UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-KSB
X ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934
For the fiscal year ended March 31, 2001
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from ________ to _________.
Commission file number: 0-26680
NICHOLAS FINANCIAL, INC.
(Name of Small Business Issuer in its Charter)
British Columbia, Canada 8736-3354
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization Identification No.)
Nicholas Financial, Inc.
2454 McMullen Booth Road, Building C
Clearwater, Florida 33759
(Address of Principal Executive Offices) (Zip Code)
Issuer's Telephone Number, Including Area Code:
(727) 726-0763
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock ($0.01 Par Value)
Check whether the issuer: (1) filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 12 months
(or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes X No
Check if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will
be contained, to the best of the registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III
of this Form 10-KSB or any amendment to this Form 10-KSB. The
issuer's revenues for its most recent fiscal year ended March 31, 2001
were $17,797,026.As of May 31, 2001, 2,317,108 shares of the
Registrant's common stock were outstanding, and the aggregate market
value of the shares held by non-affiliates was approximately
$9,531,802.
DOCUMENTS INCORPORATED BY REFERENCE: Portions of the registrant's Proxy
Statement for the Annual Meeting of Stockholders currently expected to
be held on August 7, 2001, to be filed with the Commission pursuant to
Regulation 14A, are incorporated by reference in Part III of this
Report.
Transitional Small Business Disclosure Format(check one) : Yes No X
(This page intentionally left blank)
1
NICHOLAS FINANCIAL, INC. & SUBSIDIARIES
FORM 10-KSB ANNUAL REPORT
TABLE OF CONTENTS
PART I Page No.
Item 1. Description of Business.....................3
Item 2. Description of Properties..................12
Item 3. Legal Proceedings..........................12
Item 4. Submission of Matters to a Vote of
Security Holders...........................12
PART II
Item 5. Market for Common Equity and Related
Stockholder Matters........................13
Item 6. Management's Discussion and Analysis
of Financial Condition and Results of
Operations.................................14
Item 7. Financial Statements.......................19
Item 8. Changes In and Disagreements With
Accountants on Accounting and
Financial Disclosure.......................41
PART III
Item 9. Directors, Executive Officers, Promoters
and Control Persons;Compliance with
Section 16 (a) of the Exchange Act.........41
Item 10. Executive Compensation.....................41
Item 11. Security Ownership of Certain Beneficial
Owners and Management......................41
Item 12. Certain Relationships and Related
Transactions...............................41
Item 13. Exhibits and Reports on Form 8-K...........42
2
Forward-Looking Information
This report on Form 10-KSB contains various forward-looking
statements within the meaning of Section 27A of the Securities Act of
1933 and Section 21E of the Securities Exchange Act of 1934 and
information that is based on management's beliefs and assumptions, as
well as information currently available to management. When used in
this document, the words "anticipate," "estimate," "expect," and
similar expressions are intended to identify forward-looking
statements. Although Nicholas Financial, Inc., including its
subsidiaries ("the Company"), believes that the expectations reflected
in such forward-looking statements are reasonable, it can give no
assurance that such expectations will prove to be correct. Such
statements are subject to certain risks, uncertainties and
assumptions. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect, actual
results may vary materially from those anticipated, estimated or
expected. Among the key factors that may cause actual results to
differ materially from those projected in forward-looking statements
include fluctuations in the economy, the degree and nature of
competition, fluctuations in interest rates, demand for consumer
financing in the markets served by the Company, the Company's products
and services, increases in the default rates experienced on retail
installment sales contracts, adverse regulatory changes in the
Company's existing and future markets, and the Company's ability to
expand its business, including its ability to complete acquisitions
and integrate the operations of acquired businesses, to recruit and
retain qualified employees, to expand into new markets and to maintain
profit margins in the face of increased pricing competition. All
forward-looking statements included in this report are based on
information available to the Company on the date hereof, and the
Company assumes no obligation to update any such forward-looking
statement. Prospective investors should also consult the risk factors
described from time to time in the Company's reports on Forms 10-QSB
and 10-KSB and annual reports to shareholders.
3
PART I
Item 1. Description of Business
General
Nicholas Financial, Inc. ("Nicholas Financial-Canada") is a
Canadian holding company incorporated under the laws of British
Columbia in 1986. The business activities of Nicholas Financial-
Canada are conducted through its wholly-owned subsidiaries formed
pursuant to the laws of the State of Florida, Nicholas Financial, Inc.
("Nicholas Financial") and Nicholas Data Services, Inc., ("NDS").
Nicholas Financial is a specialized consumer finance company engaged
primarily in acquiring and servicing installment sales contracts
("Contracts") for purchases of new and used automobiles and light
trucks. To a lesser extent, the Company also makes direct consumer
loans and sells consumer-finance related products ("Insurance
Products"). NDS is engaged in designing, developing, marketing and
supporting industry specific computer application software for small
businesses located primarily in the Southeast United States. Nicholas
Financial's financing activities accounted for approximately 98% of
consolidated revenues for the fiscal year ended March 31, 2001 and
NDS's activities accounted for approximately 2% of such revenues
during the same period.
Nicholas Financial-Canada, Nicholas Financial and NDS are
hereafter collectively referred to as the "Company". Unless otherwise
specified, all financial information herein is designated in United
States currency.
The Company's principal executive offices are located at 2454
McMullen Booth Road, Building C, Clearwater Florida 33759, and its
telephone number is (727) 726-0763.
Automobile Finance Business - Indirect Loans
The Company is engaged in the business of providing financing
programs, primarily on behalf of purchasers of new and used cars and
light trucks who meet the Company's credit standards, but who do not
meet the credit standards of traditional lenders, such as banks and
credit unions, because of the age of the vehicle being financed and/or
the customer's job instability or credit history. Unlike traditional
lenders, which look primarily to the credit history of the borrower in
making lending decisions and typically finance new automobiles, the
Company is willing to purchase installment sales contracts for
purchases made by borrowers who do not have a good credit history and
for older model and high mileage automobiles. In making decisions
regarding the purchase of a particular installment sales contract the
Company considers the following factors related to the borrower: place
and length of residence, current and prior job status, history in
making installment payments for automobiles, current income and credit
history. In addition, the Company examines its prior experience with
Contracts purchased from the dealer from which the Company is
purchasing the Contract, and the value of the automobile in relation
to the purchase price and the term of the installment sales Contract.
The Company's automobile finance programs are currently conducted
in Florida, Georgia and North Carolina only under the name Nicholas
Financial, Inc. The Company currently operates fourteen branch offices
in Florida, four branch offices in Georgia and two branch offices in
North Carolina. As of March 31, 2001 the Company had non-exclusive
agreements with approximately 700 dealers for the purchase of retail
installment sales contracts (the "Contracts") that meet the Company's
financing criteria. The dealer agreements require the dealer to
originate Contracts in accordance with the Company's guidelines.
The obligors under the Contracts typically make down payments, in
the form of cash or trade-in, ranging from 5% to 20% of the sale price
of the vehicle financed. The balance of the purchase price of the
vehicle plus taxes, title fees and, if applicable, premiums for
extended service contracts, accident and health insurance and/or
credit life insurance, are generally financed over a period of 12 to
60 months. Accident and health insurance coverage enables the
borrower to make required payments under the Contract in the event the
borrower becomes unable to work because of illness or accident
and credit life insurance pays the borrower's obligations under the
Contract upon his or her death.
