EXHIBIT 10.9
REVOLVING CREDIT AGREEMENT
THIS REVOLVING CREDIT AGREEMENT dated as of December 29, 1995 (this
"Agreement") is between FIRSTCITY FINANCIAL CORPORATION, a Delaware corporation
(the "Company") and CARGILL FINANCIAL SERVICES CORPORATION, a Delaware
corporation (the "Lender").
The Company has requested that the Lender provide the Company with a
revolving credit facility, pursuant to which the Lender will commit to make
revolving credit loans of up to $25,000,000.00 to the Company to finance working
capital expenditures and certain capital investments of the Company made in the
ordinary course of its business.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants set forth herein, the Company and the Lender agree as follows:
ARTICLE I.
DEFINITIONS; ACCOUNTING TERMS; INTERPRETATION
SECTION 1.01 Definitions. As used in this Agreement, the following
terms shall have the following meanings:
"Acquisition Entity" means a limited partnership, limited liability
company or corporation formed by the Company, a Subsidiary of the Company
or an Affiliate of the Company (and possibly certain other investors), for
the purpose of acquiring one or more portfolios of distressed assets in
its ordinary course of business; provided, the Company, Subsidiary or
Affiliate of the Company, as the case may be, does not own more than fifty
percent (50%) of such entity. The Acquisition Entities on the Effective
Date are listed on Schedule 1.01 hereof.
"Advance" means an advance pursuant to a Notice of Advance comprised
of a single Type of Loan from the Lender (or resulting from a conversion
or conversions on the same date having, in the case of Eurodollar Rate
Advances, the same Interest Period (except as otherwise provided in this
Agreement)).
"Advance Date" means, with respect to each Advance, the Business Day
upon which the proceeds of such Advance are to be made available to the
Company.
"Affiliate" means, with respect to any Person, any other Person
directly or indirectly controlling (including all directors and officers
of such Person), controlled by, or under direct or indirect common control
with such Person, and any other Person in which such Person's direct or
indirect equity interest is 10% or more of the total outstanding equity
interests of such Person.
"Agreement" has the meaning specified in the introduction to this
Agreement.
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"Alternate Base Rate" means, for any date, the lesser of (a) the
highest "Prime Rate" quoted in the Southwest Edition of The Wall Street
Journal plus a margin (determined by the Lender in its sole discretion)
which most closely approximates the most recent Eurodollar Rate plus the
applicable Margin and (b) the Highest Lawful Rate.
"Alternate Base Rate Advance" means any Advance bearing interest at
a rate determined by reference to the Alternate Base Rate in accordance
with the provisions of Article II.
"Assignment and Acceptance" has the meaning specified in Section
9.10 (c).
"Bankruptcy Code" has the meaning specified in Section 8.01(f).
"Board" means the Board of Governors of the Federal Reserve System
of the United States (or any successor).
"Business Day" means any day (other than a day which is a Saturday,
Sunday or legal holiday in the State of Minnesota) on which banks are open
for business in Minnetonka, Minnesota.
"Capitalized Lease Obligations" means all lease or rental
obligations which, pursuant to GAAP, are capitalized for balance sheet
purposes.
"Change of Control" means any of (i) the failure of the former
shareholders of J-Hawk Corporation (predecessor in interest to the
Company) to hold at least thirty percent (30%) of the outstanding voting
capital stock of the Company, (ii) the failure of any one of James R.
Hawkins, James T. Sartain, Rick Hagelstein, Matt Landry or David W.
MacLennan (or anyone approved by the Lender in writing in lieu of any of
the above Persons) to be a member of the Board of Directors of the Company
at any time, (iii) all or substantially all of the assets of the Company
are sold in a single transaction or series of related transactions to any
Persons or (iv) the Company merges or consolidates with or into any other
Person.
"Class A Certificate" means that certain "Class A Certificate"
issued by the FC Liquidating Trust to the Company which requires payments
to the Company in order to provide the Company with the funds required to
pay (a) the Senior Subordinated Notes (i.e., the Senior Subordinated
Certificate Payments), (b) Special Preferred Stock Payments and (c)
certain other payments.
"Code" means Internal Revenue Code of 1986 and the regulations
promulgated thereunder.
"Commitment" means $25,000,000.00.
"Commitment Fee" has the meaning specified in Section 3.01(a).
"Company" has the meaning specified in the introduction to this
Agreement.
"Credit Event" means the making of any Advance or the continuation
of any Advance as a Eurodollar Rate Advance.
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"Default" means the occurrence of any event which with the giving of
notice or the passage of time or both could become an Event of Default.
"Default Rate" means the lesser of (i) the Highest Lawful Rate and
(ii) the Eurodollar Rate plus ten percent (10%) per annum.
"Effective Date" means the date on which all conditions to make an
Advance set forth in Article IV are first met or waived in accordance with
Section 9.01 hereof.
"Eligible Assignee" means (a) a commercial bank organized under the
laws of the United States, or any state thereof, and having total assets
in excess of $1,000,000,000; (b) a commercial bank organized under the
laws of any other country which is a member of the Organization for
Economic Cooperation and Development or any successor organization, or a
political subdivision of any such country, and having total assets in
excess of $1,000,000,000; provided that such bank is acting through a
branch or agency located in the country in which it is organized or
another country which is also a member of the Organization for Economic
Cooperation and Development or any successor organization; (c) the central
bank of any country which is a member of the Organization for Economic
Cooperation and Development or any successor organization; and (d) any
other bank or similar financial institution approved by the Lender.
"Environmental Laws" means federal, state or local laws, rules or
regulations, and any judicial, arbitral or administrative interpretations
thereof, including any judicial, arbitral or administrative order,
judgment, permit, approval, decision or determination pertaining to
conservation or protection of the environment in effect at the time in
question, including the Clean Air Act, the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA"), the Federal Water
Pollution Control Act, the Occupational Safety and Health Act, the
Resource Conservation and Recovery Act, the Safe Drinking Water Act, the
Toxic Substances Control Act, the Superfund Amendment and Reauthorization
Act of 1986, the Hazardous Materials Transportation Act, and comparable
state and local laws, and other environmental conservation and protection
laws.
"ERISA" means the Employee Retirement Income Security Act of 1974
and the regulations promulgated thereunder.
"ERISA Affiliate" means (a) any trade or business (whether or not
incorporated) which is either a member of the same "controlled group" or
under "common control," within the meaning of Section 414 of the Code and
the regulations thereunder, with the Company and (b) any Subsidiary of the
Company.
"Eurodollar Rate" means the London interbank offered rate per annum
for a period equal to the Interest Period which appears on the Tele Rate
Screen "LIBO" page (3750) as of 11:00 a.m., (London time), two (2)
Business Days prior to the first day of the Interest Period.
"Eurodollar Rate Advance" means any Advance bearing interest at a
rate determined by reference to the Eurodollar Rate in accordance with the
provisions of Article II.
"Events of Default" has the meaning specified in Section 8.01.
"Execution Date" means December 29, 1995.
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"FCBOT" means First City Bancorporation of Texas, Inc., a bank
holding company incorporated in the State of Delaware, as it existed prior
to its merger with J-Hawk Corporation, a Texas corporation, on July 3,
1995.
"FC Intangible Assets" means all "Fidelity Bond" policies and claims
and "D & O" policies and claims of FCBOT and all capital stock in First
City Life Insurance Company, a life insurance company owned by FCBOT, and
all capital stock in Central Texas Insurance Company, Inc.; all of which
FC Intangible Assets are being held in the name of the Company for the
benefit of FCLT Loans, L.P., a Texas limited partnership, and/or FC
Liquidating Trust, as provided in the FCLT Asset Agency Agreement.
"FC Liquidating Trust" means FirstCity Liquidating Trust, a Texas
business trust.
"FC Trust Agreement" means that certain Liquidating Trust Agreement
dated as of July 3, 1995 under which Shawmut Bank Connecticut, National
Association, appears as Trustee (the "Trustee") and pursuant to which FC
Liquidating Trust was created, and any amendments thereto.
"FCLT Asset Agency Agreement" means (i) that certain Assignment of
Proceeds of Causes of Action dated June 21, 1995, pursuant to which FCBOT
assigned to FCLT Loans, L.P., a Texas limited partnership, all of its
right, title and interest in and to any and all proceeds recovered by
FCBOT as the result of the assertion by it of any claims related to that
portion of the FC Intangible Assets consisting of "Fidelity Bond" policies
and claims, and agreed that FCLT Loans, L.P., a Texas limited partnership,
would have the right to direct the prosecution by FCBOT of any such
claims, subject to certain terms and conditions as set forth therein, (ii)
that certain Assignment of Proceeds of Causes of Action dated July 3,
1995, pursuant to which FCBOT assigned to FCLT Loans, L.P., a Texas
limited partnership, all of its right, title and interest in and to any
and all proceeds recovered by FCBOT as the result of the assertion by it
of any claims related to that portion of the FC Intangible Assets
consisting of "D & O" policies and claims, and agreed that FCLT Loans,
L.P., a Texas limited partnership, would have the right to direct the
prosecution by FCBOT of any such claims, subject to certain terms and
conditions as set forth therein, and (iii) that certain Undertaking for
Future Assignment dated July 3, 1995, pursuant to which the Company agreed
to hold, for the benefit of FC Liquidating Trust, that portion of the FC
Intangible Assets consisting of capital stock in First City Life Insurance
Company and Central Texas Insurance Company, Inc., and agreed to transfer
to FC Liquidating Trust all proceeds in respect of such capital stock for
the account of FCLT Loans, L.P., a Texas limited partnership, and to
transfer, upon receipt of certain regulatory approvals and other
conditions, such capital stock to FCLT Loans, L.P., a Texas limited
partnership, or other designee of FC Liquidating Trust, subject to certain
terms and conditions as set forth therein.
"Fees" means all amounts payable pursuant to Section 3.01.
"Financials" has the meaning specified in Section 5.07.
"Funding Fee" shall have the meaning specified in Section 3.01(b).
"GAAP" means generally accepted accounting principles as in effect
from time to time as set forth in the opinions, statements and
pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants, the Financial Accounting
Standards
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Board and such other Persons who shall be approved by a significant
segment of the accounting profession and concurred in by the independent
certified public accountants certifying any audited financial statements
of the Company.
"Hazardous Materials" means (a) hazardous waste as defined in the
Resource Conservation and Recovery Act of 1976, or in any applicable
federal, state or local law or regulation, (b) hazardous substances, as
defined in CERCLA, or in any applicable state or local law or regulation,
(c) gasoline, or any other petroleum product or by-product, (d) toxic
substances, as defined in the Toxic Substances Control Act of 1976, or in
any applicable federal, state or local law or regulation or (e)
insecticides, fungicides, or rodenticides, as defined in the Federal
Insecticide, Fungicide, and Rodenticide Act of 1975, or in any applicable
federal, state or local law or regulation, as each such Act, statute or
regulation may be amended from time to time.
