LOAN AND SECURITY AGREEMENT
1-800-AutoTow, Inc.
D&D Towing & Recovery, Inc.
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, Inc.
1-800-AutoTow Gulf Coast East, Inc.
1-800-AutoTow Gulf Coast S.W., Inc.
1-800-AutoTow Florida, Inc.
Borrower
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▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Address
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Borrower Fed ID Tax No.
$5,098,233, subject to increase as provided herein
Credit Limit
August 6, 1999
Date
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CORPORATE FINANCE
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TABLE OF CONTENTS
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1. DEFINITIONS.................................................................................................1
1.1 Defined Terms............................................................................................1
1.2 Other Terms..............................................................................................6
2. LOANS; INTEREST RATE AND OTHER CHARGES......................................................................6
2.1 Total Facility...........................................................................................6
2.2 Loans....................................................................................................6
2.3 Overlines; Overadvances..................................................................................6
2.4 [RESERVED]...............................................................................................6
2.5 Loan Account.............................................................................................6
2.6 Interest; Fees...........................................................................................6
2.7 Default Interest Rate....................................................................................6
2.8 Examination Fee..........................................................................................6
2.9 Excess Interest..........................................................................................6
2.10 Principal Payments; Proceeds of Collateral...........................................................7
2.11 Application of Collateral.............................................................................8
2.12 Application of Payments...............................................................................8
2.13 Notification of Closing...............................................................................8
3. SECURITY....................................................................................................9
3.1 Security Interest in the Collateral......................................................................9
3.2 Perfection and Protection of Security Interest...........................................................9
3.3 Preservation of Collateral...............................................................................9
3.4 Insurance................................................................................................9
3.5 Collateral Reporting.....................................................................................9
3.6 Receivables.............................................................................................10
3.7 Equipment...............................................................................................10
3.8 Other Liens; No Disposition of Collateral..............................................................10
3.9 Collateral Security.....................................................................................10
4. CONDITIONS OF CLOSING......................................................................................11
4.1 Initial Advance.........................................................................................11
4.2 Subsequent Advances.....................................................................................13
5. REPRESENTATIONS AND WARRANTIES.............................................................................13
5.1 Due Organization........................................................................................13
5.2 Other Names.............................................................................................13
5.3 Due Authorization.......................................................................................13
5.4 Binding Obligation......................................................................................13
5.5 Intangible Property.....................................................................................13
5.6 Capital.................................................................................................13
5.7 Material Litigation.....................................................................................14
5.8 Title; Security Interests of FINOVA.....................................................................14
5.9 Restrictive Agreements; Labor Contracts.................................................................14
5.10 Laws.................................................................................................14
5.11 Consents.............................................................................................14
5.12 Defaults.............................................................................................14
5.13 Financial Condition..................................................................................14
5.14 ERISA................................................................................................14
5.15 Taxes................................................................................................14
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5.16 Locations; Federal Tax ID No.........................................................................14
5.17 Business Relationships...............................................................................14
5.18 Reaffirmations.......................................................................................14
5.19 Year 2000 Representations & Warranties...............................................................15
6. COVENANTS..................................................................................................15
6.1 Affirmative Covenants...................................................................................15
6.1.1 Taxes.............................................................................................15
6.1.2 Notice of Litigation..............................................................................15
6.1.3 ERISA.............................................................................................15
6.1.4 Change in Location................................................................................15
6.1.5 Corporate Existence...............................................................................15
6.1.6 Labor Disputes....................................................................................15
6.1.7 Violations of Law.................................................................................15
6.1.8 Defaults..........................................................................................15
6.1.9 Capital Expenditures..............................................................................15
6.1.10 Books and Records.................................................................................15
6.1.11 Leases; Warehouse Agreements.....................................................................15
6.1.12 Additional Documents..............................................................................15
6.1.13 Financial Covenants...............................................................................15
6.1.14 Year 2000 Covenants...............................................................................16
6.2 Negative Covenants......................................................................................16
6.2.1 Mergers...........................................................................................16
6.2.2 Loans.............................................................................................16
6.2.3 Dividends.........................................................................................16
6.2.4 Adverse Transactions..............................................................................16
6.2.5 Indebtedness of Others............................................................................16
6.2.6 Repurchase........................................................................................16
6.2.7 Name..............................................................................................16
6.2.8 Prepayment........................................................................................16
6.2.9 Capital Expenditure...............................................................................16
6.2.10 Compensation......................................................................................16
6.2.11 Indebtedness......................................................................................16
6.2.12 Affiliate Transactions............................................................................16
6.2.13 Nature of Business................................................................................16
6.2.14 FINOVA's Name.....................................................................................16
6.2.15 Margin Security...................................................................................17
6.2.16 Real Property.....................................................................................17
7. DEFAULT AND REMEDIES.......................................................................................17
7.1 Events of Default.......................................................................................17
7.2 Remedies................................................................................................18
7.3 Standards for Determining Commercial Reasonableness.....................................................18
8. EXPENSES AND INDEMNITIES...................................................................................18
8.1 Expenses................................................................................................18
8.2 Environmental Matters...................................................................................19
9. MISCELLANEOUS..............................................................................................19
9.1 Examination of Records; Financial Reporting.............................................................19
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9.2 Term; Termination.......................................................................................20
9.3 Recourse to Security; Certain Waivers...................................................................20
9.4 No Waiver by FINOVA.....................................................................................20
9.5 Binding on Successors and Assigns.......................................................................20
9.6 Severability............................................................................................21
9.7 Amendments; Assignments.................................................................................21
9.8 Integration.............................................................................................21
9.9 Survival................................................................................................21
9.10 Evidence of Obligations..............................................................................21
9.11 Loan Requests........................................................................................21
9.12 Notices..............................................................................................21
9.13 Brokerage Fees.......................................................................................21
9.14 Disclosure...........................................................................................21
9.15 Publicity............................................................................................21
9.16 Captions.............................................................................................21
9.17 Injunctive Relief....................................................................................21
9.18 Counterparts; Facsimile Execution....................................................................21
9.19 Construction.........................................................................................22
9.20 Time of Essence......................................................................................22
9.21 Limitation of Actions................................................................................22
9.22 Liability............................................................................................22
9.23 Notice of Breach by FINOVA...........................................................................22
9.24 Application of Insurance Proceeds....................................................................22
9.25 Power of Attorney....................................................................................22
9.26 Common Enterprise....................................................................................23
9.27 Governing Law; Waivers...............................................................................23
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THIS LOAN AND SECURITY AGREEMENT (collectively with the Schedule to Loan
Agreement (the "Schedule") attached hereto, the "Agreement") dated the date set
forth on the cover page, is entered into by and between the borrower named on
the cover page (jointly and severally, and individually and collectively, the
"Borrower"), whose address is set forth on the cover page and FINOVA Capital
Corporation ("FINOVA"), whose address is ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
1. DEFINITIONS.
1.1 Defined Terms. As used in this Agreement, the following terms have
the definitions set forth below:
"Acquisition" has the meaning set forth in the Schedule.
"Acquisition Documents" has the meaning set forth in the Schedule.
"ADA" has the meaning set forth in Section 4.1(w) hereof.
"Additional Sums" has the meaning set forth in Section 2.9(a) hereof.
"Affiliate" means any Person controlling, controlled by or under common
control with Borrower. For purposes of this definition, "control" means the
possession, directly or indirectly, of the power to direct or cause direction of
the management and policies of any Person, whether through ownership of common
or preferred stock or other equity interests, by contract or otherwise. Without
limiting the generality of the foregoing, each of the following shall be an
Affiliate: any officer, director, employee or other agent of Borrower, any
shareholder, member or subsidiary of Borrower, and any other Person with whom or
which Borrower has common shareholders, officers or directors.
"Agreement" has the meaning set forth in the preamble.
"Applicable Law" has the meaning set forth in Section 8.2(a) hereof.
"Applicable Usury Law" has the meaning set forth in Section 2.9(b)
hereof.
"Blocked Account" has the meaning set forth in Section 2.10(c) hereof.
"Business Day" means any day on which commercial banks in both Los
Angeles, California and Phoenix, Arizona are open for business.
"Capital Expenditures" means all expenditures made and liabilities
incurred for the acquisition of any fixed asset or improvement, replacement,
substitution or addition thereto which has a useful life of more than one year
and including, without limitation, those arising in connection with Capital
Leases.
"Capital Lease" means any lease of property by Borrower that, in
accordance with GAAP, should be capitalized for financial reporting purposes and
reflected as a liability on the balance sheet of Borrower.
"Closing Fee" has the meaning set forth in the Schedule.
"Closing Date" means the date of the initial advance made by FINOVA
pursuant to this Agreement.
"Code" means the Uniform Commercial Code as adopted and in effect in
the State of Arizona from time to time.
"Collateral" has the meaning set forth in Section 3.1 hereof.
"Collateral Monitoring Fee" has the meaning set forth in the Schedule.
"Conversion Date" has the meaning set forth in the Schedule.
"Current Assets" at any date means the amount at which the current
assets of Borrower would be shown on a balance sheet of Borrower as at such
date, prepared in accordance with GAAP, provided that amounts due from
Affiliates and investments in Affiliates shall be excluded therefrom.
"Current Liabilities" at any date means the amount at which the current
liabilities of Borrower would be shown on a balance sheet of Borrower as at such
date, prepared in accordance with GAAP.
"Deposit Accounts" has the meaning set forth in Section 9105 of the
Code.
"Dominion Account" has the meaning set forth in Section 2.10(c) hereof.
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"Earnings Before Interest, Taxes, Depreciation and Amortization" for
any fiscal period of Borrower means the net income of Borrower for such fiscal
period, plus interest expense, depreciation and amortization and provision for
income taxes for such fiscal period, and minus non-recurring miscellaneous
income and expenses, all calculated in accordance with GAAP.
"Eligible Receivables" means Receivables arising in the ordinary course
of Borrower's business from the sale of goods or rendition of services, which
FINOVA, in its Permitted Discretion, shall deem eligible based on such
considerations as FINOVA may from time to time deem appropriate. Without
limiting the foregoing, a Receivable shall not be deemed to be an Eligible
Receivable if (i) the account debtor has failed to pay the Receivable within a
period equal to the lesser of (A) ninety (90) days or (B) that number of days
equal to three (3) times payment terms after invoice date, to the extent of any
amount remaining unpaid after such period; (ii) the account debtor has failed to
pay more than 25% of all outstanding Receivables owed by it to Borrower within
the lesser of (A) ninety (90) days after invoice date or (B) that number of days
equal to three times payment terms after invoice date; (iii) the account debtor
is an Affiliate of Borrower; (iv) the goods relating thereto are placed on
consignment, guaranteed sale, "▇▇▇▇ and hold," "COD" or other terms pursuant to
which payment by the account debtor may be conditional; (v) the account debtor
is not located in the United States, unless the Receivable is supported by a
letter of credit or other form of guaranty or security, in each case in form and
substance satisfactory to FINOVA; (vi) the account debtor is the United States
or any department, agency or instrumentality thereof or any State, city or
municipality of the United States; (vii) Borrower is or may become liable to the
account debtor for goods sold or services rendered by the account debtor to
Borrower; (viii) the account debtor's total obligations to Borrower exceed 15%
of all Eligible Receivables, to the extent of such excess; (ix) the account
debtor disputes liability or makes any claim with respect thereto (up to the
amount of such liability or claim), or is subject to any insolvency or
bankruptcy proceeding, or becomes insolvent, fails or goes out of a material
portion of its business; (x) the amount thereof consists of late charges or
finance charges; (xi) the amount thereof consists of a credit balance more than
ninety (90) days past due; (xii) the face amount thereof exceeds $100,000,
unless accompanied by evidence of shipment of the goods relating thereto
satisfactory to FINOVA in its Permitted Discretion; (xiii) the invoice
constitutes a progress billing on a project not yet completed, except that the
final billing at such time as the matter has been completed and delivered to the
customer may be deemed an Eligible Receivable; or (xiv) the amount thereof is
not yet represented by an invoice or ▇▇▇▇ issued in the name of the applicable
account debtor.
"Equipment" means all of Borrower's present and hereafter acquired
machinery, molds, machine tools, motors, furniture, equipment, furnishings,
fixtures, trade fixtures, motor vehicles, tools, parts, dyes, jigs, goods and
other tangible personal property (other than Inventory) of every kind and
description used in Borrower's operations or owned by Borrower and any interest
in any of the foregoing, and all attachments, accessories, accessions,
replacements, substitutions, additions or improvements to any of the foregoing,
wherever located.
"Environmental Costs" has the meaning set forth in Section 8.2(b)
hereof.
"ERISA" means the Employment Retirement Income Security Act of 1974, as
amended, and the regulations thereunder.
"ERISA Affiliate" means each trade or business (whether or not
incorporated and whether or not foreign) which is or may hereafter become a
member of a group of which Borrower is a member and which is treated as a single
employer under ERISA Section 4001(b)(1), or IRC Section 414.
"Event of Default" means any of the events set forth in Section 7.1 of
this Agreement.
"Examination Fee" has the meaning set forth in the Schedule.
"Excess Availability" means, as of the date of determination thereof,
the amount by which the average daily total principal balance of the Revolving
Credit Loans facility which Borrower would be permitted to have outstanding over
the prior 30 days, based on the formulas and reserves set forth in the Schedule,
exceeds the sum of the Revolving Credit Loans then actually outstanding, such
excess then being reduced by an amount necessary to provide for the payment of
all accounts payable of Borrower which are more than 30 days past due date and
all book overdrafts.
"FINOVA Affiliate" has the meaning set forth in Section 9.22 hereof.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect from time to time as set forth in the opinions
and pronouncements of the Accounting Principles Board and the American Institute
of Certified Public Accountants and the statements and pronouncements of the
Financial Accounting Standards Boards which are applicable to the circumstances
as of the date of determination consistently applied, except that, for the
financial covenants set forth in this Agreement, GAAP shall be determined on the
basis of such principles in effect on the date hereof and consistent with those
used in the preparation of the audited financial statements delivered to Lender
prior to the date hereof.
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"General Intangibles" means all general intangibles of Borrower,
whether now owned or hereafter created or acquired by Borrower, including,
without limitation, all choses in action, causes of action, corporate or other
business records, Deposit Accounts, inventions, designs, drawings, blueprints,
Trademarks, Licenses and Patents, names, trade secrets, goodwill, copyrights,
registrations, licenses, franchises, customer lists, security and other
deposits, rights in all litigation presently or hereafter pending for any cause
or claim (whether in contract, tort or otherwise), and all judgments now or
hereafter arising therefrom, all claims of Borrower against FINOVA, rights to
purchase or sell real or personal property, rights as a licensor or licensee of
any kind, royalties, telephone numbers, proprietary information, purchase
orders, and all insurance policies and claims (including without limitation
credit, liability, property and other insurance), tax refunds and claims,
computer programs, discs, tapes and tape files, claims under guaranties,
security interests or other security held by or granted to Borrower to secure
payment of any of the Receivables by an account debtor, all rights to
indemnification and all other intangible property of every kind and nature
(other than Receivables).
"Hazardous Substance" has the meaning set forth in Section 8.2(a)
hereof.
"Indebtedness" means all of Borrower's present and future obligations,
liabilities, debts, claims and indebtedness, contingent, fixed or otherwise,
however evidenced, created, incurred, acquired, owing or arising, whether under
written or oral agreement, operation of law or otherwise, and includes, without
limiting the foregoing (i) the Obligations, (ii) obligations and liabilities of
any Person secured by a lien, claim, encumbrance or security interest upon
property owned by Borrower, even though Borrower has not assumed or become
liable therefor, (iii) obligations and liabilities created or arising under any
lease (including Capital Leases) or conditional sales contract or other title
retention agreement with respect to property used or acquired by Borrower, even
though the rights and remedies of the lessor, seller or lender are limited to
repossession, (iv) all unfunded pension fund obligations and liabilities and (v)
deferred taxes.
"Initial Term" has the meaning set forth on the Schedule.
"Inventory" means all of Borrower's now owned and hereafter acquired
goods, merchandise or other personal property, wherever located, to be furnished
under any contract of service or held for sale or lease, all raw materials, work
in process, finished goods and materials and supplies of any kind, nature or
description which are or might be used or consumed in Borrower's business or
used in connection with the manufacture, packing, shipping, advertising, selling
or finishing of such goods, merchandise or other personal property, and all
documents of title or other documents representing them.
"IRC" means the Internal Revenue Code of 1986, as amended, and the
regulations thereunder.
"Loans" has the meaning set forth in Section 2.2 hereof.
"Loan Documents" means, collectively, this Agreement, any note or notes
executed by Borrower and payable to FINOVA, and any other present or future
agreement entered into in connection with this Agreement, together with all
alterations, amendments, changes, extensions, modifications, refinancings,
refundings, renewals, replacements, restatements, or supplements, of or to any
of the foregoing.
"Loan Party" means Borrower, each Subordinating Creditor and each other
party (other than FINOVA) to any Loan Document.