4
The Company purchases Contracts from the automobile dealer at a
negotiated price that is less than the original principal amount being
financed {the discount} by the purchaser of the automobile. The
amount of the discount depends upon factors such as the age and value
of the automobile and the credit worthiness of the purchaser. In
certain markets, competition determines the discount that the Company
can charge. Historically, the Contracts purchased by the Company have
been purchased at discounts that range from 1% to 15% of the original
principal amount of the Contract. In addition to the discount, the
Company charges the dealer a processing fee of $75 per Contract
purchased. Virtually all Contracts purchased by the Company since
April 1, 1992 have been purchased from dealers without recourse,
meaning that the Company, not the dealer, bears the risk of nonpayment
by the borrower under the Contract. Prior to April 1, 1992 some
Contracts were acquired with full recourse against the dealer for
nonpayment by the borrower. As of March 31, 2001, substantially all
of the Company's loan portfolio consisted of Contracts that were
purchased without recourse against the dealer. Although substantially
all the Contracts in the Company's loan portfolio were acquired
without recourse, the dealer remains liable to the Company for
liabilities arising from certain representations and warranties made
by the dealer with respect to compliance with applicable federal and
state laws and valid title to the vehicle.
The Company purchases a Contract only after the dealer and the
Company arrive at a negotiated price for the Contract and the dealer
has provided the Company with the requisite proof that the vehicle is
properly titled, that the Company has a perfected first priority lien
on the financed vehicle, that the customer has obtained the required
collision insurance naming the Company as loss payee and that the
installment sales contract has been fully and accurately completed and
validly executed. Once the Company has received and approved all
required documents, it pays the dealer for the Contract and commences
servicing the Contract through maturity.
The Company requires the owner of the vehicle to obtain and
maintain collision insurance, naming the Company as the loss payee,
with a deductible of not more than $500. The Company does not offer
collision insurance. Both the Company and the dealers offer purchasers
of vehicles certain other "add on products". These products are
offered by the dealer on behalf of the Company or by the automobile
dealer on behalf of the dealership at the time of sale. They consist
of a roadside assistance plan, extended warranty protection, credit
life insurance, credit accident and health insurance and credit
property insurance. If the purchaser so desires, the cost of these
products may be included in the amount financed under the Contract.
As of March 31, 2001, approximately 20% of the borrowers under
Contracts in the Company's loan portfolio had elected to purchase "add
on products".
The following table sets forth certain information for each of
the fiscal years ended March 31, 2001, 2000 and 1999, respectively,
relating to the Company's automobile finance business:
2001 2000 1999
-------------------------------------
Contracts purchased -
Face value $51,193,231 $41,507,381 $32,901,892
Number of contracts
purchased 6,400 5,264 4,242
Weighted APR (1) 24.70% 24.67% 24.53%
Discount 8.36% 8.63% 9.63%
(1) "APR" means the annual interest rate payable by the borrower.
5
Direct Consumer Loans
Although the Company is licensed to make small direct consumer
loans up to $25,000, the average loan made to date by the Company had
an initial principal balance of approximately $2,500. The Company does
not expect the average loan size to increase significantly within the
foreseeable future and does not presently intend to make loans at the
maximum size permitted under its license. The Company offers loans
primarily to borrowers under the Contracts previously purchased by the
Company. In deciding whether or not to make a loan, the Company
considers the individual's credit history, job stability, income and
impressions created during a personal interview with a Company loan
officer. Additionally, because approximately 90% of the direct
consumer loans made to date have been made to borrowers under
Contracts previously purchased by the Company, the payment history of
the borrower under the Contract is a significant factor in making the
loan decision. The direct consumer loan program was implemented in
April 1995 and currently accounts for less than 5% of total revenue
for the Company. As of March 31, 2001, loans made by the Company
pursuant to its direct consumer loan program constituted approximately
4.3% of the aggregate principal amount of the Company's loan
portfolio.
In connection with its direct consumer loan program the Company
also offers health and accident insurance coverage and credit life
insurance to borrowers. Borrowers in approximately 65% of the 1,256
direct consumer loan transactions outstanding as of March 31, 2001 had
elected to purchase insurance coverage offered by the Company. The
cost of this insurance is included in the amount financed by the
borrower.
The following table sets forth certain information for each of
the fiscal years ended March 31, 2001, 2000 and 1999, respectively,
relating to the Company's direct consumer loan business:
2001 2000 1999
--------------------------------------
Loans purchased-
Face value $5,142,122 $4,511,897 $2,703,008
Number of loans
purchased 1,143 1,011 659
Weighted APR (1) 25.85% 26.07% 26.49%
(1) "APR" means the annual interest rate payable by the borrower.
Financing Sources
The Company finances the acquisition of Contracts with its
retained earnings, cash flow from operations, loans from investors,
insiders and a revolving line of credit with BankofAmerica. In August
2000, the Company expanded its line of credit capacity to $60 million,
extended the maturity date of such line to November 30, 2002 and
reduced the rate of interest payable under the line. In February 2001,
the Company further expanded its line of credit capacity to $75
million. No assurance can be given that the size of the line will be
increased or that the maturity date will be extended beyond November
30, 2002.
As of March 31, 2001, the Company owed approximately $1.0 million
to five investors who purchased notes issued by the Company. These
notes bear interest at 12%. Two of the notes totaling $700,000 are
convertible to common stock at a price of $4.50 per share. In some
cases, the Company's obligation to repay the note is subordinated to
payment of its obligations under the BankAmerica line of credit.
6
The BankAmerica line of credit is secured by all assets of the
Company. The interest rate payable by the Company on funds drawn under
the line of credit is based on either the current prime rate published
by BankAmerica or several Libor pricing options. In addition to
interest, the Company also pays a monthly fee to BankAmerica equal to
.25% of the amount available under the line of credit that has not
been drawn upon. As of March 31, 2001, the Company had drawn
approximately $48 million under the line of credit.
Underwriting Guidelines
The Company's typical customer is 30 years old, has a monthly
gross income of $1,500 and a credit history that fails to meet the
lending standards of most banks and credit unions. Among the credit
problems experienced by the Company's customers that resulted in a
poor credit history are: unpaid revolving credit card obligations;
unpaid medical bills; unpaid student loans; prior bankruptcy; and
evictions for nonpayment of rent. The Company believes that its
customer profile is similar to that of its direct competitors.
Prior to its approval of the purchase of a Contract, the Company
is provided with a standardized credit application completed by the
consumer which contains information relating to the consumer's
background, employment, and credit history. The Company also obtains
credit reports from Equifax, TRW or TransUnion which are independent
reporting services. The Company verifies the consumer's employment
history, income and residence. In most cases consumers are interviewed
by telephone by a Company application processor.
The Company has established internal buying guidelines to be used
by its Branch Managers and underwriters when purchasing Contracts.
Any Contract that does not meet these guidelines must be approved by
the senior management of the Company. The Company currently has three
Regional Managers charged with managing the specific branches in a
defined geographic area. In addition to a variety of administrative
duties, the Regional Managers are responsible for monitoring their
assigned branch's compliance with the Company's underwriting
standards.
The Company continues to utilize its Loss Recovery Department
("LRD") formally known as the Special Operations Department ("SOD) to
perform on-site audits of branch compliance with Company buying
guidelines. LRD audits Company branches on a schedule that is variable
depending on the size of the branch, length of time a branch has been
open, current tenure of the branch manager, previous branch audit
score and current and historical branch profitability. LRD reports
directly to the Accounting and Administrative Management of the
Company. The Company believes that an independent review and audit of
its branches that is not tied to the sales function of the Company is
imperative in order to assure the information obtained is impartial.
The Company uses essentially the same criteria in analyzing a
direct consumer loan as it does in analyzing the purchase of a
Contract. Lending decisions regarding direct consumer loans are made
based upon a review of the customer's loan application, credit
history, job stability, income, in-person interviews with a Company
loan officer and the value of the collateral offered by the borrower
to secure the loan. To date, since approximately 90% of the Company's
direct loans have been made to individuals whose automobiles have been
financed by the Company, the customer's payment history under the
automobile installment sale agreement is a significant factor in the
lending decision. The decision process with respect to the purchase
of Contracts is similar, although the customer's prior payment history
with automobile loans is weighted more heavily in the decision making
process and the collateral value of the automobile being financed is
considered.
