[FINOVA LOGO]
LOAN AND SECURITY AGREEMENT
AMERICAN FACTORS GROUP, INC.
BORROWER
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ADDRESS
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BORROWER FED ID TAX NO.
$2,000,000.00 DURING THE FIRST SIX MONTHS FROM THE DATE HEREOF INCREASING BY
$500,000 EVERY MONTH THEREAFTER UP TO A MAXIMUM AMOUNT OF $4,000,000
CREDIT LIMIT
MAY __ , 1998
DATE
FINOVA BUSINESS CREDIT
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THIS LOAN AND SECURITY AGREEMENT (collectively with the Schedule to Loan
Agreement (the "SCHEDULE") attached hereto, the "AGREEMENT") dated the date set
forth on the cover page, is entered into by and between the borrower named on
the cover page (jointly and severally, the "Borrower"), whose address is set
forth on the cover page and FINOVA CAPITAL CORPORATION ("FINOVA"), whose
address is ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇.
1. DEFINITIONS.
1.1 Defined Terms. As used in this Agreement, the following terms have
the definitions set forth below:
"ADA" has the meaning set forth in Section 4.1(aa) hereof.
"Additional Sums" has the meaning set forth in Section 2.8(a) hereof.
"Affiliate" means any Person controlling, controlled by or under
common control with Borrower. For purposes of this definition, "control" means
the possession, directly or indirectly, of the power to direct or cause
direction of the management and policies of any Person, whether through
ownership of common or preferred stock or other equity interests, by contract
or otherwise. Without limiting the generality of the foregoing, each of the
following shall be an Affiliate: any officer, director, employee or other agent
of Borrower, any shareholder, member or subsidiary of Borrower, and any other
Person with whom or which Borrower has common shareholders, officers or
directors.
"Agreement" has the meaning set forth in the preamble.
"Applicable Law" has the meaning set forth in Section 8.2(a) hereof.
"Applicable Usury Law" has the meaning set forth in Section 2.8(b)
hereof.
"Blocked Account" has the meaning set forth in Section 2.10(c) hereof.
"Business Day" means any day on which commercial banks in both New
York, New York and Phoenix, Arizona are open for business.
"Capital Expenditures" means all expenditures made and liabilities
incurred for the acquisition of any fixed asset or improvement, replacement,
substitution or addition thereto which has a useful life of more than one year
and including, without limitation, those arising in connection with Capital
Leases.
"Capital Lease" means any lease of property by Borrower that, in
accordance with GAAP, should be capitalized for financial reporting purposes
and reflected as a liability on the balance sheet of Borrower.
"Closing Fee" has the meaning set forth in the Schedule.
"Closing Date" means the date of the initial advance made by FINOVA
pursuant to this Agreement.
"Code" means the Uniform Commercial Code as adopted and in effect in
the State of Arizona from time to time.
"Collateral" has the meaning set forth in Section 3.1 hereof.
"Collateral Monitoring Fee" has the meaning set forth in the Schedule.
"Deposit Accounts" has the meaning set forth in Section 9105 of the
Code.
"Dominion Account" has the meaning set forth in Section 2.9(c) hereof.
"Eligible Receivables" means Receivables sold to Borrower by, and
purchased by Borrower from , its Factored Clients under the factoring
agreements between Borrower and its clients, arising in the ordinary course of
Borrower's business from the sale of goods or rendition of services by the
Factored Clients, which are covered by credit insurance with an insurer
acceptable to FINOVA and which FINOVA, in its Permitted Discretion, shall deem
eligible based on such considerations as FINOVA may from time to time deem
appropriate. Without limiting the foregoing, a Receivable shall not be deemed
to be an Eligible Receivable if (i) the account debtor has failed to pay the
Receivable within the latter of a period of ninety (90) days after the invoice
date or sixty (60) days from the date the Borrower purchases the Receivable
from a Factored Client who gave rise to the Receivable but such purchase may
not take place more than thirty (30) days after the invoice date, to the extent
of any amount remaining unpaid after such period; (ii) the account debtor has
failed to pay more than 25% of all outstanding Receivables owed by it to
Borrower within the latter of sixty (60) days from the invoice date or sixty
(60) days after the date the Borrower purchases the invoice from a Factored
Client who gave rise to the Receivable but such purchase may not take place
more than thirty (30) days after the invoice date; (iii) the account debtor is
an Affiliate of the Borrower or the Factored Client who gave rise to the
Receivable; (iv) the goods relating thereto are placed on consignment,
guaranteed sale, "▇▇▇▇ and hold," "COD" or other terms
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pursuant to which payment by the account debtor may be conditional; (v) the
account debtor is not located in the United States, unless the Receivable is
supported by a letter of credit or other form of guaranty or security, in each
case in form and substance satisfactory to FINOVA; (vi) the account debtor is
the United States or any department, agency or instrumentality thereof; (vii)
Borrower or the Factored Client who gave rise to the Receivable is or may
become liable to the account debtor for goods sold or services rendered by the
account debtor to Borrower; (viii) the account debtor's total obligations to
Borrower exceed 10% of all Eligible Receivables or the Eligible Receivables
from any one Factored Client exceed 10% of all Eligible Receivable, the
Receivable shall be ineligible to the extent of such excess; (ix) the account
debtor disputes liability or makes any claim with respect thereto (up to the
amount of such liability or claim), or is subject to any insolvency or
bankruptcy proceeding, or becomes insolvent, fails or goes out of a material
portion of its business; (x) the amount thereof consists of late charges or
finance charges; (xi) the amount thereof consists of a credit balance more than
sixty (60) days past due; (xii) the face amount thereof exceeds $30,000.00,
unless accompanied by evidence of shipment of the goods or completion of
services relating thereto satisfactory to FINOVA in its Permitted Discretion;
(xiii) the invoice constitutes a progress billing on a project not yet
completed, except that the final billing at such time as the matter has been
completed and delivered to the customer may be deemed an Eligible Receivable;
or (xiv) the amount thereof is not yet represented by an invoice or ▇▇▇▇ issued
in the name of the applicable account debtor; (xv) The Borrower has failed to
submit to Lender copies of the factoring agreement under which the Receivable
was purchased (which Factoring Agreement must be substantially in the form of
exhibit "A" attached hereto), filed UCC financing statements, UCC searches and
other documentation in form and substance satisfactory to Lender, with respect
to the Factored Client whose sale of goods or rendition of services gave rise
to the Receivable.
"Environmental Costs" has the meaning set forth in Section 8.2(b)
hereof.
"Equipment" means all of Borrower's present and hereafter acquired
machinery, molds, machine tools, motors, furniture, equipment, furnishings,
fixtures, trade fixtures, motor vehicles, tools, parts, dyes, jigs, goods and
other tangible personal property (other than Inventory) of every kind and
description used in Borrower's operations or owned by Borrower and any interest
in any of the foregoing, and all attachments, accessories, accessions,
replacements, substitutions, additions or improvements to any of the foregoing,
wherever located.
"ERISA" means the Employment Retirement Income Security Act of 1974,
as amended, and the regulations thereunder.
"ERISA Affiliate" means each trade or business (whether or not
incorporated and whether or not foreign) which is or may hereafter become a
member of a group of which Borrower is a member and which is treated as a
single employer under ERISA Section 4001(b)(1), or IRC Section 414.
"Event of Default" means any of the events set forth in Section 7.1 of
this Agreement.
"Examination Fee" has the meaning set forth in the Schedule.
"Facility Fee" has the meaning set forth in the Schedule.
"Factored Client" means a client of Borrower with whom Borrower has an
operational and enforceable factoring agreement and related documentation,
including without limitation, UCC financing statements recorded (in the
appropriate governmental offices), conveying clear title to such Client's
accounts receivables purchased by Borrower and covering a first, prior and
perfected Security interest in such client's accounts receivable and related
collateral all in form and substance acceptable to FINOVA.
"FINOVA Affiliate" has the meaning set forth in Section 9.22 hereof.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect from time to time as set forth in the opinions
and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and the statements and pronouncements
of the Financial Accounting Standards Boards which are applicable to the
circumstances as of the date of determination consistently applied, except
that, for the financial covenants set forth in this Agreement, GAAP shall be
determined on the basis of such principles in effect on the date hereof and
consistent with those used in the preparation of the audited financial
statements delivered to Lender prior to the date hereof.
"General Intangibles" means all general intangibles of Borrower,
whether now owned or hereafter created or acquired by Borrower, including,
without limitation, all choses in action, causes of action, corporate or other
business records, Deposit Accounts, inventions, designs, drawings, blueprints,
Trademarks, Licenses and Patents, names, trade secrets, goodwill, copyrights,
registrations, licenses, franchises, customer lists, security and other
deposits, rights in all litigation presently or hereafter pending for any cause
or claim (whether in contract, tort or
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otherwise), and all judgments now or hereafter arising therefrom, all claims of
Borrower against FINOVA, rights to purchase or sell real or personal property,
rights as a licensor or licensee of any kind, royalties, telephone numbers,
proprietary information, purchase orders, and all insurance policies and claims
(including without limitation credit, liability, property and other insurance)
tax refunds and claims, computer programs, discs, tapes and tape files, claims
under guaranties, security interests or other security held by or granted to
Borrower to secure payment of any of the Receivables by an account debtor, all
rights to indemnification and all other intangible property of every kind and
nature (other than Receivables).
"Guarantor(s)" has the meaning set forth in the Schedule.
"Hazardous Substance" has the meaning set forth in Section 8.2(a)
hereof.
"Indebtedness" means all of Borrower's present and future obligations,
liabilities, debts, claims and indebtedness, contingent, fixed or otherwise,
however evidenced, created, incurred, acquired, owing or arising, whether under
written or oral agreement, operation of law or otherwise, and includes, without
limiting the foregoing (i) the Obligations, (ii) obligations and liabilities of
any Person secured by a lien, claim, encumbrance or security interest upon
property owned by Borrower, even though Borrower has not assumed or become
liable therefor, (iii) obligations and liabilities created or arising under any
lease (including Capital Leases) or conditional sales contract or other title
retention agreement with respect to property used or acquired by Borrower, even
though the rights and remedies of the lessor, seller or lender are limited to
repossession, (iv) all unfunded pension fund obligations and liabilities and
(v) deferred taxes.
"Initial Payment Amount" means the percentage of the net amount of a
Receivable which is paid by the Borrower to a Factored Client as the initial
payment of the purchase price of such Receivable, which percentage shall under
no circumstances be greater than the percentage set forth in the factoring
agreement between Borrower and any such Factored Client as the "initial
payment", "advance" or other like or equivalent terminology which may be used
in Borrower's factoring agreements with its Factored Clients.
"Initial Term" has the meaning set forth on the Schedule.
"Inventory" means all of Borrower's now owned and hereafter acquired
goods, merchandise or other personal property, wherever located, to be
furnished under any contract of service or held for sale or lease, all raw
materials, work in process, finished goods and materials and supplies of any
kind, nature or description which are or might be used or consumed in
Borrower's business or used in connection with the manufacture, packing,
shipping, advertising, selling or finishing of such goods, merchandise or other
personal property, and all documents of title or other documents representing
them.
"Inventory Loans" has the meaning set forth in the Schedule.
"IRC" means the Internal Revenue Code of 1986, as amended, and the
regulations thereunder.
"Loans" has the meaning set forth in Section 2.2 hereof.
"Loan Documents" means, collectively, this Agreement, any note or
notes executed by Borrower and payable to FINOVA, and any other present or
future agreement entered into in connection with this Agreement, together with
all alterations, amendments, changes, extensions, modifications, refinancings,
refundings, renewals, replacements, restatements, or supplements, of or to any
of the foregoing.
"Loan Party" means Borrower, each Guarantor, each Subordinating
Creditor and each other party (other than FINOVA) to any Loan Document.
"Loan Reserves" means, as of any date of determination, such amounts
as FINOVA may from time to time establish and revise in good faith reducing the
amount of Revolving Credit Loans which would otherwise be available to Borrower
under the lending formula(s) provided in the Schedule: (a) to reflect events,
conditions, contingencies or risks which, as determined by FINOVA in good
faith, do or may affect either (i) the Collateral or any other property which
is security for the Obligations or its value, (ii) the assets, business or
prospects of Borrower or any Guarantor or (iii) the security interests and
other rights of FINOVA in the Collateral (including the enforceability,
perfection and priority thereof) or (b) to reflect FINOVA's good faith belief
that any collateral report or financial information furnished by or on behalf
of Borrower or any Guarantor to FINOVA is or may have been incomplete,
inaccurate or misleading in any material respect or (c) in respect of any state
of facts which FINOVA determines in good faith constitutes an Event of Default
or may, with notice or passage of time or both, constitute an Event of
Default."
"Loan Year" means each twelve month period commencing on the Closing
Date.
"Maximum Interest Rate" has the meaning set forth in Section 2.8(b)
hereof.
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"Minimum Interest Charge" has the meaning set forth in the Schedule.
"Multiemployer Plan" means a "multiemployer plan" as defined in ERISA
Sections 3(37) or 4001(a)(3) or IRC Section 414(f) which covers employees of
Borrower or any ERISA Affiliate.
"Net Worth" at any date means the Borrower's net worth as determined
in accordance with GAAP.
"Obligations" means all present and future loans, advances, debts,
liabilities, obligations, covenants, duties and indebtedness at any time owing
by Borrower to FINOVA, whether evidenced by this Agreement, any note or other
instrument or document, whether arising from an extension of credit, opening of
a letter of credit, banker's acceptance, loan, guaranty, indemnification or
otherwise, whether direct or indirect (including, without limitation, those
acquired by assignment and any participation by FINOVA in Borrower's debts
owing to others), absolute or contingent, due or to become due, including,
without limitation, all interest, charges, expenses, fees, attorney's fees,
expert witness fees, Examination Fee, letter of credit fees, Collateral
Monitoring Fee, Closing Fee, Facility Fee, Termination Fee, Minimum Interest
Charge and any other sums chargeable to Borrower hereunder or under any other
agreement with FINOVA.
"Operating Cash Flow/Actual" means, for any period, Borrower's net
income or loss (excluding the effect of any extraordinary gains or losses),
determined in accordance with GAAP, plus or minus each of the following items,
to the extent deducted from or added to the revenues of Borrower in the
calculation of net income or loss: (i) depreciation; (ii) amortization and
other non-cash charges; (iii) interest expense paid or accrued; (iv) total
federal and state income tax expense determined as the accrued liability of
Borrower in respect of such period, regardless of what portion of such expense
has actually been paid by Borrower during such period; and (v) Management Fees
paid, to the extent permitted hereunder, and after deduction for each of (a)
federal and state income taxes, to the extent actually paid during such period;
(b) any non-cash income; and (c) all actual Capital Expenditures made during
such period and not financed.
"Overadvance" has the meaning set forth in Section 2.3.
"Overline" has the meaning set forth in Section 2.3.
"PBGC" means the Pension Benefit Guarantee Corporation.
"Permitted Discretion" means FINOVA's judgment exercised in good faith
based upon its consideration of any factor which FINOVA believes in good faith:
(i) will or could adversely affect the value of any Collateral, the
enforceability or priority of FINOVA's liens thereon or the amount which FINOVA
would be likely to receive (after giving consideration to delays in payment and
costs of enforcement) in the liquidation of such Collateral; (ii) suggests that
any collateral report or financial information delivered to FINOVA by any
Person on behalf of the Borrower is incomplete, inaccurate or misleading in any
material respect; (iii) materially increases the likelihood of a bankruptcy,
reorganization or other insolvency proceeding involving the Borrower, any Loan
Party or any of the Collateral, or (iv) creates or reasonably could be expected
to create an Event of Default. In exercising such judgment, FINOVA may consider
such factors already included in or tested by the definition of Eligible
Receivables or Eligible Inventory, as well as any of the following: (i) the
financial and business climate of the Borrower's industry and general
macroeconomic conditions, (ii) changes in collection history and dilution with
respect to the Receivables, (iii) changes in demand for, and pricing of,
Inventory, (iv) changes in any concentration of risk with respect to
Receivables and/or Inventory, and (v) any other factors that change the credit
risk of lending to the Borrower on the security of the Receivables and
Inventory. The burden of establishing lack of good faith hereunder shall be on
the Borrower.
"Permitted Encumbrance" means each of the liens, mortgages and other
security interests set forth on the Schedule.
"Person" means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation, limited
liability company, government, or any agency or political division thereof, or
any other entity.
"Plan" means any plan described in ERISA Section 3(2) maintained for
employees of Borrower or any ERISA Affiliate, other than a Multiemployer Plan.
"Prepared Financials" means the balance sheets of Borrower as of the
date set forth in the Schedule in the section entitled 'Reporting Requirements'
, and as of each subsequent date on which audited balance sheets are delivered
to FINOVA from time to time hereunder, and the related statements of
operations, changes in stockholder's equity and changes in cash flow for the
periods ended on such dates.
"Prime Rate" has the meaning set forth in the Schedule.
"Prohibited Transaction" means any transaction described in Section
406 of ERISA which is not exempt by reason of Section 408 of ERISA, and any
transaction described in Section 4975(c) of the
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IRC which is not exempt by reason of Section 4975(c)(2) of the IRC.
