1
Exhibit 10.1
CREDIT AND SECURITY AGREEMENT
DATED AS OF JULY 17, 1997
BY AND BETWEEN
UGLY DUCKLING CORPORATION,
A DELAWARE CORPORATION
("LENDER")
AND
FIRST MERCHANTS ACCEPTANCE CORPORATION,
A DELAWARE CORPORATION
("BORROWER")
$10,000,000.00 REVOLVING CREDIT FACILITY
Lotsted\PHX\368160.10
2
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS..........................................................1
1.1 Defined Terms...............................................1
1.2 Other Interpretive Provisions..............................10
1.3 Accounting Principles......................................11
1.4 Times......................................................12
ARTICLE II
THE COMMITMENT......................................................12
2.1 Commitment.................................................12
2.2 Procedure for Advances.....................................12
2.3 Repayment and Mandatory Prepayment.........................12
2.4 Interest Rate..............................................13
2.5 Commitment Fee.............................................13
2.6 Computation of Fees and Interest...........................13
2.7 Payments by Borrower.......................................13
2.8 Maturity Date..............................................14
ARTICLE III
SECURITY AGREEMENT AND COLLATERAL...................................14
3.1 Security for Obligations...................................14
3.2 Security Documents.........................................14
3.3 Lender's Duty Regarding Collateral.........................14
3.4 Borrower's Duties Regarding Collateral.....................14
3.5 Power of Attorney..........................................15
3.6 Collateral Inspections.....................................16
3.7 Return of Contract Delivery Documents. ....................16
ARTICLE IV
CONDITIONS PRECEDENT; TERM OF AGREEMENT.............................16
4.1 Conditions Precedent to the Initial Advance................16
4.2 Conditions Precedent to Subsequent Advances................17
4.3 Term.......................................................17
4.4 Effect of Termination......................................17
4.5 Early Termination by Borrower..............................18
ARTICLE V
REPRESENTATIONS AND WARRANTIES......................................18
5.1 No Encumbrances............................................18
5.2 Equipment..................................................18
5.3 Location of Inventory and Equipment........................18
i
3
5.4 Location of Chief Executive Office; FEIN...................18
5.5 Due Organization and Qualification; Subsidiaries...........18
5.6 Due Authorization; No Conflict.............................19
5.7 Litigation.................................................19
5.8 No Material Adverse Change.................................19
5.9 ERISA......................................................20
5.10 Environmental and Safety Matters...........................20
ARTICLE VI
AFFIRMATIVE COVENANTS...............................................20
6.1 Financial Statements.......................................20
6.2 Inspection of Property.....................................21
6.3 Maintenance of Insurance...................................21
6.4 Default Disclosure.........................................21
6.5 Notices to Lender..........................................21
6.6 Books and Records..........................................22
6.7 Compliance and Preservation................................22
6.8 Perfection of Liens........................................22
6.9 Cooperation................................................22
ARTICLE VII
NEGATIVE COVENANTS..................................................22
7.1 Indebtedness...............................................22
7.2 Liens......................................................23
7.3 Restrictions on Fundamental Changes........................23
7.4 Disposal of Assets.........................................23
7.5 Change Name................................................23
7.6 Guarantee..................................................23
7.7 Nature of Business.........................................23
7.8 Prepayments and Amendments.................................23
7.9 Change of Control..........................................24
7.10 Consignments...............................................24
7.11 Distributions..............................................24
7.12 Accounting Methods.........................................24
7.13 Investments................................................24
7.14 Transactions with Affiliates...............................24
7.15 Compensation...............................................24
7.16 Use of Proceeds............................................24
7.17 Change in Location of Chief Executive Office...............25
7.18 No Prohibited Transactions Under ERISA.....................25
ARTICLE VIII
EVENTS OF DEFAULT/REMEDIES..........................................25
8.1 Event of Default...........................................25
8.2 Lender's Rights and Remedies...............................27
ii
4
ARTICLE IX
MISCELLANEOUS.......................................................28
9.1 Amendments and Waivers.....................................28
9.2 Notices....................................................28
9.3 No Waiver: Cumulative Remedies.............................29
9.4 Costs and Expenses.........................................29
9.5 Indemnity..................................................30
9.6 Marshaling: Payments Set Aside............................30
9.7 Successors and Assigns.....................................30
9.8 Set-off....................................................30
9.9 Counterparts...............................................31
9.10 Severability...............................................31
9.11 No Third Parties Benefited.................................31
9.12 Time.......................................................31
9.13 Governing Law and Jurisdiction.............................31
9.14 Entire Agreement...........................................32
9.15 Interpretation.............................................32
9.16 Assignment.................................................32
9.17 Revival and Reinstatement of Obligations...................32
9.18 No Purchase of Contracts/Servicing.........................32
iii
5
SCHEDULES AND EXHIBITS
[SCHEDULES & EXHIBITS NOT INCLUDED WITH THE ▇▇▇▇▇ FILING WITH THE SEC.]
SCHEDULE A The Interim Order
SCHEDULE B Inventory Locations
SCHEDULE C Borrower's Subsidiaries
SCHEDULE D Warrants, Options, etc.
SCHEDULE E Litigation
EXHIBIT A Exhibit A to the Financing Statement(s)
iv
6
CREDIT AND SECURITY AGREEMENT
This CREDIT AND SECURITY AGREEMENT (the "Agreement"), is entered into
as of July 17, 1997, between UGLY DUCKLING CORPORATION, a Delaware corporation
("Lender"), with a place of business located at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, and FIRST MERCHANTS ACCEPTANCE CORPORATION, a
Delaware corporation, the debtor and debtor-in-possession in the Reorganization
Case ("Borrower") with a principal place of business located at ▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
Lender has agreed to make available to Borrower a revolving credit
facility (the "Loan") upon the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual agreements, provisions
and covenants contained herein, the parties agree as follows:
ARTICLE I
DEFINITIONS
1.1 Defined Terms. In addition to the terms defined elsewhere in this
Agreement, the following terms have the following meanings:
"Acceptable Plan" means a Chapter 11 plan of reorganization
for Borrower that (i) has been approved by Lender or (ii) provides for payment
in full in cash of the Obligations on the effective date of such plan.
"Accounts" means all currently existing and hereafter arising
accounts, accounts receivable, contract rights, chattel paper, rights in and to
motor vehicle installment sales agreements and/or contracts, and all other forms
of obligations owing to Borrower and any and all proceeds therefrom.
"Advance" means the advance of monies by Lender on the
Commitment.
"Affiliate" means, as to any Person, any other Person which,
directly or indirectly, is in control of, is controlled by, or is under common
control with, such Person. A Person shall be deemed to control another Person if
the controlling Person possesses, directly or indirectly, the power to direct or
cause the direction of the management and policies of the other Person, whether
through the ownership of voting securities, by contract or otherwise. Without
limitation, any director, executive officer or beneficial owner of five percent
(5%) or more of the equity of a Person shall for the purposes of this Agreement,
be deemed to control the other Person. In no event shall Lender be deemed an
"Affiliate" of Borrower.
"Agreement" means this Credit and Security Agreement, as
amended, supplemented or modified from time to time in accordance with the terms
hereof.
"Asset Disposition" means any sale, exchange, or other
disposition, directly or indirectly (including any loss, destruction, or
condemnation), of any of the properties or assets of Borrower.
1
7
"Attorney Costs" means and includes all fees and disbursements
of any law firm or other external counsel.
"Authorized Person" means the President, any Vice Presidents,
Chief Financial Officer or Treasurer of Borrower.
"Bankruptcy Code" means the United States Bankruptcy Code (11
U.S.C. Section 101 et seq.), as amended, and any successor statute.
"Bankruptcy Court" means either (i) the United States
Bankruptcy Court for the District of Delaware or (ii) the United States District
Court for the District of Delaware, while acting pursuant to the grant of
federal jurisdiction under 28 U.S.C. Sections 1334 and/or 157.
"Bankruptcy Recoveries" means all actions, causes of action,
and proceeds thereof arising or related to the assertion by Debtor, or its
successor(s) of any claims under Sections 365, 544, 547, 548, 549, 550, 551, or
553(b) of the Bankruptcy Code.
"Borrower's Books" means all of Borrower's books and records
including: ledgers; records indicating, summarizing, or evidencing Borrower's
properties or assets (including the Collateral and the assets of any
Subsidiaries of Borrower) or liabilities; all information relating to Borrower's
business operations or financial condition; and all computer programs, disk or
tape files, printouts, runs, or other computer prepared information.
"Business Day" means any day other than a Saturday, Sunday or
national holiday.
"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation and Liability Act (49 U.S.C. Section 9601, et seq.).
"Certificate of Title" shall mean, with respect to a motor
vehicle underlying a Contract, the certificate of title (or other evidence of
ownership) issued by the Department of Motor Vehicles, or other appropriate
governmental body, of the state in which such vehicle is to be registered,
showing the obligor as owner, with either notation of Borrower's first lien or
such other status indicated thereon which is necessary to perfect Borrower's
security interest in the vehicle as a first priority interest, and showing no
other actual or possible lien interest in the vehicle.
"Change of Control" shall be deemed to have occurred at such
time as a "person" or "group" (within the meaning of Sections 13(d) and 14(d)(2)
of the Securities Exchange Act of 1934) becomes the "beneficial owner" (as
defined in Rule 13d3 under the Securities Exchange Act of 1934), directly or
indirectly, of more than 10% of the total voting power of all classes of stock
then outstanding of Borrower entitled to vote in the election of directors.
"Closing Date" means the date on which all conditions
precedent set forth in Section 4.1 are either satisfied or waived by Lender.
"Code" means the Internal Revenue Code of 1986, as amended,
and any regulations promulgated thereunder.
"Collateral" means each of the following:
(a) the Accounts,
2
8
(b) Borrower's Books,
(c) the Equipment,
(d) the General Intangibles,
(e) the Inventory,
(f) the Negotiable Collateral,
(g) the Contracts,
(h) the New Contracts, but only to the extent that a
court determines that Lender's purchase of such New Contracts does not
constitute a true sale of the New Contracts,
(i) any real property owned by Borrower,
(j) any and all assets, tangible and intangible belonging
to an Affiliate of Borrower, which is subsequently consolidated with Borrower or
Borrower's Bankruptcy estate,
(k) tax refunds to which Borrower is, or may be entitled,
(l) any money, or other assets of Borrower that now or
hereafter come into the possession, custody, or control of either Borrower or
Lender, except any Bankruptcy Recoveries, and
(m) the proceeds and products, whether tangible or
intangible, of any of the foregoing, including proceeds of insurance covering
any or all of the Collateral, and any and all Accounts, Borrower's Books,
Equipment, General Intangibles, Inventory, Negotiable Collateral, money, deposit
accounts, or other tangible or intangible property resulting from the sale,
exchange, collection, or other disposition of any of the foregoing, or any
portion thereof or interest therein, and the proceeds thereof.
"Commitment" means the commitment of Lender to extend a
revolving line of credit in the Commitment Amount.
"Commitment Amount" means the maximum principal amount of Ten
Million and No/100 Dollars ($10,000,000).