"Highest Lawful Rate" means the maximum nonusurious rate of interest
that, under applicable law, may be contracted for, taken, reserved,
charged or received by the Lender on the Loans or under the Loan Documents
at any time or from time to time. If the maximum rate of interest which,
under applicable law, the Lender is permitted to charge the Company on the
Loans shall change after the date hereof, to the extent permitted by
applicable law, the Highest Lawful Rate shall be automatically increased
or decreased, as the case may be, as of the effective time of such change
without notice to the Company or any other Person.
"Indebtedness" means (a) all indebtedness for borrowed money
(whether by loan or the issuance and sale of debt securities) or for the
deferred purchase price of property or services, (b) all indebtedness
created or arising under any conditional sale or other title retention
agreement with respect to property, (c) all Capitalized Lease Obligations,
(d) all guaranties or other contingent liabilities of any kind (including
letter of credit reimbursement obligations) and (e) all indebtedness, to
the extent it would constitute a liability on a balance sheet prepared in
accordance with GAAP or would be disclosed as a contingent liability in a
footnote to financial statements of such Person prepared in accordance
with GAAP.
"Interest Period" means, with respect to any Eurodollar Rate
Advance, (a) initially, the period commencing on the Advance Date and
ending on the last day of the current calendar month and (b) thereafter,
each succeeding monthly period commencing on the first (1st) day of the
following calendar month; provided that any Interest Period that would
otherwise extend beyond the Maturity Date shall end on the Maturity Date.
"Investment" means, as applied to any Person, any direct or indirect
purchase or other acquisition by such Person of the assets, stock or other
securities of any other Person, or any direct or indirect loan, advance or
capital contribution by such Person to any other Person, and any other
item which would be classified as an "investment" on a balance sheet of
such Person, including any direct or indirect contribution by such Person
of property or assets to a joint venture, partnership or other business
entity in which such Person retains an interest.
"Joint Plan" means that certain Joint Plan of reorganization dated
December 23, 1994, as amended, filed with the Bankruptcy Court in the
Bankruptcy Case by FCBOT, the Official Committee of Equity Security
Holders and J-Hawk Corporation with the participation of Cargill Financial
Services Corporation.
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"Lien" means, when used with respect to any Person, any mortgage,
lien, charge, pledge, security interest or encumbrance of any kind
(whether voluntary or involuntary and whether imposed or created by
operation of law or otherwise) upon, or pledge of, any of its property or
assets, whether now owned or hereafter acquired, or any lease intended as
security, any capital lease in the nature of the foregoing, any
conditional sale agreement or other title retention agreement, in each
case, for the purpose, or having the effect, of protecting a creditor
against loss or securing the payment or performance of an obligation.
"Loan" and "Loans" have the meaning specified in Section 2.01.
"Loan Documents" means this Agreement and the other documents
described in Article IV hereof.
"Margin" means, with respect to any Eurodollar Rate Advance, five
percent (5%) per annum.
"Material Adverse Effect" means, relative to any occurrence of
whatever nature (including any adverse determination in any litigation,
arbitration or governmental investigation or proceeding) a material
adverse effect equal to or greater than the lesser of (a) the value of
five percent (5%) of the outstanding common stock of the Company and (b)
$2,000,000.00.
"Maturity Date" means one year from the date hereof, unless
accelerated pursuant to Section 8.02.
"Multiemployer Plan" means any plan which is a "multiemployer plan"
(as such term is defined in Section 4001(a)(3) of ERISA).
"Note" has the meaning specified in Section 2.02.
"Notice of Advance" has the meaning provided in Section 2.03(a).
"Notice of Default" has the meaning specified in Section 8.02.
"Obligations" means all the obligations of the Company now or
hereafter existing under the Loan Documents, whether for principal,
interest, Fees, expenses, indemnification or otherwise.
"Payment Office" means the office of the Lender located at 6000
Clearwater Drive, Minnetonka, Minnesota, 55343, or such other office as
the Lender may hereafter designate in writing as such to the other parties
hereto.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to all or any of its functions under ERISA.
"Permitted Investments" means, as to any Person:
(a) securities issued or directly and fully guaranteed or
insured by the United States or any agency or instrumentality
thereof (provided that the full faith and credit of the United
States is pledged in support thereof) having maturities of not more
than twelve months from the date of acquisition thereof,
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(b) time deposits and certificates of deposit with maturities
of not more than twelve months from the date of acquisition by such
Person which deposits or certificates are either: (a) fully insured
by the Federal Deposit Insurance Corporation or (b) in any Bank or
other commercial bank incorporated in the United States or any U.S.
branch of any other commercial bank, in each case having capital,
surplus and undivided profits aggregating $100,000,000 or more with
a long-term unsecured debt rating of at least A- from Standard &
Poor's Ratings Group or A3 from Moody's Investors Service,
(c) commercial paper issued by any Person incorporated in the
United States rated at least A2 or the equivalent thereof by
Standard & Poor's Ratings Group or at least P2 or the equivalent
thereof by Moody's Investors Service and, in each case, maturing not
more than 270 days after the date of issuance,
(d) investments in money market mutual funds having assets in
excess of $2,000,000,000 substantially all of whose assets are
comprised of securities of the types described in clauses (a)
through (c) above,
(e) repurchase or reverse purchase agreements respecting
obligations with a term of not more than seven days for underlying
securities of the types described in clause (a) above entered into
with any bank listed in or meeting the qualifications specified in
clause (b) above,
(f) acquisitions of promissory notes evidencing loans (or real
property previously foreclosed upon) by the Company, any Subsidiary
or any Acquisition Entity in the ordinary course of its business,
and
(g) equity investments in Subsidiaries and/or Acquisition
Entities for the purposes of acquiring promissory notes evidencing
loans (or real property previously foreclosed upon).
"Person" means an individual, partnership, corporation (including a
business trust), limited liability company, joint stock company, trust,
unincorporated association, joint venture or other entity, or a foreign or
domestic state or political subdivision thereof or any agency of such
state or subdivision.
"Plan" means any employee pension benefit plan (as defined in
Section 3(2) of ERISA), subject to Title IV of ERISA or Section 412 of the
Code, other than a Multiemployer Plan, with respect to which the Company
or an ERISA Affiliate contributes or has an obligation or liability to
contribute, including any such plan that may have been terminated.
"Regulation U" means Regulation U of the Board (respecting margin
credit extended by banks), as the same is from time to time in effect, and
all official rulings and interpretations thereunder or thereof.
"Release" means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping or disposing
into the environment (including the abandonment or discarding of barrels,
containers and other closed receptacles).
"Reportable Event" means an event described in Section 4043(b) of
ERISA with respect to a Plan as to which the 30-day notice requirement has
not been waived by the PBGC.
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"Requirements of Environmental Laws" means, as to any Person, the
requirements of any applicable Environmental Law relating to or affecting
such Person or the condition or operation of such Person's business or its
properties, both real and personal.
"Responsible Officer" means, with respect to the Company, the
chairman of the board of directors, president or any executive or senior
vice president.
"Security Documents" means (a) that certain Security Agreement dated
as of even date herewith and executed by the Company granting the Lender a
first priority security interest in substantially all of the assets of the
Company, (b) that certain Pledge Agreement dated as of even date herewith
and executed by the Company granting the Lender a first priority security
interest in all of the outstanding capital stock of each Subsidiary of the
Company, (c) those certain Collateral Assignment of Partnership Interests
dated as of even date herewith, each executed by the Company and granting
the Lender a first priority security interest in all of the Company's
interest in each Acquisition Entity, (d) that certain Power of Attorney
dated as of even date herewith executed by the Company in favor of the
Lender and (e) any and all other security agreements, pledge agreements,
mortgages, assignments, UCC financing statements, registrations of pledge
and other similar documents executed by the Company and securing the
obligations.
"Senior Subordinated Certificate Payments" means payments required
to be paid to the Company under the Class A Certificate in order to
provide the Company with funds sufficient to make the scheduled payments
required to be paid under the Senior Subordinated Notes.
"Senior Subordinated Notes" means those certain "Senior Subordinated
Notes" dated July 3, 1995 issued by the Company to the Class A preferred
shareholders of FCBOT pursuant to the Joint Plan; which Senior
Subordinated Notes (a) are in the combined principal amount of
$106,690,029, (b) bear interest at the rate of nine percent (9%) per annum
payable quarterly and (c) require one (1) principal payment in the amount
of $53,345,014.50 on September 30, 1996 and an additional principal
payment in the amount of $53,345,014.50 on September 30, 1997.
"Special Preferred Stock Payments" means all dividends, redemption
amounts and other amounts at anytime payable to holders of the "Special
Preferred Stock" issued by the Company.
"Subsidiary" means and includes, with respect to any Person, (a) any
corporation more than 50% of whose stock of any class or classes having by
the terms thereof ordinary voting power to elect a majority of the
directors of such corporation (irrespective of whether or not at the time
stock of any class or classes of such corporation shall have or might have
voting power by reason of the happening of any contingency) is at the time
owned by such Person, directly or indirectly and (b) any partnership,
association, joint venture or other entity in which such Person, directly
or indirectly, has greater than 50% of (i) the directors (or Persons
performing similar functions) thereof or (ii) the equity interest;
provided, that the definition of Subsidiary shall not include any
Acquisition Entity.
"Tangible Net Worth" means: (a) total assets minus (b) the sum of
(i) all liabilities and (ii) all intangible assets, including, without
limitation, goodwill, patents, trademarks and similar items.
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"Unfunded Current Liability" means, with respect to any Plan, the
amount, if any, by which the present value of the accrued benefits under
the Plan as of the close of its most recent Plan year exceeds the fair
market value of the assets allocable thereto, determined in accordance
with Section 412 of the Code.
"Unutilized Commitment" means, at any time, the Commitment less the
outstanding Advances.
SECTION 1.02 Types of Advances. Advances hereunder are distinguished
by "Type". The Type of an Advance refers to the determination whether such
Advance is a Eurodollar Rate Advance or an Alternate Base Rate Advance.
SECTION 1.03 Accounting Terms. All accounting terms not defined
herein shall be construed in accordance with GAAP, as applicable, and all
calculations required to be made hereunder and all financial information
required to be provided hereunder shall be done or prepared in accordance with
GAAP.
ARTICLE II.