After reviewing the information included in the loan application
and taking the other factors into account, Company representatives
categorize the borrower using internally developed credit
classifications of "A", indicating higher creditworthiness, through
"D", indicating lower creditworthiness. In the absence of other
factors, such as a favorable payment history on a Contract held by the
Company, the Company generally makes direct consumer loans only to
individuals rated in categories "B" or higher. Contracts are financed
for individuals who fall within all four acceptable rating categories
utilized, "A" through "D". Usually borrowers who fall within the two
highest categories are purchasing a two to four year old, low mileage
used automobile from the inventory of a new car or franchise dealer
while borrowers in the two lowest categories are purchasing an older,
high mileage automobile from an independent used automobile dealer.
7
Upon credit approval of the customer and the receipt of all
required title and insurance documentation, the Company pays the
dealer for the Contract. The Company typically purchases the Contract
for a price that approximates the wholesale value of the automobile
being financed. The amount the Company is willing to pay a dealer for
a particular Contract depends upon the credit rating of the customer.
The Company will pay more (e.g. purchase the Contract at a smaller
discount from the original principal amount) for Contracts as the
credit risk of the customer improves. The discounts from the initial
principal amount of Contracts purchased by the Company range from 1%
to 15%.
Servicing and Monitoring of Contracts
The Company requires all customers to obtain and maintain
collision insurance covering damage to the vehicle. Failure to
maintain insurance constitutes a default under the Contract and the
Company may at its discretion repossess the vehicle. To reduce
potential loss due to insurance lapse, the Company has the legal and
contractual right to force place its own collateral protection
insurance policy which covers loss due to physical damage to vehicles
not covered by collision insurance.
The Company's Management Information Services personnel maintain
a number of reports to monitor compliance by borrowers with their
obligations under Contracts and direct loans made by the Company.
These reports may be accessed on a real-time basis throughout the
Company by management personnel, including branch office managers and
staff, at computer terminals located in the main office and each
branch office. The reports include: delinquency aging reports,
insurance due reports, customer promises reports, vehicle information
reports, purchase reports, dealer analysis reports, static pool
reports, and repossession reports.
The delinquency report is an aging report that provides basic
information regarding each account and indicates accounts that are
past due. The report includes information such as the account number,
address of the borrower, home and work phone numbers of the borrower,
original term of the Contract, number of remaining payments,
outstanding balance, due dates, date of last payment, number of days
past due, scheduled payment amount, amount of last payment, total past
due, and special payment arrangements or agreements.
Accounts that are less than 120 days matured are included on the
delinquency report on the first day that the contract is contractually
past due. After an account has matured more than 120 days, it is not
included on the delinquency report until it is 11 days past due. Once
an account becomes 30 days past due, repossession proceedings are
implemented unless the borrower provides the Company with an
acceptable explanation for the delinquency and displays a willingness,
ability to make the payment, and there is an agreed upon plan to
return the account to current status. When an account is 60 days past
due, the Company ceases amortization of the Contract and repossession
proceedings are initiated. At 120 days delinquent, if the vehicle has
not yet been repossessed, the account is written off. Once a vehicle
has been repossessed, the related loan balance no longer appears on
the delinquency report. It then appears on the Company's repossession
report and is sold, either at auction or to an automobile dealer.
When an account becomes delinquent, the Company immediately
contacts the borrower to determine the reason for the delinquency and
to determine if arrangements for payment can appropriately be made.
Once payment arrangements acceptable to the Company have been made,
the information is entered in its database and is used to generate a
"Promises Report", which is utilized by the collection staff for
account follow up.
8
The Company generates an insurance report to monitor compliance
with the insurance obligations imposed upon borrowers. This report
includes the account number, name and address of the borrower,
information regarding the insurance carrier, summarizes the insurance
coverage, identifies the expiration date of the policy, and provides
basic information regarding payment dates and the term of the
Contract. This report assists the Company in identifying borrowers
whose insurance policy is up for renewal or in jeopardy of being
canceled. The Company sends written notices to, and makes direct
contact with, borrowers whose insurance policies are about to lapse or
be canceled. If the borrower fails to provide proof of coverage
within 30 days of notice, the Company has the option of purchasing
insurance and adding the cost and applicable finance charges to the
balance of the Contract.
The Company prepares a repossession report that provides
information regarding repossessed vehicles and aids the Company in
disposing of repossessed vehicles. In addition to information
regarding the borrower, this report provides information regarding the
date of repossession, date the vehicle was sold, number of days it was
held in inventory prior to sale, year and make and model of the
vehicle, mileage, payoff amount on the Contract, NADA book value,
Black Book value, suggested sale price, location of the vehicle,
original dealer, and notes other information that may be helpful to
the Company such as the condition of the vehicle.
The Company also prepares a dealer analysis report that provides
information regarding each dealer from which it purchases Contracts.
This report allows the Company to analyze the volume of business done
with each dealer and the terms on which it purchased Contracts from
the dealer.
The Company's policy is to aggressively pursue legal remedies to
collect deficiencies from customers. Delinquency notices are sent to
customers and verbal requests for payment are made beginning when an
account becomes 11 days delinquent. When an account becomes 30 days
delinquent and the borrower has not made payment arrangements
acceptable to the Company or has failed to respond to the requests for
payment, a repossession request form is prepared by the responsible
branch office employee for approval by the branch manager for the
vicinity in which the borrower lives. Once the repossession request
has been approved, first by the Branch Manager and secondly by his
Regional Manager, it must then be approved by a corporate officer. The
repossessor delivers the vehicle to a secure location specified by the
Company where it is held. The Company maintains relationships with
several licensed repossession firms which repossess vehicles for fees
that range from $150 to $350 for each vehicle repossessed. As
required by Florida, Georgia and North Carolina law, the customer is
notified by certified letter that the vehicle has been repossessed and
that to retain the vehicle they must make arrangements satisfactory to
the Company and pay the amount owed under the Contract within ten days
after delivery of the letter. The minimum requirement for return of
the vehicle is payment of all past due amounts under the Contract and
all expenses associated with the repossession incurred by the Company.
If satisfactory arrangements for return of the vehicle are not made
within the statutory period, the Company then sends title to the
vehicle to the state title transfer department which then registers
the vehicle in the name of the Company. The Company then either sells
the vehicle to a dealer or has it transported to an automobile auction
for sale. On average, approximately 30 days lapse between the time
the Company takes possession of a vehicle and the time it is sold by a
dealer or at auction. During its most recent fiscal year, repossessed
vehicles have been sold at prices that average approximately $1,200 to
$1,800 less than the price paid by the Company for the Contract. When
the Company determines that there is a reasonable likelihood of
recovering part or all of any deficiency against the borrower under
the Contract, it pursues legal remedies available to it including law
suits, judgement liens and wage garnishments. Historically, the
Company has recovered approximately 12% of deficiencies from such
borrowers.
9
Marketing and Advertising
The Company's Contract marketing efforts are directed toward
automobile dealers. The Company attempts to meet dealers' needs by
offering highly-responsive, cost-competitive and service-oriented
financing programs. The Company relies on its Regional and Branch
Managers to solicit agreements for the purchase of Contracts with
automobile dealers located within a 25 mile radius of each branch
office. The Branch Manager provides dealers with information regarding
the Company and the general terms upon which the Company is willing to
purchase Contracts. The Company presently has no plans to implement
any other forms of advertising for the purchase of Contracts such as
radio or newspaper advertisements.
Currently, the primary method utilized by the Company in
soliciting borrowers under its direct consumer loan program is through
direct mailings followed by telephone calls to individuals who have a
good credit history with the Company with Contracts purchased by the
Company. The Company to some extent uses direct mail marketing to
those customers who meet the criteria for a consumer loan.
