EXECUTION
AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
by and between
CONGRESS FINANCIAL CORPORATION
as Lender
and
AM GENERAL CORPORATION
as Borrower
January 24, 2001
TABLE OF CONTENTS
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SECTION 1. DEFINITIONS 1
SECTION 2. ACKNOWLEDGMENT AND RESTATEMENT 17
2.1 Existing Obligations 17
2.2 Acknowledgment of Security Interests 17
2.3 Existing Agreement 17
2.4 Restatement 17
2.5 Release 18
SECTION 3. AMOUNTS AND TERMS OF LOANS 18
3.1 Loans 18
3.2 Letter of Credit Accommodations 20
3.3 Maximum Credit 22
3.4 Reserves 22
3.5 Fees 22
3.6 Interest 23
3.7 Conduct of Accounts; Cross-Collateralization 24
3.8 Use of Proceeds 25
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SECTION 4. CONDITIONS PRECEDENT TO LOANS 25
SECTION 5. COLLATERAL 27
SECTION 6. REPRESENTATIONS AND WARRANTIES 28
6.1 Organization and Qualification 28
6.2 Corporate Power and Authority 28
6.4 Compliance with Other Agreements and Applicable Law 29
6.5 Governmental Approval and Contracts 30
6.6 Chief Executive Office; Collateral Locations 30
6.7 Priority of Liens/Title to Properties 31
6.8 Tax Returns 31
6.9 Litigation 31
6.10 Intellectual Property 31
6.11 Accounts 32
6.12 Financial Statements 32
6.13 Employee Benefits 33
6.14 Environmental Compliance 33
6.15 Investment Company 34
6.16 Regulation G; Securities Exchange Act of 1934 34
6.17 No Material Adverse Change 35
6.18 Disclosure 35
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SECTION 7. ADDITIONAL COVENANTS 35
7.1 Tradenames 35
7.2 Subsidiaries 36
7.3 Indebtedness 36
7.6 Loans, Investments, Guarantees, Etc. 43
7.8 Dividends 46
7.9 Maintenance of Existence 48
7.10 Sale of Assets, Consolidation, Merger, Dissolution, Etc 48
7.11 Working Capital 49
7.12 Net Worth 49
7.13 Capital Expenditures 49
7.14 Compliance with Laws, Regulations, Etc 49
7.15 Payment of Taxes and Claims 50
7.16 Properties in Good Condition 50
7.17 Insurance 51
7.18 Compliance with ERISA 51
7.19 Notice of Default 52
7.20 Financial Statements and Other Information 52
7.21 Further Assurances 54
SECTION 8. EVENTS OF DEFAULT AND REMEDIES 54
8.1 Events of Default 55
8.2 Remedies 56
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SECTION 9. COLLECTION AND ADMINISTRATION 58
9.1 Collections; Management of Collateral 58
9.2 Right of Inspection; Access 59
9.3 Lock Box or Blocked Account 59
9.4 Accounts Documentation 60
9.5 Specific Powers 60
9.6 Appointment of Agent for Requesting Loans and Receipt of
Loans and Statements. 61
SECTION 10. EFFECTIVE DATE; TERMINATION; COSTS; MISCELLANEOUS 61
10.1 Term 61
10.2 Expenses and Additional Fees 63
10.3 Survival of Agreement 63
10.4 No Waiver; Cumulative Remedies 64
10.5 Notices 64
10.6 Entire Agreement 64
10.7 Amendments and Waivers 65
10.8 Applicable Law 65
10.9 Successors 65
10.10 Participant's Security Interests 65
10.11 Partial Invalidity 65
10.12 Headings 66
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10.13 Waiver of Jury Trial 66
10.14 Waiver of Counterclaims; Jurisdiction; Service of Process 66
10.15 Indemnification 66
10.16 Counterparts 66
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INDEX TO SCHEDULES
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Schedule 1.50 Principal Amount of GM Note
Schedule 1.62 Hummer Trademarks
Schedule 1.82 Repurchase Agreement
Schedule 6.1 Subsidiaries of Borrower
Schedule 6.3 Capitalization of Borrower
Schedule 6.4 Permits
Schedule 6.5 Government Contracts
Schedule 6.6 Principal Place of Business
and Locations of Collateral
Schedule 6.9 Pending Litigation
Schedule 6.13 Employee Benefits
Schedule 6.14 Environmental Compliance
Schedule 7.1 Tradenames
Schedule 7.3 Existing Indebtedness
Schedule 7.3(h) Number of H2 Vehicles
Schedule 7.6 Loans, Investments,
Guarantees, Etc.
Schedule 7.6(g) GEP Dividend Payment Schedule
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AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
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AGREEMENT dated January 24, 2001 by and between AM General Corporation
("Borrower", as hereinafter further defined) and CONGRESS FINANCIAL CORPORATION,
a Delaware corporation ("Lender", as hereinafter further defined).
W I T N E S S E T H
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WHEREAS, Borrower and Congress have heretofore entered into certain
financing arrangements as set forth in the Existing Agreement (as hereinafter
defined) pursuant to which Lender has made loans and advances and provided other
financial accommodations to Borrower; and
WHEREAS, Borrower has requested that Lender extend, modify and restate the
existing financial arrangements with Borrower; and
WHEREAS, Lender is willing to extend, modify and restate the existing
financing arrangements, subject to the terms and conditions contained herein and
in the other Financing Arrangements (as defined below);
NOW, THEREFORE, in consideration of the foregoing, the mutual covenants and
agreements herein contained and other good and valuable consideration, Lender
and Borrower hereby mutually covenant, warrant and agree as follows:
SECTION 1. DEFINITIONS
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All references to the plural herein shall also mean the singular and to the
singular shall also mean the plural. All references to Lender pursuant to the
definitions set forth in the recitals hereto, or to any other person herein,
shall include its respective successors and assigns. The word "including" when
used in this Agreement shall mean "including, without limitation". An Event of
Default shall exist or continue or be continuing until such Event of Default is
waived in accordance with Section 11.3 or is cured if such Event of Default is
capable of being cured. For the purposes of this Agreement and the other
Financing Agreements, the following terms shall have the respective meanings
given to them below:
1.1 "Accounts" shall mean, all present and future accounts, contract
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rights, general intangibles, chattel paper, documents and instruments, as such
terms are defined in the UCC, of Borrower, including, without limitation, all
obligations for the payment of money arising out of the sale, lease or other
disposition of goods or other property or rendition of services whether or not
evidenced by instruments or chattel paper, and whether or not earned by
performance.
1.2 "Account Debtor" shall mean each debtor or obligor in any way obligated
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on or in connection with any account.
1.3 "Adjusted After-Tax Profits" shall mean, as to any Person, with respect
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to any period, (a) the consolidated net income of such Person and its
Subsidiaries after deducting all charges which should be deducted before
arriving at consolidated net income for such period, all in accordance with
GAAP, consistently applied, and after deducting (without duplication) the
Provision for Taxes for such fiscal year, plus (b) an amount equal to any non-
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cash charges in respect of post-employment benefits for health care, life
insurance and long term disability benefits required under GAAP consistently
applied and minus (c) all
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payments made by Borrower to Renco Group pursuant to Section 7.8(e) hereof for
federal, state and local taxes based on Borrower's taxable income for such
fiscal year. For purposes of this Section 1.3, "Provision for Taxes" shall mean
an amount equal to all taxes imposed on or measured by net income, whether
federal, state or local, and whether foreign or domestic, as recorded by such
Person and its Subsidiaries in respect of such fiscal year in accordance with
GAAP consistently applied; provided, that, if such Person and its Subsidiaries
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are members of a larger consolidated group of corporations in respect of any
fiscal year, the "Provision for Taxes" shall be deemed to mean an amount equal
to the highest of (i) the Provision for Taxes determined without reference to
this proviso, or (ii) the amount of all taxes that would be imposed on, or
measured by, net income that would be paid or payable by such Person and its
Subsidiaries if they were not members of such consolidated group, or (iii) the
total of all taxes imposed on, or measured by, net income that are paid or
payable by such Person and its Subsidiaries plus the amount of any payments made
or required to be made by such Person or its Subsidiaries to any other members
of such consolidated group under any tax sharing arrangements or that are
otherwise in lieu of the payment of such taxes.
1.4 "Affiliate" shall mean, with respect to a specified Person (as
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hereinafter defined), a partnership or corporation which directly or indirectly,
through one or more intermediaries, controls or is controlled by or is under
common control with such Person, and without limiting the generality of the
foregoing, includes (a) any Person which beneficially owns or holds five (5%)
percent or more of any class of voting securities of such Person or other equity
interests in such Person, (b) any Person of which such Person beneficially owns
or holds five (5%) percent or more of any class of voting securities or in which
such Person beneficially owns or holds five (5%) percent or more of the equity
interests and (c) any director, officer or employee of such Person. For the
purposes of this definition, the term "control" (including with correlative
meanings, the terms "controlled by" and "under common control with"), as used
with respect to any Person, means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of such
Person, whether through the ownership of voting securities or by contract or
otherwise.
1.5 "Aircraft Assets" shall mean the fractional ownership of Borrower in
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two aircraft, FAA registration number N845CW and N341CW.
1.6 "AMGSC" shall mean AM General Sales Corporation, an Indiana
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corporation and wholly-owned subsidiary of Borrower, and its successors and
assigns.
1.7 "Assignment of Claims Act" shall mean the Federal Assignment of Claims
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Act of 1940, as amended, and any state or local equivalents, as the same now
exist or may from time to time hereafter be amended, modified, recodified or
supplemented, together with all rules, regulations and interpretations
thereunder or related thereto.
1.8 "Bankruptcy Code" shall mean the United States Bankruptcy Code, being
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Title 11 of the United States Code as enacted in 1978, as the same may have
heretofore been or may hereafter be amended, recodified, modified or
supplemented, together with all rules, regulations and interpretations
thereunder or related thereto.
1.9 "Board" shall mean the Board of Governors of the Federal Reserve
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System or any successor thereto.
1.10 "Borrower" shall mean the Borrower and its successors and assigns.
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1.11 "Capital Expenditures" shall mean all expenditures for, or contracts
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for expenditures for, any fixed or capital assets (including, but not limited
to, tooling) or improvements, or for replacements,
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substitutions or additions thereto, which have a useful life of more than one
(1) year, including, but not limited to, the direct or indirect acquisition of
such assets by way of offset items or otherwise and shall include capitalized
lease payments and shall not mean: (a) any expenditures and costs incurred by
Borrower in connection with the building and construction of the H2 Facility to
the extent such expenditures and costs are funded with or are to be reimbursed
with the proceeds of the GM Loan or (b) any expenditures and costs incurred by
Borrower in an amount up to $5,100,000 in connection with the acquisition of the
H1 Facility.
1.12 "Code" shall mean the Internal Revenue Code of 1986, as the same now
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exists or may from time to time hereafter be amended, modified, recodified or
supplemented, together with all rules, regulations and interpretations
thereunder or related thereto.
1.13 "Collateral" shall have the meaning set forth in Section 5 hereof.
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1.14 "Consolidated Adjusted Net Worth" shall mean, as to any Person, any
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time, in accordance with GAAP, consistently applied, on a consolidated basis for
such Person and its Subsidiaries, the amount equal to the difference between:
(a) the aggregate net book value of all assets of such Person and its
Subsidiaries, calculating the book value of inventory for this purpose on a
first-in-first-out basis, after deducting from such book values all appropriate
reserves in accordance with GAAP consistently applied (including all reserves
for doubtful receivables, obsolescence, depreciation and amortization) and (b)
the total aggregate Indebtedness of such Person and its Subsidiaries (including
tax and other proper accruals).
1.15 "Consolidated Working Capital" shall mean, as to any Person, at any
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time, the amount equal to the difference between: (a) the aggregate net book
value of all assets of such Person and its Subsidiaries, calculating the book
value of inventory for this purpose on a first-in-first-out basis, on a
consolidated basis for such Person and its Subsidiaries, which would, in
accordance with GAAP consistently applied, be classified as current assets and
(b) all Indebtedness of such Person and its Subsidiaries, on a consolidated
basis for such Person and its Subsidiaries, which would in accordance with GAAP
consistently applied, be classified as current liabilities and the Indebtedness
arising hereunder, whether or not classified as a current liability.
1.16 "Dealers" shall mean dealers who in the ordinary course of their
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respective businesses buy H1 Vehicles at wholesale from AMGSC and sell them at
retail.
1.17 "Eligible Accounts" shall mean, the Accounts created by Borrower, in
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each case, in the ordinary course of its business arising out of the sale of
goods or rendition of services by Borrower in the ordinary course of its
business, which are and at all times shall continue to be acceptable to Lender
in all respects. Standards of eligibility may be fixed and revised from time to
time solely by Lender in its exclusive judgment. In determining eligibility,
Lender may, but need not, rely on agings, reports and schedules of Accounts
furnished to Lender by Borrower, but reliance by Lender thereon from time to
time shall not be deemed to limit Lender's right to revise standards of
eligibility at any time as to both present and future Accounts. In general, an
Account shall not be deemed eligible unless: (a) the Account Debtor on such
Account is and at all times continues to be acceptable to Lender, (b) such
Account complies in all respects with the representations, covenants and
warranties set forth herein and in the other Financing Agreements, (c) subject
to the terms of Section 1.17(g) below, no more than sixty (60) days have elapsed
since the invoice date of such Account, unless such Account is secured or
payable by an irrevocable letter of credit payable to Borrower as beneficiary
which has been issued or confirmed by a financial institution acceptable to
Lender and in a form acceptable to Lender payable in United States dollars in an
amount equal to the face value of the Account, and, if Lender so requires at any
time and from time to time, the original of such letter of credit is delivered
to Lender and the issuer thereof is notified of, and
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acknowledges, the pledge and assignment thereto to Lender, in which case no more
than ninety (90) days have elapsed since the invoice date of such Account; (d)
if the Account Debtor is any Governmental Agency, Borrower shall have complied
in all respects with the Assignment of Claims Act in a manner satisfactory to
Lender with respect to such Account; provided, that, if the total aggregate
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amount of the Accounts outstanding and unpaid by such Governmental Agency under
any one Government Contract in the then current term thereof (but not any
extension or renewal term) shall be less than $100,000, the Accounts arising
thereunder which would otherwise be deemed Eligible Accounts but for Borrower's
failure to comply with the Assignment of Claims Act may nonetheless be deemed
Eligible Accounts by Lender, so long as: (i) no Event of Default, or act,
condition or event which with notice or passage of time or both, shall exist or
have occurred and (ii) at any time and from time to time, upon Lender's request,
Borrower shall comply with the Assignment of Claims Act with respect to such
Accounts, in a manner satisfactory to Lender, and take such other actions as
Lender may require to perfect and protect the interests of Lender in such
Accounts, at Borrower's cost and expense; (e) as to Accounts which arise with
respect to xxxx and hold sales, Borrower shall have delivered to Lender a xxxx
and hold letter from the Account Debtor with respect to such Accounts, in form
and substance satisfactory to Lender, evidencing, inter alia, the Account
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Debtor's unconditional obligation to take and pay for such xxxx and hold goods;
(f) as to Foreign Accounts, such Account is secured or payable by an irrevocable
letter of credit payable to Borrower as beneficiary which has been issued or
confirmed by a financial institution acceptable to Lender and in a form
satisfactory to Lender, payable in United States dollars in an amount equal to
the face value of the Account and, if Lender so requires at any time and from
time to time, the original of such letter of credit is delivered to Lender and
the issuer thereof is notified of, and acknowledges, the pledge and assignment
thereof to Lender; (g) no more than thirty (30) days have elapsed since the
invoice date of such Account, in the case of any Account for which GM is the
account debtor arising pursuant to the assembly by Borrower of H2 Vehicles for
GM (collectively, "GM Accounts"); (h) neither the account debtor nor any officer
or employee of the account debtor with respect to such Account is an officer,
employee, agent or other Affiliate of Borrower; and (i) the account debtor with
respect to such Account has not asserted a counterclaim, defense or dispute and
does not have, and does not engage in transactions which may give rise to any
right of setoff or recoupment against such Account, other than in the case of GM
Accounts in which case the amount of such GM Account shall be deemed to be the
net amount after giving effect to such setoff or recoupment taken by GM. In no
event shall Accounts representing indebtedness of any Governmental Agency only
for progress payments under a Government Contract be considered Eligible
Accounts, except to the extent such indebtedness with respect to progress
payments is included as part of an Eligible Account representing indebtedness
for goods sold or services rendered. Any Accounts which Lender determines to be
ineligible or unacceptable for purposes of the Lending Formulas at any time
shall nevertheless be and remain at all times part of the Collateral.
1.18 "Eligible Finished Engine Inventory" shall mean the Inventory of
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Borrower which is otherwise Eligible Inventory consisting of fully assembled
engines which are first quality finished goods assembled or produced on behalf
of Borrower by GEP.
1.19 "Eligible H1 Finished Goods Inventory" shall mean Inventory of
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Borrower which is otherwise Eligible Inventory consisting of H1 Vehicles which
are first quality finished goods held for resale in the ordinary course of the
business of Borrower (other than any H1 Vehicles used for demonstration and test
drives) for which bona fide sale orders have been received by Borrower which
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orders have not been cancelled or rescinded and shall include any fully operable
H1 Vehicles vehicle awaiting minor parts or details so long as no more than
forty-five (45) days have elapsed from the date such H1 Vehicles have completed
all stages of the H1 Vehicle production/assembly line; provided, that, Borrower
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has reported such date to Lender and included such vehicle and all costs of
completion therefor in sufficient detail in the inventory reports delivered to
Lender in accordance with the terms hereof.
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1.20 "Eligible H1 Service Parts Inventory" shall mean Inventory of Borrower
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which is otherwise Eligible Inventory consisting of engines (other than engines
manufactured or produced by GEP), transmissions, wheels, doors, tires, panels,
and other components, parts, appliances, accessories, accessions, attachments or
other equipment of Borrower to be incorporated in, affixed or attached to,
installed on or otherwise related to the H1 Vehicles constituting service parts.
1.21 "Eligible H1 Work-in-Process Inventory" shall mean Inventory of
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Borrower which is otherwise Eligible Inventory consisting of engines (other than
engines manufactured or produced by GEP), transmissions, wheels, doors, tires,
panels and other components, parts, appliances, accessories, accessions,
attachments or other equipment of Borrower to be incorporated in, affixed or
attached to, installed on or otherwise related to the H1 Vehicles constituting
work-in-process and shall include any fully operable H1 Vehicle awaiting minor
parts or details where forty-six (46) or more days have elapsed from the date
such H1 Vehicle have completed all stages of the H1 Vehicle production/assembly
line.
1.22 "Eligible Humvee Finished Goods Inventory" shall mean Inventory of
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Borrower which is otherwise Eligible Inventory consisting of Humvees which do
not use or bear any of the Hummer Trademarks and are first quality finished
goods held for resale in the ordinary course of the business of Borrower (other
than Humvees used for demonstration and test drives) for which bona fide sale
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orders have been received by Borrower which orders have not been cancelled or
rescinded and shall include any fully operable Humvee vehicle awaiting minor
parts or details so long as no more than forty-five (45) days have elapsed from
the date such Humvee vehicle has completed all stages of the Humvee
production/assembly line; provided, that, Borrower has reported such date to
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Lender and included such vehicle and all costs of completion therefor in
sufficient detail in the inventory reports delivered to Lender in accordance
with the terms hereof.
1.23 "Eligible Humvee Service Parts Inventory" shall mean Inventory of
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Borrower which is otherwise Eligible Inventory consisting of engines (other than
engines manufactured or produced by GEP), transmissions, wheels, doors, tires,
panels, and other components, parts, appliances, accessories, accessions,
attachments or other equipment to be incorporated in, affixed or attached to,
installed on or otherwise related to the Humvees constituting service parts and
which do not use or bear any of the Hummer Trademarks.
1.24 "Eligible Humvee Work-in-Process Inventory" shall mean Inventory of
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Borrower which is otherwise Eligible Inventory consisting of engines (other than
engines manufactured or produced by GEP), transmissions, wheels, doors, tires,
panels and other components, parts, appliances, accessories, accessions,
attachments or other equipment to be incorporated in, affixed or attached to,
installed on or otherwise related to the Humvees constituting work-in-process,
which do not use or bear any of the Hummer Trademarks and shall include any
fully operable Humvee vehicle awaiting minor parts or details where forty-six
(46) or more days have elapsed from the date such Humvee vehicle has completed
all stages of the Humvee production/assembly line.
1.25 "Eligible Inventory" shall mean the Inventory consisting of first
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quality current finished goods held for resale in the ordinary course of the
business of Borrower, current work-in-process with respect thereto and raw
materials with respect to such finished goods and service or spare parts, which
are acceptable to Lender in all respects. Standards of eligibility may be fixed
and revised from time to time solely by Lender in its exclusive judgment. In
determining eligibility Lender may, but need not, rely on reports and schedules
of Inventory furnished to Lender by Borrower, but reliance thereon by Lender
from time to time shall not be deemed to limit Lender's right to revise
standards of eligibility at any time. In general, except in Lender's
discretion, Eligible Inventory shall not include: (a) packaging and shipping
materials, (b) Inventory at the premises of third parties, (c) xxxx and hold
goods, (d) Inventory which is not subject to the first priority perfected
security interest of Lender, and (e) Inventory purchased on
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consignment; provided, however, any Inventory which would otherwise be deemed
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Eligible Inventory at locations which are not owned and operated by Borrower may
nevertheless be considered Eligible Inventory: (i) if Lender shall have received
an agreement in writing, in form and substance satisfactory to Lender, from the
holder of such Inventory or the owner and/or operator of such location, as the
case may be, pursuant to which such holder, owner and/or operator, if required
by Lender: (A) acknowledges the first priority lien on such Inventory of Lender,
and (B) agrees to waive any and all claims such holder, owner and/or operator
may, at any time, have against such Inventory, whether for processing, storage
or otherwise, and (ii) in addition to the agreement described above, if the
Inventory is on consignment and if required by Lender: (A) the holder, owner
and/or operator executes appropriate UCC-1 financing statements in favor of
Borrower, which are duly assigned to Lender and (B) if required by Lender, any
lender to the holder, owner and/or operator with any interest in inventory is
properly notified of the first priority lien on such Inventory of Lender. Any
Inventory which Lender determines to be ineligible or unacceptable for purposes
of the Lending Formulas at any time shall nevertheless be and remain at all
times part of the Collateral; provided, that, in no event shall Eligible
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Inventory include any H2 Vehicles, GM Collateral, or any other assets or
properties owned by GM or assets or properties of Borrower purchased with the
proceeds of the GM Loan or raw materials or components or other materials
purchased by Borrower and used in the assembly of the H2 Vehicle or any assets
or properties or any H1 Vehicles owned by AMGSC.
