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Exhibit 10.41
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LOAN AND SECURITY AGREEMENT
BY AND BETWEEN
XXXXXX TRAILERS, INC.
AND
FOOTHILL CAPITAL CORPORATION
DATED AS OF MARCH 28, 1997
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TABLE OF CONTENTS
Page(s)
1. DEFINITIONS AND CONSTRUCTION .......................................... 1
1.1 Definitions ....................................................... 1
1.2 Accounting Terms .................................................. 16
1.3 Code .............................................................. 16
1.4 Construction ...................................................... 16
1.5 Schedules and Exhibits ............................................ 17
2. LOAN AND TERMS OF PAYMENT ............................................. 17
2.1 Revolving Advances ................................................ 17
2.2 Letters of Credit ................................................. 18
2.3 Term Loan ......................................................... 20
2.4 Overadvances ...................................................... 21
2.5 Interest and Letter of Credit Fees: Rates, Payments, and
Calculations ...................................................... 21
2.6 Collection of Accounts ............................................ 22
2.7 Crediting Payments; Application of Collections .................... 22
2.8 Designated Account ................................................ 23
2.9 Maintenance of Loan Account; Statements of Obligations ............ 23
2.10 Fees .............................................................. 23
3. CONDITIONS; TERM OF AGREEMENT ......................................... 24
3.1 Conditions Precedent to the Initial Advance
and Letter of Credit and the Term Loan ............................ 24
3.2 Conditions Precedent to all Advances and all Letters of
Credit and the Term Loan .......................................... 26
3.3 Condition Subsequent .............................................. 26
3.4 Term; Automatic Renewal ........................................... 27
3.5 Effect of Termination ............................................. 27
3.6 Early Termination by Borrower ..................................... 27
3.7 Termination Upon Event of Default ................................. 27
4. CREATION OF SECURITY INTEREST ......................................... 28
4.1 Grant of Security Interest ........................................ 28
4.2 Negotiable Collateral ............................................. 28
4.3 Collection of Accounts, General Intangibles and
Negotiable Collateral ............................................. 28
4.4 Delivery of Additional Documentation Required ..................... 28
4.5 Power of Attorney ................................................. 29
4.6 Right to Inspect .................................................. 29
5. REPRESENTATIONS AND WARRANTIES ........................................ 29
5.1 No Encumbrances ................................................... 29
5.2 Eligible Accounts ................................................. 30
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5.3 Eligible Inventory ................................................ 30
5.4 Equipment ......................................................... 30
5.5 Location of Inventory and Equipment ............................... 30
5.6 Inventory Records ................................................. 30
5.7 Location of Chief Executive Office; FEIN .......................... 30
5.8 Due Organization and Qualification; Subsidiaries .................. 30
5.9 Due Authorization; No Conflict .................................... 30
5.10 Litigation ........................................................ 31
5.11 No Material Adverse Change ........................................ 31
5.12 Solvency .......................................................... 32
5.13 Employee Benefits ................................................. 32
5.14 Environmental Condition ........................................... 32
6. AFFIRMATIVE COVENANTS ................................................. 32
6.1 Accounting System ................................................. 32
6.2 Collateral Reporting .............................................. 32
6.3 Financial Statements, Reports, Certificates ....................... 33
6.4 Tax Returns ....................................................... 34
6.5 Guarantor Reports ................................................. 34
6.6 Returns ........................................................... 34
6.7 Title to Inventory ................................................ 35
6.8 Maintenance of Equipment .......................................... 35
6.9 Taxes ............................................................. 35
6.10 Insurance ......................................................... 35
6.11 No Setoffs or Counterclaims ....................................... 37
6.12 Location of Inventory and
Equipment ......................................................... 37
6.13 Compliance with Laws .............................................. 37
6.14 Employee Benefits ................................................. 38
6.15 Leases ............................................................ 38
6.16 Real Property ..................................................... 38
6.17 No-Offset Letters ................................................. 39
6.18 Used Trailer Inventory ............................................ 39
7. NEGATIVE COVENANTS .................................................... 39
7.1 Indebtedness ...................................................... 39
7.2 Liens ............................................................. 40
7.3 Restrictions on Fundamental Changes ............................... 40
7.4 Disposal of Assets ................................................ 40
7.5 Change Name ....................................................... 40
7.6 Guarantee ......................................................... 40
7.7 Nature of Business ................................................ 41
7.8 Prepayments and Amendments ........................................ 41
7.9 Change of Control ................................................. 41
7.10 Consignments ...................................................... 41
7.11 Distributions ..................................................... 41
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7.12 Accounting Methods ................................................ 41
7.13 Investments ....................................................... 41
7.14 Transactions with Affiliates ...................................... 41
7.15 Suspension ........................................................ 42
7.16 Compensation ...................................................... 42
7.17 Use of Proceeds ................................................... 42
7.18 Change in Location of Chief Executive Office; Inventory and
Equipment with Bailees ............................................ 42
7.19 No Prohibited Transactions Under ERISA ............................ 42
7.20 Financial Covenants ............................................... 43
7.21 Capital Expenditures .............................................. 45
7.22 Sale of U.S. Xpress Used Trailer Inventory ........................ 45
7.23 Billing Practices ................................................. 45
7.24 Repurchase of Used Trailer Inventory .............................. 45
8. EVENTS OF DEFAULT ..................................................... 45
9. FOOTHILL'S RIGHTS AND REMEDIES ........................................ 46
9.1 Rights and Remedies ............................................... 46
9.2 Remedies Cumulative ............................................... 48
10. TAXES AND EXPENSES .................................................... 49
11. WAIVERS; INDEMNIFICATION .,,,,......................................... 49
11.1 Demand; Protest; etc .............................................. 49
11.2 Foothill's Liability for Collateral ............................... 49
11.3 Indemnification ................................................... 49
12. NOTICES ............................................................... 50
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER ............................ 51
14. DESTRUCTION OF BORROWER'S DOCUMENTS ................................... 51
15. GENERAL PROVISIONS .................................................... 52
15.1 Effectiveness ..................................................... 52
15.2 Successors and Assigns ............................................ 52
15.3 Section Headings .................................................. 52
15.4 Interpretation .................................................... 52
15.5 Severability of Provisions ........................................ 52
15.6 Amendments in Writing ............................................. 52
15.7 Counterparts; Telefacsimile
Execution ......................................................... 52
15.8 Revival and Reinstatement of Obligations.. ........................ 53
15.9 Integration ....................................................... 53
15.10 Brokers Fees ...................................................... 53
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SCHEDULES AND EXHIBITS
Exhibit A Form of Xxxx and Hold Letter
Schedule E-1 Eligible Inventory Locations
Schedule E-2 Eligible Used Trailer Inventory Locations
Schedule P-1 Permitted Liens
Schedule R-1 Real Property Collateral
Schedule 5.10 Litigation
Schedule 5.13 ERISA Benefit Plans
Schedule 5.14 Environmental Matters
Schedule 6.12 Location of Inventory and Equipment
Schedule 7.1 Existing Indebtedness
Exhibit C-1 Form of Compliance Certificate
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LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (THIS "AGREEMENT"), is entered into as of
March 28, 1997, between FOOTHILL CAPITAL CORPORATION, a California corporation
("Foothill"), with a place of business located at 00000 Xxxxx Xxxxxx Xxxxxxxxx,
Xxxxx 0000, Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000 and XXXXXX TRAILERS, INC., a
Delaware corporation ("Borrower"), with its chief executive office located at
2727 Paces Ferry Road, Xxx Xxxxx Xxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxx 00000.
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION.
1.1 DEFINITIONS. As used in this Agreement, the following
terms shall have the following definitions:
"Account Debtor" means any Person who is or who may become
obligated under, with respect to, or on account of, an Account.
"Accounts" means all currently existing and hereafter
arising accounts, contract rights, and all other forms of obligations owing to
Borrower arising out of the sale or lease of goods or the rendition of
services by Borrower, irrespective of whether earned by performance, and any
and all credit insurance, guaranties, or security therefor.
"Advances" has the meaning set forth in Section 2.1(a).
"Affiliate" means, as applied to any Person, any other
Person who directly or indirectly controls, is controlled by, is under common
control with or is a director or officer of such Person. For purposes of
this definition, "control" means the possession, directly or indirectly, of the
power to vote 5% or more of the securities having ordinary voting power for the
election of directors or the direct or indirect power to direct the management
and policies of a Person.
"Agreement" has the meaning set forth in the preamble
hereto.
"Appraised Inventory Liquidation Value" means (i) in the
case of Used Trailer Inventory, the appraised orderly liquidation value of such
Used Trailer Inventory determined by Xxxxxx & Xxxxxx, Incorporated or another
appraiser reasonably acceptable to Foothill and (ii) in the case of Inventory
other than Used Trailer Inventory, the appraised liquidation value of such
Inventory, determined by MB Valuation Services, Inc. or another appraiser
reasonably acceptable to Foothill. The Appraised Inventory Liquidation Value
shall be based on the most recent appraisal obtained by Foothill or by
Borrower.
"Authorized Person" means any officer or other employee of
Borrower.
"Availability" means, at any time, the difference between
(a) the Borrowing Base and (b) the sum of, without duplication (i) all Advances
made by Foothill under Section 2.1
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that are outstanding plus (ii) the amount of undrawn or unreimbursed Letters of
Credit issued by Foothill under Section 2.2.
"Average Unused Portion of Maximum Amount" means, as of any date
of determination, (a) the Maximum Amount, less (b) the sum of (i) the average
Daily Balance of Advances that were outstanding during the immediately preceding
month, plus (ii) the average Daily Balance of the Term Loan that was outstanding
during the immediately preceding month plus (iii) the average Daily Balance of
the undrawn Letters of Credit that were outstanding during the immediately
preceding month.
"Bankruptcy Code" means the United States Bankruptcy Code (11
U.S.C. Section 101 et seq.), as amended, and any successor statute.
"Benefit Plan" means a "defined benefit plan" (as defined in
Section 3(35) of ERISA) for which Borrower, any Subsidiary of Borrower, or any
ERISA Affiliate has been an "employer" (as defined in Section 3(5) of ERISA)
within the past six years.
"Borrower" has the meaning set forth in the preamble to this
Agreement.
"Borrower's Books" means all of Borrower's books and records
including: ledgers; records indicating, summarizing, or evidencing Borrower's
properties or assets (including the Collateral) or liabilities; all information
relating to Borrower's business operations or financial condition; and all
computer programs, disk or tape files, printouts, runs, or other computer
prepared information.
"Borrowing Base" has the meaning set forth in Section 2.1(a).
"Business Day" means any day that is not a Saturday, Sunday, or
other day on which national banks are authorized or required to close.
"Change of Control" shall be deemed to have occurred at such time
as a "person" or "group" (within the meaning of Sections 13(d) and 14(d)(2) of
the Securities Exchange Act of 1934), other than Xxxxxxx X. Xxxxx, becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange Act
of 1934), directly or indirectly, of more than 10% of the total voting power of
all classes of stock then outstanding of Borrower entitled to vote in the
election of directors.
"Closing Date" means the date of the first to occur of the making
of the initial Advance, the issuance of the initial Letter of Credit or the
funding of the Term Loan.
"Code" means the California Uniform Commercial Code.
"Collateral" means each of the following:
(a) the Accounts,
(b) Borrower's Books,
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(c) the General Intangibles,
(d) the Inventory,
(e) the Negotiable Collateral,
(f) the Real Property Collateral,
(g) any money, or other assets of Borrower that now or hereafter
come into the possession, custody, or control of Foothill, and
(h) the proceeds and products, whether tangible or intangible, of
any of the foregoing, including proceeds of insurance covering any or all of the
Collateral, and any and all Accounts, Borrower's Books, General Intangibles,
Inventory, Negotiable Collateral, Real Property, money, deposit accounts, or
other tangible or intangible property resulting from the sale, exchange,
collection, or other disposition of any of the foregoing, or any portion thereof
or interest therein, and the proceeds thereof.
"Collateral Access Agreement" means a landlord waiver, mortgagee
waiver, bailee letter, or acknowledgment agreement of any warehouseman,
processor, lessor, consignee, or other Person in possession of, having a Lien
upon, or having rights or interests in the Inventory, in each case, in form and
substance satisfactory to Foothill.
"Collections" means all cash, checks, notes, instruments, and
other items of payment (including, insurance proceeds, proceeds of cash sales,
rental proceeds, and tax refunds).
"Compliance Certificate" means a certificate substantially in the
form of Exhibit C-1 and delivered by the chief accounting officer of Borrower to
Foothill.
"Contra Obligation" means, in cases where Borrower owns an Account
arising from the sale of finished goods Inventory to an Account Debtor and has
committed to purchase Used Trailer Inventory from such Account Debtor, the
current obligation of Borrower arising from its commitment to purchase Used
Trailer Inventory from such Account Debtor, provided, that no Contra Obligation
shall arise if the Account Debtor has executed a no-offset letter, in form and
substance satisfactory to Foothill.
"Daily Balance" means the amount of an Obligation owed at the end
of a given day.
"deems itself insecure" means that the Person deems itself
insecure in accordance with the provisions of Section 1208 of the Code.
"Default" means an event, condition, or default that, with the
giving of notice, the passage of time, or both, would be an Event of Default.
"Designated Account" means account number 00000000 of Borrower
maintained with Borrower's Designated Account Bank, or such other deposit
account of Borrower
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(located within the United States) which has been designated, in writing and
from time to time, by Borrower to Foothill.
"Designated Account Bank" means SouthTrust Bank of Georgia, N.A.,
whose office is located at Buford, Georgia, and whose ABA number is 000000000.
"Dilution" means, in each case based upon the experience of the
immediately prior three (3) months, the result of dividing the Dollar amount of
(a) bad debt write-downs, discounts, advertising, returns, promotions, credits,
or other dilution with respect to the Accounts, by (b) Borrower's Collections
(excluding extraordinary items) plus the Dollar amount of clause (a).
"Dilution Reserve" means, as of any date of determination, an
amount sufficient to reduce Foothill's advance rate against Eligible Accounts by
one percentage point for each percentage point by which Dilution is in excess of
5%.
"Disbursement Letter" means an instructional letter executed and delivered
by Borrower to Foothill regarding the extensions of credit to be made on the
Closing Date, the form and substance of which shall be satisfactory to
Foothill.
"Dollars or $" means United States dollars.
"Early Termination Premium" has the meaning set forth in Section
3.6.
"EBITDA" shall mean, with respect to any fiscal period of
Borrower, an amount equal to the sum for such fiscal period of (i) Net Income,
plus (ii) provision for taxes based on income, plus (iii) Interest Expense, plus
(iv) depreciation, amortization and other non-cash charges.
"Eligible Accounts" means those Accounts created by Borrower in
the ordinary course of business, that arise out of Borrower's sale of goods or
rendition of services, that strictly comply with each and all of the
representations and warranties respecting Accounts made by Borrower to Foothill
in the Loan Documents, and that are and at all times continue to be acceptable
to Foothill in all respects; provided, however, that standards of eligibility
may be fixed and revised from time to time by Foothill in Foothill's reasonable
credit judgment. Eligible Accounts shall not include the following:
(a) Accounts that are 90 days past the invoice date or Accounts
with selling terms of more than 30 days;
(b) Accounts owed by an Account Debtor or its Affiliates where 50%
or more of all Accounts owed by that Account Debtor (or its Affiliates) are
deemed ineligible under clause (a) above;
(c) Accounts with respect to which the Account Debtor is an
employee, Affiliate, or agent of Borrower;
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(d) Accounts with respect to which goods are placed on
consignment, guaranteed sale, sale or return, sale on approval, xxxx and hold,
or other terms by reason of which the payment by the Account Debtor may be
conditional unless, in the case of xxxx and hold sales either (i) not more than
forty-five (45) days have elapsed from the date of invoice of the Account
arising from such sale or (ii) the Account Debtor with respect to such Accounts
has executed a xxxx and hold letter or other appropriate letter in substantially
the form of Exhibit A or otherwise in form and substance satisfactory to
Foothill;
(e) Accounts that are not payable in Dollars or with respect to
which the Account Debtor: (i) does not maintain its chief executive office in
the United States or Canada, or (ii) is not organized under the laws of the
United States or any State thereof or Canada, or (iii) 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, unless (y) the Account is
supported by an irrevocable letter of credit satisfactory to Foothill (as to
form, substance, and issuer or domestic confirming bank) that has been delivered
to Foothill and is directly drawable by Foothill, or (z) the Account is covered
by credit insurance in form and amount, and by an insurer, satisfactory to
Foothill;
(f) Accounts with respect to which the Account Debtor is either
(i) the United States or any department, agency, or instrumentality of the
United States (exclusive, however, of Accounts with respect to which Borrower
has complied, to the satisfaction of Foothill, with the Assignment of Claims
Act, 31 U.S.C. Section 3727), or (ii) any State of the United States
(exclusive, however, of Accounts owed by any State that does not have a
statutory counterpart to the Assignment of Claims Act);
(g) (i) Accounts existing on the Closing Date with respect to
which U.S. Xpress is the Account Debtor as long as Borrower has any obligations
arising from the purchase of U.S. Xpress Used Trailer Inventory or (ii) Accounts
with respect to which the Account Debtor is a creditor of Borrower, has or has
asserted a right of setoff, has disputed its liability, or has made any claim
with respect to the Account other than in the case where Borrower has a
commitment to purchase Used Trailer Inventory (other than U.S. Xpress Used
Trailer Inventory) from the Account Debtor with respect to such Accounts;
(h) Accounts with respect to an Account Debtor, whose total
obligations owing to Borrower exceed 20% of all Eligible Accounts (other than,
prior to November 1, 1997, Accounts with respect to which the Account Debtor is
United Parcel Service, Inc.), to the extent of the obligations owing by such
Account Debtor in excess of such percentage, provided that, upon the request of
Borrower, Foothill may waive or increase the limitation if in its reasonable
credit judgment, the Account Debtor is considered credit worthy, such waiver
and/or increase by Foothill not to be unreasonably withheld or delayed;
(i) Accounts with respect to which the Account Debtor is subject
to any Insolvency Proceeding, or becomes insolvent, or goes out of business;
(j) Accounts the collection of which Foothill, in its reasonable
credit judgment, believes to be doubtful by reason of the Account Debtor's
financial condition;
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(k) Accounts with respect to which the goods giving rise to such
Account have not been shipped and billed to the Account Debtor, the services
giving rise to such Account have not been performed and accepted by the Account
Debtor, or the Account otherwise does not represent a final sale unless, in the
case of xxxx and hold sales, either (i) not more than forty-five (45) days have
elapsed from the date of invoice of the Account arising from such sale or (ii)
the Account Debtor with respect to such Accounts has executed a xxxx and hold
letter or other appropriate letter in form and substance satisfactory to
Foothill;
(l) Accounts with respect to which the Account Debtor is located
in the states of New Jersey, Minnesota, Indiana, or West Virginia (or any other
state that requires a creditor to file a Business Activity Report or similar
document in order to bring suit or otherwise enforce its remedies against such
Account Debtor in the courts or through any judicial process of such state),
unless Borrower has qualified to do business in New Jersey, Minnesota, Indiana,
West Virginia, or such other states, or has filed a Notice of Business
Activities Report with the applicable division of taxation, the department of
revenue, or with such other state offices, as appropriate, for the then-current
year, or is exempt from such filing requirement; and
(m) Accounts that represent progress payments or other advance
xxxxxxxx that are due prior to the completion of performance by Borrower of the
subject contract for goods or services.