The Industry
The non-prime automobile finance market is highly fragmented and
historically has been serviced by a variety of financial entities,
including captive finance subsidiaries of major automobile
manufactures, banks, independent finance companies, and small loan
companies. Many of these financial entities do not consistently
provide financing to this market. Although prime borrowers represent a
large segment of the automobile financing market, there are many
potential purchasers of automobiles who do not qualify as prime
borrowers. Purchasers considered by the Company to be non-prime
borrowers are generally unable to obtain credit from traditional
sources of automobile financing. The Company believes that, because
these potential purchasers represent a substantial market, there is a
demand by automobile dealers with respect to financing for non-prime
borrowers that has not been effectively served by traditional
automobile financing sources.
Computerized Information System
The Company's operations utilize integrated computer systems
developed by NDS to enhance its ability to respond to customer
inquiries, to monitor the performance of its indirect and direct loan
portfolio and the performance of individual borrowers under Contracts.
All personnel are provided with instant, simultaneous access to
information from a single shared database. The Company has created
specialized programs to automate the tracking of loans from inception.
The capacity of the networking system includes the Company's branch
office locations. See the discussion below the caption "Servicing and
Monitoring of Contracts" for a summary of the different reports
prepared by the Company.
10
Strategy
The Company's business strategy is to continue its growth and to
increase its profitability through greater penetration in its current
markets, controlled geographic expansion into new markets and
selective portfolio acquisitions. As of the date of this report, the
Company has no commitments or agreements in principle with respect to
any expansion into new geographic markets or any portfolio
acquisitions. The Company also intends to continue its expansion
through the increased origination of additional direct consumer loans.
The Company believes that opportunity for growth continues to exist in
the States of Florida, Georgia and North Carolina and intends to
continue its expansion activities in such states. The Company is also
exploring the possibility of expanding into other Southeastern States.
No assurances can be given, however, that such expansion will occur.
Competition
The consumer finance industry is fragmented and highly
competitive. There are numerous financial service companies that
provide consumer credit in the markets served by the Company including
banks, other consumer finance companies, and captive finance companies
owned by automobile manufacturers and retailers. Many of these
companies have significantly greater resources than the Company. The
Company does not believe that increased competition for the purchase
of Contracts will cause a reduction in the interest rate payable by
the purchaser of the automobile. However, increased competition for
the purchase of Contracts will enable automobile dealers to shop for
the best price, thereby giving rise to an erosion in the discount from
the initial principal amount at which the Company would be willing to
purchase Contracts.
The Company's target market consists of persons who are generally
unable to obtain traditional used car financing because of their
credit history, the vehicle's mileage or age. The Company has been
able to expand its automobile finance business in the non-prime credit
market by offering to purchase Contracts on terms that are competitive
with those of other companies which purchase automobile receivables in
that market segment. Because of the daily contact that many of its
employees have with automobile dealers located throughout the market
areas served by it, the Company is generally aware of the terms upon
which its competitors are offering to purchase Contracts. The
Company's policy is to modify its terms if necessary to remain
competitive. The Company has no intention and will not sacrifice
credit quality, its purchasing criteria or prudent business practices
in order to meet the competition or be driven by unrealizable growth
expectations. The Company expects to analyze new lending programs and
marketing methods which may be implemented with the objective of
increasing profits and or its market share, including the possibility
of offering to purchase portfolios of seasoned Contracts from dealers
in bulk transactions from $100,000 to $10,000,000.
The Company's ability to compete effectively with other companies
offering similar financing arrangements depends upon maintaining close
business relationships with dealers of new and used vehicles. No
single dealer out of the approximately 700 dealers that the Company
has contractual relationships with accounted for over 3% of its
business volume for the fiscal years ended March 31, 2001, 2000 or
1999, respectively.
11
Regulation
The Company's financing operations are subject to regulation,
supervision and licensing under various Federal, State and local
statutes and ordinances. Additionally, the procedures that must be
followed by the Company in connection with the repossession of
vehicles securing Contracts are regulated by each of the states in
which the Company does business. To date, the Company's operations
have been conducted exclusively in the States of Florida, Georgia and
North Carolina. Accordingly, the laws of such states as well as
applicable Federal laws, govern the Company's operations. Compliance
with existing laws and regulations applicable to the Company has not
had a material adverse effect on the Company's operations to date.
Management believes that it maintains all requisite licenses and
permits and is in material compliance with all applicable Local, State
and Federal regulations.
The Company maintains a Retail Installment Seller's License and a
Sales Finance Company License with the Florida Department of Banking
and Finance, the Georgia Secretary of State (Business Services &
Regulation) and the North Carolina Secretary of State. Pursuant to
regulations of the State of Florida governing the Company's financing
business activities, the Department of Banking and Finance conducts an
on site audit of each of the Company's Florida branches annually to
monitor compliance with the applicable regulations. The regulations
govern, among other matters, licensure requirements, requirements for
maintenance of proper records, payment of required fees to the State
of Florida, Georgia and North Carolina, maximum interest rates that
may be charged on loans to finance used vehicles and proper disclosure
to customers regarding financing terms.
Employees
The Company's executive management and various support functions
are centralized at the Company's Corporate Headquarters in Clearwater,
Florida. As of March 31, 2001 the Company employed a total of 95
persons, five of whom work for NDS and 90 of whom work for Nicholas
Financial. The Company provides paid holidays, vacation, sick time,
jury time, health and life insurance, long-term disability insurance,
dental insurance and a retirement plan that includes a Company
matching formula on employee contributions as well as a Company profit
sharing contribution for all qualified employees. No employees are
covered by a collective bargaining agreement and the Company believes
it has good relations with its employees.
12
Item 2. Description of Properties
The Company leases its Headquarters and branch office facilities.
Its Headquarters, located at 2454 McMullen Booth Road, Building C in
Clearwater, Florida, consist of approximately 6,800 square feet. The
Company occupies the space pursuant to a lease that commenced on
January 1, 2000 and expires on December 31, 2004. The current monthly
rent is $7,855, with annual increases of approximately 2.25% in each
subsequent year of the lease. Management believes this office space is
adequate to meet its needs for the foreseeable future.
Each of the Company's 20 branch offices located in Florida,
Georgia and North Carolina consists of approximately 1,200 square
feet. These offices are located in office parks, shopping centers or
strip malls and are occupied pursuant to leases with an initial term
of from two to five years at annual rates ranging from approximately
$8.00 to $16.00 per square foot. The Company believes that these
facilities and additional or alternate space available to it are
adequate to meet its needs for the foreseeable future.
Item 3. Legal Proceedings
The Company is not a party to any pending legal proceedings other
than ordinary routine litigation incidental to its business none of
which, in the opinion of management, will have a material adverse
effect on the Company's business, financial position or results of
operations.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during
the quarter ended March 31, 2001.
13
PART II
Item 5. Market for Common Equity and Related Stockholder Matters
Since December 23, 1997, the Company's Common Stock has traded on
the NASDAQ SmallCap System. Effective May 5, 1999, the Company's
trading symbol changed from "NICKF" to "NICK". Share information with
respect to the Common Stock is set forth in the "Selected Quarterly
Data" table included below.
As of March 31, 2001, there were approximately 450 holders of
record of the Company's Common Stock. Holders of Common Stock are
entitled to receive dividends if and when declared by the Board of
Directors out of funds legally available therefore. To date, it has
been the Company's policy to retain earnings to finance the growth of
its business. Accordingly, the Company has not declared or paid any
cash dividends since its inception and does not anticipate declaring
or paying any cash dividends in the foreseeable future. Any dividends
on the Common Stock will be at the sole discretion of the Board of
Directors and will depend upon the Company's profitability, capital
requirements, requirements of the Company's lenders, statutory
restrictions and other factors deemed relevant by the Company's Board
of Directors.
