CREDIT AGREEMENT
Exhibit
10.7
THIS
CREDIT AGREEMENT (this “Agreement”) is entered into as of March 19, 2007, by and
between Target Logistic Services, Inc., a Delaware corporation (“Borrower”), and
XXXXX FARGO BANK, NATIONAL ASSOCIATION (“Bank”).
Borrower
has requested that Bank extend or continue credit to Borrower as described
below, and Bank has agreed to provide such credit to Borrower on the terms
and
conditions contained herein.
ARTICLE
I
SECTION
1.1. LINE
OF
CREDIT.
(a) Line
of Credit.
Subject
to the terms and conditions of this Agreement, Bank hereby agrees to make
advances to Borrower from time to time up to and including December 1, 2009,
not
to exceed at any time the aggregate principal amount of Twenty Million Dollars
($20,000,000.00) (“Line of Credit”), the proceeds of which shall be used to
assist with working capital, capital expenditures (subject to Section 5.2 below)
and Permitted Acquisitions (as defined in and subject to Section 5.4 below).
Borrower’s obligation to repay advances under the Line of Credit shall be
evidenced by a promissory note dated as of March 19, 2007 (“Line of Credit
Note”), all terms of which are incorporated herein by this
reference.
(b) Limitation
on Borrowings.
Notwithstanding anything herein to the contrary, if the average daily amount
outstanding under the Line of Credit (including without limitation any undrawn
amounts under any outstanding Letters of Credit (defined below)) in any calendar
month exceeds Five Million Dollars ($5,000,000.00) (“Designated Amount”), then
outstanding borrowings under the Line of Credit, to a maximum of the principal
amount set forth in Section 1.1(a) above, shall not at any time thereafter
exceed a borrowing base (“Borrowing Base”) which is the sum of eighty percent
(80%) of Borrower’s eligible accounts receivable.
All
of
the foregoing shall be determined by Bank upon receipt and review of all
collateral reports required hereunder and such other documents and collateral
information as Bank may from time to time require. Borrower acknowledges that
said borrowing base was established by Bank with the understanding that, among
other items, the aggregate of all returns, rebates, discounts, credits and
allowances for the immediately preceding three (3) months at all times shall
be
less than five percent (5%) of Borrower’s gross sales for said period. If such
dilution of Borrower’s accounts for the immediately preceding three (3) months
at any time exceeds five percent (5%) of Borrower’s gross sales for said period,
or if there at any time exists any other matters, events, conditions or
contingencies which Bank reasonably believes may affect payment of any portion
of Borrower’s accounts, Bank, in its sole discretion, may reduce the foregoing
advance rate against eligible accounts receivable to a percentage appropriate
to
reflect such additional dilution and/or establish additional reserves against
Borrower’s eligible accounts receivable.
As
used
herein, “eligible accounts receivable” shall consist solely of trade accounts
created in the ordinary course of Borrower’s business, upon which Borrower’s
right to receive payment is absolute and not contingent upon the fulfillment
of
any condition whatsoever, and in which Bank has a perfected security interest
of
first priority, and shall not include:
(i)
any
account which is more than ninety (90) days past due;
(ii)
that
portion of any account for which there exists any right of setoff, defense
or
discount (except regular discounts allowed in the ordinary course of business
to
promote prompt payment) or for which any defense or counterclaim has been
asserted;
(iii)
any
account which represents an obligation of any state or municipal government
or
of the United States government or any political subdivision thereof (except
accounts which represent obligations of the United States government and for
which the assignment provisions of the Federal Assignment of Claims Act, as
amended or recodified from time to time, have been complied with to Bank’s
satisfaction);
(iv) any
account which represents an obligation of an account debtor located in a foreign
country other than an account debtor located in a Canadian province or
territory, so long as, in Bank’s determination, such Canadian jurisdiction
recognizes Bank’s first priority security interest in and right to collect such
account as a consequence of any security agreements and UCC filings in favor
of
Bank; provided,
that
outstanding borrowings against accounts from account debtors located in a
non-Canadian jurisdiction shall not exceed an aggregate of Five Hundred Thousand
Dollars ($500,000.00) at any time.
