Exhibit 10.3
$40,000,000.00
LOAN AND SECURITY AGREEMENT
Dated as of April 7, 1997
BETWEEN
RDO RENTAL CO.
AND
DEUTSCHE FINANCIAL SERVICES CORPORATION
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LOAN AND SECURITY AGREEMENT
BETWEEN: DEUTSCHE FINANCIAL SERVICES CORPORATION, a Nevada corporation ("DFS")
AND: RDO Rental Co., a Minnesota corporation ("Borrower").
EFFECTIVE DATE: April 10, 1997
1. RECITALS
Borrower has requested that DFS provide Borrower with a revolving
credit facility and and a credit facility for inventory acquisition purposes.
2. DEFINITIONS
Terms defined in this Agreement shall have initial capital letters.
Those terms are defined below, in this Section 2, and elsewhere in this
Agreement. All financial and accounting terms used herein and not otherwise
defined, shall be defined in accordance with GAAP.
"AAA" shall have the meaning set forth in Section 14.2.
"Accounts" shall have the meaning given to that term in the UCC, and, to
the extent not included therein, shall also mean all accounts, leases, contract
rights, chattel paper, general intangibles, choses in action and instruments,
including any Lien or other security interest that secures or may secure any of
the foregoing, plus all books, invoices, documents and other records in any form
evidencing or relating to any of the foregoing, now owned or hereafter acquired
by Borrower, in each case arising only from Eligible Inventory.
"Affiliates" shall mean: (i) any individual who is an officer or director
of a Person; and (ii) any Person who directly or indirectly controls, is
controlled by, or is under common control or ownership with, another Person. For
the purposes of this definition, the term "control" shall mean the ownership of
or the ability to direct or control 10% or more of the beneficial interest in
the applicable entity.
"Agreement" shall mean this Loan and Security Agreement, and any
amendments hereto.
"Borrowing Base" shall mean, as of any date of determination, an amount
equal to: (a) the Existing Eligible Inventory Availability, plus (b) the
Eligible Inventory Availability; plus (c) the invoice price of all Floorplan
Inventory.
"Borrowing Base Certificate" shall have the meaning set forth in Section
3.3(a).
"Business" shall mean RDO Rental Co.
"Business Day" shall mean any day other than Saturdays, Sundays, legal
holidays designated by Federal law, and any other day on which DFS' office is
closed.
"Collateral" shall mean all items described in Section 6.1.
"Credit Facility" shall have the meaning set forth in Section 3.1.
"Credit Facility Fee" shall have the meaning set forth in Section 3.5.
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"Daily Charge" shall have the meaning set forth in Section 3.5.
"Daily Contract Balance" shall have the meaning set forth in Section 3.5.
"Daily Rate" shall have the meaning set forth in Section 3.5.
"Debt" shall have the meaning set forth in Section 9.3.
"Default" shall have the meaning set forth in Section 10.
"Default Interest Rate" shall have the meaning set forth in Section 3.8.
"DFS Companies" shall have the meaning set forth in Section 14.1.
"Disputes" shall have the meaning set forth in Section 14.1.
"Effective Date" shall mean the date set forth in the heading on page 1 of
this Agreement.
"Electronic Transfers" shall have the meaning set forth in Section
3.5(b)(ii).
"Eligible Inventory" means Borrower's Eligible New Inventory and
Borrower's Eligible Used Inventory as defined below.
"Eligible Inventory Availability" shall mean the aggregate of (i) the
Value of the Existing Eligible Inventory, as set forth in Section 3.3(b), plus
(ii) the Eligible New Inventory Availability, as set forth in Section 3.3(c),
plus (iii) the Eligible Used Inventory Availability, as set forth in Section
3.3(d).
"Eligible New Inventory" shall mean Borrower's finished goods construction
machinery Inventory less than seven (7) years old whose acquisition by Borrower
was not financed by DFS, that is owned by Borrower free and clear of all Liens,
security interests and encumbrances of any third parties, except for the
Permitted Liens, that is not obsolete or unmerchantable, that is in good, new
and salable condition that conforms to the representations and warranties of
Section 8.26 of this Agreement, and which DFS deems, in its sole discretion, to
be acceptable for financing.
"Eligible Used Inventory" shall mean Borrower's finished goods
construction machinery Inventory manufactured more than twelve (12) months prior
to, or showing useage of one hundred (100) hours or more as of, the date of any
Loan or advance by DFS against such Inventory, whose acquisition by Borrower was
not financed by DFS, that is owned by Borrower free and clear of all Liens,
security interests and encumbrances of any third parties, except for the
Permitted Liens, that is not obsolete or unmerchantable, that is in good, new
and salable condition that conforms to the representations and warranties of
Section 8.26 of this Agreement, and which DFS deems, in its sole discretion, to
be acceptable for financing.
"Equipment" shall have the meaning as given to that term in the UCC, and,
to the extent not included therein, shall also mean all equipment, machinery,
trade fixtures, furnishings, furniture, supplies, materials, tools, machine
tools, office equipment, appliances, apparatus, parts and all attachments,
replacements, substitutions, accessions, additions and improvements to any of
the foregoing.
"Existing Elibible Inventory" shall mean Borrower's finished goods
construction machinery Inventory on owned by Borrower as of the date of the
Initial Advance, that is owned by Borrower free and clear of all Liens, security
interests and
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encumbrances of any third parties, except for the Permitted Liens, that is not
obsolete or unmerchantable, that is in good, new and salable condition that
conforms to the representations and warranties of Section 8.26 of this
Agreement, and which DFS deems, in its sole discretion, to be acceptable for
financing.
"Existing Eligible Inventory Availability" shall have the meaning given in
Section 3.3(b).
"FAA" shall have the meaning set forth in Section 14.5.
"Floorplan Inventory" shall mean Inventory the acquisition of which was
financed by DFS for Borrower from vendors approved by DFS in DFS' sole
discretion pursuant to Section 3.2.
"Floorplan Inventory Loan" shall have the meaning set forth in Section
3.2.
"GAAP" shall mean generally accepted accounting principles, consistently
applied.
"Indebtedness" shall mean any sum for borrowed money owed by Borrower to a
Person and shall include any debt guaranteed by Borrower, any debt as to which
the Borrower has granted or permitted to exist a Lien on any asset even if
non-recourse, letter of credit reimbursement obligations, and capitalized lease
obligations.
"Indemnified Liabilities" shall have the meaning set forth in Section
12.1.
"Indemnitees" shall have the meaning set forth in Section 12.1.
"Initial Advance" shall have the meaning set forth in Section 3.3(b).
"Intangibles" shall have the meaning set forth in Section 9.3.
"Inventory" shall have the meaning given to that term in the UCC, and, to
the extent not included therein, shall also mean all of Borrower's merchandise,
materials, finished goods, work-in-process, component materials, packaging,
shipping materials, parts and other tangible personal property, now owned or
hereafter acquired and held for sale or which contribute to the finished
products or the sale, promotion, storage and shipment thereof, whether located
at facilities owned or leased by Borrower, or in the course of transport to or
from facilities owned or leased by Borrower.
"Landlord Lien Reserve" shall mean an amount equal to two (2) months
aggregate rental payments to all of Borrower's landlords on all of Borrower's
Collateral locations (as set forth in Exhibit 8.17 attached hereto).
"Lien" shall mean any security interest, mortgage, pledge, lien,
hypothecation, judgment lien or similar legal process, charge, encumbrance,
title retention agreement or analogous instrument or device (including, without
limitation, the interest of lessors under capitalized leases and the interest of
a vendor under any conditional sale or other title retention agreement),
reservations, exceptions, encroachments, easements, rights-of-way, covenants,
conditions, restrictions, leases and other title exceptions and encumbrances
affecting any of Borrower's Collateral.
"Loan" shall mean any advance made to or for the benefit of Borrower
pursuant to this Agreement, including but not limited to any Floorplan Inventory
Loan and any Revolving Credit Loan.
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"Loan Documents" shall mean all documents executed by Borrower pursuant to
any financial accommodation between Borrower and DFS and all documents entered
into in connection with the transaction herein contemplated. The term "Loan
Documents" includes, but is not limited to, this Agreement, all financing
statements, all pledges, mortgages, deeds of trust, leasehold mortgages,
security agreements, guaranties, assignments, subordination agreements, and any
future or additional documents or writings executed under the terms of this
Agreement or any amendments or modifications hereto.
"Maximum Initial Advance" shall have the meaning given in Section 3.3(b).
"Monthly Inventory Reports" shall have the meaning given in Section
3.11(b).
"Monthly Schedule" shall have the meaning given in Section 3.11(c).
"Obligations" shall mean all liabilities and Indebtedness of any kind and
nature whatsoever now or hereafter arising, owing, due or payable from Borrower
(and/or any of its Subsidiaries and Affiliates) to DFS, whether primary or
secondary, joint or several, direct, contingent, fixed or otherwise, secured or
unsecured, or whether arising under this Agreement, any other Loan Document or
any other agreement now or hereafter executed by Borrower (or any of its
Subsidiaries or Affiliates) and delivered to DFS. Obligations will include,
without limitation, any third party claims against Borrower (or any of its
Subsidiaries or Affiliates) satisfied or acquired by DFS. Obligations will also
include all obligations of Borrower to pay to DFS: (a) any and all sums
reasonably advanced by DFS to preserve or protect the Collateral or the value of
the Collateral or to preserve, protect, or perfect DFS' security interests in
the Collateral; (b) in the event of any proceeding to enforce the collection of
the Obligations after a Default, the reasonable expenses of retaking, holding,
preparing for sale, selling or otherwise disposing of or realizing on the
Collateral, or expenses of any exercise by DFS of its rights, together with
reasonable attorneys' fees, expenses of collection and court costs, as provided
in the Loan Documents; and (c) any other indebtedness or liability of Borrower
to DFS, whether direct or indirect, absolute or contingent, now or hereafter
arising.
"Other Reports" shall have the meaning set forth in Section 3.11(c).
"Permitted Liens" shall mean: (a) Liens for taxes, assessments or other
governmental charges or levies not yet delinquent or which are being contested
in good faith by appropriate action and as to which adequate reserves shall have
been set aside in conformity with GAAP and which are, in addition, satisfactory
to DFS in its reasonable discretion; (b) Liens of mechanics, materialmen,
landlords, warehousemen, carriers and similar Liens arising in the future in the
ordinary course of business for sums not yet delinquent, or being contested in
good faith if a reserve or other appropriate provision in accordance with GAAP
shall have been made therefor and which are, in addition, satisfactory to DFS in
its reasonable discretion; (c) statutory Liens incurred in the ordinary course
of business in connection with workers' compensation, unemployment insurance,
social security, and similar items for sums not yet delinquent or being
contested in good faith, if a reserve or other appropriate provision in
accordance with GAAP shall have been made therefor and which are, in addition,
satisfactory to DFS in its reasonable discretion; (d) lessor's Liens arising
from operating leases entered into in the ordinary course of business; (e) Liens
arising from legal proceedings, so long as such proceedings are being contested
in good faith by appropriate proceedings, appropriate reserves have been
established therefor in accordance with GAAP and which are, in addition,
satisfactory to DFS in its reasonable discretion, and so long as execution is
stayed and bonded on appeal on all judgments resulting from any such
proceedings; and (f) Liens in favor of DFS granted hereunder.
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"Person" shall mean an individual, a partnership, a joint venture, a
corporation, a trust, a limited liability company, an unincorporated
organization, and a government or any department or agency thereof.