THE LOANS
SECTION 2.01 The Loans. (a) Subject to the terms and conditions
hereof, the Lender agrees at any time and from time to time on and after the
Execution Date and prior to the Maturity Date, to make and maintain a revolving
credit loan or loans (each a "Loan" and collectively, the "Loans") to the
Company, which Loans (i) shall be made and maintained pursuant to one or more
Advances comprised of Eurodollar Rate Advances (unless Eurodollar Rate Advances
are unavailable pursuant to Sections 2.10 or 2.11, and then Alternate Base Rate
Advances); provided, except as otherwise specifically provided herein, all Loans
comprising all or a portion of the same Advance shall at all times be of the
same Type, (ii) shall be made in the minimum amount of $500,000.00 and integral
multiples thereof, (iii) so long as no Default or Event of Default exists
hereunder, may be repaid and reborrowed, at the option of the Company in
accordance with the provisions hereof, (iv) may be borrowed by the Company (to
cover operating expenses only) without the express written approval of the
Lender in an amount not to exceed $3,000,000.00 at any time, (v) with respect to
Advances other than the unrestricted $3,000,000.00 operating expense draw, shall
be subject to the Lender's express written approval and shall be made for a
specific purpose with a specifically identified repayment source and (vi) shall,
in the aggregate, not exceed the Commitment. There shall be no further Advances
after the Maturity Date.
(b) The Loans shall be used to provide working capital and to
finance certain capital investments of the Company made in the ordinary course
of its business.
SECTION 2.02 The Note. The Loans shall be evidenced by the Note in
favor of the Lender (the "Note"), substantially in the form of Exhibit 2.02
hereto.
SECTION 2.03 Notice of Advance. Whenever the Company requires an
Advance, it shall give written notice thereof (a "Notice of Advance") (or
telephonic notice promptly confirmed in writing) to the Lender not later than
11:00 a.m. (Minnetonka, Minnesota time) two (2) Business Days prior to the date
of such Advance. Each Notice of Advance shall be irrevocable and
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shall be in the form of Exhibit 2.03 hereto, specifying (i) the aggregate
principal amount of the Advance to be made and (ii) the date of such Advance
(which shall be a Business Day).
SECTION 2.04 Disbursement of Funds. No later than 1:00 p.m.
(Minnetonka, Minnesota time) on each Advance Date, the Lender shall make
available the amount of the Advance in U.S. dollars and in immediately available
funds at the Payment Office.
SECTION 2.05 Continuances. Subject to Sections 2.10 and 2.11, each
Advance shall automatically continue as a Eurodollar Rate Advance during the
term of this Agreement.
SECTION 2.06 Voluntary Prepayments. The Company shall have the right
to voluntarily prepay Advances in whole or in part at any time on the following
terms and conditions: (a) no Eurodollar Rate Advance may be prepaid prior to the
last day of its Interest Period unless, simultaneously therewith, the Company
pays to the Lender all sums necessary to compensate the Lender for all costs and
expenses resulting from such prepayment, as reasonably determined by the Lender,
including, but not limited to, those costs described in Sections 2.12, and 2.13
hereof; (b) each partial prepayment shall be in an initial aggregate principal
amount of $500,000.00 and integral multiples thereof; and (c) each prepayment
pursuant to this Section shall be applied first, to the payment of accrued and
unpaid interest, and then, to the outstanding principal of such Advances in the
inverse order of maturity thereof.
SECTION 2.07 Mandatory Repayments. (a) The aggregate amount of all
Advances under the Note (and all accrued, unpaid interest) shall be due and
payable on the Maturity Date.
(b) The Company shall repay Advances on any day on which the
aggregate outstanding principal amount of the Loans exceeds the Commitment in
the amount of such excess.
SECTION 2.08 Method and Place of Payment. Except as otherwise
specifically provided herein, all payments under this Agreement due from the
Company shall be made to the Lender not later than 11:00 a.m. (Minnetonka,
Minnesota time) on the date when due and shall be made in lawful money of the
United States in immediately available funds at the Payment Office.
SECTION 2.09 Interest. (a) Subject to Section 9.08, the Company
agrees to pay interest on the total outstanding principal balance of all
Eurodollar Rate Advances from the date of each respective Advance to maturity
(whether by acceleration or otherwise) at a rate per annum (computed on the
basis of the actual number of days elapsed over a year of 360 days) which shall,
during each Interest Period applicable thereto, be equal to the lesser of (i)
the Highest Lawful Rate and (ii) the applicable Eurodollar Rate for such
Interest Period plus the Margin.
(b) Subject to Section 9.08, the Company agrees to pay interest on
the total outstanding principal balance of all Alternate Base Rate Advances from
the date of each respective Advance to maturity (whether by acceleration or
otherwise) at a rate per annum which shall at all times be equal to the lesser
of (i) the Highest Lawful Rate and (ii) the Alternate Base Rate in effect from
time to time. If the Alternate Base Rate is used, interest shall be computed on
the basis of the actual number of days elapsed over a year of 365 or 366 days,
as the case may be.
(c) Subject to Section 9.08, overdue principal and, to the extent
permitted by law, overdue interest in respect of any Advance and all other
overdue amounts owing hereunder shall bear interest for each day that such
amounts are overdue at a rate per annum equal to the Default Rate.
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(d) Interest on each Advance shall accrue from and including the
date of such Advance to but excluding the date of any repayment thereof and
shall be payable (i) in respect of Eurodollar Rate Advances (A) on the first day
of each month and (B) on the date of any voluntary or mandatory repayment or any
conversion or continuance, (ii) in respect of Alternate Base Rate Advances, (A)
on the first day of each month and (B) on the date of any voluntary or mandatory
repayment and (iii) in respect of each Advance, at maturity (whether by
acceleration or otherwise) and, after maturity, on demand.
(e) The Lender, upon determining the Eurodollar Rate for any
Interest Period, shall notify the Company thereof. Each such determination
shall, absent manifest error, be final and conclusive and binding on all parties
hereto. In addition, prior to the due date for the payment of interest on any
Advances set forth in the immediately preceding paragraph, the Lender shall
notify the Company of the amount of interest due by the Company on all
outstanding Advances on the applicable due date, but any failure of the Lender
to so notify the Company shall not reduce the Company's liability for the amount
owed.
SECTION 2.10 Interest Rate Not Ascertainable. In the event that the
Lender shall determine (which determination shall, absent manifest error, be
final, conclusive and binding upon all parties) that on any date for determining
the Eurodollar Rate for any Interest Period, by reason of any changes arising
after the date of this Agreement affecting the Eurodollar interbank market or
the Lender's position in such market, adequate and fair means do not exist for
ascertaining the applicable interest rate on the basis provided for in the
definition of Eurodollar Rate, then, and in any such event, the Lender shall
forthwith give notice to the Company of such determination. Until the Lender
notifies the Company that the circumstances giving rise to the suspension
described herein no longer exist, the obligations of the Lender to make
Eurodollar Rate Advances shall be suspended and Alternate Base Rate Advances
shall be available in lieu thereof.
SECTION 2.11 Change in Legality. (a) Notwithstanding anything to the
contrary herein contained, if any change in any law or regulation or in the
interpretation thereof by any governmental authority charged with the
administration or interpretation thereof shall make it unlawful for the Lender
to make or maintain any Eurodollar Rate Advance or to give effect to its
obligations as contemplated hereby, then, by prompt written notice to the
Company, the Lender may:
(i) declare that Eurodollar Rate Advances will not thereafter be
made hereunder, whereupon the Company shall be prohibited from requesting
Eurodollar Rate Advances hereunder unless such declaration is subsequently
withdrawn; and
(ii) require that all outstanding Eurodollar Rate Advances be
converted to Alternate Base Rate Advances, in which event (A) all such
Eurodollar Rate Advances shall be automatically converted to Alternate
Base Rate Advances as of the effective date of such notice as provided in
paragraph (b) below and (B) all payments and prepayments of principal
which would otherwise have been applied to repay the converted Eurodollar
Rate Advances shall instead be applied to repay the Alternate Base Rate
Advances resulting from the conversion of such Eurodollar Rate Advances.
(b) For purposes of this Section, a notice to the Company by the
Lender pursuant to paragraph (a) above shall be effective on the date of receipt
thereof by the Company.
SECTION 2.12 Increased Costs or Taxes. If the application or
effectiveness of any applicable law or regulation (i) shall change the basis of
taxation of payments to the Lender of the
11
principal of or interest on any Eurodollar Rate Advance made by the Lender or
any other fees or amounts payable hereunder (other than taxes imposed on the
overall net income of the Lender or franchise taxes imposed upon it by the
jurisdiction in which the Lender has an office), (ii) shall impose, modify or
deem applicable any reserve, special deposit or similar requirement against
assets of, deposits with or for the account of, or credit extended by, the
Lender or (iii) shall impose on the Lender any other condition affecting this
Agreement or any Eurodollar Rate Advance made by the Lender, and the result of
any of the foregoing shall be to increase the cost to the Lender of maintaining
the Loans or its Commitment or of making or maintaining any Eurodollar Rate
Advance or to reduce the amount of any sum received or receivable by the Lender
hereunder (whether of principal, interest or otherwise) in respect thereof by an
amount deemed in good faith by the Lender to be material, then the Company shall
pay to the Lender such additional amount as will compensate it for such increase
or reduction upon demand. The Lender shall not be entitled to make a demand for
and the Borrower shall not be liable for payment of any amount under the terms
of this Section 2.12 following the termination of the Obligations hereunder.
SECTION 2.13 Eurodollar Advance Prepayment and Default Penalties.
Subject to Section 9.08, the Company shall indemnify the Lender against any loss
or expense which it may sustain or incur as a consequence of (a) an Advance of,
or a conversion from, Eurodollar Rate Advances that does not occur on the date
specified therefor in a Notice of Advance, (b) any payment, prepayment or
conversion of a Eurodollar Rate Advance required by any other provision of this
Agreement or otherwise made on a date other than the last day of the applicable
Interest Period or (c) any default in the payment or prepayment of the principal
amount of any Eurodollar Advance or any part thereof or interest accrued
thereon, as and when due and payable (at the due date thereof, by notice of
prepayment or otherwise). Such loss or expense shall include an amount equal to
the excess determined by the Lender of (i) its cost of obtaining the funds for
the Advance being paid, prepaid or converted or not borrowed (based on the
Eurodollar Rate) for the period from the date of such payment, prepayment or
conversion or failure to borrow to the last day of the Interest Period for such
Advance (or, in the case of a failure to borrow, the Interest Period for the
Advance which would have commenced on the date of such failure to borrow) over
(ii) the amount of interest (as determined by the Lender in good faith) that
would be realized in reemploying the funds so paid, prepaid or converted or not
borrowed for such period or Interest Period, as the case may be. The Lender will
notify the Company of any loss or expense which will entitle it to compensation
pursuant to this Section, as promptly as possible after it becomes aware
thereof, but failure to so notify shall not affect the Company's liability
therefor. A certificate of the Lender setting forth any amount which it is
entitled to receive pursuant to this Section shall be delivered to the Company
and shall be conclusive absent manifest error. The Company shall pay to the
Lender the amount shown as due on any certificate within ten (10) days after its
receipt of the same. Without prejudice to the survival of any other obligations
of the Company hereunder, the obligations of the Company under this Section
shall survive the termination of this Agreement and the assignment of the Note.