"Commitment Fee" means the amount of Five Hundred Thousand and
No/100 Dollars ($500,000).
"Contracts" means any and all installment sale agreements,
chattel paper or other deferred payment obligations and all documents,
instruments and agreements relating thereto, now existing or owned or hereafter
arising or acquired by Debtor, together with all Related Security and all
payments and other proceeds arising therefrom.
"Contract Delivery Documents" shall mean, with respect to each
Contract and the underlying motor vehicle, the original Certificate of Title,
and the original executed Contract with the original Obligor and Dealer
signatures, and bearing on its front and back surface an assignment to Lender.
3
9
"Contracts Purchase Agreement" means that certain Contracts
Purchase Agreement, if any, by and between Borrower, as seller, and Lender, as
buyer, the terms of which shall be approved by the Final Order.
"Dealer" means a dealer that has sold a motor vehicle to an
Obligor pursuant to a Contract.
"Dealer Agreement" means an agreement between Borrower and a
Dealer that governs the sale or assignment of Contracts from such Dealer to
Borrower, including any provisions for assignment (whether without recourse,
with recourse, with a repurchase obligation by the Dealer or with a guaranty by
such Dealer) contained in such Contracts and Related Security with respect
thereto.
"Dealer Assignment" means a written assignment of a Contract
by a Dealer to Borrower.
"Debt" or "Indebtedness" means (i) indebtedness for borrowed
money, (ii) obligations evidenced by bonds, debentures, notes, matured
reimbursable obligations under letters of credit or other similar instruments,
(iii) obligations to pay the deferred purchase price of property or services
other than trade payables incurred in the ordinary course of business, (iv)
obligations as lessee under leases that shall have been or should be, in
accordance with GAAP recorded as capital leases, (v) obligations under direct or
indirect guaranties in respect of, and obligations (contingent or otherwise) to
purchase or otherwise acquire, or otherwise to assure a creditor against loss in
respect of, indebtedness or obligations of others of the kinds referred to in
clauses (i) through (iv), and (vi) liabilities in respect of unfunded vested
benefits under Pension Plans covered by Title IV of ERISA.
"Default" means any event or circumstance which, with the
giving of notice, the lapse of time, or both, would (if not cured or otherwise
remedied) constitute an Event of Default.
"Designated Account" means an account of Borrower, authorized
and established pursuant to the Bankruptcy Code, maintained with Borrower's
Designated Account Bank.
"Designated Account Bank" means a Bank, at which Borrower
shall establish the Designated Account and whose address and ABA number shall be
promptly supplied to Lender upon the opening of the Designated Account.
"Dollars", "dollars" and "$" each mean lawful money of the
United States.
"Environmental and Safety Laws" means all Federal, state and
local laws, regulations and ordinances, relating to the discharge, handling,
disposition or treatment of Hazardous Materials and other substances or the
protection of the environment or of employee health and safety, including,
without limitation, CERCLA, the Hazardous Materials Transportation Act (49
U.S.C. Section 1801, et seq.), the Resource Conservation and Recovery Act (42
U.S.C. Section 7401, et seq.), the Clean Air Act (42 U.S.C. Section 7401, et
seq.), the Toxic Substances Control Act (15 U.S.C. Section 2601, et seq.), the
Occupational Safety and Health Act (29 U.S.C. Section 651, et seq.) and the
Emergency Planning and Community Right-To-Know Act (42 U.S.C. Section 11001, et
seq.), each as the same may be amended and supplemented.
4
10
"Environmental Liabilities and Costs" means, as to any Person,
all liabilities, obligations, responsibilities, remedial actions, losses,
damages, punitive damages, consequential damages, treble damages, contribution,
cost recovery, costs and expenses (including all fees, disbursements and
expenses of counsel, expert and consulting fees, and costs of investigation and
feasibility studies), fines, penalties, sanctions and interest incurred as a
result of any claim or demand, by any Person, whether based in contract, tort,
implied or express warranty, strict liability, criminal or civil statute,
permit, order or agreement with any Federal, state or local governmental
authority or other Person, arising from environmental, health or safety
conditions, or the release or threatened release of a contaminant, pollutant or
Hazardous Material into the environment, resulting from the operations of such
Person or its subsidiaries, or breach of any Environmental and Safety Law or for
which such Person or its subsidiaries is otherwise liable or responsible.
"Equipment" means all of Borrower's present and hereafter
acquired machinery, machine tools, motors, equipment, furniture, furnishings,
fixtures, vehicles (including motor vehicles and trailers), tools, parts, goods
(other than consumer goods, farm products, or Inventory), wherever located,
including, (a) any interest of Borrower in any of the foregoing, and (b) all
attachments, accessories, accessions, replacements, substitutions, additions,
and improvements to any of the foregoing.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and regulations promulgated thereunder.
"Event of Default" means any of the events or circumstances
specified in Section 8.1.
"FEIN" means Federal Employer Identification Number.
"Final Order" means a final non-appealable order entered by
the Bankruptcy Court in form and substance acceptable to Lender that approves,
inter alia, the terms and conditions of the Loan.
"Financing Statements" means the Form UCC-1 Financing
Statements together with an Exhibit A in the form attached hereto, to perfect
the security interests in the Collateral pursuant to the provisions of Article
III that can be perfected by filing in the States in which Borrower maintains
offices and/or Collateral.
"Fiscal Quarter" means a fiscal quarter of Borrower.
"Fiscal Year" means a fiscal year of Borrower.
"GAAP" means generally accepted accounting principles set
forth from time to time in the opinions and pronouncements of the Accounting
Principles Board and the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board (or
agencies with similar functions of comparable stature and authority within the
accounting profession), or in such other statements by such other entity as may
be in general use by significant segments of the U.S. accounting profession,
which are applicable to the circumstances as of the date of determination.
"General Intangibles" means all of Borrower's present and
future general intangibles and other personal property (including contract
rights, rights arising under common law, statutes,
5
11
or regulations, choses or things in action, goodwill, patents, trade names,
trademarks, servicemarks, copyrights, blueprints, drawings, purchase orders,
customer lists, monies due or recoverable from pension funds, route lists,
rights to payment and other rights under any royalty or licensing agreements,
infringement claims, computer programs, information contained on computer disks
or tapes, literature, reports, catalogs, deposit accounts, insurance premium
rebates, tax refunds, and tax refund claims), other than goods, Accounts, and
Negotiable Collateral.
"Governmental Authority" means any nation or government, any
state or other political subdivision thereof, any central bank (or similar
monetary or regulatory authority) thereof, any entity, body, authority, bureau,
department or instrumentality exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government, and any
corporation or other entity owned or controlled, through stock or capital
ownership or otherwise, by any of the foregoing.
"Hazardous Materials" means (a) any material or substance
defined as or included in the definition of "hazardous substances" "hazardous
wastes" "hazardous materials", "toxic substances" or any other formulations
intended to define, list or classify substances by reason of their deleterious
properties, (b) any oil, petroleum or petroleum derived substance, (c) any
flammable substances or explosives, (d) any radioactive materials, (e) asbestos
in any form, (f) electrical equipment that contains any oil or dielectric fluid
containing levels of polychlorinated biphenyls in excess of fifty parts per
million, (g) pesticides or (h) any other chemical, material or substance,
exposure to which is prohibited, limited or regulated by any governmental agency
or authority or which may or could pose a hazard to the health and safety of
persons in the vicinity thereof.
"Indemnified Liabilities" has the meaning specified in Section
9.5.
"Indemnified Person" has the meaning specified in Section 9.5.
"Initial Advance" means any Advance made pursuant to Section
4.1 of this Agreement, which Advances in the aggregate shall not exceed the
Initial Advance Amount.
"Initial Advance Amount" means any amounts advanced pursuant
to the Interim Order, which amounts shall not exceed in the aggregate Five
Million and No/100 Dollars ($5,000,000).
"Instrument" has the meaning set forth in the UCC.
"Intangible Assets" means all intangible assets under GAAP,
including, without limitation, copyrights, franchises, goodwill, licenses, loan
origination fees, non-competition covenants, organization or formation expenses,
patents, shares of the capital stock of Borrower, service marks, service names,
trademarks, tradenames, write-up in the book value of any asset in excess of the
acquisition cost of the asset to Borrower, any amount, however designated on the
balance sheet, representing the excess of the purchase price paid for assets or
stock acquired over the value assigned thereto on the books of Borrower, loans
and advances to stockholders, directors, officers and employees of Borrower,
unamortized leasehold improvements expense not recoverable at the end of the
lease term, unamortized debt discount, and deferred discount.
"Interim Order" means those certain Interim Orders
substantially in the form attached hereto as Schedule A, which orders were
entered by the Bankruptcy Court effective as of July 14,
6
12
1997 and July 17, 1997 respectively, (i) authorizing debtor in possession
financing; (ii) granting Liens and superpriority administrative claims; and
(iii) modifying the automatic stay entered by the Bankruptcy Court.
"Inventory" means all present and future inventory in which
Borrower has any interest, including goods held for sale or lease or to be
furnished under a contract of service and all of Borrower's present and future
raw materials, work in process, finished goods, and packing and shipping
materials, wherever located.
"Lender Costs" or "Lender Expenses" means all: costs or
expenses (including taxes, and insurance premiums) required to be paid by
Borrower under any of the Loan Documents that are paid or incurred by Lender;
reasonable out-of-pocket fees or charges paid or incurred by Lender in
connection with Lender's transactions with Borrower, including, fees or charges
for photocopying, notarization, couriers and messengers, telecommunication,
public record searches (including tax lien, litigation, and UCC searches and
including searches with the patent and trademark office, the copyright office,
or the department of motor vehicles), filing, recording, publication,
appraisals, due diligence, actual out-of-pocket costs and expenses incurred by
Lender in the disbursement of funds to Borrower (by wire transfer or otherwise);
actual out-of-pocket charges paid or incurred by Lender resulting from the
dishonor of checks; reasonable out-of-pocket costs and expenses paid or incurred
by Lender to correct any default or enforce any provision of the Loan Documents,
or in gaining possession of, maintaining, handling, preserving, storing,
shipping, selling, preparing for sale, or advertising to sell the Collateral, or
any portion thereof, irrespective of whether a sale is consummated; reasonable
costs and expenses paid or incurred by Lender in examining Borrower's Books;
reasonable out-of pocket costs and expenses of third party claims or any other
suit paid or incurred by Lender in enforcing or defending the Loan Documents or
in connection with the transactions contemplated by the Loan Documents or
Lender's relationship with Borrower; and Lender's reasonable attorneys fees and
expenses incurred in advising, structuring, drafting, reviewing, administering,
amending, terminating, enforcing (including local counsel fees and attorneys
fees and expenses incurred in connection with a "workout" restructuring
concerning Borrower), defending, or concerning the Loan Documents, irrespective
of whether suit is brought. Lender's expenses shall not include costs and
expenses which Lender may incur in connection with (i) any bid by Lender for the
assets of Borrower, (ii) any proposed plan where Lender is a co-proponent or
would otherwise acquire Borrower's business or (iii) any purchase by Lender of
the claims held by other creditors of Borrower.