"Eligible Inventory" means Inventory, other than Used Trailer
Inventory, consisting of first quality finished goods held for sale in the
ordinary course of Borrower's business and raw materials for such finished
goods, that are located at or in-transit between Borrower's premises identified
on Schedule E-1, that strictly comply with each and all of the representations
and warranties respecting Inventory made by Borrower to Foothill in the Loan
Documents, and that are and at all times continue to be acceptable to Foothill
in all respects; provided, however, that standards of eligibility may be fixed
and revised from time to time by Foothill in Foothill's reasonable credit
judgment. In determining the amount to be so included, Inventory shall be
valued at the lower of cost or market on a basis consistent with Borrower's
current and historical accounting practices. An item of Inventory shall not be
included in Eligible Inventory if:
(a) it is not owned solely by Borrower or Borrower does not have
good, valid, and marketable title thereto;
(b) it is not located at one of the locations set forth on
Schedule E-1;
(c) it is not located on property owned or leased by Borrower or
in a contract warehouse, in each case, subject to a Collateral Access Agreement
executed by the mortgagee, lessor, the warehouseman, or other third party, as
the case may be, and segregated or otherwise separately identifiable from goods
of others, if any, stored on the premises;
(d) it is not subject to a valid and perfected first priority
security interest in favor of Foothill;
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(e) it consists of goods returned or rejected by Borrower's
customers or goods in transit;
(f) it is obsolete or slow moving, work-in-process, a component
that is not part of finished goods (other than in the case of raw materials), or
constitutes spare parts, packaging and shipping materials, supplies used or
consumed in Borrower's business, Inventory subject to a Lien in favor of any
third Person, xxxx and hold goods, defective goods, "seconds," or Inventory
acquired on consignment; and
(g) it does not meet all applicable standards imposed by the
National Highway Traffic Safety Administration or any other Governmental
Authority or it is subject to any licensing or similar requirements that would
limit the right of Borrower or Foothill to sell such item.
"Eligible Used Trailer Inventory" means Used Trailer Inventory
held for sale in the ordinary course of Borrower's business that strictly comply
with each and all of the representations and warranties respecting Inventory
made by Borrower to Foothill in the Loan Documents and that are and at all times
continue to be acceptable to Foothill in all respects; provided, however, that
standards of eligibility may be fixed and revised from time to time by Foothill
in Foothill's reasonable credit judgment. In determining the amount to be so
included, Used Trailer Inventory shall be valued at the lower of cost, adjusted
book value or the estimated net realizable value on a basis consistent with the
Borrower's current and historical accounting practices. An item of Used Trailer
Inventory shall not be included in Eligible Used Trailer Inventory if:
(a) it is not owned solely by the Borrower or, if the Borrower
does not have good, valid, and marketable title thereto or the Borrower is not
in possession of a certificate of title with respect thereto evidencing title in
the name of the Borrower or bearer and has not provided a copy of such
certificate of title to Foothill;
(b) it is not located at one of the locations of the Borrower set
forth on Schedule E-1 or at one of the locations set forth on Schedule E-2 or at
one of the locations within the continental United States for which Borrower has
provided written notice to Foothill;
(c) it is (i) in the possession or control of a Person that is
both a purchaser of trailers from Borrower and a seller of trailers to Borrower
and, as a result of such transactions or otherwise, is a creditor of, or has or
has asserted a right of setoff against, Borrower and (ii) not subject to a
Collateral Access Agreement executed by such Person;
(d) it is not located in a jurisdiction in which Foothill has
filed financing statements with respect to such Used Trailer Inventory that
Foothill deems necessary or appropriate to create a perfected first priority
security interest in Inventory located in such jurisdiction in favor of Foothill
unless such Used Trailer Inventory is located in a jurisdiction for which five
(5) Business Days have elapsed after both (i) Borrower has provided written
notice of such jurisdiction to Foothill as provided in clause (b) above and (ii)
Foothill has received from Borrower such
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number of completed financing statements requested Foothill, in appropriate form
for filing in such jurisdiction and otherwise reasonably acceptable to Foothill,
executed by Borrower.
(e) it consists of goods rejected by Borrower's customers or goods
in transit;
(f) it is obsolete or slow-moving Used Trailer Inventory, subject
to a Lien in favor of any third party, defective goods, it has not been
inspected by the Borrower or it is not segregated or otherwise separately
identifiable from goods of others, if any, in the possession or control of a
third-party; and
(g) it does not meet all applicable standards imposed by the
National Highway Traffic Safety Administration or any other Governmental
Authority or it is subject to any licensing or similar requirements that would
limit the right of Borrower or Foothill to sell such item.
"Equipment" means all of Borrower's present and hereafter acquired
machinery, machine tools, motors, equipment, furniture, furnishings, fixtures,
vehicles (including motor vehicles and trailers, other than trailers that
constitute Inventory), tools, parts, goods (other than consumer goods, farm
products, or Inventory), wherever located, including, (a) any interest of
Borrower in any of the foregoing, and (b) all attachments, accessories,
accessions, replacements, substitutions, additions, and improvements to any of
the foregoing.
"ERISA" means the Employee Retirement Income Security Act of 1974,
29 U.S.C. Section Section 1000 et seq., amendments thereto, successor statutes,
and regulations or guidance promulgated thereunder.
"ERISA Affiliate" means (a) any corporation subject to ERISA whose
employees are treated as employed by the same employer as the employees of
Borrower under IRC Section 414(b), (b) any trade or business subject to ERISA
whose employees are treated as employed by the same employer as the employees of
Borrower under IRC Section 414(c), (c) solely for purposes of Section 302 of
ERISA and Section 412 of the IRC, any organization subject to ERISA that is a
member of an affiliated service group of which Borrower is a member under IRC
Section 414(m), or (d) solely for purposes of Section 302 of ERISA and Section
412 of the IRC, any party subject to ERISA that is a party to an arrangement
with Borrower and whose employees are aggregated with the employees of Borrower
under IRC Section 414(o).
"ERISA Event" means (a) a Reportable Event with respect to any
Benefit Plan or Multiemployer Plan, (b) the withdrawal of Borrower, any of its
Subsidiaries or ERISA Affiliates from a Benefit Plan during a plan year in which
it was a "substantial employer" (as defined in Section 4001(a)(2) of ERISA), (c)
the providing of notice of intent to terminate a Benefit Plan in a distress
termination (as described in Section 4041(c) of ERISA), (d) the institution by
the PBGC of proceedings to terminate a Benefit Plan or Multiemployer Plan, (e)
any event or condition (i) that provides a basis under Section 4042(a)(1), (2),
or (3) of ERISA for the termination of, or the appointment of a trustee to
administer, any Benefit Plan or Multiemployer Plan, or (ii) that may result in
termination of a Multiemployer Plan pursuant to Section 4041A of ERISA, (f) the
partial
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or complete withdrawal within the meaning of Sections 4203 and 4205 of ERISA, of
Borrower, any of its Subsidiaries or ERISA Affiliates from a Multiemployer Plan,
or (g) providing any security to any Plan under Section 401(a)(29) of the IRC by
Borrower or its Subsidiaries or any of their ERISA Affiliates.
"Event of Default" has the meaning set forth in Section 8.
"Existing Lender" means The CIT Group/Business Credit, Inc.
"FEIN" means Federal Employer Identification Number.
"Foothill" has the meaning set forth in the preamble to this
Agreement.
"Foothill Account" has the meaning set forth in Section 2.6.
"Foothill Expenses" means all: costs or expenses (including taxes,
and insurance premiums) required to be paid by Borrower under any of the Loan
Documents that are paid or incurred by Foothill; fees or charges paid or
incurred by Foothill in connection with Foothill's transactions with Borrower,
including, audit fees and fees or charges for photocopying, notarization,
couriers and messengers, telecommunication, public record searches (including
tax lien, litigation, and UCC searches and including searches with the patent
and trademark office, the copyright office, or the department of motor
vehicles), filing, recording, publication, appraisal (including periodic
Personal Property Collateral appraisals), real estate surveys, real estate title
policies and endorsements, and environmental audits; costs and expenses incurred
by Foothill in the disbursement of funds to Borrower (by wire transfer or
otherwise); charges paid or incurred by Foothill resulting from the dishonor of
checks; costs and expenses paid or incurred by Foothill to correct any default
or enforce any provision of the Loan Documents, or in gaining possession of,
maintaining, handling, preserving, storing, shipping, selling, preparing for
sale, or advertising to sell the Personal Property Collateral or the Real
Property Collateral, or any portion thereof, irrespective of whether a sale is
consummated; costs and expenses paid or incurred by Foothill in examining
Borrower's Books; costs and expenses of third party claims or any other suit
paid or incurred by Foothill in enforcing or defending the Loan Documents or in
connection with the transactions contemplated by the Loan Documents or
Foothill's relationship with Borrower or any guarantor; and Foothill's
reasonable attorneys fees and expenses incurred in advising, structuring,
drafting, reviewing, administering, amending, terminating, enforcing (including
attorneys fees and expenses incurred in connection with a "workout," a
"restructuring," or an Insolvency Proceeding concerning Borrower or any
guarantor of the Obligations), defending, or concerning the Loan Documents,
irrespective of whether suit is brought.
"GAAP" means generally accepted accounting principles as in effect
from time to time in the United States, consistently applied.
"General Intangibles" means all of Borrower's present and future
general intangibles and other personal property (including contract rights,
rights arising under common law, statutes, or regulations, choses or things in
action, goodwill, patents, trade names, trademarks, servicemarks, copyrights,
blueprints, drawings, purchase orders, customer lists, monies due or
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recoverable from pension funds, route lists, rights to payment and other rights
under any royalty or licensing agreements, infringement claims, computer
programs, information contained on computer disks or tapes, literature, reports,
catalogs, deposit accounts, insurance premium rebates, tax refunds, and tax
refund claims), other than goods, Accounts, and Negotiable Collateral.
"Governing Documents" means the certificate or articles of
incorporation, by-laws, or other organizational or governing documents of any
Person.
"Governmental Authority" means any nation or government, any
Federal, state, city, town, municipality, county, local or other political
subdivision thereof or thereto and any department, commission, board, bureau,
instrumentality, agency or other entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to the
government and having jurisdiction over any of the parties to the Loan
Documents.
"Hazardous Materials" means (a) substances that are defined or
listed in, or otherwise classified pursuant to, any applicable laws or
regulations as "hazardous substances," "hazardous materials," "hazardous
wastes," "toxic substances," or any other formulation intended to define, list,
or classify substances by reason of deleterious properties such as ignitability,
corrosivity, reactivity, carcinogenicity, reproductive toxicity, or "EP
toxicity", (b) oil, petroleum, or petroleum derived substances, natural gas,
natural gas liquids, synthetic gas, drilling fluids, produced waters, and other
wastes associated with the exploration, development, or production of crude oil,
natural gas, or geothermal resources, (c) any flammable substances or explosives
or any radioactive materials, and (d) asbestos in any form or electrical
equipment that contains any oil or dielectric fluid containing levels of
polychlorinated biphenyls in excess of 50 parts per million.
"Interest Expense" shall mean total interest obligations (paid or
accrued) of Borrower, determined in accordance with GAAP on a basis consistent
with the latest audited financial statements of Borrower.
"Indebtedness" means: (a) all obligations of Borrower for borrowed
money, (b) all obligations of Borrower evidenced by bonds, debentures, notes, or
other similar instruments and all reimbursement or other obligations of Borrower
in respect of letters of credit, bankers acceptances, interest rate swaps, or
other financial products, (c) all obligations of Borrower under capital leases,
(d) all obligations or liabilities of others secured by a Lien on any property
or asset of Borrower, irrespective of whether such obligation or liability is
assumed, and (e) any obligation of Borrower guaranteeing or intended to
guarantee (whether guaranteed, endorsed, co-made, discounted, or sold with
recourse to Borrower) any indebtedness, lease, dividend, letter of credit, or
other obligation of any other Person.
"Indemnified Liabilities" has the meaning set forth in Section
11.3.
"Indemnified Person" has the meaning set forth in Section 11.3.
"Insolvency Proceeding" means any proceeding commenced by or
against any Person under any provision of the Bankruptcy Code or under any other
bankruptcy or insolvency law, assignments for the benefit of creditors, formal
or informal moratoria,
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compositions, extensions generally with creditors, or proceedings seeking
reorganization, arrangement, or other similar relief.
"Intangible Assets" means, with respect to any Person, that
portion of the book value of all of such Person's assets that would be treated
as intangibles under GAAP.
"Intercreditor Agreement" means the Intercreditor Agreement dated
as of March 28, 1997 by and between the U.S. Small Business Administration and
Foothill, as the same may be amended or otherwise modified from time to time.
"Inventory" means all present and future inventory in which
Borrower has any interest, including new and used goods held for sale or lease
or to be furnished under a contract of service, Used Trailer Inventory, any
other inventory goods and merchandise taken in trade, and all of Borrower's
present and future raw materials, work in process, finished goods, and packing
and shipping materials, wherever located.
"IRC" means the Internal Revenue Code of 1986, as amended, and the
regulations thereunder.
"IRS" means the Internal Revenue Service.
"L/C" has the meaning set forth in Section 2.2(a).
"L/C Guaranty" has the meaning set forth in Section 2.2(a).
"Letter of Credit" means an L/C or an L/C Guaranty, as the context
requires.
"Lien" means any interest in property securing an obligation owed
to, or a claim by, any Person other than the owner of the property, whether such
interest shall be based on the common law, statute, or contract, whether such
interest shall be recorded or perfected, and whether such interest shall be
contingent upon the occurrence of some future event or events or the existence
of some future circumstance or circumstances, including the lien or security
interest arising from a mortgage, deed of trust, encumbrance, pledge,
hypothecation, assignment, deposit arrangement, security agreement, adverse
claim or charge, conditional sale or trust receipt, or from a lease,
consignment, or bailment for security purposes and also including reservations,
exceptions, encroachments, easements, rights-of-way, covenants, conditions,
restrictions, leases, and other title exceptions and encumbrances affecting Real
Property.
"Loan Account" has the meaning set forth in Section 2.9.
"Loan Documents" means this Agreement, the Patent and Trademark
Security Agreement, the Disbursement Letter, the Letters of Credit, the Lockbox
Agreements, any Mortgages, any note or notes executed by Borrower and payable to
Foothill, and any other agreement entered into, now or in the future, in
connection with this Agreement.
"Lockbox Account" shall mean a depositary account established
pursuant to one of the Lockbox Agreements.
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"Lockbox Agreements" means those certain Lockbox Operating
Procedural Agreements and those certain Depository Account Agreements, in form
and substance satisfactory to Foothill, each of which is among Borrower,
Foothill, and one of the Lockbox Banks.
"Lockbox Banks" means SouthTrust Bank of Georgia, N.A.
"Lockboxes" has the meaning set forth in Section 2.6.
"Material Adverse Change" means (a) a material adverse change in
the business, prospects, operations, results of operations, assets, liabilities
or condition (financial or otherwise) of Borrower, (b) the material impairment
of Borrower's ability to perform its obligations under the Loan Documents to
which it is a party or of Foothill to enforce the Obligations or realize upon
the Collateral, (c) a material adverse effect on the value of the Collateral or
the amount that Foothill would be likely to receive (after giving consideration
to delays in payment and costs of enforcement) in the liquidation of such
Collateral, or (d) a material impairment of the priority of Foothill's Liens
with respect to the Collateral.
"Maximum Amount" means $15,000,000.
"Maximum Revolving Amount" means $15,000,000, provided that, until
such time as the Intercreditor Agreement is amended, in form and substance
satisfactory to Foothill, to provide that, in the case of a liquidation of the
assets of Borrower, such Intercreditor Agreement will either (i) not terminate
until Foothill has received the payment in full of all Obligations or (ii) not
terminate until Foothill has received payment in full of $17,000,000 plus
accrued and unpaid interest thereon, the Maximum Revolving Amount shall not
exceed $14,000,000.
"Mortgage Policy" has the meaning set forth in Section 6.16.
"Mortgages" means one or more mortgages, deeds of trust, or deeds
to secure debt, executed by Borrower in favor of Foothill pursuant to Section
6.16, the form and substance of which shall be satisfactory to Foothill, that
encumber the Real Property Collateral and the related improvements thereto.
"Multiemployer Plan" means a "multiemployer plan" (as defined in
Section 4001(a)(3) of ERISA) to which Borrower, any of its Subsidiaries, or any
ERISA Affiliate has contributed, or was obligated to contribute, within the past
six years.
