LOAN AND SECURITY AGREEMENT
dated as of August 17, 1999
between
BANK OF AMERICA, NATIONAL ASSOCIATION
and
FIRST COMMUNITY FINANCE, INC.
TABLE OF CONTENTS
1. DEFINITIONS.......................................................1
1.1 Terms Defined............................................1
Adjusted Net Earnings from Operations....................1
Adjusted Tangible Assets.................................1
Adjusted Tangible Net Worth..............................2
Advance Rate.............................................2
Affiliate................................................2
Anniversary Date.........................................2
Applicable Margin........................................2
Attorney Costs...........................................2
Availability.............................................2
Blocked Account Agreement................................2
Borrowing Base...........................................2
Business Day.............................................3
Capital Adequacy Regulation..............................3
Certificate of Title.....................................3
Closing Date.............................................3
Closing Fee..............................................3
Code.....................................................3
Collateral...............................................3
Collateral Adjustment Percent............................3
Contracts................................................3
Contract Debtor..........................................3
Credit Guidelines........................................3
Debt.....................................................3
Default..................................................4
Default Rate.............................................4
Distribution.............................................4
Dollar...................................................4
$........................................................4
Eligible Contracts.......................................4
ERISA....................................................6
ERISA Affiliate..........................................6
ERISA Event..............................................6
Event of Default.........................................6
Excess Availability......................................6
Federal Reserve Board....................................6
Financial Statements.....................................6
Fiscal Year..............................................7
Funding Date.............................................7
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GAAP.....................................................7
General Intangibles......................................7
Governmental Authority...................................7
Gross Contract Payments..................................7
Guarantor................................................7
Guaranty.................................................7
Instruments..............................................7
Intercompany Accounts....................................8
Interest Coverage Ratio..................................8
Interest Period..........................................8
IRS......................................................8
LIBOR Rate...............................................8
Eurodollar Reserve Percentage............................9
LIBOR....................................................9
LIBOR Rate Revolving Loan................................9
Lien.....................................................9
Loan Account.............................................9
Loan Documents...........................................9
Loss Reserve Percentage..................................9
Margin Stock.............................................9
Material Adverse Effect.................................10
Modified Contract.......................................10
Multi-employer Plan.....................................10
Multi-Month LIBOR Rate Revolving Loan...................10
Net Balance.............................................10
Net Charge-Offs.........................................10
Net Eligible Contract Payments..........................10
Net Six-Month Charge-Off Percent........................10
Net Twelve-Month Charge-Off Percent.....................11
Notice of Borrowing.....................................11
Notice of Conversion/Continuation.......................11
Obligations.............................................11
One-Month LIBOR Rate Revolving Loan.....................11
Other Taxes.............................................11
Participating Lender....................................11
Past Due Percent........................................11
Payment Account.........................................12
PBGC....................................................12
Pension Plan............................................12
Person..................................................12
Plan....................................................12
Property................................................12
Reference Rate..........................................12
Reference Rate Revolving Loans..........................12
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Reportable Event........................................12
Requirement of Law......................................12
Responsible Officer.....................................12
Restricted Investment...................................13
Revolving Loans.........................................13
Security Documents......................................13
Solvent.................................................13
Stated Termination Date.................................13
Subordinated Debt.......................................14
Subsidiary..............................................14
Taxes...................................................14
Termination Date........................................14
TFC.....................................................14
Total Facility..........................................14
UCC.....................................................14
Unfunded Pension Liability..............................14
Unused Line Fee.........................................14
Vehicle.................................................14
1.2 Accounting Terms........................................14
1.3 Interpretive Provisions.................................15
2. LOAN.............................................................15
2.1 Revolving Loans.........................................15
2.2 Borrowing Procedure.....................................16
3. INTEREST AND OTHER CHARGES.......................................17
3.1 Interest................................................17
3.2 Conversion and Continuation Elections...................18
3.3 Maximum Interest Rate...................................20
3.4 Closing Fee.............................................20
3.5 Unused Line Fee.........................................20
3.6 Audit Fees..............................................20
4. PAYMENTS AND PREPAYMENTS.........................................21
4.1 Payment of Revolving Loans..............................21
4.2 Termination of Facility.................................21
4.3 Payments by the Borrower................................22
4.4 Payments as Revolving Loans.............................22
4.5 Apportionment, Application and Reversal of Payments.....22
4.6 Indemnity for Returned Payments.........................23
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4.7 Lender's Books and Records; Monthly Statements..........23
5. TAXES, YIELD PROTECTION AND ILLEGALITY...........................24
5.1 Taxes...................................................24
5.2 Illegality..............................................24
5.3 Increased Costs and Reduction of Return.................25
5.4 Funding Losses..........................................25
5.5 Inability to Determine Rates............................26
5.6 Certificates of Lender..................................26
5.7 Survival................................................26
6. COLLATERAL.......................................................26
6.1 Grant of Security Interest..............................26
6.2 Perfection and Protection of Security Interest..........27
6.3 Location of Collateral..................................28
6.4 Title to, Liens on, and Sale of Collateral..............28
6.5 Access and Examination; Confidentiality.................28
6.6 Collateral Reporting....................................29
6.7 Contracts...............................................29
6.8 Collection of Contracts; Payments.......................30
6.9 Right to Cure...........................................30
6.10 Power of Attorney.......................................30
6.11 Lender's Rights, Duties and Liabilities.................31
6.12 Protection of Collateral................................31
6.13 Servicing of Contracts..................................31
7. BOOKS AND RECORDS; FINANCIAL INFORMATION; NOTICES................31
7.1 Books and Records.......................................31
7.2 Financial Information...................................32
7.3 Notices to the Lender...................................33
8. GENERAL WARRANTIES AND REPRESENTATIONS...........................34
8.1 Authorization, Validity, and Enforceability
of this Agreement and the Loan Documents..............34
8.2 Validity and Priority of Security Interest..............35
8.3 Organization and Qualification..........................35
8.4 Corporate Name; Prior Transactions......................35
8.5 Affiliates..............................................35
8.6 Financial Statements and Projections....................35
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8.7 Capitalization..........................................36
8.8 Solvency................................................36
8.9 Debt....................................................36
8.10 Title to Property.......................................36
8.11 Litigation..............................................36
8.12 No Violation of Law.....................................36
8.13 No Default..............................................36
8.14 ERISA Compliance........................................37
8.15 Taxes...................................................37
8.16 Use of Proceeds; Margin Regulations.....................37
8.17 No Material Adverse Change..............................37
8.18 Full Disclosure.........................................38
9. AFFIRMATIVE AND NEGATIVE COVENANTS...............................38
9.1 Taxes and Other Obligations.............................38
9.2 Corporate Existence and Good Standing...................38
9.3 Compliance with Law and Agreements;
Maintenance of Licenses...............................38
9.4 Compliance with ERISA...................................38
9.5 Mergers, Consolidations or Sales........................39
9.6 Distributions and Capital Change........................39
9.7 Transactions Affecting Collateral or Obligations........39
9.8 Guaranties..............................................39
9.9 Debt....................................................39
9.10 Prepayment..............................................39
9.11 Transactions with Affiliates............................39
9.12 Investment Banking and Finder's Fees....................40
9.13 Business Conducted......................................40
9.14 Liens...................................................40
9.15 Fiscal Year.............................................40
9.16 Interest Coverage Ratio.................................40
9.17 Minimum Borrowing Base; Minimum Subordinated Debt.......40
9.18 Loss Reserves...........................................40
9.19 Unsubordinated Debt to Borrowing Base...................40
9.20 Charge-Off Policy.......................................40
9.21 Subordinated Obligations................................41
9.22 New Subsidiaries........................................41
9.23 Restricted Investment...................................41
9.24 Reporting Methodology...................................41
9.25 Contract Forms..........................................41
9.26 Credit Guidelines.......................................41
9.27 Further Assurances......................................42
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10. CONDITIONS TO BORROWINGS.........................................42
10.1 Conditions Precedent to Making of Revolving Loans
on the Closing Date...................................42
10.2 Conditions Precedent to Each Revolving Loan.............43
11. DEFAULT..........................................................43
11.1 Events of Default.......................................43
11.2 Remedies................................................46
12. TERM AND TERMINATION.............................................48
12.1 Term and Termination....................................48
13. AMENDMENTS; WAIVER; PARTICIPATIONS...............................48
13.1 No Waivers; Cumulative Remedies.........................48
13.2 Amendments and Waivers..................................48
13.3 Participations..........................................48
14. MISCELLANEOUS....................................................48
14.1 Severability............................................48
14.2 Governing Law; Choice of Forum; Service of Process......49
14.3 Waiver of Jury Trial....................................49
14.4 Survival of Representations and Warranties..............50
14.5 Other Security and Guaranties...........................50
14.6 Fees and Expenses.......................................50
14.7 Notices.................................................51
14.8 Waiver of Notices.......................................51
14.9 Binding Effect..........................................52
14.10 INDEMNITY OF THE LENDER BY THE BORROWER.................52
14.11 Final Agreement.........................................52
14.12 Counterparts............................................52
14.13 Captions................................................53
14.14 Right of Setoff.........................................53
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LOAN AND SECURITY AGREEMENT
This Loan and Security Agreement ("Agreement") is made and entered into
as of August 17, 1999, by and between Bank of America, National Association
("Lender"), a national banking association, having an address at 00 Xxxx 00xx
Xxxxxx, Xxxxxx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, and First Community Finance,
Inc. ("Borrower"), a Virginia corporation, whose chief executive office is
located at 0000 Xxxxxxx Xxxxxx, Xxxxx 000, Xxxxxxxx, Xxxxxxxx 00000.
In consideration of the mutual covenants contained herein, the parties
agree as follows:
1. DEFINITIONS:
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1.1 Terms Defined. As used in this Agreement, the listed terms
are defined as follows:
"Adjusted Net Earnings from Operations" means, with respect to any
fiscal period of the Borrower, the Borrower's net income after provision for
interest expenses, income taxes and management fees for such fiscal period, as
determined in accordance with GAAP and reported on the financial statements for
such period, excluding, without duplication, any and all of the following
included in such net income: (a) gain arising from the sale of capital assets;
(b) gain arising from any write-up in the book value of any asset; (c) earnings
of any corporation, substantially all the assets of which have been acquired by
the Borrower in any manner, to the extent realized by such other corporation
prior to the date of acquisition; (d) earnings of any business entity in which
the Borrower has an ownership interest unless (and only to the extent) such
earnings shall actually have been received by the Borrower in the form of cash
distributions; (e) earnings of any person to which assets of the Borrower shall
have been sold, transferred or disposed of, or into which the Borrower shall
have been merged or which has been a party with the Borrower to any
consolidation or other form of reorganization, prior to the date of such
transaction; (f) gain arising from the acquisition of any debt or equity
security of the Borrower or from cancellation or forgiveness of Debt; and (g)
gain and non-cash losses arising from extraordinary items, as determined in
accordance with GAAP, or from any other nonrecurring transaction.
"Adjusted Tangible Assets" means all assets of the Borrower except: (a)
deferred assets, other than prepaid insurance, prepaid taxes, deferred tax
benefits and deferred origination costs; (b) patents, copyrights, trademarks,
trade names, franchises, goodwill, and other similar intangibles; (c) Restricted
Investments; (d) unamortized debt discount and expense; (e) assets of the
Borrower constituting Intercompany Accounts; (f) assets located and notes and
receivables due from obligors domiciled outside the United States of America,
Puerto Rico, or Canada (other than notes and receivables due from military
personnel whose loans were originated while such individuals were domiciled
inside the United States of America, Puerto Rico, or Canada); and (g) fixed
assets to the extent of any write-up in the book value thereof resulting from a
revaluation effective after the Closing Date.
"Adjusted Tangible Net Worth" means, at any date, the remainder of (a)
the net book value (after deducting related depreciation, obsolescence,
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amortization, valuation, and other proper reserves as determined in accordance
with GAAP) at which the Adjusted Tangible Assets would be shown on a balance
sheet of the Borrower at such date prepared in accordance with GAAP, minus (b)
the amount at which the Borrower's liabilities would be shown on such balance
sheet, and including as liabilities all reserves for contingencies and other
potential liabilities which would be required to be shown on such balance sheet.
"Advance Rate" means eighty-five percent (85%); provided, however, that
the Advance Rate shall be reduced by one percent (1.0%) for each whole
percentage point that the Collateral Adjustment Percent for the month
immediately preceding the date of determination exceeds eleven percent (11%).
For example, the Advance Rate shall be (a) eighty-four percent (84%) when the
Collateral Adjustment Percent for the month immediately preceding the date of
determination is equal to or greater than twelve percent (12%), but less than
thirteen percent (13%), and (b) eighty-three percent (83%) when the Collateral
Adjustment Percent for the month immediately preceding the date of determination
is equal to or greater than thirteen percent (13%), but less than fourteen
percent (14%), and (c) and so on.
"Affiliate" means: (a) a Person which, directly or indirectly,
controls, is controlled by or is under common control with, the Borrower; (b) a
Person which beneficially owns or holds, directly or indirectly, five percent or
more of any class of voting stock of the Borrower; or (c) a Person in which five
percent of any class of the voting stock is beneficially owned or held, directly
or indirectly, by the Borrower. The term control (including the terms
"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 the Person in question.
"Anniversary Date" means each anniversary of the Closing Date.
"Applicable Margin" means: (i) with respect to Reference Rate Revolving
Loans, one-half of one percent (0.50%), and (ii) with respect to LIBOR Rate
Revolving Loans, two and three-quarters percent (2.75%).
"Attorney Costs" means and includes all reasonable fees, expenses and
disbursements of any law firm or other external counsel engaged by the Lender,
the reasonable allocated cost of internal legal services of the Lender and all
reasonable expenses and disbursements of internal counsel of the Lender.
"Availability" means, as of the date of determination the amount
determined by multiplying the Advance Rate by the Net Eligible Contract Payments
then outstanding.
"Blocked Account Agreement" means that certain Blocked Account
Agreement described in Section 6.8.
"Borrowing Base" means the sum of the Adjusted Tangible Net Worth plus
all Subordinated Debt of the Borrower.
"Business Day" means: (a) any day that is not a Saturday, Sunday, or a
day on which banks in New York, New York, San Francisco, California, or
2
Charlotte, North Carolina, are required or permitted to be closed, and (b) with
respect to all notices, determinations, fundings and payments in connection with
the LIBOR Rate or LIBOR Rate Revolving Loans, any day that is a Business Day
pursuant to clause (a) above and that is also a day on which trading is carried
on by and between banks in the London interbank market.
"Capital Adequacy Regulation" means any guideline, request or directive
of any central bank or other Governmental Authority, or any other law, rule or
regulation, whether or not having the force of law, in each case, regarding
capital adequacy of any bank or of any corporation controlling a bank.
"Certificate of Title" means the certificate of title or other evidence
of ownership of any Vehicle issued by the appropriate Division of Motor Vehicles
or its counterpart in the jurisdiction in which the Contract Debtor resides.
"Closing Date" means the date of this Agreement.
"Closing Fee" means the fee specified in Section 3.4.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, and any successor statute, and regulations promulgated thereunder.
"Collateral" has the meaning specified in Section 6.1.
"Collateral Adjustment Percent" means, calculated as of the close of
business on the last day of each month, the sum (rounded to the lowest whole
percent) of the Past Due Percent and the Net Six-Month Charge-Off Percent.
"Contracts" means all of the Borrower's now owned and hereafter
acquired loan agreements, accounts, installment sale contracts, Instruments,
notes, documents, chattel paper, and all other forms of obligations owing to the
Borrower, and any collateral for any of the foregoing, including all rights
under any and all Security Documents and merchandise returned to or repossessed
by the Borrower.
"Contract Debtor" means each Person who is obligated to the Borrower to
perform any duty under or to make any payment pursuant to the terms of a
Contract.
"Credit Guidelines" means the Borrower's guidelines (which have
previously been reviewed and approved by the Lender) which state in detail the
credit criteria used by the Borrower in determining the creditworthiness of
Contract Debtors.
"Debt" means all liabilities, obligations, and indebtedness of the
Borrower to any Person, of any kind or nature, now or hereafter owing, arising,
due or payable, howsoever evidenced, created, incurred, acquired, or owing,
whether primary, secondary, direct or indirect, contingent, fixed, or otherwise,
3
and including, without in any way limiting, the generality of the foregoing: (i)
the Borrower's liabilities and obligations to trade creditors; (ii) all
Obligations; (iii) all obligations and liabilities to any Person secured by a
Lien on the Borrower's Property, even though the Borrower shall not have assumed
or become liable for the payment thereof; provided, however, that all such
obligations and liabilities which are limited in recourse to such Property shall
be included in Debt only to the extent of the book value of such property as
would be shown on a balance sheet of the Borrower prepared in accordance with
GAAP; (iv) all obligations and liabilities created or arising under any lease or
conditional sale or other title retention agreement with respect to Property
used or acquired by the Borrower, even if the rights and remedies of the lessor,
seller, or lender thereunder are limited to repossession of such Property;
provided, however, that all such obligations and liabilities which are limited
in recourse to such Property shall be included in Debt only to the extent of the
book value of such property as would be shown a balance sheet of the Borrower
prepared in accordance with GAAP; (v) all accrued pension fund and other
employee benefit plan obligations and liabilities; (vi) all obligations and
liabilities under Guaranties; (vii) Subordinated Debt; and (viii) deferred
taxes.
"Default" means an event or circumstance which, with the giving of
notice, the lapse of time, or both, would (if not cured or otherwise remedied
during such time) constitute an Event of Default.
"Default Rate" means a fluctuating per annum interest rate at all times
equal to the sum of (a) the otherwise applicable interest rate plus (b) two
percent (2.0%). Each Default Rate shall be adjusted simultaneously with any
change in the applicable interest rate.
"Distribution" means, in respect of any corporation: (a) the payment or
making of any dividend or other distribution of Property in respect to the
capital stock of such corporation, other than distributions in capital stock of
the same class; or (b) the redemption or other acquisition by such corporation
of any capital stock of such corporation.
"Dollar" and "$" means dollars in the lawful currency of the United
States.
