LOAN AND SECURITY AGREEMENT
by and among
DIRECT FUELS, L.P.
and
FFP OPERATING PARTNERS, L.P.
as Borrowers,
and
FOOTHILL CAPITAL CORPORATION
as Lender
Dated as of November 5, 2001
TABLE OF CONTENTS
1. DEFINITIONS AND CONSTRUCTION....................................1
1.1 Definitions............................................1
1.2 Accounting Terms......................................20
1.3 Code..................................................20
1.4 Construction..........................................20
1.5 Schedules and Exhibits................................20
2. LOAN AND TERMS OF PAYMENT......................................20
2.1 Revolver Advances.....................................20
2.2 Intentionally Deleted.................................22
2.3 Borrowing Procedures and Settlements..................22
2.4 Payments..............................................22
2.5 Overadvances..........................................23
2.6 Interest Rates and Letter of Credit Fee:
Rates, Payments, and Calculations..................23
2.7 Cash Management.......................................25
2.8 Crediting Payments; Float Charge......................26
2.9 Designated Account....................................26
2.10 Maintenance of Loan Account; Statements
of Obligations.....................................27
2.11 Fees..................................................27
2.12 Letters of Credit.....................................28
2.13 LIBOR Option..........................................30
2.14 Capital Requirements..................................32
2.15 Joint and Several Liability of Borrowers..............33
2.16 Purchase of Existing Lender Indebtedness..............35
2.17 Noteless Agreement....................................36
3. CONDITIONS; TERM OF AGREEMENT..................................36
3.1 Conditions Precedent to the Initial Extension
of Credit..........................................36
3.2 Conditions Subsequent to the Initial Extension
of Credit..........................................40
3.3 Conditions Precedent to all Extensions of Credit......40
3.4 Term..................................................41
3.5 Effect of Termination.................................41
3.6 Early Termination by DF...............................41
4. CREATION OF SECURITY INTEREST..................................42
4.1 Grant of Security Interest............................42
4.2 Negotiable Collateral.................................42
4.3 Collection of Accounts, General Intangibles,
and Negotiable Collateral...........................42
4.4 Delivery of Additional Documentation Required.........42
4.5 Power of Attorney.....................................43
4.6 Right to Inspect......................................43
4.7 Control Agreements....................................43
5. REPRESENTATIONS AND WARRANTIES.................................44
5.1 No Encumbrances.......................................44
5.2 Eligible Accounts.....................................44
5.3 Eligible Inventory....................................45
5.4 Equipment.............................................45
5.5 Location of Inventory and Equipment...................45
5.6 Inventory Records.....................................45
5.7 Location of Chief Executive Office; FEIN..............45
5.8 Due Organization and Qualification; Subsidiaries......45
5.9 Due Authorization; No Conflict........................46
5.10 Litigation............................................47
5.11 No Material Adverse Change............................47
5.12 Fraudulent Transfer...................................47
5.13 Employee Benefits.....................................47
5.14 Environmental Condition...............................48
5.15 Brokerage Fees........................................48
5.16 Intellectual Property.................................48
5.17 Leases................................................48
5.18 DDAs..................................................48
5.19 Complete Disclosure...................................48
5.20 Indebtedness..........................................49
6. AFFIRMATIVE COVENANTS..........................................49
6.1 Accounting System.....................................49
6.2 Collateral Reporting..................................49
6.3 Financial Statements, Reports, Certificates...........51
6.4 Guarantor Reports.....................................53
6.5 Return................................................53
6.6 Maintenance of Properties.............................53
6.7 Taxes.................................................54
6.8 Insurance.............................................54
6.9 Location of Inventory and Equipment...................55
6.10 Compliance with Laws..................................55
6.11 Leases................................................55
6.12 Brokerage Commissions.................................55
6.13 Existence.............................................55
6.14 Environmental.........................................55
6.15 Disclosure Updates....................................56
6.16 Springing Lien........................................56
6.17 Intercompany Secured Sales............................56
6.18 Subsequent UCC Search.................................56
6.19 Obligation to Pay.....................................56
7. NEGATIVE COVENANTS.............................................57
7.1 Indebtedness..........................................57
7.2 Liens.................................................57
7.3 Restrictions on Fundamental Changes...................58
7.4 Disposal of Assets....................................58
7.5 Change Name...........................................58
7.6 Guarantee.............................................58
7.7 Nature of Business....................................58
7.8 Prepayments and Amendments............................58
7.9 Change of Control.....................................59
7.10 Consignments..........................................59
7.11 Distributions.........................................59
7.12 Accounting Methods....................................59
7.13 Investments...........................................59
7.14 Transactions with Affiliates..........................59
7.15 Suspension............................................59
7.16 Intentionally Deleted.................................59
7.17 Use of Proceeds.......................................59
7.18 Change in Location of Chief Executive Office;
Inventory and Equipment with Bailees................60
7.19 Securities Accounts...................................60
7.20 Financial Covenants...................................60
8. EVENTS OF DEFAULT..............................................60
9. THE LENDER'S RIGHTS AND REMEDIES...............................62
9.1 Rights and Remedies...................................62
9.2 Remedies Cumulative...................................64
10. TAXES AND EXPENSES.............................................64
11. WAIVERS; INDEMNIFICATION.......................................65
11.1 Demand; Protest.......................................65
11.2 Lender's Liability for Collateral.....................65
11.3 Indemnification.......................................65
12. NOTICES. ......................................................66
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.....................67
14. ASSIGNS AND PARTICIPATIONS; SUCCESSORS.........................68
14.1 Assignments and Participations........................68
14.2 Successors............................................69
15. AMENDMENTS; WAIVERS............................................69
15.1 Amendments and Waivers................................69
15.2 No Waivers; Cumulative Remedies.......................70
16. GENERAL PROVISIONS.............................................70
16.1 Effectiveness.........................................70
16.2 Section Headings......................................70
16.3 Interpretation........................................70
16.4 Severability of Provisions............................70
16.5 Withholding Taxes.....................................70
16.6 Amendments in Writing.................................71
16.7 Counterparts; Telefacsimile Execution.................71
16.8 Revival and Reinstatement of Obligations..............71
16.9 Integration...........................................71
16.10 Intentionally Deleted.................................71
16.11 Request for Waivers...................................72
EXHIBITS AND SCHEDULES
Exhibit A-1 Form of Assignment and Acceptance
Exhibit B-1 Form of Borrowing Base Certificate
Exhibit C-1 Form of Compliance Certificate
Exhibit L-1 Form of LIBOR Notice
Exhibit P-1 Form of Promissory Note and Security Agreement
Schedule E-1 Eligible Inventory Locations
Schedule P-1 Permitted Liens
Schedule R-1 Real Property Collateral
Schedule 2.7(a) Cash Management Banks
Schedule 5.5 Locations of Inventory and Equipment
Schedule 5.7 Chief Executive Office; FEIN
Schedule 5.8(b) Capitalization of Borrowers
Schedule 5.8(c) Capitalization of Borrowers' Subsidiaries
Schedule 5.10 Litigation
Schedule 5.13 Employee Benefits
Schedule 5.14 Environmental Matters
Schedule 5.16 Intellectual Property
Schedule 5.18 Demand Deposit Accounts
Schedule 5.20 Permitted Indebtedness
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (this "Agreement"), is entered into as of
November 5, 2001, between and among FOOTHILL CAPITAL CORPORATION, a California
corporation ("Lender"), DIRECT FUELS, L.P., a Texas Limited Partnership, whose
registration number in Texas is 54340-10 ("DF"), and FFP OPERATING PARTNERS,
L.P., a Delaware Limited Partnership, whose registration number in Delaware is
2113742 ("FFPO", together with DF, "Borrowers").
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, chattel paper, or a General
Intangible.
"Accounts" means all of DF's now owned or hereafter acquired right, title,
and interest with respect to "accounts" (as that term is defined in the Code),
and any and all supporting obligations in respect thereof.
"Additional Documents" has the meaning set forth in Section 4.4.
"Advances" has the meaning set forth in Section 2.1.
"Affiliate" means, as applied to any Person, any other Person who, directly
or indirectly, controls, is controlled by, or is under common control with, such
Person. For purposes of this definition, "control" means the possession,
directly or indirectly, of the power to direct the management and policies of a
Person, whether through the ownership of Stock, by contract, or otherwise;
provided, however, that, in any event: (a) any Person which owns directly or
indirectly ten percent (10%) or more of the securities having ordinary voting
power for the election of directors or other members of the governing body of a
Person or ten percent (10%) or more of the partnership or other ownership
interests of a Person (other than as a limited partner of such Person) shall be
deemed to control such Person; (b) each director (or comparable manager) of a
Person shall be deemed to be an Affiliate of such Person; and (c) each
partnership or joint venture in which a Person owns ten percent (10%) or more as
a partner or joint venturer shall be deemed to be an Affiliate of such Person.
"Agreement" has the meaning set forth in the preamble hereto.
"Applicable Prepayment Premium" means, as of any date of determination, an
amount equal to (a) during the period of time from and after the date of the
execution and delivery of this Agreement up to the date that is the first
anniversary of the Closing Date, three percent (3%) of the Maximum Revolver
Amount on the date immediately prior to the date of determination, (b) during
the period of time from and including the date that is the first anniversary of
the Closing Date up to the date that is the second anniversary of the Closing
Date, two percent (2%) of the Maximum Revolver Amount on the date immediately
prior to the date of determination, and (c) during the period of time from and
including the date that is the second anniversary of the Closing Date up to the
Maturity Date, one percent (1%) of the Maximum Revolver Amount on the date
immediately prior to the date of determination, provided, however, at the
request of either Borrower, made no earlier than 60 days prior to the Maturity
Date, Lender shall extend the Maturity Date for sixty (60) days and any
prepayment made during such extended period shall not be subject to the
Applicable Prepayment Premium.
"Assignee" has the meaning set forth in Section 14.1(a).
"Authorized Person" means any officer or other employee of DF or the
General Partner of DF.
"Availability" means, as of any date of determination, if such date is a
Business Day, and determined at the close of business on the immediately
preceding Business Day, if such date of determination is not a Business Day, the
amount that DF is entitled to borrow as Advances under Section 2.1 (after giving
effect to all then outstanding Obligations and all sublimits and reserves
applicable hereunder).
"Bankruptcy Code" means the United States Bankruptcy Code, as in effect
from time to time.
"Base LIBOR Rate" means the rate per annum, determined by Lender in
accordance with its customary procedures, and utilizing such electronic or other
quotation sources as it considers appropriate (rounded upwards, if necessary, to
the next 1/16%), on the basis of the rates at which Dollar deposits are offered
to major banks in the London interbank market on or about 11:00 a.m. (California
time) two (2) Business Days prior to the commencement of the applicable Interest
Period, for a term and in amounts comparable to the Interest Period and amount
of the LIBOR Rate Loan requested by DF in accordance with this Agreement, which
determination shall be conclusive in the absence of manifest error.
"Base Rate" means, the rate of interest announced within ▇▇▇▇▇ Fargo at its
principal office in San Francisco 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.
"Base Rate Loan" means each portion of an Advance that bears interest at a
rate determined by reference to the Base Rate.
"Base Rate Margin" means seventy-five (75) percentage points.
"Bay View" means Bay View Bank, N.A. or its successors and assigns.
"Bay View/BVFMAC Pledged Assets" means those assets of FFPO pledged to
either Bay View or BVFMAC.
"Benefit Plan" means a "defined benefit plan" (as defined in Section 3(35)
of ERISA) for which either Borrower or ERISA Affiliate of either Borrower has
been an "employer" (as defined in Section 3(5) of ERISA) within the past six (6)
years.
"Board of Directors" means the board of directors (or comparable managers)
of the General Partner of either Borrower or any committee thereof duly
authorized to act on behalf thereof.
"Books" means all of each Borrower's now owned or hereafter acquired books
and records (including all of its Records indicating, summarizing, or evidencing
its assets (including the Collateral) or liabilities, all of its Records
relating to its business operations or financial condition, and all of its goods
or General Intangibles related to such information).
"Borrowers" has the meaning set forth in the preamble to this Agreement.
"Borrowing" means a borrowing hereunder of an Advance.
"Borrowing Base" has the meaning set forth in Section 2.1.
"Borrowing Base Certificate" means a certificate in the form of Exhibit
B-1.
"Business Day" means any day that is not a Saturday, Sunday, or other day
on which national banks are authorized or required to close, except that, if a
determination of a Business Day shall relate to a LIBOR Rate Loan, the term
"Business Day" also shall exclude any day on which banks are closed for dealings
in Dollar deposits in the London interbank market.
"BVFMAC" means Bayview Franchise Mortgage Acceptance Company or its
successors and assigns.
"Capital Lease" means a lease that is required to be capitalized for
financial reporting purposes in accordance with GAAP.
"Capitalized Lease Obligation" means any Indebtedness represented by
obligations under a Capital Lease.
"Cash Equivalents" means (a) marketable direct obligations issued or
unconditionally guaranteed by the United States or issued by any agency thereof
and backed by the full faith and credit of the United States, in each case
maturing within one (1) year from the date of acquisition thereof, (b)
marketable direct obligations issued by any state of the United States or any
political subdivision of any such state or any public instrumentality thereof
maturing within one (1) year from the date of acquisition thereof and, at the
time of acquisition, having the highest rating obtainable from either S&P or
▇▇▇▇▇'▇, (c) commercial paper maturing no more than one (1) year from the date
of acquisition thereof and, at the time of acquisition, having a rating of A-1
or P-1, or better, from S&P or ▇▇▇▇▇'▇, and (d) certificates of deposit or
bankers' acceptances maturing within one (1) year from the date of acquisition
thereof either (i) issued by any bank organized under the laws of the United
States or any state thereof which bank has a rating of A or A2, or better, from
S&P or ▇▇▇▇▇'▇, or (ii) certificates of deposit less than or equal to $100,000
in the aggregate issued by any other bank insured by the Federal Deposit
Insurance Corporation.
"Cash Management Bank" has the meaning set forth in Section 2.7(a).
"Cash Management Account" has the meaning set forth in Section 2.7(a).
"Cash Management Agreements" means those certain cash management service
agreements, in form and substance satisfactory to Lender, each of which is among
DF, Lender, and one of the Cash Management Banks.
"Change of Control" means (a) any "person" or "group" (within the meaning
of Sections 13(d) and 14(d) of the Exchange Act), who becomes the beneficial
owner (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly,
of ten percent (10%), or more, of the Partnership Interests of any Borrower, or
the equity interests in the General Partner of any Borrower, having the right to
vote for the election of members of the Board of Directors, or (b) a majority of
the members of the Board of Directors do not constitute Continuing Directors.
"Closing Date" means the date of the making of the initial Advance (or
other extension of credit) hereunder or the date on which Lender sends DF a
written notice that each of the conditions precedent set forth in Section 3.1
either have been satisfied or have been waived.
"Closing Date Business Plan" means the set of Projections of DF for the
three (3) year period following the Closing Date (on a year by year basis, and
for the one (1) year period following the Closing Date, on a month by month
basis), in form and substance (including as to scope and underlying assumptions)
satisfactory to Lender.
"Closing Intercompany Debt" shall mean the amount of Indebtedness of DF
outstanding to FFPO after giving effect to the closing of the transactions
contemplated by this Loan Agreement and the funding of the initial Advances and
issuance of the Letters of Credit on the Closing Date.
"Code" means the Texas Uniform Commercial Code, as in effect from time to
time.
"Collateral" means all of DF's now owned or hereafter acquired right,
title, and interest in and to all personal property, including without
limitation, each of the following:
(a) Accounts,
(b) Books,
(c) Equipment,
(d) General Intangibles,
(e) Inventory,
(f) Investment Property,
(g) Negotiable Collateral,
(h) Real Property Collateral,
(i) Intercompany Secured Loans,
(j) Deposit Accounts,
(k) money or other assets that now or hereafter come into the possession,
custody, or control of Lender, and
(l) the proceeds and products, whether tangible or intangible, of any of
the foregoing, including proceeds of insurance covering any or all of
the foregoing, and any and all Accounts, Books, Equipment, General
Intangibles, Inventory, Investment Property, 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.
"Collections" means all cash, checks, notes, instruments, and other items
of payment (including insurance proceeds, proceeds of cash sales, rental
proceeds, and tax refunds) of DF.
"Compliance Certificate" means a certificate substantially in the form of
Exhibit C-1 delivered by the chief financial officer of each Borrower to Lender.
"Continuing Director" means (a) any member of the Board of Directors who
was a director (or comparable manager) of the General Partner of either Borrower
on the Closing Date, and (b) any individual who becomes a member of the Board of
Directors after the Closing Date if such individual was appointed or nominated
for election to the Board of Directors by a majority of the Continuing
Directors, but excluding any such individual originally proposed for election in
opposition to the Board of Directors in office at the Closing Date in an actual
or threatened election contest relating to the election of the directors (or
comparable managers) of the General Partner of either Borrower (as such terms
are used in Rule 14a-11 under the Exchange Act) and whose initial assumption of
office resulted from such contest or the settlement thereof.
"Control Agreement" means a control agreement, in form and substance
satisfactory to Lender, executed and delivered by DF and the applicable
securities intermediary with respect to a Securities Account or a bank with
respect to a deposit account.
"Credit Card Contra Reserve" a $160,000 reserve in respect of credit card
sales, adjustable at Lender's sole and absolute discretion.
"Daily Balance" means, with respect to each day during the term of this
Agreement, the amount of an Obligation owed at the end of such day.
"DDA" means any checking or other demand deposit account maintained by DF.
"Deed of Trust" means the deed of trust or deed to secure debt, executed
and delivered by DF in favor of Lender, in form and substance satisfactory to
Lender, that encumbers the Real Property Collateral and the related improvements
thereto.
"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.
"Designated Account" means account number 5800356528 of DF maintained with
the Designated Account Bank, or such other deposit account of DF (located within
the United States) that has been designated as such, in writing, by DF to
Lender.
"Designated Account Bank" means LaSalle National Bank, whose office is
located at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and whose ABA
number is ▇▇▇▇▇▇▇▇▇.
"DF" has the meaning set forth in the preamble to this Agreement.
"Dilution" means, as of any date of determination, a percentage, based upon
the experience of the immediately prior ninety (90) days, that is the result of
dividing the Dollar amount of (a) bad debt write-downs, discounts, advertising
allowances, credits, or other dilutive items with respect to the Accounts during
such period, by (b) DF's Collections with respect to Accounts during such period
(excluding extraordinary items) plus the Dollar amount of clause (a).
"Dilution Reserve" means, as of any date of determination, an amount
sufficient to reduce the advance rate against Eligible Accounts by one (1)
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 DF to Lender regarding the extensions of credit to be made on the Closing
Date, the form and substance of which is satisfactory to Lender.
"Dollars" or "$" means United States dollars.
"Due Diligence Letter" means the due diligence letter sent by Lender's
counsel to each Borrower, together with such Borrower's completed responses to
the inquiries set forth therein, the form and substance of such responses to be
satisfactory to Lender.
"EBITDA" means, with respect to any fiscal period, DF's net earnings (or
loss), minus extraordinary gains plus non-cash extraordinary losses, plus
interest expense, income taxes, and depreciation and amortization for such
period, as determined in accordance with GAAP.
