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EXHIBIT 10.10
LOAN AND SECURITY AGREEMENT
This Agreement is between the undersigned Borrower and the undersigned
Lender concerning loans and other credit accommodations to be made by Lender to
Borrower.
SECTION 1. PARTIES
1.1 The "BORROWER" is identified in Section 10.5(c) and its
successors and assigns. If more than one Borrower is specified in Section
10.5(c), all references to Borrower shall mean each of them, jointly and
severally, individually and collectively, and the successors and assigns of
each.
1.2 The "LENDER" is THE CIT GROUP/CREDIT FINANCE, INC. and its
agents, designees, representatives, successors and assigns.
SECTION 2. LOANS AND OTHER CREDIT ACCOMMODATIONS
2.1 Revolving Loans. Lender shall, subject to the terms and
conditions contained herein, make revolving loans to Borrower ("REVOLVING
LOANS") in amounts requested by Borrower from time to time, but not in excess of
the Net Availability existing immediately prior to the making of the requested
loan and provided the requested loan would not cause the outstanding Obligations
to exceed the Maximum Credit.
(a) The "MAXIMUM CREDIT" is set forth in Section 10.1(a).
(b) The "GROSS AVAILABILITY" is at any time (i) the product of the
outstanding amount of Eligible Accounts, multiplied by the Eligible Accounts
Percentage set forth in Section 10.1(b), plus: (ii) the product(s) obtained by
multiplying the applicable Eligible Inventory Percentage(s), if any, set forth
in Section 10.1(b) by the values (based on the lower of cost, market or
appraised value) of Eligible Inventory, but the amount so added shall not
exceed any sublimits set forth in Section 10.1(c).
(c) The "NET AVAILABILITY" shall be calculated at any time as an
amount equal to the Gross Availability minus the aggregate amount of all
then-outstanding Obligations to Lender other than the then outstanding
principal balance of the Term Loan, if any.
(d) "ELIGIBLE ACCOUNTS" are accounts created by Borrower in the
ordinary course of its business which are and remain acceptable to Lender for
lending purposes. General criteria for Eligible Accounts are set forth below
but may be revised from time to time by Lender, in its sole judgment, on
fifteen (15) days' prior written notice to Borrower. Lender shall, in general,
deem and continue to deem accounts to be Eligible Accounts if: (1) such
accounts arise from bona fide completed transactions and have not remained
unpaid for more than the number of days after the invoice date set forth in
Section 10.1(d); (2) the amounts of the accounts reported to Lender are
absolutely owing to Borrower and payment is not conditional or contingent,
(such as consignments, guaranteed sales or right of return or other similar
terms); (3) the account debtor's chief executive office or principal place of
business is located in the United States; (4) such accounts do not arise from
progress xxxxxxxx, retainages or xxxx and hold sales; (5) there are no contra
relationships, setoffs, counterclaims or disputes existing with respect thereto
and there are no other facts existing or threatened which would impair or delay
the collectibility of all or any portion thereof; (6) the goods giving rise
thereto were not at the time of the sale subject to any
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liens except those permitted in this Agreement; (7) such accounts are not
accounts with respect to which the account debtor or any officer or employee
thereof is an officer, employee or agent of or is affiliated with Borrower,
directly or indirectly, whether by virtue of family membership, ownership,
control, management or otherwise; (8) there has been compliance with the
Assignment of Claims Act or similar State or local law, if applicable, if the
account debtor is the United States or any domestic governmental unit; (9)
Borrower has delivered to Lender such documents as Lender may have requested
pursuant to Section 5.9 hereof in connection with such accounts and Lender shall
have received verifications of such accounts, satisfactory to it, if sent to the
account debtors or any other obligors or any bailees pursuant to Section 5.5
hereof; (10) there are no facts existing or threatened which might result in any
adverse change in the account debtor's financial condition; (11) accounts owed
by an account debtor and its affiliates do not represent more than twenty
percent (20%) of all otherwise Eligible Accounts (the amount exceeding twenty
percent (20%) shall not be eligible);(12) not more than fifty percent (50%) of
the accounts of an account debtor or its affiliates owed to Borrower are more
than the number of days set forth in Section 10.1(d); (13) such accounts are
owed by account debtors whose total indebtedness to Borrower does not exceed the
amount of any customer credit limits as established from time to time on notice
to Borrower (the amount exceeding the credit limit shall not be eligible); and
such accounts are owed by account debtors deemed creditworthy at all times by
Lender in its reasonable credit judgment.
(e) "ELIGIBLE INVENTORY" is inventory owned by Borrower which is
and remains acceptable to Lender for lending purposes and is located at one of
the addresses set forth in Section 10.5(e).
(f) Lender shall have a continuing right to reduce the Gross
Availability by implementing Reserves ("RESERVES"), and to increase and
decrease such Reserves from time to time, if and to the extent that, in
Lender's reasonable credit judgment, such Reserves are necessary to protect
Lender against any state of facts which does, or would, with notice or passage
of time or both, constitute an Event of Default or have an adverse effect on
any Collateral.
(g) If a voluntary or involuntary petition under the Bankruptcy
Code is filed against the Borrower, then Lender need not make loans.
(h) Revolving Loans will not at any time exceed the Gross
Availability unless Lender has consented.
2.2 Term Loan. Lender shall make Term Loans to Borrower on the
terms and conditions set forth in Section 10.2 ("TERM LOAN"). The Term Loan
balance shall automatically be accelerated and become due and payable upon
termination of this Agreement.
2.3 Accommodations. Lender may, in its sole discretion, issue or
cause to be issued, from time to time at Borrower's request and on terms and
conditions and for purposes satisfactory to Lender, credit accommodations
consisting of letters of credit, bankers' acceptances, merchandise purchase
guaranties or other guaranties or indemnities for Borrower's account
("ACCOMMODATIONS"). Borrower shall execute and perform additional agreements
relating to the Accommodations in form and substance acceptable to Lender and
the issuer of any Accommodations, all of which shall supplement the rights and
remedies granted herein. Any payments made by Lender or any affiliate of Lender
in connection with the Accommodations shall constitute additional Revolving
Loans to Borrower.