"Loan Reserves" means, as of any date of determination, such amounts as
FINOVA may from time to time establish and revise in good faith reducing the
amount of Revolving Credit Loans which would otherwise be available to Borrower
under the lending formula(s) provided in the Schedule: (a) to reflect events,
conditions, contingencies or risks which, as determined by FINOVA in good faith,
do or may affect either (i) the Collateral or any other property which is
security for the Obligations or its value, (ii) the assets, business or
prospects of Borrower or (iii) the security interests and other rights of FINOVA
in the Collateral (including the enforceability, perfection and priority
thereof) or (b) to reflect FINOVA's good faith belief that any collateral report
or financial information furnished by or on behalf of Borrower to FINOVA is or
may have been incomplete, inaccurate or misleading in any material respect or
(c) in respect of any state of facts which FINOVA determines in good faith
constitutes an Event of Default or may, with notice or passage of time or both,
constitute an Event of Default.
"Loan Year" means each twelve month period commencing on the Closing
Date.
"Maximum Interest Rate" has the meaning set forth in Section 2.9(c)
hereof.
"Multiemployer Plan" means a "multiemployer plan" as defined in ERISA
Sections 3(37) or 4001(a)(3) or IRC Section 414(f) which covers employees of
Borrower or any ERISA Affiliate.
"Net Worth" at any date means the Borrower's net worth as determined in
accordance with GAAP.
"Obligations" means all present and future loans, advances, debts,
liabilities, obligations, covenants, duties and indebtedness at any time owing
by Borrower to FINOVA, whether evidenced by this Agreement, any note or other
instrument or document, whether arising from an extension of credit, opening of
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a letter of credit, banker's acceptance, loan, guaranty, indemnification or
otherwise, whether direct or indirect (including, without limitation, those
acquired by assignment and any participation by FINOVA in Borrower's debts owing
to others), absolute or contingent, due or to become due, including, without
limitation, all interest, charges, expenses, fees, attorney's fees, expert
witness fees, Examination Fee, Collateral Monitoring Fee, Closing Fee, Success
Fee, Unused Line Fee, Termination Fee and any other sums chargeable to Borrower
hereunder or under any other agreement with FINOVA.
"Operating Cash Flow/Actual" means, for any period, Borrower's net
income or loss (excluding the effect of any extraordinary gains or losses),
determined in accordance with GAAP, plus or minus each of the following items,
to the extent deducted from or added to the revenues of Borrower in the
calculation of net income or loss: (i) depreciation; (ii) amortization and other
non-cash charges; (iii) interest expense paid or accrued; (iv) total federal and
state income tax expense determined as the accrued liability of Borrower in
respect of such period, regardless of what portion of such expense has actually
been paid by Borrower during such period; and after deduction for each of (a)
federal and state income taxes, to the extent actually paid during such period;
(b) any non-cash income; and (c) all actual Capital Expenditures made during
such period and not financed.
"Overadvance" has the meaning set forth in Section 2.3.
"Overline" has the meaning set forth in Section 2.3.
"PBGC" means the Pension Benefit Guarantee Corporation.
"Permitted Discretion" means FINOVA's judgment exercised in good faith
based upon its consideration of any factor which FINOVA believes in good faith:
(i) will or could adversely affect the value of any Collateral, the
enforceability or priority of FINOVA's liens thereon or the amount which FINOVA
would be likely to receive (after giving consideration to delays in payment and
costs of enforcement) in the liquidation of such Collateral; (ii) suggests that
any collateral report or financial information delivered to FINOVA by any Person
on behalf of the Borrower is incomplete, inaccurate or misleading in any
material respect; (iii) materially increases the likelihood of a bankruptcy,
reorganization or other insolvency proceeding involving the Borrower, any Loan
Party or any of the Collateral, or (iv) creates or reasonably could be expected
to create an Event of Default. In exercising such judgment, FINOVA may consider
such factors already included in or tested by the definition of Eligible
Receivables (if applicable), as well as any of the following: (i) the financial
and business climate of the Borrower's industry and general macroeconomic
conditions, (ii) changes in collection history and dilution with respect to the
Receivables, (iii) changes in any concentration of risk with respect to
Receivables, and (iv) any other factors that change the credit risk of lending
to the Borrower on the security of the Receivables. The burden of establishing
lack of good faith hereunder shall be on the Borrower.
"Permitted Encumbrance" means each of the liens, mortgages and other
security interests set forth on the Schedule.
"Permitted Senior Indebtedness" has the meaning set forth in the
Schedule.
"Person" means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation, limited
liability company, government, or any agency or political division thereof, or
any other entity.
"Plan" means any plan described in ERISA Section 3(2) maintained for
employees of Borrower or any ERISA Affiliate, other than a
Multiemployer Plan. "Pledgors" has the meaning set forth in Section
4.1(cc) hereof.
"Preferred Stock" has the meaning set forth in the Schedule.
"Prepared Financials" means the balance sheets of Borrower as of the
date set forth in the Schedule in the section entitled `Reporting Requirements'
, and as of each subsequent date on which audited balance sheets are delivered
to FINOVA from time to time hereunder, and the related statements of operations,
changes in stockholder's equity and changes in cash flow for the periods ended
on such dates.
"Prime Rate" has the meaning set forth in the Schedule.
"Prohibited Transaction" means any transaction described in Section 406
of ERISA which is not exempt by reason of Section 408 of ERISA, and any
transaction described in Section 4975(c) of the IRC which is not exempt by
reason of Section 4975(c)(2) of the IRC.
"Property" has the meaning set forth in Section 8.2(a) hereof.
"Receivables" means all of Borrower's now owned and hereafter acquired
accounts (whether or not earned by performance), proceeds of any letters of
credit naming Borrower as beneficiary, contract rights, chattel paper,
instruments, documents and all other forms of obligations at any time owing to
Borrower, all guaranties and other security therefor, whether secured or
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unsecured, all merchandise returned to or repossessed by Borrower, and all
rights of stoppage in transit and all other rights or remedies of an unpaid
vendor, lienor or secured party.
"Renewal Term" has the meaning set forth on the Schedule.
"Reportable Event" means a reportable event described in Section 4043
of ERISA or the regulations thereunder, a withdrawal from a Plan described in
Section 4063 of ERISA, or a cessation of operations described in Section 4068(f)
of ERISA.
"Revolving Credit Loans" has the meaning set forth in the Schedule.
"Revolving Credit Limit" has the meaning set forth in the Schedule.
"Revolving Interest Rate" has the meaning set forth in the Schedule.
"Schedule" has the meaning set forth in the preamble.
"Seller" has the meaning set forth in the Schedule.
"Seller Subordinated Debt" has the meaning set forth in the Schedule.
"Senior Contractual Debt Service" means, for any period, the sum of
payments made or required to be made by Borrower during such period for (i)
interest and scheduled principal payments due on the Term Loans (excluding
voluntary prepayment and (ii) interest only payments due on the Revolving Credit
Loans facility plus the Collateral Monitoring Fee, the Success Fee and the
Unused Line Fee, and (iii) principal and interest payments due on the Permitted
Senior Indebtedness.
"Start Date" has the meaning set forth in the Schedule.
"Stock Pledge Agreement" has the meaning set forth in Section 4.1(y)
hereof.
"Subordinated Debt" means liabilities of Borrower the repayment of
which is subordinated, to the payment and performance of the Obligations,
pursuant to a subordination agreement acceptable to FINOVA in its sole
discretion. The Subordinated Debt shall include, without limitation, the Seller
Subordinated Debt.
"Subordinating Creditor" has the meaning set forth in the Schedule.
"Success Fee" has the meaning set forth in the Schedule.
"Term Loans" has the meaning set forth in the Schedule.
"Termination Fee" has the meaning set forth in Section 9.2(d) hereof.
"Total Contractual Debt Service" means, for any period, the sum of
payments made (or, as to clause (i) of this sentence, required to be made) by
Borrower during such period for (i) Senior Contractual Debt Service, and (ii)
interest and scheduled principal payments due on any and all other Indebtedness
of Borrower, including without limitation, the Subordinated Indebtedness.
"Total Facility" has the meaning set forth in Section 2.1 hereof.
"Trademarks, Copyrights, Licenses and Patents" means all of Borrower's
right, title and interest in and to, whether now owned or hereafter acquired:
(i) trademarks, trademark registrations, trade names, trade name registrations,
and trademark or trade name applications, including without limitation such as
are listed on the Schedule attached hereto and made a part hereof, as the same
may be amended from time to time, and (a) renewals thereof, (b) all income,
royalties, damages and payments now and hereafter due and/or payable with
respect thereto, including without limitation, damages and payments for past or
future infringements thereof, (c) the right to ▇▇▇ for past, present and future
infringements thereof, (d) all rights corresponding thereto throughout the
world, and (e) the goodwill of the business operated by Borrower connected with
and symbolized by any trademarks or trade names; (ii) copyrights, copyright
registrations and copyright applications, including without limitation such as
are listed on the Schedule attached hereto and made a part hereof, as the same
may be amended from time to time, and (a) renewals thereof, (b) all income,
royalties, damages and payments now and hereafter due and/or payable with
respect thereto, including without limitation, damages and payments for past or
future infringements thereof, (c) the right to ▇▇▇ for past, present and future
infringements thereof, and (d) all rights corresponding thereto throughout the
world; (iii) license agreements, including without limitation such as are listed
on the Schedule attached hereto and made a part hereof, and the right to prepare
for sale, sell and advertise for sale any Inventory now or hereafter owned by
Borrower and now or hereafter covered by such licenses; and (iv) patents and
patent applications, registered or pending, including without limitation such as
are listed on the Schedule attached hereto, together with all income, royalties,
shop rights, damages and payments thereto, the right to ▇▇▇ for infringements
thereof, and all rights thereto throughout the world and all reissues,
divisions, continuations, renewals, extensions and continuations-in-part
thereof.
"Unused Line Fee" has the meaning set forth in the Schedule.
5
1.2 Other Terms. All accounting terms used in this Agreement, unless
otherwise indicated, shall have the meanings given to such terms in accordance
with GAAP. All other terms contained in this Agreement, unless otherwise
indicated, shall have the meanings provided by the Code, to the extent such
terms are defined therein.
2. LOANS; INTEREST RATE AND OTHER CHARGES.
2.1 Total Facility. Upon the terms and conditions set forth herein and
provided that no Event of Default or event which, with the giving of notice or
the passage of time, or both, would constitute an Event of Default, shall have
occurred and be continuing, FINOVA shall, upon Borrower's request, make advances
to Borrower from time to time in an aggregate outstanding principal amount not
to exceed the Total Facility amount (the "Total Facility") set forth on the
Schedule hereto, subject to deduction of reserves for accrued interest and such
other reserves as FINOVA deems proper from time to time, and less amounts FINOVA
may be obligated to pay in the future on behalf of Borrower. The Schedule is an
integral part of this Agreement and all references to "herein", "herewith" and
words of similar import shall for all purposes be deemed to include the
Schedule.
2.2 Loans. Advances under the Total Facility ("Loans" and individually,
a "Loan") shall be comprised of the amounts shown on the Schedule.
2.3 Overlines; Overadvances. If at any time or for any reason the
outstanding amount of advances extended or issued pursuant hereto exceeds any of
the dollar limitations ("Overline") or percentage limitations ("Overadvance") in
the Schedule, then Borrower shall, upon FINOVA's demand, immediately pay to
FINOVA, in cash, the full amount of such Overline or Overadvance. Without
limiting Borrower's obligation to repay to FINOVA on demand the amount of any
Overline or Overadvance, Borrower agrees to pay FINOVA interest on the
outstanding principal amount of any Overline or Overadvance, on demand, at the
rate set forth on the Schedule and applicable to the Revolving Credit Loans.
2.4 [RESERVED].
2.5 Loan Account. All advances made hereunder shall be added to and
deemed part of the Obligations when made. FINOVA may from time to time charge
all Obligations of Borrower to Borrower's loan account with FINOVA.
2.6 Interest; Fees. Borrower shall pay FINOVA interest on the daily
outstanding balance of the Obligations at the per annum rate set forth on the
Schedule. Borrower shall also pay FINOVA the fees set forth on the Schedule.
2.7 Default Interest Rate. Upon the occurrence and during the
continuation of an Event of Default, Borrower shall pay FINOVA interest on the
daily outstanding balance of the Obligations at a rate per annum which is two
percent (2%) in excess of the rate which would otherwise be applicable thereto
pursuant to the Schedule.
2.8 Examination Fee. Borrower agrees to pay to FINOVA the Examination
Fee in the amount set forth on the Schedule in connection with each audit or
examination of Borrower performed by FINOVA prior to or after the date hereof.
Without limiting the generality of the foregoing, Borrower shall pay to FINOVA
an initial Examination Fee in an amount equal to the amount set forth on the
Schedule. Such initial Examination Fee shall be deemed fully earned at the time
of payment and due and payable upon the closing of this transaction, and shall
be deducted from any good faith deposit paid by Borrower to FINOVA prior to the
date of this Agreement.
2.9 Excess Interest.
(a) The contracted for rate of interest of the loan contemplated
hereby, without limitation, shall consist of the following: (i) the interest
rate set forth on the Schedule, calculated and applied to the principal balance
of the Obligations in accordance with the provisions of this Agreement; (ii)
interest after an Event of Default, calculated and applied to the amount of the
Obligations in accordance with the provisions hereof; and (iii) all Additional
Sums (as herein defined), if any. Borrower agrees to pay an effective contracted
for rate of interest which is the sum of the above-referenced elements. The
Examination Fee, attorneys fees, expert witness fees, Collateral Monitoring Fee,
Closing Fee, Success Fees, Termination Fee, Unused Line Fee, other charges,
goods, things in action or any other sums or things of value paid or payable by
Borrower (collectively, the "Additional Sums"), whether pursuant to this
Agreement or any other documents or instruments in any way pertaining to this
lending transaction, or otherwise with respect to this lending transaction, that
under any applicable law may be deemed to be interest with respect to this
lending transaction, for the purpose of any applicable law that may limit the
maximum amount of interest to be charged with respect to this lending
transaction, shall be payable by Borrower as, and shall be deemed to be,
additional interest and for such purposes only, the agreed upon and "contracted
for rate of interest" of this lending transaction shall be deemed to be
increased by the rate of interest resulting from the inclusion of the Additional
Sums.
(b) It is the intent of the parties to comply with the usury laws of
the State of Arizona (the "Applicable Usury Law"). Accordingly, it is agreed
that notwithstanding any provisions to the contrary in this Agreement, or in any
of the documents securing payment hereof or otherwise relating hereto, in no
event shall this Agreement or such documents require the payment or permit the
collection of interest in excess of the maximum contract rate permitted by the
Applicable Usury Law (the "Maximum Interest Rate"). In the event (a) any such
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excess of interest otherwise would be contracted for, charged or received from
Borrower or otherwise in connection with the loan evidenced hereby, or (b) the
maturity of the Obligations is accelerated in whole or in part, or (c) all or
part of the Obligations shall be prepaid, so that under any of such
circumstances the amount of interest contracted for, shared or received in
connection with the loan evidenced hereby, would exceed the Maximum Interest
Rate, then in any such event (1) the provisions of this paragraph shall govern
and control, (2) neither Borrower nor any other Person now or hereafter liable
for the payment of the Obligations shall be obligated to pay the amount of such
interest to the extent that it is in excess of the Maximum Interest Rate, (3)
any such excess which may have been collected shall be either applied as a
credit against the then unpaid principal amount of the Obligations or refunded
to Borrower, at FINOVA's option, and (4) the effective rate of interest shall be
automatically reduced to the Maximum Interest Rate. It is further agreed,
without limiting the generality of the foregoing, that to the extent permitted
by the Applicable Usury Law; (x) all calculations of interest which are made for
the purpose of determining whether such rate would exceed the Maximum Interest
Rate shall be made by amortizing, prorating, allocating and spreading during the
period of the full stated term of the loan evidenced hereby, all interest at any
time contracted for, charged or received from Borrower or otherwise in
connection with such loan; and (y) in the event that the effective rate of
interest on the loan should at any time exceed the Maximum Interest Rate, such
excess interest that would otherwise have been collected had there been no
ceiling imposed by the Applicable Usury Law shall be paid to FINOVA from time to
time, if and when the effective interest rate on the loan otherwise falls below
the Maximum Interest Rate, to the extent that interest paid to the date of
calculation does not exceed the Maximum Interest Rate, until the entire amount
of interest which would otherwise have been collected had there been no ceiling
imposed by the Applicable Usury Law has been paid in full. Borrower further
agrees that should the Maximum Interest Rate be increased at any time hereafter
because of a change in the Applicable Usury Law, then to the extent not
prohibited by the Applicable Usury Law, such increases shall apply to all
indebtedness evidenced hereby regardless of when incurred; but, again to the
extent not prohibited by the Applicable Usury Law, should the Maximum Interest
Rate be decreased because of a change in the Applicable Usury Law, such
decreases shall not apply to the indebtedness evidenced hereby regardless of
when incurred.
2.10 Principal Payments; Proceeds of Collateral.
(a) Principal Payments. Except where evidenced by notes or other
instruments issued or made by Borrower to FINOVA specifically containing payment
provisions which are in conflict with this Section 2.10 (in which event the
conflicting provisions of said notes or other instruments shall govern and
control), that portion of the Obligations consisting of principal payable on
account of Loans shall be payable by Borrower to FINOVA immediately upon the
earliest of (i) the receipt by FINOVA or, except as provided in Section 2.10(b)
below, Borrower of any proceeds of any of the Collateral, to the extent of said
proceeds, (ii) the occurrence of an Event of Default in consequence of which
FINOVA elects to accelerate the maturity and payment of such loans, or (iii) any
termination of this Agreement pursuant to Section 9.2 hereof; provided, however,
that any Overadvance or Overline shall be payable on demand pursuant to the
provisions of Section 2.3 hereof.
