EXHIBIT 10.3
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LOAN AND SECURITY AGREEMENT
by and between
ALLIED PRODUCTS CORPORATION
and
FOOTHILL CAPITAL CORPORATION
Dated as of March 29, 2000
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TABLE OF CONTENTS
1. DEFINITIONS AND CONSTRUCTION...............................................1
1.1 Definitions.........................................................1
1.3 Code...............................................................19
1.4 Construction.......................................................19
1.5 Schedules and Exhibits.............................................20
2. LOAN AND TERMS OF PAYMENT.................................................20
2.1 Revolving Advances.................................................20
2.2 Letters of Credit..................................................21
2.3 Intentionally Omitted..............................................24
2.4 Intentionally Omitted..............................................24
2.5 Overadvances.......................................................24
2.6 Interest and Letter of Credit Fees: Rates, Payments, and
Calculations......................................................24
2.7 Collection of Accounts.............................................26
2.8 Crediting Payments; Application of Collections.....................26
2.9 Designated Account.................................................27
2.10 Maintenance of Loan Account; Statements of Obligations.............27
2.11 Fees...............................................................27
3. CONDITIONS; TERM OF AGREEMENT.............................................28
3.1 Conditions Precedent to the Initial Advance, Letter of Credit,
and the Term Loan Subline.........................................28
3.2 Conditions Precedent to all Advances, all Letters of Credit,
and the Term Loan Subline.........................................31
3.3 Condition Subsequent...............................................32
3.4 Term...............................................................32
3.5 Effect of Termination..............................................32
3.6 Early Termination by Borrower......................................33
3.7 Termination Upon Event of Default..................................33
4. CREATION OF SECURITY INTEREST.............................................34
4.1 Grant of Security Interest.........................................34
4.2 Negotiable Collateral..............................................34
4.3 Collection of Accounts, General Intangibles, and Negotiable
Collateral........................................................34
4.4 Delivery of Additional Documentation Required......................34
4.5 Power of Attorney..................................................34
4.6 Right to Inspect...................................................35
5. REPRESENTATIONS AND WARRANTIES............................................35
5.1 No Encumbrances....................................................36
5.2 Eligible Accounts..................................................36
5.3 Intentionally Omitted..............................................36
5.4 Equipment..........................................................36
5.5 Location of Inventory and Equipment................................36
5.6 Inventory Records..................................................36
5.7 Location of Chief Executive Office; FEIN...........................36
5.8 Due Organization and Qualification; Subsidiaries...................37
5.9 Due Authorization; No Conflict.....................................37
5.10 Litigation.........................................................38
5.11 No Material Adverse Change.........................................38
5.12 Solvency...........................................................39
5.13 Employee Benefits..................................................39
5.14 Environmental Condition............................................39
5.15 Intellectual Property..............................................39
5.16 Machinery and Equipment............................................39
6. AFFIRMATIVE COVENANTS.....................................................40
6.1 Accounting System..................................................40
6.2 Collateral Reporting...............................................40
6.3 Financial Statements, Reports, Certificates........................41
6.4 Tax Returns........................................................42
6.5 Guarantor Reports..................................................42
6.6 Returns............................................................42
6.7 Title to Equipment.................................................42
6.8 Maintenance of Equipment...........................................43
6.9 Taxes..............................................................43
6.10 Insurance..........................................................43
6.11 No Setoffs or Counterclaims........................................45
6.12 Location of Inventory and Equipment................................45
6.13 Compliance with Laws...............................................45
6.14 Employee Benefits..................................................45
6.15 Leases.............................................................46
6.16 Contracts Related to Eligible Special Project Accounts and
Eligible Special GM Project Account...............................46
6.17 Price Adjustments in ▇▇▇▇ Hog Sale.................................46
6.18 Labor Developments.................................................47
7. NEGATIVE COVENANTS........................................................47
7.1 Indebtedness.......................................................47
7.2 Liens..............................................................47
7.3 Restrictions on Fundamental Changes................................48
7.4 Disposal of Assets.................................................48
7.5 Change Name........................................................48
7.6 Guarantee..........................................................48
7.7 Nature of Business.................................................48
7.8 Prepayments and Amendments.........................................48
7.9 Change of Control..................................................49
7.10 Consignments.......................................................49
7.11 Distributions......................................................49
7.12 Accounting Methods.................................................49
7.13 Investments........................................................49
7.14 Transactions with Affiliates.......................................49
7.15 Suspension.........................................................49
7.16 Compensation.......................................................50
7.17 Use of Proceeds....................................................50
7.18 Change in Location of Chief Executive Office; Inventory and
Equipment with Bailees............................................50
7.19 No Prohibited Transactions Under ERISA.............................50
7.20 Financial Covenants................................................51
7.21 Capital Expenditures...............................................52
7.22 Availability for Payment to Existing Lender........................52
8. EVENTS OF DEFAULT.........................................................52
9. FOOTHILL'S RIGHTS AND REMEDIES............................................54
9.1 Rights and Remedies................................................54
9.2 Remedies Cumulative................................................57
10. TAXES AND EXPENSES........................................................57
11. WAIVERS; INDEMNIFICATION..................................................58
11.1 Demand; Protest; etc...............................................58
11.2 Foothill's Liability for Collateral................................58
11.3 Indemnification....................................................58
12. NOTICES...................................................................58
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER................................60
14. DESTRUCTION OF BORROWER'S DOCUMENTS.......................................61
15. GENERAL PROVISIONS........................................................61
15.1 Effectiveness......................................................61
15.2 Successors and Assigns.............................................61
15.3 Section Headings...................................................61
15.4 Interpretation.....................................................61
15.5 Severability of Provisions.........................................61
15.6 Amendments in Writing..............................................62
15.7 Counterparts; Telefacsimile Execution..............................62
15.8 Revival and Reinstatement of Obligations...........................62
15.9 Integration........................................................62
SCHEDULES AND EXHIBITS
Schedule P-1 Permitted Liens
Schedule R-1 Real Property Collateral
Schedule 5.8 Subsidiaries
Schedule 5.10 Litigation
Schedule 5.13 ERISA Benefit Plans
Schedule 5.14 Environmental Matters
Schedule 5.15 Intellectual Property
Schedule 5.16 Machinery and Equipment
Schedule 6.12 Location of Inventory and Equipment
Exhibit A Borrower Projections
Exhibit C-1 Form of Compliance Certificate
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (this "Agreement"), is entered into as of
March 29, 2000, between FOOTHILL CAPITAL CORPORATION, a California corporation
("Foothill"), with a place of business located at ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ and ALLIED PRODUCTS CORPORATION,
a Delaware corporation ("Borrower"), with its chief executive office located at
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION.
1.1 Definitions. As used in this Agreement, the following terms
shall have the following definitions:
"Account Debtor" means any Person who is or who may become
obligated under, with respect to, or on account of, an Account.
"Accounts" means the Eligible Special Projects Account, the
Eligible Special GM Projects Accounts, Eligible Parts and Service Accounts,
contract rights, and all other forms of obligations owing to Borrower arising
out of the sale or lease of goods or the rendition of services by Borrower,
irrespective of whether earned by performance, and any and all credit insurance,
guaranties, or security therefor.
"Account Receivable Fee" has the meaning set forth in Section
2.11(f).
"Advances" has the meaning set forth in Section 2.1(a).
"Affiliate" means, as applied to any Person, any other Person
who directly or indirectly controls, is controlled by, is under common control
with or is a director or officer of such Person. For purposes of this
definition, "control" means the possession, directly or indirectly, of the power
to vote five percent (5%) or more of the securities having ordinary voting power
for the election of directors or the direct or indirect power to direct the
management and policies of a Person.
"Agreement" has the meaning set forth in the preamble hereto.
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"Authorized Person" means any officer or other employee of
Borrower.
"Average Unused Portion of Maximum Amount" means, as of any
date of determination, (a) the Maximum Amount, less (b) the sum of (i) the
average Daily Balance of Advances that were outstanding during the immediately
preceding month, plus (ii) the average Daily Balance of the undrawn Letters of
Credit that were outstanding during the immediately preceding month, plus (iii)
the outstanding average Daily Balance of the Term Loan Subline outstanding
during the immediately preceding month.
"Bank of America" means Bank of America, N.A.
"Bank of America Letter" means that letter from Bank of
America addressed to Foothill indicating that all indebtedness due Bank of
America from Borrower has been paid in full and that Bank of America has no
further security interest in any assets of Borrower, whether Real Property
Collateral or Personal Property Collateral, and said letter shall be in form and
content acceptable to Foothill.
"Bankruptcy Code" means the United States Bankruptcy Code (11
▇.▇.▇.▇▇. 101 et seq.), as amended, and any successor statute.
"Benefit Plan" means a "defined benefit plan" (as defined in
Section 3(35) of ERISA) for which Borrower, any Subsidiary of Borrower, or any
ERISA Affiliate has been an "employer" (as defined in Section 3(5) of ERISA)
within the past six years.
"Borrower" has the meaning set forth in the preamble to this
Agreement.
"Borrower's Books" means all of Borrower's books and records
including: ledgers; records indicating, summarizing, or evidencing Borrower's
properties or assets (including the Collateral) or liabilities; all information
relating to Borrower's business operations or financial condition; and all
computer programs, disk or tape files, printouts, runs, or other computer
prepared information.
"Borrowing Base" has the meaning set forth in Section 2.1(a).
"▇▇▇▇ Hog" means ▇▇▇▇ Hog, L.L.C., a Delaware limited
liability company.
"▇▇▇▇ Hog Investors" means ▇▇▇▇ Hog Investors L.L.C.
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"▇▇▇▇ Hog Letter" means that letter from ▇▇▇▇ Hog Investors
addressed to Foothill indicating that the only interest which ▇▇▇▇ Hog Investors
has in any assets of Borrower, whether Real Property Collateral or Personal
Property Collateral, is an assignment from Borrower to ▇▇▇▇ Hog Investors of one
hundred percent (100%) of Borrower's membership interest in ▇▇▇▇ Hog and one
hundred percent (100%) of Borrower's right to distributions from ▇▇▇▇ Hog as
more particularly described in that certain Membership Interest Pledge and
Indemnity Security Agreement dated March 7, 2000 between ▇▇▇▇ Hog Investors and
Borrower and said letter shall be in form and content acceptable to Foothill.
"Business Day" means any day that is not a Saturday, Sunday,
or other day on which national banks are authorized or required to close.
"Change of Control" shall be deemed to have occurred at such
time as a "person" or "group" (within the meaning of Sections 13(d) and 14(d)(2)
of the Securities Exchange Act of 1934) becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Securities Exchange Act of 1934), directly or
indirectly, of more than twenty five percent (25%) of the total voting power of
all classes of stock then outstanding of Borrower entitled to vote in the
election of directors.
"Closing Date" means the date of the first to occur of the
making of the initial Advance, or the issuance of the initial Letter of Credit.
"Code" means the Illinois Uniform Commercial Code.
"Collateral" means each of the following:
(a) the Accounts,
(b) Borrower's Books,
(c) the Equipment,
(d) the General Intangibles,
(e) the Inventory,
(f) the Investment Property,
(g) the Negotiable Collateral,
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(h) the Real Property Collateral,
(i) any money, or other assets of Borrower that now or
hereafter come into the possession, custody, or control of Foothill, and
(j) the proceeds and products, whether tangible or intangible,
of any of the foregoing, including proceeds of insurance covering any or all of
the Collateral, and any and all Accounts, Borrower's Books, Equipment, General
Intangibles, Inventory, Negotiable Collateral, Real Property, money, deposit
accounts, or other tangible or intangible property resulting from the sale,
exchange, collection, or other disposition of any of the foregoing, or any
portion thereof or interest therein, and the proceeds thereof.
"Collateral Access Agreement" means a landlord waiver,
mortgagee waiver, bailee letter, or acknowledgment agreement of any
warehouseman, processor, lessor, consignee, or other Person in possession of,
having a Lien upon, or having rights or interests in the Equipment or Inventory,
in each case, in form and substance satisfactory to Foothill.
"Collateral Assignment Agreement" means that certain
collateral assignment of the Borrower's membership interest in ▇▇▇▇ Hog,
including an assignment of all of Borrower's rights to proceeds due Borrower
upon any transfer or sale of any of Borrower's interest in ▇▇▇▇ Hog in accord
with Article 7 of ▇▇▇▇ Hog's Operating Agreement which assignment shall be
subject to prior liens in favor of the Existing Lender and ▇▇▇▇ Hog Investors,
L.L.C.
"Collections" means all cash, checks, notes, instruments, and
other items of payment (including, insurance proceeds, proceeds of cash sales,
rental proceeds, and tax refunds).
"Compliance Certificate" means a certificate substantially in
the form of Exhibit C-1 and delivered by the chief accounting officer of
Borrower to Foothill.
"Daily Balance" means the amount of an Obligation owed at the
end of a given day.
"deems itself insecure" means that the Person deems itself
insecure in accordance with the provisions of Section 1-208 of the Code.
"Default" means an event, condition, or default that, with the
giving of notice, the passage of time, or both, would be an Event of Default.
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"Designated Account" means account number 86665 00150 of
Borrower maintained with Borrower's Designated Account Bank, or such other
deposit account of Borrower (located within the United States) which has been
designated, in writing and from time to time, by Borrower to Foothill.
"Designated Account Bank" means Bank of America, whose office
is located at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and whose ABA
number is ▇▇▇▇▇▇▇▇▇.
"Dilution" means, in each case based upon the experience of
the immediately prior ninety (90) days, the result of dividing the Dollar amount
of (a) bad debt write-downs, discounts, advertising allowances, returns,
promotions, credits, or other dilution with respect to the Accounts, by (b)
Borrower's Collections (excluding extraordinary items) plus the Dollar amount of
clause (a).
"Dilution Reserve" means, as of any date of determination, an
amount sufficient to reduce Foothill's advance rate against Eligible Accounts by
one percentage point for each percentage point by which Dilution is in excess of
five percent (5%).
"Disbursement Letter" means an instructional letter executed
and delivered by Borrower to Foothill regarding the extensions of credit to be
made on the Closing Date, the form and substance of which shall be satisfactory
to Foothill.
"Dollars or $" means United States dollars.
"Early Termination Premium" has the meaning set forth in
Section 3.6.
"EBITDA" means, for any period, the net income (or net loss)
of Borrower on a consolidated basis with any Subsidiaries for such period as
determined in accordance with GAAP, (a) plus, to the extent reflected in the
changes in the statement of net income for such period, the sum of, without
duplication, the following (i) interest expense, (ii) depreciation and
amortization expense, and (ii) taxes, and (b) minus, to the extent reflected in
the changes in the statement of net income for such period, extraordinary gains.
"Eligible Accounts" means those Accounts created by Borrower
in the ordinary course of business, net of customer deposits and unapplied cash
payments to the Borrower that arise out of Borrower's sale of goods or rendition
of services, that comply with each and all of the representations and warranties
respecting Accounts made by Borrower to Foothill in the Loan Documents, and that
are not excluded as ineligible by virtue of one or more
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of the criteria set forth below; provided, however, that such criteria may be
fixed and revised from time to time by Foothill in its reasonable discretion to
address the results of any audit performed from time to time after the Closing
Date by or on behalf of Foothill. Eligible Accounts shall not include the
following:
(a) Accounts that the Account Debtor has failed to pay within
sixty (60) days of invoice date or Accounts with selling terms of more than
thirty (30) days;
(b) Accounts owed by an Account Debtor or its Affiliates where
fifty percent (50%) or more of all Accounts owed by that Account Debtor (or its
Affiliates) are deemed ineligible under clause (a) above;
(c) Accounts with respect to which the Account Debtor is an
employee, Affiliate, or agent of Borrower;
(d) Accounts with respect to which goods are placed on
consignment, guaranteed sale, sale or return, sale on approval, ▇▇▇▇ and hold,
or other terms by reason of which the payment by the Account Debtor may be
conditional;
(e) Accounts that are not payable in Dollars or with respect
to which the Account Debtor: (i) does not maintain its chief executive office in
the United States, or (ii) is not organized under the laws of the United States
or any State thereof, or (iii) is the government of any foreign country or
sovereign state, or of any state, province, municipality, or other political
subdivision thereof, or of any department, agency, public corporation, or other
instrumentality thereof, unless (y) the Account is supported by an irrevocable
letter of credit satisfactory to Foothill (as to form, substance, and issuer or
domestic confirming bank) that has been delivered to Foothill and is directly
drawable by Foothill, or (z) the Account is covered by credit insurance in form
and amount, and by an insurer, satisfactory to Foothill;
(f) Accounts with respect to which the Account Debtor is
either (i) the United States or any department, agency, or instrumentality of
the United States (exclusive, however, of Accounts with respect to which
Borrower has complied, to the satisfaction of Foothill, with the Assignment of
Claims Act, 31 U.S.C. ss. 3727), or (ii) any State of the United States
(exclusive, however, of Accounts owed by any State that does not have a
statutory counterpart to the Assignment of Claims Act);
(g) Accounts with respect to which the Account Debtor is a
creditor of Borrower, has or has asserted a right of setoff, has disputed its
liability, or has made any claim with respect to the Account;
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(h) Accounts with respect to an Account Debtor whose total
obligations owing to Borrower exceed ten percent (10%) of all Eligible Accounts,
to the extent of the obligations owing by such Account Debtor in excess of such
percentage;
(i) Accounts with respect to which the Account Debtor is
subject to any Insolvency Proceeding, or becomes insolvent, or goes out of
business;
(j) Accounts the collection of which Foothill, in its
reasonable credit judgment, believes to be doubtful by reason of the Account
Debtor's financial condition;
(k) Accounts with respect to which the goods giving rise to
such Account have not been shipped and billed to the Account Debtor, the
services giving rise to such Account have not been performed and accepted by the
Account Debtor, or the Account otherwise does not represent a final sale;
(l) Accounts with respect to which the Account Debtor is
located in the states of New Jersey, Minnesota, Indiana, or West Virginia (or
any other state that requires a creditor to file a Business Activity Report or
similar document in order to bring suit or otherwise enforce its remedies
against such Account Debtor in the courts or through any judicial process of
such state), unless Borrower has qualified to do business in New Jersey,
Minnesota, Indiana, West Virginia, or such other states, or has filed a Notice
of Business Activities Report with the applicable division of taxation, the
department of revenue, or with such other state offices, as appropriate, for the
then-current year, or is exempt from such filing requirement; and
(m) Accounts that represent progress payments or other advance
▇▇▇▇▇▇▇▇ that are due prior to the completion of performance by Borrower of the
subject contract for goods or services.