"Property" has the meaning set forth in Section 8.2(a) hereof.
"Receivable Loans" has the meaning set forth on the Schedule.
"Receivables" means all of Borrower's now owned and hereafter acquired
accounts (whether or not earned by performance, sold and assigned to Borrower
from Factored Clients, or otherwise), proceeds of any letters of credit naming
Borrower as beneficiary, contract rights, chattel paper, instruments, documents
and all other forms of obligations at any time owing to Borrower, all
guaranties and other security therefor, whether secured or unsecured, all
merchandise returned to or repossessed by Borrower, and all rights of stoppage
in transit and all other rights or remedies of an unpaid vendor, lienor secured
party.
"Renewal Term" has the meaning set forth on the Schedule.
"Reportable Event" means a reportable event described in Section 4043
of ERISA or the regulations thereunder, a withdrawal from a Plan described in
Section 4063 of ERISA, or a cessation of operations described in Section
4068(f) of ERISA.
"Revolving Credit Loans" has the meaning set forth in the Schedule.
"Revolving Credit Limit" has the meaning set forth in the Schedule.
"Revolving Interest Rate" has the meaning set forth in the Schedule.
"Schedule" has the meaning set forth in the preamble.
"Senior Contractual Debt Service" means, for any period, the sum of
payments made or required to be made by Borrower during such period for
interest only payments due on the Revolving Credit Loans facility plus the
Collateral Monitoring Fee and the Facility Fee.
"Start Date" has the meaning set forth in the Schedule.
"Subordinated Debt" means liabilities of Borrower the repayment of
which is subordinated, to the payment and performance of the Obligations,
pursuant to a subordination agreement acceptable to FINOVA in its sole
discretion.
"Subordinating Creditor" has the meaning set forth in the Schedule.
"Termination Fee" has the meaning set forth in Section 9.2(d) hereof.
"Total Contractual Debt Service" means, for any period, the sum of
payments made (or, as to clause (i) of this sentence, required to be made) by
Borrower during such period for (i) Senior Contractual Debt Service, (ii)
pursuant to the Seller Note and/or Noncompete Agreement, and (iii) interest and
scheduled principal payments due on any and all other Indebtedness of Borrower,
including without limitation the Subordinated Indebtedness.
"Total Facility" has the meaning set forth in Section 2.1 hereof.
"Trademarks, Copyrights, Licenses and Patents" means all of Borrower's
right, title and interest in and to, whether now owned or hereafter acquired:
(i) trademarks, trademark registrations, trade names, trade name registrations,
and trademark or trade name applications, including without limitation such as
are listed on the Schedule attached hereto and made a part hereof, as the same
may be amended from time to time, and (a) renewals thereof, (b) all income,
royalties, damages and payments now and hereafter due and/or payable with
respect thereto, including without limitation, damages and payments for past or
future infringements thereof, (c) the right to ▇▇▇ for past, present and future
infringements thereof, (d) all rights corresponding thereto throughout the
world, and (e) the goodwill of the business operated by Borrower connected with
and symbolized by any trademarks or trade names; (ii) copyrights, copyright
registrations and copyright applications, including without limitation such as
are listed on the Schedule attached hereto and made a part hereof, as the same
may be amended from time to time, and (a) renewals thereof, (b) all income,
royalties, damages and payments now and hereafter due and/or payable with
respect thereto, including without limitation, damages and payments for past or
future infringements thereof, (c) the right to ▇▇▇ for past, present and future
infringements thereof, and (d) all rights corresponding thereto throughout the
world; (iii) license agreements, including without limitation such as are
listed on the Schedule attached hereto and made a part hereof, and the right to
prepare for sale, sell and advertise for sale any Inventory now or hereafter
owned by Borrower and now or hereafter covered by such licenses; and (iv)
patents and patent applications, registered or pending, including without
limitation such as are listed on the Schedule attached hereto, together with
all income, royalties, shop rights, damages and payments thereto, the right to
▇▇▇ for infringements thereof, and all rights thereto throughout the world and
all reissues, divisions, continuations, renewals, extensions and
continuations-in-part thereof.
1.2 Other Terms. All accounting terms used in this Agreement, unless
otherwise indicated, shall have the meanings given to such terms in accordance
with GAAP. All other terms contained in this Agreement, unless otherwise
indicated, shall have
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the meanings provided by the Code, to the extent such terms are defined therein.
2. LOANS; INTEREST RATE AND OTHER CHARGES.
2.1 Total Facility. Upon the terms and conditions set forth herein and
provided that no Event of Default or event which, with the giving of notice or
the passage of time, or both, would constitute an Event of Default, shall have
occurred and be continuing, FINOVA shall, upon Borrower's request, make
advances to Borrower from time to time in an aggregate outstanding principal
amount not to exceed the Total Facility amount (the "TOTAL FACILITY") set forth
on the Schedule hereto, subject to deduction of reserves for accrued interest
and such other reserves as FINOVA deems proper from time to time, and less
amounts FINOVA may be obligated to pay in the future on behalf of Borrower. The
Schedule is an integral part of this Agreement and all references to "herein",
"herewith" and words of similar import shall for all purposes be deemed to
include the Schedule.
2.2 Loans. Advances under the Total Facility ("LOANS" and
individually, a "LOAN") shall be comprised of the amounts shown on the
Schedule.
2.3 Overlines; Overadvances. If at any time or for any reason the
outstanding amount of advances (including all Letters of Credit) extended or
issued pursuant hereto exceeds any of the dollar limitations ("OVERLINE") or
percentage limitations ("OVERADVANCE") in the Schedule, then Borrower shall,
upon FINOVA's demand, immediately pay to FINOVA, in cash, the full amount of
such Overline or Overadvance which, at FINOVA's option, may be applied to
reduce the outstanding principal balance of the Loans and/or cash collateralize
all or any part of any outstanding Letters of Credit. Without limiting
Borrower's obligation to repay to FINOVA on demand the amount of any Overline
or Overadvance, Borrower agrees to pay FINOVA interest on the outstanding
principal amount of any Overline or Overadvance, on demand, at the rate set
forth on the Schedule and applicable to the Revolving Credit Loans.
2.4 Loan Account. All advances made hereunder (including without
limitation all advances made by FINOVA under or in connection with any Letter
of Credit) shall be added to and deemed part of the Obligations when made.
FINOVA may from time to time charge all Obligations of Borrower to Borrower's
loan account with FINOVA.
2.5 Interest; Fees. Borrower shall pay FINOVA interest on the daily
outstanding balance of the Obligations at the per annum rate set forth on the
Schedule. Borrower shall also pay FINOVA the fees set forth on the Schedule.
2.6 Default Interest Rate. Upon the occurrence and during the
continuation of an Event of Default, Borrower shall pay FINOVA interest on the
daily outstanding balance of the Obligations at a rate per annum which is two
percent (2%) in excess of the rate which would otherwise be applicable thereto
pursuant to the Schedule.
2.7 Examination Fee. Borrower agrees to pay to FINOVA the Examination
Fee in the amount set forth on the Schedule in connection with each audit or
examination of Borrower performed by FINOVA prior to or after the date hereof.
Without limiting the generality of the foregoing, Borrower shall pay to FINOVA
an initial Examination Fee in an amount equal to the amount set forth on the
Schedule. Such initial Examination Fee shall be deemed fully earned at the time
of payment and due and payable upon the closing of this transaction, and shall
be deducted from any good faith deposit paid by Borrower to FINOVA prior to the
date of this Agreement.
2.8 Excess Interest.
(a) The contracted for rate of interest of the loan contemplated
hereby, without limitation, shall consist of the following: (i) the interest
rate set forth on the Schedule, calculated and applied to the principal balance
of the Obligations in accordance with the provisions of this Agreement; (ii)
interest after an Event of Default, calculated and applied to the amount of the
Obligations in accordance with the provisions hereof; and (iii) all Additional
Sums (as herein defined), if any. Borrower agrees to pay an effective
contracted for rate of interest which is the sum of the above-referenced
elements. The Examination Fee, attorneys fees, expert witness fees, letter of
credit fees, collateral monitoring fees, closing fees, facility fees,
Termination Fees, Minimum Interest Charges, other charges, goods, things in
action or any other sums or things of value paid or payable by Borrower
(collectively, the "ADDITIONAL SUMS"), whether pursuant to this Agreement or
any other documents or instruments in any way pertaining to this lending
transaction, or otherwise with respect to this lending transaction, that under
any applicable law may be deemed to be interest with respect to this lending
transaction, for the purpose of any applicable law that may limit the maximum
amount of interest to be charged with respect to this lending transaction,
shall be payable by Borrower as, and shall be deemed to be, additional interest
and for such purposes only, the agreed upon and "contracted for rate of
interest" of this lending transaction shall be deemed to be increased by the
rate of interest resulting from the inclusion of the Additional Sums.
(b) It is the intent of the parties to comply with the usury laws of
the State of Arizona (the "APPLICABLE USURY LAW"). Accordingly, it is agreed
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that notwithstanding any provisions to the contrary in this Agreement, or in
any of the documents securing payment hereof or otherwise relating hereto, in
no event shall this Agreement or such documents require the payment or permit
the collection of interest in excess of the maximum contract rate permitted by
the Applicable Usury Law (the "MAXIMUM INTEREST RATE"). In the event (a) any
such excess of interest otherwise would be contracted for, charged or received
from Borrower or otherwise in connection with the loan evidenced hereby, or (b)
the maturity of the Obligations is accelerated in whole or in part, or (c) all
or part of the Obligations shall be prepaid, so that under any of such
circumstances the amount of interest contracted for, shared or received in
connection with the loan evidenced hereby, would exceed the Maximum Interest
Rate, then in any such event (1) the provisions of this paragraph shall govern
and control, (2) neither Borrower nor any other Person now or hereafter liable
for the payment of the Obligations shall be obligated to pay the amount of such
interest to the extent that it is in excess of the Maximum Interest Rate, (3)
any such excess which may have been collected shall be either applied as a
credit against the then unpaid principal amount of the Obligations or refunded
to Borrower, at FINOVA's option, and (4) the effective rate of interest shall
be automatically reduced to the Maximum Interest Rate. It is further agreed,
without limiting the generality of the foregoing, that to the extent permitted
by the Applicable Usury Law; (x) all calculations of interest which are made
for the purpose of determining whether such rate would exceed the Maximum
Interest Rate shall be made by amortizing, prorating, allocating and spreading
during the period of the full stated term of the loan evidenced hereby, all
interest at any time contracted for, charged or received from Borrower or
otherwise in connection with such loan; and (y) in the event that the effective
rate of interest on the loan should at any time exceed the Maximum Interest
Rate, such excess interest that would otherwise have been collected had there
been no ceiling imposed by the Applicable Usury Law shall be paid to FINOVA
from time to time, if and when the effective interest rate on the loan
otherwise falls below the Maximum Interest Rate, to the extent that interest
paid to the date of calculation does not exceed the Maximum Interest Rate,
until the entire amount of interest which would otherwise have been collected
had there been no ceiling imposed by the Applicable Usury Law has been paid in
full. Borrower further agrees that should the Maximum Interest Rate be
increased at any time hereafter because of a change in the Applicable Usury
Law, then to the extent not prohibited by the Applicable Usury Law, such
increases shall apply to all indebtedness evidenced hereby regardless of when
incurred; but, again to the extent not prohibited by the Applicable Usury Law,
should the Maximum Interest Rate be decreased because of a change in the
Applicable Usury Law, such decreases shall not apply to the indebtedness
evidenced hereby regardless of when incurred.
2.9 Principal Payments; Proceeds of Collateral.
(a) Principal Payments. Except where evidenced by notes or other
instruments issued or made by Borrower to FINOVA specifically containing
payment provisions which are in conflict with this Section 2.9 (in which event
the conflicting provisions of said notes or other instruments shall govern and
control), that portion of the Obligations consisting of principal payable on
account of Loans shall be payable by Borrower to FINOVA immediately upon the
earliest of (i) the receipt by FINOVA or Borrower of any proceeds of any of the
Collateral, to the extent of said proceeds, (ii) the occurrence of an Event of
Default in consequence of which FINOVA elects to accelerate the maturity and
payment of such loans, or (iii) any termination of this Agreement pursuant to
Section 9.2 hereof; provided, however, that any Overadvance or Overline shall
be payable on demand pursuant to the provisions of Section 2.3 hereof.
(b) Collections. Until FINOVA notifies Borrower to the contrary,
Borrower may make collection of all Receivables for FINOVA and shall receive
all such payments or sums as trustee of FINOVA and immediately deliver all such
payments or sums to FINOVA in their original form, duly endorsed in blank or
cause the same to be deposited into a Blocked Account or Dominion Account.
FINOVA or its designee may, at any time, notify account debtors that the
Receivables have been assigned to FINOVA and of FINOVA's security interest
therein, and may collect the Receivables directly and charge the collection
costs and expenses to Borrower's loan account. Borrower agrees that, in
computing the charges under this Agreement, all items of payment shall be
deemed applied by FINOVA on account of the Obligations three (3) Business Days
after receipt by FINOVA of good funds which have been finally credited to
FINOVA's account, whether such funds are received directly from Borrower or
from the Blocked Account bank or the Dominion Account bank, pursuant to Section
2.9(c) hereof, and this provision shall apply regardless of the amount of the
Obligations outstanding or whether any Obligations are outstanding; provided,
that if any such good funds are received after 12:00 p.m. noon New York time on
any Business Day or at any time on any day not constituting a Business Day,
such funds shall be deemed received on the immediately following Business Day.
FINOVA is not, however, required to credit Borrower's account for the amount of
any item of payment which is unsatisfactory to FINOVA in its Permitted
Discretion and FINOVA may charge
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Borrower's loan account for the amount of any item of payment which is returned
to FINOVA unpaid.
(c) Establishment of a Lockbox Account or Dominion Account. Unless
Borrower shall be otherwise directed by FINOVA in writing, Borrower shall cause
all proceeds of Collateral to be deposited into a lockbox account, or such
other "blocked account" as FINOVA may require (each, a "BLOCKED ACCOUNT")
pursuant to an arrangement with such bank as may be selected by Borrower and be
acceptable to FINOVA which proceeds, unless otherwise provided herein, shall be
applied in payment of the Obligations in such order as FINOVA determines in its
sole discretion. Borrower shall issue to any such bank an irrevocable letter of
instruction directing said bank to transfer such funds so deposited to FINOVA,
either to any account maintained by FINOVA at said bank or by wire transfer to
appropriate account(s) of FINOVA. All funds deposited in a Blocked Account
shall immediately become the sole property of FINOVA and Borrower shall obtain
the agreement by such bank to waive any offset rights against the funds so
deposited. FINOVA assumes no responsibility for any Blocked Account
arrangement, including without limitation, any claim of accord and satisfaction
or release with respect to deposits accepted by any bank thereunder.
Alternatively, FINOVA may establish depository accounts in the name of FINOVA
at a bank or banks for the deposit of such funds (each, a "DOMINION ACCOUNT")
and Borrower shall deposit all proceeds of Receivables and all cash proceeds of
any sale of Inventory or, to the extent permitted herein, Equipment or cause
same to be deposited, in kind, in such Dominion Accounts of FINOVA in lieu of
depositing same to Blocked Accounts, and, unless otherwise provided herein, all
such funds shall be applied by FINOVA to the Obligations in such order as
FINOVA determines in its sole discretion.
(d) Payments Without Deductions. Borrower shall pay principal,
interest, and all other amounts payable hereunder, or under any other Loan
Document, without any deduction whatsoever, including, but not limited to, any
deduction for any setoff or counterclaim.
(e) Collection Days Upon Repayment. In the event Borrower repays the
Obligations in full at any time hereafter, such payment in full shall be
credited (conditioned upon final collection) to Borrower's loan account three
(3) Business Days after FINOVA's
receipt thereof.
(f) Monthly Accountings. FINOVA shall provide Borrower monthly with an
account of advances, charges, expenses and payments made pursuant to this
Agreement. Such account shall be deemed correct, accurate and binding on
Borrower and an account stated (except for reverses and reapplications of
payments made and corrections of errors discovered by FINOVA), unless Borrower
notifies FINOVA in writing to the contrary within thirty (30) days after each
account is rendered, describing the nature of any alleged errors or omissions.
2.10 Application of Collateral. Except as otherwise provided herein,
FINOVA shall have the continuing and exclusive right to apply or reverse and
re-apply any and all payments to any portion of the Obligations in such order
and manner as FINOVA shall determine in its sole discretion. To the extent that
Borrower makes a payment or FINOVA receives any payment or proceeds of the
Collateral for Borrower's benefit which is subsequently invalidated, declared
to be fraudulent or preferential, set aside or required to be repaid to a
trustee, debtor in possession, receiver or any other party under any bankruptcy
law, common law or equitable cause, or otherwise, then, to such extent, the
Obligations or part thereof intended to be satisfied shall be revived and
continue as if such payment or proceeds had not been received by FINOVA.
