DISCRETIONARY REVOLVING CREDIT AGREEMENT
Dated as of May 15, 1997
Sunrise Leasing Corporation, a Minnesota corporation (the "Borrower"),
located at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ and
National City Bank of Minneapolis, a national banking association (the "Bank"),
located at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, agree as
follows:
ARTICLE I.
DEFINITIONS Section 1.1. Definitions. As used in this Agreement the
following terms shall have the following meanings (such meanings to be equally
applicable to singular and plural forms of the terms defined):
(a) "Affiliate" means any of the following Persons:
(i) any director, officer or employee of the Borrower or the
Guarantor;
(ii) any person who, individually or with his immediate family,
beneficially owns or holds 5% or more of voting interest of the
Borrower or the Guarantor; or
(iii)any company in which any Person described above owns a 5% or
greater equity interest.
(b) "Borrowing Base" with respect to any Note means an amount equal to the
sum of the following:
(i) 100% of the Present Value of the Eligible Equipment Leases
designated by the Borrower on the most recent Borrowing Base
Certificate for that Note; and
(ii) 100% of the Residual Value of the inventory under Eligible
Equipment Leases designated by the Borrower on the most recent
Borrowing Base Certificate for that Note;
provided, however, that the portion of the Borrowing Base attributable to any
Eligible Equipment Lease shall not, at any time, exceed the Net Book Value of
that lease.
(c) "Borrowing Base Certificate" with respect to any Note means a
certificate signed by the chief financial officer of the Borrower
which is delivered to the Bank pursuant to Section 5.1(a) and which
shows as of the date of determination (A) the Eligible Equipment
Leases for that Note, (B) the Net Book Value, Present Value and
Residual Value for such Eligible Equipment Leases, (C) the original
cost and the accumulated depreciation of the inventory subject to such
Eligible Equipment Leases, and (D) a payment aging for such Eligible
Equipment Leases.
(d) "Borrowing Base Value" for any Eligible Equipment Lease means the
portion of the Borrowing Base attributable to such lease.
(e) "Business Day" means any day other than a Saturday, Sunday or a public
holiday or the equivalent under the laws of the State of Minnesota or
the United States of America.
(f) "Cash Expense Coverage Ratio" for any time period means a ratio the
numerator of which is the sum of the consolidated cash receipts from
continuing operations of the Borrower and the Guarantor during that
period and the denominator of which is the sum of all of their cash
expenses during that period.
(g) "Debt" means (i) indebtedness for borrowed money or for the deferred
purchase price of property or services, (ii) obligations as lessee
under leases which shall have been or should be, in accordance with
generally accepted accounting principles, recorded as capital leases,
(iii) obligations under direct or indirect guaranties in respect of,
and obligations (contingent or otherwise) to purchase or otherwise
acquire, or otherwise to assure a creditor against loss in respect of,
indebtedness or obligations of others of the kinds referred to in
clause (i) or (ii) above, and (iv) liabilities in respect of unfunded
vested benefits under plans covered by Title IV of ERISA.
(h) "Eligible Equipment Lease" means a lease (i) for which the Borrower is
the lessor and holds all financial servicing rights; (ii) which has an
original term of not more than 36 months or such longer term as the
Bank has approved in writing; (iii) all originals of which have been
delivered to the Bank and have been approved by the Bank in its sole
discretion as to form and content; (iv) which is subject to a
perfected security interest in favor of only the Bank as required by
this Agreement; (v) which relates to inventory which is (A) owned by
the Borrower and (B) subject to a perfected security interest in favor
of only the Bank as required by this Agreement; (vi) with respect to
which the Borrower has directed that all contract payments be made to
a lockbox under the control of State Street Bank and Trust Company, or
other depository acceptable to the Bank; (vii) with respect to which
the Borrower has filed a UCC-1 Financing Statement, or equivalent
document under applicable law, to give public notice of the Borrower's
interest in the inventory under the lease (provided that any lease
entered into prior to January 1, 1997 with respect to inventory with
an original cost of not more than $15,000 shall not be subject to this
subsection); and (viii) with respect to which the Bank has been
provided evidence of casualty insurance, including casualty insurance
obtained by the Borrower, showing the Bank as a loss payee; provided,
however, that (A) no lease may be added as an Eligible Equipment Lease
at a time when the lease is in default, (B) no lease may remain as an
Eligible Equipment Lease if it has been in default for more than 90
days, (C) no lease may be added as an Eligible Equipment Lease at a
time when the lessee of the lease is the lessee on other Eligible
Equipment Leases which have a Borrowing Base Value, which when added
to the Borrowing Base Value of the proposed lease, would exceed
$750,000.00 and (D) if the lease is subject to a Permitted
Encumbrance, the Borrower has obtained and delivered to the Bank a
recordable release of that lease from that Permitted Encumbrance. A
lease can be an Eligible Equipment Lease for only one Note at any
time.
