CREDIT AGREEMENT
THIS AGREEMENT is entered into as of December 11, 1996, by and among
STRATFORD AMERICAN CORPORATION, an Arizona corporation, and STRATFORD AMERICAN
CAR RENTAL SYSTEMS, INC., an Arizona corporation (collectively, individually,
jointly and severally, the "Borrower"), and IMPERIAL BANK ("Bank").
RECITAL
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Borrower has requested from Bank the credit accommodations described
below (each, a "Credit" and collectively, the "Credits"), and Bank has agreed to
provide the Credits to Borrower on the terms and conditions contained herein.
NOW, THEREFORE, for valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, Bank and Borrower hereby agree as follows:
ARTICLE I
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THE CREDITS
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SECTION 1.1. CORPORATE REVOLVING LINE OF CREDIT.
(a) Corporate Revolving Line of Credit. Subject to the terms and
conditions of this Agreement, Bank hereby agrees to make advances to Borrower
from time to time up to and including December 11, 1998, not to exceed at any
time the aggregate principal amount of Two Million Dollars ($2,000,000.00)
("Corporate Revolving Line of Credit"), the proceeds of which shall be used for
general corporate purposes related exclusively to car rental operations,
including issuance of letters of credit. Borrower's obligation to repay advances
under the Corporate Revolving Line of Credit shall be evidenced by a promissory
note substantially in the form of Exhibit A attached hereto ("Corporate
Revolving Line of Credit Note"), all terms of which are incorporated herein by
this reference.
(b) Letter of Credit Subfeature. As a subfeature under the Corporate
Revolving Line of Credit, Bank agrees from time to time during the term thereof
to issue standby letters of credit to be used exclusively for car rental
operations(each, a "Letter of Credit" and collectively, "Letters of Credit");
provided however, that the form and substance of each Letter of Credit shall be
subject to approval by Bank, in its sole discretion; and provided further, that
the aggregate undrawn amount of all outstanding Letters of Credit shall not at
any time exceed Two Million Dollars ($2,000,000.00), less all principal amounts
outstanding under the Corporate Revolving Line of Credit. Each Letter of Credit
shall be issued for a term not to exceed eighteen (18) months, as designated by
Borrower; provided however, that no Letter of Credit shall have an expiration
date subsequent to the maturity date of the Line of Credit. The undrawn amount
of all Letters of Credit shall be reserved under the Corporate Revolving Line of
Credit and shall not be available for borrowings thereunder, and all such
amounts shall
be considered used amounts under the Corporate Revolving Line of Credit and the
Asset Based Line of Credit. Each Letter of Credit shall be subject to the
additional terms and conditions of the Letter of Credit Agreement and related
documents, if any, required by Bank in connection with the issuance thereof
(each, a "Letter of Credit Agreement" and collectively, "Letter of Credit
Agreements"). Each draft paid by Bank under a Letter of Credit shall be deemed
an advance under the Corporate Revolving Line of Credit and shall be repaid by
Borrower in accordance with the terms and conditions of this Agreement
applicable to such advances; provided however, that if advances under the
Corporate Revolving Line of Credit are not available, for any reason, at the
time any draft is paid by Bank, then Borrower shall immediately pay to Bank the
full amount of such draft, together with interest thereon from the date such
amount is paid by Bank to the date such amount is fully repaid by Borrower, at
the rate of interest applicable to advances under the Corporate Revolving Line
of Credit. In such event Borrower agrees that Bank, in its sole discretion, may
debit any demand deposit account maintained by Borrower with Bank for the amount
of any such draft.
(c) Borrowing and Repayment. Borrower may from time to time during the
term of the Corporate Revolving Line of Credit borrow, partially or wholly repay
its outstanding borrowings, and reborrow, subject to all of the limitations,
terms and conditions contained herein or in the Corporate Revolving Line of
Credit Note; provided however, that the total outstanding borrowings under the
Corporate Revolving Line of Credit shall not at any time exceed the maximum
principal amount available thereunder, as set forth above.
(d) Mandatory Prepayment. Without notice or demand, if the sum of the
outstanding principal balance of the advances plus the undrawn and drawn amounts
under all Letters of Credit shall at any time exceed the Corporate Revolving
Line of Credit, the Borrower shall immediately prepay the advances to the extent
necessary to eliminate such excess.
SECTION 1.2. ASSET BASED LINE OF CREDIT.
(a) Asset Based Line of Credit. Subject to the terms and conditions of
this Agreement, Bank hereby agrees to make advances to Borrower from time to
time up to and including December 11, 1998, not to exceed at any time the
aggregate principal amount of One Million Dollars ($1,000,000.00) ("Asset Based
Line of Credit"), the proceeds of which shall be used to purchase new and
pre-owned late model (within two (2) model years) revenue earning vehicles.
Borrower's obligation to repay advances under the Asset Based Line of Credit
shall be evidenced by a promissory note substantially in the form of Exhibit B
attached hereto ("Asset Based Line of Credit Note"), all terms of which are
incorporated herein by this reference.
(b) Limitation on Borrowings. Outstanding borrowings under the Asset
Based Line of Credit, to a maximum of the principal
2.
amount set forth above, shall not at any time exceed an aggregate of eighty
percent (80%) of the purchase price (including taxes and licensing fees) of the
new vehicles and seventy-five percent (75%) of the purchase price (including
taxes and licensing fees) of late model, pre-owned vehicles.
