure its obligations under the
Loan Documents by causing each of its Subsidiaries to unconditionally guaranty
the payment and performance of all Obligations and secure such guaranty by
granting to Lender a security interest in and lien upon such Subsidiary's
property; and
WHEREAS, Borrower has agreed to sell to Lender warrants to purchase
common stock of the Borrower (the "TIC Warrants"); and
WHEREAS, Finantra Capital, Inc., a Delaware corporation ("Finantra" or
the "Parent") is the parent of TAC and has agreed to guarantee the obligations
of the Borrower and sell's to lender warrants to purchase common stock of
Finantra (the "Finantra Warrants");
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NOW, THEREFORE, in consideration ofthe premises and the agreements,
provisions and covenants herein contained, Borrower and Lender agree as follows:
SECTION 1 DEFINITIONS
1.1 Certain Defined Temms. The following terms used in this Agreement
shall have the following meanings:
"Acceptance" means Travelers Acceptance Corporat~on, a Califomia
corporation and a Subsidiary of Borrower.
"Accounts" means all accounts (as defined in the WCC), accounts
receivable, contract rights and general intangibles relating thereto, notes,
drafts and other fomns of obligations owed to or owned by Borrower arising or
resulting from the sale of goods or the rendering of services.
"Affiliate" means any Person (other than Lender): (a) directly or
indirectly controlling, controlled by, or under common control with any Loan
Party; (b) directly or indirectly owning or holding five percent (5%) or more of
any equity interest in Borrower; or (c) five percent (5%) or more of whose
voting stock or other equity interest having ordinary voting power for the
election of directors or the power to direct or cause the direction of
management, is directly or indirectly owned or held by Borrower; or (d) which
has a senior executive officer who is also a senior executive officer of
Borrower. For purposes of this definition, "control" (including with correlative
meanings, the temms "controlling", "controlled by" and "under common control
with") means the possession directly or indirectly of the power to direct or
cause the direction of the management and policies of a Person, whether through
the ownership of voting securities or other equity interest, or by contract or
otherwise.
"Agreement" means this Loan and Security Agreement as it may be
amended, restated supplemented or otherwise modified from time to time.
"XXXXX-TIC" means XXXXX-TIC Financial Services, Inc., a Califomia
corporation and a Subsidiary of Borrower.
"Asset Disposition" means the disposition, whether by sale, lease,
transfer, loss, damage, destruction, condemnation or otherwise, of any or all of
the assets of Borrower or any of its Subsidiaries other than sales of Inventory
in the ordinary course of business or dispositions of obsolete equipment in the
ordinary course of business.
"Borrower" has the meaning assigned to that term in the preamble to this
Agreement.
"Business Day" means any day excluding Saturday, Sunday and any day
which is a legal holiday under the laws of the State of New York, or is a day on
which banking institutions located in such state are closed
"Cash Equivalents" means: (a) marketable direct obligations issued or
unconditionally guaranteed by the United States Govemment or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within six (6) months from the date of acquisition thereof;
(b) commercial paper maturing no more than six (6) months from the date issued
and, at the time of acquisition, having a rating of at least A-1 from Standard &
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Poor's Corporation or at least P-l from Xxxxx'x Investors Service, Inc.; and (c)
certificates of deposit or bankers' acceptances maturing within six (6) months
from the date of issuance thereof issued by, or ovemight reverse repurchase
agreements from, any commercial bank organized under the laws of the United
States of America or any state thereof or the District of Columbia having
combined capital and surplus of not less than 5250,000,000 and not subject to
setoff rights in favor of such bank.
"Closing Date" means October 29, 1999.
"Collateral" has the meaning assigned to that temm in subsection 2.5.
"Control Person" has the meaning assigned to that temm in subsection
5.17.
"Default Rate" has the meaning assigned to that temm in subsection 2.2.
"Default" means a condition, act or event that, after notice or lapse
of time or both, would constitute an Event of Default if that condition or event
were not cured or removed within any applicable xxxxx or cure Deriod.
"Default Rate" has the meaning assigned to that temm in subsection
2.2(A).
"EBITDA" means earnings before interest, taxes, depreciation and
amortization.
"Employee Benefit Plan" means any employee benefit plan within the
meaning of Section 3(3) of ERISA which (a) is maintained for employees of
Borrower or any ERISA Affiliate or (b) has at any time within the preceding six
(6) years been maintained for the employees of Borrower or any current or fommer
ERISA Affiliate.
"Environmental Claims" means claims, liabilities, investigations,
litigation, administrative proceedings, judgments or orders relating to
Hazardous Materials.
"Environmental Laws" means any present or future federal, state or
local law, rule, regulation or order relating to pollution, waste, disposal or
the protection of human health or safety, plant life or animal life, natural
resources or the environment.
"Equipment" means all equipment (as defined in the WCC), including,
without limitation, all furniture, furnishings, fixtures, machinery, motor
vehicles, trucks, trailers, vessels, aircraft and rolling stock and all parts
thereof and all additions and accessions thereto and replacements therefor.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute and all rules and
regulations promulgated thereunder.
"ERISA Affiliate", as applied to Borrower, means any Person who is a
member of a group which is under common control with Borrower, who together with
Borrower is treated as a single employer within the meaning of Section 414(b)
and (c) of the IRC.
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"Event of Default" means each of the events set forth in subsection
7.1.
"Excess Interest" has the meaning assigned to that term in subsection
2.2(C).
"Excess Proceeds" has the meaning assigned to that term in subsection
2.4(D).
"Finantra" means Finantra Capital, Inc, a Florida Corporation.
"Finantra Common Stock" means 200,000 shares of common stock of
Finantra.
"Finantra Warrants" has the meaning assigned to that term in the
preamble to this
"Finova" means Finova Capital Corporation, a Delaware corporation.
"Fiscal Year" means each twelve month period ending on the last day of
December Agreement in each year.
"GAAP" means 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 that are applicable to the
circumstances as of the date of determination
"Hazardous Material" means all or any of the following: (a) substances
that are defined or listed in, or otherwise classified pursuant to, any
Environmental Laws or regulations as "hazardous substances", "hazardous
materials", "hazardous wastes", "toxic substances" or any other formulation
intended to define, list or classify substances by reason of deleterious
properties such as ignitability, corrosivity, reactivity, carcinogenicity, or
toxicity; (b) oil, petroleum or petroleum derived substances, natural gas,
natural gas liquids or synthetic gas and drilling fluids, produced waters and
other wastes associated with the exploration, development or production of crude
oil, natural gas or geothermal resources; (c) any flammable substances or
explosives or any radioactive materials; and (d) asbestos in any form or
electrical equipment which contains any oil or dielectric fluid containing
polychlorinated biphenyls.
"Indebtedness", as applied to any Person, means without duplication: (a)
all indebtedness for borrowed money; (b) obligations under leases which in
accordance with GAAP constitute capital leases; (c) notes payable and drafts
accepted representing extensions of credit whether or not representing
obligations for borrowed money; (d) any obligation owed for all or any part of
the deferred purchase price of property or services if the purchase price is due
more than six months from the date the obligation is incurred or is evidenced by
a note or similar written instrument; and (e) all indebtedness secured by any
Lien on any property or asset owned or held by that Person regardless of whether
the indebtedness secured thereby shall have been assumed by that Person or is
non recourse to the credit of that Person.
"Intangible Assets" means all intangible assets (determined in
conformity with GAAP) including, without limitation, goodwill, Intellectual
Property, licenses, organizational costs, deferred amounts, covenants not to
compete, unearned income and restricted funds.
"Intellectual Property" means all present and future designs, patents,
patent rights and
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applications therefor, trademarks and registrations or applications therefor,
trade names, inventions, copyrights and all applications and registrations
therefor, software or computer programs, license rights, trade secrets, methods,
processes, know-how, drawings, specifications, descriptions, and all memoranda,
notes and records with respect to any research and development, whether now
owned or hereafter acquired, all goodwill associated with any of the foregoing,
and proceeds of all of the foregoing, including, without limitation, proceeds of
insurance policies thereon.
"Intercreditor Agreement" means the Intercreditor agreement between
Lender and Finova dated as of October 29, 1999.
"Interest Expenses" means, without duplication, for any period, the
following, for Borrower and its Subsidiaries each calculated for such period:
interest expenses deducted in the determination of net income (excluding (i) the
amortization of fees and costs with respect to the transactions contemplated by
this Agreement which have been capitalized as transaction costs in accordance
with the provisions of subsection 1.2; and (ii) interest paid in kind).
"Inventory" means all inventory (as defined in the UCC) including,
without limitation, finished goods, raw materials, work in process and other
materials and supplies used or consumed in a Person's business, and goods which
are returned or repossessed.
"IRC" means the Internal Revenue Code of 1986, as amended from time to
time, and any successor statute and all rules and regulations promulgated
thereunder.
"Lender" means BHC Interim Funding, L.P. together with its successors
and permitted assigns pursuant to subsection 8.1.
"Liabilities" shall have the meaning given that term in accordance with
GAAP and shall include Indebtedness.
"Lien" means any lien, mortgage, pledge, security interest, charge or
encumbrance of any kind, whether voluntary or involuntary, (including any
conditional sale or other title retention agreement. any lease in the nature
thereof, and any agreement to give any security interest).
"Loan Documents" means this Agreement, the Term Note, the Intercreditor
Agreement and all other instruments, documents and agreements executed by or on
behalf of Borrower and its Subsidiaries and Finantra and its Subsidiaries and
delivered concurrently herewith or at any time hereafter to or for Lender in
connection with the Term Loan, and other transactions contemplated by this
Agreement, all as amended, restated, supplemented or modified from time to time
"Loan Party" means Finantra and its Subsidiaries and includes Borrower,
each of Borrower's Subsidiaries, and any other Person (other than Lender) which
is or becomes a party to any Loan Document.
"Material Adverse Effect" means a material adverse effect upon (a) the
business, operations, prospects, properties, assets or condition (financial or
otherwise) of Borrower and its Subsidiaries taken as a whole or (b) the ability
of any Loan Party to perform its obligations
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under any Loan Document to which it is a party or Lender to enforce or collect
any of the Obligations.
"Maturity Date" means October 24. 2000.
"Maximum Rate" has the meaning assigned to that term in subsection
2.2(c).
"Obligations" means all obligations, liabilities and indebtedness of
every nature of each Loan Party from time to time owed to Lender under the Loan
Documents including the principal amount of the Term Loan, all debts, claims and
indebtedness (whether incurred before or after the Termination Date), accrued
and unpaid interest and all fees, costs and expenses, whether primary,
secondary, direct, contingent, fixed or otherwise, heretofore, now and/or from
time to time hereafter owing, due or payable including, without limitation, all
interest, fees, costs and expenses accrued or incurred after the filing of any
petition under any bankruptcy or insolvency law.
"Offered Shares" has the meaning assigned to that term in subsection
5.17.
"Offering Price" has the meaning assigned to that term in subsection
5.17.
"Parent" means Finantra Capital, Inc. a Delaware corporation and the
parent of Borrowers.
"Permitted Encumbrances" means the following types of Liens: (a) Liens
(other then Liens relating to Environmental Claims or ERISA for taxes,
assessments or other governmental charges not yet due and payable; (b) statutory
Liens of landlords, carriers, warehousemen, mechanics, materialmen and other
similar liens imposed by law, which are incurred in the ordinary course of
business for sums not more than thirty (30) days delinquent; (c) Liens (other
than any Lien imposed by ERISA) incurred or deposits made in the ordinary course
of business in connection with workers' compensation, unemployment insurance and
other types of social security, statutory obligations, surety and appeal bonds,
bids, leases, government contracts, trade contracts, performance and
return-of-money bonds and other similar obligations (exclusive of obligations
for the payment of borrowed money); (d) easements, rightsof-way, restrictions,
and other similar charges or encumbrances not interfering in any material
respect with the ordinary conduct of the business of Borrower or any of its
Subsidiaries; (e) Liens in favor of Lender; (f) Liens in favor of a seller of
Equipment to secure purchase money financing of such Equipment; and (g) Liens
set forth on Schedule 1.1 (A).
"Person" means and includes natural persons, corporations, limited
partnerships, general partnerships, limited liability companies, joint stock
companies, joint ventures, associations, companies, trusts, banks, trust
companies, land trusts, business trusts or other organizations, whether or not
legal entities, and governments and agencies and political subdivisions thereof.
"Pro Forma" means the unaudited consolidated and consolidating balance
sheet of Finantra and its Subsidiaries as of the Closing Date after giving
effect to the transactions contemplated by this Agreement. The Pro Forma and the
consolidated and consolidating balance sheet of Finantra and its Subsidiaries as
of the Closing Date are annexed hereto as Schedule 1.1 (B).
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"Proposed Transferee" means a person or group of persons, as defined in
Section 1 3(d)(3) of the Securities Exchange Act of 1934, as amended to whom
Common Stock is proposed to be transferred.