ARTICLE III.
FEES
SECTION 3.01 Fees. (a) The Company agrees to pay to the Lender a
commitment fee (the "Commitment Fee") of $250,000.00. The Commitment Fee shall
be due and payable as follows: (i) $125,000.00 shall be due and payable on the
Execution Date and (ii) $125,000.00 shall be due and payable on or before May
31, 1996.
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(b) The Company agrees to pay to the Lender on each Advance Date a
fee (each a "Funding Fee") in respect of each Advance hereunder equal to .5% of
the amount of such Advance. Notwithstanding the above, the Funding Fees shall
not exceed $175,000.00 in the aggregate during the term hereof.
ARTICLE IV.
CONDITIONS PRECEDENT
SECTION 4.01 Conditions Precedent to the Initial Advance. The
obligation of the Lender to make its initial Advance to the Company is subject
to the condition that the Lender shall have received the following:
(a) this Agreement executed by the Company;
(b) the Note executed by the Company and payable to the order of the
Lender in the amount of the Commitment;
(c) the Security Documents executed by the Company;
(d) a Notice of Advance with respect to the initial Advance meeting
the requirements of Section 2.03;
(e) a certificate of an officer and of the secretary or an assistant
secretary of the Company certifying, inter alia, (i) true and complete copies of
each of the articles or certificate of incorporation, as amended and in effect
of the Company and each of its Subsidiaries, the bylaws, as amended and in
effect, of the Company and each of its Subsidiaries and the resolutions adopted
by the Board of Directors of the Company (A) authorizing the execution, delivery
and performance by the Company of this Agreement and the other Loan Documents to
which it is or will be a party and the Advances to be made hereunder, (B)
approving the forms of the Loan Documents to which it is or will be a party and
which will be delivered at or prior to the date of the initial Advance and (C)
authorizing officers of the Company to execute and deliver the Loan Documents to
which it is or will be a party and any related documents, including, any
agreement contemplated by this Agreement, (ii) the incumbency and specimen
signatures of the officers of the Company executing any documents on its behalf
and (iii) that there has been no change in the businesses or financial condition
of the Company which could have a Material Adverse Effect;
(f) favorable, signed opinions addressed to the Lender from Vander
Woude, Malone & Istre, P.C., counsel to the Company, in form and substance
satisfactory to the Lender and their counsel;
(g) the payment to the Lender of all reasonable fees and expenses
(including the reasonable fees and disbursements of Andrews & Kurth L.L.P.)
agreed upon by such parties to be paid on the Execution Date; and
(h) certificates of appropriate public officials as to the
existence, good standing and qualification to do business as a foreign
corporation, as applicable, of the Company and each of its Subsidiaries in each
jurisdiction in which the ownership of its properties or the conduct of its
business requires such qualifications and where the failure to so qualify would
have a Material Adverse Effect.
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The acceptance of the benefits of the initial Credit Event shall
constitute a representation and warranty by the Company to the Lender that all
of the conditions specified in this Section above shall have been satisfied or
waived as of that time.
SECTION 4.02 Conditions Precedent to All Credit Events. The
obligation of the Lender to make any Advance is subject to the further
conditions precedent that on the date of such Credit Event:
(a) The conditions precedent set forth in Section 4.01 shall have
theretofore been satisfied or waived.
(b) The representations and warranties set forth in Article V shall
be true and correct in all material respects as of, and as if such
representations and warranties were made on, the date of the proposed Advance
(unless such representation and warranty expressly relates to an earlier date or
is no longer true and correct solely as a result of transactions permitted by
the Loan Documents), and the Company shall be deemed to have certified to the
Lender that such representations and warranties are true and correct in all
material respects by submitting a Notice of Advance.
(c) The Lender shall have satisfactorily completed a reasonable due
diligence investigation with respect to each Advance other than an Advance under
the unrestricted $3,000,000.00 operating expense draw.
(d) The Company shall have complied with the provisions of Section
2.03 hereof.
(e) No Default or Event of Default shall have occurred and be
continuing or would result from such Credit Event.
(f) No Material Adverse Effect shall have occurred since the
delivery of the most recent financials.
(g) The Lender shall have received such other approvals, opinions or
documents as the Lender may reasonably request.
The acceptance of the benefits of each such Credit Event shall
constitute a representation and warranty by the Company to the Lender that all
of the conditions specified in this Section above exist as of that time.
SECTION 4.03 Delivery of Documents. The Note, certificates, legal
opinions and other documents and papers referred to in this Article IV, unless
otherwise specified, shall be delivered to the Lender and shall be reasonably
satisfactory in form and substance to the Lender.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES
In order to induce the Lender to enter into this Agreement and to
make the Advances provided for herein, the Company makes, on or as of the
occurrence of each Credit Event (except to the extent such representations or
warranties relate to an earlier date or are no longer true and correct
14
in all material respects solely as a result of transactions permitted by the
Loan Documents), the following representations and warranties to the Lender:
SECTION 5.01 Organization and Qualification. Each of Company and its
Subsidiaries (a) is a corporation duly organized, validly existing and in good
standing under the laws of the state of its incorporation or organization, (b)
has the corporate power to own its property and to carry on its business as now
conducted and (c) is duly qualified as a foreign corporation to do business and
is in good standing in every jurisdiction in which the failure to be so
qualified would have a Material Adverse Effect.
SECTION 5.02 Authorization and Validity. The Company has the
corporate power and authority to execute, deliver and perform its obligations
hereunder and under the other Loan Documents and all such action has been duly
authorized by all necessary corporate proceedings on its part. The Loan
Documents have been duly and validly executed and delivered by the Company and
constitute a valid and legally binding agreement the Company enforceable in
accordance with the respective terms thereof, except, in each case, as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer or other similar laws relating to or affecting
the enforcement of creditors' rights generally, and by general principles of
equity regardless of whether such enforceability is a proceeding in equity or at
law.
SECTION 5.03 Governmental Consents. No authorization, consent,
approval, license or exemption of or filing or registration with any court or
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, is necessary for the valid execution, delivery or
performance by the Company of any Loan Document.
SECTION 5.04 Conflicting or Adverse Agreements or Restrictions.
Neither the Company nor any Subsidiary is a party to any contract or agreement
or subject to any restriction which would reasonably be expected to have a
Material Adverse Effect. All agreements of the Company relating to the lending
of money or the issuance of letters of credit by any party are described hereto
on Schedule 5.04. Neither the execution nor delivery of the Loan Documents nor
compliance with the terms and provisions hereof or thereof will be contrary to
the provisions of, or constitute a default under (a) the charter or bylaws of
the Company, (b) any applicable law or any applicable regulation, order, writ,
injunction or decree of any court or governmental instrumentality or (c) any
material agreement to which the Company is a party or by which it is bound or to
which it is subject.
SECTION 5.05 Title to Assets. Each of the Company and its
Subsidiaries has good title to all material personalty and good and indefeasible
title to all material realty as reflected on the Company's and the Subsidiaries'
books and records as being owned by it, except for properties disposed of in the
ordinary course of business, subject to no Liens, except those permitted
hereunder or set forth on Schedule 7.04(a). All of such assets have been and are
being maintained by the appropriate Person in good working condition in
accordance with industry standards.
SECTION 5.06 Litigation. No proceedings against or affecting the
Company or any Subsidiary are pending or, to the knowledge of the Company,
threatened before any court or governmental agency or department which involve a
reasonable risk of having a Material Adverse Effect except those listed on
Schedule 5.06 hereof.
SECTION 5.07 Financial Statements. Prior to the Execution Date, the
Company has furnished to the Lender the audited consolidated balance sheet,
income statement and statement of cash flow for J-Hawk Corporation, predecessor
in interest to the Company, as of December 31, 1994
15
and all quarterly reports of the Company as are currently available (such
audited financials and quarterly reports, the "Financials"). The Financials have
been prepared in conformity with GAAP consistently applied (except as otherwise
disclosed in such financial statements) throughout the periods involved and
present fairly, in all material respects, the consolidated financial condition
of the Company and its consolidated Subsidiaries as of the dates thereof and the
results of their operations for the periods then ended. As of the Execution
Date, no Material Adverse Effect has occurred in the consolidated financial
condition of the Company and its consolidated Subsidiaries since December 31,
1994.
SECTION 5.08 Default. Neither the Company nor any Subsidiary is in
default under any material provisions of any instrument evidencing any
Indebtedness or of any agreement relating thereto, or in default in any respect
under any order, writ, injunction or decree of any court, or in default in any
respect under or in violation of any order, injunction or decree of any
governmental instrumentality, in such manner as to cause a Material Adverse
Effect.
SECTION 5.09 Investment Company Act. Neither the Company nor any
Subsidiary is, or is directly or indirectly controlled by or acting on behalf of
any Person which is, an "investment company," as such term is defined in the
Investment Company Act of 1940, as amended.
SECTION 5.10 Public Utility Holding Company Act. Neither the Company
nor any Subsidiary is a non-exempt "holding company," or is subject to
regulation as such, nor is, to the knowledge of the Company's or Subsidiaries'
officers, an "affiliate" of a "holding company" or a "subsidiary company" of a
"holding company," within the meaning of the Public Utility Holding Company Act
of 1935, as amended.
SECTION 5.11 ERISA. No accumulated funding deficiency (as defined in
Section 412 of the Code or Section 302 of ERISA), whether or not waived, exists
or is expected to be incurred with respect to any Plan. No liability to the PBGC
(other than required premium payments) has been or is expected by the Company to
be incurred with respect to any Plan by the Company or any ERISA Affiliate.
Neither the Company nor any ERISA Affiliate has incurred any withdrawal
liability under Title IV of ERISA with respect to any Multi-Employer Plans.
SECTION 5.12 Tax Returns and Payments. Each of the Company and its
Subsidiaries has filed all federal income tax returns and other tax returns,
statements and reports (or obtained extensions with respect thereto) which are
required to be filed and has paid or deposited or made adequate provision in
accordance with GAAP for the payment of all taxes (including estimated taxes
shown on such returns, statements and reports) which are shown to be due
pursuant to such returns, except for such taxes as are being contested in good
faith and by proceedings.