1.26 "Eligible Other Service Parts Inventory" shall mean Inventory of
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Borrower which is otherwise Eligible Inventory consisting of engines,
transmissions, wheels, doors, tires, panels and other components, parts,
appliances, accessories, accessions, attachments or other equipment to be
incorporated in, affixed or attached to or installed on, or otherwise related
to, any vehicles assembled, produced, fabricated, manufactured or serviced by
Borrower in the ordinary course of the business of Borrower, other than H1
Vehicles, Humvees and H2 Vehicles.
1.27 "Environmental Laws" shall mean all federal, state and local laws,
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rules, regulations, ordinances, and consent decrees relating to health, safety,
hazardous substances, and environmental matters, as now or at any time hereafter
in effect, applicable to Borrower's business and facilities (whether or not
owned by it). Such laws and regulations include, but are not limited to, the
Resource Conservation and Recovery Act, as amended; the Comprehensive
Environmental Response, Compensation and Liability Act, as amended; the Toxic
Substances Control Act, as amended; the Clean Water Act, as amended; the Clean
Air Act, as amended; the Hazardous Materials Transportation Act, as amended;
state and federal superlien and environmental cleanup programs; and U.S.
Department of Transportation and Environmental Protection Agency regulations.
1.28 "Equipment" shall mean all of Borrower's now owned and hereafter
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acquired equipment and fixtures, wherever located, including, without
limitation, any and all machinery used in connection with the manufacture, sale,
exchange or lease of goods or rendition of services, machinery, tooling, tools,
telephone equipment, computers, computer hardware and related computer equipment
and accessories (including software and records), vehicles (other than those
produced by Borrower and constituting Inventory), dies, jigs, furniture, trade
fixtures and fixtures, all attachments, components, parts, accessions and
property now or hereafter affixed thereto, installed thereon or used in
connection therewith, and all additions to and substitutions and replacements
thereof and all existing and future leasehold interests in equipment and
fixtures, wherever located, whether now owned or hereafter acquired and all
licenses and other rights of Borrower relating thereto, whether in the
possession and control of Borrower or in the possession and control of a third
person for the account of Borrower and all claims to the proceeds of insurance
thereon and all maintenance and warranty records relating thereto; provided,
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that, the term "Equipment" as used herein shall not include any "Inventory" as
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such term is defined herein.
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1.29 "ERISA" shall mean the United States Employee Retirement Income
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Security Act of 1974, as the same now exists or may hereafter from time to time
be amended, modified, recodified or supplemented, together with all rules,
regulations and interpretations thereunder or related thereto.
1.30 "Excess Availability" shall mean, the amount, as determined by Lender,
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calculated as of any date, equal to:
(a) the lesser of: (i) amount of the Loans then available to
Borrower pursuant to (A) the applicable Lending Formula
multiplied by the Net Amount of Eligible Accounts plus (B)
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the lesser of: (1) the sum of all of the product of the
applicable Lending Formula multiplied by the value of the
types or categories of Eligible Inventory applicable to it
or (2) the sublimits on Loans with respect to the various
types or categories of Eligible Inventory set forth in
Section 3.1(b) of this Agreement and (ii) the Maximum
Credit;
minus
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(b) the sum of: (i) the amount of all then outstanding and
unpaid Obligations, plus (ii) the aggregate amount of all
reserves established by Lender as provided in Section 3.4
hereof, plus (iii) the aggregate amount of all trade
payables and other obligations of Borrower more than thirty
(30) days past due.
1.31 "Event of Default" shall have the meaning set forth in Section 8.1
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hereof.
1.32 "Excluded Assets" shall mean (a) all Equipment, (b) all real property
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and interests in real property owned by Borrower, (c) all GM Collateral, (d) H2
Vehicles, (e) any other assets or properties owned by GM , (f) all Aircraft
Assets and (g) the shares of capital stock of GEP and AMGSC.
1.33 "Existing Agreement" shall mean the Loan and Security Agreement, dated
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as of April 30, 1992, by and between Borrower and Lender.
1.34 "Financing Agreements" shall mean this Agreement, together with all
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other agreements, documents and instruments now or at any time hereafter
executed and/or delivered in connection herewith or otherwise relating to this
Agreement, the Obligations or the Collateral, as this Agreement and such other
agreements, documents or instruments now exist or may hereafter be amended,
modified, supplemented, extended, renewed, restated or replaced.
1.35 "First Source" shall mean 1/st/ Source Bank, an Indiana state-
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chartered commercial bank, and its successors and assigns.
1.36 "First Source Mortgage" shall mean the Purchase Money Real Estate
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Mortgage and Security Agreement, dated June 6, 2000, by and between Borrower, as
mortgagor and First Source, as mortgagee with respect to the H1 Facility and the
real property described therein, as the same now exists or may hereafter be
amended, modified, supplemented, extended, renewed, restated or replaced.
1.37 "First Source Note" shall mean the Term Promissory Note, dated June 6,
-----------------
2000, issued by Borrower payable to the order of First Source in the original
principal amount of $5,000,000, as the same now exists or may hereafter be
amended, modified, supplemented, extended, renewed, restated or replaced.
1.38 "Floorplan Lenders" shall mean, collectively, General Motors
-----------------
Acceptance Corporation and such other persons who may from time to time provide
financing to any of the Dealers for the purchase of
7
H1 Vehicles by the Dealers from AMGSC, together with their respective successors
and assigns (sometimes referred to herein individually as a "Floorplan Lender").
1.39 "Foreign Account" shall mean any Account at any time owing by an
---------------
Account Debtor which: (a) does not maintain its chief executive office in the
United States, Puerto Rico or the U.S. Virgin Islands, (b) is not organized
under the laws of the United States or any state thereof or Puerto Rico or the
U.S. Virgin Islands, or (c) is the government of any foreign country or
sovereign state, or of any state, province, municipality or other political
subdivision thereof, or of any department, agency, public corporation or other
instrumentality thereof.
1.40 "GAAP" shall mean generally accepted accounting principles in the
----
United States of America as in effect from time to time as set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and the statements and pronouncements
of the Financial Accounting Standards Board which are applicable to the
circumstances as of the date of determination.
1.41 "GM" shall mean General Motors Corporation, a Delaware corporation,
--
and its successors and assigns.
1.42 "GM Accounts" shall have the meaning set forth in Section 1.17(g)
-----------
hereof.
1.43 "GM Agreements" shall mean, collectively, the following (as the same
-------------
now exist or may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced): (i) the GM Note, (ii) the GM Security Agreement,
(iii) the GM Right of Access Agreement, (iv) the GM Assignment, (v) the GM
Equity Conversion Agreement, (vi) the GM Assembly Agreement, (vii) the GM
License Agreement, (vii) the GM Royalty Sharing Agreement, (viii) the GM
Management Services Agreement, and (ix) all agreements, documents and
instruments executed and/or delivered in connection therewith; the foregoing
sometimes being referred to herein, individually, as a "GM Agreement".
1.44 "GM Assembly Agreement" shall mean the New Vehicle Assembly Agreement,
---------------------
dated on or about December 21, 1999, by and between GM and Borrower, as the same
now exists or may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced.
1.45 "GM Assignment" shall mean the Assignment Agreement, dated on or about
-------------
December 21, 1999, by and between Borrower, as assignor and GM, as assignee,
with respect to the Hummer Trademark as the same now exists and may hereafter be
amended, modified, supplemented, extended, renewed, restated or replaced.
1.46 "GM Collateral" shall mean the equipment and the H2 Facility acquired
-------------
by Borrower with the proceeds of the GM Loan, used in the production of the H2
Vehicles; provided, that, in no event shall the "GM Collateral" include: (i) any
-------- ----
of the assets and properties of Borrower existing prior to December 21, 1999,
(ii) any existing or hereafter arising or acquired accounts receivable, chattel
paper, documents, instruments, letters of credit, deposit accounts, inventory or
general intangibles of Borrower (other than general intangibles relating
exclusively, specifically and directly to the equipment and real property
constituting the GM Collateral), and (iii) any amounts at any time deposited in
or received in the lockbox or blocked account established by Borrower in
connection with its financing arrangements with Lender for the handling of
collections of accounts or other assets and the remittance thereof to Lender or
any other amounts at any time paid to Lender in respect of the obligations of
Borrower to Lender.
8
1.47 "GM Equity Conversion Agreement" shall mean the Equity Conversion
------------------------------
Agreement, dated on or about December 21, 1999, by and between Borrower and GM,
as the same now exists or may hereafter be amended, modified, supplemented,
extended, renewed, restated or replaced.
1.48 "GM Loan" shall mean loans and advances by GM to Borrower as evidenced
-------
by the GM Note.
1.49 "GM Management Services Agreement" shall mean the Management Services
--------------------------------
Agreement. dated as of December 21, 1999, by and among Borrower, AMGSC and GM, ,
as the same now exists or may hereafter be amended, modified, supplemented,
extended, renewed, restated or replaced.
1.50 "GM Note" shall mean the Promissory Note, dated on or about December
-------
21, 1999, issued by Borrower payable to GM in the original principal amount set
forth on Schedule 1.50 hereto, as the same now exists or may hereafter be
amended, modified, supplemented, extended, renewed, restated or replaced.
1.51 "GM Right of Access Agreement" shall mean the Right of Access
----------------------------
Agreement, dated on or about December 21, 1999, by and between Borrower and GM,
as the same now exists or may hereafter be amended, modified, supplemented,
extended, renewed, restated or replaced.
1.52 "GM Royalty Sharing Agreement" shall mean the Royalty Sharing
----------------------------
Agreement, dated on or about December 21, 1999, by and between Borrower and GM,
as the same now exists or may hereafter be amended, modified, supplemented,
extended, renewed, restated or replaced.
1.53 "GM Security Agreement" shall mean the Security Agreement, dated on or
---------------------
about December 21, 1999, by Borrower in favor of GM with respect to the GM
Collateral, as the same now exists or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced.
1.54 "Governmental Agency" shall mean the United States, any State of the
-------------------
United States or a local municipality or other political subdivision thereof or
any body, department, authority, agency, public corporation or instrumentality
of any of the foregoing.
1.55 "Government Contract" shall mean any now existing or hereafter arising
-------------------
prime contract, subcontract, basic ordering agreement, letter contract, purchase
or delivery order of any kind of Borrower with any Governmental Agency, any
prime contractor of any Governmental Agency or any subcontractor with respect to
any of the foregoing.
1.56 "Hazardous Materials" shall mean any hazardous, toxic or dangerous
-------------------
waste, substance or material defined as such under any Environmental Laws,
including, without limitation, (a) those substances included within the
definitions of "hazardous substances", "hazardous materials, "toxic substances",
or "solid waste" in the Resource Conservation and Recovery Act, the
Comprehensive Environmental Response, Compensation and Liability Act, the
Hazardous Materials Transportation Act, Section 311 of the Clean Water Act, and
in the regulations promulgated pursuant to said laws; (b) those substances
listed in the U.S. Department of Transportation Table or by the Environmental
Protection Agency (or any successor agency) as hazardous substances; (c) such
other substances, materials and wastes that are or become regulated under
applicable local, state or federal law, or that are classified as hazardous or
toxic under other applicable federal, state, or local laws or regulations; and
(d) any material, waste or substance that is (i) petroleum, (ii) asbestos, (iii)
polychlorinated biphenyls, (iv) flammable explosives, or (v) radioactive
materials. In the event that any of the applicable Environmental Laws are
amended so as to broaden the meaning of any of the above-referenced terms, such
broader meaning shall apply subsequent to the effective date of such amendment.
9
1.57 "H1 Facility" shall mean all buildings, structures and other
-----------
improvements owned by Borrower and located at 00000 XxXxxxxx Xxxx, Xxxxxxxxx,
Xxxxxxx, at which the Humvee and H1 Vehicles are manufactured.
1.58 "H2 Facility" shall all buildings, structures and other improvements
-----------
funded by or to be reimbursed with the proceeds of the GM Loan and located at
00000 XxXxxxxx Xxxx, Xxxxxxxxx, Xxxxxxx, at which the H2 Vehicle is assembled.
1.59 "H1 Vehicle" shall mean the commercial version of the Humvee designed
----------
and manufactured by Borrower, bearing the Hummer Trademark, sold to dealers
under a GM Management Services Agreement and shall not include any H2 Vehicles
assembled by Borrower for GM pursuant to the terms of the GM Assembly Agreement.
1.60 "H2 Vehicle" shall mean the new generation vehicle bearing the Hummer
----------
Trademark designed and owned by GM and assembled by Borrower on behalf of GM
pursuant to the GM Assembly Agreement.
1.61 "HSR Act" shall mean the Xxxx-Xxxxx-Xxxxxx Anti-Trust Improvements Act
-------
of 1976, as amended.
1.62 "Hummer Trademarks" shall mean the trademarks, marks, words, names,
-----------------
letters, numbers, symbols, emblems, shapes, designs, devices and trade dress, or
any combination thereof listed on Schedule 1.62 hereto.
1.63 "Humvee" shall mean the High-Mobility Multipurpose Wheeled Vehicles
------
designed, manufactured, sold and distributed by Borrower for sale to any
Governmental Agency or foreign government, agency, body, department, authority
or instrumentality in the ordinary course of its business.
1.64 "Indebtedness" shall mean, as to any Person, all items which, in
------------
accordance with GAAP, consistently applied, would be included in determining
total liabilities of such Person shown on the liability side of its balance
sheet as at the date such Indebtedness is to be calculated and, in any event,
shall include any liabilities secured by any mortgage, pledge, lien or security
interest existing on any of its properties or assets.
1.65 "Interest Rate" shall mean a rate of three-quarters (3/4%) percent per
-------------
annum in excess of the Prime Rate or, upon an Event of Default or termination or
non-renewal hereof, a rate of two and three-quarters (2 3/4%) percent per annum
in excess of the Prime Rate except that in the event that the outstanding amount
of the Loans or Letter of Credit Accommodations exceed the amounts available
under the Lending Formulas, the lending sublimits set forth in Sections 3.1(b)
or 3.2(f) hereof or the Maximum Credit, as applicable, the Interest Rate shall
mean, in Lender's discretion, a rate of two and three-quarters (2 3/4%) percent
per annum in excess of the Prime Rate as to the amount of any such excess(es),
whether or not such excess(es) arise or are made with or without Lender's
knowledge or consent and whether made before or after an Event of Default.
1.66 "Inventory" shall mean all of Borrower's inventory of every kind and
---------
description, now owned or hereafter acquired, or in the custody or possession,
actual or constructive, of Borrower, wherever located, including, without
limitation, all raw materials, work-in-process, finished and semi-finished
inventory of any kind, nature or description, and including, without limitation,
steel, aluminum and aluminum coils, the H1 Vehicle and Humvee engines,
transmissions, wheels, doors, tires, panels and other components, parts,
appliances, accessories, accessions, attachments or other equipment to be
10
incorporated in, affixed or attached to or installed on, or otherwise related
to, the H1 Vehicle and Humvees or any other vehicle, and any other personal
property held for sale, exchange or lease or furnished or to be furnished under
a contract of service or an exchange arrangement or used or consumed in the
business or in connection with the manufacturing, packing, shipping,
advertising, selling or finishing of such goods, inventory, merchandise and
other personal property, and all names or marks affixed to or to be affixed
thereto for purposes of selling same by the seller, manufacturer, lessor or
licensor thereof and all right, title and interest therein and thereto, wherever
located, whether now owned or hereafter acquired; provided, that, the term
-------- ----
"Inventory" as used herein shall not include any "Equipment" as such term is
defined herein or H2 Vehicles or parts and materials related thereto.
1.67 "Lender" shall mean Congress Financial Corporation, a Delaware
------
corporation, and its successors and assigns.
1.68 "Lending Formulas" shall mean, collectively, the percentages set forth
----------------
in Section 3.1(a) hereof with respect to Eligible Accounts and the various types
or categories of Eligible Inventory.
1.69 "Letter of Credit Accommodations" shall have the meaning set forth in
-------------------------------
Section 3.2 hereof.
1.70 "Loans" shall mean the outstanding Obligations of Borrower to Lender
-----
consisting of the secured loans and advances now or hereafter made by Lender to
Borrower, on a revolving basis (involving advances, repayments and readvances),
subject to the terms and conditions of this Agreement and the other Financing
Agreements.
1.71 "Management Agreement" shall mean the Management Consultant Agreement,
--------------------
effective as of April 1, 1995, between Renco Group and Borrower, as the same now
exists or may hereafter be amended, modified, supplemented, extended, renewed,
restated or replaced.
1.72 "Maximum Credit" shall mean $60,000,000.
--------------
1.73 "Net Amount of Eligible Accounts" shall mean the gross amount of
-------------------------------
Eligible Accounts minus sales, excise or similar taxes, and returns, discounts,
-----
claims, credits and allowances of any nature at any time issued, owing, granted,
outstanding, available or claimed with respect thereto, except with respect to
------
Eligible Accounts arising under any Government Contract which provides for
progress payments, the "Net Amount of Eligible Accounts" shall include amounts
representing indebtedness of the Governmental Agency which is the Account Debtor
in respect of such Eligible Accounts for progress payments previously invoiced
by Borrower to such Governmental Agency under such Government Contract.
11
1.74 "Obligations" shall mean any and all now existing and hereafter
-----------
arising obligations, liabilities and indebtedness of Borrower to Lender of every
kind and description, however evidenced whether direct or indirect, absolute or
contingent, joint or several, secured or unsecured, due or not due, primary or
secondary, liquidated or unliquidated, whether arising before, during or after
the initial or any renewal term hereof, or after the commencement of any case
with respect to Borrower under the Bankruptcy Code or any similar statute,
whether arising under this Agreement, the other Financing Agreements or by
operation of law and whether incurred by Borrower as principal, surety,
endorser, guarantor or otherwise. Without limiting the generality of the
foregoing, "Obligations" shall include: (a) Borrower's liability to Lender for
all balances owing to Lender in any account maintained on Lender's books under
this Agreement or the other Financing Agreements, (b) Borrower's liability to
Lender as maker or endorser of any promissory note or other instrument for the
payment of money, Borrower's liability to Lender under any instrument of
guaranty or indemnity, or arising under or with respect to any letter of credit,
acceptance, instrument, guarantee, endorsement or undertaking which Lender may
make, endorse or issue to others for the account of Borrower, (c) Indebtedness
owing by Borrower to Lender or to present or future Affiliates or Participants
of or with Lender arising under or in connection with any of the foregoing types
of agreements, instruments or transactions, and (d) all principal, interest,
financing charges, early termination and other fees, commissions and expenses
payable to Lender, including, but not limited to, attorneys' and accountants'
fees and disbursements, chargeable to Borrower and due from Borrower under this
Agreement, the other Financing Agreements, or under any other agreement or
arrangement which may be now or hereafter entered into between Borrower and
Lender.
1.75 "Participant" shall mean any Person which at any time participates
-----------
with Lender in respect of the Loans, the Letter of Credit Accommodations or
other Obligations or any portion thereof.
1.76 "Permits" shall have the meaning set forth in Section 6.4 hereof.
-------
1.77 "Person" or "person" shall mean an individual, a sole proprietorship,
------ ------
a partnership, a corporation (including, without limitation, any subchapter "S"
corporation, as defined in the Code), a business trust, a joint stock
corporation, a trust, an unincorporated association, a joint venture, or other
entity or a government or any agency, instrumentality or political subdivision
thereof (including any Governmental Agency).
1.78 "Prime Rate" shall mean the rate from time to time publicly announced
----------
by First Union National Bank, or its successors and assigns, as its prime rate,
whether or not such announced rate is the best rate available at such bank,
calculated on the basis of a three hundred sixty (360) day year and actual days
elapsed, which rate shall increase or decrease by an amount equal to each
increase or decrease, respectively, in such prime commercial rate of interest,
effective on the first day of the month after any change in such prime
commercial rate, based on the prime commercial rate in effect on the last day
of the month in which any such change occurs.
1.79 "Refinancing Indebtedness" shall have the meaning set forth in Section
------------------------
7.3(j) hereof.
1.80 "Renco Group" shall mean The Renco Group, Inc., a New York
-----------
corporation, and its successors and assigns.
1.81 "Renewal Date" shall have the meaning set forth in Section 10.1
------------
hereof.
1.82 "Repurchase Agreement" shall mean, individually and collectively, the
--------------------
Repurchase Agreement, substantially in the form of Schedule 1.82 annexed hereto,
which may now or from time to time hereafter be entered into by AMGSC with a
Floorplan Lender, as any of such agreements now exist
12
or may hereafter be entered into and thereafter amended, modified, supplemented,
extended, renewed, restated or replaced.
1.83 "Reserves" shall have the meaning set forth in Section 3.4.
--------
1.84 "Securities Laws" shall mean the Securities Act of 1933, as amended,
---------------
the Securities Exchange Act of 1934, as amended, and all rules, regulations and
interpretations issued pursuant thereto or in connection therewith, and all
state and local statutes, rules and regulations issued in connection therewith
or related thereto, as the same now exist or may hereafter be amended, modified,
interpreted, recodified or supplemented.
1.85 "Senior Note Indenture" shall mean the Indenture, dated as of April
---------------------
27, 1995, between Borrower and Trustee with respect to the Senior Notes, as the
same now exists or may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced.
1.86 "Senior Notes" shall mean the 12 7/8% Senior Notes due 2002 issued by
------------
Borrower pursuant to the Senior Note Indenture in the aggregate principal amount
of $75,500,000, as the same now exist or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced.
1.87 "Subsidiary" shall mean any corporation, association or organization,
----------
active or inactive, as to which more than fifty (50%) percent of the outstanding
voting stock or shares or interests shall now or hereafter be owned or
controlled, directly or indirectly, by Borrower, any Subsidiary of Borrower, or
any Subsidiary of such Subsidiary.
1.88 "Tax Sharing Agreement" shall mean the Tax Sharing Agreement, dated
---------------------
April 30, 1992, by and among Renco Group, Borrower and AMGSC, as the same now
exists or may hereafter be amended, modified, supplemented, extended, renewed,
restated or replaced.
1.89 "Tradename" shall have the meaning set forth in Section 7.1 hereof.
---------
1.90 "Trustee" shall mean Fleet Bank, N.A., and its successors and assigns,
-------
and any replacement trustee permitted pursuant to the terms and conditions of
the Senior Note Indenture.
1.91 "UCC" shall mean the Uniform Commercial Code as from time to time in
---
effect in the State of New York.
1.92 "Value" or "value" shall mean, as determined by Lender, with respect
----- -----
to the Inventory, the lower of (a) cost computed on a first-in-first-out basis
in accordance with GAAP consistently applied or (b) market value, as determined
by Lender, provided, that, for purposes of the calculation of the available
-------- ----
Loans under Section 3.1(a) hereof, the Value of the Inventory shall not include:
the portion of the value of Inventory equal to the profit earned by any
Affiliate on the sale thereof to Borrower.
1.93 Accounting Terms. All accounting terms not specifically defined herein
----------------
shall be construed in accordance with GAAP, consistently applied, except as
otherwise stated herein.
1.94 Other Defined Terms. The words "hereof", "herein", "hereunder", "this
-------------------
Agreement" and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of this
Agreement, as the same now exists or may hereafter be amended, modified,
supplemented, extended, renewed or replaced.