"Lien or Encumbrance" and "Liens and Encumbrances" in addition
to the definition set forth in the Bankruptcy Code, means any mortgage, deed of
trust, pledge, hypothecation, assignment, charge or deposit arrangement,
encumbrance, lien (statutory or other) or preference, priority or other security
interest or preferential arrangement of any kind or nature whatsoever (including
those created by, arising under or evidenced by any conditional sale or other
title retention agreement, the interest of a Lessor under a capital lease
obligation, any financing lease having substantially the same economic effect as
any of the foregoing, or the filing of any financing statement naming the owner
of the asset to which such lien relates as debtor, under the UCC or any
comparable law) and any contingent or other agreement to provide any of the
foregoing.
"List of Contracts" shall mean a list prepared by Borrower
which (i) identifies each Contract being purchased by account number, the name
of the Obligor, the outstanding principal balance thereon, and the year, make,
model, and VIN of the motor vehicle underlying the Contract, and (ii) shows the
total number of Contracts being purchased and the total outstanding principal
balances.
7
13
"Loan Documents" means this Agreement, the Stock Pledge
Agreement, the Financing Statements, and all documents delivered to Lender in
connection therewith.
"Material Adverse Effect" or "Material Adverse Change" means a
material adverse change in, or a material adverse effect upon, any of (a) the
operations, business, properties, condition (financial or otherwise) or
prospects of Borrower; (b) the ability of Borrower to perform under any Loan
Document and avoid any Event of Default, or (c) the legality, validity, binding
effect or enforceability of any Loan Document.
"Maturity Date" has the meaning set forth in Section 2.9.
"Negotiable Collateral" means one hundred percent (100%) of
the issued and outstanding capital stock of First Merchants Auto Receivables
Corporation II, a Delaware corporation.
"Net Proceeds" means (a) the gross cash proceeds (including
insurance proceeds, condemnation awards, and payments received from time to time
in respect of installment obligations and other non-cash proceeds, if
applicable) received by or on behalf of Borrower in respect of an Asset
Disposition, less (b) the sum of (i) the amount, if any, of all taxes (other
than income taxes) payable by Borrower, as applicable, in connection with such
Asset Disposition, plus Borrower's good faith best estimate of the amount of all
income taxes payable in connection with such Asset Disposition, (ii) the amount
of any reasonable reserve established in accordance with GAAP against any
liabilities associated with the properties or assets that were the subject of
such Asset Disposition, provided that the amount of any subsequent reduction of
such reserve (other than in connection with a payment in respect of any such
liability) shall be deemed to be "Net Proceeds" of an Asset Disposition
occurring on the date of such reduction, (iii) the amount applied to repay any
Indebtedness secured by a Lien upon the properties or assets that were the
subject of the Asset Disposition, to the extent such Indebtedness is required by
its terms to be repaid as a result of such Asset Disposition, and (iv)
reasonable and customary fees, including legal fees, commissions, and expenses
and other costs paid by Borrower, in connection with such Asset Disposition
(other than those payable to any Affiliate of Borrower), in each case only to
the extent not already deducted in arriving at the amount referred to in clause
(a).
"New Contracts" shall mean any rights and/or interests
purchased by Lender from Borrower (and created and available for purchase by
Borrower following the entry of the Interim Order) pursuant to a Contracts
Purchase Agreement between Borrower and Lender, which agreement shall and must
be in a form and in substance acceptable to Lender in its sole and absolute
discretion, but which includes, without limitation, (i) Accounts, (ii) security
interests and any other interests in financed vehicles, (iii) any and all other
security, warranties, guaranties and credit support with respect to the
foregoing, (iv) any proceeds of claims on any physical damage, credit life and
credit accident and health insurance policies or other insurance or certificates
relating to financed vehicles or to originators of the New Contracts, (v)
purchase agreements with dealers, (vi) installment sales, contracts or
agreements, (vii) refunds for costs of extended service contracts with respect
to financed vehicles, refunds of unearned premiums with respect to credit life
and credit accident and health insurance policies or other insurance or
certificates relating to financed vehicles or originators of the New Contracts,
and (viii) the proceeds from any and all of the foregoing.
"Notice of Advance" means a notice given by Borrower to Lender
pursuant to Section 2.2 of this Agreement, in form and substance satisfactory to
Lender.
8
14
"Obligor" means the Person obligated for the payment of
principal or other money under any Contract.
"Obligations" means all Advances, and other Debt, advances,
debts, liabilities, obligations, covenants and duties owing by Borrower to
Lender, of any kind or nature, present or future, whether or not evidenced by
any note, guaranty or other instrument, arising under this Agreement, under any
other Loan Document, the Contracts Purchase Agreement, the Servicing Agreement,
or out of the Interim Order or the Final Order, absolute or contingent, due or
to become due, now existing or hereafter arising and however acquired.
"Ordinary Course of Business" means, in respect of any
transaction involving Borrower, the ordinary course of such Person's (including
Borrower) business, substantially as conducted by any such Person prior to or as
of the Closing Date, and undertaken by such Person in good faith and not for
purposes of evading any covenant or restriction in any Loan Document.
"Permitted Liens" means (a) Liens held by Lender, and/or (b)
any and all properly perfected, valid and enforceable liens existing at or prior
to the date of this Agreement .
"Permitted Protest" means the right of Borrower to protest any
Lien other than any such Lien that secures the Obligations, tax (other than
payroll taxes or taxes that are the subject of a United States federal tax
lien), or rental payment, provided that (a) a reserve with respect to such
obligation is established on the books of Borrower in an amount that is
reasonably satisfactory to Lender, (b) any such protest is instituted and
diligently prosecuted by Borrower in good faith, and (c) Lender is satisfied
that, while any such protest is pending, there will be no impairment of the
enforceability, validity, or priority of any of the Liens of Lender in and to
the Collateral.
"Person" means a natural Person, partnership, corporation,
business trust, joint stock company, trust, unincorporated association, Joint
Venture or Governmental Authority.
"Related Security" means, with respect to a Contract:
(a) all of Debtor's interest with respect to such Contract
under the (i) Dealer Agreement pursuant to which such Contract was acquired
and/or (ii) the Dealer Assignment from the Dealer from whom the Contract was
required;
(b) all motor vehicles underlying such Contract; and
(c) all collateral, security agreements and property purported
to be subject thereto held as security for such Contract, including all
guaranties, indemnities, warranties, insurance proceeds and premium refunds and
underwritings and property of whatever character at any time held as security
for such Contract.
"Reorganization Case" means the Chapter 11 case pending in the
Bankruptcy Court and designated as Case No. 97-1500.
"Requirement of Law" means, as to any Person, any law
(statutory or common), treaty, rule or regulation or determination of an
arbitrator or of a Governmental Authority, in each case applicable to or binding
upon the Person or any of its property or to which the Person or any of its
property is subject.
9
15
"Responsible Officer" means the chief executive officer or the
president of Borrower, or any other officer having substantially the same
authority and responsibility or, with respect to financial matters, the chief
financial officer or the treasurer of Borrower, or any other officer having
substantially the same authority and responsibility.
"Security Documents" shall mean the writings described in
Article III hereof, as they may hereafter be amended, modified and/or
supplemented, and all other writings now or hereafter executed to create,
evidence and/or perfect any Lien(s) to secure the Loan or any portion(s)
thereof.
"Servicing Agreement" means that certain Servicing Agreement,
if any, by and between Borrower, as servicer, and Lender, as buyer, executed in
connection with the Contracts Purchase Agreement.
"Stock Pledge Agreement" means that certain Pledge Agreement
(Stock), dated as of the date hereof, among Borrower, as pledgor, Lender, as
lender, and ▇▇▇▇▇▇ Trust and Savings Bank, an Illinois banking corporation, as
collateral agent on behalf of Lender, pursuant to which Borrower grants Lender a
security interest in the Negotiable Collateral.
"Subsidiary" of a Person means a corporation, partnership,
limited liability partnership, limited liability company, or other entity in
which that Person directly or indirectly owns or controls the shares of stock or
other ownership interests having ordinary voting power to elect a majority of
the board of directors (or appoint other comparable managers) of such
corporation, partnership, limited liability partnership, limited liability
company, or other entity.
"UCC" means the Uniform Commercial Code as in effect from time
to time in the State of Arizona, and in any and all other states in which
Borrower and/or any of its Subsidiaries conduct, or are authorized to conduct
business.
"United States" and "U.S." each means the United States of
America.
"Voidable Transfer" has the meaning set forth in Section 9.17.
1.2 Other Interpretive Provisions.
(a) Defined Terms. Unless otherwise specified herein or
therein, all terms defined in this Agreement shall have the defined meanings
when used in any certificate or other document made or delivered pursuant
hereto. The meaning of defined terms shall be equally applicable to the singular
and plural forms of the defined terms. Terms (including uncapitalized terms) not
otherwise defined herein, and that are defined either in the Bankruptcy Code or
the UCC shall have the meanings therein described.
(b) The Agreement. The words "hereof", "herein", "hereunder"
and words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement; and
section, schedule and exhibit references are to this Agreement unless otherwise
specified.
10
16
(c) Certain Common Terms.
(i) The term "documents" includes any and all
instruments, documents, agreements, certificates, indentures, notices
and other writings, however evidenced.
(ii) The term "including" is not limiting and means
"including without limitation".
(iii) The term "or" has, except where otherwise
indicated, the inclusive meaning represented by the phrase "and/or".
(d) Performance; Time. Whenever any performance obligation
hereunder (other than a payment obligation) shall be stated to be due or
required to be satisfied on a day other than a Business Day, such performance
shall be made or satisfied on the next succeeding Business Day. In the
computation of periods of time from a specified date to a later specified date,
the word "from" means "from and including"; the words "to" and "until" each mean
"to but excluding", and the word "through" means "to and including". If any
provision of this Agreement refers to any action taken or to be taken by any
Person, or which such Person is prohibited from taking, such provision shall be
interpreted to encompass any and all means, direct or indirect, of taking, or
not taking, such action.
(e) Contracts. Unless otherwise expressly provided herein,
references to agreements and other contractual instruments shall be deemed to
include all subsequent amendments and other modifications thereto, but only to
the extent such amendments and other modifications are not prohibited by the
terms of any Loan Document.
(f) Laws. References to any statute or regulation are to be
construed as including all statutory and regulatory provisions consolidating,
amending, replacing, supplementing or interpreting the statute or regulation.
(g) Captions. The captions and headings of this Agreement are
for convenience of reference only and shall not affect the construction of this
Agreement.
(h) Independence of Provisions. The parties acknowledge that
this Agreement and other Loan Documents may use several different limitations,
tests or measurements to regulate the same or similar matters, and that such
limitations, tests and measurements are cumulative and must each be performed,
except as expressly stated to the contrary in this Agreement.
