1
EXHIBIT 10.17
---------------------------------------------
LOAN AND SECURITY AGREEMENT
dated as of September 25, 1997
between
TRIAD SYSTEMS FINANCIAL CORPORATION
as Borrower
and
MELLON US LEASING, A DIVISION OF
MELLON LEASING CORPORATION
as Lender
---------------------------------------------
$15,000,000.00
DISCOUNT LOAN FACILITY
----------------------------------
Loans Secured by Leases,
Lease Receivables and
Leased Equipment
---------------------------
2
TABLE OF CONTENTS
1. DEFINITIONS........................................................ 1
1.1 "Anniversary Date".......................................... 1
1.2 "Business Day".............................................. 1
1.3 "Closing Date".............................................. 1
1.4 "Collateral"................................................ 1
1.5 "Discount Facility"......................................... 1
1.6 "Discount Facility Loan".................................... 2
1.7 "Discount Facility Rate".................................... 2
1.8 "Discount Facility Loan Value".............................. 2
1.9 "Effective Date"............................................ 2
1.10 "Eligible Equipment"........................................ 2
1.11 "Eligible Lease"............................................ 2
1.12 "Equipment"................................................. 3
1.13 "Event of Default".......................................... 3
1.14 "Excess Proceeds"........................................... 3
1.15 "Guaranty".................................................. 3
1.16 "Invoice Price"............................................. 3
1.17 "Late Payment Rate"......................................... 3
1.18 "Lease"..................................................... 3
1.19 "Lease Proceeds"............................................ 4
1.20 "Lessee".................................................... 4
1.21 "Loan"...................................................... 4
1.22 "Loan Repayment Amount"..................................... 4
1.23 "Loan Repayment Date"....................................... 4
1.24 "Obligations"............................................... 4
1.25 "Operating Agreement"....................................... 4
1.26 "Operative Documents"....................................... 4
1.27 "Prepayment Fee"............................................ 4
1.28 "Proceeds".................................................. 4
1.29 "Remarketing Expenses"...................................... 5
1.30 "Remarketing Proceeds"...................................... 5
1.31 "Rent"...................................................... 5
1.32 "Security Supplement"....................................... 5
1.33 "Standard Cost"............................................. 5
1.34 "Tangible Net Worth"........................................ 5
1.35 "CCI"....................................................... 5
i
3
2. THE DISCOUNT FACILITY . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.1 Total Facility . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.2 Interest Calculation . . . . . . . . . . . . . . . . . . . . . . 6
2.3 Minimum Loan . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.4 Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3. THE LOANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.1 Request for Loans . . . . . . . . . . . . . . . . . . . . . . . . 6
3.2 Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.3 Disbursement of Discount Facility Loan . . . . . . . . . . . . . 7
3.4 Loan Payments and Amortizations . . . . . . . . . . . . . . . . . 7
3.5 Upgrades and Additions . . . . . . . . . . . . . . . . . . . . . 8
3.6 Optional Prepayment; Lender Refusal to Finance Upgrades
or Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.7 Mandatory Prepayment Termination of Lease . . . . . . . . . . . . 8
3.8 Mandatory Prepayment Casualty . . . . . . . . . . . . . . . . . . 9
3.9 Mandatory Prepayment Rent . . . . . . . . . . . . . . . . . . . . 9
3.10 No Other Prepayments Permitted . . . . . . . . . . . . . . . . . 9
3.11 Limited Recourse . . . . . . . . . . . . . . . . . . . . . . . . 9
3.12 Full Recourse . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4. CONDITIONS PRECEDENT TO THE INITIAL LOAN . . . . . . . . . . . . . . . . 10
4.1 Evidence of Authority of TSFC . . . . . . . . . . . . . . . . . . . 10
4.2 Evidence of Authority of CCI . . . . . . . . . . . . . . . . . . . 10
4.3 Operating Agreement . . . . . . . . . . . . . . . . . . . . . . . . 10
4.4 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . 10
4.5 TSFC Officer's Certificate . . . . . . . . . . . . . . . . . . . . 10
4.6 CCI Officer's Certificate . . . . . . . . . . . . . . . . . . . . . 11
4.7 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.8 Agreement of Admission of Additional Secured Parties . . . . . . . 11
5. CONDITIONS PRECEDENT TO ALL LOANS . . . . . . . . . . . . . . . . . . . 12
5.1 Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.2 Operating Agreement . . . . . . . . . . . . . . . . . . . . . . . . 12
5.3 Receipt of Certain Documents . . . . . . . . . . . . . . . . . . . 12
(a) Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(b) Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(c) Financing Statement Filed Against Lessees . . . . . . . . . . 12
(d) Financing Statements to be Filed Against TSFC . . . . . . . . 13
(e) Supplement . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ii
4
(f) Notice of Assignment............................. 13
(g) Acceptance Supplement............................ 13
(h) Other Documents.................................. 13
6. SECURITY AGREEMENT............................................... 13
6.1 Granting Clause........................................... 13
6.2 Appointment of Lender..................................... 14
6.3 Further Assurances........................................ 15
6.4 No Obligations Assumed by Lender.......................... 15
6.5 Release of Security Interest.............................. 15
6.6 Final Release by Lender................................... 16
7. ADMINISTRATION................................................... 16
7.1 Authorization to Collect Rent............................. 16
7.2 Collections............................................... 16
7.3 Remittance................................................ 16
7.4 Lease Receivables Statements.............................. 16
7.5 First Loss Provision Statements........................... 16
7.6 Account Status Statements................................. 17
8. INDEMNITIES, INSURANCE, FIRST LOSS............................... 17
8.1 Indemnities............................................... 17
8.2 Indemnity Payment......................................... 18
8.3 Insurance................................................. 19
8.4 First Loss Provision...................................... 19
8.5 Excess Proceeds........................................... 19
9. REPRESENTATIONS, WARRANTIES AND COVENANTS........................ 20
9.1 Due Organization.......................................... 20
9.2 Authority................................................. 20
9.3 Principal Place of Business............................... 20
9.4 Binding Obligations....................................... 20
9.5 Approvals and Consents.................................... 20
9.6 Compliance with Laws...................................... 20
9.7 Clear Ownership........................................... 21
9.8 Filings................................................... 21
9.9 Actions................................................... 21
9.10 Payment of Taxes.......................................... 22
9.11 Notices................................................... 22
9.12 Further Assurances; Enforcement of Leases................. 22
5
9.13 Validity and Enforceability of Leases and Guaranties......... 22
9.14 Leases Duly Entered Into..................................... 22
9.15 Equipment Description........................................ 22
9.16 Leases Comply with Laws...................................... 22
9.17 No Impairment of Value or Rights............................. 23
9.18 No Lessor Liens.............................................. 23
9.19 Notifications................................................ 23
9.20 Books and Records Financial and Other Information............ 23
9.21 Audit........................................................ 24
9.22 Charges and Taxes............................................ 24
9.23 Financial Covenants.......................................... 25
9.24 Maximum Requests for Loans Per Month......................... 25
10. REPOSSESSION AND REMARKETING........................................ 25
10.1 Request to Repossess; Remarketing............................ 25
10.2 Remarketing Expenses......................................... 26
10.3 Assignment................................................... 26
10.4 No Guaranty.................................................. 26
11. EVENTS OF DEFAULT, REMEDIES......................................... 26
11.1 Events of Default............................................ 26
11.2 Remedies..................................................... 28
12. MISCELLANEOUS....................................................... 30
12.1 General...................................................... 30
12.2 Notices...................................................... 30
12.3 Waivers...................................................... 31
12.4 Costs and Expenses........................................... 31
12.5 Successors; Assigns.......................................... 31
12.6 Entire Agreement............................................. 31
12.7 Headings; Titles............................................. 32
iv
6
LOAN AND SECURITY AGREEMENT entered into as of September 25,
1997 between TRIAD SYSTEMS FINANCIAL CORPORATION, a California corporation
("TSFC"), as borrower, and MELLON US LEASING, A DIVISION OF MELLON LEASING
CORPORATION, a Pennsylvania Corporation ("Lender"), as Lender.
I N T R O D U C T I O N
A. TSFC is a wholly owned subsidiary of COOPERATIVE COMPUTING,
INC. ("CCI"), a Delaware corporation. CCI manufactures and TSFC purchases
from CCI and leases to its customers computer systems and software, all in
accordance with an Operating and Support Agreement dated September 25, 1997
among CCI, TSFC and Lender.
B. Lender engages in the business of equipment lease financing.
C. Lender is willing to lend to TSFC amounts equal to the
discounted value of payments under certain of its customer leases of computer
systems and software, upgrades and add-ons or other equipment, and TSFC is
willing to grant a security interest in the lease payments, the leased computer
systems and software or other equipment and the interest of TSFC in the
leases, all subject to the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the foregoing, the parties hereto
agree as follows;
1. DEFINITIONS
When used in capitalized form herein, the following terms shall have
the meanings indicated:
1.1 "Anniversary Date" - September 25, 1998.