1.95 Uniform Commercial Code Definitions. All terms not specifically
-----------------------------------
defined herein which are defined in the UCC shall have the meanings as defined
in the UCC.
13
1.96 Interpretation. For purposes of this Agreement, unless the context
--------------
otherwise requires, all other terms hereinbefore or hereinafter defined,
including but not limited to those terms defined in the recitals hereto, shall
have the meanings herein assigned to such terms. All references to Borrower and
other Persons pursuant to the definitions set forth in the recitals hereto shall
include their respective successors and assigns. All references to any term in
the plural shall include the singular and all references to any term in the
singular shall include the plural.
SECTION 2. ACKNOWLEDGMENT AND RESTATEMENT
------------------------------
2.1 Existing Obligations. Borrower hereby acknowledges, confirms and
--------------------
agrees that Borrower is indebted to Lender for loans and advances to Borrower
under the Existing Agreement, as of the close of business on January 23, 2001,
in the aggregate principal amount of $25,430,324.46 and the aggregate amount of
$5,607,067.54 in respect of Letter of Credit Accommodations (as defined in the
Existing Agreement), together with all interest accrued and accruing thereon (to
the extent applicable), and all fees, costs, expenses and other charges relating
thereto, all of which are unconditionally owing by Borrower to Lender, without
offset, defense or counterclaim of any kind, nature or description whatsoever.
2.2 Acknowledgment of Security Interests.
------------------------------------
(a) Borrower hereby acknowledges, confirms and agrees that Lender
has and shall continue to have a security interest in and lien upon the
Collateral heretofore granted to Lender pursuant to the Existing Agreement to
secure the Obligations, as well as any Collateral granted under this Agreement
or under any of the other Financing Agreements or otherwise granted to or held
by Lender.
(b) The liens and security interests of Lender, in the Collateral
shall be deemed to be continuously granted and perfected from the earliest date
of the granting and perfection of such liens and security interests, whether
under the Existing Agreement, this Agreement or any of the other Financing
Agreements.
2.3 Existing Agreement. Borrower hereby acknowledges, confirms and agrees
------------------
that: (a) the Existing Agreement has been duly executed and delivered by
Borrower and is in full force and effect as of the date hereof and (b) the
agreements and obligations of Borrower contained in the Existing Agreement
constitute the legal, valid and binding obligations of Borrower enforceable
against it in accordance with their respective terms and Borrower has no valid
defense to the enforcement of such obligations and (c) Lender is entitled to all
of the rights and remedies provided for in the Existing Agreement.
2.4 Restatement.
-----------
(a) Except as otherwise stated in Section 2.2 hereof and this
Section 2.4, as of the date hereof, the terms, conditions, agreements,
covenants, representations and warranties set forth in the Existing Agreement
are hereby amended and restated in their entirety, and as so amended and
restated, replaced and superseded, by the terms, conditions, agreements,
covenants, representations and warranties set forth in this Agreement and the
other Financing Agreements, except that nothing herein or in the other Financing
------
Agreements shall impair or adversely affect the continuation of the liability of
Borrower for the Obligations heretofore granted, pledged and/or assigned to
Lender. The amendment and restatement contained herein shall not, in any manner,
be construed to constitute payment of, or impair, limit, cancel or extinguish,
or constitute a novation in respect of, the Indebtedness and other obligations
and liabilities of Borrower evidenced by or arising under the Existing
Agreement, and the liens and security
14
interests securing such Indebtedness and other obligations and liabilities,
which shall not in any manner be impaired, limited, terminated, waived or
released.
(b) The principal amount of the Loans and Letters of Credit
Accommodations outstanding as of the date hereof under the Existing Agreement
shall be allocated to the Loans and Letter of Credit Accommodations hereunder in
the same manner and in such amounts as are outstanding as of the date hereof.
2.5 Release. Borrower for itself and its successors and assigns does
-------
hereby remise, release, discharge and hold Lender, its officers, directors,
agents and employees and their respective predecessors, successors and assigns
harmless from all claims, demands, debts, sums of money, accounts, damages,
judgments, financial obligations, actions, causes of action, suits at law or in
equity, of any kind or nature whatsoever, whether or not now existing or known,
which Borrower or its respective successors or assigns has had or may now or
hereafter claim to have against Lender or its officers, directors, agents and
employees and their respective predecessors, successors and assigns in any way
arising from or connected with the Existing Agreement or the arrangements set
forth therein or transactions thereunder up to and including the date hereof;
except (a) to the extent Borrower shall notify Lender in writing of any specific
------
exceptions to charges for interest, fees, costs and expenses set forth in most
recent monthly statement of Borrower's loan account sent by Lender to Borrower
prior to the date hereof pursuant to the terms of the Existing Agreement within
forty-five (45) days after the date of such statement or (b) to the extent
Borrower shall notify Lender in writing of any manifest errors in any of the
monthly statements of Borrower's loan account sent by Lender to Borrower
pursuant to the terms of the Existing Agreement for the three (3) months prior
to the date hereof, to the extent Lender receives notice of such manifest errors
from Borrower within forty-five (45) days after the date hereof.
SECTION 3. AMOUNTS AND TERMS OF LOANS
---------- --------------------------
3.1 Loans.
-----
(a) Subject to, and upon the terms and conditions contained herein, at
Borrower's request, Lender shall, in its discretion, make Loans to Borrower, in
such amounts from time to time as Lender shall determine, in its discretion, of
up to:
(i) ninety (90%) percent of the Net Amount of Eligible Accounts
(or such greater or lesser percentage thereof as Lender may determine from time
to time); plus
----
(ii) (A) sixty-five (65%) percent of the Value of Eligible Humvee
Finished Goods Inventory (or such greater or lesser percentage thereof as
Lender may determine from time to time); plus (B) fifty (50%) percent of the
----
Value of Eligible Humvee Service Parts Inventory (or such greater or lesser
percentage thereof as Lender may determine from time to time); plus (C) twenty
----
(20%) percent of the Value of Eligible Humvee Work-in-Process Inventory (or such
greater or lesser percentage thereof as Lender may determine from time to time);
plus (D) fifty (50%) percent of the Value of Eligible H1 Finished Goods
----
Inventory (or such greater or lesser percentage thereof as Lender may determine
from time to time); plus (E) twenty-five (25%) percent of the Value of Eligible
----
H1 Service Parts Inventory (or such greater or lesser percentage thereof as
Lender may determine from time to time); plus (F) ten (10%) percent of the Value
----
of Eligible H1 Work-in-Process Inventory (or such greater or lesser percentage
thereof as Lender may determine from time to time); plus (G) thirty-five (35%)
----
percent of the Value of Eligible Other Service Parts Inventory (or such greater
or lesser percentage thereof as Lender may determine from time to time); plus
----
(H) fifty (50%) percent of the Value of Eligible Finished Engine Inventory (or
such greater or lesser percentage thereof as Lender may determine from time to
time); less
----
15
(iii) any Reserves.
(b) Notwithstanding anything to the contrary contained herein or in any of
the other Financing Agreements, except in Lender's discretion, the aggregate
unpaid principal amount of the Loans outstanding at any one time with respect
to:
(i) Eligible Accounts pursuant to Section 3.1(a)(i) above,
consisting of GM Accounts, regardless of the Value of such Eligible Accounts at
any time, shall not exceed $15,000,000;
(ii) Eligible Inventory pursuant to Section 3.1(a)(ii) above,
regardless of the Value of such Eligible Inventory at any time, shall not exceed
$30,000,000;
(iii) Eligible Inventory pursuant to Section 3.1(a)(ii)(D), (E) or
(F) above, regardless of the Value of such Eligible Inventory at any time, shall
not exceed $8,500,000; and
(iv) Eligible Inventory pursuant to Section 3.1(a)(ii)(A) and (D)
above consisting of fully operable Humvee vehicles and H1 Vehicles awaiting
minor parts or details, regardless of the Value of such Eligible Inventory shall
not exceed $7,500,000.
(c) Lender may, from time to time, permit the outstanding amount of any
components of the Loans or the aggregate of the outstanding Loans to exceed the
Lending Formulas, the lending sublimits set forth in Sections 3.1(b) and 3.2(f)
or the Maximum Credit, provided, that, should Lender so permit in any one
-------- ----
instance it shall not operate to limit, waive or otherwise affect any rights of
Lender on any future occasions. In such event, and without limiting the right
of Lender to demand payment of the Obligations, or any portion thereof, in
accordance with any other terms of this Agreement or the other Financing
Agreements, Borrower shall remain liable therefor and Borrower shall, upon
demand by Lender, which may be made at any time and from time to time,
immediately repay to Lender the entire amount of such excess(es).
3.2 Letter of Credit Accommodations.
-------------------------------
(a) Lender may, in its discretion, from time to time, on terms and
conditions and in amounts acceptable to Lender, at the request of Borrower,
provide one or more of the following financial accommodations to Borrower: (i)
issue, open or cause the issuance or opening of letters of credit or purchase or
other guarantees for the purchase of goods and services in the ordinary course
of the business of Borrower or for any other purpose approved by Lender or (ii)
assist Borrower in establishing or opening letters of credit for such purposes
by indemnifying the issuer thereof or guaranteeing the payment or performance of
Borrower to such issuer in connection therewith (individually, and collectively,
the "Letter of Credit Accommodations").
(b) Without limiting Lender's continuing discretion as aforesaid, the
extension of such Letter of Credit Accommodations by Lender shall be subject to
the satisfaction of each of the following additional conditions precedent: (i)
Excess Availability (except that in computing Excess Availability for this
purpose, Excess Availability shall be calculated without regard to the amount
of trade payables which would otherwise reduce Excess Availability pursuant to
clause (b)(iii) of the definition of such term), on the date of the proposed
issuance of any Letters of Credit Accommodations, shall be equal to or greater
than: (A) if the proposed Letter of Credit Accommodation is for the purpose of
purchasing Eligible Inventory, then in an amount equal to or greater than: (1)
the percentage equal to one hundred (100%) percent minus the percent of the
-----
Lending Formula then in effect as to the type or category of Eligible Inventory
to be purchased with such proposed Letter of Credit Accommodation multiplied by
----------
the value of such Eligible Inventory plus (2) the freight, duty and other
----
amounts, which Lender estimates, in its discretion, must be
16
paid for or in connection with such Inventory upon arrival or for delivery to
Borrower and (B) if the proposed Letter of Credit Accommodation is for any other
purpose, one hundred (100%) percent of the amount thereof; (ii) if such Letter
of Credit Accommodation is for the purpose of purchasing goods, Lender shall
have a valid and perfected first security interest in and lien upon goods being
acquired in connection therewith; (iii) the form and content of all such Letter
of Credit Accommodations shall be satisfactory to Lender and all documents,
instruments, notices and statements relating thereto, if any, which Lender may
request, shall be promptly delivered to Lender; and (iv) Borrower shall have
fully complied to Lender's satisfaction with all terms and provisions hereof and
of the terms and provisions of any agreements relating to the Letter of Credit
Accommodations in form and substance acceptable to Lender now or hereafter
entered into between Borrower and Lender, including the payment of all fees,
commissions and charges set forth herein and therein.
(c) Borrower hereby agrees to and does indemnify Lender with respect to
any loss, cost, liability or expense which Lender may suffer or incur in
connection with any Letter of Credit Accommodations. Borrower further agrees
that any payments made or other obligations incurred by Lender in connection
with any Letter of Credit Accommodations are part of the Obligations, and shall
be payable in accordance with the terms hereof and of the other Financing
Agreements. Any such payments made or obligations incurred by Lender, including
without limitation, any of the same made after termination or non-renewal of
this Agreement or the other Financing Agreements with respect to Letter of
Credit Accommodations extended prior to such termination or non-renewal, shall
automatically be treated for purposes hereof as Loans and shall accrue interest
at the Interest Rate then payable by Borrower commencing on the date such
payment is made by Lender.
(d) Except in Lender's discretion, the aggregate maximum amount of Loans
which might otherwise be made available to Borrower by Lender pursuant to the
Lending Formulas, the lending sublimits set forth in Sections 3.1(b) and 3.2(f)
and the Maximum Credit, shall be reduced from time to time as follows: (i) as
to Letter of Credit Accommodations for the purpose of purchasing Eligible
Inventory, by an amount equal to: (A) the percentage equal to one hundred
(100%) percent minus the percent of the Lending Formula then in effect as to the
-----
type or category of Eligible Inventory to be purchased with such Letter of
Credit Accommodation multiplied by the value of Eligible Inventory to be
----------
purchased with such Letter of Credit Accommodation, plus (B) the freight, duty
----
and other amounts which Lender estimates, in its discretion, must be paid for or
in connection with such Inventory upon arrival or for delivery to Borrower and
(ii) as to Letter of Credit Accommodations for any other purpose, one hundred
(100%) percent of the then outstanding aggregate amount thereof and all other
commitments and obligations made or incurred by Lender with respect thereto.
(e) In addition to any charges, fees or expenses charged by any bank or
issuer in connection with the Letter of Credit Accommodations, Borrower agrees
to pay to Lender a service charge as follows: (i) as to Letter of Credit
Accommodations for the purpose of purchasing goods, four hundred sixteen-
thousandths (.416%) percent for the first sixty (60) days (or any portion
thereof) and two hundred eight-thousandths (.208%) percent for each thirty (30)
day period thereafter (or any portion thereof) of the outstanding amount of any
Letter of Credit Accommodations and (ii) as to Letter of Credit Accommodations
for any other purpose, two and one-half (2 1/2%) percent per annum of the
outstanding amount thereof.
(f) Notwithstanding anything to the contrary contained herein or in any of
the other Financing Agreements, except in Lender's discretion, the aggregate
amount of all Letter of Credit Accommodations pursuant hereto and all other
commitments and obligations made or incurred by Lender pursuant hereto for the
account or benefit of Borrower in connection therewith outstanding at any time
shall not exceed $20,000,000.
17
3.3 Maximum Credit. Except in Lender's sole discretion, the aggregate
--------------
principal amount of the Loans and the Letter of Credit Accommodations at any
time outstanding shall not exceed the Maximum Credit.
3.4 Reserves.
--------
(a) Without limiting any other rights and remedies of Lender hereunder or
under the other Financing Agreements, all Loans made or otherwise available to
Borrower pursuant to the Lending Formulas, the lending sublimits set forth in
Sections 3.1(b) and 3.2(f) and the Maximum Credit shall be subject to Lender's
continuing right, in its discretion, to establish a reserve against the
availability of such Loans, and to increase and decrease such reserve from time
to time, if and to the extent that, in Lender's sole judgment, such reserve is
necessary for any reason including, (i) to protect Lender against possible non-
payment for any reason by Account Debtors or possible non-payment of any of the
Obligations, or in respect of any state of facts which does or would, with
notice or passage of time or both, constitute an Event of Default hereunder,
(ii) to reflect intercompany profit between Borrower and GEP, (iii) to reflect
the costs of completion (including, any and all parts, labor and overhead) with
respect to Eligible Humvee Finished Goods Inventory consisting of fully operable
Humvee vehicles awaiting minor parts or details, as determined by Lender, (iv)
to reflect the costs of completion (including, any and all parts, labor and
overhead) with respect to Eligible H1 Vehicle Finished Goods Inventory
consisting of fully operable H1 Vehicles awaiting minor parts or details, as
determined by Lender, (v) to reflect the value of any H1 Vehicles or Humvees
which are used for demonstration or test drives, and (vi) to reflect, in
Lender's discretion, a reserve in the amount of $1,500,000 in the event that
Borrower fails to refinance the obligations of Borrower under the Senior Note
Indenture on terms and subject to conditions satisfactory in all respects to
Lender by no later than March 1, 2002.
(b) Without limiting the generality of the foregoing, except as Lender may
otherwise determine, in its discretion, from time to time, Lender shall
establish a special reserve against the amount of the Loans otherwise available
to Borrower pursuant to the Lending Formulas (without regard to the lending
sublimits set forth in Sections 3.1(b) and 3.2(f) and the Maximum Credit), in an
amount equal to the unliquidated progress payments received by Borrower from any
Governmental Agency or prime contractor under any Government Contract at any
time outstanding.
3.5 Fees.
----
(a) As a closing fee, Borrower shall pay to Lender the aggregate amount of
$250,000, which shall be fully earned and payable as of the date hereof.
(b) As a servicing fee, Borrower shall pay to Lender the aggregate amount
of $20,000 for each month (or part thereof) that this Agreement is in effect or
so long as any of the Obligations are outstanding, which fee shall be fully
earned as of the first day of each month, but shall be payable in arrears on the
first day of the next month. The first payment of such fee shall be on the
first day of the month after the date hereof.
(c) With respect to each month (or part thereof) that this Agreement is in
effect or so long as any of the Obligations are outstanding, Borrower shall pay
to Lender an aggregate fee at a rate equal to one-half of one ( 1/2 of 1%)
percent per annum calculated for such month and payable monthly in arrears on
the first day of the next month, upon the excess, if any, of: (i) the Maximum
Credit over (ii) the average of the daily principal balances of the outstanding
Loans and the Letter of Credit Accommodations for such month (or part thereof).
18
(d) The fees provided for in this Section 3.5 shall be in addition to all
other amounts payable by Borrower under this Agreement and the other Financing
Agreements and represent compensation for services rendered and to be rendered
separate and apart from the lending of money or the use, detention or
forbearance of money. Such fees may, at Lender's option, be charged directly to
any account(s) of Borrower maintained with Lender. All fees and expenses shall
be nonrefundable when paid. All fees and expenses specified or referred to in
this Agreement due to Lender shall constitute part of the Obligations and shall
be secured by all of the Collateral. All fees provided for in this Section 3.5
which are expressed as a per annum charge shall be calculated on the basis of
the actual number of days elapsed in a three hundred sixty (360) day year.
3.6 Interest.
--------
(a) Interest on all of the Loans and other non-contingent Obligations
shall be payable by Borrower to Lender at the Interest Rate.
(b) In no event shall the Interest Rate and other charges under this
Agreement or the other Financing Agreements exceed the highest rate permitted
under any applicable law or regulation, which a court of competent jurisdiction
shall, in the final determination, deem applicable hereto. In the event that a
court determines that Lender has received interest and other charges hereunder
in excess of the highest rate applicable hereto, 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 the
provisions hereof shall be deemed amended to provide for the highest
permissible rate.
(c) Subject to the foregoing, all interest charges hereunder or in
connection herewith shall be (i) computed as provided herein and in the other
Financing Agreements and (ii) paid monthly on the first day of each calendar
month, or, at Lender's option, charged to Borrower's account(s) maintained by
Lender as of the first day of each calendar month and deemed paid by the first
amounts subsequently credited thereto.
(d) Without limiting Lender's continuing right to demand payment of the
Loans and other Obligations, or any portion thereof, in accordance with the
terms of this Agreement, or any of the other Financing Agreements, all interest
accruing hereunder on and after the date of any Event of Default or termination
or non-renewal hereof, shall be payable on demand.
3.7 Conduct of Accounts; Cross-Collateralization.
--------------------------------------------
(a) Lender may maintain one or more accounts reflecting the Loans,
repayments of the Loans and payments of the other Obligations and any of the
Collateral contemplated under this Agreement or the other Financing Agreements
with respect to Borrower, as Lender shall, in its discretion, determine. All
Loans shall be charged to a loan account in the name of Borrower on Lender's
books. All Collateral held by or granted to Lender by Borrower or any third
person shall be security for the payment and performance of any and all
Obligations of Borrower to Lender (including, but not limited to, the Loans and
the Letter of Credit Accommodations), notwithstanding the maintenance of
separate accounts for Borrower, and type of Collateral or the existence of any
notes.
(b) Borrower shall make all payments in respect of the Obligations free
and clear of, and without deduction or withholding for or on account of, any
setoff, counterclaim, defense, duties, taxes, levies, imposts, fees, deductions,
withholdings, restrictions or conditions of any kind or nature whatsoever.
(c) All Loans and other Obligations shall be payable to Lender at its
address specified herein or at such other place as Lender may hereafter
designate in writing from time to time. Lender may apply
19
payments received or collected from Borrower or for the account of Borrower
(including, without limitation, the monetary proceeds of collections or of
realization upon any Collateral) to such of the Obligations arising whether or
not then due in whatever order and manner as Lender, in its discretion,
determines. Upon the request of Lender, Borrower shall execute and deliver to
Lender one or more promissory notes, in form and substance satisfactory to
Lender, to further evidence the Loans, or any portion thereof.
(d) If after receipt of any payment of, or proceeds applied to the payment
of, all or any part of the Obligations, Lender is for any reason required to
surrender such payment or proceeds to any Person, because such payment or
proceeds is invalidated, declared fraudulent, set aside, determined to be void
or voidable as a preference, or a diversion of trust funds, or for any other
reason, then the Obligations or any part thereof intended to be satisfied shall
be revived and continue and this Agreement shall continue in full force as if
such payment or proceeds had not been received by Lender and Borrower shall be
liable to pay to Lender, and hereby indemnify Lender and hold it harmless for
the amount of such payment or proceeds surrendered. The provisions of this
Section 3.7(d) shall be and remain effective notwithstanding any contrary action
which may have been taken by Lender in reliance upon such payment or proceeds,
and any such contrary action so taken shall be without prejudice to Lender's
rights under this Agreement and shall be deemed to have been conditioned upon
such payment or proceedings having become final and irrevocable. The provisions
of this Section 3.7(d) shall survive the termination of this Agreement and the
other Financing Agreements.
(e) At Lender's option, all principal, interest, fees, commissions, costs,
expenses, or other charges hereunder, under the other Financing Agreements or in
connection herewith or therewith, and any and all Loans, may be charged directly
to any account(s) of Borrower maintained by Lender.
(f) Lender shall render to Borrower at the address of Borrower set forth
in Section 10.6 hereof, each month, one or more statements with respect to the
loan account(s) maintained by Lender with respect to Borrower pursuant to the
provisions hereof, as of the end of each month while this Agreement is in
effect. Such statements of account shall be considered correct, and deemed
accepted by and conclusively binding upon Borrower, except to the extent Lender
shall receive from Borrower written notice of all exceptions to such statement
of account with specificity, within forty-five (45) days from the date of
sending.
3.8 Use of Proceeds. All Loans to Borrower pursuant to the provisions
---------------
hereof which may be made or extended hereunder shall be used by Borrower for
general corporate purposes of Borrower.