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SECTION 3. INTEREST AND FEES
3.1 Interest.
(a) Interest on the Revolving Loans and Term Loans shall be
payable by Borrower on the first day of each month, calculated upon the closing
daily balances in the loan account of Borrower for each day during the
immediately preceding month, at the per annum rate set forth as the Interest
Rate in Section 10.3(a). The Interest Rate shall increase or decrease by an
amount equal to each increase or decrease, respectively, in the Prime Rate (as
defined below), effective as of the date of each such change. On and after any
Event of Default or termination or non-renewal hereof, interest on all unpaid
Obligations shall accrue at a rate equal to two percent (2%) per annum in
excess of the Interest Rate otherwise payable until such time as all
Obligations are indefeasibly paid in full (notwithstanding entry of any
judgment against Borrower or the exercise of any other right or remedy by
Lender), and all such interest shall be payable on demand. Interest shall in no
month be less than the Interest Rate multiplied by the Minimum Borrowing set
forth in Section 10.1(e). In no event shall charges constituting interest
exceed the rate permitted under any applicable law or regulation, and if any
provision of this Agreement is in contravention of any such law or regulation,
such provision shall be deemed amended to conform thereto.
(b) The "PRIME RATE" is the rate of interest publicly announced by
The Chase Manhattan Bank in New York, New York, or its successors and assigns
from time to time as its prime rate.
3.2 Fees. Borrower shall pay to Lender:
(a) Closing Fee. At closing a Closing Fee in the amount set forth
in SECTION 10.3(c).
(b) Facility Fee. A Facility Fee (fully earned at closing or the
beginning of any renewal term) in installments at each anniversary of closing
or renewal term as set forth in Section 10.3(d).
(c) Account Servicing Fee. Monthly, on the first day of each month
during the initial and each renewal Term an Account Servicing Fee for the
immediately preceding month (or part thereof) in the amount set forth in
Section 10.3(e).
(d) Unused Line Fee. Monthly, on the first day of each month, in
arrears, an Unused Line Fee for each month during the initial and each renewal
Term at the rate per annum set forth in Section 10.3(f), calculated upon the
amount, if any, by which the Maximum Credit exceeds the greater of the Minimum
Borrowing or the average outstanding daily principal balance during the
preceding month of all Revolving Loans, Accommodations and any Term Loan.
SECTION 4. GRANT OF SECURITY INTEREST
4.1 Grant of Security Interest. To secure the payment and
performance in full of all Obligations, Borrower hereby grants to Lender a
continuing security interest in and lien upon, and a right of setoff against,
and Borrower hereby assigns and pledges to Lender, all of the Collateral,
including any Collateral not deemed eligible for lending purposes.
4.2 "OBLIGATIONS" shall mean any and all Revolving Loans, Term
Loans, Accommodations and all other indebtedness, liabilities and obligations
of every kind, nature and description owing by Borrower to Lender and/or its
affiliates, including principal, interest, charges, fees and expenses, however
evidenced, whether as principal, surety, endorser, guarantor or otherwise,
whether arising under this Agreement or otherwise, whether now existing or
hereafter arising, whether arising before, during or after the initial or any
renewal Term or after the commencement of any case with respect to Borrower
under the United States Bankruptcy Code or any similar statute, whether direct
or indirect, absolute or contingent, joint or several, due or not due, primary
or secondary, liquidated or unliquidated, secured or
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unsecured, original, renewed or extended and whether arising directly or
howsoever acquired by Lender including from any other entity outright,
conditionally or as collateral security, by assignment, merger with any other
entity, participations or interests of Lender in the obligations of Borrower to
others, assumption, operation of law, subrogation or otherwise and shall also
include all amounts chargeable to Borrower under this Agreement or in
connection with any of the foregoing.
4.3 "COLLATERAL" shall mean all of the following property of
Borrower:
(a) All now owned and hereafter acquired right, title and
interest of Borrower in, to and in respect of all: accounts, interests in goods
represented by accounts, returned, reclaimed or repossessed goods with respect
thereto and rights as an unpaid vendor; contract rights; chattel paper;
investment property; general intangibles (including, but not limited to, tax
and duty refunds, registered and unregistered patents, trademarks, service
marks, copyrights, trade names, applications for the foregoing, trade secrets,
goodwill, processes, drawings, blueprints, customer lists, licenses, whether as
licensor or licensee, choses in action and other claims, and existing and
future leasehold interests in equipment and fixtures); documents; instruments;
letters of credit, bankers' acceptances or guaranties; cash moneys, deposits,
securities, bank accounts, deposit accounts, credits and other property now or
hereafter held in any capacity by Lender, its affiliates or any entity which,
at any time, participates in Lender's financing of Borrower or at any other
depository or other institution; agreements or property securing or relating to
any of the items referred to above;
(b) All now owned and hereafter acquired right, title and interest
of Borrower in, to and in respect of goods, including, but not limited to:
(i) All inventory, wherever located, whether now owned or
hereafter acquired, of whatever kind, nature or description, including all raw
materials, work-in-process, finished goods, and materials to be used or
consumed in Borrower's business; and all names or marks affixed to or to be
affixed thereto for purposes of selling same by the seller, manufacturer,
lessor or licensor thereof; and
(ii) All equipment and fixtures, wherever located, whether
now owned or hereafter acquired, including, without limitation, all machinery,
equipment, motor vehicles, furniture and fixtures, and any and all additions,
substitutions, replacements (including spare parts), and accessions thereof and
thereto;
(c) All now owned and hereafter acquired right, title and
interests of Borrower in, to and in respect of any personal property in or upon
which Borrower has or may hereafter have a security interest, lien or right of
setoff;
(d) All present and future books and records relating to any of
the above including, without limitation, all computer programs, printed output
and computer readable data in the possession or control of the Borrower, any
computer service bureau or other third party; and
(e) All products and proceeds of the foregoing in whatever form
and wherever located, including, without limitation, all insurance proceeds and
all claims against third parties for loss or destruction of or damage to any of
the foregoing.