SECTION 5.13 Environmental Matters. Each of the Company and its
Subsidiaries (a) possesses all environmental, health and safety licenses,
permits, authorizations, registrations, approvals and similar rights necessary
under law or otherwise for the Company or such Subsidiary to conduct its
operations as now being conducted (other than those with respect to which the
failure to possess or maintain would not, individually or in the aggregate for
the Company and such Subsidiaries, have a Material Adverse Effect) and (b) each
of such licenses, permits, authorizations, registrations, approvals and similar
rights is valid and subsisting, in full force and effect and enforceable by the
Company or such Subsidiary, and each of the Company and its Subsidiaries is in
compliance with all terms, conditions or other provisions of such permits,
authorizations, registrations, approvals and similar rights except for such
failure or noncompliance that, individually or in the aggregate for the Company
and such Subsidiaries, would not have a Material Adverse Effect. Except
16
as disclosed on Schedule 5.13, neither the Company nor any of its Subsidiaries
has received any notices of any violation of, noncompliance with, or remedial
obligation under, Requirements of Environmental Laws (which violation or
non-compliance has not been cured) and there are no writs, injunctions, decrees,
orders or judgments outstanding, or lawsuits, claims, proceedings,
investigations or inquiries pending or, to the knowledge of the Company or any
Subsidiary, threatened, relating to the ownership, use, condition, maintenance
or operation of, or conduct of business related to, any property owned, leased
or operated by the Company or any Subsidiary or other assets of the Company or
such Subsidiary, other than those violations, instances of noncompliance,
obligations, writs, injunctions, decrees, orders, judgments, lawsuits, claims,
proceedings, investigations or inquiries that, individually or in the aggregate
for the Company and such Subsidiaries, would not have a Material Adverse Effect.
Except as disclosed on Schedule 5.13, there are no material obligations,
undertakings or liabilities arising out of or relating to Environmental Laws to
which the Company or any of its Subsidiaries has agreed, assumed or retained, or
by which the Company or any of its Subsidiaries is adversely affected, by
contract or otherwise. Except as disclosed on Schedule 5.13, neither the Company
nor any of its Subsidiaries has received a written notice or claim to the effect
that such Person is or may be liable to any other Person as the result of a
Release or threatened Release of a Hazardous Material.
SECTION 5.14 Purpose of Loans. (a) The proceeds of the Advances will
be used solely to finance operating expenditures and for certain capital
investments of the Company made in the ordinary course of its business.
(b) None of the proceeds of any Advance will be used directly or
indirectly for the purpose of purchasing or carrying any "margin stock" within
the meaning of Regulation U (herein called "margin stock") or for the purpose of
reducing or retiring any indebtedness which was originally incurred to purchase
or carry a margin stock.
SECTION 5.15 Franchises and Other Rights. Each of the Company and
its Subsidiaries has all franchises, permits, licenses and other authority as
are necessary to enable it to carry on its businesses as now being conducted
where the absence of such would have a Material Adverse Effect except those
listed on Schedule 5.15 hereof. To the best of its knowledge, the Company is not
in default in respect of any of such operating rights.
SECTION 5.16 Subsidiaries. The Subsidiaries listed on Schedule 5.16
are all of the Subsidiaries of the Company as of the Execution Date.
SECTION 5.17 Solvency. After giving effect to the initial Advance
hereunder and all other Indebtedness of the Company, the Company and its
Subsidiaries, viewed as a consolidated entity have (a) capital sufficient to
carry on their businesses and transactions, (b) assets, the fair market value of
which exceeds their consolidated liabilities (as reflected on the Financials or
on the financial statements most recently delivered to the Lender), and (c)
sufficient cash flow to pay their existing debts as they mature.
SECTION 5.18 Material Facts. There is no fact which the Company has
failed to disclose to the Lender in writing which will have a Material Adverse
Effect on or, so far as the Company can now foresee, will have a Material
Adverse Effect on the assets, business, prospects, profits or condition
(financial or otherwise) of the Company or its Subsidiaries or the ability of
the Company to perform its obligations under this Agreement. No information,
exhibit or report furnished by the Company to the Lender in connection with the
negotiation of this Agreement contained any material misstatement of fact or
omitted a material fact or any fact necessary to make the statement contained
therein not materially misleading.
17
SECTION 5.19 Solvency. The Company is, and after giving effect to
the transactions contemplated under the Loan Documents will be, solvent.
SECTION 5.20 Security Interests. The Security Documents create valid
security interests in the collateral described therein in favor of the Lender
securing the Obligations and constitute perfected first priority security
interests in such collateral described therein subject to no Liens other than
Liens permitted by Section 7.04.
ARTICLE VI.
AFFIRMATIVE COVENANTS
The Company covenants and agrees that on and after the date hereof
and for so long as this Agreement is in effect and until the Commitment has
terminated:
SECTION 6.01 Information Covenants. The Company will furnish to the
Lender:
(a) As soon as available, and in any event within 45 days after the
close of each of the first three quarters in each fiscal year of the Company,
the consolidated and consolidating balance sheet of the Company and its
Subsidiaries as of the end of such quarterly period and the related consolidated
and consolidating statements of income and cash flows for such quarterly period
and for the portion of the fiscal year ended at the end of such quarter, setting
forth, in each case, comparative consolidated figures for the related periods in
the prior fiscal year, all of which shall be certified by the chief financial
officer or chief executive officer of the Company as fairly presenting in all
material respects, the financial position of the Company and its Subsidiaries as
of the end of such period and the results of their operations for the period
then ended in accordance with GAAP, subject to changes resulting from normal
year-end audit adjustments.
(b) As soon as available, and in any event within 120 days after the
close of each fiscal year of the Company, the audited consolidated and the
unaudited consolidating balance sheets of the Company and its Subsidiaries as at
the end of such fiscal year and the related consolidated and consolidating
statements of income, stockholders equity and cash flows for such fiscal year,
setting forth, in each case, comparative figures for the preceding fiscal year
and certified by KPMG Peat Marwick, L.L.P. or other independent certified public
accountants of recognized national standing, whose report shall be without
limitation as to the scope of the audit and reasonably satisfactory in substance
to the Lenders.
(c) Immediately after any Responsible Officer of the Company obtains
knowledge thereof, notice of:
(i) any material violation of, noncompliance with, or remedial
obligations under, Requirements of Environmental Laws,
(ii) any material Release or threatened material Release of
Hazardous Materials affecting any property owned, leased or operated by
the Company or any of its Subsidiaries,
(iii) any event or condition which constitutes a Default or an Event
of Default,
18
(iv) any condition or event which, in the opinion of management of
the Company, would reasonably be expected to have a Material Adverse
Effect,
(v) any Person having given any written notice to the Company or
taken any other action with respect to a claimed material default or
material adverse event under any material instrument or material
agreement, and
(vi) the institution of any litigation which might reasonably be
expected in the good faith judgment of the Company either to have a
Material Adverse Effect or result in a final, non-appealable judgment or
award in excess of $1,000,000.00 with respect to any single cause of
action, or the institution of any litigation of any kind by any party with
whom the Company has entered into a franchise agreement;
then, a notice of such event or condition will be delivered to the Lender
specifying the nature and period of existence thereof and specifying the notice
given or action taken by such Person and the nature of any such claimed default,
event or condition and, in the case of an Event of Default or Default, what
action has been taken, is being taken or is proposed to be taken with respect
thereto.
(d) At the time of the delivery of the financial statement provided
for in Sections 6.01(a) and 6.01(b), a certificate of a Responsible Officer to
the effect that no Default or Event of Default exists or, if any Default or
Event of Default does exist, specifying the nature and extent thereof and the
action that is being taken or that is proposed to be taken with respect thereto,
which certificate shall set forth the calculations required to establish whether
the Company was in compliance with the provisions of Sections 7.10 and 7.11 as
at the end of such fiscal period or year, as the case may be.
(e) Upon request by the Lender such audits of the Company's
procedures and policies and operations in respect of Environmental Laws as the
Lender may reasonably request.
(f) Promptly upon receipt thereof, a copy of any report or letter
submitted to the Company by its independent accountants in connection with any
regular or special audit of the Company's records.
(g) From time to time and with reasonable promptness, such other
information or documents as the Lender may reasonably request.
SECTION 6.02 Books, Records and Inspections. The Company and its
Subsidiaries will maintain, and will permit, or cause to be permitted, any
Person designated by the Lender to visit and inspect any of the properties of
the Company and its Subsidiaries, to examine the corporate books and financial
records of the Company and its Subsidiaries and make copies thereof or extracts
therefrom and to discuss the affairs, finances and accounts of any such
corporations with the officers, employees and agents of the Company and its
Subsidiaries and with their independent public accountants, all at such
reasonable times and as often as the Lender may request. Such inspections shall
be made as often as the Lender reasonably requests, and shall be at the expense
of the Company up to $5,000.00 annually.
SECTION 6.03 Insurance and Maintenance of Properties. (a) The
Company and its Subsidiaries will keep reasonably adequately insured by
financially sound and reputable insurers all of its material property, which is
of a character, and in amounts and against such risks, usually and reasonably
insured by similar Persons engaged in the same or similar businesses, including,
without limitation, insurance against fire, casualty and any other hazards
normally insured against. The
19
Company and its Subsidiaries will at all times maintain insurance against its
liability for injury to Persons or property, which insurance shall be by
financially sound and reputable insurers and in such amounts and form as are
customary for corporations of established reputation engaged in the same or a
similar business and owning and operating similar properties, and shall annually
provide the Lender a listing of all such insurance and such other certificates
and other evidence thereof, as the Lender shall reasonably request. A listing of
all presently existing policies of the Company and its Subsidiaries is attached
hereto as Schedule 6.03.
(b) The Company and its Subsidiaries will cause all of its material
properties used or useful in the conduct of its business to be maintained and
kept in good condition, repair and working order and supplied with all necessary
equipment and will cause to be made all reasonably necessary repairs, renewals
and replacements thereof, all as in the reasonable judgment of such Person may
be reasonably necessary so that the business carried on in connection therewith
may be properly conducted at all times.
(c) The Company will name the Lender as a loss payee on all of its
insurance policies (other than public liability insurance policies).
SECTION 6.04 Payment of Taxes. Except with respect to "distressed
assets" acquired by any Subsidiary in a portfolio acquisition, the Company and
its Subsidiaries will pay and discharge all taxes, assessments and governmental
charges or levies imposed upon it or upon its income or profits, or upon any
properties belonging to it, prior to the date on which penalties attach thereto,
except for such amounts that are being contested in good faith and by
appropriate proceedings.