1.3 Accounting Principles.
(a) Unless the context otherwise clearly requires, all
accounting terms not expressly defined herein shall be construed, and all
financial computations required under this Agreement shall be made, in
accordance with GAAP, consistently applied. In the event that GAAP changes
during the term of this Agreement such that the covenants contained in Article
VIII would then be calculated in a different manner or with different
components, (i) Borrower and Lender agree to amend this Agreement in such
respects as are necessary to conform those covenants as criteria for evaluating
Borrower's financial condition to substantially the same criteria as were
effective prior to such change in GAAP and (ii) Borrower shall be deemed to be
in compliance with the covenants contained in Article VIII following any such
change in GAAP if and to the extent that
11
17
Borrower would have been in compliance therewith under GAAP as in effect
immediately prior to such change.
(b) References herein to "fiscal year" and "fiscal quarter"
refer to such fiscal periods of Borrower.
1.4 Times. All times of the day herein are Mountain Standard Time.
ARTICLE II
THE COMMITMENT
2.1 Commitment. Lender, on the terms and conditions hereinafter set
forth and the conditions precedent pursuant to Sections 4.1 and 4.2 of this
Agreement, agrees to make Advances to Borrower from time to time on any Business
Day during the period from the Closing Date to the Business Day prior to the
Maturity Date, in an aggregate amount not to exceed at any time outstanding the
Commitment Amount, with such borrowings to be used by Borrower for working
capital purposes (including, without limitation, the repurchase of contracts
pursuant to the Contracts Purchase Agreement), operating expenses, and Chapter
11 expenses; provided, however, that, after giving effect to any Advance, the
aggregate principal amount of all outstanding Advances shall not exceed the
Commitment Amount. Within the limits of the Commitment Amount, and subject to
the other terms and conditions hereof, Borrower may borrow under this Section
2.1, repay or prepay pursuant to Section 2.3 and reborrow pursuant to this
Section 2.1.
2.2 Procedure for Advances.
(a) Each Advance subsequent to July 17, 1997 (including an
Initial Advance and each Advance subsequent thereto) shall be made upon
Borrower's irrevocable written notice to Lender in the form of a Notice of
Advance, signed by an Authorized Person, which notice must be received by Lender
prior to 10:30 a.m. one (1) Business Day prior to the requested Advance date,
specifying:
(i) the amount of the Advance;
(ii) the requested Advance date, which shall be a
Business Day; and
(iii) the permitted purpose for which the Advance
will be used by Borrower.
(b) In addition to the Notice of Advance required pursuant to
Subsection (a) above, if the purpose for which the Advance will be used by
Borrower is the purchase of Contracts, each such Notice of Advance shall be
accompanied by a List of Contracts and the applicable Contract Delivery
Documents.
(c) As to each Advance, Lender will make the amount available
to Borrower by 12:00 p.m. on the Advance date requested by Borrower in funds
immediately available to Borrower, by wire transfer to Borrower's Designated
Account maintained at the Designated Account Bank.
12
18
2.3 Repayment and Mandatory Prepayment. Borrower shall repay the
principal amount of all Advances on or prior to the Maturity Date. Borrower
shall immediately prepay that portion of the principal amount of any Advances,
at any time outstanding which exceeds the Commitment Amount.
2.4 Interest Rate.
(a) All Advances (and all Obligations not paid when due) shall
bear interest at a per annum rate of (i) ten and one/half percent (10.5%) from
July 14, 1997 through July 16, 1997, and (ii) twelve percent (12%) on and after
July 17, 1997.
(b) While any Event of Default exists and is continuing or
after acceleration, Borrower shall pay interest (after as well as before entry
of judgment thereon to the extent permitted by law) on the principal amount of
all Advances outstanding (and all other Obligations outstanding) at a rate per
annum equal to the rate of fifteen percent (15%).
(c) Interest payable hereunder shall be due and payable, in
arrears, on the first day of each month during the term hereof. Borrower hereby
authorizes Lender, at its option, without prior notice to Borrower, to charge
such interest, the fees and charges provided for in Section 9.4, (as and when
accrued or incurred if not paid within ten (10) days of demand), and all
installments or other payments due under any Loan Document to the Loan, which
amounts thereafter shall accrue interest at the rate then applicable to Advances
hereunder. Any interest not paid when due shall be compounded and shall
thereafter accrue interest at the rate then applicable to Advances hereunder, to
the extent permissible under applicable law.
(d) Anything herein to the contrary notwithstanding, the
obligations of Borrower hereunder shall be subject to the limitation that
payments of interest, plus any other amounts paid in connection herewith, shall
not be required, to the extent (but only to the extent) that contracting for or
receiving such payment by Lender would be contrary to the provisions of any law
applicable to Lender limiting the highest rate of interest which may be lawfully
contracted for, charged or received by Lender, and in such event Borrower shall
pay Lender interest and other amounts at the highest rate permitted by
applicable law.
2.5 Commitment Fee. Borrower shall unconditionally pay Lender the
Commitment Fee which is earned in full, non-refundable, and due and payable as
of the date hereof. Lender agrees, however, to forebear collection of the
Commitment Fee until February 27, 1998. Moreover, in the event Lender acquires
Borrower's business, either through an asset acquisition or a stock acquisition,
on or before February 27, 1998, Lender waives its right to collect the
Commitment Fee.
2.6 Computation of Fees and Interest. All computations of fees and
interest under this Agreement shall be made on the basis of a 360-day year and
actual days elapsed, which results in more interest being paid than if computed
on the basis of a 365-day year. Interest and fees shall accrue during each
period during which interest or such fees are computed from the first day
thereof to the last day thereof.
2.7 Payments by Borrower.
(a) All payments (including prepayments) to be made by
Borrower on account of principal, interest, fees and other amounts required
hereunder shall be made without set-off, deduction, recoupment or counterclaim
and shall, except as otherwise expressly provided herein,
13
19
be made to Lender at Lender's office as set forth in the preamble hereto, in
dollars and in immediately available funds, no later than 1:30 p.m. on the date
specified herein. Any payment which is received by Lender later than 1:30 p.m.
shall be deemed to have been received on the immediately succeeding Business Day
and any applicable interest or fee shall continue to accrue.
(b) Whenever any payment hereunder shall be stated to be due
on a day, other than a Business Day, such payment shall be made on the next
succeeding Business Day, and such extension of time shall in such case be
included in the computation of interest or fees, as the case may be.
(c) If any payment of principal, interest or Lender Expenses
is not received by Lender, within five (5) days when due, Borrower shall pay to
Lender a late charge in an amount equal to five percent (5%) of the amount not
so paid.
2.8 Maturity Date. The Maturity Date shall be the date six (6) months
from the date the Bankruptcy Court enters the Interim Order.
ARTICLE III
SECURITY AGREEMENT AND COLLATERAL
3.1 Security for Obligations. As security for the payment and
performance of the Obligations under this Agreement and all other present and
future debts, obligations and liabilities of any nature whatsoever of Borrower
to Lender, and all modifications, renewals, replacements and extensions thereof,
Borrower hereby grants to Lender a security interest in Borrower's right, title
and interest in all of the Collateral. Borrower will execute any security
agreements, collateral assignments, financing statements for filing and/or
recording and any other Lien writings required by Lender to evidence and perfect
the Liens and security interests of Lender. A carbon, photographic or other
reproduced copy of this Agreement and/or any financing statement relating hereto
shall be sufficient for filing and/or recording as a financing statement.
3.2 Security Documents. Borrower shall promptly execute or cause to be
executed such Financing Statements as are necessary to properly perfect Lender's
security interest in the states in which Borrower maintains Collateral.
3.3 Lender's Duty Regarding Collateral. Lender shall have no duty or
obligation to protect, insure, collect or realize upon the Collateral or
preserve rights in it against prior parties. Borrower releases Lender from, and
shall indemnify Lender against, any liability for any act or omission relating
to the Collateral, except for any liability directly resulting from Lender's
gross negligence or willful misconduct.
3.4 Borrower's Duties Regarding Collateral. Subject to the rights of
any person holding a prior lien in the Collateral, Borrower agrees as follows:
(a) General Maintenance of Collateral. Borrower: (i) shall
keep the Collateral free from all Liens (other than the Liens of ad valorem
property taxes which are not delinquent, any statutory landlords' liens which
are covered by Lien Waivers, mechanic's liens, Permitted Liens, and any Liens in
favor of Lender); (ii) shall defend the Collateral against all claims and legal
proceedings by persons other than Lender; (iii) shall pay and discharge when due
all taxes, levies
14
20
and other charges upon the Collateral; (iv) shall not sell, lease or otherwise
dispose of the Collateral or permit it to become a fixture or an accession to
other goods, except for sales in the Ordinary Course of Business and except as
specifically authorized in this Agreement; and (v) shall not permit the
Collateral to be used in violation of any Legal Requirement or any policy of
insurance.
(b) Insurance. Borrower shall keep all tangible Collateral and
Lender's interest in it insured. Borrower assigns and directs any insurer to pay
to Lender the proceeds of all such insurance and any premium refunds, and
authorizes Lender to endorse in the name of Borrower any instrument for such
proceeds or refunds and, at the option of Lender, to apply such proceeds or
refunds to any unpaid balance of the Obligations owing under this Agreement,
whether or not due, and/or to the restoration of the Collateral, returning any
excess to Borrower; provided, however, that if no uncured Event of Default then
exists, Lender shall allow Borrower to apply such proceeds to the repair or
restoration of the Collateral, subject to such reasonable safeguards and
procedures for the disbursement of such proceeds as Lender may establish. Lender
is authorized, in the name of Borrower or otherwise, to make, adjust or settle
claims under or cancel any insurance on the Collateral.
(c) Perfection and Priority. Borrower shall pay all Lender's
expenses and, upon Lender's request, execute all writings and take all other
actions reasonably deemed advisable by Lender to preserve the Collateral or to
establish, and determine priority of, perfection, continued perfection or
enforce Lender's interest in the Collateral.
(d) Records. Upon reasonable notice to Borrower, Lender may
examine and conduct audits of the Collateral and Borrower's records concerning
it, wherever located, and make copies of such records, at any time during normal
business hours, and Borrower shall assist Lender in so doing. Borrower shall
keep accurate, complete and current records respecting the Collateral. In
addition to the specific requirements of Section 6.1 , Borrower shall, within
ten (10) Business Days of any request by Lender, furnish to Lender a detailed
statement, certified as being substantially accurate by an Authorized Person,
setting forth the current status, value and location of all or any portion of
the Collateral.
3.5 Power of Attorney. Subject to the Provisions of the Bankruptcy
Code, Borrower hereby makes, constitutes and appoints Lender the true and lawful
attorney-in-fact of Borrower, in the name, place and stead of Borrower, or
otherwise, upon the occurrence of any Event of Default which remains uncured
following the receipt of a notice pursuant to Section 9.2:
(a) To take all actions and to execute, acknowledge, obtain
and deliver any and all writings necessary or deemed advisable by Lender in
order to exercise any rights of Borrower with respect to the Collateral or to
receive and enforce any payment or performance due to Borrower with respect to
the Collateral;
(b) To give any notices, instructions or other communications
to any person or entity in connection with the Collateral;
(c) To demand and receive all performances due under or with
respect to the Collateral and to take all lawful steps to enforce such
performances and to compromise and settle any claim or cause of action of
Borrower arising from or related to the Collateral and give acquittances and
other discharges relating thereto; and
15
21
(d) To file any claim or proceeding or to take any other
action, in the name of Lender, Borrower or otherwise, to enforce performances
due under or related to the Collateral or to protect and preserve the right,
title and interest of Lender thereunder.