"Restricted Junior Payment" means: (a) any dividend or other
distribution, direct or indirect, on account of any shares of any class of stock
of Borrower or any of its Subsidiaries now or hereafter outstanding, except a
dividend payable solely with shares of the class of stock on which such dividend
is declared, or a dividend paid to Borrower by a wholly-owned Subsidiary of
Borrower; (b) any payment or prepayment of principal of, premium, if any, or
interest on, or any redemption, conversion, exchange, retirement, defeasance,
sinking fund or similar payment, purchase or other acquisition for value, direct
or indirect, of any Subordinated Debt or any shares of any class of stock of
Borrower or any of its Subsidiaries now or hereafter outstanding, or the
issuance of a notice of an intention to do any of the foregoing; (c) any payment
made to retire, or to obtain the surrender of, any outstanding warrants, options
or other rights to acquire shares of any class of stock of Borrower or any of
its Subsidiaries now or hereafter outstanding; and (d) any payment by Borrower
or any of its Subsidiaries of any management, consulting or similar fees to any
Affiliate, whether pursuant to a management agreement or otherwise, except for
bona fide and reasonable compensation for services actually rendered.
"Sellers" has the meaning assigned to that term in the preamble to this
Agreement.
"Shares" has the meaning assigned to that term in the preamble to this
Agreement.
"Subordinated Debt" means any Indebtedness of Borrower or any of its
Subsidiaries, with respect to which the right of the holder of such Indebtedness
to receive any payments thereon is subordinated to the prior right of the holder
to receive payment in full of all Obligations, pursuant to a subordination
agreement between the Lender and such holder.
"Subsidiary" means, with respect to any Person, any corporation,
association or other business entity of which more than fifty percent (50%) of
the total voting power of shares of stock (or equivalent ownership or
controlling interest) entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by that Person or
one or more of the other subsidiaries of that Person or a combination thereof.
"TAC" means Travelers Acceptance Corporation, a California corporation,
and a Subsidiarv of the Rnrrnwer
"Term Loan" means the unpaid balance of the term loan made pursuant to
subsection 2.1.
"Term Note" means the Senior Secured Term Note of Borrower in a form
reasonably acceptable to Lender, issued pursuant to subsection 2.1.
"TIC" means Travelers Investment Corporation, a California corporation.
"TIC Common Stock" means 18,931 shares of common stock of TIC
comprising 4.28%
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of the authorized share capital of TIC, of which 442,312 shares are issued and
outstanding on the Closing Date.
"TIC Warrants" has the meaning assigned to that term in the preamble to
this Agreement.
"TLC" means Travelers Leasing Corporation, a Washington corporation,
and a Subsidiary of the Borrower.
"Trace" means Trace Credit Services, Inc., a California corporation,
and a Subsidiary of the Borrower.
"WCC" means the Uniform Commercial Code as in effect on the date hereof
in the State of New York' as amended from time to time, and any successor
statute.
"Warrants" has the meaning assigned to that term in the preamble to
this Agreement. Each Warrant issued by TIC and Finantra to Lender which will be
in the form of Exhibit A hereto.
1.2 Accounting Terms. For purposes of this Agreement, all accounting
terms not otherwise defined herein shall have the meanings assigned to such
terms in conformity with GAAP.
Financial statements and other information furnished to Lender pursuant to
subsection 5.1 shall be prepared in accordance with GAAP (as in effect at the
time of such preparation) on a consistent basis.
1.3 Other Definitional Provisions. References to "Sections",
"subsections", "Exhibits" and "Schedules" shall be to Sections, subsections,
Exhibits and Schedules, respectively, of this Agreement unless otherwise
specifically provided. Any of the terms defined in subsection l . l may, unless
the context otherwise requires, be used in the singular or the plural depending
on the reference. In this Agreement, words importing any gender include the
other genders; the words "including," "includes" and "include" shall be deemed
to be followed by the words "without limitation"; references to agreements and
other contractual instruments shall be deemed to include subsequent amendments,
assignments, and other modifications thereto, but only to the extent such
amendments, assignments and other modifications are not prohibited by the terms
of this Agreement or any other Loan Document; references to Persons include its
respective permitted successors and assigns or, in the case of governmental
Persons, Persons succeeding to the relevant functions of such Persons; and all
references to statutes and related regulations shall include any amendments of
same and any successor statutes and regulations.
SECTION 2 TERM LOAN AND COLLATERAL
2.1 Term Loan. Subject to the terms and conditions of this Agreement
and in reliance upon the representations and warranties of Borrower set forth
herein and in the other Loan Documents, Lender agrees to lend to Borrower, on
the Closing Date, a Term Loan in the original principal amount of Three Million
Six Hundred Fifty Thousand Dollars ($3,650,000). The Term Loan shall be funded
in full on the Closing Date. Amounts borrowed under this subsection 2.1 and
repaid, may not be reborrowed without Lender's written consent. The Term Loan
shall be
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repaid on October 24, 2000 (the "Maturity Date"). On the Closing
Date, Borrower shall execute and deliver to Lender with appropriate insertions,
a Term Note to evidence the Term Loan.
2.2 Interest.
A. Rate of Interest. The Term Loan and all other Obligations
shall bear interest from the Closing Date to, and including the Maturity Date,
at the rate of thirteen and one-half percent (13.5%) per annum.
After the occurrence and during the continuance of an Event of
Default, at Lender's option, the Term Loan and all other Obligations shall bear
interest at a rate per annum equal to 15% for 90 days and thereafter 18% (the
"Default Rate").
B. Computation and Payment of Interest. Interest on the Term
Loan and all other Obligations shall be computed on the daily principal balance
on the basis of a 360 day year for the actual number of days elapsed in the
period during which it accrues. In computing interest on any Loan, the date of
funding of the Loan shall be included and the date of payment of such Loan shall
be excluded. Interest on the Term Loan and all other Obligations shall be
payable to Lender monthly in arrears on the first day of each month by automatic
wire transfer to Lender's bank account, and on the date of any prepayment of
Loans, and at maturity, whether by acceleration or otherwise. As of the Closing
Date, the amount of each monthly installment of interest shall equal $39,375.0,
which amount is subject to change (i) in the event of any prepayment of
principal ofthe Term Loan or the addition to the unpaid principal balance of the
Term Loan of any other Obligations, and (ii) under the circumstances set forth
in the second sentence of Section 2.2(A) hereof.
C. Interest Laws. Notwithstanding any provision to the
contrary contained in this Agreement or any other Loan Document, Borrower shall
not be required to pay, and Lender shall not be permitted to collect, any amount
of interest in excess of the maximum amount of interest permitted by applicable
law ("Excess Interest"). If any Excess Interest is provided for or determined by
a court of competent jurisdiction to have been provided for in this Agreement or
in any other Loan Document, then in such event: (1) the provisions of this
subsection shall govern and control; (2) neither Borrower nor any other Loan
Party shall be obligated to pay any Excess Interest; (3) any Excess Interest
that Lender may have received hereunder shall be, at Lender's option, (a)
applied as a credit against the outstanding principal balance of the Obligations
or accrued and unpaid interest (not to exceed the maximum amount permitted by
law), (b) refunded to the payer thereof, or (c) any combination of the
foregoing; (4) the interest rate(s) provided for herein shall be automatically
reduced to the maximum lawful rate allowed from time to time under applicable
law (the "Maximum Rate"), and this Agreement and the other Loan Documents shall
be deemed to have been and shall be, reformed and modified to reflect such
reduction; and (5) neither Borrower nor any Loan Party shall have any action
against Lender for any damages arising out of the payment or collection of any
Excess Interest. Notwithstanding the foregoing, if for any period of time
interest on any Obligations is calculated at the Maximum Rate rather than the
applicable rate under this Agreement, and thereafter such applicable rate
becomes less than the Maximum Rate, the rate of interest payable on such
Obligations shall remain at the Maximum Rate until Lender shall have received
the amount of interest which Lender would have received during such period on
such Obligations had the rate of interest not been limited to the Maximum Rate
during such period.
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2.3 Fees.
A. Transaction Fee. Borrower shall pay to Lender on the
Closing Date a transaction fee in the amount of One Hundred Twenty Seven
Thousand Five Hundred Dollars ($127,750) less the sum of Seventy Five Thousand
Dollars ($75,000) previously paid to Lender.
B. Extension Fee. Borrower shall pay to lender on July 28,
2000, an extension fee of One Hundred Eighty Two Thousand Five Hundred Dollars
($ 182,500) if the Obligations have not been repaid, in full, on or before that
date.
C. Other Fees and Expenses. Borrower shall pay to Lender, for
its own account, all charges for returned items and all other bank charges
incurred by Lender, as well as wire transfer charges incurred by Lender for each
wire transfer made under this Agreement.
2.4 Payments and Prepayments.
A. Manner and Time of Pavment. All payments made by Borrower
with respect to the Obligations shall be made without deduction, defense, setoff
or counterclaim.
B. Payments on Business Davs. Whenever any payment to be made
hereunder shall be stated to be due on a day that is not a Business Day, the
payment may be made on the next succeeding Business Day and such extension of
time shall be included in the computation of the amount of interest or fees due
hereunder.
C. Voluntary Prepayment. Borrower shall have the right to
prepay, without premium or penalty, at any time or times after the date hereof,
all or any portion of the outstanding Term Loan, with interest to date of
Payment.
D. Mandatory Repayment. In the event Finantra or any of its
Subsidiaries (including, but not limited to Borrower) (i) procures financing
aggregating $10,000,000 or more (the "Excess Proceeds") from any source, whether
in the form of debt or equity, or (ii) sells any of its assets, or the assets of
any of its Subsidiaries including, but not limited to, the Borrower's are sold,
out of the ordinary course of business, or (iii) sells any of its capital stock
or that of any of its Subsidiaries, the Excess Proceeds shall be paid by
Finantra or any of its Subsidiaries or Borrower or any of its Subsidiaries to
Lender to repay or reduce the Term Loan, in whole or in part. All payments shall
first be applied to interest and then to principal.
2.5 Grant of Security Interest. To secure the payment and performance
of the Obligations, including all renewals, extensions, restructurings and
refinancings of any or all of the Obligations, Borrower hereby grants to Lender
a continuing Lien in and to all right, title and interest of Borrower in the
following property of Borrower, whether now owned or existing or hereafter
acquired or arising and regardless of where located (all being collectively
referred to as the "Collateral"): (A) Accounts, and all guaranties and security
therefor, and all goods and rights represented thereby or arising therefrom
including the rights of stoppage in transit, replevin and reclamation; (B)
Inventory; (C) general intangibles (as defined in the WCC); (D) documents (as
defined in the UCC) or other receipts covering, evidencing or representing
goods; (E) instruments (as defined in the WCC); (F) chattel paper (as defined in
the WCC); (G)
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Equipment;(H) Intellectual Property; (I) all deposit accounts of Borrower
maintained with any bank or financial institution; (J) all cash and other monies
and property of Borrower in the possession or under the control of Lender; (K)
all books, records, ledger cards, files, correspondence, computer programs,
tapes, disks and related data processing software that at any time evidence or
contain information relating to any of the property described above or are
otherwise necessary or helpful in the collection thereof or realization thereon;
and (L) proceeds of all or any of the property described above, including,
without limitation, the proceeds of any insurance policies covering any of the
above described property.
2.6 Preservation of Collateral and Perfection of Securitv Interests
Therein. Borrower shall, at Lender's request, at any time and from time to time,
execute and deliver to Lender such financing statements, documents and other
agreements and instruments (and pay the cost of filing or recording the same in
all public offices deemed reasonably necessary or desirable by Lender) and do
such other acts and things as Lender may deem necessary or desirable in order to
establish and maintain a valid, attached and perfected security interest in the
Collateral in favor of Lender (free and clear of all other liens, claims and
rights of third parties whatsoever, whether voluntarily or involuntarily
created, except Permitted Encumbrances) to secure payment of the Obligations,
and in order to facilitate the collection of the Collateral. Borrower
irrevocably hereby make, constitute and appoint Lender (and all Persons
designated by Lender for that purpose) as Borrower' true and lawful attorney and
agent-in-fact to execute such financing statements, documents and other
agreements and instruments and do such other acts and things as may be necessary
to preserve and perfect Lender's security interest in the Collateral. Borrower
further agree that a carbon, photographic, photostatic or other reproduction of
this Agreement or of a financing statement shall be sufficient as a financing
statement.
2.7 Possession of Collateral and Related Matters. Until an Event of
Default has occurred and is continuing, Borrower shall have the right, except as
otherwise provided in this Agreement, in the ordinary course of Borrower'
business, to sell, lease or furnish under contracts of service any of Borrower's
Inventory nominally held by Borrower for any such purpose, provided, however,
that a sale in the ordinary course of business shall not include any transfer or
sale in satisfaction, partial or complete, of a debt owed by Borrower.
SECTION 3 CONDITIONS TO TERM LOAN
3.1 Conditions to Term Loan. The obligation of Lender to make the Temm
Loan on the Closing Date is subject to satisfaction of all of the conditions set
forth below.
A. Closing Deliveries. Lender shall have received, in form and
substance satisfactory to Lender, all documents, instruments and information
identified on Schedule 3.1 (A) and all other agreements, notes, certificates,
orders, authorizations, financing statements, mortgages and other documents
which Lender may at any time reasonably request.
