EXHIBIT 4.15
LOAN AND SECURITY AGREEMENT
by and among
STARCRAFT AUTOMOTIVE GROUP, INC.
and
NATIONAL MOBILITY CORPORATION,
as Borrowers,
and
STARCRAFT CORPORATION
and
IMPERIAL AUTOMOTIVE GROUP, INC.
as Additional Credit Parties,
and
FOOTHILL CAPITAL CORPORATION,
as Lender
DATED AS OF OCTOBER 30, 1998
TABLE OF CONTENTS
Page
1. DEFINITIONS AND CONSTRUCTION...............................................1
1.1. Definitions.....................................................1
1.2. Accounting Terms...............................................17
1.3. Code...........................................................17
1.4. Construction...................................................17
1.5. Schedules and Exhibits.........................................17
2. LOAN AND TERMS OF PAYMENT.................................................17
2.1. Revolving Advances.............................................17
2.2. Letters of Credit..............................................19
2.3. Term Loan......................................................21
2.4. Intentionally Omitted..........................................21
2.5. Overadvances...................................................22
2.6. Interest: Rates, Payments and Calculations....................22
2.7. Collection of Accounts.........................................24
2.8. Crediting Payments; Application of Collections.................24
2.9. Designated Account.............................................25
2.10. Maintenance of Loan Account; Statements of Obligations........25
2.11. Fees..........................................................25
2.12. Eurodollar Rate Loans.........................................26
2.13. Illegality....................................................27
2.14. Requirements of Law...........................................28
2.15. Indemnity.....................................................29
3. CONDITIONS; TERM OF AGREEMENT.............................................30
3.1. Conditions Precedent to the Initial Advance,
Letter of Credit and the Term Loan............................30
3.2. Conditions Precedent to all Advances,
all Letters of Credit and the Term Loan.......................32
3.3. Condition Subsequent...........................................33
3.4. Term; Automatic Renewal........................................33
3.5. Effect of Termination..........................................33
3.6. Early Termination by Borrowers.................................34
3.7. Termination Upon Event of Default..............................34
4. CREATION OF SECURITY INTEREST.............................................34
4.1. Grant of Security Interest.....................................34
4.2. Negotiable Collateral..........................................34
4.3. Collection of Accounts, General Intangibles,
and Negotiable Collateral.....................................35
4.4. Delivery of Additional Documentation Required..................35
4.5. Power of Attorney..............................................35
4.6. Right to Inspect...............................................36
5. REPRESENTATIONS AND WARRANTIES............................................36
5.1. No Encumbrances................................................36
5.2. Eligible Accounts..............................................36
5.3. Eligible Inventory.............................................37
5.4. Equipment......................................................37
5.5. Location of Inventory and Equipment............................37
5.6. Inventory Records..............................................37
5.7. Location of Chief Executive Office; FEIN.......................37
5.8. Due Organization and Qualification; Subsidiaries...............37
5.9. Due Authorization; No Conflict.................................38
5.10. Litigation....................................................38
5.11. No Material Adverse Change....................................39
5.12. Solvency......................................................39
5.13. Employee Benefits.............................................39
5.14. Environmental Condition.......................................39
5.15. Year 2000 Compliance..........................................40
5.16. Consigned Chassis.............................................40
5.17. Starcraft Southwest, Inc......................................40
6. AFFIRMATIVE COVENANTS.....................................................40
6.1. Accounting System..............................................40
6.2. Collateral Reporting...........................................40
6.3. Financial Statements, Reports, Certificates....................41
6.4. Tax Returns....................................................42
6.5. Guarantor Reports..............................................43
6.6. Returns........................................................43
6.7. Title to Equipment.............................................43
6.8. Maintenance of Equipment.......................................43
6.9. Taxes..........................................................43
6.10. Insurance.....................................................44
6.11. No Setoffs or Counterclaims...................................45
6.12. Location of Inventory and Equipment...........................45
6.13. Compliance with Laws..........................................46
6.14. Employee Benefits.............................................46
6.15. Leases........................................................47
7. NEGATIVE COVENANTS........................................................47
7.1. Indebtedness...................................................47
7.2. Liens..........................................................48
7.3. Restrictions on Fundamental Changes............................48
7.4. Disposal of Assets.............................................48
7.5. Change Name....................................................48
7.6. Guarantee......................................................48
7.7. Nature of Business.............................................48
7.8. Prepayments and Amendments.....................................48
7.9. Change of Control..............................................49
7.10. Consignments; New Chassis Supplier Agreements.................49
7.11. Distributions.................................................49
7.12. Accounting Methods............................................49
7.13. Investments...................................................49
7.14. Transactions with Affiliates..................................50
7.15. Suspension....................................................50
7.16. Compensation..................................................50
7.17. Use of Proceeds...............................................50
7.18. Change in Location of Chief Executive Office; Inventory
and Equipment with Bailees................................50
7.19. No Prohibited Transactions Under ERISA.........................50
7.20. Financial Covenants............................................51
7.21. Capital Expenditures...........................................52
8. EVENTS OF DEFAULT..........................................................52
9. FOOTHILL'S RIGHTS AND REMEDIES.............................................54
9.1. Rights and Remedies.............................................54
9.2. Remedies Cumulative.............................................56
10. TAXES AND EXPENSES........................................................56
11. WAIVERS; INDEMNIFICATION..................................................57
11.1. Demand; Protest; etc...........................................57
11.2. Foothill's Liability for Collateral............................57
11.3. Indemnification................................................57
12. NOTICES...................................................................58
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER................................59
14. DESTRUCTION OF BORROWERS' DOCUMENTS.......................................59
15. GENERAL PROVISIONS........................................................60
15.1. Effectiveness..................................................60
15.2. Successors and Assigns.........................................60
15.3. Section Headings...............................................60
15.4. Interpretation.................................................60
15.5. Severability of Provisions.....................................60
15.6. Amendments in Writing..........................................61
15.7. Counterparts; Facsimile Execution..............................61
15.8. Revival and Reinstatement of Obligations.......................61
15.9. Integration....................................................61
15.10. Joint and Several Liability...................................61
SCHEDULES AND EXHIBITS
Schedule E-1 Eligible Inventory Locations
Schedule P-1 Permitted Liens
Schedule R-1 Real Property Collateral
Schedule 5.7 Chief Executive Office and FEIN
Schedule 5.8 Subsidiaries
Schedule 5.10 Litigation
Schedule 5.14 Environmental Matters
Schedule 5.13 ERISA Benefit Plans
Schedule 6.12 Location of Inventory and Equipment
Schedule 7.1 Indebtedness
Schedule 7.6 Guaranties
Schedule 7.14 Affiliate Transactions
Exhibit C-1 Form of Compliance Certificate
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (this "Agreement"), is entered into as of
October 30, 1998, among FOOTHILL CAPITAL CORPORATION, a California corporation
("Foothill"), with a place of business located at ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ and STARCRAFT AUTOMOTIVE GROUP,
INC. ("SAG"), an Indiana corporation, NATIONAL MOBILITY CORPORATION ("NMC"), an
Indiana corporation, STARCRAFT CORPORATION ("SC"), an Indiana corporation, and
IMPERIAL AUTOMOTIVE GROUP, INC. ("IAG"), an Indiana corporation, (SAG and NMC
are each individually a "Borrower", and collectively "Borrowers"; and SAG, NMC,
SC and IAG are each individually a "Company", and collectively "Companies").
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION.
1.1. Definitions.
As used in this Agreement, the following terms shall have the following
definitions:
"Account Debtor" means any Person who is or who may become obligated under,
with respect to, or on account of, an Account.
"Accounts" means, with respect to a Company, all currently existing and
hereafter arising accounts, contract rights, and all other forms of obligations
owing to such Company arising out of the sale or lease of goods or the rendition
of services by such Company, irrespective of whether earned by performance, and
any and all credit insurance, guaranties, or security therefor.
"Additional Raw Material Availability Amount" means, during November and
December of each fiscal year, an amount equal to 10% of the value of Eligible
Inventory consisting of raw materials (with such percentage subject to
adjustment as provided in Section 2.1(b)), during January and February of each
fiscal year, an amount equal to 5% of the value of Eligible Inventory consisting
of raw materials (with such percentage subject to adjustment as provided in
Section 2.1(b)), and at all other times, an amount equal to zero.
"Adjusted Eurodollar Rate" means, with respect to each Interest Period for
any Eurodollar Rate Loan, the rate per annum (rounded upwards, if necessary, to
the next 1/16%) determined by dividing (a) the Eurodollar Rate for such Interest
Period by (b) a percentage equal to (i) 100% minus (ii) the Reserve Percentage.
The Adjusted Eurodollar Rate shall be adjusted on and as of the effective day of
any change in the Reserve Percentage.
"Advances" has the meaning set forth in Section 2.1(a).
"Affiliate" means, as applied to any Person, any other Person who directly
or indirectly controls, is controlled by, is under common control with or is a
director or officer of such Person. For purposes of this definition, "control"
means the possession, directly or indirectly, of the power to vote 15% or more
of the securities having ordinary voting power for the election of directors or
the direct or indirect power to direct the management and policies of a Person.
"Agreement" has the meaning set forth in the preamble hereto.
"Authorized Person" means any officer or other employee of any Borrower.
"Average Unused Portion of Maximum Revolving Amount" means, as of any date
of determination, (a) the Maximum Revolving Amount, less (b) the sum of (i) the
average Daily Balance of Advances that were outstanding during the immediately
preceding calendar month, plus (ii) the average Daily Balance of the undrawn
Letters of Credit that were outstanding during the immediately preceding
calendar month, plus (iii) the average Daily Balance of the Tecstar Obligations
that were outstanding during the immediately preceding calendar month.
"Bankruptcy Code" means the United States Bankruptcy Code (11 ▇.▇.▇.▇▇. 101
et seq.), as amended, and any successor statute.
"Benefit Plan" means a "defined benefit plan" (as defined in Section 3(35)
of ERISA) for which any Company, any Subsidiary of any Company, or any ERISA
Affiliate has been an "employer" (as defined in Section 3(5) of ERISA) within
the past six years.
"Borrower" has the meaning set forth in the preamble to this Agreement.
"Borrowing Base" has the meaning set forth in Section 2.1(a).
"Business Day" means any day that is not a Saturday, Sunday or other day on
which national banks are authorized or required to close, except that if a
determination of a Business Day shall relate to any Eurodollar Rate Loans, the
term Business Day shall also exclude any day on which banks are closed for
dealings in dollar deposits in the London interbank market or other applicable
Eurodollar Rate market.
"Change of Control" shall be deemed to have occurred at such time as a
"person" or "group" (within the meaning of Sections 13(d) and 14(d)(2) of the
Securities Exchange Act of 1934) becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Securities Exchange Act of 1934), directly or indirectly,
of more than 20% of the total voting power of all classes of stock then
outstanding of any Company entitled to vote in the election of directors.
"Closing Date" means the date of the first to occur of the making of the
initial Advance, the issuance of the initial Letter of Credit or the funding of
the Term Loan.
"Code" means the Illinois Uniform Commercial Code.
"Collateral" means, with respect to a Company, each of the following:
(a) such Company's Accounts,
(b) such Company's Books,
(c) such Company's Equipment,
(d) such Company's General Intangibles,
(e) such Company's Inventory,
(f) such Company's Negotiable Collateral,
(g) the Real Property Collateral,
(h) any money, or other assets of such Company that now or hereafter come
into the possession, custody, or control of Foothill, and
(i) the proceeds and products, whether tangible or intangible, of any of
the foregoing, including proceeds of insurance covering any or all of the
Collateral of such Company, and any and all Accounts, Company's Books,
Equipment, General Intangibles, Inventory, Negotiable Collateral, Real Property,
money, deposit accounts, or other tangible or intangible property resulting from
the sale, exchange, collection, or other disposition of any of the foregoing, or
any portion thereof or interest therein, and the proceeds thereof.
"Collateral Access Agreement" means a landlord waiver, mortgagee waiver,
bailee letter, or acknowledgment agreement of any warehouseman, processor,
lessor, consignee, or other Person in possession of, having a Lien upon, or
having rights or interests in the Equipment or Inventory, in each case, in form
and substance satisfactory to Foothill.
"Collections" means all cash, checks, notes, instruments, and other items
of payment (including, insurance proceeds, proceeds of cash sales, rental
proceeds, and tax refunds).
"Company's Books" means, with respect to a Company, all of such Company's
books and records including: ledgers; records indicating, summarizing, or
evidencing such Company's properties or assets (including the Collateral) or
liabilities; all information relating to such Company's business operations or
financial condition; and all computer programs, disk or tape files, printouts,
runs, or other computer prepared information.
"Compliance Certificate" means a certificate substantially in the form of
Exhibit C-1 and delivered by the chief accounting officer of SAG to Foothill.
"Daily Balance" means, with respect to the Obligations or Tecstar
Obligations, the amount of an Obligation or Tecstar Obligation, as the case may
be, owed at the end of a given day.
"deems itself insecure" means that the Person deems itself insecure in
accordance with the provisions of Section 1208 of the Code.
"Default" means an event, condition, or default that, with the giving of
notice, the passage of time, or both, would be an Event of Default.
"Designated Account" means account number ▇▇▇-▇▇▇-▇▇▇ of Borrowers
maintained with Borrowers' Designated Account Bank, or such other deposit
account of Borrowers (located within the United States) which has been
designated, in writing and from time to time, by Borrowers to Foothill.
"Designated Account Bank" means National City Bank of Indiana, whose office
is located at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇,
and whose ABA number is ▇▇▇▇▇▇▇▇▇.
"Dilution" means, in each case based upon the experience of the immediately
prior 3 fiscal months, the result of dividing the Dollar amount of (a) bad debt
write-downs, discounts from the invoice amount of any Account, advertising,
returns, promotions, credits, or other dilutive items with respect to the
Accounts of Borrowers by (b) Borrowers' Collections (excluding extraordinary
items) plus the Dollar amount of clause (a).
"Dilution Reserve" means, as of any date of determination, an amount
sufficient to reduce Foothill's advance rate against Eligible Accounts by one
percentage point for each percentage point by which Dilution is in excess of 5%.
"Disbursement Letter" means an instructional letter executed and delivered
by Borrowers to Foothill regarding the extensions of credit to be made on the
Closing Date, the form and substance of which shall be satisfactory to Foothill.
"Dollars or $" means United States dollars.
"Early Termination Premium" has the meaning set forth in Section 3.6.
"EBITDA" means, for any period, the consolidated net income of SC
(including Tecstar, Inc.) for such period (exclusive of extraordinary gains and
losses), plus interest, taxes, depreciation and amortization deducted in
determining such net income for such period.
"Eligible Accounts" means those Accounts created by a Borrower in the
ordinary course of business, that arise out of such Borrower's sale of goods or
rendition of services, that strictly comply with each and all of the
representations and warranties respecting Accounts made by Borrowers to Foothill
in the Loan Documents, and that are and at all times continue to be acceptable
to Foothill in all respects; provided, however, that standards of eligibility
may be fixed and revised from time to time by Foothill in Foothill's reasonable
credit judgment. Eligible Accounts shall not include the following:
(a) Accounts of a Borrower that the Account Debtor has failed to pay within
60 days of due date or Accounts with selling terms of more than 30 days;
(b) Accounts of a Borrower owed by an Account Debtor or its Affiliates
where 50% or more of all Accounts owed by that Account Debtor (or its
Affiliates) to Borrowers are deemed ineligible under clause (a) above;
(c) Accounts of a Borrower with respect to which the Account Debtor is an
employee, Affiliate, or agent of a Company;
(d) Accounts of a Borrower with respect to which goods are placed on
consignment, guaranteed sale, sale or return, sale on approval, ▇▇▇▇ and hold,
or other terms by reason of which the payment by the Account Debtor may be
conditional;
(e) Accounts of a Borrower that are not payable in Dollars or with respect
to which the Account Debtor: (i) does not maintain its chief executive office in
the United States or Canada (provided, that the aggregate amount of Advances
against the Eligible Accounts of Account Debtors with their chief executive
office in Canada shall not exceed $500,000), or (ii) is not organized under the
laws of the United States or any State thereof, or (iii) is the government of
any foreign country or sovereign state, or of any state, province, municipality,
or other political subdivision thereof, or of any department, agency, public
corporation, or other instrumentality thereof, unless (y) the Account is
supported by an irrevocable letter of credit satisfactory to Foothill (as to
form, substance, and issuer or domestic confirming bank) that has been delivered
to Foothill and is directly drawable by Foothill, or (z) the Account is covered
by credit insurance in form and amount, and by an insurer, satisfactory to
Foothill;
(f) Accounts of a Borrower with respect to which the Account Debtor is
either (i) the United States or any department, agency, or instrumentality of
the United States (exclusive, however, of Accounts with respect to which such
Borrower has complied, to the satisfaction of Foothill, with the Assignment of
Claims Act, 31 U.S.C. ss. 3727), or (ii) any State of the United States
(exclusive, however, of Accounts owed by any State that does not have a
statutory counterpart to the Assignment of Claims Act);
(g) Accounts of a Borrower with respect to which the Account Debtor is a
creditor of a Borrower, has or has asserted a right of setoff (unless such
Account Debtor has executed and delivered to Foothill a no offset letter in form
and substance satisfactory to Foothill), has disputed its liability, or has made
any claim with respect to the Account (but only to the extent of the amount of
the liability owing to such Account Debtor, the amount of the set off that has
or may be asserted, the amount of the disputed liability or the amount of the
claim, as the case may be);
(h) Accounts of a Borrower owing by the Illinois Department of
Transportation if such obligations owing to Borrowers exceed 20% of all Eligible
Accounts, to the extent of the obligations owing by such Account Debtor in
excess of such percentage, Accounts of a Borrower owing by the General Motors
Overseas Distribution Corporation if such obligations owing to Borrowers exceed
25% of all Eligible Accounts, to the extent of the obligations owing by such
Account Debtor in excess of such percentage (provided, that if acceptable credit
insurance is received by Foothill, Foothill will consider increasing such
concentration limit with respect to General Motors Overseas Distribution
Corporation), or Accounts of a Borrower with respect to an Account Debtor (other
than the Illinois Department of Transportation and General Motors Overseas
Distribution Corporation) whose total obligations owing to Borrowers exceed 10%
of all Eligible Accounts, to the extent of the obligations owing by such Account
Debtor in excess of such percentage;
(i) Accounts of a Borrower with respect to which the Account Debtor is
subject to any Insolvency Proceeding, or becomes insolvent, or goes out of
business;
(j) Accounts of a Borrower the collection of which Foothill, in its
reasonable credit judgment, believes to be doubtful by reason of the Account
Debtor's financial condition;
(k) Accounts of a Borrower with respect to which the goods giving rise to
such Account have not been shipped and billed to the Account Debtor, Accounts of
a Borrower with respect to which the Account Debtor has been billed but the
goods giving rise to such Accounts have not been shipped, the services giving
rise to such Account have not been performed and accepted by the Account Debtor,
or the Account otherwise does not represent a final sale;
(l) Accounts of a Borrower with respect to which the Account Debtor is
located in the states of New Jersey, Minnesota or West Virginia (or any other
state that requires a creditor to file a Business Activity Report or similar
document in order to bring suit or otherwise enforce its remedies against such
Account Debtor in the courts or through any judicial process of such state),
unless such Borrower has qualified to do business in New Jersey, Minnesota, West
Virginia, or such other states, or has filed a Notice of Business Activities
Report with the applicable division of taxation, the department of revenue, or
with such other state offices, as appropriate, for the then-current calendar
year, or is exempt from such filing requirement; and
(m) Accounts of a Borrower that represent progress payments or other
advance ▇▇▇▇▇▇▇▇ that are due prior to the completion of performance by such
Borrower of the subject contract for goods or services; and
(n) Accounts representing rebate obligations owing to a Borrower.