"Eligible Accounts" means those Accounts created by DF in the ordinary
course of its business, that arise out of its sale of goods or rendition of
services, that comply with each of the representations and warranties respecting
Eligible Accounts made by DF under the Loan Documents, and that are not excluded
as ineligible by virtue of one or more of the criteria set forth below;
provided, however, that such criteria may be fixed and revised from time to time
by Lender in Lender's Permitted Discretion to address the results of any audit
performed by Lender from time to time after the Closing Date. In determining the
amount to be included, Eligible Accounts shall be calculated net of customer
deposits and unapplied cash remitted to DF. Eligible Accounts shall not include
the following:
(a) Accounts that the Account Debtor has failed to pay within three (3)
times the applicable invoice terms,
(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 Lender of DF,
(d) Accounts arising in a transaction wherein goods are placed on
consignment or are sold pursuant to a guaranteed sale, a sale or
return, a sale on approval, a ▇▇▇▇ and hold, or any other terms by
reason of which the payment by the Account Debtor may be conditional,
(e) Accounts that are not payable in Dollars,
(f) Accounts with respect to which the Account Debtor either (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 Lender
(as to form, substance, and issuer or domestic confirming bank) that
has been delivered to Lender and is directly drawable by Lender, or
(z) the Account is covered by credit insurance in form, substance, and
amount, and by an insurer, satisfactory to Lender,
(g) 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
DF has complied, to the reasonable satisfaction of Lender, with the
Assignment of Claims Act, 31 USC ss. 3727), or (ii) any state of the
United States (exclusive, however, of (y) Accounts owed by any state
that does not have a statutory counterpart to the Assignment of Claims
Act or (z) Accounts owed by any state that does have a statutory
counterpart to the Assignment of Claims Act as to which DF has
complied to Lender's satisfaction),
(h) Accounts with respect to which the Account Debtor is a creditor of DF,
has or has asserted a right of setoff, has disputed its liability, or
has made any claim with respect to its obligation to pay the Account,
to the extent of such claim, right of setoff, or dispute,
(i) Accounts with respect to an Account Debtor whose total obligations
owing to DF exceeds ten percent (10%) of all Eligible Accounts, to the
extent of the obligations owing by such Account Debtor in excess of
such percentage,
(j) Accounts with respect to which the Account Debtor is subject to an
Insolvency Proceeding, is not Solvent, has gone out of business, or as
to which DF has received notice of an imminent Insolvency Proceeding
or a material impairment of the financial condition of such Account
Debtor,
(k) Accounts with respect to which the Account Debtor is located in the
states of New Jersey, Minnesota, 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 DF has qualified to do business in New
Jersey, Minnesota, West Virginia, or such other states, or has filed a
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,
(l) Accounts, the collection of which, Lender, in its Permitted
Discretion, believes to be doubtful by reason of the Account Debtor's
financial condition,
(m) Accounts that are not subject to a valid and perfected first priority
Lender's Lien,
(n) Accounts with respect to which (i) the goods giving rise to such
Account have not been shipped and billed to the Account Debtor, or
(ii) the services giving rise to such Account have not been performed
and billed to the Account Debtor, or
(o) Accounts that represent the right to receive progress payments
or other advance ▇▇▇▇▇▇▇▇ that are due prior to the completion of
performance by DF of the subject contract for goods or services.
"Eligible Inventory" means Inventory of DF consisting of first quality
saleable goods located at the Terminal or consisting of In-Transit Inventory,
that complies with each of the representations and warranties respecting
Eligible Inventory made by DF in the Loan Documents, and that is not excluded as
ineligible by virtue of one or more of the criteria set forth below; provided,
however, that such criteria may be fixed and revised from time to time by Lender
in Lender's Permitted Discretion to address the results of any audit or
appraisal performed by Lender from time to time after the Closing Date. In
determining the amount to be so included, Inventory shall be valued at the lower
of cost or market on a basis consistent with DF's historical accounting
practices. An item of Inventory shall not be included in Eligible Inventory if:
(a) DF does not have good, valid, and marketable title thereto,
(b) it consists of goods returned or rejected by DF's customers, or
(c) it consists of goods that are obsolete or slow moving, restrictive or
custom items, non-saleable work-in-process, non-saleable raw
materials, or goods that constitute spare parts, packaging and
shipping materials, supplies used or consumed in DF's business, ▇▇▇▇
and hold goods, defective goods, "seconds," or Inventory acquired on
consignment.
"Environmental Actions" means any complaint, summons, citation, notice,
directive, order, claim, litigation, investigation, judicial or administrative
proceeding, judgment, letter, or other communication from any Governmental
Authority, or any third party involving violations of Environmental Laws or
releases of Hazardous Materials from (a) any assets, properties, or businesses
of any Borrower or any predecessor in interest, (b) from adjoining properties or
businesses, or (c) from or onto any facilities which received Hazardous
Materials generated by any Borrower or any predecessor in interest.
"Environmental Law" means any applicable federal, state, provincial,
foreign or local statute, law, rule, regulation, ordinance, code, binding and
enforceable guideline, binding and enforceable written policy or rule of common
law now or hereafter in effect and in each case as amended, or any judicial or
administrative interpretation thereof, including any judicial or administrative
order, consent, decree or judgment, to the extent binding on Borrowers, relating
to the environment, employee health and safety, or Hazardous Materials,
including CERCLA; RCRA; the Federal Water Pollution Control Act, 33 USC ss. 1251
et seq; the Toxic Substances Control Act, 15 USC ss. 2601 et seq; the Clean Air
Act, 42 USC ss. 7401 et seq.; the Safe Drinking Water Act, 42 USC ss. 3803 et
seq.; the Oil Pollution Act of 1990, 33 USC ss. 2701 et seq.; the Emergency
Planning and the Community Right-to-Know Act of 1986, 42 USC ss. 11001 et seq.;
the Hazardous Material Transportation Act, 49 USC ss. 1801 et seq.; and the
Occupational Safety and Health Act, 29 USC ss.651 et seq. (to the extent it
regulates occupational exposure to Hazardous Materials); any state and local or
foreign counterparts or equivalents, in each case as amended from time to time.
"Environmental Liabilities and Costs" means all liabilities, monetary
obligations, Remedial Actions, losses, damages, punitive damages, consequential
damages, treble damages, costs and expenses (including all reasonable fees,
disbursements and expenses of counsel, experts, or consultants and costs of
investigation and feasibility studies), fines, penalties, sanctions, and
interest incurred as a result of any claim or demand by any Governmental
Authority or any third party, and which relate to any Environmental Action.
"Environmental Lien" means any Lien in favor of any Governmental Authority
for Environmental Liabilities and Costs.
"Equipment" means all of DF's now owned or hereafter acquired right, title,
and interest with respect to equipment, machinery, machine tools, motors,
furniture, furnishings, fixtures, vehicles (including motor vehicles), tools,
parts, goods (other than consumer goods, farm products, or Inventory), wherever
located, including all attachments, accessories, accessions, replacements,
substitutions, additions, and improvements to any of the foregoing.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute thereto.
"ERISA Affiliate" means (a) any Person subject to ERISA whose employees are
treated as employed by the same employer as the employees of either 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
either 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 either 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 Person subject to ERISA that is a party to an
arrangement with either Borrower and whose employees are aggregated with the
employees of either Borrower under IRC Section 414(o).
"Event of Default" has the meaning set forth in Section 8.
"Excess Availability" means the amount, as of the date any determination
thereof is to be made, equal to Availability minus the aggregate amount, if any,
of all trade payables of DF aged in excess of their historical levels with
respect thereto and all book overdrafts in excess of their historical practices
with respect thereto, in each case as determined by Lender in its Permitted
Discretion.
"Exchange Act" means the Securities Exchange Act of 1934, as in effect from
time to time.
"Existing Lender" means collectively, KBK Financial, Inc. and Southwest
Securities Group, Inc.
"Fee Letter" means that certain fee letter, dated as of even date herewith,
between Borrowers and Lender, in form and substance satisfactory to Lender.
"FEIN" means Federal Employer Identification Number.
"FFPO" has the meaning set forth in the preamble to this Agreement.
"FFPO Consent and Waiver" means the consent and waiver of FFPO, as owner of
the computer hardware on which resides the Books and Records of Borrowers,
located at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇.
"FINA Reserve" a reserve equal to the balance owed at any given time to
Alon USA, LP ("Alon") in respect of purchases made by DF from Alon for gasoline
and diesel fuel, adjustable at Lender's sole and absolute discretion.
"Funding Date" means the date on which a Borrowing occurs.
"Funding Losses" has the meaning set forth in Section 2.13(b)(ii).
"GAAP" means generally accepted accounting principles as in effect from
time to time in the United States, consistently applied.
"General Intangibles" means all of either DF's now owned or hereafter
acquired right, title, and interest with respect to general intangibles
(including payment intangibles, contract rights, rights to payment, 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, software, literature, reports,
catalogs, money, deposit accounts, insurance premium rebates, tax refunds, and
tax refund claims), and any and all supporting obligations in respect thereof,
and any other personal property other than goods, Accounts, Investment Property,
and Negotiable Collateral.
"General Partner" means: (i) with respect to DF, Direct Fuels Management
Company, Inc., and (ii) with respect to FFPO, FFP Operating LLC.
"Governing Documents" means, with respect to any Person, the certificate or
articles of incorporation, bylaws, or other organizational documents of such
Person.
"Governmental Authority" means any federal, state, local, or other
governmental or administrative body, instrumentality, department, or agency or
any court, tribunal, administrative hearing body, arbitration panel, commission,
or other similar dispute-resolving panel or body.
"Guarantor" means any of FFP Marketing Company, Inc., FFP Financial
Services, L.P., FFP Money Order Company, Inc., Practical Tank Management, Inc.
and FFP Transportation, LLC. "Guarantors" means all of the Persons defined as a
Guarantor.
"Guaranty" means that certain general continuing guaranty executed and
delivered by Guarantors in favor of Lender, in form and substance satisfactory
to Lender.
"Hazardous Materials" means (a) substances that are defined or listed in,
or otherwise classified pursuant to, any applicable laws or regulations as
"hazardous substances," "hazardous materials," "hazardous wastes," "toxic
substances," 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," (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 fifty (50) parts per million.
"Indebtedness" means (a) all obligations of either Borrower for borrowed
money, (b) all obligations of such Borrower evidenced by bonds, debentures,
notes, or other similar instruments and all reimbursement or other obligations
of such Borrower in respect of letters of credit, bankers acceptances, interest
rate swaps, or other financial products, (c) all obligations of such Borrower
under Capital Leases, (d) all obligations or liabilities of others secured by a
Lien on any asset of such Borrower, irrespective of whether such obligation or
liability is assumed but only to the extent of the lesser of the amount thereof
or the book value of the assets secured by such Lien, (e) all obligations of
such Borrower for the deferred purchase price of assets (other than trade debt
incurred in the ordinary course of such Borrower's business and repayable in
accordance with customary trade practices), and (f) any obligation of such
Borrower guaranteeing or intended to guarantee (whether directly or indirectly
guaranteed, endorsed, co-made, discounted, or sold with recourse to such
Borrower) any obligation of any other Person, provided however, for purposes of
this Loan Agreement, the term "Indebtedness" with respect to FFPO shall not
include obligations related to the sale by FFPO of money orders in the ordinary
course of its business or purchases by FFPO of securities on margin, so long as
such purchase is not financed in whole or in part with any Advances hereunder.
"Indemnified Liabilities" has the meaning set forth in Section 11.3.
"Indemnified Person" has the meaning set forth in Section 11.3.
"Insolvency Proceeding" means any proceeding commenced by or against any
Person under any provision of the Bankruptcy Code or under any other state or
federal 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.
"Intercompany Loans" means those loans due from DF to FFPO on the Closing
Date but prior to giving effect to any repayment of Intercompany Loans as
permitted by Section 3.2(b).
"Intercompany Secured Sales" has the meaning set forth in Section 6.17.
"Intercompany Subordination Agreement" means a subordination agreement
executed and delivered by Borrowers and Lender and acknowledged by Borrowers'
Affiliates, the form and substance of which is satisfactory to Lender.
"Intercreditor Agreements" means those certain executed and delivered
intercreditor agreements among (i) FFPO, Lender and Bay View and (ii) FFPO,
Lender and BVFMAC, the form and substance of which are satisfactory to Lender.
"Interest Period" means, with respect to each LIBOR Rate Loan, a period
commencing on the date of the making of such LIBOR Rate Loan and ending one (1),
two (2), or three (3) months thereafter; provided, however, that (a) if any
Interest Period would end on a day that is not a Business Day, such Interest
Period shall be extended (subject to clauses (c)-(e) below) to the next
succeeding Business Day, (b) interest shall accrue at the applicable rate based
upon the LIBOR Rate from and including the first day of each Interest Period to,
but excluding, the day on which any Interest Period expires, (c) any Interest
Period that would end on a day that is not a Business Day shall be extended to
the next succeeding Business Day unless such Business Day falls in another
calendar month, in which case such Interest Period shall end on the next
preceding Business Day, (d) with respect to an Interest Period that begins on
the last Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such Interest
Period), the Interest Period shall end on the last Business Day of the calendar
month that is one (1), two (2), or three (3) months after the date on which the
Interest Period began, as applicable, and (e) DF may not elect an Interest
Period which will end after the Maturity Date.
"In-Transit Inventory" shall mean goods purchased by DF for sale in respect
of which title shall have passed to DF and are in transit to the Terminal but
not yet received.
"Inventory" means all of DF's now owned or hereafter acquired right, title,
and interest with respect to inventory, including goods held for sale or lease
or to be furnished under a contract of service, goods that are leased by DF as
lessor, goods that are furnished by DF under a contract of service, and raw
materials, work in process, or materials used or consumed in DF's business.
"Investment" means, with respect to any Person, any investment by such
Person in any other Person (including Affiliates) in the form of loans,
guarantees, advances, or capital contributions (excluding (a) commission,
travel, and similar advances to officers and employees of such Person made in
the ordinary course of business, and (b) bona fide Accounts arising from the
sale of goods or rendition of services in the ordinary course of business
consistent with past practice), purchases or other acquisitions for
consideration of Indebtedness or Stock, and any other items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
"Investment Property" means all of DF's now owned or hereafter acquired
right, title, and interest with respect to "investment property" as that term is
defined in the Code, and any and all supporting obligations in respect thereof.
"IRC" means the Internal Revenue Code of 1986, as in effect from time to
time.
"Landlord's Consent and Waiver" means each of the consent and waiver of
Dynamic Production, Inc., a Texas Corporation, as landlord pursuant to its lease
with FFPO, as Tenant, on that certain property located at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ and Hi-Lo Corporation, a Texas corporation, as landlord
pursuant to its lease with FFPO, as Tenant, on that certain property located at
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇.
"L/C" has the meaning set forth in Section 2.12(a).
"L/C Disbursement" means a payment made by Lender pursuant to a Letter of
Credit.
"L/C Undertaking" has the meaning set forth in Section 2.12(a).
"Lender" has the meaning set forth in the preamble to this Agreement.
"Lender's Account" means an account at a bank designated by Lender from
time to time as the account into which DF shall make all payments to Lender
under this Agreement and the other Loan Documents; unless and until Lender
notifies DF, Lender's Account shall be that certain deposit account bearing
account number 323-266193 and maintained by Lender with The Chase Manhattan
Bank, 4 New York Plaza, 15th Floor, New York, New York 10004, ABA #▇▇▇▇▇▇▇▇▇.
"Lender's Liens" means the Liens granted by DF to Lender under this
Agreement or the other Loan Documents.
"Lender Expenses" means all (a) costs or expenses (including taxes, and
insurance premiums) required to be paid by either Borrower under any of the Loan
Documents that are paid or incurred by Lender, (b) fees or charges paid or
incurred by Lender in connection with Lender's transactions with Borrowers,
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 Collateral
appraisals or business valuations) fees and charges to the extent contained in
this Agreement (and up to the amount of any limitation), real estate surveys,
real estate title policies and endorsements, and environmental audits, (c) costs
and expenses incurred by Lender in the disbursement of funds to or for the
account of DF (by wire transfer or otherwise), (d) charges paid or incurred by
Lender resulting from the dishonor of checks, (e) reasonable costs and expenses
paid or incurred by Lender to correct any default or enforce any provision of
the Loan Documents, or in gaining possession of, maintaining, handling,
preserving, storing, shipping, selling, preparing for sale, or advertising to
sell the Collateral, or any portion thereof, irrespective of whether a sale is
consummated, (f) audit fees and expenses of Lender related to audit examinations
of the Books to the extent of the fees and charges (and up to the amount of any
limitation) contained in this Agreement, (g) reasonable costs and expenses of
third party claims or any other suit paid or incurred by Lender in enforcing or
defending the Loan Documents or in connection with the transactions contemplated
by the Loan Documents or Lender's relationship with either Borrower or any
guarantor of the Obligations, (h) Lender's reasonable fees and expenses
(including attorneys fees) incurred in advising, structuring, drafting,
reviewing, administering, or amending the Loan Documents, and (i) Lender's
reasonable fees and expenses (including attorneys fees) incurred in terminating,
enforcing (including attorneys' fees and expenses incurred in connection with a
"workout," a "restructuring," or an Insolvency Proceeding concerning any Obligor
or in exercising rights or remedies under the Loan Documents), or defending the
Loan Documents, irrespective of whether suit is brought, or in taking any
Remedial Action concerning the Collateral.
"Lender-Related Person" means Lender, Lender's Affiliates, and the
officers, directors, employees, and agents of Lender.
"Letter of Credit" means an L/C or an L/C Undertaking, as the context
requires.
"Letter of Credit Usage" means, as of any date of determination, the
aggregate undrawn amount of all outstanding Letters of Credit plus one hundred
percent (100%) of the amount of outstanding time drafts accepted by an
Underlying Issuer as a result of drawings under Underlying Letters of Credit.
"LIBOR Deadline" has the meaning set forth in Section 2.13(b)(i).
"LIBOR Notice" means a written notice in the form of Exhibit L-1.
"LIBOR Rate" means, for each Interest Period for each LIBOR Rate Loan, the
rate per annum determined by Lender (rounded upwards, if necessary, to the next
1/16%) by dividing (a) the Base LIBOR Rate for such Interest Period, by (b) one
hundred percent (100%) minus the Reserve Percentage. The LIBOR Rate shall be
adjusted on and as of the effective day of any change in the Reserve Percentage.
"LIBOR Rate Loan" means each portion of an Advance that bears interest at a
rate determined by reference to the LIBOR Rate.
"LIBOR Rate Margin" means three (3) percentage points.
"Lien" means any interest in an asset securing an obligation owed to, or a
claim by, any Person other than the owner of the asset, 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, 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 Account" has the meaning set forth in Section 2.10.
"Loan Documents" means this Agreement, the Cash Management Agreements, the
Control Agreement, the Disbursement Letter, the Due Diligence Letter, the Fee
Letter, the Guaranty, the Letters of Credit, the Deed of Trust, the Landlord's
Consent and Waiver, the Officers' Certificate, the Intercompany Subordination
Agreement, the Intercreditor Agreements, the Notice and Acknowledgment of No
Oral Agreements, the Post Closing Matters Agreement, any note or notes executed
by Borrowers in connection with this Agreement and payable to Lender, and any
other agreement entered into, now or in the future, by any Borrower and Lender
in connection with this Agreement.
"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 either Borrower as a whole, (b) a material
impairment of either Borrower's ability to perform its obligations under the
Loan Documents to which it is a party or of Lender's ability to enforce the
Obligations or realize upon the Collateral, or (c) a material impairment of the
enforceability or priority of the Lender's Liens with respect to the Collateral
as a result of an action or failure to act on the part of either Borrower.
"Maturity Date" has the meaning set forth in Section 3.4.
"Maximum Revolver Amount" means $20,000,000.00.
"Negotiable Collateral" means all of a DF's now owned and hereafter
acquired right, title, and interest with respect to letters of credit, letter of
credit rights, instruments, promissory notes, drafts, documents, and chattel
paper (including electronic chattel paper and tangible chattel paper), and any
and all supporting obligations in respect thereof.
"Net Liquidation Percentage" means the percentage of the book value of DF's
Inventory that is estimated to be recoverable in an orderly liquidation of such
Inventory, such percentage to be as determined from time to time by a qualified
appraisal company selected by Lender.
"Notice and Acknowledgment of No Oral Agreements" means that Notice and
Acknowledgment of No Oral Agreements, dated as of even date herewith, among
Borrowers and Lender, in form and substance satisfactory to Lender.
"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 with respect to
outstanding Letters of Credit, premiums, liabilities (including all amounts
charged to DF's Loan Account pursuant hereto), obligations, fees (including the
fees provided for in the Fee Letter), charges, costs, Lender Expenses (including
any fees or expenses that, but for the provisions of the Bankruptcy Code, would
have accrued), lease payments, guaranties, covenants, and duties of any kind and
description owing by Borrowers or either of them to Lender pursuant to or
evidenced by the Loan Documents 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 all interest not paid when due
and all Lender Expenses that Borrowers or either of them are required to pay or
reimburse by the Loan Documents, by law, or otherwise. Any reference in this
Agreement or in the Loan Documents to the Obligations shall include all
amendments, changes, extensions, modifications, renewals replacements,
substitutions, and supplements, thereto and thereof, as applicable, both prior
and subsequent to any Insolvency Proceeding.