B. Security Interests; Guarantees; Stock Pledaes. Lender shall
have received satisfactory evidence that all security interests and liens
granted to Lender pursuant to this Agreement or the other Loan Documents have
been duly perfected and constitute liens on the Collateral, subject only to
Permitted Encumbrances. Lender shall have received instruments of secured
guaranty, in form and substance satisfactory to Lender, from the Parent and from
each
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of the Borrower's Subsidiaries. The Parent shall have pledged and collaterally
assigned to the Lender all of the issued and outstanding shares of capital stock
of the Borrower owned by the Parent, the Borrower shall have pledged and
collaterally assigned to the Lender all of the issued and outstanding shares of
capital stock of each of the Borrower's Subsidiaries owned by the Borrower, in
each case pursuant to a Stock Pledge Agreement in form and substance
satisfactory to the lender, and in connection therewith, the Lender (or its
agent) shall have received delivery of the stock certificates evidencing such
shares, together with appropriate stock powers, executed in blank.
C. Representations and Warranties. The representations and
warranties contained herein and in the Loan Documents shall be true, correct and
complete in all material respects on and as of the Closing Date to the same
extent as though made on and as of that date, except for any representation or
warranty limited by its terms to a specific date.
D. Fees. Borrower shall have paid the fee payable on the
Closing Date referred to in subsection 2.3(A).
E. No Default. No event shall have occurred and be continuing
or would result from the consummation of the requested borrowing that would
constitute an Event of Default or a Default.
F. Performance of Agreements. Each Loan Party shall have
performed in all material respects all agreements and satisfied all conditions
which any Loan Document provides shall be performed by it on or before the
Closing Date.
G. No Prohibition. No order, judgment or decree of any court,
arbitrator or governmental authority shall purport to enjoin or restrain Lender
from making the Term Loan.
H. No Litigation. There shall not be pending or, to the
knowledge of Borrower, threatened, any action, charge, claim, demand, suit,
proceeding, petition, governmental investigation or arbitration by, against or
affecting Borrower or any of its Subsidiaries or any property of Borrower or any
of its Subsidiaries that has not been disclosed by Borrower in writing, and
there shall have occurred no development in any such action, charge, claim,
demand, suit, proceeding, petition, governmental investigation or arbitration
that. in the opinion of Lender, would reasonably be expected to have a Material
Adverse Effect.
I. Warrants. (i) TIC shall have issued and delivered to the
Lender the certificate with respect to the TIC Warrants in the form of Exhibit
A, and (ii) Finantra shall have issued and delivered to the Lender the
certificate with respect to the Finantra Warrants in the form of Exhibit A.
J. Confession of Judgment. Borrower shall have delivered to
Lender a Confession of Judgment in the form of Exhibit B hereto.
K. Acquisition Consummated. The acquisition by the Borrower
from the Sellers of the Shares shall have occurred, the Stock Purchase Agreement
shall have been consummated in accordance with its terms, and all of the
conditions precedent to its effectiveness shall have occurred.
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X. Xxxxxxx Subordination. Sellers shall have subordinated in
favor of Lender, the purchase money promissory note of $5,000,000 made and
delivered to them by TAC, on terms and conditions acceptable to Lender.
SECTION 4 BORROWER'S REPRESENTATIONS AND WARRANTIES
To induce Lender to enter into this Agreement, and to make the Term
Loan, Borrower represent and warrant to Lender that the following statements are
true, correct and complete. Such representations and warranties, and all other
representations and warranties made by the Borrower, shall survive the execution
and delivery of this Agreement and the closing contemplated hereby:
4.1 Organization, Powers, Capitalization.
A. Organization and Powers. Borrower and each of its
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation and qualified to do
business in all states where such qualification is required except where failure
to be so qualified could not be reasonably expected to have a Material Adverse
Effect. Borrower and each of its Subsidiaries have all requisite corporate power
and authority to own and operate its properties, to carry on its business as now
conducted and proposed to be conducted and to enter into each Loan Document.
B. Capitalization. The authorized capital stock of Borrower
and each of its Subsidiaries is as set forth on Schedule 4.1 (B). All issued and
outstanding shares of capital stock of Borrower and each of its Subsidiaries are
duly authorized and validly issued, fully paid, nonassessable, free and clear of
all Liens other than those in favor of Lender and Finova and the Sellers, except
that the Lien in favor of the Sellers is subordinate to that of Lender and
Finova, and such shares were issued in compliance with all applicable state and
federal laws concerning the issuance of securities. No shares of the capital
stock of Borrower and each of its Subsidiaries, other than those described
above, are issued and outstanding. There are no preemptive or other outstanding
rights, options, warrants, conversion rights or similar agreements or
understandings for the purchase or acquisition from Borrower and each of its
Subsidiaries, of any shares of capital stock or other securities of any such
entity except as set forth on Schedule 4.1 (B).
4.2 Authorization of Borrowing No Conflict. Borrower has the corporate
power and authority to incur the Obligations and to grant security interests in
the Collateral. On the Closing Date, the execution, delivery and performance of
the Loan Documents by Borrower and each of its Subsidiaries signatory thereto
will have been duly authorized by all necessary corporate and shareholder
action. The execution, delivery and performance by Borrower and each of its
Subsidiaries of each Loan Document to which it is a party and the consummation
of the transactions contemplated by this Agreement and the other Loan Documents
by Borrower and each of its Subsidiaries do not contravene and will not be in
contravention of any applicable law, the corporate charter or bylaws of Borrower
and each of its Subsidiaries or any agreement or order by which they or any of
its property is bound. This Agreement is, and the other Loan Documents,
including the Term Note, when executed and delivered, will be the legally valid
and binding obligations of Borrower and its Subsidiaries (to the extent a party
thereto), each
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enforceable against the Borrower and its Subsidiaries (to the extent a party
thereto), as applicable, in accordance with its respective terms.
4.3 Financial Condition. All financial statements concern~ng Finantra
and its Subsidiaries which have been or will hereafter be furnished by Finantra
and its Subsidiaries to Lender pursuant to this Agreement have been or will be
prepared in accordance with GAAP consistently applied throughout the periods
involved (except as disclosed therein); do or will present fairly the financial
condition of the corporations covered thereby as at the dates thereof and the
results of their operations for the periods then ended, and do and will
accurately reflect the financial condition of Finantra and its Subsidiaries, and
there has been no event or development which has had, or is reasonably likely to
have a Material Adverse Effect. The Pro Forma was prepared by Finantra based on
the unaudited consolidated balance sheet of Finantra dated SePtember 30, 1999.
4.4 Indebtedness and Liabilities. As of the Closing Date, neither
Borrower nor any of its Subsidiaries has (a) any Indebtedness except as
reflected on the Pro Forma and the most recent financial statements delivered to
Lender; or (b) any Liabilities other than as reflected on the Pro Forma, the
most recent financial statements delivered to Lender or as incurred in the
ordinary course of business following the date of the most recent financial
statements delivered to Lender.
4.5 Account Warranties. Borrower represents, warrants and covenants as
to each Account arising from the sale of Inventory or from services rendered,
that, at the time of its creation, the Account is a valid, bona fide account,
representing an undisputed indebtedness incurred by the named account debtor for
goods actually sold and delivered or for services completely rendered; there are
no setoffs, offsets or counterclaims, genuine or otherwise, against the Account
(other than customary prompt payment discounts and Borrower' standard warranty
policies); the Account does not represent a sale to an Affiliate or a
consignment, sale or return or a xxxx and hold transaction; no agreement exists
permitting any deduction or discount (other than the discount stated on the
invoice); Borrower are the lawful owners of the Account and have the right to
assign the same to Lender; the Account is free of all security interests, liens
and encumbrances other than those in favor of Lender, Finova and the Sellers;
and the Account is due and payable in accordance with its terms.
4.6 Names. Schedule 4.6 sets forth all names, trade names, fictitious
names and business names under which Borrower currently conduct business or have
at any time during the past five years conducted business.
4.7 Locations; FEIN. Schedule 4.7 sets forth the location of Borrower'
principal place of business, the location of Borrower' books and records, the
location of all other of fices of Borrower and all Collateral locations, and
such locations are Borrower' sole locations for its business and the Collateral.
Borrower' federal employer identification numbers are set forth on the signature
page hereof.
4.8 Title to Properties; Liens. Borrower and each of its Subsidiaries
have good, sufficient and legal title, subject to Permitted Encumbrances, to all
its respective material properties and assets. Except for Permitted
Encumbrances, all such properties and assets are free and clear of Liens. To the
best knowledge of Borrower after due inquiry, there are no actual,
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threatened or alleged defaults with respect to any leases of real property under
which Borrower or any of its Subsidiaries are lessee or lessor which would have
a Material Adverse Effect. The Liens granted to Lender under Section 2.5 are
perfected security interests subject to no senior security interest except for
the lien in favor of Finova Capital Corporation.
4.9 Litigation: Adverse Facts. There are no judgments outstanding
against any Loan Party or affecting any property of any Loan Party nor is there
any action, charge, claim, demand, suit, proceeding, petition, govemmental
investigation or arbitration now pending or, to the best knowledge of Borrower
after due inquiry, threatened against or affecting any Loan Party or any
property of any Loan Party which could reasonably be expected to result in any
Material Adverse Effect. No Loan Party has received any opinion or memorandum or
legal advice from legal counsel to the effect that it is exposed to any
liability which could reasonably be expected to result in any Material Adverse
Effect.
4.10 Payment of Taxes. All material tax returns and reports of Borrower
and each of its Subsidiaries required to be filed by any of them have been
timely filed, and all taxes, assessments, fees and other governmental charges
upon such Persons and upon its respective properties, assets, income and
franchises which are shown on such returns as due and payable have been paid
when due and payable. As of the Closing Date, none of the United States income
tax returns of Borrower or any of its Subsidiaries are under audit. No tax liens
have been filed or are being asserted with respect to any such taxes. The
charges, accruals and reserves on the books of Borrower and each of its
Subsidiaries in respect of any taxes or other govemmental charges are in
accordance with GAAP.
4.11 Performance of Agreements. None of the Loan Parties and none of
its respective Subsidiaries is in default in the perfommance, observance or
fulfillment of any of the obligations, covenants or conditions contained in any
contractual obligation of any such Person, and no condition exists that, with
the giving of notice or the lapse of time or both, would constitute such a
default, which in any case could reasonably be expected to have a Material
Adverse Effect.
4.12 Employee Benefit Plans. Borrower, each of its Subsidiaries and
each ERISA Affiliate is in compliance in all material respects with all
applicable provisions of ERISA, the IRC and all other applicable laws and the
regulations and interpretations thereof with respect to all Employee Benefit
Plans. No material liability has been incurred by Borrower, any of its
Subsidiaries or any ERISA Affiliate which remains unsatisfied for any funding
obligation, taxes or penalties with respect to any Employee Benefit Plan.
4.13 Intellectual Property. Borrower and each of its Subsidiaries owns,
is licensed to use or otherwise has the right to use, all Intellectual Property
used in or necessary for the conduct of its business as currently conducted, and
all such Intellectual Property is identified on Schedule 4.13.
4.14 Broker's Fees. No broker's or finder's fee or commission will be
payable by reason of any action of Borrower with respect to any of the
transactions contemplated hereby.
4.15 Environmental Compliance. Borrower and each of its Subsidiaries
has been and is currently in compliance in all material respects with all
applicable Environmental Laws,
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including obtaining and maintaining in effect all material permits, licenses or
other authorizations required by applicable Environmental Laws. There are no
claims, liabilities, investigations, litigation, administrative proceedings,
judgments or orders relating to any Hazardous Materials asserted or, to
Borrower' knowledge, threatened against Borrower or any of its Subsidiaries or
relating to any real property currently or formerly owned, leased or operated by
Borrower or any of its Subsidiaries.
4.16 Solvency. After giving effect to the transactions contemplated by
the Loan Documents, and, as of, from and after the date of this Agreement,
Borrower: (a) owns and will own assets the fair salable value of which are (i)
greater than the total amount of its liabilities (including contingent
liabilities) and (ii) greater than the amount that will be required to pay the
probable liabilities of Borrower as they mature; (b) has capital that is not
unreasonably small in relation to its business as presently conducted or any
contemplated or undertaken transaction; and (c) does not intend to incur and
does not believe that it will incur debts beyond its ability to pay such debts
as they become due. There is no material fact known to Borrower that has or
could have a Material Adverse Effect and that has not been fully disclosed
herein or in such other documents, certificates and statements fumished to
Lender for use in connection with the transactions contemplated hereby.
4.17 Disclosure. No representation or warranty of Borrower or any of
its Subsidiaries contained in this Agreement, the financial statements, the
other Loan Documents, or any other document, certificate or written statement
furnished to Lender by or on behalf of any such Person for use in connection
with the Loan Documents contains any untrue statement of a material fact or
omitted, omits or will omit to state a material fact necessary in order to make
the statements contained herein or therein not misleading in light of the
circumstances in which the same were made. The Projections and pro forma
financial information contained in such materials are based upon good faith
estimates and assumptions believed by such Persons to be reasonable at the time
made, it being recognized by Lender that such projections as to future events
are not to be viewed as facts and that actual results during the period or
periods covered by any such projections may differ from the projected results.
There is no material fact known to Borrower that has had or will have a Material
Adverse Effect and that has not been disclosed herein or in such other
documents, certificates and statements fumished to Lender for use in connection
with the transactions contemplated hereby.
4.18 Insurance. Borrower and each of its Subsidiaries maintains
insurance policies for public liability, property damage for its business and
properties, product liability, and business interruption, of types and in
amounts customarily maintained by comparable businesses; and no notice of
cancellation has been received with respect to such policies and Borrower and
each of its Subsidiaries is in compliance with all conditions contained in such
policies.