(v)
any
account which arises from the sale or lease to or performance of services for,
or represents an obligation of, an employee, affiliate, partner, member, parent
or subsidiary of Borrower;
(vi)
that
portion of any account, which represents interim or progress xxxxxxxx or
retention rights on the part of the account debtor;
(vii)
any
account which represents an obligation of any account debtor when thirty percent
(30%) or more of Borrower’s accounts from such account debtor are not eligible
pursuant to (i) above;
(viii)
that
portion of any account from an account debtor which represents the amount by
which Borrower’s total accounts from said account debtor exceeds twenty-five
percent (25%) of Borrower’s total accounts;
(ix)
any
account deemed ineligible by Bank when Bank, in its reasonable discretion,
deems
the creditworthiness or financial condition of the account debtor, or the
industry in which the account debtor is engaged, to be
unsatisfactory.
(c) Cancellation
and Reinstatement of the Borrowing Base.
If the
Borrowing Base has been established in accordance with Section 1.1(b) and
thereafter the average daily amount outstanding under the Line of Credit
(including without limitation any undrawn amounts under any outstanding Letters
of Credit) does not exceed the Designated Amount at a subsequent month-end,
then
the Borrowing Base will be cancelled, subject to its reinstatement in accordance
with Section 1.1(b) if thereafter the average daily amount outstanding under
the
Line of Credit (including without limitation any undrawn amounts under any
outstanding Letters of Credit) for any month subsequently exceeds the Designated
Amount.
(d) Letter
of Credit Subfeature.
As a
subfeature under the Line of Credit, Bank agrees from time to time during the
term thereof to issue or cause an affiliate to issue standby letters of credit
and/or sight commercial letters of credit for the account of Borrower to finance
general corporate needs (each, a “Letter of Credit” and collectively, “Letters
of Credit”); provided however, that the aggregate undrawn amount of all
outstanding Letters of Credit shall not at any time exceed Five Million Dollars
($5,000,000.00). The form and substance of each Letter of Credit shall be
subject to approval by Bank, in its sole discretion. Each standby Letter
of
Credit shall be issued for a term not to exceed three hundred sixty-five (365)
days, as designated by Borrower; provided however, that no standby Letter of
Credit shall have an expiration date more than one hundred eighty (180) days
beyond the maturity date of the Line of Credit. Each sight commercial Letter
of
Credit shall be issued for a term not to exceed one hundred eighty (180) days,
as designated by Borrower; provided however, that no sight commercial Letter
of
Credit shall have an expiration date more than ninety (90) days beyond the
maturity date of the Line of Credit. The undrawn amount of all Letters of Credit
shall be reserved under the Line of Credit and shall not be available for
borrowings thereunder. Each Letter of Credit shall be subject to the additional
terms and conditions of the Letter of Credit agreements, applications and any
related documents required by Bank in connection with the issuance thereof.
Each
drawing paid under a Letter of Credit shall be deemed an advance under the
Line
of Credit and shall be repaid by Borrower in accordance with the terms and
conditions of this Agreement applicable to such advances; provided however,
that
if advances under the Line of Credit are not available, for any reason, at
the
time any drawing is paid, then Borrower shall immediately pay to Bank the full
amount drawn, together with interest thereon from the date such drawing is
paid
to the date such amount is fully repaid by Borrower, at the rate of interest
applicable to advances under the Line of Credit. In such event Borrower agrees
that Bank, in its sole discretion, may debit any account maintained by Borrower
with Bank for the amount of any such drawing.
-2-
(e) Borrowing
and Repayment.
Borrower may from time to time during the term of the Line of Credit borrow,
partially or wholly repay its outstanding borrowings, and reborrow, subject
to
all of the limitations, terms and conditions contained herein or in the Line
of
Credit Note; provided however, that the total outstanding borrowings under
the
Line of Credit shall not at any time exceed the maximum principal amount
available thereunder, as set forth above.
SECTION
1.2. INTEREST/FEES.
(a)
Interest. The
outstanding principal balance of each credit subject hereto shall bear interest
at the rate of interest set forth in each promissory note or other instrument
or
document executed in connection therewith.
(b) Computation
and Payment.
Interest shall be computed on the basis of a 360-day year, actual days elapsed.
Interest shall be payable at the times and place set forth in each promissory
note or other instrument or document required hereby.