The following table reflects the high and low sale prices for the
Company's Common Stock as reported by the NASDAQ Stock Market for each
of the periods indicated.
Price Range of Common Stock:
High Low
Fiscal Year ended March 31, 2001
First Quarter ............ $5.63 $4.50
Second Quarter......... 5.25 4.50
Third Quarter........... 5.00 4.13
Fourth Quarter............ 5.44 4.31
High Low
Fiscal Year ended March 31, 2000
First Quarter ........... $4.55 $3.50
Second Quarter........... 5.50 3.63
Third Quarter............ 5.38 4.03
Fourth Quarter............ 5.75 4.13
14
Item 6. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Overview
Consolidated net income increased in the fiscal year ended March
31, 2001 to $3,410,877 or $1.35 per diluted share from $2,577,568 or
$1.01 per diluted share in the fiscal year ended March 31, 2000.
Earnings for the year were favorably impacted by significant growth in
the outstanding loan portfolio.
The following table sets forth certain financial data:
Years Ended March 31
2001 2000
----------------------------
Average Net Finance Receivables(1) $73,076,939 $55,015,469
Average Indebtedness (2) 46,166,602 34,530,273
Interest Income 17,386,318 13,557,371
Interest Expense 3,761,689 2,771,100
Net Interest Income 13,624,629 10,786,271
----------------------------
Gross Portfolio Yield (3) 23.79% 24.64%
Average Cost of Borrowed Funds (2) 8.15% 8.03%
Net Interest Spread (4) 15.64% 16.61%
---------------------------
Net Portfolio Yield (3) 18.64% 19.61%
---------------------------
Write-off to Liquidation 7.21% 6.71%
Net Charge-Off Percentage 6.16% 5.88%
(1)Average net finance receivables represent the average of net
finance receivables throughout the year. Net finance receivables
represents gross finance receivables less any unearned finance
charges related to those receivables.
(2)Average Indebtedness represents the average outstanding borrowings
under its line of credit, subordinated debt and notes payable.
Average cost of borrowed funds represents interest expense as
percentage of average indebtedness.
(3)Gross portfolio yield represents interest income as a percentage of
average finance receivables. Net portfolio yield represents net
interest income as a percentage of average finance receivables.
(4) Net interest spread represents the gross portfolio yield less the
average cost of borrowed funds.
15
Fiscal 2001 compared to Fiscal 2000
Interest Income and Loan Portfolio
Interest income on finance receivables, predominantly finance
charge income, increased 28% to $17.4 million in fiscal 2001 from
$13.6 million in fiscal 2000. The net finance receivable balance
totaled $65.0 million at March 31, 2001, an increase of 25% from $52.0
million at March 31, 2000. The gross finance receivable balance
increased 25% to $103.2 million at March 31, 2001 from $82.8 million
at March 31, 2000. The primary reason interest revenue increased was
the increase in the outstanding loan portfolio. The primary reason net
finance receivables increased was the opening of two additional
offices and the increased receivable base of several existing branch
offices.
Computer Software Business
In fiscal 2001, the revenues of NDS were $410,708 compared with
fiscal 2000 revenues of $517,445, a decrease of 21%. Operating income
for fiscal 2001 was $25,137 compared with an operating income of
$13,205 for fiscal 2000. The Company expects both operating revenues
and income of NDS to remain stable, although no assurance can be given
in this regard.
Operating Expenses
Operating expenses excluding provision for credit losses and
interest expense increased to $7.0 million in fiscal 2001 from $5.8
million in fiscal 2000. This increase of 21% was primarily
attributable to the opening of two additional branch locations,
increasing the number of employees in several existing branch
locations and also increasing the number of corporate personnel. The
Company increased its work force from 84 employees at the end of
fiscal 2000 to 95 employees at the end of fiscal 2001.
Interest Expense
Interest expense increased to $3.8 million in fiscal 2001 as
compared to $2.8 million in fiscal 2000. This increase was due to an
increase in average outstanding borrowings from $34.5 million to $46.2
million. The average cost of borrowed funds increased from 8.03% for
fiscal 2000 to 8.15% for fiscal 2001.
16
Analysis of Credit Losses
Because of the nature of the borrowers under the Contracts and its
direct consumer loan program, the Company considers the establishment
of adequate reserves for credit losses to be imperative. The Company
segregates its Contracts into pools for purposes of establishing
reserves for losses. Each such pool consists of the loans purchased
by a Company branch office during a three month period. The average
pool consists of 77 Contracts with an aggregate initial principal
amount of approximately $613,534. As of March 31, 2001, the Company
had 296 active pools.
The Company pools Contracts according to branch location because
the branches purchase contracts in different markets located in
Florida, Georgia and North Carolina. All Contracts purchased by a
branch during a fiscal quarter comprise a pool. This method of pooling
by branch and quarter allows the Company to evaluate the different
markets where the branches operate. The pools also allow the Company
to evaluate the different levels of customer income, stability, credit
history, and the types of vehicles purchased in each market.
A pool retains an amount equal to 100% of the discount into a
reserve for credit losses. In situations where, at the date of
purchase, the discount is determined to be insufficient to absorb all
potential losses associated with the pool, a portion of future
unearned income associated with that specific pool will be added to
the reserves for credit losses until total reserves have reached the
appropriate level. Subsequent to the purchase, if the reserve for
credit losses is determined to be inadequate for a pool which is not
fully liquidated, then a charge to income is used to reestablish
adequate reserves. If a pool is fully liquidated and has any remaining
reserves, the excess reserves are recognized as income.
In analyzing a pool, the Company considers the performance of
prior pools originated by the branch office, the performance of prior
Contracts purchased from the dealers whose Contracts are included in
the current pool, the credit rating of the borrowers under the
Contracts in the pool, and current market and economic conditions.
Each pool is analyzed monthly to determine if the loss reserves are
adequate and adjustments are made if they are determined to be
necessary. As of March 31, 2001, the Company had established reserves
for losses on Contracts of $13,771,714 or 13.34% of gross outstanding
receivables under the Contracts.
17
The following tables present certain information regarding the
delinquency rates experienced by the Company with respect to Contracts
and under its direct consumer loan program:
Year Ended Year Ended
March 31, 2001 March 31, 2000
--------------- ----------------
Contracts
Gross Balance Outstanding $98,797,992 $79,218,572
Dollar Dollar
Delinquencies Amount Percent Amount Percent
---------- ------ ---------- ------
30 to 59 days $1,363,532 1.38% $1,575,437 1.99%
60 to 89 days 328,964 0.33% 171,880 0.22%
90 + days 182,951 0.19% 79,912 0.10%
---------- ----- ---------- ------
Total Delinquencies $1,875,447 $1,827,229
Total Delinquencies as a
percent of outstanding balance 1.90% 2.31%
Direct Loans
Gross Balance Outstanding $4,406,187 $3,574,364
Delinquencies
30 to 59 days 56,781 1.29% 15,421 0.43%
60 to 89 days 2,436 0.06% 6,301 0.18%
90 + days 9,659 0.22% 4,746 0.13%
------- ----- ------- -----
Total Delinquencies $68,876 $26,468
Total Delinquencies as
apercent of outstanding balance 1.56% 0.74%
The provision for credit losses was $1,470,744 in fiscal 2001 as
compared to $1,069,719 in fiscal 2000. This increase was primarily the
result of a 25% increase in the net portfolio over the prior year. The
Company increased its total reserve percentage from 13.25% of gross
finance receivables for the fiscal year ended March 31, 2000 to 13.34%
for the fiscal year ended March 31, 2001. Management believes that the
reserve adjustments made during fiscal 2001 are consistent with its
reserve methodology.
18
Income Taxes
The provision for income taxes increased 14% to $2,120,855 in
fiscal 2001 from $1,853,229 in fiscal 2000 as a result of higher
pretax income. The Company's effective tax rate decreased from 41.83%
in fiscal 2000 to 38.34% in fiscal 2001.