(b) Collections. Until Finova notifies Borrower to the contrary, as
provided in the next succeeding sentence, Borrower may make collection of all
Receivables. Immediately upon FINOVA's directing Borrower to do so, Borrower
shall, as directed by FINOVA, either (i) make collection of all Receivables for
FINOVA by directing all accounts debtors and other third parties to remit all
payments owing to Borrower to a lockbox established in connection with a Blocked
Account (and to the extent that Borrower nevertheless receives any payments
directly, Borrower shall receive all payments as trustee of FINOVA in their
original form as set forth below, duly endorsed in blank or cause the same to be
deposited in a Blocked Account or Lockbox Account) or (ii) make collection of
all Receivables for FINOVA and receive all such payments or sums as trustee of
FINOVA and immediately deliver all such payments or sums to FINOVA in their
original form, duly endorsed in blank or cause the same to be deposited into a
Blocked Account or Dominion Account. FINOVA or its designee may, at any time,
notify account debtors that the Receivables have been assigned to FINOVA and of
FINOVA's security interest therein, and may collect the Receivables directly and
charge the collection costs and expenses to Borrower's loan account. Borrower
agrees that, in computing the charges under this Agreement, all items of payment
shall be deemed applied by FINOVA on account of the Obligations one (1) Business
Day after receipt by FINOVA of good funds which have been finally credited to
FINOVA's account, whether such funds are received directly from Borrower or from
the Blocked Account bank or the Dominion Account bank, pursuant to Section
2.10(c) hereof, and this provision shall apply regardless of the amount of the
Obligations outstanding or whether any Obligations are outstanding; provided,
that if any such good funds are received after 12:00 p.m. noon (Los Angeles
time) on any Business Day or at any time on any day not constituting a Business
Day, such funds shall be deemed received on the immediately following Business
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Day. FINOVA is not, however, required to credit Borrower's account for the
amount of any item of payment which is unsatisfactory to FINOVA in its Permitted
Discretion and FINOVA may charge Borrower's loan account for the amount of any
item of payment which is returned to FINOVA unpaid.
(c) Establishment of a Lockbox Account or Dominion Account. Upon
FINOVA's direction to Borrower to do so, as provided hereinabove, Borrower shall
cause all proceeds of Collateral to be deposited into a lockbox account, or such
other "blocked account" as FINOVA may require (each, a "Blocked Account")
pursuant to an arrangement with such bank as may be selected by Borrower and be
acceptable to FINOVA which proceeds, unless otherwise provided herein, shall be
applied in payment of the Obligations in such order as FINOVA determines in its
sole discretion. Borrower shall issue to any such bank an irrevocable letter of
instruction directing said bank to transfer such funds so deposited to FINOVA,
either to any account maintained by FINOVA at said bank or by wire transfer to
appropriate account(s) of FINOVA. All funds deposited in a Blocked Account shall
immediately become the sole property of FINOVA and Borrower shall obtain the
agreement by such bank to waive any offset rights against the funds so
deposited. FINOVA assumes no responsibility for any Blocked Account arrangement,
including without limitation, any claim of accord and satisfaction or release
with respect to deposits accepted by any bank thereunder. Alternatively, FINOVA
may establish depository accounts in the name of FINOVA at a bank or banks for
the deposit of such funds (each, a "Dominion Account") and Borrower shall
deposit all proceeds of Receivables and all cash proceeds of any sale of
Inventory or, to the extent permitted herein, Equipment or cause same to be
deposited, in kind, in such Dominion Accounts of FINOVA in lieu of depositing
same to Blocked Accounts, and, unless otherwise provided herein, all such funds
shall be applied by FINOVA to the Obligations in such order as FINOVA determines
in its sole discretion.
(d) Payments Without Deductions. Borrower shall pay principal,
interest, and all other amounts payable hereunder, or under any other Loan
Document, without any deduction whatsoever, including, but not limited to, any
deduction for any setoff or counterclaim.
(e) Collection Days Upon Repayment. In the event Borrower repays the
Obligations in full at any time hereafter, such payment in full shall be
credited (conditioned upon final collection) to Borrower's loan account one (1)
Business Day after FINOVA's receipt thereof.
(f) Monthly Accountings. FINOVA shall provide Borrower monthly with an
account of advances, charges, expenses and payments made pursuant to this
Agreement. Such account shall be deemed correct, accurate and binding on
Borrower and an account stated (except for reverses and reapplications of
payments made and corrections of errors discovered by FINOVA), unless Borrower
notifies FINOVA in writing to the contrary within thirty (30) days after each
account is rendered, describing the nature of any alleged errors or admissions.
2.11 Application of Collateral. Except as otherwise provided herein,
FINOVA shall have the continuing and exclusive right to apply or reverse and
re-apply any and all payments to any portion of the Obligations in such order
and manner as FINOVA shall determine in its sole discretion. To the extent that
Borrower makes a payment or FINOVA receives any payment or proceeds of the
Collateral for Borrower's benefit which is subsequently invalidated, declared to
be fraudulent or preferential, set aside or required to be repaid to a trustee,
debtor in possession, receiver or any other party under any bankruptcy law,
common law or equitable cause, or otherwise, then, to such extent, the
Obligations or part thereof intended to be satisfied shall be revived and
continue as if such payment or proceeds had not been received by FINOVA.
2.12 Application of Payments. The amount of all payments or amounts
received by FINOVA with respect to the Loan shall be applied to the extent
applicable under this Agreement: (i) first, to accrued interest through the date
of such payment, including any Default Interest; (ii) then, to any late fees,
overdue risk assessments, Examination Fee and expenses, collection fees and
expenses and any other fees and expenses due to FINOVA hereunder; and (iii)
last, the remaining balance, if any, to the unpaid principal balance of the
Loan; provided however, while an Event of Default exists under this Agreement,
or under any other Loan Document, each payment hereunder shall be (x) held as
cash collateral to secure contingent obligations arising under the Loan
Documents and/or (y) applied to amounts owed to FINOVA by Borrower as FINOVA in
its sole discretion may determine. In calculating interest and applying payments
as set forth above: (a) interest shall be calculated and collected through the
date a payment is actually applied by FINOVA under the terms of this Agreement;
(b) interest on the outstanding balance shall be charged during any grace period
permitted hereunder; (c) at the end of each month, all accrued and unpaid
interest and other charges provided for hereunder shall be added to the
principal balance of the Loan; and (d) to the extent that Borrower makes a
payment or FINOVA receives any payment or proceeds of the Collateral for
Borrower's benefit that is subsequently invalidated, set aside or required to be
repaid to any other Person, then, to such extent, the Obligations intended to be
satisfied shall be revived and continue as if such payment or proceeds had not
been received by FINOVA and FINOVA may adjust the Loan balances as FINOVA, in
its sole discretion, deems appropriate under the circumstances.
2.13 Notification of Closing. Borrower shall provide FINOVA with at
least forty-eight (48) hours prior written notice of the Closing Date, to enable
8
FINOVA to arrange for the availability of funds. In the event the closing does
not take place on the date specified in Borrower's notice to FINOVA, other than
through the fault of FINOVA, Borrower agrees to reimburse FINOVA for FINOVA's
costs to maintain the necessary funds available for the closing, at the Term
Interest Rate A with respect to the applicable amount specified in the Schedule,
at the Term Interest Rate B and C with respect to the applicable amount
specified in the Schedule, and at the Revolving Interest Rate with respect to an
amount equal to the initial advance under the Revolving Credit Loans facility
which is to be made on the Closing Date, for the number of days which elapse
between the date specified in Borrower's notice and the date upon which the
closing actually occurs (which number of days shall not include the date
specified in Borrower's notice, but shall include the Closing Date).
3. SECURITY.
3.1 Security Interest in the Collateral. To secure the payment and
performance of the Obligations when due, Borrower hereby grants to FINOVA a
first priority security interest (subject only to Permitted Encumbrances) in all
of Borrower's now owned or hereafter acquired or arising Inventory, Equipment,
Receivables, life insurance policies and the proceeds thereof, Trademarks,
Copyrights, Licenses and Patents, Borrower's rights, but not its obligations,
under the Acquisition Documents, Investment Property (as defined in Section
9-115 of the Code) and General Intangibles, including, without limitation, all
of Borrower's Deposit Accounts, money, any and all property now or at any time
hereafter in FINOVA's possession (including claims and credit balances), and all
proceeds (including proceeds of any insurance policies, proceeds of proceeds and
claims against third parties), all products and all books and records and
computer data related to any of the foregoing (all of the foregoing, together
with all other property in which FINOVA may be granted a lien or security
interest, is referred to herein, collectively, as the "Collateral").
3.2 Perfection and Protection of Security Interest. Borrower shall, at
its expense, take all actions requested by FINOVA at any time to perfect,
maintain, protect and enforce FINOVA's first priority security interest and
other rights in the Collateral and the priority thereof from time to time,
including, without limitation, (i) executing and filing financing or
continuation statements and amendments thereof and executing and delivering such
documents and titles in connection with motor vehicles as FINOVA shall require,
all in form and substance satisfactory to FINOVA, (ii) maintaining a perpetual
inventory and complete and accurate stock records, (iii) delivering to FINOVA
warehouse receipts covering any portion of the Collateral located in warehouses
and for which warehouse receipts are issued, and transferring Inventory to
warehouses designated by FINOVA, (iv) placing notations on Borrower's books of
account to disclose FINOVA's security interest therein and (v) delivering to
FINOVA all letters of credit on which Borrower is named beneficiary. FINOVA may
file, without Borrower's signature, one or more financing statements disclosing
FINOVA's security interest under this Agreement. Borrower agrees that a carbon,
photographic, photostatic or other reproduction of this Agreement or of a
financing statement is sufficient as a financing statement. If any Collateral is
at any time in the possession or control of any warehouseman, bailee or any of
Borrower's agents or processors, Borrower shall notify such Person of FINOVA's
security interest in such Collateral and, upon FINOVA's request, instruct them
to hold all such Collateral for FINOVA's account subject to FINOVA's
instructions. From time to time, Borrower shall, upon FINOVA's request, execute
and deliver confirmatory written instruments pledging the Collateral to FINOVA,
but Borrower's failure to do so shall not affect or limit FINOVA's security
interest or other rights in and to the Collateral. Until the Obligations have
been fully satisfied and FINOVA's obligation to make further advances hereunder
has terminated, FINOVA's security interest in the Collateral shall continue in
full force and effect.
3.3 Preservation of Collateral. FINOVA may, in its Permitted
Discretion, at any time discharge any lien or encumbrance on the Collateral or
bond the same, pay any insurance, maintain guards, pay any service bureau,
obtain any record or take any other action to preserve the Collateral and charge
the cost thereof to Borrower's loan account as an Obligation; provided, however,
that unless an Event of Default has occurred and is continuing, FINOVA shall
provide Borrower with five (5) days advance notice of its intention to take any
such action.
3.4 Insurance. Borrower will maintain and deliver evidence to FINOVA of
such insurance as is required by FINOVA, written by insurers, in amounts, and
with lender's loss payee, additional insured, and other endorsements,
satisfactory to FINOVA. All premiums with respect to such insurance shall be
paid by Borrower as and when due. Accurate and certified copies of the policies
shall be delivered by Borrower to FINOVA. If Borrower fails to comply with this
Section, FINOVA may (but shall not be required to) procure such insurance and
endorsements at Borrower's expense and charge the cost thereof to Borrower's
loan account as an Obligation.
3.5 Collateral Reporting.
(a) Invoices. Borrower shall not re-date any invoice or sale from the
original date thereof or make sales on extended terms beyond those customary in
Borrower's industry, or otherwise extend or modify the term of any Receivable.
If Borrower becomes aware of any matter affecting any Receivable, including
9
information affecting the credit of the account debtor thereon, Borrower shall
promptly notify FINOVA in writing.
(b) Instruments. In the event any Receivable is or becomes evidenced by
a promissory note, trade acceptance or any other instrument for the payment of
money, Borrower shall immediately deliver such instrument to FINOVA
appropriately endorsed to FINOVA and, regardless of the form of any presentment,
demand, notice of dishonor, protest and notice of protest with respect thereto,
Borrower shall remain liable thereon until such instrument is paid in full.
3.6 Receivables.
(a) Bona Fide Sale, Etc. (i) Borrower represents and warrants that each
Receivable covers and shall cover a bona fide sale or lease and delivery by it
of goods or the rendition by it of services in the ordinary course of its
business, and shall be for a liquidated amount and FINOVA's security interest
shall not be subject to any offset, deduction, counterclaim, rights of return or
cancellation, lien or other condition. If, prior to the Conversion Date, any
representation or warranty herein is breached as to any Receivable, FINOVA may
remove such Receivable from the Receivables included in calculating the
availability of Revolving Credit Loans pursuant to Section 2.2 of the Schedule.
If from and after the Conversion Date, any representation or warranty herein is
breached as to any Receivable or any Receivable ceases to be an Eligible
Receivable for any reason other than payment thereof, then FINOVA may, in
addition to its other rights hereunder, designate any and all Receivables owing
by that account debtor as not Eligible Receivables. FINOVA shall in any such
event retain its security interest in all Receivables, whether or not included
in the availability calculation prior to the Conversion Date or included as
Eligible Receivables from and after the Conversion Date, until the Obligations
have been fully satisfied and FINOVA's obligation to provide loans hereunder has
terminated.
(ii) FINOVA at any time shall be entitled to (i) establish and increase
or decrease reserves against Receivables, prior to the Conversion Date, and
Eligible Receivables after the Conversion Date, (ii) reduce the advance rate in
the Schedule or restore such advance rate to any level equal to or below the
advance rates set forth in the Schedule or (iii) impose additional restrictions
(or eliminate the same) to the standards of eligibility set forth in the
definition of "Eligible Receivables", in the exercise of its Permitted
Discretion. FINOVA may but shall not be required to rely on the schedules and/or
reports delivered to FINOVA in connection herewith in determining the
eligibility of Receivables at any time after the Conversion Date. Reliance
thereon by FINOVA from time to time shall not be deemed to limit the right of
FINOVA to revise advance rates or standards of eligibility as provided above.
(b) Disputes. Borrower shall notify FINOVA promptly of all disputes or
claims and settle or adjust such disputes or claims at no expense to FINOVA, but
no discount, credit or allowance shall be granted to any account debtor and no
returns of merchandise shall be accepted by Borrower without FINOVA's consent,
except for discounts, credits and allowances made or given in the ordinary
course of Borrower's business. FINOVA may, at any time after the occurrence of
an Event of Default, settle or adjust disputes or claims directly with account
debtors for amounts and upon terms which FINOVA considers advisable in its
reasonable credit judgment and, in all cases, FINOVA shall credit Borrower's
loan account with only the net amounts received by FINOVA in payment of any
Receivables.
3.7 Equipment. Borrower shall keep and maintain the Equipment in good
operating condition and repair and make all necessary replacements thereto to
maintain and preserve the value and operating efficiency thereof at all times
consistent with Borrower's past practice, ordinary wear and tear excepted.
Borrower shall not permit any item of Equipment to become a fixture (other than
a trade fixture) to real estate or an accession to other property.
3.8 Other Liens; No Disposition of Collateral. Borrower represents,
warrants and covenants that except for FINOVA's security interest, Permitted
Encumbrances, and such other liens, claims and encumbrances as may be permitted
by FINOVA in its sole discretion from time to time in writing, (a) all
Collateral is and shall continue to be owned by it free and clear of all liens,
claims and encumbrances whatsoever and (b) Borrower shall not, without FINOVA's
prior written approval, sell, encumber or dispose of or permit the sale,
encumbrance or disposal of any Collateral or all or any substantial part of any
of its other assets (or any interest of Borrower therein), except for the sale
of Inventory in the ordinary course of Borrower's business. In the event FINOVA
gives any such prior written approval with respect to any such sale of
Collateral, the same may be conditioned on the sale price being equal to, or
greater than, an amount acceptable to FINOVA. The proceeds of any such sales of
Collateral shall be remitted to FINOVA pursuant to this Agreement for
application to the Obligations.
3.9 Collateral Security. The Obligations shall constitute one loan
secured by the Collateral. FINOVA may, in its sole discretion, (i) exchange,
enforce, waive or release any of the Collateral, (ii) apply Collateral and
direct the order or manner of sale thereof as it may determine, and (iii)
settle, compromise, collect or otherwise liquidate any Collateral in any manner
without affecting its right to take any other action with respect to any other
Collateral.
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4. CONDITIONS OF CLOSING.