(i) "Event of Default" means one of the events specified in Section 6.1.
(j) "Loan Documents" means this Agreement, the Notes, the Security
Agreement, the Guaranty and all other documents to be executed in
connection with this Agreement.
(k) "Loan Party" means any Person obligated under any Loan Document.
(l) "Net Book Value" means, at any time, with respect to any Eligible
Equipment Lease, the original cost of the inventory subject to that
lease minus depreciation that has been, or under generally accepted
accounting principles should have been, accumulated with respect to
that inventory
(m) "Notes" means all of the Notes described in Section 2.2
(n) "Permitted Encumbrances" means all security interests and other
encumbrances on any of the Borrower's assets as of the date hereof as
disclosed in writing to the Bank contemporaneously with this
Agreement.
(o) "Person" means an individual, corporation, partnership, joint venture,
trust or unincorporated organization or governmental agency or
political subdivision thereof.
(p) "Present Value" means, as to any Eligible Equipment Lease, the
remaining contractual payments due on that lease discounted to present
value using a discount rate equal to the stated rate of interest on
the Note for which that lease constitutes a part of the Borrowing
Base.
(q) "Residual Value" means, as to any Eligible Equipment Lease, the Net
Book Value of that lease minus the Present Value of that lease.
(r) "Senior Recourse Debt" means the aggregate of the consolidated Debt
for borrowed money of the Borrower and the Guarantor, determined and
computed in accordance with generally accepted accounting principles
consistently applied from year to year, provided that Debt shall be
included in this calculation only to the extent the Debt provides for
recourse to the Borrower or the Guarantor.
(s) "Subsidiary" means any corporation of which more than 50% of the
outstanding capital stock having ordinary voting power to elect a
majority of the Board of Directors of such corporation (irrespective
of whether or not at the time capital stock or any other class or
classes of stock of such corporation shall or might have voting power
upon the occurrence of any contingency) is at the time directly or
indirectly owned by the Borrower, by the Borrower and one or more
other Subsidiaries, or by one or more other Subsidiaries.
(t) "Tangible Net Worth" means the aggregate of the consolidated capital
stock, paid in surplus and retained earnings of the Borrower and the
Guarantor (excluding stock of the Borrower or the Guarantor held by
the Borrower or the Guarantor), determined and computed in accordance
with generally accepted accounting principles consistently applied
from year to year, less the book value of all assets of the Borrower
and the Guarantor that would be treated as intangibles under generally
accepted accounting principles including without limitation, such
items as goodwill, trademarks, tradenames, service marks, copyrights,
patents and licenses and less the book value of all obligations owed
to the Borrower or the Guarantor by any of their Affiliates.
(u) "Treasury Yield" means with respect to any Note, the yield, as
determined by the Bank, on the United States Treasury instrument with
a maturity date closest to the average payment date of the payments to
be made under the Note as estimated by the Bank.
(v) "UCC Filing Event" means any event which is, or which with the giving
of notice or the elapse of time will become, a default under any of
the provisions of Sections 5.1(f), 5.1(g) and 5.1(h).
Section 1.2. Accounting and Other Terms. All accounting terms not
specifically defined in this Agreement shall be construed in accordance with
generally accepted accounting principles consistently applied as such principles
may change from time to time. Other terms defined herein shall have the meanings
ascribed to them herein.
ARTICLE II.
REVOLVING LOAN
Section 2.1. Discretionary Revolving Loan. The Borrower has requested that
the Bank make advances to the Borrower from time to time to permit the Borrower
to carry leases on inventory that it leases. THE BANK HAS NOT COMMITTED TO
PROVIDING ANY SUCH ADVANCES AND MAY, IN ITS DISCRETION, DECIDE NOT TO MAKE ANY
SUCH ADVANCES. If the Bank, in its discretion, agrees to make any such advances
requested by the Borrower, such advances (the "Advances") shall (A) not exceed
an aggregate principal amount outstanding of $5,500,000.00; (B) be made in
accordance with the terms of this Agreement; and (C) be made on or before May
31, 1998 (the "Termination Date"). Each Advance shall be in an amount of not
less than $1,000,000.00 and of not more than the Borrowing Base for the Note
evidencing that Advance.
Section 2.2. The Notes. Each Advance made by the Bank shall be evidenced by
a separate promissory note (each a "Note" and collectively the "Notes") which is
in substantially the form of Exhibit A attached hereto (appropriately completed)
and is delivered to the Bank pursuant to Article III. Each Note shall (A) have a
final maturity date not later than 48 months after the issue date of the Note
and (B) bear an interest rate equal to 3.25% above the Treasury Yield on the
date two Business Days before the Advance evidenced by the Note.