"Prime Rate" shall mean a fluctuating interest rate per annum equal to the
highest of the prime, base or reference rates of interest announced publicly
from time to time (whether or not charged in each instance) by The Chase
Manhattan Bank and Citibank, N.A. (or any successor thereof) as such bank's
prime, base, or reference rate. Such Prime Rate in effect on the last Business
Day of each calendar month will be the Prime Rate for the following calendar
month. If any of the banks listed above discontinue the practice of announcing
or publishing a prime, base or reference rate during the term of this Agreement,
then DFS may, in its reasonable judgment, designate a comparable bank and/or
publicly announced rate to be thereafter used as a basis for determining Prime
Rate. Borrower acknowledges that any bank listed above may extend credit at
rates of interest less than its announced prime, base or reference rate.
"Rentals" shall have the meaning set forth in Section 9.2.18.
"Subordinated Debt" shall have the meaning set forth in Section 9.3.
"Subsidiaries" shall mean any corporation in which Borrower owns or
controls greater than 50% of the voting securities, or any partnership or joint
venture in which Borrower owns or controls greater than 50% of the aggregate
equitable interest. The term "Subsidiary" means any one of the Subsidiaries. As
of the Effective Date, Borrower has no Subsidiaries.
"Tangible Net Worth" shall have the meaning set forth in Section 9.3.
"Total Credit Limit" shall have the meaning set forth in Section 3.1.
"Total Revolving Credit Credit Limit" shall have the meaning set forth in
Section 3.3.
"UCC" shall mean the Uniform Commercial Code as in effect in the State of
Arizona and any successor statute, together with any regulations thereunder, in
each case as in effect from time to time. References to sections of the UCC
shall be construed to also refer to any successor sections.
"Unmatured Default" shall mean any event which, but for the passage of
time or notice, or both, would be a Default.
"Value" means (a) with respect to Eligible New Inventory, the lesser of
(1) the cost to Borrower of Borrower's Eligible Inventory (exclusive of
discounts, rebates, credits (including, without limitation price protection
credits), incentive payments and all other general intangibles relating to such
Eligible Inventory), as determined in accordance with GAAP, and (2) the Green
Guide quick sale value for Eligible Inventory, and (b) with respect to Eligible
Used Inventory, the Green Guide quick sale value.
"Revolving Credit Loan" shall have the meaning set forth in Section 3.3.
3. CREDIT FACILITY
3.1 Total Credit Facility.
In consideration of Borrower's payment and performance of its
Obligations and subject to the terms and conditions contained in this Agreement,
DFS agrees to provide, and Borrower agrees to accept, an aggregate credit
facility (the "Credit Facility") of up to Forty Million Dollars ($40,000,000.00)
(the "Total
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Credit Limit"). The Credit Facility shall be available in the form
of Floorplan Inventory Loans and Revolving Credit Loans. No Loans need be made
by DFS if Borrower is in Default or if there exists any Unmatured Default. This
is an agreement regarding the extension of credit, and not the provision of
goods or services.
3.2 Floorplan Inventory Loans.
(a) Inventory Floorplan Loan Limit. Subject to the terms of
this Agreement, DFS may provide Loans to Borrower for Floorplan Inventory and
financing approvals for Floorplan Inventory in transit from the seller thereof
(each advance being a "Floorplan Inventory Loan") up to an aggregate unpaid
principal amount at any time not to exceed (i) Forty Million Dollars
($40,000,000.00) less (ii) outstanding Revolving Credit Loans ("Inventory
Floorplan Loan Limit"). DFS may, however, at any time and without notice to
Borrower, elect not to finance any Inventory sold by particular vendors who are
in default of their obligations to DFS. DFS may at any time suspend or terminate
the relationship or approval of any vendor. DFS will use reasonable efforts to
attempt to give Borrower prior notice of such suspension or termination.
(b) Payment Terms. Borrower will immediately pay DFS the
principal indebtedness owed DFS on each item of Inventory financed by DFS on the
earliest occurrence of any of the following events: (a) when such Floorplan
Inventory is lost, stolen or damaged to the extent that such loss, theft or
damage is not adequately insured under an insurance policy which names DFS as
loss payee; (b) when such Floorplan Inventory is sold, transferred, leased,
otherwise disposed of or matured; (c) when otherwise required under the terms of
any financing program agreed to in writing by the parties. If Borrower from time
to time is required to make immediate payment to DFS of any past due obligation
discovered during any Inventory review, or at any other time, Borrower agrees
that acceptance of such payment by DFS shall not be construed to have waived or
amended the terms of its financing program. Any third party discount, rebate,
bonus or credit granted to Borrower for any Inventory will not reduce the debt
Borrower owes DFS until DFS has received payment therefor in cash. Borrower
will: (1) pay DFS even if any Inventory is defective or fails to conform to any
warranties extended by any third party; (2) not assert against DFS any claim or
defense Borrower has against any third party; and (3) indemnify and hold DFS
harmless against all claims and defenses asserted by any buyer of the Inventory
relating to the condition of, or any representations regarding, any of the
Inventory. Borrower waives all rights of offset and counterclaims Borrower may
have against DFS.
3.3 Revolving Credit Loans.
(a) Total Revolving Credit Limit. Subject to the terms of this
Agreement, DFS agrees, for so long as no Default exists, to provide to Borrower,
and Borrower agrees to accept, financing (each advance being a "Revolving Credit
Loan") on the Initial Advance, Eligible New Inventory and Eligible Used
Inventory in the maximum aggregate unpaid principal amount at any time equal to
the lesser of (i) the Borrowing Base and (ii) Forty Million Dollars
($40,000,000.00) less the Landlord Lien Reserve ("Total Revolving Credit
Limit"). A request for a Revolving Credit Loan shall be made, or shall be deemed
to be made, as provided in Section 5.1 hereof.
(b) Initial Advance. DFS agrees to lend to Borrower an amount
not to exceed the lesser of (i) the Value of Existing Eligible Inventory
("Existing Eligible Inventory Availability"), and (ii) the Total Revolving
Credit Limit (the "Maximum Initial Advance"). The actual amount of such advance
is referred to herein as the "Initial Advance". The Eligible New Inventory and
Eligible Used Inventory which supports the Initial Advance will be depreciated
for the purposes of determining Value on an eighty-four (84) month term.
(c) Eligible New Inventory. On receipt of each Borrowing Base
Certificate, DFS will credit Borrower with the lesser of (1) one hundred percent
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(100%) of the Value of Borrower's cost of Eligible New Inventory, net of
accumulated straight-line depreciation based on a sixty (60) month depreciation
schedule, and (2) the Total Revolving Credit Limit (such lesser amount being
called the "Eligible New Inventory Availability").
(d) Eligible Used Inventory. On receipt of each Borrowing Base
Certificate, DFS will credit Borrower with the lesser of (1) one hundred percent
(100%) of the Value of Borrower's Eligible Used Inventory, and (2) Ten Million
Dollars ($10,000,000) (such lesser amount being called the "Eligible Used
Inventory Availability"); provided, however, the age of the Inventory plus the
length of depreciation shall not exceed one hundred twenty (120) months.
3.4 Mandatory Prepayment.
If at any time and for any reason the aggregate amount of
outstanding Loans exceeds the Borrowing Base, Borrower will, immediately upon
demand, repay an amount of the Loans made to it by DFS hereunder equal to such
excess. In addition, Borrower shall immediately pay DFS whatever sums may be
necessary from time to time to remain in compliance with the Total Credit Limit
and the Total Revolving Credit Credit Limit, as such limits may change from time
to time, including, without limitation, as a result of any Collateral no longer
being deemed an Eligible Account or Eligible Inventory, or as a result of any
change in the Value of any Eligible Inventory, or in the amount of any Eligible
Account.
3.5 Interest; Calculation of Charges; Fees.
(a) Floorplan and Revolving Credit Loans.
(i) Interest; Calculation. Borrower will pay DFS finance
charges on the Daily Contract Balance (as defined below) at a rate that is
one-half percentage points (.50%) per annum lower than the Prime Rate. The
finance charges attributable to such rate will: (i) be computed based on a 360
day year; (ii) be calculated with respect to each day by multiplying the Daily
Rate (as defined below) by the Daily Contract Balance; and (iii) accrue from the
date DFS initiates any Electronic Transfer (as defined in Section 3.5(b)(ii)
below) or otherwise advances a Revolving Credit Loan to or for the benefit of
Borrower, until DFS receives full payment of the principal debt Borrower owes
DFS in good funds in accordance with DFS' payment recognition policy and DFS
applies such payment to Borrower's principal debt in accordance with the terms
of this Agreement.
(ii) Method of Transfer. Revolving Credit Loans will be
made by DFS, at Borrower's direction, by paper check, electronic transfer by
Automated Clearing House ("ACH"), Fed Wire Funds Transfer ("Fed Wire") or such
other electronic means as DFS may announce from time to time (ACH, Fed Wire and
such other electronic transfer are collectively referred to as "Electronic
Transfers"). If Borrower does not request a Revolving Credit Loan be made in a
specific method of transfer, DFS may determine from time to time in its sole
discretion what method of transfer to use.
(b) Definitions. The "Daily Rate" is the quotient of the
applicable annual rate provided herein divided by 360. The "Daily Contract
Balance" is the amount of outstanding principal debt which Borrower owes DFS on
all Loans at the end of each day (including the amount of all Electronic
Transfers) after DFS has credited payments which it has received on the Loans.
(c) Fees.
(i) Certain Charges. Borrower will (A) reimburse DFS for
all charges made by banks, including charges for collection of checks and other
items of payment and (B) pay DFS all fees and charges in effect from time to
time for transfers of funds to or from the Borrower. DFS may, from time to time,
announce
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in a newsletter or correspondence to Borrower such fees and charges for
transfers of funds to or from Dealer, including the issuance of Electronic
Transfers.
(ii) Credit Facility Fee. Borrower agrees to pay DFS an
annual credit facility fee, payable in advance, on the execution of this
Agreement, and on each anniversary thereof through the term of this Agreement,
in an amount equal to Ten Thousand Dollars ($10,000.00)(the "Credit Facility
Fee"). Once received by DFS, no Credit Facility Fee shall be refundable by DFS
for any reason.
3.6 Billing Statement.
DFS will send Borrower a monthly billing statement identifying
all charges due on Borrower's account with DFS. The charges specified on each
billing statement will be: (a) due and payable in full immediately on receipt;
and (b) an account stated, absent manifest error. DFS may adjust the billing
statement at any time to conform to applicable law and this Agreement.
3.7 Loan Proceeds.
The parties intend that all indebtedness incurred hereunder
shall be governed exclusively by the terms of this Agreement and the other Loan
Documents, and shall not, unless requested by DFS, be evidenced by notes or
other evidences of indebtedness. Upon any such request, Borrower will
immediately execute and deliver any such note or other evidence reasonably
requested by DFS. Any fees, charges or expenses charged to DFS by any bank for
payments made by DFS at Borrower's request shall be immediately payable by
Borrower. All advances and other obligations of Borrower made hereunder will
constitute a single obligation.
3.8 Default Interest Rate.
If a Default occurs, and unless and until cured, DFS may
without prior demand, raise the rate of interest accruing on the disbursed
unpaid principal balance of any Loan by three percentage points (3%) above the
rate of interest otherwise applicable (the "Default Interest Rate"), whether or
not DFS elects to accelerate the unpaid principal balances as a result of a
Default. DFS will notify Borrower thirty (30) days before imposing the Default
Interest Rate permitted by this Section.
3.9 Interest Rate After Certain Events.
If a judgment is entered against Borrower for sums due under
any of the Obligations, as applicable, the amount of the judgment entered (which
may include principal, interest, reasonable attorneys' fees and costs) shall
bear interest at the judgment rate as permitted under applicable law as of the
date of entry of the judgment. All Obligations of Borrower described in clauses
(a) and (b) of the definition thereof shall bear interest at the Default
Interest Rate.