"Eligible Inventory" means Inventory of a Borrower consisting of first
quality finished goods held for sale in the ordinary course of such Borrower's
business for which an order has been placed by an Account Debtor, uncut chassis
owned by a Borrower and raw materials (such as fiberglass shells, wheels, wood,
electronic devices (including televisions, radios and speakers), windows, doors,
carpet, fabrics and graphics/decals) for such finished goods, that are located
at or in-transit between such Borrower's premises identified on Schedule E-1,
that strictly comply with each and all of the representations and warranties
respecting Inventory made by such Borrower to Foothill in the Loan Documents,
and that are and at all times continue to be acceptable to Foothill in all
respects; provided, however, that standards of eligibility may be fixed and
revised from time to time by Foothill in Foothill's reasonable credit judgment.
In determining the amount to be so included, Inventory shall be valued at the
lower of cost or market on a basis consistent with a Borrower's current and
historical accounting practices; provided, that chassis consigned to a Borrower
or owned by a Borrower and subject to a Lien in favor of the supplier thereof
shall not be part of finished goods. An item of Inventory shall not be included
in Eligible Inventory if:
(a) it is not owned solely by a Borrower or a Borrower does not have good,
valid, and marketable title thereto (provided, that the interest of the chassis
supplier in the finished goods shall not cause such finished goods to not be
Eligible Inventory to the extent such supplier has executed an Intercreditor
Agreement with Foothill);
(b) it is not located at one of the locations set forth on Schedule E-1;
(c) it is not located on property owned or leased by a Borrower or in a
contract warehouse, in each case, subject to a Collateral Access Agreement
executed by the mortgagee, lessor, the warehouseman, or other third party, as
the case may be, and segregated or otherwise separately identifiable from goods
of others, if any, stored on the premises;
(d) it is not subject to a valid and perfected first priority security
interest in favor of Foothill;
(e) it consists of goods returned or rejected by a Borrower's customers or
goods in transit;
(f) it is an uncut chassis manufactured by General Motors Corporation or
any of its affiliates or subsidiaries unless a Borrower purchased such chassis
from the General Motors Vehicle Overseas Division of General Motors Corporation;
(g) it is an uncut chassis manufactured by Ford Motor Company or any of its
affiliates or subsidiaries unless such chassis is a cutaway bus chassis and a
Borrower has paid the full purchase price therefor and obtained the certificate
of origin with respect thereto; and
(h) it is obsolete or slow moving, a demonstration model, work-in-process,
consigned Inventory, packaging and shipping materials, supplies used or consumed
in a Borrower's business, Inventory subject to a Lien in favor of any third
Person, ▇▇▇▇ and hold goods, defective goods, "seconds," or Inventory acquired
on consignment.
"Equipment" means, with respect to a Company, all of such Company's present
and hereafter acquired machinery, machine tools, motors, equipment, furniture,
furnishings, fixtures, vehicles (including motor vehicles and trailers), tools,
parts, goods (other than consumer goods, farm products, or Inventory), wherever
located, including, (a) any interest of such Company in any of the foregoing,
and (b) all attachments, accessories, accessions, replacements, substitutions,
additions, and improvements to any of the foregoing.
"ERISA" means the Employee Retirement Income Security Act of 1974, 29
U.S.C. ▇▇.▇▇. 1000 et seq., amendments thereto, successor statutes, and
regulations or guidance promulgated thereunder.
"ERISA Affiliate" means (a) any corporation subject to ERISA whose
employees are treated as employed by the same employer as the employees of any
Company under IRC Section 414(b), (b) any trade or business subject to ERISA
whose employees are treated as employed by the same employer as the employees of
any Company under IRC Section 414(c), (c) solely for purposes of Section 302 of
ERISA and Section 412 of the IRC, any organization subject to ERISA that is a
member of an affiliated service group of which any Company is a member under IRC
Section 414(m), or (d) solely for purposes of Section 302 of ERISA and Section
412 of the IRC, any party subject to ERISA that is a party to an arrangement
with any Company and whose employees are aggregated with the employees of such
Company under IRC Section 414(o).
"ERISA Event" means (a) a Reportable Event with respect to any Benefit Plan
or Multiemployer Plan, (b) the withdrawal of any Company, any of its
Subsidiaries or ERISA Affiliates from a Benefit Plan during a plan year in which
it was a "substantial employer" (as defined in Section 4001(a)(2) of ERISA), (c)
the providing of notice of intent to terminate a Benefit Plan in a distress
termination (as described in Section 4041(c) of ERISA), (d) the institution by
the PBGC of proceedings to terminate a Benefit Plan or Multiemployer Plan, (e)
any event or condition (i) that provides a basis under Section 4042(a)(1), (2),
or (3) of ERISA for the termination of, or the appointment of a trustee to
administer, any Benefit Plan or Multiemployer Plan, or (ii) that may result in
termination of a Multiemployer Plan pursuant to Section 4041A of ERISA, (f) the
partial or complete withdrawal within the meaning of Sections 4203 and 4205 of
ERISA, of any Company, any of its Subsidiaries or ERISA Affiliates from a
Multiemployer Plan, or (g) providing any security to any Plan under Section
401(a)(29) of the IRC by any Company or its Subsidiaries or any of their ERISA
Affiliates.
"Eurodollar Rate" means, with respect to the Interest Period for a
Eurodollar Rate Loan, the interest rate per annum at which United States dollar
deposits are offered to Foothill (or its Affiliate) by major banks in the London
interbank market (or other Eurodollar Rate market selected by Foothill) on or
about 11:00 a.m. (California time) 2 Business Days prior to the commencement of
such Interest Period in amounts comparable to the amount of the Eurodollar Rate
Loans requested by and available to Borrowers in accordance with this Agreement,
with a maturity of comparable duration to the Interest Period selected by
Borrowers.
"Eurodollar Rate Loans" means any Loan (or any portion thereof) made or
outstanding hereunder during any period when interest on such Loan (or portion
thereof) is payable based on the Adjusted Eurodollar Rate.
"Event of Default" has the meaning set forth in Section 8.
"Excess Loan Availability" means, as of the Closing Date, the amount by
which the lesser of (A) the Maximum Revolving Amount and (B) the Borrowing Base,
exceeds the sum of Obligations (other than the Term Loan) and the amount of
deterioration in the payables over 60 days past due since the date of Foothill's
last audit of Borrowers.
"Existing Lender" means Bank One, N.A.
"FEIN" means Federal Employer Identification Number.
"Foothill" has the meaning set forth in the preamble to this Agreement.
"Foothill Account" has the meaning set forth in Section 2.7.
"Foothill Expenses" means all: costs or expenses (including taxes, and
insurance premiums) required to be paid by Companies under any of the Loan
Documents that are paid or incurred by Foothill; fees or charges paid or
incurred by Foothill in connection with Foothill's transactions with any
Company, including, fees or charges for photocopying, notarization, couriers and
messengers, telecommunication, public record searches (including tax lien,
litigation, and UCC searches and including searches with the patent and
trademark office, the copyright office, or the department of motor vehicles),
filing, recording, publication, appraisal (including periodic Personal Property
Collateral and Real Property Collateral appraisals), real estate surveys, real
estate title policies and endorsements, and environmental audits; costs and
expenses incurred by Foothill in the disbursement of funds to any Borrower (by
wire transfer or otherwise); charges paid or incurred by Foothill resulting from
the dishonor of checks; costs and expenses paid or incurred by Foothill to
correct any default or enforce any provision of the Loan Documents, or in
gaining possession of, maintaining, handling, preserving, storing, shipping,
selling, preparing for sale, or advertising to sell the Collateral, or any
portion thereof, irrespective of whether a sale is consummated; costs and
expenses paid or incurred by Foothill in examining any Company's Books; costs
and expenses of third party claims or any other suit paid or incurred by
Foothill in enforcing or defending the Loan Documents or in connection with the
transactions contemplated by the Loan Documents or Foothill's relationship with
any Company or any guarantor; and Foothill's reasonable attorneys fees and
expenses incurred in advising, structuring, drafting, reviewing, administering,
amending, terminating, enforcing (including attorneys fees and expenses incurred
in connection with a "workout," a "restructuring," or an Insolvency Proceeding
concerning any Company or any guarantor of the Obligations), defending, or
concerning the Loan Documents, irrespective of whether suit is brought.
"GAAP" means generally accepted accounting principles as in effect from
time to time in the United States, consistently applied.
"General Intangibles" means, with respect to a Company, all of such
Company's present and future general intangibles and other personal property
(including contract rights, rights arising under common law, statutes, or
regulations, choses or things in action, goodwill, patents, trade names,
trademarks, servicemarks, copyrights, blueprints, drawings, purchase orders,
customer lists, monies due or recoverable from pension funds, route lists,
rights to payment and other rights under any royalty or licensing agreements,
infringement claims, computer programs, information contained on computer disks
or tapes, literature, reports, catalogs, deposit accounts, insurance premium
rebates, tax refunds, and tax refund claims), other than goods, Accounts, and
Negotiable Collateral.
"Governing Documents" means the certificate or articles of incorporation,
by-laws, or other organizational or governing documents of any Person.
"Governmental Authority" means any nation or government, any state or other
political subdivision thereof and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government.
"Guaranties" means (i) the Guaranty of even date herewith executed by SC
and (ii) the Guaranty of even date herewith executed by IAG.
"Hazardous Materials" means (a) substances that are defined or listed in,
or otherwise classified pursuant to, any applicable laws or regulations as
"hazardous substances," "hazardous materials," "hazardous wastes," "toxic
substances," or any other formulation intended to define, list, or classify
substances by reason of deleterious properties such as ignitability,
corrosivity, reactivity, carcinogenicity, reproductive toxicity, or "EP
toxicity", (b) oil, petroleum, or petroleum derived substances, natural gas,
natural gas liquids, synthetic gas, drilling fluids, produced waters, and other
wastes associated with the exploration, development, or production of crude oil,
natural gas, or geothermal resources, (c) any flammable substances or explosives
or any radioactive materials, and (d) asbestos in any form or electrical
equipment that contains any oil or dielectric fluid containing levels of
polychlorinated biphenyls in excess of 50 parts per million.
"Indebtedness" means: (a) all obligations of a Company for borrowed money,
(b) all obligations of a Company evidenced by bonds, debentures, notes, or other
similar instruments and all reimbursement or other obligations of a Company in
respect of letters of credit, bankers acceptances, interest rate swaps, or other
financial products, (c) all obligations of a Company under capital leases, (d)
all obligations or liabilities of others secured by a Lien on any property or
asset of a Company, irrespective of whether such obligation or liability is
assumed, and (e) any obligation of a Company guaranteeing or intended to
guarantee (whether guaranteed, endorsed, co-made, discounted, or sold with
recourse to such Company) any indebtedness, lease, dividend, letter of credit,
or other obligation of any other Person.
"Insolvency Proceeding" means any proceeding commenced by or against any
Person under any provision of the Bankruptcy Code or under any other bankruptcy
or insolvency law, assignments for the benefit of creditors, formal or informal
moratoria, compositions, extensions generally with creditors, or proceedings
seeking reorganization, arrangement, or other similar relief.
"Intangible Assets" means, with respect to any Person, that portion of the
book value of all of such Person's assets that would be treated as intangibles
under GAAP.
"Intercreditor Agreements" means those certain intercreditor agreements
between Foothill and each of General Motors Acceptance Corporation, Chrysler
Credit Corporation and Ford Motor Credit Company, and any other consignor of
chassis to a Borrower.
"Interest Period" shall mean for any Eurodollar Rate Loan, a period of
approximately 30, 60 or 90 days duration as Borrowers may elect, the exact
duration to be determined in accordance with the customary practice in the
applicable Eurodollar Rate market; provided, that, Borrowers may not elect an
Interest Period which will end after the last day of the then-current term of
this Agreement.
"Inventory" means, with respect to a Company, all present and future
inventory in which such Company has any interest, including goods held for sale
or lease or to be furnished under a contract of service and all of such
Company's present and future raw materials, work in process, finished goods, and
packing and shipping materials, wherever located.
"Inventory Reserve" means an amount equal to (i) zero, during the period
commencing on the Closing Date and ending December 31, 1998, (ii) $100,000,
during the period commencing January 1, 1999 and ending January 31, 1999, (iii)
$200,000 during the period commencing February 1, 1999 and ending February 28,
1999, (iv) $300,000, during the period commencing March 1, 1999 and ending March
31, 1999, (v) $400,000 during the period commencing April 1, 1999 and ending
April 30, 1999, and (vi) $500,000 at all times on and after May 1, 1999.
"IRC" means the Internal Revenue Code of 1986, as amended, and the
regulations thereunder.
"L/C" has the meaning set forth in Section 2.2(a).
"L/C Guaranty" has the meaning set forth in Section 2.2(a).
"Letter of Credit" means an L/C or an L/C Guaranty, as the context
requires.
"Lien" means any interest in property securing an obligation owed to, or a
claim by, any Person other than the owner of the property, whether such interest
shall be based on the common law, statute, or contract, whether such interest
shall be recorded or perfected, and whether such interest shall be contingent
upon the occurrence of some future event or events or the existence of some
future circumstance or circumstances, including the lien or security interest
arising from a mortgage, deed of trust, encumbrance, pledge, hypothecation,
assignment, deposit arrangement, security agreement, adverse claim or charge,
conditional sale or trust receipt, or from a lease, consignment, or bailment for
security purposes and also including reservations, exceptions, encroachments,
easements, rights-of-way, covenants, conditions, restrictions, leases, and other
title exceptions and encumbrances affecting Real Property.
"Loan Account" has the meaning set forth in Section 2.10.
"Loan Documents" means this Agreement, the Disbursement Letter, the Letters
of Credit, the Lockbox Agreements, Mortgages, the Stock Pledge Agreement, the
Trademark Mortgage, the Patent Mortgage, the Guaranties, any note or notes
executed by any Borrower and payable to Foothill, and any other agreement
entered into, now or in the future, in connection with this Agreement.
"Loans" means the Advances and the Term Loan.
"Lockbox Account" shall mean a depository account established pursuant to
one of the Lockbox Agreements.
"Lockbox Agreements" means those certain Lockbox Operating Procedural
Agreements and those certain Depository Account Agreements, in form and
substance satisfactory to Foothill, each of which is among Borrowers, Foothill,
and one of the Lockbox Banks.
"Lockbox Banks" means National City Bank or such other banks as are
acceptable to Foothill.
"Lockboxes" has the meaning set forth in Section 2.7.
"Material Adverse Change" means (a) a material adverse change in the
business, prospects, operations, results of operations, assets, liabilities or
condition (financial or otherwise) of any Company, (b) the material impairment
of any Company's ability to perform its obligations under the Loan Documents to
which it is a party or of Foothill to enforce the Obligations or realize upon
the Collateral, (c) a material adverse effect on the value of the Collateral or
the amount that Foothill would be likely to receive (after giving consideration
to delays in payment and costs of enforcement) in the liquidation of such
Collateral, or (d) a material impairment of the priority of Foothill's Liens
with respect to the Collateral.
"Maximum Amount" means, as of any date of determination, $14,000,000.
"Maximum Revolving Amount" means $14,000,000 less (a) the outstanding
principal amount of the Term Loan and (b) the Tecstar Obligations; provided,
that so long as the maximum principal amount of "Senior Debt" as set forth in
that certain Subordination Agreement between Foothill and Existing Lenders is
$14,000, the Maximum Revolving Amount means $13,500,000 less (a) the outstanding
principal amount of the Term Loan and (b) the Tecstar Obligations.
"Mortgages" means one or more mortgages, deeds of trust, or deeds to secure
debt, executed by a Company in favor of Foothill, the form and substance of
which shall be satisfactory to Foothill, that encumber the Real Property
Collateral and the related improvements thereto.
"Multiemployer Plan" means a "multiemployer plan" (as defined in Section
4001(a)(3) of ERISA) to which any Company, any of its Subsidiaries, or any ERISA
Affiliate has contributed, or was obligated to contribute, within the past six
years.
"Negotiable Collateral" means, with respect to a Company, all of such
Company's present and future letters of credit, notes, drafts, instruments,
investment property, security entitlements, securities (including the shares of
stock of Subsidiaries of such Company), documents, personal property leases
(wherein such Company is the lessor), chattel paper, and such Company's Books
relating to any of the foregoing.
"Obligations" means all loans (including, without limitation, the Term
Loan), Advances, debts, principal, interest (including any interest that, but
for the provisions of the Bankruptcy Code, would have accrued), guaranties,
contingent reimbursement obligations under any outstanding Letters of Credit,
premiums (including Early Termination Premiums), liabilities (including all
amounts charged to Borrowers' Loan Account pursuant hereto), obligations, fees,
charges, costs, or Foothill Expenses (including any fees or expenses that, but
for the provisions of the Bankruptcy Code, would have accrued), lease payments,
guaranties, covenants, and duties owing by any Company to Foothill of any kind
and description (whether pursuant to or evidenced by the Loan Documents or
pursuant to any other agreement between Foothill and any Company, and
irrespective of whether for the payment of money), whether direct or indirect,
absolute or contingent, due or to become due, now existing or hereafter arising,
and including any debt, liability, or obligation owing from any Company to
others that Foothill may have obtained by assignment or otherwise, and further
including all interest not paid when due and all Foothill Expenses that any
Company is required to pay or reimburse by the Loan Documents, by law, or
otherwise.
"Overadvance" has the meaning set forth in Section 2.5.
"Participant" means any Person to which Foothill has sold a participation
interest in its rights under the Loan Documents.
"Patent Mortgage" means that certain Patent Mortgage of even date herewith
between SC and Foothill.
"Pay-Off Letter" means a letter, in form and substance reasonably
satisfactory to Foothill, from Existing Lender respecting the amount necessary
to repay in full all of the obligations of Companies owing to Existing Lender
(other than a $3,000,000 term loan).
"PBGC" means the Pension Benefit Guaranty Corporation as defined in Title
IV of ERISA, or any successor thereto.