2.11 Application of Payments. The amount of all payments or amounts
received by FINOVA with respect to the Loan shall be applied to the extent
applicable under this Agreement: (i) first, to accrued interest through the
date of such payment, including any Default Interest; (ii) then, to any late
fees, overdue risk assessments, Examination Fee and expenses, collection fees
and expenses and any other fees and expenses due to FINOVA hereunder; and (iii)
last, the remaining balance, if any, to the unpaid principal balance of the
Loan; provided however, while an Event of Default exists under this Agreement,
or under any other Loan Document, each payment hereunder shall be (x) held as
cash collateral to secure Obligations relating to any Letters of Credit or
other contingent obligations arising under the Loan Documents and/or (y)
applied to amounts owed to FINOVA by Borrower as FINOVA in its sole discretion
may determine. In calculating interest and applying payments as set forth
above: (a) interest shall be calculated and collected through the date a
payment is actually applied by FINOVA under the terms of this Agreement; (b)
interest on the outstanding balance shall be charged during any grace period
permitted hereunder; (c) at the end of each month, all accrued and unpaid
interest and other charges provided for hereunder shall be added to the
principal balance of the Loan; and (d) to the extent that Borrower makes a
payment or FINOVA receives any payment or proceeds of the Collateral for
Borrower's benefit that is subsequently invalidated, set aside or required to
be repaid to any other Person, then, to such extent, the Obligations intended
to be satisfied shall be revived and continue as if such payment or proceeds
had not been received by FINOVA and FINOVA may adjust the Loan balances
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as FINOVA, in its sole discretion, deems appropriate under the circumstances.
3. SECURITY.
3.1 Security Interest in the Collateral. To secure the payment and
performance of the Obligations when due, Borrower hereby grants to FINOVA a
first priority security interest (subject only to Permitted Encumbrances) in
all of Borrower's now owned or hereafter acquired or arising Inventory,
Equipment, Receivables, life insurance policies and the proceeds thereof,
Trademarks, Copyrights, Licenses and Patents, Investment Property (as defined
in Section 9-115 of the Code) and General Intangibles, including, without
limitation, all of Borrower's Deposit Accounts, money, any and all property now
or at any time hereafter in FINOVA's possession (including claims and credit
balances), and all proceeds (including proceeds of any insurance policies,
proceeds of proceeds and claims against third parties), all products and all
books and records and computer data related to any of the foregoing (all of the
foregoing, together with all other property in which FINOVA may be granted a
lien or security interest, is referred to herein, collectively, as the
"COLLATERAL").
3.2 Perfection and Protection of Security Interest. Borrower shall, at
its expense, take all actions requested by FINOVA at any time to perfect,
maintain, protect and enforce FINOVA's first priority security interest and
other rights in the Collateral and the priority thereof from time to time,
including, without limitation, (i) executing and filing financing or
continuation statements and amendments thereof and executing and delivering
such documents and titles in connection with motor vehicles as FINOVA shall
require, all in form and substance satisfactory to FINOVA, (ii) delivering to
FINOVA warehouse receipts covering any portion of the Collateral located in
warehouses and for which warehouse receipts are issued, and transferring
Inventory to warehouses designated by FINOVA, (iii) placing notations on
Borrower's books of account to disclose FINOVA's security interest therein and
(iv) delivering to FINOVA all letters of credit on which Borrower is named
beneficiary. FINOVA may file, without Borrower's signature, one or more
financing statements disclosing FINOVA's security interest under this
Agreement. Borrower agrees that a carbon, photographic, photostatic or other
reproduction of this Agreement or of a financing statement is sufficient as a
financing statement. If any Collateral is at any time in the possession or
control of any warehouseman, bailee or any of Borrower's agents or processors,
Borrower shall notify such Person of FINOVA's security interest in such
Collateral and, upon FINOVA's request, instruct them to hold all such
Collateral for FINOVA's account subject to FINOVA's instructions. From time to
time, Borrower shall, upon FINOVA's request, execute and deliver confirmatory
written instruments pledging the Collateral to FINOVA, but Borrower's failure
to do so shall not affect or limit FINOVA's security interest or other rights
in and to the Collateral. Until the Obligations have been fully satisfied and
FINOVA's obligation to make further advances hereunder has terminated, FINOVA's
security interest in the Collateral shall continue in full force and effect.
3.3 Preservation of Collateral. FINOVA may, in its Permitted
Discretion, at any time discharge any lien or encumbrance on the Collateral or
bond the same, pay any insurance, maintain guards, pay any service bureau,
obtain any record or take any other action to preserve the Collateral and
charge the cost thereof to Borrower's loan account as an Obligation.
3.4 Insurance. Borrower will maintain and deliver evidence to FINOVA
of such insurance as is required by FINOVA, written by insurers, in amounts,
and with lender's loss payee, additional insured, and other endorsements,
satisfactory to FINOVA. All premiums with respect to such insurance shall be
paid by Borrower as and when due. Accurate and certified copies of the policies
shall be delivered by Borrower to FINOVA. If Borrower fails to comply with this
Section, FINOVA may (but shall not be required to) procure such insurance and
endorsements at Borrower's expense and charge the cost thereof to Borrower's
loan account as an Obligation.
3.5 Collateral Reporting; Inventory.
(a) Invoices. Neither Borrower nor its Factored Client shall re-date
any invoice or sale from the original date thereof or make sales on extended
terms beyond those customary in Borrower's industry, or otherwise extend or
modify the term of any Receivable. If Borrower or its Factored Client becomes
aware of any matter affecting any Receivable, including information affecting
the credit of the account debtor thereon, Borrower shall promptly notify FINOVA
in writing.
(b) Instruments. In the event any Receivable is or becomes evidenced
by a promissory note, trade acceptance or any other instrument for the payment
of money, Borrower shall immediately deliver such instrument to FINOVA
appropriately endorsed to FINOVA and, regardless of the form of any
presentment, demand, notice of dishonor, protest and notice of protest with
respect thereto, Borrower shall remain liable thereon until such instrument is
paid in full.
(c) Returns. For so long as no Event of Default has occurred and is
continuing and subject to the provisions of Section 3.6(b), if any account
debtor returns any Inventory to Borrower or to a Factored Client in the
ordinary course of its business, Borrower shall promptly determine the reason
for such return
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and promptly issue a credit memorandum to the account debtor (sending a copy to
FINOVA) in the appropriate amount. In the event any attempted return occurs
after the occurrence of any Event of Default, Borrower shall (i) hold the
returned Inventory in trust for FINOVA, (ii) segregate all returned Inventory
from all of Borrower's other property, (iii) conspicuously label the returned
Inventory as FINOVA's property, and (iv) immediately notify FINOVA of the
return of any Inventory, specifying the reason for such return, the location
and condition of the returned Inventory, and on FINOVA's request deliver such
returned Inventory to FINOVA.
(d) Neither Borrower nor its Factored Clients shall consign any
Inventory.
3.6 Receivables.
(a) Eligibility. (i) Borrower represents and warrants that each Receivable
covers and shall cover a bona fide sale or lease and delivery by it of goods or
the rendition by it of services in the ordinary course of its business, and
shall be for a liquidated amount and FINOVA's security interest shall not be
subject to any offset, deduction, counterclaim, rights of return or
cancellation, lien or other condition. If any representation or warranty herein
is breached as to any Receivable or any Receivable ceases to be an Eligible
Receivable for any reason other than payment thereof, then FINOVA may, in
addition to its other rights hereunder, designate any and all Receivables owing
by that account debtor as not Eligible Receivables; provided, that FINOVA shall
in any such event retain its security interest in all Receivables, whether or
not Eligible Receivables, until the Obligations have been fully satisfied and
FINOVA's obligation to provide loans hereunder has terminated.
(ii) FINOVA at any time shall be entitled to (i) establish and
increase or decrease reserves against Eligible Receivables, (ii) reduce the
advance rates in the Schedule or restore such advance rates to any level equal
to or below the advance rates set forth in the Schedule or (iii) impose
additional restrictions (or eliminate the same) to the standards of eligibility
set forth in the definitions of "Eligible Receivables" in the exercise of its
Permitted Discretion. FINOVA may but shall not be required to rely on the
schedules an/or reports delivered to FINOVA in connection herewith in
determining the then eligibility of Receivables and Inventory. Reliance thereon
by FINOVA from time to time shall not be deemed to limit the right of FINOVA to
revise advance rates or standards of eligibility as provided above.
(b) Disputes. Borrower shall notify FINOVA promptly of all disputes or
claims and settle or adjust such disputes or claims at no expense to FINOVA,
but no discount, credit or allowance shall be granted to any account debtor and
no returns of merchandise shall be accepted by Borrower without FINOVA's
consent, except for discounts, credits and allowances made or given in the
ordinary course of Borrower's business. FINOVA may, at any time after the
occurrence of an Event of Default, settle or adjust disputes or claims directly
with account debtors for amounts and upon terms which FINOVA considers
advisable in its reasonable credit judgment and, in all cases, FINOVA shall
credit Borrower's loan account with only the net amounts received by FINOVA in
payment of any Receivables.
3.7 Equipment. Borrower shall keep and maintain the Equipment in good
operating condition and repair and make all necessary replacements thereto to
maintain and preserve the value and operating efficiency thereof at all times
consistent with Borrower's past practice, ordinary wear and tear excepted.
Borrower shall not permit any item of Equipment to become a fixture (other than
a trade fixture) to real estate or an accession to other property.
3.8 Other Liens; No Disposition of Collateral. Borrower represents,
warrants and covenants that except for FINOVA's security interest, Permitted
Encumbrances, and such other liens, claims and encumbrances as may be permitted
by FINOVA in its sole discretion from time to time in writing, (a) all
Collateral is and shall continue to be owned by it free and clear of all liens,
claims and encumbrances whatsoever and (b) Borrower shall not, without FINOVA's
prior written approval, sell, encumber or dispose of or permit the sale,
encumbrance or disposal of any Collateral or all or any substantial part of any
of its other assets (or any interest of Borrower therein), except for the sale
of Inventory in the ordinary course of Borrower's business. In the event FINOVA
gives any such prior written approval with respect to any such sale of
Collateral, the same may be conditioned on the sale price being equal to, or
greater than, an amount acceptable to FINOVA. The proceeds of any such sales of
Collateral shall be remitted to FINOVA pursuant to this Agreement for
application to the Obligations.
3.9 Collateral Security. The Obligations shall constitute one loan
secured by the Collateral. FINOVA may, in its sole discretion, (i) exchange,
enforce, waive or release any of the Collateral, (ii) apply Collateral and
direct the order or manner of sale thereof as it may determine, and (iii)
settle, compromise, collect or otherwise liquidate any Collateral in any manner
without affecting its right to take any other action with respect to any other
Collateral.
3.10 Borrower's Factored Clients. Borrower recognizes and acknowledges
that there is no, and shall be no contractual relationship or other privity
between FINOVA and any of Borrower's Factored
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Clients and Borrower shall not communicate either orally, or in writing,
directly, or indirectly, explicitly, or by implication any privity or
obligation, of any nature running from FINOVA to any Factored Client.
4. CONDITIONS OF CLOSING.
4.1 Initial Advance. The obligation of FINOVA to make the initial
advance hereunder or to issue or arrange for the issuance of the initial Letter
of Credit hereunder is subject to the fulfillment, to the satisfaction of
FINOVA and its counsel, of each of the following conditions on or prior to the
date set forth on the Schedule:
(a) Loan Documents. FINOVA shall have received each of the following
Loan Documents: (i) the Agreement fully and properly executed by Borrower; (ii)
promissory notes in such amounts and on such terms and conditions as FINOVA
shall specify, executed by Borrower; (iii) Guaranties executed by each of the
Guarantors and/or Validity and Support Agreements executed by the applicable
parties; (iv) such security agreements, intellectual property assignments,
pledge agreements, mortgages and deeds of trust as FINOVA may require with
respect to this Agreement and any Guaranties, executed by each of the parties
thereto and, if applicable, duly acknowledged for recording or filing in the
appropriate governmental offices; (v) Subordination Agreements in form and
substance acceptable to FINOVA, executed by each of the Subordinating
Creditors, together with copies of all instruments subject thereto showing a
legend indicating such subordination; (vi) such Blocked Account or Dominion
Account agreements as it shall determine; and (vii) such other documents,
instruments and agreements in connection herewith as FINOVA shall require,
executed, certified and/or acknowledged by such parties as FINOVA shall
designate;
(b) Minimum Excess Availability. Borrower shall have Excess
Availability under the Revolving Credit Loans facility of not less than the
amount specified in the Schedule, after giving effect to the initial advance
hereunder and after giving effect to any applicable Loan Reserves against
borrowing availability under the Revolving Credit Loans.
(c) Terminations by Existing Lender. Borrower's existing lender(s)
shall have executed and delivered UCC termination statements and other
documentation evidencing the termination of its liens and security interests in
the assets of Borrower or a subordination agreement in form and substance
satisfactory to FINOVA in its sole discretion;
(d) Charter Documents. FINOVA shall have received copies of Borrower's
By-laws and Articles or Certificate of Incorporation, as amended, modified, or
supplemented to the Closing Date, certified by the Secretary of Borrower;
(e) Good Standing. FINOVA shall have received a certificate of
corporate status with respect to Borrower, dated within ten (10) days of the
Closing Date, by the Secretary of State of the state of incorporation of
Borrower, which certificate shall indicate that Borrower is in good standing in
such state;
(f) Foreign Qualification. FINOVA shall have received certificates of
corporate status with respect to Borrower and each other Loan Party, each dated
within ten (10) days of the Closing Date, issued by the Secretary of State of
each state in which such party's failure to be duly qualified or licensed would
have a material adverse effect on its financial condition or assets, indicating
that such party is in good standing;
(g) Authorizing Resolutions and Incumbency. FINOVA shall have received
a certificate from the Secretary of Borrower attesting to (i) the adoption of
resolutions of Borrower's Board of Directors, and shareholders or members if
necessary, authorizing the borrowing of money from FINOVA and execution and
delivery of this Agreement and the other Loan Documents to which Borrower is a
party, and authorizing specific officers of Borrower to execute same, and (ii)
the authenticity of original specimen signatures of such officers;
(h) Insurance. FINOVA shall have received the insurance certificates
and certified copies of policies required by Section 3.4 hereof, in form and
substance satisfactory to FINOVA and its counsel, together with an additional
insured endorsement in favor of FINOVA with respect to all liability policies
and a lender's loss payable endorsement in favor of FINOVA with respect to all
casualty and business interruption policies, each in form and substance
acceptable to FINOVA and its counsel;
(i) Title Insurance. FINOVA shall have received binding commitments to
issue such title insurance with respect to Collateral or security for
Guaranties which is comprised of real property as it shall determine;
(j) Searches; Certificates of Title. FINOVA shall have received
searches reflecting the filing of its financing statements and fixture filings
in such jurisdictions as it shall determine, and shall have received
certificates of title with respect to the Collateral which shall have been duly
executed in a manner sufficient to perfect all of the security interests
granted to FINOVA;
(k) Landlord, Bailee and Mortgagee Waivers. FINOVA shall have received
landlord, bailee and/or mortgagee waivers from the lessors, bailees
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and/or mortgagees of all locations where any Collateral
is located;
(l) Fees. Borrower shall have paid all fees payable by it on the
Closing Date pursuant to this Agreement;
(m) Opinion of Counsel. FINOVA shall have received an opinion of
Borrower's counsel covering such matters as FINOVA shall determine in its sole
discretion;
(n) Officer Certificate. FINOVA shall have received a certificate of
the President and the Chief Financial Officer or similar official of Borrower,
attesting to the accuracy of each of the representations and warranties of
Borrower set forth in this Agreement and the fulfillment of all conditions
precedent to the initial advance hereunder;
(o) Solvency Certificate. If requested, FINOVA shall have received a
signed certificate of the Borrower's duly elected Chief Financial Officer
concerning the solvency and financial condition of
Borrower, on FINOVA's standard form;
(p) Blocked Account. The Blocked Account referred to in Section
2.10(c) hereof shall have been established to the satisfaction of FINOVA in its
sole discretion;
(q) Environmental Assessment. If required by FINOVA, Borrower shall
have caused a Phase I Environmental Assessment to be conducted on the property
or properties owned or occupied by Borrower, all at Borrower's own expense and
the results of such assessment(s) shall have been in form and substance
satisfactory to FINOVA in its sole discretion. Such assessment(s) shall have
included, in FINOVA's discretion, core samplings, and shall have been conducted
by an environmental engineer acceptable to FINOVA;
(r) Environmental Certificate. FINOVA shall have received an
Environmental Certificate from Borrower, in form and substance satisfactory to
FINOVA in its discretion, with respect to all locations of Collateral;
(s) Search and References. FINOVA shall have received and approved the
results of UCC, tax lien, litigation, judgment, and bankruptcy searches
regarding Buyer, Borrower, Seller, Investors and such members of the senior
management of Seller as shall remain with Borrower, and shall have received
satisfactory customer, vendor and credit reference checks on Seller.