4.1 Initial Advance. The obligation of FINOVA to make the initial
advance hereunder is subject to the fulfillment, to the satisfaction of FINOVA
and its counsel, of each of the following conditions on or prior to the date set
forth on the Schedule:
(a) Loan Documents. FINOVA shall have received each of the following
Loan Documents: (i) the Agreement fully and properly executed by Borrower; (ii)
promissory notes in such amounts and on such terms and conditions as FINOVA
shall specify, executed by Borrower; (iii) Support Agreements executed by the
applicable parties; (iv) such security agreements, intellectual property
assignments, pledge agreements, mortgages and deeds of trust as FINOVA may
require with respect to this Agreement executed by each of the parties thereto
and, if applicable, duly acknowledged for recording or filing in the appropriate
governmental offices; (v) Subordination Agreements in form and substance
acceptable to FINOVA, executed by each of the Subordinating Creditors, together
with copies of all instruments subject thereto showing a legend indicating such
subordination; (vi) such Blocked Account or Dominion Account agreements as it
shall determine; and (vii) such other documents, instruments and agreements in
connection herewith as FINOVA shall require, executed, certified and/or
acknowledged by such parties as FINOVA shall designate;
(b) Minimum Excess Availability. Borrower shall have Excess
Availability under the Revolving Credit Loans facility of not less than the
amount specified in the Schedule, after giving effect to the initial advance
hereunder and after giving effect to any applicable Loan Reserves against
borrowing availability under the Revolving Credit Loans.
(c) Terminations by Existing Lender. Borrower's and Seller's existing
lender(s) shall have executed and delivered UCC termination statements and other
documentation evidencing the termination of its liens and security interests in
the assets of Borrower (including, without limitation, all of those assets being
acquired pursuant to the Acquisition) or a subordination agreement in form and
substance satisfactory to FINOVA in its sole discretion;
(d) Charter Documents. FINOVA shall have received copies of Borrower's
By-laws and Articles or Certificate of Incorporation, as amended, modified, or
supplemented to the Closing Date, certified by the Secretary of Borrower;
(e) Good Standing. FINOVA shall have received a certificate of
corporate status with respect to Borrower, dated within ten (10) days of the
Closing Date, by the Secretary of State of the state of incorporation of
Borrower, which certificate shall indicate that Borrower is in good standing in
such state;
(f) Foreign Qualification. FINOVA shall have received certificates of
corporate status with respect to Borrower and each other Loan Party, each dated
within ten (10) days of the Closing Date, issued by the Secretary of State of
each state in which such party's failure to be duly qualified or licensed would
have a material adverse effect on its financial condition or assets, indicating
that such party is in good standing;
(g) Authorizing Resolutions and Incumbency. FINOVA shall have received
a certificate from the Secretary of Borrower attesting to (i) the adoption of
resolutions of Borrower's Board of Directors, and shareholders or members if
necessary, authorizing the borrowing of money from FINOVA and execution and
delivery of this Agreement and the other Loan Documents to which Borrower is a
party, and authorizing specific officers of Borrower to execute same, and (ii)
the authenticity of original specimen signatures of such officers;
(h) Insurance. FINOVA shall have received the insurance certificates
and certified copies of policies required by Section 3.4 hereof, in form and
substance satisfactory to FINOVA and its counsel, together with an additional
insured endorsement in favor of FINOVA with respect to all liability policies
and a lender's loss payable endorsement in favor of FINOVA with respect to all
casualty and business interruption policies, each in form and substance
acceptable to FINOVA and its counsel;
(i) Searches; Certificates of Title. FINOVA shall have received
searches reflecting the filing of its financing statements and fixture filings
in such jurisdictions as it shall determine, and shall have received
certificates of title with respect to the Collateral which shall have been duly
executed in a manner sufficient to perfect all of the security interests granted
to FINOVA;
(j) Landlord, Bailee and Mortgagee Waivers. FINOVA shall have received
landlord, bailee and/or mortgagee waivers from the lessors, bailees and/or
mortgagees of all locations where any Collateral is located;
(k) Fees. Borrower shall have paid all fees payable by it on the
Closing Date pursuant to this Agreement;
(l) Opinion of Counsel. FINOVA shall have received an opinion of
Borrower's counsel covering such matters as FINOVA shall determine in its sole
discretion;
(m) Officer Certificate. FINOVA shall have received a certificate of
the President and the Chief Financial Officer or similar official of Borrower,
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attesting to the accuracy of each of the representations and warranties of
Borrower set forth in this Agreement and the fulfillment of all conditions
precedent to the initial advance hereunder;
(n) Solvency Certificate. If requested, FINOVA shall have received a
signed certificate of the Borrower's duly elected Chief Financial Officer
concerning the solvency and financial condition of Borrower, on FINOVA's
standard form;
(o) Blocked Account. The Blocked Account referred to in Section 2.10(c)
hereof shall have been established to the satisfaction of FINOVA in its sole
discretion;
(p) [Intentionally Not Used];
(q) [Intentionally Not Used];
(r) Search and References. FINOVA shall have received and approved the
results of UCC, tax lien, litigation, judgment, and bankruptcy searches
regarding Borrower, Seller and such other Persons as Lender shall determine, and
shall have received satisfactory customer, vendor and credit reference checks on
Seller.
(s) No Material Adverse Changes. Prior to the Closing Date, there shall
have occurred no material adverse change in the financial condition of Seller or
Borrower, or in the condition of the assets of Seller, from that shown on the
draft financial statements for Seller and Borrower dated on the date set forth
in the Schedule. At the closing, Borrower shall deliver to FINOVA an officer's
certification confirming that Borrower is unaware of the existence of any such
material adverse change in Borrower's or Seller's financial condition.
(t) Material Agreements. FINOVA shall have received, reviewed and
approved all material agreements to which Borrower shall be a party, including
any such agreements of Seller which Borrower shall assume.
(u) Projections. Borrower shall submit cash flow projections and pro
forma balance sheet with adjusting entries (i) showing that the proposed
financing will provide sufficient funds for the Borrower's projected working
capital needs, and (ii) showing: (1) that the Borrower will have reasonably
sufficient capital for the conduct of its business following the initial
funding, and (2) that the Borrower will not incur debts beyond its ability to
pay such debts as they mature.
(v) Opinions. To the extent any Person other than Borrower shall be
parties to the Loan Documents, FINOVA reserves the right to require satisfactory
opinions of counsel for each such Person concerning the proper organization of
such Person and the due authorization, execution, delivery, enforceability,
validity and binding effect of the Loan Documents to which such Person is a
party. Each such opinion of counsel shall confirm, to the satisfaction of
FINOVA, that the opinion is being delivered to FINOVA at the instruction of the
party represented by such counsel, that FINOVA is entitled to rely on such
opinion and that for purposes of such reliance, FINOVA is deemed to be in
privity with the opining counsel.
(w) ADA Compliance. If necessary, as of the Closing Date, Borrower
shall be in compliance with the Americans with Disabilities Act of 1990 ("ADA"),
or, if any renovations of Borrower's facilities or modifications of Borrower's
employment practices shall be required to bring them into compliance with the
ADA, review and approval by FINOVA of Borrower's proposed plan to come into such
compliance. Borrower shall deliver representations and warranties to FINOVA
concerning Borrower's compliance with the ADA, and no evidence shall have come
to the attention of FINOVA indicating that Borrower is not in compliance with
the ADA (except to the extent that FINOVA has reviewed and approved Borrower's
plan to come into compliance).
(x) Subordination and Intercreditor Agreements. FINOVA and each
Subordinating Creditor shall have entered into a Subordination Agreement, in
form and substance satisfactory to FINOVA. Without limiting the generality of
the foregoing, Seller shall enter into one or more Subordination Agreements with
FINOVA, in form and substance satisfactory to FINOVA, providing that Seller's
right to payments in respect of the Seller Subordinated Indebtedness shall be
subordinated in right of payment to the Loan.
(y) Stock Pledge. 1-800 Auto Tow, Inc. ("Pledgor") shall have executed
and delivered to FINOVA a stock pledge agreement ("Stock Pledge Agreement"),
pledging in favor of FINOVA all of the issued and outstanding common capital
stock of each Borrower, other than Pledgor. FINOVA shall be in possession on the
Closing Date of original stock certificates evidencing the shares of each
Borrower's stock so pledged to FINOVA, and of undated stock Powers and
Assignments Apart from Certificate, executed in blank by Pledgors with respect
to all such shares.
(z) Acquisition Documents. FINOVA must review and find satisfactory all
Acquisition Documents. The Acquisition Documents must contain specific
representations and warranties, in form and substance satisfactory to FINOVA,
with respect to the accuracy of the financial information submitted by Seller,
and shall further contain indemnity provisions acceptable to FINOVA which shall
address, among other items, liability for environmental contamination and clean
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up, if any. In addition, FINOVA must review and find satisfactory all terms and
conditions applicable to any promissory notes delivered to evidence the Seller
Subordinated Debt.
(aa) Employment and Non-compete Agreements. FINOVA shall have reviewed
and approved all employment and non-compete agreements to be in effect as of the
Closing Date between Borrower and any Person.
(bb) Asset Appraisal. Borrower shall have provided to FINOVA, at
Borrower's sole cost and expense, an asset appraisal of all Borrower's fixed
assets upon which FINOVA shall be granted a first priority lien and security
interest, which appraisal must be acceptable to FINOVA in all respects.
(cc) Transaction Costs. Borrower shall provide to FINOVA a complete,
itemized summary of all transaction costs paid or incurred by any Person in
connection with the making of the Loan and the consummation of the Acquisition,
which transaction costs shall not exceed the amount set forth in the Schedule,
as well as appropriate documentation evidencing such costs and the payment
thereof. All such information must be acceptable to FINOVA, in FINOVA's sole
discretion, exercised in good faith.
(dd) Schedule Conditions. Borrower shall have complied with all
additional conditions precedent as set forth in the Schedule attached hereto.
(ee) Other Matters. All other documents and legal matters in connection
with the transactions contemplated by this Agreement shall have been delivered,
executed and recorded and shall be in form and substance satisfactory to FINOVA
and its counsel including, without limitation, each of the items listed on the
Closing Checklist attached as Exhibit 4.1 to the Schedule.
4.2 Subsequent Advances. The obligation of FINOVA to make any advance
(including the initial advance) shall be subject to the further conditions
precedent that, on and as of the date of such advance: (a) the representations
and warranties of Borrower set forth in this Agreement shall be accurate, before
and after giving effect to such advance and to the application of any proceeds
thereof; (b) no Event of Default and no event which, with notice or passage of
time or both, would constitute an Event of Default has occurred and is
continuing, or would result from such advance or from the application of any
proceeds thereof; (c) no material adverse change has occurred in the Borrower's
business, operations, financial condition, in the condition of the Collateral or
other assets of Borrower or in the prospect of repayment of the Obligations; and
(d) FINOVA shall have received such other approvals, opinions or documents as
FINOVA shall reasonably request.
5. REPRESENTATIONS AND WARRANTIES.
Borrower represents and warrants that:
5.1 Due Organization. It is a corporation duly organized, validly
existing and in good standing under the laws of the State set forth on the
Schedule, is qualified and authorized to do business and is in good standing in
all states in which such qualification and good standing are necessary in order
for it to conduct its business and own its property, and has all requisite power
and authority to conduct its business as presently conducted, to own its
property and to execute and deliver each of the Loan Documents to which it is a
party and perform all of its Obligations thereunder, and has not taken any steps
to wind-up, dissolve or otherwise liquidate its assets;
5.2 Other Names. Borrower has not, during the preceding five (5) years,
been known by or used any other corporate or fictitious name except as set forth
on the Schedule, nor has Borrower been the surviving corporation of a merger or
consolidation or acquired all or substantially all of the assets of any Person
during such time;
5.3 Due Authorization. The execution, delivery and performance by
Borrower of the Loan Documents to which it is a party have been authorized by
all necessary corporate action and do not and shall not constitute a violation
of any applicable law or of Borrower's Articles or Certificate of Incorporation
or By-Laws or any other document, agreement or instrument to which Borrower is a
party or by which Borrower or its assets are bound;
5.4 Binding Obligation. Each of the Loan Documents to which Borrower is
a party is the legal, valid and binding obligation of Borrower enforceable
against Borrower in accordance with its terms;
5.5 Intangible Property. Borrower possesses adequate assets, licenses,
patents, patent applications, copyrights, trademarks, trademark applications and
trade names for the present and planned future conduct of its business without
any known conflict with the rights of others, and each is valid and has been
duly registered or filed with the appropriate governmental authorities; each of
Borrower's patents, patent applications, copyrights, trademarks and trademark
applications which have been registered or filed with any governmental authority
(including the U.S. Patent and Trademark Office and the Library of Congress) are
listed by name, date and filing number on the Schedule;
5.6 Capital. Borrower has capital sufficient to conduct its business,
is able to pay its debts as they mature, and owns property having a fair salable
value greater than the amount required to pay all of its debts (including
contingent debts);
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5.7 Material Litigation. Borrower has no pending or overtly threatened
litigation, actions or proceedings which would materially and adversely affect
its business, assets, operations, prospects or condition, financial or
otherwise, or the Collateral or any of FINOVA's interests therein;
5.8 Title; Security Interests of FINOVA. Borrower has good,
indefeasible and merchantable title to the Collateral and, upon the execution
and delivery of the Loan Documents, the filing of UCC-1 Financing Statements,
delivery of the certificate(s) evidencing any pledged securities, the filing of
any collateral assignments or security agreements regarding Borrower,
Trademarks, Copyrights, Licenses and/or Patents, if any, with the appropriate
governmental offices and the recording of any mortgages or deeds of trust with
respect to real property, in each case in the appropriate offices, this
Agreement and such documents shall create valid and perfected first priority
liens in the Collateral, subject only to Permitted Encumbrances;
5.9 Restrictive Agreements; Labor Contracts. Borrower is not a party or
subject to any contract or subject to any charge, corporate restriction,
judgment, decree or order materially and adversely affecting its business,
assets, operations, prospects or condition, financial or otherwise, or which
restricts its right or ability to incur Indebtedness, and it is not party to any
labor dispute. In addition, no labor contract is scheduled to expire during the
Initial Term of this Agreement, except as disclosed to FINOVA in writing prior
to the date hereof;
5.10 Laws. Borrower is not in violation of any applicable statute,
regulation, ordinance or any order of any court, tribunal or governmental
agency, in any respect materially and adversely affecting the Collateral or its
business, assets, operations, prospects or condition, financial or otherwise;
5.11 Consents. Borrower has obtained or caused to be obtained or issued
any required consent of a governmental agency or other Person in connection with
the financing contemplated hereby;
5.12 Defaults. Borrower is not in default with respect to any note,
indenture, loan agreement, mortgage, lease, deed or other agreement to which it
is a party or by which it or its assets are bound, nor has any event occurred
which, with the giving of notice or the lapse of time, or both, would cause such
a default;
5.13 Financial Condition. The Prepared Financials fairly present
Borrower's financial condition and results of operations and those of such other
Persons described therein as of the date thereof in accordance with GAAP; there
are no material omissions from the Prepared Financials or other facts or
circumstances not reflected in the Prepared Financials; and there has been no
material and adverse change in such financial condition or operations since the
date of the initial Prepared Financials delivered to FINOVA hereunder;
5.14 ERISA. None of Borrower, any ERISA Affiliate, or any Plan is or
has been in violation of any of the provisions of ERISA, any of the
qualification requirements of IRC Section 401(a) or any of the published
interpretations thereunder, nor has Borrower or any ERISA Affiliate received any
notice to such effect. No notice of intent to terminate a Plan has been filed
under Section 4041 of ERISA, nor has any Plan been terminated under ERISA. The
PBGC has not instituted proceedings to terminate, or appointed a trustee to
administer, a Plan. No lien upon the assets of Borrower has arisen with respect
to a Plan. No prohibited transaction or Reportable Event has occurred with
respect to a Plan. Neither Borrower nor any ERISA Affiliate has incurred any
withdrawal liability with respect to any Multiemployer Plan. Borrower and each
ERISA Affiliate have made all contributions required to be made by them to any
Plan or Multiemployer Plan when due. There is no accumulated funding deficiency
in any Plan, whether or not waived;
5.15 Taxes. Borrower has filed all tax returns and such other reports
as it is required by law to file and has paid or made adequate provision for the
payment on or prior to the date when due of all taxes, assessments and similar
charges that are due and payable;
5.16 Locations; Federal Tax ID No. Borrower's chief executive office
and the offices and locations where it keeps the Collateral (except for
Inventory in transit) are at the locations set forth on the Schedule, except to
the extent that such locations may have been changed after notice to FINOVA in
accordance with Section 6.4 hereof; Borrower's federal tax identification number
is as shown on the Schedule;
5.17 Business Relationships. There exists no actual or threatened
termination, cancellation or limitation of, or any modification or change in,
the business relationship between Borrower and any customer or any group of
customers whose purchases individually or in the aggregate are material to the
business of Borrower, or with any material supplier, and there exists no present
condition or state of facts or circumstances which would materially and
adversely affect Borrower or prevent Borrower from conducting such business
after the consummation of the transactions contemplated by this Agreement in
substantially the same manner in which it has heretofore been conducted; and
5.18 Reaffirmations. Each request for a loan made by Borrower pursuant
to this Agreement shall constitute (i) an automatic representation and warranty
by Borrower to FINOVA that there does not then exist any Event of Default and
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(ii) a reaffirmation as of the date of said request of all of the
representations and warranties of Borrower contained in this Agreement and the
other Loan Documents.
5.19 Year 2000 Representations & Warranties. Borrower has taken all
action necessary to assure that there will be no material adverse change to
Borrower's business by reason of the advent of the year 2000, including without
limitation that all computer-based systems, embedded microchips and other
processing capabilities effectively recognize and process dates after July 31,
1999.