1.2 "Business Day" - any day other than a Saturday,
Sunday or a public or bank holiday or the equivalent for banks generally under
the laws of the State of California.
1.3 "Closing Date" - with respect to any Loan - the date
on which Lender makes a Loan to TSFC under this Agreement.
1.4 "Collateral" - as defined in Section 6.1.
1.5 "Discount Facility" - the credit facility provided by
Lender to TSFC pursuant to Section 2.
1
7
1.6 "Discount Facility Loan" - a Loan made by Lender to
TSFC under the Discount Facility.
1.7 "Discount Facility Rate" - with respect to a Discount
Facility Loan - will be that rates determined by mutual agreement of TSFC and
Lender with respect to such Loan.
1.8 "Discount Facility Loan Value" - of a Lease at the
time a Discount Facility Loan is made - either one hundred percent (100%) or
ninety-eight percent (98%) of each payment of Rent remaining unpaid under the
Lease at that time (but excluding any past due Rent), discounted from the date
each such payment is due to such time at the Discount Facility Rate with
respect to such Discount Facility Loan.
1.9 "Effective Date" - the date of this Agreement.
1.10 "Eligible Equipment" - new or remanufactured
Equipment, including but not limited to, computer systems and related
components, software and accessories manufactured or sold by CCI or another
manufacturer or seller, having a Discount Facility Loan Value of not less than
One Thousand Dollars ($1,000.00) subject to an Eligible Lease and not subject
to a security interest or other encumbrance in favor of any corporation, firm
or other person other than a security interest in favor of Lender arising under
this Agreement or a Security Supplement.
1.11 "Eligible Lease" - a full payout net lease in the
form of Exhibit A-1, naming TSFC as lessor, that:
(a) has a noncancellable term of not less than 24
months nor more than 84 months excluding
renewals or extensions;
(b) provides for (i) Rent and casualty payments
in amounts sufficient to repay to Lender the
Loan made in respect of such lease and
interest on such Loan at the Discount
Facility Rate, (ii) interest on late payments
under such lease at a rate not less than the
Late Payment Rate and (iii) all payments to
be made in United States dollars;
(c) provides that the lessor's right to receive
payment is absolute and not contingent upon
the fulfillment of any condition whatsoever
other than the passage of time;
2
8
(d) covers only Eligible Equipment subject to a
security interest in favor of Lender and
includes all hardware and any other systems
required to operate any included software;
(e) is not subject to any conditions, obligations
of, or any right or offset, counterclaim or
defense by, the Lessee thereunder;
(f) is a Lease under which the Lessee is not in
default; and
(g) is in all other respects satisfactory to
Lender.
1.12 "Equipment" - any and all Eligible Equipment leased
to a Lessee by TSFC under a Lease, located in the United States and made
subject to a security interest in favor of Lender by the execution and delivery
by TSFC to Lender of a Security Supplement specifically describing such
Eligible Equipment, together with (i) all accessions, replacements, parts,
repairs, fixtures and accessories incorporated therein or affixed thereto under
the Lease, and (ii) all upgrades, add-ons and additions incorporated therein or
affixed thereto to the extent they have been financed by Lender under this
Agreement.
1.13 "Event of Default" - as defined in Section 11.1.
1.14 "Excess Proceeds" - of an item of Equipment - any
excess of (i) the Remarketing Proceeds thereof, over (ii) the outstanding
principal balance of such Discount Facility Loan made to finance such Lease.
1.15 "Guaranty" - a guaranty, in the form of the guaranty
which comprises a part of Exhibit A-1, executed and delivered by a corporation,
firm or other person (a "Guarantor") satisfactory to Lender, assigned to Lender
as security by the execution and delivery by TSFC of a Security Supplement
specifically describing such guaranty.
1.16 "Invoice Price" - with respect to any Equipment - the
aggregate invoice prices of CCI, as manufacturer or seller, or any other
manufacturer or seller, net of taxes, transportation cost, delivery cost and
any acquisition or other fees payable by TSFC to CCI or any of its affiliates.
1.17 "Late Payment Rate" - with respect to a Discount
Facility Loan - two percent (2%) over the applicable Discount Facility Rate.
1.18 "Lease" - an Eligible Lease duly executed by the
Lessee, approved by Lender and assigned to Lender as security by the execution
and
3
9
delivery by TSFC to Lender of a Security Supplement specifically describing
such Eligible Lease.
1.19 "Lease Proceeds" - with respect to any Lease - all
payments due from or with respect to the Lessee, such Lease or the Equipment
subject to such Lease, including, but not limited to, all Rent and any security
deposits held by TSFC, all casualty, early termination, purchase option and
indemnity payments, and all insurance and sales or lease proceeds of and
requisition payments for the Equipment subject to such Lease.
1.20 "Lessee" - a United States-domiciled corporation,
partnership or sole proprietorship that is the obligor for payment of Rent
under a Lease.
1.21 "Loan" - any advance of funds by Lender under this
Agreement to TSFC.
1.22 "Loan Repayment Amount" - with respect to a Loan at
any time - the aggregate unpaid principal of, and accrued interest (including
any interest accrued at the Late Payment Rate) on, such Loan.
1.23 "Loan Repayment Date" - with respect to any Loan -
the twentieth day of each calendar month, commencing with the first such day to
occur after the Closing Date for such Loan.
1.24 "Obligations" - as defined in Section 6.1.
1.25 "Operating Agreement" - the Operating and Support
Agreement dated as of September 25, 1997 among CCI, TSFC, and Lender, in the
form of Exhibit "B" attached hereto.
1.26 "Operative Documents" - this Agreement, each
Security Supplement and the Operating Agreement.
1.27 "Prepayment Fee" - a fee equal to two percent (2%) of
then unpaid principal amount due Lender under any Lease which is prepaid
pursuant to Section 3.7.
1.28 "Proceeds" - of an item of Equipment - the sum of (i)
the (a) gross cash proceeds of sale of such item or (b) aggregate Rent
obligation under a re-lease of such item discounted at the applicable Discount
Facility Rate, as the case may be, plus (ii) any past due Rent and any other
termination amount paid by the Lessee, or by TSFC on behalf of the Lessee, plus
(iii) any security deposit held by TSFC that reduces the Lessee's lease
termination payment.
4
10
1.29 "Remarketing Expenses" - with respect to an item of
Equipment - the sum of (i) reasonable costs of repossessing, transporting,
refurbishing and remarketing the item pursuant to Section 10, plus (ii) any
applicable sales, use or similar taxes imposed in connection with the sale or
re-lease of such item and not paid by the purchaser or lessee, plus (iii) in
the case of a Lease default, enforcement and collection costs.
1.30 "Remarketing Proceeds" - with respect to an item of
Equipment - the Proceeds minus the Remarketing Expenses.
1.31 "Rent" - under a Lease, the periodic charges
specified in the Lease for the use of the Equipment, excluding casualty or
early termination, purchase option and indemnity payments and any amounts a
Lessee may be required to pay for taxes, license fees, assessments or
maintenance.
1.32 "Security Supplement" - a supplement hereto
substantially in the form of Exhibit "C", executed and delivered to Lender by
TSFC, describing Equipment and Leases and subjecting the same to the security
interest in favor of Lender arising under Section 6.
1.33 "Standard Cost" - with respect to an item of
Equipment at any time - an amount equal to fifty percent (50%) of the Loan
Repayment Amount of the Lease calculated on the Loan Repayment Date.
1.34 "Tangible Net Worth" of TSFC - the gross book value
of TSFC's consolidated tangible assets less (a) reserves applicable thereto and
(b) all of TSFC's consolidated liabilities (including accrued and deferred
income taxes) other than indebtedness subordinated, in a manner satisfactory to
Lender, to TSFC's indebtedness to Lender. All determinations of the
characterization of assets and of the values comprising "Tangible Net Worth"
shall be made in accordance with generally accepted accounting principles
consistently applied.
1.35 "CCI" - Cooperative Computing, Inc., a Delaware
corporation, or any successor entity resulting from the sale or transfer of the
stock of Cooperative Computing, Inc. to another corporation as a result of the
merger, acquisition, consolidation, or dissolution of Cooperative Computing,
Inc. or resulting from the transfer of all or substantially all of the assets
of Cooperative Computing, Inc..