The foregoing power of attorney is a power coupled with an interest and shall be
irrevocable and unaffected by the disability of the principal so long as any
portion of the Obligations remains contingent, unmatured, unliquidated, unpaid
or unperformed. Lender shall have no obligation to exercise any of the foregoing
rights and powers in any event.
3.6 Collateral Inspections. Lender shall have the right (but not the
obligation) to do a physical on-site examination of the Collateral. All costs
and expenses associated therewith shall be included in Lender Expenses.
3.7 Return of Contract Delivery Documents. For all Contracts that are
paid in full by the Obligor, Lender shall, within two (2) Business Days of
Borrower's notification thereof and written request, return to Borrower the
applicable Contract Delivery Documents. In addition, provided there is no
Default or Event of Default, Lender shall return the Contract Delivery Documents
for the time and to the extent necessary for Borrower to make corrections or to
enforce the Contracts or the obligations of the Obligor. Whenever Borrower is in
possession or control of Contract Delivery Documents for Contracts not paid in
full, Borrower shall at all times hold them in trust for Lender.
ARTICLE IV
CONDITIONS PRECEDENT; TERM OF AGREEMENT
4.1 Conditions Precedent to the Initial Advance. The obligation of
Lender to make the Initial Advance hereunder is subject to the fulfillment, to
the satisfaction of Lender and its counsel, of each of the following conditions
on or before the Closing Date; provided, however, that Lender, in its sole and
absolute discretion, may waive any of the following conditions, except the
entering of the Interim Order by the Bankruptcy Court.
(a) Lender shall have received each of the following
documents, duly executed, and each such document shall be in full force and
effect:
(i) This Agreement executed by Borrower and
Lender;
(ii) The Stock Pledge Agreement executed by
Borrower, Lender and ▇▇▇▇▇▇ Trust and Savings Bank;
(iii) The Financing Statements executed by
Borrower and Lender.
(b) The Bankruptcy Court shall have entered the Interim Order;
(c) Lender shall have received copies of the resolutions of
the board of directors of Borrower approving and authorizing the execution,
delivery and performance by Borrower of this Agreement and the other Loan
Documents to be delivered hereunder, and authorizing the Loan, certified as of
the Closing Date by the Secretary or an Assistant Secretary of Borrower;
16
22
(d) Lender shall have received a certificate of the Secretary
or Assistant Secretary of Borrower certifying the names and true signatures of
the officers of Borrower authorized to execute, deliver and perform, as
applicable, this Agreement, the Stock Pledge Agreement and all other Loan
Documents to be delivered hereunder and Lender shall have received a good
standing certificate for Borrower from the Secretary of State of Delaware; and
(e) Borrower, from the Initial Advance on the Closing Date,
shall have paid to Lender Fifty Thousand and No/100 Dollars ($50,000) as an
initial retainer, for any and all Lender Costs incurred by Lender in conducing
its due diligence, document preparation and other necessary investigations and
analyses relating to the Loan. To the extent that Lender Costs relating to the
foregoing exceed $50,000, Borrower shall pay Lender such excess amount within
thirty (30) days of Lender's written notice to Borrower.
In addition, each Initial Advance made after July 17, 1997, shall require a
Notice of Advance to Lender, pursuant to Section 2.2.
4.2 Conditions Precedent to Subsequent Advances. The following shall be
conditions precedent to all Advances subsequent to the Initial Advance:
(a) The Bankruptcy Court shall have entered the Final Order;
(b) Lender shall have received a Notice of Advance pursuant to
Section 2.2;
(c) The representations and warranties made by Borrower
contained in Article V shall be true and correct on and as of such Advance date
with the same effect as if made on and as of such Advance date (except to the
extent such representations and warranties expressly refer to an earlier date,
in which case they shall be true and correct as of such earlier date);
(d) No Default or Event of Default shall exist or shall result
from such Advance; and
(e) If the purpose for which the Advance will be used by
Borrower is the purchase of Contracts, Lender shall have received a List of
Contracts and the Contract Delivery Documents pursuant to Section 2.2.
Each Notice of Advance submitted by Borrower hereunder shall constitute a
representation and warranty by Borrower hereunder, as of the date of each such
notice or application and as of the date of each Advance, that the conditions in
this Section 4.2 are satisfied.
4.3 Term. This Agreement shall become effective upon the execution and
delivery hereby by Borrower and Lender and shall continue in full force and
effect for a term ending on the earliest of (a) the confirmation of a Chapter 11
Plan of Reorganization, (b) the date of the conversion of Borrower's Chapter 11
case to one pursuant to Chapter 7 of the Bankruptcy Code, (c) the Maturity Date,
or (d) the date of termination of this Agreement in accordance with its terms
after the occurrence and during the continuation of an Event of Default.
4.4 Effect of Termination. Upon termination of the Agreement, all
Obligations shall become due and payable immediately without notice or demand.
No termination of this Agreement, however, shall relieve or discharge Borrower
of Borrower's duties, Obligations, or covenants hereunder, and Lender's
continuing security interest in the Collateral shall remain in effect until all
17
23
Obligations have been fully and finally discharged and Lender's obligation to
provide additional credit hereunder is terminated.
4.5 Early Termination by Borrower. The provisions of Section 2.9 that
allow termination of this Agreement on the Maturity Date notwithstanding,
Borrower has the option, at any time, to terminate this Agreement by paying to
Lender, in cash, the Obligations, in full.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
In order to induce Lender to enter into this Agreement, Borrower makes
the following representations and warranties which shall be true, correct, and
complete in all respects as of the date hereof, and shall be true, correct, and
complete in all respects as of the Closing Date, and at and as of the date of
the making of each Advance made thereafter, as though made on and as of the date
of such Advance (except to the extent that such representations and warranties
relate solely to an earlier date) and such representations and warranties shall
survive the execution and delivery of this Agreement:
5.1 No Encumbrances. Borrower, as debtor and debtor in possession, has
good and indefeasible title to the Collateral, free and clear of Liens except
for Permitted Liens.
5.2 Equipment. All of the Equipment is used or held for use in
Borrower's business.
5.3 Location of Inventory and Equipment. The Inventory and Equipment
are not stored with a bailee, warehouseman, or similar party (without Lender's
prior written consent) and are located only at the locations identified on
Schedule B.
5.4 Location of Chief Executive Office; FEIN. The chief executive
office of Borrower is located at the address indicated in the preamble to this
Agreement and Borrower's FEIN is ▇▇-▇▇▇▇▇▇▇.
5.5 Due Organization and Qualification; Subsidiaries.
(a) Borrower is duly organized and existing and in good
standing under the laws of the jurisdiction of its incorporation and qualified
and licensed to do business in, and in good standing in, any state where the
failure to be so licensed or qualified reasonably could be expected to have a
Material Adverse Change.
(b) Set forth on Schedule C is a complete and accurate list of
Borrower's direct and indirect Subsidiaries, showing: (i) the jurisdiction of
their incorporation; (ii) the number of shares of each class of common and
preferred stock authorized for each of such Subsidiaries; and (iii) the number
and the percentage of the outstanding shares of each such class owned directly
or indirectly by Borrower. All of the outstanding capital stock of each such
Subsidiary has been validly issued and is fully paid and non-assessable.
(c) Except as set forth on Schedule D, no capital stock (or
any securities, instruments, warrants, options, purchase rights, conversion or
exchange rights, calls, commitments or claims of any character convertible into
or exercisable for capital stock) of any direct or indirect
18
24
Subsidiary of Borrower is subject to the issuance of any security, instrument,
warrant, option, purchase right, conversion or exchange right, call, commitment
or claim of any right, title, or interest therein or thereto.
5.6 Due Authorization; No Conflict.
(a) The execution, delivery, and performance by Borrower of
this Agreement and the Loan Documents to which it is a party have been duly
authorized by all necessary corporate action.
(b) The execution, delivery, and performance by Borrower of
this Agreement and the Loan Documents to which it is a party do not and will not
(i) violate any provision of federal, state, or local law or regulation
(including Regulations G, T, U, and X of the Federal Reserve Board) applicable
to Borrower, the Governing Documents of Borrower, or any order, judgment, or
decree of any court or other Governmental Authority binding on Borrower, (ii)
conflict with, result in a breach of, or constitute (with due notice or lapse of
time or both) a default under any material contractual obligation or material
lease of Borrower, (iii) result in or require the creation or imposition of any
Lien of any nature whatsoever upon any properties or assets of such Borrower,
other than Permitted Liens, or (iv) require any approval of stockholders or any
approval or consent of any Person under any material contractual obligation of
Borrower. The entry of the Interim Order may override the necessity of any such
consent.
(c) Other than (i) the obtaining of the Interim Order, and
(ii) the taking of any other action expressly required under this Agreement and
the Loan Documents, the execution, delivery, and performance by Borrower of this
Agreement and the Loan Documents to which Borrower is a party do not and will
not require any registration with, consent, or approval of, or notice to, or
other action with or by, any federal, state, foreign, or other Governmental
Authority or other Person. The entry of the Interim Order may override the
necessity of any such consent.
(d) This Agreement, the Loan Documents and all other documents
contemplated hereby and thereby, when executed and delivered by Borrower will be
the legally valid and binding obligations of Borrower, enforceable against
Borrower in accordance with their respective terms, except as enforcement may be
limited by equitable principles or by bankruptcy, insolvency, reorganization,
moratorium, or similar laws relating to or limiting creditors' rights generally.
(e) The Liens granted by Borrower to Lender in and to its
properties and assets pursuant to this Agreement and the other Loan Documents
are validly created, perfected, Liens, subject only to Permitted Liens.
5.7 Litigation. Except as set forth in Schedule E, there are no actions
or proceedings pending by or against Borrower before any court or administrative
agency and Borrower does not have knowledge or belief of any pending,
threatened, or imminent litigation, governmental investigations, or claims,
complaints, actions, or prosecutions involving Borrower, except for: (a) ongoing
collection matters in which Borrower is the plaintiff; (b) Borrower's Chapter 11
proceeding before the Bankruptcy Court; and (c) matters arising after the date
hereof that, if decided adversely to Borrower would not have a Material Adverse
Change.
5.8 No Material Adverse Change. All financial statements relating to
Borrower that have been delivered by Borrower to Lender have been prepared in
accordance with GAAP (except, in the case of unaudited financial statements, for
the lack of footnotes and being subject to year-end audit adjustments) and
fairly present Borrower's financial condition as of the date thereof and
19
25
Borrower's results of operations for the period then ended, except as previously
disclosed by Borrower to Lender. There has not been a Material Adverse Change
with respect to Borrower since the date of the latest financial statements
submitted to Lender on or before the Closing Date.