(c) Borrowing and Repayment. Borrower may from time to time during the
term of the Asset Based Line of Credit borrow, partially or wholly repay its
outstanding borrowings, and reborrow, subject to all of the limitations, terms
and conditions contained herein or in the Asset Based Line of Credit Note;
provided however, that the total outstanding borrowings under the Asset Based
Line of Credit shall not at any time exceed the maximum principal amount
available thereunder, as set forth above. With respect to any advance made
hereunder, Borrower shall repay each and every such advance in an amount equal
to two percent (2%) of the original outstanding principal balance plus interest
due monthly with remaining outstanding balance due at maturity. Additionally,
upon the sale of a vehicle securing the Asset Based Line of Credit Note, the
principal balance of the Note shall be repaid in an amount equal to the
remaining loan balance of the vehicle, calculated at the face amount of the
original advance less two percent (2%) amortization of the vehicle per month.
(d) Mandatory Prepayment. Without notice or demand, if the sum of the
outstanding principal balance of the advances shall at any time exceed the Asset
Based Line of Credit, the Borrower shall immediately prepay the advances to the
extent necessary to eliminate such excess.
SECTION 1.3. INTEREST/FEES.
(a) Interest. The outstanding principal balance of each Credit shall
bear interest at the rate per annum one and one-half percent (1.5%) above the
Prime Rate in effect from time to time.
(b) Prime Rate. The term "Prime Rate" shall mean at any time the rate
of interest most recently announced within Bank as its Prime Rate, with the
understanding that the Prime Rate is one of Bank's base rates and serves as the
basis upon which effective rates of interest are calculated for those loans
making reference thereto, and is evidenced by the recording thereof in such
internal publication or publications as Bank may designate. Each change in the
rate of interest shall become effective on the date each Prime Rate change is
announced within Bank.
(c) Computation and Payment. Interest shall be computed on the basis of
a 360-day year, actual days elapsed. Interest shall be payable at the times and
place set forth in the Corporate Revolving Line of Credit Note and the Asset
Based Line of Credit Note (collectively, the "Notes").
3.
(d) Commitment Fee. Borrower shall pay to Bank a non-refundable
commitment fee for both the Corporate Revolving Line of Credit and the Asset
Based Line of Credit equal to 0.50% of the committed Credit amount, which fee
shall be due and payable in full at closing.
(e) Unused Commitment Fee. Borrower shall pay to Bank a fee equal to
one quarter of one percent (0.25%) per annum (computed on the basis of a 360-day
year, actual days elapsed) on the average daily unused amount of the Corporate
Revolving Line of Credit and the Asset Based Line of Credit, which fee shall be
calculated on a quarterly basis by Bank and shall be due and payable by Borrower
in arrears within ten (10) days after each billing is sent by Bank.
(f) Letter of Credit Fees. Borrower shall pay to Bank (i) fees due and
payable upon the issuance of each Letter of Credit equal to one percent (1.0%)
per annum (computed on the basis of a 360-day year, actual days elapsed) of the
face amount thereof, and (ii) fees upon the payment or negotiation by Bank of
each draft under any Letter of Credit and fees upon the occurrence of any other
activity with respect to any Letter of Credit (including without limitation, the
transfer, amendment or cancellation of any Letter of Credit) determined in
accordance with Bank's standard fees and charges then in effect for such
activity.
SECTION 1.4. COLLATERAL. As security for all indebtedness of Borrower
to Bank under the Corporate Revolving Line of Credit, Borrower hereby grants to
Bank security interests of first priority in (i) all Borrower's inventory,
documents, accounts, instruments, securities, chattel paper (whether as obligor
or obligee), non-competition agreements, general intangibles, equipment
(including titled vehicles), patents, trademarks, fixtures and leasehold
improvements (whether or not constituting equipment), other fixed assets of any
nature, leasehold estates, escrowed funds, bonds, insurance policies, trade
names, and deposit accounts of Borrower, whether now owned or hereafter
acquired, and all proceeds or products of (including, without limitation, all
insurance proceeds or condemnation awards that may become payable with respect
to), and all books, records and files relating to, any of the foregoing, and
(ii) stock pledge of all of the issued and outstanding common stock of Stratford
American Car Rental Systems, Inc.
As security for all indebtedness of Borrower to Bank under the Asset
Based Line of Credit, Borrower hereby grants to Bank security interests of first
priority in all vehicles purchased by Borrower with loan funds under this
Credit.
Notwithstanding anything contained herein to the contrary, Borrower and
Bank hereby acknowledge and agree that the following items shall not be
collateral for any Credit (the "Excluded Collateral"): (i) all vehicles owned or
leased by Borrower that are subject to financing or lease agreements with third
parties other than Bank.
4.
SECTION 1.5. SUBORDINATION OF DEBT. All obligations of Borrower to
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▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇., ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇,
and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ shall be subordinated in right of repayment to all
obligations of Borrower to Bank, as evidenced by and subject to the terms of
subordination agreements in form and substance satisfactory to Bank.
ARTICLE II
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REPRESENTATIONS AND WARRANTIES
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Borrower makes the following representations and warranties to Bank,
which representations and warranties shall survive the execution of this
Agreement and shall continue in full force and effect until the full and final
payment, and satisfaction and discharge, of all obligations of Borrower to Bank
subject to this Agreement.
SECTION 2.1. LEGAL STATUS. Borrower is a corporation, duly organized
and existing and in good standing under the laws of the State of Arizona, and is
qualified or licensed to do business (and is in good standing as a foreign
corporation, if applicable) in all jurisdictions in which such qualification or
licensing is required or in which the failure to so qualify or to be so licensed
could have a material adverse effect on Borrower.
SECTION 2.2. AUTHORIZATION AND VALIDITY. This Agreement, the Notes, and
each other document, contract and instrument required hereby or at any time
hereafter delivered to Bank in connection herewith (collectively, the "Loan
Documents") have been duly authorized, and upon their execution and delivery in
accordance with the provisions hereof will constitute legal, valid and binding
agreements and obligations of Borrower or the party which executes the same,
enforceable in accordance with their respective terms.