"Permitted Liens" means (a) Liens held by Foothill, (b) Liens for unpaid
taxes that either (i) are not yet due and payable or (ii) are the subject of
Permitted Protests, (c) Liens set forth on Schedule P-1, (d) the interests of
lessors under operating leases and purchase money Liens of lessors under capital
leases to the extent that the acquisition or lease of the underlying asset
occurs after the Closing Date and is permitted under Section 7.21 and so long as
the Lien only attaches to the asset purchased or acquired and only secures the
purchase price of the asset, (e) Liens arising by operation of law in favor of
warehousemen, landlords, carriers, mechanics, materialmen, laborers, or
suppliers, incurred in the ordinary course of business of any Company and not in
connection with the borrowing of money, and which Liens either (i) are for sums
not yet due and payable, or (ii) are the subject of Permitted Protests, (f)
Liens arising from deposits made in connection with obtaining worker's
compensation or other unemployment insurance, (g) Liens or deposits to secure
performance of bids, tenders, or leases (to the extent permitted under this
Agreement), incurred in the ordinary course of business of a Company and not in
connection with the borrowing of money, (h) Liens arising by reason of security
for surety or appeal bonds in the ordinary course of business of a Company, (i)
Liens of or resulting from any judgment or award that would not have a Material
Adverse Effect and as to which the time for the appeal or petition for rehearing
of which has not yet expired, or in respect of which a Company is in good faith
prosecuting an appeal or proceeding for a review, and in respect of which a stay
of execution pending such appeal or proceeding for review has been secured, (j)
Liens with respect to the Real Property Collateral that are exceptions to the
commitments for title insurance issued in connection with the Mortgages, as
accepted by Foothill, and (k) with respect to any Real Property that is not part
of the Real Property Collateral, easements, rights of way, zoning and similar
covenants and restrictions, and similar encumbrances that customarily exist on
properties of Persons engaged in similar activities and similarly situated and
that in any event do not materially interfere with or impair the use or
operation of the Collateral by a Company or the value of Foothill's Lien thereon
or therein, or materially interfere with the ordinary conduct of the business of
a Company.
"Permitted Protest" means the right of a Company to protest any Lien other
than any such Lien that secures the Obligations, tax (other than payroll taxes
or taxes that are the subject of a United States federal tax lien), or rental
payment, provided that (a) a reserve with respect to such obligation is
established on the books of such Company in an amount that is reasonably
satisfactory to Foothill, (b) any such protest is instituted and diligently
prosecuted by such Company in good faith, and (c) Foothill is satisfied that,
while any such protest is pending, there will be no impairment of the
enforceability, validity, or priority of any of the Liens of Foothill in and to
the Collateral.
"Person" means and includes natural persons, corporations, limited
liability companies, limited partnerships, general partnerships, limited
liability partnerships, joint ventures, trusts, land trusts, business trusts, or
other organizations, irrespective of whether they are legal entities, and
governments and agencies and political subdivisions thereof.
"Personal Property Collateral" means all Collateral other than the Real
Property Collateral.
"Plan" means any employee benefit plan, program, or arrangement maintained
or contributed to by any Company or with respect to which it may incur
liability.
"Real Property" means any estates or interests in real property now owned
or hereafter acquired by a Company.
"Real Property Collateral" means the parcel or parcels of real property and
the related improvements thereto identified on Schedule R-1, and any Real
Property hereafter acquired by a Company.
"Reference Rate" means the variable rate of interest, per annum, most
recently announced by Norwest Bank Minnesota, National Association, or any
successor thereto, as its "base rate," irrespective of whether such announced
rate is the best rate available from such financial institution.
"Reference Rate Loan" means any Loan (or any portion thereof) made or
outstanding hereunder during any period when interest on such Loan (or portion
thereof) is payable based on the Reference Rate.
"Renewal Date" has the meaning set forth in Section 3.4.
"Reportable Event" means any of the events described in Section 4043(c) of
ERISA or the regulations thereunder other than a Reportable Event as to which
the provision of 30 days notice to the PBGC is waived under applicable
regulations.
"Reserve Percentage" means and refers to, as of the date of determination
thereof, the maximum percentage (rounded upward, if necessary to the nearest
1/100th of 1%), as determined by Foothill (or its Affiliate) in accordance with
its (or their) usual procedures (which determination shall be conclusive in the
absence of manifest error), that is in effect on such date as prescribed by the
Federal Reserve Board for determining the reserve requirements (including
supplemental, marginal, and emergency reserve requirements) with respect to
eurocurrency funding (currently referred to as "eurocurrency liabilities") by
Foothill or its Affiliates.
"Retiree Health Plan" means an "employee welfare benefit plan" within the
meaning of Section 3(1) of ERISA that provides benefits to individuals after
termination of their employment, other than as required by Section 601 of ERISA.
"Solvent" means, with respect to any Person on a particular date, that on
such date (a) at fair valuations, all of the properties and assets of such
Person are greater than the sum of the debts, including contingent liabilities,
of such Person, (b) the present fair salable value of the properties and assets
of such Person is not less than the amount that will be required to pay the
probable liability of such Person on its debts as they become absolute and
matured, (c) such Person is able to realize upon its properties and assets and
pay its debts and other liabilities, contingent obligations and other
commitments as they mature in the normal course of business, (d) such Person
does not intend to, and does not believe that it will, incur debts beyond such
Person's ability to pay as such debts mature, and (e) such Person is not engaged
in business or a transaction, and is not about to engage in business or a
transaction, for which such Person's properties and assets would constitute
unreasonably small capital after giving due consideration to the prevailing
practices in the industry in which such Person is engaged. In computing the
amount of contingent liabilities at any time, it is intended that such
liabilities will be computed at the amount that, in light of all the facts and
circumstances existing at such time, represents the amount that reasonably can
be expected to become an actual or matured liability.
"Stock Pledge Agreement" means that certain Stock Pledge Agreement of even
date herewith between SC and Foothill.
"Subsidiary" of a Person means a corporation, partnership, limited
liability company, or other entity in which that Person directly or indirectly
owns or controls the shares of stock or other ownership interests having
ordinary voting power to elect a majority of the board of directors (or appoint
other comparable managers) of such corporation, partnership, limited liability
company, or other entity.
"Tangible Net Worth" means, as of any date of determination, the difference
of (a) total stockholder's equity of SC on a consolidated basis, minus (b) the
sum of: (i) all Intangible Assets and "other assets" of the Companies, (ii) all
of the Companies' prepaid expenses, and (iii) all amounts due to the Companies
from Affiliates.
"Tecstar Loan Agreement" means that certain Loan and Security Agreement
dated as of November 20, 1998 between Tecstar, Inc. and Foothill.
"Tecstar Obligations" means the "Obligations" (as defined in the Tecstar
Loan Agreement).
"Term Loan" has the meaning set forth in Section 2.3.
"Trademark Mortgage" means that certain Trademark Mortgage of even date
herewith between SC and Foothill.
"Voidable Transfer" has the meaning set forth in Section 15.8.
1.2. Accounting Terms.
All accounting terms not specifically defined herein shall be construed in
accordance with GAAP. When used herein, the term "financial statements" shall
include the notes and schedules thereto. Whenever the term "Company" is used in
respect of a financial covenant or a related definition, it shall be understood
to mean Companies on a consolidated basis unless the context clearly requires
otherwise.
1.3. Code.
Any terms used in this Agreement that are defined in the Code shall be
construed and defined as set forth in the Code unless otherwise defined herein.
1.4. Construction.
Unless the context of this Agreement clearly requires otherwise, references
to the plural include the singular, references to the singular include the
plural, the term "including" is not limiting, and the term "or" has, except
where otherwise indicated, the inclusive meaning represented by the phrase
"and/or." The words "hereof," "herein," "hereby," "hereunder," and similar terms
in this Agreement refer to this Agreement as a whole and not to any particular
provision of this Agreement. An Event of Default shall "continue" or be
"continuing" until such Event of Default has been waived in writing by Foothill.
Section, subsection, clause, schedule, and exhibit references are to this
Agreement unless otherwise specified. Any reference in this Agreement or in the
Loan Documents to this Agreement or any of the Loan Documents shall include all
alterations, amendments, changes, extensions, modifications, renewals,
replacements, substitutions, and supplements, thereto and thereof, as
applicable.
1.5. Schedules and Exhibits.
All of the schedules and exhibits attached to this Agreement shall be
deemed incorporated herein by reference.
2. LOAN AND TERMS OF PAYMENT.
2.1. Revolving Advances.
(a) Subject to the terms and conditions of this Agreement, Foothill agrees
to make advances ("Advances") to Borrowers in an amount outstanding not to
exceed at any one time the lesser of (i) the Maximum Revolving Amount less the
outstanding balance of all undrawn or unreimbursed Letters of Credit, or (ii)
the Borrowing Base less (A) the aggregate amount of all undrawn or unreimbursed
Letters of Credit. For purposes of this Agreement, "Borrowing Base", as of any
date of determination, shall mean the result of:
(w) the lesser of (i) 85% of Eligible Accounts of
Borrowers, less the amount, if any, of the Dilution Reserve,
and (ii) an amount equal to Borrowers' Collections with
respect to Accounts of Borrowers for the immediately preceding
60 day period, plus
(x) the lower of (i) $6,000,000, and (ii) the sum of
(A) the lower of (1) 75% of the value of the Eligible
Inventory consisting of uncut chassis owned by a Borrower and
(2) $3,000,000, and (B) the lower of (1) 75% of the value of
the Eligible Inventory consisting of finished goods, and (2)
80% of the orderly liquidation value (as determined by an
appraiser and an appraisal methodology acceptable to Foothill)
of the Eligible Inventory consisting of finished goods, plus
(y) the lowest of (i) $3,000,000, (ii) the sum of 35%
of the value of the Eligible Inventory consisting of raw
materials and 100% of the Additional Raw Material Availability
Amount, and (iii) 80% of the orderly liquidation value (as
determined by an appraiser and an appraisal methodology
acceptable to Foothill) of the Eligible Inventory consisting
of raw materials, minus
(z) the aggregate amount of reserves, if any,
established by Foothill under Section 2.1(b);
provided, that the aggregate Advances outstanding predicated on the availability
described in clauses (x) and (y) above shall not exceed (A) 300% of the amount
of availability created under clause (w) above during the period commencing on
the date hereof and ending December 24, 1999, (B) 180% of the amount of
availability created under clause (w) above during the period commencing on
December 25, 1998 and ending on January 31, 1999, or (C) 160% of the amount of
availability created under clause (w) above at any time on or after February 1,
1999.
(b) Anything to the contrary in Section 2.1(a) above notwithstanding,
Foothill may create reserves against the Borrowing Base or reduce its advance
rates based upon Eligible Accounts or Eligible Inventory without declaring an
Event of Default (i) for any amount subject to a Permitted Protest, (ii) for
amounts owing to landlords or similar Persons that could assert a statutory lien
in respect of any of the Collateral, (iii) for such amounts as Foothill deems
appropriate for finished goods that may be located with a processor, and/or (iv)
as determined by Foothill in its reasonable credit judgment. Without limiting
the foregoing, Foothill shall establish the Inventory Reserve as a reserve
against the Borrowing Base.
(c) Each Loan shall be made upon a Borrower's request (pursuant to the
terms of Section 2.9), which request shall be irrevocable except as set forth in
Section 2.12, specifying (i) the amount of the requested Loan; (ii) the
requested funding date of such Loan; (iii) whether the Loan is to constitute a
Eurodollar Rate Loan or a Reference Rate Loan; and (iv) if such Loan is to
constitute a Eurodollar Rate Loan, the requested Interest Period therefor. If a
requested Loan constitutes a Eurodollar Rate Loan, such request must be
delivered to Foothill no later than 11:00 a.m. (California time) 2 Business Days
prior to the requested funding date therefor. (d) Amounts borrowed pursuant to
this Section 2.1 may be repaid and, subject to the terms and conditions of this
Agreement, reborrowed at any time during the term of this Agreement. 2.2.
Letters of Credit.
(a) Subject to the terms and conditions of this Agreement, Foothill agrees to
issue letters of credit for the account of a Borrower (each, an "L/C") or to
issue guarantees of payment (each such guaranty, an "L/C Guaranty") with respect
to letters of credit issued by an issuing bank for the account of a Borrower.
Foothill shall have no obligation to issue a Letter of Credit if any of the
following would result:
(i) the aggregate amount of all undrawn and unreimbursed
Letters of Credit, would exceed the Borrowing Base less the amount of
outstanding Advances; or
(ii) the aggregate amount of all undrawn or unreimbursed
Letters of Credit would exceed the lower of: (x) the Maximum Revolving
Amount less the amount of outstanding Advances; or (y) $2,000,000; or
(iii) the outstanding Obligations (other than under the Term Loan)
would exceed the Maximum Revolving Amount. Each Borrower expressly
understands and agrees that Foothill shall have no obligation to
arrange for the issuance by issuing banks of the letters of credit that
are to be the subject of L/C Guarantees. Each Borrower and Foothill
acknowledge and agree that certain of the letters of credit that are to
be the subject of L/C Guarantees may be outstanding on the Closing
Date. Each Letter of Credit shall have an expiration date no later than
60 days prior to the date on which this Agreement is scheduled to
terminate under Section 3.4 (without regard to any potential renewal
term) and all such Letters of Credit shall be in form and substance
acceptable to Foothill in its sole discretion. If Foothill is obligated
to advance funds under a Letter of Credit, Borrowers immediately shall
reimburse such amount to Foothill and, in the absence of such
reimbursement, the amount so advanced immediately and automatically
shall be deemed to be an Advance hereunder and, thereafter, shall bear
interest at the rate then applicable to Advances under Section 2.6.
(b) Each Borrower hereby agrees to indemnify, save, defend, and hold
Foothill harmless from any loss, cost, expense, or liability, including payments
made by Foothill, expenses, and reasonable attorneys fees incurred by Foothill
arising out of or in connection with any Letter of Credit. Each Borrower agrees
to be bound by the issuing bank's regulations and interpretations of any Letters
of Credit guarantied by Foothill and opened to or for a Borrower's account or by
Foothill's interpretations of any L/C issued by Foothill to or for a Borrower's
account, even though this interpretation may be different from such Borrower's
own, and each Borrower understands and agrees that Foothill shall not be liable
for any error, negligence, or mistake, whether of omission or commission, in
following any Borrower's instructions or those contained in the Letter of Credit
or any modifications, amendments, or supplements thereto. Each Borrower
understands that the L/C Guarantees may require Foothill to indemnify the
issuing bank for certain costs or liabilities arising out of claims by such
Borrower against such issuing bank. Each Borrower hereby agrees to indemnify,
save, defend, and hold Foothill harmless with respect to any loss, cost, expense
(including reasonable attorneys fees), or liability incurred by Foothill under
any L/C Guaranty as a result of Foothill's indemnification of any such issuing
bank.
(c) Each Borrower hereby authorizes and directs any bank that issues a
letter of credit guaranteed by Foothill to deliver to Foothill all instruments,
documents, and other writings and property received by the issuing bank pursuant
to such letter of credit, and to accept and rely upon Foothill's instructions
and agreements with respect to all matters that it would otherwise accept and
rely upon Borrowers' instructions and agreements, arising in connection with
such letter of credit and the related application. Such Borrower may or may not
be the "applicant" or "account party" with respect to such letter of credit.
(d) Any and all charges, commissions, fees, and costs incurred by
Foothill relating to the letters of credit guaranteed by Foothill shall be
considered Foothill Expenses for purposes of this Agreement and immediately
shall be reimbursable by Borrowers to Foothill.
(e) Immediately upon the termination of this Agreement, Borrowers agree
to either (i) provide cash collateral to be held by Foothill in an amount equal
to 102% of the maximum amount of Foothill's obligations under Letters of Credit,
or (ii) cause to be delivered to Foothill releases of all of Foothill's
obligations under outstanding Letters of Credit. At Foothill's discretion, any
proceeds of Collateral of Borrowers received by Foothill after the occurrence
and during the continuation of an Event of Default may be held as the cash
collateral required by this Section 2.2(e).
(f) If by reason of (i) any change in any applicable law, treaty, rule,
or regulation or any change in the interpretation or application by any
governmental authority of any such applicable law, treaty, rule, or regulation,
or (ii) compliance by the issuing bank or Foothill with any direction, request,
or requirement (irrespective of whether having the force of law) of any
governmental authority or monetary authority including, without limitation,
Regulation D of the Board of Governors of the Federal Reserve System as from
time to time in effect (and any successor thereto):
(A) any reserve, deposit, or similar requirement is or shall
be imposed or modified in respect of any Letters of Credit issued
hereunder, or
(B) there shall be imposed on the issuing bank or Foothill any
other condition regarding any letter of credit, or Letter of Credit, as
applicable, issued pursuant hereto;
and the result of the foregoing is to increase, directly or indirectly,
the cost to the issuing bank or Foothill of issuing, making, guaranteeing, or
maintaining any letter of credit, or Letter of Credit, as applicable, or to
reduce the amount receivable in respect thereof by such issuing bank or
Foothill, then, and in any such case, Foothill may, at any time within a
reasonable period after the additional cost is incurred or the amount received
is reduced, notify Borrowers, and Borrowers shall pay on demand such amounts as
the issuing bank or Foothill may specify to be necessary to compensate the
issuing bank or Foothill for such additional cost or reduced receipt, together
with interest on such amount from the date of such demand until payment in full
thereof at the rate set forth in Section 2.6(a)(i) or (c)(i), as applicable. The
determination by the issuing bank or Foothill, as the case may be, of any amount
due pursuant to this Section 2.2(f), as set forth in a certificate setting forth
the calculation thereof in reasonable detail, shall, in the absence of manifest
or demonstrable error, be final and conclusive and binding on all of the parties
hereto.
2.3. Term Loan.
Foothill has agreed to make a term loan (the "Term Loan") to Borrowers
in the original principal amount of $4,800,000. The Term Loan shall be repaid in
36 installments of principal each in the amount of $57,143 (except for the last
such installment which shall be in the amount of the unpaid principal balance of
the Term Loan). Each such installment shall be due and payable on the first day
of each calendar month commencing on the first day of December 1, 1998 and
continuing on the first day of each succeeding calendar month, and the final
payment shall be on the third anniversary of the Closing Date. The outstanding
principal balance and all accrued and unpaid interest under the Term Loan shall
be due and payable upon the termination of this Agreement, whether by its terms,
by prepayment, by acceleration, or otherwise. The unpaid principal balance of
the Term Loan may be prepaid in whole or in part without penalty or premium at
any time during the term of this Agreement upon 30 days prior written notice by
Borrowers to Foothill and with the prior written consent of Foothill. All
prepayments of principal of the Term Loan shall be applied to the installments
due on the Term Loan in the inverse order of their maturity. All amounts
outstanding under the Term Loan shall constitute Obligations.