(t) Lease and Landlord's Consent. FINOVA shall require that the Lease
in favor of Borrower from Seller regarding Borrower's facility at the
location(s) listed in the Schedule shall be for a term (including renewal
options) through the Maturity Date. FINOVA shall further require that, prior to
the Closing Date, Seller enter in a Landlord's Consent Agreement and Estoppel
Certificate, in form and substance satisfactory to FINOVA to cure defaults
under such lease and continue in occupancy of such premises in the event of
defaults by Borrower pursuant either to the Lease or the Loan Documents.
(u) No Material Adverse Changes. Prior to the Closing Date, there
shall have occurred no material adverse change in the financial condition of
Seller or Borrower, or in the condition of the assets of Seller, from that
shown on the draft financial statements for Seller dated on the date set forth
in the Schedule. At the closing, Borrower shall deliver to FINOVA an officer's
certification confirming that Borrower is unaware of the existence of any such
material adverse change in Seller's financial condition.
(v) Material Agreements. FINOVA shall have received, reviewed and
approved all material agreements to which Borrower shall be a party, including
any such agreements of Seller which Borrower shall assume.
(w) Projections. If Finova so requests, Borrower shall submit cash
flow projections and pro forma balance sheet with adjusting entries (i) showing
that the proposed financing will provide sufficient funds for the Borrower's
projected working capital needs, and (ii) showing: (1) that the Borrower will
have reasonably sufficient capital for the conduct of its business following
the initial funding, and (2) that the Borrower will not incur debts beyond its
ability to pay such debts as they mature.
(x) Opinions. To the extent any Person other than Borrower shall be
parties to the Loan Documents, FINOVA reserves the right to require
satisfactory opinions of counsel for each such Person concerning the proper
organization of such Person and the due authorization, execution, delivery,
enforceability, validity and binding effect of the Loan Documents to which such
Person is a party. Each such opinion of counsel shall confirm, to the
satisfaction of FINOVA, that the opinion is being delivered to FINOVA at the
instruction of the party represented by such counsel, that FINOVA is entitled
to rely on such opinion and that for purposes of such reliance, FINOVA is
deemed to be in privity with the opining counsel.
(y) ADA Compliance. If necessary, as of the Closing Date, Borrower
shall be in compliance with the Americans with Disabilities Act of 1990
("ADA"), or, if any renovations of Borrower's facilities or modifications of
Borrower's employment practices shall be required to bring them into compliance
with the ADA, review and approval by FINOVA of Borrower's proposed plan to come
into such compliance. Borrower shall deliver
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representations and warranties to FINOVA concerning Borrower's compliance with
the ADA, and no evidence shall have come to the attention of FINOVA indicating
that Borrower is not in compliance with the ADA (except to the extent that
FINOVA has reviewed and approved Borrower's plan to come into compliance).
(y) Subordination and Intercreditor Agreements. FINOVA and each
Subordinating Creditor shall have entered into a Subordination Agreement, in
form and substance satisfactory to FINOVA. Without limiting the generality of
the foregoing, Seller shall enter into one or more Subordination Agreements
with FINOVA, in form and substance satisfactory to FINOVA, providing that
Seller's right to payments in respect of the Seller Subordinated Indebtedness
shall be subordinated in right of payment to the Loan.
(aa) Asset Appraisal. Borrower shall have provided to FINOVA, at
Borrower's sole cost and expense, an asset appraisal of all Borrower's fixed
assets upon which FINOVA shall be granted a first priority lien and security
interest, which appraisal must be acceptable to FINOVA in all respects.
(bb) Transaction Costs. Borrower shall provide to FINOVA a complete,
itemized summary of all transaction costs paid or incurred by any Person in
connection with the making of the Loan and the consummation of the Acquisition,
which transaction costs shall not exceed the amount set forth in the Schedule,
as well as appropriate documentation evidencing such costs and the payment
thereof. All such information must be acceptable to FINOVA, in FINOVA's sole
discretion, exercised in good faith.
(cc) Schedule Conditions. Borrower shall have complied with all
additional conditions precedent as set forth in the Schedule attached hereto.
(dd) Other Matters. All other documents and legal matters in
connection with the transactions contemplated by this Agreement shall have been
delivered, executed and recorded and shall be in form and substance
satisfactory to FINOVA and its counsel including, without limitation, each of
the items listed on the Closing Checklist attached as EXHIBIT 4.1 hereto.
4.2 Subsequent Advances. The obligation of FINOVA to make any advance
or issue or cause any Letter of Credit to be issued hereunder (including the
initial advance or Letter of Credit) shall be subject to the further conditions
precedent that, on and as of the date of such advance or Letter of Credit
issuance: (a) the representations and warranties of Borrower set forth in this
Agreement shall be accurate, before and after giving effect to such advance or
issuance and to the application of any proceeds thereof; (b) no Event of
Default and no event which, with notice or passage of time or both, would
constitute an Event of Default has occurred and is continuing, or would result
from such advance or issuance or from the application of any proceeds thereof;
(c) no material adverse change has occurred in the Borrower's business,
operations, financial condition, in the condition of the Collateral or other
assets of Borrower or in the prospect of repayment of the Obligations; and (d)
FINOVA shall have received such other approvals, opinions or documents as
FINOVA shall reasonably request.
5. REPRESENTATIONS AND WARRANTIES.
Borrower represents and warrants that:
5.1 Due Organization. It is a corporation duly organized, validly
existing and in good standing under the laws of the State set forth on the
Schedule, is qualified and authorized to do business and is in good standing in
all states in which such qualification and good standing are necessary in order
for it to conduct its business and own its property, and has all requisite
power and authority to conduct its business as presently conducted, to own its
property and to execute and deliver each of the Loan Documents to which it is a
party and perform all of its Obligations thereunder, and has not taken any
steps to wind-up, dissolve or otherwise liquidate its assets;
5.2 Other Names. Borrower has not, during the preceding five (5)
years, been known by or used any other corporate or fictitious name except as
set forth on the Schedule, nor has Borrower been the surviving corporation of a
merger or consolidation or acquired all or substantially all of the assets of
any Person during such time;
5.3 Due Authorization. The execution, delivery and performance by
Borrower of the Loan Documents to which it is a party have been authorized by
all necessary corporate action and do not and shall not constitute a violation
of any applicable law or of Borrower's Articles or Certificate of Incorporation
or By-Laws or any other document, agreement or instrument to which Borrower is
a party or by which Borrower or its assets are bound;
5.4 Binding Obligation. Each of the Loan Documents to which Borrower
is a party is the legal, valid and binding obligation of Borrower enforceable
against Borrower in accordance with its terms;
5.5 Intangible Property. Borrower possesses adequate assets, licenses,
patents, patent applications, copyrights, trademarks, trademark applications
and trade names for the present and planned future conduct of its business
without any known conflict with the rights of others, and each is valid and has
been duly registered or filed with the appropriate governmental authorities;
each of Borrower's patents, patent applications, copyrights, trademarks and
trademark applications which have been registered or filed with any
governmental
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authority (including the U.S. Patent and Trademark Office and the Library of
Congress) are listed by name, date and filing number on the Schedule;
5.6 Capital. Borrower's capitalization (which for purposes of this
representation shall include in the calculation of equity Indebtedness which is
fully subordinated to FINOVA on terms satisfactory to FINOVA) on the Closing
Date shall be no less than $750,000.00 and Borrower shall at all times have
capital sufficient to conduct its business, is able to pay its debts as they
mature, and owns property having a fair salable value greater than the amount
required to pay all of its debts (including contingent debts);
5.7 Material Litigation. Borrower has no pending or overtly threatened
litigation, actions or proceedings which would materially and adversely affect
its business, assets, operations, prospects or condition, financial or
otherwise, or the Collateral or any of FINOVA's interests therein;
5.8 Title; Security Interests of FINOVA. Borrower has good,
indefeasible and merchantable title to the Collateral and, upon the execution
and delivery of the Loan Documents, the filing of UCC-1 Financing Statements,
delivery of the certificate(s) evidencing any pledged securities, the filing of
any collateral assignments or security agreements regarding Borrower,
Trademarks, Copyrights, Licenses and/or Patents, if any, with the appropriate
governmental offices and the recording of any mortgages or deeds of trust with
respect to real property, in each case in the appropriate offices, this
Agreement and such documents shall create valid and perfected first priority
liens in the Collateral, subject only to Permitted Encumbrances;
5.9 Restrictive Agreements; Labor Contracts. Borrower is not a party
or subject to any contract or subject to any charge, corporate restriction,
judgment, decree or order materially and adversely affecting its business,
assets, operations, prospects or condition, financial or otherwise, or which
restricts its right or ability to incur Indebtedness, and it is not party to
any labor dispute. In addition, no labor contract is scheduled to expire during
the Initial Term of this Agreement, except as disclosed to FINOVA in writing
prior to the date hereof;
5.10 Laws. Borrower is not in violation of any applicable statute,
regulation, ordinance or any order of any court, tribunal or governmental
agency, in any respect materially and adversely affecting the Collateral or its
business, assets, operations, prospects or condition, financial or otherwise;
5.11 Consents. Borrower has obtained or caused to be obtained or
issued any required consent of a governmental agency or other Person in
connection with the financing contemplated hereby;
5.12 Defaults. Borrower is not in default with respect to any note,
indenture, loan agreement, mortgage, lease, deed or other agreement to which it
is a party or by which it or its assets are bound, nor has any event occurred
which, with the giving of notice or the lapse of time, or both, would cause
such a default;
5.13 Financial Condition. The Prepared Financials fairly present
Borrower's financial condition and results of operations and those of such
other Persons described therein as of the date thereof in accordance with GAAP;
there are no material omissions from the Prepared Financials or other facts or
circumstances not reflected in the Prepared Financials; and there has been no
material and adverse change in such financial condition or operations since the
date of the initial Prepared Financials delivered to FINOVA hereunder;
5.14 ERISA. None of Borrower, any ERISA Affiliate, or any Plan is or
has been in violation of any of the provisions of ERISA, any of the
qualification requirements of IRC Section 401(a) or any of the published
interpretations thereunder, nor has Borrower or any ERISA Affiliate received
any notice to such effect. No notice of intent to terminate a Plan has been
filed under Section 4041 of ERISA, nor has any Plan been terminated under
ERISA. The PBGC has not instituted proceedings to terminate, or appointed a
trustee to administer, a Plan. No lien upon the assets of Borrower has arisen
with respect to a Plan. No prohibited transaction or Reportable Event has
occurred with respect to a Plan. Neither Borrower nor any ERISA Affiliate has
incurred any withdrawal liability with respect to any Multiemployer Plan.
Borrower and each ERISA Affiliate have made all contributions required to be
made by them to any Plan or Multiemployer Plan when due. There is no
accumulated funding deficiency in any Plan, whether or not waived;
5.15 Taxes. Borrower has filed all tax returns and such other reports
as it is required by law to file and has paid or made adequate provision for
the payment on or prior to the date when due of all taxes, assessments and
similar charges that are due and payable;
5.16 Locations; Federal Tax ID No. Borrower's chief executive office
and the offices and locations where it keeps the Collateral (except for
Inventory in transit) are at the locations set forth on the Schedule, except to
the extent that such locations may have been changed after notice to FINOVA in
accordance with Section 6.4 hereof; Borrower's federal tax identification
number is as shown on the Schedule;
5.17 Business Relationships. There exists no actual or threatened
termination, cancellation or limitation of, or any modification or change in,
the
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business relationship between Borrower and any customer or any group of
Factored Clients whose receivables individually or in the aggregate are
material to the business of Borrower, and there exists no present condition or
state of facts or circumstances which would materially and adversely affect
Borrower or prevent Borrower from conducting such business after the
consummation of the transactions contemplated by this Agreement in
substantially the same manner in which it has heretofore been conducted;
5.18 Factoring Agreements. All of Borrower's factoring agreements (which shall
be substantially in the form attached hereto as EXHIBIT A) with its Factored
clients are valid and enforceable and Borrower has free and clear title to all
Receivables purchased by Borrower from its Factored Clients and Borrower has a
duly recorded and perfected first and prior security interest in all of the
Receivables of the Factored Clients (and if not a prior security interest such
senior lienor has subordinated its lien in favor of Borrower and its secured
lender on terms fully satisfactory to FINOVA) and there are no offsets,
defenses or counterclaims against Borrower in favor of any Factored Clients.
Borrower will immediately advise FINOVA of any termination by a Factored Client
or by Borrower of a factoring agreement.
5.19 Reaffirmations. Each request for a loan made by Borrower pursuant
to this Agreement shall constitute (i) an automatic representation and warranty
by Borrower to FINOVA that there does not then exist any Event of Default and
(ii) a reaffirmation as of the date of said request of all of the
representations and warranties of Borrower contained in this Agreement and the
other Loan Documents.
6. COVENANTS.
6.1 Affirmative Covenants. Borrower covenants that, so long as any
Obligation remains outstanding and this Agreement is in effect, it shall:
6.1.1 Taxes. File all tax returns and pay or make adequate
provision for the payment of all taxes, assessments and other charges on or
prior to the date when due;
6.1.2 Notice of Litigation. Promptly notify FINOVA in writing of
any litigation, suit or administrative proceeding which may materially and
adversely affect the Collateral or Borrower's business, assets, operations,
prospects or condition, financial or otherwise, whether or not the claim is
covered by insurance;
6.1.3 ERISA. Notify FINOVA in writing (i) promptly upon the
occurrence of any event described in Paragraph 4043 of ERISA, other than a
termination, partial termination or merger of a Plan or a transfer of a Plan's
assets and (ii) prior to any termination, partial termination or merger of a
Plan or a transfer of a Plan's assets;
6.1.4 Change in Location. Notify FINOVA in writing forty-five (45)
days prior to any change in the location of Borrower's chief executive office
or the location of any Collateral, or Borrower's opening or closing of any
other place of business;
6.1.5 Corporate Existence. Maintain its corporate existence and
its qualification to do business and good standing in all states necessary for
the conduct of its business and the ownership of its property and maintain
adequate assets, licenses, patents, copyrights, trademarks and trade names for
the conduct of its business;
6.1.6 Labor Disputes. Promptly notify FINOVA in writing of any
labor dispute to which Borrower is or may become subject and the expiration of
any labor contract to which Borrower is a party or bound;
6.1.7 Violations of Law. Promptly notify FINOVA in writing of any
violation of any law, statute, regulation or ordinance of any governmental
entity, or of any agency thereof, applicable to Borrower which may materially
and adversely affect the Collateral or Borrower's business, assets, prospects,
operations or condition, financial or otherwise;
6.1.8 Defaults. Notify FINOVA in writing within five (5) Business
Days of Borrower's default under any note, indenture, loan agreement, mortgage,
lease or other agreement to which Borrower is a party or by which Borrower is
bound, or of any other default under any Indebtedness of Borrower or of a
default by a Factored Client under Factored Client's factoring agreement with
Borrower;
6.1.9 Capital Expenditures. Promptly notify FINOVA in writing of
the making of any Capital Expenditure materially affecting Borrower's business,
assets, prospects, operations or condition, financial or otherwise, except to
the extent permitted in the Schedule;
6.1.10 Books and Records. Keep adequate records and books of
account with respect to its business activities in which proper entries are
made in accordance with GAAP, reflecting all of its financial transactions;
6.1.11 Leases; Warehouse Agreements. Provide FINOVA with (i)
copies of all agreements between Borrower and any landlord, warehouseman or
bailee which owns any premises at which any Collateral may, from time to time,
be located (whether for processing, storage or otherwise), and (ii) without
limiting the landlord, bailee and/or mortgagee waivers to be provided pursuant
to Section 4.1(j) hereof, additional landlord, bailee and/or mortgagee waivers
in
- 16 -
form acceptable to FINOVA with respect to all locations where any Collateral is
hereafter located;
6.1.12 Additional Documents. At FINOVA's request, promptly execute
or cause to be executed and delivered to FINOVA any and all documents,
instruments or agreements deemed necessary by FINOVA to facilitate the
collection of the Obligations or the Collateral or otherwise to give effect to
or carry out the terms or intent of this Agreement or any of the other Loan
Documents. Without limiting the generality of the foregoing, if any of the
Receivables arise out of a contract with the United States of America or any
department, agency, subdivision or instrumentality thereof, Borrower shall
promptly notify FINOVA of such fact in writing and shall execute any
instruments and take any other action required or requested by FINOVA to comply
with the provisions of the Federal Assignment of Claims Act; and
6.1.13 Financial Covenants. Comply with the financial covenants
set forth on the Schedule.