"Eligible Parts and Service Accounts" means Accounts which:
(a) meet each of the requirements set forth in the definition
of Eligible Accounts;
(b) arise out of service and delivery of spare parts to
Account Debtors; and
(c) are reflected in a reporting system reasonably acceptable
to Foothill sufficient to allow Foothill to conduct an audit of said accounts in
order to determine eligibility for Advances.
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"Eligible Special GM Project Accounts" shall be limited to the
Accounts arising out of the design and manufacture of the following items for GM
as specified on the Purchase Order for each item:
Description of Item and Serial Number Purchase Order No. and Date
------------------------------------- ---------------------------
A3 Transfer Press System 29329 WHS 14587 April 4, 1997
A3 Transfer Press System 29328 WHS 14588 April 4, 1997
In order to be an Eligible Special GM Project Account said
account shall meet each of the requirements set forth in the definition of
Eligible Accounts except for (a), (h) and (k), and Borrower shall:
(a) not have received any notification from GM of non
compliance with the Purchase Order upon which Advances are being sought by
Borrower which has not been cured which cure is evidenced by a written
acknowledgment from GM;
(b) be in compliance with that certain Amendment to Purchase
Orders between Borrower and GM dated October 4, 1999 as amended by a Second and
Third Amendment with respect to Press No. 3 and Press No. 4 as outlined therein;
(c) not seek any Advance which would result in funds being
advanced in excess of the amounts set forth on the financial projections set
forth on Exhibit A; and
(d) have furnished evidence to Foothill of the renewal of its
existing labor contract, or have provided evidence satisfactory to Foothill, in
its sole discretion, that labor issues will not impede Borrower from compliance
with the terms of the Purchase Order for which Advances are being sought; and
(e) demonstrate to Foothill to its reasonable satisfaction
that Borrower has sufficient liquidity, including Advances, to complete the work
required under each of the Purchase Orders set forth above.
"Eligible Special GM Project Billed Accounts" means an Account
which:
(a) meets each of the requirements set forth in the definition
of Eligible Special GM Project Accounts; and
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(b) Borrower has invoiced GM in which event the Account shall
be an Eligible Special GM Project Account for sixty (60) days from the invoice
date provided that the selling terms for the Account are not in excess of thirty
(30) days.
"Eligible Special GM Project Unbilled Accounts" means an
Account which:
(a) meets each of the requirements set forth in the definition
of Eligible Special GM Project Accounts; and
(b) evidences a machine or a press being manufactured for GM
which is within sixty (60) days of shipment pursuant to the required terms of
the Purchase Order, and has not been invoiced to GM and shall be deemed an
Eligible Special GM Project Unbilled Account for seventy-five (75) days from
first becoming an Eligible Special GM Project Unbilled Account.
"Eligible Special Project Accounts" means an Account which:
(a) meets such of the requirements set forth in the definition
of Eligible Accounts except for (a) and (k);
(b) is subject to a written Purchase Order or Contract from an
Account Debtor;
(c) arises from the design and manufacture of a machine or
press pursuant to a Purchase Order or Contract which is at least eighty percent
(80%) complete and has been manufactured in accord with the terms of the
Purchase Order or Contract;
(d) Borrower has not received any notification from an Account
Debtor of non compliance with the Purchase Order or Contract upon which Advances
are being sought by the Borrower;
(e) Borrower has demonstrated to Foothill to its reasonable
satisfaction that Borrower has sufficient liquidity, including Advances, to
complete the work required under each of the Purchase Orders or Contract for
which Advances are being sought by the Borrower; and
(f) eligibility for Special Project Accounts Advances shall be
determined by Foothill on a case by case basis.
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"Eligible Special Project Billed Accounts" means an Account
which:
(a) meets each of the requirements set forth in the definition
of Eligible Special Project Accounts; and
(b) Borrower has invoiced the Account Debtor in which event
the Account shall be an Eligible Special Project Account for sixty (60) days
from the invoice date provided that the selling terms of the Account are not in
excess of thirty (30) days.
"Eligible Special Project Unbilled Accounts" means an Account
which:
(a) meets each of the requirements set forth in the definition
of Eligible Special Project Accounts; and
(b) evidences a machine or press being manufactured which is
within sixty (60) days of shipment pursuant to the required terms of the
Purchase Order or Contract between the Borrower and the Account Debtor and shall
be deemed an Eligible Special Project Unbilled Account only for seventy-five
(75) days from first becoming an Eligible Special Project Unbilled Account.
"Environmental Reserve" means the sum of Eight Hundred Ninety
Thousand Dollars ($890,000) which will be reserved against the Term Loan Subline
by Foothill until it has received all environmental information requested by it
with respect to the Hobart, Indiana portion of the Real Property Collateral.
Foothill must be satisfied in its sole discretion with respect to the
environmental status of the Hobart, Indiana real estate before releasing the
Environmental Reserve.
"Equipment" means all of Borrower's present and hereafter
acquired machinery, machine tools, motors, equipment, furniture, furnishings,
fixtures, vehicles (including motor vehicles and trailers), tools, parts, goods
(other than consumer goods, farm products, or Inventory), wherever located,
including, (a) any assets acquired by Borrower with the proceeds of a Capital
Expenditure Loan, (b) any interest of Borrower in any of the foregoing, and (c)
all attachments, accessories, accessions, replacements, substitutions,
additions, and improvements to any of the foregoing.
"ERISA" means the Employee Retirement Income Security Act of
1974, 29 U.S.C.ss.ss.1000 et seq., amendments thereto, successor statutes, and
regulations or guidance promulgated thereunder.
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"ERISA Affiliate" means (a) any corporation subject to ERISA
whose employees are treated as employed by the same employer as the employees of
Borrower under IRC Section 414(b), (b) any trade or business subject to ERISA
whose employees are treated as employed by the same employer as the employees of
Borrower under IRC Section 414(c), (c) solely for purposes of Section 302 of
ERISA and Section 412 of the IRC, any organization subject to ERISA that is a
member of an affiliated service group of which Borrower is a member under IRC
Section 414(m), or (d) solely for purposes of Section 302 of ERISA and Section
412 of the IRC, any party subject to ERISA that is a party to an arrangement
with Borrower and whose employees are aggregated with the employees of Borrower
under IRC Section 414(o).
"ERISA Event" means (a) a Reportable Event with respect to any
Benefit Plan or Multiemployer Plan, (b) the withdrawal of Borrower, any of its
Subsidiaries or ERISA Affiliates from a Benefit Plan during a plan year in which
it was a "substantial employer" (as defined in Section 4001(a)(2) of ERISA), (c)
the providing of notice of intent to terminate a Benefit Plan in a distress
termination (as described in Section 4041(c) of ERISA), (d) the institution by
the PBGC of proceedings to terminate a Benefit Plan or Multiemployer Plan, (e)
any event or condition (i) that provides a basis under Section 4042(a)(1), (2),
or (3) of ERISA for the termination of, or the appointment of a trustee to
administer, any Benefit Plan or Multiemployer Plan, or (ii) that may result in
termination of a Multiemployer Plan pursuant to Section 4041A of ERISA, (f) the
partial or complete withdrawal within the meaning of Sections 4203 and 4205 of
ERISA, of Borrower, any of its Subsidiaries or ERISA Affiliates from a
Multiemployer Plan, or (g) providing any security to any Plan under Section
401(a)(29) of the IRC by Borrower or its Subsidiaries or any of their ERISA
Affiliates.
"Event of Default" has the meaning set forth in Section 8.
"Existing Lender" means LaSalle Bank, N.A.
"FEIN" means Federal Employer Identification Number.
"Fiscal Projections" has the meaning set forth in Section
3.3(b).
"Foothill" has the meaning set forth in the preamble to this
Agreement.
"Foothill Account" has the meaning set forth in Section 2.7.
"Foothill Expenses" means all: costs or expenses (including
taxes, and insurance premiums) required to be paid by Borrower under any of the
Loan Documents that are paid or incurred by Foothill; fees or charges paid or
incurred by Foothill in connection with
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Foothill's transactions with Borrower, including, fees or charges for
photocopying, notarization, couriers and messengers, telecommunication, public
record searches (including tax lien, litigation, and UCC searches and including
searches with the patent and trademark office, the copyright office, or the
department of motor vehicles), filing, recording, publication, appraisal
(including periodic Personal Property Collateral or Real Property Collateral
appraisals), real estate surveys, real estate title policies and endorsements,
and environmental audits; costs and expenses incurred by Foothill in the
disbursement of funds to Borrower (by wire transfer or otherwise); charges paid
or incurred by Foothill resulting from the dishonor of checks; costs and
expenses paid or incurred by Foothill to correct any default or enforce any
provision of the Loan Documents, or in gaining possession of, maintaining,
handling, preserving, storing, shipping, selling, preparing for sale, or
advertising to sell the Personal Property Collateral or the Real Property
Collateral, or any portion thereof, irrespective of whether a sale is
consummated; costs and expenses paid or incurred by Foothill in examining
Borrower's Books; costs and expenses of third party claims or any other suit
paid or incurred by Foothill in enforcing or defending the Loan Documents or in
connection with the transactions contemplated by the Loan Documents or
Foothill's relationship with Borrower or any guarantor; and Foothill's
reasonable attorneys fees and expenses incurred in advising, structuring,
drafting, reviewing, administering, amending, terminating, enforcing (including
attorneys fees and expenses incurred in connection with a "workout," a
"restructuring," or an Insolvency Proceeding concerning Borrower or any
guarantor of the Obligations), defending, or concerning the Loan Documents,
irrespective of whether suit is brought.
"GAAP" means generally accepted accounting principles as in
effect from time to time in the United States, consistently applied.
"General Intangibles" means all of Borrower's present and
future general intangibles and other personal property (including contract
rights, rights arising under common law, statutes, or regulations, choses or
things in action, goodwill, patents, trade names, trademarks, servicemarks,
copyrights, blueprints, drawings, purchase orders, customer lists, monies due or
recoverable from pension funds, route lists, rights to payment and other rights
under any royalty or licensing agreements, infringement claims, computer
programs, information contained on computer disks or tapes, literature, reports,
catalogs, deposit accounts, insurance premium rebates, tax refunds, and tax
refund claims), other than goods, Accounts, and Negotiable Collateral.
"GM" means General Motors Corporation.
"Governing Documents" means the certificate or articles of
incorporation, by-laws, or other organizational or governing documents of any
Person.
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"Hazardous Materials" means (a) substances that are defined or
listed in, or otherwise classified or regulated pursuant to, any environmentally
related federal, state or local government applicable laws or regulations as
"hazardous substances," "hazardous materials," "hazardous wastes," "toxic
substances," "pollutant or contaminant," or any other formulation intended to
define, list, or classify substances by reason of deleterious properties such as
ignitability, corrosivity, reactivity, carcinogenicity, reproductive toxicity,
or "EP toxicity", including but not limited to the Comprehensive Environmental
Response Compensation and Liability Act, 42 U.S.C. ss.9601(14) as amended by the
Superfund Amendments, and Reauthorization Act and including the judicial
interpretations thereof, (b) oil, petroleum, or petroleum derived substances,
natural gas, natural gas liquids, synthetic gas, drilling fluids, produced
waters, and other wastes associated with the exploration, development, or
production of crude oil, natural gas, or geothermal resources, (c) any flammable
substances or explosives or any radioactive materials, and (d) asbestos in any
form or electrical equipment that contains any oil or dielectric fluid
containing levels of polychlorinated biphenyls in excess of 50 parts per
million.
"Indebtedness" means: (a) all obligations of Borrower for
borrowed money, (b) all obligations of Borrower evidenced by bonds, debentures,
notes, or other similar instruments and all reimbursement or other obligations
of Borrower in respect of letters of credit, bankers acceptances, interest rate
swaps, or other financial products, (c) all obligations of Borrower under
capital leases, (d) all obligations or liabilities of others secured by a Lien
on any property or asset of Borrower, irrespective of whether such obligation or
liability is assumed, and (e) any obligation of Borrower guaranteeing or
intended to guarantee (whether guaranteed, endorsed, co-made, discounted, or
sold with recourse to Borrower) any indebtedness, lease, dividend, letter of
credit, or other obligation of any other Person.
"Insolvency Proceeding" means any proceeding commenced by or
against any Person under any provision of the Bankruptcy Code or under any other
bankruptcy or insolvency law, assignments for the benefit of creditors, formal
or informal moratoria, compositions, extensions generally with creditors, or
proceedings seeking reorganization, arrangement, or other similar relief.
"Intangible Assets" means, with respect to any Person, that
portion of the book value of all of such Person's assets that would be treated
as intangibles under GAAP.
"Inventory" means all present and future inventory in which
Borrower has any interest, including goods held for sale or lease or to be
furnished under a contract of service and all of Borrower's present and future
raw materials, work in process, finished goods, and packing and shipping
materials, wherever located.
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"IRC" means the Internal Revenue Code of 1986, as amended, and
the regulations thereunder.
"Investment Property" has the meaning as set forth in the
Code.
"L/C" has the meaning set forth in Section 2.2(a).
"L/C Guaranty" has the meaning set forth in Section 2.2(a).
"LaSalle Letter" means that letter from Existing Lender
addressed to Foothill indicating that the only interest which Existing Lender
has in any assets of Borrower, whether Real Property Collateral or Personal
Property Collateral, is an assignment of all right, title and interest of
Borrower's membership interest in ▇▇▇▇ Hog, including, without limitation,
Borrower's interest in the capital, income, profits, and all other property
hereafter delivered to Borrower in substitution for, as proceeds of, or in
addition to any of the foregoing, all certificates, instruments and documents
representing or evidencing such property, and all cash, securities, interest,
dividends, rights and other property at any time and from time to time received,
receivable or otherwise distributed in respect of or in exchange for any or all
thereof, all of the foregoing whether now owned or hereafter acquired by
Borrower and wheresoever located and said letter shall be in form and content
acceptable to Foothill.
"Letter of Credit" means an L/C or an L/C Guaranty, as the
context requires.
"Lien" means any interest in property securing an obligation
owed to, or a claim by, any Person other than the owner of the property, whether
such interest shall be based on the common law, statute, or contract, whether
such interest shall be recorded or perfected, and whether such interest shall be
contingent upon the occurrence of some future event or events or the existence
of some future circumstance or circumstances, including the lien or security
interest arising from a mortgage, deed of trust, encumbrance, pledge,
hypothecation, assignment, deposit arrangement, security agreement, adverse
claim or charge, conditional sale or trust receipt, or from a lease,
consignment, or bailment for security purposes and also including reservations,
exceptions, encroachments, easements, rights-of-way, covenants, conditions,
restrictions, leases, and other title exceptions and encumbrances affecting Real
Property.
"Loan" means any portion of the Maximum Amount advanced
pursuant to the Loan Documents.
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"Loan Account" has the meaning set forth in Section 2.10.
"Loan Documents" means this Agreement, the Disbursement
Letter, the Letters of Credit, the Lockbox Agreements, the Mortgages, the
Collateral Assignment, the Pledge Agreements, any note or notes executed by
Borrower and payable to Foothill, and any other agreement entered into, now or
in the future, in connection with this Agreement.
"Lockbox Account" shall mean a depositary account established
pursuant to one of the Lockbox Agreements.
"Lockbox Agreements" means those certain Lockbox Operating
Procedural Agreements and those certain Depository Account Agreements, in form
and substance satisfactory to Foothill, each of which is among Borrower,
Foothill, and one of the Lockbox Banks.
"Lockbox Banks" means LaSalle Bank, N.A. or such other banks
as may be agreed to by Borrower and Foothill from time to time.
"Lockboxes" has the meaning set forth in Section 2.7.
"Material Adverse Change" means (a) a material adverse change
in the business, prospects, operations, results of operations, assets,
liabilities or condition (financial or otherwise) of Borrower, (b) the material
impairment of Borrower's ability to perform its obligations under the Loan
Documents to which it is a party or of Foothill to enforce the Obligations or
realize upon the Collateral because of Borrower's action or inaction, (c) a
material adverse effect on the value of the Collateral or the amount that
Foothill would be likely to receive (after giving consideration to delays in
payment and costs of enforcement) in the liquidation of such Collateral, or (d)
a material impairment of the priority of Foothill's Liens with respect to the
Collateral.
"Maximum Amount" means the sum of Thirty Million Dollars
($30,000,000).
"Mortgages" means one or more mortgages, deeds of trust, or
deeds to secure debt, executed by Borrower in favor of Foothill, the form and
substance of which shall be satisfactory to Foothill, that encumber the Real
Property Collateral and the related improvements thereto.