SECTION 6.05 Corporate Existence. The Company and its Subsidiaries
will do all things necessary to preserve and keep in full force and effect (a)
its corporate existence and (b) unless the failure to do so would not have a
Material Adverse Effect, the rights and franchises of each of the Company and
its Subsidiaries.
SECTION 6.06 Compliance with Statutes. The Company and its
Subsidiaries will comply with all applicable statutes, regulations and orders
of, and all applicable restrictions imposed by, all governmental bodies,
domestic or foreign, in respect of the conduct of its business and the ownership
of its property, except to the extent the failure to do so would not reasonably
be expected to have a Material Adverse Effect.
SECTION 6.07 ERISA. Immediately after any Responsible Officer of the
Company or any of its Subsidiaries knows or has reason to know any of the
following items are true the Company will deliver or cause to be delivered to
the Lender a certificate of the chief financial officer of the Company setting
forth details as to such occurrence and such action, if any, the Company or its
ERISA Affiliate is required or proposes to take, together with any notices
required or proposed to be given to or filed with or by the Company or its ERISA
Affiliate with respect thereto; that a Reportable Event has occurred or that an
application may be or has been made to the Secretary of the Treasury for a
waiver or modification of the minimum funding standard; that a Multiemployer
Plan has been or may be terminated, reorganized, partitioned or declared
insolvent under Title IV of ERISA; that any required contribution to a Plan or
Multiemployer Plan has not been or may not be timely made; that proceedings may
be or have been instituted under Section 4069(a) of ERISA to impose liability on
the Company or an ERISA Affiliate or under Section 4042 of ERISA to terminate a
Plan or appoint a trustee to administer a Plan; that the Company or any ERISA
Affiliate has incurred or may incur any liability (including any contingent or
secondary liability) on account of the termination of or withdrawal from a Plan
or a Multiemployer Plan; and that the Company or an ERISA Affiliate may be
required to
20
provide security to a Plan under Section 401(a)(29) of the Code; or any other
condition exists or may occur with respect to one or more Plans and/or
Multiemployer Plans.
SECTION 6.08 Fidelity Bond. The Company shall at all times during
the term hereof maintain a fidelity bond in an amount not less than
$2,000,000.00 per occurrence and $4,000,000.00 in the aggregate, net of any
applicable deductible.
ARTICLE VII.
NEGATIVE COVENANTS
The Company covenants and agrees that, unless the Lender shall have
otherwise given its written consent, on and after the date hereof and for so
long as this Agreement is in effect and until the Commitment has terminated:
SECTION 7.01 Change in Business. The Company will not engage in any
businesses not of the same general type as those conducted by the Company on the
Execution Date.
SECTION 7.02 Consolidation, Merger or Sale of Assets. The Company
will not wind up, liquidate or dissolve their affairs, or enter into any
transaction of merger or consolidation, or sell or otherwise dispose of all or
any part of their property or assets (other than sales of inventory and surplus
or obsolete assets in the ordinary course of business provided that any disposal
does not prejudice the Lender in any way), including the capital stock of any
Subsidiary, or purchase, lease or otherwise acquire (in one or a series of
related transactions) all or any part of the property or assets of any Person or
all of the capital stock of any Person. The Company will not permit any of its
Subsidiaries to wind up, liquidate or dissolve their affairs, or enter into any
transaction of merger or consolidation, or sell or otherwise dispose of any
capital stock of any Subsidiary, or purchase, lease or otherwise acquire (in one
or a series of related transactions) all or any part of the property or assets
of any Person or all of the capital stock of any Person.
SECTION 7.03 Indebtedness. The Company will not create, incur,
assume or permit to exist any Indebtedness except:
(a) Indebtedness existing hereunder;
(b) long term Indebtedness or unsecured short term Indebtedness not
to exceed in the aggregate $5,000,000.00; and
(c) guarantees of any Indebtedness of any Person not to exceed in
the aggregate $5,000,000.00.
SECTION 7.04 Liens. Neither the Company nor any Subsidiary will
create, incur, assume or suffer to exist any Lien upon or with respect to any of
its property or assets of any kind whether now owned or hereafter acquired (nor
will they covenant with any other Person not to grant such a Lien to the
Lender), except
(a) Liens existing on the Execution Date and listed on Schedule
7.04(a);
21
(b) Liens for taxes or assessments or other governmental charges or
levies, either not yet due and payable or being contested in good faith and by
appropriate proceedings for which adequate reserves have been established;
(c) Liens securing long term Indebtedness permitted under Section
7.03(b) above;
(d) any renewal, extension or replacement of any Lien referred to in
subparagraph (a) above; provided, that no Lien arising or existing as a result
of such extension, renewal or replacement shall be extended to cover any
property not theretofore subject to the Lien being extended, renewed or
replaced, and provided further, the principal amount of the Indebtedness secured
thereby shall not exceed the principal amount of the Indebtedness so secured at
the time of such extension, renewal or replacement; and
(e) Liens granted in connection with the acquisition of promissory
notes evidencing loans (or real property previously foreclosed upon).
SECTION 7.05 Investments. Except as provided in Sections 7.02 and
7.09, neither the Company nor any Subsidiary will, directly or indirectly, make
or own any Investment in any Person, except:
(a) The Company and its Subsidiaries may make and own Permitted
Investments;
(b) The Company and its Subsidiaries may continue to own Investments
owned by it on the Execution Date and listed on Schedule 7.05(b); and
(c) The Company and its Subsidiaries may make and own Investments
arising out of loans and advances for expenses, travel per diem and similar
items in the ordinary course of business to officers, directors and employees.
SECTION 7.06 Restricted Payments. (a) Other than payments in respect
of the Senior Subordinated Notes and the Special Preferred Stock Payments, the
Company will not pay any dividends or redeem, retire, purchase or make any other
acquisition, direct or indirect, of any shares of any class of stock of the
Company, or of any warrants, rights or options to acquire any such shares, now
or hereafter outstanding; except to the extent that the consideration therefor
consists solely of shares of stock (including warrants, rights or options
relating thereto) of the Company.
(b) Except in the ordinary course of business, the Subsidiaries will
not declare any dividends, make any loans or advances to, or otherwise transfer
any money or other assets to the Company during the term hereof; provided, such
dividends, loans or transfers are simultaneously transferred to the Lender in
repayment of the Obligations.
SECTION 7.07 Change in Accounting. The Company will not, and will
not permit any Subsidiary to, change its method of accounting except for (a)
immaterial changes permitted by GAAP in which the Company's auditors concur or
(b) changes required by GAAP. The Company shall advise the Lender in writing
promptly upon making any material change to the extent same is not disclosed in
the financial statements required under Section 6.01 hereof.
SECTION 7.08 Change of Certain Indebtedness. Other than payments in
respect of the Senior Subordinated Notes and the Special Preferred Stock
Payments, the Company will not make any voluntary prepayments of principal or
interest on any other of the Company's Indebtedness.
22
SECTION 7.09 Transactions with Affiliates. The Company will not,
directly or indirectly, engage in any transaction with any Affiliate, including
the purchase, sale or exchange of assets or the rendering of any service, except
in the ordinary course of business or pursuant to the reasonable requirements of
its business and, in each case, upon terms that are no less favorable than those
which might be obtained in an arm's-length transaction at the time from
non-Affiliates.
SECTION 7.10 Minimum Tangible Net Worth. The Company will not permit
its Tangible Net Worth during the term hereof to be less than $42,500,000.00.
SECTION 7.11 Indebtedness to Equity Ratio. The Company will not
permit the ratio of (a) its consolidated Indebtedness excluding Senior
Subordinated Notes and "Special Preferred Stock" (as such term is used in the
definition of Special Preferred Stock Payments) to (b) the amount of its equity
represented by common stock, to be greater than 5.0 to 1.0 at any time during
the term hereof.
ARTICLE VIII.
EVENTS OF DEFAULT AND REMEDIES
SECTION 8.01 Events of Default. The following events shall
constitute Events of Default ("Events of Default") hereunder:
(a) any installment of principal or payment of interest on the Note
or any payment of any Fee shall not be paid on the date on which such payment is
due and such failure is not remedied within five (5) days; or
(b) any representation or warranty made or, for purposes of Article
V, deemed made by the Company or any Subsidiary herein or in any of the Loan
Documents or other document, certificate or financial statement delivered in
connection with this Agreement or any other Loan Document shall prove to have
been incorrect in any material respect when made or deemed made or reaffirmed,
as the case may be; or
(c) the Company or any Subsidiary shall fail to perform or observe
any duty or covenant contained in Article VII hereof; or
(d) the Company or any Subsidiary shall fail to perform or observe
any duty or covenant contained in this Agreement other than in Article VII, or
in any of the Loan Documents, and such failure is not remedied within thirty
(30) days; or
(e) the Company or any Subsidiary shall (i) fail to make (whether as
primary obligor or as guarantor or other surety) any principal payment of or
interest or premium, if any, on any instrument of Indebtedness allowed hereunder
(other than the Note) outstanding beyond any period of grace provided with
respect thereto or (ii) shall fail to duly observe, perform or comply with any
agreement with any Person or any term or condition of any instrument of
Indebtedness in excess of $500,000.00, if such failure causes such obligations
to become due prior to any stated maturity; or
(f) an involuntary proceeding shall be commenced or an involuntary
petition shall be filed in a court of competent jurisdiction seeking (i) relief
in respect of the Company or any Subsidiary, or of a substantial part of the
property or assets of the Company or any Subsidiary, under
23
Title 11 of the United States Code, as now or hereafter in effect, or any
successor thereto (the "Bankruptcy Code"), or any other federal or state
bankruptcy, insolvency, receivership or similar law, (ii) the appointment of a
receiver, trustee, custodian, sequestrator, conservator or similar official for
the Company or any Subsidiary or for a substantial part of the property or
assets of the Company or any Subsidiary or (iii) the winding-up or liquidation
of the Company or any Subsidiary; and such proceeding or petition shall continue
undismissed for sixty 60 days or an order or decree approving or ordering any of
the foregoing shall be entered; or
(g) the Company or any Subsidiary shall (i) voluntarily commence any
proceeding or file any petition seeking relief under the Bankruptcy Code or any
other federal or state bankruptcy, insolvency, receivership or similar law, (ii)
consent to the institution of, or fail to contest in a timely and appropriate
manner, any proceeding or the filing of any petition described in clause (e)
above, (iii) apply for or consent to the appointment of a receiver, trustee,
custodian, sequestrator, conservator or similar official for the Company or any
Subsidiary or for a substantial part of the property or assets of the Company or
any Subsidiary, (iv) file an answer admitting the material allegations of a
petition filed against it in any such proceeding, (v) make a general assignment
for the benefit of creditors, (vi) become unable, admit in writing its inability
or fail generally to pay its debts as they become due or (vii) take any action
for the purpose of effecting any of the foregoing; or
(h) a judgment or order, which with other outstanding judgments and
orders against the Company and its Subsidiaries equal or exceed $1,000,000.00 in
the aggregate (to the extent not covered by insurance as to which the respective
insurer has acknowledged coverage), shall be entered against the Company or any
Subsidiary and (i) within thirty (30) days after entry thereof such judgment
shall not have been paid or discharged or execution thereof stayed pending
appeal or, within thirty (30) days after the expiration of any such stay, such
judgment shall not have been paid or discharged or (ii) any enforcement
proceeding shall have been commenced (and not stayed) by any creditor or upon
such judgment; or
(i) the occurrence of a change which has a Material Adverse Effect,
in the opinion of the Lender, (A) in the financial condition, business or
operations of the Company or (B) in the ability of the Company to make payment
hereunder or under the Note or the right of the Lender to enforce any of its
remedies to collect any amounts owing under the Loan Documents; or
(j) a Change of Control shall occur.