(c) Commitment
Fee.
Borrower shall pay to Bank a non-refundable commitment fee for the Line of
Credit equal to $10,000.00, which fee shall be due and payable in full on the
date Borrower executes this Agreement. Bank hereby acknowledges that such
commitment fee has been paid in full by Borrower.
(d) Sight
commercial Letter of Credit Fees.
Borrower shall pay to Bank fees upon the issuance of each sight commercial
Letter of Credit, upon the payment or negotiation of each drawing under any
sight commercial Letter of Credit and upon the occurrence of any other activity
with respect to any sight commercial Letter of Credit (including without
limitation, the transfer, amendment or cancellation of any sight commercial
Letter of Credit) determined in accordance with Bank’s standard fees and charges
then in effect for such activity.
(e) Standby
Letter of Credit Fees.
Borrower shall pay to Bank (i) fees upon the issuance of each standby
Letter of Credit equal to the Applicable Percent (as defined below) per annum
(computed on the basis of a 360-day year, actual days elapsed) of the face
amount thereof, and (ii) fees upon the payment or negotiation of each
drawing under any standby Letter of Credit and fees upon the occurrence of
any
other activity with respect to any standby Letter of Credit (including without
limitation, the transfer, amendment or cancellation of any standby Letter of
Credit) determined in accordance with Bank’s standard fees and charges then in
effect for such activity. As used herein, “Applicable Percent” shall mean, with
respect to any standby Letter of Credit, the margin over LIBOR in effect under
the Line of Credit Note at the time the standby Letter of Credit is issued
(if
any standby Letter of Credit is renewed, then a new issuance fee shall be
payable to Bank for the renewal term, and for the purpose of calculating such
fee, the Applicable Percent shall mean the margin over LIBOR in effect at the
time of such renewal).
SECTION
1.4. COLLATERAL.
As
security for all indebtedness and other obligations of Borrower to Bank subject
hereto, Borrower hereby grants to Bank security interests of first priority
in
all Borrower’s accounts receivable and other rights to payment, general
intangibles and equipment.
All
of
the foregoing shall be evidenced by and subject to the terms of such security
agreements, financing statements, deeds or mortgages, and other documents as
Bank shall reasonably require, all in form and substance satisfactory to Bank.
Borrower shall pay to Bank immediately upon demand the full amount of all
charges, costs and expenses (to include fees paid to third parties and all
allocated costs of Bank personnel), expended or incurred by Bank in connection
with any of the foregoing security, including without limitation, filing and
recording fees and costs of appraisals, audits and title insurance.
-3-
ARTICLE
II
Borrower
makes the following representations and warranties to Bank, which
representations and warranties shall survive the execution of this Agreement
and
shall continue in full force and effect until the full and final payment, and
satisfaction and discharge, of all obligations of Borrower to Bank subject
to
this Agreement.
-4-
ARTICLE
III
(a) Approval
of Bank Counsel.
All
legal matters incidental to the extension of credit by Bank shall be
satisfactory to Bank’s counsel.
(b) Documentation.
Bank
shall have received, in form and substance satisfactory to Bank, each of the
following, duly executed:
| (i) |
This
Agreement and each promissory note or other instrument or document
required hereby.
|
| (ii) |
Certificate
of Incumbency (2).
|
| (iii) |
Corporate
Resolution: Continuing Guaranty.
|
| (iv) |
Corporate
Resolution: Borrowing.
|
| (vi) |
Continuing
Guaranty.
|
| (vii) |
Continuing
Security Agreement: Rights to
Payment.
|
| (viii) |
Security
Agreement: Equipment.
|
| (ix) |
Such
other documents as Bank may require under any other Section of this
Agreement.
|
(c) Financial
Condition.
There
shall have been no material adverse change, as determined by Bank, in the
financial condition or business of Borrower or any guarantor hereunder, nor
any
material decline, as determined by Bank, in the market value of any collateral
required hereunder or a substantial or material portion of the assets of
Borrower or any such guarantor.
(d) Insurance.
Borrower shall have delivered to Bank evidence of insurance coverage on all
Borrower’s property, in form, substance, amounts, covering risks and issued by
companies satisfactory to Bank, and where required by Bank, with loss payable
endorsements in favor of Bank.