Net Income
As a result of the above factors, net income increased from
$2,577,568 in fiscal 2000 to $3,410,877 in fiscal 2001.
Liquidity and Capital Resources
The Company's cash flows for fiscal 2001 and 2000 are summarized as
follows:
Fiscal Fiscal
2001 2000
----------- -------------
Cash provided by (used in):
Operations $5,393,254 $4,946,212
Investing activities -
(primarily purchase of
installment contracts) (14,644,237) (13,366,705)
Financing activities 9,224,967 8,170,258
----------- ----------
Net decrease in cash $(26,016) $(250,235)
=========== ==========
The Company's primary use of working capital during fiscal year
2001 was the funding of the purchase of Contracts. The Contracts were
financed substantially through borrowings on the Company's $75 million
line of credit. The line of credit, which expires in November 2002,
is secured primarily by Contracts, and available borrowings are based
on a percentage of qualifying Contracts. As of March 31, 2001 the
Company had approximately $26.8 million available under the line of
credit. Since inception, the Company has also funded a portion of its
working capital needs from cash flows from operating activities.
The self-liquidating nature of installment Contracts and other
loans enables the Company to assume a higher debt-to-equity ratio than
in most businesses. The amount of debt the Company incurs from time to
time under these financing mechanisms depends on the Company's need
for cash and ability to borrow under the terms of its line of credit.
The Company believes that borrowings available under the line of
credit as well as cash flow from operations and, if necessary, the
issuance of additional subordinated debt and or additional securities
in the capital markets, will be sufficient to meet its short term
funding needs.
19
Impact of Inflation
The Company is affected by inflation primarily through increased
operating costs and expenses including increases in interest rates.
Inflationary pressures on operating costs and expenses have been
offset by the Company's continued emphasis on stringent operating and
cost controls and to a lesser extent by modest increases in support
rates from its software subsidiary, NDS. Management believes that the
Company's financial position has enabled it to negotiate favorable
interest rates. No assurances can be given that the Company will be
able to continue to do so in the future.
The Company believes that a downturn in the economy would
increase the number of purchasers of automobiles financed with
Contracts. During a modest downturn in economic activity more people
will experience a reduction in income because of downsizing, fewer and
smaller raises, and the necessity of accepting lower paying jobs. In
addition, it may be difficult for individuals who have financially
over-extended themselves to meet their debt obligations and they may
find it necessary to purchase used rather than new automobiles.
Although the number of potential customers can be expected to increase
during periods of slow economic activity, the number of defaults in
payment obligations can also be expected to increase with a resulting
increase in repossessions of vehicles securing Contracts. The Company
is not able to predict whether or not the net effect of such a
downturn would be favorable or unfavorable to the operating results of
the Company, although the Company believes that a severe downturn in
economic activities could have a material adverse effect on its
business, financial condition and results of operations.
Future Expansion
The Company currently intends to continue its expansion through
the purchase of additional Contracts and the expansion of its direct
consumer loan program. In order to increase the size of the Company's
portfolio of Contracts, it will be necessary for the Company to open
additional branch offices and increase the size of its revolving line
of credit arrangement, either with its current lender or another
lender. The Company, from time to time, has and will meet with
private investors and financial institutions that specialize in
investing in subordinated debt. The Company also intends to continue
its policy of not paying dividends and using earnings from operations
to purchase Contracts or make direct consumer loans. The Company
believes that opportunity for growth continues to exist in Florida,
Georgia and North Carolina and intends to continue its expansion
activities in those states. The Company is also exploring the
possibility of expanding into additional states; but it does not have
any current plans to do so. No assurances can be given that the
Company will be able to continue to expand its operations.
Item 7. Financial Statements
The following financial statements are filed as part of this report
(see pages 20-37)
Report of Independent Auditors..............................21
Audited Consolidated Financial Statements
Consolidated Balance Sheets.................................22
Consolidated Statements of Income...........................23
Consolidated Statements of Stockholders' Equity.............24
Consolidated Statements of Cash Flows.......................25
Notes to Consolidated Financial Statements..................26
20
(This page intentionally left blank)
21
Report of Independent Auditors
To the Board of Directors of
Nicholas Financial, Inc.
We have audited the accompanying consolidated balance sheets of
Nicholas Financial, Inc. and subsidiaries as of March 31, 2001
and 2000, and the related consolidated statements of income,
shareholders' equity and cash flows for the years then ended.
These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion
on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards
generally accepted in the United States. Those standards require
that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of Nicholas Financial, Inc. and subsidiaries
at March 31, 2001 and 2000, and the consolidated results of their
operations and their cash flows for the years then ended in
conformity with accounting principles generally accepted in the
United States.
May 18, 2001
Tampa, Florida
22
Nicholas Financial, Inc. and Subsidiaries
Consolidated Balance Sheets
March 31
2001 2000
---------------------------
Assets
Cash $ 233,167 $ 259,183
Finance receivables, net 65,040,868 52,015,107
Accounts receivable 14,468 20,922
Prepaid expenses and other assets 549,186 392,684
Property and equipment, net 333,759 331,594
Deferred income taxes 1,070,888 1,115,888
---------------------------
Total assets $67,242,336 $54,135,378
===========================
Liabilities
Line of credit $48,123,426 $38,414,549
Notes payable-related party 968,008 1,318,008
Accounts payable 3,017,503 2,695,622
Income taxes payable 93,819 44,965
Deferred revenues 611,729 518,718
Other liabilities - 16,232
---------------------------
Total liabilities 52,814,485 43,008,094
Shareholders' Equity
Preferred stock, no par: 5,000,000 shares
authorized;none issued and outstanding - -
Common stock, no par: 50,000,000 shares
authorized; 2,317,108 and 2,352,008 shares
issued and outstanding, respectively 3,601,292 3,711,602
Retained earnings 10,826,559 7,415,682
---------------------------
14,427,851 11,127,284
---------------------------
Total liabilities and
shareholders'equity $67,242,336 $54,135,378
===========================
See accompanying notes.
23
Nicholas Financial, Inc. and Subsidiaries
Consolidated Statements of Income
Year ended March 31
2001 2000
---------------------------
Revenue:
Interest income on finance receivables $17,386,318 $13,557,371
Sales 410,708 517,445
---------------------------
17,797,026 14,074,816
Expenses:
Cost of sales 84,870 90,471
Marketing 445,869 396,307
Administrative 6,356,555 5,225,373
Provision for credit losses 1,470,744 1,069,719
Depreciation 145,567 91,049
Interest expense 3,761,689 2,771,100
---------------------------
12,265,294 9,644,019
---------------------------
Operating income before income taxes 5,531,732 4,430,797
Income tax expense:
Current 2,075,855 1,694,061
Deferred 45,000 159,168
---------------------------
2,120,855 1,853,229
---------------------------
Net income 3,410,877 2,577,568
Retained earnings, beginning of year 7,415,682 4,838,114
---------------------------
Retained earnings, end of year $10,826,559 $7,415,682
===========================
Earnings per share:
Basic $1.46 $1.10
===========================
Diluted $1.35 $1.01
===========================
Weighted average shares - basic 2,336,599 2,352,286
===========================
Weighted average shares - diluted 2,568,866 2,656,315
===========================
See accompanying notes.