"Negotiable Collateral" means all of Borrower's present and future
letters of credit, notes, drafts, instruments, investment property, security
entitlements, securities (including the shares of stock of Subsidiaries of
Borrower), documents, personal property leases (wherein Borrower is the lessor),
chattel paper, and Borrower's Books relating to any of the foregoing.
"Net Income" shall mean the net income (or net loss) of Borrower
for the period in question after giving effect to deduction of or provision for
all operating expenses, all Taxes and reserves (including reserves for deferred
taxes) and all other proper deductions, all determined in accordance with GAAP,
provided that there shall be excluded: (i) any restoration of
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any contingency reserve, except to the extent that provision for such reserve
was made out of income during such period, (ii) any net gains or losses on the
sale or other disposition, not in the ordinary course of business, of capital
assets, provided that there shall also be excluded any related charges for taxes
thereon, (iii) any net gain arising from the collection of the proceeds of any
insurance policy, (iv) any write-up of any asset, and (v) any other
extraordinary item.
"Net Worth" shall mean, at any date of determination, an amount
equal to (a) the Total Assets of Borrower minus (b) Total Liabilities of
Borrower.
"Obligations" means all loans, Advances, debts, principal,
interest (including any interest that, but for the provisions of the Bankruptcy
Code, would have accrued), contingent reimbursement obligations under any
outstanding Letters of Credit, premiums (including Early Termination Premiums),
liabilities (including all amounts charged to Borrower's Loan Account pursuant
hereto), obligations, fees, charges, costs, or Foothill Expenses (including any
fees or expenses that, but for the provisions of the Bankruptcy Code, would have
accrued), lease payments, guaranties, covenants, and duties owing by Borrower to
Foothill of any kind and description (whether pursuant to or evidenced by the
Loan Documents or pursuant to any other agreement between Foothill and Borrower,
and irrespective of whether for the payment of money), whether direct or
indirect, absolute or contingent, due or to become due, now existing or
hereafter arising, and including any debt, liability, or obligation owing from
Borrower to others that Foothill may have obtained by assignment or otherwise,
and further including all interest not paid when due and all Foothill Expenses
that Borrower is required to pay or reimburse by the Loan Documents, by law, or
otherwise.
"Overadvance" has the meaning set forth in Section 2.4.
"Participant" means any Person to which Foothill has sold a
participation interest in its rights under the Loan Documents.
"Patent and Trademark Security Agreement" means the Patent and
Trademark Security Agreement made by the Borrower in favor of Foothill securing
the Obligations, as the same may be amended or otherwise modified from time to
time.
"Pay-Off Letter" means a letter, in form and substance reasonably
satisfactory to Foothill, from Existing Lender respecting the amount necessary
to repay in full all of the obligations of Borrower owing to Existing Lender and
obtain a termination or release of all of the Liens existing in favor of
Existing Lender in and to the properties or assets of Borrower.
"PBGC" means the Pension Benefit Guaranty Corporation as defined
in Title IV of ERISA, or any successor thereto.
"Permitted Liens" means (a) Liens held by Foothill, (b) Liens for
unpaid taxes that either (i) are not yet due and payable or (ii) are the subject
of Permitted Protests, (c) Liens set forth on Schedule P-1, (d) the interests of
lessors under operating leases and purchase money Liens of lessors or sellers to
the extent that the acquisition or lease of the underlying asset is permitted
under Section 7.21 and so long as the Lien only attaches to the asset purchased
or
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acquired and only secures the purchase price of the asset, (e) Liens arising by
operation of law in favor of warehousemen, landlords, carriers, mechanics,
materialmen, laborers, or suppliers, incurred in the ordinary course of business
of Borrower and not in connection with the borrowing of money, and which Liens
either (i) are for sums not yet due and payable, or (ii) are the subject of
Permitted Protests, (f) Liens arising from deposits made in connection with
obtaining worker's compensation or other unemployment insurance, (g) Liens or
deposits to secure performance of bids, tenders, or leases (to the extent
permitted under this Agreement), incurred in the ordinary course of business of
Borrower and not in connection with the borrowing of money, (h) Liens arising by
reason of security for surety or appeal bonds in the ordinary course of business
of Borrower, (i) Liens of or resulting from any judgment or award that would not
have a Material Adverse Effect and as to which the time for the appeal or
petition for rehearing of which has not yet expired, or in respect of which
Borrower is in good faith prosecuting an appeal or proceeding for a review, and
in respect of which a stay of execution pending such appeal or proceeding for
review has been secured, (j) Liens with respect to the Real Property Collateral
that are exceptions to the commitments for title insurance issued in connection
with the Mortgages, as accepted by Foothill, and (k) with respect to any Real
Property that is not part of the Real Property Collateral, easements, rights of
way, zoning and similar covenants and restrictions, and similar encumbrances
that customarily exist on properties of Persons engaged in similar activities
and similarly situated and that in any event do not materially interfere with or
impair the use or operation of the Collateral by Borrower or the value of
Foothill's Lien thereon or therein, or materially interfere with the ordinary
conduct of the business of Borrower.
"Permitted Protest" means the right of Borrower to protest any
Lien other than any such Lien that secures the Obligations, tax (other than
payroll taxes or taxes that are the subject of a United States federal tax lien
or state tax lien), or rental payment, provided that (a) a reserve with respect
to such obligation is established on the books of Borrower in an amount that is
reasonably satisfactory to Foothill, (b) any such protest is instituted and
diligently prosecuted by Borrower in good faith, and (c) Foothill is satisfied
that, while any such protest is pending, there will be no impairment of the
enforceability, validity, or priority of any of the Liens of Foothill in and to
the Collateral.
"Person" means and includes natural persons, corporations, limited
liability companies, limited partnerships, general partnerships, limited
liability partnerships, joint ventures, trusts, land trusts, business trusts, or
other organizations, irrespective of whether they are legal entities, and
governments and agencies and political subdivisions thereof.
"Personal Property Collateral" means all Collateral other than
the Real Property Collateral.
"Plan" means any employee benefit plan, program, or arrangement
maintained or contributed to by Borrower or with respect to which it may incur
liability.
"Real Property" means any estates or interests in real property
now owned or hereafter acquired by Borrower.
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"Real Property Collateral" means, subject to Section 6.16, the
parcel or parcels of real property and the related improvements thereto
identified on Schedule R-1, and any Real Property hereafter acquired by
Borrower.
"Reference Rate" means the variable rate of interest, per annum,
most recently announced by Norwest Bank Minnesota, National Association, or any
successor thereto, as its "base rate," irrespective of whether such announced
rate is the best rate available from such financial institution.
"Renewal Date" has the meaning set forth in Section 3.4.
"Reportable Event" means any of the events described in Section
4043(c) of ERISA or the regulations thereunder other than a Reportable Event as
to which the provision of 30 days notice to the PBGC is waived under applicable
regulations.
"Repurchase Agreements" means the Repurchase Agreements dated as
of March 24, 1982 and October 7, 1977 by the Company on behalf of Associates, as
in effect on the Closing Date.
"Retiree Health Plan" means an "employee welfare benefit plan"
within the meaning of Section 3(1) of ERISA that provides benefits to
individuals after termination of their employment, other than as required by
Section 601 of ERISA.
"Significant Transaction" has the meaning set forth in Section
3.6.
"Solvent" means, with respect to any Person on a particular date,
that on such date (a) at fair valuations, all of the properties and assets of
such Person are greater than the sum of the debts, including contingent
liabilities, of such Person, (b) the present fair salable value of the
properties and assets of such Person is not less than the amount that will be
required to pay the probable liability of such Person on its debts as they
become absolute and matured, (c) such Person is able to realize upon its
properties and assets and pay its debts and other liabilities, contingent
obligations and other commitments as they mature in the normal course of
business, (d) such Person does not intend to, and does not believe that it will,
incur debts beyond such Person's ability to pay as such debts mature, and (e)
such Person is not engaged in business or a transaction, and is not about to
engage in business or a transaction, for which such Person's properties and
assets would constitute unreasonably small capital after giving due
consideration to the prevailing practices in the industry in which such Person
is engaged. In computing the amount of contingent liabilities at any time, it
is intended that such liabilities will be computed at the amount that, in light
of all the facts and circumstances existing at such time, represents the amount
that reasonably can be expected to become an actual or matured liability.
"Subsidiary" of a Person means a corporation, partnership, limited
liability company, or other entity in which that Person directly or indirectly
owns or controls the shares of stock or other ownership interests having
ordinary voting power to elect a majority of the board of directors (or appoint
other comparable managers) of such corporation, partnership, limited liability
company, or other entity.
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"Taxes" shall mean any present or future taxes, levies, imposts,
duties, fees, assessments, deductions, withholdings or other charges or whatever
nature, including income, receipts, excise, property, sale, transfer, license,
payroll, withholding, social security and franchise taxes now or hereafter
imposed or levied by the United States, or any state, local or foreign
government or by any department, agency or other political subdivision or taxing
authority thereof or therein and all interest, penalties, additions to tax and
similar liabilities with respect thereto.
"Term Loan" has the meaning set forth in Section 2.3.
"Total Assets" shall mean Borrower's total assets determined in
accordance with GAAP, on a basis consistent with the latest audited financial
statements of Borrower.
"Total Liabilities" shall mean total liabilities of Borrower
determined in accordance with GAAP, on a basis consistent with the latest
audited financial statements of Borrower.
"Used Trailer Inventory" shall mean used trailers purchased by
Borrower from its customers.
"U.S. Xpress" means U.S. Xpress Enterprises, Inc., a Nevada
corporation.
"U.S. Xpress Used Trailer Inventory" means Eligible Used Trailer
Inventory, determined without giving effect to clauses (b), (d) and (e) (other
than if such trailers are rejected by U.S. Xpress) of the definition thereof,
repurchased by Borrower from U.S. Xpress, prior to the Closing Date, of which
443 units of such Used Trailer Inventory exist on the Closing Date.
"Voidable Transfer" has the meaning set forth in Section 15.8.
1.2 ACCOUNTING TERMS. All accounting terms not specifically defined
herein shall be construed in accordance with GAAP. When used herein, the term
"financial statements" shall include the notes and schedules thereto. Whenever
the term "Borrower" is used in respect of a financial covenant or a related
definition, it shall be understood to mean Borrower on a consolidated basis
unless the context clearly requires otherwise.
1.3 CODE. Any terms used in this Agreement that are defined in the
Code shall be construed and defined as set forth in the Code unless otherwise
defined herein.
1.4 CONSTRUCTION. Unless the context of this Agreement clearly
requires otherwise, references to the plural include the singular, references to
the singular include the plural, the term "including" is not limiting, and the
term "or" has, except where otherwise indicated, the inclusive meaning
represented by the phrase "and/or." The words "hereof," "herein," "hereby,"
"hereunder," and similar terms in this Agreement refer to this Agreement as a
whole and not to any particular provision of this Agreement. An Event of
Default shall "continue" or be "continuing" until such Event of Default has been
waived in writing by Foothill. Section, subsection, clause, schedule, and
exhibit references are to this Agreement unless otherwise specified. Any
reference in this Agreement or in the Loan Documents to this Agreement or any of
the Loan Documents shall
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include all alterations, amendments, changes, extensions, modifications,
renewals, replacements, substitutions, and supplements, thereto and thereof, as
applicable.
1.5 SCHEDULES AND EXHIBITS. All of the schedules and exhibits
attached to this Agreement shall be deemed incorporated herein by reference.
2. LOAN AND TERMS OF PAYMENT.
2.1 REVOLVING ADVANCES.
(a) Subject to the terms and conditions of this Agreement,
Foothill agrees to make advances ("Advances") to Borrower in an amount
outstanding not to exceed at any one time the lesser of (i) the Maximum
Revolving Amount less the then outstanding balance of all undrawn or
unreimbursed Letters of Credit less the then outstanding principal amount of the
Term Loan, or (ii) the Borrowing Base less the aggregate amount of all undrawn
or unreimbursed Letters of Credit. For purposes of this Agreement, "Borrowing
Base", as of any date of determination, shall mean the result of:
(x) the lesser of (i) the sum of (A) 80% of Eligible
Accounts other than (1) that portion of any Eligible Accounts that
is or will be satisfied by the transfer to the Borrower of Used
Trailer Inventory or (2) is subject to a Contra Obligation and (B)
40% of that portion of any Eligible Account that is subject to a
Contra Obligation, provided, that the amount of this clause (i)(B),
when taken together with the amount of subclause (ii)(B) of
paragraph (y) below, shall not exceed the aggregate amount of
$1,500,000, less (C) the amount, if any, of the Dilution Reserve,
and (ii) on and after June 1, 1997, an amount equal to Borrower's
Collections with respect to Accounts for the immediately preceding
30 day period, plus
(y) the lowest of (i) $7,000,000, (ii) the sum of (A)
30% of the value of Eligible Inventory constituting raw materials
Inventory, (B) 40% of the value of Eligible Used Trailer Inventory
other than U.S. Xpress Used Trailer Inventory, provided, that, the
amount of this subclause (ii)(B), when taken together with the
amount of subclause (i)(B) of paragraph (x) above, shall not exceed
the aggregate amount of $1,500,000, without the prior written
consent of Foothill, (C) prior to July 1, 1997, 40% of the value of
U.S. Xpress Used Trailer Inventory, provided that, the amount of
this subclause (ii)(C) shall not at any time exceed the amount
obtained by multiplying the number of units of U.S. Xpress Used
Trailer Inventory at such time by $4,000, without the prior written
consent of Foothill, and (D) 60% of the value of Eligible Inventory
constituting finished goods Inventory, and (iii) on and after June
1, 1997, 250% of the amount of credit availability created by clause
(x) above, provided, that, at any time that an appraisal of any
Inventory is obtained by Borrower or Foothill each of the advance
rates set forth in subclauses (ii)(A), (ii)(B), and (ii)(D) of this
clause (y) may be adjusted accordingly so as to not exceed 80% (in
the case of subclauses (ii)(A) and (ii)(D)) or 50% (in the case of
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subclause (ii)(B)) of the Appraised Inventory Liquidation
Value of the Inventory described in each such subclause, minus
(z) the aggregate amount of reserves, if any,
established by Foothill under Section 2.1(b).
(b) Anything to the contrary in Section 2.1(a) above
notwithstanding, Foothill may create reserves against or reduce its advance
rates based upon Eligible Accounts, Eligible Inventory, Eligible Used Trailer
Inventory, or U.S. Xpress Used Trailer Inventory without declaring an Event of
Default if it determines that there has occurred a Material Adverse Change.
(c) Foothill shall have no obligation to make Advances
hereunder to the extent they would cause the outstanding Obligations to exceed
the Maximum Revolving Amount.
(d) Amounts borrowed pursuant to this Section 2.1 may be repaid
and, subject to the terms and conditions of this Agreement, reborrowed at any
time during the term of this Agreement.
2.2 LETTERS OF CREDIT.
(a) Subject to the terms and conditions of this Agreement,
Foothill agrees to issue letters of credit for the account of Borrower (each, an
"L/C") or to issue guarantees of payment (each such guaranty, an "L/C Guaranty")
with respect to letters of credit issued by an issuing bank for the account of
Borrower. Foothill shall have no obligation to issue a Letter of Credit if any
of the following would result:
(i) the aggregate amount of all undrawn or unreimbursed
Letters of Credit would exceed the Borrowing Base less the amount of
outstanding Advances less the aggregate amount of reserves
established under Section 2.1(b); or
(ii) the aggregate amount of all undrawn or unreimbursed
Letters of Credit would exceed the lower of: (x) the Maximum
Revolving Amount less the amount of outstanding Advances less the
then outstanding principal amount of the Term Loan less the
aggregate amount of reserves established under Section 2.1(b); or
(y) $3,000,000; or
(iii) the outstanding Obligations would exceed the Maximum
Revolving Amount.
Borrower expressly understands and agrees that Foothill shall have no
obligation to arrange for the issuance by issuing banks of the letters of
credit that are to be the subject of L/C Guarantees. Borrower and Foothill
acknowledge and agree that certain of the letters of credit that are to be the
subject of L/C Guarantees may be outstanding on the Closing Date. Each Letter
of Credit shall have an expiry date no later than 60 days prior to the date on
which this Agreement is scheduled to terminate under Section 3.4 (without
regard to any potential renewal term) and all such Letters of Credit shall be
in form and substance acceptable to Foothill in its sole discretion. If
Foothill is
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obligated to advance funds under a Letter of Credit, Borrower immediately shall
reimburse such amount to Foothill and, in the absence of such reimbursement, the
amount so advanced immediately and automatically shall be deemed to be an
Advance hereunder and, thereafter, shall bear interest at the rate then
applicable to Advances under Section 2.5.
(b) Borrower hereby agrees to indemnify, save, defend, and hold
Foothill harmless from any loss, cost, expense, or liability, including payments
made by Foothill, expenses, and reasonable attorneys fees incurred by Foothill
arising out of or in connection with any Letter of Credit, unless a court of
competent jurisdiction finally determines that such loss, cost, expense, or
liability shall have resulted from the gross negligence or willful misconduct of
Foothill. Borrower agrees to be bound by the issuing bank's regulations and
interpretations of any Letters of Credit guarantied by Foothill and opened to or
for Borrower's account or by Foothill's interpretations of any L/C issued by
Foothill to or for Borrower's account, even though this interpretation may be
different from Borrower's own, and Borrower understands and agrees that Foothill
shall not be liable for any error, negligence, or mistake, whether of omission
or commission, in following Borrower's instructions or those contained in the
Letter of Credit or any modifications, amendments, or supplements thereto.
Borrower understands that the L/C Guarantees may require Foothill to indemnify
the issuing bank for certain costs or liabilities arising out of claims by
Borrower against such issuing bank. Borrower hereby agrees to indemnify, save,
defend, and hold Foothill harmless with respect to any loss, cost, expense
(including reasonable attorneys fees), or liability incurred by Foothill under
any L/C Guaranty as a result of Foothill's indemnification of any such issuing
bank, unless a court of competent jurisdiction finally determines that such
loss, cost, expense, or liability shall have resulted from the gross negligence
or willful misconduct of Foothill.