SECTION 8.02 Primary Remedies. In any such event, and at any time
after the occurrence of any of the above described events, the Lender may, by
written notice to the Company (a "Notice of Default") take any or all of the
following actions to enforce any other rights it may have against the Company;
provided, that if an Event of Default specified in Section 8.01(f) or Section
8.01(g) shall occur, the following shall occur automatically without the giving
of any Notice of Default: (a) declare the Commitment terminated, whereupon the
Commitment shall forthwith terminate immediately; (b) declare the principal of
and any accrued and unpaid interest in respect of all Advances, and all
obligations owing hereunder, to be, whereupon the same shall become, forthwith
due and payable without presentment, demand, notice of demand or of dishonor and
non-payment, protest, notice of protest, notice of intent to accelerate,
declaration or notice of acceleration or any other notice of any kind, all of
which are hereby waived by the Company; and (c) exercise any rights or remedies
under any document securing any of the Loan Documents. In the event that no
Default has occurred solely because of any grace period referred to herein, the
Company shall, nonetheless, not be entitled to any Advances during said period.
24
SECTION 8.03 Other Remedies. Upon the occurrence and during the
continuance of any Event of Default and after a Notice of Default, the Lender
may proceed to protect and enforce its rights, either by suit in equity or by
action at law or both, whether for the specific performance of any covenant or
agreement contained in this Agreement or in any other Loan Document or in aid of
the exercise of any power granted in this Agreement or in any other Loan
Document; or may proceed to enforce the payment of all amounts owing to the
Lender under the Loan Documents and any accrued and unpaid interest thereon in
the manner set forth herein or therein; it being intended that no remedy
conferred herein or in any of the other Loan Documents is to be exclusive of any
other remedy, and each and every remedy contained herein or in any other Loan
Document shall be cumulative and shall be in addition to every other remedy
given hereunder and under the other Loan Documents or now or hereafter existing
at law or in equity or by statute or otherwise.
ARTICLE IX.
MISCELLANEOUS
SECTION 9.01 Amendments. No amendment or waiver of any provision of
this Agreement, the Note or any other Loan Document, nor consent to any
departure by the Company herefrom or therefrom, shall in any event be effective
unless the same shall be in writing and signed by the Company, as to amendments,
and by the Lender in all cases, and then, in any case, such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given.
SECTION 9.02 Notices. Except with respect to telephone notifications
specifically permitted pursuant to Article II, all notices, consents, requests,
approvals, demands and other communications provided for herein shall be in
writing (including telecopy communications) and mailed, telecopied, sent by
overnight courier or delivered:
(a) If to the Company:
FirstCity Financial Corporation
P.O. Box 8216
6400 Imperial Drive
Waco, Texas 76714
Telecopy No: (817) 751-1208
Attention: Mr. James T. Sartain
(b) If to the Lender:
Cargill Financial Services Corporation
6000 Clearwater Drive
Minnetonka, Minnesota 55343-9497
Telecopy No: (612) 984-3905
Attention: Mr. Jeffrey A. Parker
25
with copies to:
Cargill Financial Services Corporation
6000 Clearwater Drive
Minnetonka, Minnesota 55343-9497
Telecopy No: (612) 984-3898
Attention: Mr. James D. Dingel
and to:
Andrews & Kurth L.L.P.
4200 Texas Commerce Tower
Houston, Texas 77002
Telecopy No. (713) 220-4295
Attention: Linda Dole
or, in the case of any party hereto, such other address or telecopy number as
such party may hereafter specify for such purpose by notice to the other
parties.
All communications shall, when mailed, telecopied or delivered, be
effective when mailed by certified mail, return receipt requested to any party
at its address specified above, or telecopied to any party to the telecopy
number set forth above, or delivered personally to any party at its address
specified above; provided, that communications to the Lender pursuant to Article
II shall not be effective until actually received by the Lender.
SECTION 9.03 No Waiver; Remedies. No failure on the part of the
Lender to exercise, and no delay in exercising, any right hereunder, under the
Note or under any other Loan Document shall operate as a waiver thereof; nor
shall any single or partial exercise of any such right, or any abandonment or
discontinuance of any steps to enforce such right, preclude any other or further
exercise thereof or the exercise of any other right. No notice to or demand on
the Company in any case shall entitle the Company to any other or further notice
or demand in similar or other circumstances. The remedies herein are cumulative
and not exclusive of any other remedies provided by law, at equity or in any
other agreement.
SECTION 9.04 Costs, Expenses and Taxes. The Company agrees to pay on
demand: (a) all reasonable due diligence and travel expenses of the Lender in
connection with any Advance not to exceed $10,000.00 per Advance, (b) all
reasonable out-of-pocket costs and expenses of the Lender in connection with the
preparation, execution and delivery of this Agreement, the Note, the other Loan
Documents and the other documents to be delivered hereunder, including the
reasonable fees and out-of-pocket expenses of counsel for the Lender with
respect thereto and with respect to advising the Lender as to its rights and
responsibilities under this Agreement, the Note and the other Loan Documents,
and any modification, supplement or waiver of any of the terms of this Agreement
or any other Loan Document, (c) all reasonable costs and expenses of the Lender
and any other holder of an interest in the Note, and the Obligations of the
Company hereunder and under the Loan Documents, including reasonable legal fees
and expenses, in connection with a default or the enforcement of this Agreement,
the Note and the other Loan Documents and (d) reasonable costs and expenses
incurred in connection with third party professional services required by the
Lender such as appraisers,
26
environmental consultants, accountants or similar Persons; provided, that prior
to any Event of Default hereunder, the Lender will first obtain the consent of
the Company to such expense, which consent shall not be unreasonably withheld.
Without prejudice to the survival of any other obligations of the Company
hereunder and under the Note, the obligations of the Company under this Section
shall survive the termination of this Agreement or the replacement of the Lender
and the assignment of the Note.
SECTION 9.05 Indemnity. (a) The Company shall indemnify the Lender
and each Affiliate thereof and their respective directors, officers, employees
and agents from, and hold each of them harmless against, any and all losses,
liabilities, claims or damages (including reasonable legal fees and expenses) to
which any of them may become subject, insofar as such losses, liabilities,
claims or damages arise out of or result from any actual or proposed use by the
Company of the proceeds of any extension of credit hereunder or any
investigation, litigation or other proceeding (including any threatened
investigation or proceeding) relating to the foregoing or any of the other Loan
Documents, and the Company shall reimburse the Lender and each Affiliate thereof
and their respective directors, officers, employees and agents, upon demand for
any expenses (including legal fees) reasonably incurred in connection with any
such investigation or proceeding; but excluding any such losses, liabilities,
claims, damages or expenses incurred by reason of the gross negligence or
willful misconduct of the Person to be indemnified.
(B) WITHOUT LIMITING ANY PROVISION OF THIS AGREEMENT, IT IS THE
EXPRESS INTENTION OF THE PARTIES HERETO THAT EACH PERSON TO BE INDEMNIFIED
HEREUNDER OR THEREUNDER SHALL BE INDEMNIFIED AND HELD HARMLESS AGAINST ANY AND
ALL LOSSES, LIABILITIES, CLAIMS OR DAMAGES: (I) ARISING OUT OF OR RESULTING FROM
THE ORDINARY SOLE OR CONTRIBUTORY NEGLIGENCE OF SUCH PERSON OR (II) IMPOSED UPON
SAID PARTY UNDER ANY THEORY OR STRICT LIABILITY. Without prejudice to the
survival of any other obligations of the Company hereunder and under the other
Loan Documents, the obligations of the Company under this Section shall survive
the termination of this Agreement and the other Loan Documents and the payment
of the Obligations or the assignment of the Note.
SECTION 9.06 Right of Setoff. If any Event of Default shall have
occurred and be continuing, the Lender is hereby authorized at any time and from
time to time, to the fullest extent permitted by law, to set off and apply any
and all deposits held and other indebtedness owing by the Lender, or any
Subsidiary or Affiliate, to or for the credit or the account of the Company
against any and all the Obligations of the Company now or hereafter existing
under this Agreement and the other Loan Documents and other obligations of the
Company held by the Lender, irrespective of whether or not the Lender shall have
made any demand under this Agreement, its Note or the Obligations and although
the Obligations may be unmatured. The rights of the Lender under this Section
are in addition to other rights and remedies (including other rights of setoff)
which the Lender may have.
SECTION 9.07 Governing Law. This Agreement, the Note, the other Loan
Documents and all other documents executed in connection herewith shall be
deemed to be contracts and agreements executed by the Company and the Lender
under the laws of the State of Minnesota and of the United States of America and
for all purposes shall be construed in accordance with, and governed by, the
laws of said state and of the United States of America. Without limitation of
the foregoing, nothing in this Agreement, or in the Note or in any other Loan
Document shall be deemed to constitute a waiver of any rights which the Lender
may have under applicable federal legislation
27
relating to the amount of interest which the Lender may contract for, take,
receive or charge in respect of the Loan and the Loan Documents, including any
right to take, receive, reserve and charge interest at the rate allowed by the
law of the state where the Lender is located.