5.9 ERISA. No accumulated funding deficiency (as defined in Section 302
of ERISA and Section 412 of the Code), whether or not waived, exists with
respect to any plan (other than a multiemployer plan). No liability to the
Pension Benefit Guaranty Corporation has been or is expected by Borrower to be
incurred with respect to any plan (other than a multiemployer plan) by Borrower
which is or would have a Material Adverse Effect. Borrower has not incurred or
does not presently expect to incur any withdrawal liability under Title IV of
ERISA with respect to any multiemployer plan which is or would be materially
adverse to Borrower. The execution and delivery of this Agreement and the other
Loan Documents will not involve any transaction which is subject to the
prohibitions of Section 406 of ERISA or in connection with which a tax could be
imposed pursuant to section 4975 of the Code. For the purpose of this Section
5.9, the term "plan" shall mean an "employee pension benefit plan" (as defined
in section 3 of ERISA) which is or has been established or maintained, or to
which contributions are or have been made, by Borrower or by any trade or
business, whether or not incorporated, which, together with Borrower, is under
common control, as described in Section 414(b) or (c) of the Code; and the term
"multiemployer plan" shall mean any plan which is a "multiemployer plan" (as
such term is defined in Section 4001(a)(3) of ERISA). No plan providing welfare
benefits to retired former employees of Borrower has been established or is
maintained for which the present value of future benefits payable, in excess of
irrevocably designated funds for such purpose, is or would have a Material
Adverse Effect.
5.10 Environmental and Safety Matters. Borrower (a) has complied in all
material respects with all applicable material Environmental and Safety Laws,
and Borrower has not received (i) notice of any material failure so to comply,
(ii) any letter or request for information under Section 104 of CERCLA or
comparable state laws or (iii) any information that would lead it to believe
that it is the subject of any Federal or state investigation concerning
Environmental and Safety Laws; (b) does not manage, generate, discharge or store
any Hazardous Materials in material violation of any material Environmental and
Safety Laws; (c) does not own, operate or maintain any underground storage tanks
or surface impoundments; and, (d) except as disclosed to Lender in writing, is
not aware of any conditions or circumstances associated with its currently or
previously owned or leased properties or operations (or those of its tenants)
which may give rise to any Environmental Liabilities and Costs which could have
a Material Adverse Effect.
ARTICLE VI
AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, so long as any credit hereunder
shall be available and until full and final payment of the Obligations, and
unless Lender shall otherwise consent in writing, Borrower shall do all of the
following:
6.1 Financial Statements. Borrower shall deliver to Lender in form and
detail satisfactory to Lender:
(a) Within fifteen (15) days after the end of each calendar
month:
20
26
(i) Any and all monthly operating reports filed with
the Bankruptcy Court and required by the Bankruptcy Code and rules
promulgated by Congress relating to the Bankruptcy Code; and
(ii) Borrower's monthly financial statements,
including balance statement, as of the last day of the preceding month
and statement of income and cash flow for the preceding month, which
may be prepared by Borrower.
(b) promptly upon receipt thereof, a copy of each other
report, if any, submitted to Borrower by independent accountants in connection
with any annual, interim or special audit made by them of the books of Borrower;
(c) promptly after its submission, copies of any other
information or documents regularly provided by Borrower to any of its other
lenders or holders of Borrower's Debt; and
(d) with reasonable promptness, such other financial data as
Lender may reasonably request.
6.2 Inspection of Property. Borrower shall permit any Person designated
by Lender in writing, to visit and inspect any of the properties of Borrower, to
examine the corporate books and financial records of Borrower and make copies
thereof or extracts therefrom and to discuss the affairs, finances and accounts
of any of such corporations with the principal officers of Borrower and its
independent public accountants, all at such reasonable times and as often as
Lender may reasonably request.
6.3 Maintenance of Insurance. Borrower shall maintain in type and
amount, any and all insurance coverages in place on the Closing Date, including:
(a) All Risk Property Damage Insurance Coverage; and
(b) General Business Insurance covering property damage
(including loss of use and occupancy) to any of Borrower's properties, public
liability insurance, including coverage for contractual liability and workers'
compensation.
Upon the request of Lender, to deliver to Lender a copy of each insurance
policy, or, if permitted by Lender, a certificate of insurance listing all
insurance in force.
6.4 Default Disclosure. Borrower shall forthwith, upon a Responsible
Officer of Borrower obtaining knowledge of an Event of Default or Default,
promptly deliver to Lender a certificate of a Responsible Officer specifying the
nature and period of existence thereof and what action the Borrower proposes to
take with respect thereto.
6.5 Notices to Lender. Borrower shall promptly notify Lender in writing
of:
(a) Any lawsuit over Ten Thousand and No/100 Dollars
($10,000.00) against Borrower; as to which the Automatic Stay does not apply.
(b) Any substantial dispute between Borrower and any
Governmental Authority;
21
27
(c) Any change in Borrower's name, address, legal structure or
the location of the Collateral.
Borrower shall place Lender's counsel on the master service list in the
Reorganization Case and Lender's counsel shall file a notice of appearance and
request for copies of all pleadings. Borrower shall not be required to
separately provide Lender with copies of any pleadings which are served on the
master service list in the Reorganization Case.
6.6 Books and Records. Borrower shall maintain adequate books and
records.
6.7 Compliance and Preservation. Borrower shall
(a) Comply with the laws (including any fictitious name
statute), regulations and orders of any government body with authority over
Borrower's business;
(b) Maintain and preserve all privileges and franchises
Borrower now has; and
(c) Make any repairs, renewals, or replacements reasonably
necessary to keep Borrower's properties in good working condition.
6.8 Perfection of Liens. Borrower shall help Lender perfect and protect
its security interests and liens.
6.9 Cooperation. Borrower shall take any reasonable action requested by
Lender to carry out the intent of this Agreement.
ARTICLE VII
NEGATIVE COVENANTS
Borrower covenants and agrees that, so long as any credit hereunder
shall be available and until full and final payment of the Obligations, Borrower
will not do any of the following without Lender's prior written consent:
7.1 Indebtedness. Create, incur, assume, permit, guarantee, or
otherwise become or remain, directly or indirectly, liable with respect to any
Indebtedness, except:
(a) Indebtedness evidenced by this Agreement;
(b) Indebtedness secured by Permitted Liens;
(c) refinancings, renewals, or extensions of Indebtedness
permitted under clause (b) of this Section 7.1 (and continuance or renewal of
any Permitted Liens associated therewith) so long as: (i) the terms and
conditions of such refinancings, renewals, or extensions do not materially
impair the prospects of repayment of the Obligations by Borrower, (ii) the net
cash proceeds of such refinancings, renewals, or extensions do not result in an
increase in the aggregate principal amount of the Indebtedness so refinanced,
renewed, or extended, (iii) such refinancings, renewals, refundings, or
extensions do not result in a shortening of the average weighted maturity of the
Indebtedness so refinanced, renewed, or extended, and (iv) to the extent
22
28
that Indebtedness that is refinanced was subordinated in right of payment to the
Obligations, then the subordination terms and conditions of the refinancing
Indebtedness must be at least as favorable to Lender as those applicable to the
refinanced Indebtedness;
(d) Indebtedness disclosed on Borrower's financial statements
or the schedules in Borrower's Reorganization Case, in each case delivered by
Borrower to Lender on or before the Closing Date.
7.2 Liens. Create, incur, assume, or permit to exist, directly or
indirectly, any Lien on or with respect to any of its property or assets, of any
kind, whether now owned or hereafter acquired, or any income or profits
therefrom, except for Permitted Liens (including Liens that are replacements of
Permitted Liens to the extent that the original Indebtedness is refinanced under
Section 7.1(d) and so long as the replacement Liens only encumber those assets
or property that secured the original Indebtedness). Anything contained herein
to the contrary notwithstanding, in no event shall Borrower create, incur,
assume, or permit to exist, directly or indirectly, any Lien on or with respect
to the Bankruptcy Recoveries; provided that nothing in this sentence shall
prohibit any attorney retained to prosecute Bankruptcy Recoveries from claiming
an attorneys' Lien under applicable state law with respect to any Bankruptcy
Recoveries prosecuted by such attorney.
7.3 Restrictions on Fundamental Changes. Except as entered into under
the provisions of an Acceptable Plan (which may include a requirement that
Borrower merge or consolidate with one of Borrower's Subsidiaries) or pursuant
to the Contracts Purchase Agreement, enter into any merger, consolidation,
reorganization, or recapitalization, or reclassify its capital stock, or
liquidate, wind up, or dissolve itself (or suffer any liquidation or
dissolution), or convey, sell, assign, lease, transfer, or otherwise dispose of,
in one transaction or a series of transactions, all or any substantial part of
its property or assets.
7.4 Disposal of Assets. Except as entered into under the provisions of
an Acceptable Plan or pursuant to the Contracts Purchase Agreement except as
expressly consented to by Lender in writing which consent shall not be
unreasonably withheld, sell, lease, assign, transfer, or otherwise dispose of
any of Borrower's properties or assets other than sales of Inventory to buyers
in the Ordinary Course of Business as currently conducted.
7.5 Change Name. Change Borrower's name, FEIN, corporate structure
(within the meaning of Section 9402(7) of the Code), or identity, or add any new
fictitious name.
7.6 Guarantee. Guarantee or otherwise become in any way liable with
respect to the obligations of any third Person except by endorsement of
instruments or items of payment for deposit to the account of Borrower or which
are transmitted or turned over to Lender.
7.7 Nature of Business. Make any change in the principal nature of
Borrower's business.
7.8 Prepayments and Amendments.
(a) Except as entered into under the provisions of an
Acceptable Plan, and except in connection with a refinancing permitted by
Section 7.l(d), prepay, redeem, retire, defease, purchase, or otherwise acquire
any Indebtedness owing to any third Person, other than the Obligations in
accordance with this Agreement, and
23
29
(b) Except as entered into under the provisions of an
Acceptable Plan or except as expressly consented to by Lender in writing which
consent shall not be unreasonably withheld, directly or indirectly, amend,
modify, alter, increase, or change any of the terms or conditions of any
agreement, instrument, document, indenture, or other writing evidencing or
concerning Indebtedness permitted under Sections 7.1 (b), (c) or (d).
7.9 Change of Control. Cause, permit, or suffer, directly or
indirectly, any Change of Control, except pursuant to an Acceptable Plan.
7.10 Consignments. Consign any Inventory or sell any Inventory on ▇▇▇▇
and hold, sale or return, sale on approval, or other conditional terms of sale.
7.11 Distributions. Make any distribution or declare or pay any
dividends (in cash or other property, other than capital stock) on, or purchase,
acquire, redeem, or retire any of Borrower's capital stock, of any class,
whether now or hereafter outstanding.
7.12 Accounting Methods. Modify or change its method of accounting or
enter into, modify, or terminate any agreement currently existing, or at any
time hereafter entered into with any third party accounting firm or service
bureau for the preparation or storage of Borrower's accounting records without
said accounting firm or service bureau agreeing to provide Lender information
regarding the Collateral or Borrower's financial condition. Borrower waives the
right to assert a confidential relationship, if any, it may have with any
accounting firm or service bureau in connection with any information requested
by Lender pursuant to or in accordance with this Agreement, and agrees that
Lender may contact directly any such accounting firm or service bureau in order
to obtain such information.