SECTION 2.3. NO VIOLATION. The execution, delivery and performance by
Borrower of each of the Loan Documents do not violate any provision of any law
or regulation, or contravene any provision of the Articles of Incorporation or
By-Laws of Borrower, or result in any breach of or default under any contract,
obligation, indenture or other instrument to which Borrower is a party or by
which Borrower may be bound.
SECTION 2.4. LITIGATION. There are no pending, or to the best of
Borrower's knowledge threatened, actions, claims, investigations, suits or
proceedings by or before any governmental authority, arbitrator, court or
administrative agency which could have a material adverse effect on the
financial condition or operation of Borrower other than those disclosed by
Borrower to Bank in writing prior to the date hereof.
5.
SECTION 2.5. CORRECTNESS OF FINANCIAL STATEMENT. The financial
statement of Borrower dated September 30, 1996, a true copy of which has been
delivered by Borrower to Bank prior to the date hereof, (a) is complete and
correct and presents fairly the financial condition of Borrower, (b) discloses
all liabilities of Borrower that are required to be reflected or reserved
against under generally accepted accounting principles, whether liquidated or
unliquidated, fixed or contingent, and (c) has been prepared in accordance with
generally accepted accounting principles consistently applied. Since the date of
such financial statement there has been no material adverse change in the
financial condition of Borrower, nor has Borrower mortgaged, pledged, granted a
security interest in or otherwise encumbered any of its assets or properties
except in favor of Bank or as otherwise permitted by Bank in writing.
SECTION 2.6. INCOME TAX RETURNS. Borrower has no knowledge of any
pending assessments or adjustments of its income tax payable with respect to any
year.
SECTION 2.7. NO SUBORDINATION. There is no agreement, indenture,
contract or instrument to which Borrower is a party or by which Borrower may be
bound that requires the subordination in right of payment of any of Borrower's
obligations subject to this Agreement to any other obligation of Borrower.
SECTION 2.8. PERMITS, FRANCHISES. Borrower possesses, and will
hereafter possess, all permits, consents, approvals, franchises and licenses
required and rights to all trademarks, trade names, patents, and fictitious
names, if any, necessary to enable it to conduct the business in which it is now
engaged in compliance with applicable law.
SECTION 2.9. ERISA. Borrower is in compliance in all material respects
with all applicable provisions of the Employee Retirement Income Security Act of
1974, as amended or recodified from time to time ("ERISA"); Borrower has not
violated any provision of any defined employee pension benefit plan (as defined
in ERISA) maintained or contributed to by Borrower (each, a "Plan"); no
Reportable Event as defined in ERISA has occurred and is continuing with respect
to any Plan initiated by Borrower; Borrower has met its minimum funding
requirements under ERISA with respect to each Plan; and each Plan will be able
to fulfill its benefit obligations as they come due in accordance with the Plan
documents and under generally accepted accounting principles.
SECTION 2.10. OTHER OBLIGATIONS. Borrower is not in default on any
obligation for borrowed money, any purchase money obligation or any other
material lease, commitment, contract, instrument or obligation.
SECTION 2.11. ENVIRONMENTAL MATTERS. Except as disclosed by Borrower to
Bank in writing prior to the date hereof, Borrower is
6.
in compliance in all material respects with all applicable Federal or state
environmental, hazardous waste, health and safety statutes, and any rules or
regulations adopted pursuant thereto, which govern or affect any of Borrower's
operations and/or properties, including without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the Superfund
Amendments and Reauthorization Act of 1986, the Federal Resource Conservation
and Recovery Act of 1976, the Federal Toxic Substances Control Act, as any of
the same may be amended, modified or supplemented from time to time. None of the
operations of Borrower is the subject of any Federal or state investigation
evaluating whether any remedial action involving a material expenditure is
needed to respond to a release of any toxic or hazardous waste or substance into
the environment. Borrower has no material contingent liability in connection
with any release of any toxic or hazardous waste or substance into the
environment.
SECTION 2.12. OWNERSHIP OF ASSETS AND CONDUCT OF BUSINESS. Borrower has
full power and authority to own its property and assets and to carry on its
business as now being conducted. Borrower owns the Collateral free of all
security interests or other encumbrances except for the following (the
"Permitted Liens"): (i) security interest, encumbrances and leases executed in
the normal course of Borrower's business, (ii) security interests and
encumbrances specifically approved in this Agreement, (iii) purchase money
security interests granted by Borrower in the normal course of Borrower's
business, (iv) the existing security interest and encumbrance granted by
Borrower to Bank One, Arizona, NA, and (v) the existing security interest and
encumbrance granted by Borrower to Dollar Systems, Inc., which encumbrance shall
be subordinated to Bank's financing and encumbrances. Other than the Permitted
Liens, no financing statement in favor of a person or entity other than Bank
covering the Collateral is filed or recorded in any public office.
SECTION 2.13. REAFFIRMATION AND SURVIVAL OF REPRESENTATIONS AND
WARRANTIES. Each request by Borrower for an advance under this Agreement shall
constitute an affirmation on the part of Borrower that the representations and
warranties contained in this Section 2 are true and correct as of the time of
such request and that the relevant conditions precedent set forth in this
Agreement have been fully satisfied. All representations and warranties made
herein shall survive the execution of this Agreement until the Credits have
matured and have been fully paid and performed.
SECTION 2.14. PURPOSE OF LOAN. Borrower represents and warrants to Bank
that: (a) the entire proceeds of all advances under this Agreement will be used
solely and exclusively for business and commercial purposes; (b) no portion of
any advance hereunder will be used for any personal, consumer, family, household
or similar purpose; and (c) no portion of any Advance hereunder will be used for
the immediate, incidental or ultimate purpose of "purchasing" or "carrying" any
"margin stock" as
7.
described in Regulation U (12 C.F.R., part 221) of the Board of Governors of the
Federal Reserve System, or for the purpose of reducing or retiring any
indebtedness which was originally incurred for such purpose.