5
11
2. THE DISCOUNT FACILITY
2.1 Total Facility. Subject to the terms and conditions
hereof, from time to time, from (and including) the Effective Date to and
excluding the Anniversary Date (unless extended by Lender and TSFC), Lender may
with respect to each Lease, make a Loan to TSFC in a principal amount equal to
the Discount Facility Loan Value; provided, however, the aggregate principal
amount of all Loans outstanding at any time shall not exceed $15,000,000.00,
and provided further that neither TSFC or CCI suffers a material adverse change
in its business, condition (financial or other), performance, operations,
properties or prospects or in its ability to perform its obligations under the
Operative Documents to which it is a party or the Leases.
2.2 Interest Calculation. Interest on the Discount
Facility Loans shall be computed on the basis of a 360-day year of 12 30-day
months.
2.3 Minimum Loan. The aggregate principal amount of the
Loans made on any Closing Date shall be not less than Two Hundred Thousand
Dollars ($200,000.00).
2.4 Payments. Lender shall pay the proceeds of the Loans
in immediately available funds on the Closing Dates for such Loans. TSFC
shall make each payment due under this Agreement to Lender or its assignee in
immediately available funds to the account or address specified by Lender or
such assignee.
3. THE LOANS
3.1 Requests for Loans. No later than ten (10) Business
Days before the Closing Date relating to a Discount Facility Loan requested by
TSFC , TSFC shall submit to Lender Eligible Leases together with lease
schedules and other supporting documentation, and the following:
(a) the name of each Lessee under such Eligible
Leases, together with (i) unless previously
submitted to Lender, financial statements, to
the extent available, of each such Lessee, if
the equipment value is over Fifty Thousand
Dollars ($50,000.00), as of the end of such
Lessee's most recent fiscal year, and any
interim financial statements of such Lessee
readily available to TSFC, or CCI, all in form
and substance satisfactory to Lender, (ii) the
payment history of such Lessee under other
leases entered into between such Lessee and
TSFC, or CCI and (iii) such additional
financial
6
12
information pertaining to any Lessee as Lender
may request;
(b) the Rent schedule for each such Eligible Lease;
and
(c) such other relevant information as is in the
possession of TSFC or as Lender shall
reasonably require.
3.2 Approvals. Within ten (10) Business Days of receipt
of all information required to be submitted pursuant to Section 3.1, Lender
shall advise TSFC in writing if, in its sole and unlimited discretion, Lender
approves the proposed Eligible Lease and, if Lender requires the credit support
of a Guarantor, the credit of the proposed Guarantor. If Lender fails to give
such advice within such ten (10) day period, Lender shall be deemed to have
declined such credit. Lender may revoke any credit approval prior to making
the Discount Facility Loan relating to a proposed Lease if, in Lender's sole
judgment, the proposed Lessee or Guarantor suffers a material adverse change in
its business, condition (financial or other), performance, operations,
properties or prospects or in its ability to perform its obligations under the
Lease or the Guaranty, as the case may be, Lender shall promptly return all
credit packages to TSFC relative to any rejected lease transactions.
3.3 Disbursement of Discount Facility Loan. Subject to a
satisfaction of the conditions precedent set forth in Section 4 and Section 5,
Lender shall make Discount Facility Loans on the Closing Date proposed in
accordance with this Section. The Discount Facility Loans made on the Closing
Date shall be in an aggregate principal amount equal to the aggregate Discount
Facility Loan Values of the Eligible Leases submitted by TSFC pursuant to
Section 3.1 and approved by Lender pursuant to Section 3.2. If, for any
reason, a Discount Facility Loan is not made on a proposed Closing Date
notwithstanding compliance by TSFC with Section 3.1, the Closing Date may be
rescheduled to a date, within ten (10) Business Days of such Closing Date,
mutually agreed upon in writing by Lender and TSFC .
3.4 Loan Payments and Amortizations. Each Discount
Facility Loan shall bear interest at the Discount Facility Rate determined for
such Loan and shall be evidenced by a Security Supplement which shall set forth
the repayment terms with respect to such Discount Facility Loan in a manner
satisfactory to Lender and shall identify the Lease(s) with respect to which
such Discount Facility Loan is made. Principal of, and accrued interest on,
the Discount Facility Loans shall be payable in accordance with the Security
Supplement for such Discount Facility Loan. Each Discount Facility Loan shall
be amortized by the Lease Proceeds received by TSFC and paid by it to Lender
with respect to the Leases financed by such Loan, with such Lease Proceeds
7
13
applied first to accrued and unpaid interest, then to any other amounts due
under such Loan, and then to principal.
3.5 Upgrades and Additions. TSFC may, from time to
time, agree with a Lessee under a Lease that the Equipment subject to such
Lease shall be upgraded or that additional Eligible Equipment should be added
to such Lease. If TSFC and such Lessee amend such Lease to increase the Rent
payable thereunder in consideration of such upgrade or addition, TSFC may
request that Lender finance the upgrade or addition covered by such amendment (
the "Lease Amendment"). Not later than ten (10) Business Days after such
request, Lender shall give TSFC written advice as to whether Lender, in its
sole discretion, has elected to finance such upgrade or addition. If Lender
fails to give such advice within such ten (10) day period, Lender shall be
deemed to have declined to finance such upgrade or addition. If Lender agrees
to finance such upgrade or addition, Lender shall, subject to satisfaction of
the conditions precedent set forth in Sections 4 and 5, make a Discount
Facility Loan in an amount equal to the aggregate increase in Rent effected by
the Lease Amendment which remains unpaid as of the applicable Closing Date, but
excluding any such increase in Rent which is past due, discounted at the
Discount Facility Rate determined on the applicable Closing Date. The Closing
Date with respect to such Discount Facility Loan shall be a date agreed upon in
writing by Lender and TSFC. If Lender agrees to make such a Discount Facility
Loan, the Lease Amendment shall be considered a "Lease" for all purposes of
this Agreement (including, without limitation, Section 5).
3.6 Optional Prepayment: Lender Refusal to Finance
Upgrades or Additions. If Lender elects not to finance an upgrade or addition
pursuant to Section 3.5, TSFC may give Lender not less than ten (10) days prior
written notice of its intention to prepay the Discount Facility Loan made to
finance the Lease in respect of which an upgrade or addition has been made. On
the first Loan Repayment Date to occur after the ten (10) day notice period has
elapsed, TSFC shall pay to Lender the Loan Repayment Amount with respect to the
Loan made to finance such Lease. No Prepayment Fee shall be payable in respect
of an optional prepayment made pursuant to this Section 3.6.
3.7 Mandatory Prepayment: Termination of Lease. If a
Lessee voluntarily terminates a Lease before its scheduled expiration, TSFC
shall prepay the Discount Facility Loan made to finance such Lease on the Loan
Repayment Date immediately following such termination. On such Loan Repayment
Date, TSFC shall pay to Lender (i) the Loan Repayment Amount with respect to
the Loan made to finance such Lease and (ii) the Prepayment Fee.
3.8 Mandatory Prepayment: Casualty. If any Equipment
subject to a Lease is lost or damaged, and cannot be repaired or replaced with
8
14
substantially similar Equipment by the first Loan Repayment Date occurring not
less than thirty (30) days after such loss or damage, TSFC shall prepay the
Discount Facility Loan made to finance such Lease on such Loan Repayment Date.
On such Loan Repayment Date, TSFC shall (i) pay to Lender the Loan Repayment
Amount with respect to the Loan made to finance such Lease. No Prepayment Fee
shall be payable in respect to a mandatory prepayment made pursuant to this
Section 3.8.
3.9 Mandatory Prepayment: Rent Default. If any Rent
under any Lease financed or refinanced by a Discount Facility Loan shall remain
unpaid for a period of ninety (90) days from the date when due, TSFC shall
prepay such Loan in accordance with Section 8.4. No Prepayment Fee shall be
payable in respect to a mandatory prepayment made pursuant to this Section 3.9.
3.10 No Other Prepayments Permitted. No Discount Facility
Loan may be prepaid except as otherwise expressly provided in the Agreement
unless TSFC pays together with the Loan Repayment Amount for such Discount
Facility Loan the Prepayment Fee.
3.11 Limited Recourse. Lender agrees that, except as
provided in this Section 3.11 Section 3.12, Section 8 and Section 10, each
Discount Facility Loan is nonrecourse to TSFC and that the repayment of each
Discount Facility Loan shall be obtained solely from the Lease Proceeds of the
Leases, Proceeds of the Equipment and the other collateral in which Lender has
been granted a security interest pursuant to Section 6; provided, however, that
TSFC shall be fully liable (without any limitation on recourse) (i) if (a) TSFC
shall fail to pay over to Lender any Lease Proceeds received by TSFC due
Lender hereunder, in which case TSFC shall be liable for the amount of the
Lease Proceeds not so paid over plus interest accrued thereon at the Late
Payment Rate from the date the Lease Proceeds were required to be paid over to
Lender, or (b) the fees and payments paid by a Lessee to TSFC upon termination
of a Lease are less than the Loan Repayment Amount relating to such Lease, in
which case TSFC shall be liable for the difference between such Loan Repayment
Amount and the amount of such fees and payments paid over to Lender and (ii)
for all payments required to be made pursuant to Section 3.8, whether or not
insurance proceeds received by TSFC are at least equal to such payments.