"Eligible Contracts" means those Contracts which the Lender, in its
reasonable discretion, deems eligible and which, without limiting the Lender's
discretionary rights, satisfy at all times all of the following requirements as
determined by the Lender in its reasonable discretion:
(a) the Contract strictly complies with all of the Borrower's
warranties and representations contained herein;
(b) no payment due under the Contract is sixty-one (61) days
or more contractually past due (it being understood and agreed that a
contractual payment shall be considered to be past due only if, and at such time
as, the cumulative aggregate amount that is due but unpaid under the Contract is
greater than ten percent (10%) of the scheduled monthly contractual payment that
is due under the Contract);
(c) except as provided in clause (b) of this Section, neither
the Borrower nor, to the best knowledge of the Borrower, the Contract Debtor is
in default under the terms of the Contract;
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(d) the Borrower has not within any twelve-month period
granted to the Contract Debtor more than two extensions of time (neither of
which is longer than one month, consecutive or for the first payment due) for
the payment of any sum due under the Contract;
(e) the Contract is not subject to any defense, counterclaim,
offset, discount, or allowance;
(f) the terms of the Contract and all related documents and
instruments comply in all respects with all Requirement of Law;
(g) the Contract Debtor is not an Affiliate or an employee of
the Borrower;
(h) the creditworthiness of the Contract Debtor, the Contract
and Contract Debtor conform to the Credit Guidelines;
(i) the Contract Debtor is not subject to a bankruptcy or
insolvency proceeding under Federal law or any similar proceeding under state
law;
(j) the Contract Debtor is a resident of the United States;
(k) the first scheduled payment pursuant to the terms of the
Contract is, or was, due within forty-five (45) days following the execution of
the Contract and all other payments are scheduled to be made on the same date of
each month thereafter;
(l) the Contract Debtor is not located in a state requiring
the filing of a business activity report or similar document in order for the
Borrower to bring suit or otherwise enforce its remedies against the Contract
Debtor in the courts or through judicial process in such state, unless the
Borrower has qualified to do business in such state, or has filed a notice of
business activities report with the appropriate state offices for the
then-current year, or is exempt from such filing requirement;
(m) in the case of a Vehicle securing repayment of a Contract,
repayment of the Contract is secured by a first priority, perfected interest in
such Vehicle and the Borrower has obtained a Certificate of Title reflecting the
Borrower as the first and sole lien holder no later than one hundred twenty
(120) days following the date such Contract was acquired or created by the
Borrower;
(n) the Property subject to the Contract is intended to be
used principally for personal or family purposes by the Contract Debtor and is
not to be used for commercial purposes;
(o) the Contract is not a Modified Contract;
(p) the Contract is acquired or created in the ordinary course
of the Borrower's business;
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(q) the Property which secures the Contract has not been
repossessed by the Borrower or returned by the Contract Debtor to the Borrower;
and
(r) the Contract provides that the unpaid balance thereof
shall be payable in equal monthly payments which will amortize the full
principal amount of the Contract over the scheduled term of the Contract.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and regulations promulgated thereunder.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) which is a member of a controlled group or under common control
with the Borrower within the meaning of Section 414(b) or (c) of the Code (and
Sections 414(m) and (o) of the Code for purposes of provisions relating to
Section 412 of the Code).
"ERISA Event" means, with respect to the Borrower, any ERISA Affiliate
or any Pension Plan, the occurrence of any of the following: (a) a Reportable
Event; (b) a withdrawal by a substantial employer (as defined in Section 4001
(a)(12) of ERISA) subject to Section 4063 of ERISA; (c) a cessation of
operations which is treated as a withdrawal under Section 4062(e) of ERISA; (d)
a complete or partial withdrawal under Section 4203 or 4205 of ERISA from a
Multi-employer Plan; (e) a notification that a Multi-employer Plan is in
reorganization under Section 4242 of ERISA; (f) the filing of a notice of intent
to terminate a Pension Plan under 4041 of ERISA; (g) the treatment of an
amendment of a Pension Plan as a termination under 4041 of ERISA; (h) the
termination of a Multi-employer Plan under Section 4041A of ERISA; (i) the
commencement of proceedings by the PBGC to terminate a Pension Plan under 4042
of ERISA; (j) an event or condition which could reasonably be expected to
constitute grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, a Pension Plan; or (k) the imposition of
any liability under Title IV of ERISA, other than PBGC premiums due but not
delinquent under Section 4007 of ERISA.
"Event of Default" has the meaning specified in Section 11.1.
"Excess Availability" means, as of the date of determination, the
remainder of (a) Availability minus (b) the aggregate amount of the Revolving
Loans then outstanding.
"Federal Reserve Board" means the Board of Governors of the Federal
Reserve System or any successor thereto.
"Financial Statements" means, according to the context in which it is
used, the financial statements attached hereto as Schedule 8.6, or any financial
statements required to be given to the Lender pursuant to this Agreement.
"Fiscal Year" means the Borrower's fiscal year for accounting purposes.
The current fiscal year of the Borrower will end on December 31, 1999.
"Funding Date" means the date on which a Revolving Loan occurs.
6
"GAAP" means generally accepted accounting principles as in effect at
such time.
"General Intangibles" means all of the Borrower's now owned or
hereafter acquired: general intangibles, choses in action and causes of action
and all other intangible personal property of the Borrower of every kind and
nature (other than Contracts), including, without limitation, all contract
rights, proprietary rights, investment property, business records, patents,
patent applications, trademarks, service marks, trade names, trade secrets,
goodwill, copyrights, business interruption insurance, computer software,
customer lists, registrations, licenses, franchises, tax refund claims, any
funds which may become due to the Borrower in connection with the termination of
any Plan and any other amounts payable to the Borrower from any Plan.
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof, any central bank (or similar monetary or
regulatory authority) thereof, any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government,
and any corporation or other entity owned or controlled, through stock or
capital ownership or otherwise, by any of the foregoing.
"Gross Contract Payments" means, as of the date of determination, (i)
with respect to an interest-bearing Contract the outstanding balance thereof
including all accrued but unpaid interest, fees, and other charges owing by the
Contract Debtor, and (ii) with respect to a precomputed Contract the outstanding
balance thereof including all unearned interest, fees, and charges owing by the
Contract Debtor.
"Guarantor" means TFC Enterprises, Inc., a Delaware corporation.
"Guaranty" means, with respect to any Person, all obligations of such
Person which in any manner directly or indirectly guarantee or assure, or in
effect guarantee or assure, the payment or performance of any indebtedness,
dividend or other obligation of any other Person (the "guaranteed obligations"),
or assure or in effect assure the holder of the guaranteed obligations against
loss in respect thereof, including, without limitation, any such obligations
incurred through an agreement, contingent or otherwise: (a) to purchase the
guaranteed obligations or any property constituting security therefor; (b) to
advance or supply funds for the purchase or payment of the guaranteed
obligations or to maintain a working capital or other balance sheet condition;
or (c) to lease property or to purchase any debt or equity securities or other
property or services.
"Instruments" shall have the same meaning as given to that term in the
UCC, and shall include all negotiable instruments, notes secured by mortgages or
trust deeds, and any other writing which evidences a right to the payment of
money and is not itself a security agreement or lease, and is of a type which
is, in the ordinary course of business, transferred by delivery with any
necessary endorsement or assignment.
"Intercompany Accounts" means all assets and liabilities, however
arising, which are due to the Borrower from, which are due from the Borrower to,
or which otherwise arise from any transaction by the Borrower with, any
Affiliate.
7
"Interest Coverage Ratio" means, for any period, the ratio of (a)
Adjusted Net Earnings from Operations for such period plus the sum of the
following to the extent deducted in computing Adjusted Net Earnings from
Operations: (i) tax expense and (ii) total interest expense, over (b) total
interest expense during such period.
"Interest Period" means, as to any One-Month LIBOR Rate Revolving Loan,
the period commencing on the first Business Day of each calendar month and
ending on the date one month thereafter, and, as to any Multi-Month LIBOR Rate
Revolving Loan, the period commencing on the Funding Date of such Loan or on the
Conversion/Continuation Date on which the Loan is converted into or continued as
a Multi-Month LIBOR Rate Revolving Loan, and ending on the date two, three or
six months thereafter as selected by the Borrower in its Notice of Borrowing or
Notice of Conversion/Continuation; provided that:
(a) if any Interest Period would otherwise end on a day that
is not a Business Day, that Interest Period shall be extended to the following
Business Day unless the result of such extension would be to carry such Interest
Period into another calendar month, in which event such Interest Period shall
end on the preceding Business Day;
(b) any Interest Period pertaining to a LIBOR Rate Revolving
Loan that begins on the last Business Day of a calendar month (or on a day for
which there is no numerically corresponding day in the calendar month at the end
of such Interest Period) shall end on the last Business Day of the calendar
month at the end of such Interest Period; and
(c) no Interest Period for any LIBOR Rate Revolving Loan shall
extend beyond the Stated Termination Date.
"IRS" means the Internal Revenue Service and any other Governmental
Authority succeeding to any of its principal functions under the Code.
"LIBOR Rate" means, for any Interest Period with respect to a LIBOR
Rate Revolving Loan, the rate of interest per annum (rounded upward to the next
1/100th of 1.0%) determined by the Lender as follows:
LIBOR Rate = LIBOR
------------------------------------
1.00 - Eurodollar Reserve Percentage
Where,
"Eurodollar Reserve Percentage" means for any day for any
Interest Period the maximum reserve percentage (expressed as a decimal,
rounded upward to the next 1/100th of 1.0%) in effect on such day
(whether or not applicable to the Lender) under regulations issued from
time to time by the Board of Governors of the Federal Reserve for
determining the maximum reserve requirement (including any emergency,
supplemental or other marginal reserve requirement) with respect to
Eurocurrency funding (currently referred to as "Eurocurrency
liabilities"); and
8
"LIBOR" means the rate of interest per annum (rounded upward
to the next 1/16th of 1.0%) at which dollar deposits in the approximate
amount of the Loan to be made or continued as, or converted into, a
LIBOR Rate Revolving Loan and having a maturity comparable to such
Interest Period would be offered by the applicable office of the Lender
to major banks in the London interbank market at their request at
approximately 11:00 a.m. (London time) two Business Days prior to the
commencement of such Interest Period.
"LIBOR Rate Revolving Loan" means a Revolving Loan during any period in
which it bears interest at the LIBOR Rate. LIBOR Rate Revolving Loans shall
include both One-Month LIBOR Rate Revolving Loans and Multi-Month LIBOR Rate
Revolving Loans.
"Lien" means: (a) any interest in Property securing an obligation owed
to, or a claim by, a Person other than the owner of the Property, whether such
interest is based on the common law, statute, or contract, and including without
limitation, a security interest, charge, claim, or lien arising from a mortgage,
deed of trust, encumbrance, pledge, hypothecation, assignment, deposit
arrangement, agreement, security agreement, conditional sale or trust receipt or
a lease, consignment or bailment for security purposes; and (b) to the extent
not included under clause (a), any reservation, exception, encroachment,
easement, right-of-way, covenant, condition, restriction, lease or other title
exception or encumbrance affecting Property.
"Loan Account" means the loan account of the Borrower, which account
shall be maintained by the Lender.
"Loan Documents" means this Agreement and all other agreements,
instruments, and documents heretofore, now or hereafter evidencing, securing,
guaranteeing or otherwise relating to the Obligations, the Collateral, the
Lender's Liens in the Collateral, or any other aspect of the transactions
contemplated by this Agreement, and shall include, without limitation, the
guaranty of the Obligations from the Guarantor and the subordination agreement
from TFC.
"Loss Reserve Percentage" means the greater of (a) three and one-half
percent (3.5%) or (b) the Net Twelve-Month Charge-Off Percent as most recently
calculated.
"Margin Stock" means "margin stock" as such term is defined in
Regulation G, T, U, or X of the Federal Reserve Board.
"Material Adverse Effect" means a material adverse change in, or a
material adverse effect upon, the operations, business, properties, condition
(financial or otherwise) or prospects of the Borrower, the Guarantor or the
Collateral.
"Modified Contract" means a Contract which, at any time, either (a) was
in payment default for more than sixty (60) days and such payment default was
cured by adjusting, amending, or reducing the payment terms or (b) is a
refinance or renewal of a prior Contract with the Contract Debtor to accomplish
any of the foregoing.
9
"Multi-employer Plan" means a multi-employer plan as defined in Section
4001(a)(3) of ERISA which is or was at any time during the current year or the
immediately preceding six (6) years contributed to by the Borrower or any ERISA
Affiliate.
"Multi-Month LIBOR Rate Revolving Loan" means a LIBOR Rate Revolving
Loan with an Interest Period of two, three or six months, as selected by the
Borrower in its Notice of Borrowing or Notice of Conversion/Continuation.
"Net Balance" means, as of the date of determination, the Gross
Contract Payments of a Contract less all unearned interest, fees, and charges
owing by the Contract Debtor.
"Net Charge-Offs" means for any period the Net Balance due under
Contracts which have been charged off by the Borrower during such period, as
reduced by the amount of all cash recoveries with respect to Contracts which had
been charged off during previous periods or during such period.
"Net Eligible Contract Payments" means, as of the date of
determination, the remainder of (a) the Gross Contract Payments owing under all
Eligible Contracts, minus (b) the sum of (i) the aggregate amount, to the extent
included within the definition of Gross Contract Payments, all unearned
interest, fees, finance charges and other charges applicable to the Eligible
Contracts, (ii) the unearned insurance commissions, dealer reserves and unearned
discounts as presented on the books and records of the Borrower, and (iii) such
other amounts as the Lender, in its reasonable discretion, deems necessary or
appropriate as a result of new types of Contracts that the Borrower did not own
as of the Closing Date or as a result of changes after the Closing Date in
accounting for Contracts.
"Net Six-Month Charge-Off Percent" means the percent, calculated as of
the close of business on the last day of each month, equal to (a) the aggregate
amount of all Net Charge-Offs during such month and each of the five (5) months
immediately preceding the date of calculation, multiplied by two (2), divided by
(b) the sum of the amount of the Net Balance owing under all Contracts
outstanding as of the last day of each of such month and the previous five (5)
months divided by six (6). For example, if the Borrower charged off $10,000 each
month for six (6) months and if the aggregate Net Balances outstanding at the
end of the previous six (6) months was $1,000,000 for three (3) months and
$1,200,000 for three (3) months, the Net Six-Month Charge-Off Percent would be
10.9% ($120,000/$1,100,000).
"Net Twelve-Month Charge-Off Percent" means the percent, calculated as
of the close of business on the last day of each month, equal to (a) the
aggregate amount of all Net Charge-Offs during such month and each of the eleven
(11) months immediately preceding the date of calculation, divided by (b) the
sum of the amount of the Net Balance owing under all Contracts outstanding as of
the last day of such month and each of the previous eleven (11) months divided
by twelve (12). For example, if the Borrower charged off $10,000 each month for
twelve (12) months and if the aggregate Net Balances outstanding at the end of
the previous twelve (12) months was $1,000,000 for six (6) months and $1,200,000
for six (6) months, the Net Twelve-Month Charge-Off Percent would be 10.9%
($120,000/$1,100,000).
10
"Notice of Borrowing" has the meaning specified in Section 2.2(b).
"Notice of Conversion/Continuation" has the meaning specified in
Section 3.2(b).
"Obligations" means all present and future loans, advances,
liabilities, obligations, covenants, duties, and debts owing by the Borrower to
the Lender, whether or not arising under or pursuant to this Agreement or any of
the other Loan Documents, whether or not evidenced by any note, or other
instrument or document, whether arising from an extension of credit, opening of
a letter of credit, acceptance, loan, guaranty, indemnification or otherwise,
whether direct or indirect (including, without limitation, those acquired by
assignment from others, and any participation by the Lender in the Borrower's
debts owing to others), absolute or contingent, due or to become due, primary or
secondary, as principal or guarantor, and including, without limitation, all
principal, interest, charges, expenses, fees, attorneys' fees, filing fees and
any other sums chargeable to the Borrower hereunder or under any of the other
Loan Documents.
"One-Month LIBOR Rate Revolving Loan" means a LIBOR Rate Revolving Loan
with an Interest Period of one month, as selected by the Borrower in its Notice
of Borrowing or Notice of Conversion/Continuation.
"Other Taxes" means any present or future stamp or documentary taxes or
any other excise or property taxes, charges or similar levies which arise from
any payment made hereunder or from the execution, delivery or registration of,
or otherwise with respect to, this Agreement or any other Loan Documents.
"Participating Lender" means a commercial bank, financial institutions,
or other Person who shall have been granted the right by the Lender to
participate in the financing provided by the Lender under this Agreement, and
who shall have entered into a participation agreement in form and substance
satisfactory to the Lender.
"Past Due Percent" means the percent, calculated as of the close of
business on the last day of each month, equal to (a) the Gross Contract Payments
owing under all Contracts (excluding Contracts charged-off) as to which any
portion of an installment due thereunder is 30 days or more past due as
determined on a contractual basis under the Borrower's Credit Guidelines as of
such day, divided by (b) the Gross Contract Payments owing under all Contracts
(excluding Contracts charged-off) as of such day.
"Payment Account" means each blocked bank account established pursuant
to Section 6.8, to which the funds of the Borrower (including, without
limitation, collections of payments relating to Contracts and other Collateral)
are deposited or credited, and which is maintained in the name of the Borrower
on terms acceptable to the Lender.
"PBGC" means the Pension Benefit Guaranty Corporation or any person
succeeding to the functions thereof.
"Pension Plan" means a pension plan (as defined in Section 3(2) of
ERISA) subject to Title IV of ERISA, and which the Borrower sponsors, maintains,
11
or to which it makes, is making, or is obligated to make contributions, or in
the case of a Multi-employer Plan, has made contributions at any time during the
immediately preceding five (5) plan years.
"Person" means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation,
Governmental Authority, or any other entity.
"Plan" means an employee benefit plan (as defined in Section 3(3) of
ERISA) which the Borrower sponsors or maintains or to which the Borrower makes,
is making, or is obligated to make contributions and includes any Pension Plan.
"Property" means any interest in any kind of property or asset, whether
personal or real property, or mixed, or tangible or intangible.
"Reference Rate" means the rate of interest publicly announced from
time to time by the Lender as its reference rate. It is a rate set by the Lender
based upon various factors including the Lender's costs and desired return,
general economic conditions, and other factors, and is used as a reference point
for pricing some loans. However, the Lender may price loans at, above, or below
such announced rate. Any changes in the Reference Rate shall take effect on the
day specified in the public announcement of such change.
"Reference Rate Revolving Loans" means a Revolving Loan during any
period in which it bears interest based on the Reference Rate.