"Obligor" means each of DF, FFPO and Guarantors.
"Officers' Certificate" means the representations and warranties of
officers form submitted by Lender to each Borrower, together with Borrowers'
completed responses to the inquiries set forth therein, the form and substance
of such responses to be satisfactory to Lender.
"Open Credit Amount" shall mean with respect to FFPO to which ▇▇ ▇▇▇▇▇
goods on open credit terms, at the time of determination thereof, the amount
reflected on the Books and Records with respect to the open credit amount
extended to FFPO by DF.
"Overadvance" has the meaning set forth in Section 2.5.
"Parent" shall mean FFP Marketing Company, Inc., a Texas corporation.
"Partnership Interest" means a limited or general partnership interest in
either Borrower.
"Participant" has the meaning set forth in Section 14.1(d).
"Pay-Off Letter" means a letter, in form and substance satisfactory to
Lender, from Existing Lender to Lender respecting the amount necessary to
purchase in full all of the obligations of Borrowers owing to Existing Lender
and obtain an assignment of all of the Liens existing in favor of Existing
Lender in and to the assets of Borrowers.
"Permitted Discretion" means a determination made in good faith and in the
exercise of reasonable (from the perspective of a secured asset-based lender)
business judgment.
"Permitted Indebtedness" means the Indebtedness described on Schedule 5.20
hereto.
"Permitted Dispositions" means (a) sales or other dispositions by either
Borrower of Equipment that is substantially worn, damaged, or obsolete in the
ordinary course of either Borrower's business, (b) sales by either Borrower of
Inventory to buyers in the ordinary course of business, (c) the use or transfer
of money or Cash Equivalents by either Borrower in a manner that is not
prohibited by the terms of this Agreement or the other Loan Documents, and (d)
the licensing by either Borrower, on a non-exclusive basis, of patents,
trademarks, copyrights, and other intellectual property rights in the ordinary
course of either Borrower's business.
"Permitted Investments" means (a) investments in Cash Equivalents, (b)
investments in negotiable instruments for collection, (c) advances made in
connection with purchases of goods or services in the ordinary course of
business, and (d) investments by a Borrower in any Affiliate provided that if
any such investment is in the form of Indebtedness, such Indebtedness investment
shall be subject to the terms and conditions of the Intercompany Subordination
Agreement.
"Permitted Liens" means (a) Liens held by Lender, (b) Liens for unpaid
taxes that either (i) are not yet delinquent, or (ii) do not constitute an Event
of Default hereunder and are the subject of Permitted Protests, (c) Liens set
forth on Schedule P-1, (d) the interests of lessors under operating leases, (e)
purchase money Liens or the interests of lessors under Capital Leases to the
extent that such Liens or interests secure Permitted Purchase Money Indebtedness
and so long as such Lien attaches only to the asset purchased or acquired and
the proceeds thereof, (f) Liens arising by operation of law in favor of
warehousemen, landlords, carriers, mechanics, materialmen, laborers, or
suppliers, incurred in the ordinary course of either Borrower's business and not
in connection with the borrowing of money, and which Liens either (i) are for
sums not yet delinquent, or (ii) are the subject of Permitted Protests, (g)
Liens arising from deposits made in connection with obtaining worker's
compensation or other unemployment insurance, (h) Liens or deposits to secure
performance of bids, tenders, or leases incurred in the ordinary course of
either Borrower's business and not in connection with the borrowing of money,
(i) Liens granted as security for surety or appeal bonds in connection with
obtaining such bonds in the ordinary course of either Borrower's business, (j)
Liens resulting from any judgment or award that is not an Event of Default
hereunder, (k) Liens with respect to the Real Property Collateral that are
exceptions to the commitments for title insurance issued in connection with the
Deed of Trust, as accepted by Lender, and (l) with respect to any Real Property
that is not part of the Real Property Collateral, easements, rights of way, and
zoning restrictions that do not materially interfere with or impair the use or
operation thereof by either Borrower.
"Permitted Protest" means the right of either Borrower to protest any Lien
(other than any such Lien that secures the Obligations), taxes (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 in such amount as is required under GAAP,
(b) any such protest is instituted promptly and prosecuted diligently by either
Borrower in good faith, and (c) Lender is satisfied that, while any such protest
is pending, there will be no impairment of the enforceability, validity, or
priority of any of the Lender's Liens.
"Permitted Purchase Money Indebtedness" means, with respect to DF, as of
any date of determination, Purchase Money Indebtedness incurred after the
Closing Date in an aggregate amount outstanding at any one time not in excess of
$250,000 and, with respect to FFPO, $2,500,000.
"Person" means 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 Real
Property.
"Projections" means DF's forecasted (a) balance sheets, (b) profit and loss
statements, and (c) cash flow statements, all prepared on a consistent basis
with its historical financial statements, together with appropriate supporting
details and a statement of underlying assumptions.
"Purchased Debt" has the meaning set forth in Section 2.16 hereof.
"Purchase Money Indebtedness" means Indebtedness (other than the
Obligations, but including Capitalized Lease Obligations), incurred at the time
of, or within twenty (20) days after, the acquisition of any fixed assets for
the purpose of financing all or any part of the acquisition cost thereof.
"Real Property" means any estates or interests in real property now owned
or hereafter acquired by DF and the improvements thereto.
"Real Property Collateral" means the parcel or parcels of Real Property
identified on Schedule R-1 as belonging to DF and any Real Property hereafter
acquired by DF.
"Records" means information that is inscribed on a tangible medium or which
is stored in an electronic or other medium and is retrievable in perceivable
form.
"Remedial Action" means all actions taken to (a) clean up, remove,
remediate, contain, treat, monitor, assess, evaluate, or in any way address
Hazardous Materials in the indoor or outdoor environment, (b) prevent or
minimize a release or threatened release of Hazardous Materials so they do not
migrate or endanger or threaten to endanger public health or welfare or the
indoor or outdoor environment, (c) perform any pre-remedial studies,
investigations, or post-remedial operation and maintenance activities, or (d)
conduct any other actions authorized by 42 USC ss. 9601.
"Required Availability" means Excess Availability and unrestricted cash and
Cash Equivalents in an amount of not less than $3,000,000.00 as of the Closing
Date and in an amount of not less than $2,500,000 as to the repayment of any
Intercompany Loans.
"Reserve Percentage" means, on any day, for Lender, the maximum percentage
prescribed by the Board of Governors of the Federal Reserve System (or any
successor Governmental Authority) for determining the reserve requirements
(including any basic, supplemental, marginal, or emergency reserves) that are in
effect on such date with respect to eurocurrency funding (currently referred to
as "eurocurrency liabilities") of that Lender, but so long as Lender is not
required or directed under applicable regulations to maintain such reserves, the
Reserve Percentage shall be zero.
"Revolver Usage" means, as of any date of determination, the sum of (a) the
then extant amount of outstanding Advances, plus (b) the then extant amount of
the Letter of Credit Usage.
"SEC" means the United States Securities and Exchange Commission and any
successor thereto.
"Securities Account" means a "securities account" as that term is defined
in the Code.
"Solvent" means, with respect to any Person on a particular date, that such
Person is not insolvent (as such term is defined in the Uniform Fraudulent
Transfer Act).
"Stock" means all shares, options, warrants, interests, participations, or
other equivalents (regardless of how designated) of or in a Person, whether
voting or nonvoting, including common stock, preferred stock, Partnership
Interests or any other "equity security" (as such term is defined in Rule 3a11-1
of the General Rules and Regulations promulgated by the SEC under the Exchange
Act).
"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 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.
"Taxes" has the meaning set forth in Section 16.5.
"Terminal" shall mean that certain Real Property described in Schedule E-1
hereto.
"Underlying Issuer" means a third Person which is the beneficiary of an L/C
Undertaking and which has issued a letter of credit at the request of Lender for
the benefit of DF.
"Underlying Letter of Credit" means a letter of credit that has been issued
by an Underlying Issuer.
"Voidable Transfer" has the meaning set forth in Section 16.8.
"▇▇▇▇▇ Fargo" means ▇▇▇▇▇ Fargo Bank, National Association, a national
banking association.
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.
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 or any other Loan
Document 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 or any
other Loan Document refer to this Agreement or such other Loan Document, as the
case may be, as a whole and not to any particular provision of this Agreement or
such other Loan Document, as the case may be. Section, subsection, clause,
schedule, and exhibit references herein are to this Agreement unless otherwise
specified. Any reference in this Agreement or in the other Loan Documents to any
agreement, instrument, or document shall include all alterations, amendments,
changes, extensions, modifications, renewals, replacements, substitutions,
joinders, and supplements, thereto and thereof, as applicable (subject to any
restrictions on such alterations, amendments, changes, extensions,
modifications, renewals, replacements, substitutions, joinders, and supplements
set forth herein). Any reference herein to any Person shall be construed to
include such Person's successors and assigns. Any requirement of a writing
contained herein or in the other Loan Documents shall be satisfied by the
transmission of a Record and any Record transmitted shall constitute a
representation and warranty as to the accuracy and completeness of the
information contained therein.
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 Revolver Advances.
(a) Subject to the terms and conditions of this Agreement, and during the term
of this Agreement, Lender agrees to make advances ("Advances") to DF in an
amount at any one time outstanding not to exceed an amount equal to the
lesser of (i) the Maximum Revolver Amount less the Letter of Credit Usage,
or (ii) the Borrowing Base less the Letter of Credit Usage. For purposes of
this Agreement, "Borrowing Base," as of any date of determination, shall
mean the result of:
(x) the lesser of
(i) eighty five percent (85%) of the amount of Eligible Accounts,
less (A) the amount, if any, of the Dilution Reserve, (B) the
Credit Card Contra Reserve and (C) the FINA Reserve, and
(ii) an amount equal to DF's Collections with respect to Accounts for
the immediately preceding twenty-five (25) day period, plus
(y) the lowest of
(i) $5,000,000, and
(ii) seventy percent (70%) of the value of Eligible Inventory less
In-Transit Inventory in excess of $3,200,000, minus
(z) the aggregate amount of reserves, if any, established by Lender under
Section 2.1(b).
(b) Anything to the contrary in this Section 2.1 notwithstanding, Lender shall
have the right to establish reserves in such amounts and with respect to
such matters, as Lender in its Permitted Discretion shall deem necessary or
appropriate, against the Borrowing Base, including reserves with respect to
(i) sums that DF 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) and has failed to pay under any Section of this
Agreement or any other Loan Document, and (ii) amounts owing by DF to any
Person to the extent secured by a Lien on, or trust over, any of the
Collateral (other than any existing Permitted Liens set forth on Schedule
P-1 which is specifically identified thereon as entitled to have priority
over the Lender's Liens), which Lien or trust, in the Permitted Discretion
of Lender likely would have a priority superior to the Lender's Liens (such
as Liens or trusts in favor of landlords, warehousemen, carriers,
mechanics, materialmen, laborers, or suppliers, or Liens or trusts for ad
valorem, excise, sales, or other taxes where given priority under
applicable law) in and to such item of the Collateral. In addition to the
foregoing, Lender shall have the right to have the Inventory appraised upon
the occurrence and continuation of an Event of Default by a qualified
appraisal company selected by Lender from time to time after the Closing
Date and, as a result, redetermine the Borrowing Base.
(c) Lender shall have no obligation to make additional Advances hereunder to
the extent such additional Advances would cause the Revolver Usage to
exceed the Maximum Revolver Amount.
(d) Amounts borrowed pursuant to this section may be repaid and, subject to the
terms and conditions of this Agreement, reborrowed at any time during the
term of this Agreement.
2.2 Intentionally Deleted.
2.3 Borrowing Procedures and Settlements.
(a) Procedure for Borrowing. Each Borrowing shall be made by a written request
by an Authorized Person delivered to Lender (which notice must be received
by Lender no later than 10:00 a.m. (California time) on the Business Day
that is the requested Funding Date specifying (i) the amount of such
Borrowing, and (ii) the requested Funding Date, which shall be a Business
Day. At Lender's election, in lieu of delivering the above-described
request in writing, any Authorized Person may give Lender telephonic notice
of such request by the required time, with such telephonic notice to be
confirmed in writing within twenty-four (24) hours of the giving of such
notice.
(b) Making of Advances. If Lender has received a timely request for a Borrowing
in accordance with the provisions hereof, and subject to the satisfaction
of the applicable terms and conditions set forth herein, Lender shall make
the proceeds of such Advance available to DF on the applicable Funding Date
by transferring available funds equal to such proceeds to DF's Designated
Account.
2.4 Payments.
(a) Payments by DF. Except as otherwise expressly provided herein, all payments
by DF shall be made to Lender's Account and shall be made in immediately
available funds, no later than 11:00 a.m. (California time) on the date
specified herein. Any payment received by Lender later than 11:00 a.m.
(California time), shall be deemed to have been received on the following
Business Day and any applicable interest or fee shall continue to accrue
until such following Business Day.
(b) Application, and Reversal of Payments.
(i) All payments shall be remitted to Lender and all such payments (other
than payments received while no Default or Event of Default has
occurred and is continuing and which relate to the payment of
principal or interest of specific Obligations or which relate to the
payment of specific fees), and all proceeds of Accounts or other
Collateral received by Lender, shall be applied as follows:
A. first, to pay any Lender Expenses then due to Lender under the Loan
Documents, until paid in full,
B. second, to pay any fees then due to Lender under the Loan Documents
until paid in full,
C. third, ratably to pay interest due in respect of Advances until paid
in full,
D. fourth, to pay the principal of all Advances until paid in full,
E. fifth, if an Event of Default has occurred and is continuing, to be
held by Lender as cash collateral in an amount up to one hundred five
percent (105%) of the then extant Letter of Credit Usage until paid in
full,
F. sixth, to pay any other Obligations until paid in full, and
G. seventh, to DF (to be wired to the Designated Account) or such other
Person entitled thereto under applicable law.
(ii) In each instance, so long as no Default or Event of Default has
occurred and is continuing, clause (i) above shall not be deemed to
apply to any payment by DF specified by DF to be for the payment of
specific Obligations then due and payable (or prepayable) under any
provision of this Agreement.
(iii)For purposes of the foregoing, "paid in full" means payment of all
amounts owing under the Loan Documents according to the terms thereof,
including loan fees, service fees, professional fees, interest (and
specifically including interest accrued after the commencement of any
Insolvency Proceeding), default interest, interest on interest, and
expense reimbursements, whether or not the same would be or is allowed
or disallowed in whole or in part in any Insolvency Proceeding.
(iv) In the event of a direct conflict between the priority provisions of
this Section 2.4 and other provisions contained in any other Loan
Document, it is the intention of the parties hereto that such priority
provisions in such documents shall be read together and construed, to
the fullest extent possible, to be in concert with each other. In the
event of any actual, irreconcilable conflict that cannot be resolved
as aforesaid, the terms and provisions of this Section 2.4 shall
control and govern.
2.5 Overadvances. If, at any time or for any reason, the amount of Obligations
owed by Borrowers to Lender pursuant to Sections 2.1 and 2.12 is greater than
either the Dollar or percentage limitations set forth in Sections 2.1 or 2.12
(an "Overadvance"), DF shall immediately pay to Lender, in cash, the amount of
such excess, which amount shall be used by Lender to reduce the Obligations in
accordance with the priorities set forth in Section 2.4(b). In addition,
Borrowers hereby promise to pay the Obligations (including principal, interest,
fees, costs, and expenses) in Dollars in full to Lender as and when due and
payable under the terms of this Agreement and the other Loan Documents.
2.6 Interest Rates and Letter of Credit Fee: Rates, Payments, and Calculations.
(a) Interest Rates. Except as provided in clause (c) below, all Obligations
(except for undrawn Letters of Credit) that have been charged to the Loan
Account pursuant to the terms hereof shall bear interest on the Daily
Balance thereof as follows (i) if the relevant Obligation is an Advance
that is a LIBOR Rate Loan, at a per annum rate equal to the LIBOR Rate plus
the LIBOR Rate Margin, and (ii) otherwise, at a per annum rate equal to the
Base Rate plus the Base Rate Margin.
(b) Letter of Credit Fee. DF shall pay Lender a Letter of Credit fee (in
addition to the charges, commissions, fees, and costs set forth in Section
2.12(e)) which shall accrue at a rate equal to two percent (2%) per annum
times the Daily Balance of the 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 ) that have been
charged to the Loan Account pursuant to the terms hereof shall bear
interest on the Daily Balance thereof at a per annum rate equal to
four (4) percentage points above the per annum rate otherwise
applicable hereunder, and
(ii) the Letter of Credit fee provided for above shall be increased to four
(4) percentage points above the per annum rate otherwise applicable
hereunder.
(d) Payment. Interest, Letter of Credit fees, and all other fees payable
hereunder shall be due and payable, in arrears, on the first day of each
month at any time that Obligations or obligation to extend credit hereunder
are outstanding. DF hereby authorizes Lender, from time to time, without
prior notice to DF, to charge such interest and fees, all Lender Expenses
(as and when incurred), the charges, commissions, fees, and costs provided
for in Section 2.12(e) (as and when accrued or incurred), the fees and
costs provided for in Section 2.11 (as and when accrued or incurred), and
all other payments as and when due and payable under any Loan Document to
DF's Loan Account, which amounts thereafter constitute Advances hereunder
and shall accrue interest at the rate then applicable to Advances
hereunder. Any interest not paid when due shall be compounded by being
charged to DF's Loan Account and shall thereafter constitute Advances
hereunder and shall accrue interest at the rate then applicable to Advances
that are Base Rate Loans hereunder.
(e) Computation. All interest and fees chargeable under the Loan Documents
shall be computed on the basis of a three hundred sixty (360) day year for
the actual number of days elapsed. In the event the Base Rate is changed
from time to time hereafter, the rates of interest hereunder based upon the
Base Rate automatically and immediately shall be increased or decreased by
an amount equal to such change in the Base Rate.
(f) 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. Borrowers and Lender, 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,
Borrowers are and shall be liable only for the payment of such maximum as
allowed by law, and payment received from either 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 and if the
principal owing has been paid in full, any remaining excess shall forthwith
be paid to such Borrower and the provisions of this Agreement and the other
Loan Documents immediately be deemed reformed and the amounts thereafter
collectible hereunder and thereunder reduced, without the necessity of the
execution of any new document, so as to comply with the applicable law, but
so as to permit the recovery of the fullest amount otherwise called for
hereunder and thereunder. For purposes of determining the maximum rate
allowed under Texas law, the applicable rate ceiling shall be the weekly
rate ceiling described in and computed in accordance with Chapter 303 of
the Texas Finance Code, as amended from time to time. Furthermore, the
parties hereto specifically declare that the provisions of Chapter 346 of
the Texas Credit Code, as amended from time to time, are not applicable to
this Agreement or any of the other Loan Documents or to the transactions
contemplated hereby.
2.7 Cash Management.
(a) DF shall (i) establish and maintain cash management services of a type and
on terms satisfactory to Lender at one or more of the banks set forth on
Schedule 2.7(a) (each a "Cash Management Bank"), and shall request in
writing and otherwise take such reasonable steps to ensure that all of its
Account Debtors forward payment of the amounts owed by them directly to
such Cash Management Bank, and (ii) deposit or cause to be deposited
promptly, and in any event no later than the first Business Day after the
date of receipt thereof, all Collections (including those sent directly by
Account Debtors to a Cash Management Bank) into a bank account in Lender's
name (a "Cash Management Account") at one of the Cash Management Banks.
(b) Each Cash Management Bank shall establish and maintain Cash Management
Agreements with Lender and DF, in form and substance acceptable to Lender.
Each such Cash Management Agreement shall provide, among other things, that
(i) all items of payment deposited in such Cash Management Account and
proceeds thereof are held by such Cash Management Bank, Lender or
bailee-in-possession for Lender, (ii) the Cash Management Bank has no
rights of setoff or recoupment or any other claim against the applicable
Cash Management Account, other than for payment of its service fees and
other charges directly related to the administration of such Cash
Management Account and for returned checks or other items of payment, and
(iii) it immediately will forward by daily sweep all amounts in the
applicable Cash Management Account to the Lender's Account.