SECTION 4. CONDITIONS PRECEDENT TO LOANS
---------- -----------------------------
Each of the following is an additional condition precedent to Lender making
the Loans and providing the Letter of Credit Accommodations pursuant to this
Agreement and the other Financing Agreements, including the continuation of the
Indebtedness pursuant to the Existing Agreement as set forth in Section 2.1 (a)
hereof and the making of any future Loans or Letter of Credit Accommodations
contemplated hereunder (any of which may be waived, in whole or in part, only by
Lender in writing):
4.1 all requisite corporate action and proceedings in connection with this
Agreement and the other Financing Agreements shall be satisfactory in form and
substance to Lender, and Lender shall have received all information and copies
of all documents, including records of requisite corporate action and
proceedings which Lender may have requested in connection therewith, such
documents where requested by Lender or its counsel to be certified by
appropriate corporate officers or governmental authority;
20
4.2 no material adverse change shall have occurred in the assets, business
or prospects of Borrower since Lender's field examination for the period through
June 30, 2000 and no change or event shall have occurred which would impair the
ability of Borrower or any obligor to perform its obligations hereunder or under
any of the other Financing Agreements to which it is a party or of Lender to
enforce the Obligations or realize upon the Collateral;
4.3 Lender shall have received, in form and substance satisfactory to
Lender, all consents, waivers, acknowledgments and other agreements from third
persons which Lender may deem necessary or desirable in order to permit, protect
and perfect its security interests in and liens upon the Collateral or to
effectuate the provisions or purposes of this Agreement and the other Financing
Agreements, including, without limitation, agreements by owners and lessors of
leased premises of Borrower and by warehouses at which Collateral is located;
4.4 Lender shall have received, in form and substance satisfactory to
Lender, all agreements with the depository banks and Borrower with respect to
the blocked accounts as Lender may require pursuant to Section 9.3 hereof, duly
authorized, executed and delivered by such depository banks and Borrower;
4.5 Lender shall have received evidence, in form and substance
satisfactory to Lender, that Lender has a valid perfected first priority
security interest in all of the Collateral;
4.6 Lender shall have received and reviewed UCC search results for all
jurisdictions in which assets of Borrower are located, which search results
shall be in form and substance satisfactory to Lender;
4.7 Lender shall have received, true, correct and complete copies of all
of the GM Agreements and any related agreements, documents or instruments, duly
authorized, executed and delivered by Borrower or GM;
4.8 Lender shall have received, in form and substance satisfactory to
Lender, evidence that Borrower has complied with the Assignment of Claims Act
with respect to such Accounts in which the Account Debtor is any Governmental
Agency arising under any Government Contract for which the remaining unpaid
balance is equal to or greater than $100,000 or such other statutes, rules
and/or regulations as may be required, as determined by Lender and take such
other actions as Lender may require to perfect and protect Lender's interests in
the Collateral, all at Borrower's cost and expense;
4.9 Lender shall have received, in form and substance satisfactory to
Lender and its counsel, the opinion letters of counsel to Borrower with respect
to the Financing Agreements and such other matters as Lender may request;
4.10 Lender shall have received evidence of insurance and loss payee
endorsements required under the Financing Agreements, in form and substance
satisfactory to Lender, and certificates of insurance policies and/or
endorsements naming Lender as loss payee, all at Borrower's cost and expense;
4.11 the other Financing Agreements and all instruments and documents
hereunder and thereunder shall have been executed and delivered to Lender, in
form and substance satisfactory to Lender;
4.12 all representations and warranties contained herein and in the other
Financing Agreements shall be true and correct in all respects; and
21
4.13 no Event of Default shall have occurred and be continuing hereunder
and no event shall have occurred or condition be existing which, with notice or
passage of time or both, would constitute an Event of Default hereunder (after
giving effect to this Agreement and the amendments and waivers provided for
herein).
SECTION 5. COLLATERAL
---------- ----------
5.1 As collateral security for the prompt performance, observance and
payment in full of all of the Obligations, Borrower hereby grants, pledges and
assigns to Lender, a continuing security interest in and liens upon, and rights
of setoff against, all of the now owned and hereafter acquired assets and
properties of Borrower (subject to Section 5.2 hereof, such assets and
properties, together with all other collateral security for the Obligations now
or hereafter granted to or otherwise held or acquired by Lender, are referred to
herein as the "Collateral"), including, but not limited to, the following:
(a) (i) all Accounts; (ii) all monies, securities and other investment
property, credit balances and deposits and other property of Borrower and the
proceeds thereof, now or hereafter held or received by, or in transit to, Lender
or any Participant or their Affiliates from or for Borrower, or at any other
depository or other institution from or for the account of Borrower, whether
for safekeeping, pledge, custody, transmission, collection or otherwise, and all
of Borrower's deposits (general or special), balances, sums and credits with
Lender or any Participant at any time existing; (iii) all right, title and
interest, and all enforcement and other rights, remedies, and security and
liens, in, to and in respect of the Accounts and other Collateral, including,
without limitation, rights of stoppage in transit, replevin, repossession and
reclamation and other rights and remedies of an unpaid vendor, lienor or secured
party, guaranties or other contracts of suretyship with respect to the Accounts,
all deposits by and property of Account Debtors or other persons or other
security securing the obligation of any Account Debtor, credit and other
insurance; (iv) all right, title and interest in, to and in respect of all goods
relating to, or which by sale have resulted in Accounts, including, without
limitation, all goods described in invoices, documents, contracts or instruments
with respect to, or otherwise representing or evidencing, any Account or other
Collateral, including, without limitation, all returned, reclaimed or
repossessed goods; (v) all deposit accounts; and (vi) all other general
intangibles of every kind and description, including, without limitation, (A)
the interests of Borrower in any surety, insurance or bonds, letters of credit
or other guaranties, (B) trade names and trademarks, and the goodwill of the
business symbolized thereby, (C) patents, (D) copyrights, (E) licenses, (F0
claims and other choses in action, (G) leasehold interests in equipment, real
estate and fixtures and (H) Federal, State and local and foreign tax refund
claims of all kinds;
(b) all Inventory;
(c) all present and future books and records relating to any of the above
including, without limitation, all ledgers, books of account, purchase or sale
agreements, invoices, records, bills of lading and other shipping evidence,
statements, correspondence, memoranda, credit files and other data relating to
the Collateral or any Account Debtor, together with tapes, disks, diskettes and
other data and software storage media and devices, file cabinets or containers
in or on which the foregoing are stored, cards, computer programs, computer
disks or tape files, computer runs, computer printouts, computer data and other
computer prepared information in the possession or control of Borrower, any
computer service bureau or other third person (including any rights of Borrower
with respect to the foregoing maintained with or by any other person); and
(d) all products and proceeds of the foregoing, in any form, including,
without limitation, any insurance proceeds and any claims against third parties
for loss or damage to or destruction of any or all of the foregoing; but
22
5.2 notwithstanding anything to the contrary stated in Section 5.1 hereof,
no security interest is granted hereunder on any Excluded Assets and the term
"Collateral" shall not include the Excluded Assets.
SECTION 6. REPRESENTATIONS AND WARRANTIES
---------- ------------------------------
Borrower hereby represents and warrants to Lender as follows, which
representations and warranties are continuing and shall survive the execution
and delivery hereof, and the truth and accuracy of each, together with the
representations and warranties in the other Financing Agreements, being a
continuing condition of each Loan and each Letter of Credit Accommodation:
6.1 Organization and Qualification.
------------------------------
(a) Borrower is a duly organized and validly existing corporation in good
standing under the laws of its state or jurisdiction of incorporation, with
perpetual corporate existence, and has the corporate power and authority to own
its properties and to transact the business in which it is engaged or presently
proposes to engage. Borrower is qualified to do business as a foreign
corporation in all states and other jurisdictions where the nature of its
business or the ownership or use of property requires such qualification.
(b) Borrower does not have any Subsidiaries as of the date hereof except
as set forth on Schedule 6.1 hereto.
6.2 Corporate Power and Authority. Borrower has the corporate power and
-----------------------------
authority to borrow and to execute, deliver and carry out the terms and
provisions of this Agreement and the other Financing Agreements and all other
agreements, instruments and documents delivered by Borrower pursuant hereto and
thereto, and Borrower has taken or caused to be taken all necessary corporate
action to authorize the execution, delivery and performance of this Agreement,
the other Financing Agreements and the other agreements relating hereto, the
present and future borrowings hereunder and thereunder and the execution,
delivery and performance of the instruments and documents delivered and to be
delivered by it pursuant hereto and thereto. This Agreement and the other
Financing Agreements to which Borrower is a party constitute legal, valid and
binding obligations of Borrower, enforceable in accordance with their respective
terms.
6.3 Capitalization. All of the issued and outstanding shares of capital
--------------
stock of Borrower are directly and beneficially owned and held by Renco Group as
set forth on the Schedule 6.3 hereto and all of such shares have been duly
authorized and are fully paid and non-assessable, free and clear of all claims,
liens, pledges and encumbrances of any kind, except as disclosed in writing to
Lender.
6.4 Compliance with Other Agreements and Applicable Law.
---------------------------------------------------
(a) Borrower is not in default in any respect under any indenture,
mortgage, deed of trust, deed to secure debt, agreement or instrument to which
it is a party or by which it or any of its respective assets or properties may
be or are bound (after giving effect to this Agreement and the amendments
provided for herein).
(b) Neither the execution and delivery of this Agreement, the other
Financing Agreements, or any of the instruments and documents to be delivered
pursuant hereto or thereto, nor the consummation of the transactions herein or
therein contemplated, nor compliance with the provisions hereof or thereof, has
violated or will violate any law or regulation or any order or decree of any
court or governmental instrumentality in any respect or does or will conflict
with or result in the breach of, or constitute a default
23
in any respect under, any indenture, mortgage, deed of trust, agreement or
instrument to which Borrower is a party or may be bound, or result in the
creation or imposition of any lien, charge or encumbrance upon any of the
property of Borrower (except as specifically contemplated hereunder or under the
other Financing Agreements) or violate any provision of the Certificate of
Incorporation or By-Laws of Borrower.
(c) Borrower has obtained all material permits, licenses, approvals,
consents, certificates, orders or authorizations of any Governmental Agency
required for the lawful conduct of its business and is in compliance in all
material respects with the requirements of all applicable laws, rules,
regulations and orders of any Governmental Agency (including, but not limited
to, the Department of State, the Department of Commerce, the Bureau of Alcohol,
Tobacco and Firearms, and the Environmental Protection Agency) relating to its
business (including, without limitation, those set forth in or promulgated
pursuant to ERISA, the Occupational Safety and Hazard Act of 1970, as amended,
the Fair Labor Standards Act of 1938, as amended, the Code, and the
Environmental Laws). Schedule 6.4 hereto sets forth all permits, licenses,
approvals, consents certificates, orders or authorizations (the "Permits")
issued to or held by Borrower by any federal, state or local Governmental Agency
and any applications pending by Borrower with such federal, state or local
Governmental Agency. The Permits constitute all permits, licenses, approvals,
consents, certificates, orders or authorizations necessary for Borrower to own
and operate its business as presently conducted or proposed to be conducted.
All of the Permits are valid and subsisting and in full force and effect.
There are no actions, claims or proceedings pending or threatened that seek the
revocation, cancellation, suspension or modification of any of the Permits.
6.5 Governmental Approval and Contracts. No consent, approval or other
-----------------------------------
action of, or filing with, or notice to any Governmental Agency is required in
connection with the execution, delivery and performance of this Agreement, the
other Financing Agreements or any of the instruments or documents to be
delivered pursuant hereto or thereto, except for the filing of UCC financing
statements. Any Government Contract or other arrangement of Borrower with the
United States or any other Governmental Agency giving rise to any Accounts are
of the type that can be assigned in accordance with the Assignment of Claims Act
and there are no restrictions or prohibitions on the right of Borrower to assign
such Government Contract or other arrangement under the terms thereof. As of
the date hereof, Borrower has complied in all respects with the Assignment of
Claims Act as to all of its Government Contracts or other arrangements with the
United States or any other Governmental Agency giving rise to any Accounts,
except for those Government Contracts with a remaining unpaid balance of less
than $100,000. All Government Contracts of Borrower as of the date hereof are
listed on Schedule 6.5 hereto. The only Government Contracts under which the
Governmental Agency which is the party thereto makes progress payments to
Borrower based on costs or otherwise pursuant to 48 C.F.R. 52.232-16 or any
other applicable government regulation or statute are those so designated on
Schedule 6.5. The amount of unliquidated progress payments under such
Government Contracts does not exceed the amounts permitted under the applicable
federal statutes and regulations.
6.6 Chief Executive Office; Collateral Locations.
--------------------------------------------
(a) The address of the principal place of business and chief executive
office of Borrower is set forth on Schedule 6.6 annexed hereto, which address is
the mailing address for said principal place of business and chief executive
office. The books and records relating to the Collateral are located at such
address. The Collateral is located only at the addresses set forth on Schedule
6.6.
(b) Borrower may open any new location within the continental United
States provided it (i) gives Lender thirty (30) days prior written notice of the
intended opening of any such new location and (ii) executes and delivers, or
causes to be executed and delivered, to Lender such agreements, documents, and
instruments as Lender may deem reasonably necessary or desirable to protect its
interests in the Collateral to be located in such location, including, without
limitation, UCC financing statements and
24
agreements from appropriate Persons acknowledging Lender's liens on the
Collateral to be located in such location, waiving any lien or claim by such
Person to the Collateral and permitting Lender access to the premises to
exercise its rights and remedies and otherwise deal with the Collateral, in each
case in form and substance satisfactory to Lender.
6.7 Priority of Liens/Title to Properties.
-------------------------------------
(a) The security interests and liens granted to Lender under this
Agreement and the other Financing Agreements constitute valid and perfected
first priority and only liens and security interests in and upon the Collateral
subject only to the liens indicated on Schedule 7.5 hereto and the liens
permitted under Section 7.5 hereof.
(b) Borrower has good and marketable title to all of its properties and
assets subject to no liens, mortgages, pledges, security interests, encumbrances
or charges of any kind, except those directly in favor of or assigned to Lender
and such others as are specifically permitted under the provisions of this
Agreement as listed on Schedule 7.5 hereto or permitted under Section 7.5 hereof
and the other Financing Agreements. Borrower has peaceful and undisturbed
possession of all real property and equipment and such other assets as may be
necessary for its business as presently conducted or proposed to be conducted
and under all leases, licenses and easements necessary for the operation of its
properties and business. None of such leases, licenses and easements contain
any unusual or burdensome provisions which might materially affect or impair the
operations of such properties and business and all such leases, licenses and
easements are valid and subsisting and in full force and effect.
6.8 Tax Returns. Borrower has filed, or caused to be filed all Federal,
-----------
State, county, local, foreign and other tax returns, reports and declarations
which are required to be filed by it and has paid or caused to be paid all taxes
shown to be due and payable on said returns and reports or in any assessment
received by it, to the extent that such taxes have become due and payable,
except taxes the validity of which are being contested in good faith by
appropriate proceedings and with respect to which adequate reserves have been
set aside on its books. Adequate provision has been made for the payment of all
accrued and unpaid Federal, State, county, local, foreign and other taxes
whether or not yet due and payable and whether or not disputed.
6.9 Litigation. Except set forth in Schedule 6.9 hereto, there is no
----------
present investigation by any Governmental Agency pending or threatened against
or affecting Borrower, its properties or business and there is no action, suit,
proceeding or claim by any Person pending or threatened against Borrower or its
assets or goodwill, or against or affecting any transactions contemplated by
this Agreement, the other Financing Agreements or other instruments, agreements
or documents delivered in connection herewith or therewith, which if adversely
determined with respect to it would result in any material adverse change in the
business, properties, assets, goodwill or condition, financial or otherwise, of
Borrower.
6.10 Intellectual Property. Borrower has all patents, trademarks,
----------------------
service-marks, trade names, trade secrets, know-how, copyrights, or licenses and
other rights with respect to any of foregoing, free from burdensome
restrictions, which are necessary for the operation of its business as presently
conducted or proposed to be conducted. No product, process, method, substance,
part or other material presently contemplated to be sold by or employed by
Borrower infringes any patent, trademark, service-xxxx, trade name, copyright,
license or other right owned by any other Person and no claim or litigation is
pending or threatened against or affecting Borrower contesting its right to sell
or use any such product, process, method, substance, part or other material. No
patent, invention, device, application or principal or any statute, law, rule,
regulation, standard or code is pending or proposed which would substantially
reduce the projected revenues of, or otherwise materially adversely affect the
business, condition (financial or otherwise), prospects, assets, property or
operations of, Borrower.
25
6.11 Accounts. Each Eligible Account represents a valid and legally
--------
enforceable indebtedness based upon an actual and bona fide sale and delivery of
goods or rendition of services in the ordinary course of the business of
Borrower which has been finally accepted by the Account Debtor and for which the
Account Debtor is unconditionally liable to make payment of the amount stated in
each invoice, document or instrument evidencing the Eligible Account in
accordance with the terms thereof, without offset, defense or counterclaim
(except: (a) to the extent the face amount of any invoice, document or
instrument evidencing an Eligible Account arising under a Government Contract
which provides for progress payments to Borrower by the Governmental Agency
which is the party to such Government Contract includes amounts for which
Borrower has previously sent an invoice, document or instrument to such
Governmental Agency in respect of progress payments required to be made by such
Governmental Agency to Borrower in accordance with the terms of such Government
Contract and applicable government regulations, (b) as to the delivery of the
goods, to the extent the sales are on a xxxx and hold basis and Lender has
received a xxxx and hold letter as required under Section 1.17(e) hereof, and
(c) to the extent of the setoff by GM with respect to the GM Accounts for the
following amounts which have been reported to Lender pursuant to Section 7.20
hereof: (i) an amount equal to the aggregate principal amount of the GM Loan
made to Borrower divided by the number of H2 Vehicles covered by the GM Assembly
Agreement (as in effect on the date hereof), as set forth in Schedule 7.3(h),
for each H2 Vehicle delivered by Borrower to GM pursuant to the GM Assembly
Agreement (as in effect on the date hereof), (ii) royalty and licensing fee
payments owing to GM pursuant to the GM Royalty Sharing Agreement (as in effect
on the date hereof), (iii the per vehicle charge owing to GM under the terms of
the GM Management Service Agreement (as in effect on the date hereof) and (iv)
normal trade payables owing to GM with respect to purchase parts purchase from
GM by Borrower. All statements made and all unpaid balances appearing in the
invoices, documents and instruments evidencing each Eligible Account are true
and correct and are in all respects what they purport to be (except to the
extent of progress payments as noted above). All signatures and endorsements
that appear on any Eligible Account are genuine and all signatories and
endorsers have full capacity to contract and each Account Debtor is solvent and
financially able to pay in full the Eligible Account when it matures. None of
the transactions underlying or giving rise to any Account violates any state or
federal laws or regulations, and all documents relating to the Accounts are
legally sufficient under such laws or regulations and shall be legally
enforceable in accordance with their terms and all recording, filing and other
requirements of giving public notice under any applicable law have been duly
complied with.
6.12 Financial Statements. None of the financial statements, reports and
--------------------
other information furnished or to be furnished by Borrower to Lender with
respect to Borrower and/or its Subsidiaries contain, as of their respective
dates, any untrue statement of material fact or omit to state any material fact
necessary to make the information therein not misleading. Such financial
statements and reports were and will be prepared in accordance with GAAP, in
effect on the date thereof, consistently applied, and shall fairly, completely
and accurately present the consolidated and consolidating financial condition
and results of operations of the applicable Persons, as of the dates and for the
periods indicated thereon.
6.13 Employee Benefits.
-----------------
(a) Except as set forth in Schedule 6.13 hereto, neither Borrower nor any
Subsidiary has any liability in connection with any employee pension benefit
plan, as defined in Section 3(3) of ERISA.
(b) Borrower has not engaged in any transaction in connection with which
Borrower or any Affiliate could be subject to either a civil penalty assessed
pursuant to Section 502(i) of ERISA or a tax imposed by Section 4975 of the
Code.
26
(c) No liability to the Pension Benefit Guaranty Corporation has been or
is expected by Borrower to be incurred with respect to any employee pension
benefit plan of Borrower or any Affiliate. There has been no reportable event
(within the meaning of Section 4043(b) of ERISA) or any other event or condition
with respect to any employee pension benefit plan which presents a risk of
termination of any such plan by the Pension Benefit Guaranty Corporation.
(d) Full payment has been made of all amounts which Borrower or any
Subsidiary is required under Section 302 of ERISA and Section 412 of the Code to
have paid under the terms of each employee pension benefit plan as contributions
to such plan as of the last day of the most recent fiscal year of such plan
ended prior to the date hereof, and no accumulated funding deficiency (as
defined in Section 302 of ERISA and Section 412 of the Code), whether or not
waived, exists with respect to any employee pension benefit plan.
(e) The current value of all vested accrued benefits under all employee
pension benefit plans maintained by Borrower that are subject to Title IV of
ERISA does not exceed the current value of the assets of such plans allocable to
such vested accrued benefits, except that in the case of Plan 001 and Plan 010
(identified on Schedule 6.13 hereto) the current vested accrued benefits under
such plans exceed the current value of the assets of such plans by $7,000,000 as
of December 31, 2000. The terms "current value" and "accrued benefit" have the
meanings specified in Section 4062(b)(1)(A) and Section 3 of ERISA,
respectively.
(f) Neither Borrower nor any of its Subsidiaries is or has ever been
obligated to contribute to any "multiemployer plan" (as such term is defined in
Section 4001(a)(3) of ERISA), that is subject to Title IV of ERISA, except as
set forth on Schedule 6.13 hereto.
6.14 Environmental Compliance.
------------------------
(a) Borrower and its Subsidiaries have not generated, used, stored,
treated, transported, manufactured, handled, produced or disposed of any
Hazardous Materials, on or off its premises (whether or not owned by it) in any
manner which at any time violates any applicable Environmental law or any
license, permit, certificate, approval or similar authorization thereunder and
the operations of Borrower and its Subsidiaries comply in all material respects
with all Environmental Laws and all licenses, permits, certificates, approvals
and similar authorizations thereunder.
(b) Except as set forth in Schedule 6.14 hereto, there has been no
investigation, proceeding, complaint, order, directive, claim, citation or
notice by any governmental authority or any other person nor is any pending or
threatened, with respect to any non-compliance with or violation of the
requirements of any Environmental Law by Borrower or any of its Subsidiaries or
the release, spill or discharge, threatened or actual, of any Hazardous Material
or the generation, use, storage, treatment, transportation, manufacturer,
handling, production or disposal of any Hazardous Materials or any other
environmental, health or safety matter, which affects Borrower, or its
Subsidiaries or their businesses, operations or assets or any properties at
which Borrower or its Subsidiaries transported, stored or disposed of any
Hazardous Materials.
(c) Borrower and its Subsidiaries have no material liability (contingent
or otherwise) in connection with a release, spill or discharge, threatened or
actual, of any Hazardous Materials or the generation, use, storage, treatment,
transportation, manufacture, handling, production or disposal of any Hazardous
Materials.
(d) Borrower and its Subsidiaries have all licenses, permits,
certificates, approvals or similar authorizations required to be obtained or
filed in connection with the operations of Borrower and its
27
Subsidiaries under any Environmental Law and all of such licenses, permits,
certificates, approvals or similar authorizations are valid and in full force
and effect.