"Reportable Event" means any of the events set forth in Section 4043 of
ERISA or the regulations thereunder, other than any such event for which the
30-day notice requirement under ERISA has been waived in regulations issued by
the PBGC.
"Requirement of Law" means, as to any Person, any law (statutory or
common), treaty, rule or regulation or determination of an arbitrator or of a
Governmental Authority, in each case applicable to or binding upon the Person or
any of its Property or to which the Person or any of its Property is subject.
"Responsible Officer" means the chief executive officer or the
president of the Borrower, or any other officer having substantially the same
authority and responsibility; or, with respect to compliance with financial
covenants, the chief financial officer or the treasurer of the Borrower, or any
other officer having substantially the same authority and responsibility.
"Restricted Investment" means any acquisition of Property by the
Borrower or any of its Subsidiaries in exchange for cash or other Property,
whether in the form of an acquisition of stock, debt security, or other
indebtedness or obligation, or the purchase or acquisition of any other
Property, or a loan, advance, capital contribution, or subscription, except
acquisitions of the following: (a) fixed assets to be used in the business of
12
the Borrower, (b) purchase of Contracts in the ordinary course of the Borrower's
business, (c) direct obligations of the United States of America, or any agency
thereof, or obligations guaranteed by the United States of America, provided
that such obligations mature within one year from the date of acquisition
thereof; (d) certificates of deposit maturing within one year from the date of
acquisition, bankers acceptances, Eurodollar bank deposits, or overnight bank
deposits, in each case issued by, created by, or with a bank or trust company
organized under the laws of the United States or any state thereof having
capital and surplus aggregating at least $100,000,000; and (e) commercial paper
given the highest rating by a national credit rating agency and maturing not
more than 270 days from the date of creation thereof.
"Revolving Loans" means the revolving loans made by the Lender to
Borrower pursuant to this Agreement as provided for under Section Two.
"Security Documents" means all security agreements, chattel mortgages,
deeds of trust, mortgages, or other security instruments, guaranties, sureties,
and agreements of every type and nature securing the obligations of Contract
Debtors under Contracts.
"Solvent" means when used with respect to the Borrower that at the time
of determination:
(i) the assets of the Borrower, at a fair valuation, are in
excess of the total amount of its debts (including, without limitation,
contingent liabilities); and
(ii) the present fair saleable value of its assets is greater
than its probable liability on its existing debts as such debts become
absolute and matured; and
(iii) it is then able and expects to be able to pay its debts
(including, without limitation, contingent debts and other commitments)
as they mature; and
(iv) it has capital sufficient to carry on its business as
conducted and as proposed to be conducted.
For purposes of determining whether the Borrower is Solvent, the amount of any
contingent liability shall be computed as the amount that, in light of all the
facts and circumstances existing at such time, represents the amount that can
reasonably be expected to become an actual or matured liability.
"Stated Termination Date" means August 17, 2002.
"Subordinated Debt" means all debt of the Borrower which is
subordinated to the Obligations pursuant to a written subordination agreement
the terms of which are satisfactory to the Lender in its sole and absolute
discretion.
"Subsidiary" of a Person means any corporation, association,
partnership, joint venture or other business entity of which more than 50% of
the voting stock or other equity interests (in the case of Persons other than
corporations), is owned or controlled directly or indirectly by the Person, or
one or more of the Subsidiaries of the Person, or a combination thereof. Unless
the context otherwise clearly requires, references herein to a "Subsidiary"
refer to a Subsidiary of the Borrower.
13
"Taxes" means any and all present or future taxes, levies, imposts,
deductions, charges or withholdings, and all liabilities with respect thereto,
excluding such taxes (including income taxes or franchise taxes) as are imposed
on or measured by the Lender's net income by the jurisdiction (or any political
subdivision thereof) under the laws of which such Lender is organized or
maintains a lending office.
"Termination Date" means the earliest to occur of (i) the Stated
Termination Date, (ii) the date the Total Facility is terminated either by the
Borrower pursuant to Section 4.2 or by the Lender pursuant to Section 11.2, and
(iii) the date this Agreement is otherwise terminated for any reason whatsoever.
"TFC" means The Finance Company, a Virginia corporation.
"Total Facility" means $25,000,000.
"UCC" means the Uniform Commercial Code (or any successor statute) of
the state of New York or of any other state the laws of which are required by
Section 9-103 thereof to be applied in connection with the issue of perfection
of security interests.
"Unfunded Pension Liability" means the excess of a Plan's benefit
liabilities under Section 4001(a)(16) of ERISA, over the current value of that
Plan's assets, determined in accordance with the assumptions used for funding
the Pension Plan pursuant to Section 412 of the Code for the applicable plan
year.
"Unused Line Fee" shall have the meaning given to that term in Section
3.5.
"Vehicle" means any new or used, two-axeled, automobile or light-duty
truck, together with all accessions, parts and equipment sold or financed in
connection therewith.
1.2 Accounting Terms. Any accounting term used in this Agreement shall
have, unless otherwise specifically provided herein, the meaning customarily
given in accordance with GAAP, and all financial computations hereunder shall be
computed, unless otherwise specifically provided herein, in accordance with GAAP
as consistently applied.
14
1.3 Interpretive Provisions.
(a) The meanings of defined terms are equally applicable to
the singular and plural forms of the defined terms.
(b) The words "hereof," "herein," "hereunder" and similar
words refer to this Agreement as a whole and not to any particular provision of
this Agreement; and Subsection, Section, Schedule and Exhibit references are to
this Agreement unless otherwise specified.
(c) (i) The term "documents" includes any and all instruments,
documents, agreements, certificates, indentures, notices and other
writings, however evidenced.
(ii) The term "including" is not limiting and means
"including without limitation."
(iii) In the computation of periods of time from a specified
date to a later specified date, the word "from" means "from and
including", the words "to" and "until" each mean "to but excluding"
and the word "through" means "to and including."
(d) Unless otherwise expressly provided herein, (i) references
to agreements (including this Agreement) and other contractual instruments shall
be deemed to include all subsequent amendments and other modifications thereto,
but only to the extent such amendments and other modifications are not
prohibited by the terms of any Loan Document, and (ii) references to any statute
or regulation are to be construed as including all statutory and regulatory
provisions consolidating, amending, replacing, supplementing or interpreting the
statute or regulation.
(e) The captions and headings of this Agreement are for
convenience of reference only and shall not affect the interpretation of this
Agreement.
(f) This Agreement and other Loan Documents may use several
different limitations, tests or measurements to regulate the same or similar
matters. All such limitations, tests and measurements are cumulative and shall
each be performed in accordance with their terms.
(g) This Agreement and the other Loan Documents are the result
of negotiations among and have been reviewed by counsel to the Lender, the
Borrower and the other parties, and are the products of all parties.
Accordingly, they shall not be construed against the Lender merely because of
the Lender's involvement in their preparation.
2. LOAN.
----
2.1 Revolving Loans. Subject to the terms and conditions of this
Agreement, including the conditions precedent set forth in Section Ten, the
Lender agrees, upon the request of the Borrower, made from time to time during
the period of the Closing Date to the Termination Date, to make revolving loans
("Revolving Loans") to the Borrower in an amount not to exceed the lesser of the
15
Total Facility or the Availability; provided, however, no Revolving Loans will
be made to the Borrower if a Default or an Event of Default exists. The Lender,
in its sole and absolute discretion, may elect to make Revolving Loans in excess
of the Availability or the Total Facility on one or more occasions, but, if it
does so, the Lender shall not be deemed thereby to have changed the limits of
the Total Facility or the Availability. Immediately upon demand by the Lender
for repayment of such excess, the Borrower shall make such payment. If the sum
of the outstanding Revolving Loans exceeds the Availability or the Total
Facility, the Lender may refuse to make or otherwise restrict the making of
Revolving Loans as the Lender determines until such excess has been eliminated.
The Borrower may request Revolving Loans either telephonically or in writing.
Each oral request for a Revolving Loan shall be conclusively presumed to be made
by a person authorized by the Borrower to do so and the crediting of a Revolving
Loan to the Borrower's deposit account, or transmittal to such Person as the
Borrower shall direct, shall conclusively establish the obligation of the
Borrower to repay such Revolving Loan as provided herein.
2.2 Borrowing Procedure.
(a) (i) Each Revolving Loan shall be made upon the Borrower's
irrevocable written notice ("Notice of Borrowing") delivered to the
Lender which notice must be received by the Lender not later than (1)
11:00 a.m. (New York, New York time) three Business Days prior to the
requested Funding Date in the case of Multi-Month LIBOR Rate Revolving
Loans and (2) 11:00 a.m. (New York, New York time) on the requested
Funding Date in the case of Reference Rate Revolving Loans and
One-Month LIBOR Rate Revolving Loans, specifying:
(A) the amount of the borrowing (which
amount, in the case of a borrowing of Multi-Month LIBOR Rate
Revolving Loans, shall not be less than $3,000,000, or that is
in an integral multiple of $500,000 in excess thereof);
(B) the requested Funding Date, which shall
be a Business Day;
(C) whether the Revolving Loans requested
are to be Reference Rate Revolving Loans, One-Month LIBOR Rate
Revolving Loans or Multi-Month LIBOR Rate Revolving Loans; and
(D) the duration of the Interest Period if
the requested Revolving Loans are to be Multi-Month LIBOR Rate
Revolving Loans. If the Notice of Borrowing fails to specify
the duration of the Interest Period for any borrowing
comprised of Multi-Month LIBOR Rate Revolving Loans, such
Interest Period shall be two months.
(ii) There may not be more than six (6) different
Interest Periods in effect at any one time.
(iii) With respect to any request for Reference Rate
Revolving Loans and One-Month LIBOR Rate Revolving Loans, in lieu of
16
delivering the above-described Notice of Borrowing, the Borrower may
give the Lender telephonic notice of such request by the required time,
and Lender shall be entitled to rely on the telephonic notice in making
such Revolving Loans.
(iv) All Revolving Loans made on the Closing Date
shall be Reference Rate Revolving Loans or One-Month LIBOR Rate
Revolving Loans, as the Borrower may direct.
(b) On or prior to the Closing Date and thereafter prior to
any change with respect to any of the information contained in the following
clauses (i) and (ii), the Borrower shall deliver to the Lender a writing setting
forth (i) the account of the Borrower to which the Lender is authorized to
transfer the proceeds of the Revolving Loans requested pursuant to this Section
2.2, and (ii) the names of the officers authorized to request Revolving Loans on
behalf of the Borrower, and shall provide the Lender with a specimen signature
of each such officer. The Lender shall be entitled to rely conclusively on such
officer's authority to request Revolving Loans on behalf of the Borrower, the
proceeds of which are to be transferred to any of the accounts specified by the
Borrower pursuant to the immediately preceding sentence, until the Lender
receives written notice to the contrary. The Lender shall have no duty to verify
the identity of any individual representing himself as one of the officers
authorized by the Borrower to make such requests on its behalf.
(c) The Lender shall not incur any liability to the Borrower
as a result of acting upon any notice referred to in Sections 2.2(a) and (b),
which notice the Lender believes in good faith to have been given by an officer
duly authorized by the Borrower to request Revolving Loans on its behalf or for
otherwise acting in good faith under this Section 2.2, and the crediting of
Revolving Loans to the Borrower's deposit account, or transmittal to such Person
as the Borrower shall direct, shall conclusively establish the obligation of the
Borrower to repay such Revolving Loans.
(d) Any Notice of Borrowing (or telephonic notice in lieu
thereof) made pursuant to Section 2.2(a) shall be irrevocable and the Borrower
shall be bound to borrow the funds requested therein in accordance therewith.
3. INTEREST AND OTHER CHARGES.
--------------------------
3.1 Interest.
--------
(a) All outstanding Obligations shall bear interest on the
unpaid principal amount thereof (including, to the extent permitted by law, on
interest thereon not paid when due) from the date made until paid in full in
cash at a rate determined by reference to the Reference Rate or the LIBOR Rate
and Sections 3.1(a)(i) or (ii), as applicable, but not to exceed the Maximum
Rate described in Section 3.3. Subject to the provisions of Section 3.2, any of
the Revolving Loans may be converted into, or continued as, Reference Rate
17
Revolving Loans, One-Month LIBOR Rate Revolving Loans or Multi-Month LIBOR Rate
Revolving Loans in the manner provided in Section 3.2. If at any time Revolving
Loans are outstanding with respect to which notice has not been delivered to the
Lender in accordance with the terms of this Agreement specifying the basis for
determining the interest rate applicable thereto, then those Revolving Loans
shall be One-Month LIBOR Rate Revolving Loans and shall bear interest at a rate
determined by reference to the LIBOR Rate for One-Month LIBOR Rate Revolving
Loans until notice to the contrary has been given to the Lender and such notice
has become effective. Except as otherwise provided herein, the outstanding
Obligations shall bear interest as follows:
(i) For all Reference Rate Revolving Loans and other
Obligations, which are not LIBOR Rate Revolving Loans, then at a
fluctuating per annum rate equal to the Reference Rate plus the
Applicable Margin;
(ii) For all One-Month LIBOR Rate Revolving Loans,
then at a per annum rate equal to the LIBOR Rate determined as of the
first Business Day of each month for an Interest Period consisting of
one month plus the Applicable Margin, with such LIBOR Rate to be
effective at all times during such month, and to be adjusted as of the
first Business Day of the following month for such following month; and
(iii) For all Multi-Month LIBOR Rate Revolving Loans,
then at a per annum rate equal to the LIBOR Rate determined for the
Applicable Interest Period plus the Applicable Margin.
Each change in the Reference Rate shall be reflected in the interest rate
described in clause (i) above as of the effective date of such change. Each
change in the LIBOR Rate shall be reflected in the interest rate described in
clause (ii) above as of the effective date of such change. All interest charges
shall be computed on the basis of a year of 360 days and actual days elapsed
(which results in more interest being paid than if computed on the basis of a
365-day year). Interest accrued on all Revolving Loans will be payable in
arrears on or before the fifteenth (15th) day of each month hereafter.
(b) If any Default or Event of Default occurs and is
continuing and the Lender in its discretion so elects, then, until such Default
or Event of Default has been cured, all of the Obligations shall bear interest
at the Default Rate applicable thereto, and all Revolving Loans that are not
Multi-Month LIBOR Rate Revolving Loans shall bear interest at a fluctuating per
annum rate equal to the Reference Rate plus the Applicable Margin plus the
Default Rate, notwithstanding any provision of Section 3.1 to the contrary.
3.2 Conversion and Continuation Elections.
-------------------------------------
(a) The Borrower may, upon irrevocable written notice to the
Lender in accordance with Section 3.2(b):
(i) elect, as of any Business Day, in the case of
Reference Rate Revolving Loans and One-Month LIBOR Rate Revolving Loans
to convert any such Revolving Loans (or any part thereof in an amount
18
not less than $3,000,000, or that is in an integral multiple of
$500,000 in excess thereof) into Multi-Month LIBOR Rate Revolving
Loans; or
(ii) elect, as of any Business Day, in the case of
Reference Rate Revolving Loans to convert all such Revolving Loans into
One-Month LIBOR Rate Revolving Loans, or in the case of One-Month LIBOR
Rate Revolving Loans to convert all such Revolving Loans into Reference
Rate Revolving Loans; or
(iii) elect, as of the last day of the applicable
Interest Period, to continue any Multi-Month LIBOR Rate Revolving Loans
having Interest Periods expiring on such day (or any part thereof in an
amount not less than $3,000,000, or that is in an integral multiple of
$500,000 in excess thereof);
provided, that if at any time the aggregate amount of Multi-Month LIBOR Rate
Revolving Loans is reduced, by payment, prepayment, or conversion of part
thereof to be less than $3,000,000, such Multi-Month LIBOR Rate Revolving Loans
shall automatically convert into One-Month LIBOR Rate Revolving Loans, and on
and after such date the right of the Borrower to continue such Revolving Loans
as, and convert such Revolving Loans into, Multi-Month LIBOR Rate Revolving
Loans, as the case may be, shall terminate.
(b) The Borrower shall deliver a notice of
conversion/continuation ("Notice of Conversion/Continuation") to be received by
the Lender not later than 11:00 a.m. (New York, New York time) at least three
Business Days in advance of the Conversion/Continuation Date, if the Revolving
Loans are to be converted into or continued as Multi-Month LIBOR Rate Revolving
Loans and specifying:
(i) the proposed Conversion/Continuation Date;
(ii) the aggregate amount of Revolving Loans to be
converted or renewed;
(iii) the type of Revolving Loans resulting from the
proposed conversion or continuation; and
(iv) the Interest Period.
(c) If upon the expiration of any Interest Period applicable
to Multi-Month LIBOR Rate Revolving Loans, the Borrower has failed to select
timely a new Interest Period to be applicable to Multi-Month LIBOR Rate
Revolving Loans or if any Default or Event of Default then exists, the Borrower
shall be deemed to have elected to convert such Multi-Month LIBOR Rate Revolving
Loans into One-Month LIBOR Rate Revolving Loans effective as of the expiration
date of such Interest Period.
(d) During the existence of a Default or Event of Default, the
Borrower may not elect to have a Revolving Loan converted into or continued as a
Multi-Month LIBOR Rate Revolving Loan.
19
(e) After giving effect to any conversion or continuation of
Multi-Month LIBOR Rate Revolving Loans, there may not be more than six (6)
different Interest Periods in effect.
3.3 Maximum Interest Rate. In no event shall any interest rate provided
for hereunder exceed the maximum rate permissible for corporate borrowers under
applicable law for loans of the type provided for hereunder (the "Maximum
Rate"). If, in any month, any interest rate, absent such limitation, would have
exceeded the Maximum Rate, then the interest rate for that month shall be the
Maximum Rate, and, if in future months, that interest rate would otherwise be
less than the Maximum Rate, then that interest rate shall remain at the Maximum
Rate until such time as the amount of interest paid hereunder equals the amount
of interest which would have been paid if the same had not been limited by the
Maximum Rate. In the event that, upon payment in full of the Obligations, the
total amount of interest paid or accrued under the terms of this Agreement is
less than the total amount of interest which would, but for this Section 3.3,
have been paid or accrued if the interest rates otherwise set forth in this
Agreement had at all times been in effect, then the Borrower shall, to the
extent permitted by applicable law, pay the Lender an amount equal to the excess
of (a) the lesser of (i) the amount of interest which would have been charged if
the Maximum Rate had, at all times, been in effect or (ii) the amount of
interest which would have accrued had the interest rates otherwise set forth in
this Agreement, at all times, been in effect over (b) the amount of interest
actually paid or accrued under this Agreement. In the event that a court
determines that the Lender has received interest and other charges hereunder in
excess of the Maximum Rate, such excess shall be deemed received on account of,
and shall automatically be applied to reduce, the Obligations other than
interest, in the inverse order of maturity, and if there are no Obligations
outstanding, the Lender shall refund to the Borrower such excess.