Section 2.3. Making of Advances. The Borrower may request Advances under
this Agreement by giving notice to the Bank, specifying the date of the
requested Advance and the amount thereof. Each request for an Advance shall be
accompanied by an executed Borrowing Base Certificate showing a Borrowing Base
for that Advance in an amount not less than that Advance. Any request for an
Advance shall be deemed to be a representation that the Borrower's
representations and warranties contained in Section 4.1 are true and correct as
of the date of the Advance as though made on and as of such date and that no
event has occurred and is continuing, or will result from such Advance, which
constitutes an Event of Default or would constitute an Event of Default but for
the requirement that notice be given or time elapse or both. If the Bank
approves a requested Advance in it sole discretion, the Bank may disburse such
Advance by crediting immediately available funds in the amount of the Advance to
the Borrower's demand deposit account maintained with the Bank.
Section 2.4. Interest and Payments. The Borrower shall repay, and shall pay
interest on, the aggregate unpaid principal amount of all Advances in accordance
with the Notes. All payments of principal, interest and fees under this
Agreement shall be made when due to the Bank in immediately available funds. All
computations of interest shall be made by the Bank on the basis of the actual
number of days elapsed in a year of 360 days. Whenever any such payment shall be
due on a non-Business Day, such payment shall be made on the next succeeding
Business Day, and such extension of time shall be included in the computation of
interest. The Bank is expressly authorized to charge any principal or interest
payment, when due, to the Borrower's demand deposit account maintained at the
Bank, or, if that account shall not contain sufficient funds, to any other
account maintained by the Borrower at the Bank.
Section 2.5. Voluntary Prepayment. The Borrower may prepay any Note in
whole or in part ; provided, however, that each voluntary prepayment shall be
made as of a principal payment date on the Note and shall be accompanied by all
interest accrued to the date of prepayment and that a prepayment in full of any
Note shall be accompanied by a prepayment fee equal to 5.0% of all principal
amounts prepaid on that Note during the entire term of that Note.
Section 2.6. Mandatory Prepayment. In the event that (A) a default,
including, without limitation, any payment default, occurs under an Eligible
Equipment Lease and is not cured within 90 days or (B) the inventory subject to
the Eligible Equipment Lease ceases for any reason to be under that lease, the
Borrower will, within 30 days of that event, provide a substitute Eligible
Equipment Lease acceptable to the Bank or prepay on the Note to which that
Eligible Equipment Lease relates an amount equal to the Borrowing Base Value of
that Eligible Equipment Lease. In the event that the lessee of an Eligible
Equipment Lease prepays any amount on that Eligible Equipment Lease, whether
through insurance proceeds, voluntary payments or otherwise, all such
prepayments shall immediately be paid to the Bank to be applied to the Note to
which that Eligible Equipment Lease relates.
Section 2.7. Use of Proceeds. The proceeds of the Advances from the Bank
shall be used to refinance existing Debt owed to First Bank National
Association.
ARTICLE III.
CONDITIONS OF LENDING
Section 3.1. Conditions Precedent to Initial Advance. If the Bank
determines to make any Advances in its discretion, the Borrower shall deliver to
the Bank prior to that Advance:
(a) The Note for that Advance, properly completed, executed and delivered
on behalf of the Borrower.
(b) A security agreement (the "Security Agreement"), in a form acceptable
to the Bank properly executed and delivered on behalf of the Borrower,
granting to the Bank a security interest in all of the Eligible
Equipment Leases which are part of the Borrowing Base for that
Advance, the inventory subject to such Eligible Equipment Leases and
other property described therein as security for the performance of
the Borrower's obligations under this Agreement and the Notes,
together with any UCC-1 Financing Statement or other document deemed
necessary or desirable by the Bank to perfect the security interest
granted by the Security Agreement.
(c) A certified copy of the resolutions of the Board of Directors of the
Borrower, approving the execution and delivery of the Loan Documents
to which it is a party and approving all other matters contemplated by
this Agreement.
(d) A certificate by the Secretary or any Assistant Secretary of the
Borrower certifying the names of the officer or officers of the
Borrower authorized to sign the Loan Documents to which it is a party,
together with a sample of the true signature of such officer.
(e) Favorable opinion of counsel to the Borrower and the Guarantor in a
form and as to such matters as the Bank may request.
(f) A guaranty (the "Guaranty") of Sunrise Resources, Inc. (the
"Guarantor"), in a form satisfactory to the Bank, securing the
Borrower's obligations under this Agreement and the Notes.
Section 3.2. Conditions Precedent to Each Advance. If the Bank determines
to make any Advances in its discretion, each Advance (including the initial
Advance) shall be subject to the further conditions precedent, that on the date
of such Advance:
(a) The representations and warranties contained in Section 4.1 of this
Agreement are correct on and as of the date of such Advance as though
made on such date; and
(b) No event has occurred and is continuing, or will result from such
Advance, which constitutes an Event of Default or would constitute an
Event of Default but for the requirement that notice be given or time
elapse or both.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
Section 4.1. Representations and Warranties of the Borrower. To induce the
Bank to make Advances, the Borrower represents and warrants as follows:
(a) Existence of Borrower. The Borrower is a corporation duly
incorporated, validly existing and in good standing under the laws of
the state indicated at the beginning of this Agreement.