6.2 Negative Covenants. Without FINOVA's prior written consent, which
consent FINOVA may withhold in its sole discretion, so long as any Obligation
remains outstanding and this Agreement is in effect, Borrower shall not:
6.2.1 Mergers. Merge or consolidate with or acquire any other
Person, or make any other material change in its capital structure or in its
business or operations which might adversely affect the repayment of the
Obligations;
6.2.2 Loans. Make advances, loans or extensions of credit to, or
invest in, any Person, except for loans or cash advances to employees which are
permitted in the Schedule;
6.2.3 Dividends. Declare or pay cash dividends upon any of its
stock or distribute any of its property or redeem, retire, purchase or acquire
directly or indirectly any of its stock;
6.2.4 Adverse Transactions. Enter into any transaction which
materially and adversely affects the Collateral or its ability to repay the
Obligations in full as and when due;
6.2.5 Indebtedness of Others. Guarantee or become directly or
contingently liable for the Indebtedness of any Person, except by endorsement
of instruments for deposit and except for the existing guarantees made by
Borrower prior to the date hereof, if any, which are set forth in the Schedule;
6.2.6 Repurchase. Make a sale to any customer on a ▇▇▇▇-and-hold,
guaranteed sale, sale and return, sale on approval, consignment, or any other
repurchase or return basis;
6.2.7 Name. Use any corporate or fictitious name other than its
corporate name as set forth in its Articles or Certificate of Incorporation on
the date hereof or as set forth on the Schedule;
6.2.8 Prepayment. Prepay any Indebtedness other than trade
payables and other than the Obligations;
6.2.9 Capital Expenditure. Make or incur any Capital Expenditure
if, after giving effect thereto, the aggregate amount of all Capital
Expenditures by Borrower in any fiscal year would exceed the amount set forth
on the Schedule;
6.2.10 Compensation. Pay total compensation, including salaries,
withdrawals, fees, bonuses, commissions, drawing accounts and other payments,
whether directly or indirectly, in money or otherwise, during any fiscal year
to all of Borrower's executives, officers and directors (or any relative
thereof) in an amount in excess of the amount set forth on the Schedule;
6.2.11 Indebtedness. Create, incur, assume or permit to exist any
Indebtedness (including Indebtedness in connection with Capital Leases) in
excess of the amount set forth on the Schedule, other than (i) the Obligations,
(ii) trade payables and other contractual obligations to suppliers and
customers incurred in the ordinary course of business, and (iii) other
Indebtedness existing on the date of this Agreement and reflected in the
Prepared Financials (except Indebtedness paid on the date of this Agreement
from proceeds of the initial advances hereunder), and (iv) Subordinated Debt;
6.2.12 Affiliate Transactions. Except as set forth below, sell,
transfer, distribute or pay any money or property to any Affiliate, or invest
in (by capital contribution or otherwise) or purchase or repurchase any stock
or Indebtedness, or any property, of any Affiliate (except that provided there
does not exist an event of default, Borrower may pay interest payments on that
Indebtedness to Medley Credit Acceptance Corporation which is subordinated to
FINOVA on terms satisfactory to FINOVA), or become liable on any guaranty of
the indebtedness, dividends or other obligations of any Affiliate.
Notwithstanding the foregoing, Borrower may pay compensation permitted by
Section 6.2.10 to employees who are Affiliates and, if no Event of Default has
occurred, Borrower may (i) engage in transactions with Affiliates in the normal
course of business, in amounts and upon terms which are fully disclosed to
FINOVA and which are no less favorable to Borrower than would be obtainable in
a comparable arm's length transaction with a Person who is not an Affiliate,
and (ii) make payments to a Subordinating Creditor that is an Affiliate,
subject to and only to the extent expressly permitted in the Subordination
- 17 -
Agreement between such Subordinating Creditor and FINOVA;
6.2.13 Nature of Business. Enter into any new business or make any
material change in any of Borrower's business objectives, purposes or
operations;
6.2.14 FINOVA's Name. Use the name of FINOVA in connection with
any of Borrower's business or activities including without limitation with its
Factored Clients, except in connection with internal business matters or as
required in dealings with governmental agencies and financial institutions or
with trade creditors of Borrower, solely for credit reference purposes; or
6.2.15 Margin Security. Borrower will not (and has not in the
past) engaged principally, or as one of its important activities, in the
business of extending credit for the purpose of purchasing or carrying margin
stock (within the meaning of Regulation G or Regulation U issued by the Board
of Governors of the Federal Reserve System), and no proceeds of any Loan or
other advance will be used to purchase or carry any margin stock or to extend
credit to others for the purpose of purchasing or carrying any margin stock, or
in any manner which might cause such Loan or other advance or the application
of such proceeds to violate (or require any regulatory filing under) Regulation
G, Regulation T, Regulation U, Regulation X or any other regulation of the
Board of Governors of the Federal Reserve System, in each case as in effect on
the date or dates of such Loan or other advance and such use of proceeds.
Further, no proceeds of any Loan or other advance will be used to acquire any
security of a class which is registered pursuant to Section 12 of the
Securities Exchange Act of 1934.
6.2.16 Real Property. Purchase or acquire any real property
without FINOVA's prior written consent, a condition of which consent shall
include delivery of appropriate environmental reports and analysis, in form and
substance satisfactory to FINOVA and its counsel.
7. DEFAULT AND REMEDIES.
7.1 Events of Default. Any one or more of the following events shall
constitute an Event of Default under this Agreement:
(a) Borrower fails to pay when due and payable any portion of the
Obligations at stated maturity, upon acceleration or otherwise;
(b) Borrower or any other Loan Party fails or neglects to perform,
keep, or observe any Obligation including, but not limited to, any term,
provision, condition, covenant or agreement contained in any Loan Document to
which Borrower or such other Loan Party is a party;
(c) Any material adverse change occurs in Borrower's business, assets,
operations, prospects or condition, financial or otherwise;
(d) The prospect of repayment of any portion of the Obligations or the
value or priority of FINOVA's security interest in the Collateral is materially
impaired;
(e) Any portion of Borrower's assets is seized, attached, subjected to
a writ or distress warrant, is levied upon or comes into the possession of any
judicial officer;
(f) Borrower shall generally not pay its debts as they become due or
shall enter into any agreement (whether written or oral), or offer to enter
into any agreement, with all or a significant number of its creditors regarding
any moratorium or other indulgence with respect to its debts or the
participation of such creditors or their representatives in the supervision,
management or control of the business of Borrower;
(g) Any bankruptcy or other insolvency proceeding is commenced by
Borrower, or any such proceeding is commenced against Borrower and remains
undischarged or unstayed for forty-five (45) days;
(h) Any notice of lien or levy or an assessment in a material amount
is filed of record with respect to any of Borrower's assets;
(i) Any judgments which are not covered by adequate insurance are
entered against Borrower in an aggregate amount exceeding $25,000 in any fiscal
year;
(j) Any default shall occur under (i) any material agreement between
Borrower and any third party including, without limitation, any default which
would result in a right by such third party to accelerate the maturity of any
Indebtedness of Borrower to such third party, or (ii) any Subordinated Debt;
(k) Any representation or warranty made or deemed to be made by
Borrower, any Affiliate or any other Loan Party in any Loan Document or any
other statement, document or report made or delivered to FINOVA in connection
therewith shall prove to have been misleading in any material respect;
(l) Any Guarantor dies, terminates or attempts to terminate its
Guaranty or any security therefor or becomes subject to any bankruptcy or other
insolvency proceeding;
(m) Any Prohibited Transaction or Reportable Event shall occur with
respect to a Plan which could have a material adverse effect on the financial
condition of Borrower; any lien upon the assets of Borrower in connection with
any Plan shall
- 18 -
arise; Borrower or any of its ERISA Affiliates shall fail to make full payment
when due of all amounts which Borrower or any of its ERISA Affiliates may be
required to pay to any Plan or any Multiemployer Plan as one or more
contributions thereto; Borrower or any of its ERISA Affiliates creates or
permits the creation of any accumulated funding deficiency, whether or not
waived; or
(n) Any transfer of more than ten percent (10%) of the issued and
outstanding shares of common stock or other evidence of ownership of Borrower
other than a transfer to Medley Credit Acceptance Corporation.
NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN, FINOVA RESERVES THE
RIGHT TO CEASE MAKING ANY LOANS DURING ANY CURE PERIOD STATED ABOVE, AND
THEREAFTER IF AN EVENT OF DEFAULT HAS OCCURRED.
7.2 Remedies. Upon the occurrence of an Event of Default, FINOVA may,
at its option and in its sole discretion and in addition to all of its other
rights under the Loan Documents, cease making Loans, terminate this Agreement
and/or declare all of the Obligations to be immediately payable in full.
Borrower agrees that FINOVA shall also have all of its rights and remedies
under applicable law, including, without limitation, the default rights and
remedies of a secured party under the Code, and upon the occurrence of an Event
of Default Borrower hereby consents to the appointment of a receiver by FINOVA
in any action initiated by FINOVA pursuant to this Agreement and to the
jurisdiction and venue set forth in Section 9.25 hereof, and Borrower waives
notice and posting of a bond in connection therewith. Further, FINOVA may, at
any time, take possession of the Collateral and keep it on Borrower's premises,
at no cost to FINOVA, or remove any part of it to such other place(s) as FINOVA
may desire, or Borrower shall, upon FINOVA's demand, at Borrower's sole cost,
assemble the Collateral and make it available to FINOVA at a place reasonably
convenient to FINOVA. FINOVA may sell and deliver any Collateral at public or
private sales, for cash, upon credit or otherwise, at such prices and upon such
terms as FINOVA deems advisable, at FINOVA's discretion, and may, if FINOVA
deems it reasonable, postpone or adjourn any sale of the Collateral by an
announcement at the time and place of sale or of such postponed or adjourned
sale without giving a new notice of sale. Borrower agrees that FINOVA has no
obligation to preserve rights to the Collateral or ▇▇▇▇▇▇▇▇ any Collateral for
the benefit of any Person. FINOVA is hereby granted a license or other right to
use, without charge, Borrower's labels, patents, copyrights, name, trade
secrets, trade names, trademarks and advertising matter, or any similar
property, in completing production, advertising or selling any Collateral and
Borrower's rights under all licenses and all franchise agreements shall inure
to FINOVA's benefit. Any requirement of reasonable notice shall be met if such
notice is mailed postage prepaid to Borrower at its address set forth in the
heading to this Agreement at least five (5) days before sale or other
disposition. The proceeds of sale shall be applied, first, to all attorneys
fees and other expenses of sale, and second, to the Obligations in such order
as FINOVA shall elect, in its sole discretion. FINOVA shall return any excess
to Borrower and Borrower shall remain liable for any deficiency to the fullest
extent permitted by law.
7.3 Standards for Determining Commercial Reasonableness. Borrower and
FINOVA agree that the following conduct by FINOVA with respect to any
disposition of Collateral shall conclusively be deemed commercially reasonable
(but other conduct by FINOVA, including, but not limited to, FINOVA's use in
its sole discretion of other or different times, places and manners of noticing
and conducting any disposition of Collateral shall not be deemed unreasonable):
Any public or private disposition: (i) as to which on no later than the fifth
calendar day prior thereto written notice thereof is mailed or personally
delivered to Borrower and, with respect to any public disposition, on no later
than the fifth calendar day prior thereto notice thereof describing in general
nonspecific terms, the Collateral to be disposed of is published once in a
newspaper of general circulation in the county where the sale is to be
conducted (provided that no notice of any public or private disposition need be
given to the Borrower or published if the Collateral is perishable or threatens
to decline speedily in value or is of a type customarily sold on a recognized
market); (ii) which is conducted at any place designated by FINOVA, with or
without the Collateral being present; and (iii) which commences at any time
between 8:00 a.m. and 5:00 p.m. Without limiting the generality of the
foregoing, Borrower expressly agrees that, with respect to any disposition of
accounts, instruments and general intangibles, it shall be commercially
reasonable for FINOVA to direct any prospective purchaser thereof to ascertain
directly from Borrower any and all information concerning the same, including,
but not limited to, the terms of payment, aging and delinquency, if any, the
financial condition of any obligor or account debtor thereon or guarantor
thereof, and any collateral therefor.
8. EXPENSES AND INDEMNITIES.
8.1 Expenses. Borrower covenants that, so long as any Obligation
remains outstanding and this Agreement remains in effect, it shall promptly
reimburse FINOVA for all costs, fees and expenses incurred by FINOVA in
connection with the negotiation, preparation, execution, delivery,
administration and enforcement of each of the Loan Documents,
- 19 -
including, but not limited to, the reasonable attorneys' and paralegals' fees
of in-house and outside counsel, expert witness fees, lien, title search and
insurance fees, appraisal fees, all charges and expenses incurred in connection
with any and all environmental reports and environmental remediation
activities, and all other costs, expenses, taxes and filing or recording fees
payable in connection with the transactions contemplated by this Agreement,
including without limitation all such costs, fees and expenses as FINOVA shall
incur or for which FINOVA shall become obligated in connection with (i) any
inspection or verification of the Collateral, (ii) any proceeding relating to
the Loan Documents or the Collateral, (iii) actions taken with respect to the
Collateral and FINOVA's security interest therein, including, without
limitation, the defense or prosecution of any action involving FINOVA and
Borrower or any third party, (iv) enforcement of any of FINOVA's rights and
remedies with respect to the Obligations or Collateral and (v) consultation
with FINOVA's attorneys and participation in any workout, bankruptcy or other
insolvency or other proceeding involving any Loan Party or any Affiliate,
whether or not suit is filed or the issues are peculiar to federal bankruptcy
or state insolvency laws. Borrower shall also pay all FINOVA charges in
connection with bank wire transfers, forwarding of loan proceeds, deposits of
checks and other items of payment, returned checks, establishment and
maintenance of lockboxes and other Blocked Accounts, and all other bank and
administrative matters, in accordance with FINOVA's schedule of bank and
administrative fees and charges in effect from time to time.
8.2 Environmental Matters.
(a) Definitions. The following definitions apply to the provisions of
this Section 8.2: (a) the term "APPLICABLE LAW" shall include, but shall not be
limited to, all local, state and/or federal laws, rules, regulations or
ordinances, whether currently in existence or hereafter enacted, which govern,
to the extent applicable to the Property or to Borrower, (i) the existence,
cleanup and/or remedy of contamination on real property; (ii) the protection of
the environment from soil, air or water pollution, or from spilled, deposited
or otherwise emplaced contamination; (iii) the emission or discharge of
hazardous substances into the environment; (iv) the control of hazardous
wastes; or (v) the use, generation, transport, treatment, removal or recovery
of Hazardous Substances; (b) the term "HAZARDOUS SUBSTANCE" shall mean (i) any
oil, flammable substance, explosives, radioactive materials, hazardous wastes
or substances, toxic wastes or substances or any other wastes, materials or
pollutants which either pose a hazard to the Property or to persons on or about
the Property or cause the Property to be in violation of any Applicable Law;
(ii) asbestos in any form which is or could become friable, urea formaldehyde
foam insulation, transformers or other equipment which contain dielectric fluid
containing levels of polychlorinated biphenyls, or radon gas; (iii) any
chemical, material or substance defined as or included in the definition of
"hazardous substances," "waste," "hazardous wastes," "hazardous materials,"
"extremely hazardous waste," "restricted hazardous waste," or "toxic
substances" or words of similar import under any Applicable Law; ; (iv) any
other chemical, material or substance, exposure to which is prohibited, limited
or regulated by any governmental authority which may or could pose a hazard to
the health or safety of the occupants of the Property or the owners and/or
occupants of property adjacent to or surrounding the Property, or any other
person coming upon the Property or adjacent property; and (v) any other
chemical, materials or substance which may or could pose a hazard to the
environment; and (c) the term "PROPERTY" shall mean all real property, wherever
located, in which Borrower or any Affiliate of Borrower has any right, title or
interest, whether now existing or hereafter arising, and including, without
limitation, as owner, lessor or lessee.
(b) Covenants and Representations. (1) Borrower represents and
warrants that there have not been during the period of Borrower's possession of
any interest in the Property and, to the best of its knowledge after reasonable
inquiry, there have not been at any other times, any activities on the Property
involving, directly or indirectly, the use, generation, treatment, storage or
disposal of any Hazardous Substances except in compliance with Applicable Law
(i) under, on or in the land included in the Property, whether contained in
soil, tanks, sumps, ponds, lagoons, barrels, cans or other containments,
structures or equipment, (ii) incorporated in the buildings, structures or
improvements included in the Property, including any building material
containing asbestos, or (iii) used in connection with any operations on or in
the Property. (2) Without limiting the generality of the foregoing and to the
extent not included within the scope of this Section 8.2(b), Borrower
represents and warrants that it is in full compliance with Applicable Law and
has received no notice from any Person or any governmental agency or other
entity of any violation by Borrower or its Affiliates of any Applicable Law.
(3) Borrower shall be solely responsible for and agrees to indemnify FINOVA,
protect and defend FINOVA with counsel reasonably acceptable to FINOVA, and
hold FINOVA harmless from and against any claims, actions, administrative
proceedings, judgments, damages, punitive damages, penalties, fines, costs,
liabilities (including sums paid in settlements of claims), interest or losses,
attorneys' fees (including any fees and expenses incurred in enforcing this
indemnity), consultant fees, expert fees, and other out-of-pocket costs or
expenses actually incurred by FINOVA (collectively, the "ENVIRONMENTAL
- 20 -
COSTS"), that may, at any time or from time to time, arise directly or
indirectly from or in connection with: (i) the presence, suspected presence,
release or suspected release of any Hazardous Substance whether into the air,
soil, surface water or groundwater of or at the Property, or any other
violation of Applicable Law, or (ii) any breach of the foregoing
representations and covenants; except to the extent any of the foregoing result
from the actions of FINOVA, its employees, agents and representatives. All
Environmental Costs incurred or advanced by FINOVA shall be deemed to be made
by FINOVA in good faith and shall constitute Obligations hereunder.