3.4 Closing Fee. The Borrower shall pay the Lender, on the Closing
Date, a closing fee (the "Closing Fee") in the amount of $62,500, which Closing
Fee shall be fully earned by the Lender on the Closing Date. The Lender and the
Borrower agree that the Closing Fee shall be financed by the Lender as a
One-Month LIBOR Rate Revolving Loan.
3.5 Unused Line Fee. The Borrower shall pay the Lender, on the
fifteenth day of each month and on the Termination Date, an unused line fee in
an amount equal to one-eighth of one percent (0.125%) per annum multiplied by
the average daily amount by which the Total Facility exceeds the average daily
outstanding amount of Revolving Loans during the immediately preceding month or
shorter period if calculated on the Termination Date. The unused line fee shall
be computed on the basis of a 360-day year for the actual number of days
elapsed.
3.6 Audit Fees. The Borrower agrees to pay to the Lender all costs and
fees reasonably incurred by the Lender's internal auditors in connection with
audits of the Borrower performed by such auditors during the term of this
Agreement; provided that, prior to the occurrence of an Event of Default, the
Lender shall not be entitled to reimbursement for any such costs and fees
incurred in connection with audits in an amount greater than $18,000 (the
20
"Maximum Audit Fee") during any year of this Agreement. One-twelfth (1/12th) of
the Maximum Audit Fee shall be payable on the fifteenth day of each month,
beginning with the fifteenth day of the first month immediately following the
Closing Date. Notwithstanding the foregoing, upon the occurrence of any Event of
Default, the Borrower shall pay all of the Lender's costs incurred in connection
with the verification, audit, and inspection of the Collateral without regard to
the foregoing limitations.
4. PAYMENTS AND PREPAYMENTS.
------------------------
4.1 Payment of Revolving Loans. The Borrower shall repay the
outstanding principal balance of the Revolving Loans, plus all accrued but
unpaid interest thereon, on the Termination Date. The Borrower may prepay
Revolving Loans at any time and reborrow subject to the terms of this Agreement;
provided, however, that with respect to any Multi-Month LIBOR Rate Revolving
Loans prepaid by the Borrower prior to the expiration date of the Interest
Period applicable thereto, the Borrower agrees to pay to the Lender the amounts
described in Section 5.4. In addition, and without limiting the generality of
the foregoing, the Borrower shall pay to the Lender, on demand, the amount by
which the outstanding Revolving Loans at any time exceed the Availability or the
Total Facility.
4.2 Termination of Facility. The Borrower may terminate this Agreement
at any time upon at least thirty (30) Business Days' prior written notice to the
Lender if (a) it pays and performs in full all Obligations on or prior to the
effective date of termination, (b) it pays the early termination fee set forth
in the next sentence (unless the payment of such early termination fee is not
required as set forth in the last sentence of this Section 4.2), and (c) it
pays, with respect to any Multi-Month LIBOR Rate Revolving Loans prepaid in
connection with such termination, the amounts described in Section 5.4. If this
Agreement is terminated at any time prior to February 17, 2002 for any reason
whatsoever (except as described in the next sentence), the Borrower shall pay to
the Lender an early termination fee determined in accordance with the following
table:
PERIOD DURING WHICH EARLY
TERMINATION OCCURS EARLY TERMINATION FEE
------------------ ---------------------
On or prior to the First
Anniversary Date 2.0% of the Total Facility
After the First Anniversary
Date, but on or prior to the
Second Anniversary Date 1.0% of the Total Facility
After the Second Anniversary
Date, but on or prior to
February 17, 2002 0.50% of the Total Facility
Notwithstanding the foregoing provisions of this Section 4.2, the Borrower shall
not be obligated to pay to the Lender an early termination fee if the reason for
termination of this Agreement is that the Lender has notified the Borrower that
the Borrower is required to pay additional amounts to the Lender under the
provisions of Section 5.3 (but the Borrower shall remain obligated to pay to the
21
Lender such additional amounts under said Section 5.3); provided, however, that
the Borrower shall be required to pay the early termination fee if either: (x)
the Borrower fails to provide written notice to the Lender of its intent to
terminate this Agreement within fifteen (15) days after the Lender sends a
notice to the Borrower that the Borrower is required to pay additional amounts
to the Lender under the provisions of Section 5.3; or (y) the Borrower fails to
pay and perform all Obligations on or prior to the ninetieth (90th) day
following the end of the fifteen (15) day period referred to in clause (x) of
this proviso. In the event that the Borrower provides Lender with a notice of
intent to terminate this Agreement in accordance with the preceding sentence,
but the Borrower fails to pay and perform all Obligations on or prior to the
ninetieth (90th) day after such fifteen-day period in accordance with the
preceding sentence, said notice of intent to terminate from the Borrower shall
be deemed to have been revoked by the Borrower, and the Borrower's obligations
to pay to the Lender an early termination fee in accordance with the terms of
this Agreement shall be deemed to have been reinstated by the Borrower and the
Lender.
4.3 Payments by the Borrower. All payments to be made by the Borrower
shall be made without setoff, recoupment or counterclaim. All payments by the
Borrower shall be made to the Lender at the Lender's address set forth in
Section 14.7, and shall be made in Dollars and in immediately available funds,
no later than 1:00 p.m. (New York, New York time) on the date specified herein.
Any payment received by the Lender later than 1:00 p.m. (New York, New York
time) shall be deemed to have been received on the following Business Day and
any applicable interest or fee shall continue to accrue until such following
Business Day. Whenever any payment is scheduled to be due on a day other than a
Business Day, such payment shall be payable on the following Business Day.
4.4 Payments as Revolving Loans. All payments of principal, interest,
fees, premiums and other sums payable hereunder, including all reimbursement for
expenses pursuant to Section 14.6, may, at the option of the Lender, in its sole
discretion, subject only to the terms of this Section 4.4, be paid from the
proceeds of Revolving Loans made hereunder, whether made following a request by
the Borrower pursuant to Section 2.2 or a deemed request as provided in this
Section 4.4. The Borrower hereby irrevocably authorizes the Lender to charge the
Loan Account for the purpose of paying principal, interest, fees, premiums and
other sums payable hereunder, including reimbursing expenses pursuant to Section
14.6, and agrees that all such amounts charged shall constitute Revolving Loans
and that all such Revolving Loans so made shall be deemed to have been requested
by the Borrower pursuant to Section 2.2.
4.5 Apportionment, Application and Reversal of Payments. All payments
received by Lender shall be applied, subject to the provisions of this
Agreement, first, to pay any fees or expense reimbursements then due to the
Lender from the Borrower; second, to pay interest due in respect of all
Revolving Loans; third, to pay or prepay principal of the Revolving Loans; and
fourth, to the payment of any other Obligation due to the Lender.
Notwithstanding anything to the contrary contained in this Agreement, unless so
22
directed by the Borrower, or unless an Event of Default is outstanding, the
Lender shall not apply any payments which it receives to any Multi-Month LIBOR
Rate Revolving Loan except (a) on the expiration date of the Interest Period
applicable to any such Multi-Month LIBOR Rate Revolving Loan, or (b) in the
event, and only to the extent, that there are no outstanding Reference Rate
Revolving Loans or One-Month LIBOR Rate Revolving Loans. The Lender shall have
the continuing and exclusive right to apply and reverse and reapply any and all
such proceeds and payments to any portion of the Obligations.
4.6 Indemnity for Returned Payments. IF AFTER RECEIPT OF ANY PAYMENT
WHICH IS APPLIED TO THE PAYMENT OF ALL OR ANY PART OF THE OBLIGATIONS, THE
LENDER IS FOR ANY REASON COMPELLED TO SURRENDER SUCH PAYMENT TO ANY PERSON
BECAUSE SUCH PAYMENT IS INVALIDATED, DECLARED FRAUDULENT, SET ASIDE, DETERMINED
TO BE VOID OR VOIDABLE AS A PREFERENCE, IMPERMISSIBLE SETOFF, OR A DIVERSION OF
TRUST FUNDS, OR FOR ANY OTHER REASON, THEN THE OBLIGATIONS OR PART THEREOF
INTENDED TO BE SATISFIED SHALL BE REVIVED AND SHALL CONTINUE AND THIS AGREEMENT
SHALL CONTINUE IN FULL FORCE AS IF SUCH PAYMENT HAD NOT BEEN RECEIVED BY THE
LENDER AND THE BORROWER SHALL BE LIABLE TO PAY TO THE LENDER, AND HEREBY DOES
INDEMNIFY THE LENDER AND HOLD THE LENDER HARMLESS FOR, THE AMOUNT OF SUCH
PAYMENT SURRENDERED. The provisions of this Section 4.6 shall be and remain
effective notwithstanding any contrary action which may have been taken by the
Lender in reliance upon such payment and any such contrary action so taken shall
be without prejudice to the Lender's rights under this Agreement and shall be
deemed to have been conditioned upon such payment having become final and
irrevocable. The provisions of this Section 4.6 shall survive the termination of
this Agreement.
4.7 Lender's Books and Records; Monthly Statements. The Borrower agrees
that the Lender's books and records showing the Obligations and the transactions
pursuant to this Agreement and the other Loan Documents shall be admissible in
any action or proceeding arising therefrom, and shall constitute prima facie
proof thereof, irrespective of whether any Obligation is also evidenced by a
promissory note or other instrument. The Lender will provide to the Borrower a
monthly statement of the Revolving Loans, payments, and other transactions
pursuant to this Agreement. Such statement shall be deemed correct, accurate,
and binding on the Borrower and an account stated (except for reversals and
reapplications of payments made as provided in Section 4.5 and corrections of
errors discovered by the Lender), unless the Borrower notifies the Lender in
writing to the contrary within thirty (30) days after such statement is
rendered. In the event a timely written notice of objections is given by the
Borrower, only the items to which exception is expressly made will be considered
to be disputed by the Borrower.
23
5. TAXES, YIELD PROTECTION AND ILLEGALITY.
--------------------------------------
5.1 Taxes.
-----
(a) Any and all payments by the Borrower to the Lender under
this Agreement and any other Loan Document shall be made free and clear of, and
without deduction or withholding for any Taxes. In addition, the Borrower shall
pay all Other Taxes.
(b) The Borrower agrees to indemnify and hold harmless the
Lender for the full amount of Taxes or Other Taxes (including any Taxes or Other
Taxes imposed by any jurisdiction on amounts payable under this Section) paid by
the Lender and any liability (including penalties, interest, additions to tax
and expenses) arising therefrom or with respect thereto, whether or not such
Taxes or Other Taxes were correctly or legally asserted. Payment under this
indemnification shall be made within thirty (30) days after the date the Lender
makes written demand therefor.
(c) If the Borrower shall be required by law to deduct or
withhold any Taxes or Other Taxes from or in respect of any sum payable
hereunder to the Lender, then:
(i) the sum payable shall be increased as necessary
so that after making all required deductions and withholdings
(including deductions and withholdings applicable to additional sums
payable under this Section) the Lender receives an amount equal to the
sum it would have received had no such deductions or withholdings been
made;
(ii) the Borrower shall make such deductions and
withholdings;
(iii) the Borrower shall pay the full amount deducted
or withheld to the relevant taxing authority or other authority in
accordance with applicable law; and
(iv) the Borrower shall also pay to the Lender, at
the time interest is paid, all additional amounts which the Lender
specifies as necessary to preserve the after-tax yield the Lender would
have received if such Taxes or Other Taxes had not been imposed.
5.2 Illegality.
----------
(a) If the Lender determines that the introduction of any
Requirement of Law, or any change in any Requirement of Law, or in the
interpretation or administration of any Requirement of Law, has made it
unlawful, or that any central bank or other Governmental Authority has asserted
that it is unlawful, for the Lender or its applicable lending office to make
LIBOR Rate Revolving Loans, then, on notice thereof by the Lender to the
Borrower, any obligation of the Lender to make LIBOR Rate Revolving Loans shall
24
be suspended until the Lender notifies the Borrower that the circumstances
giving rise to such determination no longer exist, and all Revolving Loans shall
bear interest at a fluctuating per annum rate equal to the Reference Rate plus
the Applicable Margin, notwithstanding any provision of Section 3.1 to the
contrary.
(b) If the Lender determines that it is unlawful to maintain
any LIBOR Rate Revolving Loan, the Borrower shall, upon its receipt of notice of
such fact and demand from the Lender, prepay without penalty in full such LIBOR
Rate Revolving Loans then outstanding, together with interest accrued thereon
and excluding any amounts that would have otherwise been required under Section
5.4, either on the last day of the Interest Period thereof, if the Lender may
lawfully continue to maintain such LIBOR Rate Revolving Loans to such day, or
immediately, if the Lender may not lawfully continue to maintain such LIBOR Rate
Revolving Loan. If the Borrower is required to so prepay any LIBOR Rate
Revolving Loan, then concurrently with such prepayment, the Borrower shall
borrow from the Lender, in the amount of such repayment, a Reference Rate
Revolving Loan, which shall bear interest at a fluctuating per annum rate equal
to the Reference Rate plus the Applicable Margin, notwithstanding any provision
of Section 3.1 to the contrary.
5.3 Increased Costs and Reduction of Return.
---------------------------------------
(a) If the Lender determines that, due to either (i) the
introduction of or any change in any Requirement of Law, or (ii) the compliance
by the Lender with any guideline or request from any central bank or other
Governmental Authority (whether or not having the force of any Requirement of
Law), there shall be any increase in the cost to the Lender of agreeing to make
or making, funding or maintaining any LIBOR Rate Revolving Loans, then the
Borrower shall be liable for, and shall from time to time, upon demand, pay to
the Lender additional amounts as are sufficient to compensate the Lender for
such increased costs.
(b) If the Lender shall have determined that (i) the
introduction of any Capital Adequacy Regulation, (ii) any change in any Capital
Adequacy Regulation, (iii) any change in the interpretation or administration of
any Capital Adequacy Regulation by any central bank or other Governmental
Authority charged with the interpretation or administration thereof, or (iv)
compliance by the Lender or any corporation controlling the Lender with any
Capital Adequacy Regulation, affects or would affect the amount of capital
required or expected to be maintained by the Lender or any corporation
controlling the Lender and (taking into consideration the Lender's or such
corporation's policies with respect to capital adequacy) determines that the
amount of such capital is increased as a consequence of the Total Facility,
loans, credits or obligations under this Agreement, then, upon demand of the
Lender, the Borrower shall pay to the Lender, from time to time as specified by
the Lender, additional amounts sufficient to compensate the Lender for such
increase.
5.4 Funding Losses. The Borrower shall reimburse the Lender and hold
the Lender harmless from any loss or expense which the Lender may sustain or
incur as a consequence of:
(a) the failure of the Borrower to make on a timely basis any
payment of principal of any Multi-Month LIBOR Rate Revolving Loan;
25
(b) the failure of the Borrower to borrow, continue or convert
a loan after the Borrower has given (or is deemed to have given) a Notice of
Borrowing or a Notice of Conversion/Continuation;
(c) the prepayment or other payment (including after
acceleration thereof) of any Multi-Month LIBOR Rate Revolving Loan on a day that
is not the last day of the relevant Interest Period;
including any such loss or expense arising from the liquidation or reemployment
of funds obtained by it to maintain its Multi-Month LIBOR Rate Revolving Loans
or from fees payable to terminate the deposits from which such funds were
obtained.
5.5 Inability to Determine Rates. If the Lender determines that for any
reason adequate and reasonable means do not exist for determining the LIBOR Rate
for any requested Interest Period with respect to a proposed LIBOR Rate
Revolving Loan, or that the LIBOR Rate for any requested Interest Period with
respect to a proposed LIBOR Rate Revolving Loan does not adequately and fairly
reflect the cost to the Lender of funding such Loan, the Lender will promptly so
notify the Borrower. Thereafter, the obligation of the Lender to make or
maintain LIBOR Rate Revolving Loans hereunder shall be suspended until the
Lender revokes such notice in writing. Upon receipt of such notice, the Borrower
may revoke any Notice of Borrowing or Notice of Conversion/Continuation then
submitted by it. If the Borrower does not revoke such Notice, the Lender shall
make, convert or continue the Revolving Loans, as proposed by the Borrower, in
the amount specified in the applicable notice submitted by the Borrower, but
such Revolving Loans shall be made, converted or continued as Reference Rate
Revolving Loans instead of LIBOR Rate Revolving Loans, and shall bear interest
at a fluctuating per annum rate equal to the Reference Rate plus the Applicable
Margin, notwithstanding any provision of Section 3.1 to the contrary.
5.6 Certificates of Lender. The Lender claiming reimbursement or
compensation under this Section Five shall deliver to the Borrower a certificate
setting forth in reasonable detail the amount payable to the Lender hereunder
and such certificate shall be conclusive and binding on the Borrower in the
absence of manifest error.
5.7 Survival. The agreements and obligations of the Borrower in this
Section Five shall survive the payment of all other Obligations.
6. COLLATERAL.
----------
6.1 Grant of Security Interest. As security for all Obligations, the
Borrower hereby grants to the Lender a continuing security interest in, lien on,
and assignment of, all of the following Property of the Borrower, whether now
owned or existing or hereafter acquired or arising, regardless of where located:
(a) all Contracts; (b) all General Intangibles; (c) all money, securities and
other property of any kind of the Borrower in the possession or under the
26
control of the Lender or any Participating Lender; (d) all deposit accounts with
any financial institution in which the Borrower maintains deposits; (e) all
credit balances in favor of Borrower and claims against the Lender or any of its
affiliates; (f) all books, records and other Property (other than furniture,
fixtures and equipment) related to or referring to any of the foregoing; and (g)
all accessions to, substitutions for and replacements, products and proceeds of
any of the foregoing, including, but not limited to, proceeds of any insurance
policies and claims against third parties. All of the foregoing and all other
Property of the Borrower in which the Lender may at any time be granted a Lien
is herein collectively referred to as the "Collateral." All of the Obligations
shall be secured by all of the Collateral.