(c) Borrower hereby authorizes and directs any bank that issues
a letter of credit guaranteed by Foothill to deliver to Foothill all
instruments, documents, and other writings and property received by the issuing
bank pursuant to such letter of credit, and to accept and rely upon Foothill's
instructions and agreements with respect to all matters arising in connection
with such letter of credit and the related application. Borrower may or may not
be the "applicant" or "account party" with respect to such letter of credit.
(d) Any and all charges, commissions, fees, and costs incurred
by Foothill relating to the letters of credit guaranteed by Foothill shall be
considered Foothill Expenses for purposes of this Agreement and immediately
shall be reimbursable by Borrower to Foothill.
(e) Immediately upon the termination of this Agreement,
Borrower agrees to either (i) provide cash collateral to be held by Foothill in
an amount equal to 102% of the maximum amount of Foothill's obligations under
Letters of Credit (the 2% in excess of 100% of such maximum amount to cover any
fees, costs and expenses arising from or related to such Letters of Credit), or
(ii) cause to be delivered to Foothill releases of all of Foothill's obligations
under outstanding Letters of Credit. At Foothill's discretion, any proceeds of
Collateral received by Foothill after the occurrence and during the continuation
of an Event of Default may be held as the cash collateral required by this
Section 2.2(e). Any cash collateral required by this Section 2.2(e) or Section
3.6 shall be returned to Borrower after the payment in full of all Obligations.
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(f) If by reason of (i) any change in any applicable law,
treaty, rule, or regulation or any change in the interpretation or application
by any governmental authority of any such applicable law, treaty, rule, or
regulation, or (ii) compliance by the issuing bank or Foothill with any
direction, request, or requirement (irrespective of whether having the force of
law) of any governmental authority or monetary authority including, without
limitation, Regulation D of the Board of Governors of the Federal Reserve System
as from time to time in effect (and any successor thereto):
(A) any reserve, deposit, or similar requirement is or
shall be imposed or modified in respect of any Letters of Credit issued
hereunder, or
(B) there shall be imposed on the issuing bank or
Foothill any other condition regarding any letter of credit, or Letter of
Credit, as applicable, issued pursuant hereto;
and the result of the foregoing is to increase, directly or indirectly, the
cost to the issuing bank or Foothill of issuing, making, guaranteeing, or
maintaining any letter of credit, or Letter of Credit, as applicable, or to
reduce the amount receivable in respect thereof by such issuing bank or
Foothill, then, and in any such case, Foothill may, at any time within a
reasonable period after the additional cost is incurred or the amount received
is reduced, notify Borrower, and Borrower shall pay on demand such amounts as
the issuing bank or Foothill may specify to be necessary to compensate the
issuing bank or Foothill for such additional cost or reduced receipt, together
with interest on such amount from the date of such demand until payment in full
thereof at the rate set forth in Section 2.5(a)(i) or (c)(i), as applicable.
The determination by the issuing bank or Foothill, as the case may be, of any
amount due pursuant to this Section 2.2(f), as set forth in a certificate
setting forth the calculation thereof in reasonable detail, shall, in the
absence of manifest or demonstrable error, be final and conclusive and binding
on all of the parties hereto.
2.3 TERM LOAN. Foothill has agreed to make a term loan (the "Term
Loan") to Borrower in the original principal amount of $4,000,000. The Term
Loan shall be repaid in four (4) installments of principal in the following
amounts:
================================================================================
DATE INSTALLMENT AMOUNT
================================================================================
May 1, 1997 $1,000,000
--------------------------------------------------------------------------------
June 1, 1997 $1,000,000
--------------------------------------------------------------------------------
July 1, 1997 $1,000,000
--------------------------------------------------------------------------------
August 1, 1997 $1,000,000
================================================================================
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The outstanding principal balance and all accrued and unpaid interest under the
Term Loan shall be due and payable upon the termination of this Agreement,
whether by its terms, by prepayment, by acceleration, or otherwise. The unpaid
principal balance of the Term Loan may be prepaid in whole or in part without
penalty or premium at any time during the term of this Agreement upon ten (10)
days prior written notice by Borrower to Foothill, all such prepaid amounts to
be applied to the installments due on the Term Loan in the inverse order of
their maturity. All amounts outstanding under the Term Loan shall constitute
Obligations.
2.4 OVERADVANCES. If, at any time or for any reason, the amount of
Obligations owed by Borrower to Foothill pursuant to Sections 2.1 and 2.2 is
greater than either the Dollar or percentage limitations set forth in Sections
2.1 or 2.2 (an "Overadvance"), Borrower immediately shall pay to Foothill, in
cash, the amount of such excess to be used by Foothill first, to repay Advances
outstanding under Section 2.1 and, thereafter, to be held by Foothill as cash
collateral to secure Borrower's obligation to repay Foothill for all amounts to
be paid pursuant to Letters of Credit then outstanding.
2.5 INTEREST AND LETTER OF CREDIT FEES: RATES, PAYMENTS, AND
CALCULATIONS.
(a) Interest Rate. Except as provided in clause (b) below, all
Obligations (except for undrawn Letters of Credit), shall bear interest at a per
annum rate of 1.75 percentage points above the Reference Rate.
(b) Letter of Credit Fee. Borrower shall pay Foothill a fee
(in addition to the charges, commissions, fees, and costs set forth in Section
2.2(d)) equal to 2.0% per annum times the aggregate undrawn amount of all
outstanding Letters of Credit.
(c) Default Rate. Upon the occurrence and during the
continuation of an Event of Default, (i) all Obligations (except for undrawn
Letters of Credit) shall bear interest at a per annum rate equal to 3.75
percentage points above the Reference Rate, and (ii) the Letter of Credit fee
provided in Section 2.5(b) shall be increased to 4% per annum times the amount
of the undrawn Letters of Credit that were outstanding during the immediately
preceding month.
(d) Minimum Interest. In no event shall the rate of interest
chargeable hereunder for any day be less than 8.0% per annum. To the extent
that interest accrued hereunder at the rate set forth herein would be less than
the foregoing minimum daily rate, the interest rate chargeable hereunder for
such day automatically shall be deemed increased to the minimum rate. To the
extent that interest accrued hereunder at the rate set forth herein (including
the minimum interest rate) would yield less than the foregoing minimum amount,
the interest rate chargeable hereunder for the period in question automatically
shall be deemed increased to that rate that would result in the minimum amount
of interest being accrued and payable hereunder.
(e) Payments. Interest and Letter of Credit fees payable
hereunder shall be due and payable, in arrears, on the first day of each month
during the term hereof. Borrower hereby authorizes Foothill, at its option,
without prior notice to Borrower, to charge such interest and Letter of Credit
fees, all Foothill Expenses (as and when incurred), the charges, commissions,
fees, and costs provided for in Section 2.2(d) (as and when accrued or
incurred), the fees and
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charges provided for in Section 2.10 (as and when accrued or incurred), and all
installments or other payments due under the Term Loan or any Loan Document to
Borrower's Loan Account, which amounts thereafter shall accrue interest at the
rate then applicable to Advances hereunder. Any interest not paid when due
shall be compounded and shall thereafter accrue interest at the rate then
applicable to Advances hereunder.
(f) Computation. The Reference Rate as of the date of this
Agreement is 8.5% per annum. In the event the Reference Rate is changed from
time to time hereafter, the applicable rate of interest hereunder automatically
and immediately shall be increased or decreased by an amount equal to such
change in the Reference Rate. All interest and fees chargeable under the Loan
Documents shall be computed on the basis of a 360 day year for the actual number
of days elapsed.
(g) Intent to Limit Charges to Maximum Lawful Rate. In no
event shall the interest rate or rates payable under this Agreement, plus any
other amounts paid in connection herewith, exceed the highest rate permissible
under any law that a court of competent jurisdiction shall, in a final
determination, deem applicable. Borrower and Foothill, in executing and
delivering this Agreement, intend legally to agree upon the rate or rates of
interest and manner of payment stated within it; provided, however, that,
anything contained herein to the contrary notwithstanding, if said rate or rates
of interest or manner of payment exceeds the maximum allowable under applicable
law, then, ipso facto as of the date of this Agreement, Borrower is and shall be
liable only for the payment of such maximum as allowed by law, and payment
received from Borrower in excess of such legal maximum, whenever received, shall
be applied to reduce the principal balance of the Obligations to the extent of
such excess.
2.6 COLLECTION OF ACCOUNTS. Borrower shall establish on or before the
date which is ten (10) days after the Closing Date and shall at all times
thereafter maintain lockboxes (the "Lockboxes") and, immediately after the
Closing Date, shall instruct all Account Debtors with respect to the Accounts,
General Intangibles, and Negotiable Collateral of Borrower to remit all
Collections in respect thereof to such Lockboxes. Borrower, Foothill, and the
Lockbox Banks shall enter into the Lockbox Agreements, which among other things
shall provide for the opening of a Lockbox Account for the deposit of
Collections at a Lockbox Bank. Borrower agrees that all Collections and other
amounts received by Borrower from any Account Debtor or any other source
immediately upon receipt shall be deposited into a Lockbox Account. No Lockbox
Agreement or arrangement contemplated thereby shall be modified by Borrower
without the prior written consent of Foothill. Upon the terms and subject to
the conditions set forth in the Lockbox Agreements, all amounts received in each
Lockbox Account shall be wired each Business Day into an account (the "Foothill
Account") maintained by Foothill at a depositary selected by Foothill.
2.7 CREDITING PAYMENTS; APPLICATION OF COLLECTIONS. The receipt of
any Collections by Foothill (whether from transfers to Foothill by the Lockbox
Banks pursuant to the Lockbox Agreements or otherwise) immediately shall be
applied provisionally to reduce the Obligations outstanding under Section 2.1,
but shall not be considered a payment on account unless such Collection item is
a wire transfer of immediately available federal funds and is made to the
Foothill Account or unless and until such Collection item is honored when
presented for payment.
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From and after the Closing Date, Foothill shall be entitled to charge Borrower
for three (3) Business Days of clearance or float at the rate set forth in
Section 2.5(a) or Section 2.5(c)(i), as applicable, on all Collections that are
received by Foothill (regardless of whether forwarded by the Lockbox Banks to
Foothill, whether provisionally applied to reduce the Obligations under Section
2.1, or otherwise). This across-the-board three (3) Business Day clearance or
float charge on all Collections is acknowledged by the parties to constitute an
integral aspect of the pricing of Foothill's financing of Borrower, and shall
apply irrespective of the characterization of whether receipts are owned by
Borrower or Foothill, and whether or not there are any outstanding Advances, the
effect of such clearance or float charge being the equivalent of charging three
(3) Business Days of interest on such Collections. Should any Collection item
not be honored when presented for payment, then Borrower shall be deemed not to
have made such payment, and interest shall be recalculated accordingly. Anything
to the contrary contained herein notwithstanding, any Collection item shall be
deemed received by Foothill only if it is received into the Foothill Account on
a Business Day on or before 11:00 a.m. California time. If any Collection item
is received into the Foothill Account on a non-Business Day or after 11:00 a.m.
California time on a Business Day, it shall be deemed to have been received by
Foothill as of the opening of business on the immediately following Business
Day.
2.8 DESIGNATED ACCOUNT. Foothill is authorized to make the Advances,
the Letters of Credit and the Term Loan under this Agreement based upon
telephonic or other instructions received from anyone purporting to be an
Authorized Person, or without instructions if pursuant to Section 2.5(e).
Borrower agrees to establish and maintain the Designated Account with the
Designated Account Bank for the purpose of receiving the proceeds of the
Advances requested by Borrower and made by Foothill hereunder. Unless otherwise
agreed by Foothill and Borrower, any Advance requested by Borrower and made by
Foothill hereunder shall be made to the Designated Account.
2.9 MAINTENANCE OF LOAN ACCOUNT; STATEMENTS OF OBLIGATIONS. Foothill
shall maintain an account on its books in the name of Borrower (the "Loan
Account") on which Borrower will be charged with all Advances and the Term Loan
made by Foothill to Borrower or for Borrower's account, including, accrued
interest, Foothill Expenses, and any other payment Obligations of Borrower. In
accordance with Section 2.7, the Loan Account will be credited with all payments
received by Foothill from Borrower or for Borrower's account, including all
amounts received in the Foothill Account from any Lockbox Bank. Foothill shall
render statements regarding the Loan Account to Borrower, including principal,
interest, fees, and including an itemization of all charges and expenses
constituting Foothill Expenses owing, and such statements shall, absent manifest
error, be conclusively presumed to be correct and accurate and constitute an
account stated between Borrower and Foothill, unless, within 30 days after
receipt thereof by Borrower, Borrower shall deliver to Foothill written
objection thereto describing the error or errors contained in any such
statements.
2.10 FEES. Borrower shall pay to Foothill the following fees:
(a) Closing Fee. On the Closing Date, a closing fee of
$575,000.
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(b) Term Loan Fee. On the Closing Date, a fee of $100,000,
which shall be paid with a portion of the proceeds of the Term Loan.
(c) Unused Line Fee. On the first day of each month during the
term of this Agreement, an unused line fee in an amount equal to 0.375% per
annum times the Average Unused Portion of the Maximum Amount.
(d) Annual Facility Fee. On each anniversary of the Closing
Date, an annual facility fee in an amount equal to 0.50% of the Maximum Amount.
(e) Financial Examination, Documentation, and Appraisal Fees.
Foothill's customary fee of $650 per day per examiner, plus out-of-pocket
expenses for each financial analysis and examination (i.e., audits) of Borrower
performed by personnel employed by Foothill; Foothill's customary appraisal fee
of $1,500 per day per appraiser, plus out-of-pocket expenses for each appraisal
of the Collateral performed by personnel employed by Foothill; and, the actual
charges paid or incurred by Foothill if it elects to employ the services of one
or more third Persons to perform such financial analyses and examinations (i.e.,
audits) of Borrower or to appraise the Collateral; and, on each anniversary of
the Closing Date, Foothill's customary fee of $1,000 per year for its loan
documentation review.
(f) Servicing Fee. On the first day of each month during the
term of this Agreement, and thereafter so long as any Obligations are
outstanding, a servicing fee in an amount equal to $5,000.
3. CONDITIONS; TERM OF AGREEMENT.
3.1 CONDITIONS PRECEDENT TO THE INITIAL ADVANCE, LETTER OF CREDIT AND
THE TERM LOAN. The obligation of Foothill to make the initial Advance, to issue
the initial Letter of Credit or to make the Term Loan is subject to the
fulfillment, to the satisfaction of Foothill and its counsel, of each of the
following conditions on or before the Closing Date:
(a) the Closing Date shall occur on or before March 28, 1997;
(b) Foothill shall have received searches reflecting the filing
of its financing statements;
(c) Foothill shall have written evidence that its financing
statements have been filed in all appropriate jurisdictions;
(d) Foothill shall have received each of the following
documents, duly executed, and each such document shall be in full force and
effect:
(i) the Lockbox Agreements;
(ii) the Disbursement Letter;
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(iii) the Pay-Off Letter, together with UCC termination
statements and other documentation evidencing the
termination by Existing Lender of its Liens in and
to the properties and assets of Borrower;
(iv) the Intercreditor Agreement;
(v) the Patent and Trademark Security Agreement; and
(vi) copies of each lease for real property for which
Borrower is a tenant and copy of each mortgage on
real property owned by Borrower.
(e) Foothill shall have received a certificate from the
Secretary of Borrower attesting to the resolutions of Borrower's Board of
Directors authorizing its execution, delivery, and performance of this Agreement
and the other Loan Documents to which Borrower is a party and authorizing
specific officers of Borrower to execute the same;
(f) Foothill shall have received copies of Borrower's Governing
Documents, as amended, modified, or supplemented to the Closing Date, certified
by the Secretary of Borrower;
(g) Foothill shall have received a certificate of status with
respect to Borrower, dated within 10 days of the Closing Date, such certificate
to be issued by the appropriate officer of the jurisdiction of organization of
Borrower, which certificate shall indicate that Borrower is in good standing in
such jurisdiction;
(h) Foothill shall have received certificates of status with
respect to Borrower, each dated within 15 days of the Closing Date, such
certificates to be issued by the appropriate officer of the jurisdictions in
which any Collateral is located and in which its failure to be duly qualified or
licensed would constitute a Material Adverse Change, which certificates shall
indicate that Borrower is in good standing in such jurisdictions;
(i) Foothill shall have received a certificate of insurance,
together with the endorsements thereto, as are required by Section 6.10, the
form and substance of which shall be satisfactory to Foothill and its counsel;
(j) Foothill shall have received (i) a Collateral Access
Agreement from U.S. Xpress and (ii) such Collateral Access Agreements from
lessors, warehousemen, bailees, other customers, and other third persons as
Foothill may require;
(k) Foothill shall have received an opinion of Borrower's
counsel in form and substance satisfactory to Foothill in its sole discretion;
(l) Foothill shall have received satisfactory evidence that all
tax returns required to be filed by Borrower have been timely filed and all
taxes upon Borrower or its
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properties, assets, income, and franchises (including real property taxes and
payroll taxes) have been paid prior to delinquency, except such taxes that are
the subject of a Permitted Protest; and
(m) Borrower shall have paid to Foothill the closing fee
payable under Section 2.9(a), together with all other Foothill Expenses incurred
by Foothill as of the Closing Date;
(n) Foothill shall have received (i) an appraisal of the
Inventory of the Borrower, (ii) a field survey and inspection with respect to
certain locations of the Borrower, and (iii) reference checks with respect to
the management of Borrower, each of which shall be satisfactory to Foothill in
its sole discretion;
(o) Foothill shall have received satisfactory evidence that,
after giving effect to any Advances made and Letters of Credit issued on the
Closing Date, the difference between (i) the aggregate sum of (A) Borrower's
unrestricted cash or cash equivalent plus (B) the Availability, minus (ii) the
amount of all trade payables owed by the Borrower that is more than sixty (60)
days past due is not less than $750,000; and
(p) all other documents and legal matters in connection with
the transactions contemplated by this Agreement shall have been delivered,
executed, or recorded and shall be in form and substance satisfactory to
Foothill and its counsel.