3.10 Rental Contracts.
Borrower may rent the Inventory financed by DFS or against
which DFS has advanced funds pursuant to the terms of Borrower's rental
contracts ("Rental Contracts"). All of Borrower's Rental Contracts, agreements,
and rental transactions will be in a form satisfactory to DFS and will be in
accordance with all applicable Federal, State and local laws. Borrower will
indemnify DFS against any loss or damage which DFS suffers, whether direct or
indirect, resulting in any way from the Rental Contracts, agreements, or rental
transactions which fail to comply with such laws. All Rental Contracts will be
transferable to DFS. Borrower will indemnify DFS against any claims by its
customers regarding Borrower's obligations under the Rental Contracts. Borrower
will immediately, upon DFS' request, deliver to DFS all Rental Contracts and all
related documents. This assignment is a transfer for security only, and, until
DFS has foreclosed its interest in the Rental Contracts, will not be deemed to
delegate any of Borrower's duties under the Rental Contracts to DFS, nor is it
intended to alter or impair performance by either party to the Rental Contracts.
DFS may, from time to time, verify the accuracy of the Rental Contracts, and
Borrower will immediately, upon
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DFS' request, provide DFS with the following information regarding Rental
Contracts which are in effect on the date of such request: (a) the name, address
and telephone number of each customer who has executed a Rental Contract; (b)
the location of the Inventory; (c) the date of each Rental Contract; (d) the
date when the Inventory is to be returned under each Rental Contract; and, (e)
any other information which DFS may reasonably request. If the rental period
under the Rental Contract is ninety (90) days or longer, Borrower will stamp the
original of such Rental Contract with the following legend:
'FOR VALUE RECEIVED, THIS AGREEMENT HAS BEEN ASSIGNED TO DEUTSCHE
FINANCIAL SERVICES CORPORATION AND THERE ARE NO DEFENSES AGAINST THE
ASSIGNEE.'
Other than to DFS, Borrower will not assign, sell, pledge, convey or by any
other means transfer any Rental Contracts or chattel paper associated with the
DFS Collateral, without DFS' prior written consent. Borrower will not enter into
any Rental Contracts for Inventory financed by DFS or against which DFS has
advanced funds pursuant to which: (i) the original term of the Rental Contract
is greater than three hundred sixty (360) days; (ii) the original term of the
Rental Contract is equal to or greater than the remaining economic life of such
Inventory; (iii) the customer is bound to renew the Rental Contract for the
economic life of such Inventory or is bound to become the owner of such
Inventory; or, (iv) the customer has an option to renew the Rental Contract for
the remaining economic life of such Inventory, or to become the owner of such
Inventory, for nominal consideration, or for consideration which is less than
the unpaid balance owed to DFS for such Inventory. If any such Rental Contracts
are issued, Borrower will take any action which DFS may reasonably require to
perfect and/or protect DFS' security interest in such Rental Contracts and/or
the Inventory subject thereto.
3.11 Reports.
(a) Monthly Inventory Report. In addition to Borrower's other
obligations set forth in this Agreement, Borrower agrees to provide to DFS by
the 10th business day of each month, as of the last day of the immediately prior
month a listing of all Inventory then owned by Borrowerin which DFS has a
security interest.
(b) Monthly Schedule. In addition to Borrower's other
obligations set forth in this Agreement, Borrower agrees to provide to DFS by
the 10th business day of each month, as of the last day of the immediately prior
month an Inventory Schedule (including serial number, year of manufacture, make,
model, Borrower's acquisition date, whether New Inventory or Used Inventory,
acquistion cost, accumulated depreciation to date, monthly depreciation,
depreciation terms, and such other information as DFS may request) ("Monthly
Schedule"). If any payment is required under Section 3.4 hereof (Mandatory
Prepayment), such payment will be forwarded to DFS with the Monthly Schedule.
(c) Other Reports. In addition to Borrower's other obligations
set forth in this Agreement, Borrower agrees to provide DFS within ten (10)
Business Days after each request by DFS any other report or information
requested by DFS (the "Other Reports").
(d) Accuracy of Reports. The Monthly Inventory Reports, the
Monthly Schedule and the Other Reports will be true and correct in all respects.
Borrower acknowledges DFS' reliance on the truthfulness and accuracy of each
Monthly Report, Monthly Schedule and the Other Reports.
3.12 Establishment of Reserves.
Notwithstanding the foregoing provisions of Section 3.3, DFS
shall have the right to establish reserves in such amounts, and with respect to
such
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matters, as DFS shall deem necessary or appropriate, against the amount of
Revolving Credit Loans which Borrower may otherwise request under Section 3.3,
including, without limitation, with respect to (a) price adjustments, damages,
unearned discounts, returned products or other matters for which credit
memoranda are issued in the ordinary course of Borrower's business; (b)
shrinkage, spoilage and obsolescence of Inventory; (c) slow moving Inventory;
(d) other sums chargeable against Borrower as Revolving Credit Loans under any
section of this Agreement; and (e) such other matters, events, conditions or
contingencies as to which DFS, in its credit judgment determines reserves should
be established from time to time hereunder.
3.13 Advancements
If Borrower fails to (a) perform any of the affirmative
covenants contained herein, (b) protect or preserve the Collateral or (c)
protect or preserve the status and priority of the Liens and security interest
of DFS in the Collateral, DFS may make advances to perform those obligations.
DFS will give Borrower fifteen (15) days notice prior to making such
advancement. All sums so advanced will be due and payable upon demand and will
immediately upon advancement become secured by the security interests created by
this Agreement and will be subject to the terms and provisions of this Agreement
and all of the Loan Documents. DFS may add all sums so advanced, plus any
expenses or costs incurred by DFS, including reasonable attorney's fees, as
outstanding Loans as DFS may designate in its sole discretion. The provisions of
this Section will not be construed to prevent the institution of rights and
remedies of DFS upon the occurrence of a Default. Any provisions in this
Agreement to the contrary notwithstanding, the authorizations contained in this
Section will impose no duty or obligation on DFS to perform any action or make
any advancement on behalf of Borrower and are for the sole benefit and
protection of DFS.
4. TERM OF AGREEMENT
4.1 Termination.
Borrower or DFS may terminate this Agreement at any time upon
at least ninety (90) days written notice to the other party. Termination will
not entitle Borrower to a refund of any fee. Any such written notice of
termination delivered by Borrower to DFS shall be irrevocable. It is understood
that Borrower may elect to terminate this Agreement in its entirety only, no
section or lending facility may be terminated singly.
4.2 Effect of Termination.
Any termination of this Agreement by Borrower or DFS will have
the effect of accelerating the maturity of all Obligations not then otherwise
due. Borrower will not be relieved from any Obligations to DFS arising out of
DFS' advances or commitments made before the effective termination date of this
Agreement. DFS will retain all of its rights, interests and remedies hereunder
until Borrower has paid all of Borrower's Obligations to DFS. All waivers set
forth within this Agreement will survive any termination of this Agreement.
5. BORROWING AND REPAYMENT PROCEDURES
5.1. Borrowing Procedures.
(a) Generally. A request for a Revolving Credit Loan shall be
made, or shall be deemed to be made, in the following manner: (i) Borrower may
give DFS written notice of its intention to borrow, in which notice Borrower
shall specify the amount of the proposed borrowing and the proposed borrowing
date; (ii) the becoming due of any amount required to be paid under this
Agreement as interest shall be deemed irrevocably to be a request for a
Revolving Credit Loan on the due date in the amount required to pay such
interest; and (iii) the becoming due of any other Obligations shall be deemed
irrevocably to be a request for a Revolving
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Credit Loan on the due date in the amount then so due.
For purposes of subpart (i) above, Borrower agrees that DFS may rely and act
upon any request for a Revolving Credit Loan from any individual who DFS, absent
gross negligence or willful misconduct, believes to be a representative of
Borrower.
(b) Conditions Precedent to Each Revolving Credit Loan.
Without limiting the applicability of the conditions precedent set forth in
Section 7 below to DFS' obligation to make any Revolving Credit Loan, the
obligation of DFS to make any Revolving Credit Loan shall be subject to the
further conditions precedent that, on the date of each such Revolving Credit
Loan:
(i) The following statements shall be true: (A) the
representations and warranties contained in Section 8 hereof are correct on and
as of the date of such Revolving Credit Loan as though made on and as of such
date, and (B) there exists no Default or Unmatured Default, nor would any
Default or any Unmatured Default result from the making of the Revolving Credit
Loan requested by Borrower;
(ii) Borrower shall have signed and sent to DFS, if DFS so
requests, a request for advance, setting forth in writing the amount of the
Revolving Credit Loan requested; provided, however, that the foregoing condition
precedent shall not prevent DFS, if it so elects, in its sole discretion, from
making a Revolving Credit Loan pursuant to Borrower's non-written request
therefor;
(iii) DFS shall have received a completed Borrowing Base
Certificate, signed by the Borrower, and dated not more than thirty (30) days
prior to the date of Borrower's request for such Revolving Credit Loan; and
(iv) DFS shall have received such other approvals, opinions or
documents as it may reasonably request.
Borrower agrees that the making of a request by Borrower for a Revolving Credit
Loan, shall constitute a certification by Borrower and the Person(s) executing
or giving the same that all representations and warranties of Borrower herein
are true as of the date thereof and that all required conditions to the making
of the Revolving Credit Loan have been met.
5.2 All Loans One Obligation.
All Obligations of Borrower to DFS under this Agreement and
all other agreements between Borrower and DFS shall constitute one obligation to
DFS secured by the security interest granted in this Agreement, and by all other
Liens heretofore, now, or at any time or times hereafter granted by Borrower.
All of the rights of DFS set forth in this Agreement shall apply to any
modification of or supplement to this Agreement, or Exhibits hereto, unless
otherwise agreed in writing.
5.3 Payments of Principal and Interest.
All payments and amounts due hereunder by Borrower shall be
made or be payable without set-off or counterclaim and shall be made to DFS on
the date due at its office(s) responsible for Borrower's account, or at such
other place which DFS may designate to Borrower in writing. Any payments
received after such time shall be deemed received on the next Business Day.
Whenever any payment to be made hereunder shall be stated to be due on a date
other than a Business Day, such payment may be made on the next succeeding
Business Day, and such extension of time shall be included in the computation of
payment of interest or any fees.
5.4 Collection Days.
All payments and all amounts received hereunder will be
credited by DFS to Borrower's account three (3) days after funds have been
deposited into DFS' general operating account.
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6. SECURITY FOR THE OBLIGATIONS
6.1 Grant of Security Interest.
To secure payment of all of Borrower's current and future
Obligations and to secure Borrower's performance of all of the provisions under
this Agreement, Borrower grants DFS a security interest in all of Borrower's:
(1) new and used inventory and equipment which is financed by DFS for, or
against which DFS has advanced monies to, Borrower, whether now owned or
hereafter acquired and whether or not transferred to Borrower from another
company; and (2) all accounts, contract rights, chattel paper, security
agreements, deposit accounts, reserves, documents, general intangibles and
instruments arising from all such inventory and equipment, and all judgments,
claims, insurance policies and payments owed or made to Borrower thereon; and
(3) all attachments, accessories, accessions, substitutions and replacements to
such inventory and equipment; and (4) all proceeds of all of the foregoing. All
such assets are collectively referred to herein as the "Collateral." All such
terms for which meanings are provided in the Uniform Commercial Code are used
herein with such meanings. All Collateral financed by DFS, and all proceeds
thereof, will be held in trust by Borrower for DFS, with such proceeds being
payable in accordance with this Agreement. Borrower covenants with DFS that DFS
may realize upon all or part of any Collateral in any order it desires and any
realization by any means upon any Collateral will not bar realization upon any
other Collateral. Borrower's liability under this Agreement is direct and
unconditional and will not be affected by the release or nonperfection of any
security interest granted hereunder.