2.4. Intentionally Omitted.
2.5. Overadvances.
If, at any time or for any reason, the amount of Obligations (other
than the Term Loan) owed by Borrowers to Foothill pursuant to Sections 2.1 and
2.2 is greater than either the Dollar or percentage limitations set forth in
Sections 2.1 and 2.2 (an "Overadvance"), Borrowers immediately shall pay to
Foothill, in cash, the amount of such excess to be used by Foothill first, to
repay Advances outstanding under Section 2.1 and, thereafter, to be held by
Foothill as cash collateral to secure Borrowers' obligation to repay Foothill
for all amounts paid pursuant to Letters of Credit.
2.6. Interest: Rates, Payments and Calculations.
(a) Interest Rate. Except as provided in clause (c) below, all
outstanding Obligations (except for undrawn Letters of Credit) shall
bear interest as follows:
(i) Each Eurodollar Rate Loan (other than the portion
thereof that is part of the Term Loan) shall bear interest at
a per annum rate of 3 percentage points above the Adjusted
Eurodollar Rate and each Eurodollar Rate Loan constituting a
portion of the Term Loan shall bear interest at a per annum
rate of 3.5 percentage points above the Adjusted Eurodollar
Rate, and
(ii) all other outstanding Obligations (other than
the portion thereof that is part of the Term Loan) shall bear
interest at a per annum rate of 0.5 percentage points above
the Reference Rate and the Term Loan (other than the portion
thereof that is part of a Eurodollar Rate Loan) shall bear
interest at a per annum rate of 0.75 percentage points above
the Reference Rate; provided, that, notwithstanding the
foregoing, the Revolving Loans predicated on the Additional
Raw Material Availability Amount shall bear interest at a per
annum rate of 2 percentage points above the Reference Rate.
(b) Letter of Credit Fee. Borrowers shall pay Foothill a fee (in
addition to the charges, commissions, fees, and costs set forth in Section
2.2(d)) equal to 1.75% per annum times the aggregate undrawn amount of all
outstanding Letters of Credit.
(c) Default Rate. Upon the occurrence and during the continuation of an
Event of Default, (i) all Obligations (except for undrawn Letters of Credit and
the Term Loan) shall bear interest at a per annum rate equal to 3.5 percentage
points above the Reference Rate, (ii) the Term Loan shall bear interest at a per
annum rate equal to 3.75 percentage points above the Reference Rate, and (iii)
the Letter of Credit fee provided in Section 2.6(b) shall be increased to 4.75%
per annum times the amount of the undrawn Letters of Credit that were
outstanding during the immediately preceding calendar month; provided, that
notwithstanding the foregoing, the Revolving Loans predicated on the Additional
Raw Material Availability Amount shall bear interest at a per annum rate of 6
percentage points above the Reference Rate.
(d) Minimum Interest. In no event shall the rate of interest chargeable
hereunder for any day be less than 7% per annum. To the extent that interest
accrued hereunder at the rate set forth herein would be less than the foregoing
minimum daily rate, the interest rate chargeable hereunder for such day
automatically shall be deemed increased to the minimum rate.
(e) Payments. Interest in respect of Reference Rate Loans and Letter of
Credit Fees shall be due and payable, in arrears, on the first day of each
calendar month during the term hereof. Interest in respect of each Eurodollar
Rate Loan shall be due and payable, in arrears, on the last day of the Interest
Period applicable thereto. Each Borrower hereby authorizes Foothill, at its
option, without prior notice to Borrowers, to charge such interest and Letter of
Credit Fees, all Foothill Expenses (as and when incurred), the fees and charges
provided for in Section 2.11 (as and when accrued or incurred), and all
installments or other payments due under the Term Loan or any Loan Document to
Borrowers' Loan Account, which amounts thereafter shall accrue interest at the
rate then applicable to Advances hereunder. Any interest not paid when due and
shall be compounded and shall thereafter accrue interest at the rate then
applicable to Advances hereunder.
(f) Computation. The Reference Rate as of the date of this Agreement is
8% per annum. In the event the Reference Rate is changed from time to time
hereafter, the applicable rate of interest hereunder automatically and
immediately shall be increased or decreased by an amount equal to such change in
the Reference Rate. All interest and fees chargeable under the Loan Documents
shall be computed on the basis of a 360 day year for the actual number of days
elapsed.
(g) Intent to Limit Charges to Maximum Lawful Rate. In no event shall
the interest rate or rates payable under this Agreement, plus any other amounts
paid in connection herewith, exceed the highest rate permissible under any law
that a court of competent jurisdiction shall, in a final determination, deem
applicable. Borrowers and Foothill, in executing and delivering this Agreement,
intend legally to agree upon the rate or rates of interest and manner of payment
stated within it; provided, however, that, anything contained herein to the
contrary notwithstanding, if said rate or rates of interest or manner of payment
exceeds the maximum allowable under applicable law, then, ipso facto as of the
date of this Agreement, Borrowers are and shall be liable only for the payment
of such maximum as allowed by law, and payment received from Borrowers in excess
of such legal maximum, whenever received, shall be applied to reduce the
principal balance of the Obligations to the extent of such excess.
(h) For purposes of calculating interest, Revolving Loans shall be
deemed to be predicated upon the availability created by the Additional Raw
Material Availability Amount last. 2.7. Collection of Accounts.
Borrowers shall at all times maintain lockboxes (the "Lockboxes") and,
immediately after the Closing Date, shall instruct all Account Debtors with
respect to the Accounts, General Intangibles, and Negotiable Collateral of
Borrowers to remit all Collections in respect thereof to such Lockboxes.
Borrowers, Foothill, and the Lockbox Banks shall enter into the Lockbox
Agreements, which among other things shall provide for the opening of a Lockbox
Account for the deposit of Collections at a Lockbox Bank. Borrowers agree that
all Collections and other amounts received by any Borrower from any Account
Debtor or any other source immediately upon receipt shall be deposited into a
Lockbox Account. No Lockbox Agreement or arrangement contemplated thereby shall
be modified by any Borrower without the prior written consent of Foothill. Upon
the terms and subject to the conditions set forth in the Lockbox Agreements, all
amounts received in each Lockbox Account after all applicable collection periods
shall be wired each Business Day into an account (the "Foothill Account")
maintained by Foothill at a depository selected by Foothill.
2.8. Crediting Payments; Application of Collections.
The receipt of any Collections by Foothill (whether from transfers to
Foothill by the Lockbox Banks pursuant to the Lockbox Agreements or otherwise)
immediately shall be applied provisionally to reduce the Obligations outstanding
under Section 2.1, but shall not be considered a payment on account unless such
Collection item is a wire transfer of immediately available federal funds and is
made to the Foothill Account or unless and until such Collection item is honored
when presented for payment. From and after the Closing Date, Foothill shall be
entitled to charge Borrowers for 2 Business Days of `clearance' or `float' at
the rate set forth in Section 2.6(a)(i) or Section 2.6(c)(i), as applicable, on
all Collections that are received by Foothill (regardless of whether forwarded
by the Lockbox Banks to Foothill, whether provisionally applied to reduce the
Obligations under Section 2.1, or otherwise). This across-the-board 2 Business
Day clearance or float charge on all Collections is acknowledged by the parties
to constitute an integral aspect of the pricing of Foothill's financing of
Borrowers, and shall apply irrespective of the characterization of whether
receipts are owned by any Borrower or Foothill, and whether or not there are any
outstanding Advances, the effect of such clearance or float charge being the
equivalent of charging 2 Business Days of interest on such Collections. Should
any Collection item not be honored when presented for payment, then Borrowers
shall be deemed not to have made such payment, and interest shall be
recalculated accordingly. Anything to the contrary contained herein
notwithstanding, any Collection item shall be deemed received by Foothill only
if it is received into the Foothill Account on a Business Day on or before 11:00
a.m. California time. If any Collection item is received into the Foothill
Account on a non-Business Day or after 11:00 a.m. California time on a Business
Day, it shall be deemed to have been received by Foothill as of the opening of
business on the immediately following Business Day.
2.9. Designated Account.
Foothill is authorized to make the Advances, the Letters of Credit and
the Term Loan under this Agreement based upon telephonic or other instructions
received from anyone purporting to be an Authorized Person, or without
instructions if pursuant to Section 2.6(e). Borrowers agree to establish and
maintain the Designated Account with the Designated Account Bank for the purpose
of receiving the proceeds of the Advances requested by any Borrower and made by
Foothill hereunder. Unless otherwise agreed by Foothill and Borrowers, any
Advance requested by any Borrower and made by Foothill hereunder shall be made
to the Designated Account.
2.10. Maintenance of Loan Account; Statements of Obligations.
Foothill shall maintain an account on its books in the name of
Borrowers (the "Loan Account") on which Borrowers will be charged with all
Advances made by Foothill to any Borrower or for Borrowers' account, including,
accrued interest, Foothill Expenses, and any other payment Obligations of any
Borrower. In accordance with Section 2.8, the Loan Account will be credited with
all payments received by Foothill from any Borrower or for Borrowers' account,
including all amounts received in the Foothill Account from any Lockbox Bank.
Foothill shall render statements regarding the Loan Account to Borrowers,
including principal, interest, fees, and including an itemization of all charges
and expenses constituting Foothill Expenses owing, and such statements shall be
conclusively presumed to be correct and accurate and constitute an account
stated between Borrowers and Foothill unless, within 30 days after receipt
thereof by Borrowers, Borrowers shall deliver to Foothill written objection
thereto describing the error or errors contained in any such statements.
2.11. Fees.
Borrowers shall pay to Foothill the following fees:
(a) Closing Fee. On the Closing Date, a closing fee of $70,000;
(b) Unused Line Fee. On the first day of each calendar month during the
term of this Agreement, an unused line fee in an amount equal to 0.25% per annum
times the Average Unused Portion of the Maximum Revolving Amount;
(c) Financial Examination, Documentation, and Appraisal Fees.
Foothill's customary fee of $650 per day per examiner, plus out-of-pocket
expenses for each financial analysis and examination (i.e., audits) of Borrowers
performed by personnel employed by Foothill; Foothill's customary appraisal fee
of $1,500 per day per appraiser, plus out-of-pocket expenses for each appraisal
of the Collateral performed by personnel employed by Foothill; and, the actual
charges paid or incurred by Foothill if it elects to employ the services of one
or more third Persons to perform such financial analyses and examinations (i.e.,
audits) of Borrowers or to appraise the Collateral; and
(d) Servicing Fee. On the first day of each calendar month during the
term of this Agreement, and thereafter so long as any Obligations are
outstanding, a servicing fee in an amount equal to $2,000 per month. 2.12.
Eurodollar Rate Loans.
2.12 Eurodollar Rate Loans. Any other provisions herein to the contrary
notwithstanding, the following provisions shall govern with respect to
Eurodollar Rate Loans as to the matters covered:
(a) Borrowing; Conversion; Continuation. Borrowers may from time to
time, on or after the Closing Date, request in a written or telephonic
communication with Foothill: (i) Loans to constitute Eurodollar Rate Loans
(pursuant to Section 2.12(c)); (ii) that Reference Rate Loans be converted into
Eurodollar Rate Loans; or (iii) that existing Eurodollar Rate Loans continue for
an additional Interest Period. Any such request shall specify the aggregate
amount of the requested Eurodollar Rate Loans, the proposed funding date
therefor (which shall be a Business Day, and with respect to continued
Eurodollar Rate shall be the last day of the Interest Period of the existing
Eurodollar Rate loans being continued), and the proposed Interest Period, in
each case subject to the limitations set forth below). Eurodollar Rate Loans may
only be made, continue, or extended if, as of the proposed funding date therefor
each of the following conditions is satisfied:
(v) no Event of Default exists;
(w) no more than 3 Interest Periods may be in effect
at any one time;
(x) the amount of each Eurodollar Rate Loan borrowed,
converted, or continued must be in an amount not less than
$1,000,000 and integral multiples of $500,000 in excess
thereof;
(y) Foothill shall have determined that the Interest
Period or Adjusted Eurodollar Rate is available to Foothill
and can be readily determined as of the date of the request
for such Eurodollar Rate Loan by Borrowers; and
(z) Foothill shall have received such request at
least 2 Business Days prior to the proposed funding date
therefor.
Any request by Borrowers to borrow Eurodollar Rate Loans, to convert Reference
Rate Loans to Eurodollar Rate Loans, or to continue any existing Eurodollar Rate
Loans shall be irrevocable, except to the extent that Foothill shall determine
under Sections 2.12(a), 2.13 or 2.14 that such Eurodollar Rate Loans cannot be
made or continued.
(b) Determination of Interest Period. By giving notice as set forth in
Section 2.12(a), the Borrowers shall have the option of selecting an Interest
Period for such Eurodollar Rate Loan. The determination of Interests Periods
shall be subject to the following provisions:
(i) in the case of immediately successive Interest
Periods, each successive Interest Period shall commence on the
date on which the next preceding Interest Period expires;
(ii) if any Interest period would otherwise expire on
a day which is not a Business Day, the Interest Period shall
be extended to expire on the next succeeding Business Day;
provided, however, that if the next succeeding Business Day
occurs in the following calendar month, then such Interest
Period shall expire on the immediately preceding Business Day;
(iii) if any Interest Period begins on the last
Business Day of a calendar month, or on a day for which there
is no numerically corresponding day in the calendar month at
the end of such Interest Period, then the Interest Period
shall end on the last Business Day of the calendar month at
the end of such Interest Period; and
(iv) Borrowers may not select an Interest period
which expires later than the last day of the current term of
this Agreement.
(c) Automatic Conversion; Optional Conversion by Foothill. Any
Eurodollar Rate Loan shall automatically convert to a Reference Rate Loan upon
the last day of the applicable Interest Period, unless Foothill has received a
request to continue such Eurodollar Rate Loan at least 2 Business Days prior to
the end of such Interest period in accordance with the terms of Section 2.12(a).
Any Eurodollar Rate Loan shall, at Foothill's option, upon notice to Borrowers,
convert to a Reference Rate Loan in the event that (i) an Event of Default shall
have occurred and be continuing as of the last day of the Interest Period for
such Eurodollar Rate Loan, or (ii) this Agreement shall terminate, and Borrowers
shall pay to Foothill any amounts required by Section 2.15 as a result thereof.
2.13. Illegality.
Any other provision herein to the contrary notwithstanding, if the
adoption of or any change in any law or in the interpretation or application
thereof shall make it unlawful for Foothill to make or maintain Eurodollar Rate
Loans as contemplated by this Agreement, (a) the obligation of Foothill
hereunder to make Eurodollar Rate loans, continue Eurodollar Rate Loans as such,
and convert Reference Rate Loans to Eurodollar Rate Loans shall forthwith be
cancelled and (b) Foothill's then outstanding Eurodollar Rate Loans, if any,
shall be converted automatically to Reference Rate Loans on the respective last
days of the then current Interest Periods with respect thereto or within such
earlier period as required by law; provided, however, that before making any
such demand, Foothill agrees to use reasonable efforts (consistent with its
internal policy and legal and regulatory restrictions and so long as such
efforts would not be disadvantageous to it, in its reasonable discretion, in any
legal, economic or regulatory manner) to designate a different lending office if
the making of such a designation would allow Foothill or its lending office to
continue to perform its obligations to make Eurodollar Rate Loans. If any such
conversion of a Eurodollar Rate Loan occurs on a day which is not the last day
of the then current Interest period with respect thereto, Borrowers shall pay to
Foothill such amounts, if any, as may be required pursuant to Section 2.15. If
circumstances subsequently change so that Foothill shall determine that it is no
longer so affected, Foothill will promptly notify Borrowers, and upon receipt of
such notice, the obligations of Foothill to make or continue Eurodollar Rate
Loans or to convert Reference Rate Loans into Eurodollar Rate Loans shall be
reinstated.
2.14. Requirements of Law.
(a) If the adoption of or any change in any law or in the
interpretation or application thereof or compliance by Foothill with any request
or directive (whether or not having the force of law) from any central bank or
other Governmental Authority made subsequent to the date hereof:
(i) shall subject Foothill to any tax, levy, charge, fee,
reduction or withholding of any kind whatsoever with respect to this
Agreement or any Loan, or change the basis of taxation of payments to
Foothill in respect thereof (except for taxes and the establishment of
a tax based on the net income of Foothill or changes in the rate of tax
on the net income of Foothill);
(ii) shall impose, modify or hold applicable any reserve,
special deposit, compulsory loan or similar requirement against assets
held by, deposits or other liabilities in or for the account of, Loans
or other extensions of credit by, or any other acquisition of funds by,
any office of Foothill; or (iii) shall impose on Foothill any other
condition with respect to this Agreement or any Loan; and the result of
any of the foregoing is to increase the cost to Foothill, by an amount
which Foothill deems to be material, of making, converting into,
continuing or maintaining Loans or to increase the cost to Foothill, by
an amount which Foothill deems to be material, or to reduce any amount
receivable hereunder in respect of Loans, or to forego any other sum
payable thereunder or make any payment on account thereof, then, in any
such case, Borrowers shall promptly pay Foothill, upon its demand, any
additional amounts necessary to compensate Foothill for such increased
cost or reduced amount receivable; provided, however, that before
making any such demand, Foothill agrees to use reasonable efforts
(consistent with its internal policy and legal and regulatory
restrictions and so long as such efforts would not be disadvantageous
to it, in its reasonable discretion, in any legal, economic or
regulatory manner) to designate a different Eurodollar lending office
if the making of such designation would allow Foothill or its
Eurodollar lending office to continue to perform its obligations to
make Eurodollar Rate Loans or to continue to fund or maintain
Eurodollar Rate Loans and avoid the need for, or materially reduce the
amount of, such increased cost. If Foothill becomes entitled to claim
any additional amounts pursuant to this Section 2.14, Foothill shall
promptly notify Borrowers of the event by reason of which it has become
so entitled. A certificate as to any additional amounts payable
pursuant to this Section 2.14 submitted by Foothill to Borrowers shall
be conclusive in the absence of manifest error. If Borrowers so notify
Foothill within 5 Business Days after Foothill notifies Borrowers of
any increased cost pursuant to the foregoing provisions of this Section
2.14, Borrowers may convert all Eurodollar Rate Loans then outstanding
into Reference Rate loans in accordance with Section 2.12 and,
additionally, reimburse Foothill for any cost in accordance with
Section 2.15.
(b) If Foothill shall have determined that the adoption of or any
change in any law regarding capital adequacy or in the interpretation or
application thereof or compliance by Foothill or any Person controlling Foothill
with any request or directive regarding capital adequacy (whether or not having
the force of law) from any Governmental Authority made subsequent to the date
hereof does or shall have the effect of increasing the amount of capital
required to be maintained or reducing the rate of return on Foothill's or such
Person's capital as a consequence of its obligations hereunder to a level below
that which such Foothill or such Person could have achieved but for such change
or compliance (taking into consideration Foothill's or such Person's policies
with respect to capital adequacy) by an amount deemed by Foothill to be
material, then from time to time, after submission by Foothill to Borrowers of a
prompt written request therefor, Borrowers shall pay to Foothill such additional
amount or amounts as will compensate Foothill or such Person for such reduction.