SECTION 2.15. STOCK OWNERSHIP. Stratford American Corporation
represents and warrants to Bank that it owns 80% of the issued and outstanding
shares of common stock of Stratford American Car Rental Systems, Inc.
ARTICLE III
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CONDITIONS
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SECTION 3.1. CONDITIONS OF INITIAL EXTENSION OF CREDIT. The obligation
of Bank to grant any of the Credits is subject to the fulfillment to Bank's
satisfaction of all of the following conditions:
(a) Approval of Bank Counsel. All legal matters incidental to the
granting of each of the Credits shall be satisfactory to Bank's counsel.
(b) Documentation. Bank shall have received, in form and substance
satisfactory to Bank, each of the following (collectively the "Loan Documents"),
duly executed:
(i) This Agreement and the Notes.
(ii) Continuing Security Agreement: Rights to Payment and
Inventory.
(iii) Security Agreement: Equipment and Fixtures.
(iv) General Pledge Agreement.
(v) Subordination and Standstill Agreement.
(vi) UCC-1 Financing Statements.
(vii) Such other documents as Bank may require under any other
Section of this Agreement.
(c) Financial Condition. There shall have been no material adverse
change, as determined by Bank, in the financial condition or business of
Borrower, nor any material decline, as determined by Bank, in the market value
of any collateral required hereunder or a substantial or material portion of the
assets of Borrower.
(d) Insurance. Borrower shall have delivered to Bank evidence of
insurance coverage on all Borrower's property, in form, substance, amounts,
covering risks and issued by companies
8.
satisfactory to Bank, and where required by Bank, with loss payable endorsements
in favor of Bank.
(e) Subordinated Debt. Borrower shall have delivered to Bank copies of
all documentation relating to all subordinated debt, which shall be subject to
Bank's review and approval.
(f) Franchise Agreement. Borrower shall have delivered to Bank copies
of its franchise agreement with Dollar Systems, Inc., which shall be subject to
Bank's review and approval.
(g) Subordination Agreement. Borrower shall have delivered to Bank a
subordination agreement relating to the subordination of Dollar Systems, Inc.
security interests and liens in favor of Bank's security interests and liens.
SECTION 3.2. CONDITIONS OF EACH EXTENSION OF CREDIT. The obligation of
Bank to make each extension of credit requested by Borrower hereunder shall be
subject to the fulfillment to Bank's satisfaction of each of the following
conditions:
(a) Compliance. The representations and warranties contained herein and
in each of the other Loan Documents shall be true on and as of the date of the
signing of this Agreement and on the date of each extension of credit by Bank
pursuant hereto, with the same effect as though such representations and
warranties had been made on and as of each such date, and on each such date, no
Event of Default as defined herein, and no condition, event or act which with
the giving of notice or the passage of time or both would constitute such an
Event of Default, shall have occurred and be continuing or shall exist.
(b) Documentation. Bank shall have received all additional documents
which may be required in connection with such extension of credit.
ARTICLE IV
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AFFIRMATIVE COVENANTS
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Borrower covenants that so long as Bank remains committed to extend
credit to Borrower pursuant hereto, or any liabilities (whether direct or
contingent, liquidated or unliquidated) of Borrower to Bank under any of the
Loan Documents remain outstanding, and until payment in full of all obligations
of Borrower subject hereto, Borrower shall, unless Bank otherwise consents in
writing:
SECTION 4.1. PUNCTUAL PAYMENTS. Punctually pay all principal, interest,
fees or other liabilities due under any of the Loan Documents at the times and
place and in the manner specified therein, and immediately upon demand by Bank,
the amount by which the outstanding principal balance of any of the Credits at
any time exceeds any limitation on borrowings applicable thereto.
9.
SECTION 4.2. ACCOUNTING RECORDS. Maintain adequate books and records in
accordance with generally accepted accounting principles consistently applied,
and permit any representative of Bank, at any reasonable time, to inspect, audit
and examine such books and records, to make copies of the same, and to inspect
the properties of Borrower.
SECTION 4.3. FINANCIAL STATEMENTS. Provide to Bank all of the
following, in form and detail satisfactory to Bank:
(a) Within one hundred twenty (120) days after the end of each fiscal
year: (1) detailed financial statements (including a balance sheet and a profit
and loss statement and a statement of cash flow), setting forth, on a
consolidated basis in consolidating form for Borrower and any subsidiary of
Borrower, all assets, liabilities and net worth as of the end of such fiscal
year (and the immediately preceding fiscal year) and any profit and loss for the
relevant fiscal year (and the immediately preceding fiscal year), which
statements shall be audited by (and accompanied by the unqualified opinion of) a
Certified Public Accountant acceptable to the Bank; and (2) copies of all 10K
reports filed with the Securities Exchange Commission;
(b) not later than forty-five (45) days after and as of the end of each
fiscal quarter, copies of the 10Q reports filed with the Securities Exchange
Commission.
(c) contemporaneously with each quarterly financial statement of
Borrower, a certificate of the chief financial officer of Borrower that Borrower
is in compliance with all financial covenants and that said financial statements
are accurate;
(d) from time to time such other information as Bank may reasonably
request.
SECTION 4.4. COMPLIANCE. Preserve and maintain all licenses, permits,
governmental approvals, rights, privileges and franchises necessary for the
conduct of its business; and comply with the provisions of all documents
pursuant to which Borrower is organized and/or which govern Borrower's continued
existence and with the requirements of all laws, rules, regulations and orders
of any governmental authority applicable to Borrower and/or its business.