SECTION 5. COLLECTION AND ADMINISTRATION
5.1 Collections. Borrower will, at its expense as Lender requests,
direct that all remittances and all other proceeds of accounts and other
Collateral be sent to a lock box designated by Lender, and
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deposited into a bank account selected by Lender with arrangements with the
bank providing that all funds deposited in the bank account are to be
transferred solely to Lender. Borrower shall bear all risk of loss of any funds
deposited into such account. In connection therewith, Borrower shall execute
such lock box and bank account agreements as Lender shall specify with banks
acceptable to Borrower and reasonably acceptable to Lender. Any collections or
other proceeds received by Borrower shall be held in trust for Lender and
immediately remitted to Lender in kind.
5.2 Charges to Loan Account. At Lender's option, all payments of
principal, interest, fees, costs, expenses and other charges provided for in
this Agreement, or in any other agreement now or hereafter existing between
Lender and Borrower, may be charged on the date when due, as principal to any
loan account of Borrower maintained by Lender. Interest, fees for
Accommodations, the Unused Line Fee and any other amounts payable by Borrower
to Lender based on a per annum rate shall be calculated on the basis of actual
days elapsed over a 360-day year.
5.3 Payments. All Obligations shall be payable at Lender's Office
set forth in Section 10.5(a) or at Lender's bank designated in Section 10.5(b)
or at such other bank or place as Lender may expressly designate from time to
time for purposes of this Section. Lender shall apply all proceeds of accounts
or other Collateral received by Lender and all other payments in respect of the
Obligations to the Revolving Loans or to any other Obligations then due, in
whatever order or manner Lender shall determine. For purposes of determining
Gross Availability and Net Availability and for the calculation of the Minimum
Borrowing, remittances and other payments will be treated as credited to the
loan account of Borrower maintained by Lender and Collateral balances to which
they relate, upon the date of Lender's receipt of advice from Lender's bank
that such remittances or other payments have been credited to Lender's account
or in the case of remittances or other payments received directly in kind by
Lender, upon the date of Lender's deposit thereof at Lender's bank, subject to
final payment and collection. In computing interest charges, the loan account
of Borrower will be credited with remittances and other payments for the number
of days set forth in Section 10.3(b) after the day Lender has received
remittances in Lender's account at Lender's Bank. For purposes of this
Agreement, "BUSINESS DAY" shall mean any day other than a Saturday, Sunday or
any other day on which Lender or banks located in states where Lender has its
offices, are authorized to close.
5.4 Loan Account Statements. Lender shall render to Borrower
monthly a loan account statement. Each statement shall be considered correct
and binding upon Borrower as an account stated, except to the extent that
Lender receives, within sixty (60) days after the mailing of such statement,
written notice from Borrower of any specific exceptions by Borrower to that
statement.
5.5 Direct Collections. Lender may, at any time, (a) notify any
account debtor that the accounts and other Collateral which includes a monetary
obligation have been assigned to Lender by Borrower and that payment thereof is
to be made to the order of and directly to Lender, (b) send, or cause to be
sent by its designee, requests (which may identify the sender by a pseudonym)
for verification by telephone, in writing or otherwise of accounts and other
Collateral directly to any account debtor or any other obligor or any bailee
with respect thereto, (c) demand, collect or enforce payment of any accounts or
such other Collateral, but without any duty to do so, and Lender shall not be
liable for any failure to collect or enforce payment thereof, (d) take or
bring, in the name of Lender or Borrower, all steps, actions, suits or
proceedings deemed by Lender necessary or desirable to effect collection of or
other realization upon the accounts and other Collateral, (e) after an Event of
Default, change the address for delivery of mail to Borrower and to receive and
open mail addressed to Borrower, and (f) after an Event of Default, extend the
time of payment of, compromise or settle for cash, credit, return of
merchandise, and upon any terms or conditions, any and all accounts or other
Collateral which includes a monetary obligation and discharge or release the
account debtor or other obligor, without affecting any of the Obligations. At
Lender's request, all invoices and statements sent to any account debtor, other
obligor or
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bailee, shall state that the accounts and such other Collateral have been
assigned to Lender and are payable directly and only to Lender.
5.6 Attorney-in-Fact. Borrower hereby irrevocably appoints Lender
as Borrower's attorney-in-fact and authorizes Lender at Borrower's sole
expense, to exercise at any times in Lender's discretion all or any of the
powers necessary for Lender to obtain information about the Collateral or to
enforce Lender's rights.
5.7 Liability. Borrower hereby releases and exculpates Lender, its
officers and employees from any liability arising from any acts under this
Agreement or in furtherance thereof, except for gross negligence or willful
misconduct. Lender will not have any liability to Borrower for lost profits or
other special or consequential damages.
5.8 Administration of Accounts. After written notice by Lender to
Borrower or without notice after an Event of Default, Borrower shall not, (a)
amend, modify, settle or compromise any of the accounts or any other Collateral
which includes a monetary obligation, (b) release in whole or in part any
account debtor or other person liable for the payment of any of the accounts or
any such other Collateral, or (c) grant any credits, discounts, allowances,
deductions, return authorizations or the like with respect to any of the
accounts or any such other Collateral.
5.9 Documents. Borrower shall deliver to Lender, as Lender may
request, all documents, schedules, invoices, proofs of delivery, purchase
orders, statements, contracts and all other information evidencing or relating
to the Collateral, in form and substance satisfactory to Lender and duly
executed by Borrower. Without limiting the provisions of Section 5.5,
Borrower's granting of credits, discounts, allowances, deductions, return
authorizations or the like will be promptly reported to Lender in writing. In
no event shall any schedule or confirmatory assignment (or the absence thereof
or omission of any of the accounts or other Collateral therefrom) limit or in
any way be construed as a waiver, limitation or modification of the security
interests or rights of Lender or the warranties, representations and covenants
of Borrower under this Agreement. Any documents, schedules, invoices or other
paper delivered to Lender by Borrower may be destroyed or otherwise disposed of
by Lender six (6) months after receipt by Lender, unless Borrower requests
their return in writing in advance and makes prior arrangements for their
return at Borrower's expense.
5.10 Access. Lender shall have access, prior to an Event of Default
during reasonable business hours and on or after an Event of Default at any
time, to all of the premises where Collateral is located for the purposes of
inspecting or copying the Collateral, and all Borrower's books and records.