3.12 Full Recourse. Notwithstanding anything set forth
herein, including, without limitation, any limitation on recourse against TSFC,
Discount Facility Loans may be with recourse to TSFC. Such Loans shall be
secured by Leases which are Eligible Leases except that the creditworthiness of
the Lessee may not otherwise be acceptable to Lender. A Discount Facility Loan
with recourse shall be designated as such by mutual written agreement of Lender
9
15
and TSFC, as the case may be, prior to the Closing Date of such Loans. Upon
occurrence at any time of any default under such Leases, TSFC shall repay the
Discount Facility Loan made to finance such Leases on the Loan Repayment Date
occurring not more than thirty (30) days after such default. On such Loan
Repayment Date, TSFC shall pay (i) the outstanding principal balance of the
Discount Facility Loan made to finance such Leases, and (ii) all accrued and
unpaid interest on such Discount Facility Loan to the date of payment. No
Prepayment Fee shall be payable in respect of any such prepayment. The amounts
paid to Lender by TSFC pursuant to this paragraph shall not be charged against
the First Loss Provision defined in Section 8.4.
4. CONDITIONS PRECEDENT TO THE INITIAL LOAN
Lender will not make the initial Loan hereunder until it has
received all of the following, in form and substance satisfactory to Lender:
4.1 Evidence of Authority of TSFC. Certified
resolutions of the Board of Directors of TSFC authorizing the execution,
delivery and performance of each of the Operative Documents to which it is a
party and any other document required hereunder together with an incumbency
certificate with respect to the officer or officers of TSFC executing any of
such Operative Documents and any document required hereunder.
4.2 Evidence of Authority of CCI. Certified resolutions
of the Board of Directors of CCI authorizing the execution, delivery and
performance of the Operating Agreement and any other document required
thereunder together with an incumbency certificate with respect to the officer
or officers of CCI executing the Operating Agreement and any document required
thereunder.
4.3 Operating Agreement. The Operating Agreement, duly
executed by CCI, TSFC, and Lender.
4.4 Financial Statements. The most recent consolidated
financial statements of CCI and TSFC.
4.5 TSFC Officer's Certificate. A certificate from a
duly authorized officer of TSFC, dated as of the first Closing Date, stating
that:
(a) all representations and warranties made by
TSFC under this Agreement and under the
Operating Agreement are true and correct as
of the date of the certificate;
10
16
(b) TSFC is in compliance with all covenants made
under this Agreement; and
(c) no event has occurred and is continuing that
is, or with the passage of time or giving of
notice or both would be, an Event of Default
or a default under or breach of the Operating
Agreement; and
(d) containing an express undertaking by TSFC to
give immediate notice to Lender it at any
time if any of the above statements are no
longer true.
4.6 CCI Officer's Certificate. A certificate from a duly
authorized officer of CCI, dated as of the first Closing Date, stating that:
(a) all representations and warranties made by
CCI under the Operating Agreement are true
and correct as of the date of the
certificate;
(b) CCI is in compliance with all covenants made
under the Operating Agreement;
(c) no event has occurred and is continuing that
is, or with the passage of time or giving of
notice or both would be, a default under or
breach of the Operating Agreement; and
(d) containing an express undertaking by CCI to
give immediate written notice to Lender if
at any time if any of the above statements
is no longer true.
4.7 Insurance. Evidence of the insurance required by
Section 8.3.
4.8 Agreement of Admission of Additional Secured Parties.
Evidence that the Agreement of Admission of Additional Secured Parties, in the
form previously executed by Lender has been duly executed and delivered by all
of the other parties thereto.
11
17
5. CONDITIONS PRECEDENT TO ALL LOANS
Lender will not make any Loan hereunder (including the initial
Loan) unless on the date thereof:
5.1 Notice. TSFC shall have given Lender verbal notice
of each Closing Date no later than five (5) Business Days prior to such Closing
Date.
5.2 Operating Agreement. The Operating Agreement shall
be in full force and effect and no defaults or breaches shall exist thereunder
as of the applicable Closing Date.
5.3 Receipt of Certain Documents. Lender shall have
received the following, in form and substance satisfactory to Lender:
a) Lease. (i) A signed fax copy or
original, manually executed counterparts in
the possession of CCI or TSFC on such
Closing Date of each Lease financed on such
Closing Date and the related Lease Schedule
substantially in the form contained in
Exhibit "A-1", in each case duly executed by
TSFC as lessor and by the Lessee
thereunder;
(b) Guaranty. If required by Lender,
signed fax copy or original, manually
executed counterparts in the possession of
CCI or TSFC on such Closing Date of each
Guaranty duly executed by the Guarantor;
(c) Financing Statements Filed Against
Lessees. Except in the case of Leases of
Equipment having an aggregate Invoice Price
less than Thirty-five Thousand Dollars
($35,000.00), either evidence of electronic
filing receipts, a search report from Dun &
Bradstreet listing, among other things,
filing numbers and filing dates or copy of
duly executed and filed Uniform Commercial
Code financing statements on form UCC-1
naming TSFC as secured party and the Lessees
under the Leases to be financed on the
Closing Date as debtors, identifying as
collateral the Equipment subject to such
Leases.
(d) Financing Statements to be Filed
Against TSFC. Copies of duly executed
Uniform Commercial Code financing statements
on form UCC-1, naming TSFC as
12
18
debtor and Lender, as secured party, and
identifying as collateral the Leases and any
Guaranties and Equipment to be assigned in
sufficient number to be filed in all
jurisdictions as may be necessary, in
Lender's judgment, to perfect Lender's
security interest in such collateral,
including, without limitation, jurisdictions
where TSFC has its chief executive offices
and maintain its records in respect to the
Leases;
(e) Supplement. A Security Supplement,
duly executed by TSFC relating to and
describing the Lease, and Guaranty and the
Equipment covered thereby;
(f) Notice of Assignment. An original
notice to the relevant Lessee of the
assignment to Lender of the relevant Lease,
signed by TSFC, substantially in the form of
Exhibit "D";
(g) Acceptance Supplement. A copy of
the original executed counterpart of the
delivery and acceptance certificate with
respect to each Lease where the Invoice
Price exceeds Fifty Thousand Dollars
($50,000.00) (substantially in the form
contained in Exhibit "A-1") containing a
complete description of the Equipment, duly
executed by the Lessee thereunder; and
(h) Other DocumentsSuch other documents,
instruments or agreements as Lender may
reasonably request.
6. SECURITY AGREEMENT
6.1 Granting Clause. In order to induce Lender to make
Loans from time to time to TSFC, and in order to secure (i) the prompt
repayment of the Loans and payment of all interest accrued thereon and any
applicable Prepayment Fee if any, (ii) the strict performance and observance by
TSFC of the obligations to be performed by it hereunder and (iii) all costs of
litigation, collection, reasonable attorneys' fees and other costs expended or
incurred in connection with the enforcement of Lender's rights hereunder and
with respect to the Leases and the Equipment (the obligations referred to in
clauses (i) through (iii) being collectively referred to as the "Obligations"),
TSFC hereby assigns, pledges and grants a continuing security interest to
Lender in all of its right, title and interest in and to the following
described properties, assets and rights (such properties, assets and rights
collectively called the "Collateral"):
13
19
(a) each Lease and all of TSFC's rights
thereunder including the right to receive
payments (including Rent and security
deposits) due to TSFC thereunder and the
right to exercise rights and remedies upon
default;
(b) every item or component of Equipment subject
to Leases, together with (i) all accessions,
replacements and substitutions thereto and
therefore and (ii) all upgrades, add-ons and
additions thereto and therefore to the
extent they have been financed by Lender
under this Agreement, and (iii) all of its
rights in the software and licenses related
thereto;
(c) each and every Guaranty, security interest,
mortgage or other security securing
(including security deposits) the payment
and performance of the Lessee's obligations
under the Leases;
(d) all Lease Proceeds and Proceeds of items or
components of Equipment; and
(e) all warranty and other rights TSFC may have
with respect to the Leases and the Equipment
subject thereto against the manufacturer(s)
of the Equipment, and
(f) the proceeds (whether cash or non-cash
proceeds), and products of all the
properties, assets and rights described in
paragraphs (a), (b),(c), (d) and (e) above
including without limitation, all insurance
payments, whether or not Lender is the loss
payee thereof; in each case whether now
owned or hereafter acquired.