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"Multiemployer Plan" means a "multiemployer plan" (as defined
in Section 4001(a)(3) of ERISA) to which Borrower, any of its Subsidiaries, or
any ERISA Affiliate has contributed, or was obligated to contribute, within the
past six years.
"Negotiable Collateral" means all of Borrower's present and
future letters of credit, notes, drafts, instruments, investment property,
security entitlements, securities (including the shares of stock of Subsidiaries
of Borrower), documents, personal property leases (wherein Borrower is the
lessor), chattel paper, and Borrower's Books relating to any of the foregoing.
"Obligations" means all loans, Advances, debts, principal,
interest (including any interest that, but for the provisions of the Bankruptcy
Code, would have accrued), contingent reimbursement obligations under any
outstanding Letters of Credit, premiums (including Early Termination Premiums),
liabilities (including all amounts charged to Borrower's Loan Account pursuant
hereto), obligations, fees, charges, costs, or Foothill Expenses (including any
fees or expenses that, but for the provisions of the Bankruptcy Code, would have
accrued), lease payments, guaranties, covenants, and duties owing by Borrower to
Foothill of any kind and description (whether pursuant to or evidenced by the
Loan Documents or pursuant to any other agreement between Foothill and Borrower,
and irrespective of whether for the payment of money), whether direct or
indirect, absolute or contingent, due or to become due, now existing or
hereafter arising, and including any debt, liability, or obligation owing from
Borrower to others that Foothill may have obtained by assignment or otherwise,
and further including all interest not paid when due and all Foothill Expenses
that Borrower is required to pay or reimburse by the Loan Documents, by law, or
otherwise.
"Overadvance" has the meaning set forth in Section 2.5.
"Participant" means any Person to which Foothill has sold a
participation interest in its rights under the Loan Documents.
"PBGC" means the Pension Benefit Guaranty Corporation as
defined in Title IV of ERISA, or any successor thereto.
"Permitted Liens" means (a) Liens held by Foothill, (b) Liens
for unpaid taxes that either (i) are not yet due and payable or (ii) are the
subject of Permitted Protests, (c) Liens set forth on Schedule P-1, (d) the
interests of lessors under operating leases and purchase money Liens of lessors
under capital leases to the extent that the acquisition or lease of the
underlying asset is permitted under Section 7.21 and so long as the Lien only
attaches to the asset purchased or acquired and only secures the purchase price
of the asset, (e) Liens arising
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by operation of law in favor of warehousemen, landlords, carriers, mechanics,
materialmen, laborers, or suppliers, incurred in the ordinary course of business
of Borrower and not in connection with the borrowing of money, and which Liens
either (i) are for sums not yet due and payable, or (ii) are the subject of
Permitted Protests, (f) Liens arising from deposits made in connection with
obtaining worker's compensation or other unemployment insurance, (g) Liens or
deposits to secure performance of bids, tenders, or leases (to the extent
permitted under this Agreement), incurred in the ordinary course of business of
Borrower and not in connection with the borrowing of money, (h) Liens arising by
reason of security for surety or appeal bonds in the ordinary course of business
of Borrower, (i) Liens of or resulting from any judgment or award that would not
have a Material Adverse Effect and as to which the time for the appeal or
petition for rehearing of which has not yet expired, or in respect of which
Borrower is in good faith prosecuting an appeal or proceeding for a review, and
in respect of which a stay of execution pending such appeal or proceeding for
review has been secured, (j) Liens with respect to the Real Property Collateral
that are exceptions to the commitments for title insurance issued in connection
with the Mortgages, as accepted by Foothill, and (k) with respect to any Real
Property that is not part of the Real Property Collateral, easements, rights of
way, zoning and similar covenants and restrictions, and similar encumbrances
that customarily exist on properties of Persons engaged in similar activities
and similarly situated and that in any event do not materially interfere with or
impair the use or operation of the Collateral by Borrower or the value of
Foothill's Lien thereon or therein, or materially interfere with the ordinary
conduct of the business of Borrower.
"Permitted Protest" means the right of Borrower to protest any
Lien other than any such Lien that secures the Obligations, tax (other than
payroll taxes or taxes that are the subject of a United States federal tax
lien), or rental payment, provided that (a) a reserve with respect to such
obligation is established on the books of Borrower in an amount that is
reasonably satisfactory to Foothill, (b) any such protest is instituted and
diligently prosecuted by Borrower in good faith, and (c) Foothill is satisfied
that, while any such protest is pending, there will be no impairment of the
enforceability, validity, or priority of any of the Liens of Foothill in and to
the Collateral.
"Person" means and includes natural persons, corporations,
limited liability companies, limited partnerships, general partnerships, limited
liability partnerships, joint ventures, trusts, land trusts, business trusts, or
other organizations, irrespective of whether they are legal entities, and
governments and agencies and political subdivisions thereof.
"Personal Property Collateral" means all Collateral other than
the Real Property Collateral.
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"Plan" means any employee benefit plan, program, or
arrangement maintained or contributed to by Borrower or with respect to which it
may incur liability.
"Pledge Agreements" means those certain Pledge Agreements
executed by the Borrower in favor of Foothill and pledging to Foothill all of
the Borrower's joint venture interest in Verson Pressentechnik GmbH and all of
its rights as a member of High Production Technology, L.L.C., a Delaware limited
liability company which it created with Automatic Feed Co.
"Real Property" means any estates or interests in real
property now owned or hereafter acquired by Borrower.
"Real Property Collateral" means the parcel or parcels of real
property and the related improvements thereto identified on Schedule R-1, and
any Real Property hereafter acquired by Borrower.
"Reference Rate" means the rate of interest announced within
▇▇▇▇▇ Fargo Bank, N.A. at its principal office in San Francisco, California from
time to time as its "prime rate", with the understanding that the "prime rate"
is one of ▇▇▇▇▇ Fargo's base rates (not necessarily the lowest of such rates)
and serves as the basis upon which effective rates of interest are calculated
for those loans making reference thereto and is evidenced by the recording
thereof after its announcement in such internal publication or publications as
▇▇▇▇▇ Fargo may designate.
"Renewal Date" has the meaning set forth in Section 3.4.
"Reportable Event" means any of the events described in
Section 4043(c) of ERISA or the regulations thereunder other than a Reportable
Event as to which the provision of thirty (30) days notice to the PBGC is waived
under applicable regulations.
"Retiree Health Plan" means an "employee welfare benefit plan"
within the meaning of Section 3(1) of ERISA that provides benefits to
individuals after termination of their employment, other than as required by
Section 601 of ERISA.
"Revolving Note" has the meaning as set forth in Section 2.1.
"SEC Reports" means (i) Borrower's 10-K Report as filed with
the Securities and Exchange Commission (the "SEC") for each of its fiscal years
after December
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31, 1999, and (ii) all of the Borrower's forms 10-Q and 8-K filed with the SEC
since January 1, 2000.
"Solvent" means, with respect to any Person on a particular
date, that on such date (a) at fair valuations, all of the properties and assets
of such Person are greater than the sum of the debts, including contingent
liabilities, of such Person, (b) the present fair salable value of the
properties and assets of such Person is not less than the amount that will be
required to pay the probable liability of such Person on its debts as they
become absolute and matured, (c) such Person is able to realize upon its
properties and assets and after funding of the Loan pay its debts and other
liabilities, contingent obligations and other commitments as they mature in the
normal course of business, (d) such Person does not intend to, and does not
believe that it will, incur debts beyond such Person's ability to pay as such
debts mature, and (e) such Person is not engaged in business or a transaction,
and is not about to engage in business or a transaction, for which such Person's
properties and assets would constitute unreasonably small capital after giving
due consideration to the prevailing practices in the industry in which such
Person is engaged. In computing the amount of contingent liabilities at any
time, it is intended that such liabilities will be computed at the amount that,
in light of all the facts and circumstances existing at such time, represents
the amount that reasonably can be expected to become an actual or matured
liability.
"Subsidiary" of a Person means a corporation, partnership,
limited liability company, or other entity in which that Person directly or
indirectly owns or controls the shares of stock or other ownership interests
having ordinary voting power to elect a majority of the board of directors (or
appoint other comparable managers) of such corporation, partnership, limited
liability company, or other entity.
"Term Loan Subline" means a subline in the amount of Ten
Million Six Hundred Thousand Dollars ($10,600,000), minus the amount of the
Environmental Reserve. The Term Loan Subline shall be reduced by One Hundred
Seventy Six Thousand Six Hundred Sixty Seven Dollars ($176,667) per month
commencing on September 1, 2000.
"Voidable Transfer" has the meaning set forth in Section 15.8.
1.2 Accounting Terms. All accounting terms not specifically defined
herein shall be construed in accordance with GAAP. When used herein, the term
"financial statements" shall include the notes and schedules thereto. Whenever
the term "Borrower" is used in respect of a financial covenant or a related
definition, it shall be understood to mean Borrower on a consolidated basis
unless the context clearly requires otherwise.
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1.3 Code. Any terms used in this Agreement that are defined in the
Code shall be construed and defined as set forth in the Code unless otherwise
defined herein.
1.4 Construction. Unless the context of this Agreement clearly
requires otherwise, references to the plural include the singular, references to
the singular include the plural, the term "including" is not limiting, and the
term "or" has, except where otherwise indicated, the inclusive meaning
represented by the phrase "and/or." The words "hereof," "herein," "hereby,"
"hereunder," and similar terms in this Agreement refer to this Agreement as a
whole and not to any particular provision of this Agreement. An Event of Default
shall "continue" or be "continuing" until such Event of Default has been waived
in writing by Foothill. Section, subsection, clause, schedule, and exhibit
references are to this Agreement unless otherwise specified. Any reference in
this Agreement or in the Loan Documents to this Agreement or any of the Loan
Documents shall include all alterations, amendments, changes, extensions,
modifications, renewals, replacements, substitutions, and supplements, thereto
and thereof, as applicable.
1.5 Schedules and Exhibits. All of the schedules and exhibits
attached to this Agreement shall be deemed incorporated herein by reference.
2. LOAN AND TERMS OF PAYMENT.
2.1 Revolving Advances.
(a) Subject to the terms and conditions of this Agreement,
Foothill agrees to make advances ("Advances") to Borrower in an amount
outstanding not to exceed at any one time the lesser of (i) the Maximum Amount,
less the outstanding balance of all undrawn or unreimbursed Letters of Credit,
or (ii) the Borrowing Base, less the outstanding balance of all undrawn or
unreimbursed Letters of Credit. For purposes of this Agreement, "Borrowing
Base", as of any date of determination, shall mean the result of:
(w) eighty five percent (85%) of Eligible Parts and Service
Accounts, less the amount, if any, of the Dilution Reserve, plus
(x) sixty five percent (65%) of Eligible Special Project
Unbilled Accounts, plus sixty five percent (65%) of Eligible Special
GM Project Unbilled Accounts, plus eighty five percent (85%) of
Eligible Special Project Billed Accounts, plus eighty five percent
(85%) of Eligible Special GM Project Billed Accounts, less the
amount, if any, of the Dilution Reserve, plus
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(y) the maximum amount of the Term Loan Subline, minus
(z) the aggregate amount of reserves, if any, established by
Foothill under Section 2.1(b).
(b) Anything to the contrary in this Section 2.1(a)
notwithstanding, Foothill shall have the right to establish reserves in such
amounts, and with respect to such matters as Foothill in its reasonable
discretion shall deem necessary or appropriate, against the Borrowing Base,
including reserves with respect to (i) dismantling shipping and installation of
any machines or presses, (ii) sums that Borrower is required to pay (such as
taxes, assessments, insurance premiums, or, in the case of leased assets, rents
or other amounts payable under such leases if the failure to pay same would
result in the lessor obtaining a prior lien ahead of Foothill with respect to
any Collateral) and has failed to pay under any Section of this Agreement or any
other Loan Document, and (iii) amounts owing by Borrower to any Person to the
extent secured by a Lien on, or trust over, any of the Collateral, which Lien or
trust, in the sole discretion of Foothill would be likely to have a priority
superior to the Liens (such as landlord liens, ad valorem taxes, or sales taxes
where given priority under applicable law) in and to such item of the
Collateral.
(c) Foothill shall have no obligation to make Advances
hereunder to the extent they would cause the outstanding Obligations to exceed
the Maximum Amount.
(d) Amounts borrowed pursuant to this Section 2.1 may be
repaid and, subject to the terms and conditions of this Agreement, reborrowed at
any time during the term of this Agreement.
(e) Other than Eligible Special GM Project Accounts or
Eligible Parts and Service Accounts or the Term Loan Subline, Borrower may not
obtain any Advances until Borrower has complied with the requirements of Section
3.3(b) by delivering the Fiscal Projections.
(f) Except for Advances under the Term Loan Subline, Borrower
may not obtain any Advances pursuant to this Section 2.1 until Borrower has sold
its nineteen and nine tenths percent (19.9%) membership interest in ▇▇▇▇ Hog to
▇▇▇▇ Hog Investors or its Affiliates and paid in full all indebtedness due to
Existing Lender and provided further that there is no Event of Default.
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2.2 Letters of Credit.
(a) Subject to the terms and conditions of this Agreement,
Foothill agrees to issue letters of credit for the account of Borrower (each, an
"L/C") or to issue guarantees of payment (each such guaranty, an "L/C Guaranty")
with respect to letters of credit issued by an issuing bank for the account of
Borrower. Foothill shall have no obligation to issue a Letter of Credit if any
of the following would result:
(i) the sum of one hundred percent (100%) of the aggregate
amount of all undrawn and unreimbursed Letters of Credit, would
exceed the Borrowing Base less the amount of outstanding Advances
less the aggregate amount of reserves established under Section
2.1(b); or
(ii) the aggregate amount of all undrawn or unreimbursed
Letters of Credit would exceed the lower of: (x) the Maximum Amount
less the amount of outstanding Advances less the aggregate amount of
reserves established under Section 2.1(b); or (y) Two Million
Dollars ($2,000,000); or
(iii) the outstanding Obligations would exceed the Maximum
Amount.
(b) Borrower expressly understands and agrees that Foothill
shall have no obligation to arrange for the issuance by issuing banks of the
letters of credit that are to be the subject of L/C Guarantees. Borrower and
Foothill acknowledge and agree that certain of the letters of credit that are to
be the subject of L/C Guarantees may be outstanding on the Closing Date. Each
Letter of Credit shall have an expiry date no later than sixty (60) days prior
to the date on which this Agreement is scheduled to terminate under Section 3.4
(without regard to any potential renewal term) and all such Letters of Credit
shall be in form and substance acceptable to Foothill in its sole discretion. If
Foothill is obligated to advance funds under a Letter of Credit, Borrower
immediately shall reimburse such amount to Foothill and, in the absence of such
reimbursement, the amount so advanced immediately and automatically shall be
deemed to be an Advance hereunder and, thereafter, shall bear interest at the
rate then applicable to Advances under Section 2.6.
(c) Borrower hereby agrees to indemnify, save, defend, and
hold Foothill harmless from any loss, cost, expense, or liability, including
payments made by Foothill, expenses, and reasonable attorneys fees incurred by
Foothill arising out of or in connection with any Letter of Credit. Borrower
agrees to be bound by the issuing bank's regulations and interpretations of any
Letters of Credit guaranteed by Foothill and opened to or for Borrower's account
or by Foothill's interpretations of any L/C issued by Foothill to or for
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Borrower's account, even though this interpretation may be different from
Borrower's own, and Borrower understands and agrees that Foothill shall not be
liable for any error, negligence, or mistake, whether of omission or commission,
in following Borrower's instructions or those contained in the Letter of Credit
or any modifications, amendments, or supplements thereto. Borrower understands
that the L/C Guarantees may require Foothill to indemnify the issuing bank for
certain costs or liabilities arising out of claims by Borrower against such
issuing bank. Borrower hereby agrees to indemnify, save, defend, and hold
Foothill harmless with respect to any loss, cost, expense (including reasonable
attorneys fees), or liability incurred by Foothill under any L/C Guaranty as a
result of Foothill's indemnification of any such issuing bank.
(d) Borrower hereby authorizes and directs any bank that
issues a letter of credit guaranteed by Foothill to deliver to Foothill all
instruments, documents, and other writings and property received by the issuing
bank pursuant to such letter of credit, and to accept and rely upon Foothill's
instructions and agreements with respect to all matters arising in connection
with such letter of credit and the related application. Borrower may or may not
be the "applicant" or "account party" with respect to such letter of credit.
(e) Any and all charges, commissions, fees, and costs incurred
by Foothill relating to the letters of credit guaranteed by Foothill shall be
considered Foothill Expenses for purposes of this Agreement and immediately
shall be reimbursable by Borrower to Foothill.
(f) Immediately upon the termination of this Agreement,
Borrower agrees to either (i) provide cash collateral to be held by Foothill in
an amount equal to one hundred five percent (105%) of the maximum amount of
Foothill's obligations under Letters of Credit, or (ii) cause to be delivered to
Foothill releases of all of Foothill's obligations under outstanding Letters of
Credit. At Foothill's discretion, any proceeds of Collateral received by
Foothill after the occurrence and during the continuation of an Event of Default
may be held as the cash collateral required by this Section 2.2(e).