Lender, at no charge, may use such of Borrower's personnel, equipment,
including computer equipment, programs, printed output and computer readable
media, supplies and premises for the collection of accounts and realization on
other Collateral as Lender, in its sole discretion, deems appropriate. Borrower
hereby irrevocably authorizes all accountants and third parties to disclose and
deliver to Lender at Borrower's expense all financial information, books and
records, work papers, management reports and other information in their
possession regarding Borrower.
SECTION 6. ADDITIONAL REPRESENTATIONS, WARRANTIES AND COVENANTS
Borrower hereby represents, warrants and covenants to Lender the
following, the truth and accuracy of which, and compliance with which, shall be
continuing conditions of the making of loans or other credit accommodations by
Lender to Borrower:
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6.1 Financial and Other Reports. Borrower shall keep and maintain
its books and records in accordance with generally accepted accounting
principles, consistently applied. Borrower shall, at its expense on or before
Wednesday of every other week, deliver to Lender true and complete inventory
reports relating to the prior two weeks. Borrower shall, at its expense on or
before the fifteenth (15th) day of each month, deliver to Lender: (a) true and
complete monthly agings of its accounts receivable and accounts payable; (b)
monthly inventory reports; and (c) internally prepared interim financial
statements. Annually, Borrower shall deliver reviewed financial statements of
Borrower accompanied by the report and opinion thereon of independent certified
public accountants acceptable to Lender, as soon as available, but in no event
later than ninety (90) days after the end of Borrower's fiscal year. Borrower
to provide cash flow projections in a format reasonably acceptable to Lender.
All of the foregoing shall be in such form and together with such information
with respect to the business of Borrower or any guarantor, as Lender may in
each case reasonably request.
6.2 Trade Names. Borrower may from time to time render invoices
under its trade names set forth in Section 10.5(g) and, Borrower represents
that: (a) each trade name does not refer to another corporation or other legal
entity, (b) all accounts and proceeds thereof (including any returned
merchandise) invoiced under any such trade names are owned exclusively by
Borrower and (c) Lender may receive, endorse and deposit to any loan account of
Borrower maintained by Lender all checks or other remittances made payable to
any trade name of Borrower representing payment with respect to such sales or
services.
6.3 Losses. Borrower shall promptly notify Lender in writing of
any loss, damage, investigation, action, suit, proceeding or claim relating to
a material portion of the Collateral or which may result in any material
adverse change in Borrower's business, assets, liabilities or condition,
financial or otherwise.
6.4 Books and Records. Borrower's books and records concerning
accounts and its chief executive office are and shall be maintained only at the
address set forth in Section 10.5(d). Borrower's only other places of business
and the only other locations of Collateral, if any, are and shall be the
addresses set forth in Section 10.5(f) hereof, except Borrower may change such
locations or open a new place of business after thirty (30) days prior written
notice to Lender. Borrower shall execute and deliver or cause to be executed
and delivered to Lender such financing statements, amendments, financing
documents and security and other agreements as Lender may reasonably require.
6.5 Title. Borrower has and at all times will continue to have
good and marketable title to all of the Collateral, free and clear of all
liens, security interests, claims or encumbrances of any kind except in favor
of Lender and except, if any, those set forth on Schedule A hereto; and
provided that Lender agrees to subordinate its lien on equipment to another
lender in the event that (a) Borrower is not in default under the Financing
Agreements, (b) Borrower has requested that Lender make loans to the Borrower
secured by the equipment, and (c) Lender is not willing to make loans to
Borrower in an amount equal to or greater than 80% of the forced sale value of
the equipment as determined by an appraiser acceptable to Lender, which
appraisal shall be conducted at Borrower's sole expense.
6.6 Disposition of Assets. Borrower shall not directly or
indirectly: (a) sell, lease, transfer, assign, abandon or otherwise dispose of
any part of the Collateral or any material portion of its other assets (other
than sales of inventory to buyers in the ordinary course of business and
disposals of equipment which are replaced with equipment of at least a
substantially equal value to that disposed of) or (b) consolidate with or merge
with or into any other entity, or permit any other entity to consolidate with
or merge with or into Borrower or (c) form or acquire any interest in any firm,
corporation or other entity.
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6.7 Insurance. Borrower shall at all times maintain, with
financially sound and reputable insurers, adequate insurance (including,
without limitation, at the option of Lender, earthquake and flood insurance)
with respect to the Collateral and other assets. All such insurance policies
shall be in such form, substance, amounts and coverage as may be reasonably
satisfactory to Lender and shall provide for thirty (30) days' prior written
notice to Lender of cancellation or reduction of coverage. Lender may obtain at
Borrower's expense, any such insurance should Borrower fail to do so and adjust
or settle any claim or other matter under or arising pursuant to such insurance
or to amend or cancel such insurance. Borrower shall provide evidence of such
insurance and a lender's loss payable endorsement satisfactory to Lender.
Borrower shall deliver to Lender, in kind, all instruments representing
proceeds of insurance received by Borrower. Lender may apply any insurance
proceeds received at any time to the cost of repairs to or replacement of any
portion of the Collateral and/or, at Lender's option, to payment of or as
security for any of the Obligations in any order or manner as Lender
determines.
6.8 Compliance With Laws. Borrower is and at all times will
continue to be in compliance with the requirements of all material laws, rules,
regulations and orders of any governmental authority relating to its business
(including laws, rules, regulations and orders relating to income, withholding,
excise, property and social security taxes, minimum wages, employee retirement
and welfare benefits, employee health and safety, or environmental matters) and
all material agreements or other instruments binding on Borrower or its
property. Borrower shall pay and discharge all taxes, assessments and
governmental charges against Borrower or any Collateral when due, unless the
same are being contested in good faith. Lender may establish Reserves for the
amount contested and penalties which may accrue thereon.
6.9 Accounts. With respect to each account deemed an Eligible
Account, except as reported in writing to Lender, Borrower has no knowledge
that any of the criteria for eligibility are not or are no longer satisfied and
the Eligibility criteria will continue to be satisfied. All statements made and
all unpaid balances and other information appearing in the invoices,
agreements, proofs of rendition of services and delivery of goods and other
documentation relating to the accounts, and all confirmatory assignments,
schedules, statements of account and books and records with respect thereto,
are true and correct and in all respects what they purport to be.