SECTION 4.5. INSURANCE. Maintain and keep in force insurance of the
types and in amounts customarily carried in lines of business similar to that of
Borrower, including but not limited to fire, extended coverage, public
liability, flood, property damage and workers' compensation, with all such
insurance carried with companies and in amounts satisfactory to Bank, and
deliver to Bank from time to time at Bank's request schedules setting forth all
insurance then in effect.
10.
SECTION 4.6. FACILITIES. Keep all properties useful or necessary to
Borrower's business in good repair and condition, and from time to time make
necessary repairs, renewals and replacements thereto so that such properties
shall be fully and efficiently preserved and maintained.
SECTION 4.7. TAXES AND OTHER LIABILITIES. Pay and discharge when due
any and all indebtedness, obligations, assessments and taxes, both real or
personal, including without limitation Federal and state income taxes and state
and local property taxes and assessments, except such (a) as Borrower may in
good faith contest or as to which a bona fide dispute may arise, and (b) for
which Borrower has made provision, to Bank's satisfaction, for eventual payment
thereof in the event Borrower is obligated to make such payment.
SECTION 4.8. LITIGATION. Borrower will give Bank prompt notice of:
(a) Any litigation or claims that may or could materially and adversely
affect the repayment of any Credits, the performance by Borrower under the Loan
Documents or the financial condition or operations of Borrower; and
(b) All complaints and charges filed by or with any governmental
authority or any other person or entity (i) that could materially and adversely
affect the Collateral or any portion thereof or any of the Loan Documents, or
(ii) exercising supervision or control of Borrower, or its business or assets,
that could impair the security of Bank or adversely affect any of its rights
under any of the Loan Documents.
SECTION 4.9. FINANCIAL CONDITION. On a consolidated basis, maintain
Borrower's financial condition as follows using generally accepted accounting
principles consistently applied and used consistently with prior practices
(except to the extent modified by the definitions herein), with compliance
determined commencing with Borrower's financial statements for the period ending
December 31, 1996:
(a) Net profit, measured on an annual basis, not less than $200,000 as
of December 31, 1997, and $400,000 as of December 31, 1998.
(b) Debt to Cash Flow Ratio not less than 3.0:1.0 measured quarterly on
a rolling twelve (12) month basis defined as total long term debt divided by
EBITDA for the prior twelve (12) month period.
(c) Maintain a minimum of seventy-five percent (75%) of existing
subordinated debt as subordinated debt or converting a minimum of seventy-five
percent (75%) of existing subordinated debt to equity upon maturity in May,
1997.
11.
(d) Revenue earning vehicles ratio of not less than 1.0:1.0, measured
on a quarterly basis, and calculated as follows: revenue earning vehicles, net
divided by notes secured by revenue earning vehicles.
SECTION 4.10. NOTICE TO BANK. Promptly (but in no event more than five
(5) days after the occurrence of each such event or matter) give written notice
to Bank in reasonable detail of: (a) the occurrence of any Event of Default, or
any condition, event or act which with the giving of notice or the passage of
time or both would constitute an Event of Default; (b) any change in the name or
the organizational structure of Borrower, or any action, claim, investigation,
suit or proceeding pending or asserted by or before any governmental authority,
arbitrator, court or administrative agency challenging or denying Borrower's
qualification for tax treatment as if it were a partnership for income tax
purposes; (c) the occurrence and nature of any Reportable Event or Prohibited
Transaction, each as defined in ERISA, or any funding deficiency with respect to
any Plan; or (d) any termination or cancellation of any insurance policy which
Borrower is required to maintain, or any uninsured or partially uninsured loss
through liability or property damage, or through fire, theft or any other cause
affecting Borrower's property in excess of an aggregate of $250,000.00.
SECTION 4.11. INDEMNIFICATION OF BANK.
(a) Borrower (the "Indemnitor") shall indemnify, defend and hold Bank
and its past and current officers, directors, employees, attorneys and agents,
and their respective successors and assigns (collectively, the "Indemnitees"),
harmless for, from, and against any and all claims (including without
limitation, attorneys' fees) asserted against any Indemnitee by any person,
entity or governmental authority arising out of or in connection with the
ownership or use of any portion of the Collateral (except as to claims which
arise solely out of an Indemnitee's gross negligence or willful misconduct). If,
in the reasonable judgment of Bank, the Indemnitor is incapable of defending, or
unwilling to defend, the relevant Indemnitee(s) against such claims or fail to
defend the relevant Indemnitee(s) against such claims in a manner Bank
reasonably deems appropriate, Bank shall be entitled to appear in any action or
proceeding to defend the relevant Indemnitee(s) against such claims, and the
Indemnitor shall reimburse Bank for all costs incurred by Bank in connection
therewith, including reasonable attorneys' fees, within ten (10) days after
demand therefor. Any failure to so reimburse Bank within the specified time
period shall constitute a Default under this Agreement, and the unreimbursed
amount shall be added to the outstanding balance of the Credits and bear
interest at the interest rate until paid.
(b) The relevant Indemnitee(s), at its sole option, shall be entitled
to settle or compromise any claim asserted against it, and such settlement shall
be binding upon the Indemnitor for purposes of the foregoing indemnification;
provided, however, that the
12.
Indemnitor may settle or compromise any such claim, or decide not to settle or
compromise any such claim, as long as all Indemnitees are fully released from
any and all liability thereon. Payment by Bank pursuant to such settlement or
compromise, or payment by Bank of any judgment or claim successfully asserted
against an Indemnitee or the Collateral, shall be added to the outstanding
balance of the Credits and bear interest at the interest rate until paid.
(c) The agreements contained in this Section (4.11) shall survive
repayment of the Credits and the termination of any other portions of this
Agreement.