(c) So long as no Default or Event of Default has occurred and is continuing,
DF may amend Schedule 2.7(a) or (b) to add or replace a Cash Management
Bank or Cash Management Account; provided, however, that (i) such
prospective Cash Management Bank shall be satisfactory to Lender and Lender
shall have consented in writing in advance to the opening of such Cash
Management Account with the prospective Cash Management Bank, and (ii)
prior to the time of the opening of such Cash Management Account, DF and
such prospective Cash Management Bank shall have executed and delivered to
Lender a Cash Management Agreement. DF shall close any of its Cash
Management Accounts (and establish replacement cash management accounts in
accordance with the foregoing sentence) promptly and in any event within
thirty (30) days of notice from Lender that the creditworthiness of any
Cash Management Bank is no longer acceptable in Lender's reasonable
judgment, or as promptly as practicable and in any event within sixty (60)
days of notice from Lender that the operating performance, funds transfer,
or availability procedures or performance of the Cash Management Bank with
respect to Cash Management Accounts or Lender's liability under any Cash
Management Agreement with such Cash Management Bank is no longer acceptable
in Lender's reasonable judgment.
(d) The Cash Management Accounts shall be cash collateral accounts, with all
cash, checks and similar items of payment in such accounts securing payment
of the Obligations, and in which DF is hereby deemed to have granted a Lien
to Lender.
2.8 Crediting Payments; Float Charge. The receipt of any payment item by Lender
(whether from transfers to Lender by the Cash Management Banks pursuant to the
Cash Management Agreements or otherwise) shall not be considered a payment on
account unless such payment item is a wire transfer of immediately available
federal funds made to the Lender's Account or unless and until such payment item
is honored when presented for payment. Should any payment item not be honored
when presented for payment, then either Borrower shall be deemed not to have
made such payment and interest shall be calculated accordingly. Anything to the
contrary contained herein notwithstanding, any payment item shall be deemed
received by Lender only if it is received into the Lender's Account on a
Business Day on or before 11:00 a.m. (California time). If any payment item is
received into the Lender's 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
Lender as of the opening of business on the immediately following Business Day.
From and after the Closing Date, Lender shall be entitled to charge Borrowers
for one Business Day of `clearance' or `float' at the rate applicable to Base
Rate Loans under Section 2.6 on all Collections that are received by either
Borrower (regardless of whether forwarded by the Cash Management Banks to
Lender). This across-the-board one Business Day clearance or float charge on all
Collections is acknowledged by the parties to constitute an integral aspect of
the pricing of the financing of Borrowers and shall apply irrespective of
whether or not there are any outstanding monetary Obligations; the effect of
such clearance or float charge being the equivalent of charging one Business Day
of interest on such Collections.
2.9 Designated Account. Lender is authorized to make the Advances and Lender is
authorized to issue the Letters of Credit, 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(d). DF
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 DF and made by Lender hereunder. Unless otherwise agreed by Lender and DF,
any Advance requested by DF and made by Lender hereunder shall be made to the
Designated Account.
2.10 Maintenance of Loan Account; Statements of Obligations. Lender shall
maintain an account on its books in the name of DF (the "Loan Account") on which
DF will be charged with all Advances made by Lender to DF or for DF's account,
the Letters of Credit issued by Lender for DF's account, and with all other
payment Obligations hereunder or under the other Loan Documents, including,
accrued interest, fees and expenses, and Lender Expenses. In accordance with
Section 2.8, the Loan Account will be credited with all payments received by
Lender from DF or for DF's account, including all amounts received in the
Lender's Account from any Cash Management Bank. Lender shall render statements
regarding the Loan Account to DF, including principal, interest, fees, and
including an itemization of all charges and expenses constituting Lender
Expenses owing, and such statements shall be conclusively presumed to be correct
and accurate and constitute an account stated between DF and Lender unless,
within thirty (30) days after receipt thereof by DF, DF shall deliver to Lender
written objection thereto describing the error or errors contained in any such
statements.
2.11 Fees. DF shall pay to Lender the following fees and charges, which fees and
charges shall be non-refundable when paid (irrespective of whether this
Agreement is terminated thereafter):
(a) Unused Line Fee. On the first day of each month during the term of this
Agreement, an unused line fee in the amount equal to one-half of one
percent (.50%) per annum times the result of (i) the Maximum Revolver
Amount, less (ii) the sum of (A) the average Daily Balance of Advances that
were outstanding during the immediately preceding month, plus (B) the
average Daily Balance of the Letter of Credit Usage during the immediately
preceding month (the result of (i) less (ii), the "Line Usage"); provided,
however, during any month in which the Line Usage exceeds $10,000,000, the
unused line fee shall be reduced to one-quarter of one percent (.25%) per
annum,
(b) Fee Letter Fees. As and when due and payable under the terms of the Fee
Letter, DF shall pay to Lender the fees set forth in the Fee Letter, and
(c) Audit, Appraisal, and Valuation Charges. Audit, appraisal, and valuation
fees and charges as follows (i) a fee of $750 pay day, per auditor, plus
out-of-pocket expenses for each financial audit of DF performed by
personnel employed by Lender, (ii) if implemented, a one time charge of
$3,000 plus out-of-pocket expenses for expenses for the establishment of
electronic collateral reporting systems, (iii) actual costs and expenses
incurred for each appraisal of the Collateral performed by personnel
employed by Lender, and (iv) the actual charges paid or incurred by Lender
if it elects to employ the services of one or more third Persons to perform
financial audits of DF, to appraise the Collateral, or any portion thereof,
or to assess DF's business valuation.
2.12 Letters of Credit.
(a) Subject to the terms and conditions of this Agreement, Lender agrees to
issue letters of credit for the account of DF (each, an "L/C") or to
purchase participations or execute indemnities or reimbursement obligations
(each such undertaking, an "L/C Undertaking") with respect to letters of
credit issued by an Underlying Issuer (as of the Closing Date, the
prospective Underlying Issuer is to be ▇▇▇▇▇ Fargo) for the account of DF.
To request the issuance of an L/C or an L/C Undertaking (or the amendment,
renewal, or extension of an outstanding L/C or L/C Undertaking), DF shall
hand deliver or telecopy (or transmit by electronic communication, if
arrangements for doing so have been approved by Lender) to Lender
(reasonably in advance of the requested date of issuance, amendment,
renewal, or extension) a notice requesting the issuance of an L/C or L/C
Undertaking, or identifying the L/C or L/C Undertaking to be amended,
renewed, or extended, the date of issuance, amendment, renewal, or
extension, the date on which such L/C or L/C Undertaking is to expire, the
amount of such L/C or L/C Undertaking, the name and address of the
beneficiary thereof (or of the Underlying Letter of Credit, as applicable),
and such other information as shall be necessary to prepare, amend, renew,
or extend such L/C or L/C Undertaking. If requested by Lender, DF also
shall be an applicant under the application with respect to any Underlying
Letter of Credit that is to be the subject of an L/C Undertaking. Lender
shall have no obligation to issue a Letter of Credit if any of the
following would result after giving effect to the requested Letter of
Credit:
(i) the Letter of Credit Usage would exceed the Borrowing Base less the
amount of outstanding Advances,
(ii) the Letter of Credit Usage would exceed $5,000,000.00, or
(iii)the Letter of Credit Usage would exceed the Maximum Revolver Amount
less the then extant amount of outstanding Advances.
(b) DF and Lender acknowledge and agree that certain Underlying Letters of
Credit may be issued to support letters of credit that already are
outstanding as of the Closing Date. Each Letter of Credit (and
corresponding Underlying Letter of Credit) shall have an expiry date no
later than thirty (30) days prior to the Maturity Date and all such Letters
of Credit (and corresponding Underlying Letter of Credit) shall be in form
and substance acceptable to Lender (in the exercise of its Permitted
Discretion), including the requirement that the amounts payable thereunder
must be payable in Dollars. If Lender is obligated to advance funds under a
Letter of Credit, DF immediately shall reimburse such L/C Disbursement to
Lender by paying to Lender an amount equal to such L/C Disbursement not
later than 11:00 a.m., California time, on the date that such L/C
Disbursement is made, if DF shall have received written or telephonic
notice of such L/C Disbursement prior to 10:00 a.m., California time, on
such date, or, if such notice has not been received by DF prior to such
time on such date, then not later than 11:00 a.m., California time, on the
Business Day that DF receives such notice, if such notice is received prior
to 10:00 a.m., California time, on the date of receipt, and, in the absence
of such reimbursement, the L/C Disbursement immediately and automatically
shall be deemed to be an Advance hereunder and, thereafter, shall bear
interest at the rate then applicable to Advances that are Base Rate Loans
under Section 2.6. To the extent an L/C Disbursement is deemed to be an
Advance hereunder, DF's obligation to reimburse such L/C Disbursement shall
be discharged and replaced by the resulting Advance.
(c) Each Borrower hereby agrees to indemnify, save, defend, and hold Lender
harmless from any loss, cost, expense, or liability, and reasonable
attorneys fees incurred by Lender arising out of or in connection with any
Letter of Credit; provided, however, that no Borrower shall be obligated
hereunder to indemnify for any loss, cost, expense, or liability that is
caused by the gross negligence or willful misconduct of Lender. Each
Borrower agrees to be bound by the Underlying Issuer's regulations and
interpretations of any Underlying Letter of Credit or by Lender's
interpretations of any L/C issued by Lender to or for DF's account, even
though this interpretation may be different from such Borrower's own, and
each Borrower understands and agrees that Lender shall not be liable for
any error, negligence, or mistake, whether of omission or commission, in
following either Borrower's instructions or those contained in the Letter
of Credit or any modifications, amendments, or supplements thereto. Each
Borrower understands that the L/C Undertakings may require Lender to
indemnify the Underlying Issuer for certain costs or liabilities arising
out of claims by any Borrower against such Underlying Issuer. Each Borrower
hereby agrees to indemnify, save, defend, and hold Lender harmless with
respect to any loss, cost, expense (including reasonable attorneys fees),
or liability incurred by Lender under any L/C Undertaking as a result of
Lender's indemnification of any Underlying Issuer; provided, however, that
neither Borrower shall be obligated hereunder to indemnify for any loss,
cost, expense, or liability that is caused by the gross negligence or
willful misconduct of Lender.
(d) DF hereby authorizes and directs any Underlying Issuer to deliver to Lender
all instruments, documents, and other writings and property received by
such Underlying Issuer pursuant to such Underlying Letter of Credit and to
accept and rely upon Lender's instructions with respect to all matters
arising in connection with such Underlying Letter of Credit and the related
application.
(e) Any and all charges, commissions, fees, and costs incurred by Lender
relating to Underlying Letters of Credit shall be Lender Expenses for
purposes of this Agreement and immediately shall be reimbursable by DF to
Lender for the account of Lender; it being acknowledged and agreed by DF
that, as of the Closing Date, the issuance charge imposed by the
prospective Underlying Issuer is .825% per annum times the face amount of
each Underlying Letter of Credit, that such issuance charge may be changed
from time to time, and that the Underlying Issuer also imposes a schedule
of charges for amendments, extensions, drawings, and renewals.
(f) If by reason of (i) any change in any applicable law, treaty, rule, or
regulation or any change in the interpretation or application thereof by
any Governmental Authority, or (ii) compliance by the Underlying Issuer or
Lender with any direction, request, or requirement (irrespective of whether
having the force of law) of any Governmental Authority or monetary
authority including, Regulation D of the Federal Reserve Board as from time
to time in effect (and any successor thereto):
(i) any reserve, deposit, or similar requirement is or shall be imposed or
modified in respect of any Letter of Credit issued hereunder, or
(ii) there shall be imposed on the Underlying Issuer or Lender any other
condition regarding any Underlying Letter of Credit or any Letter of
Credit issued pursuant hereto;
and the result of the foregoing is to increase, directly or indirectly, the cost
to Lender of issuing, making, guaranteeing, or maintaining any Letter of Credit
or to reduce the amount receivable in respect thereof by Lender, then, and in
any such case, Lender may, at any time within a reasonable period after the
additional cost is incurred or the amount received is reduced, notify DF, and DF
shall pay on demand such amounts as Lender may specify to be necessary to
compensate Lender 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 then applicable to Base Rate Loans hereunder. The
determination by Lender of any amount due pursuant to this section, 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.
2.13 LIBOR Option.
(a) Interest and Interest Payment Dates. In lieu of having interest charged at
the rate based upon the Base Rate, DF shall have the option (the "LIBOR
Option") to have interest on all or a portion of the Advances be charged at
the LIBOR Rate. Interest on LIBOR Rate Loans shall be payable on the
earliest of (i) the last day of the Interest Period applicable thereto,
(ii) the occurrence of an Event of Default in consequence of which Lender
has elected to accelerate the maturity of the Obligations, (iii)
termination of this Agreement pursuant to the terms hereof, or (iv) the
first day of each month that such LIBOR Rate Loan is outstanding. On the
last day of each applicable Interest Period, unless DF properly has
exercised the LIBOR Option with respect thereto, the interest rate
applicable to such LIBOR Rate Loan automatically shall convert to the rate
of interest then applicable to Base Rate Loans of the same type hereunder.
At any time that an Event of Default has occurred and is continuing, DF no
longer shall have the option to request that Advances bear interest at the
LIBOR Rate and Lender shall have the right to convert the interest rate on
all outstanding LIBOR Rate Loans to the rate then applicable to Base Rate
Loans hereunder.
(b) LIBOR Election.
(i) DF may, at any time and from time to time, so long as no Event of
Default has occurred and is continuing, elect to exercise the LIBOR
Option by notifying Lender prior to 11:00 a.m. (California time) at
least three (3) Business Days prior to the commencement of the
proposed Interest Period (the "LIBOR Deadline"). Notice of DF's
election of the LIBOR Option for a permitted portion of the Advances
and an Interest Period pursuant to this section shall be made by
delivery to Lender of a LIBOR Notice received by Lender before the
LIBOR Deadline, or by telephonic notice received by Lender before the
LIBOR Deadline (to be confirmed by delivery to Lender of a LIBOR
Notice received by Lender prior to 5:00 p.m. (California time) on the
same day).
(ii) Each LIBOR Notice shall be irrevocable and binding on each Borrower.
In connection with each LIBOR Rate Loan, each Borrower shall
indemnify, defend, and hold Lender harmless against any loss, cost, or
expense incurred by Lender as a result of (a) the payment of any
principal of any LIBOR Rate Loan other than on the last day of an
Interest Period applicable thereto (including as a result of an Event
of Default), (b) the conversion of any LIBOR Rate Loan other than on
the last day of the Interest Period applicable thereto, or (c) the
failure to borrow, convert, continue or prepay any LIBOR Rate Loan on
the date specified in any LIBOR Notice delivered pursuant hereto (such
losses, costs, and expenses, collectively, "Funding Losses"). Funding
Losses shall, with respect to Lender, be deemed to equal the amount
determined by Lender to be the excess, if any, of (i) the amount of
interest that would have accrued on the principal amount of such LIBOR
Rate Loan had such event not occurred, at the LIBOR Rate that would
have been applicable thereto plus the LIBOR Rate Margin, for the
period from the date of such event to the last day of the then current
Interest Period therefor (or, in the case of a failure to borrow,
convert or continue, for the period that would have been the Interest
Period therefor), minus (ii) the amount of interest that would accrue
on such principal amount for such period at the interest rate which
Lender would be offered were it to be offered, at the commencement of
such period, Dollar deposits of a comparable amount and period in the
London interbank market. A certificate of Lender delivered to DF
setting forth any amount or amounts that Lender is entitled to receive
pursuant to this section shall be conclusive absent manifest error.
(iii)DF shall have not more than 5 LIBOR Rate Loans in effect at any given
time. DF only may exercise the LIBOR Option for LIBOR Rate Loans of at
least $1,000,000 and integral multiples of $500,000 in excess thereof.
(c) Prepayments. DF may prepay LIBOR Rate Loans at any time; provided, however,
that in the event that LIBOR Rate Loans are prepaid on any date that is not
the last day of the Interest Period applicable thereto, including as a
result of any automatic prepayment pursuant to Section 2.5 through the
required application by Lender of proceeds of Collections in accordance
with Section 2.4(b) or for any other reason, including early termination of
the term of this Agreement or acceleration of the Obligations pursuant to
the terms hereof, each Borrower shall indemnify, defend, and hold Lender
and their Participants harmless against any and all Funding Losses in
accordance with clause (b) above.
(d) Special Provisions Applicable to LIBOR Rate.
(i) The LIBOR Rate may be adjusted by Lender on a prospective basis to
take into account any additional or increased costs to Lender of
maintaining or obtaining any eurodollar deposits or increased costs
due to changes in applicable law occurring subsequent to the
commencement of the then applicable Interest Period, including changes
in tax laws (except changes of general applicability in corporate
income tax laws) and changes in the reserve requirements imposed by
the Board of Governors of the Federal Reserve System (or any
successor), excluding the Reserve Percentage, which additional or
increased costs would increase the cost of funding loans bearing
interest at the LIBOR Rate. In any such event, Lender shall give DF
notice of such a determination and adjustment and, upon its receipt of
the notice from Lender, DF may, by notice to Lender (y) require Lender
to furnish to DF a statement setting forth the basis for adjusting
such LIBOR Rate and the method for determining the amount of such
adjustment, or (z) repay the LIBOR Rate Loans with respect to which
such adjustment is made (together with any amounts due under clause
(b)(ii) above).
(ii) In the event that any change in market conditions or any law,
regulation, treaty, or directive, or any change therein or in the
interpretation of application thereof, shall at any time after the
date hereof, in the reasonable opinion of Lender, make it unlawful or
impractical for Lender to fund or maintain LIBOR Advances or to
continue such funding or maintaining, or to determine or charge
interest rates at the LIBOR Rate, Lender shall give notice of such
changed circumstances to DF and (y) in the case of any LIBOR Rate
Loans that are outstanding, the date specified in Lender's notice
shall be deemed to be the last day of the Interest Period of such
LIBOR Rate Loans, and interest upon the LIBOR Rate Loans of Lender
thereafter shall accrue interest at the rate then applicable to Base
Rate Loans, and (z) DF shall not be entitled to elect the LIBOR Option
until Lender determines that it would no longer be unlawful or
impractical to do so.
(e) No Requirement of Matched Funding. Anything to the contrary contained
herein notwithstanding, Lender, nor any of its Participants, is required
actually to acquire eurodollar deposits to fund or otherwise match fund any
Obligation as to which interest accrues at the LIBOR Rate. The provisions
of this section shall apply as if Lender or its Participants had match
funded any Obligation as to which interest is accruing at the LIBOR Rate by
acquiring eurodollar deposits for each Interest Period in the amount of the
LIBOR Rate Loans.
2.14 Capital Requirements. If, after the date hereof, Lender determines that (i)
the adoption of or change in any law, rule, regulation or guideline regarding
capital requirements for banks or bank holding companies, or any change in the
interpretation or application thereof by any Governmental Authority charged with
the administration thereof, or (ii) compliance by Lender or its parent bank
holding company with any guideline, request or directive of any such entity
regarding capital adequacy (whether or not having the force of law), the effect
of reducing the return on Lender's or such holding company's capital as a
consequence of Lender's obligations hereunder to a level below that which Lender
or such holding company could have achieved but for such adoption, change, or
compliance (taking into consideration Lender's or such holding company's then
existing policies with respect to capital adequacy and assuming the full
utilization of such entity's capital) by any amount deemed by Lender to be
material, then Lender may notify DF thereof. Following receipt of such notice,
DF agrees to pay Lender on demand the amount of such reduction of return of
capital as and when such reduction is determined, payable within ninety (90)
days after presentation by Lender of a statement in the amount and setting forth
in reasonable detail Lender's calculation thereof and the assumptions upon which
such calculation was based (which statement shall be deemed true and correct
absent manifest error). In determining such amount, Lender may use any
reasonable averaging and attribution methods.
2.15 Joint and Several Liability of Borrowers.
(a) Each Borrower is accepting joint and several liability hereunder and under
the other Loan Documents in consideration of the financial accommodations
to be provided by Lender under this Agreement, for the mutual benefit,
directly and indirectly, of each Borrower and in consideration of the
undertakings of the other Borrower to accept joint and several liability
for the Obligations.
(b) Each Borrower, jointly and severally, hereby irrevocably and
unconditionally accepts, not merely as a surety but also as a co-debtor,
joint and several liability with the other Borrower, with respect to the
payment and performance of all of the Obligations (including, without
limitation, any Obligations arising under this Section 2.15), it being the
intention of the parties hereto that all the Obligations shall be the joint
and several Obligations of each Person composing Borrowers without
preferences or distinction among them.