6.2 Future Advances.
DFS' security interests shall secure all current and all
future advances to Borrower made by DFS under the Loan Documents.
6.3 Financing Statements.
Borrower shall execute and deliver to DFS for the benefit of
DFS such financing statements, certificates of title and original documents as
may be required by DFS with respect to DFS' security interests.
6.4 Guaranties.
Borrower shall cause any and all Subsidiaries, whether now
existing or hereafter acquired, to execute and deliver collateralized guaranties
of the Obligations secured by a first priority, perfected security interest in
the assets described therein.
6.5 Further Assurances.
Borrower will execute and deliver to DFS, at such time or
times as DFS may request, all financing statements, security agreements,
assignments, certificates, affidavits, reports, schedules, and other documents
and instruments that DFS may deem necessary to perfect and maintain perfected
DFS' security interests in the Collateral and to fully consummate the
transactions contemplated under all Loan Documents. All filing, recording or
registration fees shall be payable by Borrower.
7. CONDITIONS PRECEDENT
All duties and obligations of DFS under the Loan Documents on the
Effective Date, and at all times during the term of this Agreement, are
specifically subject to the full and continued satisfaction by Borrower of the
conditions precedent set forth below.
7.1 Conditions Precedent.
The following conditions must be satisfied as of the Effective
Date:
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(a) DFS' Counsel. DFS' counsel must approve of all matters pertaining to
(i) title to the Collateral; (ii) the form, substance and due execution of
all Loan Documents; (iii) Borrower's organizational documents; and (iv)
all other legal matters, including the application of any laws relating to
usury.
(b) Material Change. There must not have been any material adverse change,
between April 1, 1997 and the Effective Date, in the condition of
Borrower, the condition of the Business, the value and condition of the
Collateral, the structure of Borrower other than as contemplated herein,
or in the financial information, audits and the like obtained by DFS.
(c) Perfected Liens. DFS shall have a perfected first priority Lien and
security interest in the Collateral, subject only to the Permitted Liens.
(d) Insurance. Borrower shall provide DFS with certificates of insurance
evidencing that Borrower has obtained the insurance as required in Section
9.1.2.
(e) Laws. Borrower and its Subsidiaries shall be in compliance with all
applicable laws and governmental regulations, including, but not limited
to, all Environmental Laws, the failure to comply with which would have a
material adverse effect on Borrower, its Subsidiaries or the Business.
(f) Certificate of Good Standing. A certificate of good standing for
Borrower (or other similar certificate) must be delivered to DFS, from the
appropriate governmental authority of Borrower's state of incorporation
and other jurisdictions in which Borrower does business, dated not earlier
than 30 days prior to the Effective Date.
(g) Opinion of Borrower's Counsel. DFS must receive a written opinion from
counsel for Borrower, dated the Effective Date, and addressed to and for
the benefit of DFS, in form and substance satisfactory to DFS.
(h) UCC Searches. DFS must receive a certificate from a provider of
financing statement searches acceptable to DFS which identifies all
financing statements of public record not more than 5 days before the
Effective Date, that pertain to the Collateral.
(i) Other Documents. Such other documents, certificates, submissions,
insurance policies and other matters as reasonably requested by DFS
relating to the transaction herein contemplated.
(j) President's Certificate. In the form attached hereto as Exhibit 7.1(j)
compliance with all of the terms and conditions in the Loan Documents.
(k) Articles of Incorporation. A certified copy of the Articles of
Incorporation, By-Laws and the resolutions of the directors of Borrower
authorizing the transactions contemplated by this Agreement.
(l) Secretary's Certificate of Resolution and Incumbency. In the form
attached hereto as Exhibit 7.1(l).
(m) Pre-closing Reviews. DFS must complete reviews with satisfactory
results of Borrower's Inventory and Accounts. All costs and expenses for
such pre-closing reviews will be included within the pre-closing expenses.
(n) Payoff Letter. A lien release and payoff letter executed by any and
all lienholders on any of the Collateral, other than with respect to the
Permitted Liens.
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8. REPRESENTATIONS AND WARRANTIES
To induce DFS to enter into this Agreement, Borrower makes the
representations and warranties set forth below, all of which will remain true in
all material respects during the term of this Agreement. Borrower acknowledges
DFS' justifiable right to rely upon the representations and warranties set forth
below.
8.1 Financial Statements.
Borrower warrants and represents to DFS that all financial
statements and information relating to Borrower or any Guarantor which have been
or may hereafter be delivered by Borrower or any Guarantor are true and correct
and have been and will be prepared in accordance with GAAP and, with respect to
such previously delivered statements or information, there has been no material
adverse change in the financial or business condition of Borrower or any
Guarantor since the submission to DFS, either as of the date of delivery, or, if
different, the date specified therein, and Borrower acknowledges DFS' reliance
thereon.
8.2 Non-Existence of Defaults.
Neither Borrower nor any of its Subsidiaries is in default
with respect to any material amount of its existing Indebtedness. The making and
performance of this Agreement and all other Loan Documents, will not
immediately, or with the passage of time, the giving of notice, or both: (a)
violate the provisions of the bylaws or any other corporate document of
Borrower; (b) violate any laws to the best of Borrower's knowledge after
diligent inquiry; (c) result in a material default under any contract,
agreement, or instrument to which Borrower is a party or by which Borrower or
its properties are bound; or (d) result in the creation or imposition of any
security interest in, or Lien or encumbrance upon, any of the Collateral except
the Permitted Liens.
8.3 Litigation.
Set forth on Exhibit 8.3 is a list of all actions, suits,
investigations or proceedings pending or, in the knowledge of Borrower,
threatened against Borrower or any of its Subsidiaries, as of the date hereof in
which there is a reasonable probability of an adverse decision which would
materially and adversely affect Borrower, the Business, or the Collateral.
8.4 Material Adverse Changes.
Borrower does not know of or expect any material adverse
change in the Business, or in Borrower's or any of the Subsidiaries' assets,
liabilities, properties, or condition, financial or otherwise, including changes
in Borrower's financial condition prior to and inclusive offrom the earlier of
(a) the latest proposal or terms sheet or (b) DFS' last audit prior to the
Effective Date.
8.5 Title to Collateral.
Except as set forth on Exhibit 8.5, Borrower has good and
marketable title to all of the Collateral, free and clear of any and all Liens,
claims and encumbrances, other than the Permitted Liens.
8.6 Corporate Status.
Borrower and each of the Subsidiaries is a corporation duly
organized and validly existing, in good standing, with perpetual corporate
existence, under the laws of their respective jurisdictions of formation.
Borrower and its Subsidiaries have the corporate power and authority to own
their properties and to transact the Business in which they are engaged and
presently propose to engage. Borrower and each Subsidiary is duly qualified as a
foreign corporation and in good standing in all states where the nature of their
Business or the ownership or use of their property requires such qualification,
and where failure to so qualify would have a material adverse effect on its
Business, operations or financial condition.
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8.7 Subsidiaries.
Borrower has no subsidiaries.
8.8 Power and Authority.
Borrower has the corporate power to borrow and to execute,
deliver and carry out the terms and provisions of the Loan Documents. Borrower
has taken or caused to be taken all necessary corporate action to authorize the
execution, delivery and performance of this Agreement and all other Loan
Documents and the borrowing thereunder.
8.9 Place of Business.
Borrower's chief executive office and the principal place of
business is located at ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇. Borrower's records
concerning the Collateral are kept at such chief executive office, or will be
kept at such other place that Borrower informs DFS of not less than 30 days in
advance of relocation.
8.10 Enforceability of the Loan Documents.
The Loan Documents executed by Borrower are the valid and
binding obligations of Borrower and are enforceable against Borrower in
accordance with their terms, except as limited by bankruptcy, insolvency, or
other laws of general application relating to the enforcement of creditors'
rights.
8.11 Taxes.
Borrower's federal tax identification number is ▇▇-▇▇▇▇▇▇▇.
Borrower has: (a) filed all federal, state and local tax returns and other
reports that it is required by law to file, (b) paid or caused to be paid all
taxes, assessments and other governmental charges that are due and payable, the
failure of which to pay would have a material adverse effect on the Business,
except those contested in good faith and in accordance with accepted procedures,
and for which adequate reserves have been established in accordance with GAAP,
and (c) made adequate provision for the payment of such taxes, assessments or
other charges accruing but not yet payable. Borrower has no knowledge of any
deficiency or additional assessment in a material amount in connection with any
taxes, assessments or charges.
8.12 Compliance with Laws.
Borrower, to the best of its knowledge after diligent inquiry,
has complied, and shall cause each Subsidiary to comply, in all material
respects with all applicable laws, including any Environmental Laws and any
zoning laws, the failure to comply with which would have a material adverse
effect on Borrower individually, or Borrower and its Subsidiaries on a
consolidated basis.
8.13 Consents.
Borrower and the Subsidiaries have obtained all material
consents, permits, licenses, approvals or authorization of, or effected the
filing, registration or qualification with, any governmental entity which is
required to be obtained or effected by Borrower and the Subsidiaries in
connection with the Business or the execution and delivery of this Agreement and
the other Loan Documents the failure of which to obtain or effect would have a
material adverse effect on Borrower individually, or on Borrower and its
Subsidiaries on a consolidated basis.
8.14 Purpose.
Borrower will use the advances which DFS makes under the
Credit Facility solely for lawful purposes and as described in Section 3 hereof.
8.15 Condition of the Business.
All material assets used in the conduct of the Business are in
good operating condition and repair and are fully usable in the ordinary course
thereof,
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reasonable wear and tear excepted.
8.16 Capital.
All issued shares and all outstanding shares in the
Subsidiaries as reflected in Borrower's financial statements are validly issued
pursuant to proper authorization of the board of directors of such Subsidiary,
and are fully paid, and non-assessable. There are no outstanding subscriptions,
warrants, options, calls or commitments, obligations or securities convertible
or exchangeable for shares of any stock of Borrower or the Subsidiaries.
Borrower shall give DFS thirty days (30) prior written notice before entering
any agreement to register its equity or debt securities under the Securities Act
of 1933, as amended, or any state securities law. All Borrower's issued shares
and outstanding capital stock are fully paid and non-assessable, and each such
Person's capital structure is as set forth on Exhibit 8.16.
8.17 Location of Collateral.
Exhibit 8.17 describes the locations where any of the
Collateral is located or stored as of the date hereof.
8.18 Real Property.
Borrower does not own or lease any real property, except as
set forth on Exhibit 8.18 attached hereto.
8.19 Solvency.
The Borrower now has capital sufficient to carry on its
respective business and transactions and all business and transactions in which
it is about to engage and is now solvent and able to pay its respective debts as
they mature, and Borrower now owns property having a value, greater than the
amount required to pay Borrower's debts.
8.20 Business Locations; Agent for Process.
Since incorporation, Borrower has had no office, place of
business or agent for service of process located in any state or county other
than as shown Exhibit 8.17.
8.21 Warranties and Representations-Inventory.
For each item of Inventory listed by Borrower on any Borrowing
Base Certificate, Borrower covenants, warrants and represents to DFS that at all
times: (a) Inventory not on rent will be kept only at the locations indicated on
Exhibit 8.17; (b) Borrower now keeps and will keep correct and accurate records
itemizing and describing the kind, type, quality and quantity of Inventory,
Borrower's cost therefor and the selling price thereof, the daily withdrawals
therefrom and the additions thereto; (c) Inventory is not and will not be stored
with a bailee, repairman, warehouseman or similar party without DFS' prior
written consent, and Borrower will, concurrently with delivery to such party,
cause any such party to issue and deliver to DFS, in form acceptable to DFS,
warehouse receipts, in DFS' name evidencing the storage of such Inventory, and
waivers of warehouseman's liens in favor of DFS; (d) Borrower will pay all
taxes, rents, business taxes, and the like on the premises where the Inventory
is located; and (e) Borrower will not lend, pledge, consign, transfer or secrete
any of the Inventory or use any of the Inventory for any purpose other than
exhibition and sale to buyers in the ordinary course of business, without DFS'
prior written consent.