6.10 Equipment. With respect to Borrower's equipment, Borrower
shall keep the equipment in good order and repair, and in running and
marketable condition, ordinary wear and tear excepted.
6.11 Financial Covenants. Borrower shall at all times maintain
working capital and net worth (each as determined in accordance with generally
accepted accounting principles, in effect on the date hereof, consistently
applied) in the amounts set forth in Section 10.4(a) and (b) respectively and
Borrower shall not, directly or indirectly, expend or commit to expend, for
fixed or capital assets (including capital lease obligations) an amount in
excess of the capital expenditure limit set forth in Section 10.4(c) in any
fiscal year of Borrower.
6.12 Affiliated Transactions. Borrower will not, directly or
indirectly: (a) lend or advance money or property to, guarantee or assume
indebtedness of, or invest (by capital contribution or otherwise) in any
person, firm, corporation or other entity, except so long as an Event of
Default does not exist, Borrower may lend money to its parent; or (b) declare,
pay or make any dividend, redemption or other distribution on account of any
shares of any class of stock of Borrower now or hereafter outstanding, except
so long as an Event of Default does not exist, Borrower may pay dividends to
its parent; or (c) make any payment of the principal amount of or interest on
any indebtedness owing to any officer, director, shareholder, or affiliate of
Borrower, except so long as an Event of Default does not exist, Borrower may
make such payments to its parent; or (d) make any loans or advances to any
officer, director, employee shareholder or affiliate of Borrower; except so
long as an Event of Default does not
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exist, Borrower may make loans to its parent; (e) enter into any sale, lease or
other transaction with any officer, director, employee, shareholder or
affiliate of Borrower on terms that are less favorable to Borrower than those
which might be obtained at the time from persons who are not an officer,
director, employee, shareholder or affiliate of Borrower.
6.13 Fees and Expenses. Borrower shall pay, on Lender's demand, all
costs, expenses, filing fees and taxes payable in connection with the
preparation, execution, delivery, recording, administration, collection,
liquidation, enforcement and defense of the Obligations, Lender's rights in the
Collateral, this Agreement and all other existing and future agreements or
documents contemplated herein or related hereto, including any amendments,
waivers, supplements or consents which may hereafter be made or entered into in
respect hereof, or in any way involving claims or defense asserted by Lender or
claims or defense against Lender asserted by Borrower, any guarantor or any
third party directly or indirectly arising out of or related to the
relationship between Borrower and Lender or any guarantor and Lender,
including, but not limited to the following, whether incurred before, during or
after the initial or any renewal Term or after the commencement of any case
with respect to Borrower or any guarantor under the United States Bankruptcy
Code or any similar statute: (a) all costs and expenses of filing or recording
(including Uniform Commercial Code financing statement filing taxes and fees,
documentary taxes, intangibles taxes and mortgage recording taxes and fees, if
applicable); (b) all insurance premiums, appraisal fees and search fees; (c)
all fees as then in effect relating to the wire transfer of loan proceeds and
other funds and fees then in effect for returned checks and credit reports; (d)
all reasonable expenses and costs, unless previously paid by Borrower, from
time to time hereafter incurred by Lender during the course of periodic field
examinations of the Collateral and Borrower's operations including field
examiner travel, food and lodging, plus a per diem charge at the rate set forth
in Section 10.3(g) for Lender's examiners in the field and office; and (e) the
reasonable costs, disbursements and fees of in-house and outside counsel to
Lender, including but not limited to such fees and disbursements incurred as a
result of a workout, restructuring, reorganization, liquidation, insolvency
proceeding or litigation between the parties hereto, any third party and in any
appeals arising therefrom.
6.14 Further Assurances. At the request of Lender, at any time and
from time to time, at Borrower's sole expense, Borrower shall execute and
deliver or cause to be executed and delivered to Lender, such agreements,
documents and instruments, including waivers, consents and subordination
agreements from mortgagees or other holders of security interests or liens,
landlords or bailees, and do or cause to be done such further acts as Lender,
in its discretion, deems necessary or desirable to create, preserve, perfect or
validate any security interest of Lender in the Collateral and otherwise to
effectuate the provisions and purposes of this Agreement. Borrower hereby
authorizes Lender to file financing statements or amendments against Borrower
in favor of Lender with respect to the Collateral, without Borrower's signature
and to file as financing statements any carbon, photographic or other
reproductions of this Agreement or any financing statements signed by Borrower.
6.1 Environmental Condition. None of Borrower's properties or
assets has ever been designated or identified in any manner pursuant to any
environmental protection statute as a hazardous waste or hazardous substance
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 by
Borrower. Borrower has not received a summons, citation, notice, or directive
from the Environmental Protection Agency or any other federal or state
governmental agency any action or omission by Borrower resulting in the
releasing, or otherwise exposing of hazardous waste or hazardous substances
into the environment. Borrower is and will continue to be in compliance (in all
material respects) with all statutes, regulations, ordinances and other legal
requirements pertaining to the production, storage, handling, treatment,
release, transportation or disposal of any hazardous waste or hazardous
substance.
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6.16 State of Incorporation. If Borrower is a corporation, it is
duly organized, existing and in good standing under the laws of the state set
forth in Section 10.5(h).