6.15 Investment Company. Borrower is not an "investment company", or an
------------------
"affiliated person" or "promoter" or "principal underwriter", as such terms are
defined in the Investment Company Act of 1940, as amended (15 U.S.C. (S)80a-1,
et seq.). The making of the Loans and extension of the Letter of Credit
------
Accommodations by Lender, the application of the proceeds and the repayment
thereof by Borrower and the performance of the transactions contemplated herein
will not violate any provision of the Investment Company Act of 1940, as
amended, or any rule, regulation or order issued pursuant thereto.
6.16 Regulation G; Securities Exchange Act of 1934. Borrower does not own
---------------------------------------------
any "margin security" as such term is defined in Regulation G, as amended (12
C.F.R. Part 207) of the Board. The proceeds of the borrowings made pursuant to
this Agreement and the other Financing Agreements will be used by Borrower only
for the purposes contemplated hereunder. None of the proceeds will be used,
directly or indirectly, for the purpose of purchasing or carrying any margin
security or for the purpose of reducing or retiring any Indebtedness which was
originally incurred to purchase or carry any margin security or for any other
purpose which might cause any of the Loans to be considered a "purpose credit"
within the meaning of Regulation G of the Board, as amended. Borrower will not
take, nor will it permit any agent acting in its behalf to take, any action
which might cause this Agreement or the other Financing Agreements, or
instruments delivered pursuant hereto or thereto, to violate any regulation of
the Board or to violate the Securities Exchange Act of 1934 or any state or
other securities laws, in each case as in effect on the date hereof or as
amended hereafter.
6.17 No Material Adverse Change. There has been no material adverse change
--------------------------
in the business, assets, condition (financial or otherwise) or results of
operations or prospects of Borrower, taken as a whole, since the date of the
most recent financial statements with respect thereto submitted to Lender and
field examination with respect thereto (for the period ending June 30, 2000)
conducted by Lender.
6.18 Disclosure.
----------
(a) The information contained in the representations and warranties of
Borrower set forth in this Agreement, the other Financing Agreements, or in any
other instrument, document, list, certificate, statement, schedule or exhibit
heretofore delivered or to be delivered to Lender, as contemplated in this
Agreement or in the other Financing Agreements, does not contain and will not
contain any untrue statement of a material fact and does not omit and will not
omit to state a material fact necessary in order to make the information
contained herein or therein not misleading.
(b) After giving effect to the transactions contemplated by this
Agreement, the other Financing Agreements, and the other instruments or
documents delivered in connection herewith and therewith, there does not exist
and there has not occurred any condition or event which constitutes an Event of
Default or which, after notice or passage of time or both, would constitute an
Event of Default.
SECTION 7. ADDITIONAL COVENANTS
---------- --------------------
In addition to the covenants set forth in the other Financing Agreements,
Borrower hereby covenants to and agrees with Lender that until all of the
Obligations have been paid in full, Borrower shall comply with the following
covenants, or cause the same to be complied with, unless Lender shall otherwise
consent in writing:
28
7.1 Tradenames. Some of Borrower's invoices may from time to time be
----------
rendered to customers under the tradenames listed on Schedule 7.1 annexed hereto
(which, together with any new tradenames used after the date hereof are referred
to collectively as the "Tradenames" and individually, as a "Tradename"). As to
the Tradenames used by it, and the related Accounts, Borrower hereby agrees
that:
(a) Each Tradename is a tradename (and not an independent corporation or
other legal entity) by which Borrower may identify and sell or lease certain of
its goods or services and conduct a portion of its business.
(b) All Accounts and proceeds thereof (including any returned merchandise)
which arise from the sale or lease of goods or rendition of services invoiced
under the Tradename shall be owned solely by Borrower and shall be subject to
the security interests of Lender and other terms of this Agreement and the other
Financing Agreements.
(c) All assignments or confirmatory schedules of Accounts or chattel paper
delivered to Lender by Borrower, whether in the name of any of the Tradenames or
Borrower, shall be executed by Borrower as owner of such assigned Accounts, as
the case may be.
(d) New Tradenames may be used by Borrower, but only if (i) Lender is
given at least thirty (30) days prior written notice of the intended use of any
new Tradename and (ii) such supplemental financing statements as Lender shall
request shall be executed and delivered to Lender by Borrower for filing by
Lender prior to the use of such new Tradename.
7.2 Subsidiaries. Borrower shall not form or acquire any Subsidiaries
------------
without the prior written consent of Lender, which consent shall not be
unreasonably withheld. In the event Lender so consents, promptly upon such
formation or acquisition, Borrower shall cause any such Subsidiary to execute
and deliver to Lender, in form and substance satisfactory to Lender and its
counsel: (a) an absolute and unconditional guarantee of payment of any and all
present and future Obligations of Borrower to Lender, (b) a general security
agreement granting to Lender a first and only lien (except as otherwise
consented to by Lender) upon the Subsidiary's assets of the same type and
category as the Collateral, (c) related Uniform Commercial Code financing
statements, and (d) such other agreements, documents and instruments as Lender
may require, including, but not limited to, supplements and amendments hereto
and other loan agreements or instruments evidencing indebtedness of such new
Subsidiary to Lender.
7.3 Indebtedness. Borrower shall not, and shall not permit any Subsidiary
------------
to, create, incur, assume or permit to exist, contingently or otherwise, any
Indebtedness, except:
(a) Indebtedness to Lender;
(b) Indebtedness consisting of unsecured current liabilities incurred in
the ordinary course of its business;
(c) Indebtedness consisting of unsecured non-current accruals and deferred
liabilities (other than for borrowed money or with respect to capital leases) or
in respect of post-employment benefits for health care, life insurance and long
term disability benefits, in each case incurred in the ordinary course of its
business;
(d) Indebtedness incurred in the ordinary course of its business secured
only by liens permitted under Sections 7.5(c);
29
(i) the payments in respect of such Indebtedness by Borrower
shall not exceed $2,000,000 in the aggregate in any twelve (12) month period
during the Term hereof;
(ii) Borrower shall not directly or indirectly, (A) make any
prepayments or other non-mandatory payments in respect of such Indebtedness or
any payments pursuant to the purported acceleration thereof, or (B) redeem,
retire, defease, purchase or otherwise acquire such Indebtedness, or set aside
or otherwise deposit or invest any sums for such purpose; and
(iii) Borrower shall furnish to Lender all notices, demands or
other materials in connection with such Indebtedness either received by
Borrower, or on its behalf, promptly after receipt thereof, or sent by Borrower
or on its behalf, concurrently with the sending thereof, as the case may be;
(e) Indebtedness of Borrower to Renco Group in respect of: (i) the
transactions permitted under Section 7.7(b), and (ii) unpaid dividends permitted
to be accrued pursuant to Section 7.8(c) hereof;
(f) Indebtedness existing on the date hereof which is described on
Schedule 7.3 hereto, provided, that:
-------- ----
(i) Borrower may only make regularly scheduled payments of
principal and interest in respect of such Indebtedness as set forth in Schedule
7.3; and
(ii) Borrower shall not, directly or indirectly, (A) make any
prepayments or other non-mandatory payments in respect of such Indebtedness or
(B) redeem, retire, defease, purchase or otherwise acquire such Indebtedness, or
set aside or otherwise deposit or invest any sums for such purpose or (C) amend,
modify, alter or change the terms of the arrangements with respect to such
Indebtedness or otherwise; and
(iii) Borrower shall furnish to Lender all notices, demands or
other materials received concerning such Indebtedness, either received by
Borrower in connection therewith promptly after receipt thereof or sent by
Borrower, concurrently with the sending thereof, as the case may be;
(g) Indebtedness of Borrower of up to the maximum principal amount of
$75,500,000, less the aggregate amount of all repayments or repurchases,
optional or mandatory, of principal in respect thereof, evidenced by the Senior
Notes, plus interest thereon at the rate provided for in the Senior Notes (as in
effect on the date hereof); provided, that: (i) Borrower shall only make
-------- ----
regularly scheduled payments of principal and interest or other mandatory
payments in respect of such Indebtedness in accordance with the terms of the
Senior Notes (as in effect on the date hereof); (ii) Borrower shall not,
directly or indirectly, (A) amend, modify, alter or change the terms of the
Senior Notes or any of the other Senior Note Offering Agreements or (B) redeem,
retire, defease, purchase or otherwise acquire such Indebtedness, or set aside
or otherwise deposit or invest any sums for such purpose in any sinking fund,
except, for (1) redemptions of the Senior Notes at the option of Borrower, in
------
whole or in part, pursuant to the terms and conditions of the Senior Notes (as
in effect on the date hereof) and the Senior Note Indenture (as in effect on the
date hereof), (2) redemptions using the proceeds of the Refinancing Indebtedness
permitted hereunder, (3) mandatory redemptions of the Senior Notes (as in effect
on the date hereof) required by the Senior Note Indenture (as in effect on the
date hereof) in the event (aa) Borrower has Excess Cash Flow (as defined in the
Senior Note Indenture as in effect on the date hereof) at the end of any twelve
(12) month period ending April 30, (bb) of certain Asset Sales (as defined in
the Senior Note Indenture as in effect on the date hereof) of Borrower other
than the Collateral, and (cc) of a Change of Control (as defined in the Senior
Note Indenture as in effect on the date hereof); and (iv) Borrower shall furnish
to Lender all notices, demands or other materials either received from any of
the holders of the Senior Notes and the Trustee, or on their behalf, promptly
after receipt thereof, or sent by Borrower, or on its behalf, to
30
any of the holders of the Senior Notes or the Trustee, concurrently with the
sending thereof, as the case may be;
(h) Indebtedness of Borrower to GM pursuant to loans in cash or
immediately available funds by GM to Borrower as evidenced by the GM Note,
provided, that, (i) such Indebtedness shall not bear any interest, (ii) such
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Indebtedness is, and shall only be secured by, the security interests and liens
upon the GM Collateral as permitted under Section 7.5(e) hereof, (iii) the
rights and remedies of GM arising in connection with or pursuant to the GM Loan
are limited to recourse against the GM Collateral and Borrower does not have any
personal liability to GM in respect of the obligations of Borrower to GM arising
pursuant to the GM Loan (such that Borrower does not have any liability in the
event of any deficiency for amounts owing to GM after GM has exercised its
rights and remedies with respect to the GM Collateral), the proceeds of the GM
Loan shall be used for: (A) the engineering and construction of the H2 Facility,
(B) the purchase of certain machinery and equipment for use in the production of
the H2 Vehicle; and (C) costs required for Borrower to prepare to assemble the
H2 Vehicles (except for the cost of the time of Borrower's management and
employees dedicated to the performance of the activities contemplated by the GM
Agreements), (iv) such Indebtedness shall not exceed the amount set forth on
Schedule 1.49 hereto, less the aggregate amount of all repayments or repurchases
of principal in respect thereof, (v) Borrower shall not, directly or indirectly,
make any payments with respect to such Indebtedness, including, but not limited
to any prepayments or any non-mandatory payments, except that (A) Borrower may
------ ----
directly pay GM or GM may obtain payments in respect of such Indebtedness by
offsetting against the assembly fee otherwise payable to Borrower pursuant to
the terms of the GM Assembly Agreement in effect on the date hereof, in an
amount equal to the aggregate principal amount of the GM Loan made to Borrower
divided by the number of H2 Vehicles covered by the GM Assembly Agreement in
effect on the date hereof, as set forth in Schedule 7.3(h), for each H2 Vehicle
delivered by Borrower to GM pursuant to the GM Assembly Agreement in effect on
the date hereof, and (B) Borrower may make prepayments in respect of the GM Note
pursuant to the terms of the GM Equity Conversion Agreement as in effect on the
date hereof so long as (1) as of the date of any such prepayment and after
giving effect thereto, the Excess Availability shall not have been less than
$10,000,000, and for each of the thirty (30) consecutive days immediately prior
to any such prepayment, Excess Availability shall not be less than $10,000,000,
(2) Lender shall have received not less than seven (7) days prior written notice
of the intention of Borrower to make such prepayment, together with such
information with respect thereto as Lender may request, and (3 as of the date
of any such prepayment and after giving effect thereto, no Event of Default or
act, condition or event which with notice or passage of time or both would
constitute an Event of Default shall exist or have occurred, (vi) Borrower shall
not, directly or indirectly, (A) amend, modify, alter or change any terms of
such Indebtedness or any of the GM Agreements except, that, Borrower may, after
------ ----
prior written notice to Lender, amend, modify, alter or change the terms thereof
so as to extend the maturity thereof or defer the timing of any payments in
respect thereof, or to forgive or cancel any portion of such Indebtedness (other
than pursuant to payments thereof), or to reduce the interest rate or any fees
in connection therewith, or to make any covenants contained therein less
restrictive or burdensome as to Borrower, or to make such other changes which
would not be expected to adversely impact the Borrower's ability to repay the
Obligations or the Lender's rights to realize on its Collateral or (B) redeem,
retire, defease, purchase or otherwise acquire such Indebtedness, or set aside
or otherwise deposit or invest any sums for such purpose, and (vii) Borrower
shall furnish to Lender all notices or demands in connection with such
Indebtedness either received by Borrower or on its behalf, promptly after the
receipt thereof or sent by Borrower or on its behalf concurrently with the
sending thereof, as the case may be;
(i) Indebtedness of Borrower to First Source arising pursuant to the First
Source Note as in effect on the date hereof; provided, that, (i) such
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Indebtedness is and shall only be secured by the security interests and liens
upon the First Source Mortgage as permitted under Section 7.5(f) hereof, (ii)
such Indebtedness shall not exceed $5,000,000 (less the aggregate amount of all
repayments in respect thereof), (iii) neither Borrower not any of its
Subsidiaries shall, directly or indirectly, make any payments with respect to
such Indebtedness, including, but not limited to any prepayments or any non-
mandatory
31
payments, except that Borrower may make regularly scheduled monthly payments in
------ ----
respect of the First Source Note as in effect on the date hereof so long as the
aggregate principal amount of all such payments shall not exceed $5,000,000 and
as of the date of each such payment and after giving effect thereto, no Event of
Default or act, condition or event which with notice or passage of time or both
would constitute an Event of Default shall exist or have occurred and be
continuing, (iv) neither Borrower nor any of its Subsidiaries shall, directly or
indirectly, (A) amend, modify, alter or change any terms of such Indebtedness or
any other provisions of any agreement, document or instruments to the extent
such provision governs or affects the Indebtedness as in effect on the date
hereof except, that, Borrower may, after prior written notice to Lender, amend,
------ ----
modify, alter or change the terms thereof so as to extend the maturity thereof
or defer the timing of any payments in respect thereof, or to forgive or cancel
any portion of such Indebtedness (other than pursuant to payments thereof), or
to reduce the interest rate or any fees in connection therewith or to make any
covenants contained therein less restrictive or burdensome as to Borrower, or
(B) redeem, retire, defease, purchase or otherwise acquire such Indebtedness, or
set aside or otherwise deposit or invest any sums for such purpose, (v) Borrower
shall furnish to Lender all notices or demands in connection with such
Indebtedness either received by Borrower or on its behalf, promptly after the
receipt thereof or sent by Borrower or on its behalf concurrently with the
sending thereof, as the case may be; and (vi) Lender shall at all times have
access, on terms and conditions satisfactory to Lender, to (A) the H1 Facility
so that Lender shall be able to exercise its rights and remedies and otherwise
deal with the Collateral and (B) the Equipment to complete Inventory;
(j) Indebtedness issued in exchange for, or the proceeds of which are used
to extend, refinance, replace or substitute for, Indebtedness permitted under
Section 7.3(g) hereof (the "Refinancing Indebtedness"); provided, that, as to
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any such Refinancing Indebtedness, each of the following conditions is
satisfied: (i) Lender shall have received not less than ten (10) Business Days'
prior written notice of the intention to incur such Indebtedness, which notice
shall set forth in reasonable detail satisfactory to Lender, the amount of such
Indebtedness, the schedule of repayments and maturity date with respect thereto
and such other information with respect thereto as Lender may reasonably
request, (ii) promptly upon Lender's request, Lender shall have received true,
correct and complete copies of all agreements, documents and instruments
evidencing or otherwise related to such Indebtedness, as duly authorized,
executed and delivered by the parties thereto, (iii) such Indebtedness incurred
by Borrower and its Subsidiaries shall be at such rates and with such fees and
charges which are commercially reasonable, (iv) as of the date of incurring such
Indebtedness and after giving effect thereto, no Event of Default shall exist or
have occurred and be continuing, (v) the principal amount of such Refinancing
Indebtedness shall not exceed the principal amount of the Indebtedness so
extended, refinanced, replaced or substituted for (plus the amount of reasonable
refinancing fees and expenses incurred in connection therewith) plus
$40,000,000, (vi) the Refinancing Indebtedness shall be unsecured, (vii)
Borrower and its Subsidiaries may only make regularly scheduled payments of
principal, interest and fees, if any, in respect of such Indebtedness (except as
otherwise permitted below), (viii) Borrower and its Subsidiaries shall not,
directly or indirectly, (A) amend, modify, alter or change in any material
respect the terms of the agreements with respect to such Indebtedness, except
------
that Borrower and its Subsidiaries may, after prior written notice to Lender,
----
amend, modify, alter or change the terms thereof so as to extend the maturity
thereof, or defer the timing of any payments in respect thereof, or to forgive
or cancel any portion of such Indebtedness (other than pursuant to payments
thereof), or to reduce the interest rate or any fees in connection therewith, or
to make any covenants contained therein less restrictive or burdensome as to
Borrower and its Subsidiaries or otherwise more favorable to Borrower and its
Subsidiaries, or (B) redeem, retire, defease, purchase or otherwise acquired
such Indebtedness, or set aside or otherwise deposit or invest any sums for such
purpose, except as expressly required pursuant to the terms thereof or pursuant
to regularly scheduled payments permitted herein or with the proceeds of any
other Refinancing Indebtedness permitted hereunder, and (xi) Borrower and its
Subsidiaries shall furnish to Lender all notices of default or demands in
connection with such Indebtedness received by Borrower and its Subsidiaries or
on its behalf promptly after the receipt thereof;
32
(k) Indebtedness of Borrower to Transamerica Insurance Finance Corporation
(or another lender acceptable to Lender providing loans or other financial
accommodations to Borrower to finance its insurance premiums) in respect of
unearned premiums payable on certain insurance policies maintained by Borrower
pursuant to the terms of Premium Finance Agreement, Disclosure Statement and
Security Agreement among Borrower and Transamerica Insurance Finance Corporation
(or any other similar type of agreement with substantially similar terms among
Borrower and another lender acceptable to Lender providing loans or other
financial accommodations to Borrower to finance its insurance premiums),
provided, that, (i) in no event shall the total amount of such Indebtedness
-------- ----
outstanding at any time exceed $2,000,000, (ii) Lender shall have received true,
correct and complete copies of all agreements, documents and instruments
evidencing or otherwise related to such Indebtedness, as duly authorized,
executed and delivered by the parties thereto, (iii) such Indebtedness shall be
unsecured except to the extent of any unearned premiums paid by Borrower or any
return of the premium for such policy, (iv) Borrower shall not, directly or
indirectly, (A) amend, modify, alter or change the terms of the agreements with
respect to such Indebtedness; except, that, Borrower may, after prior written
------ ----
notice to Lender, amend, modify, alter or change the terms thereof so as to
extend the maturity thereof or defer the timing of any payments in respect
thereof, or to forgive or cancel any portion of such Indebtedness (other than
pursuant to payments thereof), or to reduce the interest rate or any fees in
connection therewith, or to make any covenants contained therein less
restrictive or burdensome as to Borrower or otherwise more favorable to
Borrower, or (B) redeem, retire, defease, purchase or otherwise acquire such
Indebtedness, or set aside or otherwise deposit or invest any sums for such
purpose and (v) Borrower shall furnish to Lender all notices or demands in
connection with such Indebtedness either received by Borrower or on its behalf
after the receipt thereof, or sent by Borrower or on its behalf, concurrently
with the sending thereof, as the case may be;
(l) unsecured Indebtedness of Borrower to any of its Subsidiaries arising
after the date hereof pursuant to loans by such Subsidiaries to Borrower (other
than Indebtedness consisting of unsecured liabilities incurred in the ordinary
course of business and permitted under Section 7.3 (b) hereof), provided, that,
-------- ----
(i) such Indebtedness is subject to, and subordinate in right of payment to, the
right of Lender to receive the prior indefeasible payment and satisfaction in
full of all of the Obligations on terms and conditions acceptable to Lender,
(ii) Lender shall have received, in form and substance satisfactory to Lender,
as subordination agreement providing for, inter, alia, the terms of the
----- ----
subordination in right of payment of such Indebtedness of Borrower to the prior
indefeasible payment and satisfaction in full of all of the Obligations, duly
authorized, executed and delivered by such Subsidiaries and Borrower, (iii)
Lender shall have received, on a monthly basis pursuant to Section 7.20 hereof,
a report setting for the balance of any such Indebtedness and such other and
further information which Lender shall request, (iv) Borrower shall not,
directly or indirectly make, or be required to make, any payments in respect of
such Indebtedness so long as any of the Obligations are outstanding and unpaid
in this Agreement has not been terminated; provided, that, Borrower may make
-------- ----
payments in respect of such Indebtedness, so long as each of the following
conditions is satisfied as to any such payment: (A) as to each such payment,
Lender shall have received prior written notice from Borrower that Borrower will
make such payment not less than five (5) business days prior to the date
thereof, (B) as of the date of any such payment and immediately after giving
effect thereto, no Event of Default or act, condition or event which with notice
or passage of time or both would constitute an Event of Default shall exist or
have occurred and be continuing, and (C) as of the date of any such payment and
immediately after giving effect thereto, Excess Availability shall be greater
than $5,000,000; (v) Borrower shall not, directly or indirectly, (A) amend,
modify, alter or change any terms of such Indebtedness or any agreement,
document or instrument related thereto, or (B) redeem, retire, defease, purchase
or otherwise acquire such Indebtedness, or set aside or invest any sums for such
purpose, (vi) Borrower shall furnish to Lender all notices, demands or other
materials in connection with such Indebtedness either received by Borrower or on
its behalf, promptly after receipt thereof, or sent by either Borrower or on its
behalf, concurrently with the sending
33
thereof, as the case may be and (vii) Lender shall have received, in form and
substance satisfactory to Lender copies of all necessary consents and approvals
of third parties to such Indebtedness, including the holders of the Senior Notes
and the Trustee; and
(m) the unsecured Indebtedness of Borrower or AMGSC to Floorplan Lenders
as permitted in Section 7.6(f) hereof.
7.4 Registration Rights Agreement. In the event that Borrower registers
-----------------------------
any Refinancing Indebtedness in accordance with the Securities Laws, Borrower
shall deliver to Lender any registration statement, notice or other filing with
the Securities and Exchange Commission related thereto and shall enter into an
amendment to the Loan Agreement providing for, among other things, the agreement
by Borrower to deliver to Lender all filings, notices or other documents
required by Borrower to be delivered to the Securities and Exchange Commission
pursuant to the Securities Laws upon the effective date of the transactions
contemplated by the any relevant registration rights agreement.