(b) Authority to Execute. The execution, delivery and performance by the
Borrower of the Loan Documents to which it is a party are within the
Borrower's corporate powers, have been duly authorized by all
necessary corporate action, do not and will not conflict with any
provision of law or of the charter or bylaws of the Borrower or of any
agreement or contractual restriction binding upon or affecting the
Borrower or any of its property, and need no further shareholder or
creditor consent.
(c) Binding Obligation. This Agreement is, and the other Loan Documents
when delivered hereunder will be, legal, valid and binding obligations
of the Loan Parties enforceable against such Persons in accordance
with their respective terms.
(d) Governmental Approval. No consent of, or filing with, any governmental
authority is required on the part of any Loan Party in connection with
the execution, delivery or performance of any Loan Documents, except
for Uniform Commercial Code financing statements required to be filed
to perfect the security interests granted under the Security
Agreement.
(e) Financial Statements. The audited financial statements of the Borrower
as of March 31, 1996 and the unaudited financial statements as of
December 31, 1996, copies of which have been furnished to the Bank,
have been prepared in conformity with generally accepted accounting
principles consistently applied and present fairly the financial
condition of the Borrower as of such dates, and the results of the
operations of the Borrower for the financial periods then ended, and
since such dates, there has been no materially adverse change in such
financial condition.
(f) Litigation. Except as listed in Schedule 4.1(f), no litigation or
governmental proceeding is pending or threatened against the Borrower
which may have a materially adverse effect on the financial condition
or operations of the Borrower.
(g) Title to Assets. The Borrower has good and marketable title to all
assets used in connection with its trades or businesses, and none of
such assets is subject to any mortgage, pledge, lien, security
interest or encumbrance of any kind, except for current taxes not
delinquent, and except as has been disclosed in writing to the Bank
contemporaneously with this Agreement.
(h) Taxes. The Borrower has filed all federal and state income and excess
profits tax returns which are required to be filed, and has paid all
taxes shown on such returns to be due and all other tax assessments
received by it to the extent that such assessments have become due.
(i) ERISA. No plan (as that term is defined in the Employee Retirement
Income Security Act of 1974 ("ERISA")) of the Borrower (a "Plan")
which is subject to Part 3 of Subtitle B of Title 1 of ERISA had an
accumulated funding deficiency (as such term is defined in ERISA) as
of the last day of the most recent fiscal year of such Plan ended
prior to the date hereof, or would have had such an accumulated
funding deficiency on such date if such year were the first year of
such Plan, and no material liability to the Pension Benefit Guaranty
Corporation has been, or is expected by the Borrower to be, incurred
with respect to any such Plan. No Reportable Event (as defined in
ERISA) has occurred and is continuing in respect to any such Plan.
(j) Defaults. The Borrower is not in default in the payment of principal
or interest on any indebtedness for borrowed money and is not in
default under any instrument or agreement under or subject to which
any indebtedness for borrowed money has been issued, and no event has
occurred and is continuing which, with or without the lapse of time or
the giving of notice, or both, constitutes or would constitute an
event of default under any such instrument or agreement or an Event of
Default hereunder.
(k) Subsidiaries. The Borrower has no Subsidiaries other than Sunrise
Funding Corporation I, a Minnesota corporation.
(l) Patents, Trademarks, Etc. The Borrower has good and marketable title
to all patents, trademarks, processes, copyrights, franchises and
licenses title to which is necessary for the operation of the
Borrower's businesses.
(m) Use of Proceeds For Securities Transactions. No proceeds of any
Advance will be used to acquire any security in any transaction which
is subject to Sections 13 and 14 of the Securities Exchange Act of
1934.
(n) Regulation U. The Borrower is not engaged in the business of extending
credit for the purpose of purchasing or carrying margin stock (within
the meaning of Regulation U issued by the Board of Governors of the
Federal Reserve System), and no proceeds of any Advance will be used
to purchase or carry any margin stock or to extend credit to others
for the purpose of purchasing or carrying any margin stock.
ARTICLE V.