(c) If and to the extent that either Borrower shall fail to make any payment
with respect to any of the Obligations as and when due or to perform any of
the Obligations in accordance with the terms thereof, then in each such
event the other Persons composing Borrowers will make such payment with
respect to, or perform, such Obligation.
(d) The Obligations of each Person composing Borrowers under the provisions of
this Section 2.15 constitute the absolute and unconditional, full recourse
Obligations of each Person composing Borrowers enforceable against each
such Borrower to the full extent of its properties and assets, irrespective
of the validity, regularity or enforceability of this Agreement or any
other circumstances whatsoever.
(e) Except as otherwise expressly provided in this Agreement, each Person
composing Borrowers hereby waives notice of acceptance of its joint and
several liability, notice of any Advances or Letters of Credit issued under
or pursuant to this Agreement, notice of the occurrence of any Default,
Event of Default, or of any demand for any payment under this Agreement,
notice of any action at any time taken or omitted by Lender under or in
respect of any of the Obligations, any requirement of diligence or to
mitigate damages and, generally, to the extent permitted by applicable law,
all demands, notices and other formalities of every kind in connection with
this Agreement (except as otherwise provided in this Agreement). Each
Person composing Borrowers hereby assents to, and waives notice of, any
extension or postponement of the time for the payment of any of the
Obligations, the acceptance of any payment of any of the Obligations, the
acceptance of any partial payment thereon, any waiver, consent or other
action or acquiescence by Lender at any time or times in respect of any
default by any Person composing Borrowers in the performance or
satisfaction of any term, covenant, condition or provision of this
Agreement, any and all other indulgences whatsoever by Lender in respect of
any of the Obligations, and the taking, addition, substitution or release,
in whole or in part, at any time or times, of any security for any of the
Obligations or the addition, substitution or release, in whole or in part,
of any Person composing Borrowers. Without limiting the generality of the
foregoing, each Borrower assents to any other action or delay in acting or
failure to act on the part of Lender with respect to the failure by any
Person composing Borrowers to comply with any of its respective
Obligations, including, without limitation, any failure strictly or
diligently to assert any right or to pursue any remedy or to comply fully
with applicable laws or regulations thereunder, which might, but for the
provisions of this Section 2.15 afford grounds for terminating, discharging
or relieving any Person composing Borrowers, in whole or in part, from any
of its Obligations under this Section 2.15, it being the intention of each
Person composing Borrowers that, so long as any of the Obligations
hereunder remain unsatisfied, the Obligations of such Person composing
Borrowers under this Section 2.15 shall not be discharged except by
performance and then only to the extent of such performance. The
Obligations of each Person composing Borrowers under this Section 2.15
shall not be diminished or rendered unenforceable by any winding up,
reorganization, arrangement, liquidation, reconstruction or similar
proceeding with respect to any Person composing Borrowers or Lender. The
joint and several liability of the Persons composing Borrowers hereunder
shall continue in full force and effect notwithstanding any absorption,
merger, amalgamation or any other change whatsoever in the name,
constitution or place of formation of any of the Persons composing
Borrowers or Lender.
(f) Each Person composing Borrowers represents and warrants to Lender that such
Borrower is currently informed of the financial condition of Borrowers and
of all other circumstances which a diligent inquiry would reveal and which
bear upon the risk of nonpayment of the Obligations. Each Person composing
Borrowers further represents and warrants to Lender that such Borrower has
read and understands the terms and conditions of the Loan Documents. Each
Person composing Borrowers hereby covenants that such Borrower will
continue to keep informed of Borrowers' financial condition, the financial
condition of other guarantors, if any, and of all other circumstances which
bear upon the risk of nonpayment or nonperformance of the Obligations.
(g) The provisions of this Section 2.15 are made for the benefit of Lender and
its respective successors and assigns, and may be enforced by it or them
from time to time against any or all of the Persons composing Borrowers as
often as occasion therefor may arise and without requirement on the part of
Lender, successor, or assign first to marshal any of its or their claims or
to exercise any of its or their rights against any of the other Persons
composing Borrowers or to exhaust any remedies available to it or them
against any of the other Persons composing Borrowers or to resort to any
other source or means of obtaining payment of any of the Obligations
hereunder or to elect any other remedy. The provisions of this Section 2.15
shall remain in effect until all of the Obligations shall have been paid in
full or otherwise fully satisfied. If at any time, any payment, or any part
thereof, made in respect of any of the Obligations, is rescinded or must
otherwise be restored or returned by Lender upon the insolvency, bankruptcy
or reorganization of any of the Persons composing Borrowers, or otherwise,
the provisions of this Section 2.15 will forthwith be reinstated in effect,
as though such payment had not been made.
(h) Each of the Persons composing Borrowers hereby agrees that it will not
enforce any of its rights of contribution or subrogation against the other
Persons composing Borrowers with respect to any liability incurred by it
hereunder or under any of the other Loan Documents, any payments made by it
to Lender with respect to any of the Obligations or any collateral security
therefor until such time as all of the Obligations have been paid in full
in cash. Any claim which either Borrower may have against the other
Borrower with respect to any payments to Lender hereunder or under any
other Loan Documents are hereby expressly made subordinate and junior in
right of payment, without limitation as to any increases in the Obligations
arising hereunder or thereunder, to the prior payment in full in cash of
the Obligations and, in the event of any insolvency, bankruptcy,
receivership, liquidation, reorganization or other similar proceeding under
the laws of any jurisdiction relating to either Borrower, its debts or its
assets, whether voluntary or involuntary, all such Obligations shall be
paid in full in cash before any payment or distribution of any character,
whether in cash, securities or other property, shall be made to either
Borrower therefor.
Each of the Persons composing Borrowers hereby agrees that, after the occurrence
and during the continuance of any Default or Event of Default, the payment of
any amounts due with respect to the indebtedness owing by either Borrower to the
other Borrower is hereby subordinated to the prior payment in full in cash of
the Obligations. Each Borrower hereby agrees that after the occurrence and
during the continuance of any Default or Event of Default, such Borrower will
not demand, ▇▇▇ for or otherwise attempt to collect any indebtedness of the
other Borrower owing to such Borrower until the Obligations shall have been paid
in full in cash. If, notwithstanding the foregoing sentence, such Borrower shall
collect, enforce or receive any amounts in respect of such indebtedness, such
amounts shall be collected, enforced and received by such Borrower as trustee
for the Lender, and such Borrower shall deliver any such amounts to Lender for
application to the Obligations in accordance with Section 2.4(b).
2.16 Purchase of Existing Lender Indebtedness
Upon the satisfaction of all the conditions precedent set forth in Section 3.1
hereof, the Borrowers shall request an advance from Lender in the amount of the
then-outstanding Existing Lender indebtedness (the "Purchased Debt") and Lender
shall directly wire transfer to the Existing Lender such amount to purchase the
Purchased Debt and such amount shall be deemed to be the initial Advance
outstanding hereunder; provided, however, that without any further action, the
terms and conditions of the Purchased Debt shall be modified by this Agreement
and the other Loan Documents. It is the intent of the parties hereto that by
virtue of the Lender's purchase of the Purchased Debt, Lender shall be entitled
to the benefits of all liens and security interests created pursuant to the
Existing Lender's loan documents, which shall continue and survive the execution
and delivery of this Agreement and the other Loan Documents. Each Borrower
hereby ratifies and affirms all the security interests and liens evidenced by
the Existing Lender's loan documents for the benefit of Lender. This Agreement,
with respect to the Purchased Debt, shall evidence a modification, renewal and
extension thereof, but not an extinquishment or novation thereof.
2.17 Noteless Agreement
No promissory notes shall evidence the Obligations of Borrowers to Lender.
Lender shall maintain in accordance with its usual practice an account or
accounts on its books evidencing the Obligations of each Borrower resulting from
each Advance made by Lender from time to time, including the amounts of
principal and interest payable and paid to Lender hereunder. The entries
maintained in said accounts shall be prima facie evidence of the existence and
amounts of the Advances made by Lender and the payment obligations of each
Borrower; provided, however, that the failure of Lender to maintain such
accounts or any error therein shall not in any manner affect the obligation of
each Borrower to repay the Advances made in accordance with their terms.
..
3. CONDITIONS; TERM OF AGREEMENT.
3.1 Conditions Precedent to the Initial Extension of Credit. The obligation of
Lender to make the initial Advance (or otherwise to extend any credit provided
for hereunder), is subject to the fulfillment, to the satisfaction of Lender, of
each of the conditions precedent set forth below:
(a) the Closing Date shall occur on or before November 5, 2001;
(b) Lender shall have received all financing statements required by Lender, and
Lender shall have received searches reflecting the filing of all such
financing statements;
(c) Lender shall have received each of the following documents, in form and
substance satisfactory to Lender, duly executed, and each such document
shall be in full force and effect:
(i) the Disbursement Letter,
(ii) the Due Diligence Letter,
(iii) the Fee Letter,
(iv) the Guaranty,
(v) the Cash Management Agreements,
(vi) the Deed of Trust,
(vii) the Landlord's Consent and Waiver,
(viii) the FFPO Consent and Waiver,
(ix) the Officers' Certificate,
(x) the Intercompany Subordination Agreement,
(xi) the Pay-Off Letter, together with (A) UCC amendment statements and
other documentation evidencing the assignment by Existing Lender of
its Liens in and to the properties and assets of DF and (B) UCC
termination statements evidencing the termination by Existing Lender
of its Liens in and to the properties and assets of FFPO;
(xii) the Intercreditor Agreements,
(xiii) the Notice and Acknowledgment of No Oral Agreements;
(xiv) the Post Closing Matters Agreement; and
(xvi)any and all other documents executed prior to or upon the Closing
Date by the Borrower and Lender in connection with this Agreement.
(d) Lender shall have received a certificate from the Secretary (or comparable
manager) of the General Partner of each Borrower attesting to the
resolutions of such General Partner's Board of Directors authorizing its
execution, delivery, and performance of this Agreement and the other Loan
Documents to which each Borrower is a party and authorizing specific
officers of the General Partners to execute the same;
(e) Lender shall have received copies of each Borrower's and each General
Partner's Governing Documents, as amended, modified, or supplemented to the
Closing Date, certified by the Secretary (or comparable manager) of the
respective General Partner;
(f) Lender shall have received a certificate of status with respect to each
Borrower and General Partner, dated within 45 days of the Closing Date,
such certificate to be issued by the appropriate officer of the
jurisdiction of organization of each Borrower and General Partner, which
certificate shall indicate that each Borrower and General Partner is in
good standing in such jurisdiction;
(g) Lender shall have received certificates of status with respect to each
Borrower and General Partner, each dated within 45 days of the Closing
Date, such certificates to be issued by the appropriate officer of the
jurisdictions (other than the jurisdiction of organization of each Borrower
and General Partner) in which its failure to be duly qualified or licensed
would constitute a Material Adverse Change, which certificates shall
indicate that each Borrower and General Partner is in good standing in such
jurisdictions;
(h) Lender shall have received a certificate from the Secretary (or comparable
manager) of each Guarantor attesting to the resolutions of such Guarantor's
board of directors, manager or general partner, as the case may be,
authorizing its execution, delivery, and performance of the Loan Documents
to which such Guarantor is a party and authorizing specific officers of
such Guarantor to execute the same;
(i) Lender shall have received copies of each Guarantor's Governing Documents,
as amended, modified, or supplemented to the Closing Date, certified by the
Secretary (or comparable manager) of such Guarantor;
(j) Lender shall have received a certificate of status with respect to each
Guarantor, dated within 45 days of the Closing Date, such certificate to be
issued by the appropriate officer of the jurisdiction of organization of
such Guarantor, which certificate shall indicate that such Guarantor is in
good standing in such jurisdiction;
(k) Lender shall have received certificates of status with respect to each
Guarantor, each dated within 45 days of the Closing Date, such certificates
to be issued by the appropriate officer of the jurisdictions (other than
the jurisdiction of organization of such Guarantor) in which its failure to
be duly qualified or licensed would constitute a Material Adverse Change,
which certificates shall indicate that such Guarantor is in good standing
in such jurisdictions;
(l) Lender shall have received a certificate of insurance, together with the
endorsements thereto, as are required by Section 6.8, the form and
substance of which shall be satisfactory to Lender;
(m) Lender shall have received opinions of Obligors' counsel in form and
substance satisfactory to Lender;
(n) Lender shall have received a certificate of the chief financial officer of
each Borrower as satisfactory evidence that all tax returns required to be
filed by such Borrower have been timely filed and all taxes upon Borrowers
or their 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;
(o) DF shall have the Required Availability of $3,000,000 after giving effect
to the initial extensions of credit hereunder (including credit extensions
for the purpose of repaying Intercompany Loans on the Closing Date);
(p) Lender shall have completed its business, legal, and collateral due
diligence, including (i) a collateral audit and review of each Borrower's
Books and Records and verification of each Borrower's representations and
warranties to Lender, the results of which shall be satisfactory to Lender,
and (ii) an inspection of each of the locations where Inventory is located,
the results of which shall be satisfactory to Lender;
(q) Lender shall have received completed reference checks with respect to each
Borrower's senior management, the results of which are satisfactory to
Lender in its sole discretion;
(r) Lender shall have received DF's Closing Date Business Plan;
(s) Borrowers shall pay all Lender Expenses incurred in connection with the
transactions evidenced by this Agreement;
(t) Each Borrower shall have received all licenses, approvals or evidence of
other actions required by any Governmental Authority in connection with the
execution and delivery by such Borrower of this Agreement or any other Loan
Document or with the consummation of the transactions contemplated hereby
and thereby;
(u) 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 Lender;
(v) an appropriate In-Transit Inventory reserve shall have been established by
Lender;
(w) an appropriate FINA Reserve shall have been established by Lender, with
such FINA Reserve to be in place until such time as Alon and Lender shall
have entered into an intercreditor agreement;
(x) a Credit Card Contra Reserve and/or Dilution Reserve for amounts owed to
"branded" suppliers Citgo, Diamond Shamrock, FINA, Conoco, and Chevron,
which are subject to contra offset or Dilution, shall have been established
by Lender;
(y) Borrowers shall have provided a reference from their Existing Lender to
Lender;
(z) Lender's auditors shall have conducted detailed testing of credit and
rebills to ensure that Dilution is calculated accurately;
(aa) Lender shall have conducted a satisfactory review of distributor contracts
with "branded" fuel suppliers; and
(bb) Lender shall have completed a Senior Sponsor Visit in accordance with its
customary procedures.
3.2 Conditions Subsequent to the Initial Extension of Credit. The obligation of
Lender to continue to make Advances (or otherwise extend credit hereunder) is
subject to the fulfillment, on or before the date applicable thereto, of each of
the conditions subsequent set forth below (the failure by either 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 Lender certified
copies of the policies of insurance, together with the endorsements
thereto, as are required by Section 6.8, the form and substance of which
shall be satisfactory to Lender and its counsel;
(b) repayment of Intercompany Loans, or future loans of a similar quality due
to FFPO from DF, will be permitted, from time to time, so long as no Event
of Default exists and so long as DF has the Required Availability of
$2,500,000 after giving effect to such payment;
(c) Lender will have the ability to appraise the Inventory in an Event of
Default;
(d) Lender will require accounts receivable reporting twice weekly from DF;
(e) Lender will require inventory reporting daily from DF;
(f) Lender will require month-end tank level reports from DF verified by a
reputable third party acceptable to Lender;
(g) Within thirty (30) days of the Closing Date, one hundred percent (100%) of
all of DF's customer accounts under ACH terms shall be set up to
automatically sweep into Lender's lockbox; and,
(h) Lender shall have received a mortgagee title insurance policy for the Real
Property Collateral issued by a title insurance company satisfactory to
Lender (the "Mortgage Policy") in the amount of $500,000 assuring Lender
that the Mortgage on such Real Property Collateral is a valid and
enforceable first priority mortgage Lien on such Real Property Collateral
free and clear of all defects and encumbrances except Permitted Liens, and
the Mortgage Policy otherwise shall be in form and substance satisfactory
to Lender.
3.3 Conditions Precedent to all Extensions of Credit. The obligation of Lender
to make all Advances (or to extend any other credit hereunder) shall be subject
to the following conditions precedent:
(a) the representations and warranties contained in this Agreement and the
other Loan Documents shall be true and correct in all material 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;
(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
any Borrower, Lender, or any of their Affiliates; and
(d) no Material Adverse Change shall have occurred.
3.4 Term. This Agreement shall become effective upon the execution and delivery
hereof by Borrowers and Lender and shall continue in full force and effect for a
term ending on November 5, 2004 (the "Maturity Date"). The foregoing
notwithstanding, Lender 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 DF 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 Borrowers of their duties, Obligations, or covenants
hereunder and the Lender's Liens in the Collateral shall remain in effect until
all Obligations have been fully and finally discharged and Lender's obligations
to provide additional credit hereunder have been terminated. When this Agreement
has been terminated and all of the Obligations have been fully and finally
discharged and Lender's obligations to provide additional credit under the Loan
Documents have been terminated irrevocably, Lender will, at Borrowers' sole
expense, execute and deliver any UCC termination statements, lien releases,
mortgage releases, re-assignments of trademarks, discharges of security
interests, and other similar discharge or release documents (and, if applicable,
in recordable form) as are reasonably necessary to release, as of record, the
Lender's Liens and all notices of security interests and liens previously filed
by Lender with respect to the Obligations.
3.6 Early Termination by DF. DF has the option, at any time upon 90 days prior
written notice by DF to Lender, to terminate this Agreement by paying to Lender,
in cash, the Obligations (including either (i) providing cash collateral to be
held by Lender in an amount equal to one hundred five percent (105%) of the then
extant Letter of Credit Usage, or (ii) causing the original Letters of Credit to
be returned to Lender), in full, together with the Applicable Prepayment
Premium. If DF has sent a notice of termination pursuant to the provisions of
this section, then Lender's obligations to extend credit hereunder shall
terminate and DF shall be obligated to repay the Obligations (including either
(i) providing cash collateral to be held by Lender in an amount equal to one
hundred five percent (105%) of the then extant Letter of Credit Usage, or (ii)
causing the original Letters of Credit to be returned to Lender), in full,
together with the Applicable Prepayment Premium, on the date set forth as the
date of termination of this Agreement in such notice. In the event of the
termination of this Agreement and repayment of the Obligations at any time prior
to the Maturity Date, for any other reason, including (a) termination upon the
election of Lender to terminate after the occurrence of an Event of Default, (b)
foreclosure and sale of Collateral, (c) sale of the Collateral in any Insolvency
Proceeding, or (d) restructure, reorganization or compromise of the Obligations
by the confirmation of a plan of reorganization, or any other plan of
compromise, restructure, or arrangement in any Insolvency Proceeding, then, in
view of the impracticability and extreme difficulty of ascertaining the actual
amount of damages to Lender or profits lost by Lender as a result of such early
termination, and by mutual agreement of the parties as to a reasonable
estimation and calculation of the lost profits or damages of Lender, DF shall
pay the Applicable Prepayment Premium to Lender, measured as of the date of such
termination.
4. CREATION OF SECURITY INTEREST.
4.1 Grant of Security Interest. DF hereby grants to Lender a continuing security
interest in all of its right, title, and interest in all currently existing and
hereafter acquired or arising Personal Property Collateral in order to secure
prompt repayment of any and all of the Obligations in accordance with the terms
and conditions of the Loan Documents and in order to secure prompt performance
by Borrowers of each of their covenants and duties under the Loan Documents. DF
authorizes Lender to file one or more financing or continuation statements, and
amendments thereto, relating to all or any part of the Collateral without the
signature of Debtor where permitted by law. The Lender's Liens in and to the
Personal Property Collateral shall attach to all Personal Property Collateral
without further act on the part of Lender or Borrowers. Anything contained in
this Agreement or any other Loan Document to the contrary notwithstanding,
except for Permitted Dispositions, Borrowers have no authority, express or
implied, to dispose of any item or portion of the Collateral.
