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EXHIBIT 10.8
LOAN AND SECURITY AGREEMENT entered into as of between CCI/TRIAD FINANCIAL
HOLDING CORPORATION ("SPE"), a California corporation, and SANWA BUSINESS CREDIT
CORPORATION ("SBCC"), a Delaware corporation, as lender.
I N T R O D U C T I O N
A. Both SPE and Triad Systems Financial Corporation ("TSFC"), a California
corporation are wholly owned subsidiaries of COOPERATIVE COMPUTING, INC. dba
TRIAD SYSTEMS CORPORATION ("CCI/Triad"), a Delaware corporation. CCI/Triad
manufactures and TSFC purchases from CCI/Triad and leases to TSFC's customers
computer systems and software, all in accordance with an Operating and Support
Agreement among CCI/Triad, TSFC, SPE and Lender.
B. TSFC has transferred by sale to SPE certain receivables due TSFC under
the leases and TSFC has assigned to SPE certain of its rights and interests in
the Leases, computer systems, software and equipment.
C. Lender engages in the business of equipment lease financing.
D. Lender is willing to lend to SPE amounts equal to the discounted value
of payments receivable under certain of the customer leases of computer systems
and software, upgrades and add-ons or other equipment, and SPE is willing to
grant a security interest in the lease payments, the leased computer systems
and software or other equipment and the interest of TSFC in the leases, all
subject to the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the foregoing, the parties hereto
agree as follows.
1. DEFINITIONS.
When used in capitalized form herein, the following terms shall have the
meanings indicated:
1.1 "Adjustment Amount" means the amount determined in accordance with
Schedule A attached hereto and made a part hereof ("as" the same may from time
to time be revised by SBCC by written revisions). The Adjustment Amount
compensates SBCC for the initial direct costs incurred when discounting the
Lease to which it relates.
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1.2 "Business Day" - any day other than a Saturday, Sunday or a public or
bank holiday or the equivalent for banks generally under the laws of the State
of California.
1.3. "Closing Date" with respect to each Loan - the date on which SBCC
makes a Loan to SPE under this Agreement.
1.4 "Collateral" - as defined in Section 6.1.
1.5 "Discount Facility" - the credit facility provided by SBCC to SPE
pursuant to Section 4.
1.6 "Discount Facility Loan" - a loan made by SBCC to SPE under the
Discount Facility, including Recourse Loans.
1.7 "Discount Facility Rate" - with respect to a Discount Facility Loan -
a per annum rate of interest equal to the sum of (i) one-half of the sum the
yields quoted for "this week" for "five (5) year Treasury Notes, constant
maturity yield" in the two most recently published versions of Statistical
Release H.15(519) (as published by the Board of Governors of the Federal
Reserve System), plus (ii) three hundred (300) basis points.
1.8 "Discount Facility Loan Value" of (i) a Lease at the time a Discount
Facility Loan is made - (a) with respect to Leases dated as of May+31,+1989 or
earlier, one hundred percent (100%) of each payment of Rent (net of any
rebates, credits or reductions which are or may be applicable thereto)
remaining unpaid under the Lease at that time (but excluding any past due
Rent), discounted from the date each such payment is due to such time at the
Discount Facility Rate with respect to such Discount Facility Loan, and (b)
with respect to Leases dated as of June 1, 1989 or later, one hundred percent
(100%) of each payment of Rent (net of all Credits, rebates and discounts)
remaining unpaid under the Lease at that time (but excluding any past due Rent)
discounted from the date each such payment is due to such time at the Discount
Facility Rate with respect to such Discount Facility Loan; and (ii) of a
Purchase Option at the time a Recourse Loan is made - one hundred percent
(100%) of the amount of the Purchase Option discounted from the date that the
Put is due to such time at the Discount Facility Rate with respect to such
Recourse Loan.
1.9 "Effective Date" - the date of this Agreement.
1.10 "Eligible Equipment" - new or remanufactured computer systems and
related components, software and accessories, or other equipment acceptable to
SBCC, having a Discount Loan Value of not less than $5,000.00 or such other
amount as is consented to by SBCC, subject to an Eligible Lease and not subject
to a security interest or other encumbrance in favor of any corporation, firm
or other person other than a security interest in favor of SBCC arising under
this Agreement or a Security Supplement."
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1.11 "Eligible Lease" - a full payout net lease in the form of Exhibit
A-1, naming TSFC as lessor, that:
(a) has a noncancellable term of not more than 84 months excluding
renewals or extensions;
(b) provides for (i) Rent and casualty payments in amounts sufficient to
repay to SBCC the Loan made in respect of such lease and interest on such
Loan at the Discount Facility Rate, (ii) interest on late payments under such
lease at a rate not less than the Late Payment Rate and (iii) all payments to
be made in the United States dollars;
(c) provides that the lessor's right to receive payment is absolute and
not contingent upon the fulfillment of any condition whatsoever other than
the passage of time;
(d) covers only Eligible Equipment subject to a security interest in
favor of SBCC and includes all hardware and any other systems required to
operate any included software;
(e) is not subject to any conditions of the obligations of, or any
right or offset, counterclaim or defense by, the Lessee thereunder;
(f) is a Lease of Equipment solely for business or commercial
purposes, and not for any personal, family, household or agricultural
purpose;
(g) as of the Closing Date, has no unpaid accrued Rent which is more
than thirty (30) days overdue;
(h) is a Lease under which the Lessee is not in default, nor has there
occurred any event which with the passage of time or giving of notice or both
would become a Lessee Default; and
(i) is in all other respects satisfactory to SBCC.
1.12 "Equipment" - any and all Eligible Equipment leased to a Lessee by
TSFC under a Lease, located in the United States and made subject to a security
interest in favor of SBCC by the execution and delivery by SPE of a Security
Supplement specifically describing such Eligible Equipment, together with (i)
all accessions, replacements, parts, repairs, fixtures and accessories
incorporated therein or affixed thereto under the Lease, and (ii) all upgrades,
add-ons and additions incorporated therein or affixed thereto to the extent
they have been financed by SBCC under this Agreement.
1.13 "Event of Default" - as defined in section 11.1.
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1.14 "Excess Proceeds" - of an item of Equipment - any excess of (i) (A)
the Proceeds thereof less (B) Remarketing Expenses, over (ii) the relevant Loan
Repayment Amount.
1.15 "Guaranty" - a guaranty, in the form of the guaranty which comprises
a part of Exhibit A-1, executed and delivered by a corporation, firm or other
person (a "Guarantor") satisfactory to SBCC, assigned to SBCC as security by
the execution and delivery by TSC of a Security Supplement specifically
describing such guaranty.
1.16 "Invoice Price" - with respect to any Equipment - the aggregate
invoice prices of Triad, as manufacturer or seller, or any other manufacturer
or seller, net of taxes, transportation cost, delivery cost and any acquisition
or other fees payable to CCI/Triad or any of its affiliates.
1.17 "Late Payment Rate" with respect to a Discount Facility Loan - two
percent (2%) in excess of the applicable Discount Facility Rate.
1.18 "Lease" - an Eligible Lease duly executed by the Lessee, approved by
SBCC and assigned to SBCC as security by the execution and delivery by SPE to
SBCC of a Security Supplement specifically describing such Eligible Lease.
1.19 "Lease Proceeds" with respect to any Lease - all payments due from or
with respect to the Lessee, such Lease or the Equipment subject to such Lease,
including, but not limited to, all Rent and any security deposits held by TSFC,
all casualty, early termination, purchase option and indemnity payments, and
all insurance and sales or lease proceeds of and requisition payments for the
equipment subject to such Lease.
1.20 "Lessee" - a United States-domiciled corporation, partnership or sole
proprietorship that is the obligor for payment of Rent under a Lease.
1.21 "Lessee Default" means: (i) failure of an Lessee under any Lease to
make a Lease a payment of Rent within ninety (90) days of the due date of the
payment; (ii) failure of any Lessee to perform any of its material obligations
(other then its obligation to pay Rent) under Lease; (iii) insolvency of any
Lessee, inability of any Lessee to pay its debts as they mature, the making by
any Lessee of an assignment for the benefit of creditors, or institution of any
proceeding by or against any Lessee alleging that the Lessee is insolvent or
unable to pay its debts as they mature if such proceeding is not withdrawn or
dismissed within sixty (60) days after its institution; (iv) entry of any final
judgment against any Lessee remaining unsatisfied for a period of thirty (30)
days if such judgment is deemed by us to be a material factor in the
creditworthiness of the Lessee; (v) death of any Lessee who is a natural person
or of any general partner of any Lessee which is a partnership; (vi)
dissolution, merger, consolidation or transfer of a substantial part of the
property of any Lessee which is a corporate or a partnership, if such
dissolution, merger, consolidation or transfer is deemed by us to be a material
factor in determining the creditworthiness of such Obligor; or (vii) falsity in
any material respect as of the
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date made in any statement, representation or warranty of any Lessee in
connection with any Lease.
1.22 "Loan" - any advance of funds by SBCC under this Agreement to SPE.
1.23 "Loan Repayment Date" with respect to any Loan - the twentieth day of
each calendar month, commencing with the first such day to occur after the
Closing Date for such Loan.
1.24 'Net Book Value' - with respect to a Loan at any time - means the sum
of (i) the unpaid balance of principal of such Loan, (ii) the unpaid amount of
costs, expenses and other amounts then due under or with respect to such Loan,
and (iii) any unpaid interest accrued on such principal, costs, expenses and
amounts at the Discount Loan Rate or Late Payment Rate, whichever is
applicable."