COVENANTS OF THE BORROWER
Section 5.1 Affirmative Covenants. So long as any Note shall remain unpaid, or,
if no Note remains unpaid, until the Termination Date, the Borrower will, unless
the Bank shall give its prior written consent:
(a) Financial Reporting. Furnish to the Bank: (i) as soon as available and
in any event within 45 days after the end of each quarter of each
fiscal year of the Borrower, balance sheets of the Borrower as of the
end of such quarter and statements of income and retained earnings of
the Borrower for the period commencing at the end of the previous
fiscal year and ending with the end of such quarter, certified by the
chief financial officer of the Borrower; (ii) as soon as available and
in any event within 90 days after the end of each fiscal year of the
Borrower, (A) a copy of the Form 10-K for such year for the Borrower,
containing financial statements for such year certified in a manner
acceptable to the Bank by independent public accountants acceptable to
the Bank and (B) if available, a budget and projections prepared by
the Borrower in a form acceptable to the Bank for the following fiscal
year; (iii) promptly upon the sending or filing thereof copies of all
public reports issued by the Borrower to any of its security holders,
to the Securities and Exchange Commission or to any national
securities exchange; (iv) promptly upon the filing or receiving
thereof, copies of all reports which the Borrower files under ERISA or
which the Borrower receives from the Pension Benefit Guaranty
Corporation if such report shows any material violation or potential
violation by the Borrower of its obligations under ERISA; (v) such
other information concerning the conditions or operations, financial
or otherwise, of the Borrower as the Bank from time to time may
reasonably request; (vi) within 30 days after the end of each month, a
Borrowing Base Certificate (in the form of Exhibit C) for each Note, a
Cash Settlement Certificate (in the form of Exhibit D) and a payments
aging on all Eligible Equipment Leases.
(b) Visitation Rights. At any reasonable time and from time to time,
permit the Bank or any agents or representatives thereof, to examine
and make copies of and abstracts from the records and books of account
of, and visit the properties of, the Borrower, and to discuss the
affairs, finances and accounts of the Borrower with any of its
officers or directors. The Borrower will reimburse the Bank for its
reasonable costs and expenses of conducting such periodic
examinations, provided that, in the absence of an Event of Default,
the Borrower will be required to compensate the Bank for the costs of
no more than two examinations at a cost of $500.00 each in any
calendar year.
(c) Notification of Default, Etc. Notify the Bank as promptly as
practicable (but in any event not later than 5 Business Days) after
the Borrower obtains knowledge of: (i) the occurrence of any event
which constitutes an Event of Default or which would constitute an
Event of Default with the passage of time or the giving of notice or
both; or (ii) the commencement of any litigation or governmental
proceedings of any type which could materially adversely affect the
financial condition or business operations of the Borrower.
(d) Compliance Certificate. At the time each quarterly financial statement
is required to be provided to Bank under this Agreement, the Borrower
will provide to Bank a certificate of the chief financial officer of
the Borrower substantially in the form of Exhibit B attached hereto
(appropriately completed). If that certificate shows that an Event of
Default or any event which would constitute an Event of Default with
the passage of time or the giving of notice or both, has occurred, the
certificate shall state in reasonable detail the circumstances
surrounding such event and action proposed by the Borrower to cure
such event.
(e) Keeping of Financial Records and Books of Account. Maintain proper
financial records in accordance with generally accepted accounting
principles consistently applied which fully and correctly reflect all
financial transactions and all assets and liabilities of the Borrower.
(f) Tangible Net Worth. Maintain at all times Tangible Net Worth of not
less than $25,000,000.00 plus 75% of positive net income earned by the
Borrower and the Guarantor in each fiscal year starting after March
31, 1995, calculated on a cumulative basis.
(g) Debt Ratio. Maintain at all times a ratio of Senior Recourse Debt to
Tangible Net Worth of not more than 4.50 to 1.
(h) Cash Expense Coverage Ratio. Maintain as of the end of each fiscal
quarter a Cash Expense Coverage Ratio of not less than 1.25 to 1 as
calculated on a rolling four-quarter basis.
(i) Maintenance of Insurance. Maintain such insurance with reputable
insurance carriers as is normally carried by companies engaged in
similar businesses and owning similar property, and name the Bank as
loss payee on all policies insuring personal property in which the
Bank has a security interest and provide the Bank with certificates of
insurance evidencing its status as a loss payee. The loss payee
endorsement shall provide for payment to the Bank notwithstanding any
acts or omissions of the Borrower and shall require notice to the Bank
30 days prior to the expiration or cancellation of the insurance.
(j) Maintenance of Properties, Etc. Maintain and preserve all of its
properties, necessary or useful in the proper conduct of its business,
in good working order and condition, ordinary wear and tear excepted.
(k) Payment of Taxes. Pay all taxes, assessments and governmental charges
of any kind payable by it as such taxes, assessments and charges
become due and before any penalty shall be imposed, except as the
Borrower shall contest in good faith and by appropriate proceedings
providing such reserves as are required by generally accepted
accounting principles.
(l) Compliance with ERISA. Cause each Plan to comply and be administered
in accordance with those provisions of ERISA which are applicable to
such Plan.
(m) Preservation of Corporate Existence, Etc. Preserve and maintain its
corporate existence, rights, franchises and privileges in the
jurisdiction of its incorporation, and qualify and remain qualified,
as a foreign corporation in each jurisdiction in which such
qualification is necessary or desirable in view of its business and
operations or the ownership of its properties.