6.2 Appointment of Lender. If Lender assumes
administration of collection of Rent pursuant to Section 11.2, TSFC
irrevocably appoints the Lender as its attorney-in-fact (such power being
coupled with an interest) to do, in its sole and unlimited discretion, any or
all of the following:
(a) to endorse or sign TSFC's ' name on all
checks, collections receipts, UCC's or other
documents related to the Leases;
(b) to take possession of and open mail
addressed to TSFC relating to such
collection and remove Rent and proceeds and
products of the Collateral;
14
20
(c) to ask, demand, collect, receive, xxx for,
compound and give acquittance for any and
all payments assigned hereunder;
(d) to settle, adjust or compromise any claim
thereunder as fully as TSFCcould itself;
(e) to endorse its name on all checks and other
commercial paper given in payment or in part
payment thereof; and
(f) in its discretion, to file any claim or take
any other action or proceeding, either in
Lender's own name or in TSFC's name or
otherwise, that Lender may deem necessary or
appropriate to collect any and all sums that
may be or become due or payable under the
Leases or that may be necessary or
appropriate to protect the right, title and
interest of Lender in and to the Collateral
and the security intended to be afforded
thereby and hereby.
6.3 Further Assurances. TSFC will upon written
direction from Lender and at the expense of TSFC , do, execute, acknowledge and
deliver all and every further acts, deeds, conveyances, instruments, transfers
and assurances reasonably necessary or proper for the better assuring,
conveying, assigning and confirming unto Lender all of the Collateral, whether
now owned or hereafter acquired and shall not provide further assurances to any
other lender which may conflict with Lender's security interest or provide such
lender with a security interest superior to Lender's without first giving to
Lender the same further assurances.
6.4 No Obligations Assumed by Lender. Lender does not
assume, and its interest herein shall not be subject to, any obligations or
liabilities of TSFC under any Lease or any duty to collect money due
thereunder or to enforce collection thereof. Lender assumes no responsibility,
obligation or liability for any representation, warranty or obligation, express
or implied, made by any agent or employee of TSFC to a Lessee in connection
with any Lease.
6.5 Release of Security Interest. Upon payment in full
of all amounts due on a Loan and provided no Event of Default shall have
occurred and be continuing, Lender agrees to (i) release its security interest
in the Lease financed by such Loan and the Equipment subject thereto; (ii)
deliver to TSFC such other documents relating to released Leases and Equipment
prepared by
15
21
TSFC as TSFC may reasonably request, and (iii) deliver the foregoing items
within ten (10) days to TSFC after receipt of termination payment.
6.6 Final Release by Lender. Upon termination of
Lender's commitment to make Loans, repayment in full to Lender of all Loans,
and performance of all other Obligations, Lender will release its security
interest in the Collateral in the manner provided in Section 6.5.
7. ADMINISTRATION
7.1 Authorization to Collect Rent. Until such time as
there is an Event of Default hereunder or TSFC's authority to collect Rent is
terminated pursuant to Section 11, TSFC is authorized to and shall collect Rent
from Lessees. TSFC shall provide Lender with monthly Lease Receivable Report
relating to the immediately preceding month.
7.2 Collections. TSFC will undertake such collections as
an independent contractor and not as Lender's agent, and in connection
therewith will at its sole cost and expense, diligently perform all billing and
collecting for Rent due and to become due with respect to Leases and Equipment
financed under Discount Facility Loans. TSFC shall xxxx Lessees in accordance
with its standard billing procedures provided that each invoice sent with
respect to any Lease sold and assigned hereunder shall segregate the amount due
thereunder for maintenance, services and taxes.
TSFC shall deliver to Lender a list of all Leases then
outstanding, and a statement showing the delinquency under such Leases.
7.3 Remittances. TSFC shall, on or before the Loan
Repayment Date of each month, make payment to Lender of the amount due on each
Discount Facility Loan on such date regardless of whether or not any Rent under
applicable Leases shall have been collected by TSFC. Notwithstanding the
preceding sentence, during any period of time in which TSFC is not obligated to
perform its obligations under Section 8.4 by reason of the limitation on its
liability set forth therein, TSFC shall be obligated to make payments to Lender
on each Discount Facility Loan only to the extent that TSFC shall have
collected Rent under the applicable Leases.
TSFC shall provide Lender the first loss provision described
in Section 8.4 on a quarterly basis.
7.4 Lease Receivables Statements. As soon as available,
but no later than the twentieth day of each month, TSFC shall deliver to Lender
a list
16
22
of all Leases then outstanding, and a statement showing payments, such Leases
both being complete and correct.
7.5 First Loss Provision Statements. On the last
Business Day of each January, April, July and October, TSFC shall provide
Lender with a quarterly statement as of such date of the First Loss Provision
described in Section 8.4, in the form attached hereto as Exhibit E.
7.6 Account Status Statements. As soon as available,
TSFC shall deliver to Lender any changes in account status for any Leases then
outstanding that TSFC becomes aware of from time to time. Account status shall
be defined, but not limited to, changes in Lessee billing address, equipment
locations, equipment, and/or legal name.
8. INDEMNITIES, INSURANCE, FIRST LOSS
8.1 Indemnities. Notwithstanding anything set forth
herein, including, without limitation, any limitation on recourse against TSFC
, TSFC shall indemnify, protect and defend Lender and hold it safe and
harmless from and against any and all losses, claims, demands, penalties,
actions, suits, proceedings, costs, expenses (including reasonable attorneys'
fees), damages and liabilities ("Indemnified Amount") (other than Indemnified
Amounts arising from or pertaining to the gross negligence or willful
misconduct by Lender) that may at any time be made, brought, incurred, assessed
or adjudged against Lender arising from or pertaining to:
(a) the manufacture, purchase, license,
subscription, financing, ownership, delivery,
rejection, nondelivery, possession, use,
dismantling, transportation, storage,
operation, maintenance, repair, return or other
disposition of the Equipment;
(b) breach of any covenant or warranty made by
TSFC, or CCI relating to any Equipment or Lease
or maintenance of any Equipment, including
qualification of any Equipment for any tax
benefit;
(c) any claim, action or proceeding involving
patent or trademark infringement or copyright
or trade secret violations relating to the
Equipment (including any interest or penalty)
whether or not such claim, action or proceeding
involves a claim of infringement or a
combination or design patent;
17
23
(d) failure of Lender, for whatever reason, to have
obtained a first priority perfected purchase
money security interest in and lien on the
Collateral, including, without limitation, the
Leases and the Equipment whether or not (i) the
Equipment is deemed to be an asset of a Lessee
as the result of a Lease being held to be a
security agreement rather than a true lease or
(ii) Uniform Commercial Code financing
statements on form UCC-1 were filed against a
Lessee with respect to the Equipment under
Section 5.3 (c);
(e) any misrepresentation made by any agent or
employee of TSFC, or CCI in the course of
negotiations regarding any Lease or Equipment;
(f) any breach of any warranty or covenant, or any
misrepresentation, of TSFC, or CCI in any
Lease, any Operative Document or any
certificate of an officer of TSFC, or CCI
delivered in accordance therewith;
(g) failure of any lease or Equipment to comply
with applicable laws, regulations or
contractual specifications or warranties, or to
be an Eligible Lease or Eligible Equipment, as
the case may be;
(h) any dispute, claim, offset, or defense of any
Lessee (other than payment by, or discharge in
bankruptcy of, such Lessee) to the payment of
any Rent;
(i) Lender having received from TSFC only a fax copy
(rather that the original, manually executed
copy) of any Lease or any Guaranty;
(j) failure of TSFC or CCI to pay when due any taxes
for which it is liable; and
(j) any wrongful or negligent acts or omissions of
TSFC, its agents or assigns, in carrying out
TSFC's obligations under Section 7 or Section 10.
TSFC shall assume, at its expense, full responsibility for the
defense and satisfaction of the foregoing, with counsel reasonably satisfactory
to Lender. All of the indemnities set forth in this Section 8.1 shall survive
the cancellation or termination of this Agreement.
18
24
8.2 Indemnity Payment. Upon the occurrence of any of the
events set forth in Section 8.1, TSFC unconditionally agrees to pay Lender,
upon written demand, the Indemnified Amount.
8.3 Insurance. With respect to all Equipment, TSFC
shall maintain in full effect, and shall deliver to Lender evidence of, (a)
liability insurance, with a combined single limit of at least Five Hundred
Thousand Dollars ($500,000.00) per occurrence, naming Lender as additional
insured, (b) property damage insurance including all- risk insurance, on all
Equipment, naming Lender as a loss payee, in an amount equal to actual cash
value or replacement value, with a deductible of not more than Two Hundred
Thousand Dollars ($200,000.00) per year for all Equipment and (c) such other
insurance as is usual in the business carried on by TSFC, which insurance shall
be satisfactory to Lender as to amount, form, nature and carrier.