-5-
(a) Compliance.
The
representations and warranties contained herein and in each of the other Loan
Documents shall be true on and as of the date of the signing of this Agreement
and on the date of each extension of credit by Bank pursuant hereto, with the
same effect as though such representations and warranties had been made on
and
as of each such date, and on each such date, no Event of Default as defined
herein, and no condition, event or act which with the giving of notice or the
passage of time or both would constitute such an Event of Default, shall have
occurred and be continuing or shall exist.
(b) Documentation.
Bank
shall have received all additional documents which may be required in connection
with such extension of credit.
ARTICLE
IV
Borrower
covenants that so long as Bank remains committed to extend credit to Borrower
pursuant hereto, or any liabilities (whether direct or contingent, liquidated
or
unliquidated) of Borrower to Bank under any of the Loan Documents remain
outstanding, and until payment in full of all obligations of Borrower subject
hereto, Borrower shall, unless Bank otherwise consents in writing:
SECTION
4.3. FINANCIAL
STATEMENTS. Provide to Bank all of the following, in form and detail
satisfactory to Bank:
(a) not
later
than 90 days after and as of the end of each fiscal year, a consolidated audited
financial statement of Borrower and TLI, prepared by a certified public
accountant acceptable to Bank, to include balance sheet, income statement and
statement of cash flow;
(b) not
later
than each August 31, an annual projection of Borrower’s and TLI’s operations for
the following fiscal year, prepared by Borrower and TLI, to include balance
sheet and income statement;
(c) not
later
than 30 days after and as of the end of each month during any period of time
when there is no Borrowing Base, an aged listing of accounts receivable;
(d) not
later
than 20 days after and as of the end of each month during any period of time
when the Borrowing Base is established, a borrowing base certificate and an
aged
listing of accounts receivable and accounts payable;
(e) not
later
than 45 days after and as of the end of each fiscal quarter, an unaudited
consolidated financial statement of Borrower and TLI, prepared by Borrower
and
TLI, to include balance sheet, income statement, and statement of cash flow;
and
(f) from
time
to time such other information as Bank may reasonably request.
-6-
(a) Total
Liabilities divided by Tangible Net Worth not greater than 4.0 to 1.0 at each
fiscal quarter end, with “Total Liabilities” defined as the aggregate of current
liabilities and non-current liabilities less subordinated debt, and with
“Tangible Net Worth” defined as the aggregate of total stockholders’ equity plus
subordinated debt less any intangible assets (and any loans, advances and/or
investments by Borrower and/or TLI to any person or entity as permitted pursuant
to Section 5.5 below shall be included in the calculation of intangible assets
herein).
(b) Quick
Ratio not less than 1.0 to 1.0 at each Applicable Fiscal Quarter End (defined
below), with “Quick Ratio” defined as the aggregate of unrestricted cash,
unrestricted marketable securities and receivables convertible into cash divided
by the sum of total current liabilities plus the aggregate amount of all
outstanding borrowings under the Line of Credit (including any undrawn amounts
under any outstanding Letters of Credit thereunder).
As
used
herein, “Applicable Fiscal Quarter End” means any fiscal quarter during which
time the average daily amount outstanding under the Line of Credit, (including
any undrawn amounts under any outstanding Letters of Credit) was equal to or
less than the Designated Amount for a minimum period of one (1)
month.
(c) Net
profit after taxes (“NPAT”) not less than $1.00 on a year-to-date basis,
determined as of each December 31, and June 30.