4.19 Compliance with Laws. Neither Borrower nor any of its Subsidiaries
is in violation of any law, ordinance, rule, regulation, order, policy,
guideline or other requirement of any domestic or foreign government or any
instrumentality or agency thereof, having jurisdiction over the conduct of its
business or the ownership of its properties, including, without limitation, any
violation relating to any use, release, storage, transport or disposal of any
Hazardous Material, which violation would subject Borrower or any of its
Subsidiaries, or any of its respective officers to criminal liability or have a
Material Adverse Effect and no notice of any such violation has been received.
-16-
4.20 Bank Accounts. Schedule 4.20 sets forth the account numbers and
locations of all bank accounts of Borrower and its Subsidiaries.
4.21 Subsidiaries. Borrower has no Subsidiaries other than as set forth
on Schedule 4.21.
4.22 Employee Matters. Except as set forth on Schedule 4.22, (a)
neither Borrower, any of its Subsidiaries nor any of such Loan Party's employees
is subject to any collective bargaining agreement, (b) no petition for
certification or union election is pending with respect to the employees of
Borrower or any of its Subsidiaries and no union or collective bargaining unit
has sought such certification or recognition with respect to the employees of
any Loan Party and (c) there are no strikes, slowdowns, work stoppages or
controversies pending or, to the best knowledge of Borrower after due inquiry,
threatened between Borrower or any of its Subsidiaries and its respective
employees, other than employee grievances arising in the ordinary course of
business which could reasonably be expected to have, either individually or in
the aggregate, a Material Adverse Effect. Except as set forth on Schedule 4.22,
neither Borrower nor any of its Subsidiaries is subject to an employment
contract.
4.23 Governmental Regulation. Neither Borrower nor any of its
Subsidiaries is, or, after giving effect to any loan, will be, subject to
regulation under the Public Utility Holding Company Act of 1935, the Federal
Power Act or the Investment Company Act of 1940 or to any federal or state
statute or regulation limiting its ability to incur indebtedness for borrowed
money.
4.24 Receivables and Pavables. As of October 1, 1999, the Borrower and
its Subsidiaries' receivables and payables were as set forth in detail on
Schedule 4.24, all of which are respectively collectible and payable in the
ordinary course of business in accordance with the usual terms and conditions of
the Borrower and its Subsidiaries.
SECTION 5 AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, so long as any of the Commitments
hereunder shall be in effect and until payment in full of all Obligations unless
Lender shall otherwise give its prior written consent, Borrower shall perform,
and shall cause each of its Subsidiaries to perform, all covenants in this
Section 5 aDDlicable to such Person.
5.1 Financial Statements and Other Reports. Borrower will maintain, and
cause each of its Subsidiaries and its Parent to maintain, a system of
accounting established and administered in accordance with sound business
practices to permit preparation of financial statements in conformity with GAAP.
Borrower will deliver to Lender the financial statements and other reports
described below.
A. Monthly Financials. As soon as available and in any event
within twenty (20) days after the end of each month, Borrower will deliver (1)
the consolidated and consolidating balance sheet of Borrower and its
Subsidiaries and the consolidated and consolidating balance sheet of Parent and
its Subsidiaries as at the end of such month and the related consolidated and
consolidating statements of income, stockholders' equity and cash flow
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for such month and for the period from the beginning of the then current Fiscal
Year to the end of such month, and (2) a schedule of the outstanding
Indebtedness for borrowed money of Borrower and its Subsidiaries and Parent and
its Subsidiaries describing in reasonable detail each such debt issue or loan
outstanding and the principal amount and amount of accrued and unpaid interest
with respect to each such debt issue or loan.
B. Quarterly Financials. As soon as available and in any event
within forty-five (45) days after the end of each quarter of each Fiscal Year,
Borrower will deliver the consolidated and consolidating balance sheet of
Borrower and its Subsidiaries and the consolidated and consolidating balance of
Parent and its Subsidiaries as at the end of such period and the related
consolidated and consolidating statements of income, stockholders' equity and
cash flow for such quarter of such Fiscal Year and for the period from the
beginning of the then current Fiscal Year to the end of such quarter of such
Fiscal Year.
C. Year-End Financials. As soon as available and in any event
within ninety (90) days after the end of each Fiscal Year, Borrower will deliver
(1) the consolidated balance sheet of Borrower and its Subsidiaries and the
consolidated and consolidating balance of Parent and its Subsidiaries as at the
end of such year and the related consolidated statements of income,
stockholders' equity and cash flow for such Fiscal Year; (2) a schedule of the
outstanding Indebtedness of Borrower and its Subsidiaries and Parent and its
Subsidiaries describing in reasonable detail each such debt issue or loan
outstanding and the principal amount and amount of accrued and unpaid interest
with respect to each such debt issue or loan; and (3) a report with respect to
the financial statements from a firm of independent certified public accountants
selected by Borrower, and reasonably acceptable to Lender, which report shall be
unqualified as to going concern and scope of audit of Borrower and its
Subsidiaries and the consolidated and consolidating balance of Parent and its
Subsidiaries and shall state that (a) such consolidated financial statements
present fairly the consolidated financial position of Borrower and its
Subsidiaries and the consolidated and consolidating balance of Parent and its
Subsidiaries as at the dates indicated and the results of their operations and
cash flow for the periods indicated in conformity with GAAP applied on a basis
consistent with prior years and (b) that the examination by such accountants in
connection with such consolidated financial statements has been made in
accordance with generally accepted auditing standards; and (4) copies of the
consolidating financial statements of Borrower and its Subsidiaries and Parent
and its Subsidiaries, including (a) consolidating balance sheets of Borrower and
its Subsidiaries and the consolidated and consolidating balance of Parent and
its Subsidiaries as at the end of such Fiscal Year showing intercompany
eliminations and (b) related consolidating statements of earnings of Borrower
and its Subsidiaries and the consolidated and consolidating balance of Parent
and its Subsidiaries showing intercompany eliminations.
D. Accountants' Certification and Reports. Promptly upon
receipt thereof, Borrower will deliver copies of all significant reports
submitted to Borrower by independent public accountants in connection with each
annual, interim or special audit of the financial statements of Borrower made by
such accountants, including the comment letter submitted by such accountants to
management in connection with its annual audit.
E. Management Report. Together with each delivery of financial
statements of Borrower and its Subsidiaries pursuant to subdivisions (B) and (C)
of this subsection 51, Borrower will deliver a management report: (1) describing
the operations and financial condition
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of Borrower and its Subsidiaries and Parent and its Subsidiaries for the month
then ended and the portion of the current Fiscal Year then elapsed (or for the
Fiscal Year then ended in the case of year-end financials); (2) setting forth in
comparative form the corresponding figures for the corresponding periods of the
previous Fiscal Year; and (3) discussing the reasons for any significant
variations. The information above shall be presented in reasonable detail and
shall be certified on behalf of Borrower and Parent by the chief financial of
ficer or Chief Executive Of ficer of Borrower and Parent to the effect that such
information fairly presents the results of operations and financial condition of
Borrower and its Subsidiaries and Parent and its Subsidiaries as at the dates
and for the periods indicated.
F. Government Notices. Borrower will deliver to Lender
promptly after receipt copies of all notices, requests, subpoenas, inquiries or
other writings received from any governmental agency concerning any Employee
Benefit Plan, the violation or alleged violation of any Environmental Laws, the
storage, use or disposal of any Hazardous Material, the violation or alleged
violation of the Fair Labor Standards Act or Borrower's payment or non-payment
of any taxes including any tax audit.
G. Events of Default' etc. Promptly upon any officer of
Borrower obtaining knowledge of any of the following events or conditions,
Borrower shall deliver a certificate signed by Borrower's chief executive of
ficer specifying the nature and period of existence of such condition or event
and what action Borrower has taken, is taking and proposes to take with respect
thereto: (1 ) any condition or event that constitutes an Event of Default or
Default; (2) any notice of material default that any Person has given to
Borrower or any of its Subsidiaries or any other action taken with respect to a
claimed material default; or (3) any Material Adverse Effect.
H. Trade Names. Borrower and each of its Subsidiaries will
give Lender at least thirty (30) days' advance written notice of any change of
name or of any new trade name or fictitious business name. Borrower's use of any
trade name or fictitious business name will be in compliance with all laws
regarding the use of such names.
I. Locations. Borrower will give Lender at least thirty (30)
days advance written notice of any change in Borrower~s principal place of
business or any change in the location of its books and records or the
Collateral or of any new location for Its books and records or the Collateral.
J. Bank Accounts. Borrower will give Lender prompt notice of
any new bank accounts Borrower or any of its Subsidiaries intends to establish
prior to its opening same.
K. Litigation. Promptly upon any of ficer of Borrower or its
subsidiaries obtaining knowledge of( 1 ) the institution of any action, suit,
proceeding, governmental investigation or arbitration against or affecting any
Loan Party or any property of Borrower or any Subsidiary not previously
disclosed by Borrower to Lender or (2) any material development in any action,
suit, proceeding, governmental investigation or arbitration at any time pending
against or affecting Borrower or any Subsidiary or any property of Borrower or
any Subsidiary which could reasonably be expected to have a Material Adverse
Effect, Borrower will promptly give notice thereof to Lender and provide such
other information as may be reasonably available to them to enable Lender and
its counsel to evaluate such matter.
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L. Other Information. With reasonable promptness, Borrower
will deliver such other information and data as may be available to and
disclosable by Borrower with respect to any Loan Party, any Subsidiary of any
Loan Party or the Collateral as Lender may reasonably request from time to time.
5.2 Access to Accountants. Borrower authorizes Lender to discuss the
financial condition and financial statements of Borrower and its Subsidiaries
with Borrower's independent public accountants upon reasonable notice to
Borrower of its intention to do so, and authorizes such accountants to respond
to all of Lender's inquiries.
5.3 Inspection. Borrower shall permit Lender and any authorized
representatives designated by Lender to visit and inspect any of th properties
of Borrower or any of its Subsidiaries, including its financial and accounting
records, and in conjunction with such inspection, to make copies and take
extracts therefrom, and to discuss its affairs, finances and business with its
officers and independent public accountants, at such reasonable times during
normal business hours and as often as may be reasonably requested.
5.4 Collateral Records. Borrower shall keep full and accurate books and
records relating to the Collateral and shall xxxx such books and records to
indicate Lender's security interests in the Collateral.
5.5 Account Covenants: Verification. Borrower shall, at its own expense
use its best efforts to assure prompt payment of all amounts due or to become
due under the Accounts. Borrower will promptly notify Lender in the event that a
customer alleges any dispute or claim with respect to an Account or of any other
circumstances known to Borrower that may impair the validity or collectibility
of an Account. Lender shall have the right, at any time or times hereafter, to
verify the validity, amount or any other matter relating to an Account, by mail,
telephone or in person. After the occurrence of a Default or an Event of
Default, Borrower shall not, without the prior consent of Lender, adjust, settle
or compromise the amount or payment of any Account, or release wholly or partly
any customer or obligor thereof, or allow any credit or discount thereon.
5.6 Endorsement. Borrower hereby constitutes and appoints Lender and
all Persons designated by Lender for that purpose as Borrower's true and lawful
attomey-in-fact, with power to endorse Borrower's name to any check or other
instrument and all proceeds of Collateral that come into Lender's possession or
under Lender's control. Both the appointment of Lender as Borrower's attorney
and Lender's rights and powers are coupled with an interest and are irrevocable
until payment in full and complete performance of all of the Obligations.
5.7 Corporate Existence. Borrower will, and will cause each of its
Subsidiaries to, at all times preserve and keep in full force and effect its
corporate existence and all rights and franchises material to its business.
Borrower will promptly notify Lender of any change in its or its Subsidiaries'
ownership or corporate structure.
5.8 Payment of Taxes. Borrower will, and will cause each of its
Subsidiaries to, pay all taxes, assessments and other governmental charges
imposed upon it or any of its properties or assets or with respect to any of its
franchises, business, income or property before any penalty
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accrues thereon provided that no such tax need be paid if Borrower or one of its
Subsidiaries is contesting same in good faith by appropriate proceedings
promptly instituted and diligently conducted and if Borrower or such Subsidiary
has established appropriate reserves as shall be required in conformity with
GAAP.
5.9 Maintenance of Properties: Insurance. Borrower will maintain or
cause to be maintained in good repair, working order and condition all material
properties used in the business of Borrower and its Subsidiaries and will make
or cause to be made all appropriate repairs, renewals and replacements thereof.
Borrower will maintain or cause to be maintained, with financially sound and
reputable insurers, public liability and property damage insurance with respect
to its business and properties and the business and properties of its
Subsidiaries against loss or damage of the kinds customarily carried or
maintained by corporations of established reputation engaged in similar
businesses and in amounts reasonably acceptable to Lender. Borrower shall cause
Lender to be named as loss payee on all insurance policies relating to any
Collateral and as additional insured under all liability policies, in each case
pursuant to appropriate endorsements in form and substance reasonably
satisfactory to Lender and shall collaterally assign to Lender as security for
the payment of the Obligations all business interruption insurance of Borrower.
Borrower shall apply any proceeds received from any policies of insurance
relating to any Collateral (except to the extent of proceeds used to replace
Inventory) to the Obligations.