3.2 CONDITIONS PRECEDENT TO ALL ADVANCES, ALL LETTERS OF CREDIT AND
THE TERM LOAN. The following shall be conditions precedent to all Advances, all
Letters of Credit and the Term Loan hereunder:
(a) the representations and warranties contained in this
Agreement and the other Loan Documents shall be true and correct in all respects
on and as of the date of such extension of credit, as though made on and as of
such date (except to the extent that such representations and warranties relate
solely to an earlier date);
(b) no Default or Event of Default shall have occurred and be
continuing on the date of such extension of credit, nor shall either result from
the making thereof; and
(c) no injunction, writ, restraining order, or other order of
any nature prohibiting, directly or indirectly, the extending of such credit
shall have been issued and remain in force by any governmental authority against
Borrower, Foothill, or any of their Affiliates.
3.3 CONDITION SUBSEQUENT. As a condition subsequent to initial
closing hereunder, Borrower shall perform or cause to be performed the following
(the failure by Borrower to so perform or cause to be performed constituting an
Event of Default):
(a) within 30 days of the Closing Date, deliver to Foothill the
certified copies of the policies of insurance, together with the endorsements
thereto, as are required by Section 6.10, the form and substance of which shall
be satisfactory to Foothill and its counsel; and
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(b) within 10 days of the Closing Date, establish the Lockboxes
pursuant to Section 2.6 and the Lockbox Agreements and, until such time as the
Lockboxes are established, receive all Collections in trust for the benefit of
Foothill and, on each Business Day, send a wire transfer of all Collections
representing good funds to the Foothill Account.
3.4 TERM; AUTOMATIC RENEWAL. This Agreement shall become effective
upon the execution and delivery hereof by Borrower and Foothill and shall
continue in full force and effect for a term ending on the date (the "Renewal
Date") that is five (5) years from the Closing Date and automatically shall be
renewed for successive two (2) year periods thereafter, unless sooner terminated
pursuant to the terms hereof. Either party may terminate this Agreement
effective on the Renewal Date or on any two (2) year anniversary of the Renewal
Date by giving the other party at least 90 days prior written notice. The
foregoing notwithstanding, Foothill shall have the right to terminate its
obligations under this Agreement immediately and without notice upon the
occurrence and during the continuation of an Event of Default.
3.5 EFFECT OF TERMINATION. On the date of termination of this
Agreement, all Obligations (including contingent reimbursement obligations of
Borrower with respect to any outstanding Letters of Credit) immediately shall
become due and payable without notice or demand. No termination of this
Agreement, however, shall relieve or discharge Borrower of Borrower's duties,
Obligations, or covenants hereunder, and Foothill's continuing security
interests in the Collateral shall remain in effect until all Obligations have
been fully and finally discharged and Foothill's obligation to provide
additional credit hereunder is terminated. If Borrower has sent a notice of
termination pursuant to the provisions of Section 3.4, but fails to pay the
Obligations in full on the date set forth in said notice, then Foothill may, but
shall not be required to, renew this Agreement for an additional term of one (1)
year.
3.6 EARLY TERMINATION BY BORROWER. The provisions of Section 3.4 that
allow termination of this Agreement by Borrower only on the Renewal Date and
certain anniversaries thereof notwithstanding, Borrower has the option, at any
time upon 15 days prior written notice to Foothill, to terminate this Agreement
by paying to Foothill, in cash, the Obligations (including an amount equal to
102% of the undrawn amount of the Letters of Credit, such amount to be held as
cash collateral and applied to the Obligations and/or returned to the Borrower
in accordance with Section 2.2(e)), in full, together with a premium (the "Early
Termination Premium") equal to (i) if such date is on or prior to the first
anniversary of the Closing Date, four percent (4.00%) of the Maximum Amount,
(ii) if such date is after the first anniversary of the Closing Date and on or
prior to the second anniversary of the Closing Date, three percent (3.00%) of
the Maximum Amount, (iii) if such date is after the second anniversary of the
Closing Date and on or prior to the third anniversary of the Closing Date, two
percent (2.00%) of the Maximum Amount, or (iv) if such date is after the third
anniversary of the Closing Date one percent (1.00%) of the Maximum Amount,
provided, that, if in connection with any merger by the Borrower with or into
another Person, or the acquisition by the Borrower of all or substantially all
of the outstanding capital stock or assets of another Person (a "Significant
Transaction"), the Borrower (A) requires financing in an aggregate amount of at
least $20,000,000 to finance such Significant Transaction and the working
capital requirements of the Borrower thereafter, and (B) obtains a good faith
proposal from another lender to finance the Significant Transaction and the
working capital needs of the Borrower thereafter
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pursuant to terms that Foothill is not willing to offer to the Borrower, then
Foothill shall reduce the prepayment fee provided for above by 50%.
3.7 TERMINATION UPON EVENT OF DEFAULT. If Foothill terminates this
Agreement upon the occurrence of an Event of Default, in view of the
impracticability and extreme difficulty of ascertaining actual damages and by
mutual agreement of the parties as to a reasonable calculation of Foothill's
lost profits as a result thereof, Borrower shall pay to Foothill upon the
effective date of such termination, a premium in an amount equal to the Early
Termination Premium. The Early Termination Premium shall be presumed to be the
amount of damages sustained by Foothill as the result of the early termination
and Borrower agrees that it is reasonable under the circumstances currently
existing. The Early Termination Premium provided for in this Section 3.7 shall
be deemed included in the Obligations.
4. CREATION OF SECURITY INTEREST.
4.1 GRANT OF SECURITY INTEREST. Borrower hereby grants to Foothill a
continuing security interest in all currently existing and hereafter acquired or
arising Personal Property Collateral in order to secure prompt repayment of any
and all Obligations and in order to secure prompt performance by Borrower of
each of its covenants and duties under the Loan Documents. Foothill's security
interests in the Personal Property Collateral shall attach to all Personal
Property Collateral without further act on the part of Foothill or Borrower.
Anything contained in this Agreement or any other Loan Document to the contrary
notwithstanding, except for the sale of Inventory to buyers in the ordinary
course of business, Borrower has no authority, express or implied, to dispose of
any item or portion of the Personal Property Collateral or the Real Property
Collateral.
4.2 NEGOTIABLE COLLATERAL. In the event that any Collateral,
including proceeds, is evidenced by or consists of Negotiable Collateral,
Borrower, immediately upon the request of Foothill, shall endorse and deliver
physical possession of such Negotiable Collateral to Foothill.
4.3 COLLECTION OF ACCOUNTS, GENERAL INTANGIBLES AND NEGOTIABLE
COLLATERAL. At any time, Foothill or Foothill's designee may (a) notify
customers or Account Debtors of Borrower that the Accounts, General Intangibles
or Negotiable Collateral have been assigned to Foothill or that Foothill has a
security interest therein, and (b) collect the Accounts, General Intangibles and
Negotiable Collateral directly and charge the collection costs and expenses to
the Loan Account. Borrower agrees that it will hold in trust for Foothill, as
Foothill's trustee, any Collections that it receives and immediately will
deliver said Collections to Foothill in their original form as received by
Borrower.
4.4 DELIVERY OF ADDITIONAL DOCUMENTATION REQUIRED. At any time upon
the request of Foothill, Borrower shall execute and deliver to Foothill all
financing statements, continuation financing statements, fixture filings,
security agreements, pledges, assignments, endorsements of certificates of
title, applications for title, affidavits, reports, notices, schedules of
accounts, letters of authority, and all other documents that Foothill reasonably
may request, in form satisfactory to Foothill, to perfect and continue perfected
Foothill's security interests in the
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Collateral, and in order to fully consummate all of the transactions
contemplated hereby and under the other the Loan Documents.
4.5 POWER OF ATTORNEY. Borrower hereby irrevocably makes,
constitutes, and appoints Foothill (and any of Foothill's officers, employees,
or agents designated by Foothill) as Borrower's true and lawful attorney, with
power to (a) if Borrower refuses to, or fails timely to execute and deliver any
of the documents described in Section 4.4, sign the name of Borrower on any of
the documents described in Section 4.4, (b) at any time that an Event of Default
has occurred and is continuing or Foothill deems itself insecure, sign
Borrower's name on any invoice or xxxx of lading relating to any Account, drafts
against Account Debtors, schedules and assignments of Accounts, verifications of
Accounts, and notices to Account Debtors, (c) send requests for verification of
Accounts, (d) endorse Borrower's name on any Collection item that may come into
Foothill's possession, (e) at any time that an Event of Default has occurred and
is continuing or Foothill deems itself insecure, notify the post office
authorities to change the address for delivery of Borrower's mail to an address
designated by Foothill, to receive and open all mail addressed to Borrower, and
to retain all mail relating to the Collateral and forward all other mail to
Borrower, (f) at any time that an Event of Default has occurred and is
continuing or Foothill deems itself insecure, make, settle, and adjust all
claims under Borrower's policies of insurance and make all determinations and
decisions with respect to such policies of insurance, and (g) at any time that
an Event of Default has occurred and is continuing or Foothill deems itself
insecure, settle and adjust disputes and claims respecting the Accounts directly
with Account Debtors, for amounts and upon terms that Foothill determines to be
reasonable, and Foothill may cause to be executed and delivered any documents
and releases that Foothill determines to be necessary. The appointment of
Foothill as Borrower's attorney, and each and every one of Foothill's rights and
powers, being coupled with an interest, is irrevocable until all of the
Obligations have been fully and finally repaid and performed and Foothill's
obligation to extend credit hereunder is terminated.
4.6 RIGHT TO INSPECT. Foothill (through any of its officers,
employees, or agents) shall have the right, from time to time hereafter to
inspect Borrower's Books and all certificates of title with respect to Used
Trailer Inventory and to check, test, and appraise the Collateral in order to
verify Borrower's financial condition or the amount, quality, value, condition
of, or any other matter relating to, the Collateral.
5. REPRESENTATIONS AND WARRANTIES.
In order to induce Foothill to enter into this Agreement, Borrower makes
the following representations and warranties which shall be true, correct, and
complete in all respects as of the date hereof, and shall be true, correct, and
complete in all respects as of the Closing Date, and at and as of the date of
the making of each Advance, Letter of Credit or Term Loan made thereafter, as
though made on and as of the date of such Advance, Letter of Credit or Term
Loan (except to the extent that such representations and warranties relate
solely to an earlier date) and such representations and warranties shall
survive the execution and delivery of this Agreement:
5.1 NO ENCUMBRANCES. Borrower has good and indefeasible title to the
Collateral, free and clear of Liens except for Permitted Liens.
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5.2 ELIGIBLE ACCOUNTS. The Eligible Accounts are bona fide existing
obligations created by the sale and delivery of Inventory or the rendition of
services to Account Debtors in the ordinary course of Borrower's business,
unconditionally owed to Borrower without defenses, disputes, offsets,
counterclaims, or rights of return or cancellation. The property giving rise to
such Eligible Accounts has been delivered to the Account Debtor, or to the
Account Debtor's agent for immediate shipment to and unconditional acceptance by
the Account Debtor. Borrower has not received notice of actual or imminent
bankruptcy, insolvency, or material impairment of the financial condition of any
Account Debtor regarding any Eligible Account.
5.3 ELIGIBLE INVENTORY. All Eligible Inventory, Eligible Used
Trailer Inventory and U.S. Xpress Used Trailer Inventory is of good and
merchantable quality, free from defects. The Borrower is in possession of a
certificate of title evidencing title in the name of the Borrower or bearer with
respect to all Eligible Used Trailer Inventory and all U.S. Xpress Used Trailer
Inventory.
5.4 EQUIPMENT. All of the Equipment is used or held for use in
Borrower's business and is fit for such purposes.
5.5 LOCATION OF INVENTORY AND EQUIPMENT. The Inventory (excluding
Used Trailer Inventory other than Eligible Used Trailer Inventory, and excluding
U.S. Xpress Used Trailer Inventory) and Equipment are not stored with a bailee,
warehouseman, customer or similar party (without Foothill's prior written
consent) and are located only at the locations identified on Schedule 6.12 or
otherwise as permitted by Section 6.12.
5.6 INVENTORY RECORDS. Borrower keeps correct and accurate records
itemizing and describing the kind, type, quality, and quantity of the Inventory,
and Borrower's cost therefor.
5.7 LOCATION OF CHIEF EXECUTIVE OFFICE; FEIN. The chief executive
office of Borrower is located at the address indicated in the preamble to this
Agreement and Borrower's FEIN is 00-0000000.
5.8 DUE ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.
(a) Borrower is duly organized and existing and in good
standing under the laws of the jurisdiction of its incorporation and qualified
and licensed to do business in, and in good standing in, any state where the
failure to be so licensed or qualified reasonably could be expected to have a
Material Adverse Change.
(b) The Borrower has no Subsidiaries.
5.9 DUE AUTHORIZATION; NO CONFLICT.
(a) The execution, delivery, and performance by Borrower of
this Agreement and the Loan Documents to which it is a party have been duly
authorized by all necessary corporate action.
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(b) The execution, delivery, and performance by Borrower of
this Agreement and the Loan Documents to which it is a party do not and will not
(i) violate any provision of federal, state, or local law or regulation
(including Regulations G, T, U, and X of the Federal Reserve Board) applicable
to Borrower, the Governing Documents of Borrower, or any order, judgment, or
decree of any court or other Governmental Authority binding on Borrower, (ii)
conflict with, result in a breach of, or constitute (with due notice or lapse of
time or both) a default under any material contractual obligation or material
lease of Borrower, (iii) result in or require the creation or imposition of any
Lien of any nature whatsoever upon any properties or assets of Borrower, other
than Permitted Liens, or (iv) require any approval of stockholders or any
approval or consent of any Person under any material contractual obligation of
Borrower.
(c) Other than the filing of appropriate financing statements,
fixture filings, and mortgages, the execution, delivery, and performance by
Borrower of this Agreement and the Loan Documents to which Borrower is a party
do not and will not require any registration with, consent, or approval of, or
notice to, or other action with or by, any federal, state, foreign, or other
Governmental Authority or other Person.
(d) This Agreement and the Loan Documents to which Borrower is
a party, and all other documents contemplated hereby and thereby, when executed
and delivered by Borrower will be the legally valid and binding obligations of
Borrower, enforceable against Borrower in accordance with their respective
terms, except as enforcement may be limited by equitable principles or by
bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to
or limiting creditors' rights generally.
(e) The Liens granted by Borrower to Foothill in and to its
properties and assets pursuant to this Agreement and the other Loan Documents
are validly created, perfected, and first priority Liens, subject only to
Permitted Liens.
5.10 LITIGATION. There are no actions or proceedings pending by or
against Borrower before any court or administrative agency and Borrower does not
have knowledge or belief of any pending, threatened, or imminent litigation,
governmental investigations, or claims, complaints, actions, or prosecutions
involving Borrower or any guarantor of the Obligations, except for: (a) ongoing
collection matters in which Borrower is the plaintiff; (b) matters disclosed on
Schedule 5.10; and (c) matters arising after the date hereof that, if decided
adversely to Borrower, would not have a Material Adverse Change.
5.11 NO MATERIAL ADVERSE CHANGE. All financial statements relating to
Borrower or any guarantor of the Obligations that have been delivered by
Borrower to Foothill have been prepared in accordance with GAAP (except, in the
case of unaudited financial statements, for the lack of footnotes and being
subject to year-end audit adjustments) and fairly present Borrower's (or such
guarantor's, as applicable) financial condition as of the date thereof and
Borrower's results of operations for the period then ended. There has not been
a Material Adverse Change with respect to Borrower (or such guarantor, as
applicable) since the date of the latest financial statements submitted to
Foothill on or before the Closing Date.
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5.12 SOLVENCY. After giving effect to the initial Advance
and/or the initial Letter of Credit on the Closing Date Borrower is Solvent. No
transfer of property is being made by Borrower and no obligation is being
incurred by Borrower in connection with the transactions contemplated by this
Agreement or the other Loan Documents with the intent to hinder, delay, or
defraud either present or future creditors of Borrower.
5.13 EMPLOYEE BENEFITS. None of Borrower, any of its
Subsidiaries, or any of their ERISA Affiliates maintains or contributes to any
Benefit Plan, other than those listed on Schedule 5.13. Borrower, each of its
Subsidiaries and each ERISA Affiliate have satisfied the minimum funding
standards of ERISA and the IRC with respect to each Benefit Plan to which it is
obligated to contribute. No ERISA Event has occurred nor has any other event
occurred that may result in an ERISA Event that reasonably could be expected to
result in a Material Adverse Change. None of Borrower or its Subsidiaries, any
ERISA Affiliate, or any fiduciary of any Plan is subject to any direct or
indirect liability with respect to any Plan under any applicable law, treaty,
rule, regulation, or agreement. None of Borrower or its Subsidiaries or any
ERISA Affiliate is required to provide security to any Plan under Section
401(a)(29) of the IRC.
5.14 ENVIRONMENTAL CONDITION. Except as set forth in Schedule
5.14, none of Borrower's properties or assets has ever been used by Borrower or,
to the best of Borrower's knowledge, by previous owners or operators in the
disposal of, or to produce, store, handle, treat, release, or transport, any
Hazardous Materials. Except as set forth in Schedule 5.14, none of Borrower's
properties or assets has ever been designated or identified in any manner
pursuant to any environmental protection statute as a Hazardous Materials
disposal site, or a candidate for closure pursuant to any environmental
protection statute. No Lien arising under any environmental protection statute
has attached to any revenues or to any real or personal property owned or
operated by Borrower. Borrower has not received a summons, citation, notice, or
directive from the Environmental Protection Agency or any other federal or state
governmental agency concerning any action or omission by Borrower resulting in
the releasing or disposing of Hazardous Materials into the environment.