6.2 Perfection and Protection of Security Interest.
----------------------------------------------
(a) The Borrower shall, at its expense, perform all steps
requested by the Lender at any time to perfect, maintain, protect, and enforce
the Lender's Liens in the Collateral, including, without limitation: (i)
executing and filing financing or continuation statements, and amendments
thereof, in form and substance satisfactory to the Lender; (ii) delivering to
the Lender, at the request of Lender, the originals of all Instruments,
documents, and chattel paper, and all other Collateral of which the Lender
determines it should have physical possession in order to perfect and protect
the Lender's security interest therein, duly pledged, endorsed or assigned to
the Lender without restriction; (iii) placing notations on the Borrower's books
of account to disclose the Lender's security interest; and (iv) taking such
other steps as are deemed necessary or desirable by the Lender to maintain and
protect the Lender's Liens in the Collateral. To the extent permitted by
applicable law, the Lender may file, without the Borrower's signature, one or
more financing statements disclosing the Lender's Liens in the Collateral. The
Borrower agrees that a carbon, photographic, photostatic, or other reproduction
of this Agreement or of a financing statement is sufficient as a financing
statement.
(b) Except with respect to Collateral delivered to the Lender
pursuant to this Section 6.2, the Borrower shall immediately following the
execution or receipt of a Contract, stamp on the Contract the following words:
"This document is subject to a security interest in favor of Bank of America,
National Association."
(c) If any Collateral is at any time in the possession or
control of any bailee or any of the Borrower's agents, then the Borrower shall
notify the Lender thereof and shall notify such Person of the Lender's security
interest in such Collateral and, upon the Lender's request, instruct such Person
to hold all such Collateral for the Lender's account subject to the Lender's
instructions. If at any time any Collateral is located on a facility which is
not owned by the Borrower, then the Borrower shall, at the request of the
Lender, obtain written waivers, in form and substance satisfactory to the
Lender, of all present and future Liens to which the owner or lessor of such
premises may be entitled to assert against the Collateral.
(d) From time to time, the Borrower shall, upon the Lender's
request, execute and deliver confirmatory written instruments pledging to the
Lender the Collateral, but the Borrower's failure to do so shall not affect or
limit the Lender's security interest or the Lender's other rights in and to the
27
Collateral. So long as this Agreement is in effect and until all Obligations
have been fully satisfied, the Lender's Liens in the Collateral shall continue
in full force and effect (whether or not deemed eligible for the purpose of
calculating the Availability or as the basis for any advance, loan, extension of
credit, or other financial accommodation).
6.3 Location of Collateral. The Borrower represents and warrants to the
Lender that: (a) Schedule 6.3 is a correct and complete list of the Borrower's
chief executive office, the location of its books and records, the locations of
the Collateral (except for Collateral in the possession of the Lender), and the
locations of all of its other places of business; and (b) Schedule 6.3 correctly
identifies any facilities and locations that are not owned by the Borrower and
sets forth the names of the owners and lessors of such locations. The Borrower
covenants and agrees that it will not (i) maintain any Collateral at any
location other than those locations listed on Schedule 6.3, (ii) otherwise
change or add to any of such locations, or (iii) change the location of its
chief executive office from the location identified in Schedule 6.3, unless it
gives the Lender at least thirty (30) days' prior written notice thereof and
executes any and all financing statements and other documents that the Lender
requests in connection therewith.
6.4 Title to, Liens on, and Sale of Collateral. The Borrower represents
and warrants to the Lender that: (a) all of the Collateral is and will continue
to be owned solely by the Borrower free and clear of all Liens whatsoever except
for the Lender's Liens; (b) the Lender's Liens in the Collateral will not be
subject to any prior Lien; (c) the Borrower will store and maintain the
Collateral with all reasonable care; and (d) the Borrower will not, without the
Lender's prior written approval, sell, or dispose of or permit the sale or
disposition of any of the Collateral. The inclusion of proceeds in the
Collateral shall not be deemed to constitute the Lender's consent to any sale or
other disposition of the Collateral except as expressly permitted herein.
6.5 Access and Examination; Confidentiality.
---------------------------------------
(a) The Lender may at all reasonable times (and at any time
when a Default or Event of Default exists) have access to, examine, audit, make
copies of and inspect all of the Borrower's books and records and discuss the
Borrower's affairs with the Borrower's officers and management and independent
public accountants (and by this provision the Borrower hereby authorizes said
accountants to discuss with the Lender the finances and affairs of the Borrower
and each of its subsidiaries). The Borrower will deliver to the Lender any
instrument necessary for the Lender to obtain records from any service bureau
maintaining records for the Borrower. The Lender may, at any time and at the
Borrower's expense, make copies of all of the Borrower's books and records, or
require the Borrower to deliver such copies to the Lender. The Lender may,
without expense to the Lender, use such of the Borrower's respective personnel,
supplies, and premises as may be reasonably necessary for maintaining or
enforcing the Lender's Liens in the Collateral. The Lender shall have the right,
at any time, in the Lender's name or in the name of a nominee of the Lender, to
verify the validity, amount or any other matter relating to the Contracts, or
other Collateral, by mail, telephone, or otherwise.
(b) The Borrower agrees that, subject to the Borrower's prior
consent for uses other than in a traditional tombstone, which consent shall not
be unreasonably withheld or delayed, the Lender may use the Borrower's name in
advertising and promotional material and in conjunction therewith disclose the
general terms of this Agreement. The Lender agrees to take normal and reasonable
28
precautions and exercise due care to maintain the confidentiality of all
information identified as "confidential" or "secret" by the Borrower and
provided to the Lender by or on behalf of the Borrower, under this Agreement or
any other Loan Document, and neither the Lender nor any of its Affiliates shall
use any such information other than in connection with or in enforcement of this
Agreement and the other Loan Documents, except to the extent that such
information (i) was or becomes generally available to the public other than as a
result of disclosure by the Lender, or (ii) was or becomes available on a
nonconfidential basis from a source other than the Borrower, provided that such
source is not bound by a confidentiality agreement with the Borrower known to
the Lender; provided, however, that the Lender may disclose such information (1)
at the request or pursuant to any requirement of any Governmental Authority to
which the Lender is subject or in connection with an examination of the Lender
by any such Governmental Authority; (2) pursuant to subpoena or other court
process; (3) when required to do so in accordance with the provisions of any
applicable Requirement of Law; (4) to the extent reasonably required in
connection with any litigation or proceeding (including, but not limited to, any
bankruptcy proceeding) to which the Lender or any of its Affiliates may be
party; (5) to the extent reasonably required in connection with the exercise of
any remedy hereunder or under any other Loan Document; (6) to the Lender's
independent auditors, accountants, attorneys and other professional advisors;
(7) to any prospective Participating Lender or assignee under any assignment
agreement, actual or potential, provided that such prospective Participating
Lender or assignee agrees to keep such information confidential to the same
extent required of the Lender hereunder; (8) as expressly permitted under the
terms of any other document or agreement regarding confidentiality to which the
Borrower is party or is deemed party with the Lender, and (9) to its Affiliates.
6.6 Collateral Reporting. The Borrower shall provide the Lender, by the
fifteenth day of each month, for the immediately preceding month, with the
following documents in form satisfactory to the Lender: (a) a collateral and
loan status report on forms provided by the Lender (or such other form approved
by Lender), (b) an aging of the Borrower's Contracts, listing each Contract
under which any payment due thereunder is sixty (60) or more days past due, as
determined on a contractual basis, together with a reconciliation to the
previous month's aging and to the Borrower's general ledger; (c) a calculation
of the Past Due Percent, the Net Six-Month Charge-Off Percent and the Net
Twelve-Month Charge-Off Percent; (d) a report describing all Modified Contracts
and the status thereof, (e) such other reports as to the Collateral of the
Borrower as the Lender shall reasonably request from time to time; and (f) a
certificate of an officer of the Borrower certifying as to the accuracy and
completeness of the foregoing. If any of the Borrower's records or reports of
the Collateral are prepared by an accounting service or other agent, the
Borrower hereby authorizes such service or agent to deliver such records,
reports, and related documents to the Lender.
6.7 Contracts.
---------
(a) The Borrower hereby represents and warrants to the Lender
with respect to the Contracts, that: (i) each existing Contract represents, and
each future Contract will represent, a bona fide obligation of the Contract
29
Debtor, enforceable in accordance with its terms; (ii) each existing Contract
is, and each future Contract will be, for a liquidated amount payable by the
Contract Debtor thereon on the terms set forth in the Contract therefor or in
the schedule thereof delivered to the Lender, without any offset, deduction,
defense (including the defense of usury), or counterclaim; (iii) there is only
one original counterpart of the Contract executed by the Contract Debtor; (iv)
each Contract correctly sets forth the terms thereof, including the interest
rate applicable thereto and correctly describes the collateral for such
Contract; (vi) the signatures of all Contract Debtors are genuine and, to the
knowledge of the Borrower, each Contract Debtor had the legal capacity to enter
into and execute such documents on the date thereof; (vii) each Contract
complies with all Requirement of Law; and (viii) the Borrower has not used
illegal, improper, fraudulent or deceptive marketing techniques or unfair
business practices with respect to the Contracts.
(b) The Borrower shall not grant any discount, credit or
allowance to any such Contract Debtor without the Lender's prior written
consent, except for discounts, credits and allowances made or given in the
ordinary course of the Borrower's business.
6.8 Collection of Contracts; Payments. While this Agreement is in
effect, the Borrower shall immediately, upon receipt thereof, deposit all
proceeds of the Collateral (including all payments received in connection with
the Contracts) into a Payment Account, which Payment Account shall be subject to
the terms of a Blocked Account Agreement, on terms acceptable to Lender, between
the Borrower, the Lender and the bank. At all times only the Lender shall have a
right to withdraw any funds from the Payment Account. All funds deposited into
the Payment Account are subject solely to the direction of the Lender, will be
the Lender's sole Property and will be credited to the Borrower's Loan Account
(conditional upon final collection upon receipt by Lender).
6.9 Right to Cure. The Lender may, in its discretion, pay any amount or
do any act required of the Borrower hereunder or under any other Loan Document
in order to preserve, protect, maintain or enforce the Obligations, the
Collateral or the Lender's Liens therein, which the Borrower fails to pay or do,
including, without limitation, payment of any final, non-appealable judgment
against the Borrower, any insurance premium, any landlord's claim, and any other
Lien upon or with respect to the Collateral; provided that the Lender shall give
the Borrower thirty (30) days' prior written notice of the Lender's intent to
pay any final, non-appealable judgment against the Borrower. All payments that
the Lender makes under this Section 6.9 and all out-of-pocket costs and expenses
that the Lender pays or incurs in connection with any action taken by it
hereunder shall be charged to the Borrower's Loan Account as a Revolving Loan.
Any payment made or other action taken by the Lender under this Section 6.9
shall be without prejudice to any right to assert an Event of Default hereunder.
6.10 Power of Attorney. The Borrower hereby appoints the Lender and the
Lender's designee as the Borrower's attorney, with power: (a) to endorse the
Borrower's name on any checks, notes, acceptances, money orders, or other forms
of payment or security that come into the Lender's possession related to the
Collateral; (b) to sign the Borrower's name on any assignments of Contracts,
30
notices of assignment, and financing statements and to file any such financing
statements by electronic means with or without a signature as authorized or
required by applicable law; (c) to notify the post office authorities, when an
Event of Default exists, to change the address for delivery of the Borrower's
mail to an address designated by the Lender and to receive, open and dispose of
all mail addressed to the Borrower; (d) to send requests for verification of
Contracts to Contract Debtors; and (e) to do all things necessary to carry out
this Agreement. The Borrower ratifies and approves all acts of such attorney.
Neither the Lender nor its attorneys will be liable for any acts or omissions or
for any error of judgment or mistake of fact or law not constituting gross
negligence or willful misconduct. This power, being coupled with an interest, is
irrevocable until this Agreement has been terminated and the Obligations have
been fully satisfied.
6.11 Lender's Rights, Duties and Liabilities. The Borrower assumes all
responsibility and liability arising from or relating to the use, sale or other
disposition of the Collateral. The Obligations shall not be affected by any
failure of the Lender to take any steps to perfect the Lender's Liens in the
Collateral or to collect or realize upon the Collateral, nor shall loss of or
damage to the Collateral release the Borrower from any of the Obligations.
Following the occurrence and continuation of an Event of Default, the Lender may
(but shall not be required to), without notice to or consent from the Borrower,
xxx upon or otherwise collect, extend the time for payment of, modify or amend
the terms of, compromise or settle for cash, credit, or otherwise upon any
terms, grant other indulgences, extensions, renewals, compositions, or releases,
and take or omit to take any other action with respect to the Collateral, any
agreement relating thereto, any insurance applicable thereto, or any Person
liable directly or indirectly in connection with any of the foregoing, without
discharging or otherwise affecting the liability of the Borrower for the
Obligations or under this Agreement or any other agreement now or hereafter
existing between the Lender and the Borrower.
6.12 Protection of Collateral. The Borrower shall pay all of the
Borrower's expenses of protecting, storing, insuring, handling, maintaining, and
shipping the Collateral and any and all excise, property, sales, and use taxes
levied by any state, federal or local authority on any of the Collateral or in
respect of the sale thereof.
6.13 Servicing of Contracts. The Borrower shall collect all payments
and other proceeds of the Contracts and other Collateral and deposit the
proceeds into the Payment Account and perform customary insurance follow-up with
respect to each policy of insurance, if any, covering the Property which is the
subject of the Contracts.
7. BOOKS AND RECORDS; FINANCIAL INFORMATION; NOTICES.
-------------------------------------------------
7.1 Books and Records. The Borrower shall maintain, at all times,
correct and complete books, records and accounts in which complete, correct and
timely entries are made of its transactions in accordance with GAAP applied
consistently with the audited Financial Statements required to be delivered
pursuant to Section 7.2(a). The Borrower shall, by means of appropriate entries,
reflect in such accounts and in all Financial Statements proper liabilities and
reserves for all taxes and proper provision for depreciation and amortization of
31
property and bad debts, all in accordance with GAAP. The Borrower shall maintain
at all times books and records pertaining to the Collateral in such detail, form
and scope as the Lender shall reasonably require, including, but not limited to,
records of (a) all payments received and all credits and extensions granted with
respect to the Contracts; and (b) all other dealings affecting the Collateral.
The Borrower shall maintain a system for duplicating and storing, at a secure
location, a duplicate set of books and records concerning the Collateral. In
addition, the Borrower shall maintain a credit file for each Contract Debtor,
containing financial information reflecting the creditworthiness of each
Contract Debtor.
7.2 Financial Information. The Borrower shall promptly furnish to the
Lender, all such financial information as the Lender shall reasonably request,
and notify its auditors and accountants that the Lender is authorized to obtain
such information directly from them. Without limiting the foregoing, the
Borrower will furnish to the Lender, in such detail as the Lender shall request,
the following:
(a) As soon as available, but in any event not later than
ninety (90) days after the close of each Fiscal Year, consolidated and
consolidating audited balance sheets, and statements of income and expense, cash
flow and stockholders' equity for the Guarantor and its consolidated
Subsidiaries for such Fiscal Year, and the accompanying notes thereto, setting
forth in each case in comparative form figures for the previous Fiscal Year, all
in reasonable detail, fairly presenting the financial position and the results
of operations of the Guarantor and its consolidated Subsidiaries as at the date
thereof and for the Fiscal Year then ended, and prepared in accordance with
GAAP. Such statements shall be examined in accordance with generally accepted
auditing standards and, in the case of such statements performed on a
consolidated basis, accompanied by a report thereon unqualified as to scope by
independent certified public accountants selected by the Borrower and reasonably
satisfactory to the Lender.
(b) As soon as available, but in any event not later than
thirty (30) days after the end of each month, consolidated and consolidating
unaudited balance sheets of the Borrower and its consolidated Subsidiaries as at
the end of such month, and consolidated and unaudited statements of income and
expense and cash flow for the Borrower and its consolidated Subsidiaries for
such month and for the period from the beginning of the Fiscal Year to the end
of such month, all in reasonable detail, fairly presenting the financial
position and results of operations of the Borrower and its consolidated
Subsidiaries as at the date thereof and for such periods, and prepared in
accordance with GAAP applied consistently with the audited Financial Statements
required to be delivered pursuant to Section 7.2(a). Such statements shall be
certified to be fairly stated in all material respects by the chief financial
officer of the Borrower, subject to normal year-end adjustments.
(c) With each of the audited Financial Statements delivered
pursuant to Section 7.2(a), a certificate of the independent certified public
accountants that examined such statement to the effect that they have reviewed
and are familiar with this Agreement and that, in examining such Financial
Statements, they did not become aware of any fact or condition which then
constituted a Default or Event of Default, except for those, if any, described
in reasonable detail in such certificate.
32
(d) With each of the annual audited Financial Statements
delivered pursuant to Section 7.2(a) and each of the unaudited Financial
Statements delivered pursuant to Section 7.2(b), a certificate of the chief
financial officer of the Borrower (i) setting forth in reasonable detail the
calculations required to establish that the Borrower was in compliance with the
covenants set forth in Sections 9.16 through 9.19 during the period covered in
such Financial Statements, (ii) stating that, except as explained in reasonable
detail in such certificate, (A) all of the representations and warranties of the
Borrower contained in this Agreement and the other Loan Documents are correct
and complete in all material respects as at the date of such certificate as if
made at such time, and (B) no Default or Event of Default then exists or existed
during the period covered by such Financial Statements, and (iii) describing and
analyzing in reasonable detail all material trends, changes, and developments in
each and all Financial Statements. If such certificate discloses that a
representation or warranty is not correct or complete or that a Default or Event
of Default existed or exists, such certificate shall set forth what action the
Borrower has taken or proposes to take with respect thereto.
(e) No sooner than sixty (60) days and not less than thirty
(30) days prior to the beginning of each Fiscal Year, annual forecasts (to
include forecasted consolidated and consolidating balance sheets and statements
of income and expenses) for the Borrower and its Subsidiaries as at the end of
and for each month of such Fiscal Year.
(f) Promptly after filing with the PBGC and the IRS, a copy of
each annual report or other filing filed with respect to each Plan of the
Borrower.
(g) Promptly upon the filing thereof, copies of all reports,
if any, filed by the Borrower with the Securities and Exchange Commission under
the Exchange Act.