5.10 Compliance with Laws. Borrower will, and will cause each of its
Subsidiaries to, comply with the requirements of all applicable laws, rules,
regulations and orders of any governmental authority as now in effect and which
may be imposed in the future in all jurisdictions in which Borrower or any of
its Subsidiaries is now doing business or may hereafter be doing business, other
than those laws the noncompliance with which would not have a Material Adverse
Effect.
5.11 Further Assurances. Borrower shall, and shall cause each of its
Subsidiaries to, from time to time, execute such guaranties, financing or
continuation statements, documents, security agreements, reports and other
documents or deliver to Lender such instruments, certificates of title or other
documents as Lender at any time may reasonably request to evidence, perfect or
otherwise implement the guaranties and security for repayment of the Obligations
provided for in the Loan Documents, provided that Borrower shall not be required
to execute any document or take any action which would create an event of
default with respect to Borrower's Obligations to Finova or Sellers. At Lender's
request, Borrower shall cause any wholly-owned or substantially whollyowned
Subsidiaries of Borrower promptly to guaranty the Obligations and to grant to
Lender security interests in the real, personal and mixed property of such
Subsidiary to secure the Obligations.
5.12 Collateral Locations. Borrower will keep the Collateral at the
locations specified on Schedule 4.7. With respect to any new location (which in
any event shall be within the continental United States), Borrower will execute
such documents and take such actions as Lender deems necessary to perfect and
protect the security interests of the Lender in the Collateral prior to the
transfer or removal of any Collateral to such new location.
5.13 Bailees. If any Collateral is at any time in the possession or
control of any warehouseman, bailee or any of Borrower's agents or processors,
Borrower shall, upon the
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request of Lender, notify such warehouseman, bailee, agent or processor of the
security interests in favor of Lender created hereby and shall instruct such
Person to hold all such Collateral for Lender's account subject to Lender's
instructions.
5.14 Use of Proceeds and Marain Security. Borrower shall use the
proceeds of all Loans for proper business purposes (as described in the recitals
to this Agreement) consistent with all applicable laws, statutes, rules and
regulations. No portion of the proceeds of any Loan shall be used by Borrower or
any Or its Subsidiaries for the purpose of purchasing or carrying of margin
stock within the meaning of Regulation U, or in any manner that might cause the
borrowing or the application of such proceeds to violate Regulation T or
Regulation X or any other regulation of the Board of Governors of the Federal
Reserve System, or to violate the Exchange Act.
5.15 Observer Rights. Lender shall have the right (i) to appoint one
representative as an observer who shall have the right to receive notice of, and
attend any meetings of, the Board of directors and Executive Committees of the
Borrower and (ii) to receive on a timely basis, copies of all written
information provided to the Board of Directors or Executive Committee of
Borrower.
5.16 Financial Covenants. Borrower shall maintain and keep in full
force and effect, on a consolidated basis with its Subsidiaries, each of the
financial covenants set forth below. The calculation and determination of each
such financial covenant, and all accounting terms contained therein, shall be so
calculated and construed in accordance with GAAP, applied on a basis consistent
with the financial statements of Borrower delivered on or before the Closing
Date:
A. Net Worth. Borrower shall maintain a net worth at all times
during and at the end of each fiscal quarter, commencing with the fiscal quarter
ending in December, 1999, of not less than 512,000,000.
B. Interest Coverage. Borrower shall maintain for each fiscal
quarter of each fiscal year, in each case together with the preceding fiscal
quarters of such fiscal year, commencing with the fiscal quarter ending in
December, 1999, a ratio of(i) EBITDA for such period to (ii) interest expense
for each such period of not less than 1.50 to 1.00.
SECTION 6 NEGATIVE COVENANTS
Borrower covenants and agrees that until payment in full of all
Obligations unless Borrower has received the prior written consent of Lender,
Borrower shall not and will not permit any of its Subsidiaries to:
6.1 Indebtedness and Liabilities. Directly or indirectly create, incur,
assume, guaranry, or otherwise become or remain directly or indirectly liable,
on a fixed or contingent basis, with respect to any Indebtedness except: (a) the
Obligations; (b) purchase money financing; and (c) trade payables and normal
accruals in the ordinary course of business not yet due and payable or with
respect to which Borrower or any of its Subsidiaries is contesting in good faith
the amount or validity thereof by appropriate proceedings and then only to the
extent that Borrower or any of its Subsidiaries has established adequate
reserves therefor, if appropriate
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under GAAP.
6.2 Guaranties. Except for endorsements of instruments or items of
payment for collection in the ordinary course of business, guaranty, endorse, or
otherwise in any way become or be responsible for any obligations of any other
Person (other than a wholly-owned Subsidiary of Borrower), whether directly or
indirectly by agreement to purchase the indebtedness of any other Person or
through the purchase of goods, supplies or services, or maintenance of working
capital or other balance sheet covenants or conditions, or by way of stock
purchase, capital contribution, advance or loan for the purpose of paying or
discharging any indebtedness or obligation of such other Person or otherwise.
6.3 Transfers. Liens and Related Matters.
A. Transfers. Sell, assign (by operation of law or otherwise)
or otherwise dispose of, or grant any option with respect to any of the
Collateral except that Borrower and its Subsidiaries may (i) sell Inventory and
dispose of obsolete Equipment in the ordinary course of business; and (ii) make
Asset Dispositions if all of the following conditions are met: (1) the market
value of assets sold or otherwise disposed of in any single transection or
series of related transections does not exceed S50,000 and the aggregate market
value of assets sold or otherwise disposed of in any Fiscal Year does not exceed
$1 00,0DO; (2) the consideration received is at least equal to the fair market
value of such assets; (3) the sole consideration received is cash; and (4) no
Default or Event of Default shall then exist or result from such sale or other
disposition.
B. Liens. Except for Permitted Encumbrances, directly or
indirectly create, incur, assume or permit to exist any Lien on or with respect
to any of the Collateral or any proceeds, income or Profits therefrom.
C. No Negative. Pledges. Enter into or assume any agreement
(other than the Loan Documents) prohibiting the creation or assumption of any
Lien upon its properties or assets. whether now owned or hereafter acquired.
6.4 Restricted Junior Payments. Directly or indirectly declare, order,
pay, make or set apart any sum for any Restricted Junior Payment, except that
Subsidiaries of Borrower may make Restricted Junior Payments with respect to its
common stock to the extent necessary to permit Borrower to pay the Obligations,
and to permit Borrower to pay expenses incurred in the ordinary course of
business.
6.5 Restriction on Fundamental Changes. (a) Enter into any transaction
of merger or consolidation; (b) liquidate, wind-up or dissolve itself (or suffer
any liquidation or dissolution); (c) convey, sell, lease, sublease, transfer or
otherwise dispose of, in one transaction or a series of transactions, all or any
substantial part of its business or assets, or the capital stock of any of its
Subsidiaries, whether now owned or hereafter acquired; or (d) acquire by
purchase or otherwise all or any substantial part ofthe business or assets of,
or stock or other evidence of beneficial ownership of, any Person, except with
the prior written consent of Lender.
6.6 Transactions with Affiliates. Directly or indirectly, enter into or
permit to exist any transaction (including the purchase, sale or exchange of
property or the rendering of any service) with any Affiliate or with any
officer, director or employee of any Loan Party, except
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for transactions in the ordinary course of and pursuant to the reasonable
requirements of Borrower's business and upon fair and reasonable terms which are
fully disclosed to Lender and which are no less favorable to Borrower than it
would obtain in a comparable arm's length transaction with an unaffiliated
Person.
6.7 Environmental Liabilities. (a) Violate in any material respect any
applicable Environmental Law; (b) dispose of any Hazardous Materials (except in
accordance with applicable law) into or onto or from, any real property owned,
leased or operated by any Loan Party; or (c) permit any Lien imposed pursuant to
any Environmental Law to be imposed or to remain on any real property owned,
leased or operated by Borrower or any of its Subsidiaries.
6.8 Conduct of Business. From and after the Closing Date, engage in any
business other than businesses of the type engaged in by Borrower or any
Subsidiary on the Closing Date.
6.9 Compliance with ERISA. Establish any new Employee Benefit Plan or
amend any existing Employee Benefit Plan if the liability or increased liability
resulting from such establishment or amendment is material. Neither Borrower nor
any Subsidiary shall fail to establish, maintain and operate each Employee
Benefit Plan in compliance in all material respects with the provisions of
ERISA, the IRC and all other applicable laws and the regulations and
interpretations thereof.
6.10 Subsidiaries. Establish, create or acquire any new Subsidiaries.
6.11 Fiscal Year. Change its Fiscal Year.
6.12 Press Release; Public Offering Materials. Disclose the name of
Lender in any press re ease or m any prospectus, proxy statement or other
materials filed with any governmental entity relating to a public offering of
the capital stock of any Loan Party except as may be required by law.
6.13 Bank Accounts. Establish any new bank accounts, or amend or
terminate any Blocked Account or lockbox agreement without Lender's prior
written consent.
6.14 Charter Documents. Make any material changes to any of Borrower',
or its Subsidiaries', charter documents.
SECTION 7 DEFAULT, RIGHTS AND REMEDIES
7.1 Event of Default. "Event of Default" shall mean the occurrence or
existence of any one or more of the following:
A. Payment. Failure to make payment of any of the Obligations
when due and in the case of interest, such failure shall not be cured within
five (5) days of the applicable due date; or
B. Default in Other Agreements. (1) Failure of Borrower or any
of its Subsidiaries to pay when due (or within any applicable grace period) any
principal or interest on any Indebtedness (other than the Obligations) or (2)
default by Parent, Borrower or any of
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its Subsidiaries under any agreement evidencing any Indebtedness (other than the
Obligations), or pursuant to which such Indebtedness was issued or governed, and
such default continues beyond any applicable grace or cure period; or
C. Breach of Certam Provisions. Failure of Borrower to perform
or comply with any term or condition contained in subsections 2.1 (D), 5.1 (B),
5.1 (C), 5.1 (D), 5.3, 5.5, 5.9 or contained in Section 6; or
D. Breach of Warrantv. Any representation, warranty,
certification or other statement made by any Loan Party in any Loan Document or
in any statement or certificate at any time given by such Person in writing
pursuant or in connection with any Loan Document is false or misleading in any
material respect on the date made; or
E. Other Defaults Under Loan Documents. Borrower or any other
Loan Party defaults in the performance of or compliance with any term contained
in this Agreement or the other Loan Documents and such default is not remedied
or waived within ten ( 10) days after receipt by Borrower of notice from Lender
of such default (other than occurrences described in other provisions of this
subsection 7.1 for which a different grace or cure period is specified or which
constitute immediate Events of Default); or
F. Involuntary Bankruptcy; Appointment of Receiver. etc. (1) A
court enters a decree or order for relief with respect to Borrower or any of its
Subsidiaries in an involuntary case under the Bankruptcy Code or any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, which
decree or order is not stayed or other similar relief is not granted under any
applicable federal or state law; or (2) the continuance of any of the following
events for sixty (60) days unless dismissed, bonded or discharged: (a) an
involuntary case is commenced against Borrower or any of its Subsidiaries, under
any applicable bankruptcy, insolvency or other similar law now or hereafter in
effect; or (b) a decree or order of a court for the appointment of a receiver,
liquidator, sequestrator, trustee, custodian or other of ficer having similar
powers over Borrower or any of its Subsidiaries, or over all or a substantial
part of its respective property, is entered; or (c) an interim receiver, trustee
or other custodian is appointed without the consent of Borrower or any of its
Subsidiaries, for all or a substantial part of the property of Borrower or any
such Subsidiary: or
G. Voluntary Bankruptcy: Appointment of Receiver. etc. (1) An
order for relief is entered with respect to Borrower or any of its Subsidiaries
or Borrower or any of its Subsidiaries commences a voluntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or consents to the entry of an order for relief in an involuntary case
or to the conversion of an involuntary case to a voluntary case under any such
law or consents to the appointment of or taking possession by a receiver,
trustee or other custodian for all or a substantial part of its property; or (2)
Borrower or any of its Subsidiaries makes any assignment for the benefit of
creditors; or (3) the board of directors of Borrower or any of its Subsidiaries
adopts any resolution or otherwise authorizes action to approve any of the
actions referred to in this subsection 7.1(G); or
H. Liens. Any lien, levy or assessment is filed or recorded
with respect to or otherwise imposed upon all or any part of the Collateral or
the assets of Borrower or any of its Subsidiaries by the United States or any
department or instrumentality thereof or by any state,
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county, municipality or other governmental agency (other than Permitted
Encumbrances) and such lien, levy or assessment is not stayed, vacated, paid or
discharged within ten (10) days; or
I. Judgment and Attachments. Any money judgment, writ or
warrant of attachment, or similar process involving ( 1 ) an amount in any
individual case in excess of $50,000, or (2) an amount in the aggregate at any
time in excess of $100,000 (in either case not adequately covered by insurance
as to which the insurance company has acknowledged coverage or undertaken the
defense thereof subject only to customary reservation of rights) is entered or
filed against Borrower or any of its Subsidiaries or any of its respective
assets and remains undischarged, unvacated, unbonded or unstayed for a period of
thirty (30) days or in any event later than five (5) days prior to the date of
any proposed sale thereunder; or
J. Dissolution. Any order, judgment or decree is entered
against Borrower or any of its Subsidiaries decreeing the dissolution or split
up of Borrower or that Subsidiary and such order remains undischarged or
unstayed for a period in excess of twenty (20) days; or
K. Solvency. Borrower ceases to be solvent (as represented by
Borrower in subsection 4.16) or admits in writing its present or prospective
inability to pay its debts as they become due: or
L. Injunction. Borrower or any of its Subsidiaries is
enjoined, restrained or in any way prevented by the order of any court or any
administrative or regulatory agency from conducting all or any material part of
its business and such order continues for more than thirty (30) days; or
M. Invalidity of Loan Documents. Any of the Loan Documents for
any reason, other than a partial or full release in accordance with the terms
thereof, ceases to be in full force and effect or is declared to be null and
void, or any Loan Party denies that it has any further liability under any Loan
Documents to which it is party, or gives notice to such effect; or
N. Failure of Securitv. Lender does not have or ceases to have
a valid and perfected first priority security interest in the Collateral
(subject to Permitted Encumbrances), in each case, for any reason other than the
failure of Lender to take any action within its control; or
O. Licenses and Permits. The loss, suspension or revocation
of, or failure to renew, any license or permit now held or hereafter acquired by
Borrower or any of its Subsidiaries, if such loss, suspension, revocation or
failure to renew could reasonably be expected to have a Material Adverse Effect.