7.13 Investments. Directly or indirectly make, acquire, or incur any
liabilities (including contingent obligations) for or in connection with (a) the
acquisition of the securities (whether debt or equity) of, or other interests
in, a Person, (b) loans, advances, capital contributions, or transfers of
property to a Person, or (c) the acquisition of all or substantially all of the
properties or assets of a Person.
7.14 Transactions with Affiliates. Directly or indirectly enter into or
permit to exist any material transaction with any Affiliate of Borrower except
for transactions that are in the Ordinary Course of Business, upon fair and
reasonable terms, that are fully disclosed to Lender, and that are no less
favorable to Borrower than would be obtained in an arm's length transaction with
a non-Affiliate.
7.15 Compensation. Increase the annual fee or per-meeting fees paid to
directors over the prior year's fee; pay or accrue total cash compensation,
during any year, to officers and senior management employees in excess of that
paid or accrued in the prior year, other than in connection with the severance
and retention program in an amount not to exceed Three Million Seven Hundred
Thousand and No/100 Dollars ($3,700,000.00).
7.16 Use of Proceeds. Use the proceeds of the Advances made hereunder
for any purpose other than (a) on the Closing Date, to pay Lender Costs incurred
in connection with this Agreement, and (b) thereafter, consistent with the terms
and conditions hereof, for its lawful and permitted corporate purposes.
24
30
7.17 Change in Location of Chief Executive Office. Relocate its chief
executive office to a new location without providing 30 days prior written
notification thereof to Lender and so long as, at the time of such written
notification, Borrower provides any financing statements or fixture filings
necessary to perfect and continue perfected Lender's security interests and also
provides to Lender a Collateral access agreement with respect to such new
location.
7.18 No Prohibited Transactions Under ERISA. Directly or indirectly:
(a) engage, or permit any Subsidiary of Borrower to engage, in
any prohibited transaction which is reasonably likely to result in a civil
penalty or excise tax described in Sections 406 of ERISA or 4975 of the Code for
which a statutory or class exemption is not available or a private exemption has
not been previously obtained from the Department of Labor;
(b) permit to exist with respect to any Benefit Plan any
accumulated funding deficiency (as defined in Sections 302 of ERISA and 412 of
the Code), whether or not waived;
(c) fail, or permit any Subsidiary of Borrower to fail, to pay
timely required contributions or annual installments due with respect to any
waived funding deficiency to any Benefit Plan;
(d) terminate, or permit any Subsidiary of Borrower to
terminate, any Benefit Plan where such event would result in any liability of
Borrower or any of its Subsidiaries under Title IV of ERISA;
(e) fail, or permit any Subsidiary of Borrower to fail, to
make any required contribution or payment to any Multiemployer Plan;
(f) fail, or permit any Subsidiary of Borrower to fail, to pay
any required installment or any other payment required under Section 412 of the
Code on or before the due date for such installment or other payment;
(g) amend, or permit any Subsidiary of Borrower to amend, a
retirement plan resulting in an increase in current liability for the plan year
such that either of Borrower or any Subsidiary of Borrower is required to
provide security to such retirement plan under Section 401 (a)(29) of the Code;
or
(h) withdraw, or permit any Subsidiary of Borrower to
withdraw, from any Multiemployer Plan where such withdrawal is reasonably likely
to result in any liability of any such entity under Title IV of ERISA.
ARTICLE VIII
EVENTS OF DEFAULT/REMEDIES
8.1 Event of Default. Any of the following shall constitute an "Event
of Default":
(a) If Borrower fails to pay when due and payable or when
declared due and payable, any portion of the Obligations (whether of principal,
interest (including any interest which,
25
31
but for the provisions of the Bankruptcy Code, would have accrued on such
amounts), fees and charges due Lender, reimbursement of Lender Costs, or other
amounts constituting Obligations);
(b) If Borrower fails to perform, keep, or observe any term,
provision, condition, covenant, or agreement contained in this Agreement, in any
of the Loan Documents, or in any other future agreement between Borrower and
Lender, including without limitation the Contracts Purchase Agreement, if any,
and the Servicing Agreement, if any;
(c) If there is a Material Adverse Change;
(d) If any third party obtains from the Bankruptcy Court
relief from the automatic stay under the Bankruptcy Code to permit such Person
to attach, seize, subject to a writ of distress warrant, or levy upon, or obtain
possession of, a material portion of any Collateral in connection with a claim
of such Person, unless such Collateral is not material to Borrower's business
and Borrower does not have any material equity in such Collateral;
(e) If Borrower's Chapter 11 case is converted to a case under
Chapter 7 of the Bankruptcy Code, unless such conversion is stayed and Borrower
continues to operate in Chapter 11;
(f) If Borrower is enjoined or restrained, by court order from
continuing to conduct all or any material part of its business affairs, unless
such order is stayed;
(g) If notices of Lien, levy, or assessment are filed of
record with respect to any of Borrower's properties or assets which are not
pre-petition or have not been cured within ten (10) days after the Lien has been
filed, or a Bankruptcy Court order is entered, pursuant to 11 U.S.C. Sections
364(c) or (d), or otherwise, which grants a Lien, levy or assessment on any
property of Borrower's bankruptcy estate which (a) represent claims which have
priority over the security interests of Lender in the Collateral, or (b)
represent claims which are junior to the security interests of Lender in the
Collateral;
(h) If a judgment or other claim becomes a Lien or encumbrance
upon any material portion of Borrower's properties or assets and such judgment
is not removed or released within 15 days of the entry of such judgment;
(i) If Borrower makes any payment on account of Indebtedness
that has been contractually subordinated in right of payment to the payment of
the Obligations, except to the extent such payment is permitted by the terms of
the subordination provisions applicable to such Indebtedness;
(j) If any material misstatement or misrepresentation exists
now or hereafter in any warranty, representation, statement, or report made to
Lender by Borrower or any officer, employee, agent, or director of Borrower
which has not been corrected to date, or if any such warranty or representation
is withdrawn;
(k) If the Interim Order or Final Order entered by the Court
approving the Loan is vacated or otherwise materially modified, without the
prior express written consent Lender of;
(l) If a Chapter 11 Trustee or Chapter 11 Examiner with
expanded management-type powers is appointed in Borrower's bankruptcy case; or
26
32
(m) If there is confirmation of a Chapter 11 plan without
repayment of any and all sums due Lender under the Loan (including the
Commitment Fee or Lender Costs which may be then owed) in full on the Effective
Date of the plan.
8.2 Lender's Rights and Remedies. Subject to the provisions of the
Bankruptcy Code, upon the occurrence, and during the continuation, of an Event
of Default, Lender shall provide Borrower with written notice thereof and the
option to cure. If Borrower fails to cure such Event of Default within twenty
(20) days after delivery of such written notice, Lender may, at its sole and
absolute discretion, without further notice, and without demand or further order
of the Bankruptcy Court, except to the extent expressly required by the Interim
Order or Final Order, as applicable, do any one or more of the following, all of
which are authorized by Borrower:
(a) Declare all Obligations, whether evidenced by this
Agreement, by any of the other Loan Documents, or otherwise, immediately due and
payable;
(b) Cease advancing money or extending credit to or for the
benefit of Borrower under this Agreement, under any of the Loan Documents, or
under any other agreement between Borrower and Lender;
(c) Terminate this Agreement and any of the other Loan
Documents as to any future liability or obligation of Lender, but without
affecting Lender's rights and security interests in the Collateral and without
affecting the Obligations;
(d) Settle or adjust disputes and claims directly with account
debtors for amounts and-upon terms which Lender considers advisable, and in such
cases, Lender will credit the Advances with only the net amounts received by
Lender in payment of such disputed Accounts after deducting all fees and other
expenses owed to Lender and incurred or expended in connection therewith;
(e) Cause Borrower to hold all returned Inventory in trust for
Lender, segregate all returned Inventory from all other property of Borrower or
in Borrower's possession and conspicuously label said returned Inventory as the
property of Lender;
(f) Without notice to or demand upon Borrower, make such
payments and do such acts as Lender considers necessary or reasonable to protect
its security interests in the Collateral.
(g) Without notice to Borrower (such notice being expressly
waived), and without constituting a retention of any collateral in satisfaction
of an obligation (within the meaning of Section 9-505 of the UCC), set off and
apply to the Obligations any and all (i) balances and deposits of Borrower held
by Lender, or (ii) indebtedness at any time owing to or for the credit or the
account of Borrower held by Lender;
(h) Apply to the Bankruptcy Court, upon three (3) Business
Days notice to Borrower, Borrower's counsel, counsel for the official creditors
committee in such case, and the United States Trustee (which three (3) Business
Days notice hereby conclusively is agreed to be sufficient notice), for one or
more of the following forms of relief: (a) appointment of an examiner for
Borrower; (b) appointment of a trustee for Borrower; (c) conversion of
Borrower's Chapter 11 case to a case under Chapter 7 of the Bankruptcy Code; or
(d) dismissal of the bankruptcy case of Borrower. Borrower hereby expressly
agrees that three (3) Business Days notice shall be adequate notice for the
requesting of the foregoing specified forms of relief in the event of the
occurrence and
27
33
continuation of an Event of Default hereunder, and Borrower expressly waives any
right to object to the adequacy of notice in connection with a request for any
of the foregoing specified forms of relief if such three (3) Business Days
notice is given and an Event of Default is found to exist. Nothing in this
paragraph shall limit the right of Lender to apply to the Bankruptcy Court for
such other or further relief as may be justified and appropriate, and nothing in
this paragraph shall limit the other rights and remedies of Lender provided for
elsewhere in this Agreement or in any other Loan Document;
Lender's rights and remedies under this Agreement, the Loan Documents, and all
other agreements shall be cumulative. No exercise by Lender of one right or
remedy shall be deemed an election, and no waiver by Lender of any Event of
Default shall be deemed a continuing waiver. No delay by Lender shall constitute
a waiver, election, or acquiescence by it.
ARTICLE IX
MISCELLANEOUS
9.1 Amendments and Waivers. No amendment or waiver of any
provision of this Agreement or any other Loan Document, and no consent with
respect to any departure by Borrower therefrom, shall be effective unless the
same shall be in writing and signed by Lender and Borrower, and then such waiver
shall be effective only in the specific instance and for the specific purpose
for which given.
9.2 Notices.
(a) All notices, requests and other communications provided
for hereunder shall be in writing (including, unless the context expressly
otherwise provides, by facsimile transmission, provided, that, any matter
transmitted by facsimile (i) shall be immediately confirmed by a telephone call
to the recipient, and (ii) shall be followed promptly by a hard copy original
thereof by over-night courier to the address set forth below; or to such other
address as shall be designated by such party in a written notice to the other
party, and as directed to each other party, at such other address as shall be
designated by Lender or Borrower in a written notice to Borrower and Lender.