8.22 Reaffirmation.
Each request for a Loan made by Borrower pursuant to this
Agreement or any of the other Loan Documents shall constitute (a) an automatic
representation and warranty by Borrower to DFS that there does not then exist
any Default or any Unmatured Default, and (b) a reaffirmation as of the date of
said request of all of the representations and warranties of Borrower contained
in this Agreement and the other Loan Documents.
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8.23 Survival of Representations and Warranties.
Borrower covenants, warrants and represents to DFS that all
representations and warranties of Borrower contained in this Agreement shall be
true at the time of Borrower's execution of this Agreement, and shall survive
the execution, delivery and acceptance thereof by DFS and the parties thereto
and the closing of the transactions described therein or related thereto.
9. BORROWER'S COVENANTS
9.1 Affirmative Covenants.
During the term of this Agreement and thereafter for so long
as any Obligations are outstanding and unpaid, Borrower covenants that unless
otherwise consented to by DFS in writing, it shall perform all the acts and
promises required by this Agreement and all the acts and promises set forth
below.
9.1.1 Payment and Performance. Borrower will pay and perform
all Obligations in full when and as due hereunder.
9.1.2 Insurance.
(a) Type of Insurance. Borrower will at all times cause
the Business and the Collateral to be insured by
insurers of reasonable financial soundness and having an
A. M. Best rating of A or better, with such policies,
against such risks and in such amounts as are
appropriate for reasonably prudent businesses in
Borrower's industry and of Borrower's size and financial
strength.
(b) Requirements as to Insurance Policies. The policies
of insurance which Borrower is required to carry shall
comply with the requirements listed below:
(i) Each such policy shall provide that it may not be
canceled or allowed to lapse at the end of a policy
period without at least 30 days' prior written notice to
DFS;
(ii) Each liability and hazard insurance policy shall
name DFS as an additional insured; and
(iii) Each property insurance policy required hereunder
shall contain a standard lender's loss payable clause in
favor of DFS. Such insurance policies shall also contain
lender's loss payable endorsements satisfactory to DFS
providing, among other things, that any loss shall be
payable in accordance with the terms of such policy
notwithstanding any act of Borrower which might
otherwise result in forfeiture of such insurance;
(c) Collection of Claims. Borrower will promptly advise
DFS of any insured casualty and Borrower agrees that DFS
may direct all insurance proceeds therefrom to be paid
directly to DFS to the extent that such loss is not
adequately insured under an insurance policy which names
DFS as a loss payee, and hereby appoints DFS its
attorney-in-fact for such purpose.
(d) Blanket Policies. Any insurance required hereunder
may be supplied by means of a blanket or umbrella
insurance policy.
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(e) Delivery of Policies or Certificates of Insurance.
Borrower shall deliver to DFS certificates of insurance
issued by insurers to evidence that the insurance
maintained by Borrower complies with the requirements
hereunder.
9.1.3 Sale of Inventory. Borrower will sell its Inventory only
in the ordinary course of business, unless written permission to the contrary is
obtained from DFS.
9.1.4 Notice of Litigation and Proceedings. Borrower will give
prompt notice to DFS of: (a) any litigation or proceeding (including fines and
penalties of any public authority) in which it, or any of the Subsidiaries is a
party in which there is a reasonable probability of an adverse decision which
would require it or any of the Subsidiaries to pay money or deliver assets,
whether or not the claim is considered to be covered by insurance; (b) any class
action litigation against it, regardless of size; and (c) the institution of any
other suit or proceeding that might materially and adversely affect its or any
of its Subsidiary's operations, financial condition, property or the Business.
9.1.5 Payment of Indebtedness to Third Persons. Borrower will,
and will cause each Subsidiary to, pay, when due, all Indebtedness and any other
liability due third persons, except when the amount thereof is being contested
in good faith by appropriate proceedings and with adequate reserves therefor
satisfactory to DFS in accordance with GAAP being set aside by Borrower or such
Subsidiary. DFS will use reasonable efforts to attempt to give Borrower notice
before DFS requires Borrower to set aside additional reserves.
9.1.6 Notice of Change of Business Location. Borrower will
notify DFS 30 days in advance of: (a) any change in or discontinuation of the
location of the Collateral, Borrower's principal place of business, or any of
the Subsidiaries' existing offices or places of business, (b) the establishment
of any new places of business relating to the Business, and (c) any change in or
addition to the locations where Borrower's Inventory or records are kept.
9.1.7 Payment of Taxes. Borrower will, and will cause each
Subsidiary to, pay or cause to be paid, when and as due, all taxes, assessments
and charges or levies imposed upon it or on any of its property or that it is
required to withhold and pay over to the taxing authority or that it must pay on
its income, the failure of which to pay would have a material adverse effect on
Borrower individually, or on Borrower and the Subsidiaries on a consolidated
basis, except where contested in good faith by appropriate proceedings with
adequate reserves therefor satisfactory to DFS, in accordance with GAAP, having
been set aside by Borrower or such Subsidiary. DFS will use reasonable efforts
to attempt to give Borrower notice before DFS requires additional reserves.
However, Borrower will and will cause each Subsidiary to, pay or cause to be
paid all such taxes, assessments, charges or levies immediately whenever
foreclosure of any Lien that attaches on the Collateral appears imminent.
9.1.8 Further Assurances. Borrower agrees to, and will cause
each Subsidiary to, execute such other and further documents, including, without
limitation, deeds of trust, promissory notes, security agreements, financing
statements, continuation statements, certificates of title, and the like as may
from time to time in the reasonable opinion of DFS be necessary to perfect,
confirm, establish, re-establish, continue, or complete the security interests,
collateral assignments and Liens in the Collateral, and the purposes and
intentions of this Agreement.
9.1.9 Maintenance of Status. Borrower will take all necessary
steps to (a) preserve its, and each Subsidiary's, existence as a corporation,
(b)
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preserve Borrower's and the Subsidiaries' franchises and permits, and (c)
comply with all present and future material agreements to which Borrower, or any
of the Subsidiaries, is subject, and (d) maintain, and cause each Subsidiary to
maintain, its qualification and good standing in all states in which such
qualification is necessary or in which the failure to be so qualified might have
a material adverse effect on the financial condition or properties of Borrower
or the Business. Borrower will not change the nature of the Business during the
term of this Agreement.
9.1.10 Financial Statements; Reporting Requirements;
Certification as to Events of Defaults. During the term of this Agreement,
Borrower will furnish two copies of the following to DFS:
(a) within 90 days after the end of each fiscal year, annual
financial statements for Borrower and its Subsidiaries as of
the end of such fiscal year, consisting of a consolidated and
consolidating balance sheet, consolidated and consolidating
statement of operations, consolidated and consolidating
statements of cash flows and consolidated and consolidating
statement of stockholder's equity, in comparative form,
together with a narrative description of the financial
condition and results of operations and the liquidity and
capital resources of Borrower and setting forth in comparative
form the corresponding figures for the corresponding period of
the prior fiscal year and the corresponding figures from the
most recent financial projections of Borrower, discussing the
reasons for any significant variations. The statements and
balance sheet will be audited by an independent firm of
certified public accountants selected by Borrower and
acceptable to DFS, and certified by that firm of certified
public accountants to have been prepared in accordance with
GAAP. The certified public accountants will render an
unqualified opinion as to such statements and balance sheets.
DFS will have the absolute and irrevocable right, from time to
time, to discuss the affairs of Borrower directly with the
independent certified public accountant after prior notice to
Borrower and the reasonable opportunity of Borrower to be
present at any such discussions;
(b) by the 30th day of each month, financial statements for
Borrower and its Subsidiaries as of the end of the immediately
preceding month, consisting of consolidated and consolidating
balance sheet and statement of operations prepared by
Borrower;
(c) by the 45th day of each quarter, a certificate of the
President, or Chief Financial Officer, in the form of Exhibit
9.1.10(c) attached hereto, of Borrower stating that such
Person has reviewed the provisions of the Loan Documents and
that a review of the activities of Borrower during such
quarter has been made by or under such Person's supervision
with a view to determining whether Borrower has observed and
performed all of Borrower's obligations under the Loan
Documents, and that, to the best of such Person's knowledge,
information and belief, Borrower has observed and performed
each and every undertaking contained in the Loan Documents and
is not at the time in default in the observance or performance
of any of the terms and conditions thereof or, if Borrower
will be so in default, specifying all of such defaults and
events of which such Person may have knowledge;
(d) promptly upon receipt thereof, copies of all final reports
and final management letters submitted to Borrower or any of
the Borrower's Subsidiaries by independent accountants in
connection with any annual or interim audit of the books of
Borrower or such
20
Subsidiaries made by such accountants;
(e) any other statements, reports and other information as DFS
may reasonably request concerning the financial condition or
operations of Borrower and its properties.
9.1.11 Notice of Existence of Default. Borrower will, and will
cause its Subsidiaries to, promptly notify DFS of: (a) the existence of any
known condition or event, which constitutes a Default or an Unmatured Default
and (b) the actual or threatened termination, suspension, lapse or
relinquishment of any material license, authorization, permit or other right
granted Borrower or for Borrower's benefit and used in the Business, or granted
to any of its Subsidiaries or for any such Subsidiaries' benefit, by any
governmental agency material to the Business.
9.1.12 Compliance with Laws. Borrower will, and will cause its
Subsidiaries to, comply in all material respects with all applicable laws,
rules, regulations and orders.
9.1.13 Maintenance of Collateral. Borrower will maintain all
material Collateral and every part thereof in good condition and repair.
Borrower will not permit the value of the Collateral to be materially impaired.
Borrower will defend the Collateral against all claims and legal proceedings by
persons other than DFS. Borrower will not transfer the Collateral from the
premises where now located (other than Inventory sold or rented in the ordinary
course of business), or permit the Collateral to become a fixture or accession
(unless so affixed on the Effective Date) to any goods which are not items of
Collateral, without the prior written approval of DFS. Borrower will not permit
the Collateral to be used in violation of any applicable law, regulations, or
any policy of insurance. As to Collateral consisting of instruments and chattel
paper, Borrower will preserve rights in it against prior parties.
9.1.14 Collateral Records and Statements. Borrower will keep
such accurate and complete books and records pertaining to the Collateral in
such detail and form as DFS reasonably requires, including, but not limited to:
schedules of inventory; original orders; invoices; shipping documents; billing
settlements and receivables; sold receivables; Inventory listing containing
model, serial number (if available) and location. Other reporting will be
available upon request by DFS. The statements will be in the form and will
contain the information as is prescribed by DFS.
9.1.15 Inspection of Collateral. DFS and any third party
appraiser selected by DFS may examine the Collateral at any time, and from time
to time during normal business hours. DFS and any third party appraiser selected
by DFS will have full access to, and the right to: (a) review, inspect and make
abstracts and copies from Borrower's books and records pertaining to the
Collateral, and (b) inspect and examine Inventory and check and test the same as
to quality, quantity, Value and condition, wherever located, at any time during
reasonable business hours, and from time to time. Borrower will assist DFS and
any third party appraiser selected by DFS in so doing.
9.1.16 Acquisition of Stock or Assets; New Subsidiaries.
Borrower will give DFS written notice at least thirty (30) days before Borrower:
(a) acquires all or substantially all the assets of, equity interest or stock
in, another business, or (b) creates any Subsidiaries.