6. AFFIRMATIVE COVENANTS.
Borrower covenants and agrees that, so long as any credit
hereunder shall be available and until full and final payment of the
Obligations, and unless Foothill shall otherwise consent in writing, Borrower
shall do all of the following:
6.1 ACCOUNTING SYSTEM. Maintain a standard and modern system
of accounting that enables Borrower to produce financial statements in
accordance with GAAP, and maintain records pertaining to the Collateral that
contain information as from time to time may be requested by Foothill. Borrower
also shall keep a modern inventory reporting system that shows all additions,
sales, claims, returns, and allowances with respect to the Inventory.
6.2 COLLATERAL REPORTING. Provide Foothill with the following
documents at the following times in form satisfactory to Foothill: (a) on each
Business Day, a sales journal, collection journal, and credit register since the
last such schedule and a calculation of the Borrowing Base as of such date, (b)
on a monthly basis and, in any event, by no later than the 10th
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day of each month during the term of this Agreement, (i) a detailed calculation
of the Borrowing Base, and (ii) a detailed aging, by total, of the Accounts,
together with a reconciliation to the detailed calculation of the Borrowing Base
previously provided to Foothill, (c) on a monthly basis and, in any event, by no
later than the 10th day of each month during the term of this Agreement, a
summary aging, by vendor, of Borrower's accounts payable and any book overdraft,
(d) on a daily basis, an Inventory report with respect to finished goods
Inventory and on a weekly basis, Inventory reports specifying Borrower's cost
and the wholesale market value of its Inventory by category, with additional
detail showing additions to and deletions from the Inventory, (e) on each
Business Day, notice of all returns, disputes, or claims, (f) upon request,
copies of invoices in connection with the Accounts, customer statements, credit
memos, remittance advices and reports, deposit slips, shipping and delivery
documents in connection with the Accounts and for Inventory and Equipment
acquired by Borrower, purchase orders and invoices, (g) on a quarterly basis, a
detailed list of Borrower's customers, (h) on a monthly basis, a calculation of
the Dilution for the prior month; (i) such other reports as to the Collateral or
the financial condition of Borrower as Foothill may request from time to time;
(j) on a weekly basis and at such other times upon request of Foothill, a
certificate of a financial officer of the Borrower setting forth a list of each
certificate of title in the possession of the Borrower for each item of Used
Trailer Inventory and separately identifying each item of Eligible Used Trailer
Inventory and U.S. Xpress Used Trailer Inventory, together with a copy of each
such certificate of title that has not previously been delivered to Foothill;
(k) on each Business Day, written notice of the purchase or acquisition, the
sale or disposition or the change in location of Eligible Used Trailer Inventory
on the immediately preceding Business Day together with a copy of the
certificate of title with respect to such Eligible Used Trailer Inventory; (l)
prior to the submission of an Eligible Account which has an off-setting Contra
Obligation in excess of $500,000, written notice to Foothill of the Account
Debtor, the amount of the Contra Obligation, the terms of the Contra Obligation
and such other information requested by Foothill, in substance satisfactory to
Foothill, together with a copy of the contract evidencing such Contra
Obligations, if available, and (m) on a weekly basis, a report setting forth all
Contra Obligations, in substance satisfactory to Foothill. Original sales
invoices evidencing daily sales shall be mailed by Borrower to each Account
Debtor and, at Foothill's direction, the invoices shall indicate on their face
that the Account has been assigned to Foothill and that all payments are to be
made directly to Foothill.
6.3 FINANCIAL STATEMENTS, REPORTS, CERTIFICATES. Deliver to Foothill:
(a) as soon as available, but in any event within 30 days after the end of each
month during each of Borrower's fiscal years, a company prepared balance sheet,
income statement, and statement of cash flow covering Borrower's operations
during such period; and (b) as soon as available, but in any event within 120
days after the end of each of Borrower's fiscal years, financial statements of
Borrower for each such fiscal year, audited by independent certified public
accountants reasonably acceptable to Foothill and certified, without any
qualifications, by such accountants to have been prepared in accordance with
GAAP, together with a certificate of such accountants addressed to Foothill
stating that such accountants do not have knowledge of the existence of any
Default or Event of Default. Such audited financial statements shall include a
balance sheet, profit and loss statement, and statement of cash flow and, if
prepared, such accountants' letter to management. If Borrower is a parent
company of one or more Subsidiaries, or Affiliates, or is a Subsidiary or
Affiliate of another company, then, in addition to the financial statements
referred to above,
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Borrower agrees to deliver financial statements prepared on a consolidating
basis so as to present Borrower and each such related entity separately, and on
a consolidated basis.
Together with the above, Borrower also shall deliver to Foothill
Borrower's Form 10-Q Quarterly Reports, Form 10-K Annual Reports, and Form 8-K
Current Reports, and any other filings made by Borrower with the Securities and
Exchange Commission, if any, as soon as the same are filed, or any other
information that is provided by Borrower to its shareholders, and any other
report reasonably requested by Foothill relating to the financial condition of
Borrower.
Each month, together with the financial statements provided
pursuant to Section 6.3(a), Borrower shall deliver to Foothill a certificate
signed by its chief financial officer to the effect that: (i) all financial
statements delivered or caused to be delivered to Foothill hereunder have been
prepared in accordance with GAAP (except, in the case of unaudited financial
statements, for the lack of footnotes and being subject to year-end audit
adjustments) and fairly present the financial condition of Borrower, (ii) the
representations and warranties of Borrower contained in this Agreement and the
other Loan Documents are true and correct in all material respects on and as of
the date of such certificate, as though made on and as of such date (except to
the extent that such representations and warranties relate solely to an earlier
date), (iii) for each month that also is the date on which a financial covenant
in Section 7.20 is to be tested, a Compliance Certificate demonstrating in
reasonable detail compliance at the end of such period with the applicable
financial covenants contained in Section 7.20, and (iv) on the date of delivery
of such certificate to Foothill there does not exist any condition or event that
constitutes a Default or Event of Default (or, in the case of clauses (i), (ii),
or (iii), to the extent of any non-compliance, describing such non-compliance as
to which he or she may have knowledge and what action Borrower has taken, is
taking, or proposes to take with respect thereto).
Borrower shall have issued written instructions to its independent
certified public accountants authorizing them to communicate with Foothill and
to release to Foothill whatever financial information concerning Borrower that
Foothill may request. Borrower hereby irrevocably authorizes and directs all
auditors, accountants, or other third parties to deliver to Foothill, at
Borrower's expense, copies of Borrower's financial statements, papers related
thereto, and other accounting records of any nature in their possession, and to
disclose to Foothill any information they may have regarding Borrower's business
affairs and financial conditions.
6.4 TAX RETURNS. Deliver to Foothill copies of each of Borrower's
future federal income tax returns, and any amendments thereto, within 30 days of
the filing thereof with the Internal Revenue Service.
6.5 GUARANTOR REPORTS. Cause any guarantor of any of the Obligations
to deliver its annual financial statements at the time when Borrower provides
its audited financial statements to Foothill and copies of all federal income
tax returns as soon as the same are available and in any event no later than 30
days after the same are required to be filed by law.
6.6 RETURNS. Cause returns and allowances, if any, as between
Borrower and its Account Debtors to be on the same basis and in accordance with
the usual customary practices of Borrower, as they exist at the time of the
execution and delivery of this Agreement. If, at a time
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when no Event of Default has occurred and is continuing, any Account Debtor
returns any Inventory to Borrower, Borrower promptly shall determine the reason
for such return and, if Borrower accepts such return, issue a credit memorandum
(with a copy to be sent to Foothill) in the appropriate amount to such Account
Debtor. If, at a time when an Event of Default has occurred and is continuing,
any Account Debtor returns any Inventory to Borrower, Borrower promptly shall
determine the reason for such return and, if Foothill consents (which consent
shall not be unreasonably withheld), issue a credit memorandum (with a copy to
be sent to Foothill) in the appropriate amount to such Account Debtor.
6.7 TITLE TO INVENTORY. Upon Foothill's request, Borrower
immediately shall deliver to Foothill, properly endorsed, any and all evidences
of ownership of, certificates of title, or applications for title to any items
of Inventory, provided, that certificates of title for Used Trailer Inventory
may be requested by Foothill only if (i) Foothill determines, in the exercise of
its reasonable credit judgment, that the security interest granted by this
Agreement is or may become voidable, unperfected or not given the priority
contemplated by this Agreement and (ii) Foothill establishes a system to provide
Borrower with access to such certificates of title on the same Business Day
notice is given by Borrower of a sale of the underlying Used Trailer Inventory,
provided, further, that as of the Closing Date, Foothill has no present
intention to make any such request.
6.8 MAINTENANCE OF EQUIPMENT. Maintain the Equipment in good
operating condition and repair (ordinary wear and tear excepted), and make all
necessary replacements thereto so that the value and operating efficiency
thereof shall at all times be maintained and preserved.
6.9 TAXES. Cause all assessments and taxes, whether real,
personal, or otherwise, due or payable by, or imposed, levied, or assessed
against Borrower or any of its property to be paid in full, before delinquency
or before the expiration of any extension period, except to the extent that the
validity of such assessment or tax shall be the subject of a Permitted Protest.
Borrower shall make due and timely payment or deposit of all such federal,
state, and local taxes, assessments, or contributions required of it by law, and
will execute and deliver to Foothill, on demand, appropriate certificates
attesting to the payment thereof or deposit with respect thereto. Borrower will
make timely payment or deposit of all tax payments and withholding taxes
required of it by applicable laws, including those laws concerning F.I.C.A.,
F.U.T.A., state disability, and local, state, and federal income taxes, and
will, upon request, furnish Foothill with proof satisfactory to Foothill
indicating that Borrower has made such payments or deposits.
6.10 INSURANCE.
(a) At its expense, keep the Personal Property Collateral
insured against loss or damage by fire, theft, explosion, sprinklers, and all
other hazards and risks, and in such amounts, as are ordinarily insured against
by other owners in similar businesses. Borrower also shall maintain business
interruption, public liability, product liability, and property damage insurance
relating to Borrower's ownership and use of the Personal Property Collateral, as
well as insurance against larceny, embezzlement, and criminal misappropriation.
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(b) If Foothill receives a Mortgage on any Real Property
Collateral, at its expense, Borrower shall obtain and maintain (i) insurance of
the type necessary to insure the Improvements and Chattels (as such terms are
defined in the Mortgages), for the full replacement cost thereof, against any
loss by fire, lightning, windstorm, hail, explosion, aircraft, smoke damage,
vehicle damage, earthquakes, elevator collision, and other risks from time to
time included under "extended coverage" policies, in such amounts as Foothill
may require, but in any event in amounts sufficient to prevent Borrower from
becoming a co-insurer under such policies, (ii) combined single limit bodily
injury and property damages insurance against any loss, liability, or damages
on, about, or relating to each parcel of Real Property Collateral, in an amount
of not less than $1,000,000; (iii) business rental insurance covering annual
receipts for a 12 month period for each parcel of Real Property Collateral; and
(iv) insurance for such other risks as Foothill may require. Replacement costs,
at Foothill's option, may be redetermined by an insurance appraiser,
satisfactory to Foothill, not more frequently than once every 12 months at
Borrower's cost.
(c) All such policies of insurance shall be in such form,
with such companies, and in such amounts as may be reasonably satisfactory to
Foothill. All insurance required herein shall be written by companies which are
authorized to do insurance business in the State of California. All hazard
insurance and such other insurance as Foothill shall specify, shall contain a
California Form 438BFU (NS) mortgagee endorsement, or an equivalent endorsement
satisfactory to Foothill, showing Foothill as sole loss payee thereof, and shall
contain a waiver of warranties. Every policy of insurance referred to in this
Section 6.10 shall contain an agreement by the insurer that it will not cancel
such policy except after 30 days prior written notice to Foothill and that any
loss payable thereunder shall be payable notwithstanding any act or negligence
of Borrower or Foothill which might, absent such agreement, result in a
forfeiture of all or a part of such insurance payment and notwithstanding (i)
occupancy or use of the Real Property Collateral for purposes more hazardous
than permitted by the terms of such policy, (ii) any foreclosure or other action
or proceeding taken by Foothill pursuant to the Mortgages upon the happening of
an Event of Default, or (iii) any change in title or ownership of the Real
Property Collateral. Borrower shall deliver to Foothill certified copies of
such policies of insurance and evidence of the payment of all premiums therefor.
(d) Original policies or certificates thereof satisfactory
to Foothill evidencing such insurance shall be delivered to Foothill at least 30
days prior to the expiration of the existing or preceding policies. Borrower
shall give Foothill prompt notice of any loss covered by such insurance, and
Foothill shall have the right to adjust any loss. Foothill shall have the
exclusive right to adjust all losses payable under any such insurance policies
without any liability to Borrower whatsoever in respect of such adjustments. Any
monies received as payment for any loss under any insurance policy including the
insurance policies mentioned above, shall be paid over to Foothill to be applied
at the option of Foothill either to the prepayment of the Obligations without
premium, in such order or manner as Foothill may elect, or shall be disbursed to
Borrower under stage payment terms satisfactory to Foothill for application to
the cost of repairs, replacements, or restorations. All repairs, replacements,
or restorations shall be effected with reasonable promptness and shall be of a
value at least equal to the value of the items or property destroyed prior to
such damage or destruction. Upon the occurrence of an Event of Default,
Foothill shall have the right to
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apply all prepaid premiums to the payment of the Obligations in such order or
form as Foothill shall determine.
(e) Borrower shall not take out separate insurance
concurrent in form or contributing in the event of loss with that required to be
maintained under this Section 6.10, unless Foothill is included thereon as named
insured with the loss payable to Foothill under a standard California 438BFU
(NS) Mortgagee endorsement, or its local equivalent. Borrower immediately shall
notify Foothill whenever such separate insurance is taken out, specifying the
insurer thereunder and full particulars as to the policies evidencing the same,
and originals of such policies immediately shall be provided to Foothill.
6.11 NO SETOFFS OR COUNTERCLAIMS. Make payments hereunder and
under the other Loan Documents by or on behalf of Borrower without setoff or
counterclaim and free and clear of, and without deduction or withholding for or
on account of, any federal, state, or local taxes.
6.12 LOCATION OF INVENTORY AND EQUIPMENT. Keep the Inventory
(excluding Used Trailer Inventory, other than Eligible Used Trailer Inventory,
and excluding U.S. Xpress Used Trailer Inventory) and Equipment only at the
locations identified on Schedule 6.12; provided, however, that (i) Borrower may
amend Schedule 6.12 so long as such amendment occurs by written notice to
Foothill not less than 30 days prior to the date on which the Inventory (other
than Used Trailer Inventory) or Equipment is moved to such new location, so long
as such new location is within the continental United States, and so long as, at
the time of such written notification, Borrower provides any financing
statements or fixture filings necessary to perfect and continue perfected
Foothill's security interests in such assets and also provides to Foothill a
Collateral Access Agreement and (ii) Borrower may keep Eligible Used Trailer
Inventory at locations not identified on Schedule 6.12 if Borrower provides
Foothill with written notice of such locations and such locations are in a
jurisdiction in which Foothill has filed financing statements with respect to
such Inventory that Foothill deems necessary or appropriate to create a
perfected first priority security interest in Inventory located in such
jurisdiction in favor of Foothill, unless such Eligible Used Trailer Inventory
is located in a jurisdiction for which five (5) Business Days have elapsed after
both (A) Borrower has provided written notice of such jurisdiction to Foothill
and (B) Foothill has received from Borrower the number of financing statements
requested by Foothill, in appropriate form for filing in such jurisdiction and
otherwise reasonably acceptable to Foothill, executed by the Borrower.
6.13 COMPLIANCE WITH LAWS. Comply with the requirements of all
applicable laws, rules, regulations, and orders of the National Highway Traffic
Safety Administration and any other Governmental Authority, including the Fair
Labor Standards Act, and the Americans With Disabilities Act, other than laws,
rules, regulations, and orders the non-compliance with which, individually or in
the aggregate, would not have and could not reasonably be expected to have a
Material Adverse Change.
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6.14 EMPLOYEE BENEFITS.
(a) Promptly, and in any event within 10 Business Days
after Borrower or any of its Subsidiaries knows or has reason to know that an
ERISA Event has occurred that reasonably could be expected to result in a
Material Adverse Change, a written statement of the chief financial officer of
Borrower describing such ERISA Event and any action that is being taking with
respect thereto by Borrower, or any such Subsidiary or ERISA Affiliate, and any
action taken or threatened by the IRS, Department of Labor, or PBGC. Borrower
or such Subsidiary, as applicable, shall be deemed to know all facts known by
the administrator of any Benefit Plan of which it is the plan sponsor, (ii)
promptly, and in any event within 3 Business Days after the filing thereof with
the IRS, a copy of each funding waiver request filed with respect to any Benefit
Plan and all communications received by Borrower, any of its Subsidiaries or, to
the knowledge of Borrower, any ERISA Affiliate with respect to such request, and
(iii) promptly, and in any event within 3 Business Days after receipt by
Borrower, any of its Subsidiaries or, to the knowledge of Borrower, any ERISA
Affiliate, of the PBGC's intention to terminate a Benefit Plan or to have a
trustee appointed to administer a Benefit Plan, copies of each such notice.
Cause to be delivered to Foothill, upon Foothill's request,
each of the following: (i) a copy of each Plan (or, where any such plan is not
in writing, complete description thereof) (and if applicable, related trust
agreements or other funding instruments) and all amendments thereto, all written
interpretations thereof and written descriptions thereof that have been
distributed to employees or former employees of Borrower or its Subsidiaries;
(ii) the most recent determination letter issued by the IRS with respect to each
Benefit Plan; (iii) for the three most recent plan years, annual reports on Form
5500 Series required to be filed with any governmental agency for each Benefit
Plan; (iv) all actuarial reports prepared for the last three plan years for each
Benefit Plan; (v) a listing of all Multiemployer Plans, with the aggregate
amount of the most recent annual contributions required to be made by Borrower
or any ERISA Affiliate to each such plan and copies of the collective bargaining
agreements requiring such contributions; (vi) any information that has been
provided to Borrower or any ERISA Affiliate regarding withdrawal liability under
any Multiemployer Plan; and (vii) the aggregate amount of the most recent annual
payments made to former employees of Borrower or its Subsidiaries under any
Retiree Health Plan.