1.25 "Obligations" - as set forth in Section 6.1.
1.26 "Operating Agreement" - the Operating and Support Agreement dated as
of _______________, among CCI/Triad, TSFC, SPE, and SBCC, in the form of
Exhibit _____ attached hereto.
1.27 "Operative Documents" - this Agreement, each Security Supplement,
Note and the Operating Agreement.
1.28 "Proceeds" of an item of Equipment subject to remarketing under this
Agreement - the sum of (i) the (A) gross cash proceeds of sale of such item or
(B) aggregate Rent obligation under a re-lease of such item discounted at the
then applicable Discount Facility Rate, or, if none, at the rate then used by
SBCC for discounting similar leases or agreements, plus (ii) any past due Rent
and any other termination amount paid by the Lessee, or by SPE on behalf of the
Lessee, plus (iii) any security deposit held by TSFC or SPE that reduces the
Lessee's lease termination payment.
1.29 "Purchase Option" - an obligation of the Lessee under a Lease to pay
a specific amount at the end of the Lease's term in addition to any regular
installments of Rent, which obligation may be unconditional (e.g. a "put") or
subject to the Lessee's election (e.g. a fixed price purchase option).
1.30 "Qualified Lease" - a Lease which satisfies, which covers Equipment
which satisfies, and with respect to which are satisfied, all of the
requirements and conditions of Sections 1.10, 1.11, 8.3, 9.7, 9.8, 9.13-9.19,
9.23 and 9.26. In addition, and notwithstanding that a Lease is otherwise a
Qualified Lease, upon a breach of the covenants set forth in Section 9.27 or
9.28, or a breach of any other covenant or agreement (excepting covenants or
agreements to make payments which are limited pursuant to Section 3.12) which
remains unremedied thirty
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(30) days after notice from SBCC, the Lease and all other Leases shall cease to
be Qualified Leases.
1.31 "Recourse Loan" - as defined in Section 3.13.
1.32 "Remarketing Expenses" with respect to an item of Equipment - the sum
of (i) CCI/Triad's or TSFC's standard costs of repossessing, transporting,
refurbishing and remarketing the item pursuant to Section 10, plus (ii) any
applicable sales, use or similar taxes imposed in connection with the sale or
re-lease of such item and not paid by the purchaser or lessee, plus (iii)
reasonable and customary enforcement and collection costs.
1.33 "Remarketing Proceeds" with respect to an item of Equipment - the
Proceeds minus the Remarketing Expenses.
1.34 "Rent" - under a Lease, the periodic charges specified in the Lease
for the use of the Equipment, excluding casualty or early termination, purchase
option, Put, indemnity payments and any amounts a Lessee may be required to pay
for taxes, license fees, assessments or maintenance.
1.35 "Security Supplement" - a supplement hereto substantially in the form
of Exhibit ______, executed and delivered to SBCC by SPE, describing Equipment
and Leases and subjecting the same to the security interest in favor of SBCC
arising under Section 6.
1.36 "Standard Cost" with respect to an item of Equipment at any time - an
amount equal to fifty percent (50%) of the Net Book Value for the related Loan
calculated on the date of payment.
1.37 "System Evaluation Agreement" - the System Purchase, Support, and
License Agreement in the form of Exhibit _____.
1.38 [Intentionally Omitted]
1.39 "Upgrade" - as defined in Section 3.5.
1.40 "Supplemented Net Book Value" - with respect to a Loan at any time -
means the sum of (i) the Net Book Value of such Loan, and (ii) the Adjustment
Amount for such Loan for the period in which the Net Book Value is calculated.
2. THE LOANS.
2.1 Loans. Subject to the terms and conditions hereof, and to SBCC's
approval of from time to time, from (and including) the Effective Date to (and
excluding) the termination of this Agreement, upon request of SPE, for itself
or on behalf of, SBCC may, with
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respect to each Lease covered by the request and in SBCC's sole discretion,
make a Loan to SPE in a principal amount equal to the Discount Facility Loan
Value of such Lease(s)"
2.2 Interest Calculation. Interest on the Discount Facility Loans shall
be computed on the basis of a 360-day year consisting of twelve 30-day periods.
2.3 Minimum Loan. The aggregate principal amount of the Loans made on any
Closing Date shall be not less than $250,000.00.
2.4 Payments. SBCC shall pay the proceeds of the Loans in immediately
available funds on the Closing Dates. SPE shall make each payment due under
this Agreement or any Security Supplement to SBCC or its assignee in
immediately available funds to the account or address specified by SBCC or such
assignee.
3. DISCOUNT FACILITY.
3.1 Requests for Loans. No later than ten (10) Business Days before each
proposed Closing Date relating to a Discount Facility Loan requested by SPE,
SPE shall submit to SBCC Eligible Leases together with lease schedules and
other supporting documentation, and the following:
(a) the name of each Lessee under such Eligible Leases, together with
(i) unless previously submitted to SBCC, financial statements of each such
Lessee and each Guarantor relating to such Lease as of the end of such
Lessee's and Guarantor's most recent fiscal year, respectively, and any
interim financial statements of such Lessee and such Guarantor readily
available to SPE, or TSFC, all in form and substance satisfactory to SBCC,
(ii) the payment history of such Lessee or Guarantor under other leases
entered into between such Lessee or Guarantor and SPE, or TSFC and (iii) such
additional financial information pertaining to any Lessee or Guarantor as
SBCC may request;
(b) the Rent schedule for each such Eligible Lease;
(c) copies of invoices evidencing the Invoice Price of each item of
Equipment subject to such Eligible Leases and evidence satisfactory to SBCC
that such Invoice Price has been paid in full to CCI/Triad by the lessor
under such Eligible Leases; and
(d) such other relevant information as SBCC shall reasonable require.
3.2 Approvals. Within ten (10) Business Days of receipt of all
information required to be submitted pursuant to Section 3.1, SBCC shall advise
SPE if, upon review of the credit of the Lessee, the value of the Equipment and
the documentation submitted pursuant to Section 3.1, SBCC approves the proposed
Lease and, if SBCC requires the credit support of a guarantor, the credit of
the proposed Guarantor. If SBCC fails to give such advice within such
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ten day period, SBCC shall be deemed to have declined such credit and shall so
advise SPE. SBCC may revoke any credit approval prior to making the Discount
Facility Loan relating to a proposed Lease if, in SBCC's sole judgment, the
proposed Lessee or Guarantor suffers an adverse change in its business or
financial condition.
3.3 Disbursement of Discount Facility Loans. Subject to satisfaction of
the conditions precedent set forth in Section 4 and Section 5, SBCC may make
Discount Facility Loans with respect to approved Leases on the Closing Dates
proposed in accordance with Section 3.1. The Discount Facility Loans made on
each Closing Date shall be in an aggregate principal amount equal to the
aggregate Discount Facility Loan Values of the Eligible Leases submitted by SPE
pursuant to Section 3.1 and approved by SBCC pursuant to Section 3.2 If, for
any reason, a Discount Facility Loan is not made on a proposed Closing Date
notwithstanding compliance by SPE with Section 3.1, the Closing Date may be
rescheduled to a date, within ten (10) Business Days of such Closing Date,
mutually agreed upon in writing by SBCC and SPE.
3.4 Loan Payments and Amortizations. Each Discount Facility Loan shall
bear interest at the Discount Facility Rate determined on the applicable
Closing Date. Principal of, and accrued interest on, the Discount Facility
Loans shall be payable on each Loan Repayment Date until fully paid. Each
Discount Facility Loan shall be amortized by the Lease Proceeds received by
SBCC with respect to the Leases financed by such Loan, with such Lease Proceeds
applied first to accrued and unpaid interest, then to any other amounts due
under the Loan (excluding principal) and then to principal.
3.5 Upgrades and Additions. If the Lessee desires to add features to or
to enhance the performance of Equipment covered by a Lease by adding or
replacing components to the leased Equipment, (an "Upgrade"), SPE shall
promptly advise SBCC of the Lessee's intention and offer SBCC the right to
finance the Upgrade. Upgrades financed under a contract or agreement separate
from the primary Lease covering the Equipment to be upgraded will be offered to
SBCC for discounting in the same manner as Leases are offered under this
Agreement, with a Discount Facility Loan Value to be determined at the time the
Upgrade is offered. Upgrades which are to be financed by increasing the
monthly payments under, or by extensions to the term of, the existing Lease
will similarly be offered to SBCC, with a Discount Facility Loan Value
determined at the time the Upgrade is offered. Not later than ten (10)
Business Days after such, offering SBCC shall give SPE written advice as to
whether SBCC, in its sole discretion, has elected to finance such additional
Lease Proceeds. If SBCC fails to give such advice within such ten (10) day
period, SBCC shall be deemed to have declined to finance such additional Lease
Proceeds and shall so advise SPE in writing. If SBCC agrees to finance such
additional Lease Proceeds, SBCC shall, subject to satisfaction of the
conditions precedent set forth in Sections 4 and 5, make a Discount Facility
Loan in an amount equal to the aggregate increase in Rent effected by the Lease
Amendment which remains unpaid as of the applicable Closing Date, but excluding
any such increase in Rent which is past due, discounted at the Discount
Facility Rate determined on the applicable Closing Date. The Closing Date with
respect to such Discount Facility Loan shall be a date agreed upon in writing
by SBCC and SPE. If SBCC agrees to make such a Discount Facility
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Loan, the Lease Amendment shall be considered a "Lease" for all purposes of
this Agreement (including, without limitation, Section 5).