8.4 First Loss Provision. If any Rent under any Lease
financed or refinanced by a Discount Facility Loan shall remain unpaid for a
period of ninety (90) days from the date when due, TSFC shall, on the next
succeeding Loan Repayment Date, upon written demand by Lender, pay to Lender
the Loan Repayment Amount of such Discount Facility Loan. The liability of
TSFC under this Section 8.4 on any Loan Repayment Date shall not exceed (i) ten
percent (10%) of the aggregate initial principal amount of all Loans made under
this Agreement as of such Loan Repayment Date plus (ii) the aggregate Standard
Cost of all Equipment financed with the Discount Facility Loans with respect to
which Lender has made demand pursuant hereto minus (iii) the aggregate Loan
Repayment Amounts paid by TSFC to Lender pursuant to this Section 8.4 with
respect to Discount Facility Loans as of such Loan Repayment Date minus (iv)
the aggregate of all amounts paid by TSFC to Lender under Section 7.3 without
having collected Rent under Leases financed by Discount Facility Loans which
Lender has demanded to be repaid under this Section 8.4 on such Loan Repayment
Date to the extent TSFC has been unable to collect such amounts from such
Lessees as of such Loan Repayment Date. The method of determining this amount
is described in Exhibit "E". Lender's rights under this Section 8.4 shall be
cumulative and in addition to all other rights to receive payment of the
Discount Facility Loans pursuant to this Agreement.
8.5 Excess Proceeds. If, on any Loan Repayment Date, all
or any portion of any Loan Repayment Amount shall not have been paid pursuant
to Section 8.4 due to the limitation on the liability of TSFC set forth in
that Section and TSFC thereafter realizes Excess Proceeds with respect to any
Equipment to Lender, the previously unpaid portion of all such Loan Repayment
Amounts shall be promptly paid by TSFC to Lender to the extent of such Excess
Proceeds.
19
25
9. REPRESENTATIONS, WARRANTIES AND COVENANTS
TSFC represents, warrants and covenants that:
9.1 Due Organization. It is a corporation duly organized
and validly existing in good standing under the laws of California, and is duly
qualified or otherwise authorized to do business wherever necessary to carry on
its present business and operations and to perform its respective obligations
under each Operative Document and each Lease.
9.2 Authority. It has the full power, authority and
legal right to enter into and perform its obligations under each Operative
Document.
9.3 Principal Place of Business. Its chief executive
office and the office where it maintains its records concerning payments under
the Leases is in Livermore, California, and it will not change such principal
place of business or remove therefrom such records, or any other records
relating to the Collateral or any Loan, or change its name, identity or
corporate structure, without at least thirty (30) days prior written notice to
Lender.
9.4 Binding Obligations. Each Operative Document has
been duly authorized and upon execution and delivery will constitute legal,
valid and binding obligations, enforceable against it in accordance with the
terms thereof.
9.5 Approvals and Consents. No stockholder approval, or
approval or consent of any trustee or holder of any indebtedness or obligation,
or authorization, consent, approval or license by, exemption from or
registration with, any court or governmental department, commission, board,
agency or instrumentality, domestic or foreign, is necessary in connection with
the execution, delivery and performance of its obligations under the Operative
Documents, and no consent of any owner, lessor or mortgagee of premises where
any Equipment is located is needed to permit Lender or TSFC to enforce the
rights of the lessor under the Leases or, if required, the same have been
obtained and certified copies have been delivered to Lender.
9.6 Compliance with Laws. There is no law, governmental
rule, regulation, judgment, decree or order binding on it that would be
contravened by the execution and delivery of, and performance under, the
Operative Documents. It will at all times comply with, or cause to be complied
with, all laws, statutes, rules, regulations, orders and directions of any
governmental authority having jurisdiction over it or its business if not
complied with, would have a material adverse effect on TSFC's business,
condition (financial or other), performance, operations, properties or
prospects or on its ability to perform its obligations under the Operative
Documents or the Leases.
20
26
9.7 Clear Ownership. It is, and will continue to be, the
record and beneficial owner of 100% of each Lease and all Equipment subject to
Leases in which it is named as Lessor free and clear to all mortgages, deeds of
trust, pledges and other liens, security interests, charges or encumbrances,
except for liens for taxes due but not yet payable and liens in favor of Lender
and shall promptly deliver to Lender any executed counterparts of Leases which
were not delivered to Lender pursuant to Section 5.3(a) and which have
subsequently come into its or CCI's possession. Notwithstanding the foregoing,
TSFC shall be entitled to transfer to CCI or a subsidiary corporation of CCI
record and beneficial ownership of any Equipment subject to Leases in which
TSFC is named as Lessor, provided that:
(a) TSFC remains fully bound under the Agreement
with respect to all Obligations, including the
Obligations assumed by the assignee;
(b) the assignee assumes in writing the Obligations
of TSFC under this Agreemen, subject to all
the terms and conditions hereof and Lender's
rights and remedies hereunder, and recognizes
the continuing validity and priority of the
lien of Lender in the Equipment;
(c) the assignee executes any documentation
reasonably required by Lender to facilitate the
foregoing provisions of this Section 9.7 and
the Operating Agreement; and
(d) the assignee and TSFC execute and file all
Uniform Commercial Code financing statements
and assignment statements necessary or
appropriate, in Lender's sole judgment, to
continue, perfect and protect Lender's first
priority security interest in the Collateral
hereunder.
9.8 Filings. This Agreement and the Uniform Commercial
Code filings made pursuant hereto create in favor of Lender a valid and
perfected first priority security interest in the Collateral securing the
Obligations.
9.9 Actions. There are no actions, suits, proceedings,
claims or disputes pending or, to its knowledge, threatened against or
affecting it or its properties before any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign,
that, if determined adversely to it, would have a material adverse effect on
its business, condition (financial or other), performance, operations,
properties or prospects, its ability to perform its obligations under the
Operative Documents or the Leases or Lender's security interest in the
Collateral.
21
27
9.10 Payment of Taxes. It has filed and will file all tax
returns (federal, state and local) required to be filed and has paid all taxes
shown thereon to be due, including interest and penalties, unless it is
contesting the payment of certain taxes in good faith and has established
adequate reserves therefore.
9.11 Notices. It will send to Lender copies of all
significant notices, including, but not limited to, any notices with respect to
the terms of any Lease, and other instruments or communications required or
permitted to be given by the Lessee under any Lease.
9.12 Further Assurances; Enforcement of Leases. It will: (a)
preserve and maintain its corporate existence and all rights, privileges and
franchises now enjoyed and conduct its business in an orderly, efficient and
customary manner; and (b) from time to time, at its own expense, take all
actions reasonably necessary to establish, preserve, protect and perfect the
rights created by this Agreement, including, without limitation, (i) the full
and punctual performance of all of its obligations under the Leases; (ii) the
enforcement of the Leases without waiver, amendment or modification; and (iii)
the exercise of any and all rights of the lessor under the Leases as may be
necessary or advisable to assure full compliance with the terms and provisions
thereof and to protect Lender's security interest in the Collateral.
9.13 Validity and Enforceability of Leases and Guaranties.
Each Eligible Lease and Guaranty submitted to Lender pursuant to Section 5.3 is
genuine, valid and enforceable and is not subject to any offset, deduction,
counterclaim or lien.
9.14 Leases Duly Entered Into. All parties to each Lease
and Guaranty have full power, authority and legal right to enter into and
perform its obligations under such Lease or Guaranty, as the case may be. Each
Lease and Guaranty will be duly authorized, executed and delivered by the
parties thereto, will constitute legal, valid and binding obligations of the
parties thereto, enforceable in accordance with their respective terms and will
be in full force and effect on the Closing Date relating thereto, and no
default thereunder shall exist on such Closing Date. The entire agreement with
each Lessee is embodied solely in the executed counterparts of the applicable
Lease and other documentation furnished to Lender with respect to such Lease.
9.15 Equipment Description Each Lease describes the
Equipment leased to the Lessee named in such Lease, the Rent required for such
Equipment and any applicable early termination payments.
9.16 Leases Comply with Laws. Each Lease complies with
and does not violate applicable laws, regulations or contractual specifications
or
22
28
warranties, including without limitation, any applicable laws relating to
maximum rates of interest (whether or not imputed) or similar charges and all
required disclosures have been made with respect thereto under federal
truth-in- lending and truth-in-leasing regulations to the extent applicable.
9.17 No Impairment of Value or Rights. It will not do
anything that might impair the value of any Lease or Equipment or any of the
rights or obligations of the parties hereto under any Lease.