24
Nicholas Financial, Inc. and Subsidiaries
Consolidated Statement of Stockholders' Equity
Total
Common Stock Retained Shareholders'
Shares Amount Earnings Equity
------------------------------------------------
Balance at April 1, 1999 2,349,108 $3,702,587 $4,838,114 $8,540,701
Issuance of common stock 5,000 22,400 - 22,400
Repurchase and retirement
of common stock (2,100) (13,385) - (13,385)
Net Income - - 2,577,568 2,577,568
------------------------------------------------
Balance at March 31, 2000 2,352,008 3,711,602 7,415,682 11,127,284
------------------------------------------------
Issuance of common stock 1,000 3,400 - 3,400
Issued in connection with
services rendered - 23,600 - 23,600
Repurchase and retirement
of common stock (35,900) (169,794) - (169,794)
Settlement of accounts
receivable from shareholder
related to exercise
of options - 32,484 - 32,484
Net income - - 3,410,877 3,410,877
------------------------------------------------
Balance at March 31, 2001 2,317,108 $3,601,292 $10,826,559 $14,427,851
================================================
See accompanying notes.
25
Nicholas Financial, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
Year ended March 31
2001 2000
------------------------
Cash flows from operating activities
Net income $3,410,877 $2,577,568
Adjustments to reconcile net income to net
cash provided
by operating activities:
Depreciation 145,567 91,049
Provision for credit losses 1,470,744 1,069,719
Deferred income taxes 45,000 159,168
Changes in operating assets and liabilities:
Accounts receivable 6,454 2,010
Prepaid expenses and other (132,902) (83,840)
Accounts payable 321,881 960,266
Income taxes payable 48,854 44,965
Deferred revenues 93,011 130,774
Other liabilities (16,232) (5,467)
------------------------
Net cash provided by operating activities 5,393,254 4,946,212
Investing activities
Increase in finance receivables, net of
principal collected (14,496,505) (13,161,355)
Purchase of property and equipment,
net of disposals (147,732) (205,350)
-------------------------
Net cash used in investing activities (14,644,237) (13,366,705)
Financing activities
Repayment of notes payable-related party (350,000) (288,757)
Net proceeds from line of credit 9,708,877 8,450,000
(Repurchase) sale of common stock (133,910) 9,015
-------------------------
Net cash provided by financing activities 9,224,967 8,170,258
-------------------------
Net decrease in cash (26,016) (250,235)
Cash, beginning of year 259,183 509,418
-------------------------
Cash, end of year $ 233,167 $ 259,183
=========================
See accompanying notes.
26
Nicholas Financial, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
March 31, 2001
1. Organization
Nicholas Financial, Inc. (NFI, Canada) is a Canadian holding
company incorporated under the laws of British Columbia with two
wholly-owned United States subsidiaries, Nicholas Data Services,
Inc. (NDS) and Nicholas Financial, Inc. (NFI). NDS is engaged
principally in the development, marketing and support of computer
application software. NFI is engaged principally in providing
installment sales financing. Both NDS and NFI are based in
Florida, U.S.A. The accompanying financial statements are stated
in U.S. dollars and are presented in accordance with accounting
principles generally accepted in the United States.
2. Accounting Policies
Consolidation
The consolidated financial statements include the accounts of
NFI, Canada and its wholly-owned subsidiaries, NDS and NFI,
collectively referred to as the Company. All intercompany
transactions and balances have been eliminated.
Property and Equipment
Property and equipment are recorded at cost. Expenditures for
repairs and maintenance are charged to expense as incurred.
Depreciation of property and equipment is computed using the
straight-line method over the estimated useful lives of the
assets as follows:
Automotive 3 years
Equipment 5 years
Furniture and fixtures 7 years
Leasehold improvements Lease term
Allowance for Loan Losses
The allowance for loan losses is increased by charges against
earnings and decreased by charge-offs (net of recoveries). In
addition to the allowance for loan losses, a nonrefundable dealer
reserve has been established using unearned interest and dealer
discounts to absorb potential credit losses. To the extent actual
credit losses exceed these reserves, a bad debt provision is
recorded; and to the extent credit losses are less than the
reserve, the reserve is accreted into income as an adjustment to
the interest yield over the term of the underlying finance
receivables.
27
2. Accounting Policies (continued)
Management's periodic evaluation of the adequacy of the allowance
is based on the Company's past loan experience, known and
inherent risks in the portfolio, adverse situations that may
affect the borrower's ability to repay, the estimated value of
any underlying collateral, and current economic conditions.
Income Taxes
Income taxes are accounted for under the asset and liability
method. Deferred tax assets and liabilities are recognized for
the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases and operating loss and
tax credit carryforwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rate is recognized in
income in the period that includes the enactment date.
Revenue Recognition
Interest income on finance receivables is recognized using the
interest method. Accrual of interest income on finance
receivables is suspended when a loan is contractually delinquent
for 60 days or more or the collateral is repossessed, whichever
is earlier.
Revenues resulting from the sale of hardware and software are
recognized when persuasive evidence of an agreement exists,
delivery of the products has occurred, no significant Company
obligation with regard to implementation remain, the fee is fixed
or determinable and collectibility is probable. If the fee due
from the customer is not fixed or determinable, revenue is
recognized as payments become due from the customer. If
collectibility is not considered probable, revenue is recognized
when the fee is collected. Arrangements that included software
services are evaluated to determine whether those services are
essential to the functionality of other elements of the
arrangement. When software services are considered essential,
revenue under the arrangement is recognized using contract
accounting. When software services are not considered essential,
the revenue related to the software services is recognized as the
services are performed. The unamortized amounts are included in
the caption "deferred revenues."
28
Earnings Per Share
Basic earnings per share excludes any dilutive effects of common
stock equivalents such as options, warrants, and convertible
securities. Diluted earnings per share includes the effects of
dilutive options, warrants, and convertible securities. Basic and
diluted earnings per share have been computed as follows:
2. Accounting Policies (continued)
Year ended March 31
2001 2000
-------------------------
Numerator:
Numerator for basic earnings per share - Net
income available to common stockholders $3,410,877 $2,577,568
Effect of dilutive securities:
Convertible debt 59,489 94,023
-------------------------
Numerator for dilutive earnings per share -
income available to common stockholders
after assumed conversions $3,470,366 $2,671,591
=========================
Denominator:
Denominator for basic earnings per share -
weighted average shares 2,336,599 2,352,286
Effect of dilutive securities: (A)
Employee stock options 58,649 54,231
Convertible debt 173,618 249,798
-------------------------
Denominator for diluted earnings per share -
adjusted weighted-average shares and assumed
conversions 2,568,866 2,656,315
=========================
Earnings per share - basic $1.46 $1.10
=========================
Earnings per share - diluted $1.35 $1.01
=========================
Footnote A:
Options 42,000 -
Warrants - 333,333
The options and warrants above were outstanding but not included
in the computation of diluted earnings per share because the
effect would be antidilutive.
29
2. Accounting Policies (continued)
Stock Option Accounting
The Company has elected to follow Accounting Principles Board
Opinion No. 25, Accounting for Stock Issued to Employees (APB 25)
and related interpretations in accounting for its stock option
grants and to present the disclosure requirements relating to
stock-based compensation plans required by Financial Accounting
Standards Board Statement No. 123, Accounting for Stock-Based
Compensation (FAS 123).
Financial Instruments
The Company's financial instruments consist of finance
receivables, accounts receivable, line of credit, notes
payable-related party and accounts payable. For each of these
financial instruments, the carrying value approximates its fair
value.
The Company's financial instruments that are exposed to
concentrations of credit risk are primarily finance receivables,
which are concentrated in the states of Florida, Georgia and
North Carolina. The Company provides credit during the normal
course of business and performs ongoing credit evaluations of it
customers. The Company maintains allowances for potential credit
losses which, when realized, have been within the range of
management's expectations. The Company perfects a primary
security interest in all vehicles financed as a form of
collateral.
Use of Estimates
The preparation of the financial statements in conformity with
accounting principles generally accepted in the United States
requires management to make estimates and assumptions that affect
the amounts reported in the financial statements and accompanying
notes. The most significant of these estimates relates to the
determination of the allowance for credit losses and related
reserves. Actual results could differ from those estimates.