6. COVENANTS.
6.1 Affirmative Covenants. Borrower covenants that, so long as any
Obligation remains outstanding and this Agreement is in effect, it shall:
6.1.1 Taxes. File all tax returns and pay or make adequate
provision for the payment of all taxes, assessments and other charges on or
prior to the date when due;
6.1.2 Notice of Litigation. Promptly notify FINOVA in writing
of any litigation, suit or administrative proceeding which may materially and
adversely affect the Collateral or Borrower's business, assets, operations,
prospects or condition, financial or otherwise, whether or not the claim is
covered by insurance;
6.1.3 ERISA. Notify FINOVA in writing (i) promptly upon the
occurrence of any event described in Paragraph 4043 of ERISA, other than a
termination, partial termination or merger of a Plan or a transfer of a Plan's
assets and (ii) prior to any termination, partial termination or merger of a
Plan or a transfer of a Plan's assets;
6.1.4 Change in Location. Notify FINOVA in writing forty-five
(45) days prior to any change in the location of Borrower's chief executive
office or the location of any Collateral, or Borrower's opening or closing of
any other place of business;
6.1.5 Corporate Existence. Maintain its corporate existence
and its qualification to do business and good standing in all states necessary
for the conduct of its business and the ownership of its property and maintain
adequate assets, licenses, patents, copyrights, trademarks and trade names for
the conduct of its business;
6.1.6 Labor Disputes. Promptly notify FINOVA in writing of any
labor dispute to which Borrower is or may become subject and the expiration of
any labor contract to which Borrower is a party or bound;
6.1.7 Violations of Law. Promptly notify FINOVA in writing of
any violation of any law, statute, regulation or ordinance of any governmental
entity, or of any agency thereof, applicable to Borrower which may materially
and adversely affect the Collateral or Borrower's business, assets, prospects,
operations or condition, financial or otherwise;
6.1.8 Defaults. Notify FINOVA in writing within five (5)
Business Days of Borrower's default under any note, indenture, loan agreement,
mortgage, lease or other agreement to which Borrower is a party or by which
Borrower is bound, or of any other default under any Indebtedness of Borrower;
6.1.9 Capital Expenditures. Promptly notify FINOVA in writing
of the making of any Capital Expenditure materially affecting Borrower's
business, assets, prospects, operations or condition, financial or otherwise,
except to the extent permitted in the Schedule;
6.1.10 Books and Records. Keep adequate records and books of
account with respect to its business activities in which proper entries are made
in accordance with GAAP, reflecting all of its financial transactions;
6.1.11 Leases; Warehouse Agreements. Provide FINOVA with (i)
copies of all agreements between Borrower and any landlord, warehouseman or
bailee which owns any premises at which any Collateral may, from time to time,
be located (whether for processing, storage or otherwise), and (ii) without
limiting the landlord, bailee and/or mortgagee waivers to be provided pursuant
to Section 4.1(j) hereof, additional landlord, bailee and/or mortgagee waivers
in form acceptable to FINOVA with respect to all locations where any Collateral
is hereafter located;
6.1.12 Additional Documents. At FINOVA's request, promptly
execute or cause to be executed and delivered to FINOVA any and all documents,
instruments or agreements deemed necessary by FINOVA to facilitate the
collection of the Obligations or the Collateral or otherwise to give effect to
or carry out the terms or intent of this Agreement or any of the other Loan
Documents. Without limiting the generality of the foregoing, if any of the
Receivables with a face value in excess of $1,000 arises out of a contract with
the United States of America or any department, agency, subdivision or
instrumentality thereof, Borrower shall promptly notify FINOVA of such fact in
writing and shall execute any instruments and take any other action required or
requested by FINOVA to comply with the provisions of the Federal Assignment of
Claims Act; and
6.1.13 Financial Covenants. Comply with the financial
covenants set forth on the Schedule.
15
6.1.14 Year 2000 Covenants. Borrower shall take all action
necessary to assure that there will be no material adverse change to Borrower's
business by reason of the advent of the year 2000, including without limitation
that all computer-based systems, embedded microchips and other processing
capabilities effectively recognize and process dates after July 31, 1999. At
FINOVA's request, Borrower shall provide to FINOVA assurance reasonably
acceptable to FINOVA that Borrower's computer-based systems, embedded microchips
and other processing capabilities are year 2000 compatible.
6.2 Negative Covenants. Without FINOVA's prior written consent, which
consent FINOVA may withhold in its sole discretion, so long as any Obligation
remains outstanding and this Agreement is in effect, Borrower shall not:
6.2.1 Mergers. Merge or consolidate with or acquire any other
Person, or make any other material change in its capital structure or in its
business or operations which might adversely affect the repayment of the
Obligations;
6.2.2 Loans. Make advances, loans or extensions of credit to,
or invest in, any Person, except for loans or cash advances to employees which
are permitted in the Schedule;
6.2.3 Dividends. Declare or pay cash dividends upon any of its
stock or distribute any of its property or redeem, retire, purchase or acquire
directly or indirectly any of its stock;
6.2.4 Adverse Transactions. Enter into any transaction which
materially and adversely affects the Collateral or its ability to repay the
Obligations in full as and when due;
6.2.5 Indebtedness of Others. Guarantee or become directly or
contingently liable for the Indebtedness of any Person, except by endorsement of
instruments for deposit and except for the existing guarantees made by Borrower
prior to the date hereof, if any, which are set forth in the Schedule;
6.2.6 Repurchase. Make a sale to any customer on a
▇▇▇▇-and-hold, guaranteed sale, sale and return, sale on approval, consignment,
or any other repurchase or return basis;
6.2.7 Name. Use any corporate or fictitious name other than
its corporate name as set forth in its Articles or Certificate of Incorporation
on the date hereof or as set forth on the Schedule;
6.2.8 Prepayment. Prepay any Indebtedness other than trade
payables and other than the Obligations;
6.2.9 Capital Expenditure. Make or incur any Capital
Expenditure if, after giving effect thereto, the aggregate amount of all Capital
Expenditures by Borrower in any fiscal year would exceed the amount set forth on
the Schedule;
6.2.10 Compensation. Pay total compensation, including
salaries, withdrawals, fees, bonuses, commissions, drawing accounts and other
payments, whether directly or indirectly, in money or otherwise, during any
fiscal year to all of Borrower's executives, officers and directors (or any
relative thereof) in an amount in excess of the amount set forth on the
Schedule;
6.2.11 Indebtedness. Create, incur, assume or permit to exist
any Indebtedness (including Indebtedness in connection with Capital Leases) in
excess of the amount set forth on the Schedule, other than (i) the Obligations,
(ii) trade payables and other contractual obligations to suppliers and customers
incurred in the ordinary course of business, and (iii) other Indebtedness
existing on the date of this Agreement and reflected in the Prepared Financials
(except Indebtedness paid on the date of this Agreement from proceeds of the
initial advances hereunder), and (iv) Subordinated Debt;
6.2.12 Affiliate Transactions. Except as set forth below,
sell, transfer, distribute or pay any money or property to any Affiliate, or
invest in (by capital contribution or otherwise) or purchase or repurchase any
stock or Indebtedness, or any property, of any Affiliate, or become liable on
any guaranty of the indebtedness, dividends or other obligations of any
Affiliate. Notwithstanding the foregoing, Borrower may pay compensation
permitted by Section 6.2.10 to employees who are Affiliates and, if no Event of
Default has occurred, Borrower may (i) engage in transactions with Affiliates in
the normal course of business, in amounts and upon terms which are fully
disclosed to FINOVA and which are no less favorable to Borrower than would be
obtainable in a comparable arm's length transaction with a Person who is not an
Affiliate, and (ii) make payments to a Subordinating Creditor that is an
Affiliate, subject to and only to the extent expressly permitted in the
Subordination Agreement between such Subordinating Creditor and FINOVA;
6.2.13 Nature of Business. Enter into any new business or make
any material change in any of Borrower's business objectives, purposes or
operations;
6.2.14 FINOVA's Name. Use the name of FINOVA in connection
with any of Borrower's business or activities, except in connection with
internal business matters or as required in dealings with governmental agencies
and financial institutions or with trade creditors of Borrower, solely for
credit reference purposes; or
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6.2.15 Margin Security. Borrower will not (and has not in the
past) engaged principally, or as one of its important activities, in the
business of extending credit for the purpose of purchasing or carrying margin
stock (within the meaning of Regulation G or Regulation U issued by the Board of
Governors of the Federal Reserve System), and no proceeds of any Loan or other
advance will be used to purchase or carry any margin stock or to extend credit
to others for the purpose of purchasing or carrying any margin stock, or in any
manner which might cause such Loan or other advance or the application of such
proceeds to violate (or require any regulatory filing under) Regulation G,
Regulation T, Regulation U, Regulation X or any other regulation of the Board of
Governors of the Federal Reserve System, in each case as in effect on the date
or dates of such Loan or other advance and such use of proceeds. Further, no
proceeds of any Loan or other advance will be used to acquire any security of a
class which is registered pursuant to Section 12 of the Securities Exchange Act
of 1934.
6.2.16 Real Property. Purchase or acquire any real property
without FINOVA's prior written consent, a condition of which consent shall
include delivery of appropriate environmental reports and analysis, in form and
substance satisfactory to FINOVA and its counsel.
7. DEFAULT AND REMEDIES.
7.1 Events of Default. Any one or more of the following events shall
constitute an Event of Default under this Agreement:
(a) Borrower fails to pay when due and payable any portion of the
Obligations at stated maturity, upon acceleration or otherwise;
(b) Borrower or any other Loan Party fails or neglects to perform,
keep, or observe any Obligation including, but not limited to, any term,
provision, condition, covenant or agreement contained in any Loan Document to
which Borrower or such other Loan Party is a party;
(c) Any material adverse change occurs in Borrower's business, assets,
operations, prospects or condition, financial or otherwise;
(d) The prospect of repayment of any portion of the Obligations or the
value or priority of FINOVA's security interest in the Collateral is materially
impaired;
(e) Any portion of Borrower's assets is seized, attached, subjected to
a writ or distress warrant, is levied upon or comes into the possession of any
judicial officer;
(f) Borrower shall generally not pay its debts as they become due or
shall enter into any agreement (whether written or oral), or offer to enter into
any agreement, with all or a significant number of its creditors regarding any
moratorium or other indulgence with respect to its debts or the participation of
such creditors or their representatives in the supervision, management or
control of the business of Borrower;
(g) Any bankruptcy or other insolvency proceeding is commenced by
Borrower, or any such proceeding is commenced against Borrower and remains
undischarged or unstayed for forty-five (45) days;
(h) Any notice of lien, levy or assessment is filed of record with
respect to any of Borrower's assets;
(i) Any judgments are entered against Borrower in an aggregate amount
exceeding $25,000 in any fiscal year;
(j) Any default shall occur under (i) any material agreement between
Borrower and any third party including, without limitation, any default which
would result in a right by such third party to accelerate the maturity of any
Indebtedness of Borrower to such third party, or (ii) any Subordinated Debt;
(k) Any representation or warranty made or deemed to be made by
Borrower, any Affiliate or any other Loan Party in any Loan Document or any
other statement, document or report made or delivered to FINOVA in connection
therewith shall prove to have been misleading in any material respect;
(l) Any Prohibited Transaction or Reportable Event shall occur with
respect to a Plan which could have a material adverse effect on the financial
condition of Borrower; any lien upon the assets of Borrower in connection with
any Plan shall arise; Borrower or any of its ERISA Affiliates shall fail to make
full payment when due of all amounts which Borrower or any of its ERISA
Affiliates may be required to pay to any Plan or any Multiemployer Plan as one
or more contributions thereto; Borrower or any of its ERISA Affiliates creates
or permits the creation of any accumulated funding deficiency, whether or not
waived; or
(m) Any transfer of more than ten percent (10%) of the issued and
outstanding shares of common stock or other evidence of ownership of Borrower
(other than pursuant to the Acquisition or in connection with the conversion of
the Preferred Stock to common stock).
NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN, FINOVA RESERVES THE
RIGHT TO CEASE MAKING ANY LOANS DURING ANY CURE PERIOD STATED ABOVE, AND
THEREAFTER IF AN EVENT OF DEFAULT HAS OCCURRED.
17
7.2 Remedies. Upon the occurrence of an Event of Default, FINOVA may,
at its option and in its sole discretion and in addition to all of its other
rights under the Loan Documents, cease making Loans, terminate this Agreement
and/or declare all of the Obligations to be immediately payable in full.
Borrower agrees that FINOVA shall also have all of its rights and remedies under
applicable law, including, without limitation, the default rights and remedies
of a secured party under the Code, and upon the occurrence of an Event of
Default Borrower hereby consents to the appointment of a receiver by FINOVA in
any action initiated by FINOVA pursuant to this Agreement and to the
jurisdiction and venue set forth in Section 9.27 hereof, and Borrower waives
notice and posting of a bond in connection therewith. Further, FINOVA may, at
any time, take possession of the Collateral and keep it on Borrower's premises,
at no cost to FINOVA, or remove any part of it to such other place(s) as FINOVA
may desire, or Borrower shall, upon FINOVA's demand, at Borrower's sole cost,
assemble the Collateral and make it available to FINOVA at a place reasonably
convenient to FINOVA. FINOVA may sell and deliver any Collateral at public or
private sales, for cash, upon credit or otherwise, at such prices and upon such
terms as FINOVA deems advisable, at FINOVA's discretion, and may, if FINOVA
deems it reasonable, postpone or adjourn any sale of the Collateral by an
announcement at the time and place of sale or of such postponed or adjourned
sale without giving a new notice of sale. Borrower agrees that FINOVA has no
obligation to preserve rights to the Collateral or ▇▇▇▇▇▇▇▇ any Collateral for
the benefit of any Person. FINOVA is hereby granted a license or other right to
use, without charge, Borrower's labels, patents, copyrights, name, trade
secrets, trade names, trademarks and advertising matter, or any similar
property, in completing production, advertising or selling any Collateral and
Borrower's rights under all licenses and all franchise agreements shall inure to
FINOVA's benefit. Any requirement of reasonable notice shall be met if such
notice is mailed postage prepaid to Borrower at its address set forth in the
heading to this Agreement at least ten (10) days before sale or other
disposition. The proceeds of sale shall be applied, first, to all attorneys fees
and other expenses of sale, and second, to the Obligations in such order as
FINOVA shall elect, in its sole discretion. FINOVA shall return any excess to
Borrower and Borrower shall remain liable for any deficiency to the fullest
extent permitted by law.
7.3 Standards for Determining Commercial Reasonableness. Borrower and
FINOVA agree that the following conduct by FINOVA with respect to any
disposition of Collateral shall conclusively be deemed commercially reasonable
(but other conduct by FINOVA, including, but not limited to, FINOVA's use in its
sole discretion of other or different times, places and manners of noticing and
conducting any disposition of Collateral shall not be deemed unreasonable): Any
public or private disposition: (i) as to which on no later than the fifth
calendar day prior thereto written notice thereof is mailed or personally
delivered to Borrower and, with respect to any public disposition, on no later
than the fifth calendar day prior thereto notice thereof describing in general
non-specific terms, the Collateral to be disposed of is published once in a
newspaper of general circulation in the county where the sale is to be conducted
(provided that no notice of any public or private disposition need be given to
the Borrower or published if the Collateral is perishable or threatens to
decline speedily in value or is of a type customarily sold on a recognized
market); (ii) which is conducted at any place designated by FINOVA, with or
without the Collateral being present; and (iii) which commences at any time
between 8:00 a.m. and 5:00 p.m. Without limiting the generality of the
foregoing, Borrower expressly agrees that, with respect to any disposition of
accounts, instruments and general intangibles, it shall be commercially
reasonable for FINOVA to direct any prospective purchaser thereof to ascertain
directly from Borrower any and all information concerning the same, including,
but not limited to, the terms of payment, aging and delinquency, if any, the
financial condition of any obligor or account debtor thereon or guarantor
thereof, and any collateral therefor.
8. EXPENSES AND INDEMNITIES
8.1 Expenses. Borrower covenants that, so long as any Obligation
remains outstanding and this Agreement remains in effect, it shall promptly
reimburse FINOVA for all costs, fees and expenses incurred by FINOVA in
connection with the negotiation, preparation, execution, delivery,
administration and enforcement of each of the Loan Documents, including, but not
limited to, the attorneys' and paralegals' fees of in-house and outside counsel,
expert witness fees, lien, title search and insurance fees, appraisal fees, all
charges and expenses incurred in connection with any and all environmental
reports and environmental remediation activities, and all other costs, expenses,
taxes and filing or recording fees payable in connection with the transactions
contemplated by this Agreement, including without limitation all such costs,
fees and expenses as FINOVA shall incur or for which FINOVA shall become
obligated in connection with (i) any inspection or verification of the
Collateral, (ii) any proceeding relating to the Loan Documents or the
Collateral, (iii) actions taken with respect to the Collateral and FINOVA's
security interest therein, including, without limitation, the defense or
prosecution of any action involving FINOVA and Borrower or any third party, (iv)
enforcement of any of FINOVA's rights and remedies with respect to the
Obligations or Collateral and (v) consultation with FINOVA's attorneys and
participation in any workout, bankruptcy or other insolvency or other proceeding
involving any Loan Party or any Affiliate, whether or not suit is filed or the
issues are peculiar to federal bankruptcy or state insolvency laws. Borrower
shall also pay all FINOVA charges in connection with bank wire transfers,
forwarding of loan proceeds, deposits of checks and other items of payment,
returned checks, establishment and maintenance of lockboxes and other Blocked
Accounts, and all other bank and administrative matters, in accordance with
FINOVA's schedule of bank and administrative fees and charges in effect from
time to time.