(n) UCC Filing Event. Within five Business Days after the Bank notifies
the Borrower of a UCC Filing Event, the Borrower will provide to the
Bank executed and recordable UCC-3 assignments (or equivalent
documents under applicable law) assigning to the Bank all of the UCC-1
Financing Statements or equivalent documents held by the Borrower with
respect to Eligible Equipment Leases as described in Section
1.1(g)(vii).
Section 5.2. Negative Covenants. So long as any Note shall remain unpaid,
or, if no Note remains unpaid, until the Termination Date, the Borrower will
not, unless the Bank shall give its prior written consent:
(a) Liens. Create or suffer to exist any mortgage, pledge, lien, security
interest or other encumbrance with respect to any Collateral under the
Security Agreement except Permitted Encumbrances.
(b) Merger, Etc. Merge or consolidate with any other Person; sell, divest,
transfer, convey, lease or otherwise dispose of (whether in one
transaction or in a series of transactions) all or a substantial
portion of its assets (whether now owned or hereafter acquired) to any
other Person.
(c) Transactions with Affiliates. Engage in any transaction (including,
without limitation, loans or financial accommodations of any kind)
with any Affiliate provided that such transactions are permitted if
they are on terms no less favorable to the Borrower than would be
obtainable if no such relationship existed.
(d) Change in Nature of Business. Make any material change in the nature
of the business of the Borrower, taken as a whole, as carried on at
the date hereof, or sell or divest any line or division of its
business.
ARTICLE VI.
DEFAULT
Section 6.1. Events of Default. "Events of Default" in this Agreement means
any of the following events:
(a) Failure of the Borrower to pay the principal of any Note when due or,
if payable on demand, upon demand, provided that the Borrower may use
a five day grace period with respect to such a failure not more
frequently than twice in each calendar year;
(b) Failure of the Borrower to pay any interest or fees required to be
paid hereunder or under any Note when due, provided that the Borrower
may use a five day grace period with respect to such a failure not
more frequently than twice in each calendar year;
(c) Any representation or warranty made by, or on behalf of, any Loan
Party in, or pursuant to, any Loan Document shall prove to have been
incorrect in any material respect when made;
(d) Default in performance of any other covenant or agreement of any Loan
Party in, or pursuant to, any Loan Document and continuance of such
default or breach for a period of 30 days after written notice thereof
to such Person by the Bank;
(e) Any Loan Party shall generally not pay its or his debts as such debts
become due, or shall admit in writing its or his inability to pay its
or his debts generally, or shall make a general assignment for the
benefit of creditors; or any proceeding shall be instituted by or
against any Loan Party seeking to adjudicate it or him a bankrupt or
insolvent, or seeking liquidation, winding up, reorganization,
arrangement, adjustment, custodianship, protection, relief, or
composition of it or him or its or his debts under any law relating to
bankruptcy, insolvency or reorganization or relief of debtors, or
seeking the entry of an order for relief, or the appointment of a
receiver, custodian, trustee, or other similar official for it or him
or for any substantial part of its or his property; or any Loan Party
shall take any corporate action to authorize any of the actions set
forth above in this subsection; and in the case of a proceeding of the
type described in this paragraph commenced against any Loan Party,
that proceeding shall not be dismissed within 60 days or that Loan
Party shall consent to that proceeding;
(f) The Borrower shall fail to pay any Debt (but excluding Debt evidenced
by any Note) of the Borrower or any interest or premium thereon, when
due (whether by scheduled maturity, required prepayment, acceleration,
demand or otherwise) and such failure shall continue after the
applicable grace period, if any, specified in the agreement or
instrument relating to such Debt; or any other default under any
agreement or instrument relating to any such Debt, or any other event,
shall occur and shall continue after the applicable grace period, if
any, specified in such agreement or instrument, if the effect of such
default or event is to cause the automatic acceleration of the
maturity of such Debt; or any such Debt shall be declared to be due
and payable, or required to be prepaid (other than by a regularly
scheduled required prepayment), prior to the stated maturity thereof;
(g) Any guaranty or any third party security interest securing any
indebtedness of the Borrower to the Bank shall be repudiated or
revoked, or purported to be repudiated or revoked;
(h) The entry against any Loan Party of a final judgment, decree or order
for the payment of money in excess of $100,000.00 and the continuance
of such judgment, decree or order unsatisfied for a period of 30 days
without a stay of execution;
(i) Any Reportable Event (as defined in ERISA) shall have occurred and
continue for 30 days; or any Plan shall have been terminated by the
Borrower not in compliance with ERISA, or a trustee shall have been
appointed by a court to administer any Plan, or the Pension Benefit
Guaranty Corporation shall have instituted proceedings to terminate
any Plan or to appoint a trustee to administer any Plan.