SECTION 7. EVENTS OF DEFAULT AND REMEDIES
7.1 Events of Default. All Obligations shall be immediately due
and payable, without notice or demand, and any provisions of this Agreement as
to future loans and credit accommodations by Lender shall terminate
automatically, upon the termination or non-renewal of this Agreement or, at
Lender's option, upon or at any time after the occurrence or existence of any
one or more of the following "EVENTS OF DEFAULT":
(a) Borrower fails to pay when due any of the Obligations or fails
to perform any of the terms of this Agreement or any other existing or future
financing, security or other agreement between Borrower and Lender or any
affiliate of Lender, except that with respect to any defaults under Section 6.1
hereof, Borrower shall have forty-eight (48) hours after receipt of written
notice of such default in accordance with Section 9.4 of the Loan Agreement, to
cure such default;
(b) Any representation, warranty or statement of fact made by
Borrower to Lender in this Agreement or any other agreement, schedule,
confirmatory assignment or otherwise, or to any affiliate of Lender, shall
prove inaccurate or misleading in any material respect;
(c) Any guarantor revokes, terminates or fails to perform any of
the terms of any guaranty, endorsement or other agreement of such party in
favor of Lender or any affiliate of Lender;
(d) Any judgment or judgments aggregating in excess of the amount
set forth in Section 10.5(i) or any injunction or attachment is obtained
against Borrower or any guarantor, which remains unstayed for a period of ten
(10) days or is enforced;
(e) Borrower or any guarantor dies or ceases to exist or the usual
business of Borrower or any guarantor ceases or is suspended;
(f) Any change in the chief executive officer, chief operating
officer, chief financial officer or controlling ownership of Borrower;
(g) Borrower or any guarantor becomes insolvent, makes an
assignment for the benefit of creditors, makes or sends notice of a bulk
transfer or calls a general meeting of its creditors or principal creditors;
(h) Any petition or application for any relief under the
bankruptcy laws of the United States now or hereafter in effect or under any
insolvency, reorganization, receivership, readjustment of debt, dissolution or
liquidation law or statute of any jurisdiction now or hereafter in effect
(whether at law or in equity) is filed by or against Borrower or any guarantor;
(i) The indictment or threatened indictment of Borrower or any
guarantor under any criminal statute, or commencement or threatened
commencement of criminal or civil proceedings against Borrower or any
guarantor, pursuant to which statute or proceedings the penalties or remedies
sought or available include forfeiture of any of the property of Borrower or
such guarantor which Lender believes may have a material adverse effect on the
Collateral or Borrower's business; or
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(j) Any default or event of default occurs on the part of Borrower
under any material agreement, document or instrument to which Borrower is a
party or by which Borrower or any of its property is bound and continues beyond
any applicable cure period.
7.2 Remedies. Upon the occurrence of an Event of Default and at
any time thereafter, Lender shall have all rights and remedies provided in this
Agreement, any other agreements between Borrower and Lender, the Uniform
Commercial Code and other applicable law, all of which rights and remedies may
be exercised without notice to Borrower, all such notices being hereby waived,
except such notice as is expressly provided for hereunder or is not waivable
under applicable law. All rights and remedies of Lender are cumulative and not
exclusive and are enforceable, in Lender's discretion, alternatively,
successively, or concurrently on any one or more occasions and in any order
Lender may determine. Without limiting the foregoing, Lender may (a) accelerate
the payment of all Obligations and demand immediate payment thereof to Lender,
(b) with or without judicial process or the aid or assistance of others, enter
upon any premises on or in which any of the Collateral may be located and take
possession of the Collateral or complete processing, manufacturing and repair
of all or any portion of the Collateral, (c) require Borrower, at Borrower's
expense, to assemble and make available to Lender any part or all of the
Collateral at any place and time designated by Lender, (d) collect, foreclose,
receive, appropriate, setoff and realize upon any and all Collateral, (e) sell,
lease, transfer, assign, deliver or otherwise dispose of any and all Collateral
(including, without limitation, entering into contracts with respect thereto,
by public or private sales at any exchange, broker's board, any office of
Lender or elsewhere) at such prices or terms as Lender may deem reasonable, for
cash, upon credit or for future delivery, with the Lender having the right to
purchase the whole or any part of the Collateral at any such public sale, all
of the foregoing being free from any right or equity of redemption of Borrower,
which right or equity of redemption is hereby expressly waived and released by
Borrower. If any of the Collateral is sold or leased by Lender upon credit
terms or for future delivery, the Obligations shall not be reduced as a result
thereof until payment therefor is finally collected by Lender. If notice of
disposition of Collateral is required by law, ten (10) days prior notice by
Lender to Borrower designating the time and place of any public sale or the
time after which any private sale or other intended disposition of Collateral
is to be made, shall be deemed to be reasonable notice thereof and Borrower
waives any other notice. In the event Lender institutes an action to recover
any Collateral or seeks recovery of any Collateral by way of prejudgment
remedy, Borrower waives the posting of any bond which might otherwise be
required.
7.3 Application of Proceeds. Lender may apply the cash proceeds of
Collateral from any sale, lease, foreclosure or other disposition of the
Collateral to payment of any of the Obligations, in whole or in part and in
such order as Lender may elect, whether or not then due. Borrower shall remain
liable to Lender for the payment of any deficiency together with interest at
the highest rate provided for herein and all costs and expenses of collection
or enforcement, including reasonable attorneys' fees and legal expenses.
7.4 Lender's Cure of Third Party Agreement Default. Lender may, at
its option, cure any default by Borrower under any agreement with a third party
or pay or bond on appeal any judgment entered against Borrower, discharge
taxes, liens, security interests or other encumbrances at any time levied on or
existing with respect to the Collateral and pay any amount, incur any expense
or perform any act which, in Lender's sole judgment, is necessary or
appropriate to preserve, protect, insure, maintain, or realize upon the
Collateral. Lender may charge Borrower's loan account for any amounts so
expended, such amounts to be repayable by Borrower on demand. Lender shall be
under no obligation to effect such cure, payment, bonding or discharge, and
shall not, by doing so, be deemed to have assumed any obligation or liability
of Borrower.
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SECTION 8. JURY TRIAL WAIVER; CERTAIN OTHER WAIVERS AND CONSENTS
8.1 JURY TRIAL WAIVER. BORROWER AND LENDER EACH WAIVE ALL RIGHTS
TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING INSTITUTED BY EITHER OF THEM
AGAINST THE OTHER WHICH PERTAINS DIRECTLY OR INDIRECTLY TO THIS AGREEMENT, THE
OBLIGATIONS, THE COLLATERAL, ANY ALLEGED TORTIOUS CONDUCT BY BORROWER OR
LENDER, OR, IN ANY WAY, DIRECTLY OR INDIRECTLY, ARISES OUT OF OR RELATES TO THE
RELATIONSHIP BETWEEN BORROWER AND LENDER. IN NO EVENT WILL LENDER BE LIABLE FOR
LOST PROFITS OR OTHER SPECIAL OR CONSEQUENTIAL DAMAGES.