2.15. Indemnity.
Each Borrower agrees to indemnify Foothill and to hold Foothill
harmless from any loss or expense which Foothill may sustain or incur as a
consequence of (a) default by Borrowers in payment when due of the principal
amount of or interest on any Eurodollar Rate Loan, (b) default by Borrowers in
making a borrowing of, conversion into, or continuation of Eurodollar Rate Loans
after Borrowers have given a notice requesting the same in accordance with the
provisions of this Agreement, (c) default by Borrowers in making any prepayment
after Borrowers have given a notice thereof in accordance with the provisions of
this Agreement, or (d) the making of a prepayment of Eurodollar Rate Loans on a
day which is not the last day of an Interest Period with respect thereto
(whether due to the termination of this Agreement upon the Event of Default or
otherwise), including, in each case, any such loss or expense (but excluding
loss of margin) arising from the reemployment of funds obtained by it or from
fees payable to terminate the deposits from which such funds were obtained.
Calculation of all amounts payable to Foothill under this Section 2.15 shall be
made as though Foothill had actually funded the relevant Eurodollar Rate Loan
through the purchase of a deposit bearing interest at the Eurodollar Rate in an
amount equal to the amount of such Eurodollar Rate Loan and having a maturity
comparable to the relevant Interest Period; provided, however, that Foothill may
fund each of the Eurodollar Rate Loans in any manner it sees fit, and the
foregoing assumption shall be utilized only for the calculation of amounts
payable under this Section 2.15.
3. CONDITIONS; TERM OF AGREEMENT.
3.1. Conditions Precedent to the Initial Advance, Letter of Credit and
the Term Loan.
The obligation of Foothill to make the initial Advance, to issue the
initial Letter of Credit or to make the Term Loan is subject to the fulfillment,
to the satisfaction of Foothill and its counsel, of each of the following
conditions on or before the Closing Date:
(a) the Closing Date shall occur on or before November 20, 1998;
(b) Foothill shall have received searches reflecting the filing of its
financing statements and fixture filings for each Company and Tecstar, Inc.;
(c) Foothill shall have received each of the following documents, duly
executed, and each such document shall be in full force and effect:
(i) the Lockbox Agreements;
(ii) the Disbursement Letter;
(iii) the Pay-Off Letters, together with UCC termination
statements and other documentation evidencing the termination by each
Existing Lender of its Liens in and to the properties and assets of all
Companies;
(iv) the Mortgages, the Guaranties, the Trademark Mortgage,
the Patent Mortgage and the Stock Pledge Agreement; and
(v) the Intercreditor Agreements.
(d) Foothill shall have received a certificate from the Secretary of
each Company attesting to the resolutions of such Company's Board of Directors
authorizing its execution, delivery, and performance of this Agreement and the
other Loan Documents to which such Company is a party and authorizing specific
officers of Company to execute the same;
(e) Foothill shall have received copies of each Company's Governing
Documents, as amended, modified, or supplemented to the Closing Date, certified
by the Secretary of such Company;
(f) Foothill shall have received a certificate of status with respect
to each Company, dated within 30 days of the Closing Date, such certificate to
be issued by the appropriate officer of the jurisdiction of organization of such
Company, which certificate shall indicate that such Company is in good standing
in such jurisdiction;
(g) Foothill shall have received certificates of status with respect to
each Company, each dated within 30 days of the Closing Date, such certificates
to be issued by the appropriate officer of the jurisdictions in which its
failure to be duly qualified or licensed would constitute a Material Adverse
Change, which certificates shall indicate that such Company is in good standing
in such jurisdictions;
(h) Foothill shall have received a certificate of insurance, together
with the endorsements thereto, as are required by Section 6.10, the form and
substance of which shall be satisfactory to Foothill and its counsel;
(i) Foothill shall have received the $2,000,000 promissory note
executed by Tecstar, Inc. in favor of SAG endorsed to Foothill and the Security
Agreement executed by Tecstar, Inc. and SAG, and such documents shall be in form
and substance satisfactory to Foothill;
(j) Foothill shall have reviewed and shall be satisfied with the
results of the Inventory and Equipment appraisals;
(k) Foothill shall have reviewed each Company's chassis agreements with
its suppliers and shall be satisfied with the results thereof;
(l) Foothill shall have received such Collateral Access Agreements from
lessors, warehousemen, bailees, and other third persons as Foothill may require;
(m) Foothill shall have received an opinion of Companies' counsel in
form and substance satisfactory to Foothill in its sole discretion;
(n) Foothill shall have received (i) appraisals of the Real Property
Collateral and appraisals of the Equipment, in each case satisfactory to
Foothill and in compliance with FIRREA guidelines, (ii) ALTA surveys for the
Real Property Collateral, and (iii) mortgagee title insurance policies (or
marked commitments to issue the same) issued by a title insurance company
satisfactory to Foothill (each a "Mortgage Policy" and collectively, the
"Mortgage Policies") in amounts satisfactory to Foothill assuring Foothill that
the Mortgages on such Real Property Collateral are valid and enforceable first
priority mortgage Liens on such Real Property Collateral free and clear of all
defects and encumbrances except Permitted Liens, and the Mortgage Policies shall
otherwise be in form and substance reasonably satisfactory to Foothill;
(o) Foothill shall have received a phase-I environmental report and a
real estate survey shall have been completed with respect to the Real Property
Collateral and copies thereof delivered to Foothill; the environmental
consultants and surveyors retained for such reports or surveys, the scope of the
reports or surveys, and the results thereof shall be acceptable to Foothill in
its sole discretion.
(p) Foothill shall have reviewed the Companies' proposed payment
schedule to General Motors Company with respect to $3,000,000 past due amount
and shall be satisfied with the results thereof;
(q) Foothill shall have entered into a Subordination Agreement with
Existing Lender on terms and conditions satisfactory to Foothill;
(r) Foothill shall have received background searches of the officers of
the Companies and be satisfied with the results thereof;
(s) Foothill shall have received satisfactory evidence that all tax
returns required to be filed by each Borrower have been timely filed and all
taxes upon each Borrower or its properties, assets, income, and franchises
(including real property taxes and payroll taxes) have been paid prior to
delinquency, except such taxes that are the subject of a Permitted Protest;
(t) Foothill shall have received the Companies' business plan,
availability projections and cash flow projections for the fiscal year ending on
the Sunday closest to September 30, 1999 and such business plan and cash flow
projections shall be satisfactory to Foothill;
(u) Borrowers shall have Excess Availability of at least $75,000 after
giving effect to the funding of the initial Loans and Letters of Credit; and
(v) all other documents and legal matters in connection with the
transactions contemplated by this Agreement shall have been delivered, executed,
or recorded and shall be in form and substance satisfactory to Foothill and its
counsel.
3.2. Conditions Precedent to all Advances, all Letters of Credit and
the Term Loan.
The following shall be conditions precedent to all Advances, all
Letters of Credit and the Term Loan hereunder:
(a) the representations and warranties contained in this Agreement and
the other Loan Documents shall be true and correct in all respects on and as of
the date of such extension of credit, as though made on and as of such date
(except to the extent that such representations and warranties relate solely to
an earlier date);
(b) no Default or Event of Default shall have occurred and be
continuing on the date of such extension of credit, nor shall either result from
the making thereof; and (c) no injunction, writ, restraining order, or other
order of any nature prohibiting, directly or indirectly, the extending of such
credit shall have been issued and remain in force by any governmental authority
against any Company, Foothill, or any of their Affiliates.
3.3. Condition Subsequent.
As a condition subsequent to initial closing hereunder, Borrowers shall
perform or cause to be performed the following (the failure by Borrowers to so
perform or cause to be performed constituting an Event of Default) within:
(a) 30 days of the Closing Date, deliver to Foothill the certified
copies of the policies of insurance, together with the endorsements thereto, as
are required by Section 6.10, the form and substance of which shall be
satisfactory to Foothill and its counsel; and
(b) 10 days of the Closing Date, deliver to Foothill availability
projections for the fiscal year ending on the Sunday closest to September 30,
1999.
3.4. Term; Automatic Renewal.
This Agreement shall become effective upon the execution and delivery
hereof by Borrowers and Foothill and shall continue in full force and effect for
a term ending on the date (the "Renewal Date") that is three years from the
Closing Date and automatically shall be renewed for successive one year periods
thereafter, unless sooner terminated pursuant to the terms hereof. Either
Borrowers or Foothill may terminate this Agreement effective on the Renewal Date
or on any one year anniversary of the Renewal Date by giving the other parties
at least 90 days prior written notice; provided, that Borrowers may not
terminate this Agreement unless contemporaneously therewith the Tecstar Loan
Agreement is terminated. The foregoing notwithstanding, Foothill shall have the
right to terminate its obligations under this Agreement immediately and without
notice upon the occurrence and during the continuation of an Event of Default.
3.5. Effect of Termination.
On the date of termination of this Agreement, all Obligations
(including contingent reimbursement obligations of Borrowers with respect to any
outstanding Letters of Credit) immediately shall become due and payable without
notice or demand. No termination of this Agreement, however, shall relieve or
discharge Borrowers of their duties, Obligations, or covenants hereunder, and
Foothill's continuing security interests in the Collateral shall remain in
effect until all Obligations have been fully and finally discharged and
Foothill's obligation to provide additional credit hereunder is terminated. If
any Borrower has sent a notice of termination pursuant to the provisions of
Section 3.4, but Borrowers fail to pay the Obligations in full on the date set
forth in said notice, then Foothill may, but shall not be required to, renew
this Agreement for an additional term of one year.
3.6. Early Termination by Borrowers.
The provisions of Section 3.4 that allow termination of this Agreement
by Borrowers only on the Renewal Date and certain anniversaries thereof
notwithstanding, Borrowers have the option, at any time upon 90 days prior
written notice to Foothill, to terminate this Agreement by paying to Foothill,
in cash, the Obligations (including an amount equal to 102% of the undrawn
amount of the Letters of Credit), in full, together with a premium (the "Early
Termination Premium") equal to (a) 2% of the Maximum Amount if such termination
occurs on or before the first anniversary of the date hereof, and (b) 1% of the
Maximum Amount if such termination occurs after the first anniversary of the
date hereof but on or before the third anniversary of the date hereof or 1%
after the third anniversary of the date hereof but before the end of any renewal
term.
3.7. Termination Upon Event of Default.
If Foothill terminates this Agreement upon the occurrence of an Event
of Default, in view of the impracticability and extreme difficulty of
ascertaining actual damages and by mutual agreement of the parties as to a
reasonable calculation of Foothill's lost profits as a result thereof, Borrowers
shall pay to Foothill upon the effective date of such termination, a premium in
an amount equal to the Early Termination Premium. The Early Termination Premium
shall be presumed to be the amount of damages sustained by Foothill as the
result of the early termination and Borrowers agree that it is reasonable under
the circumstances currently existing. The Early Termination Premium provided for
in this Section 3.7 shall be deemed included in the Obligations.
4. CREATION OF SECURITY INTEREST.
4.1. Grant of Security Interest.
Each Company hereby grants to Foothill a continuing security interest
in all currently existing and hereafter acquired or arising Personal Property
Collateral of such Company in order to secure prompt repayment of any and all
Obligations and in order to secure prompt performance by each Company of each of
its covenants and duties under the Loan Documents. Foothill's security interests
in the Personal Property Collateral shall attach to all Personal Property
Collateral without further act on the part of Foothill or any Company. Anything
contained in this Agreement or any other Loan Document to the contrary
notwithstanding, except for the sale of Inventory to buyers in the ordinary
course of business and as permitted under Section 7.4, no Company has any
authority, express or implied, to dispose of any item or portion of the
Collateral.
4.2. Negotiable Collateral.
In the event that any Collateral, including proceeds, is evidenced by
or consists of Negotiable Collateral, Companies, immediately upon the request of
Foothill, shall endorse and deliver physical possession of such Negotiable
Collateral to Foothill.
4.3. Collection of Accounts, General Intangibles, and Negotiable
Collateral.
At any time, Foothill or Foothill's designee may (a) notify customers
or Account Debtors of a Company that the Accounts, General Intangibles, or
Negotiable Collateral have been assigned to Foothill or that Foothill has a
security interest therein, and (b) collect the Accounts, General Intangibles,
and Negotiable Collateral directly and charge the collection costs and expenses
to the Loan Account. Each Company agrees that it will hold in trust for
Foothill, as Foothill's trustee, any Collections that it receives and
immediately will deliver said Collections to the Lockbox or to Foothill in their
original form as received by such Company.
4.4. Delivery of Additional Documentation Required.
At any time upon the request of Foothill, each Company shall execute
and deliver to Foothill all financing statements, continuation financing
statements, fixture filings, security agreements, pledges, assignments,
endorsements of certificates of title, applications for title, affidavits,
reports, notices, schedules of accounts, letters of authority, and all other
documents that Foothill reasonably may request, in form satisfactory to
Foothill, to perfect and continue perfected Foothill's security interests in the
Collateral, and in order to fully consummate all of the transactions
contemplated hereby and under the other the Loan Documents.
4.5. Power of Attorney.
Each Company hereby irrevocably makes, constitutes, and appoints
Foothill (and any of Foothill's officers, employees, or agents designated by
Foothill) as such Company's true and lawful attorney, with power to (a) if any
Company refuses to, or fails timely to execute and deliver any of the documents
described in Section 4.4, sign the name of such Company on any of the documents
described in Section 4.4, (b) at any time that an Event of Default has occurred
and is continuing or Foothill deems itself insecure, sign such Company's name on
any invoice or ▇▇▇▇ of lading relating to any Account, drafts against Account
Debtors, schedules and assignments of Accounts, verifications of Accounts, and
notices to Account Debtors, (c) send requests for verification of Accounts, (d)
endorse such Company's name on any Collection item that may come into Foothill's
possession, (e) at any time that an Event of Default has occurred and is
continuing or Foothill deems itself insecure, notify the post office authorities
to change the address for delivery of such Company's mail to an address
designated by Foothill, to receive and open all mail addressed to such Company,
and to retain all mail relating to the Collateral and forward all other mail to
such Company, (f) at any time that an Event of Default has occurred and is
continuing or Foothill deems itself insecure, make, settle, and adjust all
claims under such Company's policies of insurance and make all determinations
and decisions with respect to such policies of insurance, and (g) at any time
that an Event of Default has occurred and is continuing or Foothill deems itself
insecure, settle and adjust disputes and claims respecting the Accounts directly
with Account Debtors, for amounts and upon terms that Foothill determines to be
reasonable, and Foothill may cause to be executed and delivered any documents
and releases that Foothill determines to be necessary. The appointment of
Foothill as each Company's attorney, and each and every one of Foothill's rights
and powers, being coupled with an interest, is irrevocable until all of the
Obligations have been fully and finally repaid and performed and Foothill's
obligation to extend credit hereunder is terminated.
4.6. Right to Inspect.
Foothill (through any of its officers, employees, or agents) shall have
the right, from time to time hereafter to inspect each Company's Books and to
check, test, and appraise the Collateral in order to verify each Company's
financial condition or the amount, quality, value, condition of, or any other
matter relating to, the Collateral. Foothill shall have the right, at Borrowers'
expense, to obtain desk top appraisals of the Inventory on a semi-annual basis
and full count appraisals of the Inventory on an annual basis, in each case,
such appraisals to be in form, scope and methodology acceptable to Foothill and
performed by an appraiser acceptable to Foothill.
5. REPRESENTATIONS AND WARRANTIES.
In order to induce Foothill to enter into this Agreement, each Company
makes the following representations and warranties which shall be true, correct,
and complete in all respects as of the date hereof, and shall be true, correct,
and complete in all respects as of the Closing Date, and at and as of the date
of the making of each Advance, Letter of Credit or Term Loan made thereafter, as
though made on and as of the date of such Advance, Letter of Credit or Term Loan
(except to the extent that such representations and warranties relate solely to
an earlier date) and such representations and warranties shall survive the
execution and delivery of this Agreement:
5.1. No Encumbrances.
Each Company has good and indefeasible title to its respective
Collateral, free and clear of Liens except for Permitted Liens.
5.2. Eligible Accounts.
The Eligible Accounts of each Borrower are bona fide existing
obligations created by the sale and delivery of Inventory or the rendition of
services to Account Debtors in the ordinary course of such Borrower's business,
unconditionally owed to such Borrower without defenses, disputes, offsets,
counterclaims, or rights of return or cancellation. The property giving rise to
such Eligible Accounts has been delivered to the Account Debtor, or to the
Account Debtor's agent for immediate shipment to and unconditional acceptance by
the Account Debtor. No Borrower has received notice of actual or imminent
bankruptcy, insolvency, or material impairment of the financial condition of any
Account Debtor regarding any Eligible Account.
5.3. Eligible Inventory.
All Eligible Inventory is of good and merchantable quality, free from
defects.
5.4. Equipment.
All of the Equipment of each Company is used or held for use in such
Company's respective business and is fit for such purposes.
5.5. Location of Inventory and Equipment.
The Inventory and Equipment are not stored with a bailee, warehouseman,
or similar party (without Foothill's prior written consent) and are located only
at the locations identified on Schedule 6.12 or otherwise permitted by Section
6.12.
5.6. Inventory Records.
Each Company keeps correct and accurate records itemizing and
describing the kind, type, quality, and quantity of the Inventory, and such
Company's cost therefor.
5.7. Location of Chief Executive Office; FEIN.
The address of each Company 's chief executive office and FEIN is as
set forth on Schedule 5.7.
5.8. Due Organization and Qualification; Subsidiaries.
(a) Each Company is duly organized and existing and in good standing
under the laws of the jurisdiction of its incorporation and qualified and
licensed to do business in, and in good standing in, any state where the failure
to be so licensed or qualified reasonably could be expected to have a Material
Adverse Change.
(b) Set forth on Schedule 5.8, is a complete and accurate list of each
Company's direct and indirect Subsidiaries, showing: (i) the jurisdiction of
their incorporation; (ii) the number of shares of each class of common and
preferred stock authorized for each of such Subsidiaries; and (iii) the number
and the percentage of the outstanding shares of each such class owned directly
or indirectly by such Company. All of the outstanding capital stock of each such
Subsidiary has been validly issued and is fully paid and non-assessable.
(c) Except as set forth on Schedule 5.8, no capital stock (or any
securities, instruments, warrants, options, purchase rights, conversion or
exchange rights, calls, commitments or claims of any character convertible into
or exercisable for capital stock) of any direct or indirect Subsidiary of any
Company is subject to the issuance of any security, instrument, warrant, option,
purchase right, conversion or exchange right, call, commitment or claim of any
right, title, or interest therein or thereto.