3.6 Optional Prepayment: SBCC Refusal to Finance Upgrades or Additions.
If SBCC elects not to finance increased Lease Proceeds related to Upgrades or
additions pursuant to Section 3.5, SPE may give SBCC notice of its intention to
prepay the Discount Facility Loan or part thereof made to finance the Lease in
respect of which an Upgrade has been made. On the next Loan Repayment Date
occurring in January, April, July or October, SPE shall prepay such Loan or
part thereof by paying SBCC an amount equal to the Net Book Value thereof,
determined as of the date of prepayment. No Prepayment Fee in excess of such
Net Book Value shall be payable in respect of an optional prepayment made
pursuant to this Section 3.6.
3.7 Mandatory Prepayment: Termination of Lease. If a Lessee terminates a
Lease before its scheduled expiration, SPE shall prepay the Discount Facility
Loan or part thereof made to finance such Lease on the Loan Repayment Date next
occurring in January, April, July or October. On such Loan Repayment Date, SPE
shall prepay such Loan or part thereof by paying SBCC an amount equal to the
Supplemented Net Book Value thereof, determined as of the date of prepayment.
3.8 Mandatory Prepayment: Casualty. If any Equipment subject to a Lease
is lost or damaged, and cannot be repaired or replaced with substantially
similar Equipment manufactured by CCI/Triad by the Loan Repayment Date next
occurring in January, April, July or October occurring not less than thirty
(30) days after such loss or damage, SPE shall prepay the Discount Facility
Loan or part thereof made to finance such Lease on such Loan Repayment Date. On
such Loan Repayment date, SPE shall prepay such Loan or part thereof by paying
SBCC an amount equal to the Supplemented Net Book Value thereof, determined as
of the date of prepayment.
3.9 Mandatory Prepayment: Lessee Default. If any Lessee Default under
any Lease financed or refinanced by a Discount Facility Loan shall have
occurred SPE shall prepay such Loan in accordance with, and subject to the
liability limitations of Section 8.4. No Prepayment Fee in excess of such Net
Book Value shall be payable in respect of any such prepayment. Prepayments
made pursuant to Sections 3.6, 3.7, 3.8 or 3.10 shall not constitute
prepayments made pursuant to this Section 3.9, nor shall any such prepayments
be taken into account as credits against SPE's ultimate loss liability under
Section 8.4.
3.10 Mandatory Prepayment: Qualified Lease. If at any time, any Lease
which is financed or refinanced by a Discount Facility Loan shall not be or
shall cease to be a Qualified Lease, SPE shall, on the next occurring Loan
Repayment Date, prepay such Loan or part thereof as is attributable to such
Lease by paying SBCC an amount equal to the Supplemented Net Book Value
thereof, determined on the date of prepayment.
3.11 No Other Prepayments Permitted. No Discount Facility Loan may be
prepaid except as expressly provided in this Agreement.
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3.12 Limited Recourse. SBCC agrees that, except as provided in Sections
3.6-3.10, Section 3.13, Section 7, Section 8, and Section 10 with respect to
Remarketing Expenses, each Discount Facility Loan is nonrecourse to SPE and
that the repayment of each Discount Facility Loan shall be obtained solely from
the Lease Proceeds of the Leases, Proceeds of the Equipment and the other
Collateral in which SBCC has been granted a security interest pursuant to
Section 6; provided, however, that SPE shall be jointly and severally liable
(without any limitation on recourse) (i) if (A) either SPE or TSFC shall fail
to pay over to SBCC any Lease Proceeds received by SPE or TSFC if required to
do so, in which case SPE shall be liable for the amount of the Lease Proceeds
received by SPE or TSFC if required to do so, in which case SPE shall be liable
for the amount of the Lease Proceeds not so paid over plus interest accrued
thereon at the Late Payment Rate from the date the Lease Proceeds were required
to be paid over to SBCC, or (B) the fees and payments paid by a Lessee to SPE
upon termination of a Lease are less than the Supplemented Net Book Value
relating to such Lease and (ii) for all payments required to be made pursuant
to Section 3.8, whether or not insurance proceeds received by SPE are at least
equal to such payments.
3.13 Full Recourse. Notwithstanding anything set forth herein, including,
without limitation, any limitation on recourse against SPE, Discount Facility
Loans may be made with recourse to SPE ("Recourse Loans"). Such Recourse Loans
shall be made with respect to Leases which are Eligible Leases except that the
creditworthiness of the Lessee is not otherwise acceptable to SBCC and/or
Leases under which a Purchase Option is provided. A Recourse Loan shall be
designated as such by mutual written agreement of SBCC and SPE prior to the
Closing Date of such Loans. Upon occurrence at any time of (i) any Lessee
Default under a Lease made subject to a Recourse Loan because of the
unacceptability of the Lessee's creditworthiness, or (ii) the failure, by a
Lessee, to pay the full amount of the Purchase Option at the end of the Lease
term under a Recourse Loan made with respect to such Purchase Option, SPE shall
repay the Recourse Loan or part thereof made to finance such Lease or Purchase
Option on the Loan Repayment Date occurring not more than thirty (30) days
after such default. On such Loan Repayment Date, SPE shall prepay such
Recourse Loan or part thereof by paying to SBCC an amount equal to the Net Book
Value thereof, determined as of the date of prepayment. No prepayment fee in
excess of such Net Book Value shall be payable in respect of any such
prepayment. The amounts paid to SBCC by SPE pursuant to this paragraph shall
not be charged against the First Loss Provision defined in Section 8.4.
4. CONDITIONS PRECEDENT TO FIRST LOAN.
SBCC's obligations to provide the first Loan hereunder are subject to the
receipt by SBCC of the following, in form and substance satisfactory to SBCC:
4.1 Evidence of Authority of SPE. Certified resolutions of the board of
directors of SPE, respectively, authorizing the execution, delivery and
performance of each of the Operative Documents to which it is a party and any
other document required hereunder together
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with an incumbency certificate with respect to the officer or officers of SPE,
respectively, executing any of such Operative Documents and any document
required hereunder.
4.2 Evidence of Authority of CCI/Triad. Certified resolutions of the
Board of Directors of CCI/Triad authorizing the execution, delivery and
performance of the Operating Agreement and any other document required
thereunder together with an incumbency certificate with respect to the officer
or officers of CCI/Triad executing the Operating Agreement and any document
required thereunder.
4.3 Operating Agreement. The Operating Agreement, duly executed by
CCI/Triad, TSFC, SPE, and SBCC.
4.4 Financial Statements. The most recent fiscal year's financial
statements of CCI/Triad, SPE, prepared in accordance with the standards
described in Section 9.21 and certified by independent certified public
accountants of recognized national standing; and interim financial statements
for each reporting period ended after such fiscal year, prepared in accordance
with the standards described in Section 9.21 and signed by such company's
respective chief financial officer treasurer or controller.
4.5 Officer's Certificate. A certificate from a duly authorized officer
of SPE, dated as of the first Closing Date, stating that:
(a) all representations and warranties made by SPE under this
Agreement and under the Operating Agreement are true and correct as of the
date of the certificate;
(b) SPE are in compliance with all covenants made under this
Agreement; and
(c) no event has occurred and is continuing that is, or with the
passage of time or giving of notice would be, an Event of Default or a
default under or breach of the Operating Agreement;
and containing an express undertaking by SPE, at any time that any Obligation
remains outstanding, to give immediate notice to SBCC if any of the above
statements is no longer true.
4.6 CCI/Triad Officer's Certificate. A certificate from a duly authorized
officer of CCI/Triad, dated as of the first Closing Date, stating that:
(a) all representations and warranties made by CCI/Triad under the
Operating Agreement are true and correct as of the date of the certificate;
(b) CCI/Triad is in compliance with all covenants made under the
Operating Agreement; and
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(c) no event has occurred and is continuing that is, or with the
passage of time or giving of notice would be, a default under or breach of
the Operating Agreement;
and containing an express undertaking by CCI/Triad to give immediate written
notice to SBCC if at any time prior to the Anniversary Date any of the above
statements is no longer true.
4.7 Insurance. Evidence of the insurance required by Section 8.3.
4.8 Opinion of Counsel. A written opinion of outside counsel,
substantially in the form attached hereto as Exhibit _____ and dated as of the
first Closing Date, with respect to the matters set forth in Exhibit ______,
and such other legal matters relating hereto as SBCC may reasonably request.
4.9 Agreement of Admission of Additional Secured Parties. Evidence that
the Agreement of Admission of Additional Secured Parties, in the form
previously executed by SBCC, has been duly executed and delivered by all of the
other parties thereto.
5. CONDITIONS PRECEDENT TO ALL LOANS.
5.1 Notice. SPE shall have given SBCC notice of each Closing Date no
later than ten (10) Business Days prior to such Closing Date.
5.2 Operating Agreement. The Operating Agreement shall be in full force
and effect and no defaults or breaches shall exist thereunder as of the
applicable Closing Date.
5.3 System Evaluation Agreements. No Leases being financed by a Discount
Facility Loan shall be subject to any condition, contingency, acceptance or
performance evaluation, including any under a System Evaluation Agreement on
the applicable Closing Date.