9.18 No Lessor Liens. No Lease submitted to Lender
pursuant to Section 5.3, or any Equipment subject thereto, or any other of its
rights therein, has been assigned to, or be subject to, any lien or security
interest in favor of, any person other than Lender.
9.19 Notifications. It will promptly notify Lender of:
(a) any Event of Default or event which, upon the
lapse of time or giving of notice, or both,
would become an Event of Default, or any event
which is, or upon the lapse of time or giving
of notice, or both, would become a default
under or breach of the Operating Agreement;
(b) any and all litigation or other matters or
events concerning it or any Lessee that has a
reasonable possibility of materially and
adversely affecting its or any Lessee's
business, condition (financial or other),
performance, operations, properties or
prospects or adversely affecting Lender's
security interest in the Collateral.
9.20 Books and Records Financial and Other Information.
It shall:
(a) maintain adequate books, accounts and records
and prepare all financial statements required
hereunder in accordance with generally accepted
accounting principles and practices
consistently applied and in compliance with the
regulations of any governmental regulatory body
having jurisdiction over it;
(b) give Lender and its representatives, at all
reasonable times and upon reasonable notice,
access to all records, files and books of
accounting pertaining to all transactions
subject to this Agreement, and permit
23
29
Lender and its representatives to inspect,
audit and make extracts therefrom;
(c) upon the occurrence of an Event of Default or
an event which, upon the lapse of time or
giving of notice, or both, would become an
Event of Default, permit Lender to exercise the
inspection rights of TSFC under the Leases, on
a non-exclusive basis;
(d) deliver to Lender in form and detail
satisfactory to Lender, and in such reasonable
number of copies as Lender may request:
(i) as soon as available, but no later than
thirty (30) days after the end of each
fiscal quarter, the quarterly financial
statements of TSFC and CCI, in each case
signed by the principal financial officer
of TSFC or CCI, as the case may be;
(ii) the lists of Lease receivables and
statements showing the aging of
receivables as required by Section 7.4;
(iii) the statement of first loss provision
required by Section 7.5;
(iv) such other information as Lender may
reasonably request; and
(e) Deliver to Lender, in such reasonable number of
copies as Lender may request, as soon as
available, but no later than ninety (90) days
after the end of each fiscal year, (i) the
audited annual financial statements of CCI and
(ii) the annual financial statements of TSFC,
audited or reviewed if available, or unaudited
but signed by the principal financial officer
of TSFC.
9.21 Audit. It shall permit Lender, from time to time,
upon reasonable request and at Lender's sole expense, to conduct an audit of
TSFC's accounting and operating procedures as they relate to the Leases,
provided such audit does not unreasonably interfere with TSFC's normal
business operation.
9.22 Charges and Taxes It shall make all filings in
respect of and pay (or reimburse Lender for, upon presentation of an invoice)
all charges and
24
30
local, state or federal taxes (other than net income taxes of the Lender or
franchise taxes levied upon Lender's net income), license fees, or other
assessments, charges, fines and penalties, together with interest payable with
respect thereto, levied or imposed upon or in connection with this Agreement,
the Leases, the Equipment, the Rent and the Proceeds. Upon request of Lender,
TSFC shall furnish Lender written evidence of such payment.
9.23 Financial Covenants.
(a) the Tangible Net Worth of TSFC shall at all
times be at least $17,500,000.00;
(b) the ratio of TSFC's total consolidated debt
(including subordinated debt) to TSFC's
Tangible Net Worth shall at all times be no
greater than 3 to 1;
Compliance with Section 9.23 shall be made in accordance with
generally accepted accounting principles, consistently applied, as to both
classification and amounts.
9.24 Maximum Requests for Loans Per Month. It will make
no more than a combined total of three (3) requests for Loans, under Section
3.1, during each thirty day period.
10. REPOSSESSION AND REMARKETING
10.1 Request to Repossess; Remarketing. In the event that
TSFC does not perform its obligations under Section 8.4 by reason of the
limitation on its liability set forth therein, upon Lender's determination that
a default exists under a Lease financed or refinanced by a Discount Facility
Loan, either through notification by TSFC pursuant to Section 9.19 or
otherwise, and that such default remains uncured within the time, if any, for
curing the same permitted by the Lease, Lender, as secured party under this
Agreement, may request TSFC to act as its agent, and upon such request TSFC
will, as such agent, use diligent efforts to repossess the Equipment subject to
such Lease as promptly and efficiently as is legally permissible. Thereafter
TSFC will repair, service, refurbish and update, as needed, and, for a period
of one hundred twenty (120) days or such other period as TSFC and Lender may
agree upon in writing from the date the Equipment is repossessed (the
"Remarketing Period"), attempt to sell or re-lease such Equipment on a
non-priority (but non-discriminatory) basis and on such terms and conditions as
reflect fair market value for similar equipment and are acceptable to Lender,
in its sole discretion. TSFC shall give no less priority to remarketing
Equipment pursuant to this Section 10.1 that it would similar equipment owned,
leased or managed by
25
31
TSFC. The obligations of TSFC to remarket such Equipment for sale or lease
shall include, but not be limited to, efforts to sell such Equipment,
preparation and supervision of the documentation of each transaction and an
accounting of the activities referred to in this Section 10.1, including
information relative to the status of negotiations for offers made in respect
of such Equipment.
If TSFC has not remarketed any Equipment at the conclusion of
the Remarketing Period, upon notice from Lender, TSFC's exclusive right to
remarket shall terminate and Lender shall have the right to remarket such
Equipment on terms and conditions satisfactory to it. If Lender remarkets the
Equipment, it shall retain Proceeds in an amount equal to the Loan Repayment
Amount applicable to the Loan financing the Lease to which such Equipment was
subject and any Remarketing Expenses incurred by Lender and shall remit the
Excess Proceeds to TSFC.
Nothing contained in this Section 10.1 shall be deemed to
constitute a release by Lender of its security interest in any of the
Collateral. Lender shall release its security interest in Equipment which has
been sold pursuant to this Section 10.1.
10.2 Remarketing Expenses. Remarketing Expenses shall be
for the account of the party incurring such expenses and shall be recoverable
from the Proceeds of such remarketing.
10.3 Assignment. The rights and obligations of any party
under this Section 10 may be assigned only with the written consent of all
parties.
10.4 No Guaranty. Notwithstanding anything contained
herein to the contrary, the obligations and duties of TSFC contained in this
Section 10 shall not be construed to include a guarantee by TSFC that the
Remarketing Proceeds with respect to any Equipment will equal or exceed the
Loan Repayment Amount relating to such Equipment.
11. EVENTS OF DEFAULT, REMEDIES
11.1 Events of Default. Any one of the following events
shall constitute an "Event of Default" hereunder:
(a) TSFC shall fail to remit to Lender when due
any Lease Proceeds or Proceeds of an item of
Equipment received by TSFC, or shall fail to
make any payment required hereunder, in each
case within five (5) days of the date due
thereof; or
26
32
(b) TSFC shall fail to observe or perform any
other obligation hereunder, or under any other
agreement between Lender and TSFC, which is not
corrected within thirty (30) days of written
notice from Lender; provided, however, that if
(1) such failure is curable, (2) such failure
cannot be remedied within the 30-day period,
(3) TSFC commences diligent efforts to effect
such remedy within the 30-day period and
actively and diligently pursues such efforts,
and (4) such failure does not involve any risk
of the sale, forfeiture or loss of the
Equipment or any part thereof or any interest
therein of Lender; then TSFC shall have an
additional period of 60 days beyond such 30
days to effect such remedy, failing which an
Event of Default shall occur hereunder; or
(c) any covenant, representation or warranty made
by TSFC or CCI to Lender in any Operative
Document or in any certificate delivered
pursuant thereto shall be untrue in any
material respect when made or during any period
of time for which it is enforceable or shall be
breached by TSFC or CCI. Notwithstanding the
foregoing, to the extent that such a breach
occurs, and such breach relates to an
individual Lease, TSFC shall have thirty (30)
days from receipt of demand by Lender to
repurchase the Lease pursuant to the terms of
the Mandatory Prepayment clause set forth at
Paragraph 3.7 herein. TSFC's failure to
repurchase such a Lease within said thirty (30)
day period shall then constitute an Event of
Default under this subparagraph; or
(d) an injunction, attachment or other legal
process shall issue against any material part
of TSFC's property or a material judgment or
lien shall be filed against TSFC which is not
stayed, vacated, bonded, or otherwise
discharged within ninety (90) days after the
date of entry thereof; or
(e) TSFC or CCI shall cease to do business as a
going concern, shall become bankrupt, shall
make an assignment for the benefit of creditors
or otherwise take advantage of the bankruptcy
or any other law for the relief of debtors; a
trustee or receiver for TSFC or CCI shall be
appointed or there shall be filed by or against
TSFC any petition under any provision of the
27
33
Federal Bankruptcy Code, as amended, and, in
the case of a petition filed against TSFC or
CCI, such petition shall not be dismissed,
withdrawn, or otherwise eliminated within
ninety (90) days after the filing thereof; or
(f) any ERISA plan of CCI shall terminate, or CCI
or TSFC shall fully or partially withdraw from
such a plan or plan which could result in
liability of CCI or TSFC to the Pension
Benefit Guaranty Corporation or to such plan or
plans in the Aggregate amount of One Million
Dollars ($1,000,000) or more (in excess of any
applicable insurance).