SECTION 4.12. USE OF ADVANCES; PAYMENT OF COSTS AND EXPENSES RELATING
TO COLLATERAL. Borrower shall use all advances from the Loans solely for
permitted purposes for the particular advances described in this Agreement.
Borrower shall promptly pay all costs and expenses relating to the Collateral,
but may contest in good faith the validity or amount thereof provided that
Borrower shall have furnished Bank a cash deposit or other appropriate security
in an amount and form satisfactory to Bank to protect Bank against the creation
of any lien on, or any sale or forfeiture of, any Collateral. Upon the final
determination of Borrower, contest, Borrower shall promptly pay any sums
determined to be due, whereupon any deposit or security provided by Borrower
shall be returned to Borrower.
SECTION 4.13. LICENSES, PERMITS AND BONDS; MANAGEMENT. Borrower shall
maintain in full force and effect all rights, licenses and bonding commitments
necessary to carry on its primary business. Borrower shall maintain the
corporate existence and shall maintain executive personnel and management at a
level of experience and ability equivalent to present personnel and management.
SECTION 4.14. FURTHER DOCUMENTS OR ACTS. Borrower, at its expense,
shall execute and deliver, or cause to be executed and delivered, to Bank such
other writings, including current and updated certified copies of corporate
borrowing resolutions, and shall do or cause to be done such other acts as Bank
may reasonably require in connection with the Credits.
SECTION 4.15. BANK'S COSTS AND FEES.
(a) In addition to any requirements under the Loan Documents and the
documents relating to this Agreement, Borrower hereby agrees that all reasonable
expenses of Bank, including, all legal fees and costs of the law firm of ▇▇▇▇▇ &
▇▇▇▇▇▇ L.L.P.(up to a maximum of 4,750.00) and all allocated costs for the
services of Bank's in-house staff such as appraisals, incurred in connection
with or to be incurred in the future and related to (a) the negotiation,
preparation, execution, and delivery of this Agreement, and all related
instruments, including, without limitation, all charges for recording, filing,
appraisal fees, and
13.
expenses of Bank's outside and in-house counsel and all expenses for the
Commitment; (b) the protection of the rights of Bank in connection with the
transactions and documents described herein; (c) the enforcement of payment of
Borrower, obligations to Bank, whether by judicial proceedings or otherwise; (d)
the enforcement of payment of such obligations by any action or participation
in, or in connection with, a case or proceeding under any chapter of the federal
Bankruptcy Code, or any successor statute thereto, including without limitation
defense of any matter brought by a debtor therein, making any attempt to enforce
remedies therein, or proposing a plan or participating in the plan process; (e)
Bank's review of documentation and other information delivered by Borrower
pursuant to the Loan Documents and this Agreement from time to time; (f) all
expenses paid by Bank on Borrower's behalf; and (g) all legal fees of Bank's
outside and in-house counsel (as determined by the court or arbitrator and not
by a jury if any action or arbitration is commenced, including without
limitation, any allocated costs of in-house counsel), and disbursements related
to any of the above and/or the Credits (collectively "Bank Expenses"), shall be
immediately reimbursed to Bank by Borrower upon Bank's request therefor.
ARTICLE V
---------
NEGATIVE COVENANTS
------------------
Borrower further covenants that so long as Bank remains committed to
extend credit to Borrower pursuant hereto, or any liabilities (whether direct or
contingent, liquidated or unliquidated) of Borrower to Bank under any of the
Loan Documents remain outstanding, and until payment in full of all obligations
of Borrower subject hereto, Borrower will not without Bank's prior written
consent:
SECTION 5.1. USE OF FUNDS. Use any of the proceeds of any of the
Credits except for the purposes stated in Article I hereof.
SECTION 5.2. OTHER INDEBTEDNESS. Create, incur, assume or permit to
exist any indebtedness or liabilities resulting from borrowings, loans or
advances, whether secured or unsecured, matured or unmatured, liquidated or
unliquidated, joint or several, except (a) the liabilities of Borrower to Bank,
(b) any other liabilities of Borrower existing as of, and disclosed to Bank
prior to, the date hereof, and (c) the Permitted Liens.
SECTION 5.3. MERGER, CONSOLIDATION, TRANSFER OF ASSETS. Merge into or
consolidate with any other entity; make any substantial change in the nature of
Borrower's business as conducted as of the date hereof; acquire all or
substantially all of the assets of any other entity; nor sell, lease, transfer
or otherwise dispose of all or a substantial or material portion of Borrower's
assets except in the ordinary course of its business.
SECTION 5.4. GUARANTIES. Guarantee or become liable in any way as
surety, endorser (other than as endorser of negotiable
14.
instruments for deposit or collection in the ordinary course of business),
accommodation endorser or otherwise for, nor pledge or hypothecate any assets of
Borrower as security for, any liabilities or obligations of any other person or
entity, except any of the foregoing in favor of Bank and the Permitted Liens.
SECTION 5.5. LOANS, ADVANCES, INVESTMENTS. Make any loans or advances
to or investments in any person or entity, except any of the foregoing existing
as of, and disclosed to Bank prior to, the date hereof.
SECTION 5.6. DIVIDENDS, DISTRIBUTIONS. Declare or pay any dividend or
distribution either in cash, stock or any other property on Borrower's stock now
or hereafter outstanding.
SECTION 5.7. PLEDGE OF ASSETS. Mortgage, pledge, grant or permit to
exist a security interest in, or lien upon, all or any portion of Borrower's
assets now owned or hereafter acquired, except the Permitted Liens, any of the
foregoing in favor of Bank or which is existing as of, and disclosed to Bank in
writing prior to, the date hereof.
SECTION 5.8. CHANGE IN FISCAL YEAR ACCOUNTING METHODS. Borrower shall
not, without having received the prior written consent of Bank, change its
fiscal year or other accounting periods or change its method of accounting other
than to conform to GAAP applied on a consistent basis.