SECTION 9.08 Interest. Each provision in this Agreement and each
other Loan Document is expressly limited so that in no event whatsoever shall
the amount paid, or otherwise agreed to be paid, to the Lender or charged,
contracted for, reserved, taken or received by the Lender, for the use,
forbearance or detention of the money to be loaned under this Agreement or any
Loan Document or otherwise (including any sums paid as required by any covenant
or obligation contained herein or in any other Loan Document which is for the
use, forbearance or detention of such money), exceed that amount of money which
would cause the effective rate of interest to exceed the Highest Lawful Rate,
and all amounts owed under this Agreement and each other Loan Document shall be
held to be subject to reduction to the effect that such amounts so paid or
agreed to be paid, charged, contracted for, reserved, taken or received which
are for the use, forbearance or detention of money under this Agreement or such
Loan Document shall in no event exceed that amount of money which would cause
the effective rate of interest to exceed the Highest Lawful Rate. Anything in
the Note or any other Loan Document to the contrary notwithstanding, the Company
shall not be required to pay unearned interest on the Note and the Company shall
not be required to pay interest on the Obligations at a rate in excess of the
Highest Lawful Rate, and if the effective rate of interest which would otherwise
be payable under the Note and such Loan Documents would exceed the Highest
Lawful Rate, or if the holder of the Note shall receive any unearned interest or
shall receive monies that are deemed to constitute interest which would increase
the effective rate of interest payable by the Company under the Note and the
other Loan Documents to a rate in excess of the Highest Lawful Rate, then (a)
the amount of interest which would otherwise be payable by the Company shall be
reduced to the amount allowed under applicable law and (b) any unearned interest
paid by the Company or any interest paid by the Company in excess of the Highest
Lawful Rate shall in the first instance be credited on the principal of the
obligations of the Company (or if all such obligations shall have been paid in
full, refunded to the Company). It is further agreed that, without limitation of
the foregoing, all calculations of the rate of interest contracted for,
reserved, taken, charged or received by the Lender under the Note and the
Obligations and under the other Loan Documents are made for the purpose of
determining whether such rate exceeds the Highest Lawful Rate, and shall be
made, to the extent permitted by usury laws applicable to the Lender, by
amortizing, prorating and spreading in equal parts during the period of the full
stated term of the Note and this Agreement and all interest at any time
contracted for, charged or received by the Lender in connection therewith.
SECTION 9.09 Survival of Representations and Warranties. All
representations, warranties and covenants contained herein or made in writing by
the Company in connection herewith and the other Loan Documents shall survive
the execution and delivery of this Agreement, the Note and the other Loan
Documents, the termination of the Commitment of the Lender and will bind and
inure to the benefit of the respective successors and assigns of the parties
hereto, whether so expressed or not; provided, that the Commitment of the Lender
shall not inure to the benefit of any successor or assign of the Company.
SECTION 9.10 Successors and Assigns; Participations. (a) All
covenants, promises and agreements by or on behalf of the Company or the Lender
that are contained in this
28
Agreement shall bind and inure to the benefit of their respective permitted
successors and assigns. The Company may not assign or transfer any of its rights
or obligations hereunder.
(b) The Lender may assign to or sell participations to one or more
banks of all or a portion of its rights and obligations under this Agreement and
the other Loan Documents (including all or a portion of the Commitment, the
Advances and the Obligations of the Company owing to it and the Note); provided,
that the participating banks or other entities shall be entitled to the cost
protection provisions contained in Article II and Section 9.04 and the Company
shall continue to deal solely and directly with the Lender in connection with
its rights and obligations under this Agreement and the other Loan Documents.
Except with respect to cost protections provided to a participant pursuant to
this paragraph and the items listed in Section 9.01 hereof, no participant shall
be a third party beneficiary of this Agreement nor shall it be entitled to
enforce any rights provided to the Lender against the Company under this
Agreement.
(c) With the prior written consent of the Company and the Lender
(which consent shall not be unreasonably withheld), the Lender may assign to one
or more other Eligible Assignees all or a portion of its interests, rights, and
obligations under this Agreement and the other Loan Documents (including all or
a portion of the Commitment and the same portion of the Loans and other
Obligations of the Company at the time owing to it and the Note); provided,
however, that (i) each such assignment shall be in a minimum principal amount of
not less than $1,000,000.00 and shall be of a constant, and not a varying,
percentage of all the Lender's Commitment, rights and obligations under this
Agreement, (ii) the parties to each such assignment shall execute and deliver to
the Lender, for its acceptance, an Assignment and Acceptance in form and
substance satisfactory to the Lender (an "Assignment and Acceptance") and the
Note subject to such assignment and (iii) no assignment shall be effective until
receipt by the Lender of a reasonable service fee in respect of said assignment
equal to $2,000.00. Upon such execution, delivery, acceptance and recording,
from and after the effective date specified in each Assignment and Acceptance,
which effective date shall be at least five (5) Business Days after the
execution thereof unless otherwise agreed to by the Lender and the Eligible
Assignee thereunder (x) the Eligible Assignee thereunder shall be a party hereto
and to the other Loan Documents and, to the extent provided in such Assignment
and Acceptance, have the rights and obligations of the Lender hereunder and
under the other Loan Documents and (y) the Lender thereunder shall, to the
extent provided in such Assignment and Acceptance, be released from its
obligations under this Agreement and the other Loan Documents (and, in the case
of an Assignment and Acceptance covering all of the remaining portion of the
Lender's rights and obligations under this Agreement and the other Loan
Documents, the Lender shall cease to be a party hereto).
(d) Notwithstanding any other provision herein, the Lender may, in
connection with any assignment or participation or proposed assignment or
participation pursuant to this Section disclose to the assignee or participant
or proposed assignee or participant, any information relating to the Company
furnished to the Lender by or on behalf of the Company.
SECTION 9.11 Confidentiality. The Lender agrees to exercise its best
efforts to keep any information delivered or made available by the Company to it
which is clearly indicated to be confidential information, confidential from
anyone other than Persons employed or retained by the Lender who are or are
expected to become engaged in evaluating, approving, structuring or
administering the Loans; provided that nothing herein shall prevent any Lender
from disclosing such
29
information (a) pursuant to subpoena or upon the order of any court or
administrative agency, (b) upon the request or demand of any regulatory agency
or authority having jurisdiction over the Lender, (c) which has been publicly
disclosed, (d) to the extent reasonably required in connection with any
litigation to which the Lender, the Company or its respective Affiliates may be
a party, (e) to the extent reasonably required in connection with the exercise
of any remedy hereunder, (f) to the Lender's legal counsel and independent
auditors and (g) to any actual or proposed participant or assignee of all or
part of its rights hereunder which has agreed in writing to be bound by the
provisions of this Section. The Lender will promptly notify the Company of any
information that it is required or requested to deliver pursuant to clause (b)
or (c) of this Section and, if the Company is a party to any such litigation,
clause (e) of this Section .
SECTION 9.12 Separability. Should any clause, sentence, paragraph or
Section of this Agreement be judicially declared to be invalid, unenforceable or
void, such decision will not have the effect of invalidating or voiding the
remainder of this Agreement, and the parties hereto agree that the part or parts
of this Agreement so held to be invalid, unenforceable or void will be deemed to
have been stricken herefrom and the remainder will have the same force and
effectiveness as if such part or parts had never been included herein.
SECTION 9.13 Execution in Counterparts. This Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement.
SECTION 9.14 Interpretation. (a) In this Agreement, unless a clear
contrary intention appears:
(i) the singular number includes the plural number and vice
versa;
(ii) reference to any gender includes each other gender;
(iii) the words "herein," "hereof" and "hereunder" and other
words of similar import refer to this Agreement as a whole and not to any
particular Article, Section or other subdivision;
(iv) reference to any Person includes such Person's successors
and assigns but, if applicable, only if such successors and assigns are
permitted by this Agreement, and reference to a Person in a particular
capacity excludes such Person in any other capacity or individually,
provided that nothing in this clause is intended to authorize any
assignment not otherwise permitted by this Agreement;
(v) except as expressly provided to the contrary herein,
reference to any agreement, document or instrument (including this
Agreement) means such agreement, document or instrument as amended,
supplemented or modified and in effect from time to time in accordance
with the terms thereof and, if applicable, the terms hereof, and reference
to the Note or other note includes the Note issued pursuant hereto in
extension or renewal thereof and in substitution or replacement therefor;
30
(vi) unless the context indicates otherwise, reference to any
Article, Section, Schedule or Exhibit means such Article or Section hereof
or such Schedule or Exhibit hereto;
(vii) the words "including" (and with correlative meaning
"include") means including, without limiting the generality of any
description preceding such term;
(viii) with respect to the determination of any period of
time, except as expressly provided to the contrary, the word "from" means
"from and including" and the word "to" means "to but excluding"; and
(ix) reference to any law, rule or regulation means such as
amended, modified, codified or reenacted, in whole or in part, and in
effect from time to time.
(b) The Article and Section headings herein and the Table of
Contents are for convenience only and shall not affect the construction hereof.
(c) No provision of this Agreement shall be interpreted or construed
against any Person solely because that Person or its legal representative
drafted such provision.
SECTION 9.15 SUBMISSION TO JURISDICTION. (A) ANY LEGAL ACTION OR
PROCEEDING WITH RESPECT TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS MAY BE
BROUGHT IN THE COURTS OF THE STATE OF MINNESOTA, IN HENNEPIN COUNTY OR ELSEWHERE
OR OF THE UNITED STATES FOR THE DISTRICT OF MINNESOTA AND, BY EXECUTION AND
DELIVERY OF THIS AGREEMENT, THE COMPANY HEREBY IRREVOCABLY ACCEPTS FOR ITSELF
AND IN RESPECT OF ITS PROPERTY, UNCONDITIONALLY, THE JURISDICTION OF THE
AFORESAID COURTS WITH RESPECT TO ANY SUCH ACTION OR PROCEEDING.
(B) THE COMPANY HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY
NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF THE AFORESAID ACTIONS OR
PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT BROUGHT IN THE
COURTS REFERRED TO IN CLAUSE (A) ABOVE AND HEREBY FURTHER IRREVOCABLY WAIVES AND
AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION OR
PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
SECTION 9.16 WAIVER OF JURY TRIAL. THE COMPANY HEREBY WAIVES, TO THE
EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION
OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT OR UNDER ANY
AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE
FUTURE BE DELIVERED IN CONNECTION HEREWITH OR ARISING FROM OR RELATING TO ANY
LENDING RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT, AND AGREES, TO
THE EXTENT PERMITTED BY APPLICABLE LAW, THAT ANY SUCH ACTION OR PROCEEDING SHALL
BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
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SECTION 9.17 FINAL AGREEMENT OF THE PARTIES. THIS AGREEMENT
(INCLUDING THE SCHEDULES AND EXHIBITS HERETO), THE NOTE AND THE OTHER LOAN
DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES RELATING TO THE
SUBJECT MATTER HEREOF AND THEREOF AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE
NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized as of the
date first above written.
FIRSTCITY FINANCIAL CORPORATION
/s/ James T. Sartain
James T. Sartain
President
CARGILL FINANCIAL SERVICES CORPORATION
/s/ Jeffrey A. Parker
Jeffrey A. Parker
Assistant Vice President
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