11.2 Remedies. If an Event of Default shall have
occurred, and such Event of Default had not been cured within an applicable
cure period, and further upon notice of such Event of Default to TSFC Lender
shall have the right to do any or all of the following:
(a) complete and deliver to the Lessees the notices
received by Lender from TSFC pursuant to
Section 5.3(f) and to commence direct
collection of the Rents until such time as
Lender has received the total Loan Repayment
Amount of all Loans due under the Agreement, an
administrative fee in an amount reasonably
determined by Lender to reimburse it for its
anticipated costs and expenses of directly
billing and collecting the Lessees for Rent
(the "Administrative Fee"), any late charges,
or other costs or expenses incurred by Lender
and due hereunder:
(b) (i) exercise of any of the Lessor's rights
under any of the Leases, or (ii) by written
notice, require TSFC to exercise on behalf of
Lender as secured party under this Agreement
any and all of the rights available to the
Lessor under any Lease to the extent not
already exercised by TSFC, whereupon TSFC shall
immediately take all requested action;
(c) discontinue making Loans and as liquidated
damages and not a penalty, to assess the
Administrative Fee and to accelerate the
balance due under the First Loss Provision
pursuant to Section 8.4 of the Agreement to be
due and payable immediately, or
28
34
(d) proceed against TSFC, CCI or both of them, for
all rights and remedies Lender may have under
this Agreement and/or the Operating Agreement
or provided by applicable law or otherwise
available at law or in equity.
Upon the occurrence of an Event of Default, or upon the
failure of a Lessee to perform its obligations under a Lease, Lender shall have
and may exercise all the rights and remedies of a secured party under the
California Uniform Commercial Code (expressly including, but not limited to,
those granted under 9-502(1) and 9-306 dealing with retention of cash
proceeds); and any other applicable laws (including but not limited to the
right to assume direct collection of any and all Leases and retain any and all
cash proceeds collected under the Leases until such time that Lender has
received the total Loan Repayment Amount of all Loans due under this Agreement,
plus the Administrative Fee, late charges or other costs and expenses incurred
by lender and due hereunder); provided, however, that so long as Lessee under a
Lease is not in default thereunder, Lender shall not take any action or
exercise any right that would disturb such Lessee's full and quiet enjoyment of
all of such Lessee's rights under that Lease. Lender will give TSFC reasonable
notice of the time and place of any public sale of any Collateral or of the
time after which any public or private sale of such Collateral or any other
intended disposition thereof is to be made. Unless otherwise provided by law,
the requirement of reasonable notice shall be met if such notice is delivered
at least ten (10) days before or mailed, postage prepaid, to TSFC , at least
twenty (20) days before the time of such sale or disposition. Subject to
applicable provisions of this Agreement, Collateral proceeds including, but not
limited to, the proceeds of any sale or disposition of Collateral shall be
applied: first, to the expense of settling all liens and claims against such
Collateral and all reasonable costs, charges and expenses incurred by Lender in
connection with the Event of Default, Lender's exercise of remedies under this
Section 11.2 (including without limitation those described in Section 12.4),
and in taking, removing, holding, preparing for sale and selling the Equipment;
second, to the payment of the remaining total Loan Repayment Amount of all
Loans; third, to any other unpaid obligations of TSFC hereunder and of CCI
under the Operating Agreement; and fourth, any remaining proceeds shall be paid
to TSFC.
TSFC shall pay to Lender all fees, costs and expenses incurred
by Lender in enforcing any term of condition of this Agreement, including
without limitation, Lender's attorney's fees.
Notwithstanding the foregoing, Lender shall have the right to
discontinue making Loans at any time in its sole discretion, whether or not an
Event of Default has occurred.
29
35
Nothing contained in this Section 11.2 shall entitle Lender to
recourse against TSFC with respect to payment of the Loans which is not
expressly granted to Lender by this Agreement.
12. MISCELLANEOUS
12.1 General. Waiver of any particular default shall not
be a waiver of any other default. All Lender's rights are cumulative and not
alternative. No waiver or change, modification or amendment in this Agreement
shall bind Lender or TSFC unless an officer of Lender and TSFC , has agreed to
such waiver or change, modification or amendment in writing. Any provision of
this Agreement contrary to, prohibited by or invalid under applicable laws or
regulations shall be inapplicable and deemed omitted herefrom, but shall not
invalidate the remaining provisions hereof. No oral agreement, guaranty or
warranty shall be binding. This Agreement shall be governed by the laws of
California.
12.2 Notices. All notices, demands, directions, consents
and approvals hereunder shall be in writing and shall be delivered in person,
by telecopy, by overnight courier or by prepaid certified mail, addressed to
the party for whom it is intended, if to
Triad Systems Financial Corporation
0000 Xxxxx Xxxxx
Xxxxxxxxx, Xxxxxxxxxx, 00000
Telecopy No. 000-000-0000
Attention: Xxxxxx X. Xxxxxxxx, Vice President
With a copy to: Xxxx Xxxx, Vice President
Finance & CFO Cooperative Computing, Inc.
0000 Xxx Xxxx Xxxx
Xxxxxx, Xxxxx 00000
Telecopy No. 512/328-6461
and if to
Mellon US Leasing, a Division of
Mellon Leasing Corporation
000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: President
Telecopy No.: 415/538-9611
30
36
and shall be deemed delivered on the day of actual receipt. Either party may
change its address for the receipt of notices, demands, directions, consents,
and approvals by notice duly given to the other party pursuant to this Section
12.2.
Notices may also effectively be given by transmitting over
electronic devices such as facsimile machine, if either party to whom such
notice is being sent has such device in its office. Notices given by
electronic transmitting devices shall be deemed effective on the date of
transmission.
12.3 Waivers. TSFC hereby waives demand, presentment,
protest and notice thereof with respect to any and all instruments, notice of
acceptance hereof, and all other demands and notices of any description, except
as expressly provided herein. No delay or omissions on the part of either
party in exercising any right, remedy, option, or notice of default, except as
any pertinent statute of limitations which may apply, on any one occasion,
shall be construed as a bar to or waiver of any other default, right, remedy or
option, or the same default, right, remedy or option any future occasion.
12.4 Costs and Expenses. In any case where Lender or TSFC
is entitled hereunder to reimbursement of costs and expenses, such costs and
expenses shall include interest on any judgment and court costs, reasonable
legal fees and expenses (including allocated fees of internal counsel).
12.5 Successors; Assigns. This Agreement shall inure to
the benefit of and be binding upon Lender and TSFC and their respective
successors and permitted assigns. Neither party may assign this Agreement
without the other party's consent, unless such assignment is to any wholly
owned subsidiary, parent or affiliate of the assigning party. If either party
does not consent to such proposed assignment, TSFC shall have the option to
prepay the outstanding aggregate Loan Repayment Amount to Lender at a price to
be determined by mutual agreement of the parties.
12.6 Entire Agreement. The terms and conditions herein
contained constitute the entire agreement between Lender and TSFC with respect
to the subject matter hereof, except to the extent other agreements are
referred to herein or contemplated hereby or executed contemporaneously
herewith, and supersede all previous communications whether oral or written
between Lender and TSFC with respect to such subject matter. No agreement or
understanding varying or extending any rights or obligations hereunder of
either of the parties shall be binding unless in a writing signed by a duly
authorized officer or representative of the party against which such variance
or extension is sought to be enforced.
31
37
12.7 Headings; Titles. The cover, table of contents and
titles for Sections used in this Agreement are intended to be descriptive only
and shall not be deemed to limit, extend or in any way modify the meaning of
the text of this Agreement
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their officers thereunto duly authorized as of the day and
year first above written.
TRIAD SYSTEMS FINANCIAL CORPORATION,
a California Corporation
By: /S/ XXXXXXX X. XXXXXX
----------------------------------------
General Counsel
Its: Authorized Signatory
MELLON US LEASING, A DIVISION OF
MELLON LEASING CORPORATION,
a Pennsylvania Corporation
By: /S/ XXXX X. XXXXXXX
-----------------------------------------
Vice President
Its: Authorized Signatory
32