4.2 Negotiable Collateral. In the event that any Collateral, including proceeds,
is evidenced by or consists of Negotiable Collateral, and if and to the extent
that perfection of priority of Lender's security interest is dependent on or
enhanced by possession, DF, immediately upon the request of Lender, shall
endorse and deliver physical possession of such Negotiable Collateral to Lender.
4.3 Collection of Accounts, General Intangibles, and Negotiable Collateral. At
any time after the occurrence and during the continuation of an Event of
Default, Lender or Lender's designee may (a) notify Account Debtors of DF that
the Accounts, chattel paper, or General Intangibles have been assigned to Lender
or that Lender has a security interest therein, or (b) collect the Accounts,
chattel paper, or General Intangibles directly and charge the collection costs
and expenses to the Loan Account. DF agrees that it will hold in trust for
Lender, as Lender's trustee, any Collections that it receives and immediately
will deliver said Collections to Lender or a Cash Management Bank in their
original form as received by DF.
4.4 Delivery of Additional Documentation Required. At any time upon the request
of Lender, DF shall execute and deliver to Lender, any and all financing
statements, fixture filings, security agreements, pledges, assignments,
endorsements of certificates of title, and all other documents (the "Additional
Documents") that Lender may request in its Permitted Discretion, in form and
substance satisfactory to Lender, to perfect and continue perfected or better
perfect the Lender's Liens in the Collateral (whether now owned or hereafter
arising or acquired), to create and perfect Liens in favor of Lender in any Real
Property acquired after the Closing Date, and in order to fully consummate all
of the transactions contemplated hereby and under the other Loan Documents. To
the maximum extent permitted by applicable law, DF authorizes Lender to execute
any such Additional Documents in DF's name and authorizes Lender to file such
executed Additional Documents in any appropriate filing office. In addition, on
such periodic basis as Lender shall require, DF shall (a) provide Lender with a
report of all new patentable, copyrightable, or trademarkable materials acquired
or generated by it during the prior period, (b) cause all patents, copyrights,
and trademarks acquired or generated by DF that are not already the subject of a
registration with the appropriate filing office (or an application therefor
diligently prosecuted) to be registered with such appropriate filing office in a
manner sufficient to impart constructive notice of its ownership thereof, and
(c) cause to be prepared, executed, and delivered to Lender supplemental
schedules to the applicable Loan Documents to identify such patents, copyrights,
and trademarks as being subject to the security interests created thereunder.
Upon an Event of Default, and pursuant to Section 6.16 hereof, FFPO shall grant
such liens and security interests in its assets and properties as Lender may
require in accordance with the provisions of this Section 4.4.
4.5 Power of Attorney. DF hereby irrevocably makes, constitutes, and appoints
Lender (and any of Lender's officers, employees, or Lenders designated by
Lender) as its true and lawful attorney, with power to (a) if a DF refuses to,
or fails timely to execute and deliver any of the documents described in Section
4.4, sign the name of DF on any of the documents described in Section 4.4, (b)
at any time that an Event of Default has occurred and is continuing, sign DF's
name on any invoice or ▇▇▇▇ of lading relating to the Collateral, drafts against
Account Debtors, or notices to Account Debtors, (c) send requests for
verification of Accounts, (d) endorse DF's name on any Collection item that may
come into Lender's possession, (e) at any time that an Event of Default has
occurred and is continuing, make, settle, and adjust all claims under DF's
policies of insurance and make all determinations and decisions with respect to
such policies of insurance, and (f) at any time that an Event of Default has
occurred and is continuing, settle and adjust disputes and claims respecting the
Accounts, chattel paper, or General Intangibles directly with Account Debtors,
for amounts and upon terms that Lender determines to be reasonable, and Lender
may cause to be executed and delivered any documents and releases that Lender
determines to be necessary. The appointment of Lender as DF's attorney, and each
and every one of its rights and powers, being coupled with an interest, is
irrevocable until all of the Obligations have been fully and finally repaid and
performed and Lender's obligations to extend credit hereunder are terminated.
4.6 Right to Inspect. Lender (through any of its respective officers, employees,
or agents) shall have the right, upon reasonable notice and during normal
business hours, from time to time hereafter to inspect the Books and to check,
test, and appraise the Collateral in order to verify DF's financial condition or
the amount, quality, value, condition of, or any other matter relating to, the
Collateral.
4.7 Control Agreements. DF agrees that it will not transfer assets out of any
Securities Accounts other than as permitted under Section 7.19 and, if to
another securities intermediary, unless DF and the substitute securities
intermediary have entered into a Control Agreement. No arrangement contemplated
hereby or by any Control Agreement in respect of any Securities Accounts or
other Investment Property shall be modified by DF without the prior written
consent of Lender. Upon the occurrence and during the continuance of a Default
or Event of Default, Lender may notify any securities intermediary to liquidate
the applicable Securities Account or any related Investment Property maintained
or held thereby and remit the proceeds thereof to the Lender's Account.
5. REPRESENTATIONS AND WARRANTIES.
In order to induce Lender to enter into this Agreement, each Borrower, unless
otherwise stated herein, makes the following representations and warranties to
Lender which shall be true, correct, and complete, in all material respects, as
of the date hereof, and shall be true, correct, and complete, in all material
respects, as of the Closing Date, and at and as of the date of the making of
each Advance (or other extension of credit) made thereafter, as though made on
and as of the date of such Advance (or other extension of credit) (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. Each Borrower has good and indefeasible title to its
properties and assets, free and clear of Liens except for Permitted Liens.
5.2 Eligible Accounts. The Eligible Accounts are bona fide existing payment
obligations of Account Debtors created by the sale and delivery of Inventory or
the rendition of services to such Account Debtors in the ordinary course of DF's
business, owed to DF without defenses, disputes, offsets, counterclaims, or
rights of return or cancellation. As to each Eligible Account, such Account is
not:
(a) owed by an employee, Affiliate, or Lender of DF,
(b) on account of a transaction wherein goods were placed on consignment or
were sold pursuant to a guaranteed sale, a sale or return, a sale on
approval, a ▇▇▇▇ and hold, or on any other terms by reason of which the
payment by the Account Debtor may be conditional,
(c) payable in a currency other than Dollars,
(d) owed by an Account Debtor that has or has asserted a right of setoff, has
disputed its liability, or has made any claim with respect to its
obligation to pay the Account,
(e) owed by an Account Debtor that is subject to any Insolvency Proceeding or
is not Solvent or as to which DF has received notice of an imminent
Insolvency Proceeding or a material impairment of the financial condition
of such Account Debtor,
(f) on account of a transaction as to which the goods giving rise to such
Account have not been shipped and/or billed to the Account Debtor or the
services giving rise to such Account have not been performed and accepted
by the Account Debtor, and
(g) a right to receive progress payments or other advance ▇▇▇▇▇▇▇▇ that are due
prior to the completion of performance by DF of the subject contract for
goods or services.
5.3 Eligible Inventory. All Eligible Inventory consists of first quality
saleable goods located at the Terminal or consisting of In-Transit Inventory. As
to each item of Eligible Inventory, such Inventory is:
(a) owned by DF free and clear of all Liens other than Liens in favor of
Lender,
(b) either located at one of the locations set forth on Schedule E-1 or in
transit from one such location to another such location,
(c) not goods that have been returned or rejected by DF's customers, and
(d) not goods that are obsolete or slow moving, restrictive or custom items,
non-saleable work-in-process, or that constitute spare parts, packaging and
shipping materials, supplies used or consumed in DF's business, ▇▇▇▇ and
hold goods, defective goods, "seconds," or Inventory acquired on
consignment.
5.4 Equipment. All of the Equipment is used or held for use in DF's business and
is fit, in all material respects, for such purposes.
5.5 Location of Inventory and Equipment. None of DF's Inventory and Equipment is
stored with a bailee, warehouseman, or similar party and are located only at the
locations identified on Schedule 5.5.
5.6 Inventory Records. DF keeps correct and accurate records itemizing and
describing the type, quality, and quantity of its Inventory and the book value
thereof.
5.7 Location of Chief Executive Office; FEIN. The chief executive office of each
Borrower is located at the addresses indicated in Schedule 5.7 and each
Borrower's FEIN is identified in Schedule 5.7.
5.8 Due Organization and Qualification; Subsidiaries.
(a) Each Borrower and General Partner is duly organized and existing and in
good standing under the laws of the jurisdiction of its organization and
qualified to do business in any state where the failure to be so qualified
reasonably could be expected to have a Material Adverse Change.
(b) Set forth on Schedule 5.8(b), is a complete and accurate description of the
percentage interest held by each partner of each Borrower as of the Closing
Date.
(c) Except as set forth on Schedule 5.8(c), neither Borrower has any direct or
indirect Subsidiaries.
5.9 Due Authorization; No Conflict.
(a) As to each Borrower, the execution, delivery, and performance by such
Borrower of this Agreement and the Loan Documents to which it is a party
have been duly authorized by all necessary action on the part of such
Borrower.
(b) As to each Borrower, the execution, delivery, and performance by such
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 applicable to such Borrower, the Governing Documents of such
Borrower, or any order, judgment, or decree of any court or other
Governmental Authority binding on such 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 of such Borrower, (iii)
result in or require the creation or imposition of any Lien of any nature
whatsoever upon any properties or assets of such Borrower, other than
Permitted Liens, or (iv) require any approval of such Borrower's
interestholders except the approval of its General Partner or any approval
or consent of any Person under any material contractual obligation of such
Borrower.
(c) Other than the filing of financing statements, fixture filings, and the
Deed of Trust, the execution, delivery, and performance by each Borrower of
this Agreement and the Loan Documents to which such 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 Governmental Authority or other
Person.
(d) As to each Borrower, this Agreement and the other Loan Documents to which
such Borrower is a party, and all other documents contemplated hereby and
thereby, when executed and delivered by such Borrower will be the legally
valid and binding Obligations of such Borrower, enforceable against such
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 Lender's Liens are validly created, perfected, and first priority
Liens, subject only to Permitted Liens.
(f) The execution, delivery, and performance by each Guarantor of the Loan
Documents to which it is a party have been duly authorized by all necessary
action on the part of each Guarantor.
(g) The execution, delivery, and performance by each Guarantor of 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 applicable to such
Guarantor, the Governing Documents of such Guarantor, or any order,
judgment, or decree of any court or other Governmental Authority binding on
such Guarantor, (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 of such Guarantor, (iii) result in or require the
creation or imposition of any Lien of any nature whatsoever upon any
properties or assets of such Guarantor, other than Permitted Liens, or (iv)
require any approval of such Guarantor's interestholders except the
approval of a General Partner or Manager, as applicable or any approval or
consent of any Person under any material contractual obligation of such
Guarantor.
(h) The execution, delivery, and performance by each Guarantor of the Loan
Documents to which it 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 Governmental Authority or other Person.
(i) The Loan Documents to which each Guarantor is a party, and all other
documents contemplated hereby and thereby, when executed and delivered by
each Guarantor will be legally valid and binding obligations of such
Guarantor, enforceable against such Guarantor 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.
5.10 Litigation. Other than those matters disclosed on Schedule 5.10, there are
no actions, suits, or proceedings pending or, to the best knowledge of either
Borrower, threatened against such Borrower except for (a) matters that are fully
covered by insurance (subject to customary deductibles), and (b) matters arising
after the Closing Date that, if decided adversely to such Borrower, as
applicable, reasonably could not be expected to result in a Material Adverse
Change. There are no actions, suits, or proceedings pending against such
Borrower, as of the Closing date, except for (c) matters that are fully covered
by insurance (subject to customary deductibles) or (d) matters that if decided
adversely against such Borrower reasonably could not be expected to result in a
Material Adverse Change.
5.11 No Material Adverse Change. All financial statements relating to Borrowers
or Guarantors that have been delivered by any of them to Lender have been
prepared in accordance with GAAP (except, in the case of unaudited financial
statements, for the lack of footnotes and being subject to year-end audit
adjustments) and present fairly in all material respects, such Borrower's or
such Guarantor's, as applicable, financial condition as of the date thereof and
results of operations for the period then ended. There has not been a Material
Adverse Change with respect to Borrowers or Guarantors, as applicable, since the
date of the latest financial statements submitted to Lender on or before the
Closing Date.
5.12 Fraudulent Transfer.
(a) each Borrower is Solvent.
(b) No transfer of property is being made by any Borrower and no obligation is
being incurred by any 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
Borrowers.
5.13 Employee Benefits. Neither Borrower nor any of its ERISA Affiliates
maintains or contributes to any Benefit Plan except as set forth on Schedule
5.13 hereto.
5.14 Environmental Condition. Except as set forth on Schedule 5.14, (a) to each
Borrower's knowledge, none of its properties or assets has ever been used by
such Borrower or by previous owners or operators in the disposal of, or to
produce, store, handle, treat, release, or transport, any Hazardous Materials,
where such production, storage, handling, treatment, release or transport was in
violation, in any material respect, of applicable Environmental Law, (b) to each
Borrower's knowledge, none of its properties or assets has ever been designated
or identified in any manner pursuant to any environmental protection statute as
a Hazardous Materials disposal site, (c) neither Borrower has received notice
that a Lien arising under any Environmental Law has attached to any revenues or
to any Real Property owned or operated by such Borrower, and (d) neither
Borrower has 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 such Borrower resulting in the
releasing or disposing of Hazardous Materials into the environment.
5.15 Brokerage Fees. Neither Borrower has utilized the services of any broker or
finder in connection with Borrowers' obtaining financing from Lender under this
Agreement and no brokerage commission or finders fee is payable by such Borrower
in connection herewith.
5.16 Intellectual Property. Each Borrower owns, or holds licenses in, all
trademarks, trade names, copyrights, patents, patent rights, and licenses that
are necessary to the conduct of its business as currently conducted. Attached
hereto as Schedule 5.16 is a true, correct, and complete listing of all material
patents, patent applications, trademarks, trademark applications, trade names,
copyrights, and copyright registrations as to which each Borrower is the owner
or is an exclusive licensee.
5.17 Leases. Each Borrower enjoys peaceful and undisturbed possession under all
leases material to its business and to which such Borrower is a party or under
which it is operating. All of such leases are valid and subsisting and no
material default by such Borrower exists under any of them.
5.18 DDAs. Set forth on Schedule 5.18 are all of the DDAs of DF, including, with
respect to each depository (i) the name and address of such depository, and (ii)
the account numbers of the accounts maintained with such depository.
5.19 Complete Disclosure. All factual information (taken as a whole) furnished
by or on behalf of each Borrower in writing to Lender (including all information
contained in the schedules hereto or in the other Loan Documents) for purposes
of or in connection with this Agreement, the other Loan Documents or any
transaction contemplated herein or therein is, and all other such factual
information (taken as a whole) hereafter furnished by or on behalf of each
Borrower in writing to the Lender will be, true and accurate, in all material
respects, on the date as of which such information is dated or certified and not
incomplete by omitting to state any fact necessary to make such information
(taken as a whole) not misleading in any material respect at such time in light
of the circumstances under which such information was provided. On the Closing
Date, the Closing Date Projections represent, and as of the date on which any
other Projections are delivered to Lender, such additional Projections represent
DF's good faith best estimate of its future performance for the periods covered
thereby.
5.20 Indebtedness. Set forth on Schedule 5.20 is a true and complete list of all
Indebtedness of each Borrower outstanding immediately prior to the Closing Date
that is to remain outstanding after the Closing Date and such schedule
accurately reflects the aggregate principal amount of such Indebtedness, and in
respect of DF, the principal terms thereof.
6. AFFIRMATIVE COVENANTS.
Each Borrower, unless otherwise stated herein, covenants and agrees that, so
long as any credit hereunder shall be available and until full and final payment
of the Obligations, each Borrower shall do all of the following:
6.1 Accounting System. Maintain a system of accounting that enables each
Borrower to produce financial statements in accordance with GAAP and maintain
records pertaining to the Collateral that contain information as from time to
time reasonably may be requested by Lender. DF also shall keep an inventory
reporting system that shows all additions, sales, claims, returns, and
allowances with respect to the Inventory.
6.2 Collateral Reporting. DF shall provide Lender with the following documents
at the following times in form satisfactory to Lender:
Daily
(a) Inventory reports specifying DF's cost and the wholesale market
value of its Inventory, by category, with additional detail
showing additions to and deletions from the Inventory,
Bi-Weekly
(b) accounts receivable reporting from DF, including a sales journal,
collection journal, and credit register since the last such
schedule and a calculation of the Borrowing Base as of such date,
(c) notice of all returns, disputes, or claims,
(d) Alon's statement reflecting the amount owed to Alon by DF for
purchases of gasoline and diesel fuel,
Monthly (not later than (e) Monthly branded credit card transactions and branded
accounts payable analysis the 15th day of each month to determine the adequacy
of the Credit Card Contra Reserve, calendar month)
(f) month-end tank level reports from DF verified by a reputable
third party acceptable to Lender,
(g) a detailed calculation of the Borrowing Base (including detail
regarding those Accounts that are not Eligible Accounts),
(h) a detailed aging, by total, of the Accounts, together with a
reconciliation to the detailed calculation of the Borrowing Base
previously provided to Lender,
(i) a summary aging, by vendor, of DF's accounts payable and any book
overdraft,
(j) a calculation of Dilution for the prior month,
(k) report detailing all conversions of convenience stores to
gas-only outlets
(l) report detailing any and all sales of convenience stores or truck
stops
Quarterly
(m) a detailed list of DF's customers,
Upon request by Lender
(n) a report regarding DF's accrued, but unpaid, ad valorem taxes,
(o) copies of invoices in connection with the Accounts, credit memos,
remittance advices, deposit slips, shipping and delivery
documents in connection with the Accounts and, for Inventory and
Equipment acquired by DF, purchase orders and invoices, and
(p) such other reports as to the Collateral, or the financial
condition of DF as Lender may request.
In addition, DF agrees to cooperate fully with Lender to facilitate and
implement a system of electronic collateral reporting in order to provide
electronic reporting of each of the items set forth above.
6.3 Financial Statements, Reports, Certificates. Deliver to Lender:
(a) as soon as available, but in any event within thirty-five (35) days (fifty
(50) days in the case of a calendar month that is the end of one of the
first three (3) fiscal quarters in a fiscal year) after the end of each
calendar month during each Borrower's fiscal years,
(i) a company prepared balance sheet and income statement covering each
Borrower's operations during such period,
(ii) a certificate signed by the chief financial officer of each Borrower
to the effect that:
A. the financial statements delivered hereunder have been prepared
in accordance with GAAP (except for the lack of footnotes and
being subject to year-end audit adjustments) and fairly present
in all material respects the financial condition of each
Borrower,
B. the representations and warranties of each 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), and
C. there does not exist any condition or event that constitutes a
Default or Event of Default (or, to the extent of any
non-compliance, describing such non-compliance as to which he or
she may have knowledge and what action Borrowers have taken, are
taking, or propose to take with respect thereto);
(b) as soon as available, but in any event within fifty (50) days after the end
of each Borrower's fiscal quarter,
(i) a company prepared balance sheet, income statement and statement of
cash flow covering each Borrower's operations during such period,
(ii) a certificate signed by the chief financial officer of each Borrower
to the effect that:
A. the financial statements delivered hereunder have been prepared
in accordance with GAAP (except for the lack of footnotes and
being subject to year-end audit adjustments) and fairly present
in all material respects the financial condition of each
Borrower,
B. the representations and warranties of each 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),
C. there does not exist any condition or event that constitutes a
Default or Event of Default (or, to the extent of any
non-compliance, describing such non-compliance as to which he or
she may have knowledge and what action Borrowers have taken, are
taking, or propose to take with respect thereto), and
(iii)for each quarter that is the date on which a financial covenant in
Section 7.20 is to be tested, DF shall submit a Compliance Certificate
demonstrating, in reasonable detail, compliance at the end of such
period with the applicable financial covenants contained in Section
7.20,
(c) as soon as available, but in any event within one hundred ten (110) days
after the end of each Borrower's fiscal years,
(i) financial statements of each Borrower for each such fiscal year,
audited by independent certified public accountants reasonably
acceptable to Lender and certified, without any qualifications, by
such accountants to have been prepared in accordance with GAAP (such
audited financial statements to include a balance sheet, income
statement, and statement of cash flow and, if prepared, such
accountants' letter to management), and
(ii) a certificate of such accountants addressed to Lender stating that
such accountants do not have knowledge of the existence of any Default
or Event of Default under Section 7.20,
(d) as soon as available, but in any event within twenty (20) days prior to the
start of DF's fiscal years, copies of DF's Projections, in form and
substance (including as to scope and underlying assumptions) satisfactory
to Lender, in its sole discretion, for the forthcoming three (3) years,
year by year, and for the forthcoming fiscal year, month by month,
certified by the chief financial officer of General Partner of DF as being
such officer's good faith best estimate of the financial performance of DF
during the period covered thereby,
(e) as soon as available but in any event within fifteen (15) days, if and when
filed by either Borrower or its Parent,
(i) 10-Q quarterly reports, Form 10-K annual reports, and Form 8-K current
reports,
(ii) any other filings made by either Borrower with the SEC,
(iii)copies of each Borrower's federal income tax returns, and any
amendments thereto, filed with the Internal Revenue Service, and
(iv) any other material, written information that is provided by each
Borrower to its partners generally,
(f) as soon as available but in any event within fifteen (15) days, if and when
filed by either Borrower and if requested by Lender, satisfactory evidence
of payment of applicable excise taxes in each jurisdiction in which (i)
such Borrower conducts business or is required to pay any such excise tax,
(ii) where such Borrower's failure to pay any such applicable excise tax
would result in a Lien on the properties or assets of such Borrower, or
(iii) where such Borrower's failure to pay any such applicable excise tax
reasonably could be expected to result in a Material Adverse Change,
(g) as soon as a Borrower has knowledge of any event or condition that
constitutes a Default or an Event of Default, notice thereof and a
statement of the curative action that such Borrower proposes to take with
respect thereto, and
(h) upon the request of Lender, any other report reasonably requested relating
to the financial condition of either Borrower.