-7-
ARTICLE
V
Borrower
further covenants that so long as Bank remains committed to extend credit to
Borrower pursuant hereto, or any liabilities (whether direct or contingent,
liquidated or unliquidated) of Borrower to Bank under any of the Loan Documents
remain outstanding, and until payment in full of all obligations of Borrower
subject hereto, without Bank’s prior written consent:
SECTION
5.4. MERGER,
CONSOLIDATION, TRANSFER OF ASSETS. Borrower will not, and will not permit TLI
to, merge into or consolidate with any other entity; make any substantial change
in the nature of their businesses as conducted as of the date hereof; sell,
lease, transfer or otherwise dispose of all or a substantial or material portion
of their assets except in the ordinary course of its business; nor acquire
all
or substantially all of the assets of another entity, except “Permitted
Acquisitions,” with “Permitted Acquisitions” defined as a “non-hostile”
acquisition by Borrower and/or TLI of all or a portion of (i) the ownership
interest(s), or (ii) the assets of another entity engaged in the business of
domestic and international freight forwarding, provided,
however,
that
(a) at the closing of, and as a result of such acquisition, no default in the
payment or performance of any obligation, nor any defined event of default,
shall exist under the terms of the Loan Documents including, without limitation,
any violation of the financial covenants set forth in Section 4.9 hereof; and
(b) the total consideration (including cash, notes and/or stock) paid by
Borrower and/or TLI for any such acquisitions in the aggregate does not exceed
Five Million Dollars ($5,000,000.00) in any fiscal year. In connection with
determining the total consideration of any such acquisition, amounts to be
paid
by Borrower and/or TLI after the closing of any such acquisition that are
dependant on pre-determined profit and/or sales performance levels of the
acquired entity shall not be included as part of the total consideration for
the
purpose hereof.
SECTION
5.6. DIVIDENDS,
DISTRIBUTIONS. Borrower will not declare or pay any dividend or distribution
either in cash, stock or any other property on Borrower’s stock now or hereafter
outstanding, nor redeem, retire, repurchase or otherwise acquire any shares
of
any class of Borrower’s stock now or hereafter outstanding, except Permitted
Distributions (defined below), provided
that (a)
there exists no Event of Default, nor any condition, act or event which with
the
giving of notice or the passage of time or both would constitute any such Event
of Default and no such Event of Default will result after giving effect to
such
Permitted Distributions, and (b) the Permitted Distributions shall be limited
as
set forth in the following table, and for the purposes of calculating the amount
of Permitted Distributions that may be permitted hereunder, Borrower must meet
the applicable NPAT threshold after taking into account the amount of the
proposed Permitted Distribution. Borrower shall provide to Bank, upon request,
any documentation required by Bank to substantiate the appropriateness of the
amounts paid or to be paid. As used herein, “Permitted Distributions” shall be
limited as follows:
|
NPAT
Threshold
|
Permitted
Distributions
|
|
|
-less
than $167,000.00
|
-up
to $125,000.00 in the aggregate in any fiscal year
|
|
|
-equal
to or greater than $167,000.00
|
-the
lesser of $1,000,000.00 or 75% of NPAT in the aggregate in any fiscal
year
|
-8-
ARTICLE
VI
SECTION
6.1. The
occurrence of any of the following shall constitute an “Event of Default” under
this Agreement:
(a) Borrower
shall fail to pay when due any principal, interest, fees or other amounts
payable under any of the Loan Documents.
(b) Any
financial statement or certificate furnished to Bank in connection with, or
any
representation or warranty made by Borrower or any other party under this
Agreement or any other Loan Document shall prove to be incorrect, false or
misleading in any material respect when furnished or made.
(c) Any
default in the performance of or compliance with any obligation, agreement
or
other provision contained herein or in any other Loan Document (other than
those
referred to in subsections (a) and (b) above), and with respect to any such
default which by its nature can be cured, such default shall continue for a
period of twenty (20) days from its occurrence.
(d) Any
default in the payment or performance of any obligation, or any defined event
of
default, under the terms of any contract or instrument (other than any of the
Loan Documents) pursuant to which Borrower, any guarantor hereunder or any
general partner or joint venturer in Borrower if a partnership or joint venture
(with each such guarantor, general partner and/or joint venturer referred to
herein as a “Third Party Obligor”) has incurred any debt or other liability to
any person or entity, including Bank.
(e) The
filing of a notice of judgment lien against Borrower or any Third Party Obligor;
or the recording of any abstract of judgment against Borrower or any Third
Party
Obligor in any county in which Borrower or such Third Party Obligor has an
interest in real property; or the service of a notice of levy and/or of a writ
of attachment or execution, or other like process, against the assets of
Borrower or any Third Party Obligor; or the entry of a judgment against Borrower
or any Third Party Obligor.