5.9. Due Authorization; No Conflict.
(a) The execution, delivery, and performance by each Company of this
Agreement and the Loan Documents to which it is a party have been duly
authorized by all necessary corporate action.
(b) The execution, delivery, and performance by each Company of this
Agreement and the Loan Documents to which it is a party do not and will not (i)
violate any provision of federal, state, or local law or regulation (including
Regulations G, T, U, and X of the Federal Reserve Board) applicable to such
Company, the Governing Documents of such Company, or any order, judgment, or
decree of any court or other Governmental Authority binding on such Company,
(ii) conflict with, result in a breach of, or constitute (with due notice or
lapse of time or both) a default under any material contractual obligation or
material lease of such Company, (iii) result in or require the creation or
imposition of any Lien of any nature whatsoever upon any properties or assets of
such Company, other than Permitted Liens, or (iv) require any approval of
stockholders or any approval or consent of any Person under any material
contractual obligation of such Company.
(c) Other than the filing of appropriate financing statements, fixture
filings, and mortgages, the execution, delivery, and performance by each Company
of this Agreement and the Loan Documents to which such Company is a party do not
and will not require any registration with, consent, or approval of, or notice
to, or other action with or by, any federal, state, foreign, or other
Governmental Authority or other Person.
(d) This Agreement and the Loan Documents to which each Company is a
party, and all other documents contemplated hereby and thereby, when executed
and delivered by such Company will be the legally valid and binding obligations
of such Company, enforceable against such Company in accordance with their
respective terms, except as enforcement may be limited by equitable principles
or by bankruptcy, insolvency, reorganization, moratorium, or similar laws
relating to or limiting creditors' rights generally.
(e) The Liens granted by each Company to Foothill in and to its
properties and assets pursuant to this Agreement and the other Loan Documents
are validly created, perfected, and first priority Liens, subject only to
Permitted Liens.
5.10. Litigation.
There are no actions or proceedings pending by or against any Company
before any court or administrative agency and none of the Companies has
knowledge or belief of any pending, threatened, or imminent litigation,
governmental investigations, or claims, complaints, actions, or prosecutions
involving any Company or any guarantor of the Obligations, except for: (a)
ongoing collection matters in which any Company is the plaintiff; (b) matters
disclosed on Schedule 5.10; and (c) matters arising after the date hereof that,
if decided adversely to any Company, would not have a Material Adverse Change.
5.11. No Material Adverse Change.
All financial statements relating to each Company or any guarantor of
the Obligations that have been delivered by such Company to Foothill have been
prepared in accordance with GAAP (except, in the case of unaudited financial
statements, for the lack of footnotes and being subject to year-end audit
adjustments) and fairly present such Company's (or such guarantor's, as
applicable) financial condition as of the date thereof and such Company's
results of operations for the period then ended. There has not been a Material
Adverse Change with respect to any Company (or such guarantor, as applicable)
since the date of the latest financial statements submitted to Foothill on or
before the Closing Date.
5.12. Solvency.
Each Company (other than IAG) is Solvent. No transfer of property is
being made by any Company and no obligation is being incurred by any Company in
connection with the transactions contemplated by this Agreement or the other
Loan Documents with the intent to hinder, delay, or defraud either present or
future creditors of any Company.
5.13. Employee Benefits.
No Company, any of its Subsidiaries, or any of their ERISA Affiliates
maintains or contributes to any Benefit Plan, other than those listed on
Schedule 5.13. Each Company, each of its Subsidiaries and each ERISA Affiliate
have satisfied the minimum funding standards of ERISA and the IRC with respect
to each Benefit Plan to which it is obligated to contribute. No ERISA Event has
occurred nor has any other event occurred that may result in an ERISA Event that
reasonably could be expected to result in a Material Adverse Change. No Company
or its Subsidiaries, any ERISA Affiliate, or any fiduciary of any Plan is
subject to any direct or indirect liability with respect to any Plan under any
applicable law, treaty, rule, regulation, or agreement. No Company or its
Subsidiaries or any ERISA Affiliate is required to provide security to any Plan
under Section 401(a)(29) of the IRC.
5.14. Environmental Condition.
No Company's properties or assets has ever been used by such Company
or, to the best of such Company's knowledge, by previous owners or operators in
the disposal of, or to produce, store, handle, treat, release, or transport, any
Hazardous Materials, except in compliance with applicable laws or as described
on Schedule 5.14. No Company's properties or assets has ever been designated or
identified in any manner pursuant to any environmental protection statute as a
Hazardous Materials disposal site, or a candidate for closure pursuant to any
environmental protection statute. No Lien arising under any environmental
protection statute has attached to any revenues or to any real or personal
property owned or operated by any Company. Except as described on Schedule 5.14,
no Company has received a summons, citation, notice, or directive from the
Environmental Protection Agency or any other federal or state governmental
agency concerning any action or omission by any Company resulting in the
releasing or disposing of Hazardous Materials into the environment.
5.15. Year 2000 Compliance.
Companies have begun to undertake a comprehensive review and assessment
of their computer applications and have begun to make inquiry of their material
suppliers, vendors and customers. Based on the foregoing, Companies reasonably
believe that what is commonly referred to as the "Year 2000 problem" (that is,
the risk that computer applications used by any Person may be unable to
recognize and perform properly date-sensitive functions involving certain dates
prior to and any date after December 31, 1999) will not result in a Material
Adverse Change on the operations, business, properties, or conditions (financial
or otherwise) of Companies. Companies are taking all necessary and appropriate
steps to ascertain the extent of, quantify and successfully address the business
and financial risks facing Companies as a result of the Year 2000 problem,
including ascertaining risks resulting from the failure of key customers and
suppliers of Companies to address successfully the Year 2000 problems, and
Companies' material computer applications will, on or before March 31, 1999,
adequately address the Year 2000 problem in all material respects.
5.16. Consigned Chassis.
No Company's Inventory includes any chassis consigned to such Company.
5.17. Starcraft Southwest, Inc.
Starcraft Southwest, Inc. is a wholly-owned subsidiary of SC. It has no
assets and conducts no business operations.
6. AFFIRMATIVE COVENANTS.
Each Company covenants and agrees that, so long as any credit hereunder
shall be available and until full and final payment of the Obligations, and
unless Foothill shall otherwise consent in writing, each Company shall do all of
the following:
6.1. Accounting System.
Maintain a standard and modern system of accounting that enables each
Company to produce financial statements in accordance with GAAP, and maintain
records pertaining to the Collateral that contain information as from time to
time may be requested by Foothill. Each Company also shall keep a modern
inventory reporting system that shows all additions, sales, claims, returns, and
allowances with respect to the Inventory.
6.2. Collateral Reporting.
Provide Foothill with the following documents at the following times in
form satisfactory to Foothill: (a) on a weekly basis, a sales journal,
collection journal, and credit register since the last such schedule and a
calculation of the Borrowing Base as of such date, (b) on a monthly basis and,
in any event, by no later than the 10th day of each fiscal month during the term
of this Agreement, (i) a detailed calculation of the Borrowing Base, and (ii) a
detailed aging by due date, by total, of the Accounts of each Borrower, together
with a reconciliation to the detailed calculation of the Borrowing Base
previously provided to Foothill, (c) on a monthly basis and, in any event, by no
later than the 10th day of each fiscal month during the term of this Agreement,
a summary aging, by vendor, of each Borrower's accounts payable and any book
overdraft, (d) on a weekly basis, Inventory reports specifying each Borrower's
cost and the wholesale market value of its Inventory by category, with
additional detail showing additions to and deletions from the Inventory
(provided, that the Inventory report with respect to raw materials shall be
delivered on a monthly basis), (e) on a weekly basis a report identifying those
Accounts which have been invoiced to the customer thereof but with respect to
which the Inventory has not yet been shipped, (f) on each Business Day if
requested by Foothill, notice of all returns, disputes or claims (other than
claims described in the warranty claims report delivered to Foothill pursuant to
clause (h) below), (g) upon request, copies of invoices in connection with the
Accounts, customer statements, credit memos, remittance advices and reports,
deposit slips, shipping and delivery documents in connection with the Accounts
and for Inventory and Equipment acquired by each Borrower, purchase orders and
invoices, (h) on a quarterly basis, a detailed list of each Borrower's customers
and a warranty claims report in form and substance satisfactory to Foothill, (i)
on a monthly basis, a calculation of the Dilution for the prior fiscal month;
and (j) such other reports as to the Collateral or the financial condition of
each Borrower as Foothill may request from time to time. Original sales invoices
evidencing daily sales shall be mailed by each Borrower to each Account Debtor
and, at Foothill's direction, the invoices shall indicate on their face that the
Account has been assigned to Foothill and that all payments are to be made
directly to Foothill. In addition to the foregoing, Borrowers shall promptly
provide to Foothill any report that Borrowers deliver to General Motors
Corporation.
6.3. Financial Statements, Reports, Certificates.
Deliver to Foothill: (a) as soon as available, but in any event within
30 days after the end of each fiscal month during each of SC's fiscal years, a
company prepared balance sheet, income statement, and statement of cash flow
covering the Companies' consolidated operations during such period; (b) as soon
as available, but in any event within 90 days after the end of each of each SC's
fiscal years, consolidated financial statements of Companies for each such
fiscal year, audited by independent certified public accountants reasonably
acceptable to Foothill and certified, without any qualifications, by such
accountants to have been prepared in accordance with GAAP, together with a
certificate of such accountants addressed to Foothill stating that such
accountants do not have knowledge of the existence of any Default or Event of
Default; and (c) at the end of a fiscal year a monthly budget for the following
fiscal year, on a Company by Company basis. Such audited financial statements
shall include a balance sheet, profit and loss statement, and statement of cash
flow and, if prepared, such accountants' letter to management. The financial
statements referred to above shall be prepared on a consolidated basis for SC
and its Subsidiaries.
Together with the above, SC also shall deliver to Foothill SC's Form
10-Q Quarterly Reports, Form 10-K Annual Reports and Form 8-K Current Reports,
and any other filings made by SC with the Securities and Exchange Commission, if
any, as soon as the same are filed, or any other information that is provided by
SC to its shareholders, and any other report reasonably requested by Foothill
relating to the financial condition of SC and its Subsidiaries. In addition, so
long as ▇▇▇▇▇▇▇▇ & Associates is engaged by the Companies, SC shall cause
▇▇▇▇▇▇▇▇ & Associates to deliver to Foothill a monthly status report.
Each fiscal month, together with the financial statements provided
pursuant to Section 6.3(a), SC shall deliver to Foothill a certificate signed by
its chief financial officer to the effect that: (i) all financial statements
delivered or caused to be delivered to Foothill hereunder have been prepared in
accordance with GAAP (except, in the case of unaudited financial statements, for
the lack of footnotes and being subject to year-end audit adjustments) and
fairly present the financial condition of each Company, (ii) the representations
and warranties of each Company contained in this Agreement and the other Loan
Documents are true and correct in all material respects on and as of the date of
such certificate, as though made on and as of such date (except to the extent
that such representations and warranties relate solely to an earlier date),
(iii) for each fiscal month that also is the date on which a financial covenant
in Sections 7.20 and 7.21 is to be tested, a Compliance Certificate
demonstrating in reasonable detail compliance at the end of such period with the
applicable financial covenants contained in Sections 7.20 and 7.21, and (iv) on
the date of delivery of such certificate to Foothill there does not exist any
condition or event that constitutes a Default or Event of Default (or, in the
case of clauses (i), (ii), or (iii), to the extent of any non-compliance,
describing such non-compliance as to which he or she may have knowledge and what
action Companies have taken, are taking, or propose to take with respect
thereto).
Each Company shall have issued written instructions to its independent
certified public accountants authorizing them to communicate with Foothill and
to release to Foothill whatever financial information concerning such Company
that Foothill may request. Such Company hereby irrevocably authorizes and
directs all auditors, accountants, or other third parties to deliver to
Foothill, at such Company's expense, copies of such Company's financial
statements, papers related thereto, and other accounting records of any nature
in their possession, and to disclose to Foothill any information they may have
regarding such Company's business affairs and financial conditions.
6.4. Tax Returns.
Deliver to Foothill copies of each of each Company's future federal
income tax returns, and any amendments thereto, within 30 days of the filing
thereof with the Internal Revenue Service.
6.5. Guarantor Reports.
Cause any guarantor of any of the Obligations (other than IAG) to
deliver its annual financial statements at the time when each Company provides
its audited financial statements to Foothill and copies of all federal income
tax returns as soon as the same are available and in any event no later than 30
days after the same are required to be filed by law.
6.6. Returns.
Cause returns and allowances, if any, as between each Borrower and its
Account Debtors to be on the same basis and in accordance with the usual
customary practices of such Borrower, as they exist at the time of the execution
and delivery of this Agreement. If, at a time when no Event of Default has
occurred and is continuing, any Account Debtor returns any Inventory to a
Borrower, such Borrower promptly shall determine the reason for such return and,
if such Borrower accepts such return, issue a credit memorandum (with a copy to
be sent to Foothill) in the appropriate amount to such Account Debtor. If, at a
time when an Event of Default has occurred and is continuing, any Account Debtor
returns any Inventory to such Borrower, such Borrower promptly shall determine
the reason for such return and, if Foothill consents (which consent shall not be
unreasonably withheld), issue a credit memorandum (with a copy to be sent to
Foothill) in the appropriate amount to such Account Debtor.
6.7. Title to Equipment.
Upon Foothill's request, each Company immediately shall deliver to
Foothill, properly endorsed, any and all evidences of ownership of, certificates
of title, or applications for title to any items of Equipment.
6.8. Maintenance of Equipment.
Maintain the Equipment in good operating condition and repair (ordinary
wear and tear excepted), and make all necessary replacements thereto so that the
value and operating efficiency thereof shall at all times be maintained and
preserved. Other than those items of Equipment that constitute fixtures on the
Closing Date, no Company shall permit any item of Equipment to become a fixture
to real estate or an accession to other property, and such Equipment shall at
all times remain personal property.
6.9. Taxes.
Cause all assessments and taxes, whether real, personal, or otherwise,
due or payable by, or imposed, levied, or assessed against any Company or any of
its property to be paid in full, before delinquency or before the expiration of
any extension period, except to the extent that the validity of such assessment
or tax shall be the subject of a Permitted Protest. To the extent that a Company
fails timely to make payment of such taxes or assessments, Foothill shall be
entitled, in its discretion, to reserve an amount equal to such unpaid amounts
against the Borrowing Base. Each Company shall make due and timely payment or
deposit of all such federal, state, and local taxes, assessments, or
contributions required of it by law, and will execute and deliver to Foothill,
on demand, appropriate certificates attesting to the payment thereof or deposit
with respect thereto. Each Company will make timely payment or deposit of all
tax payments and withholding taxes required of it by applicable laws, including
those laws concerning F.I.C.A., F.U.T.A., state disability, and local, state,
and federal income taxes, and will, upon request, furnish Foothill with proof
satisfactory to Foothill indicating that such Company has made such payments or
deposits.
6.10. Insurance.
(a) At its expense, keep the Personal Property Collateral insured
against loss or damage by fire, theft, explosion, sprinklers, and all other
hazards and risks, and in such amounts, as are ordinarily insured against by
other owners in similar businesses. Each Company also shall maintain business
interruption, public liability, product liability, and property damage insurance
relating to Company's ownership and use of the Personal Property Collateral, as
well as insurance against larceny, embezzlement, and criminal misappropriation.
(b) At its expense, obtain and maintain (i) insurance of the type
necessary to insure the improvements and fixtures on the Real Property, for the
full replacement cost thereof, against any loss by fire, lightning, windstorm,
hail, explosion, aircraft, smoke damage, vehicle damage, earthquakes, elevator
collision, and other risks from time to time included under "extended coverage"
policies, in such amounts as Foothill may require, but in any event in amounts
sufficient to prevent any Company from becoming a co-insurer under such
policies, (ii) combined single limit bodily injury and property damages
insurance against any loss, liability, or damages on, about, or relating to each
parcel of Real Property Collateral, in an amount of not less than $2,000,000;
(iii) business rental insurance covering annual receipts for a 12 month period
for each parcel of Real Property Collateral; and (iv) insurance for such other
risks as Foothill may require. Replacement costs, at Foothill's option, may be
redetermined by an insurance appraiser, satisfactory to Foothill, not more
frequently than once every 12 months at Borrowers' cost.
(c) All such policies of insurance shall be in such form, with such
companies, and in such amounts as may be reasonably satisfactory to Foothill.
All hazard insurance and such other insurance as Foothill shall specify, shall
contain a Form 438BFU (NS) mortgagee endorsement, or an equivalent endorsement
satisfactory to Foothill, showing Foothill as sole loss payee thereof, and shall
contain a waiver of warranties. Every policy of insurance referred to in this
Section 6.10 shall contain an agreement by the insurer that it will not cancel
such policy except after 30 days prior written notice to Foothill and that any
loss payable thereunder shall be payable notwithstanding any act or negligence
of Companies or Foothill which might, absent such agreement, result in a
forfeiture of all or a part of such insurance payment and notwithstanding (i)
occupancy or use of the Real Property Collateral for purposes more hazardous
than permitted by the terms of such policy, (ii) any foreclosure or other action
or proceeding taken by Foothill pursuant to the Mortgages upon the happening of
an Event of Default, or (iii) any change in title or ownership of the Real
Property Collateral. Companies shall deliver to Foothill certified copies of
such policies of insurance and evidence of the payment of all then due premiums
therefor. (d) Original policies or certificates thereof satisfactory to Foothill
evidencing such insurance shall be delivered to Foothill at least 30 days prior
to the expiration of the existing or preceding policies. Companies shall give
Foothill prompt notice of any loss covered by such insurance, and Foothill shall
have the right to adjust any loss. Foothill shall have the exclusive right to
adjust all losses payable under any such insurance policies without any
liability to Companies whatsoever in respect of such adjustments. Any monies
received as payment for any loss under any insurance policy including the
insurance policies mentioned above, shall be paid over to Foothill to be applied
at the option of Foothill either to the prepayment of the Obligations without
premium, in such order or manner as Foothill may elect, or shall be disbursed to
Companies under stage payment terms satisfactory to Foothill for application to
the cost of repairs, replacements, or restorations; provided, that so long as no
Event of Default exists the proceeds of a casualty involving less than $50,000
shall be remitted to Companies. All repairs, replacements, or restorations shall
be effected with reasonable promptness and shall be of a value at least equal to
the value of the items or property destroyed prior to such damage or
destruction. Upon the occurrence of an Event of Default, Foothill shall have the
right to apply all prepaid premiums to the payment of the Obligations in such
order or form as Foothill shall determine. (e) No Company shall take out
separate insurance concurrent in form or contributing in the event of loss with
that required to be maintained under this Section 6.10, unless Foothill is
included thereon as named insured with the loss payable to Foothill under a
standard 438BFU (NS) Mortgagee endorsement, or its local equivalent. Companies
immediately shall notify Foothill whenever such separate insurance is taken out,
specifying the insurer thereunder and full particulars as to the policies
evidencing the same, and originals of such policies immediately shall be
provided to Foothill.