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8.2 Environmental Matters.
(a) Definitions. The following definitions apply to the provisions of
this Section 8.2: (a) the term "Applicable Law" shall include, but shall not be
limited to, all local, state and/or federal laws, rules, regulations or
ordinances, whether currently in existence or hereafter enacted, which govern,
to the extent applicable to the Property or to Borrower, (i) the existence,
cleanup and/or remedy of contamination on real property; (ii) the protection of
the environment from soil, air or water pollution, or from spilled, deposited or
otherwise emplaced contamination; (iii) the emission or discharge of hazardous
substances into the environment; (iv) the control of hazardous wastes; or (v)
the use, generation, transport, treatment, removal or recovery of Hazardous
Substances; (b) the term "Hazardous Substance" shall mean (i) any oil, flammable
substance, explosives, radioactive materials, hazardous wastes or substances,
toxic wastes or substances or any other wastes, materials or pollutants which
either pose a hazard to the Property or to persons on or about the Property or
cause the Property to be in violation of any Applicable Law; (ii) asbestos in
any form which is or could become friable, urea formaldehyde foam insulation,
transformers or other equipment which contain dielectric fluid containing levels
of polychlorinated biphenyls, or radon gas; (iii) any chemical, material or
substance defined as or included in the definition of "hazardous substances,"
"waste," "hazardous wastes," "hazardous materials," "extremely hazardous waste,"
"restricted hazardous waste," or "toxic substances" or words of similar import
under any Applicable Law; (iv) any other chemical, material or substance,
exposure to which is prohibited, limited or regulated by any governmental
authority which may or could pose a hazard to the health or safety of the
occupants of the Property or the owners and/or occupants of property adjacent to
or surrounding the Property, or any other person coming upon the Property or
adjacent property; and (v) any other chemical, materials or substance which may
or could pose a hazard to the environment; and (c) the term "Property" shall
mean all real property, wherever located, in which Borrower or any Affiliate of
Borrower has any right, title or interest, whether now existing or hereafter
arising, and including, without limitation, as owner, lessor or lessee.
(b) Covenants and Representations. (1) Borrower represents and warrants
that there have not been during the period of Borrower's possession of any
interest in the Property and, to the best of its knowledge after reasonable
inquiry, there have not been at any other times, any activities on the Property
involving, directly or indirectly, the use, generation, treatment, storage or
disposal of any Hazardous Substances except in compliance with Applicable Law
(i) under, on or in the land included in the Property, whether contained in
soil, tanks, sumps, ponds, lagoons, barrels, cans or other containments,
structures or equipment, (ii) incorporated in the buildings, structures or
improvements included in the Property, including any building material
containing asbestos, or (iii) used in connection with any operations on or in
the Property. (2) Without limiting the generality of the foregoing and to the
extent not included within the scope of this Section 8.2(b), Borrower represents
and warrants that it is in full compliance with Applicable Law and has received
no notice from any Person or any governmental agency or other entity of any
violation by Borrower or its Affiliates of any Applicable Law. (3) Borrower
shall be solely responsible for and agrees to indemnify FINOVA, protect and
defend FINOVA with counsel reasonably acceptable to FINOVA, and hold FINOVA
harmless from and against any claims, actions, administrative proceedings,
judgments, damages, punitive damages, penalties, fines, costs, liabilities
(including sums paid in settlements of claims), interest or losses, attorneys'
fees (including any fees and expenses incurred in enforcing this indemnity),
consultant fees, expert fees, and other out-of-pocket costs or expenses actually
incurred by FINOVA (collectively, the "Environmental Costs"), that may, at any
time or from time to time, arise directly or indirectly from or in connection
with: (i) the presence, suspected presence, release or suspected release of any
Hazardous Substance whether into the air, soil, surface water or groundwater of
or at the Property, or any other violation of Applicable Law, or (ii) any breach
of the foregoing representations and covenants; except to the extent any of the
foregoing result from the actions of FINOVA, its employees, agents and
representatives. All Environmental Costs incurred or advanced by FINOVA shall be
deemed to be made by FINOVA in good faith and shall constitute Obligations
hereunder.
9. MISCELLANEOUS.
9.1 Examination of Records; Financial Reporting.
(a) Examinations. FINOVA shall at all reasonable times have full access
to and the right to examine, audit, make abstracts and copies from and inspect
Borrower's records, files, books of account and all other documents, instruments
and agreements relating to the Collateral and the right to check, test and
appraise the Collateral. Borrower shall deliver to FINOVA any instrument
necessary for FINOVA to obtain records from any service bureau maintaining
records for Borrower. All instruments and certificates prepared by Borrower
showing the value of any of the Collateral shall be accompanied, upon FINOVA's
request, by copies of related purchase orders and invoices. FINOVA may, at any
time after the occurrence of an Event of Default, remove from Borrower's
19
premises Borrower's books and records (or copies thereof) or require Borrower to
deliver such books and records or copies to FINOVA. FINOVA may, without expense
to FINOVA, use such of Borrower's personnel, supplies and premises as may be
reasonably necessary for maintaining or enforcing FINOVA's security interest.
(b) Reporting Requirements. Borrower shall furnish FINOVA, upon
request, such information and statements as FINOVA shall request from time to
time regarding Borrower's business affairs, financial condition and the results
of its operations. Without limiting the generality of the foregoing, Borrower
shall provide FINOVA with: (i) FINOVA's standard form collateral and loan
report, monthly (or more often as FINOVA may request) (prepared on an individual
basis for each entity included within the definition with Borrower and on an
aggregate basis for all such entities), and upon FINOVA's request, copies of
sales journals, cash receipt journals, and deposit slips; (ii) upon FINOVA's
request, copies of sales invoices, customer statements and credit memoranda
issued, remittance advices and reports; (iii) copies of shipping and delivery
documents, upon request; (iv) on or prior to the date set forth on the Schedule,
monthly agings (aged from invoice date) and reconciliations of Receivables (with
listings of concentrated accounts) (prepared on an individual basis for each
entity included within the definition of Borrower and on an aggregate basis for
all such entities), payables reports, inventory reports, compliance certificates
and unaudited financial statements with respect to the prior month prepared on a
basis consistent with such statements prepared in prior months and otherwise in
accordance with GAAP; (v) audited annual consolidated and consolidating
financial statements, prepared in accordance with GAAP applied on a basis
consistent with the most recent Prepared Financials provided to FINOVA by
Borrower, including balance sheets, income and cash flow statements, accompanied
by the unqualified report thereon of independent certified public accountants
acceptable to FINOVA, as soon as available, and in any event, within ninety (90)
days after the end of each of Borrower's fiscal years; and (vi) such
certificates relating to the foregoing as FINOVA may request, including, without
limitation, a monthly certificate from the president and the chief financial
officer of Borrower showing Borrower's compliance with each of the financial
covenants set forth in this Agreement, and stating whether any Event of Default
has occurred or event which, with giving of notice or the passage of time, or
both, would constitute an Event of Default, and if so, the steps being taken to
prevent or cure such Event of Default. All reports or financial statements
submitted by Borrower shall be in reasonable detail and shall be certified by
the principal financial officer of Borrower as being complete and correct.
9.2 Term; Termination.
(a) Term. The Initial Term of the Revolving Credit Loans facility and
the obligation of FINOVA to made advances with respect thereto in accordance
with this Agreement shall be as set forth on the Schedule, and the Revolving
Credit Loans facility and this Agreement shall be automatically renewed for one
or more Renewal Term(s) as set forth in the Schedule, unless earlier terminated
as provided herein.
(b) Prior Notice. Each party shall have the right to terminate this
Agreement effective at the end of the Initial Term or at the end of any Renewal
Term by giving the other party written notice not less than sixty (60) days
prior to the effective date of such termination, by registered or certified
mail.
(c) Payment in Full. Upon the effective date of termination, the
Obligations shall become immediately due and payable in full in cash.
(d) Early Termination; Termination Fee. In addition to the procedure
set forth in Section 9.2(b), Borrower may terminate this Agreement at any time
but only upon sixty (60) days' prior written notice and prepayment of the
Obligations. Upon any such early termination by Borrower or any termination of
this Agreement by FINOVA upon the occurrence of an Event of Default, then, and
in any such event, Borrower shall pay to FINOVA upon the effective date of such
termination a fee (the "Termination Fee") in an amount equal to the amount shown
on the Schedule.
9.3 Recourse to Security; Certain Waivers. All Obligations shall be
payable by Borrower as provided for herein and, in full, at the termination of
this Agreement; recourse to security shall not be required at any time. Borrower
waives presentment and protest of any instrument and notice thereof, notice of
default and, to the extent permitted by applicable law, all other notices to
which Borrower might otherwise be entitled.
9.4 No Waiver by FINOVA. Neither FINOVA's failure to exercise any
right, remedy or option under this Agreement, any supplement, the Loan Documents
or other agreement between FINOVA and Borrower nor any delay by FINOVA in
exercising the same shall operate as a waiver. No waiver by FINOVA shall be
effective unless in writing and then only to the extent stated. No waiver by
FINOVA shall affect its right to require strict performance of this Agreement.
FINOVA's rights and remedies shall be cumulative and not exclusive.
9.5 Binding on Successors and Assigns. All terms, conditions, promises,
covenants, provisions and warranties shall inure to the benefit of and bind
FINOVA's and Borrower's respective representatives, successors and assigns.
20
9.6 Severability. If any provision of this Agreement shall be
prohibited or invalid under applicable law, it shall be ineffective only to such
extent, without invalidating the remainder of this Agreement.
9.7 Amendments; Assignments. This Agreement may not be modified,
altered or amended, except by an agreement in writing signed by Borrower and
FINOVA. Borrower may not sell, assign or transfer any interest in this Agreement
or any other Loan Document, or any portion thereof, including, without
limitation, any of Borrower's rights, title, interests, remedies, powers and
duties hereunder or thereunder. Borrower hereby consents to FINOVA's
participation, sale, assignment, transfer or other disposition, at any time or
times hereafter, of this Agreement and any of the other Loan Documents, or of
any portion hereof or thereof, including, without limitation, FINOVA's rights,
title, interests, remedies, powers and duties hereunder or thereunder. In
connection therewith, FINOVA may disclose all documents and information which
FINOVA now or hereafter may have relating to Borrower or Borrower's business. To
the extent that FINOVA assigns its rights and obligations hereunder to a third
party, FINOVA shall thereafter be released from such assigned obligations to
Borrower and such assignment shall effect a novation between Borrower and such
third party.
9.8 Integration. This Agreement, together with the Schedule (which is a
part hereof) and the other Loan Documents, reflect the entire understanding of
the parties with respect to the transactions contemplated hereby.
9.9 Survival. All of the representations and warranties of Borrower
contained in this Agreement shall survive the execution, delivery and acceptance
of this Agreement by the parties. No termination of this Agreement or of any
guaranty of the Obligations shall affect or impair the powers, obligations,
duties, rights, representations, warranties or liabilities of the parties hereto
and all shall survive such termination.
9.10 Evidence of Obligations. Each Obligation may, in FINOVA's
discretion, be evidenced by notes or other instruments issued or made by
Borrower to FINOVA. If not so evidenced, such Obligation shall be evidenced
solely by entries upon FINOVA's books and records.
9.11 Loan Requests. Each oral or written request for a loan by any
Person who purports to be any employee, officer or authorized agent of Borrower
shall be made to FINOVA on or prior to 11:00 a.m., Eastern Daylight time, on the
Business Day on which the proceeds thereof are requested to be paid to Borrower
and shall be conclusively presumed to be made by a Person authorized by Borrower
to do so and the crediting of a loan to Borrower's operating account shall
conclusively establish Borrower's obligation to repay such loan. Unless and
until Borrower otherwise directs FINOVA in writing, all loans shall be wired to
Borrower's operating account set forth on the Schedule.
9.12 Notices. Any notice required hereunder shall be in writing and
addressed to the Borrower and FINOVA at their addresses set forth at the
beginning of this Agreement. Notices hereunder shall be deemed received on the
earlier of receipt, whether by mail, personal delivery, facsimile, or otherwise,
or upon deposit in the United States mail, postage prepaid.
9.13 Brokerage Fees. Borrower represents and warrants to FINOVA that,
with respect to the financing transaction herein contemplated, no Person is
entitled to any brokerage fee or other commission, except as described on
Exhibit 9.13 to the Schedule, and Borrower agrees to indemnify and hold FINOVA
harmless against any and all such claims.
9.14 Disclosure. No representation or warranty made by Borrower in this
Agreement, or in any financial statement, report, certificate or any other
document furnished in connection herewith contains any untrue statement of a
material fact or omits to state any material fact necessary to make the
statements herein or therein not misleading. There is no fact known to Borrower
or which reasonably should be known to Borrower which Borrower has not disclosed
to FINOVA in writing with respect to the transactions contemplated by this
Agreement which materially and adversely affects the business, assets,
operations, prospects or condition (financial or otherwise), of Borrower.
9.15 Publicity. FINOVA is hereby authorized to issue appropriate press
releases and to cause a tombstone to be published announcing the consummation of
this transaction and the aggregate amount thereof.
9.16 Captions. The Section titles contained in this Agreement are
without substantive meaning and are not part of this Agreement.
9.17 Injunctive Relief. Borrower recognizes that, in the event Borrower
fails to perform, observe or discharge any of its Obligations under this
Agreement, any remedy at law may prove to be inadequate relief to FINOVA.
Therefore, FINOVA, if it so requests, shall be entitled to temporary and
permanent injunctive relief in any such case without the necessity of proving
actual damages.
9.18 Counterparts; Facsimile Execution. This Agreement may be executed
in one or more counterparts, each of which taken together shall constitute one
and the same instrument, admissible into evidence. Delivery of an executed
counterpart of this Agreement by telefacsimile shall be equally as effective as
delivery of a manually executed counterpart of this Agreement. Any party
delivering an executed counterpart of this Agreement by telefacsimile shall also
deliver a manually executed counterpart of this Agreement, but the failure to
deliver a manually executed counterpart shall not affect the validity,
enforceability, and binding effect of this Agreement.
21
9.19 Construction. The parties acknowledge that each party and its
counsel have reviewed this Agreement and that the normal rule of construction to
the effect that any ambiguities are to be resolved against the drafting party
shall not be employed in the interpretation of this Agreement or any amendments
or exhibits hereto.
9.20 Time of Essence. Time is of the essence for the performance by
Borrower of the Obligations set forth in this Agreement.
9.21 Limitation of Actions. Borrower agrees that any claim or cause of
action by Borrower against FINOVA, or any of FINOVA's directors, officers,
employees, agents, accountants or attorneys, based upon, arising from, or
relating to this Agreement, or any other present or future agreement, or any
other transaction contemplated hereby or thereby or relating hereto or thereto,
or any other matter, cause or thing whatsoever, whether or not relating hereto
or thereto, occurred, done, omitted or suffered to be done by FINOVA, or by
FINOVA's directors, officers, employees, agents, accountants or attorneys,
whether sounding in contract or in tort or otherwise, shall be barred unless
asserted by Borrower by the commencement of an action or proceeding in a court
of competent jurisdiction by the filing of a complaint within one year after
[the date on which Borrower knew or reasonably should have known of such claim
or cause of action] and service of a summons and complaint on an officer of
FINOVA or any other Person authorized to accept service of process on behalf of
FINOVA, within 30 days thereafter. Borrower agrees that such one-year period of
time is a reasonable and sufficient time for Borrower to investigate and act
upon any such claim or cause of action. The one-year period provided herein
shall not be waived, tolled, or extended except by a specific written agreement
of FINOVA. This provision shall survive any termination of this Loan Agreement
or any other agreement.
9.22 Liability. Neither FINOVA nor any FINOVA Affiliate shall be liable
for any indirect, special, incidental or consequential damages in connection
with any breach of contract, tort or other wrong relating to this Agreement or
the Obligations or the establishment, administration or collection thereof
(including without limitation damages for loss of profits, business
interruption, or the like), whether such damages are foreseeable or
unforeseeable, even if FINOVA has been advised of the possibility of such
damages. Neither FINOVA, nor any FINOVA Affiliate shall be liable for any
claims, demands, losses or damages, of any kind whatsoever, made, claimed,
incurred or suffered by the Borrower through the ordinary negligence of FINOVA,
or any FINOVA Affiliate. "FINOVA Affiliate" shall mean FINOVA's directors,
officers, employees, agents, attorneys or any other Person or entity affiliated
with or representing FINOVA.
9.23 Notice of Breach by FINOVA. Borrower agrees to give FINOVA written
notice of (i) any action or inaction by FINOVA or any attorney of FINOVA in
connection with any Loan Documents that may be actionable against FINOVA or any
attorney of FINOVA or (ii) any defense to the payment of the Obligations for any
reason, including, but not limited to, commission of a tort or violation of any
contractual duty or duty implied by law. Borrower agrees that unless such notice
is fully given as promptly as possible (and in any event within thirty (30)
days) after Borrower has knowledge, or with the exercise of reasonable diligence
should have had knowledge, of any such action, inaction or defense, Borrower
shall not assert, and Borrower shall be deemed to have waived, any claim or
defense arising therefrom.