(h) As soon as available, but in any event not later than
fifteen (15) days after the Borrower's receipt thereof, a copy of all management
reports and management letters prepared for the Borrower by its independent
certified public accountants.
(i) Promptly after their preparation, copies of any and all
proxy statements, financial statements, and reports which the Borrower makes
available to its stockholders.
(j) Promptly after filing with the IRS, a copy of each tax
return filed by the Borrower or by any of its Subsidiaries.
(k) Such additional information as the Lender may from time to
time reasonably request regarding the financial and business affairs of the
Borrower.
7.3 Notices to the Lender. The Borrower shall notify the Lender, in
writing of the following matters at the following times:
(a) Immediately after becoming aware of any Default or Event
of Default.
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(b) Immediately after becoming aware that the holder of any
capital stock of the Borrower or of any Debt has given notice or taken any
action with respect to a claimed default.
(c) Immediately after becoming aware of any Material Adverse
Effect.
(d) Immediately after becoming aware of any pending or
threatened strike, work stoppage, unfair labor practice claim, or other labor
dispute affecting the Borrower or any of its Subsidiaries in a manner which
could reasonably be expected to have a Material Adverse Effect.
(e) Immediately after becoming aware of any violation of any
law, statute, regulation, or ordinance of a Governmental Authority affecting the
Borrower which could reasonably be expected to have a Material Adverse Effect.
(f) Any change in the Borrower's name, state of incorporation,
or form of organization, trade names or styles under which the Borrower will
create or acquire Contracts, or to which instruments in payment of Contracts may
be made payable, in each case at least thirty (30) days prior thereto.
(g) Within ten (10) Business Days after the Borrower or any
ERISA Affiliate knows or has reason to know, that an ERISA Event has occurred,
and, when known, any action taken or threatened by the IRS, the DOL or the PBGC
with respect thereto.
Each notice given under this Section shall describe the subject matter
thereof in reasonable detail, and shall set forth the action that the Borrower
or any ERISA Affiliate, as applicable, has taken or proposes to take with
respect thereto.
8. GENERAL WARRANTIES AND REPRESENTATIONS. THE BORROWER WARRANTS AND REPRESENTS
TO THE LENDER, AT ALL TIMES DURING THE TERM OF THIS AGREEMENT AND UNTIL THE
OBLIGATIONS HAVE BEEN SATISFIED, THAT EXCEPT AS HEREAFTER DISCLOSED TO AND
ACCEPTED BY THE LENDER IN WRITING:
8.1 Authorization, Validity, and Enforceability of this Agreement and
the Loan Documents. The Borrower has the corporate power and authority to
execute, deliver and perform this Agreement and the other Loan Documents, to
incur the Obligations, and to grant to the Lender Liens upon and security
interests in the Collateral. The Borrower has taken all necessary corporate
action (including without limitation, obtaining approval of its stockholders if
necessary) to authorize its execution, delivery, and performance of this
Agreement and the other Loan Documents. No consent, approval, or authorization
of, or declaration or filing with, any Governmental Authority, and no consent of
any other Person, is required in connection with the Borrower's execution,
34
delivery and performance of this Agreement and the other Loan Documents, except
for those already duly obtained. This Agreement and the other Loan Documents
have been duly executed and delivered by the Borrower, and constitute the legal,
valid and binding obligations of the Borrower, enforceable against it in
accordance with their respective terms without defense, setoff or counterclaim.
Borrower's execution, delivery, and performance of this Agreement and the other
Loan Documents do not and will not conflict with, or constitute a violation or
breach of, or constitute a default under, or result in the creation or
imposition of any Lien upon the Property of the Borrower (except as contemplated
by this Agreement) by reason of the terms of (a) any mortgage, lease, agreement,
or instrument to which the Borrower is a party or which is binding upon it, (b)
any Requirement of Law applicable to the Borrower, or (c) the certificate or
articles of incorporation or bylaws of the Borrower.
8.2 Validity and Priority of Security Interest. The provisions of this
Agreement and the other Loan Documents create legal and valid Liens on all the
Collateral in favor of the Lender and such Liens constitute perfected and
continuing Liens on all the Collateral, having priority over all other Liens on
the Collateral securing all the Obligations and enforceable against the Borrower
and all third parties.
8.3 Organization and Qualification. The Borrower (a) is duly
incorporated and organized and validly existing in good standing under the laws
of the state of its incorporation, (b) is qualified to do business as a foreign
corporation and is in good standing in the jurisdictions set forth on Schedule
8.3 which are the only jurisdictions in which qualification is necessary in
order for it to own or lease its Property and conduct its business, and (c) has
all requisite power and authority to conduct its business and to own its
Property.
8.4 Corporate Name; Prior Transactions. The Borrower has not, during
the past five (5) years, been known by or used any other corporate or fictitious
name, or been a party to any merger or consolidation, or acquired all or
substantially all of the assets of any Person, or acquired any of its Property
outside of the ordinary course of business.
8.5 Affiliates. Schedule 8.5 is a correct and complete list of the name
and relationship to the Borrower of each and all of the Borrower's Affiliates.
Each Affiliate which is a corporation is (a) duly incorporated and organized and
validly existing in good standing under the laws of its state of incorporation
set forth on Schedule 8.5, (b) qualified to do business as a foreign corporation
and in good standing in each jurisdiction in which the failure to so qualify or
be in good standing could reasonably be expected to have a Material Adverse
Effect on any such Affiliate, and (c) has all requisite power and authority to
conduct its business and own its Property.
8.6 Financial Statements and Projections.
------------------------------------
(a) The Borrower has delivered to the Lender the audited
balance sheet and related statements of income, retained earnings, cash flow,
and changes in stockholders equity for the Guarantor and its consolidated
Subsidiaries as of December 31, 1998, and for the Fiscal Year then ended,
accompanied by the report thereon of the Guarantor's independent certified
public accountants. The Borrower has also delivered to the Lender the unaudited
35
balance sheet and related statements of income and cash flow for the Borrower as
of June 30, 1999. Such financial statements are attached hereto as Schedule 8.6.
All such financial statements have been prepared in accordance with GAAP and
present accurately and fairly the financial position of the Guarantor and its
consolidated Subsidiaries or the Borrower, as the case may be, as at the dates
thereof and their results of operations for the periods then ended.
(b) The projections of the Borrower, when submitted to the
Lender as required by this Agreement, will represent the Borrower's best
estimate of the future financial performance of the Borrower.
8.7 Capitalization. The Borrower's authorized capital stock consists of
five thousand (5,000) shares of common stock, par value $0.01 per share, of
which one hundred (100) shares are validly issued and outstanding, fully paid
and non-assessable and are owned beneficially and of record by the Guarantor.
8.8 Solvency. The Borrower is Solvent prior to and after giving effect
to the making of the Revolving Loans to be made on the Closing Date and shall
remain Solvent during the term of this Agreement.
8.9 Debt. After giving effect to the making of the Revolving Loans to
be made on the Closing Date, the Borrower has no Debt, except (a) the
Obligations, (b) Debt described on the most recent Financial Statement, and (c)
trade payables and other contractual obligations arising in the ordinary course
of business. The Borrower has Subordinated Debt of $4,562,201 owing to TFC as of
July 31, 1999.
8.10 Title to Property. The Borrower has good, indefeasible, and
marketable title to all of its Property (including, without limitation, the
assets reflected on the most recent Financial Statements delivered to the
Lender, except as disposed of in the ordinary course of business since the date
thereof).
8.11 Litigation. Except as set forth on Schedule 8.11, there is no
pending or (to the best of the Borrower's knowledge) threatened action, suit,
proceeding, or counterclaim by any Person, or investigation by any Governmental
Authority which could reasonably be expected to cause a Material Adverse Effect.
8.12 No Violation of Law. The Borrower is not in violation of any
Requirement of Law, judgment, order, or decree applicable to it which violation
could reasonably be expected to have a Material Adverse Effect and the
Contracts, in form and substance, comply with all Requirements of Law, including
all interest rate and disclosure requirements. None of the Contracts are secured
by non-purchase money security interests covering a consumer's household goods.
8.13 No Default. The Borrower is not in default with respect to any
note, indenture, loan agreement, mortgage, lease, deed, or other agreement to
which the Borrower is a party or by which it is bound, which default could
reasonably be expected to have a Material Adverse Effect.
36
8.14 ERISA Compliance.
----------------
(a) Each Plan is in compliance in all material respects with
the applicable provisions of ERISA, the Code and other federal or state law.
Each Plan which is intended to qualify under Section 401(a) of the Code has
received a favorable determination letter from the IRS and to the best knowledge
of the Borrower, nothing has occurred which would cause the loss of such
qualification. The Borrower and each ERISA Affiliate has made all required
contributions to any Plan subject to Section 412 of the Code, and no application
for a funding waiver or an extension of any amortization period pursuant to
Section 412 of the Code has been made with respect to any Plan.
(b) There are no pending or, to the best knowledge of
Borrower, threatened claims, actions or lawsuits, or action by any Governmental
Authority, with respect to any Plan which has resulted or could reasonably be
expected to result in a Material Adverse Effect. There has been no prohibited
transaction or violation of the fiduciary responsibility rules with respect to
any Plan which has resulted or could reasonably be expected to result in a
Material Adverse Effect.
(c) (i) No ERISA Event has occurred or is reasonably expected
to occur; (ii) no Pension Plan has any Unfunded Pension Liability; (iii) neither
the Borrower nor any ERISA Affiliate has incurred, or reasonably expects to
incur, any liability under Title IV of ERISA with respect to any Pension Plan
(other than premiums due and not delinquent under Section 4007 of ERISA); (iv)
neither the Borrower nor any ERISA Affiliate has incurred, or reasonably expects
to incur, any liability (and no event has occurred which, with the giving of
notice under Section 4219 of ERISA, would result in such liability) under
Section 4201 or 4243 of ERISA with respect to a Multi-employer Plan; and (v)
neither the Borrower nor any ERISA Affiliate has engaged in a transaction that
could be subject to Section 4069 or 4212(c) of ERISA.
8.15 Taxes. The Borrower has filed all Federal and other tax returns
and reports required to be filed, and have paid all Federal and other taxes,
assessments, fees and other governmental charges levied or imposed upon them or
their properties, income or assets otherwise due and payable.
8.16 Use of Proceeds; Margin Regulations. The proceeds of the Revolving
Loans are to be used solely for working capital purposes. The Borrower is not
engaged in the business of purchasing or selling Margin Stock or extending
credit for the purpose of purchasing or carrying Margin Stock.
8.17 No Material Adverse Change. No Material Adverse Effect has
occurred since the date of the Financial Statements which are attached hereto as
Schedule 8.6. On the basis of a comprehensive review and assessment undertaken
by Borrower of Borrower's computer applications and inquiry made of Borrower's
material suppliers, vendors and customers Borrower reasonably believes that the
"Year 2000 problem" (that is, the risk that computer applications used by any
37
person may be unable to recognize and perform properly date-sensitive functions
involving certain dates prior to and any date after December 31, 1999) will not
result in a material adverse change in the operations, business, properties, or
condition (financial or otherwise) of the Borrower.
8.18 Full Disclosure. None of the representations or warranties made by
the Borrower in the Loan Documents as of the date such representations and
warranties are made or deemed made, and none of the statements contained in any
exhibit, report, statement or certificate furnished by or on behalf of the
Borrower in connection with the Loan Documents (including the offering and
disclosure materials delivered by or on behalf of the Borrower to the Lender
prior to the Closing Date), contains any untrue statement of a material fact or
omits any material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances under which they are
made, not misleading as of the time when made or delivered.
9. AFFIRMATIVE AND NEGATIVE COVENANTS. THE BORROWER COVENANTS TO THE LENDER
THAT, SO LONG AS ANY OF THE OBLIGATIONS REMAIN OUTSTANDING OR THIS AGREEMENT IS
IN EFFECT:
9.1 Taxes and Other Obligations. The Borrower shall (a) file when due
all tax returns and other reports which it is required to file; (b) pay, or
provide for the payment, when due, of all taxes, fees, assessments and other
governmental charges against it or upon its Property, income and franchises,
make all required withholding and other tax deposits, and establish adequate
reserves for the payment of all such items, and provide to the Lender, upon
request, satisfactory evidence of its timely compliance with the foregoing; and
(c) pay when due all Debt owed by it and all claims of materialmen, mechanics,
carriers, warehousemen, landlords and other like Persons, and all other
indebtedness owed by it and perform and discharge in a timely manner all other
obligations undertaken by it; provided, however, so long as Borrower has
notified the Lender in writing, the Borrower need not pay any tax, fee,
assessment, or governmental charge, that (i) it is contesting in good faith by
appropriate proceedings diligently pursued, (ii) the Borrower has established
proper reserves for as provided in GAAP, and (iii) no Lien on the Collateral
results from such non-payment.
9.2 Corporate Existence and Good Standing. The Borrower shall maintain
its corporate existence and its qualification and good standing in all
jurisdictions in which the failure to maintain such qualification or good
standing could reasonably be expected to have a material adverse effect on the
Borrower's Property, business, operations, prospects, or condition (financial or
otherwise).
9.3 Compliance with Law and Agreements; Maintenance of Licenses. The
Borrower shall comply with all Requirements of Law including the Federal Trade
Commission's used car rule and all usury and consumer credit disclosure laws and
regulation. The Borrower shall obtain and maintain all licenses, permits,
franchises, and governmental authorizations necessary to own its Property and to
conduct its business as conducted on the Closing Date.
9.4 Compliance with ERISA. The Borrower shall, and shall cause each of
its ERISA Affiliates to: (a) maintain each Plan in compliance in all material
respects with the applicable provisions of ERISA, the Code and other federal or
state law; (b) cause each Plan which is qualified under Section 401(a) of the
38
Code to maintain such qualification; (c) make all required contributions to any
Plan subject to Section 412 of the Code; (d) not engage in a prohibited
transaction or violation of the fiduciary responsibility rules with respect to
any Plan; and (e) not engage in a transaction that could be subject to Section
4069 or 4212(c) of ERISA.
9.5 Mergers, Consolidations or Sales. The Borrower shall not (a) enter
into any transaction of merger, reorganization, or consolidation with any other
Person; (b) transfer, sell, assign, lease, or otherwise dispose of all or any
part of the Collateral; (c) transfer, sell, assign, lease or otherwise dispose
of any substantial part of its assets that do not constitute any part of the
Collateral, other than sales of obsolete assets, and other assets in the
ordinary course of business that do not constitute any part of the Collateral;
or (d) liquidate or dissolve.
9.6 Distributions and Capital Change. The Borrower shall not (i)
directly or indirectly declare or make or incur any liability to make any
Distribution or (ii) make any change in its capital structure.
9.7 Transactions Affecting Collateral or Obligations. The Borrower
shall not enter into any transaction which is likely to have a Material Adverse
Effect.
9.8 Guaranties. The Borrower shall not make, issue, or become liable on
any Guaranty, except Guaranties in favor of the Lender.
9.9 Debt. The Borrower shall not incur or maintain any Debt, other
than: (a) the Obligations; (b) trade payables and contractual obligations to
suppliers and customers incurred in the ordinary course of business (including
office leases, equipment purchase agreements, equipment sale and leaseback
agreements, and office furniture financing agreements); (c) other Debt existing
on the Closing Date and reflected in the Financial Statements attached hereto as
Schedule 8.6; (d) Subordinated Debt in accordance with the terms of this
Agreement; and (e) intercompany debt owing to the Guarantor that is subject to
the subordination provisions of the guaranty from the Guarantor in favor of the
Lender.
9.10 Prepayment. The Borrower shall not voluntarily prepay any Debt,
except (i) the Obligations, any Subordinated Debt and any intercompany debt
owing to the Guarantor in accordance with the terms of this Agreement; and (ii)
any Debt incurred or arising in connection with office leases, equipment
purchase agreements, equipment sale and leaseback agreements, and office
furniture financing agreements.
9.11 Transactions with Affiliates. The Borrower shall not sell,
transfer, distribute, or pay any money or Property, including, but not limited
to, any management fees or expenses of any nature, to any Affiliate, or lend or
advance money or Property to any Affiliate, or invest in (by capital
contribution or otherwise) or purchase or repurchase any stock or indebtedness,
or any Property, of any Affiliate, or become liable on any Guaranty of the
indebtedness, dividends, or other obligations of any Affiliate; provided,
39
however, that the Borrower may pay management fees to the Guarantor as long as,
at the time of any such payment, no Default or Event of Default shall have
occurred and be continuing or would result from such payment. Notwithstanding
the foregoing, the Borrower may engage in transactions with Affiliates in the
ordinary course of business, in amounts and upon terms fully disclosed to the
Lender, and no less favorable to the Borrower than would be obtained in a
comparable arm's-length transaction with a third party who is not an Affiliate.
9.12 Investment Banking and Finder's Fees. The Borrower shall not pay
or agree to pay, or reimburse any other party with respect to, any investment
banking or similar or related fee, underwriter's fee, finder's fee, or broker's
fee to any Person in connection with this Agreement. The Borrower shall defend
and indemnify the Lender against and hold them harmless from all claims of any
Person for any such fees, and all costs and expenses (including without
limitation, attorneys' fees) incurred by the Lender in connection therewith.
9.13 Business Conducted. The Borrower shall not engage, directly or
indirectly, in any line of business other than the businesses in which the
Borrower is engaged on the Closing Date, provided that the Borrower shall be
permitted to offer products that are ancillary to or extensions of the types of
Contracts which the Borrower offers or purchases as of the Closing Date.
9.14 Liens. The Borrower shall not create, incur, assume, or permit to
exist any Lien on any Collateral, except for the Lien in favor of the Lender.
9.15 Fiscal Year. The Borrower shall not change its Fiscal Year.
9.16 Interest Coverage Ratio. The Borrower shall maintain an Interest
Coverage Ratio, calculated on a rolling four-quarter basis, as of the last day
of each quarter in each Fiscal Year, beginning with the first fiscal quarter of
the 1999 Fiscal Year, of not less than 1.0 to 1.
9.17 Minimum Borrowing Base; Minimum Subordinated Debt. The Borrower
shall not permit (a) the aggregate amount of the Borrowing Base to be less than
$3,200,000 at any time, or (b) the aggregate amount of the Subordinated Debt
owing to TFC to be less than $4,000,000 at any time.