9. MISCELLANEOUS.
9.1 Examination of Records; Financial Reporting.
(a) Examinations. FINOVA shall at all reasonable times during normal
working hours have full access to and the right to examine, audit, make
abstracts and copies from and inspect Borrower's records, files, books of
account and all other documents, instruments and agreements relating to the
Collateral and the right to check, test and appraise the Collateral. Borrower
shall deliver to FINOVA any instrument necessary for FINOVA to obtain records
from any service bureau maintaining records for Borrower. All instruments and
certificates prepared by Borrower showing the value of any of the Collateral
shall be accompanied, upon FINOVA's request, by copies of related purchase
orders and invoices. FINOVA may, at any time after the occurrence of an Event
of Default, remove from Borrower's premises Borrower's books and records (or
copies thereof) or require Borrower to deliver such books and records or copies
to FINOVA. FINOVA may, without expense to FINOVA, use such of Borrower's
personnel, supplies and premises as may be reasonably necessary for maintaining
or enforcing FINOVA's security interest.
(b) Reporting Requirements. Borrower shall furnish FINOVA, upon
request, such information and statements as FINOVA shall request from time to
time regarding Borrower's business affairs, financial condition, the results of
its operations, contracts and agreements and financial and other information
with respect to its Factored Clients. Without limiting the generality of the
foregoing, Borrower shall provide FINOVA with: (i) FINOVA's standard form
collateral and loan report, daily, and upon FINOVA's request, copies of sales
journals, cash receipt journals, and deposit slips; (ii) upon FINOVA's request,
copies of sales invoices, customer statements and credit memoranda issued,
remittance advices and reports; (iii) copies of shipping and delivery
documents, upon request; (iv) on or prior to the date set forth on the
Schedule, monthly agings (aged from invoice date) and reconciliations of
Receivables (with listings of concentrated accounts), payables reports,
inventory reports, compliance certificates and unaudited financial statements
with respect to the prior month prepared on a basis consistent with such
statements prepared in prior months and otherwise in accordance with GAAP; (v)
audited annual consolidated and consolidating financial statements, prepared in
accordance with GAAP applied on a basis consistent with the most recent
Prepared Financials provided to FINOVA by Borrower, including balance sheets,
income and cash flow statements, accompanied by the unqualified report thereon
of independent certified public accountants acceptable to FINOVA, as soon as
available, and in any event, within ninety (90) days after the end of each of
Borrower's fiscal years; and (vi) such certificates relating to the foregoing
as FINOVA may request, including, without limitation, a monthly certificate
from the president and the chief financial officer of Borrower showing
Borrower's compliance with each of the financial covenants set forth in this
Agreement, and stating whether any Event of Default has occurred or event
which, with giving of notice or the passage of time, or both, would constitute
an Event of Default, and if so, the steps being taken to prevent or cure such
Event of Default. All reports or financial statements submitted by Borrower
shall be in reasonable detail and shall be certified by the principal financial
officer of Borrower as being complete and correct.
(c) Guarantor's Financial Statements and Tax Returns. Borrower shall
cause each of the Guarantors to deliver to FINOVA such Guarantor's annual
financial statement (in form acceptable to FINOVA) and a copy of such
Guarantor's federal income tax return with respect to the corresponding year,
in each case on the date when such tax return is due or, if earlier, on the
date when available.
9.2 Term; Termination.
(a) Term. The Initial Term of the Revolving Credit Loans facility and
the obligation of FINOVA to made advances with respect thereto in accordance
with this Agreement shall be as set forth on the Schedule, and the Revolving
Credit Loans facility and this Agreement shall be automatically renewed for one
or more Renewal Term(s) as set forth in the Schedule, unless earlier terminated
as provided herein.
(b) Prior Notice. Each party shall have the right to terminate this
Agreement effective at the end of the Initial Term or at the end of any Renewal
Term by giving the other party written notice not less than sixty (60) days
prior to the effective date of such termination, by registered or certified
mail.
(c) Payment in Full. Upon the effective date of termination, the
Obligations shall become immediately due and payable in full in cash.
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(d) Early Termination; Termination Fee. In addition to the procedure
set forth in Section 9.2(b), Borrower may terminate this Agreement at any time
but only upon sixty (60) days' prior written notice and prepayment of the
Obligations. Upon any such early termination by Borrower or any termination of
this Agreement by FINOVA upon the occurrence of an Event of Default, then, and
in any such event, Borrower shall pay to FINOVA upon the effective date of such
termination a fee (the "TERMINATION FEE") in an amount equal to the amount
shown on the Schedule.
9.3 Recourse to Security; Certain Waivers. All Obligations shall be
payable by Borrower as provided for herein and, in full, at the termination of
this Agreement; recourse to security shall not be required at any time.
Borrower waives presentment and protest of any instrument and notice thereof,
notice of default and, to the extent permitted by applicable law, all other
notices to which Borrower might otherwise be entitled.
9.4 No Waiver by FINOVA. Neither FINOVA's failure to exercise any
right, remedy or option under this Agreement, any supplement, the Loan
Documents or other agreement between FINOVA and Borrower nor any delay by
FINOVA in exercising the same shall operate as a waiver. No waiver by FINOVA
shall be effective unless in writing and then only to the extent stated. No
waiver by FINOVA shall affect its right to require strict performance of this
Agreement. FINOVA's rights and remedies shall be cumulative and not exclusive.
9.5 Binding on Successor and Assigns. All terms, conditions, promises,
covenants, provisions and warranties shall inure to the benefit of and bind
FINOVA's and Borrower's respective representatives, successors and assigns.
9.6 Severability. If any provision of this Agreement shall be
prohibited or invalid under applicable law, it shall be ineffective only to
such extent, without invalidating the remainder of this Agreement.
9.7 Amendments; Assignments. This Agreement may not be modified,
altered or amended, except by an agreement in writing signed by Borrower and
FINOVA. Borrower may not sell, assign or transfer any interest in this
Agreement or any other Loan Document, or any portion thereof, including,
without limitation, any of Borrower's rights, title, interests, remedies,
powers and duties hereunder or thereunder. Borrower hereby consents to FINOVA's
participation, sale, assignment, transfer or other disposition, at any time or
times hereafter, of this Agreement and any of the other Loan Documents, or of
any portion hereof or thereof, including, without limitation, FINOVA's rights,
title, interests, remedies, powers and duties hereunder or thereunder. In
connection therewith, FINOVA may disclose all documents and information which
FINOVA now or hereafter may have relating to Borrower or Borrower's business.
To the extent that FINOVA assigns its rights and obligations hereunder to a
third party, FINOVA shall thereafter be released from such assigned obligations
to Borrower and such assignment shall effect a novation between Borrower and
such third party.
9.8 Integration. This Agreement, together with the Schedule (which is
a part hereof) and the other Loan Documents, reflect the entire understanding
of the parties with respect to the transactions contemplated hereby.
9.9 Survival. All of the representations and warranties of Borrower
contained in this Agreement shall survive the execution, delivery and
acceptance of this Agreement by the parties. No termination of this Agreement
or of any guaranty of the Obligations shall affect or impair the powers,
obligations, duties, rights, representations, warranties or liabilities of the
parties hereto and all shall survive such termination.
9.10 Evidence of Obligations. Each Obligation may, in FINOVA's
discretion, be evidenced by notes or other instruments issued or made by
Borrower to FINOVA. If not so evidenced, such Obligation shall be evidenced
solely by entries upon FINOVA's books and records.
9.11 Loan Requests. Each oral or written request for a loan by any
Person who purports to be any employee, officer or authorized agent of Borrower
shall be made to FINOVA on or prior to 11:00 a.m., NEW YORK time, on the
Business Day on which the proceeds thereof are requested to be paid to Borrower
and shall be conclusively presumed to be made by a Person authorized by
Borrower to do so and the crediting of a loan to Borrower's operating account
shall conclusively establish Borrower's obligation to repay such loan. Unless
and until Borrower otherwise directs FINOVA in writing, all loans shall be
wired to Borrower's operating account set forth on the Schedule.
9.12 Notices. Any notice required hereunder shall be in writing and
addressed to the Borrower and FINOVA at their addresses set forth at the
beginning of this Agreement. Notices hereunder shall be deemed received on the
earlier of receipt, whether by mail, personal delivery, facsimile, or
otherwise, or upon deposit in the United States mail, postage prepaid.
9.13 Brokerage Fees. Borrower represents and warrants to FINOVA that,
with respect to the financing transaction herein contemplated, no Person is
entitled to any brokerage fee or other commission other than (a) $20,000
payable on the closing date, and (b) $30,000 payable in six (6) equal
consecutive monthly installments commencing one month after the
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Closing Date, to Fresh Capital Financial Services, Inc., and, to the extent
available to Borrower hereunder, Borrower hereby irrevocably requests and
authorizes FINOVA to remit such Loan proceeds to Fresh Capital Financial
Services Inc. to effectuate the payment of such brokerage fees, and Borrower
agrees to indemnify and hold FINOVA harmless against any and all such claims.
9.14 Disclosure. No representation or warranty made by Borrower in
this Agreement, or in any financial statement, report, certificate or any other
document furnished in connection herewith contains any untrue statement of a
material fact or omits to state any material fact necessary to make the
statements herein or therein not misleading. There is no fact known to Borrower
or which reasonably should be known to Borrower which Borrower has not
disclosed to FINOVA in writing with respect to the transactions contemplated by
this Agreement which materially and adversely affects the business, assets,
operations, prospects or condition (financial or otherwise), of Borrower.
9.15 Publicity. FINOVA is hereby authorized to issue appropriate press
releases and to cause a tombstone to be published announcing the consummation
of this transaction and the aggregate amount thereof.
9.16 Captions. The Section titles contained in this Agreement are
without substantive meaning and are not part of this Agreement.
9.17 Injunctive Relief. Borrower recognizes that, in the event
Borrower fails to perform, observe or discharge any of its Obligations under
this Agreement, any remedy at law may prove to be inadequate relief to FINOVA.
Therefore, FINOVA, if it so requests, shall be entitled to temporary and
permanent injunctive relief in any such case without the necessity of proving
actual damages.
9.18 Counterparts; Facsimile Execution. This Agreement may be executed
in one or more counterparts, each of which taken together shall constitute one
and the same instrument, admissible into evidence. Delivery of an executed
counterpart of this Agreement by telefacsimile shall be equally as effective as
delivery of a manually executed counterpart of this Agreement. Any party
delivering an executed counterpart of this Agreement by telefacsimile shall
also deliver a manually executed counterpart of this Agreement, but the failure
to deliver a manually executed counterpart shall not affect the validity,
enforceability, and binding effect of this Agreement.
9.19 Construction. The parties acknowledge that each party and its
counsel have reviewed this Agreement and that the normal rule of construction
to the effect that any ambiguities are to be resolved against the drafting
party shall not be employed in the interpretation of this Agreement or any
amendments or exhibits hereto.
9.20 Time of Essence. Time is of the essence for the performance by
Borrower of the Obligations set forth in this Agreement.
9.21 Limitation of Actions. Borrower agrees that any claim or cause of
action by Borrower against FINOVA, or any of FINOVA's directors, officers,
employees, agents, accountants or attorneys, based upon, arising from, or
relating to this Agreement, or any other present or future agreement, or any
other transaction contemplated hereby or thereby or relating hereto or thereto,
or any other matter, cause or thing whatsoever, whether or not relating hereto
or thereto, occurred, done, omitted or suffered to be done by FINOVA, or by
FINOVA's directors, officers, employees, agents, accountants or attorneys,
whether sounding in contract or in tort or otherwise, shall be barred unless
asserted by Borrower by the commencement of an action or proceeding in a court
of competent jurisdiction by the filing of a complaint within one year after
the first act, occurrence or omission upon which such claim or cause of action,
or any part thereof, is based and service of a summons and complaint on an
officer of FINOVA or any other Person authorized to accept service of process
on behalf of FINOVA, within 30 days thereafter. Borrower agrees that such
one-year period of time is a reasonable and sufficient time for Borrower to
investigate and act upon any such claim or cause of action. The one-year period
provided herein shall not be waived, tolled, or extended except by a specific
written agreement of FINOVA. This provision shall survive any termination of
this Loan Agreement or any other agreement.
9.22 Liability. Neither FINOVA nor any FINOVA Affiliate shall be
liable for any indirect, special, incidental or consequential damages in
connection with any breach of contract, tort or other wrong relating to this
Agreement or the Obligations or the establishment, administration or collection
thereof (including without limitation damages for loss of profits, business
interruption, or the like), whether such damages are foreseeable or
unforeseeable, even if FINOVA has been advised of the possibility of such
damages. Neither FINOVA, nor any FINOVA Affiliate shall be liable for any
claims, demands, losses or damages, of any kind whatsoever, made, claimed,
incurred or suffered by the Borrower through the ordinary negligence of FINOVA,
or any FINOVA Affiliate. "FINOVA AFFILIATE" shall mean FINOVA's directors,
officers, employees, agents, attorneys or any other Person or entity affiliated
with or representing FINOVA.
- 23 -
9.23 Notice of Breach by FINOVA. Borrower agrees to give FINOVA
written notice of (i) any action or inaction by FINOVA or any attorney of
FINOVA in connection with any Loan Documents that may be actionable against
FINOVA or any attorney of FINOVA or (ii) any defense to the payment of the
Obligations for any reason, including, but not limited to, commission of a tort
or violation of any contractual duty or duty implied by law. Borrower agrees
that unless such notice is fully given as promptly as possible (and in any
event within thirty (30) days) after Borrower has knowledge, or with the
exercise of reasonable diligence should have had knowledge, of any such action,
inaction or defense, Borrower shall not assert, and Borrower shall be deemed to
have waived, any claim or defense arising therefrom.
9.24 Application of Insurance Proceeds. The net proceeds of any
casualty insurance insuring the Collateral, after deducting all costs and
expenses (including attorneys' fees) of collection, shall be applied, at
FINOVA's option, either toward replacing or restoring the Collateral, in a
manner and on terms satisfactory to FINOVA, or toward payment of the
Obligations. Any proceeds applied to the payment of Obligations shall be
applied in such manner as FINOVA may elect. In no event shall such application
relieve Borrower from payment in full of all installments of principal and
interest which thereafter become due in the order of maturity thereof.
9.25 Power of Attorney. Borrower appoints FINOVA and its designees as
Borrower's attorney, with the power to endorse Borrower's name on any checks,
notes, acceptances, money orders or other forms of payment or security that
come into FINOVA's possession; to sign Borrower's name on any invoice or ▇▇▇▇
of lading relating to any Receivable, on drafts against customers, on
assignments of Receivables, on notices of assignment, financing statements and
other public records, on verifications of accounts and on notices to customers
or account debtors; to send requests for verification of Receivables to
customers or account debtors; after the occurrence of any Event of Default, to
notify the post office authorities to change the address for delivery of
Borrower's mail to an address designated by FINOVA and to open and dispose of
all mail addressed to Borrower; and to do all other things FINOVA deems
necessary or desirable to carry out the terms of this Agreement. Borrower
hereby ratifies and approves all acts of such attorney. Neither FINOVA nor any
of its designees shall be liable for any acts or omissions nor for any error of
judgment or mistake of fact or law while acting as Borrower's attorney. This
power, being coupled with an interest, is irrevocable until the Obligations
have been fully satisfied and FINOVA's obligation to provide loans hereunder
shall have terminated
9.26 GOVERNING LAW; WAIVERS. THIS AGREEMENT, INCLUDING WITHOUT
LIMITATION ENFORCEMENT OF THE OBLIGATIONS, SHALL BE INTERPRETED IN ACCORDANCE
WITH THE INTERNAL LAWS (AND NOT THE CONFLICT OF LAWS RULES) OF THE STATE OF
ARIZONA GOVERNING CONTRACTS TO BE PERFORMED ENTIRELY WITHIN SUCH STATE.
BORROWER HEREBY CONSENTS TO THE EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL
COURT LOCATED WITHIN THE COUNTY OF MARICOPA IN THE STATE OF ARIZONA OR, AT THE
SOLE OPTION OF FINOVA, IN ANY OTHER COURT IN WHICH FINOVA SHALL INITIATE LEGAL
OR EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT MATTER JURISDICTION OVER THE
MATTER IN CONTROVERSY. BORROWER WAIVES ANY OBJECTION OF FORUM NON CONVENIENS
AND VENUE. BORROWER FURTHER WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON
IT, AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE MADE IN THE MANNER SET
FORTH IN SECTION 9.12 HEREOF FOR THE GIVING OF NOTICE. BORROWER FURTHER WAIVES
ANY RIGHT IT MAY OTHERWISE HAVE TO COLLATERALLY ATTACK ANY JUDGMENT ENTERED
AGAINST IT.