6.15 LEASES. Pay when due all rents and other amounts payable
under any leases to which Borrower is a party or by which Borrower's properties
and assets are bound, unless such payments are the subject of a Permitted
Protest. To the extent that Borrower fails timely to make payment of such rents
and other amounts payable when due under its leases, Foothill shall be entitled,
in its discretion, to reserve an amount equal to such unpaid amounts against the
Borrowing Base.
6.16. REAL PROPERTY. Upon the occurrence of an Event of Default
or if the Borrower has not sold the parcel of real property and the related
improvements thereto identified on Schedule R-1 on or before June 1, 1997, upon
the request of Foothill, the Borrower shall promptly, and in any event within
forty-five (45) days of a request by Foothill, (i) provide to
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Foothill appraisals of such Real Property satisfactory to Foothill, (ii) execute
and deliver a Mortgage covering such Real Property and provide to Foothill
evidence that such Mortgage on such Real Property has been filed in the
appropriate jurisdiction, (iii) provide to Foothill mortgagee title insurance
policies (or marked commitments to issue the same) for the Real Property
Collateral issued by a title insurance company satisfactory to Foothill (each a
"Mortgage Policy" and, collectively, the "Mortgage Policies") in amounts
satisfactory to Foothill, assuring Foothill that the Mortgage on such Real
Property creates a valid and enforceable first priority Lien on such Real
Property free and clear of all defects and encumbrances except Permitted Liens,
and the Mortgage Policies shall otherwise be in form and substance reasonably
satisfactory to Foothill, (iv) provide to Foothill a phase-I environmental
report and a real estate survey with respect to such Real Property (the
environmental consultants and surveyors retained for such reports or surveys,
the scope of the reports or surveys, and the results thereof shall be acceptable
to Foothill in its sole discretion), and (v) pay all recording taxes, fees,
costs and Foothill Expenses arising from or relating to the satisfaction of the
conditions set forth in this Section 6.16.
6.17 NO-OFFSET LETTERS. Promptly and in any event within
fifteen (15) days after any Eligible Used Trailer Inventory becomes located on
property owned or leased by the Borrower or in a warehouse or on property owned
or leased by, or otherwise in the possession or control of, a customer or a
third party, use its best efforts to obtain a Collateral Access Agreement
executed by the mortgagee, lessee, warehouseman, customer or other third party.
6.18 USED TRAILER INVENTORY. (a) On a weekly basis a report
setting forth for the preceding week any commitment to purchase Used Trailer
Inventory, the type of Used Trailer Inventory being purchased, the purchase
price of such Used Trailer Inventory, the terms of such purchase and such other
information requested by Foothill, in form and substance satisfactory to
Foothill.
(b) Upon the request of Foothill, Borrower shall upon terms
satisfactory to Foothill promptly sell, assign or otherwise transfer all Used
Trailer Inventory existing at the time of such request to a bankruptcy remote
subsidiary or another entity satisfactory to Foothill and thereafter all
transactions by Borrower involving Used Trailer Inventory shall be conducted
through such bankruptcy remote subsidiary or such other entity and on terms
satisfactory to Foothill, provided, that Foothill may make such request only if
Foothill determines, in the exercise of its reasonable credit judgment, that the
security interest granted by this Agreement is or may become voidable,
unperfected or not given the priority contemplated by this Agreement, provided,
further, that as of the Closing Date, Foothill has no present intention to make
any such request.
7. NEGATIVE COVENANTS.
Borrower covenants and agrees that, so long as any credit
hereunder shall be available and until full and final payment of the
Obligations, Borrower will not do any of the following without Foothill's prior
written consent:
7.1 INDEBTEDNESS. Create, incur, assume, permit, guarantee, or
otherwise become or remain, directly or indirectly, liable with respect to any
Indebtedness, except:
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(a) Indebtedness evidenced by this Agreement, together
with Indebtedness to issuers of letters of credit that are the subject of L/C
Guarantees;
(b) Indebtedness set forth in the latest financial
statements of Borrower submitted to Foothill on or prior to the Closing Date;
(c) Indebtedness secured by Permitted Liens; and
(d) refinancings, renewals, or extensions of
Indebtedness permitted under clauses (b) and (c) of this Section 7.1 (and
continuance or renewal of any Permitted Liens associated therewith) so long as:
(i) the terms and conditions of such refinancings, renewals, or extensions do
not materially impair the prospects of repayment of the Obligations by Borrower,
(ii) the net cash proceeds of such refinancings, renewals, or extensions do not
result in an increase in the aggregate principal amount of the Indebtedness so
refinanced, renewed, or extended, (iii) such refinancings, renewals, refundings,
or extensions do not result in a shortening of the average weighted maturity of
the Indebtedness so refinanced, renewed, or extended, and (iv) to the extent
that Indebtedness that is refinanced was subordinated in right of payment to the
Obligations, then the subordination terms and conditions of the refinancing
Indebtedness must be at least as favorable to Foothill as those applicable to
the refinanced Indebtedness.
7.2 LIENS. Create, incur, assume, or permit to exist, directly
or indirectly, any Lien on or with respect to any of its property or assets, of
any kind, whether now owned or hereafter acquired, or any income or profits
therefrom, except for Permitted Liens (including Liens that are replacements of
Permitted Liens to the extent that the original Indebtedness is refinanced under
Section 7.1(d) and so long as the replacement Liens only encumber those assets
or property that secured the original Indebtedness).
7.3 RESTRICTIONS ON FUNDAMENTAL CHANGES. Enter into any
merger, consolidation, reorganization, or recapitalization, or reclassify its
capital stock, or liquidate, wind up, or dissolve itself (or suffer any
liquidation or dissolution), or convey, sell, assign, lease, transfer, or
otherwise dispose of, in one transaction or a series of transactions, all or any
substantial part of its property or assets.
7.4 DISPOSAL OF ASSETS. Sell, lease, assign, transfer, or
otherwise dispose of any of Borrower's properties or assets other than sales of
Inventory to buyers in the ordinary course of Borrower's business as currently
conducted.
7.5 CHANGE NAME. Change Borrower's name, FEIN, corporate
structure (within the meaning of Section 9-402(7) of the Code), or identity,
or add any new fictitious name.
7.6 GUARANTEE. Guarantee or otherwise become in any way liable
with respect to the obligations of any third Person except by endorsement of
instruments or items of payment for deposit to the account of Borrower or which
are transmitted or turned over to Foothill, provided that the Borrower may
guarantee obligations of its customers pursuant to the Repurchase Agreements.
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7.7 NATURE OF BUSINESS. Make any change in the principal
nature of Borrower's business.
7.8 PREPAYMENTS AND AMENDMENTS.
(a) Except in connection with a refinancing permitted by
Section 7.1(d), prepay, redeem, retire, defease, purchase, or otherwise acquire
any Indebtedness owing to any third Person, other than the Obligations in
accordance with this Agreement, and
(b) Directly or indirectly, amend, modify, alter,
increase, or change any of the terms or conditions of any agreement, instrument,
document, indenture, or other writing evidencing or concerning Indebtedness
permitted under Sections 7.1(b), (c) or (d).
7.9 CHANGE OF CONTROL. Cause, permit, or suffer, directly or
indirectly, any Change of Control.
7.10 CONSIGNMENTS. Consign any Inventory or sell any Inventory
on sale or return, sale on approval, or other conditional terms of sale other
than in the ordinary course of business.
7.11 DISTRIBUTIONS. Make any distribution or declare or pay any
dividends (in cash or other property, other than capital stock) on, or purchase,
acquire, redeem, or retire any of Borrower's capital stock, of any class,
whether now or hereafter outstanding.
7.12 ACCOUNTING METHODS. Modify or change its method of
accounting or enter into, modify, or terminate any agreement currently existing,
or at any time hereafter entered into with any third party accounting firm or
service bureau for the preparation or storage of Borrower's accounting records
without said accounting firm or service bureau agreeing to provide Foothill
information regarding the Collateral or Borrower's financial condition. Borrower
waives the right to assert a confidential relationship, if any, it may have with
any accounting firm or service bureau in connection with any information
requested by Foothill pursuant to or in accordance with this Agreement, and
agrees that Foothill may contact directly any such accounting firm or service
bureau in order to obtain such information.
7.13 INVESTMENTS. Directly or indirectly make, acquire, or
incur any liabilities (including contingent obligations) for or in connection
with (a) the acquisition of the securities (whether debt or equity) of, or other
interests in, a Person, (b) loans, advances, capital contributions, or transfers
of property to a Person, or (c) the acquisition of all or substantially all of
the properties or assets of a Person, provided that the Borrower may make loans
and advances to its employees in the ordinary course of business, in an
aggregate amount at any one time outstanding not to exceed $10,000.00.
7.14 TRANSACTIONS WITH AFFILIATES. Except as provided in
Section 7.24, directly or indirectly enter into or permit to exist any material
transaction with any Affiliate of Borrower except for transactions that are in
the ordinary course of Borrower's business, upon fair and
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reasonable terms, that are fully disclosed to Foothill, and that are no less
favorable to Borrower than would be obtained in an arm's length transaction with
a non-Affiliate.
7.15 SUSPENSION. Suspend or go out of a substantial portion of
its business.
7.16 COMPENSATION. Increase the annual cash fee or per-meeting
cash fees paid to directors during any calendar year by more than 25% over the
prior calendar year; pay or accrue total cash salaries, during any calendar
year, to officers and senior management employees in an aggregate amount in
excess of 115% of that paid or accrued in the prior calendar year; pay bonuses
to its officers and senior management employees during any calendar year, in an
aggregate amount, in excess of 10% of Borrower's Net Income for the immediately
preceding calendar year.
7.17 USE OF PROCEEDS. Use (a) the proceeds of the Advances and
the Term Loan made hereunder for any purpose other than (i) on the Closing Date,
(x) to repay in full the outstanding principal, accrued interest, and accrued
fees and expenses owing to Existing Lender, (y) to pay the Term Loan Fee, and
(z) to pay transactional costs and expenses incurred in connection with this
Agreement, and (ii) thereafter, consistent with the terms and conditions hereof,
for its lawful and permitted corporate purposes (including the financing of
working capital and capital expenditures as well as the refinancing of existing
indebtedness).
7.18 CHANGE IN LOCATION OF CHIEF EXECUTIVE OFFICE; INVENTORY AND
EQUIPMENT WITH BAILEES. Relocate its chief executive office to a new location
without providing 30 days prior written notification thereof to Foothill and so
long as, at the time of such written notification, Borrower provides any
financing statements or fixture filings necessary to perfect and continue
perfected Foothill's security interests and also provides to Foothill a
Collateral Access Agreement with respect to such new location. The Inventory
and Equipment shall not at any time now or hereafter be stored with a bailee,
warehouseman, or similar party without Foothill's prior written consent.
7.19 NO PROHIBITED TRANSACTIONS UNDER ERISA. Directly or
indirectly:
(a) engage, or permit any Subsidiary of Borrower to
engage, in any prohibited transaction which is reasonably likely to result in a
civil penalty or excise tax described in Sections 406 of ERISA or 4975 of the
IRC for which a statutory or class exemption is not available or a private
exemption has not been previously obtained from the Department of Labor;
(b) permit to exist with respect to any Benefit Plan any
accumulated funding deficiency (as defined in Sections 302 of ERISA and 412 of
the IRC), whether or not waived;
(c) fail, or permit any Subsidiary of Borrower to fail,
to pay timely required contributions or annual installments due with respect to
any waived funding deficiency to any Benefit Plan;
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(d) terminate, or permit any Subsidiary of Borrower to
terminate, any Benefit Plan where such event would result in any liability of
Borrower, any of its Subsidiaries or any ERISA Affiliate under Title IV of
ERISA;
(e) fail, or permit any Subsidiary of Borrower to fail,
to make any required contribution or payment to any Multiemployer Plan;
(f) fail, or permit any Subsidiary of Borrower to fail,
to pay any required installment or any other payment required under Section 412
of the IRC on or before the due date for such installment or other payment;
(g) amend, or permit any Subsidiary of Borrower to
amend, a Plan resulting in an increase in current liability for the plan year
such that either of Borrower, any Subsidiary of Borrower or any ERISA Affiliate
is required to provide security to such Plan under Section 401(a)(29) of the
IRC; or
(h) withdraw, or permit any Subsidiary of Borrower to
withdraw, from any Multiemployer Plan where such withdrawal is reasonably likely
to result in any liability of any such entity under Title IV of ERISA;
which, individually or in the aggregate, results in or reasonably would be
expected to result in a claim against or liability of Borrower, any of its
Subsidiaries or any ERISA Affiliate in excess of $100,000.
7.20 FINANCIAL COVENANTS. Fail to maintain:
(a) EBITDA. EBITDA for each period of four consecutive
fiscal quarters of the Borrower (or one fiscal quarter for the fiscal quarter
ended June 30, 1997, two fiscal quarters for the fiscal quarter ended September
30, 1997 or three fiscal quarters for the fiscal quarter ended December 31,
1997) for which the last quarter ends on a date set forth below of at least the
amount set forth opposite such date:
Fiscal Quarter Ended EBITDA
-------------------- ------
June 30, 1997 -0-
September 30, 1997 $1,000,000
December 31, 1997 $2,000,000
March 31, 1998 $3,000,000
June 30, 1998 $4,000,000
September 30, 1998 $4,000,000
December 31, 1998 $4,000,000
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March 31, 1999 $4,200,000
June 30, 1999 $4,300,000
September 30, 1999 $4,400,000
December 31, 1999 $4,500,000
March 31, 2000 and thereafter $4,600,000
(b) Net Worth. Net Worth of at least the amount indicated below
for each date set forth below:
Fiscal Quarter Ended Net Worth
-------------------- ----------
June 30, 1997 $1,000,000
September 30, 1997 $1,125,000
December 31, 1997 $1,250,000
March 31, 1998 $1,500,000
June 30, 1998 $1,625,000
September 30, 1998 $1,750,000
December 31, 1998 $1,875,000
March 31, 1999 $2,000,000
June 30, 1999 $2,125,000
September 30, 1999 $2,250,000
December 31, 1999 $2,375,000
March 31, 2000 $2,500,000
June 30, 2000 $2,625,000
September 30, 2000 $2,750,000
December 31, 2000 $2,875,000
March 31, 2001 $3,000,000
June 30, 2001 $3,125,000
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September 30, 2001 $3,250,000
December 31, 2001 and thereafter $3,375,000
7.21 CAPITAL EXPENDITURES. Make capital expenditures in any
fiscal year in excess of $1,7000,000.
7.22 SALE OF U.S. XPRESS USED TRAILER INVENTORY. Sell any U.S.
Xpress Used Trailer Inventory consisting of 1991 or 1992 fifty-three foot
trailers for a price of less than $7,000 per trailer.
7.23 BILLING PRACTICES. Send invoices to customers purchasing
finished goods Inventory prior to the completion of such Inventory.
7.24 REPURCHASE OF USED TRAILER INVENTORY. Repurchase any Used
Trailer Inventory from TYM, Inc. or any other entity controlled by Xxxxxxx X.
Xxxxx unless (i) such repurchase occurs after August 1, 1997, (ii) the Term Loan
has been repaid in full, (iii) the price paid by Borrower for such Used Trailer
Inventory is not greater than the price paid to Borrower when Borrower sold such
Used Trailer Inventory to TYM, Inc. or such other entity, and (iv) both before
and after the giving effect to such repurchase, no Default or Event of Default
has occurred and is continuing and Availability is not less than $4,000,000.
8. EVENTS OF DEFAULT.
Any one or more of the following events shall constitute an event
of default (each, an "Event of Default") under this Agreement:
8.1 If Borrower fails to pay when due and payable or when
declared due and payable, any portion of the Obligations (whether of principal,
interest (including any interest which, but for the provisions of the Bankruptcy
Code, would have accrued on such amounts), fees and charges due Foothill,
reimbursement of Foothill Expenses, or other amounts constituting Obligations);
8.2 If Borrower fails to perform, keep, or observe any term,
provision, condition, covenant, or agreement contained in this Agreement, in any
of the Loan Documents, or in any other present or future agreement between
Borrower and Foothill;
8.3 If there is a Material Adverse Change;
8.4 If any material portion of Borrower's properties or assets
is attached, seized, subjected to a writ or distress warrant, or is levied upon,
or comes into the possession of any third Person;
8.5 If an Insolvency Proceeding is commenced by Borrower;
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8.6 If an Insolvency Proceeding is commenced against Borrower
and any of the following events occur: (a) Borrower consents to the institution
of the Insolvency Proceeding against it; (b) the petition commencing the
Insolvency Proceeding is not timely controverted; (c) the petition commencing
the Insolvency Proceeding is not dismissed within 45 calendar days of the date
of the filing thereof; provided, however, that, during the pendency of such
period, Foothill shall be relieved of its obligation to extend credit hereunder;
(d) an interim trustee is appointed to take possession of all or a substantial
portion of the properties or assets of, or to operate all or any substantial
portion of the business of, Borrower; or (e) an order for relief shall have been
issued or entered therein;
8.7 If Borrower is enjoined, restrained, or in any way
prevented by court order from continuing to conduct all or any material part of
its business affairs;
8.8 If a notice of Lien, levy, or assessment is filed of record
with respect to any of Borrower's properties or assets by the United States
Government, or any department, agency, or instrumentality thereof, or by any
state, county, municipal, or governmental agency, or if any taxes or debts owing
at any time hereafter to any one or more of such entities becomes a Lien,
whether xxxxxx or otherwise, upon any of Borrower's properties or assets and the
same is not paid on the payment date thereof;
8.9 If a judgment or other claim in excess of $75,000 becomes
a Lien or encumbrance upon any material portion of Borrower's properties or
assets;
8.10 If there is a default in any material agreement to which
Borrower is a party with one or more third Persons and such default (a) occurs
at the final maturity of the obligations thereunder, or (b) results in a right
by such third Person(s), irrespective of whether exercised, to accelerate the
maturity of Borrower's obligations thereunder;
8.11 If Borrower makes any payment on account of Indebtedness
that has been contractually subordinated in right of payment to the payment of
the Obligations, except to the extent such payment is permitted by the terms of
the subordination provisions applicable to such Indebtedness;
8.12 If any misstatement or misrepresentation exists now or
hereafter in any warranty, representation, statement, or report made to Foothill
by Borrower or any officer, employee, agent, or director of Borrower, or if any
such warranty or representation is withdrawn.