8.2 Counterclaims. Borrower waives all rights to interpose any
claims, deductions, setoffs or counterclaims of any kind, nature or description
in any action or proceeding instituted by Lender with respect to this
Agreement, the Obligations, the Collateral or any matter arising therefrom or
relating thereto, except compulsory counterclaims.
8.3 Jurisdiction. Borrower hereby irrevocably submits and consents
to the nonexclusive jurisdiction of the State and Federal Courts located in the
State in which the office of Lender designated in Section 10.5(a) is located
and any other State where any Collateral is located with respect to any action
or proceeding arising out of this Agreement, the Obligations, the Collateral or
any matter arising therefrom or relating thereto. In any such action or
proceeding, Borrower waives personal service of the summons and complaint or
other process and papers therein and agrees that the service thereof may be
made by mail directed to Borrower at its chief executive office set forth
herein or other address thereof of which Lender has received notice as provided
herein, service to be deemed complete five (5) days after mailing, or as
permitted under the rules of either of said Courts. Any such action or
proceeding commenced by Borrower against Lender will be litigated only in a
Federal Court located in the district, or a State Court in the State and
County, in which the office of Lender designated in Section 10.5(a) is located
and Borrower waives any objection based on FORUM NON CONVENIENS and any
objection to venue in connection therewith.
8.4 No Waiver by Lender. Lender shall not, by any act, delay,
omission or otherwise be deemed to have expressly or impliedly waived any of
its rights or remedies unless such waiver shall be in writing and signed by an
authorized officer of Lender. A waiver by Lender of any right or remedy on any
one occasion shall not be construed as a bar to or waiver of any such right or
remedy which Lender would otherwise have on any future occasion, whether
similar in kind or otherwise.
SECTION 9. TERM OF AGREEMENT; MISCELLANEOUS
9.1 Term. This Agreement shall only become effective upon
execution and delivery by Borrower and Lender and shall continue in full force
and effect for a term set forth in Section 10.6 from the date hereof and shall
be deemed automatically renewed, based upon all of the terms and provisions of
this Agreement, for successive terms of equal duration thereafter unless
terminated as of the end of the initial or any renewal term (each a "TERM") by
either party giving the other written notice at least sixty (60) days prior to
the end of the then current Term.
9.2 Early Termination. Borrower may also terminate this Agreement
by giving Lender at least thirty (30) days prior written notice and payment in
full of all of the Obligations as provided herein, including the Early
Termination Fee, unpaid Facility Fee and any other fees. Thirty days after
receipt of such early termination notice, Lender need not make any further
loans or accommodations. Lender shall also have the right to terminate this
Agreement at any time upon or after the occurrence of an Event of Default. If
Lender terminates this Agreement upon or after the occurrence of an Event of
Default,
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Borrower shall pay Lender forthwith, in full, all Obligations, including Early
Termination Fee, Facility Fee and any other fees. In view of the impracticality
and extreme difficulty of ascertaining actual damages and by mutual agreement
of the parties as to a reasonable calculation of Lender's lost profits, the
Early Termination Fee shall be the percentage of the Maximum Credit set forth
in Section 10.3(h).
9.3 Termination Indemnity Deposit. Upon termination of this
Agreement by Borrower, as permitted herein, in addition to payment of all
Obligations which are not contingent, Borrower shall deposit such amount of
cash collateral as Lender determines is necessary to secure Lender from loss,
cost, damage or expense, including reasonable attorneys' fees, in connection
with any open Accommodations or remittance items or other payments
provisionally credited to the Obligations and/or to which Lender has not yet
received final and indefeasible payment.
9.4 Notices. Except as otherwise provided, all notices, requests
and demands hereunder shall be (a) made to Lender at its address set forth in
Section 10.5(a) and to Borrower at its chief executive office set forth in
Section 10.5(d), or to such other address as either party may designate by
written notice to the other in accordance with this provision, and (b) deemed
to have been given or made: if by hand, immediately upon delivery; if by telex,
telegram or telecopy (fax), immediately upon receipt; if by overnight delivery
service, one day after dispatch; and if by first class or certified mail, three
(3) days after mailing.
9.5 Severability. If any provision of this Agreement is held to be
invalid or unenforceable, such provision shall not affect this Agreement as a
whole, but this Agreement shall be construed as though it did not contain the
particular provision held to be invalid or unenforceable.
9.6 Entire Agreement; Amendments; Assignments. This Agreement
contains the entire agreement of the parties as to the subject matter hereof,
all prior commitments, proposals and negotiations concerning the subject matter
hereof being merged herein. Neither this Agreement nor any provision hereof
shall be amended, modified or discharged orally or by course of conduct, but
only by a written agreement signed by an authorized officer of Lender. This
Agreement shall be binding upon and inure to the benefit of each of the parties
hereto and their respective successors and assigns, except that any obligation
of Lender under this Agreement shall not be assignable nor inure to the
successors and assigns of Borrower.
9.7 Discharge of Borrower. No termination of this Agreement shall
relieve or discharge Borrower of its Obligations, grants of Collateral, duties
and covenants hereunder or otherwise until such time as all Obligations to
Lender have been indefeasibly paid and satisfied in full, including, without
limitation, the continuation and survival in full force and effect of all
security interests and liens of Lender in and upon all then existing and
thereafter-arising or acquired Collateral and all warranties and waivers of
Borrower.
9.8 Usage. All terms used herein which are defined in the Uniform
Commercial Code shall have the meanings given therein unless otherwise defined
in this Agreement and all references to the singular or plural herein shall
also mean the plural or singular, respectively.
9.9 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State in which the office of
Lender set forth in Section 10.5(a) below is located.
SECTION 10. ADDITIONAL DEFINITIONS AND TERMS
10.1 (a) Maximum Credit: $3,000,000
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(b) Gross Availability Formulas:
Eligible Accounts Percentage: 85% provided that the Dilution Percentage does not exceed 4%.
The Dilution Percentage is the sum of Borrower's credits, allowances, discounts, write-offs,
contra-accounts and offsets and deductions which reduce the value of accounts receivable
divided by gross invoices. The Dilution Percentage shall be calculated on a rolling 90 day
average. If the Dilution Percentage exceeds 4% then Lender may reduce the Eligible Accounts
Percentage to a lower rate in its reasonable credit judgment.