Section 6.2 Rights and Remedies. If any Event of Default shall occur and be
continuing, the Bank may exercise any or all of the following rights and
remedies:
(a) Declare the Notes, all interest thereon, and all other obligations
under, or pursuant to, any Loan Document to be immediately due and
payable, and upon such declaration such Notes, interest and other
obligations shall immediately be due and payable, without presentment,
demand, protest or any notice of any kind, all of which are expressly
waived;
(b) Exercise any right or remedy under the Security Agreement, or any
other right or remedy of a secured party under the Uniform Commercial
Code as in effect in Minnesota;
(c) Exercise any other right or remedy available to the Bank at law or in
equity.
ARTICLE VII.
MISCELLANEOUS
Section 7.1. No Waiver; Cumulative Remedies. No failure or delay on the
part of the Bank in exercising any right or remedy under, or pursuant to, any
Loan Document shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right, remedy or power preclude other or further exercise
thereof, or the exercise of any other right, remedy or power. The remedies in
the Loan Documents are cumulative and are not exclusive of any remedies provided
by law.
Section 7.2. Amendments and Waivers. No amendment or waiver of any
provision of any Loan Document shall be effective unless such amendment or
waiver is in writing and is signed by the Bank, and such amendment or waiver
shall be effective only in the specific instance and for the specific purpose
for which it was given.
Section 7.3. Notices, Etc. All notices and other communications provided
for hereunder shall be in writing (including telecopier communication) and
mailed or telecopied or delivered, if to the Borrower, at its address stated in
the preamble hereof, Attention: R. ▇▇▇▇▇▇▇ ▇▇▇▇; and if to the Bank, at its
address stated in the preamble hereof, Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇; or, as to
each party, at such other address as shall be designated by such party in a
written notice to the other party. All such notices and communications shall,
when mailed or telecopied, be effective when deposited in the mails or
transmitted by telecopier, respectively, addressed as aforesaid, except that
notices to the Bank pursuant to the provisions of Article II shall not be
effective until received by the Bank.
Section 7.4. Costs and Expenses. The Borrower agrees to pay on demand all
costs and expenses of the Bank in connection with the preparation of the Loan
Documents, including reasonable attorneys fees and legal expenses, as well as
all costs and expenses of the Bank, including reasonable attorneys fees and
expenses, in connection with the administration and enforcement of the Loan
Documents (whether suit is commenced or not).
Section 7.5. Right of Set-off. Upon the occurrence and during the
continuance of any Event of Default the Bank is hereby authorized at any time
and from time to time, to the fullest extent permitted by law, to set off and
apply any and all deposits (general or special, time or demand, provisional or
final) at any time held and other indebtedness at any time owing by the Bank to
or for the credit or the account of the Borrower or the Guarantor against any
and all of the obligations of the Borrower now or hereafter existing under any
Loan Document, irrespective of whether or not the Bank shall have made any
demand under any Loan Document and although such obligations may be unmatured.
The Bank agrees promptly to notify the Borrower after any such set-off and
application, provided that the failure to give such notice shall not affect the
validity of such set-off and application. The rights of the Bank under this
Section are in addition to other rights and remedies (including, without
limitation, other rights of set-off) which the Bank may have.
Section 7.6. Governing Law. All Loan Documents shall be governed by the
laws of the State of Minnesota. Any term used in this Agreement and not
otherwise defined shall have the definition given that term in the Uniform
Commercial Code as in effect in the State of Minnesota from time to time. If any
term in this Agreement shall be held to be illegal or unenforceable, the
remaining portions of this Agreement shall not be affected, and this Agreement
shall be construed and enforced as if this Agreement did not contain the term
held to be illegal or unenforceable. The Borrower hereby irrevocably submits to
the jurisdiction of the Minnesota District Court, Fourth District, and the
Federal District Court, District of Minnesota, Fourth Division, over any action
or proceeding arising out of or relating to this Agreement and agrees that all
claims in respect of such action or proceeding may be heard and determined in
any such court.
Section 7.7. Binding Effect; Assignment. All Loan Documents shall be
binding upon and inure to the benefit of the Loan Parties and the Bank and their
respective successors and assigns. No Loan Party shall have the right to assign
its rights or interest under any such agreement without the prior written
consent of the Bank.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized officers as of the date first above written.
Sunrise Leasing Corporation
By /s/ R. ▇▇▇▇▇▇▇ ▇▇▇▇
Its Vice President
National City Bank of Minneapolis
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Its Vice President
A-2
EXHIBIT A
PROMISSORY NOTE
$____________ Dated: ____________, 199___
For value received, Sunrise Leasing Corporation , a Minnesota corporation
(the "Borrower") promises to pay to the order of National City Bank of
Minneapolis (the "Bank"), at its offices in Minneapolis, Minnesota, in lawful
money of the United States of America, the principal amount of
______________________________________________________ Dollars
($____________________) together with interest on any and all principal amounts
remaining unpaid hereon from the date of this Note until said principal amounts
are fully paid at a fixed annual rate equal to ____%.