9. FOOTHILL'S RIGHTS AND REMEDIES.
9.1 RIGHTS AND REMEDIES. Upon the occurrence, and during the
continuation, of an Event of Default Foothill may, at its election, without
notice of its election and without demand, do any one or more of the following,
all of which are authorized by Borrower:
(a) Declare all Obligations, whether evidenced by this
Agreement, by any of the other Loan Documents, or otherwise, immediately due and
payable;
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(b) Cease advancing money or extending credit to or for
the benefit of Borrower under this Agreement, under any of the Loan Documents,
or under any other agreement between Borrower and Foothill;
(c) Terminate this Agreement and any of the other Loan
Documents as to any future liability or obligation of Foothill, but without
affecting Foothill's rights and security interests in the Personal Property
Collateral or the Real Property Collateral and without affecting the
Obligations;
(d) Settle or adjust disputes and claims directly with
Account Debtors for amounts and upon terms which Foothill considers advisable,
and in such cases, Foothill will credit Borrower's Loan Account with only the
net amounts received by Foothill in payment of such disputed Accounts after
deducting all Foothill Expenses incurred or expended in connection therewith;
(e) Cause Borrower to hold all returned Inventory and
certificates of title for all Used Trailer Inventory in trust for Foothill,
segregate all returned Inventory and certificates of title for all Used Trailer
Inventory from all other property of Borrower or in Borrower's possession,
conspicuously label said returned Inventory as the property of Foothill and, on
demand by Foothill, deliver possession of all certificates of title for all Used
Trailer Inventory in its possession, properly endorsed, to Foothill;
(f) Without notice to or demand upon Borrower or any
guarantor, make such payments and do such acts as Foothill considers necessary
or reasonable to protect its security interests in the Collateral. Borrower
agrees to assemble the Personal Property Collateral if Foothill so requires, and
to make the Personal Property Collateral available to Foothill as Foothill may
designate. Borrower authorizes Foothill to enter the premises where the Personal
Property Collateral is located, to take and maintain possession of the Personal
Property Collateral, or any part of it, and to pay, purchase, contest, or
compromise any encumbrance, charge, or Lien that in Foothill's determination
appears to conflict with its security interests and to pay all expenses incurred
in connection therewith. With respect to any of Borrower's owned or leased
premises, Borrower hereby grants Foothill a license to enter into possession of
such premises and to occupy the same, without charge, for up to 120 days in
order to exercise any of Foothill's rights or remedies provided herein, at law,
in equity, or otherwise;
(g) Without notice to Borrower (such notice being
expressly waived), and without constituting a retention of any collateral in
satisfaction of an obligation (within the meaning of Section 9-505 of the Code),
set off and apply to the Obligations any and all (i) balances and deposits of
Borrower held by Foothill (including any amounts received in the Lockbox
Accounts), or (ii) indebtedness at any time owing to or for the credit or the
account of Borrower held by Foothill;
(h) Hold, as cash collateral, any and all balances and
deposits of Borrower held by Foothill, and any amounts received in the Lockbox
Accounts, to secure the full and final repayment of all of the Obligations;
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(i) Ship, reclaim, recover, store, finish, maintain,
repair, prepare for sale, advertise for sale, and sell (in the manner provided
for herein) the Personal Property Collateral. Foothill is hereby granted a
license or other right to use, without charge, Borrower's labels, patents,
copyrights, rights of use of any name, trade secrets, trade names, trademarks,
service marks, and advertising matter, or any property of a similar nature, as
it pertains to the Personal Property Collateral, in completing production of,
advertising for sale, and selling any Personal Property Collateral and
Borrower's rights under all licenses and all franchise agreements shall inure to
Foothill's benefit;
(j) Sell the Personal Property Collateral at either a
public or private sale, or both, by way of one or more contracts or
transactions, for cash or on terms, in such manner and at such places (including
Borrower's premises) as Foothill determines is commercially reasonable. It is
not necessary that the Personal Property Collateral be present at any such sale;
(k) Foothill shall give notice of the disposition of the
Personal Property Collateral as follows:
(1) Foothill shall give Borrower and each holder
of a security interest in the Personal Property Collateral who has filed with
Foothill a written request for notice, a notice in writing of the time and place
of public sale, or, if the sale is a private sale or some other disposition
other than a public sale is to be made of the Personal Property Collateral, then
the time on or after which the private sale or other disposition is to be made;
(2) The notice shall be personally delivered or
mailed, postage prepaid, to Borrower as provided in Section 12, at least 5 days
before the date fixed for the sale, or at least 5 days before the date on or
after which the private sale or other disposition is to be made; no notice needs
to be given prior to the disposition of any portion of the Personal Property
Collateral that is perishable or threatens to decline speedily in value or that
is of a type customarily sold on a recognized market. Notice to Persons other
than Borrower claiming an interest in the Personal Property Collateral shall be
sent to such addresses as they have furnished to Foothill;
(3) If the sale is to be a public sale, Foothill
also shall give notice of the time and place by publishing a notice one time at
least 5 days before the date of the sale in a newspaper of general circulation
in the county in which the sale is to be held;
(l) Foothill may credit bid and purchase at any public
sale; and
(m) Any deficiency that exists after disposition of the
Personal Property Collateral as provided above will be paid immediately by
Borrower. Any excess will be returned, without interest and subject to the
rights of third Persons, by Foothill to Borrower.
9.2 REMEDIES CUMULATIVE. Foothill's rights and remedies under
this Agreement, the Loan Documents, and all other agreements shall be
cumulative. Foothill shall have all other rights and remedies not inconsistent
herewith as provided under the Code, by law, or in equity. No exercise by
Foothill of one right or remedy shall be deemed an election, and no waiver
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by Foothill of any Event of Default shall be deemed a continuing waiver. No
delay by Foothill shall constitute a waiver, election, or acquiescence by it.
10. TAXES AND EXPENSES.
If Borrower fails to pay any monies (whether taxes,
assessments, insurance premiums, or, in the case of leased properties or assets,
rents or other amounts payable under such leases) due to third Persons, or fails
to make any deposits or furnish any required proof of payment or deposit, all as
required under the terms of this Agreement, then, to the extent that Foothill
determines that such failure by Borrower could result in a Material Adverse
Change, in its discretion and without prior notice to Borrower, Foothill may do
any or all of the following: (a) make payment of the same or any part thereof;
(b) set up such reserves in Borrower's Loan Account as Foothill deems necessary
to protect Foothill from the exposure created by such failure; or (c) obtain and
maintain insurance policies of the type described in Section 6.10, and take any
action with respect to such policies as Foothill deems prudent. Any such
amounts paid by Foothill shall constitute Foothill Expenses. Any such payments
made by Foothill shall not constitute an agreement by Foothill to make similar
payments in the future or a waiver by Foothill of any Event of Default under
this Agreement. Foothill need not inquire as to, or contest the validity of,
any such expense, tax, or Lien and the receipt of the usual official notice for
the payment thereof shall be conclusive evidence that the same was validly due
and owing.
11. WAIVERS; INDEMNIFICATION.
11.1 DEMAND; PROTEST; ETC. Borrower waives demand,
protest, notice of protest, notice of default or dishonor, notice of payment and
nonpayment, nonpayment at maturity, release, compromise, settlement, extension,
or renewal of accounts, documents, instruments, chattel paper, and guarantees at
any time held by Foothill on which Borrower may in any way be liable.
11.2 FOOTHILL'S LIABILITY FOR COLLATERAL. So long as
Foothill complies with its obligations, if any, under Section 9-207 of the Code,
Foothill shall not in any way or manner be liable or responsible for: (a) the
safekeeping of the Collateral; (b) any loss or damage thereto occurring or
arising in any manner or fashion from any cause; (c) any diminution in the value
thereof; or (d) any act or default of any carrier, warehouseman, bailee,
forwarding agency, or other Person. All risk of loss, damage, or destruction of
the Collateral shall be borne by Borrower.
11.3 INDEMNIFICATION. Borrower shall pay, indemnify,
defend, and hold Foothill, each Participant, and each of their respective
officers, directors, employees, counsel, agents, and attorneys-in-fact (each, an
"Indemnified Person") harmless (to the fullest extent permitted by law) from and
against any and all claims, demands, suits, actions, investigations,
proceedings, and damages, and all reasonable attorneys fees and disbursements
and other costs and expenses actually incurred in connection therewith (as and
when they are incurred and irrespective of whether suit is brought), at any time
asserted against, imposed upon, or incurred by any of them in connection with or
as a result of or related to the execution, delivery, enforcement, performance,
and administration of this Agreement and any other Loan Documents or the
transactions contemplated herein, and with respect to any investigation,
litigation, or proceeding related to this Agreement, any other Loan Document, or
the use of the proceeds of the credit provided hereunder
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(irrespective of whether any Indemnified Person is a party thereto), or any act,
omission, event or circumstance in any manner related thereto (all the
foregoing, collectively, the "Indemnified Liabilities"). Borrower shall have no
obligation to any Indemnified Person under this Section 11.3 with respect to any
Indemnified Liability that a court of competent jurisdiction finally determines
to have resulted from the gross negligence or willful misconduct of such
Indemnified Person. This provision shall survive the termination of this
Agreement and the repayment of the Obligations.
12. NOTICES.
Unless otherwise provided in this Agreement, all notices or
demands by any party relating to this Agreement or any other Loan Document shall
be in writing and (except for financial statements and other informational
documents which may be sent by first-class mail, postage prepaid) shall be
personally delivered or sent by registered or certified mail (postage prepaid,
return receipt requested), overnight courier, or telefacsimile to Borrower or to
Foothill, as the case may be, at its address set forth below:
IF TO BORROWER: XXXXXX TRAILERS, INC.
One Paces West, Suite 1700
0000 Xxxxx Xxxxx Xxxx
Xxxxxxx, Xxxxxxx 00000
Attn: T. Xxxxxxx Xxxxxxxx
Fax No. (000) 000-0000
WITH COPIES TO: XXXXXX & BIRD
0000 Xxxx Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
Attn: Xxxx Xxxxxxxxx, Esq.
Fax No. (000) 000-0000
IF TO FOOTHILL: FOOTHILL CAPITAL CORPORATION
00000 Xxxxx Xxxxxx Xxxxxxxxx
Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
Attn: Business Finance Division Manager
Fax No. (000) 000-0000
WITH COPIES TO: XXXXXXX XXXX & XXXXX LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxx X. Neporent, Esq.
Xxxxxxxx X. Xxxxxxx, Esq.
Fax No. (000) 000-0000
The parties hereto may change the address at which they are to
receive notices hereunder, by notice in writing in the foregoing manner given to
the other. All notices or demands
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sent in accordance with this Section 12, other than notices by Foothill in
connection with Sections 9-504 or 9-505 of the Code, shall be deemed received on
the earlier of the date of actual receipt or 3 days after the deposit thereof in
the mail. Borrower acknowledges and agrees that notices sent by Foothill in
connection with Sections 9-504 or 9-505 of the Code shall be deemed sent when
deposited in the mail or personally delivered, or, where permitted by law,
transmitted telefacsimile or other similar method set forth above.
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.
THE VALIDITY OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
(UNLESS EXPRESSLY PROVIDED TO THE CONTRARY IN AN ANOTHER LOAN DOCUMENT), THE
CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT HEREOF AND THEREOF, AND THE RIGHTS
OF THE PARTIES HERETO AND THERETO WITH RESPECT TO ALL MATTERS ARISING HEREUNDER
OR THEREUNDER OR RELATED HERETO OR THERETO SHALL BE DETERMINED UNDER, GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA. THE
PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE TRIED AND LITIGATED ONLY IN THE
STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF LOS ANGELES, STATE OF
CALIFORNIA OR, AT THE SOLE OPTION OF FOOTHILL, IN ANY OTHER COURT IN WHICH
FOOTHILL SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT
MATTER JURISDICTION OVER THE MATTER IN CONTROVERSY. EACH OF BORROWER AND
FOOTHILL WAIVES, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH
MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO
THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 13.
BORROWER AND FOOTHILL HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF
ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF THE LOAN
DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT
CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR
STATUTORY CLAIMS. EACH OF BORROWER AND FOOTHILL REPRESENTS THAT IT HAS REVIEWED
THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS
FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A COPY
OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
14. DESTRUCTION OF BORROWER'S DOCUMENTS.
All documents, schedules, invoices, agings, or other papers
delivered to Foothill may be destroyed or otherwise disposed of by Foothill four
(4) months after they are delivered to or received by Foothill, unless Borrower
requests, in writing, the return of said documents, schedules, or other papers
and makes arrangements, at Borrower's expense, for their return.
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15. GENERAL PROVISIONS.
15.1 EFFECTIVENESS. This Agreement shall be binding and deemed
effective when executed by Borrower and Foothill.
15.2 SUCCESSORS AND ASSIGNS. This Agreement shall bind and
inure to the benefit of the respective successors and assigns of each of the
parties; provided, however, that Borrower may not assign this Agreement or any
rights or duties hereunder without Foothill's prior written consent and any
prohibited assignment shall be absolutely void. No consent to an assignment by
Foothill shall release Borrower from its Obligations. Foothill may assign this
Agreement and its rights and duties hereunder and no consent or approval by
Borrower is required in connection with any such assignment. Foothill reserves
the right to sell, assign, transfer, negotiate, or grant participations in all
or any part of, or any interest in Foothill's rights and benefits hereunder. In
connection with any such assignment or participation, Foothill may disclose all
documents and information which Foothill now or hereafter may have relating to
Borrower or Borrower's business. To the extent that Foothill assigns its rights
and obligations hereunder to a third Person, Foothill thereafter shall be
released from such assigned obligations to Borrower and such assignment shall
effect a novation between Borrower and such third Person.
15.3 SECTION HEADINGS. Headings and numbers have been set
forth herein for convenience only. Unless the contrary is compelled by the
context, everything contained in each section applies equally to this entire
Agreement.
15.4 INTERPRETATION. Neither this Agreement nor any
uncertainty or ambiguity herein shall be construed or resolved against Foothill
or Borrower, whether under any rule of construction or otherwise. On the
contrary, this Agreement has been reviewed by all parties and shall be
construed and interpreted according to the ordinary meaning of the words used
so as to fairly accomplish the purposes and intentions of all parties hereto.
15.5 SEVERABILITY OF PROVISIONS. Each provision of this
Agreement shall be severable from every other provision of this Agreement for
the purpose of determining the legal enforceability of any specific provision.
15.6 AMENDMENTS IN WRITING. This Agreement can only be amended
by a writing signed by both Foothill and Borrower.
15.7 COUNTERPARTS; TELEFACSIMILE EXECUTION. This Agreement may
be executed in any number of counterparts and by different parties on separate
counterparts, each of which, when executed and delivered, shall be deemed to be
an original, and all of which, when taken together, shall constitute but one
and the same Agreement. Delivery of an executed counterpart of this Agreement
by telefacsimile shall be equally as effective as delivery of an original
executed counterpart of this Agreement. Any party delivering an executed
counterpart of this Agreement by telefacsimile also shall deliver an original
executed counterpart of this Agreement but the failure to deliver an original
executed counterpart shall not affect the validity, enforceability, and binding
effect of this Agreement.
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15.8 REVIVAL AND REINSTATEMENT OF OBLIGATIONS. If the incurrence or
payment of the Obligations by Borrower or any guarantor of the Obligations or
the transfer by either or both of such parties to Foothill of any property of
either or both of such parties should for any reason subsequently be declared to
be void or voidable under any state or federal law relating to creditors'
rights, including provisions of the Bankruptcy Code relating to fraudulent
conveyances, preferences, and other voidable or recoverable payments of money or
transfers of property (collectively, a "Voidable Transfer"), and if Foothill is
required to repay or restore, in whole or in part, any such Voidable Transfer,
or elects to do so upon the reasonable advice of its counsel, then, as to any
such Voidable Transfer, or the amount thereof that Foothill is required or
elects to repay or restore, and as to all reasonable costs, expenses, and
attorneys fees of Foothill related thereto, the liability of Borrower or such
guarantor automatically shall be revived, reinstated, and restored and shall
exist as though such Voidable Transfer had never been made.
15.9 INTEGRATION. This Agreement, together with the other Loan
Documents, reflects the entire understanding of the parties with respect to the
transactions contemplated hereby and shall not be contradicted or qualified by
any other agreement, oral or written, before the date hereof.
15.10 BROKERS FEES. Borrower shall be solely responsible for any and
all brokerage commissions, finders fees or similar compensation payable in
connection with this Agreement and the transactions contemplated hereby, and
Borrower agrees to indemnify and hold harmless Foothill and its officers,
directors, employees, agents and representatives from any and all such
commissions, fees and similar compensation. Borrower represents and warrants
that no such fee, commission or similar compensation is due or claimed to be due
in connection with this Agreement or the transactions contemplated hereby other
than a fee owned to Xxxxxxxx Xxxxxxx & Company, for payment of which Borrower is
solely responsible.
REMAINDER OF PAGE INTENTIONALLY BLANK
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in New York, New York.
XXXXXX TRAILERS, INC.,
a Delaware corporation
By /s/ Xxxxxxx X. Xxxxx
--------------------
Title: President
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FOOTHILL CAPITAL CORPORATION,
a California corporation
By: /s/ Xxxxxxxx Xxxxxxxxxx
-----------------------
Title: Senior Vice Prseident
---------------------