9.2 Negative Covenants.
During the term of this Agreement and thereafter, for so long
as any Obligations are outstanding and unpaid, Borrower covenants that unless
otherwise
21
consented to in writing by DFS, Borrower shall not perform or cause or
permit to be performed the following acts:
9.2.1 Change of Name, Etc. Borrower will not change its name,
or begin to trade under any assumed names or trade names without thirty (30)
days prior written notice to DFS. Borrower will not change its manner of
organization, enter into any mergers, consolidations, reorganizations or
recapitalizations without DFS' prior written consent.
9.2.2 Sale or Transfer of Assets. Except in the ordinary
course of business, or except as consented to in writing by DFS, Borrower will
not sell, transfer, lease (including sale-leaseback) or otherwise dispose of all
or any substantial part of their assets. This provision will not apply to any
sale if the proceeds of such sale pay the Obligations in full.
9.2.3 Encumbrance of Assets. Borrower will not mortgage,
pledge, grant or permit to exist a security interest in or Lien upon any of the
Collateral, now owned or hereafter acquired except for the Permitted Liens.
9.2.4 False Certificates or Documents. Borrower has not and
will not furnish DFS with any certificate or other document that contains any
untrue statement of material fact or that omits to state a material fact
necessary to make it not misleading in light of the circumstances under which it
was furnished.
9.2.5 Assignment. Borrower will not assign or attempt to
assign the Loan Documents or any of its interests under the Loan Documents,
except in favor of DFS.
9.2.6 Transactions with Affiliates. Borrower will not enter
into any contracts, leases, sales or other transactions with any Affiliate on
terms less favorable than could be obtained generally by Borrower from a
non-Affiliate.
9.2.7 Loans by Borrower. Borrower will not make any loan to
any Person, except for loans in anticipation of reasonable and normally
reimbursable business expenses and trade credit extended in the ordinary course
of Business.
9.2.8 Fiscal Year. Borrower will not change its fiscal
year-end without sixty (60) days prior written notice to DFS.
9.2.9 This section has been deleted.
9.2.10 Adverse Transactions. Borrower will not enter into any
transaction, or permit any Subsidiary to enter into any transaction, which
materially and adversely affects or may materially and adversely affect the
Collateral or Borrower's ability to repay the Obligations.
9.2.11 Guaranties. Borrower will not guarantee, assume,
endorse or otherwise, in any way, become directly or contingently liable with
respect to the Indebtedness of any Person, except (1) by execution of a
Collateralized Guaranty of the indebtedness owed by RDO Equipment Co. to DFS,
and (2) by endorsement of instruments or items of payment for deposit or
collection.
9.2.12 ▇▇▇▇-and-Hold Sales, Etc. Borrower will not make a sale
to any customer on a ▇▇▇▇-and-hold, guaranteed sale, sale and return, sale on
approval or consignment basis, or any sale on a repurchase or return basis.
9.2.13 Margin Securities. Borrower will not own, purchase or
acquire, or permit any Subsidiary to own, purchase or acquire, (or enter, or
permit any Subsidiary to enter, into any contract to purchase or acquire) any
"margin
22
security" as defined by any regulation of the Federal Reserve Board as
now in effect or as the same may hereafter be in effect unless, prior to any
such purchase or acquisition or entering into any such contract, DFS shall have
received an opinion of counsel satisfactory to DFS to the effect that such
purchase or acquisition will not cause this Agreement to violate Regulations G
or U or any other regulation of the Federal Reserve Board then in effect.
9.2.14 Tax Consolidation. Borrower will not file or consent to
the filing of any consolidated income tax return with any Person other than
Parent Company.
9.2.15 Stock Redemption. Borrower will not redeem or purchase
any of its outstanding capital stock, warrants in favor of anyone other than
DFS, or stock options or convert or permit such stock, warrants or options to be
converted into cash, nor has or shall Borrower guaranty to any of its
shareholders any minimum stock price or valuation.
10. DEFAULT/REMEDIES
10.1 Events of Default. Borrower will be in default under this
Agreement if any of the following events occurs and is not cured or waived: (a)
immediately for events under subsections (e), (h), (i), (j), (k), (l), (m), (n)
or (o) below; (b) within two (2) business days after receiving written notice by
DFS to borrower for events under subsections (d), (f), (q) or (s) below; or (c)
within thirty (30) days after receiving written notice by DFS to borrower in all
other cases (each, a "Default"):
(a) Borrower breaches any terms, covenants, warranties or
representations contained herein;
(b) RDO Equipment Co., Inc. breaches any terms, covenants (including
financial covenants), warranties or representations contained in any guaranty or
other agreement between RDO Equipment Co., Inc. and DFS;
(c) any representation, statement, report or certificate made or
delivered by Borrower or RDO Equipment Co. to DFS is not accurate when made;
(d) Borrower fails to pay any portion of Borrower's debts to DFS
when due and payable hereunder or under any other agreement between DFS and
Borrower;
(e) Borrower abandons any Collateral;
(f) Borrower or RDO Equipment Co. is or becomes in default of any
material term or in any material amount of any material obligation owed to any
third party;
(g) a money judgment issues against Borrower or RDO Equipment Co.;
(h) an attachment, sale or seizure issues or is executed against any
assets of Borrower or against any assets of RDO Equipment Co.;
(i) Borrower ceases existence as a corporation;
(j) Borrower ceases or suspends business;
(k) Borrower or RDO Equipment Co. makes a general assignment for the
benefit of creditors;
(l) Borrower or RDO Equipment Co. becomes insolvent or voluntarily
or involuntarily becomes subject to the Federal Bankruptcy Code, any state
insolvency law or any similar law;
(m) any receiver is appointed for any of Borrower's or any of RDO
Equipment Co.'s assets;
(n) any guaranty of Borrower's debts to DFS is terminated;
(o) Borrower or RDO Equipment Co. misrepresents Borrower's or RDO
Equipment Co.'s individual or consolidated financial condition or organizational
structure;
(p) any of the Collateral becomes subject to any Lien, claim,
encumbrance or security interest other than a Permitted Lien;
(q) Borrower shall be enjoined, restrained or in any way prevented
by court, governmental or administrative order from conducting all or any
material part of its Business; or any material lease or agreement pursuant to
which Borrower leases, uses or occupies any property shall be canceled or
terminated prior to the
23
expiration of its stated term, or any part of the Collateral shall be taken
through condemnation or the value thereof shall be impaired through
condemnation;
(r) RDO Equipment Co. shall cease to own and control, beneficially
and of record, at least fifty-one percent (51%) of the issued and outstanding
capital stock of Borrower;
(s) there shall occur a material adverse change in the financial or
other condition or business prospects of Borrower or RDO Equipment Co.; or
(t) DFS determines in good faith that it is insecure with respect to
any of the Collateral or the payment of any part of Borrower's Obligations.
10.2 Remedies. In the event of a Default, and after the expiration
of any applicable curing periods set forth in Section 10.1 above:
(i) DFS may at any time at DFS' election, upon notice or demand to
Borrower, do any one or more of the following: cease making further Loans and
declare all or any of the Obligations immediately due and payable, together with
all costs and expenses of DFS' collection activity, including, without
limitation, all reasonable attorneys' fees; exercise any or all rights under
applicable law (including, without limitation, the right to possess, transfer
and dispose of the Collateral); and/or cease extending any additional credit to
Borrower.
(ii) Borrower will segregate and keep the Collateral in trust for
DFS, and in good order and repair, and will not sell, rent, lease, consign,
otherwise dispose of or use any Collateral, nor further encumber any Collateral.
(iii) Upon DFS' oral or written demand, Borrower will immediately
deliver the Collateral to DFS, in good order and repair, at a place specified by
DFS, together with all related documents; or DFS may, in DFS' sole discretion
and without notice or demand to Borrower, take immediate possession of the
Collateral together with all related documents.
(iv) DFS may, upon notice, apply the Default Interest Rate.
(v) DFS may, upon notice to Borrower and at any time or times
hereafter enforce payment and collect, by legal proceedings or otherwise,
Accounts which arose from Eligible Inventory ("DFS Pledged Accounts") in the
name of Borrower or DFS; and take control of any cash or non-cash items of
payment or proceeds of DFS Pledged Accounts and of any rejected, returned,
repossessed or stopped in transit goods relating to DFS Pledged Accounts. DFS
may at its sole election and without demand enter, with or without process of
law, any premises where Collateral might be and, without charge or liability to
DFS therefor do one or more of the following: (i) take possession of the
Collateral and use or store it in said premises or remove it to such other place
or places as DFS may deem convenient; (ii) take possession of all or part of
such premises and the Collateral and place a custodian in the exclusive control
thereof until completion of enforcement of DFS' security interest in the
Collateral or until DFS' removal of the Collateral and, (iii) remain on such
premises and use the same, together with Borrower's materials, supplies, books
and records, for the purpose of liquidating or collecting such Collateral and
conducting and preparing for disposition of such Collateral.
(vi) Upon the occurrence of a Default under Sections 10.1 (i), (k),
(l) or (m), all Obligations shall automatically be accelerated and due and
payable and the Default Interest Rate shall automatically apply as of the date
of the first occurrence of such Default, without any prior notice, demand or
action of any type on the part of DFS.
All of DFS' rights and remedies are cumulative. DFS' failure to
exercise any of DFS' rights or remedies hereunder will not waive any of DFS'
rights or remedies as to any past, current or future Default.
11. SALE OF COLLATERAL
Borrower agrees that if DFS conducts a private sale of any
Collateral by requesting bids from 10 or more dealers or distributors in that
type of Collateral, any sale by DFS of such Collateral in bulk or in parcels
within 120 days of: (a) DFS' taking possession and control of such Collateral;
or (b) when DFS is otherwise
24
authorized to sell such Collateral; whichever occurs last, to the bidder
submitting the highest cash bid therefor, is a commercially reasonable sale of
such Collateral under the Uniform Commercial Code. Borrower agrees that the
purchase of any Collateral by a vendor, as provided in any agreement between DFS
and the vendor, if any, is a commercially reasonable disposition and private
sale of such Collateral under the Uniform Commercial Code, and no request for
bids shall be required. Borrower further agrees that 7 or more business days
prior written notice will be commercially reasonable notice of any public or
private sale (including any sale to a vendor). Borrower irrevocably waives any
requirement that DFS retain possession and not dispose of any Collateral until
after an arbitration hearing, arbitration award, confirmation, trial or final
judgment. If DFS disposes of any such Collateral other than as herein
contemplated, the commercial reasonableness of such disposition will be
determined in accordance with the laws of the state governing this Agreement.
12. INDEMNIFICATIONS
12.1 General Indemnity.
In addition to the payment of expenses and attorneys' fees, if
applicable, whether or not the transactions contemplated hereby shall be
consummated, Borrower agrees to indemnify, pay and hold DFS and the officers,
directors, employees, agents, and affiliates of DFS and such holders
(collectively called the "Indemnitees") harmless from and against, any and all
other liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, claims, costs, expenses and disbursements of any kind or nature
whatsoever (including, without limitation, the reasonable fees and disbursements
of counsel for any of such Indemnitees in connection with any investigative,
administrative or judicial proceeding commenced or threatened, whether or not
any of such Indemnitees shall be designated a party thereto), that may be
imposed on, incurred by, or asserted against the Indemnitees, in any manner
relating to or arising out of the Loan Documents, the statements contained in
any commitment letters delivered by DFS, DFS' agreement to make the Loans or any
other payment hereunder, or the use or intended use of the proceeds of any of
the Loans hereunder (the "Indemnified Liabilities"); provided, however, that
Borrower shall have no obligation to an Indemnitee hereunder with respect to
Indemnified Liabilities arising from the gross negligence or willful misconduct
of an Indemnitee. To the extent that the undertaking to indemnify, pay and hold
harmless set forth in the preceding sentence may be unenforceable because it is
violative of any law or public policy, Borrower shall contribute the maximum
portion that it is permitted to pay and satisfy under applicable law, to the
payment and satisfaction of all Indemnified Liabilities incurred by the
Indemnitees or any of them. The provisions of the undertakings and
indemnification set out in this Section 12.1 shall survive satisfaction and
payment of the Obligations and termination of this Agreement.