In addition to delivery of the financial statements referred to above, Borrowers
agree that their fiscal years shall remain the same. Each Borrower agrees that
its independent certified public accountant is authorized to communicate with
Lender and to release to Lender whatever financial information concerning each
Borrower that Lender reasonably may request. Each Borrower waives the right to
assert a confidential relationship, if any, it may have with any accounting firm
or service bureau in connection with any information requested by Lender
pursuant to or in accordance with this Agreement, and agree that Lender may
contact directly any such accounting firm or service bureau in order to obtain
such information.
6.4 Guarantor Reports. Cause Guarantors to deliver their annual financial
statements at the time when Borrowers provide their audited financial statements
to Lender 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.
6.5 Return. Cause returns and allowances as between DF and its Account Debtors,
to be on the same basis and in accordance with the usual customary practices of
DF, 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 DF, DF promptly shall determine the
reason for such return and, if DF accepts such return, issue a credit memorandum
(with a copy to be sent to Lender) 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 DF, DF promptly shall determine the
reason for such return and, if Lender consents (which consent shall not be
unreasonably withheld), issue a credit memorandum (with a copy to be sent to
Lender) in the appropriate amount to such Account Debtor.
6.6 Maintenance of Properties. Maintain and preserve all of its properties which
are necessary or useful in the proper conduct to its business in good working
order and condition, ordinary wear and tear excepted, and comply at all times
with the provisions of all leases to which it is a party as lessee, so as to
prevent any loss or forfeiture thereof or thereunder.
6.7 Taxes. Cause all assessments and taxes, whether real, personal, or
otherwise, due or payable by, or imposed, levied, or assessed against either
Borrower or any of its assets 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. Each
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 Lender with proof satisfactory to Lender
indicating that the applicable Borrower has made such payments or deposits. Each
Borrower shall deliver satisfactory evidence of payment of applicable excise
taxes in each jurisdiction in which such Borrower is required to pay any such
excise tax.
6.8 Insurance.
(a) At each Borrower's expense, maintain insurance respecting its property and
assets wherever located, covering loss or damage by fire, theft, explosion,
and all other hazards and risks as ordinarily are insured against by other
Persons engaged in the same or similar businesses. Each Borrower also shall
maintain business interruption, public liability, and product liability
insurance, as well as insurance against larceny, embezzlement, and criminal
misappropriation. All such policies of insurance shall be in such amounts
and with such insurance companies as are reasonably satisfactory to Lender.
Each Borrower shall deliver copies of all such policies to Lender with a
satisfactory lender's loss payable endorsement naming Lender as sole loss
payee or additional insured, as appropriate. Each policy of insurance or
endorsement shall contain a clause requiring the insurer to give not less
than fifteen (15) days prior written notice to Lender in the event of
cancellation of the policy for any reason whatsoever.
(b) Each Borrower shall give Lender prompt notice of any loss covered by such
insurance. Lender shall have the exclusive right to adjust any losses
payable under any such insurance policies in excess of $50,000, without any
liability to such Borrower whatsoever in respect of such adjustments. Any
monies received as payment for any loss under any insurance policy
mentioned above (other than liability insurance policies) or as payment of
any award or compensation for condemnation or taking by eminent domain,
shall be paid over to Lender to be applied at the option of Lender either
to the prepayment of the Obligations or shall be disbursed to the
appropriate Borrower under staged payment terms reasonably satisfactory to
Lender for application to the cost of repairs, replacements, or
restorations. Any such 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.
(c) No Borrower shall take out separate insurance concurrent in form or
contributing in the event of loss with that required to be maintained under
this Section 6.8, unless Lender is included thereon as named insured with
the loss payable to Lender under a lender's loss payable endorsement or its
equivalent. Each Borrower immediately shall notify Lender whenever such
separate insurance is taken out, specifying the insurer thereunder and full
particulars as to the policies evidencing the same, and copies of such
policies promptly shall be provided to Lender.
6.9 Location of Inventory and Equipment. DF shall keep the Inventory and
Equipment only at the locations identified on Schedule 5.5; provided, however,
that DF may amend Schedule 5.5 so long as such amendment occurs by written
notice to Lender 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, DF provides any financing statements or fixture
filings necessary to perfect and continue the Lender's Liens on such assets.
6.10 Compliance with Laws. Comply 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 result in and reasonably could not be expected to
result in a Material Adverse Change.
6.11 Leases. Pay when due all rents and other amounts payable under any leases
to which each Borrower is a party or by which such Borrower's properties and
assets are bound, unless such payments are the subject of a Permitted Protest.
6.12 Brokerage Commissions. Pay any and all brokerage commission or finders fees
incurred in connection with or as a result of Borrowers' obtaining financing
from Lender under this Agreement. Each Borrower agrees and acknowledges that
payment of all such brokerage commissions or finders fees shall be the sole
responsibility of Borrowers, and each Borrower agrees to indemnify, defend, and
hold Lender harmless from and against any claim of any broker or finder arising
out of Borrowers' obtaining financing from Lender under this Agreement.
6.13 Existence. At all times preserve and keep in full force and effect each
Borrower's valid existence and good standing and any rights and franchises
material to Borrowers' businesses.
6.14 Environmental. (a) Keep any property either owned or operated by either
Borrower free of any Environmental Liens or post bonds or other financial
assurances sufficient to satisfy the Obligations or liability evidenced by such
Environmental Liens, (b) comply, in all material respects, with Environmental
Laws and provide to Lender documentation of such compliance which Lender
reasonably requests, (c) promptly notify Lender of any release of a Hazardous
Material of any reportable quantity from or onto property owned or operated by
either Borrower and take any Remedial Actions required to ▇▇▇▇▇ said release or
otherwise to come into compliance with applicable Environmental Law, and (d)
promptly provide Lender with written notice within ten (10) days of the receipt
of any of the following: (i) notice that an Environmental Lien has been filed
against any of the real or personal property of either Borrower, (ii)
commencement of any Environmental Action or notice that an Environmental Action
will be filed against either Borrower, and (iii) notice of a violation,
citation, or other administrative order which reasonably could be expected to
result in a Material Adverse Change.
6.15 Disclosure Updates. Promptly and in no event later than five (5) Business
Days after obtaining knowledge thereof, (a) notify Lender if any written
information, exhibit, or report furnished to Lender contained any untrue
statement of a material fact or omitted to state any material fact necessary to
make the statements contained therein not misleading in light of the
circumstances in which made, (b) notify Lender if either Borrower shall at any
time hold or acquire a commercial tort claim in excess of $250,000 and grant to
Lender in writing a security interest therein and in the proceeds thereof, all
upon the terms of this Agreement, with such writing to be in form and substance
satisfactory to Lender, and (c) correct any defect or error that may be
discovered therein or in any Loan Document or in the execution, acknowledgement,
filing, or recordation thereof.
6.16 Springing Lien Upon the occurrence of an Event of Default, Lender shall
have the option to demand that FFPO, at its own cost and expense, grant to
Lender liens and security interests in all or any portion of its assets as
Lender shall designate. Such liens shall be first priority with respect to all
assets of FFPO that were or should have been unencumbered as of the date of this
Agreement or, to the extent that consents can be obtained from prior
lienholders, subordinate on all assets of FFPO which were subject to Permitted
Liens as of the Closing Date. FFPO shall execute all documentation necessary in
the reasonable judgment of Lender to perfect and evidence such liens within ten
(10) days with respect to any personal property and sixty (60) days with respect
to any real property. Such security interests and liens will be created under
such security agreements, mortgages, deeds of trust and other instruments and
documents as are satisfactory to Lender, and FFPO shall deliver or cause to be
delivered to Lender all such instruments and documents (including legal
opinions, title insurance policies, surveys and lien searches) as Lender shall
reasonably request to evidence compliance with this Section 6.16. FFPO agrees to
provide such evidence as Lender shall reasonably request as to the perfection
and priority status of each such security interest and lien.
6.17 Intercompany Secured Sales. DF shall (i) cause all indebtedness and
obligations arising in favor of DF from the sale by DF of goods on credit terms
to FFPO to be evidenced by a promissory note secured by a first, prior, and
perfected security interest in and to the rights, including property rights, of
DF with respect to such sales pursuant to documentation satisfactory to Lender
("Intercompany Secured Sales") and (ii) endorse and deliver such promissory note
to Lender to be held as Collateral, such promissory note to be substantially in
the form of Exhibit P-1 hereto.
6.18 Subsequent UCC ▇▇▇▇▇▇.▇▇ soon as practicable after the Closing Date, DF
shall be required to deliver to Lender an updated UCC search which shall reflect
that Lender has a first priority and perfected lien in and to the Collateral,
the parties recognizing that no date certain could be set for completion of such
requirement due to current technical difficulties with the Texas Secretary of
State's office, but that the covenant contained herein shall require DF to
pursue delivery of such UCC search on a diligent basis.
6.19 Obligation to Pay. Each Borrower hereby unconditionally promises to pay
Lender, in accordance with the terms and conditions of this Loan Agreement
including, without limitation, Section 2.4 hereof, the Obligations, and to pay
the Obligations in full on the Maturity Date.
7. NEGATIVE COVENANTS.
Each Borrower, unless otherwise stated herein, covenants and agrees that, so
long as any credit hereunder shall be available and until full and final payment
of the Obligations, each Borrower will not do any of the following:
7.1 Indebtedness. Create, incur, assume, permit, or otherwise become or remain,
directly or indirectly, liable with respect to any Indebtedness, except:
(a) Indebtedness evidenced by this Agreement and the other Loan Documents,
together with Indebtedness owed to Underlying Issuers with respect to
Underlying Letters of Credit;
(b) Indebtedness set forth on Schedule 5.20;
(c) Permitted Purchase Money Indebtedness;
(d) refinancings, renewals, or extensions of Indebtedness permitted under
clauses (b) and (c) of this Section 7.1 (and continuance or renewal of any
Permitted Liens associated therewith) so long as: (i) the terms and
conditions of such refinancings, renewals, or extensions do not, in
Lender's judgment, materially impair the prospects of repayment of the
Obligations by Borrowers or materially impair Borrowers' creditworthiness,
(ii) such refinancings, renewals, or extensions do not result in an
increase in the principal amount of, or interest rate with respect to, the
Indebtedness so refinanced, renewed, or extended, (iii) such refinancings,
renewals, or extensions do not result in a shortening of the average
weighted maturity of the Indebtedness so refinanced, renewed, or extended,
nor are they on terms or conditions, that, taken as a whole, are materially
more burdensome or restrictive to the applicable Borrower, and (iv) if the
Indebtedness that is refinanced, renewed, or extended was subordinated in
right of payment to the Obligations, then the terms and conditions of the
refinancing, renewal, or extension Indebtedness must include subordination
terms and conditions that are at least as favorable to Lender as those that
were applicable to the refinanced, renewed, or extended Indebtedness;
(e) from and after the satisfaction of item (f) described in Section 7.1(f),
below, Indebtedness of DF to FFPO, at any time outstanding, not in excess
of the sum of $5,000,000 plus the Closing Intercompany Debt; or
(f) from and after the Closing Date and until the Closing Intercompany Debt is
known by Borrowers' satisfaction of item (f) on Schedule 1 to the Post
Closing Matters Agreement of even date herewith among Borrowers and Lender,
DF shall not incur new indebtedness of a similar quality to the
Intercompany Loans to FFPO in an amount in excess of $5,000,000 at any time
outstanding.
7.2 Liens. Create, incur, assume, or permit to exist, directly or indirectly,
any Lien on or with respect to any of its assets, of any kind, whether now owned
or hereafter acquired, or any income or profits therefrom, except for Permitted
Liens (including Liens that are replacements of Permitted Liens to the extent
that the original Indebtedness is refinanced, renewed, or extended under Section
7.1(d) and so long as the replacement Liens only encumber those assets that
secured the refinanced, renewed, or extended Indebtedness).
7.3 Restrictions on Fundamental Changes. Enter into any merger, consolidation,
reorganization, or recapitalization, or reclassify its Partnership Interests.
(a) Liquidate, wind up, or dissolve itself (or suffer any liquidation or
dissolution).
(b) Convey, sell, lease, license, assign, transfer, or otherwise dispose of, in
one transaction or a series of transactions, all or any substantial part of
its assets.
7.4 Disposal of Assets. Other than Permitted Dispositions, convey, sell, lease,
license, assign, transfer or otherwise dispose of any of its assets; provided,
however, notwithstanding anything to the contrary contained in the definition of
Permitted Dispositions, FFPO shall have the right to sell, without Lender
consent, up to twelve (12) convenience stores or truck stops per annum and
provided further, however, FFPO shall have the right to convert any number of
convenience stores to gas-only outlets during any fiscal year without prior
notice to or consent from Lender.
7.5 Change Name. Change either Borrower's name, FEIN, organizational structure,
jurisdiction (of incorporation, organization or formation) or identity, or add
any new fictitious name; provided, however, that a Borrower may change its name
upon at least thirty (30) days prior written notice by such Borrower to Lender
of such change and so long as, at the time of such written notification, such
Borrower provides any financing statements or fixture filings necessary to
perfect and continue perfected Lender's Liens.
7.6 Guarantee. DF shall not 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 its account or which are
transmitted or turned over to Lender.
7.7 Nature of Business. Make any change in the principal nature of either
Borrower's business.
7.8 Prepayments and Amendments.
(a) Except in connection with a refinancing permitted by Section 7.1(d) or
repayments of Intercompany Loans permitted by Section 3.2(b), DF shall not
prepay, redeem, defease, purchase, or otherwise acquire any Indebtedness,
other than the Obligations in accordance with this Agreement, and
(b) Except in connection with a refinancing permitted by Section 7.1(d) or
repayments of Intercompany Loans permitted by Section 3.2(b), DF shall not
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) or (c).
7.9 Change of Control. Cause, permit, or suffer, directly or indirectly, any
Change of Control.
7.10 Consignments. DF shall not 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. DF shall make no distributions with respect to its
Partnership Interests.
7.12 Accounting Methods. Modify or change its method of accounting (other than
as may be required to conform to GAAP) 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
either Borrower's accounting records without said accounting firm or service
bureau agreeing to provide Lender information regarding the Collateral or such
Borrower's financial condition.
7.13 Investments. Except for Permitted Investments, DF shall not directly or
indirectly, make or acquire any Investment, or incur any liabilities (including
contingent obligations) for or in connection with any Investment; provided,
however, that DF shall not have Permitted Investments (other than in the Cash
Management Accounts) in excess of $250,000 outstanding at any one time unless DF
and the applicable securities intermediary or bank have entered into Control
Agreements or similar arrangements governing such Permitted Investments, as
Lender shall determine in its Permitted Discretion, to perfect (and further
establish) the Lender's Liens in such Permitted Investments.
7.14 Transactions with Affiliates. DF shall not directly or indirectly enter
into or permit to exist any transaction with a material effect with any
Affiliate of DF except for transactions expressly permitted by this Agreement or
that are in the ordinary course of DF's business, upon fair and reasonable
terms, that are fully disclosed to Lender, and that are no less favorable to DF
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.
7.16 Intentionally Deleted
7.17 Use of Proceeds. Use the proceeds of the Advances for any purpose other
than (a) on the Closing Date (i) to repay in full the outstanding principal,
accrued interest, and accrued fees and expenses owing to Existing Lender, and
(ii) to pay transactional fees, costs, and expenses incurred in connection with
this Agreement, the other Loan Documents, and the transactions contemplated
hereby and thereby, and (b) thereafter, consistent with the terms and conditions
hereof, for its lawful and permitted purposes, including, but not limited to,
the repayment or refinancing of the Intercompany Loans and for general and
corporate working capital needs.
7.18 Change in Location of Chief Executive Office; Inventory and Equipment with
Bailees. DF shall not relocate its chief executive office to a new location
without providing thirty (30) days prior written notification thereof to Lender
and so long as, at the time of such written notification, DF provides any
financing statements or fixture filings necessary to perfect and continue
Lender's Liens with respect to such new location. The Inventory and Equipment of
DF shall not at any time now or hereafter be stored with a bailee, warehouseman,
or similar party without Lender's prior written consent.
7.19 Securities Accounts. DF shall not establish or maintain any Securities
Account unless Lender shall have received a Control Agreement in respect of such
Securities Account. DF agrees to not transfer assets out of any Securities
Account; provided, however, that, so long as no Event of Default has occurred
and is continuing or would result therefrom, DF may use such assets (and the
proceeds thereof) to the extent not prohibited by this Agreement.
7.20 Financial Covenants. DF shall fail to maintain EBITDA, measured on the
basis of its then most recently ended four (4) fiscal quarters, of less than the
required amount set forth in the following table for the applicable period set
forth opposite thereto;
Applicable Amount Applicable Period
--------------------------------------- -------------------------------
$3,842,000 For the twelve (12) month period
ending December 31, 2001
--------------------------------------- -------------------------------
$4,716,000 For the twelve (12) month period
ending March 31, 2002
-------------------------------------- --------------------------------
$3,752,000 For the twelve (12 month period
ending June 30, 2002
--------------------------------------- -------------------------------
$3,628,000 For the twelve (12) month period
ending September 30, 2002
--------------------------------------- -------------------------------
$3,598,000 For the twelve (12) month period
ending December 31, 2002, and
each fiscal quarter thereafter
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:
8.1 If either Borrower fails to pay when due and payable or when declared due
and payable, all or 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 Lender,
reimbursement of Lender Expenses, or other amounts constituting Obligations);
8.2 If any Obligor fails to perform, keep, or observe any negative covenant in
this Agreement or in any of the other Loan Documents;
8.3 If any Obligor fails to duly observe or perform any term, provision,
covenant, condition or agreement contained in this Agreement or any other Loan
Document (other than those described in Section 8.1 and 8.2 hereof) and such
default shall continue unremedied for a period of thirty (30) days after written
notice thereof from Lender;
8.4 If any material portion of either Borrower's assets is attached, seized,
subjected to a writ or distress warrant, levied upon, or comes into the
possession of any third Person;
8.5 If an Insolvency Proceeding is commenced by any Obligor;
8.6 If an Insolvency Proceeding is commenced against any Obligor or either
General Partner, and any of the following events occur: (a) the applicable
Obligor 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, Lender shall be relieved of
its obligation to extend credit hereunder, (d) an interim trustee is appointed
to take possession of all or any substantial portion of the properties or assets
of, or to operate all or any substantial portion of the business of, any
Obligor, or (e) an order for relief shall have been entered therein;
8.7 If either 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;
8.8 If a notice of Lien, levy, or assessment in respect of an agreement of
$100,000 or more is filed of record with respect to either Borrower's assets by
the United States, 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 Borrower's assets and the same is not paid
before such payment is delinquent;
8.9 If a judgment or other claim becomes a Lien or encumbrance upon any material
portion of either Borrower's assets;
8.10 If there is a default in any material agreement to which either Borrower is
a party and such default (a) occurs at the final maturity of the obligations
thereunder, or (b) results in a right by the other party thereto, irrespective
of whether exercised, to accelerate the maturity of the applicable Borrower's
obligations thereunder, to terminate such agreement, or to refuse to renew such
agreement pursuant to an automatic renewal right therein;
8.11 If either 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;
8.12 If any material misstatement or misrepresentation exists now or hereafter
in any warranty, representation, statement, or Record made to Lender by any
Borrower, or any officer, employee, agent, or director of any Borrower;
8.13 If the obligation of any Guarantor under its Guaranty is limited or
terminated by operation of law or by such Guarantor thereunder;
8.14 If this Agreement or any other Loan Document that purports to create a
Lien, shall, for any reason, fail or cease to create a valid and perfected and,
except to the extent permitted by the terms hereof or thereof, first priority
Lien on or security interest in the Collateral covered hereby or thereby; or
8.15 Any provision of any Loan Document shall at any time for any reason be
declared to be null and void, or the validity or enforceability thereof shall be
contested by either Borrower, or a proceeding shall be commenced by either
Borrower, or by any Governmental Authority having jurisdiction over either
Borrower, seeking to establish the invalidity or unenforceability thereof, or
either Borrower shall deny that the other Borrower has any liability or
obligation purported to be created under any Loan Document.