6.11. No Setoffs or Counterclaims.
Make payments hereunder and under the other Loan Documents by or on
behalf of each Company without setoff or counterclaim and free and clear of, and
without deduction or withholding for or on account of, any federal, state, or
local taxes.
6.12. Location of Inventory and Equipment.
Keep the Inventory and Equipment only at the locations identified on
Schedule 6.12; provided, however, that Companies may amend Schedule 6.12 to add
a new location so long as such amendment occurs by written notice to Foothill
not less than 30 days prior to the date on which the Inventory or Equipment is
moved to such new location, so long as such new location is within the
continental United States, and so long as, at the time of such written
notification, Companies provide any financing statements or fixture filings
necessary to perfect and continue perfected Foothill's security interests in
such assets and also provide to Foothill a Collateral Access Agreement.
6.13. Compliance with Laws.
Comply with the requirements of all applicable laws, rules,
regulations, and orders of any governmental authority, including the Fair Labor
Standards Act and the Americans With Disabilities Act, other than laws, rules,
regulations, and orders the non-compliance with which, individually or in the
aggregate, would not have and could not reasonably be expected to have a
Material Adverse Change.
6.14. Employee Benefits.
(a) Promptly, and in any event within 10 Business Days after any
Company or any of its Subsidiaries knows or has reason to know that an ERISA
Event has occurred that reasonably could be expected to result in a Material
Adverse Change, deliver a written statement of the chief financial officer of
such Company describing such ERISA Event and any action that is being taken with
respect thereto by such Company, any such Subsidiary or ERISA Affiliate, and any
action taken or threatened by the IRS, Department of Labor, or PBGC. Such
Company or such Subsidiary, as applicable, shall be deemed to know all facts
known by the administrator of any Benefit Plan of which it is the plan sponsor,
shall promptly, and in any event within 3 Business Days after the filing thereof
with the IRS, deliver a copy of each funding waiver request filed with respect
to any Benefit Plan and all communications received by such Company, any of its
Subsidiaries or, to the knowledge of Companies, any ERISA Affiliate with respect
to such request, and shall promptly, and in any event within 3 Business Days
after receipt by such Company, any of its Subsidiaries or, to the knowledge of
Companies, any ERISA Affiliate, of the PBGC's intention to terminate a Benefit
Plan or to have a trustee appointed to administer a Benefit Plan, deliver copies
of each such notice.
(b) Cause to be delivered to Foothill, upon Foothill's request, each of
the following: (i) a copy of each Plan (or, where any such plan is not in
writing, complete description thereof) (and if applicable, related trust
agreements or other funding instruments) and all amendments thereto, all written
interpretations thereof and written descriptions thereof that have been
distributed to employees or former employees of any Company or its Subsidiaries;
(ii) the most recent determination letter issued by the IRS with respect to each
Benefit Plan; (iii) for the three most recent plan years, annual reports on Form
5500 Series required to be filed with any governmental agency for each Benefit
Plan; (iv) all actuarial reports prepared for the last three plan years for each
Benefit Plan; (v) a listing of all Multiemployer Plans, with the aggregate
amount of the most recent annual contributions required to be made by any
Company or any ERISA Affiliate to each such plan and copies of the collective
bargaining agreements requiring such contributions; (vi) any information that
has been provided to any Company or any ERISA Affiliate regarding withdrawal
liability under any Multiemployer Plan; and (vii) the aggregate amount of the
most recent annual payments made to former employees of any Company or its
Subsidiaries under any Retiree Health Plan.
6.15. Leases.
Pay when due all rents and other amounts payable under any leases to
which any Company is a party or by which any Company's properties and assets are
bound, unless such payments are the subject of a Permitted Protest. To the
extent that any Company fails timely to make payment of such rents and other
amounts payable when due under its leases, Foothill shall be entitled, in its
discretion, to reserve an amount equal to such unpaid amounts against the
Borrowing Base.
7. NEGATIVE COVENANTS.
Each Company covenants and agrees that, so long as any credit hereunder
shall be available and until full and final payment of the Obligations, no
Company will do any of the following without Foothill's prior written consent:
7.1. Indebtedness.
Create, incur, assume, permit, guarantee, or otherwise become or
remain, directly or indirectly, liable with respect to any Indebtedness, except:
(a) Indebtedness evidenced by this Agreement, together with
Indebtedness to issuers of letters of credit that are the subject of L/C
Guarantees;
(b) Indebtedness set forth on Schedule 7.1;
(c) Indebtedness secured by Permitted Liens; and
(d) refinancings, renewals, or extensions of Indebtedness permitted
under clauses (b) and (c) of this Section 7.1 (and continuance or renewal of any
Permitted Liens associated therewith) so long as: (i) the terms and conditions
of such refinancings, renewals, or extensions do not materially impair the
prospects of repayment of the Obligations by any Company, (ii) the net cash
proceeds of such refinancings, renewals, or extensions do not result in an
increase in the aggregate principal amount of the Indebtedness so refinanced,
renewed, or extended, (iii) such refinancings, renewals, refundings, or
extensions do not result in a shortening of the average weighted maturity of the
Indebtedness so refinanced, renewed, or extended, and (iv) to the extent that
Indebtedness that is refinanced was subordinated in right of payment to the
Obligations, then the subordination terms and conditions of the refinancing
Indebtedness must be at least as favorable to Foothill as those applicable to
the refinanced Indebtedness.
7.2. Liens.
Create, incur, assume, or permit to exist, directly or indirectly, any
Lien on or with respect to any of its property or assets, of any kind, whether
now owned or hereafter acquired, or any income or profits therefrom, except for
Permitted Liens (including Liens that are replacements of Permitted Liens to the
extent that the original Indebtedness is refinanced under Section 7.1(d) and so
long as the replacement Liens only encumber those assets or property that
secured the original Indebtedness).
7.3. Restrictions on Fundamental Changes.
Enter into any merger, consolidation, reorganization, or
recapitalization, or reclassify its capital stock, or liquidate, wind up, or
dissolve itself (or suffer any liquidation or dissolution), or convey, sell,
assign, lease, transfer, or otherwise dispose of, in one transaction or a series
of transactions, all or any substantial part of its property or assets.
7.4. Disposal of Assets.
Sell, lease, assign, transfer, or otherwise dispose of any of any
Company's properties or assets other than (i) sales of Inventory to buyers in
the ordinary course of such Company's business as currently conducted and (ii)
so long as no Event of Default exists or would be caused thereby, sales of
obsolete or unuseful Equipment in the aggregate amount not to exceed $50,000 in
any fiscal year.
7.5. Change Name.
Change any Company's name, FEIN, corporate structure (within the
meaning of Section 9402(7) of the Code), or identity, or add any new fictitious
name.
7.6. Guarantee.
Except as described on Schedule 7.6, guarantee or otherwise become in
any way liable with respect to the obligations of any third Person except by
endorsement of instruments or items of payment for deposit to the account of a
Borrower or which are transmitted or turned over to Foothill.
7.7. Nature of Business.
Make any change in the principal nature of any Company's business.
7.8. Prepayments and Amendments.
(a) Except in connection with a refinancing permitted by Section
7.1(d), prepay, redeem, retire, defease, purchase, or otherwise acquire any
Indebtedness owing to any third Person, other than the Obligations in accordance
with this Agreement, and
(b) Directly or indirectly, amend, modify, alter, increase, or change
any of the terms or conditions of any agreement, instrument, document,
indenture, or other writing evidencing or concerning Indebtedness permitted
under Sections 7.1(b), (c) or (d).
7.9. Change of Control.
Cause, permit, or suffer, directly or indirectly, any Change of
Control.
7.10. Consignments; New Chassis Supplier Agreements.
Consign any Inventory or sell any Inventory on ▇▇▇▇ and hold, sale or
return, sale on approval, or other conditional terms of sale; or commingle
consigned chassis and chassis owned by a Borrower; or enter into any arrangement
to acquire chassis on consignment unless the consignor thereof enters into an
intercreditor agreement with Foothill satisfactory to Foothill.
7.11. Distributions.
Make any distribution or declare or pay any dividends (in cash or other
property, other than capital stock) on, or purchase, acquire, redeem, or retire
any of any Company's capital stock, of any class, whether now or hereafter
outstanding.
7.12. Accounting Methods.
Modify or change its method of accounting or enter into, modify, or
terminate any agreement currently existing, or at any time hereafter entered
into with any third party accounting firm or service bureau for the preparation
or storage of any Company's accounting records without said accounting firm or
service bureau agreeing to provide Foothill information regarding the Collateral
or such Company's financial condition. Each Company waives the right to assert a
confidential relationship, if any, it may have with any accounting firm or
service bureau in connection with any information requested by Foothill pursuant
to or in accordance with this Agreement, and agrees that Foothill may contact
directly any such accounting firm or service bureau in order to obtain such
information.
7.13. Investments.
Directly or indirectly make, acquire, or incur any liabilities
(including contingent obligations) for or in connection with (a) the acquisition
of the securities (whether debt or equity) of, or other interests in, a Person,
(b) loans, advances, capital contributions, or transfers of property to a
Person, or (c) the acquisition of all or substantially all of the properties or
assets of a Person; provided, that so long as no Event of Default exists or
would be caused thereby, Companies may make loans to Tecstar, Inc. in an
aggregate principal amount outstanding not to exceed $2,000,000 at any time so
long as such loans are evidenced by one or more promissory notes assigned to
Foothill.
7.14. Transactions with Affiliates.
Except as described on Schedule 7.14, directly or indirectly enter into
or permit to exist any material transaction with any Affiliate of any Company
except for transactions that are in the ordinary course of such Company's
business, upon fair and reasonable terms, that are fully disclosed to Foothill,
and that are no less favorable to such Company than would be obtained in an
arm's length transaction with a non-Affiliate.
7.15. Suspension.
Suspend or go out of a substantial portion of its business.
7.16. Compensation.
Increase the annual fee or per-meeting fees paid to directors of
Companies during any fiscal year by more than 15% over the prior fiscal year;
pay or accrue total cash compensation, during any fiscal year, to officers and
senior management employees of Companies in an aggregate amount in excess of
115% of that paid or accrued in the prior fiscal year; provided, that the
foregoing shall not prohibit Companies from employing additional officers and
senior management at a compensation level comparable for that type of position
in the industry.
7.17. Use of Proceeds.
Use the proceeds of the Advances and the Term Loan made hereunder for
any purpose other than (i) on the Closing Date, (y) to repay in full the
outstanding principal, accrued interest, and accrued fees and expenses owing to
Existing Lenders, and (z) to pay transactional costs and expenses incurred in
connection with this Agreement, and (ii) thereafter, consistent with the terms
and conditions hereof, for its lawful and permitted corporate purposes.
7.18. Change in Location of Chief Executive Office; Inventory and
Equipment with Bailees.
Relocate its chief executive office to a new location without providing
30 days prior written notification thereof to Foothill and so long as, at the
time of such written notification, Borrowers provide any financing statements or
fixture filings necessary to perfect and continue perfected Foothill's security
interests and also provides to Foothill a Collateral Access Agreement with
respect to such new location. The Inventory and Equipment shall not at any time
now or hereafter be stored with a bailee, warehouseman, or similar party without
Foothill's prior written consent.
7.19. No Prohibited Transactions Under ERISA.
Directly or indirectly:
(a) engage, or permit any Subsidiary of any Company to engage, in any
prohibited transaction which is reasonably likely to result in a civil penalty
or excise tax described in Sections 406 of ERISA or 4975 of the IRC for which a
statutory or class exemption is not available or a private exemption has not
been previously obtained from the Department of Labor;
(b) permit to exist with respect to any Benefit Plan any accumulated
funding deficiency (as defined in Sections 302 of ERISA and 412 of the IRC),
whether or not waived;
(c) fail, or permit any Subsidiary of any Company to fail, to pay
timely required contributions or annual installments due with respect to any
waived funding deficiency to any Benefit Plan;
(d) terminate, or permit any Subsidiary of any Company to terminate,
any Benefit Plan where such event would result in any liability of such Company,
any of its Subsidiaries or any ERISA Affiliate under Title IV of ERISA;
(e) fail, or permit any Subsidiary of any Company to fail, to make any
required contribution or payment to any Multiemployer Plan;
(f) fail, or permit any Subsidiary of any Company to fail, to pay any
required installment or any other payment required under Section 412 of the IRC
on or before the due date for such installment or other payment;
(g) amend, or permit any Subsidiary of any Company to amend, a Plan
resulting in an increase in current liability for the plan year such that any
Company, any Subsidiary of any Company or any ERISA Affiliate is required to
provide security to such Plan under Section 401(a)(29) of the IRC; or
(h) withdraw, or permit any Subsidiary of any Company to withdraw, from
any Multiemployer Plan where such withdrawal is reasonably likely to result in
any liability of any such entity under Title IV of ERISA; which, individually or
in the aggregate, results in or reasonably would be expected to result in a
claim against or liability of any Company, any of its Subsidiaries or any ERISA
Affiliate in excess of $100,000.
7.20. Financial Covenants.
Fail to maintain:
(a) Tangible Net Worth. Tangible Net Worth of at least (i) negative
$3,200,000 as of the last day of the fiscal quarter ending on the Sunday closest
to December 31, 1998, (ii) negative $3,200,000 as of the last day of the fiscal
quarter ending on the Sunday closest to ▇▇▇▇▇ ▇▇, ▇▇▇▇, (▇▇▇) negative $350,000
as of the last day of the fiscal quarter ending on the Sunday closest to June
30, 1999, and (iv) $700,000 as of the last day of the fiscal quarter ending on
the Sunday closest to September 30, 1999. For each fiscal quarter ending after
the Sunday closest to September 30, 1999, Companies shall maintain Tangible Net
Worth at a level to be determined by Foothill, which level will be based on
Companies' projections (but in no event will Tangible Net Worth as of the last
day of any such fiscal quarter be less than $700,000);
(b) EBITDA. EBITDA of at least (i) negative $2,400,000 for the fiscal
quarter ending on the Sunday closest to December 31, 1998; (ii) $362,000 for the
fiscal quarter ending on the Sunday closest to March 31, 1999; (iii) $1,518,000
for the fiscal quarter ending on the Sunday closest to June 30, 1999; and (iv)
$410,000 for the fiscal quarter ending on the Sunday closest to September 30,
1999. For each fiscal quarter ending after the Sunday closest to September 30,
1999, Companies shall maintain EBITDA at a level to be determined by Foothill,
which level will be based on Companies' projections (but in no event shall
EBITDA for any fiscal quarter be less than the level of EBITDA required for the
corresponding fiscal quarter in the immediate preceding fiscal year). Companies
agree to deliver to Foothill projections for each fiscal year prior to the
beginning of such fiscal year and such projections shall be in form and
substance acceptable to Foothill.
7.21. Capital Expenditures.
Make capital expenditures in any fiscal year in excess of $500,000.
8. EVENTS OF DEFAULT.
Any one or more of the following events shall constitute an event of
default (each, an "Event of Default") under this Agreement:
8.1. If any Company fails to pay when due and payable or when declared
due and payable, any portion of the Obligations (whether of principal, interest
(including any interest which, but for the provisions of the Bankruptcy Code,
would have accrued on such amounts), fees and charges due Foothill,
reimbursement of Foothill Expenses, or other amounts constituting Obligations);
8.2. (a) If a Company fails or neglects to perform, keep or observe any
term, provision, condition, covenant or agreement contained in Sections 6.1
(Accounting System), 6.2 (Collateral Reporting), 6.3 (Financial Statements,
Reports, Certificates), 6.4 (Tax Returns), 6.7 (Title to Equipment), 6.8
(Maintenance of Equipment), 6.12 (Location of Inventory and Equipment), 6.13
(Compliance with Laws), 6.14 (Employee Benefits) or 6.15 (Leases) of this
Agreement and such failure continues for a period of 5 Business Days; or (b) if
a Company or any other Obligor fails or neglects to perform, keep, or observe
any other term, provision, condition, covenant or agreement contained in this
Agreement, or in any of the other Loan Documents; in each case, other than any
such term, provision, condition, covenant, or agreement that is the subject of
another provision of this Section 8, in which event such other provision of this
Section 8 shall govern; provided, that during any period of time that any such
failure or neglect of a Company or such other Obligor referred to in this
paragraph exists, even if such failure or neglect is not yet an Event of Default
by virtue of the existence of a grace or cure period or the pre-condition of the
giving of a notice, Foothill shall not be required during such period to make
Advances to Borrowers.
8.3. If there is a Material Adverse Change;
8.4. If any material portion of any Company's properties or assets is
attached, seized, subjected to a writ or distress warrant, or is levied upon, or
comes into the possession of any third Person;
8.5. If an Insolvency Proceeding is commenced by any Company;
8.6. If an Insolvency Proceeding is commenced against any Company and
any of the following events occur: (a) any Company consents to the institution
of the Insolvency Proceeding against it; (b) the petition commencing the
Insolvency Proceeding is not timely controverted; (c) the petition commencing
the Insolvency Proceeding is not dismissed within 60 calendar days of the date
of the filing thereof; provided, however, that, during the pendency of such
period, Foothill shall be relieved of its obligation to extend credit hereunder;
(d) an interim trustee is appointed to take possession of all or a substantial
portion of the properties or assets of, or to operate all or any substantial
portion of the business of, any Company; or (e) an order for relief shall have
been issued or entered therein;
8.7. If any Company is enjoined, restrained, or in any way prevented by
court order from continuing to conduct all or any material part of its business
affairs;
8.8. If a notice of Lien, levy, or assessment is filed of record with
respect to any of any Company's properties or assets by the United States
Government, or any department, agency, or instrumentality thereof, or by any
state, county, municipal, or governmental agency, or if any taxes or debts owing
at any time hereafter to any one or more of such entities becomes a Lien,
whether ▇▇▇▇▇▇ or otherwise, upon any of any Company's properties or assets and
the same is not paid on the payment date thereof;
8.9. If a judgment or other claim in excess of $50,000 becomes a Lien
or encumbrance upon any material portion of any Company's properties or assets;
8.10. If there is a default under any of the agreements between General
Motors Acceptance Corporation or any of its Affiliates, Ford Motor Credit
Company or any of its Affiliates or Chrysler Financial Company, L.L.C. or any of
its Affiliates, on the one hand, and any of the Companies, on the other hand; or
if there is a default under any Intercreditor Agreement; or if there is an
"Event of Default" as defined in the Tecstar Loan Agreement; or if there is a
default under any other material agreement to which any Company is a party with
one or more third Persons and such default (a) occurs at the final maturity of
the obligations thereunder, or (b) results in a right by such third Person(s),
irrespective of whether exercised, to accelerate the maturity of any Company's
obligations thereunder; or if any of the Intercreditor Agreements is terminated;
8.11. If any Company makes any payment on account of Indebtedness that
has been contractually subordinated in right of payment to the payment of the
Obligations, except to the extent such payment is permitted by the terms of the
subordination provisions applicable to such Indebtedness;
8.12. If any warranty, representation, statement, or report made to
Foothill by any Company or any officer, employee, agent, or director of any
Company, is untrue or misleading in any material respect when made, or if any
such warranty or representation is withdrawn; or
8.13. If the obligation of any guarantor under its guaranty or other
third Person under any Loan Document is limited or terminated by operation of
law or by the guarantor or other third Person thereunder, or any such guarantor
or other third Person becomes the subject of an Insolvency Proceeding.