5.4 Receipt of Certain Documents. SBCC shall have received the following,
in form and substance satisfactory to SBCC:
(a) Lease. (i) All original, manually executed counterparts in the
possession of CCI/Triad, TSFC or SPE on such Closing Date of each Lease
financed on such Closing Date and the related Lease Schedule, in each case
duly executed by TSFC as lessor and by the Lessee thereunder;
(b) Guaranty. If required by SBCC, all original, manually executed
counterparts in the possession of CCI/Triad, SPE on such Closing Date of each
Guaranty duly executed by the Guarantor;
(c) Financing Statements Filed Against Lessees. Except in the case of
Leases of Equipment having an aggregate Invoice Price less than $15,000,
copies of duly executed and filed Uniform Commercial Code financing
statements on form XXX-0
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(or, in Louisiana, a document with similar effect) naming SPE as secured
party and the Lessees under the Leases to be financed on the Closing Date as
debtors, identifying as collateral the Equipment subject to such Leases
together with all accessions, replacements, parts, additions and
substitutions thereto and therefor, whether then owned or after acquired, and
all upgrades, add-ons and additions thereto and therefor. SBCC shall have
the right at any time (which right is coupled with an interest and a power of
appointment) to act as SPE's and/'s attorney in fact to execute XXX-0, XXX-0,
or UCC-3 financial statements on behalf of SPE for the purpose of filing
and/or assigning said financing statements to SBCC and perfecting SBCC's
security interest in the Equipment, provided SBCC bear all costs and expenses
incurred with the filing of such UCC Statements;
(d) Financing Statements To Be Filed Against SPE. Copies of duly
executed Uniform Commercial Code financing statements on form UCC-1 (or, in
Louisiana, a document with similar effect), naming SPE, respectively, as
debtor and SBCC as secured party, and identifying as collateral the
Collateral described in Section 6.1, in sufficient number to be filed in all
jurisdictions as may be necessary, in SBCC's judgment, to perfect SBCC's
security interest in such Collateral, including, without limitation,
jurisdictions where (i) SPE has its chief executive offices, (ii) SPE
maintain its records concerning the Leases and (iii) the Equipment is
located;
(e) Supplement. A Security Supplement, duly executed by SPE relating
to and describing the Lease, any Guaranty and the Equipment covered thereby;
(f) Notice of Assignment. An original notice to the relevant Lessee
of the assignment to SBCC of the relevant Lease, signed by TSFC substantially
in the form of Exhibit ___________;
(g) Acceptance Supplement. An original executed counterpart of the
certificate of acceptance with respect to each Lease (in the form contained
in Exhibit A-1) containing a complete description of the Equipment, duly
executed by the Lessee thereunder; and
(h) Other Documents. Such other documents, instruments or agreements
as SBCC may reasonably request.
6. SECURITY AGREEMENT.
6.1 Granting Clause. In order to induce SBCC to make Loans from time to
time to SPE, and in order to secure (i) the prompt repayment of the Loans and
payment of all interest accrued thereon, (ii) the strict performance and
observance by SPE of the obligations to be performed by it hereunder and (iii)
all costs of litigation, collection, reasonable attorneys' fees and other costs
expended or incurred in connection with the enforcement of SBCC's rights
hereunder and with respect to the Leases and the Equipment (the obligations
referred to in
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clauses (i) through (iii) being collectively referred to as the "Obligations"),
SPE hereby assign, pledge and grant a continuing security interest to SBCC in
all of its right, title and interest in and to the following described
properties, assets and rights (such properties, assets and rights collectively
called the "Collateral"):
(a) each Lease, Guaranty and all payments (including Rent) due and to
become due to SPE thereunder;
(b) every item or component of Equipment subject to Leases, together
with (i) all accessions, replacements, parts, additions and substitutions
thereto and therefor whether now owned or hereafter acquired and (ii) all
upgrades, add-ons and additions thereto and therefor unless the same can be
readily removed without affecting the original performance or configuration
of the original Equipment and in any case if they have been financed by SBCC
under this Agreement;
(c) all Lease Proceeds and Proceeds of items or components of
Equipment; and
(d) the proceeds (whether cash or non-cash proceeds), and products of
all the properties, assets and rights described in paragraphs (a), (b) and
(c) above, including without limitation, all insurance payments, whether or
not SBCC is the loss payee thereof;
in each case whether now owned or hereafter acquired.
6.2 Appointment of SBCC. If SBCC assumes administration of collection of
Rent pursuant to Section 7 or Section 11.2, SPE irrevocably authorizes SBCC:
(a) to endorse or sign SPE's ' name on all checks, collections,
receipts UCC's or other documents related to the Leases;
(b) to take possession of an open mail addressed to SPE or TSFC
relating to such collection and remove Rent and proceeds and products of the
Collateral;
(c) to ask, demand, collect, receive, xxx for, compound and give
acquittance for any and all payments assigned hereunder;
(d) to settle, adjust or compromise any claim thereunder as fully as
it or TSFC could;
(e) to endorse SPE's or TSFC's name on all checks and other commercial
paper given in payment or in part payment thereof; and
(f) in its discretion, to file any claim or take any other action or
proceeding, either in SBCC's own name or in SPE's or TSFC's names, or
otherwise, that SBCC may
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deem necessary, desirable or appropriate to collect any and all sums that may
be or become due or payable under the Leases or that may be necessary or
appropriate to protect the right, title and interest of SBCC in and to the
Collateral and the security intended to be afforded thereby and hereby.
6.3 Further Assurances. SPE will upon written direction from SBCC and at
the expense of SPE, do, execute, acknowledge and deliver all and every further
acts, deeds, conveyances, transfers and assurances reasonably necessary or
proper for the better effectuation of this Agreement, including but not limited
to assuring, conveying, assigning and confirming unto SBCC all of the
Collateral, whether now owned or hereafter acquired.
6.4 No Obligations Assumed by SBCC. SBCC does not assume, and its
interest herein shall not be subject to, any obligations or liability of TSFC
under any lease or any duty to collect money due thereunder or to enforce
collection thereof. SBCC assumes no responsibility, obligation or liability of
any kind whatsoever with respect to any Lease or Equipment, or for any
representation, warranty or obligation, express or implied, made by any person
or entity in connection with any lease.
6.5 Release of Security Interest. Upon payment in full of all amounts due
on a Loan and provided no Event of Default shall have occurred and be
continuing, SBCC agrees to (i) release its security interest in the Lease
financed by such Loan and the Equipment subject thereto, except to the extent
that such Lease or Equipment constitute Collateral for any unpaid Recourse Loan
or other Obligation; (ii) execute and deliver to SPE such UCC-3 releases and
other documents relating to released Leases and Equipment prepared by SPE as
SPE may reasonably request, and (iii) if requested by SPE, deliver to SPE
within thirty (30) days of such request the original documents relating to
released Leases described in Section 5.4(a), (b), (f), (g) and (h).
6.6 Final Release by SBCC. Upon termination of SBCC's commitment to make
Loans, repayment in full to SBCC of all Loans, and performance of all other
Obligations, SBCC will release its security interest in the Collateral in the
manner provided in Section 6.5.
7. ADMINISTRATION.
7.1 Authorization to Collect Rent. Until such time as there is an Event
of Default hereunder or SPE's authority to collect Rent is terminated pursuant
to Section 7.7, or 11.2 SPE is authorized to and shall collect Rent from
Lessees.
7.2 Collections. SPE will undertake such collections as an independent
contractor and not as SBCC's agent, and in connection therewith will at its
sole cost and expense, diligently perform all billing and collecting for Rent
due and to become due with respect to Leases and Equipment financed under
Discount Facility Loans. SPE shall xxxx Lessees in accordance with its
standard billing procedures provided that each invoice sent with respect to
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any Lease sold and assigned hereunder shall segregate the amount due thereunder
for maintenance, services and taxes.
7.3 Remittances. SPE shall, on or before the Loan Repayment Date of each
month, make payment to SBCC of the amount due on each Discount Facility Loan on
such date regardless of whether or not any Rent under applicable Leases shall
have been collected by SPE. SPE's obligation to make remittances pursuant to
this Section 7.3 shall, except with respect to remittances under Recourse
Loans, cease and be of no further effect at such time as SPE shall have no
further liability to SBCC under the provisions of Section 8.4(c) of this
Agreement.
7.4 Lease Receivables Statements. As soon as available, but no later than
the twentieth day of each month, SPE shall cause TSFC to deliver to SBCC a list
of all Leases then outstanding, and a statement showing the aging of
receivables under, and collections received under, such Leases both certified
as being complete and correct by a responsible officer of SPE.
7.5 First Loss Provision Statements. On the last Business Day of each
January, April, July and October, SPE shall cause TSFC to provide SBCC with a
quarterly statement as of such date of the first loss provision described in
Section 8.4.
7.6 Account Status Statements. As soon as available, SPE shall cause TSFC
to deliver to SBCC any changes in account status for any Leases then
outstanding that TSFC becomes aware of from time to time. Account status shall
be defined, but not limited to, changes in Lessee billing address, equipment
locations, equipment, and/or legal name.