(g) If by reason of (i) any change in any applicable law,
treaty, rule, or regulation or any change in the interpretation or application
by any governmental authority of any such applicable law, treaty, rule, or
regulation, or (ii) compliance by the issuing bank or Foothill with any
direction, request, or requirement (irrespective of whether having the force of
law) of any governmental authority or monetary authority including, without
limitation, Regulation D of the Board of Governors of the Federal Reserve System
as from time to time in effect (and any successor thereto):
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(A) any reserve, deposit, or similar requirement is or shall
be imposed or modified in respect of any Letters of Credit issued
hereunder, or
(B) there shall be imposed on the issuing bank or Foothill any
other condition regarding any letter of credit, or Letter of Credit, as
applicable, issued pursuant hereto;
and the result of the foregoing is to increase, directly or indirectly, the cost
to the issuing bank or Foothill of issuing, making, guaranteeing, or maintaining
any letter of credit, or Letter of Credit, as applicable, or to reduce the
amount receivable in respect thereof by such issuing bank or Foothill, then, and
in any such case, Foothill may, at any time within a reasonable period after the
additional cost is incurred or the amount received is reduced, notify Borrower,
and Borrower shall pay on demand such amounts as the issuing bank or Foothill
may specify to be necessary to compensate the issuing bank or Foothill for such
additional cost or reduced receipt, together with interest on such amount from
the date of such demand until payment in full thereof at the rate set forth in
Section 2.6(a)(i) or (c)(i), as applicable. The determination by the issuing
bank or Foothill, as the case may be, of any amount due pursuant to this Section
2.2(f), as set forth in a certificate setting forth the calculation thereof in
reasonable detail, shall, in the absence of manifest or demonstrable error, be
final and conclusive and binding on all of the parties hereto.
2.3 Intentionally Omitted.
2.4 Intentionally Omitted.
2.5 Overadvances. If, at any time or for any reason, the amount of
Obligations owed by Borrower to Foothill pursuant to Sections 2.1, 2.2 and 2.4
is greater than either the Dollar or percentage limitations set forth in
Sections 2.1 or 2.2 (an "Overadvance"), Borrower immediately shall pay to
Foothill, in cash, the amount of such excess to be used by Foothill first, to
repay Advances outstanding under Section 2.1 and, thereafter, to be held by
Foothill as cash collateral to secure Borrower's obligation to repay Foothill
for all amounts paid pursuant to Letters of Credit.
2.6 Interest and Letter of Credit Fees: Rates, Payments, and
Calculations.
(a) Interest Rate. Except as provided in clause (b) below, (i)
all Obligations (except for undrawn Letters of Credit and borrowings under the
Term Loan Subline) shall bear interest on the Daily Balance at a per annum rate
of one and one quarter percentage points (1.25%) above the Reference Rate, and
(ii) borrowings under the Term Loan
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Subline shall bear interest at a per annum rate of two percentage points (2.0%)
above the Reference Rate. For purposes of interest calculation, Advances under
Section 2.1 shall first be made under the Term Loan Subline.
(b) Letter of Credit Fee. Borrower shall pay Foothill a fee
(in addition to the charges, commissions, fees, and costs set forth in Section
2.2(e)) equal to one and one half percent (1.50%) per annum times the Daily
Balance of the aggregate undrawn amount of all outstanding Letters of Credit.
(c) Default Rate. Upon the occurrence and during the
continuation of an Event of Default, (i) all Obligations (except for undrawn
Letters of Credit) shall bear interest at a per annum rate equal to three
percentage points (3.0%) above the Interest Rate otherwise charged in Section
2.6(a), and (ii) the Letter of Credit fee provided in Section 2.6(b) shall be
increased to five percent (5%) per annum times the Daily Balance of the amount
of the undrawn Letters of Credit that were outstanding during the immediately
preceding month.
(d) Minimum Interest. In no event shall the rate of interest
chargeable hereunder for any day be less than eight percent (8%) per annum. To
the extent that interest accrued hereunder at the rate set forth herein would be
less than the foregoing minimum daily rate, the interest rate chargeable
hereunder for such day automatically shall be deemed increased to the minimum
rate. To the extent that interest accrued hereunder at the rate set forth herein
(including the minimum interest rate) would yield less than the foregoing
minimum amount, the interest rate chargeable hereunder for the period in
question automatically shall be deemed increased to that rate that would result
in the minimum amount of interest being accrued and payable hereunder.
(e) Payments. Interest and Letter of Credit fees payable
hereunder shall be due and payable, in arrears, on the first day of each month
during the term hereof. Borrower hereby authorizes Foothill, at its option,
without prior notice to Borrower, to charge such interest and Letter of Credit
fees, all Foothill Expenses (as and when incurred), the charges, commissions,
fees, and costs provided for in Section 2.2(d) (as and when accrued or
incurred), the fees and charges provided for in Section 2.11 (as and when
accrued or incurred), and all installments or other payments due under the Term
Loan Subline, or any Loan Document to Borrower's Loan Account, which amounts
thereafter shall accrue interest at the rate then applicable to Advances
hereunder. Any interest not paid when due shall be compounded and shall
thereafter accrue interest at the rate then applicable to Advances hereunder.
(f) Computation. The Reference Rate as of the date of this
Agreement is nine percent (9%) per annum. In the event the Reference Rate is
changed from
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time to time hereafter, the applicable rate of interest hereunder automatically
and immediately shall be increased or decreased by an amount equal to such
change in the Reference Rate. All interest and fees chargeable under the Loan
Documents shall be computed on the basis of a 360 day year for the actual number
of days elapsed.
(g) Intent to Limit Charges to Maximum Lawful Rate. In no
event shall the interest rate or rates payable under this Agreement, plus any
other amounts paid in connection herewith, exceed the highest rate permissible
under any law that a court of competent jurisdiction shall, in a final
determination, deem applicable. Borrower and Foothill, in executing and
delivering this Agreement, intend legally to agree upon the rate or rates of
interest and manner of payment stated within it; provided, however, that,
anything contained herein to the contrary notwithstanding, if said rate or rates
of interest or manner of payment exceeds the maximum allowable under applicable
law, then, ipso facto as of the date of this Agreement, Borrower is and shall be
liable only for the payment of such maximum as allowed by law, and payment
received from Borrower in excess of such legal maximum, whenever received, shall
be applied to reduce the principal balance of the Obligations to the extent of
such excess.
2.7 Collection of Accounts. Borrower shall at all times maintain
lockboxes (the "Lockboxes") and, immediately after the Closing Date, shall
instruct all Account Debtors with respect to the Accounts, General Intangibles,
and Negotiable Collateral of Borrower to remit all Collections in respect
thereof to such Lockboxes. Borrower, Foothill, and the Lockbox Banks shall enter
into the Lockbox Agreements, which among other things shall provide for the
opening of a Lockbox Account for the deposit of Collections at a Lockbox Bank.
Borrower agrees that all Collections and other amounts received by Borrower from
any Account Debtor or any other source immediately upon receipt shall be
deposited into a Lockbox Account. No Lockbox Agreement or arrangement
contemplated thereby shall be modified by Borrower without the prior written
consent of Foothill. Upon the terms and subject to the conditions set forth in
the Lockbox Agreements, all amounts received in each Lockbox Account shall be
wired each Business Day into an account (the "Foothill Account") maintained by
Foothill at a depositary selected by Foothill.
2.8 Crediting Payments; Application of Collections. The receipt of
any Collections by Foothill (whether from transfers to Foothill by the Lockbox
Banks pursuant to the Lockbox Agreements or otherwise) immediately shall be
applied provisionally to reduce the Obligations outstanding under Section 2.1,
but shall not be considered a payment on account unless such Collection item is
a wire transfer of immediately available federal funds and is made to the
Foothill Account or unless and until such Collection item is honored when
presented for payment. From and after the Closing Date, Foothill shall be
entitled to charge Borrower for one
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(1) Business Day of `clearance' or `float' at the rate set forth in Section
2.6(a)(i) or Section 2.6(c)(i), as applicable, on all Collections that are
received by Foothill (regardless of whether forwarded by the Lockbox Banks to
Foothill, whether provisionally applied to reduce the Obligations under Section
2.1, or otherwise). This across-the-board one (1) Business Day clearance or
float charge on all Collections is acknowledged by the parties to constitute an
integral aspect of the pricing of Foothill's financing of Borrower, and shall
apply irrespective of the characterization of whether receipts are owned by
Borrower or Foothill, and whether or not there are any outstanding Advances, the
effect of such clearance or float charge being the equivalent of charging one
(1) Business Days of interest on such Collections. Should any Collection item
not be honored when presented for payment, then Borrower shall be deemed not to
have made such payment, and interest shall be recalculated accordingly. Anything
to the contrary contained herein notwithstanding, any Collection item shall be
deemed received by Foothill only if it is received into the Foothill Account on
a Business Day on or before 11:00 a.m. California time. If any Collection item
is received into the Foothill Account on a non-Business Day or after 11:00 a.m.
California time on a Business Day, it shall be deemed to have been received by
Foothill as of the opening of business on the immediately following Business
Day.
2.9 Designated Account. Foothill is authorized to make the Advances,
the Letters of Credit, and the Term Loan Subline, under this Agreement based
upon telephonic or other instructions received from anyone purporting to be an
Authorized Person, or without instructions if pursuant to Section 2.6(e).
Borrower agrees to establish and maintain the Designated Account with the
Designated Account Bank for the purpose of receiving the proceeds of the
Advances requested by Borrower and made by Foothill hereunder. Unless otherwise
agreed by Foothill and Borrower, any Advance requested by Borrower and made by
Foothill hereunder shall be made to the Designated Account.
2.10 Maintenance of Loan Account; Statements of Obligations.
Foothill shall maintain an account on its books in the name of Borrower (the
"Loan Account") on which Borrower will be charged with all Advances, and the
Term Loan Subline made by Foothill to Borrower or for Borrower's account,
including, accrued interest, Foothill Expenses, and any other payment
Obligations of Borrower. In accordance with Section 2.8, the Loan Account will
be credited with all payments received by Foothill from Borrower or for
Borrower's account, including all amounts received in the Foothill Account from
any Lockbox Bank. Foothill shall render statements regarding the Loan Account to
Borrower, including principal, interest, fees, and including an itemization of
all charges and expenses constituting Foothill Expenses owing, and such
statements shall be conclusively presumed to be correct and accurate and
constitute an account stated between Borrower and Foothill unless, within thirty
(30) days after receipt
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thereof by Borrower, Borrower shall deliver to Foothill written objection
thereto describing the error or errors contained in any such statements.
2.11 Fees. Borrower shall pay to Foothill the following fees:
(a) Closing Fee. On the Closing Date, a closing fee of Three
Hundred Thousand Dollars ($300,000);
(b) Unused Line Fee. On the first day of each month during the
term of this Agreement, an unused line fee in an amount equal to one half
percent (0.5%) per annum times the Average Unused Portion of the Maximum Amount;
(c) Intentionally Omitted;
(d) Financial Examination, Documentation, and Appraisal Fees.
Foothill's customary fee of Seven Hundred Fifty Dollars ($750) per day per
examiner, plus out-of-pocket expenses for each financial analysis and
examination (i.e., audits) of Borrower performed by personnel employed by
Foothill; Foothill's customary appraisal fee of One Thousand Five Hundred
Dollars ($1,500) per day per appraiser, plus out-of-pocket expenses for each
appraisal of the Collateral performed by personnel employed by Foothill; and,
the actual charges paid or incurred by Foothill if it elects to employ the
services of one or more third Persons to perform such financial analyses and
examinations (i.e., audits) of Borrower or to appraise the Collateral. It is
agreed that so long as no Event of Default shall be in existence or event which
with the passage of time would become an Event of Default be in existence,
Foothill shall not audit Borrower more often than quarterly during any calendar
year;
(e) Servicing Fee. On the first day of each month during the
term of this Agreement, and thereafter so long as any Obligations are
outstanding, a servicing fee in an amount equal to Five Thousand Dollars
($5,000) provided, however that the Servicing Fee shall be Four Thousand Dollars
($4,000) if the Borrower uses electronic reporting acceptable to Foothill; and
(f) Account Receivable Fee. On the first day of each month
during the term of this Agreement, a fee of Fifty Thousand Dollars ($50,000)
(the "Account Receivable Fee") if (i) during the preceding month prior to
establishing Eligible Parts and Service Accounts, Borrower had any Advances
outstanding on Eligible Special Project Unbilled Accounts or Eligible Special
Project Billed Accounts or Eligible Special GM Project Unbilled Accounts or
Eligible Special GM Project Billed Accounts or there were Letters of Credit
outstanding and the foregoing in the aggregate, exceeded the sum of One Million
Five Hundred
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Thousand Dollars ($1,500,000) for more than one day, or (ii) during the
preceding month after the establishment of Eligible Parts and Service Accounts,
Borrower had any Advances including Letter of Credit exposure outstanding
hereunder against Eligible Special Project Unbilled Accounts or Eligible Special
Project Billed Accounts or Eligible Special GM Project Unbilled Accounts or
Eligible Special GM Project Billed Accounts.
For purposes of determining Advances outstanding initial
Advances shall be made against the Term Loan Subline, then against Eligible
Parts and Service Accounts and then against Eligible Special Project Unbilled
Accounts and then against Eligible Special Project Billed Accounts and then
against Eligible Special GM Project Unbilled Accounts and then against Eligible
Special GM Project Billed Accounts.
3. CONDITIONS; TERM OF AGREEMENT.
3.1 Conditions Precedent to the Initial Advance, Letter of Credit,
and the Term Loan Subline. The obligation of Foothill to make the initial
Advance, to issue the initial Letter of Credit, or to make the Term Loan Subline
is subject to the fulfillment, to the satisfaction of Foothill and its counsel,
of each of the following conditions on or before the Closing Date:
(a) the Closing Date shall occur on or before March 31, 2000;
(b) Foothill shall have received searches reflecting the
filing of its financing statements and fixture filings as a first lien on the
Collateral except for the liens in favor of the Existing Lender and ▇▇▇▇ Hog,
which liens shall be limited only to a lien in favor of the Existing Lender and
▇▇▇▇ Hog Investors, L.L.C. in the Borrower's interest in ▇▇▇▇ Hog;
(c) Foothill shall have received each of the following
documents, duly executed, and each such document shall be in full force and
effect:
(i) the Lockbox Agreements;
(ii) the Disbursement Letter;
(iii) the Pay-Off Letter, together with UCC termination
statements and other documentation evidencing the termination by Bank of
America National Trust and Savings Association of its Liens in and to the
properties and assets of Borrower;
(iv) the Mortgages;
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(v) the Collateral Assignment;
(vi) the Pledge Agreements;
(vii) the Trademark, Patent and Copyright Pledge Agreements;
(viii) copy of a letter to GM requesting that Notice of any
non compliance with any purchase order be sent to Foothill.
(d) Foothill shall have received a certificate from the
Secretary of Borrower attesting to the resolutions of Borrower's Board of
Directors authorizing its execution, delivery, and performance of this Agreement
and the other Loan Documents to which Borrower is a party and authorizing
specific officers of Borrower to execute the same;
(e) Foothill shall have received copies of Borrower's
Governing Documents, as amended, modified, or supplemented to the Closing Date,
certified by the Secretary of Borrower;
(f) Foothill shall have received a certificate of status with
respect to Borrower, dated within ten (10) days of the Closing Date, such
certificate to be issued by the appropriate officer of the jurisdiction of
organization of Borrower, which certificate shall indicate that Borrower is in
good standing in such jurisdiction;
(g) Foothill shall have received certificates of status with
respect to Borrower, each dated within fifteen (15) days of the Closing Date,
such certificates to be issued by the appropriate officer of the jurisdictions
in which its failure to be duly qualified or licensed would constitute a
Material Adverse Change, which certificates shall indicate that Borrower is in
good standing in such jurisdictions;
(h) Foothill shall have received a certificate of insurance,
together with the endorsements thereto, as are required by Section 6.10, the
form and substance of which shall be satisfactory to Foothill and its counsel;
(i) Foothill shall have received duly executed certificates of
title with respect to that portion of the Collateral that is subject to
certificates of title;
(j) Foothill shall have received an opinion of Borrower's
counsel in form and substance satisfactory to Foothill and its counsel in its
sole discretion;
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(k) Foothill shall have received (i) appraisals of the Real
Property Collateral and appraisals of the Equipment, in each case satisfactory
to Foothill, and (ii) mortgagee title insurance policies (or marked commitments
to issue the same) for the Real Property Collateral issued by a title insurance
company satisfactory to Foothill and its counsel (each a "Mortgage Policy" and,
collectively, the "Mortgage Policies") in amounts satisfactory to Foothill
assuring Foothill that the Mortgages on such Real Property Collateral are valid
and enforceable first priority mortgage Liens on such Real Property Collateral
free and clear of all defects and encumbrances except Permitted Liens, and the
Mortgage Policies shall otherwise be in form and substance reasonably
satisfactory to Foothill and its counsel;
(l) Foothill shall have received phase-I environmental reports
on the Real Property Collateral and real estate surveys shall have been
completed with respect to the Real Property Collateral and copies thereof
delivered to Foothill; the environmental consultants and surveyors retained for
such reports or surveys, the scope of the reports or surveys, and the results
thereof shall be acceptable to Foothill in its reasonable discretion;
(m) Foothill shall have received reasonably satisfactory
evidence that all tax returns required to be filed by Borrower have been timely
filed and all taxes upon Borrower or its properties, assets, income, and
franchises (including real property taxes and payroll taxes) have been paid
prior to delinquency, except such taxes that are the subject of a Permitted
Protest;
(n) Foothill shall have received all SEC Reports;
(o) Foothill shall have received from Borrower a balance sheet
reflecting its financial position after the sale of its ▇▇▇▇ Hog division to
▇▇▇▇ Hog.