9.24 Application of Insurance Proceeds. The net proceeds of any
casualty insurance insuring the Collateral, after deducting all costs and
expenses (including attorneys' fees) of collection, shall be applied, at
FINOVA's option, either toward replacing or restoring the Collateral, in a
manner and on terms satisfactory to FINOVA, or toward payment of the
Obligations. Any proceeds applied to the payment of Obligations shall be applied
in such manner as FINOVA may elect. In no event shall such application relieve
Borrower from payment in full of all installments of principal and interest
which thereafter become due in the order of maturity thereof.
9.25 Power of Attorney. Borrower appoints FINOVA and its designees as
Borrower's attorney, with the power to endorse Borrower's name on any checks,
notes, acceptances, money orders or other forms of payment or security that come
into FINOVA's possession; to sign Borrower's name on any invoice or ▇▇▇▇ of
lading relating to any Receivable, on drafts against customers, on assignments
of Receivables, on notices of assignment, financing statements and other public
records, on verifications of accounts and on notices to customers or account
debtors; to send requests for verification of Receivables to customers or
account debtors; after the occurrence of any Event of Default, to notify the
post office authorities to change the address for delivery of Borrower's mail to
an address designated by FINOVA and to open and dispose of all mail addressed to
Borrower; and to do all other things FINOVA deems necessary or desirable to
carry out the terms of this Agreement. Borrower hereby ratifies and approves all
acts of such attorney. Neither FINOVA nor any of its designees shall be liable
for any acts or omissions nor for any error of judgment or mistake of fact or
law while acting as Borrower's attorney. This power, being coupled with an
interest, is irrevocable until the Obligations have been fully satisfied and
FINOVA's obligation to provide loans hereunder shall have terminated
22
9.26 Common Enterprise. Each Person comprising Borrower (if more than
one) (each "Borrower Party") acknowledges and agrees that it is part of a common
business enterprise together with each other Borrower Party pursuant to which
loans and financial accommodations (including, particularly, those contemplated
hereunder), made to any one such Borrower Party (and its use of the proceeds of
such accommodations) shall result in direct and substantial economic benefit to
each other Borrower Party; and that, in consideration of such benefits, each
Borrower Party, as an inducement to Lender's extending such accommodations
hereunder, and with knowledge of Lender's reliance hereupon, has agreed to bind
itself, JOINTLY AND SEVERALLY, for all Obligations of Borrower hereunder and to
pledge its assets as security therefor to Lender.
9.27 Governing Law; Waivers. THIS AGREEMENT, INCLUDING WITHOUT
LIMITATION ENFORCEMENT OF THE OBLIGATIONS, SHALL BE INTERPRETED IN ACCORDANCE
WITH THE INTERNAL LAWS (AND NOT THE CONFLICT OF LAWS RULES) OF THE STATE OF
ARIZONA GOVERNING CONTRACTS TO BE PERFORMED ENTIRELY WITHIN SUCH STATE. BORROWER
HEREBY CONSENTS TO THE EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT
LOCATED WITHIN THE COUNTY OF MARICOPA IN THE STATE OF ARIZONA OR, AT THE SOLE
OPTION OF FINOVA, IN ANY OTHER COURT IN WHICH FINOVA SHALL INITIATE LEGAL OR
EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT MATTER JURISDICTION OVER THE MATTER
IN CONTROVERSY. BORROWER WAIVES ANY OBJECTION OF FORUM NON CONVENIENS AND VENUE.
BORROWER FURTHER WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT, AND
CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE MADE IN THE MANNER SET FORTH IN
SECTION 9.12 HEREOF FOR THE GIVING OF NOTICE. BORROWER FURTHER WAIVES ANY RIGHT
IT MAY OTHERWISE HAVE TO COLLATERALLY ATTACK ANY JUDGMENT ENTERED AGAINST IT.
9.28 MUTUAL WAIVER OF RIGHT TO JURY TRIAL. FINOVA AND BORROWER EACH
HEREBY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON,
ARISING OUT OF, OR IN ANY WAY RELATING TO: (i) THIS AGREEMENT; (ii) ANY OTHER
PRESENT OR FUTURE INSTRUMENT OR AGREEMENT BETWEEN FINOVA AND BORROWER; OR (iii)
ANY CONDUCT, ACTS OR OMISSIONS OF FINOVA OR BORROWER OR ANY OF THEIR DIRECTORS,
OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH
FINOVA OR BORROWER; IN EACH OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT
OR TORT OR OTHERWISE.
1-800 AUTO TOW, INC.
Fed. Tax I.D. # ▇▇-▇▇▇▇▇▇▇
By:/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Senior Vice President
and Chief Operating Officer
Signed, sealed and delivered
in the presence of:
/s/ ▇▇▇▇▇ ▇▇▇▇▇
---------------
Notary Public
D&D TOWING & RECOVERY, INC.
Fed. Tax I.D. # ▇▇-▇▇▇▇▇▇▇
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
Signed, sealed and delivered
in the presence of:
/s/ ▇▇▇▇▇ ▇▇▇▇▇
---------------
Notary Public
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, INC.
Fed. Tax I.D. # ▇▇-▇▇▇▇▇▇▇
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
Signed, sealed and delivered
in the presence of:
/s/ ▇▇▇▇▇ ▇▇▇▇▇
---------------
Notary Public
23
1-800-AUTOTOW GULF COAST
EAST, INC.
Fed. Tax I.D. # ▇▇-▇▇▇▇▇▇▇
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
Signed, sealed and delivered
in the presence of:
/s/ ▇▇▇▇▇ ▇▇▇▇▇
---------------
Notary Public
1-800-AUTOTOW GULF COAST S.W., INC.
Fed. Tax I.D. # ▇▇-▇▇▇▇▇▇▇
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
Signed, sealed and delivered
in the presence of:
/s/ ▇▇▇▇▇ ▇▇▇▇▇
---------------
Notary Public
1-800-AUTOTOW FLORIDA, INC.
Fed. Tax I.D. # ▇▇-▇▇▇▇▇▇▇
By:/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
Signed, sealed and delivered
in the presence of:
/s/ ▇▇▇▇▇ ▇▇▇▇▇
---------------
Notary Public
FINOVA:
FINOVA CAPITAL CORPORATION
By:/s/ ▇▇▇▇ ▇▇▇▇▇
-----------------
Name:▇▇▇▇ ▇▇▇▇▇
---------------
Title:Vice President
24
Schedule to
Loan and Security Agreement
Borrower: 1-800-AutoTow, Inc.
D&D Towing & Recovery, Inc.
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, Inc.
1-800-AutoTow Gulf Coast East, Inc.
1-800-AutoTow Gulf Coast S.W., Inc.
1-800-AutoTow Florida, Inc.
Address: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Date: August 6, 1999
This Schedule forms an integral part of the Loan and Security Agreement between
the above Borrower and FINOVA Capital Corporation dated the above date, and all
references herein and therein to "this Agreement" shall be deemed to refer to
said Agreement and to this Schedule.
================================================================================
DEFINITIONS (SECTION 1):
"Acquisition" means, collectively, those seven acquisitions described
on Exhibit 1A attached hereto.
"Acquisition Documents" means, collectively, those stock and asset
purchase documents described on Exhibit 1B attached hereto pertaining to the
Acquisition, all other documents referred to therein, and all other instruments
to be executed between Borrower and Seller in connection with the Acquisition.
"Conversion Date" means that date on which pursuant to Section 2.2
hereof FINOVA elects to change the basis upon which availability of Revolving
Credit Loans is determined to 80% of the net amount of Eligible Accounts.
"Permitted Senior Indebtedness" means all the debt described on Exhibit
1D attached hereto.
"Preferred Stock" means Borrower's 8% Cumulative Preferred Stock.
"Seller" means, collectively, all of the sellers under the Acquisition,
as identified on Exhibit 1A attached hereto.
"Seller Subordinated Debt" means, collectively, the Subordinated Debt
held by Seller, as described on Exhibit 1C attached hereto.
1
"Subordinating Creditor" means each Seller holding Seller Subordinated
Debt.
================================================================================
TOTAL FACILITY (SECTION 2.1):
$5,098,233, subject to increase to up to $5,483,233 as
provided in the "Additional Provisions" section below
================================================================================
LOANS (SECTION 2.2):
Revolving Credit Loans: A revolving line of credit
consisting of loans against Borrower's Eligible
Receivables ("Revolving Credit Loans") in an
aggregate outstanding principal amount not to
exceed the lesser of (a) or (b) below:
(a) One Million Dollars ($1,000,000) (the
"Revolving Credit Limit"), less any Loan
Reserves, or
(b) an amount equal to (A) (i) 65% of the
net amount of Receivables less (1) any
Receivables owing by any account debtor
which is an Affiliate of Borrower and (2)
any Receivables which are more than ninety
(90) days past due, or, (ii) if FINOVA so
elects in its sole discretion at any time by
written notice to Borrower, 80% of the net
amount of Eligible Receivables, less (B) in
each case, any Loan Reserves.
Term Loans: those certain three term loans against
the value of Borrower's machinery, equipment
and/or real estate in the respective principal
amounts not to exceed Three Million Three Hundred
Ninety Eight Thousand Two Hundred Thirty-Three
Dollars ($3,398,233) ("Term Loan A"), Five Hundred
Thousand Dollars ($500,000) ("Term Loan B") and
Two Hundred Thousand Dollars ($200,000) ("Term
Loan C"; Term Loan A, Term Loan B and Term Loan C,
collectively, the "Term Loans"); provided, that
the Terms Loans shall be made on such terms (in
addition to the terms set forth herein) as are set
forth on separate promissory notes of Borrower
from time to time, each in form and substance
satisfactory to FINOVA in its sole discretion.
2
================================================================================
INTEREST AND FEES (SECTION 2.6):
Revolving Interest Rate. Borrower shall pay FINOVA
interest on the daily outstanding balance of
Borrower's Revolving Credit Loans at a per annum
rate of 1.5% in excess of the rate of interest
announced publicly by Citibank, N.A., (or any
successor thereto), from time to time as its
"prime rate" (the "Revolving Interest Rate") which
may not be such institution's lowest rate.
Term Interest Rate A. Borrower shall pay FINOVA
interest on the daily outstanding balance of Term
Loan A at a rate per annum of 1.5% in excess of
the Prime Rate ("Term Interest Rate A"). Term
Interest Rate B and C. Borrower shall pay FINOVA
interest on the daily outstanding balance of Term
Loan B and Term Loan C at a rate per annum of 3.0%
in excess of the Prime Rate ("Term Interest Rate B
and C").
The Revolving Interest Rate, Term Interest Rate A
and Term Interest Rate B and C shall be increased
or decreased, as the case may be, without notice
or demand of any kind, upon the announcement of
any change in the Prime Rate. Each change in the
Prime Rate shall be effective hereunder on the
first day following the announcement of such
change. Interest charges and all other fees and
charges herein shall be computed on the basis of a
year of 360 days and actual days elapsed and shall
be payable to FINOVA in arrears on the first day
of each month.
Collateral Monitoring Fee. At the closing of this
transaction and on the first day of each calendar
month thereafter, Borrower shall pay FINOVA a
collateral monitoring fee of $600 ("Collateral
Monitoring Fee"); provided however, that Borrower
agrees and acknowledges that each Loan Year a full
year's fee shall be deemed earned at the beginning
of the respective Loan Year.
Closing Fee. At the closing of this transaction,
Borrower shall pay to FINOVA a closing fee in an
amount equal to $50,982 ("Closing Fee"), which
shall be deemed fully earned on the date such
payment is due.
Success Fee. Borrower shall pay to FINOVA a
success fee ("Success Fee") in the amount of
$15,000 per annum. The Success Fee shall be deemed
3
fully earned at the time when due and is otherwise
due and payable annually, commencing upon the
first anniversary of the date of this Agreement
and continuing on each subsequent anniversary
thereof. To the extent that Borrower prepays the
Loans prior to the expiration of the Initial Term,
Borrower shall be required to pay to FINOVA in
connection with such prepayments any unpaid
Success Fee to the extent necessary to cause the
aggregate amount of the Success Fees paid
hereunder prior to and concurrently with such
prepayment to equal or exceed $45,000.
Unused Line Fee. With respect to each fiscal
quarter, or portion thereof during the term of
this Agreement, Borrower shall unconditionally pay
to FINOVA a fee equal to one-half of one percent
(0.50%) per annum of the difference between the
Revolving Credit Limit and the average daily
outstanding balance of the Revolving Credit Loans
during such quarter, or portion thereof ("Unused
Line Fee"), which fee shall be calculated and
payable quarterly, in arrears, and shall be due
and payable, commencing on the first Business Day
of the Borrower's first fiscal quarter following
the Closing Date and continuing on the first
Business Day of each fiscal quarter thereafter.
Examination Fee. Borrower agrees to pay to FINOVA
an examination fee in the amount of $600 per
person per day in connection with each audit or
examination of Borrower performed by FINOVA prior
to or after the date hereof, plus all costs and
expenses incurred in connection therewith (the
"Examination Fee"). Without limiting the
generality of the foregoing, Borrower shall pay to
FINOVA an initial Examination Fee in an amount
equal to $600 per person per day, plus all costs
and expenses incurred in connection therewith.
Such initial Examination Fee shall be deemed fully
earned at the time of payment and due and payable
upon the closing of this transaction, and shall be
deducted from any good faith deposit paid by
Borrower to FINOVA prior to the date of this
Agreement. Notwithstanding anything contained
herein to the contrary so long as no Event of
Default has occurred and is continuing, Borrower
shall not be required to pay for more than four
(4) such audits in any calendar year.
================================================================================
NOTIFICATION OF CLOSING (SECTION 2.13):
The Term Loan A amount for purposes of Section
2.13 shall be $3,398,233. The Term Loan B and C
amount for purposes of Section 2.13 shall be
$700,000.
4
================================================================================
CONDITIONS OF CLOSING (SECTION 4.1):
The obligation of FINOVA to make the initial
advance hereunder or to issue or arrange for the
issuance of the initial Letter of Credit hereunder
is subject to the fulfillment, to the satisfaction
of FINOVA and its counsel, of each of the
following conditions, in addition to the
conditions set forth in Sections 4.1 and 4.2
above:
(a) Minimum Excess Availability (Section 4.1(b)).
Not less than $700,000. Accounts payable
outstanding: 30 days or more from their invoice
date.
(b) No Material Adverse Change (Section 4.1(s)).
Draft financial statements for Seller dated as of
the dates specified on Exhibit 4.1. Further, no
material adverse change has occurred in the
Borrower's business, operations, financial
condition, or assets or in the prospect of
repayment of the Obligations since March 31, 1999.
(c) Equity Investment. FINOVA shall have received
evidence satisfactory to itself that, on or before
the Closing Date, Borrower has received cash
contributions in the aggregate principal amount of
$2,700,000 in exchange for the issuance of
Preferred Stock, on a basis satisfactory to
FINOVA, and that the Seller has accepted common
stock as payment of at least $3,014,000 of the
purchase price under the Acquisition on terms and
conditions satisfactory to FINOVA.
(d) Preferred Stock. The terms of the Preferred
Stock shall be satisfactory to FINOVA in all
respects.
(e) Support Agreements. ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ shall each have
delivered a Support Agreement in favor of FINOVA,
and in form and substance satisfactory to FINOVA.
(f) Transaction Costs. (Section 4.1(cc)). Not to
exceed $600,000.
(g) Common Stock. 1-800-AutoTow, Inc. shall have
issued to FINOVA shares of its common stock in an
amount equal to two percent (2%) of the issued and
outstanding common stock of Borrower on terms and
conditions satisfactory to FINOVA.
Borrower shall cause the conditions precedent set
forth in Section 4.1 of this Agreement and set
forth above in this Schedule to be satisfied, and
shall provide evidence to FINOVA that all such
conditions precedent have been satisfied, on or
before August 6, 1999.