7.7 Collection by SBCC. If, at any time, (i) an Event of Default shall
have occurred, or (ii) Rents under more than ten percent (10%) of all Leases
(determined according to the current Net Book Value of Discount Facility Loans
than outstanding respect to the Leases) shall be sixty (60) or more days past
due, then in either of such events, SBCC may immediately terminate SPE's
authority to xxxx and collect for Rent. Upon such termination SBCC may
undertake to collect Rents and other amounts due and to become due under the
Leases, deliver to the Lessees notices of the assignment of the Leases to SBCC,
direct the Lessees to thenceforth make payment of all Rents and other amounts
then due or to become due under the Leases directly to SBCC, and otherwise
enforce the rights of the lessor under the Leases.
7.8 Power of Attorney, Discretion to Collect. Upon SBCC's undertaking to
collect Rents, SPE hereby irrevocably constitute and appoint SBCC as its true
and lawful attorney with full power of substitution, for it and in its name,
place and stead, to ask, demand, collect, receive, receipt for, xxx for,
compound and give acquittance for any and all Rents and other sums due under
Leases assigned hereunder, and to endorse the name of SPE on all checks,
collections, receipts or instruments given in payment or part payment thereof.
SBCC may take or fail to take whatever action with respect to collections as
it, in its sole discretion, shall deem proper. Regardless of what collection
action is taken, the provisions of Section 3.13 and 8.4 shall be unaffected by
any such action or failure to act.
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8. INDEMNITIES; INSURANCE; FIRST LOSS.
8.1 Indemnities. Notwithstanding anything set forth herein, including,
without limitation, any limitation on recourse against SPE, SPE shall indemnify
SBCC and hold it safe and harmless from and against any and all losses, claims,
actions, suits, proceedings, costs, expenses, damages, penalties, forfeitures
and liabilities including reasonable attorneys' fees and court costs
("Indemnified Amount") (other than Indemnified Amounts arising from or
pertaining solely to the gross negligence or willful misconduct by SBCC) that
may at any time be made, brought, incurred, assessed or adjudged against SBCC
solely arising from or pertaining to the Leases and Equipment, including but
not limited to:
(a) the leasing, use, maintenance or operation of the Equipment;
(b) breach of any alleged covenant, obligation or warranty made by
SPE, TSFC, or CCI/Triad relating to any Equipment or Lease or maintenance of
any Equipment, including qualification of any Equipment for any tax benefit;
(c) any claim, action or preceding involving patent infringement or
copyright or trade secret violations relating to the Equipment (including any
interest or penalty) whether or not such claim, action or proceeding involves
a claim or infringement of a combination or design patent;
(d) failure of SBCC, for whatever reason, to have obtained a first
priority perfected purchase money security interest in and lien on the
Collateral, including, without limitation, the Leases and the Equipment
(whether or not (i) the Equipment is deemed to be an asset of a Lessee as the
result of a Lease being held to be a security agreement rather than a true
lease or (ii) Uniform Commercial Code financing statements on form UCC-1 were
filed against a Lessee with respect to the equipment under Section 5.4(c));
(e) any statement or misrepresentation made in the course of
negotiations regarding any Lease or Equipment;
(f) any breach of any warranty or covenant, or any misrepresentation,
of SPE, TSFC or CCI/Triad in any Lease, any Operative Document or any
certificate of an officer of SPE, or CCI/Triad delivered in accordance
therewith;
(g) failure of any lease or Equipment to comply with applicable laws,
regulations or contractual specifications or warranties, or to be an Eligible
Lease or Eligible Equipment, as the case may be;
(h) any dispute, claim, offset or defense of any Lessee (other than
payment by, or discharge in bankruptcy of, such Lessee) to the payment of any
Rent;
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(i) failure to SPE, TSFC or CCI/Triad to pay when due any taxes for
which it is liable;
(j) any alleged injury to persons or property or any violation of
invention or patent rights;
(k) any governmental fees, taxes, charges or penalties levied or
imposed in respect to any Lease or related Equipment; and
(l) any wrongful or negligent acts or omissions of SPE or TSFC, or
either of their agents or assigns, in carrying out SPE's or TSFC's
obligations under Section 7 or Section 10.
All of the indemnities set forth in this Section 8.1 shall survive the
cancellation or termination of this Agreement.
8.2 Indemnity Payment. Upon the occurrence of any of the events set
forth in Section 8.1, SPE unconditionally agree to pay to SBCC, upon written
demand, the Indemnified Amount.
8.3 Insurance. With respect to all Equipment, SPE shall cause TSFC to
maintain in full effect, and shall deliver to SBCC evidence of, (a) liability
insurance, including all-risk insurance, with a combined single limit of at
least $500,000.00 per occurrence, naming SBCC as additional insured, (b)
property damage insurance on all Equipment, naming SBCC as a loss payee, in an
amount equal to actual cash value or replacement value, with a deductible of
not more than $200,000.00 per year for all Equipment, in each case with such
endorsements (including breach of warranty) and with such underwriters as are
satisfactory to SBCC and (c) such other insurance as is usual in the business
carried on by SPE, TSFC and CCI/Triad, which insurance shall be satisfactory to
SBCC as to amount, form, nature and carrier.
8.4 First Loss Provision.
(a) Upon the occurrence of any Lessee Default under any Lease financed
or refinanced by a Discount Loan Facility (excepting Recourse Loans), and
upon written demand by SBCC, SPE shall prepay, on the next Loan Prepayment
Date occurring in January, April, July or October, the Discount Facility Loan
or part thereof which is attributable to such Lease by paying to SBCC an
amount equal to the Net Book Value of the Discount Facility Loan or part
thereof outstanding with respect to the defaulted Lease.
(b) Upon SBCC's receipt of a prepayment specified in Section 8.4(a),
SBCC will terminate its security interest in the defaulted Lease and related
Collateral (except to the extent that such Lease or Collateral constitute
security for any unpaid Recourse Loan or other Obligation) and reassign the
same to SPE without recourse to, and
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without representations or warranties by SBCC of any kind whatsoever. SPE
shall then promptly take all reasonable steps to recapture possession of the
Equipment covered by the defaulted Lease and use its best efforts to remarket
the Equipment in the manner provided in Section 10 hereof.
(c) The maximum amount of liability which SPE will be required to bear
under Section 8.4(a) hereof with respect to any Loans made at any time under
this Agreement shall be limited to the extent that any amount payable
thereunder exceeds the sum of ten percent (10%) of the aggregate initial
amount of all Loans, exclusive of Recourse Loans, made pursuant to this
Agreement, plus (i) the aggregate Standard Cost of all Equipment covered by
defaulted Leases which in turn are covered by Loans prepaid under Section
8.4(a), plus (ii) the excess, if any, of the aggregate Remarketing Proceeds
realized with respect to such Equipment over the Standard Cost thereof, plus
(iii) the maximum amount of liability which TSFC may be required to bear
under Section 8.4 (net of any reductions on account of repurchases and other
reductions to such maximum liability as provided in said Section) of that
certain Loan and Security Agreement, dated as of August 8, 1989, as amended
and supplemented from time to time, between SBCC and TSFC, as successor to
TSC Leasing Corporation and Orleans Leasing Corporation, minus (iv) the
amount, if any, of payments (exclusive of any such payments made with respect
to Recourse Loans) made by SPE under Section 7.3 hereof which have not been
received from the Lessees, and minus (v) the amount of excess loss charges
made with respect to the Canadian Loan Agreement (as provided for in Section
8.4(d) below). SBCC's rights under this Section 8.4 shall be cumulative and
in addition to all other rights (except the rights to receive prepayments
under Section 3.9 which are incorporated in SBCC's rights under this Section
8.4) to receive payment of the Discount Facility Loans pursuant to this
Agreement.
If, at any time, SPE's ' liability under this Section 8.4 shall have
been reduced to zero, SPE shall thereafter have no liability under this
Section 8.4 except to the extent that SPE thereafter realizes Excess Proceeds
with respect to any Equipment or Rent from any Lessee not previously received
by SPE, in which event the previously unpaid portion of all such Net Book
Values shall be promptly paid by SPE to the extent of such Excess Proceeds.
(d) It is understood that Triad Systems Canada, Limited ("Triad
Canada") an affiliate of SPE's, TSFC's and CCI/Triad's, has entered into a
Loan and Security Agreement, dated as of _________________ (the "Canada Loan
Agreement") with Sanwa Bank Canada, Ltd. ("Sanwa Bank Canada"). The Canada
Loan Agreement is structured similarly to this Agreement and provides that
Triad Canada must, to the extent of a specified loss limitation, make
mandatory payment of loans upon the occurrence of obligor defaults under the
agreements securing such loans. SBCC, Sanwa Bank Canada, SPE, TSFC and
CCI/Triad, and Triad Canada have agreed that, to the extent that such
obligor-default-triggered loan repayments under the Canada
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Loan Agreement exceed the amount of loss limitation provided under the Canada
Loan Agreement, Triad Canada may be required by Sanwa Bank Canada to continue
to make such loan repayments to the extent that the loss limitation under
Section 8.4(c) of this Agreement has not been exceeded. In furtherance of
the agreement regarding loss limitations applicable to the Canada Loan
Agreement, SBCC has agreed to reimburse Sanwa Bank Canada for the amount of
any such additional loss which is not promptly paid by Triad Canada, and SPE
has agreed to reimburse SBCC for the amount of any such payments. It is
acknowledged and agreed that any such reimbursement obligations owed to SBCC
from SPE shall constitute and be construed as obligations under this
Agreement. To the extent that such excess payments under the Canada Loan
Agreement or such reimbursements are made, the amount of such payment or
reimbursement shall be charged against the maximum amount of loss provided
under Section 8.4(c) of this Agreement, and the maximum amount of loss
provided under Section 8.4(c) will be reduced by the U.S. Dollar equivalent
of such charge (determined as of the date of payment of such amount to Sanwa
Bank Canada).