7.5 Limitation on Liens. Borrower shall not, and shall not permit any
-------------------
Subsidiary to, create, incur, assume, or permit to exist any mortgage, pledge,
security interest, lien, encumbrance, defect in title or restriction upon the
use of its real or personal properties, whether now owned or hereafter acquired,
except:
(a) the liens, encumbrances or security interests in favor of Lender;
(b) tax, mechanics, warehouse and other like statutory liens arising in
the ordinary course of Borrower's or its Subsidiaries' businesses to the extent:
(i) such liens secure Indebtedness which is not overdue or (ii) until
foreclosure or similar proceedings shall have been commenced, such liens secure
Indebtedness relating to claims or liabilities which are (A) fully insured and
being defended at the sole cost and expense and at the sole risk of the insurer
or (B) being contested in good faith by appropriate proceedings available to
Borrower or its Subsidiaries prior to the commencement of foreclosure or other
similar proceedings and are adequately escrowed for or reserved against in
Lender's judgment;
(c) purchase money mortgages or other purchase money liens or security
interest upon any specific fixed assets hereafter acquired, or mortgages, liens,
or security interests existing on any such future fixed assets at the time of
acquisition thereof (including, without limitation, capitalized or finance
leases) or in connection with the refinancing of existing capitalized leases
with respect to specific fixed assets, provided, that (i) no such purchase money
-------- ----
or other mortgage, lien or security interest (or capitalized or finance lease,
as the case may be) with respect to specific future fixed assets or as
refinanced shall extend to or cover any other property, other than the specific
fixed assets so acquired, or acquired or refinanced subject to such mortgage,
lien or security interest (or lease) and the proceeds thereof, (ii) such
mortgage, lien or security interest secures the obligation to pay the purchase
price of such specific fixed assets only (or the obligations under the
capitalized or finance lease), (iii) the principal amount secured thereby shall
not exceed one hundred (100%) percent of the cost of the fixed assets so
acquired, (iv) Borrower shall provide Lender thirty (30) days prior written
notice of any such mortgage, security interest, lien or encumbrance, and (v)
prior to the granting of any such mortgage, security interest, lien or
encumbrance, Lender shall have received, in form and substance reasonably
satisfactory to Lender, such consents, waivers, acknowledgments, releases and
other agreements and documents from such mortgagee, secured party, lessor or
other third persons which Lender may deem necessary or desirable acknowledging
the first priority liens of Lender, waiving any security interests, liens or
other claims by such persons to the Collateral and permitting Lender access to
the real property and the Equipment so that Lender may exercise its rights and
remedies and otherwise deal with the Collateral unless otherwise agreed to by
Lender;
34
(d) the purchase money mortgages or other purchase money liens or security
interests upon the GM Collateral in favor of GM pursuant to the GM Security
Agreement (as in effect on the date hereof) to secure the Indebtedness of
Borrower to GM permitted under Section 7.3(h) above, and GM's rights under the
GM Right of Access Agreement;
(e) the mortgages or security interests upon the H1 Facility in favor of
First Source permitted under Section 7.3(i) above; and
(f) liens and security interests securing Indebtedness permitted under
Section 7.3(f).
7.6 Loans, Investments, Guarantees, Etc. Borrower shall not, and shall
------------------------------------
not permit any Subsidiary to, directly or indirectly, make, incur, assume or
permit to exist, any loans or advance money or property to any person, or invest
in (by capital contribution, dividend or otherwise) or purchase or repurchase
the stock or Indebtedness or all or a substantial part of the assets or
properties of any person, or guarantee, assume, endorse, or otherwise become
responsible for (directly or indirectly) the Indebtedness, performance,
obligations, stock or dividends of any person or agree to do any of the
foregoing, except:
------
(a) guarantees by any Subsidiary of Borrower of the Obligations in favor
of Lender;
(b) the endorsement of instruments for collection or deposit in the
ordinary course of business;
(c) the additional loans, capital investments (which for this purpose
shall not include capital expenditures), guarantees, insurance bonds,
performance or surety bonds described on Schedule 7.6 annexed hereto, which sets
forth the parties, amounts, time periods and key terms with respect thereto;
(d) after written notice thereof to Lender, investments in the following
instruments, which shall be pledged and delivered to Lender upon Lender's
request, (i) marketable obligations issued or guaranteed by the United States of
America or an instrumentality or agency thereof, maturing not more than one (1)
year after the date of acquisition thereof, (ii) certificates of deposit or
other obligations maturing not more than one (1) year after the date of
acquisition thereof issued by any bank or trust company organized under the laws
of and located in the United States of America or any State thereof and having
capital, surplus and undivided profits of at least $100,000,000, and (iii) open
market commercial paper with a maturity not in excess of two hundred seventy
(270) days from the date of acquisition thereof which have the highest credit
rating by either Standard & Poor's Ratings Service or Xxxxx'x Investors Service,
Inc.;
(e) Borrower may make loans or advance money or property to, or invest by
capital contribution in AMGSC; provided, that, (i) the aggregate amount of any
-------- ----
loans or advances by Borrower to AMGSC at any time outstanding shall not exceed
$500,000 (and in the event such loans at any time exceed $250,000, Borrower
shall cause AMGSC to execute and deliver a promissory note to evidence such
loans payable to the order of Borrower, the original of which shall be endorsed
by Borrower as payable to the order of Lender and as so endorsed shall be
delivered by Borrower to Lender), (ii) the aggregate amount of the cash capital
contributions made by Borrower to AMGSC shall not exceed $500,000 and (iii) the
aggregate amount of capital contributions by Borrower to AMGSC in personal
property (other than cash) shall not exceed personal property having a total net
book value of $1,000,000;
(f) Borrower or AMGSC may from time to time repurchase from a Floorplan
Lender any H1 Vehicle repossessed by the Floorplan Lender and as to any
Floorplan Lenders who so agree, the Indebtedness of Dealers to such Floorplan
Lender relating thereto, in accordance with the terms of the Repurchase
Agreement with such Floorplan Lender subject to the fulfillment (and not merely
the waiver) of all conditions to such purchase contained therein; provided,
--------
that, (i) the aggregate amount of the total liability of Borrower and AMGSC to
----
all Floorplan Lenders for the purchase of H1 Vehicles and, if
35
applicable, such Indebtedness (whether contingent or otherwise) outstanding at
any one time shall not exceed $30,000,000; provided, that, subject to the
-------- ----
written consent of Lender in each instance, the liability of Borrower and AMGSC
to a Floorplan Lender in connection with any fleet sales may be excluded from
such limit, (ii) no Event of Default shall exist or have occurred, (iii)
Borrower shall not, directly or indirectly (A) amend, modify, alter or change
the terms of the Repurchase Agreement or (B) prepay the purchase price for a
repossessed H1 Vehicle to any Floorplan Lender in advance of the delivery of the
H1 Vehicle by the Floorplan Lender to AMGSC or Borrower, (iv) Borrower shall
furnish to Lender all notices, demands or other materials received concerning
such Indebtedness, either received by Borrower or AMGSC, or on its or their
behalf, in connection therewith, promptly after receipt thereof or sent by
Borrower or AMGSC, or on its or their behalf, concurrently with the sending
thereof, as the case may be, (v) Borrower and AMGSC shall give Lender not less
than five (5) business days notice of the intention of Borrower and/or AMGSC to
enter into any Repurchase Agreement, (vi) Borrower and AMGSC shall deliver to
Lender, promptly after its execution, a true, correct and complete copy of any
Repurchase Agreement entered into by Borrower and/or AMGSC with any Floorplan
Lender and any other information or materials which Lender may request in
connection with the arrangements of Borrower and/or AMGSC with any Floorplan
Lender and (vii) Lender shall have received, in form and substance satisfactory
to Lender copies of all necessary consents and approvals of third parties to
such Indebtedness, including the holders of the Senior Notes and the Trustee;
(g) the investments to the equity of GEP by Borrower in the amount of
$12,000,000 prior to the date hereof; provided, that, Borrower shall have no
-------- ----
further obligation or liability to make any capital contributions or other
additional investments or other payments to or in or for the benefit of GEP;
except that Borrower may make capital contributions or other payments to or in
------ ----
or for the benefit of GEP; provided, that, each of the following conditions is
-------- ----
satisfied as of the date of any such capital contribution or other payment: (i)
in no event shall the aggregate amount of all such capital contributions or
other payments exceed $ 4,000,000 after the date hereof, (ii) within thirty (30)
days after the end of each fiscal month, Borrower shall provide to Lender a
report in form and substance satisfactory to Lender of the outstanding amount of
such capital contributions or other payments as of the last day of the
immediately preceding month and indicating any capital contributions or other
payments made and payments received during the immediately preceding month,
(iii) as of the date of any such capital contribution or other payment made
after the date hereof and after giving effect thereto, each of Borrower and GEP
shall be solvent, (iv) as of the date of any such capital contributions or other
payments made after the date hereof and after giving effect thereto, no Event of
Default or act, condition or event which with notice or passage of time or both
would constitute an Event of Default shall exist or have occurred and be
continuing; and (v) GEP shall pay dividends to Borrower, to the extent permitted
by applicable law, in cash or other immediately available funds as set forth on
Schedule 7.6(g) without offset, defense, deduction or counterclaim of any kind
nature or description whatsoever;
(h) loans by any Subsidiaries of Borrower to Borrower after the date
hereof to the extent the Indebtedness of Borrower to such Subsidiaries arising
pursuant to such loans is permitted under Section 7.3 hereof; and
(i) investments made prior to the date hereof in AMGSC and Chippewa
Corporation.
7.7 Transactions with Affiliates. Borrower shall not, and shall not
----------------------------
permit any Subsidiary to, directly or indirectly:
(a) purchase, acquire or lease any property from, or sell, transfer or
lease any property to, any shareholder, officer, director, agent, employee or
Affiliate, except on prices or terms no less favorable than would have been
obtained in an arm's length transaction with a non-affiliated Person; provided,
--------
that, the
----
36
total aggregate amount of accounts receivable arising from sales of Inventory by
Borrower to AMGSC at any one time outstanding shall not exceed $5,000,000, or
(b) make any payment of management fees, tax sharing payments, insurance
premiums or of the principal amount of or interest on any Indebtedness owing to
any shareholder, officer, director or Affiliate of Borrower, except,
------
(i) Borrower and its Subsidiaries may pay: (A) a monthly management
fee to Renco Group monthly in arrears; provided, that, in no event shall the
-------- ----
aggregate amount of such fee paid in any month exceed $100,000, and (B) an
annual management fee to Renco Group annually in arrears, in an amount not to
exceed the "Annual Fee", as such term is defined in the first paragraph of
Section 3(b) of the Management Agreement (as in effect on the date hereof);
provided, that, such monthly fee and annual fee may only be paid so long as, no
-------- ----
Event of Default or act, condition or event which with notice or passage of time
or both would constitute an Event of Default exists or has occurred or would
exist or continue after giving effect to any such payment;
(ii) Borrower and its Subsidiaries may make payments to Renco Group
for actual and necessary reasonable out-of-pocket legal and accounting,
marketing, payroll and similar types of services paid for by Renco Group on
behalf of Borrower and its Subsidiaries in the ordinary course of its respective
businesses or as the same may be directly attributable to Borrower and its
Subsidiaries;
(iii) Borrower and its Subsidiaries may make payments to Renco Group
pursuant to the Tax Sharing Agreement (as in effect on the date hereof);
provided, that, (A) Borrower and its Subsidiaries are included in the
-------- ----
consolidated federal income tax return filed by Renco Group as to which Borrower
and its Subsidiaries is making such payments, (B) the payments in any year shall
not exceed the federal income tax liability that Borrower or its Subsidiaries
would have been liable for if Borrower or its Subsidiaries had filed its tax
returns on a stand-alone basis except that Borrower and its Subsidiaries shall
not have the benefit of any of its tax loss carryforwards and any intercompany
items shall, for tax liability purposes, be recorded on a cash basis rather than
on an accrual basis, (C) such payments shall be made by Borrower and its
Subsidiaries no earlier than five (5) days prior to the date on which Renco
Group is required to make its payments to the Internal Revenue Service, and (D)
in the event that Borrower also joins with Renco Group in filing any combined or
consolidated (or similar) state or local income tax returns, then the making of
payments to Renco Group shall be allowed in a manner as similar as possible to
that provided herein with respect to federal income taxes;
(iv) with respect to any fiscal year of Borrower and is
Subsidiaries, Borrower and its Subsidiaries may pay to Renco Group an amount
equal to the lesser of (A) Borrower's and its Subsidiaries' allocable share of
premiums and other costs for insurance with respect to property, business
interruption, casualty and other types of business insurance coverage for
Borrower and its Subsidiaries under the insurance policies of Renco Group with
respect to which Borrower and its Subsidiaries is included as an insured or
Borrower's or its Subsidiaries' assets or properties are covered or (B) an
amount not to exceed $4,000,000 for each such fiscal year; and
(v) any payments to Renco Group permitted under Section 7.8(e)
hereof.
7.8 Dividends. Borrower and its Subsidiaries shall not, directly or
---------
indirectly, during any fiscal year of Borrower and its Subsidiaries, commencing
with Borrower's and its Subsidiaries' current fiscal year, declare or pay any
cash dividends or dividends payable in property other than stock on account of
any shares of any class of capital stock of Borrower or its Subsidiaries now or
hereafter outstanding, or set apart any sums for such purpose, or redeem,
retire, defease, purchase or otherwise acquire any shares of any class of
capital stock of Borrower or its Subsidiaries (or set aside or otherwise deposit
or invest any
37
sums for such purpose) for any consideration other than stock or apply or set
apart any sums, or make any other distribution (by reduction of capital or
otherwise) in respect of any such shares or agree to do any of the foregoing,
except:
------
(a) any Subsidiary of Borrower which is permitted to exist in accordance
with Section 7.2 hereof may pay any dividends on account of any shares of class
of Capital Stock to Borrower;
(b) Borrower may, in any fiscal year, declare and pay, out of legally
available funds therefor, dividends in respect of the common stock of Borrower
of up to fifty (50%) percent of Borrower's Adjusted After-Tax Profits for the
immediately preceding fiscal year, on a non-cumulative basis; provided, that,
each of the following conditions is satisfied, as determined by Lender, as of
the date of, and after giving effect to, each such payment of such dividends in
any fiscal year:
(i) no Event of Default exists or has occurred, or act, condition or
event which with notice or passage of time or both would constitute an Event of
Default exists or has occurred; and
(ii) Excess Availability as of the date of the payment of such
dividends, and after giving effect to such payment of such dividends and any
payments for management fees, tax sharing payments and insurance premium
payments paid or to be paid in such month, shall be not less than $5,000,000;
(c) dividends may be declared and paid by Borrower in any fiscal year, out
of legally available funds therefor, in respect of the shares of preferred stock
of Borrower issued and outstanding as of the date hereof in accordance with the
terms of such preferred stock; provided, that, each of the following conditions
-------- ----
is satisfied, as determined by Lender, as of the date of each such payment of
such dividends in any fiscal year:
(i) no Event of Default exists or has occurred, or act, condition or
event which with notice or passage of time or both would constitute an Event of
Default exists or has occurred or would exist or occur after giving effect to
any such payment;
(ii) the Excess Availability as of the date of the payment of such
dividends, and after giving effect to the payment of such dividends, and any
payments for management fees, tax sharing payments and insurance premiums
payments paid or to be paid in such month, shall be not less than $5,000,000 and
for each of the thirty (30) consecutive days immediately prior to the payment of
such dividends, Excess Availability shall have been not less than $5,000,000;
(d) notwithstanding anything to the contrary contained in this Section
7.8, but subject to the terms and conditions contained herein, Borrower may,
solely in connection with the Excess Cash Flow Offer (as defined in the
Indenture as in effect on the date hereof), upon five (5) days prior written
notice to Lender, to the extent that an Excess Cash Flow Offer is not fully
subscribed to, use not more than the aggregate amount of $2,500,000 annually
constituting the unutilized portion of the Excess Cash Flow up to the maximum
aggregate cumulative amount of not more than $5,000,000 in connection with such
Cash Flow Offer to redeem preferred stock in accordance with the Articles of
Incorporation of Borrower and/or declare and pay, out of legally available funds
therefor, dividends on such preferred stock; provided, that, the conditions set
-------- ----
forth in Sections 7.8(c)(i) and (ii) hereof have been satisfied; and
(e) with respect to any year that Borrower and its Subsidiaries have
effectively been designated as a qualified Subchapter S subsidiary company
("QSSS") under the Code, Borrower may pay cash dividends, from legally available
funds therefor, to the extent taxable income of Borrower is required to be
included in the taxable income shown by Renco Group as reported in its
subchapter S tax returns ("Form 1120S"), subject to the following:
38
(i) such cash dividends shall be with respect to any such period, in
an amount up to the product of (A) the taxable income of Borrower and its
Subsidiaries for such period which is the basis for Renco Group being required
to include such taxable income in its Form 1120S, as amended or modified or
determined by audit, and the required estimated taxable income related thereto
and the comparable state and local taxable income reports and estimated taxable
income, multiplied by (B) the corporate Federal, State and local tax rates,
whether calculated on regular taxable income or alternative minimum taxable
income, as applicable, in effect for the taxable period applicable to Borrower
and its Subsidiaries using the rates that would be applicable if Borrower and
its Subsidiaries were not a QSSS and calculated in accordance with the tax
sharing arrangement by and among Borrower, its Subsidiaries and Renco Group (as
in effect on the date hereof),
(ii) Borrower may pay such cash dividends with respect to any such
period so long as (A) in such period, Borrower and its Subsidiaries are
effectively designated a QSSS, (B) the product of the taxable income of Borrower
and its Subsidiaries for such period multiplied by the applicable tax rates as
described above shall be reduced by any applicable tax credits or deductions
calculated in accordance with the tax sharing arrangement by and among Borrower,
its Subsidiaries and Renco Group (as in effect on the date hereof) available to
Borrower and its Subsidiaries which would reduce the amount of the income taxes
payable by Borrower and its Subsidiaries, (C) any such dividends shall be paid
no more than five (5) days prior to the date that Renco Group's shareholders are
required to make payment of the taxes based on the taxable income of Borrower
and its Subsidiaries, (D) not less than five (5) days prior to the payment of
any such dividends, Lender shall have received a certificate signed by the chief
financial officer of Borrower, in form and substance satisfactory to Lender,
stating the calculation of the amount which is the basis for tax distributions
to Renco Group permitted hereunder through such period (if any) and providing
full information and computations with respect thereto and (E) such dividend
shall not be in violation of applicable law or any other agreement to which
Borrower is a party or by which Borrower or its assets are bound, and
(iii) in no event shall dividends be paid based on taxable income of
Borrower and its Subsidiaries for jurisdictions which do not recognize Borrower
and its Subsidiaries as a QSSS and where (A) Borrower and its Subsidiaries are
required to file and pay its individual taxes, and (B) where Renco Group is not
required to pay or by virtue of a consolidated (or similar) return, does not
make payments in respect of, the tax liability of Borrower or any of its
Subsidiaries in such jurisdiction.
7.9 Maintenance of Existence. Borrower shall at all times preserve, renew
------------------------
and keep in full force and effect its corporate existence and rights and
franchises with respect thereto and maintain in full force and effect all
permits, licenses, trademarks, tradenames, approvals, authorizations, leases and
contracts necessary to carry on the business as presently or proposed to be
conducted.
7.10 Sale of Assets, Consolidation, Merger, Dissolution, Etc. Borrower
-------------------------------------------------------
shall not, directly or indirectly, (a) merge into or with or consolidate with
any other Person or permit any other Person to merge into or with or consolidate
with Borrower, or (b) sell, assign, lease, transfer, abandon or otherwise
dispose of all or any substantial portion of its property or assets or any stock
or Indebtedness to any other Person or change the nature of its business or (c)
wind up, liquidate or dissolve or (d) agree to do any of the foregoing.
7.11 Working Capital. Borrower and its Subsidiaries shall, at all times,
---------------
maintain a Consolidated Working Capital of not less than the following amounts
during the period indicated (inclusive of the first and last days of such
period):
39
Period Amount
------ ------
Through January 31, 2001 $28,700,000
From February 1, 2001 through
and including April 30, 2001 $30,100,000
From May 1, 2001 through
and including July 31, 2001 $34,200,000
From August 1, 2001 through
and including October 31, 2001 $22,900,000
From November 1, 2001 through
and including January 31, 2002 $13,700,000
From February 1, 2002 through
and including April 30, 2002 $ 7,000,000
From May 1, 2002 through
and including July 31, 2002 $ 6,300,000
From August 1, 2002 through
and including October 31, 2002 $24,400,000
From November 1, 2002 through
and including January 31, 2003 $33,100,000
From February 1, 2003 through
and including April 30, 2003 $36,900,000
From May 1, 2003 through
and including July 31, 2003 $46,100,000
From August 1, 2003 and
at all times thereafter $22,300,000
7.12 Net Worth. Borrower and its Subsidiaries shall, at all times,
---------
maintain a Consolidated Adjusted Net Worth of not less than the following
amounts during the period indicated (inclusive of the first and last days of
such period):
Period Amount
------ ------
Through January 31, 2001 ($55,500,000)
From February 1, 2001 through
and including April 30, 2001 ($54,600,000)
From May 1, 2001 through
and including July 31, 2001 ($51,800,000)
From August 1, 2001 through
and including October 31, 2001 ($49,800,000)
40
From November 1, 2001 through
and including January 31, 2002 ($61,600,000)
From February 1, 2002 through
and including April 30, 2002 ($71,300,000)
From May 1, 2002 through
and including July 31, 2002 ($70,900,000)
From August 1, 2002 through
and including October 31, 2002 ($53,300,000)
From November 1, 2002 through
and including January 31, 2003 ($45,500,000)
From February 1, 2003 through
and including April 30, 2003 ($42,400,000)
From May 1, 2003 through
and including July 31, 2003 ($34,200,000)
From August 1, 2003
and at all times thereafter ($29,900,000)
7.13 Capital Expenditures. Borrower and its Subsidiaries, shall not,
--------------------
directly or indirectly, make or commit to make, whether through purchase,
capital leases or otherwise, Capital Expenditures on a non-cumulative basis
(such that expenditures not made or committed to be made in any one fiscal year
may not be made or committed to be made in any following fiscal year), in excess
of a total aggregate amount of: (a) $20,000,000 in the fiscal year of Borrower
ending October 31, 2000, (b) $20,000,000 in the fiscal year of Borrower ending
October 31, 2001, (c) $15,000,000 in the fiscal year of Borrower ending October
31, 2002 and (d) $10,000,000 in any fiscal year of Borrower thereafter; except
------
that to the extent Borrower and its Subsidiaries, make Capital Expenditures in
----
any one fiscal year in amounts less than the applicable amount set forth in
Section 7.13(a) or 7.13(b) above, Borrower may make additional Capital
Expenditures in the next consecutive fiscal year in amounts up to the difference
between the applicable amount set forth above and the Capital Expenditures
actually made in the immediately preceding fiscal year.