9. THE LENDER'S RIGHTS AND REMEDIES.
9.1 Rights and Remedies. Upon the occurrence, and during the continuation, of an
Event of Default, Lender (at its election but without notice of its election and
without demand) may do any one or more of the following, all of which are
authorized by Borrowers:
(a) Declare all Obligations, whether evidenced by this Agreement, by any of the
other Loan Documents, or otherwise, immediately due and payable;
(b) Cease advancing money or extending credit to or for the benefit of DF under
this Agreement, under any of the Loan Documents, or under any other
agreement between any Obligor and Lender;
(c) Terminate this Agreement and any of the other Loan Documents as to any
future liability or obligation of Lender, but without affecting any of the
Lender's Liens in the Collateral and without affecting the Obligations;
(d) Settle or adjust disputes and claims directly with Account Debtors for
amounts and upon terms which Lender considers advisable, and in such cases,
Lender will credit the Loan Account with only the net amounts received by
Lender in payment of such disputed Accounts after deducting all Lender
Expenses incurred or expended in connection therewith;
(e) Cause DF to hold all returned Inventory in trust for Lender, segregate all
returned Inventory from all other assets of DF or in DF's possession and
conspicuously label said returned Inventory as the property of Lender;
(f) Without notice to or demand upon any Obligor, make such payments and do
such acts as Lender considers necessary or reasonable to protect its
security interests in the Collateral. DF agrees to assemble the Personal
Property Collateral if Lender so requires, and to make the Personal
Property Collateral available to Lender at a place that Lender may
designate which is reasonably convenient to both parties. DF authorizes
Lender 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 Lien that in Lender's determination appears to conflict with the
Lender's Liens and to pay all expenses incurred in connection therewith and
to charge DF's Loan Account therefor. With respect to any of DF's owned or
leased premises, DF hereby grants Lender a license to enter into possession
of such premises and to occupy the same, without charge, in order to
exercise any of Lender's rights or remedies provided herein, at law, in
equity, or otherwise;
(g) Without notice to any Obligor (such notice being expressly waived), and
without constituting a retention of any collateral in satisfaction of an
obligation (within the meaning of the Code), set off and apply to the
Obligations any and all (i) balances and deposits of any Obligor held by
Lender (including any amounts received in the Cash Management Accounts), or
(ii) Indebtedness at any time owing to or for the credit or the account of
any Obligor held by Lender;
(h) Hold, as cash collateral, any and all balances and deposits of any Obligor
held by Lender, and any amounts received in the Cash Management Accounts,
to secure the full and final repayment of all of the Obligations;
(i) 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. DF hereby grants to Lender a license or other
right to use, without charge, DF's labels, patents, copyrights, 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 DF's rights under all licenses and all
franchise agreements shall inure to Lender's benefit;
(j) 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 DF's premises) as
Lender determines is commercially reasonable. It is not necessary that the
Personal Property Collateral be present at any such sale;
(k) Lender shall give notice of the disposition of the Personal Property
Collateral as follows:
(i) Lender shall give DF (for the benefit of DF) 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 of
the Personal Property Collateral, then the time on or after which the
private sale or other disposition is to be made; and
(ii) The notice shall be personally delivered or mailed, postage prepaid,
to DF as provided in Section 12, at least ten (10) days before the
earliest time of disposition set forth in the notice; 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;
(l) Lender may credit bid and purchase at any public sale;
(m) Lender may seek the appointment of a receiver or keeper to take possession
of all or any portion of the Collateral or to operate same and, to the
maximum extent permitted by law, may seek the appointment of such a
receiver without the requirement of prior notice or a hearing;
(n) Lender shall have all other rights and remedies available to it at law or
in equity pursuant to any other Loan Documents; and
(o) Any deficiency that exists after disposition of the Personal Property
Collateral as provided above will be paid immediately by DF. Any excess
will be returned, without interest and subject to the rights of third
Persons, by Lender to DF.
9.2 Remedies Cumulative. The rights and remedies of Lender under this Agreement,
the other Loan Documents, and all other agreements shall be cumulative. Lender
shall have all other rights and remedies not inconsistent herewith as provided
under the Code, by law, or in equity. No exercise by Lender of one right or
remedy shall be deemed an election, and no waiver by Lender of any Event of
Default shall be deemed a continuing waiver. No delay by Lender shall constitute
a waiver, election, or acquiescence by it.
10. TAXES AND EXPENSES.
If either 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, Lender, in its sole discretion
and without prior notice to either Borrower, may do any or all of the following:
(a) make payment of the same or any part thereof, (b) set up such reserves in
DF's Loan Account as Lender deems necessary to protect Lender from the exposure
created by such failure, or (c) in the case of the failure to comply with
Section 6.8 hereof, obtain and maintain insurance policies of the type described
in Section 6.8 and take any action with respect to such policies as Lender deems
prudent. Any such amounts paid by Lender shall constitute Lender Expenses and
any such payments shall not constitute an agreement by Lender to make similar
payments in the future or a waiver by Lender of any Event of Default under this
Agreement. Lender 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. Each 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 documents,
instruments, chattel paper, and guarantees at any time held by Lender on which
such Borrower may in any way be liable.
11.2 Lender's Liability for Collateral. DF hereby agrees that: (a) so long as
Lender complies with its obligations, if any, under the Code, Lender shall not
in any way or manner be liable or responsible for: (i) the safekeeping of the
Collateral, (ii) any loss or damage thereto occurring or arising in any manner
or fashion from any cause, (iii) any diminution in the value thereof, or (iv)
any act or default of any carrier, warehouseman, bailee, forwarding agency, or
other Person, and (b) all risk of loss, damage, or destruction of the Collateral
shall be borne by DF.
11.3 Indemnification. Each Borrower shall pay, indemnify, defend, and hold the
Lender-Related Persons, each Participant, and each of their respective officers,
directors, employees, 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 (a) in connection with or as a
result of or related to the execution, delivery, enforcement, performance, or
administration of this Agreement, any of the other Loan Documents, or the
transactions contemplated hereby or thereby, and (b) with respect to any
investigation, 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"). The foregoing to the
contrary notwithstanding, no Borrower shall have any 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. If any Indemnified Person makes any payment to any
other Indemnified Person with respect to an Indemnified Liability as to which
either Borrower was required to indemnify the Indemnified Person receiving such
payment, the Indemnified Person making such payment is entitled to be
indemnified and reimbursed by such Borrower with respect thereto. WITHOUT
LIMITATION, THE FOREGOING INDEMNITY SHALL APPLY TO EACH INDEMNIFIED PERSON WITH
RESPECT TO INDEMNIFIED LIABILITIES WHICH IN WHOLE OR IN PART CAUSED BY OR ARISE
OUT OF ANY NEGLIGENT ACT OR OMISSION OF SUCH INDEMNIFIED PERSON OR OF ANY OTHER
PERSON.
12. NOTICES.
Unless otherwise provided in this Agreement, all notices or demands by either
Borrower or Lender to the other 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, electronic mail (at such
email addresses as DF or Lender, as applicable, may designate to each other in
accordance herewith), or telefacsimile to Borrowers in care of DF or to Lender,
as the case may be, at its address set forth below:
If to Borrowers DIRECT FUELS, L.P.
by and through its General Partner,
Direct Fuels Management Company, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇
Fax No. ▇▇▇.▇▇▇.▇▇▇▇
with copies to Borrowers' counsel:
Jenkens & ▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, #▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn.: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
Fax No.: ▇▇▇.▇▇▇.▇▇▇▇
If to Lender: FOOTHILL CAPITAL CORPORATION
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Business Finance Division Manager
Fax No. ▇▇▇.▇▇▇.▇▇▇▇
with copies to Lender's counsel:
▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇, P.C.
▇▇▇▇ ▇▇▇▇ ▇▇▇., ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Fax No. ▇▇▇.▇▇▇.▇▇▇▇
Lender and each Borrower may change the address at which they are to receive
notices hereunder, by notice in writing in the foregoing manner given to the
other party. All notices or demands sent in accordance with this Section 12,
other than notices by Lender in connection with enforcement rights against the
Collateral under the provisions of the Code, shall be deemed received on the
earlier of the date of actual receipt or three (3) Business Days after the
deposit thereof in the mail. Each Borrower acknowledges and agrees that notices
sent by Lender in connection with the exercise of enforcement rights against
Collateral under the provisions of the Code shall be deemed sent when deposited
in the mail or personally delivered, or, where permitted by law, transmitted by
telefacsimile or any other method set forth above.
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.
(a) THE VALIDITY OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (UNLESS
EXPRESSLY PROVIDED TO THE CONTRARY IN ANOTHER LOAN DOCUMENT IN RESPECT OF
SUCH OTHER 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 TEXAS.
(b) 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
DALLAS, STATE OF TEXAS, PROVIDED, HOWEVER, THAT ANY SUIT SEEKING
ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT
LENDER'S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE LENDER ELECTS TO
BRING SUCH ACTION OR WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND.
EACH BORROWER AND LENDER WAIVES, TO THE EXTENT PERMITTED UNDER APPLICABLE
LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS
OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE
WITH THIS SECTION 13(b).
EACH BORROWER AND LENDER HEREBY WAIVES 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 BORROWER AND LENDER REPRESENTS
THAT EACH HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY
WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN
THE EVENT OF LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN
CONSENT TO A TRIAL BY THE COURT.
14. Assigns and Participations; successors.
14.1 Assignments and Participations.
(a) Lender may assign and delegate to one or more assignees (each an
"Assignee") all, or any ratable part of all, of the Obligations and the
other rights and obligations of Lender hereunder and under the other Loan
Documents; provided, however, that Borrowers may continue to deal solely
and directly with Lender in connection with the interest so assigned to an
Assignee until written notice of such assignment, together with payment
instructions, addresses, and related information with respect to the
Assignee, have been given to DF by Lender and the Assignee by an
appropriate assignment and acceptance agreement, a form of which is
attached hereto as Exhibit A-1.
(b) From and after the date that Lender provides DF with such written notice
and executed assignment and acceptance agreement (i) the Assignee
thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such assignment
and acceptance agreement, shall have the assigned and delegated rights and
obligations of Lender under the Loan Documents, and (ii) Lender shall, to
the extent that rights and obligations hereunder and under the other Loan
Documents have been assigned and delegated by it pursuant to such
assignment and acceptance agreement, relinquish its rights (except with
respect to Section 11.3 hereof) and be released from its obligations under
this Agreement (and in the case of an assignment and acceptance agreement
covering all or the remaining portion of Lender's rights and obligations
under this Agreement and the other Loan Documents, Lender shall cease to be
a party hereto and thereto), and such assignment shall affect a novation
between each Borrower and the Assignee.
(c) Immediately upon each Borrower's receipt of such fully executed assignment
and acceptance agreement, this Agreement shall be deemed to be amended to
the extent, but only to the extent, necessary to reflect the addition of
the Assignee and the resulting adjustment of the rights and duties of
Lender arising therefrom.
(d) Lender may at any time sell to one or more commercial banks, financial
institutions, or other Persons not Affiliates of Lender (a "Participant")
participating interests in Obligations and the other rights and interests
of Lender hereunder and under the other Loan Documents; provided, however,
that (i) Lender shall remain the "Lender" for all purposes of this
Agreement and the other Loan Documents and the Participant receiving the
participating interest in the Obligations and the other rights and
interests of Lender hereunder shall not constitute a "Lender" hereunder or
under the other Loan Documents and Lender's obligations under this
Agreement shall remain unchanged, (ii) Lender shall remain solely
responsible for the performance of such obligations, (iii) Borrowers and
Lender shall continue to deal solely and directly with each other in
connection with Lender's rights and obligations under this Agreement and
the other Loan Documents, (iv) Lender shall not transfer or grant any
participating interest under which the Participant has the right to approve
any amendment to, or any consent or waiver with respect to, this Agreement
or any other Loan Document, except to the extent such amendment to, or
consent or waiver with respect to this Agreement or of any other Loan
Document would (A) extend the final maturity date of the Obligations
hereunder in which such Participant is participating, (B) reduce the
interest rate applicable to the Obligations hereunder in which such
Participant is participating, (C) release all or a material portion of the
Collateral or guaranties (except to the extent expressly provided herein or
in any of the Loan Documents) supporting the Obligations hereunder in which
such Participant is participating, (D) postpone the payment of, or reduce
the amount of, the interest or fees payable to such Participant through
Lender, or (E) change the amount or due dates of scheduled principal
repayments or prepayments or premiums, and (v) all amounts payable by
Borrowers hereunder shall be determined as if Lender had not sold such
participation, except that, if amounts outstanding under this Agreement are
due and unpaid, or shall have been declared or shall have become due and
payable upon the occurrence of an Event of Default, each Participant shall
be deemed to have the right of set-off in respect of its participating
interest in amounts owing under this Agreement to the same extent as if the
amount of its participating interest were owing directly to it as a Lender
under this Agreement. The rights of any Participant only shall be
derivative through Lender and no Participant shall have any rights under
this Agreement or the other Loan Documents or any direct rights as to
Borrowers, the Collections, the Collateral, or otherwise in respect of the
Obligations. No Participant shall have the right to participate directly in
the making of decisions by Lender.
(e) In connection with any such assignment or participation or proposed
assignment or participation, a Lender may disclose all documents and
information which it now or hereafter may have relating to any Borrower or
any Borrower's business.
(f) Any other provision in this Agreement notwithstanding, Lender may at any
time create a security interest in, or pledge, all or any portion of its
rights under and interest in this Agreement in favor of any Federal Reserve
Bank in accordance with Regulation A of the Federal Reserve Bank or U.S.
Treasury Regulation 31 CFR ss. 203.14, and such Federal Reserve Bank may
enforce such pledge or security interest in any manner permitted under
applicable law.
14.2 Successors. This Agreement shall bind and inure to the benefit of the
respective successors and assigns of each of the parties; provided, however,
that no Borrower may assign this Agreement or any rights or duties hereunder
without Lender's prior written consent and any prohibited assignment shall be
absolutely void ab initio. No consent to assignment by Lender shall release
either Borrower from its Obligations. Lender may assign this Agreement and the
other Loan Documents and its rights and duties hereunder and thereunder pursuant
to Section 14.1 hereof and, except as expressly required pursuant to Section
14.1 hereof, no consent or approval by either Borrower is required in connection
with any such assignment.
15. AMENDMENTS; WAIVERS.
15.1 Amendments and Waivers. No amendment or waiver of any provision of this
Agreement or any other Loan Document, and no consent with respect to any
departure by either Borrower therefrom, shall be effective unless the same shall
be in writing and signed by Lender and each Borrower and then any such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given.
15.2 No Waivers; Cumulative Remedies. No failure by Lender to exercise any
right, remedy, or option under this Agreement or, any other Loan Document, or
delay by Lender in exercising the same, will operate as a waiver thereof. No
waiver by Lender will be effective unless it is in writing, and then only to the
extent specifically stated. No waiver by Lender on any occasion shall affect or
diminish Lender's rights thereafter to require strict performance by each
Borrower of any provision of this Agreement. Lender's rights under this
Agreement and the other Loan Documents will be cumulative and not exclusive of
any other right or remedy that Lender may have.
16. GENERAL PROVISIONS.
16.1 Effectiveness. This Agreement shall be binding and deemed effective when
executed by each Borrower and Lender.
16.2 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.
16.3 Interpretation. Neither this Agreement nor any uncertainty or ambiguity
herein shall be construed against Lender or either 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 accomplish fairly the purposes and
intentions of all parties hereto.
16.4 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.
16.5 Withholding Taxes. All payments made by either Borrower hereunder or under
any note will be made without setoff, counterclaim, or other defense, except as
required by applicable law other than for Taxes (as defined below). All such
payments will be made free and clear of, and without deduction or withholding
for, any present or future taxes, levies, imposts, duties, fees, assessments or
other charges of whatever nature now or hereafter imposed by any jurisdiction
(other than the United States) or by any political subdivision or taxing
authority thereof or therein (other than of the United States) with respect to
such payments (but excluding, any tax imposed by any jurisdiction or by any
political subdivision or taxing authority thereof or therein (i) measured by or
based on the net income or net profits of Lender, or (ii) to the extent that
such tax results from a change in the circumstances of Lender, including a
change in the residence, place of organization, or principal place of business
of Lender, or a change in the branch or lending office of Lender participating
in the transactions set forth herein) and all interest, penalties or similar
liabilities with respect thereto (all such non-excluded taxes, levies, imposts,
duties, fees, assessments or other charges being referred to collectively as
"Taxes"). If any Taxes are so levied or imposed, each Borrower agrees to pay the
full amount of such Taxes, and such additional amounts as may be necessary so
that every payment of all amounts due under this Agreement or under any note,
including any amount paid pursuant to this Section 16.5 after withholding or
deduction for or on account of any Taxes, will not be less than the amount
provided for herein; provided, however, that no Borrower shall be required to
increase any such amounts payable to Lender if the increase in such amount
payable results from Lender's own willful misconduct or gross negligence. Each
Borrower will furnish to Lender as promptly as possible after the date the
payment of any Taxes is due pursuant to applicable law certified copies of tax
receipts evidencing such payment by such Borrower.
16.6 Amendments in Writing. This Agreement only can be amended by a writing
signed by Lender and each Borrower.
16.7 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. The foregoing shall apply to each other Loan Document mutatis
mutandis.
16.8 Revival and Reinstatement of Obligations. If the incurrence or payment of
the Obligations by either Borrower or any Guarantor or the transfer to Lender of
any property 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, or other voidable or recoverable payments of money or transfers of
property (collectively, a "Voidable Transfer"), and if Lender is required to
repay or restore, in whole or in part, any such Voidable Transfer, or elects to
do so upon the reasonable advice of its counsel, then, as to any such Voidable
Transfer, or the amount thereof that Lender is required or elects to repay or
restore, and as to all reasonable costs, expenses, and attorneys fees of Lender
related thereto, the liability of such Borrower or such Guarantor automatically
shall be revived, reinstated, and restored and shall exist as though such
Voidable Transfer had never been made.
16.9 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.
16.10 Intentionally Deleted
16.11 Request for Waivers Lender agrees that either Borrower shall have the
right at any time and from time to time to submit to Lender a written request
for a waiver by Lender of any term or covenant contained in this Agreement;
provided, however, such Borrower acknowledges and agrees that Lender shall have
no obligation to grant any such waiver, such decision to be in Lender's sole and
absolute discretion.
[Signature page to follow.]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered as of the date first above written.
DIRECT FUELS, L.P.,
a Texas limited partnership
By: Direct Fuels Management Company, Inc.,
a Texas corporation, its General Partner
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Vice President
FFP OPERATING PARTNERS, L.P.,
a Delaware limited partnership
By: FFP Operating LLC,
a Delaware limited liability company,
its General Partner
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Vice President
FOOTHILL CAPITAL CORPORATION,
a California corporation
By: /s/
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