9. REPRESENTATIONS, WARRANTIES AND COVENANTS.
SPE represents, warrants and covenants that, at all times until all Loans
made pursuant to this Agreement shall have been fully paid:
9.1 Due Organization. It and TSFC each is a corporation duly organized
and validly existing good standing under the laws of California, and is duly
qualified or otherwise authorized to do business wherever necessary to carry on
its present business and operations and to perform its respective obligations
under each Operative Document.
9.2 Authority. It and TSFC each has the full power, authority and legal
right to enter into and perform its obligations under each Operative Document.
9.3 Principal Place of Business. As to SPE and TSFC respectively, its
chief executive office and the office where it maintains its records concerning
payments under the Leases is at 0000 Xxxxx Xxxxx Xxxxxxxxx, Xxxxxxxxxx
00000-0000, and it will not change such principal place of business or remove
therefrom such records, or any other records relating to the Collateral or any
Loan, without thirty (30) days prior written notice to SBCC.
9.4 Binding Obligations. Each Operative Document has been duly
authorized and upon execution and delivery will constitute legal, valid and
binding obligations, enforceable against it, TSFC and/or CCI/Triad in
accordance with the terms thereof.
9.5 Approvals and Consents. No stock holder approval, or approval or
consent of any trustee or holder of any indebtedness or obligation, or
authorization, consent, approval or license by, exemption from or registration
with, any court or governmental department,
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commission, board, agency or instrumentality, domestic or foreign, is or will
be necessary in connection with the execution, delivery and performance of its
obligations under the Operative Documents, and no consent of any owner, lessor
or mortgagee of premises where any Equipment is located is or will be needed to
permit SBCC or the lessor to enforce the rights of the lessor under the Leases
or, if required, the same have been or, as needed, will be obtained and
certified copies have been or will be delivered to SBCC.
9.6 Compliance with Laws. There is no law, governmental rule,
regulation, judgment, decree or order binding on it that would be contravened
by the execution and delivery of, and performance under, the Operative
Documents. SPE will at all times comply with, or cause to be complied with,
all laws, statutes, rules, regulations, orders and directions of any
governmental authority having jurisdiction over it or its business.
9.7 Clear Ownership. The interests of SPE and TSFC combined are, and
will continue to be, the record and beneficial ownership of 100% of each Lease
and all Equipment subject to Leases in which TSFC is named as Lessor, free and
clear of all of the Collateral free and clear of all mortgages, deeds of trust,
pledges and other liens, security interests, charges or encumbrances, except
for liens for taxes due but not yet payable, and shall promptly deliver to SBCC
any executed counterparts of Leases which were not previously delivered to SBCC
pursuant to Section 5.4(a) and which have subsequently come into its, TSFC's or
CCI/Triad's possession.
9.8 Filings. This Agreement and the Uniform Commercial Code filings made
pursuant hereto create in favor of SBCC a valid and perfected first priority
security interest in the Collateral securing the Obligations.
9.9 Actions. There are no actions, suits, proceedings, claims or
disputes pending or, to its knowledge, threatened against or affecting it or
its properties before any court or governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, that, if determined
adversely to it, would have a material adverse effect on its condition,
business or operations, its ability to perform its obligations under the
Operative Agreements or SBCC's security interest in the Collateral.
9.10 Payment of Taxes. It has filed and will file all tax returns
(federal, state and local) required to be filed and has paid and will pay all
taxes shown thereon to be due, including interest and penalties, unless it is
contesting the payment of certain taxes in good faith and has established
adequate reserves therefor.
9.11 Notices. It will send to SBCC copies of all significant notices,
including, but not limited to, any notices with respect to the terms of any
Lease, and other instruments or communications required or permitted to be
given by the Lessee under any Lease.
9.12 Further Assurances; Enforcement of Leases. It will and will cause
TSFC to:
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(a) preserve and maintain its corporate existence and all rights,
privileges and franchises now enjoyed and conduct its business in an orderly,
efficient and customary manner;
(b) from time to time, at its own expense, take all action reasonably
necessary to establish, preserve, protect and perfect the rights created by
this Agreement, including, without limitation, (i) the full and punctual
performance of all of its obligations arising by contract or imposed by
applicable law, rate or regulation under the Leases and with respect to the
Equipment; (ii) the enforcement of the Leases without waiver, amendment or
modification; (iii) in the case of Leases having an Invoice Price equal to or
greater than $15,000, and to the extent not previously done pursuant to
Section 5.4(c)(ii), preparation, execution and filing of amendments on form
UCC-2 or UCC-3, as appropriate, to the financing statements described in
Section 5.4(c) to name SBCC as assignee of the secured party, and delivery to
SBCC of copies thereof; and (iv) the exercise of any and all rights of the
lessor under the Leases as may be necessary or advisable to assure full
compliance with the terms and provisions thereof and to protect SBCC's
security interest in the Collateral.
9.13 Validity and Enforceability of Leases and Guaranties. Each Eligible
Lease and Guaranty submitted to SBCC pursuant to Section 3.1 shall be genuine,
valid and enforceable and shall not be subject to any offset, deduction,
counterclaim defense or lien of any kind whatsoever.
9.14 Leases Duly Entered Into. All parties to each Lease and Guaranty
shall have full authority and capacity to execute and deliver such Lease or
Guaranty, as the case may be and to perform its obligations thereunder.
9.15 Equipment Description. Each Lease will correctly and accurately
describe the Equipment leased to the Lessee named in such Lease, the Rent
required for such Equipment and any applicable early termination payments.
9.16 Leases Comply with Laws. Each Lease will comply with and not
violate applicable laws and regulations including, without limitation, any
applicable laws relating to maximum rates of interest (whether or not imputed)
or similar charges.
9.17 No Impairment of Value or Rights. It has not done nor will it do
anything that might impair the value or validity of any Lease guaranty or
Equipment or any of the rights of the parties hereto under any Lease.
9.18 No Lessor Liens. No Lease submitted to SBCC pursuant to Section
3.1, or any Equipment subject thereto, or any Rents or other of its rights
therein, will have been assigned to, or be subject to any lien or security
interest in favor of, any person other than SBCC.
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9.19 No Modification of Leases. It will not waive, amend or otherwise
modify any provision of any Lease without the prior written consent of SBCC.
9.20 Notifications. It will promptly notify SBCC of:
(a) any Event of Default or event which, upon the lapse of time or
giving of notice, or both, would become an Event of Default, or any event
which is, or upon the lapse of time or giving of notice, or both, would
become a default under or breach of the Operating Agreement;
(b) any Lessee Default, default or violation of any of the provisions
of a Lease by a Lessee, any loss or damage to any Equipment or any materially
adverse credit information that it may have knowledge of with respect to a
Lessee or Guarantor, or a proposed Lessee or Guarantor;
(c) any and all litigation or other matters or events concerning it or
any Lessee that has a reasonable possibility of materially and adversely
affecting its or any Lessee's financial condition, its business or SBCC's
security interest in the Collateral;
(d) any change in the name or address of any Lessee; and
(e) not less than ten (10) days prior to such occurrence, any change
in the location of SPE's principal place of business or chief executive
office or (ii) opening or closing any places of business in any jurisdiction
where a UCC financing statement or similar document would need to be filed in
order to perfect or protect SBCC's security interest or other interest in any
Lease, Rents or Equipment.
9.21 Books and Records; Financial and Other Information. It shall and as
to TSFC, shall cause TSFC to:
(a) maintain adequate books, accounts and records and prepare all
financial statements required hereunder in accordance with generally accepted
accounting principles and practices consistently applied and in compliance
with the regulations of any governmental regulatory body having jurisdiction
over it;
(b) give SBCC and its representatives, at all reasonable times and
upon reasonable notice, access to all records, files and books of accounting
pertaining to all transactions subject to this Agreement, and permit SBCC and
its representatives to inspect, audit, and make extracts therefrom;
(c) upon SBCC's undertaking of collection of Rents or the occurrence
of an Event of Default or an event which, upon the lapse of time or giving of
notice, or both, would become an Event of Default, permit SBCC to exercise
the inspection rights of TSFC under the Leases, on a non-exclusive basis;
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(d) deliver to SBCC in form and detail satisfactory to SBCC, and in
such reasonable number of copies as SBCC may request:
(i) the lists of Lease receivables and statements showing the aging of
receivables, as required by Section 7.4;
(ii) the statements of first loss provision required by Section 7.5;
and
(iii) such other statement or statements, lists of property and
accounts, budgets, forecasts or reports as to TSFC or SPE as SBCC may
reasonably request.
(e) promptly, but in no event later than ninety (90) days after the
end of the relevant fiscal year or sixty (60) days after the end of the
relevant fiscal quarter, submit to SBCC copies of the most recent 10-K or
10-Q statement of CCI/Triad filed with the Securities and Exchange Commission
("SEC"), or if such reports are not so filed, comparable reports containing
such detail and prepared according to the same standards as in 10K and 10Q
reports, and any and all financial reports, notices and proxy statements sent
by it to shareholders as a group or filed with the SEC;
(f) promptly, but in no event later than ninety (90) days after the
end of the relevant year or fiscal quarter, submit to SBCC copies of SPE's
unaudited financial statements for such year or quarter, which shall present
fairly SPE's financial condition as of the end of such period and the results
of operations for such period, which shall be signed by SPE's chief financial
officer; and
(g) Monthly Financial Statements. Not later than thirty (30) days
after the end of each month, SPE shall provide SBCC with monthly financial
statements relating to the immediately preceding month.