Principal and interest shall be paid in monthly installments on the last
day of each month, starting on the last day of the first full month after the
date hereof and ending on the last day of the 48th full month after the date
hereof. Each monthly installment shall be equal to the aggregate amount of all
payments due during that month under each Eligible Equipment Lease then included
in the Borrowing Base for this Note under the Loan Agreement; provided, however,
that the last such installment shall be in the amount necessary to repay in full
the unpaid principal amount hereof together with all accrued but unpaid
interest. Each installment shall be applied first to interest then due and then
to principal. The monthly installment due under this Note shall be calculated
each month without regard to whether the Borrower actually receives all payments
due under each Eligible Equipment Lease during that month.
This Note is one of the Notes referred to in, and is entitled to the
benefits of, the Discretionary Revolving Credit Agreement dated as of May 15,
1997 (the "Loan Agreement") between the Borrower and the Bank, which Loan
Agreement, among other things, contains provisions for the acceleration of the
maturity of this Note upon the happening of certain stated events and also for
mandatory and voluntary prepayments of the principal amount due under this Note
upon stated terms and conditions.
Sunrise Leasing Corporation
By________________________________________
Its_____________________________________
B-1
EXHIBIT B
FORM OF COMPLIANCE CERTIFICATE
I, the _________________________ of Sunrise Leasing Corporation (the
"Borrower"), hereby provide this Compliance Certificate in accordance with
Section 5.1(d) of the Discretionary Revolving Credit Agreement (the "Agreement")
dated as of May 15, 1997 between the Borrower and National City Bank of
Minneapolis.
I certify that as of the date hereof:
(1) The representations and warranties of the Borrower contained in
Article IV of the Agreement are correct as though made on the date
hereof.
(2) No event has occurred and is continuing which constitutes an Event of
Default under the Agreement or would constitute an Event of Default
but for the requirement that notice be given or time elapse or both.
I further certify that as of _____________________, 19__:
(1) Tangible Net Worth as defined in the Agreement was $______________
compared to a minimum in the Agreement of $25,000,000.00 plus 75% of
positive net income earned by the Borrower in each fiscal year
starting after March 31, 1995, calculated on a cumulative basis.
(2) The ratio of Senior Recourse Debt to Tangible Net Worth as defined in
the Agreement was _______________________ compared to a maximum in the
Agreement of 4.50 to 1.
(3) The Cash Expense Coverage Ratio as defined in the Agreement was ____
to 1 compared to a minimum in the Agreement of 1.25 to 1.
Dated: _______________________________ _________________________________
Title: ___________________________
C-1
EXHIBIT C
BORROWING BASE CERTIFICATE
For Note No. ___________________
(Or Proposed New Advance In the Principal Amount of $_________________)
A. Present Value of Eligible Equipment Leases Payments ________________
B. Residual Value of Eligible Equipment Leases ________________
C. Subtotal (A+B) ________________
D. Original Cost of Equipment ________________
E. Less Accumulated Depreciation ________________
F. Subtotal (D-E) (Net Book Value) ________________
G. Total Borrowing Base (Lesser of C or F) ________________
H. Note Balance (or Proposed Advance Amount) ________________
I Total (G-H) (Must be zero or positive at all times) ________________
Dated: _______________________________ _________________________________
Title: __________________________
Exhibit D
Cash Settlement Certificate
Sunrise Leasing Corporation
Monthly Cash Settlement Certificate
For the Month Ending _____________
Dated _____________
I. Lease Receivables
a) Monthly payments paid by the lessees during the month:
__________________________
b) Monthly payments paid by SLC during the month:
______________________________
c) Total monthly payments due during the month on Eligible Equipment Leases:
________
II. Residuals
d) Proceeds from sale of equipment coming off lease during the month:
________________
e) Proceeds from insurance on equipment damaged during the
month:__________________
f) Residual amount of equipment subject to release during the
month:__________________
g) Total residual amount of equipment coming off lease during the
month:______________
III Case Settlement
h) Total cash due (c+d+e): _______________________________
i) Interest due on the Note: _______________________________
j) Principal payment on the Note (h minus i) _______________________________
k) Beginning principal balance _______________________________
l) Ending principal balance _______________________________
Schedule 4.1(f)
List of Litigation
An arbitration claim was filed against Sunrise Resources, Inc. (the "Company")
by the former shareholders of The ▇.▇. ▇▇▇▇ Companies, Inc. (d/b/a International
Leasing Corporation) ("ILC") seeking rescission of the merger between the
Company and ILC or, in the alternative, for reformation of the merger agreement
to give such former ILC shareholders additional shares of Company Common Stock,
and attorneys' fees and costs, to compensate them for what they consider
inadequate disclosure regarding the Company. The arbitration hearing has been
completed, and the decision of the arbitrators is expected to be announced soon.
Following the merger, and prior to the arbitration hearing, the (merged) Company
transferred certain (merged) assets to the Borrower. In the event that the
arbitrator rescinds the merger transaction, a portion of the Borrower's assets
may have to be transferred to ILC.