(p) all other documents and legal matters in connection with
the transactions contemplated by this Agreement shall have been delivered,
executed, or recorded and shall be in form and substance satisfactory to
Foothill and its counsel;
(q) Borrower shall have availability of not less than Two
Million Five Hundred Thousand Dollars ($2,500,000) of the Maximum Amount after
payment of all other items required hereunder;
(r) Foothill shall have received final background checks on
the principal officers of Borrower which shall be satisfactory to Foothill; and
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(s) Foothill shall have received the ▇▇▇▇ Hog Letter, the
LaSalle Letter and the Bank of America Letter.
3.2 Conditions Precedent to all Advances, all Letters of Credit, and
the Term Loan Subline. The following shall be conditions precedent to all
Advances, all Letters of Credit, and the Term Loan Subline hereunder:
(a) the representations and warranties contained in this
Agreement and the other Loan Documents shall be true and correct in all respects
on and as of the date of such extension of credit, as though made on and as of
such date (except to the extent that such representations and warranties relate
solely to an earlier date);
(b) no Default or Event of Default shall have occurred and be
continuing on the date of such extension of credit, nor shall either result from
the making thereof; and
(c) no injunction, writ, restraining order, or other order of
any nature prohibiting, directly or indirectly, the extending of such credit
shall have been issued and remain in force by any governmental authority against
Borrower, Foothill, or any of their Affiliates.
(d) Foothill shall have reviewed and approved the Fiscal
Projections (as defined below) except that this requirement shall not apply for
Advances made against Eligible Special GM Project Billed Accounts or Eligible
Special GM Project Unbilled Accounts or Eligible Service and Parts Accounts or
the Term Loan Subline.
3.3 Condition Subsequent. As a condition subsequent to initial
closing hereunder, Borrower shall perform or cause to be performed the following
(the failure by Borrower to so perform or cause to be performed constituting an
Event of Default):
(a) within thirty (30) days of the Closing Date, deliver to
Foothill the certified copies of the policies of insurance, together with the
endorsements thereto, as are required by Section 6.10, the form and substance of
which shall be satisfactory to Foothill and its counsel;
(b) on or before October 31, 2000, delivery to Foothill
updated financial projections for fiscal year 2001 (the "Fiscal Projections");
(c) within sixty (60) days of the Closing Date, deliver to
Foothill a Phase I Environmental Audit or such other information as Foothill
shall request with respect to
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the environmental status of the Real Property Collateral located in Hobart,
Indiana. Until delivery of said material and approval of same by Foothill in its
sole discretion Foothill shall retain the Environmental Reserve;
(d) within a reasonable time after the Closing Date, develop a
spare parts and service accounts ledger. Foothill will not make any Advances for
Service and Parts Accounts until an acceptable ledger system is developed by
Borrower and approved by Foothill; and
(e) Prior to an Advance, excluding Advances under the Term
Loan Subline, Foothill shall have conducted an updated audit of Borrower which
audit shall not disclose any Material Adverse Changes from the date hereof.
3.4 Term. This Agreement shall become effective upon the execution
and delivery hereof by Borrower and Foothill and subject to Section 3.6 hereof,
shall continue in full force and effect for a term ending on the date that is
three (3) years from the Closing Date (the "Termination Date"). The foregoing
notwithstanding, Foothill shall have the right to terminate its obligations
under this Agreement immediately and without notice upon the occurrence and
during the continuation of an Event of Default.
3.5 Effect of Termination. On the date of termination of this
Agreement, all Obligations (including contingent reimbursement obligations of
Borrower with respect to any outstanding Letters of Credit) immediately shall
become due and payable without notice or demand. No termination of this
Agreement, however, shall relieve or discharge Borrower of Borrower's duties,
Obligations, or covenants hereunder, and Foothill's continuing security
interests in the Collateral shall remain in effect until all Obligations have
been fully and finally discharged and Foothill's obligation to provide
additional credit hereunder is terminated.
3.6 Early Termination by Borrower. The provisions of Section 3.4
notwithstanding, Borrower has the option, at any time upon ninety (90) days
prior written notice to Foothill, to terminate this Agreement by paying to
Foothill, in cash, the Obligations (including an amount equal to one hundred and
five percent (105%) of the undrawn amount of the Letters of Credit), in full,
together with a premium (the "Early Termination Premium") equal to the
following:
(a) Three percent (3%) of the Maximum Amount with respect to
any prepayments made on or before the one (1) year anniversary date of the
Closing Date;
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(b) Two percent (2%) of the Maximum Amount with respect to any
prepayments made after the one (1) year anniversary date of the Closing Date and
on or before the two (2) year anniversary date of the Closing Date; and
(c) One percent (1%) of the Maximum Amount for any prepayment
made after the two year anniversary date of the Closing Date.
Notwithstanding anything to the contrary in this Section 3.6,
in the event that the Borrower refinances the Obligations in full with the
proceeds received from the sale of its interest in ▇▇▇▇ Hog, L.L.C. or the sale
of its Verson division, or a secondary public offering of its securities, then
the Early Termination Premium shall be equal to one half of one percent (0.50%)
of the amount prepaid. There will be no Early Termination Premium if the
Borrower refinances the Obligations in full with ▇▇▇▇▇ Fargo Bank.
3.7 Termination Upon Event of Default. If Foothill terminates this
Agreement upon the occurrence of an Event of Default, in view of the
impracticability and extreme difficulty of ascertaining actual damages and by
mutual agreement of the parties as to a reasonable calculation of Foothill's
lost profits as a result thereof, Borrower shall pay to Foothill upon the
effective date of such termination, a premium in an amount equal to the Early
Termination Premium. The Early Termination Premium shall be presumed to be the
amount of damages sustained by Foothill as the result of the early termination
and Borrower agrees that it is reasonable under the circumstances currently
existing. The Early Termination Premium provided for in this Section 3.7 shall
be deemed included in the Obligations.
4. CREATION OF SECURITY INTEREST.
4.1 Grant of Security Interest. Borrower hereby grants to Foothill a
continuing security interest in all currently existing and hereafter acquired or
arising Personal Property Collateral and Real Property Collateral in order to
secure prompt repayment of any and all Obligations and in order to secure prompt
performance by Borrower of each of its covenants and duties under the Loan
Documents. Foothill's security interests in the Personal Property Collateral
shall attach to all Personal Property Collateral without further act on the part
of Foothill or Borrower. Anything contained in this Agreement or any other Loan
Document to the contrary notwithstanding, except for the sale of Inventory to
buyers in the ordinary course of business, Borrower has no authority, express or
implied, to dispose of any item or portion of the Personal Property Collateral
or the Real Property Collateral.
4.2 Negotiable Collateral. In the event that any Collateral,
including proceeds, is evidenced by or consists of Negotiable Collateral,
Borrower, immediately upon the
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request of Foothill, shall endorse and deliver physical possession of such
Negotiable Collateral to Foothill.
4.3 Collection of Accounts, General Intangibles, and Negotiable
Collateral. At any time, Foothill or Foothill's designee may (a) notify
customers or Account Debtors of Borrower that the Accounts, General Intangibles,
or Negotiable Collateral have been assigned to Foothill or that Foothill has a
security interest therein, and (b) after an Event of Default, collect the
Accounts, General Intangibles, and Negotiable Collateral directly and charge the
collection costs and expenses to the Loan Account. Borrower agrees that it will
hold in trust for Foothill, as Foothill's trustee, any Collections that it
receives and immediately will deliver said Collections to Foothill in their
original form as received by Borrower.
4.4 Delivery of Additional Documentation Required. At any time upon
the request of Foothill, Borrower shall execute and deliver to Foothill all
financing statements, continuation financing statements, fixture filings,
security agreements, pledges, assignments, endorsements of certificates of
title, applications for title, affidavits, reports, notices, schedules of
accounts, letters of authority, and all other documents that Foothill reasonably
may request, in form reasonably satisfactory to Foothill, to perfect and
continue perfected Foothill's security interests in the Collateral, and in order
to fully consummate all of the transactions contemplated hereby and under the
other the Loan Documents. Foothill is hereby authorized to execute any of the
foregoing on behalf of Borrower or to file same electronically pursuant to the
Code.
4.5 Power of Attorney. Borrower hereby irrevocably makes,
constitutes, and appoints Foothill (and any of Foothill's officers, employees,
or agents designated by Foothill) as Borrower's true and lawful attorney, with
power to (a) if Borrower refuses to, or fails timely to execute and deliver any
of the documents described in Section 4.4, sign the name of Borrower on any of
the documents described in Section 4.4, (b) at any time that an Event of Default
has occurred and is continuing or Foothill deems itself insecure, sign
Borrower's name on any invoice or ▇▇▇▇ of lading relating to any Account, drafts
against Account Debtors, schedules and assignments of Accounts, verifications of
Accounts, and notices to Account Debtors, (c) send requests for verification of
Accounts, (d) endorse Borrower's name on any Collection item that may come into
Foothill's possession, (e) at any time that an Event of Default has occurred and
is continuing or Foothill deems itself insecure, notify the post office
authorities to change the address for delivery of Borrower's mail to an address
designated by Foothill, to receive and open all mail addressed to Borrower, and
to retain all mail relating to the Collateral and forward all other mail to
Borrower, (f) at any time that an Event of Default has occurred and is
continuing or Foothill deems itself insecure, make, settle, and adjust all
claims under Borrower's policies of insurance and make all determinations and
decisions with respect to such policies of insurance, and (g) at any time that
an Event of Default has occurred
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and is continuing or Foothill deems itself insecure, settle and adjust disputes
and claims respecting the Accounts directly with Account Debtors, for amounts
and upon terms that Foothill determines to be reasonable, and Foothill may cause
to be executed and delivered any documents and releases that Foothill determines
to be necessary. The appointment of Foothill as Borrower's attorney, and each
and every one of Foothill's rights and powers, being coupled with an interest,
is irrevocable until all of the Obligations have been fully and finally repaid
and performed and Foothill's obligation to extend credit hereunder is
terminated.
4.6 Right to Inspect. Foothill (through any of its officers,
employees, or agents) shall have the right, from time to time hereafter to
inspect Borrower's Books and to check, test, and appraise the Collateral in
order to verify Borrower's financial condition or the amount, quality, value,
condition of, or any other matter relating to, the Collateral, provided however,
that unless there is an Event of Default or an event, the occurrence of which
but for the passage of time would be an Event of Default, any such inspection as
set forth herein shall be after reasonable notice to the Borrower and shall take
place during the Borrower's normal business hours.
5. REPRESENTATIONS AND WARRANTIES.
In order to induce Foothill to enter into this Agreement, Borrower
makes the following representations and warranties which shall be true, correct,
and complete in all respects as of the date hereof, and shall be true, correct,
and complete in all respects as of the Closing Date, and at and as of the date
of the making of each Advance, Letter of Credit, Term Loan Subline, or Capital
Expenditure Loan made thereafter, as though made on and as of the date of such
Advance, Letter of Credit, Term Loan Subline, or Capital Expenditure Loan
(except to the extent that such representations and warranties relate solely to
an earlier date) and such representations and warranties shall survive the
execution and delivery of this Agreement:
5.1 No Encumbrances. Borrower has good and indefeasible title to the
Collateral, free and clear of Liens except for Permitted Liens.
5.2 Eligible Accounts. The Eligible Special GM Project Billed
Accounts and Eligible Special Project Billed Accounts and Eligible Parts and
Service Accounts are bona fide existing obligations created by the sale and/or
delivery of Inventory or the rendition of services to Account Debtors in the
ordinary course of Borrower's business, unconditionally owed to Borrower without
defenses, disputes, offsets, counterclaims, or rights of return or cancellation.
Borrower has not received notice of actual or imminent bankruptcy, insolvency,
or material impairment of the financial condition of any Account Debtor
regarding any Eligible Special Project Account or Eligible Parts and Service
Account and Borrower has not received
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any notice from GM of non compliance with any Eligible Special GM Project
Accounts and Borrower is in compliance with all terms of each Special GM Project
Account or any other Eligible Special Project Account. Borrower has sufficient
liquidity (including Advances) to complete all required work on any Eligible
Special GM Project Account or any Eligible Special Project Account.
5.3 Intentionally Omitted.
5.4 Equipment. All of the Equipment is used or held for use in
Borrower's business.
5.5 Location of Inventory and Equipment. The Inventory and Equipment
are not stored with a bailee, warehouseman, or similar party (without Foothill's
prior written consent) and are located only at the locations identified on
Schedule 6.12 or otherwise permitted by Section 6.12.
5.6 Inventory Records. Borrower keeps correct and accurate records
itemizing and describing the kind, type, quality, and quantity of the Inventory,
and Borrower's cost therefor.
5.7 Location of Chief Executive Office; FEIN. The chief executive
office of Borrower is located at the address indicated in the preamble to this
Agreement and Borrower's FEIN is ▇▇-▇▇▇▇▇▇▇.
5.8 Due Organization and Qualification; Subsidiaries.
(a) Borrower is duly organized and existing and in good
standing under the laws of the jurisdiction of its incorporation and qualified
and licensed to do business in, and in good standing in, any state where the
failure to be so licensed or qualified reasonably could be expected to have a
Material Adverse Change.
(b) Set forth on Schedule 5.8, is a complete and accurate list
of Borrower's direct and indirect Subsidiaries, showing: (i) the jurisdiction of
their incorporation; (ii) the number of shares of each class of common and
preferred stock authorized for each of such Subsidiaries; and (iii) the number
and the percentage of the outstanding shares of each such class owned directly
or indirectly by Borrower. All of the outstanding capital stock of each such
Subsidiary has been validly issued and is fully paid and non-assessable.
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(c) Except as set forth on Schedule 5.8, no capital stock (or
any securities, instruments, warrants, options, purchase rights, conversion or
exchange rights, calls, commitments or claims of any character convertible into
or exercisable for capital stock) of any direct or indirect Subsidiary of
Borrower is subject to the issuance of any security, instrument, warrant,
option, purchase right, conversion or exchange right, call, commitment or claim
of any right, title, or interest therein or thereto.
(d) Except as set forth on Schedule 5.8, none of Borrower's
subsidiaries own any assets and Borrower will not create any new subsidiaries or
make any current subsidiary operational or transfer or acquire assets for any
subsidiary without Foothill's prior written consent.
5.9 Due Authorization; No Conflict.
(a) The execution, delivery, and performance by Borrower of
this Agreement and the Loan Documents to which it is a party have been duly
authorized by all necessary corporate action.
(b) The execution, delivery, and performance by Borrower of
this Agreement and the Loan Documents to which it is a party do not and will not
(i) violate any provision of federal, state, or local law or regulation
(including Regulations G, T, U, and X of the Federal Reserve Board) applicable
to Borrower, the Governing Documents of Borrower, or any order, judgment, or
decree of any court or other Governmental Authority binding on Borrower, (ii)
conflict with, result in a breach of, or constitute (with due notice or lapse of
time or both) a default under any material contractual obligation or material
lease of Borrower, (iii) result in or require the creation or imposition of any
Lien of any nature whatsoever upon any properties or assets of Borrower, other
than Permitted Liens, or (iv) require any approval of stockholders or any
approval or consent of any Person under any material contractual obligation of
Borrower.
(c) Other than the filing of appropriate financing statements,
fixture filings, and mortgages, the execution, delivery, and performance by
Borrower of this Agreement and the Loan Documents to which Borrower is a party
do not and will not require any registration with, consent, or approval of, or
notice to, or other action with or by, any federal, state, foreign, or other
Governmental Authority or other Person.
(d) This Agreement and the Loan Documents to which Borrower is
a party, and all other documents contemplated hereby and thereby, when executed
and delivered by Borrower will be the legally valid and binding obligations of
Borrower, enforceable against
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Borrower in accordance with their respective terms, except as enforcement may be
limited by equitable principles or by bankruptcy, insolvency, reorganization,
moratorium, or similar laws relating to or limiting creditors' rights generally.
(e) The Liens granted by Borrower to Foothill in and to its
properties and assets pursuant to this Agreement and the other Loan Documents
are validly created, perfected, and first priority Liens, subject only to
Permitted Liens.
5.10 Litigation. There are no actions or proceedings pending by or
against Borrower before any court or administrative agency and Borrower does not
have knowledge or belief of any pending, threatened, or imminent litigation,
governmental investigations, or claims, complaints, actions, or prosecutions
involving Borrower or any guarantor of the Obligations, except for: (a) ongoing
collection matters in which Borrower is the plaintiff; (b) matters disclosed on
Schedule 5.10; and (c) matters arising after the date hereof that, if decided
adversely to Borrower, would not have a Material Adverse Change.
5.11 No Material Adverse Change. All financial statements relating
to Borrower or any guarantor of the Obligations that have been delivered by
Borrower to Foothill have been prepared in accordance with GAAP (except, in the
case of unaudited financial statements, for the lack of footnotes and being
subject to year-end audit adjustments) and fairly present Borrower's (or such
guarantor's, as applicable) financial condition as of the date thereof and
Borrower's results of operations for the period then ended. All financial
statements delivered by Borrower after the sale of its ▇▇▇▇ Hog division to ▇▇▇▇
Hog, fairly present Borrower's financial condition after said sale. There has
not been a Material Adverse Change with respect to Borrower (or such guarantor,
as applicable) since the date of the latest financial statements submitted to
Foothill on or before the Closing Date, including financial statements
reflecting the sale of Borrower's ▇▇▇▇ Hog division.