9.22 Audit. It shall permit SBCC, from time to time, upon reasonable
request and at SBCC's sole expense, to conduct an audit of TSFC's and SPE's '
accounting and operating procedures as they relate to the Leases.
9.23 Charges and Taxes. It shall make all filings in respect of and pay
(or reimburse SBCC for, upon presentation of an invoice) all charges and local,
state or federal taxes (other than net income taxes of SBCC or franchise taxes
levied upon SBCC's net income), license fees, or other assessments, charges,
fines and penalties, together with interest payable with respect thereto,
levied or imposed upon or in connection with this Agreement, the Leases, the
Equipment and the Rent. Upon request of SBCC, SPE shall furnish, or cause TSFC
to furnish, written evidence of such payment to SBCC.
9.24 Financial Covenants. Neither CCI/Triad nor any successor entity
will be in default of, or fail to satisfy, any of the financial covenants which
are applicable to it under any
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credit facility provided by The Chase Manhattan Bank, N.A. or other acquisition
or working capital lender, including any covenants pertaining to interest
coverage, consolidated EBITDA to consolidated cash interest expense, minimum
consolidated EBITDA, consolidated total debt to consolidated EBITDA, and fixed
charge coverage. TSC will provide certificates to SBCC, concurrently with the
delivery of the financial statements required under this Agreement and signed
by a responsible officer, stating that to the best of such officer's knowledge,
the requirements of this Section 9.24 have been duly observed and satisfied,
and showing in detail the calculations supporting such statements.
9.25 Maximum Requests for Loans Per Month. It will make no more than a
combined total of two (2) requests for Loans, under Section 3.1, during each
calendar month until the Anniversary Date.
9.26 Concerning the Leases. With respect to each Lease all of the
following are true and correct as to the Lease, the Rents under the Lease, and
the Equipment covered by the Lease:
(a) The Lease arises from a bona fide lease or sale of the Equipment
described in the Lease and the Equipment is in all respects in accord with
the requirements of the Lease and has been delivered to and unqualifiedly
accepted by the lessee or vendee thereunder; none of the Equipment covered by
the Lease, after its delivery and acceptance by such lessee or vendee, is a
fixture under the applicable laws of any state where the Equipment is or may
be located;
(b) The Equipment complies with all applicable laws and regulations;
(c) The Contract accurately describes the Equipment covered thereby
and the Rent due thereunder, and is in all respects what it purports to be;
(d) All counterparts of the Lease have been clearly marked to
indicate that only one counterpart is the "Original", and that counterpart
will be delivered to SBCC at the time of our purchase;
(e) At the time of the SBCC Loan with respect to the Lease, SPE has
informed SBCC in writing of all agreements entered into in connection with
the Lease and fully executed copies (all original copies if requested by
SBCC) of all those agreements will be delivered to SBCC simultaneously with
delivery of the Lease;
(f) Each Lessee under a Lease or guarantor under a guaranty has all
the legal power, capacity and right required for it to enter into the Lease
or guaranty and any supplemental agreements and to perform its obligations
thereunder;
(g) Neither SPE, TSFC, or the vendor or lessor of the Equipment is in
default of any of its or such vendor's or lessor's obligations under the
Lease or arising by
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contract or imposed by applicable law, rule or regulation with respect to the
Lease and the related Equipment;
(h) SPE and/or TSFC have taken, at their expense, all steps from time
to time necessary or deemed by SBCC to be desirable to perfect (and continue
the perfection of) SBCC's security interest in the Lease, the Rent and the
Equipment covered by the Lease;
(i) At the time of SBCC's Loan with respect to the Lease, no amounts
have been prepaid on the Lease except advance payments which are required by
the terms of the Lease.
9.27 Continuation of Existence and Business. Neither SPE, TSFC, or
CCI/Triad will (i) cease to engage in substantially the same line of business
in which any of them are engaged on the date of this Agreement, (ii) cease to
engage in the sale or lease of Equipment, or (iii) sell, transfer or convey a
substantial part of its assets or effect or be a party to any merger or
consolidation without SBCC's prior written consent.
9.28 The Operating Agreement is in full force and effect, has not been
withdrawn, modified without SBCC's written consent, rescinded or repudiated,
and no default or breach thereunder exists.
10. REPOSSESSION AND MARKETING.
10.1 Request to Repossess; Remarketing. If a default exists under a
Lease financed or refinanced by a Discount Facility Loan, either through
notification by SPE or TSFC pursuant to Section 9.20 or otherwise, and that
such default remains uncured within the time, if any, for curing the same
permitted by the Lease, and provided that no prepayment with respect to such
Lease has been made pursuant to Section 8.4 of this Agreement, SBCC, as secured
party under this Agreement, may request SPE to cause TSFC to act as its agent,
and upon such request TSFC will, as such agent, use diligent efforts to
repossess the Equipment subject to such Lease as promptly and efficiently as is
legally permissible. Thereafter TSFC will refurbish and update, as needed,
and, for a period of one hundred twenty (120) days or such other period as TSFC
and SBCC may agree upon in writing from the date the Equipment is repossessed
(the "Remarketing Period"), attempt to sell or release such Equipment on a
non-priority (but nondiscriminatory) basis and on such terms and conditions as
reflect fair market value for similar equipment and are acceptable to SBCC, in
its sole discretion. TSFC shall give no less priority to remarketing Equipment
pursuant to this Section 10.1 than it would similar equipment owned, leased or
managed by TSFC. The obligations of TSFC to remarket such Equipment for sale
of lease shall include, but not be limited to, efforts sell such Equipment,
preparation and supervision of the documentation of each transaction and an
accounting of the activities referred to in this Section 10.1, including
information relative to the status of negotiations for offers made in respect
of such Equipment.
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If TSFC has not remarketed any Equipment at the conclusion of the
Remarketing Period, upon notice from SBCC, TSFC's exclusive right to remarket
shall terminate and SBCC shall have the right to remarket such Equipment on
terms and conditions satisfactory to it. If SBCC remarkets the Equipment, it
shall retain Proceeds in an amount equal to the Net Book Value applicable to
the Loan financing the Lease to which such Equipment was subject and any
reasonable expenses incurred and shall remit the Excess Proceeds to SPE.
Nothing contained in this Section 10.1 shall be deemed to constitute a
release by SBCC of its security interest in any of the Collateral. SBCC shall
release its security interest in Equipment which has been sold pursuant to this
Section 10.1.
10.2 Remarketing Expenses. Remarketing Expenses shall be for the account
of the party incurring such Expenses and shall be recoverable from Proceeds
realized by the party remarketing the Equipment.
10.3 No Guaranty. Notwithstanding anything contained herein to the
contrary, the obligations and duties of SPE and TSFC contained in this Section
10 shall not be construed to include a guaranty that the Remarketing Proceeds
with respect to any Equipment will equal or exceed the Net Book Value relating
to such Equipment.
11. EVENT OF DEFAULT; REMEDIES.
11.1 Event of Default. Any one of the following events shall constitute
an "Event of Default" hereunder:
(a) SPE shall fail to remit to SBCC when due any Lease Proceeds or
Proceeds of an item of Equipment received directly by SPE or TSFC, or shall
fail to make any payment required hereunder, in each case within five (5)
days written notice thereof from SBCC;
(b) SPE shall fail to observe or perform any other obligation
hereunder, or under any other agreement between SBCC and SPE, which is not
corrected within thirty (30) days of written notice thereof from SBCC;
(c) any covenant, representation or warranty made by SPE, TSFC, or
CCI/Triad to SBCC in any Operative Documents or in any certificate delivered
pursuant thereto shall be untrue in any material respect when made or shall
be breached by SPE, TSFC, or CCI/Triad. Notwithstanding the foregoing, to the
extent that such a breach occurs, and such breach relates to an individual
Lease, SPE shall have ten (10) days from receipt of demand by SBCC to prepay
the Discount Facility Loan with respect to the Lease pursuant to the terms of
the Mandatory Prepayment clause set forth a Paragraph 3.7 herein. SPE's
failure to prepay such Loan within said ten (10) day period shall then
constitute an Event of Default under this subparagraph (c);
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(d) an injunction, attachment or other legal process shall issue
against any material part of SPE's or TSFC ' property or a material judgment
or lien shall be filed against SPE's or TSFC which is not stayed, vacated,
bonded, or otherwise discharged within sixty (60) days after the date of
entry thereof;
(e) SPE, TSFC, or CCI/Triad shall cease to do business as a going
concern, shall become bankrupt, shall make an assignment for the benefit of
creditors or otherwise take advantage of the bankruptcy or any other law for
the relief of debtors; a trustee or receiver for SPE or TSFC shall be
appointed or there shall be filed by or against SPE or TSFC any petition
under any provision of the Federal Bankruptcy Code, as amended, and such
petition shall not be dismissed, withdrawn, or otherwise eliminated within
sixty (60) days after the filing thereof;
(f) SPE, TSFC, or CCI/Triad shall (i) cease to engage in substantially
the same line of business in which any of them are engaged on the date of
this Agreement, (ii) cease to engage in the sale or lease of Equipment, or
(iii) sell, transfer or convey a substantial part of its assets or effect or
be a party to any merger or consolidation;
(g) any material breach or default shall occur under any Operative
Document or such Operative Document shall be rescinded or otherwise
abrogated;
(h) any material adverse change since the Effective Date shall occur
in the financial condition or business operations of CCI/Triad, SPE or TSFC ;
or
(i) any ERISA plan of CCI/Triad, SPE or TSFC shall terminate, or
CCI/Triad, SPE or TSFC shall fully or partially withdraw from such a plan or
plan which could result in liability of CCI/Triad, SPE or TSFC to the Pension
Benefit Guaranty Corporation or to such plan or plans in the aggregate amount
of $50,000 or more (in excess of any applicable insurance).