P. Forfeiture. There is filed against Borrower any civil or
criminal action, suit or proceeding under any federal or state racketeering
statute (including, without limitation, the Racketeer Influenced and Corrupt
Organization Act of 1970), which action, suit or proceeding (1 ) is not
dismissed within one hundred twenty (120) days; and (2) could result in the
confiscation or forfeiture of any material portion of the Collateral.
7.2 Acceleration. Upon the occurrence of any Event of Default described
in the
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foregoing subsections 7.1 (F) or 7.1 (G), all Obligations shall automatically
become immediately due and payable, without presentment, demand, protest or
other requirements of any kind, all of which are hereby expressly waived by
Borrower. Upon the occurrence of any other Event of Default, the Lender may
declare all Obligations to be immediately due and payable, without presentment,
demand, protest or other requirements of any kind. all of which are hereby
expressly waived by Borrower.
7.3 Remedies. If any Event of Default shall have occurred and be
continuing, in addition to and not in limitation of any rights or remedies
available to Lender at law or in equity, Lender may exercise in respect of the
Collateral, in addition to all other rights and remedies provided for herein or
otherwise available to it, all the rights and remedies of a secured party on
default under the UCC (whether or not the UCC applies to the affected
Collateral) and may also (a) notify any or all obligors on the Accounts to make
all payments directly to Lender; (b) require Borrower to, and Borrower hereby
agrees that it will, at its expense and upon request of Lender forthwith,
assemble all or part of the Collateral as directed by Lender and make it
available to Lender at a place to be designated by Lender which is reasonably
convenient to both parties; (c) without notice or demand or legal process, enter
upon any premises of Borrower and take possession of the Collateral, if this can
be done without breach of the peace; and (d) without notice except as specified
below, sell the Collateral or any part thereof in one or more parcels at public
or private sale, at any of the Lender's of fices or elsewhere, at such time or
times, for cash, on credit or for future delivery, and at such price or prices
and upon such other terms as Lender may deem commercially reasonable. Borrower
agrees that, to the extent notice of sale shall be required by law, at least ten
(10) days notice to Borrower of the time and place of any public sale or the
time after which any private sale is to be made shall constitute reasonable
notification. At any sale of the Collateral, if permitted by law, Lender may bid
(which bid may be, in whole or in part, in the fomm of cancellation of
indebtedness) for the purchase of the Collateral or any portion thereof for the
account of Lender. Lender shall not be obligated to make any sale of Collateral
regardless of notice of sale having been given. Borrower shall remain liable for
any deficiency. Lender may adjourr any public or private sale from time to time
by announcement at the time and place fixed there or, and such sale may, without
further notice, be made at the time and place to which it was so ad :)umed. To
the extent pemmitted by law, Borrower hereby specifically waives all rights of
redemption, stay or appraisal which it has or may have under any law now
existing or hereafter enacted. Lender shall not be required to proceed against
any Collateral but may proceed against Borrower directly.
7.4 Appointment of Attorney-in-Fact. Borrower hereby constitutes and
appoints Lender as Borrower's attomey-in-fact with full authority in the place
and stead of Borrower and in the name of Borrower, Lender or otherwise, from
time to time in Lender's discretion while an Event of Default is continuing to
take any action and to execute any instrument that Lender may deem necessary or
advisable to accomplish the purposes of this Agreement, including: (a) to ask,
demand, collect, xxx for, recover, compound, receive and give acquittance and
receipts for moneys due and to become due under or in respect of any of the
Collateral; (b) to adjust, settle or compromise the amount or payment of any
Account, or release wholly or partly any customer or obligor thereunder or allow
any credit or discount thereon; (c) to receive, endorse, and collect any drafts
or other instruments, documents and chattel paper, in connection with clause (a)
above; (d) to file any claims or take any action or institute any proceedings
that Lender may deem necessary or desirable for the collection of any of the
Collateral or otherwise to enforce the rights of Lender with respect to any of
the Collateral; and (e) to sign and endorse
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any invoices, freight or express bills, bills of lading, storage or warehouse
receipts, assignments, verifications and notices in connection with Accounts and
other documents relating to the Collateral. The appointment of Lender as
Borrower's attomey and Lender's rights and powers are coupled with an interest
and are irrevocable until payment in full and complete performance of all of the
Obligations.
7.5 Limitation on Duty of Lender with Respect to Collateral. Beyond the
safe custody thereof, Lender shall have no duty with respect to any Collateral
in its possession or control (or in the possession or control of any agent or
bailee) or with respect to any income thereon or the preservation of rights
against prior parties or any other rights pertaining thereto. Lender shall be
deemed to have exercised reasonable care in the custody and preservation of the
Collateral in its possession if the Collateral is accorded treatment
substantially equal to that which Lender accords its own property. Lender shall
not be liable or responsible for any loss or damage to any of the Collateral, or
for any diminution in the value thereof, by reason of the act or omission of any
warehouseman, carrier, forwarding agency, consignee or other agent or bailee
selected by Lender in good faith.
7.6 Application of Proceeds. Upon the occurrence and during the
continuance of an Event of Default, (a) Borrower irrevocably waives the right to
direct the application of any and all payments at any time or times thereafter
received by Lender from or on behalf of Borrower, and Borrower hereby
irrevocably agrees that Lender shall have the continuing exclusive right to
apply and to reapply any and all payments received at any time or times after
the occurrence and during the continuance of an Event of Default against the
Obligations in such manner as Lender may deem advisable notwithstanding any
previous entry by Lender upon any books and records and (b) the proceeds of any
sale of, or other realization upon, all or any part of the Collateral shall be
applied: first, to all fees, costs and expenses incurred by Lender with respect
to this Agreement, the other Loan Documents or the Collateral; second, to all
fees due and owing to Lender; third, to accrued and unpaid interest on the
Obligations; fourth, to the principal amounts of the Obligations outstanding;
and fifth, to any other indebtedness or obligations of Borrower owing to Lender.
7.7 License of Intellectual Property. Borrower hereby assigns,
transfers and conveys to Lender, effective upon the occurrence, and during the
continuance, of any Event of Default hereunder, the non-exclusive right and
license to use all Intellectual Property owned or used by Borrower together with
any goodwill associated therewith, all to the extent necessary to enable Lender
to realize on the Collateral and any successor or assign to enjoy the benefits
ofthe Collateral. This right and license shall inure to the benefit of all
successors, assigns and transferees of Lender and its successors, assigns and
transferees, whether by voluntary conveyance, operation of law, assignment,
transfer, foreclosure, deed in lieu of foreclosure or otherwise. Such right and
license is granted free of charge, without requirement that any monetary payment
whatsoever be made to Borrower by Lender.
7.8 Waivers, Non-Exclusive Remedies. No failure on the part of Lender
to exercise, and no delay in exercising and no course of dealing with respect
to, any right under this Agreement or the other Loan Documents shall operate as
a waiver thereof; nor shall any single or partial exercise by Lender of any
right under this Agreement or any other Loan Document preclude any other or
further exercise thereof or the exercise of any other right. The rights in this
Agreement and the other Loan Documents are cumulative and are not exclusive of
any other
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remedies provided bv law.
SECTION 8 MISCELLANEOUS
8.1 Assignments and Participations. Lender may assign its rights and
delegate its obligations under this Agreement and further may assign, or sell
participations in, all or any part of the Temm Loan or any other interest herein
to an Affiliate or to another Person. In the case of an assignment authorized
under this subsection 8.1, the assignee shall have, to the extent of such
assignment, the same rights, benefits and obligations as it would if it were a
Lender hereunder. Lender shall be relieved of its obligations hereunder with
respect to the Commitments or assigned portion thereof. Borrower hereby
acknowledges and agrees that any assignment will give rise to a direct
obligation of Borrower to the assignee and that the assignee shall be considered
to be a "Lender". Lender may fumish any infommation concerning Borrower and its
Subsidiaries in its possession from time to time to assignees and participants
(including prospective assignees and participants).
8.2 Set Off. In addition to any rights now or hereafter granted under
applicable law and not by way of limitation of any such rights, upon the
occurrence, and during the continuance, of any Event of Default, Lender, each
assignee of Lender's interest, and each participant is hereby authorized by
Borrower at any time or from time to time, without notice to Borrower or to any
other Person, any such notice being hereby expressly waived, to set off and to
appropriate and to apply any and all balances held by it at any of its offices
for the account of Borrower or any of its Subsidiaries (regardless of whether
such balances are then due to Borrower or its Subsidiaries) and any other
property at any time held or owing by that Lender or assignee to or for the
credit or for the account of Borrower against and on account of any of the
Obligations then outstanding; provided, that no participant shall exercise such
right without the prior written consent of Lender.
Borrower hereby agrees, to the fullest extent perrnitted by
law, that any Lender, assignee or participant may exercise its right of setoff
with respect to amounts in excess of its pro rata share of the Obligations (or,
in the case of a participant, in excess of its pro rata participation interest
in the Obligations) and that such Lender, assignee or participant, as the case
may be, shall be deemed to have purchased for cash in the amount of such excess,
participations in each other Lender's or holder's share of the Obligations.
8.3 Expenses and Attomeys' Fees. Whether or not the transactions
contemplated hereby shall be consummated, Borrower agrees to promptly pay all
reasonable fees, costs and expenses incurred by Lender in connection with any
matters contemplated by or arising out of this Agreement or the other Loan
Documents including the following, and all such fees, costs and expenses shall
be part ofthe Obligations, payable on demand and secured by the Collateral: (a)
fees, costs and expenses (including attomeys' fees, allocated costs of intemal
counsel and fees of environmental consultants, accountants and other
professionals retained by Lender) incurred in connection with the examination,
review, due diligence investigation, documentation and closing of the financing
arrangements evidenced by the Loan Documents; (b) fees, costs and expenses
(including reasonable attomeys' fees, allocated costs of intemal counsel and
fees of environmental consultants, accountants and other professionals retained
by Lender) incurred in connection with the review, negotiation, preparation,
documentation, execution and administration of the Loan Documents, the Temm
Loan, and any amendments, waivers,
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consents, forbearance and other modifications relating thereto or any
subordination or intercreditor agreements; (c) fees, costs and expenses incurred
in creating, perfecting and maintaining perfection of Liens in favor of Lender;
(d) fees, costs and expenses incurred in connection with forwarding to Borrower
the proceeds of Loans including Lender's standard wire transfer fee; (e) fees,
costs, expenses and bank charges, including bank charges for resumed checks,
incurred by Lender in establishing, maintaining and handling lock box accounts,
blocked accounts or other accounts for collection of the Collateral; (f) fees,
costs, expenses (including reasonable attorneys' fees and allocated costs of
intemal counsel) and costs of settlement incurred in collecting upon or
enforcing rights against the Collateral or incurred in any action to enforce
this Agreement or the other Loan Documents or to collect any payments due from
Borrower or any other Loan Party under this Agreement or any other Loan Document
or incurred in connection with any refinancing or restructuring of the credit
arrangements provided under this Agreement, whether in the nature of a "workout"
or in connection with any insolvency or bankruptcy proceedings or otherwise.
8.4 Indemnity. In addition to the payment of expenses pursuant to
subsection 8.3, whether or not the transactions contemplated hereby shall be
consummated, Borrower agrees to indemnify, pay and hold Lender and any holder of
the Temm Note and the officers, directors, employees, agents, consultants,
auditors, persons engaged by Lender and any holder of the Temm Note to evaluate
or monitor the Collateral, affiliates and attomeys of Lender and such holders
(collectively called the "Indemnitees") harmless from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
claims, costs, expenses and disbursements of any kind or nature whatsoever
(including the reasonable fees and disbursements of counsel for such Indemnitees
in connection with any investigative, administrative orjudicial proceeding
commenced or threatened, whether or not such Indemnitee shall be designated a
party thereto) that may be imposed on, incurred by, or asserted against that
Indemnitee, in any manner relating to or arising out ofthis Agreement orthe
other Loan Documents, the consummation ofthe transactions contemplated by this
Agreement, the statements contained in the commitment letters, if any, delivered
by Lender, Lender's agreement to make the Temm Loan hereunder, the use or
intended use of the proceeds of any of the Temm Loan or the exercise of any
right or remedy hereunder or under the other Loan Documents (the "Indemnified
Liabilities"); provided that Borrower shall have no obligation to an Indemnitee
hereunder with respect to Indemnified Liabilities arising from the gross
negligence or willful misconduct of that Indemnitee as detemmined by a court of
competent jurisdiction.