9.18 Loss Reserves. The Borrower shall maintain loss reserves at all
times during the term of this Agreement in an amount, calculated as of the close
of business on the last day of each month, which shall not be less than an
amount equal to the Loss Reserve Percentage multiplied by the Net Balance
outstanding as of such day.
9.19 Unsubordinated Debt to Borrowing Base. The Borrower shall not
permit the ratio, calculated as of the last day of each month, of (a) the
remainder of all Debt minus all Subordinated Debt to (b) Borrowing Base, to be
more than (i) 4.5 to 1 beginning on the last day of the month following the
Closing Date and ending on the last day of the month that is immediately prior
to the first Anniversary Date, and (ii) 4.0 to 1 beginning on the last day of
the month following the first Anniversary Date and thereafter.
9.20 Charge-Off Policy. The Borrower shall maintain its current policy
for charging off the unpaid balance of its delinquent Contracts. Without
limiting the generality of the foregoing, the Borrower's policy shall continue
to provide, as a minimum, that on the last day of each month the Borrower shall
40
charge off the unpaid balance of all Contracts with respect to which any payment
due thereunder is one hundred eighty (180) or more days contractually
delinquent, except that the Borrower shall be permitted to abstain from making
any such charge-offs if the aggregate Net Balance of all of the Contracts which
are not so charged-off is less than $50,000.
9.21 Subordinated Obligations. Except as permitted by the terms of the
applicable subordination agreement, the Borrower shall not directly or
indirectly (a) make any payment with respect to any Subordinated Debt; (b) amend
or modify any Subordinated Debt in such a manner as to affect adversely the
Lender; or (c) prepay or redeem all or any part of any Subordinated Debt.
9.22 New Subsidiaries. The Borrower shall not, directly or indirectly,
organize or acquire any Subsidiary other than those listed on Schedule 8.5.
9.23 Restricted Investment. The Borrower shall not make any Restricted
Investment.
9.24 Reporting Methodology. The Borrower shall not amend or modify the
methodology employed by the Borrower in preparing its accounting and financial
reports relating to the presentation of (i) the delinquency of Contracts, (ii)
the charge-off of delinquent Contracts and (iii) the unearned insurance
commissions and dealer discounts from the methodology employed by the Borrower
as of the Closing Date so as to change the consistency of the information with
respect to such items, from time to time, provided to Lender.
9.25 CONTRACT FORMS. THE BORROWER SHALL NOT USE IN ITS BUSINESS
CONTRACTS WHICH ARE NOT ON THE PRINTED FORMS PREVIOUSLY APPROVED IN WRITING BY
THE LENDER AND THE BORROWER SHALL NOT CHANGE OR VARY THE PRINTED FORMS OF SUCH
CONTRACTS WITHOUT THE LENDER'S PRIOR WRITTEN CONSENT, UNLESS SUCH CHANGE OR
VARIATION IS REQUIRED BY ANY REQUIREMENT OF LAW. ALL CONTRACTS ACQUIRED BY THE
BORROWER SHALL BE ON FORMS REVIEWED AND APPROVED BY BORROWER'S COUNSEL (EITHER
IN-HOUSE OR OUTSIDE COUNSEL). THE BORROWER SHALL DELIVER TO THE LENDER A COPY OF
THE MEMORANDUM PREPARED BY THE BORROWER'S COUNSEL COMMENTING ON THE COMPLIANCE
OF THE FORM(S) OF THE ACQUIRED CONTRACT(S) WITH ANY REQUIREMENT OF LAW FOR ANY
ACQUISITION WITH A PURCHASE PRICE OF LESS THAN $100,000, WHICH MEMORANDUM SHALL
BE SATISFACTORY IN FORM AND SUBSTANCE TO THE LENDER. FOR ANY ACQUISITION WITH A
PURCHASE PRICE IN EXCESS OF $100,000, THE BORROWER SHALL SUBMIT TO THE LENDER AN
OPINION OF THE BORROWER'S COUNSEL REGARDING THE COMPLIANCE OF THE FORM(S) OF THE
CONTRACT(S) WITH ANY REQUIREMENT OF LAW, WHICH OPINION SHALL BE SATISFACTORY IN
FORM AND SUBSTANCE TO THE LENDER.
9.26 Credit Guidelines. The Borrower shall not make any material
changes in its Credit Guidelines (a copy of which has been previously furnished
by the Borrower to the Lender) without the Lender's prior written consent which
the Lender may withhold in its sole and absolute discretion.
9.27 Further Assurances. The Borrower shall execute and deliver, or
cause to be executed and delivered, to the Lender such documents and agreements,
41
and shall take or cause to be taken such actions, as the Lender may, from time
to time, reasonably request to carry out the terms and conditions of this
Agreement and the other Loan Documents.
10. CONDITIONS TO BORROWINGS.
------------------------
10.1 Conditions Precedent to Making of Revolving Loans on the Closing
Date. The obligation of the Lender to make the Revolving Loans on the Closing
Date is subject to the following conditions precedent having been satisfied in a
manner satisfactory to the Lender:
(a) All representations and warranties contained in this
Agreement and in the other Loan Documents shall be true and correct as of the
Closing Date.
(b) No Default or Event of Default shall exist on the Closing
Date, or would exist after giving effect to the Revolving Loans to be made on
such date.
(c) The Lender shall have received such opinions of counsel
for the Borrower as the Lender has requested, each such opinion to be in a form,
scope, and substance satisfactory to the Lender.
(d) The Lender shall have received:
(i) acknowledgment copies of proper financing
statements, duly filed on or before the Closing Date under the UCC of
all jurisdictions that the Lender may deem necessary or desirable in
order to perfect the Lender's Lien; and
(ii) duly executed UCC-3 Termination Statements and
other instruments, in form and substance satisfactory to the Lender, as
shall be deemed necessary by Lender to terminate and satisfy all Liens,
other than Permitted Liens, on the Collateral.
(e) The Lender shall have received a guaranty, satisfactory in
form and substance to the Lender, from the Guarantor, and a subordination
agreement, satisfactory in form and substance to the Lender, from TFC.
(f) The Borrower shall have paid all fees and expenses of the
Lender and the Attorney Costs incurred in connection with any of the Loan
Documents and the transactions contemplated thereby, it being understood and
agreed that the maximum amount of the payment by the Borrower under this Section
10.1(g) shall be $10,000.
(g) The Borrower shall have paid in full the Closing Fee.
(h) The Lender shall have had an opportunity, if Lender so
chooses, to examine the books of account and other records and files of the
Borrower and to make copies thereof and to conduct a pre-closing audit which
shall include, without limitation, verification of Contracts and Availability,
and the results of such examination and audit shall have been satisfactory to
the Lender in all respects.
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(i) All proceedings taken in connection with the execution of
this Agreement, the other Loan Documents and all documents and papers relating
thereto shall be satisfactory in form, scope, and substance to the Lender.
(j) No material adverse change shall have occurred in the
operations, business, profits, properties, condition (financial or otherwise) or
prospects of the Borrower or in the Collateral since June 30, 1999, and the
Lender shall have received a certificate of the Borrower's chief financial
officer to such effect.
The acceptance by the Borrower of any Revolving Loans made on the
Closing Date shall be deemed to be a representation and warranty made by the
Borrower to the effect that all of the conditions precedent to the making of
such Revolving Loans have been satisfied, with the same effect as delivery to
the Lender of a certificate signed by a Responsible Officer of the Borrower,
dated the Closing Date, to such effect.
10.2 Conditions Precedent to Each Revolving Loan. The obligation of the
Lender to make each Revolving Loan, including the initial Revolving Loans on the
Closing Date, shall be subject to the further conditions precedent that on and
as of the date of any such extension of credit the following statements shall be
true, and the acceptance by the Borrower of any extension of credit shall be
deemed to be a statement to the effect set forth in clauses (i) and (ii), with
the same effect as the delivery to the Lender of a certificate signed by a
Responsible Officer, dated the date of such extension of credit, stating that:
(i) The representations and warranties contained in
this Agreement and the other Loan Documents are correct in all material
respects on and as of the date of such extension of credit as though
made on and as of such date, except to the extent the Lender has been
notified by the Borrower that any representation or warranty is not
correct and the Lender has explicitly waived in writing compliance with
such representation or warranty; and
(ii) No event has occurred and is continuing, or
would result from such extension of credit, which constitutes a Default
or an Event of Default.
11. DEFAULT.
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11.1 Events of Default. It shall constitute an event of default ("Event
of Default") if any one or more of the following shall occur for any reason:
(a) any failure to pay the principal of or interest or premium
on any of the Obligations when due, whether upon demand or otherwise;
(b) any representation or warranty made or deemed made by the
Borrower in this Agreement or by the Borrower, the Guarantor or TFC in any of
the other Loan Documents, any Financial Statement, or any certificate furnished
by the Borrower at any time to the Lender shall prove to be untrue in any
material respect as of the date when made, deemed made, or furnished;
43
(c) any default shall occur in the observance or performance
by the Borrower or the Guarantor of (i) any of the covenants and agreements
contained in this Agreement (other than Sections 9.17(a), 9.18 or 9.19), any
other Loan Documents, or any other agreement entered into at any time to which
the Borrower and/or the Guarantor, as applicable, and the Lender are party, or
if any such agreement or document shall terminate (other than in accordance with
its terms or the terms hereof or with the written consent of the Lender) or
become void or unenforceable, without the written consent of the Lender; or (ii)
Sections 9.17(a), 9.18 or 9.19, and such default shall continue for a period of
thirty (30) days after the Borrower becomes aware that it is not in compliance;
or any default shall occur in the observance or performance by TFC of any of the
covenants and agreements contained in the subordination agreement from TFC in
favor of the Lender, or such subordination agreement from TFC shall terminate
(other than in accordance with its terms or the terms hereof or with the written
consent of the Lender) or become void or unenforceable, without the written
consent of the Lender;
(d) default shall occur by the Borrower, the Guarantor or TFC
with respect to any Debt for borrowed money (other than the Obligations) in an
outstanding principal amount which exceeds, in the aggregate for all such Debt
with respect to which default shall have occurred, $100,000, or under any
agreement or instrument under or pursuant to which any such Debt or indebtedness
may have been issued, created, assumed, or guaranteed by the Borrower, the
Guarantor or TFC and such default shall continue for more than the period of
grace, if any, therein specified, if the effect thereof (with or without the
giving of notice or further lapse of time or both) is to accelerate, or to
permit the holders of any such Debt or indebtedness to accelerate, the maturity
of any such Debt; or any such Debt or indebtedness shall be declared due and
payable or be required to be prepaid (other than by a regularly scheduled
required prepayment) prior to the stated maturity thereof;
(e) the Borrower, the Guarantor or TFC shall (i) file a
voluntary petition in bankruptcy or file a voluntary petition or an answer or
otherwise commence any action or proceeding seeking reorganization, arrangement
or readjustment of its debts or for any other relief under the federal
Bankruptcy Code, as amended, or under any other bankruptcy or insolvency act or
law, state or federal, now or hereafter existing, or consent to, approve of, or
acquiesce in, any such petition, action or proceeding; (ii) apply for or
acquiesce in the appointment of a receiver, assignee, liquidator, sequestrator,
custodian, trustee or similar officer for it or for all or any part of its
Property; (iii) make an assignment for the benefit of creditors; or (iv) be
unable generally to pay its Debts as they become due;
(f) an involuntary petition shall be filed or an action or
proceeding otherwise commenced against the Borrower, the Guarantor or TFC
seeking reorganization, arrangement or readjustment of the debts of such Person
or for any other relief under the federal Bankruptcy Code, as amended, or under
any other bankruptcy or insolvency act or law, state or federal, now or
hereafter existing and either (i) such petition, action or proceeding shall not
have been dismissed within a period of sixty (60) days after its commencement,
or (ii) an order for relief against such Person shall have been entered in such
proceeding;
44
(g) a receiver, assignee, liquidator, sequestrator, custodian,
trustee or similar officer for the Borrower, the Guarantor or TFC or for all or
any part of its respective Property shall be appointed or a warrant of
attachment, execution or similar process shall be issued against any part of the
Property of the Borrower, the Guarantor or TFC;
(h) the Borrower, the Guarantor or TFC shall file a
certificate of dissolution under applicable state law or shall be liquidated,
dissolved or wound-up or shall commence or have commenced against it any action
or proceeding for dissolution, winding-up or liquidation, or shall take any
corporate action in furtherance thereof;
(i) all or any material part of the Property of the Borrower,
the Guarantor or TFC shall be nationalized, expropriated or condemned, seized or
otherwise appropriated, or custody or control of such Property or such Person
shall be assumed by any Governmental Authority or any court of competent
jurisdiction at the instance of any Governmental Authority, except where
contested in good faith by proper proceedings diligently pursued where a stay of
enforcement is in effect;
(j) any guaranty of the Obligations shall be terminated,
revoked or declared void or invalid;
(k) one or more final judgments or orders for the payment of
money, which judgment(s) shall not be the subject of an appeal after the
expiration of the applicable time period during which an appeal must be filed
or, if appealed, shall not have been stayed on appeal, and which amount shall
not be fully covered by insurance, (i) shall be rendered against the Borrower
aggregating in excess of $100,000, or (ii) shall be rendered against the
Guarantor and TFC aggregating in excess of $1,000,000;
(l) any loss, theft, damage or destruction of any item or
items of Collateral or other Property of the Borrower, the Guarantor or TFC
occurs which (i) materially and adversely affects the Property, business,
operation, prospects, or condition of such Person, or (ii) is material in amount
and is not adequately covered by insurance;
(m) there occurs a Material Adverse Effect;
(n) there is filed against the Borrower, the Guarantor or TFC
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;
(o) for any reason other than the failure of the Lender to
take any action available to it to maintain perfection of the Lender's Liens in
the Collateral, pursuant to the Loan Documents, any Loan Document ceases to be
in full force and effect or any Lien with respect to any material portion of the
Collateral intended to be secured thereby ceases to be, or is not, valid,
perfected and prior to all other Liens or is terminated, revoked or declared
void;
45
(p) the Guarantor shall, at any time, cease to be the record
and beneficial owner of one hundred percent (100%) of all of the issued and
outstanding voting stock of the Borrower; or
(q) an ERISA Event shall occur with respect to a Pension Plan
or Multi-employer Plan which has resulted or could reasonably be expected to
result in liability of the Borrower under Title IV of ERISA to the Pension Plan,
Multi-employer Plan or the PBGC in an aggregate amount in excess of $100,000;
(ii) the aggregate amount of Unfunded Pension Liability among all Pension Plans
at any time exceeds $100,000; or (iii) the Borrower or any ERISA Affiliate shall
fail to pay when due, after the expiration of any applicable grace period, any
installment payment with respect to its withdrawal liability under Section 4201
of ERISA under a Multi-employer Plan in an aggregate amount in excess of
$100,000.
11.2 Remedies.
--------
(a) If a Default or an Event of Default has occurred and is
continuing, the Lender may, in its discretion, do one or more of the following
at any time or times and in any order, without notice to or demand on the
Borrower: (i) reduce the amount of the Total Facility or the advance rates used
in computing the Availability; and (ii) restrict the amount of or refuse to make
Revolving Loans. If an Event of Default exists, the Lender may do one or more of
the following, in addition to the actions described in the preceding sentence,
at any time or times and in any order, without notice to or demand on the
Borrower: (i) terminate this Agreement; (ii) declare any or all Obligations to
be immediately due and payable; provided, however, that upon the occurrence of
any Event of Default described in Sections 11.1(e), 11.1(g), or 11.1(h), this
Agreement shall automatically terminate and all Obligations shall automatically
become immediately due and payable without notice or demand of any kind; and
(iii) pursue its other rights and remedies under the Loan Documents and
applicable law.
(b) If an Event of Default has occurred and is continuing, all
rights of the Borrower to collect any payments due under the Collateral and all
rights of the Borrower to exercise the consensual rights which it would
otherwise be entitled to exercise with respect thereto, shall, at the option of
the Lender and upon written notice from the Lender to the Borrower, immediately
terminate. The Borrower acknowledges and agrees that following an Event of
Default the Lender shall be entitled to receive all of the Contract payments,
without deduction, even though this may render the Borrower insolvent and leave
the Borrower without any funds to pay its operating expenses. The Borrower, at
the Lender's request, shall immediately provide the Lender with a current list
of the names and addresses for all Contract Debtors and shall, at the Lender's
request following an Event of Default, immediately direct all Contract Debtors
(pursuant to a form of notice prepared by the Lender) to make all payments due
under the Contracts and the other Collateral directly to the Lender or to a bank
account designated by the Lender, and the Borrower shall otherwise cooperate
with the Lender in that regard.
(c) If an Event of Default has occurred and is continuing: (i)
the Lender shall have, in addition to all other rights, the rights and remedies
of a secured party under the UCC; (ii) the Lender may, at any time, take
46
possession of the Collateral and keep it on the Borrower's premises, at no cost
to the Lender or remove any part of it to such other place or places as the
Lender may desire, or the Borrower shall, upon the Lender's demand, at the
Borrower's cost, assemble the Collateral and make it available to the Lender at
a place reasonably convenient to the Lender; (iii) the Lender may exchange,
waive, or release any of the Collateral, apply Collateral and direct the order
or manner of sale thereof as the Lender may determine, and settle, compromise,
collect, or otherwise liquidate any Collateral in any manner, all without
affecting the Obligations or the Lender's right to take any action with respect
to any other Collateral; (iv) the Lender may notify the Contract Debtors that
the Contracts have been assigned to Lender and may collect them directly; and
(v) the Lender may sell and deliver any Collateral at public or private sales,
for cash, upon credit or otherwise, at such prices and upon such terms as the
Lender deems advisable, in its sole discretion, and may, if the Lender deems it
reasonable, postpone or adjourn any sale of the Collateral by an announcement at
the time and place of sale or of such postponed or adjourned sale without giving
a new notice of sale. Without in any way requiring notice to be given in the
following manner, the Borrower agrees that any notice by the Lender of sale,
disposition or other intended action hereunder or in connection herewith,
whether required by the UCC or otherwise, shall constitute reasonable notice to
the Borrower if such notice is mailed by registered or certified mail, return
receipt requested, postage prepaid, or is delivered personally against receipt,
at least five (5) Business Days prior to such action to the Borrower's address
specified in or pursuant to Section 14.7. If any Collateral is sold on terms
other than payment in full at the time of sale, no credit shall be given against
the Obligations until the Lender receives payment, and if the buyer defaults in
payment, the Lender may resell the Collateral without further notice to the
Borrower. In the event the Lender seeks to take possession of all or any portion
of the Collateral by judicial process, the Borrower irrevocably waives: (a) the
posting of any bond, surety or security with respect thereto which might
otherwise be required; (b) any demand for possession prior to the commencement
of any suit or action to recover the Collateral; and (c) any requirement that
the Lender retain possession and not dispose of any Collateral until after trial
or final judgment. The Borrower agrees that the Lender has no obligation to
preserve rights to the Collateral or marshal any Collateral for the benefit of
any Person. The Lender is hereby granted a license or other right to use,
without charge, the Borrower's labels, patents, copyrights, name, trade secrets,
trade names, trademarks, and advertising matter, or any similar Property, in
advertising or selling any Collateral, and the Borrower's rights under all
licenses and all franchise agreements shall inure to the Lender's benefit. The
proceeds of sale shall be applied first to all expenses of sale, including
attorneys' fees, and then to the Obligations in whatever order the Lender
elects. The Lender will return any excess to the Borrower and the Borrower shall
remain liable for any deficiency.