7.14 Compliance with Laws, Regulations, Etc.
---------------------------------------
(a) Borrower shall, and shall cause each Subsidiary to, at all times comply
in all material respects with all applicable provisions of laws, rules,
regulations, licenses, permits, approvals and orders and duly observe all
requirements, of any foreign, Federal, State or local governmental authority,
including, without limitation, ERISA, the Code, the Occupational Safety and
Health Act of 1970, as amended, the Fair Labor Standards Act of 1938, as amended
and the rules and regulations thereunder and all other statutes, rules,
regulations, orders, permits and stipulations relating to environmental
pollution and employee health and safety, including, without limitation, the
Environmental Laws.
(b) Borrower shall, and shall cause each Subsidiary to, take prompt and
appropriate action to respond to any non-compliance with any of the
Environmental Laws and shall regularly report to Lender with regard to such
response. If Borrower receives any notice of (i) the happening of any event
involving
41
the use, spill, discharge or clean-up of any Hazardous Material or (ii) any
complaint, order, citation or notice with regard to air emissions, water
discharges, noise emissions or any other environmental, health or safety matter
affecting Borrower from any Person, including, but not limited to, the United
States Environmental Protection Agency or any state or local environmental
agency or authority, then Borrower shall give, within three (3) business days,
both oral and written notice of same to Lender. Without limiting the generality
of the foregoing, whenever there is non-compliance, or any condition which
requires any action by or on behalf of Borrower in order to avoid any non-
compliance, with any Environmental Law, Borrower shall, at Lender's request and
Borrower's expense: (A) cause an independent environmental engineer acceptable
to Lender to conduct such tests of the site where Borrower's noncompliance or
alleged non-compliance with Environmental Laws has occurred and prepare and
deliver to Lender a report setting forth the results of such tests, a proposed
plan for responding to any environmental problems described therein, and an
estimate of the costs thereof; and (B) provide to Lender a supplemental report
of such engineer whenever the scope of the environmental problems, or Borrower's
response thereto or the estimated costs thereof, shall change.
7.15 Payment of Taxes and Claims. Borrower shall, and shall cause each
---------------------------
Subsidiary and each member of any consolidated group with Borrower for purposes
of filing any tax returns to, duly pay and discharge all taxes, assessments,
contributions and governmental charges upon or against it or its properties or
assets, except for taxes which are being contested in good faith and with all
due diligence by appropriate proceedings and which are adequately reserved
against in the opinion of Lender, prior to the date on which penalties attach
thereto. Borrower shall be liable for any tax or penalty imposed upon any
transaction under this Agreement or any of the other Financing Agreements or
giving rise to the Accounts or any other Collateral or which Lender may be
required to withhold or pay for any reason and Borrower agrees to indemnify and
hold Lender harmless with respect thereto, and to repay to Lender on demand the
amount thereof, and until paid by Borrower such amount shall be added and deemed
part of the Loans.
7.16 Properties in Good Condition.
----------------------------
(a) Borrower shall keep its properties, and shall cause each of its
Subsidiaries to keep its properties, in good repair, working order and condition
(reasonable wear and tear excepted) and, from time to time, make and cause each
of its Subsidiaries to make all needful and proper repairs, renewals,
replacements, additions and improvements thereto, so that the business carried
on may be properly and advantageously conducted at all times in accordance with
prudent business management.
(b) All of the Inventory is and will be held for sale or lease, or to be
furnished in connection with the rendition of services, in the ordinary course
of Borrower's business, and is and will be fit for such purposes. Borrower shall
keep Inventory in good and marketable condition, at its own expense. Borrower
shall not, without prior written notice to Lender, acquire or accept any
inventory on consignment or approval. Borrower agrees that all Inventory shall
be produced in accordance with the Federal Fair Labor Standards Act of 1938, as
amended, and all rules, regulations, and orders thereunder. Borrower shall
conduct a physical count of the Inventory at least once per fiscal year, and at
such other times as Lender reasonably requests, and shall promptly supply Lender
with a copy of such count accompanied by a report of the Value of such
Inventory, provided, that, Borrower may obtain certain parts and supplies on
-------- ----
consignment from GM needed for use in the assembly of the H2 Vehicles so long as
such parts and supplies shall at all times be segregated and separately
identifiable as consigned goods and in any report with respect to the Inventory
delivered to Lender under Section 7.20(a) hereof, such parts and supplies shall
be separately and clearly identified. Borrower shall not, except after prior
written notice to Lender, sell any Inventory on a xxxx-and-hold, guaranteed
sale, sale and return, sale on approval, or other repurchase or return basis;
provided, that, Borrower shall promptly furnish to Lender such reports with
-------- ----
respect thereto from time to time and in such form and substance as Lender may
require.
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(c) Borrower assumes all responsibility and liability arising from or
relating to the use, sale or other disposition of the Inventory.
7.17 Insurance. Borrower shall at all times maintain with financially
---------
sound and reputable insurers, insurance with respect to the Collateral against
loss or damage of the kind and in the amounts customarily insured against by
corporations of established reputation engaged in the same or similar businesses
and similarly situated and Borrower shall maintain public liability insurance
against claims for personal injury, death or property damage occurring upon, in,
about or in connection with the use of any properties owned, occupied or
controlled by it and occurring in connection with the use (or otherwise) of any
products manufactured or sold by it, and workmen's compensation insurance. Said
policies of insurance shall be satisfactory to Lender as to form, amount and
insurer. Borrower shall furnish certificates, policies or endorsements to Lender
as proof of such insurance, and, if it fails to do so, Lender is authorized, but
not required, to obtain such insurance at the expense of Borrower. All policies
shall provide for at least thirty (30) days prior written notice to Lender of
any cancellation or reduction of coverage and that Lender may act as attorney
for Borrower in obtaining, and at any time on or after the occurrence of an
Event of Default, adjusting, settling, amending and cancelling such insurance.
Borrower shall obtain non-contributory lender's loss payable endorsements to all
property insurance policies in form and substance satisfactory to Lender
specifying that the proceeds of such insurance shall be payable to Lender as its
interests may appear and further specifying that Lender shall be paid regardless
of an act or omission by Borrower. At its option, at any time on or after the
occurrence of an Event of Default, Lender may apply any insurance proceeds
received by Lender at any time to the cost of repairs or replacement of
Collateral and/or to payment of the Obligations, whether or not then due, in any
order and in such manner as Lender, in its discretion, may determine.
7.18 Compliance with ERISA. Borrower shall not, with respect to all
---------------------
"employee pension benefit plans" maintained by Borrower or any of its
Subsidiaries:
(a)(i) terminate any of such employee pension benefit plans so as to incur
any liability to the Pension Benefit Guaranty Corporation established pursuant
to ERISA, (ii) allow or suffer to exist any prohibited transaction involving any
of such employee pension benefit plans or any trust created thereunder which
would subject Borrower or such Subsidiary to a tax or penalty or other liability
on prohibited transactions imposed under Section 4975 of the Code or ERISA,
(iii) fail to pay to any such employee pension benefit plan any contribution
which it is obligated to pay under the terms of such plan, (iv) allow or suffer
to exist any accumulated funding deficiency, whether or not waived, with respect
to any such employee pension benefit plan, (v) allow or suffer to exist any
occurrence of a reportable event or any other event or condition which presents
a material risk of termination by the Pension Benefit Guaranty Corporation of
any such employee pension benefit plan that is a Single Employer Plan, which
termination could result in any liability to the Pension Benefit Guaranty
Corporation or (vi) incur any withdrawal liability with respect to any
multiemployer pension plan which is not fully bonded; and
(b) as used in this Section 7.18, the term "employee pension benefit
plans," "employee benefit plans", "accumulated funding deficiency" and
"reportable event" shall have the respective meanings assigned to them in
ERISA, and the term "prohibited transaction" shall have the meaning assigned to
it in Section 4975 of the Code and ERISA.
7.19 Notice of Default. Promptly upon becoming aware of the existence of
-----------------
any condition or event which constitutes an Event of Default or any condition or
event which, with the passage of time or notice or both would constitute such an
Event of Default, pursuant to the provisions of this Agreement or the other
Financing Agreements, Borrower shall give Lender written notice thereof
specifying the nature of such condition or event.
43
7.20 Financial Statements and Other Information.
------------------------------------------
(a) Borrower shall provide Lender:
(i) as soon as available, but in any event not later than
forty-five (45) days after the end of each fiscal quarter, quarterly
consolidated and consolidating financial statements of Borrower and its
Subsidiaries (including balance sheets, statements of income and cash flow
statements), accompanied by a certificate of the President or Chief Financial
Officer of Borrower stating that such financial statements were prepared in
accordance with GAAP consistently applied and fairly, accurately and completely
present the results of operations and financial condition of Borrower and its
Subsidiaries for the fiscal quarter then ended and as of the end of such fiscal
quarter subject to normal year end adjustment;
(ii) as soon as available, but in any event not later than
ninety (90) days after the end of each fiscal year, annual consolidated and
consolidating financial statements of Borrower and its Subsidiaries (including
balance sheets, statements of income and cash flow statements), together with
the opinion of independent certified public accountants, which accountants shall
be a nationally recognized independent accounting firm selected by Borrower and
its Subsidiaries and acceptable to Lender, that such consolidated and
consolidating financial statements have been prepared in accordance with GAAP
consistently applied, and present fairly the results of operations and financial
condition of Borrower and its Subsidiaries for the year then ended and as of the
end of such year;
(iii) promptly after delivery thereof, any management letters and
reports by such independent certified public accountants to Borrower and its
Subsidiaries;
(iv) as soon as available, but in any event not later than
thirty (30) days after the end of each month, unless Lender requests the
following reports or information more frequently: (A) interim financial
statements (including balance sheet, statement of income and statement of
changes in financial position), and (B) monthly accounts receivable agings and
inventory reports, and such schedules of Accounts and Inventory, together with
any further financial and other information regarding the Collateral or the
business of Borrower, as Lender may request from time to time, all in form and
substance satisfactory to Lender, including, but not limited to: (1) a list of
any Government Contracts for which the total aggregate amount of the Accounts
outstanding and unpaid by the Governmental Agency with respect to such Accounts
is in excess of $100,000, the status of Borrower's compliance with the
Assignment of Claims Act with respect thereto and the amount of unliquidated
progress payments outstanding under any Government Contracts at the end of the
preceding month, (2) a report with respect to any Indebtedness of Borrower to
any of its Subsidiaries, and (3) a certificate signed by the chief financial
officer of Borrower, in form and substance satisfactory to Lender, stating: (aa)
the amount of the GM Accounts of Borrower, (bb) all amounts GM has the right to
set off against such Accounts including, in the case of Borrower, the amounts GM
has the right to set off under the terms of the GM Assembly Agreement in payment
of amounts owing by Borrower to GM under the GM Note or otherwise, and (cc) all
amounts payable by Borrower to GM including any and all payables for goods and
services and royalty fees including, in the case of Borrower, any amounts
payable to GM under any of the GM Agreements or otherwise; and
(v) weekly inventory reports including, among other things,
separate categories for (A) the aggregate amount of all Eligible Humvee Finished
Goods Inventory consisting of fully operable Humvee vehicles awaiting minor
parts or details, (B) the date such Humvee vehicle finished all stages of the
Humvee production/assembly line, (C) all costs of completion including parts,
labor and overhead, (D) the aggregate amount of all of all Eligible H1 Vehicle
Finished Goods Inventory consisting of fully operable H1 Vehicles awaiting minor
parts or details, (E) the date such H1 Vehicle finished all stages of the H1
Vehicle production/assembly line and (F) all costs of completion including
parts, labor and overhead.
44
(b) Simultaneously with the delivery of each of the quarterly and annual
consolidated and consolidating financial statements as set forth herein, Lender
shall receive a certificate executed by the Chief Financial Officers of Borrower
certifying the absence (or existence) of any Event of Default pursuant to the
provisions hereof and the absence (or existence) of any event or condition
which, with the passage of time or the giving of notice or both would constitute
an Event of Default and that the Loans as at the end of such periods,
respectively, do not exceed the Lending Formulas. Should any such Event of
Default or event or condition exist, said certificate shall set forth such event
or condition or Event of Default in reasonable detail together with a
description of any action contemplated or being taken with respect thereto.
(c) Borrower will promptly notify Lender in writing of any investigation,
action, suit, proceeding or claim which might result in any material adverse
change in its business, properties, assets, goodwill or condition, financial or
otherwise.
(d) Borrower will promptly provide Lender with any information, notices,
requests or reports filed with, or furnished to, or received from, any
Governmental Agency (except as to those items arising in the ordinary course of
Borrower's business with any Governmental Agency under its Government Contracts
and not required to be provided to Lender under any other provision hereof or of
the other Financing Agreements, in which case only upon Lender's request).
(e) Borrower will promptly provide Lender such budgets, forecasts,
projections and other information respecting the business operations and
financial or other condition of Borrower and its Subsidiaries, as Lender may,
from time to time, reasonably request.
(f) Lender is hereby authorized to deliver a copy of any financial
statement or any other information relating to the business, operations or
financial condition of Borrower or its Subsidiaries, which may be furnished to
it hereunder or otherwise, to any court, regulatory body or agency or other
Government Agency having jurisdiction over Lender or to any other person which
shall, or shall have any right or obligation to, succeed to all or any part of
Lender's interest in any of the Loans, this Agreement or the Collateral,
including without limitation, any Participant.
(g) Borrower hereby irrevocably authorizes and directs all accountants,
auditors or other third parties to deliver to Lender, at Borrower's expense,
copies of the financial statements, and other accounting records relating to
Borrower and its Subsidiaries of any nature in its possession and to disclose to
Lender any information they may have regarding the business affairs and
financial condition of Borrower and its Affiliates.
7.21 Further Assurances. Borrower has executed or shall contemporaneously
------------------
herewith execute and deliver such of the other Financing Agreements to which it
is a party. Borrower shall, at its expense, duly execute and deliver, or shall
cause to be duly executed and delivered, such further agreements, instruments
and documents, including, without limitation, additional security agreements,
mortgages, deeds of trust, deeds to secure debt, collateral assignments, Uniform
Commercial Code financing statements or amendments or continuations thereof,
landlord's or mortgagee's waivers of liens and consents to the exercise by
Lender of all the rights and remedies hereunder, under any of the other
Financing Agreements or applicable law with respect to the Collateral, and do or
cause to be done such further acts as may be necessary or proper in Lender's
opinion to evidence, perfect, maintain and enforce the security interest and the
priority thereof in the Collateral and to otherwise effectuate the provisions or
purposes of this Agreement or any of the other Financing Agreements. Where
permitted by law, Borrower hereby authorizes Lender to execute and file one or
more Uniform Commercial Code financing statements signed only by Lender. Upon
the request of Lender, at any time and from time to time, Borrower shall, at its
cost and expense, do, make, execute, deliver and record, register or file,
financing statements,
45
mortgages, deeds of trust, deeds to secure debt, and other instruments, acts,
pledges, assignments and transfers (or cause the same to be done) and will
deliver to Lender such instruments evidencing items of Collateral as may be
requested by any of them.
SECTION 8. EVENTS OF DEFAULT AND REMEDIES
---------- ------------------------------
8.1 Events of Default. The occurrence of any one or more of the following
-----------------
events shall constitute an "Event of Default" hereunder and under the other
Financing Agreements:
(a) Borrower shall be in default in the payment of any of the Obligations
when due, which default shall continue for three (3) days; or
(b) Borrower shall fail to observe or perform any covenants or agreements
contained in this Agreement, the other Financing Agreements or in any other
document or instrument referred to herein or therein other than as described in
Section 8.1(a) above and such failure shall continue for fifteen (15) days,
provided, that, such fifteen (15) day period shall not apply in the case of: (i)
-------- ----
any failure to observe any such covenant or agreement which is not capable of
being cured at all or within such fifteen (15) day period or which has been the
subject of a prior failure within a six (6) month period or (ii) an intentional
breach by Borrower or its management of any such covenant or agreement; or
(c) any present or future representation, warranty or statement of fact
when made by or on behalf of Borrower to Lender is false or misleading in any
material respect; or
(d) Borrower shall be generally unable to pay its debts as they mature; or
(e) a final non-appealable judgment of a court of competent jurisdiction
is rendered against Borrower, any of its Subsidiaries or any person liable on or
in respect of the Obligations in excess of $250,000 in any one case or in excess
of $500,000 in the aggregate and the same shall remain undischarged for a period
in excess of thirty (30) days or execution shall at any time not be effectively
stayed; or
(f) Borrower shall suspend or discontinue doing business for any reason,
become insolvent, call a meeting of creditors or have a creditors' committee
appointed, make a general assignment for the benefit of creditors, or shall
admit in writing its inability to pay its debts as they become due, or shall
commence any action or proceeding for relief under the Bankruptcy Code or any
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or similar relief under the Bankruptcy Code or any other present or future
statute, law or regulation or shall file any answer admitting or not contesting
the allegations of a petition filed against it in any such proceeding or shall
seek or consent to or acquiesce in the appointment of any trustee, receiver or
liquidator of Borrower or all or any part of its properties or assets; or
(g) Borrower shall have commenced against it any action or proceeding for
relief under the Bankruptcy Code or any reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief under the
Bankruptcy Code or any other present or future statute, law or regulation or the
appointment of any trustee, receiver or liquidator of Borrower or any part of
its properties or assets, which is not dismissed within thirty (30) days of its
commencement, or Borrower by any act or omission indicates its consent to,
acquiescence in or approval of, any such action or proceeding or if the relief
requested is granted sooner; or
46
(h) Borrower shall be in continuing default for more than the applicable
cure period, in the payment of any principal or interest, if any, due on any
Indebtedness owed by it (other than trade payables not more than ninety (90)
days past due) in an aggregate principal amount of $1,000,000 or more or in the
performance of any of the other terms or covenants of any evidence of such
Indebtedness or of any mortgage, security agreement, indenture, pledge or other
agreement relating thereto or securing such indebtedness or with respect to any
contract, lease, license or other obligation owed to any person other than
Lender (including, but not limited to, any Government Contract) in an aggregate
amount of $1,000,000 or more; or
(i) there is any change in the control or ownership of Borrower; or
(j) there shall be a material adverse change in the business, assets or
condition (financial or otherwise) of Borrower from the date hereof; or
(k) any material default by Borrower or GM under any of the GM Agreements
(subject to any applicable cure period set forth therein) or the termination of
any of the GM Agreements;
(l) the occurrence of any default or event of default under any of the
other Financing Agreements; or
(m) the failure of GEP to make any dividend payment to Borrower in the
amounts and by the dates set forth on Schedule 7.6(g) hereof (whether or not the
failure to make such payment is as a result of the requirement of applicable law
or otherwise).
8.2 Remedies.
--------
(a) Without limiting Lender's rights to demand payment sooner as provided
in this Agreement, upon or at any time after the occurrence of any one or more
of such Events of Default, upon termination of this Agreement or the other
Financing Agreements, or if this Agreement and the other Financing Agreements
are not renewed, in addition to any other rights Lender may have under the
Financing Agreements or otherwise:
(i) Lender may, at any time thereafter, at its option, without
presentment for payment, demand, notice of dishonor or notice of protest or any
other or further notice, all of which are hereby expressly waived by Borrower,
declare any or all of the Obligations to be immediately due and payable,
together with interest at the highest rate of interest hereunder until fully and
indefeasibly paid, and
(ii) each Participant, to the fullest extent permitted by applicable
law, shall have the right to (A) set off against the Obligations any and all
deposits (whether general or special, time or demand, provisional or final),
credits, balances, accounts, monies or other assets which are the property of
Borrower and held by such Participant or owed by such Participant to Borrower
and (B) remit the same to Lender for application to the Obligations, and
(iii) without further notice to Borrower, Lender may appropriate, set
off and apply to the payment of any or all of the Obligations, any or all
Collateral, in such manner as Lender shall determine, enforce payment of any
Collateral, settle, compromise or release in whole or in part, any amounts owing
on the Collateral, make allowances and adjustments with respect thereto, issue
credits in Lender's or Borrower's name, sell, assign and deliver the Collateral
(or any part thereof), at public or private sale, at broker's board, for cash,
upon credit or otherwise, at Lender's option and discretion, and Lender may bid
or become purchaser at any such sale, if public, free from any right of
redemption which is hereby expressly waived; and
47
(iv) without limiting the generality of the foregoing, Lender is
hereby authorized at any time and from time to time, to set off and apply any
and all deposits (general or special, time or demand, provisional or final) at
any time held and other Indebtedness at any time owing by Lender to or for the
credit or the account of Borrower against any and all of the Obligations,
whether or not then due and payable, and
(v) Lender shall have the right, without notice to Borrower (except
as otherwise expressly provided herein), at any time and from time to time in
its discretion, with or without judicial process or the aid or assistance of
others and without cost to Lender (A) to enter upon any premises other than the
H2 Facility (except that if any Collateral is located in H2 Facility Borrower
shall cooperate in all respects with Lender and assist Lender in obtaining
access to the H2 Facility) on or in which any of the Inventory or Equipment may
be located and, without resistance or interference by Borrower, take possession
of the Inventory; (B) to complete processing, manufacturing and repair of all or
any portion of the Inventory using the Equipment; (C) to sell, foreclose or
otherwise dispose of any part or all of the Inventory on or in any premises of
Borrower or premises of any other party; (D) to require Borrower, at its
expense, to assemble and make available to Lender any part or all of the
Inventory or Equipment at any reasonable place and time designated by Lender;
and (E) to remove any or all of the Inventory from any premises on or in which
the same may be located, for the purpose of effecting the sale, foreclosure or
other disposition thereof or for any other purpose.
(b) Lender shall have all of the rights and remedies of a secured party
under the UCC or applicable law of any other State in which any Collateral may
be situated, in addition to all of the rights and remedies set forth in this
Agreement and the other Financing Agreements, and in any instrument or document
referred to herein or therein, and/or under any other applicable law relating to
this Agreement, the other Financing Agreements, the Obligations or the
Collateral.
(c) Borrower agrees that the giving of five (5) days notice by Lender to
its address set forth below, designating the place and time of any public sale
or of the time after which any private sale or other intended disposition of the
Collateral is to be made, shall be deemed to be reasonable notice thereof and
Borrower waives any other notice with respect thereto.
(d) The net cash proceeds resulting from the exercise of any of the
foregoing rights or remedies shall be applied by Lender to the payment of the
Obligations in such order as Lender may elect, and Borrower shall remain liable
to Lender for any deficiency.
(e) In the event Lender institutes an action to recover any Collateral or
seeks recovery of any Collateral by way of prejudgment remedy or otherwise,
Borrower hereby irrevocably waives (i) the posting of any bond, surety or
security with respect thereto which might otherwise be required, (ii) any demand
for possession prior to the commencement of any suit or action to recover the
Collateral, and (iii) any requirement that Lender retain possession and not
dispose of any Collateral until after trial or final judgment.