8.5 Amendments and Waivers. No amendment, modification, temmination or
waiver of any provision of this Agreement or of the other Loan Documents, or
consent to any departure by Borrower therefrom, shall be effective unless the
same shall be in writing and signed by Lender and Borrower. Each amendment,
modification, termination or waiver shall be effective only in the specific
instance and for the specific purpose for which it was given.
8.6 Notices. Unless otherwise specifically provided herein, all notices
shall be in writing addressed to the respective party as set forth below and may
be personally served, telecopied or sent by ovemight courier service or United
States mail and shall be deemed to have been given:
(a) if delivered in person, when delivered; (b) if delivered by telecopy, on the
date of transmission if transmitted on a Business Day before 4:00 p.m. Eastern
standard time or, if not,
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on the next succeeding Business Day; (c) if delivered by overnight courier, two
(2) days after delivery to such courier properly addressed; or (d) if by U.S.
Mail, four (4) Business Days after depositing in the United States mail, with
postage prepaid and properly addressed.
If to Borrower: Travelers Acquisition Corporation
0000 Xxxxxxx Xxxxxx, Xxxxx 0X
Xxxxxxxx, XX 00000
Attention: Xxxxxx X. Press, Chairman
Facsimile: (760) 931 -9568
With copies to: Xxxxxxx X. Xxxxxxx, Esq.
Westside Corporate Center
000 X. Xxxx Xxxxxx Xxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000
Facsimile: (000) 000-0000
and
Finantra Capital, Inc
Attention: Xxxxxx X. Press, Chairman
Westside Corporate Center
000 X. Xxxx Xxxxxx Xxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000
If to Lender: BHC Interim Funding, L.P.
c/o Brooks, Xxxxxxxx & Company, Inc.
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xx. Xxxxxxx X. Xxxxx
Facsimile: (000) 000-0000
With a copy to: Wolf, Block, Xxxxxx and Xxxxx-Xxxxx LLP
000 Xxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxxx, Esq.
Facsimile: (000) 000-0000
or to such other address as the party addressed shall have previously designated
by written notice to the serving party, given in accordance with this subsection
8.6.
8.7 Survival of Warranties and Certain Acreements. All agreements,
representations and warranties made herein shall survive the execution and
delivery of this Agreement and the making of the Term Loan hereunder.
Notwithstanding anything in this Agreement or implied by law to the contrary,
the agreements of Borrower set forth in subsections 8.3 and 8.4 shall survive
the payment of the Term Loan and the termination of this Agreement.
8.8 Indulgence Not Waiver. No failure or delay on the part of Lender in
the exercise of any power, right or privilege shall impair such power, right or
privilege or be construed to
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be a waiver of any default or acquiescence therein, nor shall any single or
partial exercise of any such power, right or privilege preclude other or further
exercise thereof or of any other right, power or privilege.
8.9 Marshaling: Payments Set Aside. Lender shall not be under any
obligation to marshal any assets in favor of any Loan Party or any other party
or against or in payment of any or all of the Obligations. To the extent that
any Loan Party makes a payment or payments to Lender or Lender enforces its
security interests or exercise its rights of setoff, and such payment or
payments or the proceeds of such enforcement or setoff or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside
and/or required to be repaid to a trustee, receiver or any other party under any
bankruptcy law, state or federal law, common law or equitable cause, then to the
extent of such recovery, the Obligations or part thereof originally intended to
be satisfied, and all Liens, rights and remedies therefor, shall be revived and
continued in full force and effect as if such payment had not been made or such
enforcement or setoff had not occurred.
8.10 Entire Agreement. This Agreement, the Term Note, and the other
Loan Documents referred to herein embody the final, entire agreement among the
parties hereto and supersede any and all prior commitments, agreements,
representations, and understandings, whether written or oral, relating to the
subject maker hereof and may not be contradicted or varied by evidence of prior,
contemporaneous, or subsequent oral agreements or discussions of the parties
hereto. There are no oral agreements among the parties hereto.
8.11 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 an exception
to, or be otherwise within the limitations of, another covenant shall not avoid
the occurrence of a Default or an Event of Default if such action is taken or
condition exists.
8.12 Severability. The invalidity, illegality or unenforceability in
any jurisdiction of any provision in or obligation under this Agreement or the
other Loan Documents shall not affect or impair the validity, legality or
enforceability of the remaining provisions or obligations under this Agreement,
or the other Loan Documents or of such provision or obligation in any other
jurisdiction.
8.13 Headings. Section and subsection headings in this Agreement are
included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose or be given any substantive effect.
8.14 APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW
YORK WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
8.15 Successors and Assigns. This Agreement shall be binding upon and
Inure to the benefit of the parties hereto and its respective successors and
assigns except that Borrower may not assign its rights or obligations hereunder
without the prior written consent of Lender.
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8.16 No Fiduciary Relationship: Limitation of Liabilities.
A. No provision in this Agreement or in any of the other Loan
Documents and no course of dealing between the parties shall be deemed to create
any fiduciary duty by Lender to Borrower.
B. Neither Lender, nor any affiliate, officer, director,
shareholder, employee, attorney, or agent of Lender shall have any liability
with respect to, and Borrower hereby waives, releases, and agrees not to xxx any
of them upon, any claim for any special, indirect, incidental, or consequential
damages suffered or incurred by Borrower in connection with, arising out of, or
in any way related to, this Agreement or any of the other Loan Documents, or any
of the transactions contemplated by this Agreement or any of the other Loan
Documents. Borrower hereby waives, releases, and agrees not to xxx Lender or any
of Lender's affiliates, officers, directors, employees, attorneys, or agents for
punitive damages in respect of any claim in connection with, arising out of, or
in any way related to, this Agreement or any of the other Loan Documents, or any
of the transactions contemplated by this Agreement or any of the transactions
contemplated hereby.
8.17 CONSENT TO JURISDICTION. BORROWER HEREBY CONSENTS TO THE
JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF NEW
YORK, STATE OF NEW YORK, AND IRREVOCABLY AGREES THAT, SUBJECT TO LENDER'S
ELECTION, ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS
AGREEMENT, THE TERM NOTE, OR THE OTHER LOAN DOCUMENTS SHALL BE LITIGATED IN SUCH
COURTS. Borrower ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES,
GENERALLY AND UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION OF THE AFORESAID
COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS, AND IRREVOCABLY AGREES TO
BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT, THE
TERM NOTE, THE OTHER LOAN DOCUMENTS OR THE OBLIGATIONS.
8.18 WAIVER OF JURY TRIAL. BORROWER AND LENDER HEREBY WAIVE ITS
RESPECTIVE RIGHTS TO A JURY TRL4L OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS AGREEMENT, THE TERM NOTE OR THE OTHER LOAN DOCUMENTS.
Borrower AND LENDER ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO
ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH HAS ALREADY RELIED ON THE WAIVER
IN ENTERING INTO THIS AGREEMENT, THE TERM NOTE AND THE OTHER LOAN DOCUMENTS AND
THAT EACH WILL CONTINUE TO RELY ON THE WAIVER IN ITS RELATED FUTURE DEALINGS.
Borrower AND LENDER FURTHER WARRANT AND REPRESENT THAT EACH HAS REVIEWED THIS
WAIVER WITH ITS LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES
ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.
8.19 Construction. Borrower and Lender each acknowledge that it has had
the benefit of legal counsel of its own choice and has been afforded an
opportunity to review this Agreement and the other Loan Documents with its legal
counsel and that this Agreement and the other Loan Documents shall be construed
as if jointly drafted by Borrower and Lender.
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8.20 Counterparts; Effectiveness. This Agreement and any amendments,
waivers, consents, or supplements may be executed in any number of counterparts
and by different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all of which
counterparts together shall constitute but one and the same instrument. This
Agreement shall become effective upon the execution of a counterpart hereof by
each of the parties hereto. Delivery of an executed counterpart of a signature
page to this Agreement, any amendments, waivers consents or supplements, or to
any other Loan Document by Facsimile shall be as effective as delivery of a
manually executed counterpart thereof.
8.21 No Duty. All attorneys, accountants, appraisers, and
otherprofessional Persons and consultants retained by Lender shall have the
right to act exclusively in the interest of Lender and shall have no duty of
disclosure, duty of loyalty, duty of care, or other duty or obligation of any
type or nature whatsoever to Borrower or any of Borrower's shareholders or any
other Person.
SECTION 9 SUBORDINATION
9.1 Obligations Subordinate to Senior Indebtedness. The Borrower, and
each Person that has guaranteed the payment of the Obligations (each a
"Guarantor") covenants and agrees, and the Lender and each other holder of the
Term Note, if any, likewise covenants and agrees, that, (a) to the extent and in
the manner hereinafter set forth in this Section 9, the payment of the
Obligations, including pursuant to any amendment, modification, restatement or
renewal thereof, and any guaranty of such payment (the "Subordinated
Obligations"), is hereby expressly made subordinated and subject in right of
payment to the prior payment in full of all "Senior Indebtedness", as
hereinafter defined, and (b) the terms and conditions of such subordination is
for the benefit of the holders of the Senior Indebtedness and each such holder
may enforce such subordination. As used herein, the term "Senior Indebtedness"
shall mean all (i) payment obligations now or hereafter incurred pursuant to and
in accordance with the terms of the Loan and Security Agreement dated September
23, 1999 (as the same may be amended, modified, supplemented or restated, the
"Senior Credit Agreement") among Travelers Acceptance Corporation, Travelers
Leasing Corporation and Trace Credit Services, Inc. (each a "Traveler's
Company") and Finova Capital Corporation (the "Senior Creditor") and (ii) the
contingent liability of each Person arising from its guaranty of the payment of
Indebtedness incurred pursuant to the Senior Credit Agreement (each a
"Traveler's Guarantor", and collectively with each Traveler's Company, a
"Traveler's Obligor"). Senior Indebtedness shall include, without limitation,
all principal, interest (including without limitation, any post-petition
interest on such obligations at the rate set forth in the Senior Credit
Agreement, accruing whether or not granted or permitted in connection with an
event of the type referred to in Section 7.1 (F) or (G) hereof), premium,
penalties, fees, expenses, indemnification, reimbursements, damages and other
liabilities payable under the Senior Credit Agreement; provided that in no event
shall the principal amount of Senior Indebtedness exceed $32,500,000 (as such
amount is reduced by reductions of revolving commitments to the extent such
reductions are permanent). Senior Indebtedness outstanding under the Senior
Credit Agreement shall continue to constitute Senior Indebtedness for all
purposes hereof, notwithstanding that such Senior Indebtedness or any claim in
respect thereof may be disallowed, avoided or subordinated pursuant to any
insolvency law, the Bankruptcy Code or any similar federal or state law for the
relief of debtors or other applicable insolvency law or equitable principles as
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a claim for unmatured interest.
9.2 Payment Over of Proceeds Upon Dissolution. In the event of (i) any
insolvency or bankruptcy case or proceeding, or any receivership, liquidation,
reorganization or other similar case or proceeding in connection therewith,
relative to the Traveler's Obligor or to its assets, or (ii) any liquidation,
dissolution or other winding up of the Traveler's Obligor, whether voluntary or
involuntary and whether or not involving insolvency or bankruptcy, or (iii) any
assignment for the benefit of creditors or any other marshaling of assets and
liabilities of the Traveler's Obligor (collectively, "Bankruptcy Events"), then
and in any such event:
A. the holders of Senior Indebtedness shall be entitled to
receive payment in full in cash of all amounts due or to become due on or in
respect of all Senior Indebtedness (including interest after the commencement of
a Bankruptcy Event at the rate specified in the Senior Indebtedness, whether or
not allowed), before the Lender is entitled to receive any direct or indirect
payment or distribution on account of Subordinated Obligations including,
without limitation, by exercise of set-off and any payment which may be payable
or deliverable by any reason of any other Indebtedness being subordinated in
right of payment to the Subordinated Obligations;
B. any payment or distribution of assets of the Traveler's
Obligor of any kind or character, whether in cash, property or securities, by
set-off or otherwise, to which the Lender would be entitled but for the
provisions of this Section 9, with the exception of any such payment or
distribution (each a "Permitted Payment" or a "Permitted Distribution",
respectively) ( 1 ) authorized by an unstayed, final, nonappealable order or
decree stating that effect is being given to the subordination of such
Subordinated Obligations to the Senior Indebtedness, and made by a court of
competent jurisdiction in a reorganization proceeding under any applicable
bankruptcy law or (2) of securities which, if debt securities, are subordinated
to at least the same extent as the Subordinated Obligations are to (A) such
Senior Indebtedness or (B) any securities issued in exchange for Senior
Indebtedness; provided, however, that (x) the final maturity of such securities
shall not be earlier than one year following the maturity date of the last to
mature of the Senior Indebtedness (including any issued in exchange therefor) at
the time outstanding and the scheduled amortization shall not be more favorable
(as to amount or time of payment ) then the scheduled amortization of the
principal amount of the Subordinated Obligations, (y) such securities shall
contain covenants which are no more restrictive than the covenants contained
herein and shall not contain greater defaults than as are contained herein and
(z) such securities shall bear interest at a rate per annum less than or equal
to 18% per annum computed on the same basis as described herein, shall be paid
by the liquidating trustee or agent or other Person making such payment or
distribution, whether a trustee in bankruptcy, a receiver or liquidating trustee
or otherwise, directly to the holder of all Senior Indebtedness or their
representative or representatives or to the trustee or trustees under any
indenture under which any instruments evidencing any of such Senior Indebtedness
may have been issued, ratably according to the aggregate amounts remaining
unpaid on account of the principal of, and interest on, such Senior Indebtedness
held or represented by each, to the extent necessary to make payment in full of
all such Senior Indebtedness remaining unpaid, after giving effect to any
concurrent payment or distribution to the holders such Senior Indebtedness, and
C. in the event that, notwithstanding the foregoing provisions
of this Section
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9, the Lender shall have received any such payment or distribution of assets of
the Borrower or any Guarantor of any kind or character, whether property or
securities (but excluding any Permitted Payment or Permitted Distribution
received by the Lender) before all Senior Indebtedness is paid in full or
payment thereof is provided for, then and in such event such payment or
distribution shall be paid over or delivered forthwith to the trustee in
bankruptcy, receiver, liquidating trustee, custodian, assignee, agent or other
Person making payment or distribution of assets of the Traveler's Obligor for
application to the payment of all such Senior Indebtedness remaining unpaid, to
the extent necessary to pay such Senior Indebtedness in full, after giving
effect to any concurrent payment or distribution to or for the holders of such
Senior Indebtedness.