(f) Borrower
or any Third Party Obligor shall become insolvent, or shall suffer or consent
to
or apply for the appointment of a receiver, trustee, custodian or liquidator
of
itself or any of its property, or shall generally fail to pay its debts as
they
become due, or shall make a general assignment for the benefit of creditors;
Borrower or any Third Party Obligor shall file a voluntary petition in
bankruptcy, or seeking reorganization, in order to effect a plan or other
arrangement with creditors or any other relief under the Bankruptcy Reform
Act,
Title 11 of the United States Code, as amended or recodified from time to time
(“Bankruptcy Code”), or under any state or federal law granting relief to
debtors, whether now or hereafter in effect; or any involuntary petition or
proceeding pursuant to the Bankruptcy Code or any other applicable state or
federal law relating to bankruptcy, reorganization or other relief for debtors
is filed or commenced against Borrower or any Third Party Obligor, or Borrower
or any Third Party Obligor shall file an answer admitting the jurisdiction
of
the court and the material allegations of any involuntary petition; or Borrower
or any Third Party Obligor shall be adjudicated a bankrupt, or an order for
relief shall be entered against Borrower or any Third Party Obligor by any
court
of competent jurisdiction under the Bankruptcy Code or any other applicable
state or federal law relating to bankruptcy, reorganization or other relief
for
debtors.
(g) There
shall exist or occur any event or condition which Bank in good faith believes
impairs, or is substantially likely to impair, the prospect of payment or
performance by Borrower of its obligations under any of the Loan
Documents.
-9-
(h) The
death
or incapacity of Borrower or any Third Party Obligor if an individual. The
dissolution or liquidation of Borrower or any Third Party Obligor if a
corporation, partnership, joint venture or other type of entity; or Borrower
or
any such Third Party Obligor, or any of its directors, stockholders or members,
shall take action seeking to effect the dissolution or liquidation of Borrower
or such Third Party Obligor.
(i) Any
change in control in which one or more persons or entities (other than Xxxx
Xxxxxx or Xxxxxx Xxxxxxxxx) acquires ownership, directly or indirectly, of
securities of Borrower representing 50% or more of the voting securities
entitled to vote in the election of the Board of Directors of Borrower and/or
TLI.
ARTICLE
VII
| BORROWER: |
Target
Logistic Services, Inc.
0000
Xxxxx Xxxxxxx Xxxxxx
Xxxxxx,
XX 00000
Target
Logistics, Inc.
0000
Xxxx Xxxxxxx Xxxx
Xxxxxxxx,
XX 00000
Attn:
Xxxx Xxxxxx, CFO
Target
Logistics, Inc.
000
Xxxxxxxxxx Xxxxx - 0xx Xxxxx
Xxxxxxxxx,
XX 00000
Attn:
Xxxxxx Xxxxxxxxx, CEO
Neuberger,
Quinn, Gielen, Rubin & Gibber, P.A.
Xxx
Xxxxx Xxxxxx - 00xx Xxxxx
Xxxxxxxxx,
XX 00000-0000
Attn:
Xxxxxx Xxxxxxx
|
-10-
|
BANK:
|
XXXXX
FARGO BANK, NATIONAL ASSOCIATION
South
Bay RCBO
000
Xxxx Xxxxx Xxxx., Xxxxx #000
Xxxx
Xxxxx, XX 00000
|
or
to
such other address as any party may designate by written notice to all other
parties. Each such notice, request and demand shall be deemed given or made
as
follows: (a) if sent by hand delivery, upon delivery; (b) if sent by
mail, upon the earlier of the date of receipt or three (3) days after deposit
in
the U.S. mail, first class and postage prepaid; and (c) if sent by
telecopy, upon receipt.
SECTION
7.3. COSTS,
EXPENSES AND ATTORNEYS’ FEES. Borrower shall pay to Bank immediately upon demand
the full amount of all payments, advances, charges, costs and expenses,
including reasonable attorneys’ fees (to include outside counsel fees and all
allocated costs of Bank’s in-house counsel), expended or incurred by Bank in
connection with (a) the negotiation and preparation of this Agreement and
the other Loan Documents, Bank’s continued administration hereof and thereof,
and the preparation of any amendments and waivers hereto and thereto;
provided,
however,
that
the total amount of costs, expenses and attorneys’ fees to be paid by Borrower
in connection with the negotiation and preparation of this Agreement and the
other Loan Documents shall not exceed $10,000.00, (b) the enforcement of
Bank’s rights and/or the collection of any amounts which become due to Bank
under any of the Loan Documents, and (c) the prosecution or defense of any
action in any way related to any of the Loan Documents, including without
limitation, any action for declaratory relief, whether incurred at the trial
or
appellate level, in an arbitration proceeding or otherwise, and including any
of
the foregoing incurred in connection with any bankruptcy proceeding (including
without limitation, any adversary proceeding, contested matter or motion brought
by Bank or any other person) relating to Borrower or any other person or entity.