- 24 -
9.27 MUTUAL WAIVER OF RIGHT TO JURY TRIAL. FINOVA AND BORROWER EACH
HEREBY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED
UPON, ARISING OUT OF, OR IN ANY WAY RELATING TO: (I) THIS AGREEMENT; (II) ANY
OTHER PRESENT OR FUTURE INSTRUMENT OR AGREEMENT BETWEEN FINOVA AND BORROWER; OR
(III) ANY CONDUCT, ACTS OR OMISSIONS OF FINOVA OR BORROWER OR ANY OF THEIR
DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER PERSONS
AFFILIATED WITH FINOVA OR BORROWER; IN EACH OF THE FOREGOING CASES, WHETHER
SOUNDING IN CONTRACT OR TORT OR OTHERWISE.
BORROWER:
AMERICAN FACTORS GROUP, INC.
FED. TAX ID # ▇▇-▇▇▇▇▇▇▇
BY_______________________________
PRESIDENT OR VICE PRESIDENT
On this 8th day of May, 1998 before me personally came
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ who stated that he is the President of American Factors Group,
Inc. and who executed the foregoing Loan and Security Agreement in his capacity
as such officer by order of its Board of Directors.
----------------------------
Notary Public NOTARY PUBLIC, ▇▇▇▇▇▇▇ COUNTY,GEORGIA
MY COMMISSION EXPIRES FEB. 25, 2000
FINOVA:
FINOVA CAPITAL CORPORATION
BY_______________________________
TITLE______________________________
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SCHEDULE TO
LOAN AND SECURITY AGREEMENT
BORROWER: AMERICAN FACTORS GROUP, INC.
ADDRESS: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇
DATE: MAY ____, 1998
This Schedule forms an integral part of the Loan and Security Agreement between
the above Borrower and FINOVA Capital Corporation dated the above date, and all
references herein and therein to "this Agreement" shall be deemed to refer to
said Agreement and to this Schedule.
===============================================================================
DEFINITIONS (SECTION 1):
"Guarantor" means MEDLEY CREDIT ACCEPTANCE CORPORATION.
"Subordinating Creditor" - None
===============================================================================
TOTAL FACILITY (SECTION 2.1):
$2,000,000.00 DURING THE FIRST SIX MONTHS FROM THE DATE HEREOF, WHICH AMOUNT
SHALL INCREASE BY $500,000.00 EVERY MONTH THEREAFTER UP TO A MAXIMUM AMOUNT OF
$4,000,000.00
===============================================================================
LOANS (SECTION 2.2):
REVOLVING CREDIT LOANS: A revolving line of
credit consisting of loans against Borrower's
Eligible Receivables ("RECEIVABLE LOANS") (the
Receivable Loans shall also be referred to as the
"REVOLVING CREDIT LOANS") in an aggregate
outstanding principal amount not to exceed the
lesser of (a) or (b) below:
(a) $2,000,000.00 DURING THE FIRST SIX
MONTHS FROM THE DATE HEREOF, WHICH AMOUNT
SHALL INCREASE BY $500,000.00 EVERY SIX (6)
MONTHS THEREAFTER UP TO A MAXIMUM AMOUNT OF
($4,000,000.00) (the "REVOLVING CREDIT
LIMIT"), less any Loan Reserves, or
(b) the difference of
(i) an amount equal to (A) 90% of the
Initial Payment Amount of the net
amount of Eligible Receivables;
(ii) any Loan Reserves.
INTEREST AND FEES (SECTION 2.5):
Revolving Interest Rate. Borrower shall pay FINOVA
interest on the daily outstanding balance of
Borrower's Revolving Credit Loans at a per annum
rate of one and one-half of one percent (1 1/2%) in
excess of the rate of interest announced publicly by
Citibank, N.A., (or any successor thereto), from
time to time as its "prime rate" (the " PRIME RATE")
which may not be such institution's lowest rate. The
interest rate chargeable hereunder in respect of the
Revolving Credit Loans (herein, the "REVOLVING
INTEREST RATE") shall be increased or decreased, as
the case may be, without notice or demand of any
kind, upon the announcement of any change in the
Prime Rate. Each change in the Prime Rate shall be
effective hereunder on the first day following the
announcement of such change. Interest charges and
all other fees and charges herein shall be computed
on the basis of a year of 360 days and actual days
elapsed and shall be payable to FINOVA in arrears on
the first day of each month.
Minimum Interest Charge. With respect to each
calendar month or portion thereof during the term of
this Agreement (excluding the calendar month in
which this Agreement is executed), Borrower shall
also pay FINOVA, on the first day of the next month,
as a minimum charge, the amount by which accrued
interest pursuant to the Revolving Interest Rate
section above for such month or portion thereof is
less than the interest which would have been earned
by FINOVA had the average outstanding loan balance
during the entire month been equal to the lessor of
(a) the Credit Limit in effect in any such month or
(b) $2,500,000.00(the "Minimum Interest Charge").
Notwithstanding the occurrence of any Event of
Default hereunder or termination of this Agreement
by FINOVA as a result thereof, the Minimum Interest
Charge shall be paid by Borrower for the unexpired
portion of the Initial Term or any Renewal Term of
this Agreement.
Collateral Monitoring Fee. At the closing of this
transaction and on the first day of each calendar
month thereafter, Borrower shall pay FINOVA a
collateral monitoring fee of $1,500.00 ("COLLATERAL
MONITORING FEE"); provided however, that Borrower
agrees and acknowledges that each Loan Year a -+full
year's fee shall be deemed earned at the beginning
of the respective Loan Year.
Closing Fee. At the closing of this transaction,
Borrower shall pay to FINOVA a closing fee in an
amount equal to one percent (1%) of the Total
Facility which shall be earned on the Closing Date,
but shall be payable in the following manner:
$20,000 at closing and thereafter eleven consecutive
monthly installments commencing the first month
anniversary of the Closing Date and on each one
month anniversary thereafter, the first ten (10)
installments each in the amount of One Thousand
Eight Hundred Eighteen
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Dollars ($1,818.00) and the 11th installment in the
amount of One Thousand One Hundred Twenty Dollars
($1,820.00).
Facility Fee. Borrower shall pay to FINOVA a
facility fee equal to 1% per annum of the amount of
the Total Facility ("FACILITY FEE"). The Facility
Fee shall be deemed fully earned at the time when
due and shall be due and is otherwise due and
payable annually commencing on the first anniversary
of the date of this Agreement and continuing on each
subsequent anniversary thereof.
Examination Fee. Borrower agrees to pay to FINOVA an
examination fee in the amount of $600.00 per person
per day in connection with each audit or examination
of Borrower performed by FINOVA prior to or after
the date hereof, plus all costs and expenses
incurred in connection therewith (the "EXAMINATION
FEE"). Without limiting the generality of the
foregoing, Borrower shall pay to FINOVA an initial
Examination Fee in an amount equal to $600.00 per
person per day, plus all costs and expenses incurred
in connection therewith. Such initial Examination
Fee shall be deemed fully earned at the time of
payment and due and payable upon the closing of this
transaction, and shall be deducted from any good
faith deposit paid by Borrower to FINOVA prior to
the date of this Agreement.
===============================================================================
CONDITIONS OF CLOSING (SECTION 4.1):
The obligation of FINOVA to make the initial
advance hereunder is subject to the fulfillment,
to the satisfaction of FINOVA and its counsel, of
each of the following conditions, in addition to
the conditions set forth in Sections 4.1 and 4.2
above:
(a) Lease and Landlord's Consent (Section 4.1(t)).
Location(s): ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇ ▇▇▇▇▇, ▇▇
(b) No Material Adverse Change (Section 4.1(u)).
Draft financial statements for Seller dated as of
August 31, 1997. Further, no material adverse
change has occurred in the Borrower's business,
operations, financial condition, or assets or in
the prospect of repayment of the Obligations
since April 7, 1998.
(d) Validity and Support Agreements. ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇. and ▇▇▇▇▇▇ Press
shall each have delivered a Validity and Support
Agreement in favor of FINOVA, and in form and
substance satisfactory to FINOVA.
Borrower shall cause the conditions precedent set
forth in Section 4.1 of this Agreement and set
forth above in this Schedule to be satisfied, and
shall provide evidence to FINOVA that all such
conditions precedent have been satisfied, on or
before May 15, 1998.
- 3 -
===============================================================================
BORROWER INFORMATION:
Borrower's State of Incorporation (Section 5.1): Florida
Borrower's copyrights, patents trademarks, and licenses (Section 5.5):
None.
Fictitious Names/Prior Corporate Names (Section 5.2): None
Prior Corporate Names: NONE
Fictitious Names: NONE
Borrower Locations (Section 5.16)
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇
Borrower's Federal Tax Identification Number (Section 5.16): ▇▇-▇▇▇▇▇▇▇
Permitted Encumbrances (Section 1.1) NONE
===============================================================================
FINANCIAL COVENANTS (SECTION 6.1.13):
Borrower shall comply with all of the
following covenants. Compliance shall be
determined as of the end of each month or
quarter (as determined by FINOVA in its
sole discretion), except as otherwise
specifically provided below:
Net Worth. Borrower shall at all times maintain Net
Worth (which for purposes of this
calculation shall include as equity
Indebtedness due to Medley Acceptance
Corporation which is subordinated to FINOVA
on terms acceptable to FINOVA) of not less
than $750,000.00 and which amount shall
increase by increments of no less than
$50,000.00 during each fiscal year end that
this Agreement is in effect (this covenant
shall be measured semi-annually).
===============================================================================
NEGATIVE COVENANTS (SECTION 6.2):
Employee Advances: Borrower shall not make any loans or
advances to Employees except in the ordinary course
of business and consistent with past practices of
Borrower in an aggregate amount not exceeding at any
time $5,000.
Existing Guaranties: None.
- 4 -
Capital Expenditures: Borrower shall not make or incur any
Capital Expenditure if, after giving effect thereto,
the aggregate amount of all Capital Expenditures by
Borrower in any fiscal year (beginning with the 1998
fiscal year) would exceed $25,000 without FINOVA's
consent, which consent shall not be unreasonably
withheld.
Compensation: Borrower shall not pay total compensation,
including salaries, withdrawals, fees,
bonuses, commissions, drawing accounts and
other payments, whether directly or
indirectly, in money or otherwise, during
any fiscal year to those employees of
Borrower and their spouses who are employed
by Borrower, who are shareholders of
Borrower in excess of what is provided for
in the employment agreements (copies of
which have been delivered to FINOVA) and
which shall not be amended as to
compensation without FINOVA's written
consent) between Borrower and any such
employees.
Indebtedness: Borrower shall not create, incur, assume or
permit to exist any Indebtedness (including
Indebtedness in connection with Capital
Leases) in excess of $25,000.00 other than
(i) the Obligations, (ii) trade payables
and other contractual obligations to
suppliers and customers incurred in the
ordinary course of business and (iii) other
Indebtedness existing on the date of this
Agreement and reflected in Exhibit 6.2
attached hereto and (iv) Indebtedness owed
to Medley Credit Acceptance Corporation
which is subordinated to FINOVA on terms
acceptable to FINOVA.
===============================================================================
REPORTING REQUIREMENTS (SECTION 9.1):
1. Borrower shall provide FINOVA with monthly
agings aged by invoice date and reconciliations
of Receivables within ten (10) days after the
end of each month or as otherwise requested.
2. Borrower shall provide FINOVA with monthly
unaudited income statement and balance sheet
within thirty (30) days after the end of each
month.
3. Borrower shall provide FINOVA with audited
consolidated and consolidating fiscal financial
statements within ninety (90) days after the end
of each fiscal year, as more specifically
described in Section 9.1(b) hereof, and with an
opinion issued by a Certified Public Accountant
which is acceptable to FINOVA.
4. Borrower shall provide FINOVA with annual
operating budgets (including income statements,
balance sheets and cash flow statements, by
month) for the upcoming fiscal year of Borrower
within thirty (30) days prior to the end of each
fiscal year of Borrower.
5. Borrower's balance sheets for purposes of the
definition of Prepared Financials shall be as of
December 31.
- 5 -
===============================================================================
TERM (SECTION 9.2):
The initial term of this Agreement shall be TWO
(2) year(s) from the date hereof (the "INITIAL
TERM") and shall be automatically renewed for
successive periods of one (1) year each (each, a
"RENEWAL TERM"), unless earlier terminated as
provided in Section 7 or 9.2 above or elsewhere
in this Agreement.
===============================================================================
TERMINATION FEE (SECTION 9.2):
(A) Revolving Credit Loans Facility. The
Termination Fee applicable to the Revolving
Credit Loans facility provided for in Section
9.2(d) shall be an amount equal to the following
percentage of the average daily outstanding
balance of the Obligations for the 180-day period
(or lesser period if applicable) preceding the
date of termination:
(i) Five percent (5%), if such early termination
occurs on or prior to the first year anniversary
of the date of this Agreement;
(ii) two percent (2%), if such early termination
occurs after the first year anniversary of the
date of this Agreement, but prior to the
eighteenth month anniversary of this Agreement;
and
(iii) one percent (1%) if such early termination
occurs after the eighteenth month anniversary but
prior to the second year anniversary of this
Agreement.
- 6 -
DISBURSEMENT (SECTION 9.11):
Unless and until Borrower otherwise directs
FINOVA in writing, all loans shall be wired to
Borrower's following operating account:
ABA No. ▇▇▇▇▇▇▇▇▇
A/C NO. 2020000574556
First Union National Bank, Jacksonville, Florida
===============================================================================
BORROWER: FINOVA:
AMERICAN FACTORS GROUP, INC. FINOVA CAPITAL
CORPORATION
BY_______________________________ BY____________________________
PRESIDENT OR VICE PRESIDENT TITLE_________________________
On this day of May, 1998 before me personally came ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
who stated that he is the President of American Factors Group, Inc. and who
executed the foregoing Loan and Security Agreement in his capacity as such
officer of said corporation by order of its Board of Directors.
------------------------------------
Notary Public NOTARY PUBLIC, ▇▇▇▇▇▇▇ COUNTY, GEORGIA
MY COMMISSION EXPIRES FEB. 25, 2000
- 7 -
EXHIBIT A
PURCHASE AND SALE AGREEMENT
(NONRECOURSE)
Date:______________
Seller:________________________________________________________________________
This Purchase and Sale Agreement (the "Agreement") is made and entered into
as of the above date (the "Contract Date") by the Seller and the Purchaser,
AMERICAN FACTORS GROUP, INC. a Florida Corporation ("AFG"). In consideration of
the mutual promises and covenants contained herein the Seller and AFG hereby
agree to the terms and conditions contained herein and in any Addendum and/or
Attachments to this Agreement. Unless otherwise provided, this Agreement shall
serve as a Master Agreement, under the same terms and conditions, for all
future purchases of invoices by AFG from Seller.
1. PURCHASE AND SALE OF INVOICES
(a) Assignment and Ownership of Accounts Receivable: Seller hereby sells,
transfers, conveys, assigns, endorses and delivers to AFG as absolute owner,
all of the Seller's right, title and interest in all the accounts receivables
and invoices which are subject thereof and evidence of same (and collection
rights thereto) individually identified on Attachment "A" to this Agreement or
on subsequently executed Bulk Assignments ("Accounts Receivable"). For purposes
of this Agreement, the purchase of multiple invoices by AFG at any one time
shall be considered the purchase of one (1) invoice in the aggregate amount of
all invoices purchased.
(b) Authority to collect Accounts Receivable: AFG as the sole and
absolute owner of the Accounts Receivable, shall have the sole and exclusive
power and authority to collect each Account Receivable through legal action or
otherwise, and may, in its sole determination, settle, compromise, or assign
(in whole or part) any of the Accounts Receivable. Seller shall make no
attempt to have the Accounts Receivable paid directly to it by an Account
Debtor. Seller hereby appoints AFG (and its agents and employees) as its lawful
attorney-in-fact (which appointment is coupled with an interest and cannot be
revoked by Seller so long as AFG is the owner of an unpaid Account Receivable)
for the purpose of collecting the Accounts Receivable. Seller agrees that it
will not negotiate any funds it may receive in payment of any invoices assigned
to AFG and shall forward all such payments within 48 hours to AFG in the same
form as received to the address set forth in this Agreement or as otherwise
instructed.
(c) Payment of Purchase Price: AFG shall pay Seller a purchase price
(the "Purchase Price") for the Accounts Receivable equal to the gross face
amount of the Accounts Receivable, less
1
the discount earned by AFG (the "Discount") and less any payment discounts or
offsets taken by the account debtors (either revealed or concealed, known or
unknown, proper or improper). The Discount earned by AFG shall be based on the
Discount Schedule on Exhibit "B" which is attached hereto and made a part of
this Purchase and Sale Agreement. Upon the execution of this Agreement by Seller
and AFG the Purchase Price shall be paid by check as follows:
(1) An initial payment (the "Initial Payment") equal to % of
the gross face amount of the Accounts Receivable less any Adjustments (as
defined below) and less any retainage to be held by the account debtor. The
Initial Payment shall be made to Seller at the time of AFG's acceptance of
Seller's offer of the sale of the Accounts Receivable and the delivery by
Seller of all required documents including but not limited to properly executed
Assignments of invoices and acknowledgements of the assignment of said invoices
by the account debtors; and
(2) A final payment (the "Final Payment") drawn against the
reserve (the "Reserve") equal to: the Purchase Price less (i) the Initial
Payment: (ii) the Discount; and (iii) payment discounts or offsets taken by the
account debtors.