If, notwithstanding the provisions of this Agreement, there shall occur
any consolidation of the Traveler's Obligor with, or any merger of the
Traveler's Obligor into, another corporation or the liquidation or dissolution
of the Traveler's Obligor following any conveyance, transfer or lease of its
properties and assets substantially as an entirety to another corporation, such
consolidation, merger or liquidation shall not be deemed a Bankruptcy Event
provided that no other Bankruptcy Event shall have occurred and be continuing at
the time of such consolidation, merger or liquidation. The Senior Creditor is
hereby authorized to file an appropriate claim on behalf of the Lender if the
Lender does not file such claim or there is not filed on behalf of the Lender a
proper proof of claim in the form required in any Bankruptcy Event prior to
thirty (30) days before the expiration of the time to file such claim or claims.
D. No Payment in Certain Circumstances. In the event that (i)
the Traveler's Obligor shall fail to pay when due (after giving effect to any
applicable grace periods), upon acceleration or otherwise, any amount or
obligation with respect to Senior Indebtedness under the Senior Credit Agreement
(a "Payment Default") which Payment Default shall not have been cured or waived,
or (ii) an event of default arising from a breach or violation of Section 5,
Section 6.1 (E), Section 6.2 or Section 6.3 of the Senior Credit Agreement, as
in effect on the date of execution thereof shall occur and be continuing, which
shall not have been cured or waived (a "Non-Payment Default"), and the Borrower
and the Lender receive written notice of such Non-Payment Default from the
Senior Creditor (a "Non-Payment Blockage Notice"), then no payment on account of
the Subordinated Obligations shall be made by the Borrower or any Guarantor (x)
in the case of any Payment Default, unless and until such Senior Indebtedness
shall have been paid in full or until such Payment Default shall have been cured
or waived, or (y) in the case of any Non-Payment Default, from the earlier of
the date on which the Borrower and the Lender receive such Non-Payment Blockage
Notice until the earlier of (1) 120 days after such date and (2) the date, if
any, on which the Senior Indebtedness under the Senior Credit Agreement is paid
in full or such Non-Payment Default is waived by the Senior Creditor or
otherwise cured (a "Blockage Period"); provided that only one Non-Payment
Blockage Notice may be given in any 360-day period.
In the event that, notwithstanding the foregoing, the Borrower or any
Guarantor shall make any payment to the Lender prohibited by the foregoing
provisions of this Section 9.3, then and in such event such payment shall be
paid over and delivered forthwith to the Senior Creditor. The provisions of this
Section 9.3 shall not apply to any payment with respect to which Section 9.2
would be applicable.
9.3 Acceleration Rights; Remedies. If an Event of Default, other than
an Event of
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Default under Section 7.1 (F) or (G), shall exist at any time that any Senior
Indebtedness under the Senior Credit Agreement shall be outstanding, neither the
Lender nor any other holder of the Term Note shall take any action, judicial or
otherwise, to collect payment on the Subordinated Obligations or to pursue any
other remedy with respect to the Subordinated Obligations so long as the Senor
Creditor is diligently exercising rights and pursuing remedies with respect to
the Senior Indebtedness or the collateral securing the Senior Indebtedness;
provided, that any amount received by the Lender as a result of any action
permitted above prior to payment in full in cash of the Senior Indebtedness
under the Senior Credit Agreement shall be paid to the Senior Creditor in
accordance with the provisions of this Section 9.
9.4 Payment Otherwise Permitted. Nothing contained in this Section 9 or
elsewhere in this Agreement or in the Term Note shall prevent the Borrower, or
the Guarantors, at any time except as set forth in Section 9.2 or under the
conditions described in Section 9.3, from making payments at any time of
principal of and interest on the Term Loan or any other amount payable by the
Borrower or the Guarantors under the Term Note or this Agreement.
Notwithstanding the provisions of this Section 9, the Lender shall not be
charged with knowledge of the existence of any facts, including of the
occurrence of a payment Default, which would prohibit the making of any payment
or distribution by the Borrower or the Guarantors or the receipt or retention
thereof by the Lender, or the taking of any action by the Lender of the type
referred to in Section 9.4, unless the Lender shall have received at least two
Business Day's prior written notice of such facts.
9.5 Subrogation to Rights of Holders of Senior Indebtedness. Subject
to, and solely effective following, the final indefeasible payment in full of
all Senior Indebtedness, the Lender shall be subrogated to the rights of the
holders of Senior Indebtedness to receive payments and distributions of cash,
property and securities applicable to such Senior Indebtedness to the extent of
the payments or distributions made to such holders, or otherwise applied to
payment of, the Senior Indebtedness pursuant to the provisions of this Section 9
until the principal of and the interest on the Term Loan and the Term Note shall
be paid in full in cash. For purposes of such subrogation, no payments or
distributions to the holders of Senior Indebtedness of any cash, property or
securities to which the Lender would be entitled except for the provisions of
this Section 9, and no payments over pursuant to the provisions of this Section
9 to the holders of Senior Indebtedness by the Lender shall, as among the
Borrower or any Guarantor, its creditors (other than holders of Senior
Indebtedness) and the Lender, be deemed to be a payment or distribution by the
Borrower or such Guarantor to or on account of the Senior Indebtedness.
9.6 Provisions Solely to Define Relative Rights. The provisions of this
Section 9 are and are intended solely for the purpose of defining the relative
rights of the holder of the Term Note on the one hand and the holders of Senior
Indebtedness on the other hand. Nothing contained in this Section 9 or elsewhere
in this Agreement or in the Term Note is intended to or shall (i) impair, as
among the Borrower or any Guarantor, its creditors (other than holders of Senior
Indebtedness) and the Lender, the obligation of the Borrower and the Guarantors
which is absolute and unconditional, to pay to the Lender the principal of, and
premium and interest on, and any other amount payable by the Borrower under, the
Term Loan, the Term Note or this Agreement as and when the same shall become due
and payable in accordance with its terms; or (ii) affect the relative rights
against the Borrower and the Guarantors of the Lender and its creditors (other
than the holders of Senior Indebtedness); or (iii) prevent the Lender from
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accelerating the Term Loan and all other Obligations and exercising all other
remedies otherwise permitted by applicable law upon default under this
Agreement, subject to the rights, if any, under this Section 9 of the holders of
Senior Indebtedness (x) upon the occurrence of a Bankruptcy Event, to receive,
pursuant to and in accordance with Section 9.2, cash, property and securities
otherwise payable or deliverable to the Lender, (y) under the conditions
specified in Section 9.3. to prevent any payment prohibited by such Section or
(z) under Section 9.4.
9.7 No Waiver of Subordination Provisions: Amendment. No right of any
present or future holder of any Senior Indebtedness to enforce subordination as
herein provided shall at any time in any way be prejudiced or impaired by any
act or failure to act on the part of the Borrower or any Guarantor or by any act
or failure to act, in good faith, by any such holder, or by any noncompliance by
the Borrower or any Guarantor with the terms, provisions, and covenants of this
Agreement, regardless of any Knowledge thereof any such holder may have or be
otherwise charged with. Without in any way limiting the generality of the
foregoing, the holder of Senior Indebtedness may at any time and from time to
time, without the consent of or notice to the Lender or any other holder of the
Term Note, without incurring responsibility to the Lender or such holder and
without impairing or releasing the subordination provided in this Section 9 or
the obligations hereunder of the Lender and such holder to the holders of Senior
Indebtedness, do any one or more of the following: (i) change the manner, place
or terms of payment or extend the time of payment of, or renew or alter, Senior
Indebtedness or any instrument evidencing the same or any agreement under which
Senior Indebtedness is outstanding; (ii) sell, exchange, release or otherwise
deal with any property pledged, mortgaged or otherwise securing Senior
Indebtedness; (iii) release any person liable in any manner for the collection
of Senior Indebtedness; and (iv) exercise or refrain from exercising any rights
against the Traveler's Obligor and any other Person, subject to the obligation
to diligently exercise rights and pursue remedies in accordance with Section
9.4.
9.8 Reliance on Judicial Order or Certificate of Liquidating Agent.
Upon any payment or distribution of assets of the Traveler's Obligor referred to
in this Section 9, the Lender shall be entitled to rely upon any unstayed,
final, nonappealable order or decree entered by any court of competent
jurisdiction in which a Bankruptcy Event is pending, for the purpose of
ascertaining the Persons entitled to participate in such payment or
distribution, the holders of Senior Indebtedness, the amount thereof or payable
thereon, the amount or amounts paid or distributed thereon and all other facts
pertinent thereto or to this Section 9.
9.9 Turnover, Miscellaneous Subordination Provisions. (A) If a
distribution is made to any holder of Subordinated Obligations that because of
this Section 9 should not have been made to it, such holder shall segregate such
distribution from its other funds and property and hold it in trust for the
benefit of, and, upon written request, pay it over (in the same form as
received, with any necessary endorsement) to, the holders of Senior Indebtedness
as their interests may appear, or their agent or representative or the trustee
under the indenture or other agreement (if any) pursuant to which Senior
Indebtedness may have been issued, as their respective interests may appear, for
application (in the case of cash) to, or as collateral (in the case of non-cash
property or securities) for the payment or prepayment of, all obligations with
respect to Senior Indebtedness remaining unpaid to the extent necessary to pay
such obligations in full in accordance with their terms, after giving effect to
an concurrent payment or distribution to or for the holders of Senior
Indebtedness.
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B. A distribution may consist of cash, securities or other
property, by setoff or otherwise, and a payment or distribution on account of
any obligations with respect to the holders of Subordinated Obligations shall
include any redemption, purchase or other acquisition of the Subordinated
Obligations.
C. For the purpose of this Section 9, all Senior Indebtedness
now or hereafter existing shall not be deemed to have been paid in full unless
the holders or the owners thereof shall have received the indefeasible payment
in full in cash.
D. The agreements contained in this Section 9 shall continue
to be effective or be reinstated, as the case may be, if at any time any payment
of any of the Senior Indebtedness is rescinded or must otherwise be returned by
any holder of Senior Indebtedness upon any Bankruptcy Event or any other
nonappealable order of a court of competent jurisdiction of the Borrower, all as
though such payment had not been made.
E. All rights and interests under this Agreement of the
holders of Senior Indebtedness, and all agreements and obligations )f the
holders of Subordinated Obligations and the Borrower and the Guarantors under
this Section 9, shall remain in full force and effect irrespective of (i) any
lack of validity or enforceability of the Senior Credit Agreement, any
promissory notes evidencing the Indebtedness thereunder, or any other agreement
or instrument relating thereto or to any other Senior Indebtedness, or (ii) any
other circumstance that might otherwise constitute a defense available to, or a
discharge of, any holders of Subordinated Obligations, the Borrower or the
Guarantors including, but not limited to, priority liens or lack of lien
perfection.
F. The provisions set forth in this Section 9 constitute a
continuing agreement and shall (i) be and remain in full force and effect until
payment in full of all Senior Indebtedness and at such time when Finova shall
not have any obligation to make advances under the Senior Credit Agreement, (ii)
be binding upon the holders of Subordinated Obligations, the Borrower and the
Guarantors, and their respective successors, transferees and assigns, and (iii)
inure to the benefit of, and be enforceable directly by, each of the holders of
Senior Indebtedness and their respective successors, transferees and assigns.
THIS SPACE INTENTIONALLY LEFT BLANK
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Witness the due execution hereof by the respective duly authorized
officers of the undersigned as of the date first written above.
Lender: BHC INTERIM FUNDING, L.P.
By BHCGP, L.L.C., its General Partner
By BHC Investors, L.L.C., its Managing Member
By:
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Borrower: TRAVELERS ACQUISITION CORPORATION
By:
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Xxxxxx X. Press, Vice President
(EIN: 65-0930O556)
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