SECTION
7.7. TIME.
Time is of the essence of each and every provision of this Agreement and each
other of the Loan Documents.
SECTION
7.10. GOVERNING
LAW. This Agreement shall be governed by and construed in accordance with the
laws of the State of California.
-11-
SECTION
7.11. ARBITRATION.
(a) Arbitration.
The
parties hereto agree, upon demand by any party, to submit to binding arbitration
all claims, disputes and controversies between or among them (and their
respective employees, officers, directors, attorneys, and other agents), whether
in tort, contract or otherwise in any way arising out of or relating to (i)
any
credit subject hereto, or any of the Loan Documents, and their negotiation,
execution, collateralization, administration, repayment, modification,
extension, substitution, formation, inducement, enforcement, default or
termination; or (ii) requests for additional credit.
(b) Governing
Rules.
Any
arbitration proceeding will (i) proceed in a location in California selected
by
the American Arbitration Association (“AAA”); (ii) be governed by the Federal
Arbitration Act (Title 9 of the United States Code), notwithstanding any
conflicting choice of law provision in any of the documents between the parties;
and (iii) be conducted by the AAA, or such other administrator as the parties
shall mutually agree upon, in accordance with the AAA’s commercial dispute
resolution procedures, unless the claim or counterclaim is at least
$1,000,000.00 exclusive of claimed interest, arbitration fees and costs in
which
case the arbitration shall be conducted in accordance with the AAA’s optional
procedures for large, complex commercial disputes (the commercial dispute
resolution procedures or the optional procedures for large, complex commercial
disputes to be referred to herein, as applicable, as the “Rules”). If there is
any inconsistency between the terms hereof and the Rules, the terms and
procedures set forth herein shall control. Any party who fails or refuses to
submit to arbitration following a demand by any other party shall bear all
costs
and expenses incurred by such other party in compelling arbitration of any
dispute. Nothing contained herein shall be deemed to be a waiver by any party
that is a bank of the protections afforded to it under 12 U.S.C. §91 or any
similar applicable state law.
(c)
No
Waiver of Provisional Remedies, Self-Help and Foreclosure.
The
arbitration requirement does not limit the right of any party to (i) foreclose
against real or personal property collateral; (ii) exercise self-help remedies
relating to collateral or proceeds of collateral such as setoff or repossession;
or (iii) obtain provisional or ancillary remedies such as replevin, injunctive
relief, attachment or the appointment of a receiver, before during or after
the
pendency of any arbitration proceeding. This exclusion does not constitute
a
waiver of the right or obligation of any party to submit any dispute to
arbitration or reference hereunder, including those arising from the exercise
of
the actions detailed in sections (i), (ii) and (iii) of this
paragraph.
(d) Arbitrator
Qualifications and Powers.
Any
arbitration proceeding in which the amount in controversy is $5,000,000.00
or
less will be decided by a single arbitrator selected according to the Rules,
and
who shall not render an award of greater than $5,000,000.00. Any dispute in
which the amount in controversy exceeds $5,000,000.00 shall be decided by
majority vote of a panel of three arbitrators; provided however, that all three
arbitrators must actively participate in all hearings and deliberations. The
arbitrator will be a neutral attorney licensed in the State of California or
a
neutral retired judge of the state or federal judiciary of California, in either
case with a minimum of ten years experience in the substantive law applicable
to
the subject matter of the dispute to be arbitrated. The arbitrator will
determine whether or not an issue is arbitratable and will give effect to the
statutes of limitation in determining any claim. In any arbitration proceeding
the arbitrator will decide (by documents only or with a hearing at the
arbitrator’s discretion) any pre-hearing motions which are similar to motions to
dismiss for failure to state a claim or motions for summary adjudication. The
arbitrator shall resolve all disputes in accordance with the substantive law
of
California and may grant any remedy or relief that a court of such state could
order or grant within the scope hereof and such ancillary relief as is necessary
to make effective any award. The arbitrator shall also have the power to award
recovery of all costs and fees, to impose sanctions and to take such other
action as the arbitrator deems necessary to the same extent a judge could
pursuant to the Federal Rules of Civil Procedure, the California Rules of Civil
Procedure or other applicable law. Judgment upon the award rendered by the
arbitrator may be entered in any court having jurisdiction. The institution
and
maintenance of an action for judicial relief or pursuit of a provisional or
ancillary remedy shall not constitute a waiver of the right of any party,
including the plaintiff, to submit the controversy or claim to arbitration
if
any other party contests such action for judicial relief.