13. OTHER TERMS
13.1 Amendment, Changes and Modification.
The Loan Documents may be amended, changed or modified only as
may be agreed upon in writing by Borrower and DFS from time to time.
13.2 Binding Effect.
The Loan Documents will be binding upon the parties, their
successors and assigns, provided, however, that Borrower shall not assign or
attempt to assign this Agreement, any other Loan Document or any of its
interests under the Loan Documents, without the prior written consent of DFS.
13.3 Broker Fee.
Neither party is obligated to pay any premium or other charge,
brokerage fee or commission in connection with the agreements set forth herein.
25
Each party will indemnify the other and hold it harmless from any such claim
arising out of such party's acts or those of its representatives.
13.4 Entire Agreement.
The Loan Documents embody the entire agreement of the parties
relating to the Credit Facility. There are no promises, terms, conditions,
obligations or warranties other than those contained in the Loan Documents. The
Loan Documents supersede all prior communications, representations or
agreements, verbal or written, between the parties relating to the Credit
Facility.
13.5 Headings.
The headings to the sections of this Agreement are included
only for the convenience of the parties and will not have the effect of
defining, diminishing or enlarging the rights of the parties or affecting the
construction or interpretation of any portion of this Agreement.
13.6 Incorporation by Reference.
All other Loan Documents are incorporated herein by this
reference and are made a part of this Agreement as if fully set forth herein.
This Agreement, prior to such incorporation, controls in the event of any
conflict with the terms of any other Loan Documents.
13.7 Interpretation.
For the purpose of construing this Agreement, unless the
context otherwise requires, words in the singular will be deemed to include
words in the plural, and vice versa.
13.8 Notices.
Any notice under the Loan Documents, will be in writing. Any
notice to be given or document to be delivered under the Loan Documents will be
deemed to have been duly given upon delivery, if delivered in person or by any
expedited delivery service which provides proof of delivery, upon tested telex
or facsimile transmission, or on the fifth Business Day after mailing, if mailed
by certified mail, return receipt requested, postage prepaid mail, addressed to
DFS or Borrower at the appropriate addresses. DFS will use reasonable efforts to
deliver any notice DFS is required to give to Borrower; provided, however, that
failure by DFS to actually give any such notice will not be deemed to be a
waiver of any rights or remedies of DFS and will not give rise to any claims,
defenses or damages by Borrower. The addresses for notices are those set forth
below or such other addresses as may be hereafter specified by written notice by
the parties:
to DFS: Deutsche Financial Services Corporation
▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇
Facsimile No.:(▇▇▇)▇▇▇-▇▇▇▇
with a copy to: Deutsche Financial Services Corporation
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇. ▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: General Counsel
Facsimile No.:(▇▇▇) ▇▇▇-▇▇▇▇
to Borrower: RDO RENTAL CO.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Facsimile No.:(▇▇▇) ▇▇▇-▇▇▇▇
26
with a copy to: RDO EQUIPMENT CO.
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Facsimile No.:(▇▇▇) ▇▇▇-▇▇▇▇
13.9 No Third Party Beneficiary Rights and Reliance.
No Person not a party to this Agreement will have any benefit
under this Agreement nor have third-party beneficiary rights as a result of any
of the Loan Documents, nor will any party be entitled to rely on any actions or
inactions of DFS or its agents, all of which are done for the sole benefit and
protection of DFS.
13.10 Protection or Preservation of Collateral.
DFS will not have any contractual duty to protect, insure,
collect or realize upon the Collateral or preserve rights in it against prior
parties. DFS will not be responsible or liable for any shortage, discrepancy,
damage, loss or destruction of any part of the Collateral regardless of the
cause.
13.11 Relationship of the Parties.
Neither DFS on the one hand nor Borrower on the other hand
will be deemed a partner, joint venturer or related entity of the other by
reason of the Loan Documents.
13.12 Reversal of Payments.
To the extent that Borrower makes a payment or payments to
DFS, which payment or payments or proceeds or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside or required to
be repaid to a trustee, receiver or any other party under any bankruptcy law,
state or federal law, common law, or equitable cause, then to the extent of such
payment or proceeds received, the Credit Facility will be revived and continue
in full force and effect, as if such payment or proceeds had not been received
by DFS.
13.13 Severability.
If any provision of this Agreement (either generally, or as to
a specific application to a set of facts) will be held to be invalid, illegal or
unenforceable, such invalidity, illegality or unenforceability will not affect
any other provision of this Agreement (either in its entirety, or as to or the
application of such provision to any other set of facts), but this Agreement
will be construed as if such invalid, illegal or unenforceable provision never
had been included in this Agreement.
13.14 Maximum Interest.
Borrower acknowledges that DFS intends to strictly conform to
the applicable usury laws governing this Agreement. Regardless of any provision
contained herein or in any other document executed or delivered in connection
herewith or therewith, DFS shall never be deemed to have contracted for, charged
or be entitled to receive, collect or apply as interest on this Agreement
(whether termed interest herein or deemed to be interest by judicial
determination or operation of law), any amount in excess of the maximum amount
allowed by applicable law, and, if DFS ever receives, collects or applies as
interest any such excess, such amount which would be excessive interest will be
applied first to the reduction of the unpaid principal balances of advances
under this Agreement, and, second, any remaining excess will be paid to
Borrower. In determining whether or not the interest paid or payable under any
specific contingency exceeds the highest lawful rate, Borrower and DFS shall, to
the maximum extent permitted under applicable law: (a) characterize any
non-principal payment (other than payments which are expressly designated as
interest payments hereunder) as an expense or fee rather than as interest; (b)
exclude voluntary pre-payments and the effect thereof; and (c) spread the total
amount of interest throughout the entire term of this
27
Agreement so that the interest rate is uniform throughout such term.
13.15 Waivers by DFS.
DFS may at any time or from time to time waive all or any
rights under any of the Loan Documents, but any waiver or indulgence at any time
or from time to time will not constitute, unless specifically so expressed by
DFS in writing, a future waiver by DFS of performance by Borrower.
13.16 Survival.
The grant of security interest herein to secure all
Obligations, and all provisions relating to the Collateral will survive
termination of this Agreement and will remain in full force and effect until all
Obligations have been paid in full and this Agreement has been terminated. The
Agreement to arbitrate all Disputes will survive termination of this Agreement.
13.17 Participations; Assignments.
DFS may, without the consent of Borrower, grant participations
in or assign, at any time and from time to time hereafter, its interest in this
Agreement or any Loan Document, or of any portion thereof.
13.18 Counterparts.
This Agreement may be executed in any number of counterparts,
all of which taken together shall constitute one and the same instrument, and
either of the parties hereto may execute this Agreement by signing any such
counterpart.
13.19 Information.
DFS may provide credit references to any third party or may
provide other information that DFS may from time to time possess on Borrower to
any manufacturer or seller of Inventory against which DFS has loaned monies, but
DFS will not supply any financial information on Borrower to any third party.
DFS may obtain from any vendor any credit, financial or other information on
Borrower that any such vendor may from time to time possess.
13.20 Release.
Borrower releases DFS from all claims and causes of action
which Borrower may now or hereafter have for any loss or damage to it claimed to
be caused by or arising from any act or omission to act on the part of DFS, its
officers, agents or employees, except for willful misconduct or gross
negligence.
13.21 Miscellaneous.
Time is of the essence regarding Borrower's performance of its
obligations to DFS notwithstanding any course of dealing or custom on DFS' part
to grant extensions of time. Borrower's liability under this Agreement is direct
and unconditional and will not be affected by the release or nonperfection of
any security interest granted hereunder. DFS will have the right to refrain from
or postpone enforcement of this Agreement or any other Loan Documents without
prejudice and the failure to strictly enforce the Loan Documents will not be
construed as having created a course of dealing between DFS and Borrower
contrary to the specific terms of the Loan Documents or as having modified,
released or waived the same. The express terms of this Agreement and the other
Loan Documents will not be modified by any course of dealing, usage of trade, or
custom of trade which may deviate from the terms hereof. If Borrower fails to
pay any taxes, fees or other obligations which may impair DFS' interest in the
Collateral, or fails to keep the Collateral insured, DFS may, but shall not be
required to, pay such taxes, fees or obligations and pay the cost to insure the
Collateral, and the amounts paid will be: (a) an additional debt owed by
Borrower to DFS, which shall be subject to finance charges as provided herein;
and (b) due and payable immediately in full. Borrower agrees to pay all of DFS'
reasonable attorneys' fees and expenses incurred by DFS in enforcing DFS' rights
hereunder.
28
13.22 Waivers by Borrower.
Borrower irrevocably waives notice of: DFS' acceptance of this
Agreement, presentment, demand, protest, nonpayment, nonperformance, and
dishonor. Borrower and DFS irrevocably waive all rights to claim any punitive
and/or exemplary damages. Borrower waives all rights of offset and counter
claims Borrower may have against DFS. Borrower waives all notices of default and
non-payment at maturity of any or all of the Accounts.
13.23 NO ORAL AGREEMENTS.
ORAL AGREEMENTS OR COMMITMENTS TO LEND MONEY, EXTEND CREDIT OR
TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT INCLUDING PROMISES TO EXTEND OR
RENEW SUCH DEBT ARE NOT ENFORCEABLE. TO PROTECT YOU, (BORROWER(S)) AND US
(CREDITOR) FROM MISUNDERSTANDING OR DISAPPOINTMENT, ANY AGREEMENTS WE REACH
COVERING SUCH MATTERS ARE CONTAINED IN THIS WRITING, WHICH IS THE COMPLETE AND
EXCLUSIVE STATEMENT OF THE AGREEMENT BETWEEN US, EXCEPT AS WE MAY LATER AGREE IN
WRITING TO MODIFY IT. THERE ARE NO UNWRITTEN AGREEMENTS BETWEEN THE PARTIES. DFS
may, from time to time, announce in writing to Borrower its policies and
procedures regarding its administration of this facility including, without
limit, DFS' fees and/or charges for transfers of funds to or from Borrower,
including Electronic Transfers; any subsequent use by Borrower of this facility
following any such announcement shall constitute Borrower's acceptance of such
revised policies and procedures.
13.24 Supplement.
If Borrower and DFS have heretofore executed other agreements
in connection with all or any part of the Collateral, this Agreement shall
supplement each and every other agreement previously executed by and between
Borrower and DFS, and in that event, this Agreement shall neither be deemed a
novation nor a termination of such previously executed agreement nor shall
execution of this Agreement be deemed a satisfaction of any obligation secured
by such previously executed agreement.
13.25 Use of Counsel and Receipt of Agreement.
Borrower acknowledges that it has received a true and complete
copy of this Agreement. Borrower acknowledges that it has (a) had representation
of counsel during negotiation of this Agreement, and (b) read and understood
this Agreement.
13.26 Facsimiles, Etc.
Notwithstanding anything herein to the contrary: (a) DFS may
rely on any facsimile copy, electronic data transmission or electronic data
storage of any statement, Statement of Transaction, financial statements or
other reports, and (b) such facsimile copy, electronic data transmission or
electronic data storage will be deemed an original, and the best evidence
thereof for all purposes, including, without limitation, under this Agreement or
any other Loan Documents, and for all evidentiary purposes before any
arbitrator, court or other adjudicatory authority.