5
================================================================================
BORROWER INFORMATION:
Borrower's State of Incorporation (Section 5.1): See Exhibit 5.1
-----------
Borrower's copyrights, patents trademarks, and licenses (Section 5.5): See Exhibit 5.5
-----------
Fictitious Names/Prior Corporate Names (Section 5.2): See Exhibit 5.2
-----------
Prior Corporate Names: See Exhibit 5.2
Fictitious Names: See Exhibit 5.2
Borrower Locations (Section 5.16) See Exhibit 5.16
------------
Borrower's Federal Tax Identification Number (Section 5.16): See Exhibit 5.16
------------
Permitted Encumbrances (Section 1.1): See Exhibit 1.1
================================================================================
FINANCIAL COVENANTS (SECTION 6.1.13):
Borrower shall comply with all of the
following covenants. Compliance shall be
determined as of the end of each month or
quarter (as determined by FINOVA in its sole
discretion), except as otherwise
specifically provided below:
Current Ratio. Borrower shall maintain a ratio of Current
Assets to Current Liabilities of not less
than the ratio specified below for each
applicable period specified below:
Applicable Period Ratio
----------------- -----
>
Fiscal Year ending March 31, 2000 .80:1.00
Fiscal Year ending March 31, 2001 .80:1.00
Fiscal Year ending March 31, 2002 .90:1.00
Fiscal Year ending March 31, 2003 1.10:1.00
Fiscal Year ending March 31, 2004 and thereafter 1.30:1.00
Debt to Net Worth. Borrower shall maintain a ratio of
Indebtedness to Net Worth of not greater
than the ratio specified below for each
applicable period:
6
Applicable Period Ratio
----------------- -----
Fiscal Year ending March 31, 2000 1.0:1.00
Fiscal Year ending March 31, 2001 .70:1.00
Fiscal Year ending March 31, 2002 .50:1.00
Fiscal Year ending March 31, 2003 and thereafter .30:1.00
EBITDA. Borrower shall achieve Earnings Before
Interest, Taxes, Depreciation and
Amortization of not less than the amount
specified below with respect to each
applicable period specified below:
Applicable Period Amount
----------------- ------
Fiscal Year ending March 31, 2000 $2,200,000
Fiscal Year ending March 31, 2001 $2,300,000
Fiscal Year ending March 31, 2002 $2,400,000
Fiscal Year ending March 31, 2003 $2,500,000
Fiscal Year ending March 31, 2004 and each fiscal $2,700,000
year ending thereafter
Net Worth. Borrower shall maintain Net Worth of not
less than the amount specified below for
each applicable period specified below:
Applicable Period Net Worth
----------------- ---------
Fiscal Year ending March 31, 2000 $6,200,000
Fiscal Year ending March 31, 2001 $7,000,000
Fiscal Year ending March 31, 2002 $7,700,000
Fiscal Year ending March 31, 2003 $8,300,000
Fiscal Year ending March 31, 2004 and each fiscal $9,000,000
year thereafter
Senior Debt Service Coverage Ratio. As of the last day of each calendar
quarter ended March 31, June 30,
September 30 or December 31,
Borrower's Operating Cash
Flow/Actual for the consecutive
12-month period ending as of such
last day must be at least 1.3 times
the amount necessary to meet
Borrower's Senior Contractual Debt
7
Service for such 12-month period;
provided however, that, the initial
such calculation of such ratio
shall be for the period from the
Closing Date through December 31,
1999; and, provided further, that
all such determinations shall be
made on a consolidated basis.
Total Debt Service Coverage Ratio. As of the last day of each calendar
quarter ended March 31, June 30,
September 30 or December 31,
Borrower's Operating Cash
Flow/Actual for the consecutive
12-month period ending as of such
last day must be at least 1.10
times the amount necessary to meet
Borrower's Total Contractual Debt
Service for such 12-month period;
provided however, that, the initial
such calculation of such ratio
shall be for the period from the
Closing Date through December 31,
1999; and, provided further, that
all such determinations shall be
made on a consolidated basis.
================================================================================
NEGATIVE COVENANTS (SECTION 6.2):
Employee Advances: Borrower shall not make
any loans or advances to Employees
except in the ordinary course of
business and consistent with past
practices of Borrower in an
aggregate amount not exceeding at
any time $25,000.
Existing Guaranties: [None]
Capital Expenditures: Borrower shall not
make or incur any Capital
Expenditure if, after giving effect
thereto, the aggregate amount of
all Capital Expenditures by
Borrower in any fiscal year
(beginning with the 1999 fiscal
year) would exceed $650,000.
Compensation: Borrower shall not pay total
compensation, including salaries,
withdrawals, fees, bonuses,
commissions, drawing accounts and
other payments, whether directly or
indirectly, in money or otherwise,
during any fiscal year to all of
Borrower's executives, officers and
directors (or any relative thereof)
in an amount in excess of $650,000
during the fiscal years of Borrower
ending on December 31, 1999 and
December 31, 2000 and in excess of
110% of such total compensation
paid in the preceding fiscal year
in each fiscal year thereafter;
provided, however, that Borrower
may pay reasonable compensation to
one additional officer hired after
the Closing Date without reference
to such restrictions.
Indebtedness Borrower shall not create, incur,
assume or permit to exist any
Indebtedness (including
Indebtedness in connection with
Capital Leases) in excess of
$100,000 other than (i) the
Obligations, (ii) trade payables
and other contractual obligations
to suppliers and customers incurred
in the ordinary course of business
and (iii) the Subordinated Debt
(other than Indebtedness paid on
the date of this Agreement from
proceeds of initial advances
hereunder).
8
================================================================================
REPORTING REQUIREMENTS (SECTION 9.1):
1. Borrower shall provide FINOVA with monthly
agings aged by invoice date and reconciliations
of Receivables within ten (10) days after
the end of each month.
2. Borrower shall provide FINOVA with monthly
accounts payable agings aged by invoice date,
outstanding or held check registers and inventory
certificates within ten (10) days after the end
of each month.
3. Borrower shall provide FINOVA with monthly
unaudited consolidated and consolidating
financial statements within thirty (30) days
after the end of each month.
4. Borrower shall provide FINOVA with audited
consolidated and consolidating financial
statements within ninety (90) days after the end
of each fiscal year, as more specifically
described in Section 9.1(b) hereof, and with an
opinion issued by a Certified Public Accountant
which is acceptable to FINOVA.
5. Borrower shall provide FINOVA with annual
operating budgets (including income statements,
balance sheets and cash flow statements, by
month) for the upcoming fiscal year of Borrower
within thirty (30) days prior to the end of each
fiscal year of Borrower.
6. Borrower's balance sheets for purposes of the
definition of Prepared Financials shall be as of
March 31, 1999.
================================================================================
TERM (SECTION 9.2):
The initial term of this Agreement shall be five
year(s) from the date hereof (the "Initial Term")
and shall be automatically renewed for successive
periods of one (1) year each (each, a "Renewal
Term"), unless earlier terminated as provided in
Section 7 or 9.2 above or elsewhere in this
Agreement.
================================================================================
TERMINATION FEE (SECTION 9.2):
(A) Revolving Credit Loans Facility. The
Termination Fee applicable to the Revolving Credit
Loans facility provided for in Section 9.2(d)
9
shall be an amount equal to the following
percentage of the Revolving Credit Limit:
(i) three percent (3%), if such early termination
occurs on or prior to the first anniversary of the
date of this Agreement;
(ii) two percent (2%), if such early termination
occurs after the first anniversary of the date of
this Agreement but prior to the second anniversary
of he date of this Agreement; and
(iii) one percent (1%) if such early termination
occurs after the second anniversary of the date of
this Agreement.
(B) Term Loans. The Termination Fee applicable to
the Term Loans provided for in Section 9.2(d)
shall be equal to :
(i) three percent (3%) of the amount prepaid if
such prepayment is made during the Loan Year
beginning on the Closing Date;
(ii) two percent (2%) of the amount prepaid if
such prepayment is made during the Loan Year
beginning on the first anniversary of the Closing
Date; and
(iii) one percent (1%) of the amount prepaid if
such prepayment is made during the Loan Year
beginning on the second anniversary of the Closing
Date;
================================================================================
DISBURSEMENT (SECTION 9.11):
Unless and until Borrower otherwise directs FINOVA
in writing, all loans shall be wired to Borrower's
following operating account: See Exhibit 9.11
================================================================================
ADDITIONAL PROVISIONS:
1. Accounting System. Borrower will implement a
comprehensive and uniform accounting system at all
of its locations on or prior to December 31, 1999.
2. Subordinated Debt. Borrower will not make any
payments on any Subordinated Debt except as
permitted under the subordination agreement
applicable thereto.
3. Increase in Term Loan A. During the period
commencing on the date hereof and ending thirty
(30) days after the date hereof, at Borrower's
request made in connection with its consummation
of the acquisition of the assets of BJ's Transport
(the "BJ Transport Acquisition"), FINOVA shall
make an additional advance to Borrower in the
10
amount of up to Three Hundred Eighty Five Thousand
Dollars ($385,000) which shall be reflected as an
increase in Term Loan A in like amount (the "Term
Loan A Addition"); subject to the conditions
precedent that (a) FINOVA shall have reviewed and
approved all of the documents pertaining to the BJ
Transport Acquisition and the assets being
acquired thereunder (including, without
limitation, that FINOVA shall have a first
priority security interest therein) and any
liabilities being assumed thereunder, (b) each of
the conditions set forth in Section 4.2 shall have
been satisfied and (c) Borrower shall have
executed and delivered to FINOVA such amendments
to or amendments and restatements of the existing
term note evidency the Term Loan A as FINOVA shall
request (which shall provide that the Term Loan A
Addition shall amortize on the same basis as the
Term Loan A), such documents as FINOVA shall
request to evidence and perfect FINOVA's first
priority security interest in the assets acquired
in the BJ Transport Acquisition and such other
documents, instruments and agreements as FINOVA
shall request to evidence or secure the Term Loan
A Addition and (d) Borrower shall have paid to
Lender a term loan increase fee in an amount equal
to one percent (1%) of such increase. In the event
that the Term Loan A Addition is made to Borrower,
the Total Facility shall be increased by the
amount thereof.
11
================================================================================
1-800-AUTOTOW, INC.
Fed. Tax I.D. # ▇▇-▇▇▇▇▇▇▇
By:/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Senior Vice President and
Chief Executive
Officer
Signed, sealed and delivered
in the presence of:
/s/ ▇▇▇▇▇ ▇▇▇▇▇
---------------
Notary Public
12
D&D TOWING & RECOVERY, INC.
Fed. Tax I.D. # ▇▇-▇▇▇▇▇▇▇
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
Signed, sealed and delivered
in the presence of:
/s/ ▇▇▇▇▇ ▇▇▇▇▇
---------------
Notary Public
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, INC.
Fed. Tax I.D. # ▇▇-▇▇▇▇▇▇▇
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
Signed, sealed and delivered
in the presence of:
/s/ ▇▇▇▇▇ ▇▇▇▇▇
---------------
Notary Public
1-800-AUTOTOW GULF COAST
EAST, INC.
Fed. Tax I.D. # ▇▇-▇▇▇▇▇▇▇
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
Signed, sealed and delivered
in the presence of:
/s/ ▇▇▇▇▇ ▇▇▇▇▇
---------------
Notary Public
13
1-800-AUTOTOW GULF COAST S.W., INC.
Fed. Tax I.D. # ▇▇-▇▇▇▇▇▇▇
By:/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
Signed, sealed and delivered
in the presence of:
/s/ ▇▇▇▇▇ ▇▇▇▇▇
---------------
Notary Public
1-800-AUTOTOW FLORIDA, INC.
Fed. Tax I.D. # ▇▇-▇▇▇▇▇▇▇
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
Signed, sealed and delivered
in the presence of:
/s/ ▇▇▇▇▇ ▇▇▇▇▇
---------------
Notary Public
FINOVA:
FINOVA CAPITAL CORPORATION
By:/s/ ▇▇▇▇ ▇▇▇▇▇
-----------------
Name:▇▇▇▇ ▇▇▇▇▇
---------------
Title:Vice President
Signed, sealed and delivered
in the presence of:
/s/ ▇▇▇▇▇ ▇▇▇▇▇
---------------
Notary Public
14
EXHIBIT 1A
----------
Acquisitions
------------
1. Acquisition of the assets of A-Ace Towing, Inc., ▇▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ related to their towing business
located at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ by 1-800-AutoTow
Gulf Coast S.W. Inc.
2. Merger of Arrow Towing and Recovery, Inc. with and into
1-800-AutoTow Gulf Coast East, Inc., with 1-800-AutoTow Gulf Coast
East, Inc. as the surviving corporation.
3. Acquisition of the assets of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Inc. d/b/a ▇▇▇▇▇'▇
Towing Service related to its towing business located at ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇. ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ by 1-800-AutoTow Gulf Coast East, Inc.
4. Acquisition of the assets of Dixie Grand Towing, Robert's Towing,
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇ ▇▇▇▇▇▇▇ relating to their towing business
located at ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ by
1-800-AutoTow Gulf Coast East, Inc.
5. Merger of L&W Collision, Towing and Recovery, Inc. into
1-800-AutoTow Gulf Coast East, Inc. with 1-800-AutoTow Gulf Coast East,
Inc. as the surviving corporation.
6. (a) Acquisition of the assets of ▇▇▇▇▇ Towing, Inc. related to
its vehicle towing business located at ▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇ by 1-800-AutoTow Gulf Coast East, Inc.
(b) Acquisition of the assets of ▇▇▇▇▇ Autobody, Inc. related
to its vehicle towing business located at ▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇ by 1-800-AutoTow Gulf Coast East, Inc.
7. Acquisition of the assets of Town N' Country Towing, Inc. related to
its vehicle towing business located at ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ by 1-800-AutoTow Gulf Coast East, Inc.
EXHIBIT 1B
----------
Acquisition Documents
---------------------
1. Asset Purchase Agreement between A-Ace Towing, ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and 1-800-AutoTow, Inc. and 1-800-AutoTow Gulf
Coast S.W., Inc. and all related assignments, bills of sale,
certificates, and other documents, instruments and agreements.
2. Merger Agreement and Plan of Reorganization dated as of July 23,
1998 among 1-800-AutoTow, Inc., 1-800-AutoTow Gulf Coast East, Inc.,
and Arrow Towing and Recovery, Inc. and the shareholders listed therein
and all related documents, instruments and agreements.
3. Asset Purchase Agreement between ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Inc. d/b/a/
▇▇▇▇▇'▇ Towing Service and 1-800-AutoTow, Inc. and 1-800-AutoTow Gulf
Coast East, Inc and all related assignments, bills of sale,
certificates and documents, instruments and agreements.
4. Asset Purchase Agreement between ▇▇▇▇▇ ▇▇▇▇▇▇ Towing, Robert's
Towing, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇ ▇▇▇▇▇▇▇ and 1-800-AutoTow, Inc. and
1-800-AutoTow Gulf Coast East, Inc. and all related assignments, bills
of sale, certificates and documents, instruments and agreements.
5. Merger Agreement and Plan of Reorganization among 1-800-AutoTow,
Inc., 1-800-AutoTow Gulf Coast East, Inc., L&W Collision, Towing and
Recovery, Inc. and the stock holders listed therein and all related
documents, instruments and agreements.
6. (a) Asset Purchase Agreement among ▇▇▇▇▇ Towing, Inc.,
1-800-AutoTow, Inc. and 1-800-AutoTow Florida, Inc. and all related
assignments, bills of sale, certificates and other documents,
instruments and agreements.
(b) Asset Purchase Agreement among ▇▇▇▇▇ Auto Body, Inc.,
1-800-AutoTow, Inc. and 1-800-AutoTow Florida, Inc. and all related
assignments, bills of sale, certificates and other documents,
instruments and agreements.
7. Asset Purchase Agreement among Town `N Country Towing, Inc., and
1-800-AutoTow, Inc. and 1-800-AutoTow Gulf Coast East, Inc. and all
related assignments, bills of sale, certificates and other documents,
instruments and agreements.
EXHIBIT 1C
----------
Seller Subordinated Debt
------------------------
1. Promissory Note in the amount of $200,000 made by
1-800-AutoTow, Inc. in favor of A-Ace Towing, Inc., ▇▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇.
2. Promissory Note in the amount of $150,000 made by
1-800-AutoTow, Inc. in favor of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Inc.
3. Promissory Note in the amount of $625,000 made by
1-800-AutoTow, Inc. in favor of ▇▇▇▇▇ Towing, Inc.
4. Promissory Note in the amount of $175,000 made by
1-800-AutoTow, Inc. in favor of Lyon Autobody, Inc.
EXHIBIT 4.1
-----------
Closing Checklist
-----------------
[See Attached]
EXHIBIT 1D
----------
Permitted Senior Indebtedness
-----------------------------
EXHIBIT 5.1
-----------
States of Incorporation
-----------------------
1-800-AutoTow, Inc. Delaware
D&D Towing & Recovery, Inc. Florida
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, Inc. Pennsylvania
1-800-AutoTow Gulf Coast East, Inc. Florida
1-800-AutoTow Gulf Coast S.W., Inc. Texas
1-800-AutoTow Florida, Inc. Florida
EXHIBIT 5.2
-----------
Prior Corporate Names; Fictitious Names
---------------------------------------
Aroars Towing & Recovery (name used by D&D Towing & Recovery, Inc.)
Pittsburgh Auto & Truck Center (name used by ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, Inc.)
EXHIBIT 5.5
-----------
Patents, Trademarks, etc.
-------------------------
Application Application No.
----------- ---------------
1-800-AUTOTOW 75/354824
EXHIBIT 5.16
------------
Borrower Locations
------------------
Company/Fed Tax I.D. # Address County
---------------------- ------- ------
1-800-AutoTow, Inc. ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Fed Tax I.D. # ▇▇-▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
D&D Towing & Recovery, Inc. ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇
Fed Tax I.D. # ▇▇-▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, Inc. ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Alleghney
Fed Tax I.D. # ▇▇-▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
1-800-AutoTow Gulf Coast East, Inc. ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Fed Tax I.D. #69-0935926 ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇. ▇▇▇▇▇▇▇▇▇▇, ▇▇
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇.
▇▇▇▇▇, ▇▇
1-800-AutoTow Gulf Coast S.W., Inc. ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Fed Tax I.D. # ▇▇-▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇
1-800-AutoTow Gulf Coast, Florida, Inc. ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Fed Tax I.D. # ▇▇-▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