(d) As soon as AFG collects the aggregate amount of the Accounts
Receivable from the account debtors, AFG will deliver a check to Seller (drawn
against the Reserve) for the aggregate amount collected, less the initial
Payment, less the Discount earned by AFG and less any reimbursable expenses
("Adjustment") incurred by AFG for the purpose of compensating AFG for any sums
owing AFG pursuant to Section 2 of this or any other Purchase and Sale
Agreement by and between Seller and AFG.
2. SELLER'S REPRESENTATIONS: Seller represents, warrants and covenants to
AFG that:
(a) Seller is the sole owner of the Accounts Receivable and none of the
Accounts Receivable have been previously assigned or encumbered in any manner.
Seller has the full power and authority to sell each of the Accounts Receivable
and has duly authorized their sale to AFG through this Purchase and Sale
Agreement.
(b) Each Account Receivable is current and presently due to Seller;
and is for the amount stated in Attachment A. There are no set-offs,
deductions, disputes, contingencies or counterclaims against Seller on any of
the Accounts Receivable. Except for the customer's financial ability to pay or
bankruptcy each Account Receivable is due and collectible in full no later than
ninety (90) days after the date on each said Account Receivable.
(c) Each Account Receivable is current and presently due and owing to
Seller and payment is not contingent upon the fulfillment of any other
obligation at any time.
(d) AFG shall be the sole owner and holder of the Accounts Receivable,
together with any products, proceeds, contract rights and/or claims relating to
the Accounts Receivable, all of
2
which are to be deemed a part of the Accounts Receivable; however, should Seller
receive payment of all or any portion of any of the Accounts Receivable, Seller
shall so notify AFG immediately and shall hold all checks and other instruments
received in trust for AFG and shall deliver to AFG such checks and other
instruments (or, at the direction of AFG the proceeds thereof) without delay.
(e) Seller presents that any payments received by it on Accounts
Receivable assigned to AFG shall be deemed "Trust Funds" and if not remitted to
AFG shall constitute a debt which can not be discharged in Bankruptcy or such
other laws intended to give debtor relief.
(f) Seller hereby ratifies and confirms each of the statements made in
its most current Corporate Resolution delivered to AFG authorizing the sale of
Accounts Receivable to AFG.
In deciding to purchase the Accounts Receivable, AFG has materially
relied upon the documents and other information provided by Seller and upon
Seller's representations contained in this section 2 herein. All
representations, warranties, indemnities and covenants of the Seller under this
Agreement shall survive the termination for any reason of this Agreement until
such time as AFG has collected in full any and all Accounts Receivable or
monies due it under this Agreement.
3. NO RECOURSE TO SELLER.
AFG warrants to Seller that if any Account Receivable is not paid by an
account debtor other than for a reason which would be a breach of the
provisions of Section 2 of this Purchase and Sale Agreement, then neither
Seller nor any guarantor shall be liable to return to AFG the amount of the
Initial Payment.
4. COLLECTION AND ATTORNEY'S FEES.
AFG shall have the full power and authority to collect each Account
Receivable, through legal action or otherwise, and may, in its sole
discretion, settle, compromise, or assign (in whole or in part) any of the
Accounts Receivable, or otherwise exercise any other right now existing or
hereafter arising with respect to any of the Accounts Receivable, if such
action will, facilitate collection. Seller and each guarantor shall jointly
and severally be liable for the full amount of the attorney's fees incurred
in collection, together with interest on the amount of the Accounts
Receivable from the date hereof to the date of satisfaction at the maximum rate
permitted by law. If AFG or Seller is required to enforce their rights
hereunder against the other party, by virtue of a breach by the other party of
the provisions of Section 2 hereof, then in addition to any other obligations
hereunder, the prevailing party shall be entitled to recover reasonable
attorney's fees and costs from the other party.
5. ADDENDUM.
An addendum is or is not attached to this
Agreement.
3
6. REIMBURSABLE EXPENSES. ("Adjustments") In connection with the purchase
of the Accounts Receivable, AFG may incur expenses relating to providing reports
or services to Seller either inside or outside the scope of this Agreement.
AFG shall be entitled to reimbursement from Seller for expenses incurred for
overnight delivery services (e.g. Fed Ex) and wire transfer of funds. AFG shall
furnish to Seller, upon request, a schedule promulgated by AFG from time to
time setting forth the cost of such reimbursements.
7. DEFAULT BY SELLER.
(a) The following shall be an "Event of Default" under this Agreement:
(1) A misrepresentation by Seller, (intentional or otherwise)
of any representation, covenant, or warranty contained herein.
(2) A misstatement of a fact (other than a clerical error)
regarding any of the Accounts Receivables as to amount, validity, lack of
defenses, offsets, counterclaims or credits by the account debtor or liability
of the account debtor for payment of the invoice in accordance with its terms.
(3) Failure of AFG to receive payment in full of any Account
Receivable (in collected funds), due to the act or failure to act of the Seller
other than financial inability or bankruptcy of an account debtor. As used
herein, the term "bankruptcy" shall mean a judicially supervised insolvency or
bankruptcy proceeding seeking the discharge of an account debtor's debts which
proceeding is initiated after the sale of the particular Account Receivable to
AFG.
(4) A breach by Seller of any other provision of any written
agreement between Seller and AFG which breach is not cured within three (3)
days after receipt of faxed notice of such breach by Seller.
(b) In the event Seller commits an Event of Default hereunder, AFG
shall have, in addition to all remedies available to AFG at law or in equity,
the following specific remedies:
(1) AFG may take for AFG's account a credit against any
Reserve or any other payments received by AFG for or on the account of Seller.
(2) AFG may demand that Seller repurchase an Account
Receivable from AFG and pay to AFG the amount of the Initial Payment made by
AFG on the Account Receivable plus the Discount which would have been earned
by AFG.
(3) AFG may notify Seller, in writing, that it is requiring
Seller to repurchase all unpaid Accounts Receivable purchased by AFG from
Seller under this and all other agreements between Seller and AFG. The purchase
price to be paid by Seller within seven (7) days after receipt of said notice
from AFG shall be the sum of (i) the Initial Payment paid by AFG for the unpaid
4
Accounts Receivable, and (ii) the Discount which would have been earned by AFG
had all such unpaid Accounts Receivable been paid in full as of the date of the
written notice to Seller set forth above, plus any adjustments;
(4) Any and all rights and remedies available to a secured
party under the Florida Uniform Commercial Code;
(5) The right to deduct and offset from any amount due Seller
any loss, liability, damage or expense caused by such breach;
(6) The right to ▇▇▇ and recover from the Seller all direct,
special and consequential damages of AFG.
(c) Under no circumstances shall AFG be obligated to pursue collection
of the Accounts Receivable through litigation or otherwise before pursuing and
remedies set forth herein.
(d) The remedies set forth herein are not the exclusive remedies of
AFG and may be sought in any combination.
8. ATTORNEY IN FACT.
Seller hereby appoints AFG its attorney-in-fact (which appointment is
coupled with an interest and is therefore irrevocable by Seller so long as AFG
is the owner of an unpaid Account Receivable for the purpose of signing and
endorsing on behalf of Seller, all checks, drafts, and other forms of payment
received by AFG in connection with the payment of each Account Receivable and
payment of any other amounts due AFG by Seller.
9. SECURITY INTEREST.
In order to secure Seller's performance under this Agreement and the
truth and accuracy of the representations, warranties and covenants made by
Seller hereunder, Seller hereby grants to AFG a security interest in Seller's
existing and future accounts, contract rights, receivables and claims and all
proceeds and replacements thereof and all general intangibles in connection
therewith Seller further agrees to comply with all appropriate requests from
AFG in order to perfect AFG security interest in and to such collateral and to
execute any financing statement(s) or additional documents as AFG may require,
including a security agreement separate herefrom. Upon termination of this
Agreement by agreement of the parties or by fulfillment of all conditions
hereunder by all parties, AFG shall forward a properly executed UCC-3 to Seller
within five (5) days after receipt of written request from Seller and the
satisfactions of all the Seller's obligations and the delivery of all required
indemnities to the Lender.
5
NOTICES
10. Any communication, delivery or notice to be given hereunder shall
be duly given if in writing and mailed certified mail, telefaxed or overnight
delivery as follows:
(1) To AFG: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇.
-----------------------
Suite 101
-----------------------
▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
-----------------------
-----------------------
-----------------------
-----------------------
(2) To Seller:
-----------------------
-----------------------
-----------------------
(3) To Guarantor :
-----------------------
-----------------------
-----------------------
11. Miscellaneous Provisions:
(a) Construction and Governing Law: This Agreement shall be construed
and enforced under the laws of the State of Florida. In the event any provision
of this Agreement shall be declared invalid by a court of competent
jurisdiction, said invalidity shall not invalidate the Agreement as a whole,
but said Agreement shall be construed as if the invalidated provision was
omitted from the Agreement.
(b) Entire Agreement: This Agreement supersedes and cancels any and
all other contracts referring to the subject matter herein. No modifications,
alteration or waiver of this Agreement shall be effective unless in writing and
executed by the parties hereto.
(c) Assignability: This Agreement shall inure to the benefit of AFG,
its successors and assigns. This Agreement and the rights conferred herein
shall be non-assignable by the Seller.
(d) Counterparts: This Agreement may be executed in several
counterparts, each of
6
which shall be deemed an original, but all of which counterparts collectively
shall constitute one instrument representing the Agreement between the parties
hereto.
(e) Captions: Captions of the various section contained in this
Agreement are intended to be used solely for convenience of the Parties and are
not intended, nor are they deemed to modify, or explain or to be used as an aid
in the construction of any of the provision of this Agreement.
(f) Attorney's Fees: In the event of any litigation arising out of the
terms of this Agreement, the prevailing party shall be entitled to
reimbursement of reasonable attorney's fees and costs at both the trial court
level and on appeal.
(g) Waiver of Trial by Jury: Seller and AFG hereby knowingly,
irrevocably, voluntarily and intentionally waive any right either may have to a
trial by jury in respect of any action, proceeding or counterclaim based on
this Agreement, or arising out of, under or in connection with this Agreement
or any Agreement contemplated to be executed in connection with this Agreement,
or any course of conduct, course of dealing, statements (whether verbal or
written) or actions of any party hereto.
AS TO PURCHASER: AS TO SELLER:
AMERICAN FACTORS GROUP, INC. __________________________
a Florida Corporation __________________________
By: ________________________ By: ______________________
Name: ______________________ Name: ____________________
Title: _____________________ Title: ___________________
PERSONAL GUARANTY AND JOINDER
The undersigned hereby personally, absolutely and unconditionally guarantees
the truth and accuracy of the representations and warranties of Seller herein
and the payment and performance of Seller's obligations under this Agreement.
The undersigned shall be primarily liable for such obligations and in the event
Seller commits an event of default, AFG may invoke the benefits of this
guaranty before pursuing any remedies against Seller and before proceeding
against any collateral for such obligation.
--------------------------
7
EXHIBIT 4.1
FINOVA CAPITAL CORPORATION
BORROWER: AMERICAN FACTORS GROUP, INC.
DOCUMENT CHECKLIST
PART I: PARTIES
Borrower: American Factors, Group, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
-----------------------------------------
-----------------------------------------
-----------------------------------------
-----------------------------------------
Lender: FINOVA Capital Corporation ("FINOVA")
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
-----------------------------------------
-----------------------------------------
Attn: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------------
-----------------------------------------
Counsel to Lender: ▇▇▇▇ ▇. ▇▇▇▇
-----------------------------------------
Winick & Rich, P.C.
-----------------------------------------
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------------
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
-----------------------------------------
Counsel to Borrower:
-----------------------------------------
-----------------------------------------
-----------------------------------------
-----------------------------------------
PART II: DOCUMENTS
Responsible Executed
Party Received
----- --------
Loan and Security Agreement with Lender ______
Schedule and Exhibits to Loan and Security Agreement
Secretary Certificate Borrower ______
Corporate Guaranty of Medley Credit Acceptance Corp. Lender ______
Secretary Certificate of Corp. Guarantor Lender ______
Validity and Support Agreement of ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Lender ______
Validity and Support Agreement of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Jr. Lender ______
Validity and Support Agreement of ▇▇▇▇▇▇ Press Lender ______
Form of Collateral Assignment of Credit Insurance Policy and Lender ______
copy of Policy
Landlord/Mortgagee Waivers: Lender ______
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇
Opinion of Borrower's Counsel Borrower ______
Copy of Articles of Incorporation of Borrower Borrower ______
Copy of Bylaws of Borrower Borrower ______
Certificate of Good Standing as a Domestic Corporation Lender ______
(Florida) and UCC search
UCC-1 Financing Statements Lender ______
Wire Instructions Borrower ______
Certificate of No Change Lender ______
Appointment of Agent - American Factors Group, Inc.
Note: ▇▇▇▇ all Condition Subsequents with a *
2
Appointment of Agent - Medley Credit Acceptance Corporation Lender ______
Subordination and Standstill Agreement ______ ______
Signature Authorization Lender ______
Evidence of Capitilization Borrower ______
Lock Box Agreement Lender ______
Certificate of Invoice ______ ______
Form of Factoring Agreement Borrower ______
Subordinated Note from American Factors to Medley Credit Borrower ______
Acknowledgement of Availability Lender ______
Disbursement Letter Lender ______
Note: ▇▇▇▇ all Condition Subsequents with a *
3
EXHIBIT 6.2
TABLE OF CONTENTS
1. DEFINITIONS..........................................................2
1.1 Defined Terms...............................................2
1.2 Other Terms.................................................6
2. LOANS; INTEREST RATE AND OTHER CHARGES...............................7
2.1 Total Facility..............................................7
2.2 Loans.......................................................7
2.3 Overlines; Overadvances.....................................7
2.4 Loan Account................................................7
2.5 Interest; Fees..............................................7
2.6 Default Interest Rate.......................................7
2.7 Examination Fee.............................................7
2.8 Excess Interest.............................................7
2.9 Principal Payments; Proceeds of Collateral.................8
2.10 Application of Collateral...................................9
2.11 Application of Payments.....................................9
3. SECURITY............................................................10
3.1 Security Interest in the Collateral........................10
3.2 Perfection and Protection of Security Interest.............10
3.3 Preservation of Collateral.................................10
3.4 Insurance..................................................10
3.5 Collateral Reporting; Inventory............................10
3.6 Receivables................................................11
3.7 Equipment..................................................11
3.8 Other Liens; No Disposition of Collateral.................11
3.9 Collateral Security........................................11
3.10 Borrower's Factored Clients................................11
4. CONDITIONS OF CLOSING...............................................12
4.1 Initial Advance............................................12
4.2 Subsequent Advances........................................14
5. REPRESENTATIONS AND WARRANTIES......................................14
5.1 Due Organization...........................................14
5.2 Other Names................................................14
5.3 Due Authorization..........................................14
5.4 Binding Obligation.........................................14
5.5 Intangible Property........................................14
5.6 Capital....................................................15
5.7 Material Litigation........................................15
5.8 Title; Security Interests of FINOVA........................15
5.9 Restrictive Agreements; Labor Contracts....................15
5.10 Laws.......................................................15
5.11 Consents...................................................15
5.12 Defaults...................................................15
5.13 Financial Condition........................................15
5.14 ERISA......................................................15
5.15 Taxes......................................................15
5.16 Locations; Federal Tax ID No...............................15
5.17 Business Relationships.....................................15
5.18 Factoring Agreements.......................................16
5.19 Reaffirmations.............................................16
- i -
6. COVENANTS...........................................................16
6.1 Affirmative Covenants......................................16
6.2 Negative Covenants.........................................17
7. DEFAULT AND REMEDIES................................................18
7.1 Events of Default..........................................18
7.2 Remedies...................................................19
7.3 Standards for Determining Commercial Reasonableness........19
8. EXPENSES AND INDEMNITIES............................................19
8.1 Expenses...................................................19
8.2 Environmental Matters.....................................20
9. MISCELLANEOUS.......................................................21
9.1 Examination of Records; Financial Reporting................21
9.2 Term; Termination..........................................21
9.3 Recourse to Security; Certain Waivers......................22
9.4 No Waiver by FINOVA........................................22
9.5 Binding on Successor and Assigns...........................22
9.6 Severability...............................................22
9.7 Amendments; Assignments ...................................22
9.8 Integration................................................22
9.9 Survival...................................................22
9.10 Evidence of Obligations....................................22
9.11 Loan Requests..............................................22
9.12 Notices....................................................22
9.13 Brokerage Fees.............................................22
9.14 Disclosure.................................................23
9.15 Publicity..................................................23
9.16 Captions...................................................23
9.17 Injunctive Relief..........................................23
9.18 Counterparts; Facsimile Execution. ........................23
9.19 Construction...............................................23
9.20 Time of Essence............................................23
9.21 Limitation of Actions......................................23
9.22 Liability..................................................23
9.23 Notice of Breach by FINOVA.................................24
9.24 Application of Insurance Proceeds..........................24
9.25 Power of Attorney..........................................24
9.26 Governing Law; Waivers.....................................24
9.27 MUTUAL WAIVER OF RIGHT TO JURY TRIAL.......................25
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