13.27 Power of Attorney.
Borrower irrevocably appoints DFS (and any Person designated
by it) as Borrower's true and lawful Attorney with full power to at any time, in
the discretion of DFS only in the event of a Default, to: (a) endorse the name
of Borrower upon any of the items of payment of proceeds of the Collateral and
deposit the same in the account of DFS for application to the Obligations; (b)
sign the name of Borrower on any document or instrument that DFS shall deem
necessary or appropriate to perfect and maintain perfected the security
interests in the Collateral under this Agreement; (c) initiate and settle any
insurance claim and endorse Borrower's name on any check, instrument or other
item of payment; (d) endorse the name of Borrower upon financing statements,
instruments, Certificates of Title and Statements of Origin pertaining to the
Collateral; (e) supply omitted information and correct errors in any documents
between DFS and Borrower; and (f) do anything to preserve and protect the
Collateral and DFS' rights and interest
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therein. In the event of a Default, Borrower irrevocably appoints DFS (and any
Person designated by it) as Borrower's true and lawful Attorney with full power
to at any time, in the discretion of DFS to: (i) demand payment, enforce payment
and otherwise exercise all of Borrower's rights, and remedies with respect to
the collection of any Accounts; (ii) settle, adjust, compromise, extend or renew
any Accounts; (iii) settle, adjust or compromise any legal proceedings brought
to collect any Accounts; (iv) sell or assign any Accounts upon such terms, for
such amounts and at such time or times as DFS may deem advisable; (v) discharge
and release any Accounts; (vi) prepare, file and sign Borrower's name on any
Proof of Claim in Bankruptcy or similar document against any Account Debtor;
(vii) endorse the name of Borrower upon any chattel paper, document, instrument,
invoice, freight ▇▇▇▇, ▇▇▇▇ of lading or similar document or agreement relating
to any Account or goods pertaining thereto; and (viii) take control in any
manner of any item of payments or proceeds and for such purpose to notify the
Postal Authorities to change the address for delivery of mail addressed to
Borrower to such address as DFS may designate. This power of attorney is for
value and coupled with an interest and is irrevocable so long as any Obligations
remain outstanding and by DFS exercising such right, DFS shall not waive any
right against Borrower until the Obligations are paid in full.
14. BINDING ARBITRATION.
14.1 Arbitrable Claims.
Except as otherwise specified below, all actions, disputes,
claims and controversies under common law, statutory law or in equity of any
type or nature whatsoever (including, without limitation, all torts, whether
regarding negligence, breach of fiduciary duty, restraint of trade, fraud,
conversion, duress, interference, wrongful replevin, wrongful sequestration,
fraud in the inducement, usury or any other tort, all contract actions, whether
regarding express or implied terms, such as implied covenants of good faith,
fair dealing, and the commercial reasonableness of any Collateral disposition,
or any other contract claim, all claims of deceptive trade practices or lender
liability, and all claims questioning the reasonableness or lawfulness of any
act), whether arising before or after the date of this Agreement, and whether
directly or indirectly relating to: (a) this Agreement and/or any amendments and
addenda hereto, or the breach, invalidity or termination hereof; (b) any
previous or subsequent agreement between DFS and Borrower; (c) any act committed
by DFS or by any parent company, subsidiary or affiliated company of DFS (the
"DFS Companies"), or by any employee, agent, officer or director of a DFS
Company whether or not arising within the scope and course of employment or
other contractual representation of the DFS Companies provided that such act
arises under a relationship, transaction or dealing between DFS and Borrower;
and/or (d) any other relationship, transaction or dealing between DFS and
Borrower (collectively the "Disputes"), will be subject to and resolved by
binding arbitration.
14.2 Administrative Body.
All arbitration hereunder will be conducted by the American
Arbitration Association ("AAA"). If the AAA is dissolved, disbanded or becomes
subject to any state or federal bankruptcy or insolvency proceeding, the parties
will remain subject to binding arbitration which will be conducted by a mutually
agreeable arbitral forum. The parties agree that all arbitrator(s) selected will
be attorneys with at least five (5) years secured transactions experience. The
arbitrator(s) will decide if any inconsistency exists between the rules of any
applicable arbitral forum and the arbitration provisions contained herein. If
such inconsistency exists, the arbitration provisions contained herein will
control and supersede such rules. The site of all arbitration proceedings will
be in Cottonwood, Arizona or such other location as the parties agree.
14.3 Discovery.
Discovery permitted in any arbitration proceeding commenced
hereunder is limited as follows. No later than thirty (30) days after the filing
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of a claim for arbitration, the parties will exchange detailed statements
setting forth the facts supporting the claim(s) and all defenses to be raised
during the arbitration, and a list of all exhibits and witnesses. No later than
twenty-one (21) days prior to the arbitration hearing, the parties will exchange
a final list of all exhibits and all witnesses, including any designation of any
expert witness(es) together with a summary of their testimony; a copy of all
documents and a detailed description of any property to be introduced at the
hearing. Under no circumstances will the use of interrogatories, requests for
admission, requests for the production of documents or the taking of depositions
be permitted. However, in the event of the designation of any expert
witness(es), the following will occur: (a) all information and documents relied
upon by the expert witness(es) will be delivered to the opposing party, (b) the
opposing party will be permitted to depose the expert witness(es), (c) the
opposing party will be permitted to designate rebuttal expert witness(es), and
(d) the arbitration hearing will be continued to the earliest possible date that
enables the foregoing limited discovery to be accomplished.
14.4 Exemplary or Punitive Damages.
The Arbitrator(s) will not have the authority to award
exemplary or punitive damages and each party hereby irrevocably waives any right
to claim any exemplary or punitive damages.
14.5 Confidentiality of Awards.
All arbitration proceedings, including testimony or evidence
at hearings, will be kept confidential, although any award or order rendered by
the arbitrator(s) pursuant to the terms of this Agreement may be entered as a
judgment or order in any state or federal court and may be confirmed within the
federal judicial district which includes the residence of the party against whom
such award or order was entered. This Agreement concerns transactions involving
commerce among the several states. The Federal Arbitration Act, Title 9 U.S.C.
Sections 1 et seq., as amended ("FAA") will govern all arbitration(s) and
confirmation proceedings hereunder.
14.6 Prejudgment and Provisional Remedies.
Nothing herein will be construed to prevent DFS' or Borrower's
use of bankruptcy, receivership, injunction, repossession, replevin, claim and
delivery, sequestration, seizure, attachment, foreclosure, dation and/or any
other prejudgment or provisional action or remedy relating to any Collateral for
any current or future debt owed by either party to the other. Any such action or
remedy will not waive DFS' or Borrower's right to compel arbitration of any
Dispute.
14.7 Attorneys' Fees.
If either Borrower or DFS brings any other action for judicial
relief with respect to any Dispute (other than those set forth in Section 14.6)
the party bringing such action will be liable for and immediately pay all of the
other party's costs and expenses (including attorneys' fees) incurred to stay or
dismiss such action and remove or refer such Dispute to arbitration. If either
Borrower or DFS brings or appeals an action to vacate or modify an arbitration
award and such party does not prevail, such party will pay all costs and
expenses, including attorneys' fees, incurred by the other party in defending
such action. Additionally, if Borrower sues DFS or institutes any arbitration
claim or counterclaim against DFS in which DFS is the prevailing party, Borrower
will pay all costs and expenses (including attorneys' fees) incurred by DFS in
the course of defending such action or proceeding.
14.8 Limitations.
Any arbitration proceeding must be instituted: (a) with
respect to any Dispute for the collection of any debt owed by either party to
the other, within two (2) years
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after the date the last payment was received by the instituting party; and (b)
with respect to any other Dispute, within two (2) years after the date the
incident giving rise thereto occurred, whether or not any damage was sustained
or capable of ascertainment or either party knew of such incident. Failure to
institute an arbitration proceeding within such period will constitute an
absolute bar and waiver to the institution of any proceeding, whether
arbitration or a court proceeding, with respect to such Dispute.
14.9 Survival After Termination.
The agreement to arbitrate will survive the termination of
this Agreement.
15. INVALIDITY/UNENFORCEABILITY OF BINDING ARBITRATION.
IF THIS AGREEMENT IS FOUND TO BE NOT SUBJECT TO ARBITRATION, ANY
LEGAL PROCEEDING WITH RESPECT TO ANY DISPUTE WILL BE TRIED IN A COURT OF
COMPETENT JURISDICTION BY A JUDGE WITHOUT A JURY. BORROWER AND DFS WAIVE ANY
RIGHT TO A JURY TRIAL IN ANY SUCH PROCEEDING.
16. GOVERNING LAW.
Borrower acknowledges and agrees that this and all other agreements
between Borrower and DFS have been substantially negotiated, and will be
substantially performed, in the state of Arizona. Accordingly, Borrower agrees
that all Disputes will be governed by, and construed in accordance with, the
laws of such state, except to the extent inconsistent with the provisions of the
FAA which shall control and govern all arbitration proceedings hereunder.
IN WITNESS WHEREOF, the parties have, by their duly authorized
officers, executed this Agreement as of the Effective Date.
THIS AGREEMENT CONTAINS BINDING ARBITRATION, JURY WAIVER AND PUNITIVE DAMAGES
WAIVER PROVISIONS
ATTEST: RDO RENTAL CO.
By: /s/▇▇▇▇▇ ▇. ▇▇▇▇▇ By: /s/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------- ----------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇ - Secretary Print Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
--------------------------------
DEUTSCHE FINANCIAL SERVICES CORPORATION
By: /s/▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------------
Print Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Title: Regional Vice President
--------------------------------
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FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT
This First Amendment is made to that certain Loan and Security Agreement
entered into on April 7, 1997 ("Agreement") by and between RDO Rental
Co.("Borrower") and DEUTSCHE FINANCIAL SERVICES CORPORATION ("DFS").
FOR GOOD AND VALUABLE CONSIDERATION RECEIVED, Borrower and DFS agree to
amend the Agreement as follows:
1. The amount of the Total Credit Limit, as defined in the first
sentence of Section 3.1 of the Agreement, Total Credit Facility, is hereby
amended to read Forty Six Million Two Hundred Fifty Thousand Dollars
($46,250,000.00).
2. The first sentence of Section 3.2(a) of the Agreement, Inventory
Floorplan Loan Limit, is hereby deleted in ist entirety and restated to read as
follows:
Subject to the terms of this Agreement, DFS may provide Loans to
Borrower for Floorplan Inventory and financing approvals for
Floorplan Inventory in transit from the seller thereof (each advance
being a "Floorplan Inventory Loan") up to an aggregate unpaid
principal amount at any time not to exceed (i) the Total Credit
Limit less (ii) outstanding Revolving Credit Loans ("Inventory
Floorplan Loan Limit").
3. The first sentence of Section 3.3(a) of the Agreement, Total
Revolving Credit Limit, is hereby deleted in its entirety and restated to read
as follows:
Subject to the terms of this Agreement, DFS agrees, for so long as
no Default exists, to provide to Borrower, and Borrower agrees to
accept, financing (each advance being a "Revolving Credit Loan") on
the Initial Advance, Eligible New Inventory and Eligible Used
Inventory in the maximum aggregate unpaid principal amount at any
time equal to the lesser of (i) the Borrowing Base and (ii) the
Total Credit Limit less the aggregate amount of Inventory Floorplan
Loans ("Total Revolving Credit Limit").
4. All other terms as they appear in the Agreement, to the extent not
inconsistent with the foregoing, are ratified and remain unchanged and in full
force and effect.
IN WITNESS WHEREOF, the parties have executed this First Amendment to Loan
and Security Agreement as of this 31st day of August, 1998.
RDO RENTAL CO. DEUTSCHE FINANCIAL SERVICES CORPORATION
By: /s/▇▇▇▇▇ ▇. ▇▇▇▇▇ By: /s/▇▇ ▇▇▇▇▇▇▇▇▇
-------------------------------- ----------------------------------
Title: Secretary/CFO Title: Vice President
----------------------------- -------------------------------
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