5.12 Solvency. Borrower is Solvent. No transfer of property is being
made by Borrower and no obligation is being incurred by Borrower in connection
with the transactions contemplated by this Agreement or the other Loan Documents
with the intent to hinder, delay, or defraud either present or future creditors
of Borrower.
5.13 Employee Benefits. None of Borrower, any of its Subsidiaries,
or any of their ERISA Affiliates maintains or contributes to any Benefit Plan,
other than those listed on Schedule 5.13. Borrower, each of its Subsidiaries and
each ERISA Affiliate have satisfied the minimum funding standards of ERISA and
the IRC with respect to each Benefit Plan to which it is obligated to
contribute. No ERISA Event has occurred nor has any other event occurred that
may result in an ERISA Event that reasonably could be expected to result in a
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Material Adverse Change. None of Borrower or its Subsidiaries, any ERISA
Affiliate, or any fiduciary of any Plan is subject to any direct or indirect
liability with respect to any Plan under any applicable law, treaty, rule,
regulation, or agreement. None of Borrower or its Subsidiaries or any ERISA
Affiliate is required to provide security to any Plan under Section 401(a)(29)
of the IRC.
5.14 Environmental Condition. Except as disclosed on Schedule 5.14,
none of Borrower's properties or assets has (a) ever been used by Borrower or,
to the best of Borrower's knowledge, by previous owners or operators in the
disposal of, or to produce, store, handle, treat, release, or transport, any
Hazardous Materials, or (b) ever been designated or identified in any manner
pursuant to any environmental protection statute as a Hazardous Materials
disposal site, or a candidate for closure pursuant to any environmental
protection statute. No Lien arising under any environmental protection statute
has attached to any revenues or to any real or personal property owned or
operated by Borrower. Borrower has not during the past three (3) years received
a summons, citation, notice, or directive from the Environmental Protection
Agency or any other federal or state governmental agency concerning any action
or omission by Borrower resulting in the releasing or disposing of Hazardous
Materials into the environment.
5.15 Intellectual Property. Borrower is the owner of all
Intellectual Property as set forth on Schedule 5.15 including all patents,
trademarks, trade names and copyrights set forth on Schedule 5.15 and Schedule
5.15 accurately sets forth each patent, trademark, trade name and copyright
owned by Borrower.
5.16 Machinery and Equipment. Borrower has reviewed that certain
Machinery and Equipment Appraisal of its Verson Division prepared by ▇▇▇▇▇▇ ▇▇▇▇
Associates, Inc. dated as of October 27, 1999 (the "M&E Appraisal") and
represents that all of the machinery and equipment set forth thereon, except as
set forth on Schedule 5.16, is owned by Borrower and not subject to any lease.
6. AFFIRMATIVE COVENANTS.
Borrower covenants and agrees that, so long as any credit hereunder
shall be available and until full and final payment of the Obligations, and
unless Foothill shall otherwise consent in writing, Borrower shall do all of the
following:
6.1 Accounting System. Maintain a standard and modern system of
accounting that enables Borrower to produce financial statements in accordance
with GAAP, and maintain records pertaining to the Collateral that contain
information as from time to time
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may be reasonably requested by Foothill. Borrower also shall keep a modern
inventory reporting system that shows all additions, sales, claims, returns, and
allowances with respect to the Inventory.
6.2 Collateral Reporting. Provide Foothill with the following
documents at the following times in form satisfactory to Foothill: (a) on each
Business Day, a sales journal, collection journal, and credit register since the
last such schedule and a calculation of the Borrowing Base as of such date, (b)
on a monthly basis and, in any event, by no later than the tenth (10th) day of
each month during the term of this Agreement, (i) a detailed calculation of the
Borrowing Base, and (ii) a detailed aging, by total, of the Accounts, together
with a reconciliation to the detailed calculation of the Borrowing Base
previously provided to Foothill, (c) on a monthly basis and, in any event, by no
later than the tenth (10th) day of each month during the term of this Agreement,
a summary aging, by vendor, of Borrower's accounts payable and any book
overdraft, (d) on a monthly basis, Inventory reports specifying Borrower's cost
of its Inventory by category, with additional detail showing additions to and
deletions from the Inventory, (e) on each Business Day, notice of all returns,
disputes, or claims, (f) upon request, copies of invoices in connection with the
Accounts, customer statements, credit memos, remittance advices and reports,
deposit slips, shipping and delivery documents in connection with the Accounts
and for Inventory and Equipment acquired by Borrower, purchase orders and
invoices, (g) on a quarterly basis, a detailed list of Borrower's customers, (h)
on a monthly basis, a calculation of the Dilution for the prior month; and (i)
such other reports as to the Collateral or the financial condition of Borrower
as Foothill may request from time to time. Original sales invoices evidencing
daily sales shall be mailed by Borrower to each Account Debtor and, at
Foothill's direction after an Event of Default or after the occurrence of an
event but for the passage of time would be an Event of Default, the invoices
shall indicate on their face that the Account has been assigned to Foothill and
that all payments are to be made directly to Foothill. Borrower shall provide
Foothill with access to its electronic data for all of the foregoing.
6.3 Financial Statements, Reports, Certificates.
(a) Deliver to Foothill: (i) as soon as available, but in any
event within forty-five (45) days after the end of the last month of each
calendar quarter during each of Borrower's fiscal years and within thirty (30)
days after the end of every other month during each of Borrower's fiscal years,
a company prepared balance sheet, income statement, and statement of cash flow
covering Borrower's operations during such period; and (ii) as soon as
available, but in any event within ninety (90) days after the end of each of
Borrower's fiscal years, financial statements of Borrower for each such fiscal
year, audited by independent certified public accountants reasonably acceptable
to Foothill and certified, without any qualifications, by such accountants to
have been prepared in accordance with GAAP, together
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with a certificate of such accountants addressed to Foothill stating that such
accountants do not have knowledge of the existence of any Default or Event of
Default. Foothill acknowledges that PricewaterhouseCoopers L.L.P. is a public
accountant acceptable to Foothill. Such audited financial statements shall
include a balance sheet, profit and loss statement, and statement of cash flow
and, if prepared, such accountants' letter to management. If Borrower is a
parent company of one or more Subsidiaries, or Affiliates, or is a Subsidiary or
Affiliate of another company, then, in addition to the financial statements
referred to above, Borrower agrees to deliver financial statements prepared on a
consolidating basis so as to present Borrower and each such related entity
separately, and on a consolidated basis.
(b) Together with the above, Borrower also shall deliver to
Foothill all SEC Reports including but not limited to Borrower's Form 10-Q
Quarterly Reports, Form 10-K Annual Reports, and Form 8-K Current Reports, and
any other filings made by Borrower with the Securities and Exchange Commission,
if any, as soon as the same are filed, or any other information that is provided
by Borrower to its shareholders, and any other report reasonably requested by
Foothill relating to the financial condition of Borrower.
(c) Each month, together with the financial statements
provided pursuant to Section 6.3(a), Borrower shall deliver to Foothill a
certificate signed by its chief financial officer to the effect that: (i) all
financial statements delivered or caused to be delivered to Foothill hereunder
have been prepared in accordance with GAAP (except, in the case of unaudited
financial statements, for the lack of footnotes and being subject to year-end
audit adjustments) and fairly present the financial condition of Borrower, (ii)
the representations and warranties of Borrower contained in this Agreement and
the other Loan Documents are true and correct in all material respects on and as
of the date of such certificate, as though made on and as of such date (except
to the extent that such representations and warranties relate solely to an
earlier date), (iii) for each month that also is the date on which a financial
covenant in Section 7.20 is to be tested, a Compliance Certificate demonstrating
in reasonable detail compliance at the end of such period with the applicable
financial covenants contained in Section 7.20, and (iv) on the date of delivery
of such certificate to Foothill there does not exist any condition or event that
constitutes a Default or Event of Default (or, in the case of clauses (i), (ii),
or (iii), to the extent of any non-compliance, describing such non-compliance as
to which he or she may have knowledge and what action Borrower has taken, is
taking, or proposes to take with respect thereto).
(d) Borrower shall have issued written instructions to its
independent certified public accountants authorizing them to communicate with
Foothill and to release to Foothill whatever financial information concerning
Borrower that Foothill may request. Borrower hereby irrevocably authorizes and
directs all auditors, accountants, or other third
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parties to deliver to Foothill, at Borrower's expense, copies of Borrower's
financial statements, papers related thereto, and other accounting records of
any nature in their possession, and to disclose to Foothill any information they
may have regarding Borrower's business affairs and financial conditions.
6.4 Tax Returns. Deliver to Foothill copies of each of Borrower's
future federal income tax returns, and any amendments thereto, within thirty
(30) days of the filing thereof with the Internal Revenue Service.
6.5 Guarantor Reports. Cause any guarantor of any of the Obligations
to deliver its annual financial statements at the time when Borrower provides
its audited financial statements to Foothill and copies of all federal income
tax returns as soon as the same are available and in any event no later than
thirty (30) days after the same are required to be filed by law.
6.6 Returns. Cause returns and allowances, if any, as between
Borrower and its Account Debtors to be on the same basis and in accordance with
the usual customary practices of Borrower, as they exist at the time of the
execution and delivery of this Agreement. If, at a time when no Event of Default
has occurred and is continuing, any Account Debtor returns any Inventory to
Borrower, Borrower promptly shall determine the reason for such return and, if
Borrower accepts such return, issue a credit memorandum (with a copy to be sent
to Foothill) in the appropriate amount to such Account Debtor. If, at a time
when an Event of Default has occurred and is continuing, any Account Debtor
returns any Inventory to Borrower, Borrower promptly shall determine the reason
for such return and, if Foothill consents (which consent shall not be
unreasonably withheld), issue a credit memorandum (with a copy to be sent to
Foothill) in the appropriate amount to such Account Debtor.
6.7 Title to Equipment. Upon Foothill's request, Borrower
immediately shall deliver to Foothill, properly endorsed, any and all evidences
of ownership of, certificates of title, or applications for title to any items
of Equipment.
6.8 Maintenance of Equipment. Maintain the Equipment in good
operating condition and repair (ordinary wear and tear excepted), and make all
necessary replacements thereto so that the value and operating efficiency
thereof shall at all times be maintained and preserved. Other than those items
of Equipment that constitute fixtures on the Closing Date, Borrower shall not
permit any item of Equipment to become a fixture to real estate or an accession
to other property, and such Equipment shall at all times remain personal
property.
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6.9 Taxes. Cause all assessments and taxes, whether real, personal,
or otherwise, due or payable by, or imposed, levied, or assessed against
Borrower or any of its property to be paid in full, before delinquency or before
the expiration of any extension period, except to the extent that the validity
of such assessment or tax shall be the subject of a Permitted Protest. Borrower
shall make due and timely payment or deposit of all such federal, state, and
local taxes, assessments, or contributions required of it by law, and will
execute and deliver to Foothill, on demand, appropriate certificates attesting
to the payment thereof or deposit with respect thereto. Borrower will make
timely payment or deposit of all tax payments and withholding taxes required of
it by applicable laws, including those laws concerning F.I.C.A., F.U.T.A., state
disability, and local, state, and federal income taxes, and will, upon request,
furnish Foothill with proof satisfactory to Foothill indicating that Borrower
has made such payments or deposits.
6.10 Insurance.
(a) At its expense, keep the Personal Property Collateral
insured against loss or damage by fire, theft, explosion, sprinklers, and all
other hazards and risks, and in such amounts, as are ordinarily insured against
by other owners in similar businesses. Borrower also shall maintain business
interruption, public liability, product liability, and property damage insurance
relating to Borrower's ownership and use of the Personal Property Collateral, as
well as insurance against larceny, embezzlement, and criminal misappropriation.
(b) At its expense, obtain and maintain (i) insurance of the
type necessary to insure the Improvements and Property (as such terms are
defined in the Mortgages), for the full replacement cost thereof, against any
loss by fire, lightning, windstorm, hail, explosion, aircraft, smoke damage,
vehicle damage, earthquakes, elevator collision, and other risks from time to
time included under "extended coverage" policies, in such amounts as Foothill
may require, but in any event in amounts sufficient to prevent Borrower from
becoming a co-insurer under such policies, (ii) combined single limit liability
insurance for claims arising from the Real Property Collateral, in an amount of
not less than Ten Million Dollars ($10,000,000) in the aggregate; and (iii)
insurance for such other risks as Foothill may require. Replacement costs, at
Foothill's option, may be redetermined by an insurance appraiser, satisfactory
to Foothill, not more frequently than once every 12 months at Borrower's cost.
(c) All such policies of insurance shall be in such form, with
such companies, and in such amounts as may be reasonably satisfactory to
Foothill. All insurance required herein shall be written by companies which are
authorized to do insurance business in the States of Indiana and Illinois. All
hazard insurance and such other insurance as Foothill shall specify, shall
contain a California Form 438BFU (NS) mortgagee endorsement, or an
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equivalent endorsement satisfactory to Foothill, showing Foothill as sole loss
payee thereof, and shall contain a waiver of warranties. Every policy of
insurance referred to in this Section 6.10 shall contain an agreement by the
insurer that it will not cancel such policy except after thirty (30) days prior
written notice to Foothill and that any loss payable thereunder shall be payable
notwithstanding any act or negligence of Borrower or Foothill which might,
absent such agreement, result in a forfeiture of all or a part of such insurance
payment and notwithstanding (i) occupancy or use of the Real Property Collateral
for purposes more hazardous than permitted by the terms of such policy, (ii) any
foreclosure or other action or proceeding taken by Foothill pursuant to the
Mortgages upon the happening of an Event of Default, or (iii) any change in
title or ownership of the Real Property Collateral. Borrower shall deliver to
Foothill certified copies of such policies of insurance and evidence of the
payment of all premiums therefor.
(d) Original policies or certificates thereof satisfactory to
Foothill evidencing such insurance shall be delivered to Foothill at least
thirty (30) days prior to the expiration of the existing or preceding policies.
Borrower shall give Foothill prompt notice of any loss covered by such
insurance, and Foothill shall have the right to adjust any loss. Foothill shall
have the exclusive right to adjust all losses in excess of Twenty-five Thousand
Dollars ($25,000) payable under any such insurance policies without any
liability to Borrower whatsoever in respect of such adjustments. Any monies
received as payment for any loss under any insurance policy including the
insurance policies mentioned above, shall be paid over to Foothill to be applied
at the option of Foothill either to the prepayment of the Obligations without
premium, in such order or manner as Foothill may elect, or shall be disbursed to
Borrower under stage payment terms satisfactory to Foothill for application to
the cost of repairs, replacements, or restorations. All repairs, replacements,
or restorations shall be effected with reasonable promptness and shall be of a
value at least equal to the value of the items or property destroyed prior to
such damage or destruction. Upon the occurrence of an Event of Default, Foothill
shall have the right to apply all prepaid premiums to the payment of the
Obligations in such order or form as Foothill shall determine.
(e) Borrower shall not take out separate insurance concurrent
in form or contributing in the event of loss with that required to be maintained
under this Section 6.10, unless Foothill is included thereon as named insured
with the loss payable to Foothill under a standard California 438BFU (NS)
Mortgagee endorsement, or its local equivalent. Borrower immediately shall
notify Foothill whenever such separate insurance is taken out, specifying the
insurer thereunder and full particulars as to the policies evidencing the same,
and originals of such policies immediately shall be provided to Foothill.
6.11 No Setoffs or Counterclaims. Make payments hereunder and under
the other Loan Documents by or on behalf of Borrower without setoff or
counterclaim and free and
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clear of, and without deduction or withholding for or on account of, any
federal, state, or local taxes.
6.12 Location of Inventory and Equipment. Keep the Inventory and
Equipment only at the locations identified on Schedule 6.12; provided, however,
that Borrower may amend Schedule 6.12 so long as such amendment occurs by
written notice to Foothill not less than thirty (30) days prior to the date on
which the Inventory or Equipment is moved to such new location, so long as such
new location is within the continental United States, and so long as, at the
time of such written notification, Borrower provides any financing statements or
fixture filings necessary to perfect and continue perfected Foothill's security
interests in such assets and also provides to Foothill a Collateral Access
Agreement.
6.13 Compliance with Laws. Comply in all material respects with the
requirements of all applicable laws, rules, regulations, and orders of any
governmental authority, including the Fair Labor Standards Act and the Americans
With Disabilities Act, other than laws, rules, regulations, and orders the
non-compliance with which, individually or in the aggregate, would not have and
could not reasonably be expected to have a Material Adverse Change.
6.14 Employee Benefits.
(a) Promptly, and in any event within ten (10) Business Days
after Borrower or any of its Subsidiaries knows or has reason to know that an
ERISA Event has occurred that reasonably could be expected to result in a
Material Adverse Change, a written statement of the chief financial officer of
Borrower describing such ERISA Event and any action that is being taking with
respect thereto by Borrower, any such Subsidiary or ERISA Affiliate, and any
action taken or threatened by the IRS, Department of Labor, or PBGC. Borrower or
such Subsidiary, as applicable, shall be deemed to know all facts known by the
administrator of any Benefit Plan of which it is the plan sponsor, (ii)
promptly, and in any event within three (3) Business Days after the filing
thereof with the IRS, a copy of each funding waiver request filed with respect
to any Benefit Plan and all communications received by Borrower, any of its
Subsidiaries or, to the knowledge of Borrower, any ERISA Affiliate with respect
to such request, and (iii) promptly, and in any event within three (3) Business
Days after receipt by Borrower, any of its Subsidiaries or, to the knowledge of
Borrower, any ERISA Affiliate, of the PBGC's intention to terminate a Benefit
Plan or to have a trustee appointed to administer a Benefit Plan, copies of each
such notice.