9. FOOTHILL'S RIGHTS AND REMEDIES.
9.1. Rights and Remedies.
Upon the occurrence, and during the continuation, of an Event of
Default Foothill may, at its election, without notice of its election and
without demand, do any one or more of the following, all of which are authorized
by Companies:
(a) Declare all Obligations, whether evidenced by this Agreement, by
any of the other Loan Documents, or otherwise, immediately due and payable;
(b) Cease advancing money or extending credit to or for the benefit of
Companies under this Agreement, under any of the Loan Documents, or under any
other agreement between any Company and Foothill;
(c) Terminate this Agreement and any of the other Loan Documents as to
any future liability or obligation of Foothill, but without affecting Foothill's
rights and security interests in the Collateral and without affecting the
Obligations;
(d) Settle or adjust disputes and claims directly with Account Debtors
for amounts and upon terms which Foothill considers advisable, and in such
cases, Foothill will credit Borrowers' Loan Account with only the net amounts
received by Foothill in payment of such disputed Accounts after deducting all
Foothill Expenses incurred or expended in connection therewith;
(e) Cause each Company to hold all returned Inventory in trust for
Foothill, segregate all returned Inventory from all other property of such
Company or in such Company's possession and conspicuously label said returned
Inventory as the property of Foothill;
(f) Without notice to or demand upon any Company or any guarantor, make
such payments and do such acts as Foothill considers necessary or reasonable to
protect its security interests in the Collateral. Each Company agrees to
assemble the Personal Property Collateral if Foothill so requires, and to make
the Personal Property Collateral available to Foothill as Foothill may
designate. Each Company authorizes Foothill to enter the premises where the
Personal Property Collateral is located, to take and maintain possession of the
Personal Property Collateral, or any part of it, and to pay, purchase, contest,
or compromise any encumbrance, charge, or Lien that in Foothill's determination
appears to conflict with its security interests and to pay all expenses incurred
in connection therewith. With respect to any of each Company's owned or leased
premises, each Company hereby grants Foothill a license to enter into possession
of such premises and to occupy the same, without charge, in order to exercise
any of Foothill's rights or remedies provided herein, at law, in equity, or
otherwise;
(g) Without notice to any Company (such notice being expressly waived),
and without constituting a retention of any collateral in satisfaction of an
obligation (within the meaning of Section 9505 of the Code), set off and apply
to the Obligations any and all (i) balances and deposits of any Company held by
Foothill (including any amounts received in the Lockbox Accounts), or (ii)
indebtedness at any time owing to or for the credit or the account of Borrowers
held by Foothill;
(h) Hold, as cash collateral, any and all balances and deposits of any
Company held by Foothill, and any amounts received in the Lockbox Accounts, to
secure the full and final repayment of all of the Obligations;
(i) Ship, reclaim, recover, store, finish, maintain, repair, prepare
for sale, advertise for sale, and sell (in the manner provided for herein) the
Personal Property Collateral. Foothill is hereby granted a license or other
right to use, without charge, each Company's labels, patents, copyrights, rights
of use of any name, trade secrets, trade names, trademarks, service marks, and
advertising matter, or any property of a similar nature, as it pertains to the
Personal Property Collateral, in completing production of, advertising for sale,
and selling any Personal Property Collateral and any Company's rights under all
licenses and all franchise agreements shall inure to Foothill's benefit;
(j) Sell the Personal Property Collateral at either a public or private
sale, or both, by way of one or more contracts or transactions, for cash or on
terms, in such manner and at such places (including any Company's premises) as
Foothill determines is commercially reasonable. It is not necessary that the
Personal Property Collateral be present at any such sale;
(k) Foothill shall give notice of the disposition of the Personal
Property Collateral as follows:
(i) Foothill shall give Companies and each holder of a
security interest in the Personal Property Collateral who has filed
with Foothill a written request for notice, a notice in writing of the
time and place of public sale, or, if the sale is a private sale or
some other disposition other than a public sale is to be made of the
Personal Property Collateral, then the time on or after which the
private sale or other disposition is to be made;
(ii) The notice shall be personally delivered or mailed,
postage prepaid, to Companies as provided in Section 12, at least 10
days before the date fixed for the sale, or at least 10 days before the
date on or after which the private sale or other disposition is to be
made; no notice needs to be given prior to the disposition of any
portion of the Personal Property Collateral that is perishable or
threatens to decline speedily in value or that is of a type customarily
sold on a recognized market. Notice to Persons other than Companies
claiming an interest in the Personal Property Collateral shall be sent
to such addresses as they have furnished to Foothill; (iii) If the sale
is to be a public sale, Foothill also shall give notice of the time and
place by publishing a notice one time at least 10 days before the date
of the sale in a newspaper of general circulation in the county in
which the sale is to be held;
(l) Foothill may credit bid and purchase at any public sale; and
(m) Any deficiency that exists after disposition of the Personal
Property Collateral as provided above will be paid immediately by Companies. Any
excess will be returned, without interest and subject to the rights of third
Persons, by Foothill to Companies.
9.2. Remedies Cumulative.
Foothill's rights and remedies under this Agreement, the Loan
Documents, and all other agreements shall be cumulative. Foothill shall have all
other rights and remedies not inconsistent herewith as provided under the Code,
by law, or in equity. No exercise by Foothill of one right or remedy shall be
deemed an election, and no waiver by Foothill of any Event of Default shall be
deemed a continuing waiver. No delay by Foothill shall constitute a waiver,
election, or acquiescence by it.
10. TAXES AND EXPENSES.
If any Company fails to pay any monies (whether taxes, assessments,
insurance premiums, or, in the case of leased properties or assets, rents or
other amounts payable under such leases) due to third Persons, or fails to make
any deposits or furnish any required proof of payment or deposit, all as
required under the terms of this Agreement, then, to the extent that Foothill
determines that such failure by such Company could result in a Material Adverse
Change, in its discretion and without prior notice to any Company, Foothill may
do any or all of the following: (a) make payment of the same or any part
thereof; (b) set up such reserves in Borrowers' Loan Account as Foothill deems
necessary to protect Foothill from the exposure created by such failure; or (c)
obtain and maintain insurance policies of the type described in Section 6.10,
and take any action with respect to such policies as Foothill deems prudent. Any
such amounts paid by Foothill shall constitute Foothill Expenses. Any such
payments made by Foothill shall not constitute an agreement by Foothill to make
similar payments in the future or a waiver by Foothill of any Event of Default
under this Agreement. Foothill need not inquire as to, or contest the validity
of, any such expense, tax, or Lien and the receipt of the usual official notice
for the payment thereof shall be conclusive evidence that the same was validly
due and owing.
11. WAIVERS; INDEMNIFICATION.
11.1. Demand; Protest; etc.
Each Company waives demand, protest, notice of protest, notice of
default or dishonor, notice of payment and nonpayment, nonpayment at maturity,
release, compromise, settlement, extension, or renewal of accounts, documents,
instruments, chattel paper, and guarantees at any time held by Foothill on which
such Company may in any way be liable.
11.2. Foothill's Liability for Collateral.
So long as Foothill complies with its obligations, if any, under
Section 9207 of the Code, Foothill shall not in any way or manner be liable or
responsible for: (a) the safekeeping of the Collateral; (b) any loss or damage
thereto occurring or arising in any manner or fashion from any cause; (c) any
diminution in the value thereof; or (d) any act or default of any carrier,
warehouseman, bailee, forwarding agency, or other Person. All risk of loss,
damage, or destruction of the Collateral shall be borne by Companies.
11.3. Indemnification.
Each Company shall pay, indemnify, defend, and hold Foothill, each
Participant and each of their respective officers, directors, employees,
counsel, agents, and attorneys-in-fact (each, an "Indemnified Person") harmless
(to the fullest extent permitted by law) from and against any and all claims,
demands, suits, actions, investigations, proceedings, and damages, and all
reasonable attorneys fees and disbursements and other costs and expenses
actually incurred in connection therewith (as and when they are incurred and
irrespective of whether suit is brought), at any time asserted against, imposed
upon, or incurred by any of them in connection with or as a result of or related
to the execution, delivery, enforcement, performance, and administration of this
Agreement and any other Loan Documents or the transactions contemplated herein,
and with respect to any investigation, litigation, or proceeding related to this
Agreement, any other Loan Document, or the use of the proceeds of the credit
provided hereunder (irrespective of whether any Indemnified Person is a party
thereto), or any act, omission, event or circumstance in any manner related
thereto (all the foregoing, collectively, the "Indemnified Liabilities"). No
Company shall have any obligation to any Indemnified Person under this Section
11.3 with respect to any Indemnified Liability that a court of competent
jurisdiction finally determines to have resulted from the gross negligence or
willful misconduct of such Indemnified Person. This provision shall survive the
termination of this Agreement and the repayment of the Obligations.
12. NOTICES.
Unless otherwise provided in this Agreement, all notices or demands by
any party relating to this Agreement or any other Loan Document shall be in
writing and (except for financial statements and other informational documents
which may be sent by first-class mail, postage prepaid) shall be personally
delivered or sent by registered or certified mail (postage prepaid, return
receipt requested), overnight courier, or facsimile to Companies or to Foothill,
as the case may be, at its address set forth below:
If to a Company: STARCRAFT CORPORATION
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Fax No. (▇▇▇) ▇▇▇-▇▇▇▇
with copies to: ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Fax No. (▇▇▇) ▇▇▇-▇▇▇▇
If to Foothill: FOOTHILL CAPITAL CORPORATION
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: Business Finance Division Manager
Fax No. (▇▇▇) ▇▇▇-▇▇▇▇
with copies to: GOLDBERG, KOHN, BELL, BLACK,
▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, LTD.
▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
Fax No. (▇▇▇) ▇▇▇-▇▇▇▇
The parties hereto may change the address at which they are to receive
notices hereunder, by notice in writing in the foregoing manner given to the
other. All notices or demands sent in accordance with this Section 12, other
than notices by Foothill in connection with Sections 9504 or 9505 of the Code,
shall be deemed received on the earlier of the date of actual receipt or 3 days
after the deposit thereof in the mail. Each Company acknowledges and agrees that
notices sent by Foothill in connection with Sections 9504 or 9505 of the Code
shall be deemed sent when deposited in the mail or personally delivered, or,
where permitted by law, transmitted facsimile or other similar method set forth
above.
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.
THE VALIDITY OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (UNLESS
EXPRESSLY PROVIDED TO THE CONTRARY IN AN ANOTHER LOAN DOCUMENT), THE
CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT HEREOF AND THEREOF, AND THE RIGHTS
OF THE PARTIES HERETO AND THERETO WITH RESPECT TO ALL MATTERS ARISING HEREUNDER
OR THEREUNDER OR RELATED HERETO OR THERETO SHALL BE DETERMINED UNDER, GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS. THE
PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE TRIED AND LITIGATED ONLY IN THE
STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF ▇▇▇▇, STATE OF ILLINOIS OR, AT
THE SOLE OPTION OF FOOTHILL, IN ANY OTHER COURT IN WHICH FOOTHILL SHALL INITIATE
LEGAL OR EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT MATTER JURISDICTION OVER
THE MATTER IN CONTROVERSY. EACH OF EACH COMPANY AND FOOTHILL WAIVES, TO THE
EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE
DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY
PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 13. EACH OF EACH COMPANY
AND FOOTHILL HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM
OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY
OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT
CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS.
EACH OF EACH COMPANY AND FOOTHILL REPRESENTS THAT IT HAS REVIEWED THIS WAIVER
AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING
CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF THIS
AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
14. DESTRUCTION OF BORROWERS' DOCUMENTS.
All documents, schedules, invoices, agings, or other papers delivered
to Foothill may be destroyed or otherwise disposed of by Foothill 4 calendar
months after they are delivered to or received by Foothill, unless a Company
requests, in writing, the return of said documents, schedules, or other papers
and makes arrangements, at such Company's expense, for their return.
15. GENERAL PROVISIONS.
15.1. Effectiveness.
This Agreement shall be binding and deemed effective when executed by
each Company and Foothill.
15.2. Successors and Assigns.
This Agreement shall bind and inure to the benefit of the respective
successors and assigns of each of the parties; provided, however, that no
Company may assign this Agreement or any rights or duties hereunder without
Foothill's prior written consent and any prohibited assignment shall be
absolutely void. No consent to an assignment by Foothill shall release any
Company from its Obligations. Foothill may assign this Agreement and its rights
and duties hereunder and no consent or approval by any Company is required in
connection with any such assignment. Foothill reserves the right to sell,
assign, transfer, negotiate, or grant participations in all or any part of, or
any interest in Foothill's rights and benefits hereunder. In connection with any
such assignment or participation, Foothill may disclose all documents and
information which Foothill now or hereafter may have relating to any Company or
any Company's business. To the extent that Foothill assigns its rights and
obligations hereunder to a third Person, Foothill thereafter shall be released
from such assigned obligations to Companies.
15.3. Section Headings.
Headings and numbers have been set forth herein for convenience only.
Unless the contrary is compelled by the context, everything contained in each
Section applies equally to this entire Agreement.
15.4. Interpretation.
Neither this Agreement nor any uncertainty or ambiguity herein shall be
construed or resolved against Foothill or Companies, whether under any rule of
construction or otherwise. On the contrary, this Agreement has been reviewed by
all parties and shall be construed and interpreted according to the ordinary
meaning of the words used so as to fairly accomplish the purposes and intentions
of all parties hereto.
15.5. Severability of Provisions.
Each provision of this Agreement shall be severable from every other
provision of this Agreement for the purpose of determining the legal
enforceability of any specific provision.
15.6. Amendments in Writing.
This Agreement can only be amended by a writing signed by both Foothill
and Companies.
15.7. Counterparts; Facsimile Execution.
This Agreement may be executed in any number of counterparts and by
different parties on separate counterparts, each of which, when executed and
delivered, shall be deemed to be an original, and all of which, when taken
together, shall constitute but one and the same Agreement. Delivery of an
executed counterpart of this Agreement by facsimile shall be equally as
effective as delivery of an original executed counterpart of this Agreement. Any
party delivering an executed counterpart of this Agreement by facsimile also
shall deliver an original executed counterpart of this Agreement but the failure
to deliver an original executed counterpart shall not affect the validity,
enforceability, and binding effect of this Agreement.
15.8. Revival and Reinstatement of Obligations.
If the incurrence or payment of the Obligations by Companies or any
guarantor of the Obligations or the transfer by either or both of such parties
to Foothill of any property of either or both of such parties should for any
reason subsequently be declared to be void or voidable under any state or
federal law relating to creditors' rights, including provisions of the
Bankruptcy Code relating to fraudulent conveyances, preferences, and other
voidable or recoverable payments of money or transfers of property
(collectively, a "Voidable Transfer"), and if Foothill is required to repay or
restore, in whole or in part, any such Voidable Transfer, or elects to do so
upon the reasonable advice of its counsel, then, as to any such Voidable
Transfer, or the amount thereof that Foothill is required or elects to repay or
restore, and as to all reasonable costs, expenses, and attorneys fees of
Foothill related thereto, the liability of Borrowers or such guarantor
automatically shall be revived, reinstated, and restored and shall exist as
though such Voidable Transfer had never been made.
15.9. Integration.
This Agreement, together with the other Loan Documents, reflects the
entire understanding of the parties with respect to the transactions
contemplated hereby and shall not be contradicted or qualified by any other
agreement, oral or written, before the date hereof.
15.10. Joint and Several Liability.
(a) The obligation of the Borrowers hereunder and under the other Loan
Documents are joint and several.
(b) The liability of each Borrower hereunder and under the Loan
Documents shall be absolute, unconditional and irrevocable irrespective of:
(i) any lack of validity, legality or enforceability of this
Agreement, or any other Loan Document as to any Borrower;
(ii) the failure of Foothill (A) to enforce any right or
remedy against any Borrower or any other Person (including any
guarantor or any Borrower) under the provisions of this Agreement, any
other Loan Documents or otherwise, or
(B) to exercise any right or remedy against any
guarantor of, or collateral security any Obligations;
(iii) any change in the time, manner or place of payment of,
or in any other term of, all or any of the Obligations, or other
extension, compromise or renewal of any Obligations;
(iv) any reduction, limitation, impairment or termination of
any Obligations with respect to any Borrower for any reason including
any claim of waiver, release, surrender, alteration or compromise, and
shall not be subject to (and each Borrower hereby waives any right to
or claim of) any defense or setoff, counterclaim, recoupment or
termination whatsoever by reason of the invalidity, illegality,
nongenuineness, irregularity, compromise, unenforceability of, or any
other event or occurrence affecting, any Obligations with respect to
any Borrower;
(v) any addition, exchange, release, surrender or
nonperfection of any Collateral, or any amendment to or waiver or
release or addition of, or consent to departure from any guaranty, held
by any Foothill securing any of the Obligations; or
(vi) any other circumstance which might otherwise constitute a
defense available to, or a legal or equitable discharge of, any
Borrower, any surety or any guarantor.
Each Borrower agrees if such Borrower's joint and several liability
hereunder, or if any liens securing such joint and several liability, would, but
for the application of this sentence, be unenforceable under applicable law,
such joint and several liability and each such lien shall be valid and
enforceable to the maximum extent that would not cause such joint and several
liability or such lien to be enforceable under applicable law, and such joint
and several liability and such lien shall be deemed to have been automatically
amended accordingly at all relevant times.
To the maximum extent permitted by law, each Borrower hereby waives any
defense arising by reason of any claim or defense based upon an election of
remedies by Foothill including any defense based upon an election of remedies by
Foothill.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in Chicago, Illinois.
STARCRAFT AUTOMOTIVE GROUP, INC.,
an Indian corporation
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
--------------------------------------
Title Senior Vice President
------------------------------
NATIONAL MOBILITY CORPORATION,
an Indiana corporation
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
--------------------------------------
Title Senior Vice President
------------------------------
IMPERIAL AUTOMOTIVE GROUP, INC.,
an Indiana corporation
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
--------------------------------------
Title Senior Vice President
------------------------------
STARCRAFT CORPORATION,
an Indiana corporation
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
--------------------------------------
Title President
------------------------------
FOOTHILL CAPITAL CORPORATION,
a California corporation
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------------
Title Senior Vice President
------------------------------