Eligible Inventory Percentages:
Finished Goods 40%
Raw Materials 40%
(c) Inventory Sublimit(s): $500,000
(d) Maximum days after Invoice
Date for Eligible Accounts: 90 Days
(e) Minimum Borrowing: $750,000 determined on a monthly basis
10.2 Term Loan:
(a) amount N/A
(b) monthly amortization N/A
(c) maturity date N/A
10.3 Interest, Fees & Charges:
(a) Interest Rate: Prime Rate plus 1.5% per annum
(b) Clearance: 2 Business Days
(c) Closing Fee: $15,000, earned and payable at Closing
(d)(1) Facility Fee for Initial Term:
First Anniversary: 1.0% of the Maximum Credit
Second Anniversary: 1.0% of the Maximum Credit
(2) Facility Fee for Renewal Term:
Renewal Date: 1.0% of the Maximum Credit
First Anniversary: 1.0% of the Maximum Credit
Second Anniversary: 1.0% of the Maximum Credit
provided, however, that Lender shall waive the Facility Fee to the extent not paid in the event
that (i) Borrower is not in default under the Financing Agreements and (ii) the Obligations are
paid with proceeds from new financing provided to Borrower by Chase Manhattan Bank or one of
its affiliates.
(e) Account Servicing Fee: $0
(f) Unused Line Fee: per annum $0
(g) Field Examination per diem charge per examiner $650 plus out of
pocket expenses
(h) Early Termination Fee:
First year: 2% of the Maximum Credit
Second year and thereafter: 1% of the Maximum Credit
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provided, however, that Lender shall waive the Early Termination Fee in the event that (i) the
termination occurs after the first anniversary of the Closing, (ii) Borrower is not in default under
the Financing Agreements and (iii) the Obligations are paid with proceeds from new financing provided
to the Borrower by Chase Manhattan Bank or one of its affiliates.
10.4 Financial Covenants:
(a) Working Capital: N/A
(b) Net Worth: N/A
(c) Capital Expenditures: per fiscal year N/A
10.5 (a) Lender's Office: 00 Xxxxx XxXxxxx
Xxxxxxx, Xxxxxxxx, 00000
(b) Lender's Bank: Bank of America, Illinois
000 Xxxxx XxXxxxx Xxxxxx
Xxxxxxx, XX 00000
(c) Borrower: Tri-Star Airline Services, Inc.
Pride Aviation, Inc.
Casper Air Service
Aero Design, Inc.
Pride Aviation Portland, Inc.
(d) Borrower's Chief Executive Office: Tri-Star Airline Services, Inc.
000 X. Xxxxx Xxxxxx
Xxxxx 0000
Xxxxxx, XX 00000
Pride Aviation, Inc.
0000 Xxxxxx Xxxxx
Xxx Xxxxxx, XX 00000
Casper Air Service
0000 Xxxxxx
Xxxxxx, XX 00000
Aero Design, Inc.
000 Xxx Xxxx Xxxxx
Xx. Xxxxxx, XX 00000
Pride Aviation Portland, Inc.
0000 Xxxxxx Xxxxx
Xxx Xxxxxx, XX 00000
(e) Locations of Eligible Inventory
Collateral: Tri-Star Airline
Services, Inc. - X.X. Xxx 000000
XXX Xxxxxxx
Xxxxxx, Xxxxx 00000
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Pride Aviation, Inc. 0000 X.X. Xxxxxxxx Xx.
Xxxxxxxx, Xxxxxx 00000
0000 Xxxxxx Xxxxx
Xxx Xxxxxx, XX 00000
Casper Air Service - 7956 Xxxxxx
Xxxxxx, XX 00000
Aero Design, Inc. - 000 Xxx Xxxx Xxxxx
Xx. Xxxxxx, XX 00000
Pride Aviation
Portland, Inc. 0000 X.X. Xxxxxxxx Xx.
Xxxxxxxx, Xxxxxx 00000
0000 Xxxxxx Xxxxx
Xxx Xxxxxx, XX 00000
(f) Borrower's Other Offices and Locations of
Collateral: None
(g) Borrower's Trade Names for Invoicing: None
(h) Borrower's State of Incorporation:
Tri-Star Airline Services, Inc. Texas
Pride Aviation, Inc. - Oklahoma
Casper Air Service - Wyoming
Aero Design, Inc. - Tennessee
Pride Aviation Portland, Inc. Oregon
(i) Judgment Amount $25,000
10.6 Term: 3 Years
10.7 Multiple Borrowers: The "Borrower" as defined in Section 1.1 and
identified in Section 10.5(c) consists of five "Borrowers". A request for a
Revolving Loan shall be made by a particular Borrower, with all relevant
determinations with respect to such request to be based on such Borrower's
individual criteria, such as the amount of its Eligible Accounts, Eligible
Inventory and Net Availability. Notwithstanding the foregoing, the maximum
aggregate amount outstanding for all Borrowers shall at no time exceed
$3,000,000. Except as provided in this Section 10.7 and as otherwise
specifically provided, "Borrower" shall be defined as set forth in Section 1.1
hereof.
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IN WITNESS WHEREOF, Borrower and Lender have duly executed this
Agreement this 21st day of August, 1998.
LENDER BORROWER:
THE CIT GROUP/CREDIT TRI-STAR AIRLINE
FINANCE, INC. SERVICES, INC.
By: By: /s/ XXX XXXXXXX
------------------------ ----------------------------
Title: Title: President
--------------------- -------------------------
PRIDE AVIATION, INC.
By: /s/ XXX XXXXXXX
----------------------------
Title: Chairman of the Board
-------------------------
CASPER AIR SERVICE
By: /s/ XXX XXXXXXX
----------------------------
Title: Chairman of the Board
-------------------------
AERO DESIGN, INC.
By: /s/ XXX XXXXXXX
----------------------------
Title: Chairman of the Board
-------------------------
PRIDE AVIATION
PORTLAND, INC.
By: /s/ XXX XXXXXXX
----------------------------
Title: Chairman of the Board
-------------------------
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