(b) Cause to be delivered to Foothill, upon Foothill's
request, each of the following: (i) a copy of each Plan (or, where any such plan
is not in writing, complete
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description thereof) (and if applicable, related trust agreements or other
funding instruments) and all amendments thereto, all written interpretations
thereof and written descriptions thereof that have been distributed to employees
or former employees of Borrower or its Subsidiaries; (ii) the most recent
determination letter issued by the IRS with respect to each Benefit Plan; (iii)
for the three most recent plan years, annual reports on Form 5500 Series
required to be filed with any governmental agency for each Benefit Plan; (iv)
all actuarial reports prepared for the last three plan years for each Benefit
Plan; (v) a listing of all Multiemployer Plans, with the aggregate amount of the
most recent annual contributions required to be made by Borrower or any ERISA
Affiliate to each such plan and copies of the collective bargaining agreements
requiring such contributions; (vi) any information that has been provided to
Borrower or any ERISA Affiliate regarding withdrawal liability under any
Multiemployer Plan; and (vii) the aggregate amount of the most recent annual
payments made to former employees of Borrower or its Subsidiaries under any
Retiree Health Plan.
6.15 Leases. Pay when due all rents and other amounts payable under
any leases to which Borrower is a party or by which Borrower's properties and
assets are bound, unless such payments are the subject of a Permitted Protest.
To the extent that Borrower fails timely to make payment of such rents and other
amounts payable when due under its leases, Foothill shall be entitled, in its
discretion, to reserve an amount equal to such unpaid amounts against the
Borrowing Base.
6.16 Contracts Related to Eligible Special Project Accounts and
Eligible Special GM Project Account. Cause to be delivered to Foothill monthly
status reports with respect to all work in process pursuant to Purchase Orders
and contracts with respect to Eligible Special Project Accounts or Eligible
Special GM Project Accounts. In addition, Borrower shall deliver to Foothill any
notices received from GM with respect to any Eligible Special GM Project
Accounts or from any other Account Debtors with respect to Eligible Special
Project Accounts.
6.17 Price Adjustments in ▇▇▇▇ Hog Sale. Cause to be delivered to
Foothill all information relating to any price adjustments made with respect to
the sale by Borrower of its ▇▇▇▇ Hog division to ▇▇▇▇ Hog as required pursuant
to that certain Limited Liability Company Interest Purchase and Asset
Contribution Agreement by and between Borrower and ▇▇▇▇ Hog Investors, L.L.C.
and ▇▇▇▇ Hog dated as of October 21, 1999, as amended and cause to be delivered
to Foothill copies of any amendments or modifications of the ▇▇▇▇ Hog Amended
and Restated Operating Agreement dated March 7, 2000.
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6.18 Labor Developments. Cause to be delivered to Foothill monthly
status reports with respect to its labor negotiations from a new labor contract
as well as a copy of its new labor contract after execution of same.
7. NEGATIVE COVENANTS.
Borrower covenants and agrees that, so long as any credit hereunder
shall be available and until full and final payment of the Obligations, Borrower
will not do any of the following without Foothill's prior written consent:
7.1 Indebtedness. Create, incur, assume, permit, guarantee, or
otherwise become or remain, directly or indirectly, liable with respect to any
Indebtedness, except:
(a) Indebtedness evidenced by this Agreement, together with
Indebtedness to issuers of letters of credit that are the subject of L/C
Guarantees;
(b) Indebtedness set forth in the latest financial statements
of Borrower submitted to Foothill on or prior to the Closing Date;
(c) Indebtedness secured by Permitted Liens; and
(d) refinancings, renewals, or extensions of Indebtedness
permitted under clauses (b) and (c) of this Section 7.1 except that there may be
no additional borrowings from the Existing Lender (and continuance or renewal of
any Permitted Liens associated therewith) so long as: (i) the terms and
conditions of such refinancings, renewals, or extensions do not materially
impair the prospects of repayment of the Obligations by Borrower, (ii) the net
cash proceeds of such refinancings, renewals, or extensions do not result in an
increase in the aggregate principal amount of the Indebtedness so refinanced,
renewed, or extended, (iii) such refinancings, renewals, refundings, or
extensions do not result in a shortening of the average weighted maturity of the
Indebtedness so refinanced, renewed, or extended, and (iv) to the extent that
Indebtedness that is refinanced was subordinated in right of payment to the
Obligations, then the subordination terms and conditions of the refinancing
Indebtedness must be at least as favorable to Foothill as those applicable to
the refinanced Indebtedness.
7.2 Liens. Create, incur, assume, or permit to exist, directly or
indirectly, any Lien on or with respect to any of its property or assets, of any
kind, whether now owned or hereafter acquired, including without limitation any
of Borrower's interest in High Production Technology L.L.C. or Verson
Pressentechnik GmbH, or any income or profits therefrom, except for Permitted
Liens (including Liens that are replacements of Permitted Liens to the extent
that
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the original Indebtedness is refinanced under Section 7.1(d) and so long as the
replacement Liens only encumber those assets or property that secured the
original Indebtedness).
7.3 Restrictions on Fundamental Changes. Enter into any merger,
consolidation, reorganization, or recapitalization, or reclassify its capital
stock, or liquidate, wind up, or dissolve itself (or suffer any liquidation or
dissolution), or convey, sell, assign, lease, transfer, or otherwise dispose of,
in one transaction or a series of transactions, all or any substantial part of
its property or assets.
7.4 Disposal of Assets. Sell, lease, assign, transfer, or otherwise
dispose of any of Borrower's properties or assets other than sales of Inventory
to buyers in the ordinary course of Borrower's business as currently conducted.
7.5 Change Name. Change Borrower's name, FEIN, corporate structure
(within the meaning of Section 9-402(7) or any amendment thereto or revision
thereof of the Code), or identity, or add any new fictitious name.
7.6 Guarantee. Guarantee or otherwise become in any way liable with
respect to the obligations of any third Person except by endorsement of
instruments or items of payment for deposit to the account of Borrower or which
are transmitted or turned over to Foothill.
7.7 Nature of Business. Make any change in the principal nature of
Borrower's business.
7.8 Prepayments and Amendments.
(a) Except in connection with a refinancing permitted by
Section 7.1(d) or payment of the indebtedness owed Existing Lender upon the sale
by Borrower of its nineteen and nine tenths percent (19.9%) membership interest
in ▇▇▇▇ Hog, prepay, redeem, retire, defease, purchase, or otherwise acquire any
Indebtedness owing to any third Person, other than the Obligations in accordance
with this Agreement, and
(b) Directly or indirectly, amend, modify, alter, increase, or
change any of the terms or conditions of any agreement, instrument, document,
indenture, or other writing evidencing or concerning Indebtedness permitted
under Sections 7.1(b), (c), or (d).
7.9 Change of Control. Cause, permit, or suffer, directly or
indirectly, any Change of Control.
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7.10 Consignments. Consign any Inventory or sell any Inventory on
▇▇▇▇ and hold, sale or return, sale on approval, or other conditional terms of
sale.
7.11 Distributions. Make any distribution or declare or pay any
dividends (in cash or other property, other than capital stock) on, or purchase,
acquire, redeem, or retire any of Borrower's capital stock, of any class,
whether now or hereafter outstanding.
7.12 Accounting Methods. Except as set forth in Footnote 1 to the
Report of Independent Accountants prepared by PriceWaterhouseCoopers, L.L.P. and
dated April 15, 1999, modify or change its method of accounting or enter into,
modify, or terminate any agreement currently existing, or at any time hereafter
entered into with any third party accounting firm or service bureau for the
preparation or storage of Borrower's accounting records without said accounting
firm or service bureau agreeing to provide Foothill information regarding the
Collateral or Borrower's financial condition. Borrower waives the right to
assert a confidential relationship, if any, it may have with any accounting firm
or service bureau in connection with any information requested by Foothill
pursuant to or in accordance with this Agreement, and agrees that Foothill may
contact directly any such accounting firm or service bureau in order to obtain
such information.
7.13 Investments. Directly or indirectly make, acquire, or incur any
liabilities (including contingent obligations) for or in connection with (a) the
acquisition of the securities (whether debt or equity) of, or other interests
in, a Person, (b) loans, advances (excluding travel advances of up to One
Hundred Thousand Dollars ($100,000) in the aggregate in any one year), capital
contributions except for quarterly contributions to Verson Pressentechnik, GmbH
pursuant to that certain Agreement dated August 27, 1998 and except for
contributions to High Production Technology, L.L.C. as required pursuant to the
terms of that certain Limited Liability Company Operating Agreement dated June
17, 1997, provided however that such contributions in the aggregate shall not
exceed in any one year One Million and No/100 Dollars ($1,000,000), or transfers
of property to a Person, or (c) the acquisition of all or substantially all of
the properties or assets of a Person.
7.14 Transactions with Affiliates. Directly or indirectly enter into
or permit to exist any material transaction with any Affiliate of Borrower
except for transactions that are in the ordinary course of Borrower's business,
upon fair and reasonable terms, that are fully disclosed to Foothill, and that
are no less favorable to Borrower than would be obtained in an arm's length
transaction with a non-Affiliate.
7.15 Suspension. Suspend or go out of a substantial portion of its
business.
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7.16 Compensation. Increase the annual fee or per-meeting fees paid
to directors during any year by more than fifteen percent (15%) over the prior
year; pay or accrue total cash compensation, during any year, to officers and
senior management employees in an aggregate amount in excess of one hundred
fifteen percent (115%) of that paid or accrued in the prior year.
7.17 Use of Proceeds. Use (a) the proceeds of the Advances made
hereunder for any purpose other than on the Closing Date to pay transactional
costs and expenses incurred in connection with this Agreement, and thereafter,
consistent with the terms and conditions hereof, for its lawful and permitted
corporate purposes. Use of proceeds of the Advances may not be used to pay any
amount due the Existing Lender.
7.18 Change in Location of Chief Executive Office; Inventory and
Equipment with Bailees. Relocate its chief executive office to a new location
without providing thirty (30) days prior written notification thereof to
Foothill and so long as, at the time of such written notification, Borrower
provides any financing statements or fixture filings necessary to perfect and
continue perfected Foothill's security interests and also provides to Foothill a
Collateral Access Agreement with respect to such new location. The Inventory and
Equipment shall not at any time now or hereafter be stored with a bailee,
warehouseman, or similar party without Foothill's prior written consent.
7.19 No Prohibited Transactions Under ERISA. Directly or indirectly:
(a) engage, or permit any Subsidiary of Borrower to engage, in
any prohibited transaction which is reasonably likely to result in a civil
penalty or excise tax described in Sections 406 of ERISA or 4975 of the IRC for
which a statutory or class exemption is not available or a private exemption has
not been previously obtained from the Department of Labor;
(b) permit to exist with respect to any Benefit Plan any
accumulated funding deficiency (as defined in Sections 302 of ERISA and 412 of
the IRC), whether or not waived;
(c) fail, or permit any Subsidiary of Borrower to fail, to pay
timely required contributions or annual installments due with respect to any
waived funding deficiency to any Benefit Plan;
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(d) terminate, or permit any Subsidiary of Borrower to
terminate, any Benefit Plan where such event would result in any liability of
Borrower, any of its Subsidiaries or any ERISA Affiliate under Title IV of
ERISA;
(e) fail, or permit any Subsidiary of Borrower to fail, to
make any required contribution or payment to any Multiemployer Plan;
(f) fail, or permit any Subsidiary of Borrower to fail, to pay
any required installment or any other payment required under Section 412 of the
IRC on or before the due date for such installment or other payment;
(g) amend, or permit any Subsidiary of Borrower to amend, a
Plan resulting in an increase in current liability for the plan year such that
either of Borrower, any Subsidiary of Borrower or any ERISA Affiliate is
required to provide security to such Plan under Section 401(a)(29) of the IRC;
or
(h) withdraw, or permit any Subsidiary of Borrower to
withdraw, from any Multiemployer Plan where such withdrawal is reasonably likely
to result in any liability of any such entity under Title IV of ERISA;
which, individually or in the aggregate, results in or reasonably would be
expected to result in a claim against or liability of Borrower, any of its
Subsidiaries or any ERISA Affiliate in excess of One Hundred Thousand Dollars
($100,000).
7.20 Financial Covenants. Fail to maintain:
(a) For the prior three (3) months for the period ending June
30, 2000, EBITDA equal to or greater than negative One Million Three Hundred
Thousand Dollars (-$1,300,000);
(b) For the prior six (6) months for the period ending
September 30, 2000, EBITDA equal to or greater than negative Three Million Five
Hundred Thousand Dollars (-$3,500,000);
(c) For the prior nine (9) months for the period ending
December 31, 2000, EBITDA equal to or greater than negative Four Million Six
Hundred Thousand Dollars (-$4,600,000);
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(d) For the prior twelve (12) months for the following periods
ending, as set forth below, EBITDA equal to or greater than:
March 31, 2001 - $3,900,000
June 30, 2001 - $3,000,000
September 30, 2001 $1,300,000
December 31, 2001 $7,600,000; or
(e) For each period ending after the period ending December
31, 2001 and thereafter, for each period ending on the last day of each calendar
quarter, EBITDA equal to or greater than Seven Million, Six Hundred Thousand
Dollars ($7,600,000).
7.21 Capital Expenditures. Make capital expenditures in the fiscal
year ending December 31, 2000 with respect to that certain G&L Horizontal Mill
being purchased by Borrower (the "G&L Mill") in excess of Five Million, Two
Hundred Thousand Dollars ($5,200,000) or any other capital expenditures ending
in December 31, 2000 in excess of One Million, Five Hundred Thousand Dollars
($1,500,000) or make any capital expenditures in the fiscal year ending in
December 31, 2001 in excess of Two Million, Seven Hundred Fifty Thousand Dollars
($2,750,000) with respect to the G&L Mill, or in excess of Two Million, Six
Hundred Fifty Dollars ($2,650,000) to rebuild an existing horizontal boring mill
or in excess of One Million Dollars ($1,000,000) for other capital expenditures,
provided, however, that non-financed capital expenditures for fiscal year
ending December 31, 2001 may not exceed Two Million Dollars ($2,000,0000) in the
aggregate.
7.22 Availability for Payment to Existing Lender. Make any payment
to Existing Lender unless Borrower has availability hereunder after giving
effect to such payment of not less than Five Million Dollars ($5,000,000).
8. EVENTS OF DEFAULT.
Any one or more of the following events shall constitute an event of
default (each, an "Event of Default") under this Agreement:
(a) If Borrower fails to pay when due and payable or when
declared due and payable, any portion of the Obligations (whether of principal,
interest (including any interest which, but for the provisions of the Bankruptcy
Code, would have accrued on such amounts), fees and charges due Foothill,
reimbursement of Foothill Expenses, or other amounts constituting Obligations);
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(b) If Borrower fails to perform, keep, or observe any term,
provision, condition, covenant, or agreement contained in this Agreement, in any
of the Loan Documents, or in any other present or future agreement between
Borrower and Foothill, provided however, that Borrower shall have five (5) days
to cure its failure to perform, keep or observe any term, provision, condition,
covenant or agreement with respect to Section Nos. 6.2, 6.3, 6.4, 6.6, 6.12 or
6.15;
(c) If there is a Material Adverse Change;
(d) If any material portion of Borrower's properties or assets
is attached, seized, subjected to a writ or distress warrant, or is levied upon,
or comes into the possession of any third Person;
(e) If an Insolvency Proceeding is commenced by Borrower;
(f) If an Insolvency Proceeding is commenced against Borrower
and any of the following events occur: (a) Borrower consents to the institution
of the Insolvency Proceeding against it; (b) the petition commencing the
Insolvency Proceeding is not timely controverted; (c) the petition commencing
the Insolvency Proceeding is not dismissed within forty five (45) calendar days
of the date of the filing thereof; provided, however, that, during the pendency
of such period, Foothill shall be relieved of its obligation to extend credit
hereunder; (d) an interim trustee is appointed to take possession of all or a
substantial portion of the properties or assets of, or to operate all or any
substantial portion of the business of, Borrower; or (e) an order for relief
shall have been issued or entered therein;
(g) If Borrower is enjoined, restrained, or in any way
prevented by court order from continuing to conduct all or any material part of
its business affairs;
(h) If a notice of Lien, levy, or assessment is filed of
record with respect to any of Borrower's properties or assets by the United
States Government, or any department, agency, or instrumentality thereof, or by
any state, county, municipal, or governmental agency, or if any taxes or debts
owing at any time hereafter to any one or more of such entities becomes a Lien,
whether ▇▇▇▇▇▇ or otherwise, upon any of Borrower's properties or assets and the
same is not paid on the payment date thereof but excluding taxes not yet due and
payable;
(i) If a judgment in excess of Fifty Thousand Dollars
($50,000) or other claim becomes a Lien or encumbrance upon any material portion
of Borrower's properties or assets;
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(j) If there is a default in any material agreement to which
Borrower is a party with one or more third Persons and such default (a) occurs
at the final maturity of the obligations thereunder, or (b) results in a right
by such third Person(s), irrespective of whether exercised, to accelerate the
maturity of Borrower's obligations thereunder;
(k) If Borrower makes any payment on account of Indebtedness
that has been contractually subordinated in right of payment to the payment of
the Obligations, except to the extent such payment is permitted by the terms of
the subordination provisions applicable to such Indebtedness;
(l) If any misstatement or misrepresentation of a material
fact exists now or hereafter in any warranty, representation, statement, or
report made to Foothill by Borrower or any officer, employee, agent, or director
of Borrower, or if any such warranty or representation is withdrawn;
(m) If the obligation of any guarantor under its guaranty or
other third Person under any Loan Document is limited or terminated by operation
of law or by the guarantor or other third Person thereunder, or any such
guarantor or other third Person becomes the subject of an Insolvency Proceeding;
or
(n) failure of Borrower to sell to ▇▇▇▇ Hog Investors its
Nineteen and nine tenths percent (19.9%) membership interest in ▇▇▇▇ Hog on or
before June 30, 2000 with Borrower receiving net proceeds of not less than Six
Million Dollars ($6,000,000) for said sale after payment of all obligations to
Existing Lender and to ▇▇▇▇ Hog Investors and after all adjustments to the
purchase price between Borrower and ▇▇▇▇ Hog Investors and net of all amounts to
be held under any escrow arrangement.