11.2 Remedies. If an Event of Default shall have occurred, upon notice
of such Event of Default (other than an Event of Default under Section 11.1(e))
to SPE, SBCC shall have the right to do any or all of the following:
(a) complete and deliver to the Lessees the notices received by SBCC
pursuant to Section 5.4(f) and to commence direct collection of the Rents
until such time as SBCC has received the total Supplemented Net Book Value of
all Loans due under this Agreement;
(b) (i) exercise any of the lessor's rights under any of the Leases,
or (ii) by written notice, require SPE or TSFC to exercise on behalf of SBCC
as secured party under this Agreement any and all of the rights available to
the lessor under any Lease to the extent not already exercised by SPE,
whereupon SPE shall immediately take or cause TSFC to take all requested
action;
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(c) discontinue making Loans; or
(d) proceed against SPE, TSFC or CCI/Triad for all rights and remedies
SBCC may have in law or in equity under this Agreement and/or the Operating
Agreement.
Upon the occurrence of an Event of Default, or upon the failure of an
Lessee to perform its obligation under a Lease, SBCC shall have and may
exercise all the rights and remedies of a secured party under the California
Uniform Commercial Code (expressly including, but not limited to, those granted
under 9-502(1) and 9-306 dealing with the retention of cash proceeds), and any
other applicable laws (including but not limited to the right to assume direct
collection of any and all Leases and retain any and all cash proceeds collected
under the leases until such time that SBCC has received he total Supplemented
Net Book Value of all Loans due under this Agreement); provided, however, that
so long as Lessee under a Lease is not in default thereunder, SBCC shall not
take any action or exercise any right that would disturb such Lessee's full and
quiet enjoyment of all of such Lessee's rights under that Lease. SBCC will
give SPE reasonable notice of the time and place of any public sale of any
Collateral or of the time after which any public or private sale of such
Collateral or any other intended disposition thereof is to be made. Unless
otherwise provided by law, the requirement of reasonable notice shall be met if
such notice is delivered at least ten (10) days before or mailed, postage
prepaid, to SPE, at least twenty (20) days before the time of such sale or
disposition. Subject to applicable provisions of this Agreement, the proceeds
of any sale or disposition of Collateral shall be applied: first, to the
expense of settling all liens and claims against such Collateral and all costs,
charges and expenses incurred by SBCC in connection with the Event of Default,
SBCC's exercise of remedies under this Section 11.2 (including without
limitation those described in Section 12.4), and in taking, removing, holding,
preparing for sale and selling the Equipment; second, to the payment of the
remaining total Supplemented Net Book Value of all Loans; third, to any other
unpaid obligations of SPE hereunder; and fourth, any remaining proceeds shall
be paid to SPE.
Notwithstanding the foregoing, SBCC shall have the right to discontinue
making Loans at any time in its sole discretion, whether or not an Event of
Default has occurred.
Nothing contained in this Section 11.2 shall entitle SBCC to recourse
against SPE with respect to payment of the Loans which is not expressly granted
to SBCC by this Agreement.
12. MISCELLANEOUS.
12.1 General. Waiver of any particular default shall not be a waiver of
any other default. All SBCC's rights are cumulative and not alternative. No
waiver or change in this Agreement shall bind SBCC or SPE unless an officer of
SBCC or SPE has agreed to such waiver or change in writing. Any provision of
this Agreement contrary to, prohibited by or invalid under applicable laws or
regulations shall be inapplicable and deemed omitted herefrom, but shall not
invalidate the remaining provisions hereof. No oral agreement, guaranty or
warranty shall be binding. This Agreement shall be governed by the laws of
California.
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12.2 Notices. All notices demands, directions, consents and approvals
hereunder shall be in writing and shall be delivered in person, by telegram, by
overnight courier or by prepaid certified mail, addressed to the party for whom
it is intended, (i) if to SPE, at 0000 Xxxxx Xxxxx, Xxxxxxxxx, Xxxxxxxxxx
00000, Attention: President, and (ii) if to SBCC, at Xxx Xxxxx Xxxxxx Xxxxx,
Xxxxx 0000, Xxxxxxx, Xxxxxxxx 00000, Attention:++Senior Credit Officer, VFD,
and shall be deemed delivered on the day of actual receipt. Either party may
change its address for the receipt of notices, demands, directions, consent,
and approvals by notice duly given to the other party pursuant to this Section
12.2.
12.3 Waivers. SPE hereby waive demand, presentment, protest and notice
thereof with respect to any and all instruments, notice of acceptance hereof,
and all other demands and notices of any description, except as expressly
provided herein. No delay or omissions on the part of either party in
exercising any right, remedy, option, or notice of default, except as any
pertinent statute of limitations which may apply, on any one occasion, shall be
construed as a bar to or waiver of any other default, right, remedy or option,
or the same default, right, remedy or option on any future occasion.
12.4 Costs and Expenses. In any case where SBCC or SPE is entitled
hereunder to reimbursement of costs and expenses, such costs and expenses shall
include interest on any judgment and court costs, reasonable legal fees and
expenses (including allocated fees of internal counsel) and punitive (as award
by a court of competent jurisdiction) as well as actual damages.
12.5 Successors, Assignment By SBCC. This Agreement shall be binding on,
and inure to the benefit of, SBCC, SPE, and their respective successors and
assigns and contains the entire understanding and agreement with respect to the
subject matter hereof. It is understood and agreed that from time to time SBCC
may, without notice to SPE, (i) decide that any or all of the Loans pursuant
hereto shall be made by one or more of SBCC's affiliates, subsidiaries, or
subsidiaries of its affiliates; (ii) assign to one or more of its affiliates,
subsidiaries or subsidiaries of its affiliates, all of its right, title and
interest in any Loan made hereunder and the Equipment covered by any Lease; and
(iii) assign this Agreement in whole or in part and/or all or part of its
rights and benefits under this Agreement to any person. If one or more of
SBCC's affiliates, subsidiaries or subsidiaries of its affiliates make any
Loans pursuant to this Agreement, such Loans shall be made under the terms and
conditions of this Agreement.
12.6 No Assignment By SPE. This Agreement is not assignable by SPE, by
operation of law or otherwise.
12.7 Reliance. All of the covenants, agreements, representations and
warranties made by SPE in this Agreement shall, notwithstanding any
investigation by SBCC, be deemed to be material to and to have been relied upon
by SBCC with respect to each Loan made pursuant to this Agreement. SBCC's
knowledge at any time of any breach of or non-compliance with any of such
covenants, agreements, representations or warranties shall not constitute a
waiver of any thereof by SBCC.
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12.8 Entire Agreement. The terms and conditions herein contained
constitute the entire agreement between SBCC, SPE with respect to the subject
matter hereof, except to the extent other agreements are referred to herein or
contemplated hereby or executed contemporaneously herewith, and supersede all
previous communications whether oral or written between SBCC and SPE with
respect to such subject matter. No agreement or understanding varying or
extending any rights or obligations hereunder of either of the parties shall be
binding unless in a writing signed by a duly authorized officer or
representative of the party against which such variance or extension is sought
to be enforced.
12.9 Headings; Title. The cover, table of contents and titles for
Sections used in this Agreement are intended to be descriptive only and shall
not be deemed to limit, extend or in any way modify the meaning of the text of
this Agreement. Reference to integral sections without decimals include all
decimal sections within such integral sections.
12.10 Joint and Several Liability. SPE shall be jointly and severally
liable for all recourse liability of SPE under this Agreement.
12.11 Jury Waiver, Jurisdiction Selection. SPE AND SBCC HEREBY WAIVES
ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION TO ENFORCE OR DEFEND ANY MATTER
ARISING FROM OR RELATED TO THIS AGREEMENT. SPE AGREES NOT TO INSTITUTE ANY
LEGAL ACTION OR PROCEEDING AGAINST SBCC OR ANY OF ITS DIRECTORS, OFFICERS,
EMPLOYEES, AGENTS OR PROPERTY, CONCERNING ANY MATTER ARISING OUT OF OR RELATING
TO THIS AGREEMENT IN ANY COURT OTHER THAN ONE LOCATED IN XXXX COUNTY, ILLINOIS.
12.12 Termination. This Agreement shall continue in effect until
terminated by either party at any time upon thirty (30) days written notice to
the other, provided, however that all of the rights and obligations of the
parties applicable to Loans made prior to such termination shall survive such
termination.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their officers thereunto duly authorized as of the day and
year first above written.
CCI/TRIAD FINANCIAL HOLDING CORPORATION ("SPE"),
a California Corporation
By: /s/ XXXX XXXXX
------------------------------
Its: President
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SANWA BUSINESS CREDIT CORPORATION,
a Delaware Corporation
By: /s/ XXXXXX MAY
------------------------------
Its: Credit Manager
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