ARTICLE VI
----------
EVENTS OF DEFAULT
-----------------
SECTION 6.1. The occurrence of any of the following shall constitute an
"Event of Default" under this Agreement:
(a) Borrower shall fail to pay when due any principal, interest, fees
or other amounts payable under any of the Loan Documents and the expiration of
five (5) days after written notice from Bank to Borrower of such failure.
(b) Any financial statement or certificate furnished to Bank in
connection with, or any representation or warranty made by Borrower or any other
party under this Agreement or any other Loan Document shall prove to be
incorrect, false or misleading in any material respect when furnished or made.
(c) Any default in the performance of or compliance with any
obligation, agreement or other provision contained herein or in any other Loan
Document (other than those referred to in subsections (a) and (b) above), and
with respect to any such default which by its nature can be cured, such default
shall continue for a period of twenty (20) days from its occurrence.
(d) Any default in the payment or performance of any obligation, or any
defined event of default, under the terms of any
15.
contract or instrument (other than any of the Loan Documents) pursuant to which
Borrower has incurred any debt or other liability to any person or entity,
including Bank, including the expiration of all applicable notice and cure
periods.
(e) The filing of a notice of judgment lien against Borrower; or the
recording of any abstract of judgment against Borrower in any county in which
Borrower has an interest in real property; or the service of a notice of levy
and/or of a writ of attachment or execution, or other like process, against the
assets of Borrower; or the entry of a judgment against Borrower, all of which is
not dismissed or released within thirty (30) days the entry of any such matter.
(f) Borrower shall suffer or consent to or apply for the appointment of
a receiver, trustee, custodian or liquidator of itself or any of its property,
or shall generally fail to pay its debts as they become due, or shall make a
general assignment for the benefit of creditors; Borrower shall file a voluntary
petition in bankruptcy, or seeking reorganization, in order to effect a plan or
other arrangement with creditors or any other relief under the Bankruptcy Reform
Act, Title 11 of the United States Code, as amended or recodified from time to
time ("Bankruptcy Code"), or under any state or Federal law granting relief to
debtors, whether now or hereafter in effect; or any involuntary petition or
proceeding pursuant to the Bankruptcy Code or any other applicable state or
Federal law relating to bankruptcy, reorganization or other relief for debtors
is filed or commenced against Borrower, or Borrower shall file an answer
admitting the jurisdiction of the court and the material allegations of any
involuntary petition; or Borrower shall be adjudicated a bankrupt, or an order
for relief shall be entered against Borrower by any court of competent
jurisdiction under the Bankruptcy Code or any other applicable state or Federal
law relating to bankruptcy, reorganization or other relief for debtors.
(g) There shall exist or occur any event or condition which Bank in
good faith believes impairs, or is substantially likely to impair, the prospect
of payment or performance by Borrower of its obligations under any of the Loan
Documents.
(h) The dissolution or liquidation of Borrower or any of their
directors, stockholders or members, shall take action seeking to effect the
dissolution or liquidation of Borrower.
SECTION 6.2. REMEDIES. Upon the occurrence of any Event of Default: (a)
all indebtedness of Borrower under each of the Loan Documents, any term thereof
to the contrary notwithstanding, shall at Bank's option and without notice
become immediately due and payable without presentment, demand, protest or
notice of dishonor, all of which are hereby expressly waived by Borrower; (b)
the obligation, if any, of Bank to extend any further credit under any of the
Loan Documents shall immediately cease and terminate; and (c) Bank shall have
all rights, powers and remedies available under
16.
each of the Loan Documents, or accorded by law, including without limitation the
right to resort to any or all security for any of the Credits and to exercise
any or all of the rights of a beneficiary or secured party pursuant to
applicable law. All rights, powers and remedies of Bank may be exercised at any
time by Bank and from time to time after the occurrence of an Event of Default,
are cumulative and not exclusive, and shall be in addition to any other rights,
powers or remedies provided by law or equity.
ARTICLE VII
-----------
MISCELLANEOUS
-------------
SECTION 7.1. NO WAIVER. No delay, failure or discontinuance of Bank in
exercising any right, power or remedy under any of the Loan Documents shall
affect or operate as a waiver of such right, power or remedy; nor shall any
single or partial exercise of any such right, power or remedy preclude, waive or
otherwise affect any other or further exercise thereof or the exercise of any
other right, power or remedy. Any waiver, permit, consent or approval of any
kind by Bank of any breach of or default under any of the Loan Documents must be
in writing and shall be effective only to the extent set forth in such writing.
SECTION 7.2. NOTICES. All notices, requests and demands which any party
is required or may desire to give to any other party under any provision of this
Agreement must be in writing delivered to each party at the following address:
BORROWER: STRATFORD AMERICAN CORPORATION
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, Arizona 85016
Attn: ▇▇▇ ▇. ▇▇▇▇▇▇
BANK: IMPERIAL BANK
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: R. ▇▇▇▇ ▇▇▇▇▇▇▇▇
or to such other address as any party may designate by written notice to all
other parties. Each such notice, request and demand shall be deemed given or
made as follows: (a) if sent by hand delivery, upon delivery; (b) if sent by
mail, upon the earlier of the date of receipt or three (3) days after deposit in
the U.S. mail, first class and postage prepaid; and (c) if sent by telecopy,
upon receipt.
SECTION 7.3. COSTS, EXPENSES AND ATTORNEYS' FEES. Borrower shall pay to
Bank immediately upon demand the full amount of all payments, advances, charges,
costs and expenses, including reasonable attorneys' fees (to include outside
counsel fees and all allocated costs of Bank's in-house counsel), incurred by
Bank in connection with (a) the negotiation and preparation of this
17.