9. FOOTHILL'S RIGHTS AND REMEDIES.
9.1 Rights and Remedies.
(a) Upon the occurrence, and during the continuation, of an
Event of Default Foothill may, at its election, without notice of its election
and without demand, do any one or more of the following, all of which are
authorized by Borrower:
(i) Declare all Obligations, whether evidenced by this
Agreement, by any of the other Loan Documents, or otherwise,
immediately due and payable;
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(ii) Cease advancing money or extending credit to or for the
benefit of Borrower under this Agreement, under any of the Loan
Documents, or under any other agreement between Borrower and
Foothill;
(iii) Terminate this Agreement and any of the other Loan
Documents as to any future liability or obligation of Foothill, but
without affecting Foothill's rights and security interests in the
Personal Property Collateral or the Real Property Collateral and
without affecting the Obligations;
(iv) Settle or adjust disputes and claims directly with
Account Debtors for amounts and upon terms which Foothill considers
advisable, and in such cases, Foothill will credit Borrower's Loan
Account with only the net amounts received by Foothill in payment of
such disputed Accounts after deducting all Foothill Expenses
incurred or expended in connection therewith;
(v) Cause Borrower to hold all returned Inventory in trust for
Foothill, segregate all returned Inventory from all other property
of Borrower or in Borrower's possession and conspicuously label said
returned Inventory as the property of Foothill;
(vi) Without notice to or demand upon Borrower or any
guarantor, make such payments and do such acts as Foothill considers
necessary or reasonable to protect its security interests in the
Collateral. Borrower agrees to assemble the Personal Property
Collateral if Foothill so requires, and to make the Personal
Property Collateral available to Foothill as Foothill may designate.
Borrower authorizes Foothill to enter the premises where the
Personal Property Collateral is located, to take and maintain
possession of the Personal Property Collateral, or any part of it,
and to pay, purchase, contest, or compromise any encumbrance,
charge, or Lien that in Foothill's determination appears to conflict
with its security interests and to pay all expenses incurred in
connection therewith. With respect to any of Borrower's owned or
leased premises, Borrower hereby grants Foothill a license to enter
into possession of such premises and to occupy the same, without
charge, for up to one hundred twenty (120) days in order to exercise
any of Foothill's rights or remedies provided herein, at law, in
equity, or otherwise;
(vii) Without notice to Borrower (such notice being expressly
waived), and without constituting a retention of any collateral in
satisfaction of an obligation (within the meaning of Section 9-505
and any amendments thereof
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of the Code), set off and apply to the Obligations any and all (i)
balances and deposits of Borrower held by Foothill (including any
amounts received in the Lockbox Accounts), or (ii) indebtedness at
any time owing to or for the credit or the account of Borrower held
by Foothill;
(viii) Hold, as cash collateral, any and all balances and
deposits of Borrower held by Foothill, and any amounts received in
the Lockbox Accounts, to secure the full and final repayment of all
of the Obligations;
(ix) Ship, reclaim, recover, store, finish, maintain, repair,
prepare for sale, advertise for sale, and sell (in the manner
provided for herein) the Personal Property Collateral. Foothill is
hereby granted a license or other right to use, without charge,
Borrower's labels, patents, copyrights, rights of use of any name,
trade secrets, trade names, trademarks, service marks, and
advertising matter, or any property of a similar nature, as it
pertains to the Personal Property Collateral, in completing
production of, advertising for sale, and selling any Personal
Property Collateral and Borrower's rights under all licenses and all
franchise agreements shall inure to Foothill's benefit;
(x) Sell the Personal Property Collateral at either a public
or private sale, or both, by way of one or more contracts or
transactions, for cash or on terms, in such manner and at such
places (including Borrower's premises) as Foothill determines is
commercially reasonable. It is not necessary that the Personal
Property Collateral be present at any such sale;
(xi) Foreclose on the Real Property Collateral in accord with
the terms of the Mortgages; and
(xii) Direct Borrower to sell all of its membership interest
in ▇▇▇▇ Hog in accord with Article 7 of ▇▇▇▇ Hog's Amended and
Restated Operating Agreement dated March 7, 2000.
(b) Foothill shall give notice of the disposition of the
Personal Property Collateral as follows:
(i) Foothill shall give Borrower and each holder of a security
interest in the Personal Property Collateral who has filed with
Foothill a written request for notice, a notice in writing of the
time and place of public sale, or, if the sale is a private sale or
some other disposition other than a public sale is to be made
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of the Personal Property Collateral, then the time on or after which
the private sale or other disposition is to be made;
(ii) The notice shall be personally delivered or mailed,
postage prepaid, to Borrower as provided in Section 12, at least
five (5) days before the date fixed for the sale, or at least five
(5) days before the date on or after which the private sale or other
disposition is to be made; no notice needs to be given prior to the
disposition of any portion of the Personal Property Collateral that
is perishable or threatens to decline speedily in value or that is
of a type customarily sold on a recognized market. Notice to Persons
other than Borrower claiming an interest in the Personal Property
Collateral shall be sent to such addresses as they have furnished to
Foothill;
(iii) If the sale is to be a public sale, Foothill also shall
give notice of the time and place by publishing a notice one time at
least five (5) days before the date of the sale in a newspaper of
general circulation in the county in which the sale is to be held;
(iv) Foothill may credit bid and purchase at any public sale;
and
(v) Any deficiency that exists after disposition of the
Personal Property Collateral as provided above or after disposition
of the Real Property Collateral will be paid immediately by
Borrower. Any excess will be returned, without interest and subject
to the rights of third Persons, by Foothill to Borrower.
9.2 Remedies Cumulative. Foothill's rights and remedies under this
Agreement, the Loan Documents, and all other agreements shall be cumulative.
Foothill shall have all other rights and remedies not inconsistent herewith as
provided under the Code, by law, or in equity. No exercise by Foothill of one
right or remedy shall be deemed an election, and no waiver by Foothill of any
Event of Default shall be deemed a continuing waiver. No delay by Foothill shall
constitute a waiver, election, or acquiescence by it.
10. TAXES AND EXPENSES.
If Borrower fails to pay any monies (whether taxes, assessments,
insurance premiums, or, in the case of leased properties or assets, rents or
other amounts payable under such leases) due to third Persons, or fails to make
any deposits or furnish any required proof of payment or deposit, all as
required under the terms of this Agreement, then, to the extent that
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Foothill determines that such failure by Borrower could result in a Material
Adverse Change, in its discretion and without prior notice to Borrower, Foothill
may do any or all of the following: (a) make payment of the same or any part
thereof; (b) set up such reserves in Borrower's Loan Account as Foothill deems
necessary to protect Foothill from the exposure created by such failure; or (c)
obtain and maintain insurance policies of the type described in Section 6.10,
and take any action with respect to such policies as Foothill deems prudent. Any
such amounts paid by Foothill shall constitute Foothill Expenses. Any such
payments made by Foothill shall not constitute an agreement by Foothill to make
similar payments in the future or a waiver by Foothill of any Event of Default
under this Agreement. Foothill need not inquire as to, or contest the validity
of, any such expense, tax, or Lien and the receipt of the usual official notice
for the payment thereof shall be conclusive evidence that the same was validly
due and owing.
11. WAIVERS; INDEMNIFICATION.
11.1 Demand; Protest; etc. Borrower waives demand, protest, notice
of protest, notice of default or dishonor, notice of payment and nonpayment,
nonpayment at maturity, release, compromise, settlement, extension, or renewal
of accounts, documents, instruments, chattel paper, and guarantees at any time
held by Foothill on which Borrower may in any way be liable.
11.2 Foothill's Liability for Collateral. So long as Foothill
complies with its obligations, if any, under Section 9-207 of the Code, Foothill
shall not in any way or manner be liable or responsible for: (a) the safekeeping
of the Collateral; (b) any loss or damage thereto occurring or arising in any
manner or fashion from any cause; (c) any diminution in the value thereof; or
(d) any act or default of any carrier, warehouseman, bailee, forwarding agency,
or other Person. All risk of loss, damage, or destruction of the Collateral
shall be borne by Borrower.
11.3 Indemnification. Borrower shall pay, indemnify, defend, and
hold Foothill, each Participant, and each of their respective officers,
directors, employees, counsel, agents, and attorneys-in-fact (each, an
"Indemnified Person") harmless (to the fullest extent permitted by law) from and
against any and all claims, demands, suits, actions, investigations,
proceedings, and damages, and all reasonable attorneys fees and disbursements
and other costs and expenses actually incurred in connection therewith (as and
when they are incurred and irrespective of whether suit is brought), at any time
asserted against, imposed upon, or incurred by any of them in connection with or
as a result of or related to the execution, delivery, enforcement, performance,
and administration of this Agreement and any other Loan Documents or the
transactions contemplated herein, and with respect to any investigation,
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litigation, or proceeding related to this Agreement, any other Loan Document, or
the use of the proceeds of the credit provided hereunder (irrespective of
whether any Indemnified Person is a party thereto), or any act, omission, event
or circumstance in any manner related thereto (all the foregoing, collectively,
the "Indemnified Liabilities"). Borrower shall have no obligation to any
Indemnified Person under this Section 11.3 with respect to any Indemnified
Liability that a court of competent jurisdiction finally determines to have
resulted from the gross negligence or willful misconduct of such Indemnified
Person. This provision shall survive the termination of this Agreement and the
repayment of the Obligations.
12. NOTICES.
Unless otherwise provided in this Agreement, all notices or demands
by any party relating to this Agreement or any other Loan Document shall be in
writing and (except for financial statements and other informational documents
which may be sent by first-class mail, postage prepaid) shall be personally
delivered or sent by registered or certified mail (postage prepaid, return
receipt requested), overnight courier, or telefacsimile to Borrower or to
Foothill, as the case may be, at its address set forth below:
If to Borrower: Allied Products Corporation
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Corporate Secretary
Fax No. 312/▇▇▇-▇▇▇▇
with copies to: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
Quaker Tower
▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, Esq.
Fax No. 312/▇▇▇-▇▇▇▇
If to Foothill: FOOTHILL CAPITAL CORPORATION
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Attn: Business Finance Division Manager
Fax No. 310/▇▇▇-▇▇▇▇
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with copies to: Foothill Capital Corporation
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▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Loan Portfolio Manager
Fax No. 617/▇▇▇-▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇ & Heckscher LLP
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Fax No. 312/▇▇▇-▇▇▇▇
The parties hereto may change the address at which they are to
receive notices hereunder, by notice in writing in the foregoing manner given to
the other. All notices or demands sent in accordance with this Section 12, other
than notices by Foothill in connection with Sections 9-504 or 9-505 of the Code,
shall be deemed received on the earlier of the date of actual receipt or three
(3) days after the deposit thereof in the mail. Borrower acknowledges and agrees
that notices sent by Foothill in connection with Sections 9-504 or 9-505 of the
Code shall be deemed sent when deposited in the mail or personally delivered,
or, where permitted by law, transmitted telefacsimile or other similar method
set forth above.
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.
THE VALIDITY OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (UNLESS
EXPRESSLY PROVIDED TO THE CONTRARY IN AN ANOTHER LOAN DOCUMENT), THE
CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT HEREOF AND THEREOF, AND THE RIGHTS
OF THE PARTIES HERETO AND THERETO WITH RESPECT TO ALL MATTERS ARISING HEREUNDER
OR THEREUNDER OR RELATED HERETO OR THERETO SHALL BE DETERMINED UNDER, GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS. THE
PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE TRIED AND LITIGATED ONLY IN THE
STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF ▇▇▇▇, STATE OF ILLINOIS OR, AT
THE SOLE OPTION OF FOOTHILL, IN ANY OTHER COURT IN WHICH FOOTHILL SHALL INITIATE
LEGAL OR EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT MATTER JURISDICTION OVER
THE MATTER IN CONTROVERSY. EACH OF BORROWER AND FOOTHILL WAIVES, TO THE EXTENT
PERMITTED UNDER APPLICABLE
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LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR
TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH
THIS SECTION 13. BORROWER AND FOOTHILL HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A
JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF
THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING
CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR
STATUTORY CLAIMS. EACH OF BORROWER AND FOOTHILL REPRESENTS THAT IT HAS REVIEWED
THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS
FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF
THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
14. DESTRUCTION OF BORROWER'S DOCUMENTS.
All documents, schedules, invoices, agings, or other papers
delivered to Foothill may be destroyed or otherwise disposed of by Foothill 4
months after they are delivered to or received by Foothill, unless Borrower
requests, in writing, the return of said documents, schedules, or other papers
and makes arrangements, at Borrower's expense, for their return.
15. GENERAL PROVISIONS.
15.1 Effectiveness. This Agreement shall be binding and deemed
effective when executed by Borrower and Foothill.
15.2 Successors and Assigns. This Agreement shall bind and inure to
the benefit of the respective successors and assigns of each of the parties;
provided, however, that Borrower may not assign this Agreement or any rights or
duties hereunder without Foothill's prior written consent and any prohibited
assignment shall be absolutely void. No consent to an assignment by Foothill
shall release Borrower from its Obligations. Foothill may assign this Agreement
and its rights and duties hereunder and no consent or approval by Borrower is
required in connection with any such assignment. Foothill reserves the right to
sell, assign, transfer, negotiate, or grant participations in all or any part
of, or any interest in Foothill's rights and benefits hereunder. In connection
with any such assignment or participation, Foothill may disclose all documents
and information which Foothill now or hereafter may have relating to Borrower or
Borrower's business. To the extent that Foothill assigns its rights and
obligations hereunder to a third Person, Foothill thereafter shall be released
from such assigned obligations
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to Borrower and such assignment shall effect a novation between Borrower and
such third Person.
15.3 Section Headings. Headings and numbers have been set forth
herein for convenience only. Unless the contrary is compelled by the context,
everything contained in each section applies equally to this entire Agreement.
15.4 Interpretation. Neither this Agreement nor any uncertainty or
ambiguity herein shall be construed or resolved against Foothill or Borrower,
whether under any rule of construction or otherwise. On the contrary, this
Agreement has been reviewed by all parties and shall be construed and
interpreted according to the ordinary meaning of the words used so as to fairly
accomplish the purposes and intentions of all parties hereto.
15.5 Severability of Provisions. Each provision of this Agreement
shall be severable from every other provision of this Agreement for the purpose
of determining the legal enforceability of any specific provision.
15.6 Amendments in Writing. This Agreement can only be amended by a
writing signed by both Foothill and Borrower.
15.7 Counterparts; Telefacsimile Execution. This Agreement may be
executed in any number of counterparts and by different parties on separate
counterparts, each of which, when executed and delivered, shall be deemed to be
an original, and all of which, when taken together, shall constitute but one and
the same Agreement. Delivery of an executed counterpart of this Agreement by
telefacsimile shall be equally as effective as delivery of an original executed
counterpart of this Agreement. Any party delivering an executed counterpart of
this Agreement by telefacsimile also shall deliver an original executed
counterpart of this Agreement but the failure to deliver an original executed
counterpart shall not affect the validity, enforceability, and binding effect of
this Agreement.
15.8 Revival and Reinstatement of Obligations. If the incurrence or
payment of the Obligations by Borrower or any guarantor of the Obligations or
the transfer by either or both of such parties to Foothill of any property of
either or both of such parties should for any reason subsequently be declared to
be void or voidable under any state or federal law relating to creditors'
rights, including provisions of the Bankruptcy Code relating to fraudulent
conveyances, preferences, and other voidable or recoverable payments of money or
transfers of property (collectively, a "Voidable Transfer"), and if Foothill is
required to repay or restore, in whole or in part, any such Voidable Transfer,
or elects to do so upon the reasonable advice of its counsel, then, as to any
such Voidable Transfer, or the amount thereof that Foothill is
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required or elects to repay or restore, and as to all reasonable costs,
expenses, and attorneys fees of Foothill related thereto, the liability of
Borrower or such guarantor automatically shall be revived, reinstated, and
restored and shall exist as though such Voidable Transfer had never been made.
15.9 Integration. This Agreement, together with the other Loan
Documents, reflects the entire understanding of the parties with respect to the
transactions contemplated hereby and shall not be contradicted or qualified by
any other agreement, oral or written, before the date hereof.
(Signature page to follow.)
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IN WITNESS WHEREOF, the parties hereto have caused this Loan and
Security Agreement to be executed in Los Angeles, California.
ALLIED PRODUCTS CORPORATION,
a Delaware corporation
By: /S/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
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Title: Vice President & Secretary
FOOTHILL CAPITAL CORPORATION,
a California corporation
By: /S/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
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Title: Vice President
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FACILITY ADDRESS CITY COUNTY STATE FOOTHILL NAME AMOUNT
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NAME AND ZIP LIEN OF OF PRIOR
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CODE POSITION PRIOR LIEN
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LIENOR
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Schedule R-1