If to Borrower: FIRST MERCHANTS ACCEPTANCE CORPORATION
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esquire
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
28
34
If to Lender: UGLY DUCKLING CORPORATION
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.P.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esquire
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
(b) All such notices, requests and communications shall, when
transmitted by overnight delivery or faxed, be effective when delivered for
overnight (next day) delivery, transmitted by facsimile machine, respectively,
or if delivered, upon delivery, except that notices pursuant to Article II shall
not be effective until actually received by Lender.
(c) Borrower acknowledges and agrees that any agreement of
Lender to receive certain notices by telephone and facsimile is solely for the
convenience and at the request of Borrower. Lender shall be entitled to rely on
the authority of any Person purporting to be a Person authorized by Borrower to
give such notice and Lender shall not have any liability to Borrower or to other
Person on account of any action taken or not taken by Lender in reliance upon
such telephonic or facsimile notice. The obligation of Borrower to repay the
Advances shall not be affected in any way or to any extent by any failure by
Lender to receive written confirmation of any telephonic or facsimile notice or
the receipt by Lender of a confirmation which is at variance with the terms
understood by Lender to be contained in the telephonic or facsimile notice.
9.3 No Waiver: Cumulative Remedies. No failure to exercise and no delay
in exercising, on the part of Lender, any right, remedy, power or privilege
hereunder, shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, remedy, power or privilege hereunder preclude any other
or further exercise thereof or the exercise of any other right, remedy, power or
privilege.
9.4 Costs and Expenses. Borrower shall, whether or not the transactions
contemplated hereby shall be consummated:
(a) pay or reimburse Lender within ten (10) Business Days
after demand for all Lender Costs incurred by Lender in connection with the
development, preparation, delivery, administration and execution of (and any
amendment, supplement, waiver or modification to in each case whether or not
consummated), this Agreement, any Loan Document and any other documents prepared
in connection herewith, or therewith, and the consummation of the transactions
contemplated hereby and thereby, including the reasonable Attorney Costs
incurred by Lender with respect thereto;
(b) pay or reimburse Lender within ten (10) Business Days
after demand for all Lender Costs incurred by Lender in connection with the
enforcement, attempted enforcement, or preservation of any rights or remedies
(including in connection with any "workout" or restructuring regarding the
Advances, and including in any Insolvency Proceeding or appellate proceeding)
29
35
under this Agreement, any other Loan Document, and any such other documents,
including reasonable Attorney Costs incurred by Lender; and
(c) pay or reimburse Lender within ten (10) Business Days
after demand for all reasonable appraisal (including the allocated cost of
internal appraisal services), audit, due diligence, monitoring review,
environmental inspection and review (including the allocated cost of such
internal services), search and filing costs, fees and expenses, incurred or
sustained by Lender in connection with the Loan, the Loan Documents, any of the
Obligations and the matters referred to under (a) and (b) of this Section 9.4.
9.5 Indemnity. Borrower shall pay, indemnify, and hold Lender, its
Affiliates and Subsidiaries, and their respective officers, directors,
employees, counsel, agents and attorneys-in-fact (each, an "Indemnified Person")
harmless from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, charges, expenses or disbursements
(including Attorney Costs) of any kind or nature whatsoever with respect to the
execution, delivery, enforcement, performance and administration of this
Agreement and any other Loan Documents, or the transactions contemplated hereby
and thereby, and with respect to any investigation, litigation or proceeding
(including any Insolvency Proceeding or appellate proceeding) related to this
Agreement or the Advances or the use of the proceeds thereof, whether or not any
Indemnified Person is a party thereto (all the foregoing, collectively, the
"Indemnified Liabilities"); provided, that, Borrower shall have no obligation
hereunder to any Indemnified Person with respect to Indemnified Liabilities
arising from the gross negligence or willful misconduct of such Indemnified
Person or the breach by Lender of its obligations hereunder. The agreements in
this Section 9.5 shall survive payment of all other Obligations and the
termination of this Agreement.
9.6 Marshaling: Payments Set Aside. Lender shall not be under any
obligation to marshal any assets in favor of Borrower or any other Person or
against or in payment of any or all of the Obligations. To the extent that
Borrower makes a payment or payments to Lender, or to the extent Lender enforces
its Liens or exercises its rights of set-off, and such payment or payments or
the proceeds of such enforcement or set-off 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 in connection with any
bankruptcy, or otherwise, then to the extent of such recovery the obligation or
part thereof originally intended to be satisfied shall be revived and continued
in full force and effect as if such payment had not been made or such
enforcement or set-off had not occurred.
9.7 Successors and Assigns. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns, except that Borrower may not assign or transfer any of
its rights or delegate obligations under this Agreement or any of the Loan
Documents without the prior written consent of Lender.
9.8 Set-off. In addition to any rights and remedies of Lender provided
by law, if an Event of Default exists, and Borrower fails to cure such Event of
Default within twenty (20) days after delivery of written notice thereof, Lender
is authorized at any time and from time to time, without prior notice to
Borrower, any such notice being waived by Borrower to the fullest extent
permitted by law, to set off and apply any and all monies or deposits at any
time held by, and other indebtedness at any time owing by, Lender to or for the
credit or the account of Borrower against any and all Obligations owing to
Lender, now or hereafter existing, irrespective of whether or not Lender shall
have made demand under this Agreement or any Loan Document and although such
Obligations may be contingent or unmatured. Lender agrees promptly to notify
Borrower after any
30
36
such set-off and application made by Lender; provided, however, that, the
failure to give such notice shall not affect the validity of such set-off and
application. The rights of Lender under this Section 9.8 are in addition to the
other rights and remedies (including other rights of set-off) which Lender may
have.
9.9 Counterparts. This Agreement may be executed by one or more of the
parties to this Agreement in any number of separate counterparts, each of which,
when so executed, shall be deemed an original, and all of said counterparts
taken together shall be deemed to constitute but one and the same instrument. A
set of the copies of this Agreement signed by both parties shall be lodged with
Borrower and Lender.
9.10 Severability. The illegality or unenforceability of any provision
of this Agreement or any instrument or agreement required hereunder shall not in
any way affect or impair the legality or enforceability of the remaining
provisions of this Agreement or any instrument or agreement required hereunder.
9.11 No Third Parties Benefited. This Agreement is made and entered
into for the sole protection and legal benefit of Borrower and Lender, and their
permitted successors and assigns, and no other Person shall be a direct or
indirect legal beneficiary of, or have any direct or indirect cause of action or
claim in connection with, this Agreement or any of the other Loan Documents.
Lender shall have no obligation to any Person not a party to this Agreement or
other Loan Documents.
9.12 Time. Time is of the essence as to each term or provision of this
Agreement and each of the other Loan Documents.
9.13 Governing Law and Jurisdiction.
THE VALIDITY OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, THE
CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT HEREOF AND THEREOF, AND THE RIGHTS
OF THE PARTIES HERETO AND THERETO WITH RESPECT TO ALL MATTERS ARISING HEREUNDER
OR THEREUNDER OR RELATED HERETO OR THERETO SHALL BE DETERMINED UNDER, GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE UNITED STATES OF AMERICA
(INCLUDING THE BANKRUPTCY CODE), IT BEING THE INTENT OF THE PARTIES THAT FEDERAL
LAW SHALL GOVERN THE RIGHTS AND DUTIES OF THE PARTIES HERETO WITHOUT REGARD TO
THE APPLICATION OF ANY PROVISION OF STATE LAW. TO THE EXTENT THAT FEDERAL LAW
WOULD APPLY THE LAW OF ANY STATE AS THE FEDERAL RULE FOR THE PURPOSES OF THIS
AGREEMENT, THE PARTIES AGREE THAT THE LAWS OF THE STATE OF ARIZONA SHALL BE USED
TO SUPPLEMENT APPLICABLE FEDERAL LAW.
THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION
WITH THIS AGREEMENT SHALL BE TRIED AND LITIGATED ONLY IN THE BANKRUPTCY COURT.
BORROWER AND LENDER WAIVE, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY
RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT
TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION
9.13.
BORROWER AND LENDER HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY
TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF THE
LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN,
31
37
INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER
COMMON LAW OR STATUTORY CLAIMS. BORROWER AND LENDER REPRESENT THAT EACH HAS
REVIEWED THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL
RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A
COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE
COURT.
9.14 Entire Agreement. This Agreement, together with the other Loan
Documents, embodies the entire Agreement and understanding among Borrower and
Lender and supersedes all prior or contemporaneous agreements and understandings
of such Persons, verbal or written, relating to the subject matter hereof and
thereof and any prior arrangements made with respect to the payment by Borrower
(or any indemnification for) any Lender Costs incurred (or to be incurred) by or
on behalf of Lender.
9.15 Interpretation. This Agreement is the result of negotiations
between and has been reviewed by counsel to Lender, Borrower and other parties,
and is the product of all parties hereto. Accordingly, this Agreement and the
other Loan Documents shall not be construed against Lender merely because of
Lender's involvement in the preparation of such documents and agreements.
9.16 Assignment. Lender may assign its rights hereunder and under the
Loan Documents without the consent of Borrower, provided, however, that prior to
September 13, 1997, Lender may so assign its rights without the consent of
Borrower only by providing to Borrower written notice thirty (30) calendar days
prior to the date upon which the assignment is to become effective. Borrower may
not assign or delegate any of its rights, interest or obligations hereunder or
under any of the Loan Documents.
9.17 Revival and Reinstatement of Obligations. If the incurrence or
payment of the Obligations by Borrower or the transfer by Borrower to Lender of
any property of either or both of such parties should for any reason
subsequently be declared to be void or voidable under any state or federal law
relating to creditors' rights, including provisions of the Bankruptcy Code
relating to fraudulent conveyances, preferences, and other voidable or
recoverable payments of money or transfers of property (collectively, a
"Voidable Transfer"), and if Lender is required to repay or restore, in whole or
in part, any such Voidable Transfer, or elects to do so upon the reasonable
advice of its counsel, then, as to any such Voidable Transfer, or the amount
thereof that Lender is required or elects to repay or restore, and as to all
reasonable costs, expenses, and Attorney Costs of Lender related thereto, the
liability of Borrower automatically shall be revived, reinstated, and restored
and shall exist as though such Voidable Transfer had never been made.
9.18 No Purchase of Contracts/Servicing. Notwithstanding the provisions
of the Term Sheet attached as Exhibit B to the Motion of Borrower for entry of
the Interim Order, and referenced in the Interim Order, Borrower and Lender
hereby acknowledge and agree that as of the date hereof, neither the Contracts
Purchase Agreement nor the Servicing Agreement have been executed.
Notwithstanding the foregoing, Borrower and Lender hereby reserve the right to
discuss executing such documents at some later date.
32
38
IN WITNESS WHEREOF, the parties hereby have caused this Agreement to be
executed as of the date first written above.
FIRST MERCHANTS ACCEPTANCE
CORPORATION, a Delaware corporation
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: President & CEO
UGLY DUCKLING CORPORATION, a Delaware
corporation
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President
33