Agreement and the other Loan Documents, Bank's continued administration hereof
and thereof, and the preparation of any amendments and waivers hereto and
thereto, (b) the enforcement of Bank's rights and/or the collection of any
amounts which become due to Bank under any of the Loan Documents, and (c) the
prosecution or defense of any action in any way related to any of the Loan
Documents, including without limitation, any action for declaratory relief, and
including any of the foregoing incurred in connection with any bankruptcy
proceeding relating to Borrower.
SECTION 7.4. SUCCESSORS, ASSIGNMENT. This Agreement shall be binding
upon and inure to the benefit of the heirs, executors, administrators, legal
representatives, successors and assigns of the parties; provided however, that
Borrower may not assign or transfer its interest hereunder without Bank's prior
written consent. Bank reserves the right to sell, assign, transfer, negotiate or
grant participations in all or any part of, or any interest in, Bank's rights
and benefits under each of the Loan Documents. In connection therewith, Bank may
disclose all documents and information which Bank now has or may hereafter
acquire relating to any of the Credits, Borrower or its business, or any
collateral required hereunder.
SECTION 7.5. ENTIRE AGREEMENT; AMENDMENT. This Agreement and the other
Loan Documents constitute the entire agreement between Borrower and Bank with
respect to the Credits and supersede all prior negotiations, communications,
discussions and correspondence concerning the subject matter hereof. This
Agreement may be amended or modified only by a written instrument executed by
each party hereto.
SECTION 7.6. NO THIRD PARTY BENEFICIARIES. This Agreement is made and
entered into for the sole protection and benefit of the parties hereto and their
respective permitted successors and assigns, and no other person or entity shall
be a third party beneficiary of, or have any direct or indirect cause of action
or claim in connection with, this Agreement or any other of the Loan Documents
to which it is not a party.
SECTION 7.7. TIME. Time is of the essence of each and every provision
of this Agreement and each other of the Loan Documents.
SECTION 7.8. SEVERABILITY OF PROVISIONS. If any provision of this
Agreement shall be prohibited by or invalid under applicable law, such provision
shall be ineffective only to the extent of such prohibition or invalidity
without invalidating the remainder of such provision or any remaining provisions
of this Agreement.
SECTION 7.9. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of California, except to the
extent Bank has greater rights or remedies under Federal law, whether as a
national bank or
18.
otherwise, in which case such choice of California law shall not be deemed to
deprive Bank of any such rights and remedies as may be available under Federal
law.
SECTION 7.10. COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which when executed and delivered shall be
deemed to be an original, and all of which when taken together shall constitute
one and the same Agreement.
SECTION 7.11. REFERENCE PROVISION. Each controversy, dispute or claim
("Claim") between the parties arising out of or relating to this Agreement,
which is not settled in writing within ten days after the "Claim Date" (defined
as the date on which a party gives written notice to all other parties that a
controversy, dispute or claim exists), will be settled by a reference proceeding
in Los Angeles, California in accordance with the provisions of Section 638 et
seq. of the California Code of Civil Procedure, or their successor section
("CCP"), which shall constitute the exclusive remedy for the settlement of any
Claim, including whether such Claim is subject to the reference proceeding and
the parties waive their rights to initiate any legal proceedings against each
other in any court or jurisdiction other than the Superior Court of Los Angeles
(the "Court"). The referee shall be a retired Judge selected by mutual agreement
of the parties, and if they cannot so agree within thirty days after the Claim
Date, the referee shall be selected by the Presiding Judge of the Court. The
referee shall be appointed to sit as a temporary judge, as authorized by law.
The referee shall (a) be requested to set the matter for hearing within sixty
(60) days after the Claim Date and (b) try any and all issues of law or fact and
report a statement of decision upon them, if possible, within ninety (90) days
of the Claim Date. Any decision rendered by the referee will be final, binding
and conclusive and judgment shall be entered pursuant to CCP 644 in the Court.
All discovery permitted by this Agreement shall be completed no later than
fifteen (15) days before the first hearing date established by the referee. The
referee may extend such period in the event of a party's refusal to provide
requested discovery for any reason whatsoever, including, without limitation,
legal objections raised to such discovery or unavailability of a witness due to
absence or illness. No party shall be entitled to "priority" in conducing
discovery. Depositions may be taken by either party upon seven (7) days written
notice, and, request for production of inspection of documents shall be
responded to within ten (10) days after service. All disputes relating to
discovery which cannot be resolved by the parties shall be submitted to the
referee whose decision shall be final and binding upon the parties.
b. The referee shall be required to determine all issues in
accordance with existing case law and the statutory laws of the State of
California. The rules of evidence applicable to proceedings at law in the State
of California will be applicable to the reference proceeding. The referee shall
be empowered to enter equitable as well as legal relief, to provide all
temporary and/or
19.
provisional remedies and to enter equitable orders that will be binding upon the
parties. The referee shall issue a single judgment at the close of the reference
proceeding which shall dispose of all of the claims of the parties that are the
subject to the reference. The parties hereto expressly reserve the right to
contest or appeal from the final judgment or any appealable order or appealable
judgment entered by the referee. The parties expressly reserve the right to
findings of fact, conclusions of law, a written statement of decision, and the
right to move for a new trial or a different judgment, which new trial, if
granted, is also to be a reference proceeding under this provision.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first written above.
STRATFORD AMERICAN CORPORATION,
an Arizona corporation
By:/s/ ▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------
Title: President
--------------------------
STRATFORD AMERICAN CAR RENTAL SYSTEMS, INC.,
an Arizona corporation
By:/s/ ▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------
Title: President
--------------------------
IMPERIAL BANK
By:/s/ R. ▇▇▇▇ ▇▇▇▇▇▇▇▇
-----------------------------
Title: Vice President
--------------------------
20.