(d) If an Event of Default occurs, the Borrower hereby waives
all rights to notice and hearing prior to the exercise by the Lender of the
Lender's rights to repossess the Collateral without judicial process or to
replevy, attach or levy upon the Collateral without notice or hearing.
12. TERM AND TERMINATION.
--------------------
12.1 Term and Termination. This Agreement shall terminate on the Stated
Termination Date. The Lender may terminate this Agreement without notice upon
47
the occurrence of an Event of Default. Upon the effective date of termination of
this Agreement for any reason whatsoever, all Obligations shall become
immediately due and payable. Notwithstanding the termination of this Agreement,
until all Obligations are indefeasibly paid and performed in full, the Borrower
shall remain bound by the terms of this Agreement and shall not be relieved of
any of its Obligations hereunder and the Lender shall retain all of its rights
and remedies hereunder (including, without limitation, the security interest of
the Lender in, and all rights and remedies with respect to, all then existing
and after-arising Collateral).
13. AMENDMENTS; WAIVER; PARTICIPATIONS.
----------------------------------
13.1 No Waivers; Cumulative Remedies. No failure by the Lender to
exercise any right, remedy, or option under this Agreement or any present or
future supplement thereto, or in any other agreement between or among the
Borrower and the Lender, or delay by the Lender in exercising the same, will
operate as a waiver thereof. No waiver by the Lender will be effective unless it
is in writing, and then only to the extent specifically stated. No waiver by the
Lender on any occasion shall affect or diminish the Lender's rights thereafter
to require strict performance by the Borrower of any provision of this
Agreement. The Lender's rights under this Agreement will be cumulative and not
exclusive of any other right or remedy which the Lender may have.
13.2 Amendments and Waivers. No amendment or waiver of any provision of
this Agreement or any other Loan Document, and no consent with respect to any
departure by the Borrower therefrom, shall be effective unless the same shall be
in writing and signed by the Lender and the Borrower and then any such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given.
13.3 Participations. The Lender may at any time sell participating
interests in any Revolving Loans and the other interests of the Lender hereunder
and under the other Loan Documents; provided, however, that (i) the Lender's
obligations under this Agreement shall remain unchanged, (ii) the Lender shall
remain solely responsible for the performance of such obligations, and (iii) the
Borrower shall continue to deal solely and directly with the Lender in
connection with the Lender's rights and obligations under this Agreement and the
other Loan Documents. If amounts outstanding under this Agreement are due and
unpaid, or shall have been declared or shall have become due and payable upon
the occurrence of an Event of Default, each Participating Lender shall be deemed
to have the right of set-off in respect of its participating interest in amounts
owing under this Agreement to the same extent as if the amount of its
participating interest were owing directly to it as a Lender under this
Agreement.
14. MISCELLANEOUS.
-------------
14.1 Severability. The illegality or unenforceability of any provision
of this Agreement or any instrument or agreement required hereunder shall not in
any way affect or impair the legality or enforceability of the remaining
provisions of this Agreement or any instrument or agreement required hereunder.
14.2 Governing Law; Choice of Forum; Service of Process.
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(a) THIS AGREEMENT SHALL BE DEEMED TO HAVE BEEN MADE IN THE
STATE OF NEW YORK AND SHALL BE GOVERNED BY AND INTERPRETED IN ACCORDANCE WITH
THE LAWS OF SUCH STATE, EXCEPT THAT NO DOCTRINE OF CHOICE OF LAW SHALL BE USED
TO APPLY THE LAWS OF ANY OTHER STATE OR JURISDICTION.
(b) Any legal action or proceeding with respect to this
Agreement or any other loan document may be brought in the federal and state
courts of New York, and by execution and delivery of this Agreement, the
Borrower and the Lender consent, for itself and in respect of its property, to
the non-exclusive jurisdiction of those courts. Each of the Borrower and the
Lender irrevocably waives any objection, including any objection to the laying
of venue or based on the grounds of Forum Non Conveniens, which it may now or
hereafter have to the bringing of any action or proceeding in such jurisdiction
in respect of this Agreement or any document related hereto. Notwithstanding the
foregoing: (1) the Lender shall have the right to bring any action or proceeding
against the Borrower or its property in the courts of any other jurisdiction the
Lender deem necessary or appropriate in order to realize on the Collateral or
other security for the Obligations, and (2) each of the parties hereto
acknowledges that any appeals from the courts described in the immediately
preceding sentence may have to be heard by a court located outside those
jurisdictions.
14.3 Waiver of Jury Trial.
--------------------
(a) THE BORROWER AND THE LENDER EACH WAIVE THEIR RESPECTIVE
RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING
OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER
LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY,
RELATED PERSON, PARTICIPANT, OR ASSIGNEE, WHETHER WITH RESPECT TO CONTRACT
CLAIMS, TORT CLAIMS, OR OTHERWISE. THE BORROWER AND THE LENDER EACH AGREE THAT
ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A
JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR
RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO
ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART,
TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER LOAN
DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT
AND THE OTHER LOAN DOCUMENTS.
(b) THE BORROWER AGREES THAT IT WILL NOT ASSERT AGAINST THE
LENDER ANY CLAIM FOR CONSEQUENTIAL, INCIDENTAL, SPECIAL OR PUNITIVE DAMAGES IN
49
CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
14.4 Survival of Representations and Warranties. All of the Borrower's
representations and warranties contained in this Agreement shall survive the
execution, delivery, and acceptance thereof by the parties, notwithstanding any
investigation by the Lender or its agents.
14.5 Other Security and Guaranties. The Lender, may, without notice or
demand and without affecting the Borrower's obligations hereunder, from time to
time: (a) take from any Person and hold collateral (other than the Collateral)
for the payment of all or any part of the Obligations and exchange, enforce or
release such collateral or any part thereof; and (b) accept and hold any
endorsement or guaranty of payment of all or any part of the Obligations and
release or substitute any such endorser or guarantor, or any Person who has
given any Lien in any other collateral as security for the payment of all or any
part of the Obligations, or any other Person in any way obligated to pay all or
any part of the Obligations.
14.6 Fees and Expenses. The Borrower agrees to pay to the Lender, on
demand, all costs and expenses that Lender pays or incurs in connection with the
administration, enforcement, and termination of this Agreement, including,
without limitation: (a) Attorney Costs; (b) costs and expenses (including
attorneys' and paralegals' fees and disbursements which shall include the
allocated costs of Lender's in-house counsel fees and disbursements) for any
amendment, supplement, waiver, consent, or subsequent closing in connection with
the Loan Documents and the transactions contemplated thereby; (c) costs and
expenses of lien and title searches and title insurance; (d) taxes, fees and
other charges for filing financing statements and continuations, and other
actions to perfect, protect, and continue the Lender's Liens in the Collateral
(including costs and expenses paid or incurred by the Lender in connection with
the consummation of Agreement); (e) sums paid or incurred to pay any amount or
take any action required of the Borrower under the Loan Documents that the
Borrower fails to pay or take; (f) costs of appraisals, inspections, and
verifications of the Collateral, including, without limitation, travel, lodging,
meals and other expenses for inspections of the Collateral and the Borrower's
operations by the Lender's personnel, plus the Lender's then customary charge
for field examinations and audits and the preparation of reports thereof, as
more particularly described in Section 3.6; (g) costs and expenses of forwarding
loan proceeds, collecting checks and other items of payment, and establishing
and maintaining the Account; (h) costs and expenses of preserving and protecting
the Collateral; and (i) costs and expenses (including attorneys' and paralegals'
fees and disbursements which shall include the allocated cost of the Lender's
in-house counsel fees and disbursements) paid or incurred to obtain payment of
the Obligations, enforce the Lender's Liens in the Collateral, sell or otherwise
realize upon the Collateral, and otherwise enforce the provisions of the Loan
Documents, or to defend any claims made or threatened against the Lender arising
out of the transactions contemplated hereby (including without limitation,
preparations for and consultations concerning any such matters). The foregoing
shall not be construed to limit any other provisions of the Loan Documents
regarding costs and expenses to be paid by the Borrower. All of the foregoing
costs and expenses may be charged by the Lender to the Loan Account as Revolving
Loans as described in Section 4.4.
50
14.7 Notices. Except as otherwise provided herein, all notices, demands
and requests that any party is required or elects to give to any other shall be
in writing, or by a telecommunications device capable of creating a written
record, and any such notice shall become effective (a) upon personal delivery
thereof, including, but not limited to, delivery by overnight mail and courier
service, (b) four (4) days after it shall have been mailed by United States
mail, first class, certified or registered, with postage prepaid, or (c) in the
case of notice by such a telecommunications device, when properly transmitted
(receipt electronically acknowledged), in each case addressed to the party to be
notified as follows:
If to the Lender: Bank of America, National Association
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx Xxxxxxxx
Facsimile: (000) 000-0000
with copies to: Bank of America, National Association
00000 Xxx Xxxxx Xxxx
Xxx Xxxxx, XX 00000
Attention: Legal Department
Facsimile: (000) 000-0000
If to the Borrower: First Community Finance, Inc.
0000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxx, XX 00000
Attention: G. Xxxx Xxxxxx
Facsimile: (000) 000-0000
with copies to: TFC Enterprises, Inc.
0000 Xxxxx Xxxx Xxxx, Xxxxx 000X
Xxxxxxx, XX 00000
Attention: Xxxxx Xxxxxx
Facsimile: (000) 000-0000
or to such other address as each party may designate for itself by like notice.
Failure or delay in delivering copies of any notice, demand, request, consent,
approval, declaration or other communication to the persons designated above to
receive copies shall not adversely affect the effectiveness of such notice,
demand, request, consent, approval, declaration or other communication.
14.8 Waiver of Notices. Unless otherwise expressly provided herein, the
Borrower waives presentment, protest and notice of demand or dishonor and
protest as to any instrument, notice of intent to accelerate the Obligations and
notice of acceleration of the Obligations, as well as any and all other notices
to which it might otherwise be entitled. No notice to or demand on the Borrower
which the Lender may elect to give shall entitle the Borrower to any or further
notice or demand in the same, similar or other circumstances.
51
14.9 Binding Effect. The provisions of this Agreement shall be binding
upon and inure to the benefit of the respective representatives, successors, and
assigns of the parties hereto; provided, however, that no interest herein may be
assigned by the Borrower without the prior written consent of the Lender.
14.10 INDEMNITY OF THE LENDER BY THE BORROWER. THE BORROWER AGREES TO
INDEMNIFY AND HOLD THE LENDER AND ITS OFFICERS, DIRECTORS, EMPLOYEES, COUNSEL,
AGENTS AND ATTORNEYS-IN-FACT (EACH, AN "INDEMNIFIED PERSON") HARMLESS FROM AND
AGAINST ANY AND ALL LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES,
ACTIONS, JUDGMENTS, SUITS, COSTS, CHARGES, EXPENSES AND DISBURSEMENTS (INCLUDING
ATTORNEY COSTS) OF ANY KIND OR NATURE WHATSOEVER WHICH MAY AT ANY TIME
(INCLUDING AT ANY TIME FOLLOWING REPAYMENT OF THE REVOLVING LOANS) BE IMPOSED
ON, INCURRED BY OR ASSERTED AGAINST ANY SUCH PERSON IN ANY WAY RELATING TO OR
ARISING OUT OF THIS AGREEMENT OR ANY DOCUMENT CONTEMPLATED BY OR REFERRED TO
HEREIN, OR THE TRANSACTIONS CONTEMPLATED HEREBY, OR ANY ACTION TAKEN OR OMITTED
BY ANY SUCH PERSON UNDER OR IN CONNECTION WITH ANY OF THE FOREGOING, INCLUDING
WITH RESPECT TO ANY INVESTIGATION, LITIGATION OR PROCEEDING (INCLUDING ANY
INSOLVENCY PROCEEDING OR APPELLATE PROCEEDING) RELATED TO OR ARISING OUT OF THIS
AGREEMENT OR THE REVOLVING LOANS OR THE USE OF THE PROCEEDS THEREOF, WHETHER OR
NOT ANY INDEMNIFIED PERSON IS A PARTY THERETO (ALL THE FOREGOING, COLLECTIVELY,
THE "INDEMNIFIED LIABILITIES"); PROVIDED, THAT THE BORROWER SHALL HAVE NO
OBLIGATION HEREUNDER TO ANY INDEMNIFIED PERSON WITH RESPECT TO INDEMNIFIED
LIABILITIES RESULTING SOLELY FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF
SUCH INDEMNIFIED PERSON. THIS INDEMNITY SHALL SURVIVE PAYMENT OF ALL OTHER
OBLIGATIONS AND THE TERMINATION OF THIS AGREEMENT.
14.11 Final Agreement. This Agreement and the other Loan Documents are
intended by the Borrower and the Lender to be the final, complete, and exclusive
expression of the agreement between them. This Agreement supersedes any and all
prior oral or written agreements relating to the subject matter hereof. No
modification, rescission, waiver, release, or amendment of any provision of this
Agreement or any other Loan Document shall be made, except by a written
agreement signed by the Borrower and a duly authorized officer of the Lender.
14.12 Counterparts. This Agreement may be executed in any number of
counterparts, and by the Lender and the Borrower in separate counterparts, each
of which shall be an original, but all of which shall together constitute one
and the same agreement.
14.13 Captions. The captions contained in this Agreement are for
convenience of reference only, are without substantive meaning and should not be
construed to modify, enlarge, or restrict any provision.
52
14.14 Right of Setoff. In addition to any rights and remedies of the
Lender provided by law, if an Event of Default exists, the Lender is authorized
at any time and from time to time, without prior notice to the Borrower, any
such notice being waived by the Borrower to the fullest extent permitted by law,
to set off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held by, and other indebtedness at any time
owing by, such Lender to or for the credit or the account of the Borrower
against any and all Obligations owing to the Lender, now or hereafter existing,
irrespective of whether or not the Lender shall have made demand under this
Agreement or any Loan Document and although such Obligations may be contingent
or unmatured. The Lender agrees promptly to notify the Borrower after any such
set-off and application made by the Lender; provided, however, that the failure
to give such notice shall not affect the validity of such set-off and
application.
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
53
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first above written.
"LENDER" "BORROWER"
Bank of America, National Association First Community Finance, Inc.
By: By:
----------------------- ---------------------
Name: Name:
----------------------- ---------------------
Title: Title:
----------------------- ---------------------
54
LIST OF SCHEDULES
-----------------
SCHEDULE 6.3 Location of the Borrower's Chief Executive Office
and other Locations
SCHEDULE 8.3 List of Jurisdictions in Which Borrower is Qualified
and Where Incorporated and in Good Standing
SCHEDULE 8.5 List of Affiliates
SCHEDULE 8.6 Borrower's Financial Statements
SCHEDULE 8.11 List of Litigation
55
SCHEDULE 6.3
TO
LOAN AND SECURITY AGREEMENT
LOCATION OF THE BORROWER'S CHIEF EXECUTIVE OFFICE
AND OTHER LOCATIONS
-------------------
See attached page for locations.
56
SCHEDULE 8.3 TO
LOAN AND SECURITY AGREEMENT
LIST OF JURISDICTIONS IN WHICH BORROWER IS QUALIFIED
AND WHERE INCORPORATED AND IN GOOD STANDING
-------------------------------------------
Virginia (state of incorporation)
North Carolina
57
SCHEDULE 8.5 TO
LOAN AND SECURITY AGREEMENT
LIST OF AFFILIATES
------------------
Name of Company Relationship
--------------- ------------
TFC Enterprises, Inc., TFC Enterprises, Inc. owns 100% of the issued and
a Delaware corporation outstanding stock of First Community Finance, Inc.
The Finance Company, TFC Enterprises, Inc. owns 100% of the issued and
a Virginia corporation outstanding stock of The Finance Company
Recoveries, Inc.,. TFC Enterprises, Inc. owns 100% of the issued and
a Virginia corporation outstanding stock of Recoveries, Inc.
The Insurance Agency, Inc., The Finance Company owns 100% of the issued and
a Virginia corporation outstanding stock of The Insurance Agency, Inc.
PC Acceptance Corporation, TFC Enterprises, Inc. owns 100% of the issued and
a Virginia corporation outstanding stock of PC Acceptance Corporation
TFC Receivables Corporation, The Finance Company owns 100% of the issued and
a Virginia corporation outstanding stock of TFC Receivables Corporation
TFC Receivables Corporation 2, The Finance Company owns 100% of the issued and
a Virginia corporation outstanding stock of TFC Receivables Corporation 2
58
SCHEDULE 8.6 TO
LOAN AND SECURITY AGREEMENT
BORROWER'S FINANCIAL STATEMENTS
-------------------------------
Attached hereto are the following items:
1. The audited balance sheet and related statements of income, retained
earnings, cash flow, and changes in stockholders equity for TFC
Enterprises, Inc. and its consolidated Subsidiaries as of December 31,
1998, and for the Fiscal Year then ended, accompanied by the report
thereon of TFC Enterprises, Inc.'s independent certified public
accountants.
2. The unaudited balance sheet and related statements of income and cash
flow for First Community Finance, Inc. as of June 30, 1999.
59
SCHEDULE 8.11 TO
LOAN AND SECURITY AGREEMENT
LIST OF LITIGATION
------------------
None