(f) Lender may, at its option, cure any default by Borrower under any
agreement with any Person, which constitutes, or with notice or passage of time
or both would constitute, an Event of Default hereunder or under any of the
other Financing Agreements, or pay or bond on appeal any judgment entered
against Borrower (irrespective of the amount of said judgment or the time
elapsed since entry thereof), and charge Borrower's account therefor, such
amounts to be repayable by Borrower on demand, together with interest thereon at
the highest rate of interest hereunder; provided, however, Lender shall be under
-------- -------
no obligation to effect such cure, payment or bonding and shall not, by making
any payment for Borrower's account, be deemed to have assumed any obligation or
liability of Borrower.
48
(g) The enumeration of the foregoing rights and remedies is not intended
to be exclusive, and such rights and remedies are in addition to and not by way
of limitation of any other rights or remedies Lender may have under the UCC or
other applicable law. Lender shall have the right to determine which rights and
remedies, and in which order any of the same, are to be exercised, and to
determine which Collateral is to be proceeded against and in which order, and
the exercise of any right or remedy shall not preclude the exercise of any
others, all of which shall be cumulative.
(h) No act, failure or delay by Lender shall constitute a waiver of any of
the rights and remedies of Lender. No single or partial waiver by Lender of any
provision of this Agreement or any of the other Financing Agreements, or breach
or default thereunder, or of any right or remedy which Lender may have shall
operate as a waiver of any other provision, breach, default, right or remedy or
of the same provision, breach, default, right or remedy on a future occasion.
(i) Borrower waives presentment, notice of dishonor, protest and notice of
protest of all instruments included in or evidencing any of the Obligations or
the Collateral and any and all notices or demands whatsoever (except as
expressly provided herein). Lender may, at all times, proceed directly against
Borrower to enforce payment of the Obligations and shall not be required to take
any action of any kind to preserve, collect or protect any rights in the
Collateral.
SECTION 9. COLLECTION AND ADMINISTRATION
---------- -----------------------------
9.1 Collections; Management of Collateral.
-------------------------------------
(a) Until the authority of Borrower to do so is curtailed or terminated at
any time by Lender, Borrower shall, at its expense and on behalf of Lender,
collect, as the property of Lender and in trust for Lender, all remittances and
all amounts unpaid on Accounts or other Collateral, and Borrower shall not
commingle such collections with Borrower's own funds. Borrower shall on the day
received remit all such collections to Lender in the form received duly endorsed
by Borrower for deposit with Lender, unless Lender shall direct Borrower
otherwise. All amounts collected on Accounts or other Collateral when received
by Lender at such place as Lender may designate from time to time shall be
credited to the loan account of Borrower, after adding one (1) business day for
federal funds wire transfers and two (2) business days for checks and other
remittances, including, without limitation, checks issued by a Governmental
Agency, in each case as to any form of remittance, conditional upon final
payment to Lender.
(b) Notwithstanding anything to the contrary contained in Section 9.1(a)
above, if at any time there are no Loans outstanding on each such day that there
are no Loans outstanding, for purposes of calculating interest on the
Obligations for such day, all amounts collected on Accounts or other Collateral
received by Lender in its account designated for such purpose will be applied
(conditional upon final collection) to the Obligations on the business day of
receipt by Lender provided such payments and notice thereof are received in
accordance with Lender's usual and customary practices as in effect from time to
time and within sufficient time to credit Borrower's loan account on such day,
and if not, then on the next business day. To the extent Lender may hold cash
collateral to secure all of the Obligations on terms and conditions determined
by Lender, so long as no Event of Default shall exist or have occurred and be
continuing, Borrower shall receive a credit to its loan account maintained by
Lender on the funds held by Lender at a rate equal to three (3%) percent per
annum less than the Prime Rate. Such credit shall be applied to the loan account
of Borrower as of the first day of each month.
(c) Borrower shall immediately upon obtaining knowledge thereof report to
Lender all reclaimed, repossessed or returned goods, material claims of Account
Debtors and any other matter affecting the
49
value, enforceability or collectibility of Accounts. At Lender's request, any
goods reclaimed or repossessed by or returned to Borrower will be set aside,
marked with Lender's name and held by Borrower for the account of Lender and
subject to the security interests of Lender. All claims and disputes relating to
Accounts are to be promptly adjusted within a reasonable time, at Borrower's own
cost and expense. Lender may, at its option, settle, adjust or compromise claims
and disputes relating to Accounts which are not adjusted by Borrower within a
reasonable time.
9.2 Right of Inspection; Access. Lender and its representatives shall at
---------------------------
all times have free access to and right of inspection of the Collateral and have
full access to and the right to examine and make copies each of Borrower's books
and records, to confirm and verify all Accounts, to perform general audits and
to do whatever else Lender deems necessary to protect the interests of Lender.
Lender may at any time remove from the premises of Borrower or require Borrower
or any accountants and auditors employed by Borrower to deliver any books and
records and Lender may, without cost or expense to them, use such of Borrower's
personnel, supplies, computer equipment and space at its places of business as
may be reasonably necessary for the handling of collections.
9.3 Lock Box or Blocked Account. Borrower shall, in the manner requested
---------------------------
by Lender from time to time, direct that all proceeds of Accounts, letters of
credit, banker's acceptances and other proceeds of Collateral shall be payable
to a lock box or post office box designated by Lender and under its control
and/or deposited into a blocked account under its control and/or deposited into
an account maintained in Lender's name and under its control and in connection
therewith shall execute such lock box, blocked account and other agreement as
Lender in its discretion shall specify.
9.4 Accounts Documentation. Borrower shall maintain its shipping forms,
----------------------
invoices and other related documents in a form satisfactory to Lender and shall
maintain its books, records and accounts in accordance with GAAP consistently
applied. Borrower shall keep and maintain, at its cost and expense, satisfactory
and complete books and records of all Accounts, all payments received or credits
granted thereon, and all other dealings therewith. At such times as Lender may
reasonably request, Borrower shall deliver to Lender all original documents
evidencing the sale and delivery of goods or the performance of services which
created any Accounts, including, but not limited to, all original contracts,
orders, invoices, bills of lading, warehouse receipts, delivery tickets and
shipping receipts, together with schedules describing the Accounts and/or
written confirmatory assignments to Lender of each Account, in form and
substance satisfactory to Lender and duly executed by Borrower, together with
such other information as Lender may request. In no event shall the making or
the failure to make or the content of any schedule or assignment or Borrower's
failure to comply with the provisions hereof be deemed or construed as a waiver,
limitation or modification of the security interest in, lien upon and assignment
of the Collateral or the representations, warranties or covenants under this
Agreement or the other Financing Agreements. Any documents, schedules, invoices
or other papers delivered to Lender, pursuant to this Section or otherwise, may
be destroyed or otherwise disposed of by them one (1) year after the same are
delivered, unless Borrower makes written request therefor and pays all expenses
attendant to their return, in which event Lender or such Lender shall return
same when their actual or anticipated need therefor has ceased.
9.5 Specific Powers. Borrower hereby constitutes Lender and its designee,
---------------
as its attorney-in-fact, at its own cost and expense, to exercise at any time
all or any of the following powers which, being coupled with an interest, shall
be irrevocable until all Obligations have been paid in full: (a) to receive,
take, endorse, assign, deliver, accept and deposit, in the name of Lender or
Borrower, any and all checks, notes, drafts, remittances and other instruments
and documents relating to the Collateral; (b) on or after the occurrence of an
Event of Default, or an event which with notice, passage of time or both would
constitute an Event of Default, to receive, open and dispose of all mail
addressed to Borrower and to notify postal authorities to change the address for
delivery thereof to such address as Lender may designate; (c) to transmit to
Account Debtors notice of Lender's interest therein and to request from such
Account
50
Debtors at any time, in the name of Lender or Borrower or that of Lender's
designee, information concerning the Accounts and the amounts owing thereon; (d)
on or after the occurrence of an Event of Default, or an event which with
notice, passage of time or both would constitute an Event of Default, to notify
Account Debtors to make payment directly to Lender; (e) on or after the
occurrence of an Event of Default, or an event which with notice, passage of
time or both would constitute an Event of Default, to take or bring, in the name
of Lender or Borrower, all steps, actions, suits or proceedings deemed by Lender
necessary or desirable to effect collection of the Collateral; and (f) to
execute in Borrower's name and on its behalf any UCC financing statements or
amendments thereto. Borrower hereby releases Lender and its officers, employees
and designees, from any liability arising from any act or acts under this
Agreement or in furtherance thereof, whether of omission or commission, and
whether based upon any error of judgment or mistake of law or fact, except as a
result of Lender's gross negligence or wilful misconduct as determined pursuant
to a final non-appealable order of a court of competent jurisdiction.
SECTION 10. EFFECTIVE DATE; TERMINATION;
COSTS; MISCELLANEOUS
--------------------
10.1 Term.
----
(a) This Agreement and the other Financing Agreements shall become
effective as of the date set forth on the first page hereof and shall continue
in full force and effect for a term ending October 30, 2004 (the "Renewal
Date"), and from year to year thereafter, unless sooner terminated pursuant to
the terms hereof.
(b) Lender or Borrower may terminate this Agreement and the other
Financing Agreements effective on the Renewal Date or on the anniversary of the
Renewal Date in any year by giving to the other party at least sixty (60) days
prior written notice; provided, that, this Agreement and all other Financing
-------- -----
Agreements must be terminated simultaneously.
(c) In addition, Lender shall have the right to terminate this Agreement
and the other Financing Agreements as to future Loans and Letter of Credit
Accommodations and other liabilities of Lender immediately at any time upon the
occurrence of an Event of Default or an act, condition or event which with
notice or passage of time or both would constitute an Event of Default.
(d) Upon the effective date of termination or non-renewal of the Financing
Agreements, Borrower shall pay to Lender, in full, all outstanding and unpaid
Obligations (including but not limited to the Loans and all interest, fees
(including the early termination fees provided herein, if applicable), charges,
expenses and other amounts provided for hereunder, under the other Financing
Agreements or otherwise) and shall furnish cash collateral to Lender for all
undrawn amounts available pursuant to previously issued and outstanding Letter
of Credit Accommodations, by wire transfer in federal funds to such bank account
of Lender, as Lender may, in its discretion, designate in writing to Borrower
for such purpose. Interest at the Interest Rate shall be due until and
including the next business day, if the amounts so paid by Borrower to the bank
account designated by Lender are received in such bank account later than 12:00
noon, New York, New York time.
(e) No termination of the Financing Agreements shall relieve or discharge
Borrower of its duties, obligations and covenants under the Financing Agreements
until all Obligations have been fully discharged and paid, and Lender's
continuing security interest in the Collateral shall remain in effect until all
such Obligations have been fully discharged and paid.
51
(f) If Lender terminates this Agreement or the other Financing Agreements
upon the occurrence of an Event of Default or at the request of Borrower prior
to the end of the then current term of this Agreement and the other Financing
Agreements, in view of the impracticality and extreme difficulty of ascertaining
actual damages and by mutual agreement of the parties as to a reasonable
calculation of Lender's lost profits as a result thereof, Borrower hereby agrees
to pay to Lender, upon the effective date of such termination, an early
termination fee in an amount equal to:
(i) two (2%) percent of the Maximum Credit, if such termination is
effective on or prior to October 30, 2003; and
(ii) one (1%) percent of the Maximum Credit, if such termination is
effective after October 30, 2003 but prior to October 30, 2004.
Such early termination fee shall be presumed to be the amount of damages
sustained by said early termination and Borrower agrees that it is reasonable
under the circumstances currently existing. The early termination fee provided
for in this Section 10.1 shall be deemed included in the Obligations.
10.2 Expenses and Additional Fees.
----------------------------
(a) Borrower shall pay to Lender on demand all reasonable costs and
expenses that Lender pays or incurs in connection with the negotiation,
preparation, consummation, administration, enforcement and termination of this
Agreement and the other Financing Agreements, including, without limitation: (i)
reasonable attorneys' and paralegals' fees and disbursements of counsel to
Lender and any Participant; (ii) costs and expenses (including reasonable
attorneys' and paralegals' fees and disbursements) for any amendment,
supplement, waiver, consent, or subsequent closing in connection with this
Agreement and the other Financing Agreements and the transactions contemplated
hereby and thereby; (iii) costs and expenses of lien and title searches and
title insurance; (iv) taxes, fees and other charges for recording any agreements
or documents with the Office of Patents and Trademarks, the Copyright Office or
any other governmental authority, and the filing of UCC financing statements and
continuations, and other actions to perfect, protect, and continue the security
interests and liens of Lender in the Collateral; (v) sums paid or incurred to
pay any amount or take any action required of Borrower under the Financing
Agreements that Borrower fails to pay or take; (vi) costs of appraisals,
environmental audits, inspections and verifications of the Collateral,
including, without limitation, travel, lodging, and meals for inspections of the
Collateral and Borrower's operations by Lender or its agents, plus a charge of
$500 per person per day for Lender's field examiners; (vii) costs and expenses
of forwarding loan proceeds, collecting checks and other items of payment, and
establishing and maintaining payment accounts and lock boxes; (viii) costs and
expenses of preserving and protecting the Collateral; and (ix) costs and
expenses (including attorneys' and paralegals' fees and disbursements) paid or
incurred to obtain payment of the Obligations, enforce the security interests
and liens of Lender, sell or otherwise realize upon the Collateral, and
otherwise enforce the provisions of this Agreement and the other Financing
Agreements, or to defend any claims made or threatened against Lender arising
out of the transactions contemplated hereby and thereby (including, without
limitation, preparations for and consultations concerning any such matters). The
foregoing shall not be construed to limit any other provisions of the Financing
Agreements regarding costs and expenses to be paid by Borrower.
(b) Borrower shall pay to Lender all of its customary charges and fees in
connection with (i) any payment, claim or refund relating to the dishonor of any
checks or other items of any of Borrower or Account Debtors, and (ii) wire
transfers to Borrower.
(c) All sums provided for in this Section 10.2 shall be part of the
Obligations, shall be payable on demand, and shall accrue interest after demand
for payment thereof at the highest rate of interest then
52
payable hereunder. Lender is hereby irrevocably authorized to charge any amounts
payable hereunder directly to any of the account(s) maintained by Lender with
respect to Borrower.
10.3 Waiver of Existing Defaults.
---------------------------
(a) Subject to the terms and conditions contained herein, Lender hereby
waives: (i) Borrower's compliance with the covenants contained in Sections 6.11
and 6.13 of the Existing Agreement for the period through and including the date
hereof, (ii) Borrower's compliance with the covenants contained in Section
6.6(f) of the Existing Agreement for the period through and including the date
hereof, and (ii) Borrower's compliance with the covenant contained in Section
2(c)(i) of the letter agreement providing for Lender's consent to the formation
of GEP, dated September 14, 1999, by and among, Borrower, GEP, AMGSC and Lender
(the "General Engine Consent") for the period through and including the date
hereof.
(b) The waivers contained in Section 10.3(a) should not be construed as a
bar to or an express or implied waiver of any other or further Event of Default
which may have occurred on or prior to the date hereof, whether or not
continuing on that date, or any other or further Event of Default which may
occur after that date, whether similar in kind or otherwise, and shall not
constitute a waiver, express or implied of any of the rights or remedies of
Lender arising under the terms of the Existing Agreement, the Loan Agreement,
the General Engine Consent or the other Financing Agreements on any future
occasion or otherwise.
10.4 Survival of Agreement. All agreements, representations and warranties
---------------------
contained herein or made in writing by the parties hereto in connection with the
transactions contemplated hereby shall survive the execution and delivery of
this Agreement, the other Financing Agreements and the consummation of the
transactions contemplated herein or therein regardless of any investigation made
by or on behalf of Lender.
10.5 No Waiver; Cumulative Remedies. No failure to exercise, and no delay
------------------------------
in exercising on the part of Lender, any right, power or privilege under this
Agreement or under any of the other Financing Agreements or other documents
referred to herein or therein shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, power or privilege hereunder or
thereunder preclude any other or further exercise thereof or the exercise of
any other right, power and privilege. No notice to or demand on Borrower not
required hereunder or any of the other Financing Agreements shall entitle
Borrower to any other or further notice or demand in similar or other
circumstances or constitute a waiver of the rights of Lender to any other or
further action in any circumstances without notice or demand. The rights and
remedies of Lender under this Agreement, the other Financing Agreements and any
other present and future agreements between Lender and Borrower are cumulative
and not exclusive of any rights or remedies provided by law or under any of the
Financing Agreements or such other agreements and all such rights and remedies
may be exercised successively or concurrently.
10.6 Notices. All notices, requests and demands to or upon the respective
-------
parties hereto shall be in writing and shall be deemed to have been duly given
or made if by hand, immediately upon delivery; if by telex, telecopier or
telegram, immediately upon sending; if by express mail or any other overnight
delivery service, one (1) day after dispatch; and if by registered or certified
mail, return receipt requested, five (5) days after mailing. All notices,
requests and demands upon the parties are to be given to the following addresses
(or to such other address as any party may designate by notice in accordance
with this Section):
53
If to Borrower: AM General Corporation
000 Xxxxx Xxxxx Xxxxxx
Xxxxx Xxxx, Xxxxxxx 00000
Attn: President
with copies to: The Renco Group, Inc.
00 Xxxxxxxxxxx Xxxxx. Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 10112
Attn: Xx. Xxx Xxxx Xxxxxxx
If to Lender: Congress Financial Corporation
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Portfolio Manager
10.7 Entire Agreement. This Agreement, the other Financing Agreements, any
----------------
supplements hereto or thereto, and any instruments or documents delivered or to
be delivered in connection herewith or therewith represents the entire agreement
and understanding concerning the subject matter hereof and thereof between the
parties hereto, and supersede all other prior and contemporaneous agreements,
understandings, negotiations and discussions, representations, warranties,
commitments, offers and contracts concerning the subject matter hereof, whether
oral or written.
10.8 Amendments and Waivers. Neither this Agreement, nor any of the other
----------------------
Financing Agreements or any other instrument or document referred to herein or
therein may be changed, waived, discharged or terminated orally, except by an
instrument in writing signed by the party against whom enforcement of the
change, waiver, discharge or termination is sought.
10.9 Applicable Law. This Agreement and the other Financing Agreements
--------------
and all other documents referred to herein or therein are being executed and
delivered in New York, New York and together with all transactions and the
obligations and rights thereunder, shall be governed by, construed and
interpreted in accordance with the laws of the State of New York.
10.10 Successors. This Agreement, the other Financing Agreements and any
----------
other document referred to herein or therein shall be binding upon and inure to
the benefit of and be enforceable by Lender, Borrower and its respective
successors and assigns, except that Borrower may not assign its rights under
this Agreement, the other Financing Agreements and any other document referred
to herein or therein without the prior written consent of Lender. Lender may,
after notice to Borrower, assign its rights and delegate its obligations under
this Agreement and the other Financing Agreements and further may assign, or
after notice to Borrower which notice shall inform Borrower of the name of the
new participant, sell participations in, all or any part of the Loans, the
Letter of Credit Accommodations or any other interest herein to another bank or
other person, in which event, the assignee or participant shall have, to the
extent of such assignment or participation, the same rights and benefits as it
would have if it were the Lender hereunder, except as otherwise provided by the
terms of such assignment or participation. Lender may furnish any information
concerning Borrower in the possession of Lender from time to time to assignees
and participants or prospective assignees and participants.
10.11 Participant's Security Interests. If a Participant shall at any time
--------------------------------
participate with Lender in the Loans and Letter of Credit Accommodations,
Borrower hereby grants to such Participant and such Participant shall have and
is hereby given, a continuing lien on and security interest in any money,
securities and other property of Borrower in the custody or possession of the
Participant, including the right of setoff, to the extent of the Participant's
participation in the Obligations, and such Participant shall
54
be deemed to have the same right of setoff to the extent of its participation in
the Obligations, as it would have if it were a direct lender.
10.12 Partial Invalidity. If any provision of this Agreement or the other
------------------
Financing Agreements is held to be invalid or unenforceable, such invalidity or
unenforceability shall not invalidate this Agreement or the other Financing
Agreements as a whole but this Agreement or the particular Financing Agreement,
as the case may be, shall be construed as though it did not contain the
particular provision or provisions held to be invalid or unenforceable and the
rights and obligations of the parties shall be construed and enforced only to
such extent as shall be permitted by law.
10.13 Headings. The headings used herein are for convenience only and do
--------
not constitute matters to be considered in interpreting this Agreement.
10.14 Waiver of Jury Trial. The parties hereto hereby waive trial by jury
--------------------
in any action or proceeding of any kind with respect to, in connection with, or
arising out of this Agreement, the other Financing Agreements, the Obligations,
the Collateral, or any instrument, document or guaranty delivered pursuant
hereto or to any of the foregoing, or the validity, protection, interpretation,
administration, collection or enforcement hereof or thereof, or any other claim
or dispute hereunder or thereunder.
10.15 Waiver of Counterclaims; Jurisdiction; Service of Process. Borrower
---------------------------------------------------------
hereby waives all rights of setoff and rights to impose permissive counterclaims
in the event of any litigation with respect to any matter connected with this
Agreement, the other Financing Agreements, the Obligations, the Collateral, or
any transaction between the parties hereto, and irrevocably consents and submits
to the non-exclusive jurisdiction of the Supreme Court of the State of New York
in New York County, and of the United States District Court for the Southern
District of New York and the courts of any State in which any of the Collateral
is located and of any Federal Court located in such States in connection with
any action, proceeding or claim arising out of or relating to this Agreement,
the other Financing Agreements, the Obligations, the Collateral, or any
document, instrument or guaranty delivered pursuant hereto or to any of the
foregoing. In any such litigation, Borrower waives personal service of any
summons, complaint or other process and agrees that the service thereof may be
made by certified or registered mail, return receipt requested, directed to it
at its chief executive office set forth herein, or designated in writing
pursuant to this Agreement, or in any other manner permitted by the rules of
either of said Courts. Within thirty (30) days after such mailing, Borrower
named in any such summons, complaint or other process shall appear to answer
such summons, complaint or other process, failing which Borrower shall be deemed
in default and judgment may be entered by Lender against Borrower for the amount
of the claim and other relief requested therein.
10.16 Indemnification. Borrower hereby indemnifies, defends and holds
---------------
Lender, and its directors, officers, agents, employees and counsel, harmless
from and against any and all losses, claims, damages, liabilities, deficiencies,
judgments, penalties or expenses imposed on, incurred by or asserted against any
of them, except as a result of Lender's gross negligence or wilful misconduct
as determined pursuant to a final non-appealable order of a court of competent
jurisdiction.
10.17 Counterparts. This Agreement may be executed in any number of
------------
counterparts, and by Lender and Borrower in separate counterparts, each of which
shall be an original, but all of which shall together constitute one and the
same agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
55
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered by their duly authorized officers as of the day and year
first above written.
CONGRESS FINANCIAL CORPORATION
By:___________________________________
Title:________________________________
AM GENERAL CORPORATION
By:___________________________________
Title:________________________________
56