(e) Discovery.
In any
arbitration proceeding, discovery will be permitted in accordance with the
Rules. All discovery shall be expressly limited to matters directly relevant
to
the dispute being arbitrated and must be completed no later than 20 days before
the hearing date. Any requests for an extension of the discovery periods, or
any
discovery disputes, will be subject to final determination by the arbitrator
upon a showing that the request for discovery is essential for the party’s
presentation and that no alternative means for obtaining information is
available.
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(f) Class
Proceedings and Consolidations.
No
party hereto shall be entitled to join or consolidate disputes by or against
others in any arbitration, except parties who have executed any Loan Document,
or to include in any arbitration any dispute as a representative or member
of a
class, or to act in any arbitration in the interest of the general public or
in
a private attorney general capacity.
(g) Payment
Of Arbitration Costs And Fees.
The
arbitrator shall award all costs and expenses of the arbitration
proceeding.
(h) Real
Property Collateral; Judicial Reference.
Notwithstanding anything herein to the contrary, no dispute shall be submitted
to arbitration if the dispute concerns indebtedness secured directly or
indirectly, in whole or in part, by any real property unless (i) the holder
of
the mortgage, lien or security interest specifically elects in writing to
proceed with the arbitration, or (ii) all parties to the arbitration waive
any
rights or benefits that might accrue to them by virtue of the single action
rule
statute of California, thereby agreeing that all indebtedness and obligations
of
the parties, and all mortgages, liens and security interests securing such
indebtedness and obligations, shall remain fully valid and enforceable. If
any
such dispute is not submitted to arbitration, the dispute shall be referred
to a
referee in accordance with California Code of Civil Procedure Section 638 et
seq., and this general reference agreement is intended to be specifically
enforceable in accordance with said Section 638. A referee with the
qualifications required herein for arbitrators shall be selected pursuant to
the
AAA’s selection procedures. Judgment upon the decision rendered by a referee
shall be entered in the court in which such proceeding was commenced in
accordance with California Code of Civil Procedure Sections 644 and
645.
(i) Miscellaneous.
To the
maximum extent practicable, the AAA, the arbitrators and the parties shall
take
all action required to conclude any arbitration proceeding within 180 days
of
the filing of the dispute with the AAA. No arbitrator or other party to an
arbitration proceeding may disclose the existence, content or results thereof,
except for disclosures of information by a party required in the ordinary course
of its business or by applicable law or regulation. If more than one agreement
for arbitration by or between the parties potentially applies to a dispute,
the
arbitration provision most directly related to the Loan Documents or the subject
matter of the dispute shall control. This arbitration provision shall survive
termination, amendment or expiration of any of the Loan Documents or any
relationship between the parties.
(j) Small
Claims Court.
Notwithstanding anything herein to the contrary, each party retains the right
to
pursue in Small Claims Court any dispute within that court’s jurisdiction.
Further, this arbitration provision shall apply only to disputes in which either
party seeks to recover an amount of money (excluding attorneys’ fees and costs)
that exceeds the jurisdictional limit of the Small Claims Court.
| Target Logistic Services, Inc. |
XXXXX
FARGO BANK,
NATIONAL
ASSOCIATION
|
||
| By: /s/ Xxxxxx X. Xxxxxx | By: /s/ | ||
|
Title:
Vice President
|
Xxxxxx
Xxxxxx
Vice
President
|
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