Statement of Cash Flows
Cash paid for income taxes for the years ended March 31, 2001 and
2000 was approximately $2,027,000 and $1,596,000, respectively.
Cash paid for interest for the years ended March 31, 2001 and
2000 was approximately $3,705,000 and $2,631,000, respectively.
30
2. Accounting Policies (continued)
Recent Accounting Pronouncements
Financial Accounting Standards Board Statements No. 133 and 138,
Accounting for Certain Derivative Instruments and Certain Hedging
Activities, became effective January 1, 2001. Statements No. 133
and 138 require that derivatives, as defined by the Statements,
be recorded for financial reporting purposes at fair value.
Changes in fair value are reported directly through the statement
of income unless specific hedge accounting criteria are met. The
Company expects to adopt the new statement effective April 1,
2001. The Company does not anticipate that the adoption of the
Statement will have a significant effect on its results of
operations or financial position.
3. Finance Receivables
Finance receivables consist of consumer automobile finance
installment contracts and are detailed as follows:
2001 2000
--------------------------
Finance receivables, gross $103,204,179 $82,792,936
Less:
Unearned interest (24,391,597) (19,809,115)
--------------------------
78,812,582 62,983,821
Nonrefundable dealer reserve (10,306,699) (8,444,103)
Allowance for credit losses (3,465,015) (2,524,611)
--------------------------
Finance receivables, net $65,040,868 $52,015,107
==========================
The terms of the receivables range from 12 to 60 months and bear
a weighted average effective interest rate of 24% for both 2001
and 2000, respectively.
31
3. Finance Receivables (continued)
The following table sets forth a reconciliation of the changes in
nonrefundable dealer reserves for the years ended March 31:
2001 2000
----------------------------
Balance at beginning of year $8,444,103 $6,643,593
Discounts acquired on new volume 8,449,361 6,785,407
Recoveries 696,588 520,264
Accreted to income (2,330,757) (2,046,012)
Losses absorbed (4,952,596) (3,459,149)
--------------------------
Balance at end of year $10,306,699 $8,444,103
==========================
Reserve as a percent of gross
finance receivables 9.99% 10.20%
==========================
The following table sets forth a reconciliation of the changes in
the allowance for credit losses for the years ended March 31:
2001 2000
--------------------------
Balance at beginning of year $2,524,611 $1,904,957
Current year provision 1,470,744 1,069,719
Recoveries 10,564 -
Accreted to income (190,724) (80,607)
Losses absorbed (350,180) (369,458)
------------------------
Balance at end of year $3,465,015 $2,524,611
========================
Reserve as a percent of gross
finance receivables 3.36% 3.05%
========================
32
4. Property and Equipment
Accumulated Net Book
Cost Depreciation Value
------------------------------------------
2001
Automotive $169,944 $ 58,670 $111,274
Equipment 372,079 252,871 119,208
Furniture and
fixtures 155,542 101,412 54,130
Leasehold
improvements 169,521 120,374 49,147
-----------------------------------
$867,086 $533,327 $333,759
===================================
2000
Automotive $ 88,670 $ 11,230 $ 77,440
Equipment 326,155 201,813 124,342
Furniture and
fixtures 138,304 85,715 52,589
Leasehold
improvements 166,225 89,002 77,223
-----------------------------------
$719,354 $387,760 $331,594
===================================
5. Line of Credit
The Company has a $75,000,000 line of credit facility (the Line)
with BA Business Credit, Inc. of which approximately $48,000,000
was outstanding at March 31, 2001. Borrowings under the Line bear
interest at the Bank of America prime rate or several Libor
pricing options. Pledged as collateral for this credit facility
are all of the assets of Nicholas Financial, Inc. and Nicholas
Data Services, Inc. The Line expires on November 30, 2002.
On May 11, 1999 the Company entered into an interest rate swap
with a notional amount of $10 million at a fixed rate of 5.81%,
maturing on May 24, 2002. On May 21, 1999 the Company entered
into two interest rate swaps with notional amounts of $5 million
each, at fixed rates of 5.81% and 6.08%, maturing on May 24, 2001
and May 24, 2004, respectively.
On August 18, 1999 the Company terminated a $5 million swap
maturing on May 24, 2004 in exchange for $52,000. In addition the
Company entered into an interest rate swap with a notional amount
of $10 million at a fixed rate of 5.80%, provided that 30 day
libor does not exceed 8%, maturing on May 24, 2003. In the event
30 day libor exceeds 8.00% , the fixed rate of 5.80% would swap
back to the variable rate for all periods where 30 day libor
exceeds 8.00%.
33
5. Line of Credit (continued)
On May 17, 2000 the Company entered into an interest rate swap
with a notional amount of $10 million at a fixed rate of 6.87%,
provided that 30 day libor does not exceed 7.7%, maturing on May
17, 2004. In the event 30 day libor exceeds 7.70%, the fixed rate
of 6.87% would swap back to the variable rate for all periods
where 30 day libor exceeds 7.70%.
On March 30, 2001 the Company entered into an interest rate swap
with a notional amount of $10 million at a fixed rate of 4.89%,
maturing on March 30, 2003.
The Company utilizes the above noted interest rate swaps to
manage its interest rate exposure. The swaps effectively convert
a portion of the Company's floating rate debt to a fixed rate,
more closely matching the interest rate characteristics of the
Company's finance receivables.
6. Notes Payable-Related Party
Notes payable to shareholders, directors and individuals related
thereto at March 31:
2001 2000
-----------------------
Note payable, unsecured, with interest
at varying rates up to 12%, quarterly
interest payments due through November
2001, at which time the entire
principal balance and unpaid interest
is due, subordinated to the Line. The
note is convertible at the option of
the holder, into common shares at
prices from $4.50 to $6.00 per share. $700,000 $850,000
Note payable, unsecured interest at
12%, quarterly interest due through
April 2000, at which time the entire
balance and unpaid interest is due,
subordinated to the Line. The note is
convertible at the option of the
holder, into common shares at $8.25
per share. - 200,000
34
6. Notes Payable-Related Party (continued)
2001 2000
------------------------
Note payable, unsecured, interest at
12%, principal and interest due upon
30 day demand. $219,270 $219,270
Note payable, unsecured, interest at
12%, principal and interest due upon
30 day demand. 48,738 48,738
----------------------
$968,008 $1,318,008
======================
Maturities of notes payable are summarized as follows:
Year ending March 31:
2002 $968,008
==========
The company incurred interest expense on the above notes of
approximately $150,000 and $197,000 for the years ended March
31, 2001 and 2000, respectively.
7. Income Taxes
The provision for income taxes reflects an effective U.S tax
rate, which differs from the corporate tax rate (34%) for the
following reasons:
2001 2000
------------------------
Provision for income taxes at Federal
statutory rate $1,880,789 $1,506,471
Increase resulting from:
State income taxes, net of Federal
benefit 202,109 243,694
Other 37,957 103,064
------------------------
$2,120,855 $1,853,229
========================
The Company's deferred tax assets consist of the following as of
March 31:
2001 2000
-------------------------
Allowance for credit losses not
deductible for tax purposes $1,005,497 $1,038,867
Other items 65,391 77,021
----------------------
$1,070,888 $1,115,888
======================
35
7. Income Taxes (continued)
NFI, Canada has income tax loss carryforward balances of
approximately Cdn$298,000 (2000-Cdn$277,000) which are available
to reduce future taxable income.
For the years ended March 31, 2001 and 2000, the Company would
have recorded deferred tax assets of approximately $93,000 and
$86,000, respectively, due primarily to these Canadian income tax
loss carryforwards. The assets, however, are offset entirely by a
valuation allowance due to the relative uncertainty surrounding
the realization of the assets.
8. Shareholders' Equity
The Company has an employee stock incentive plan (the SIP) for
officers, directors and key employees under which 299,700 shares
of common stock were reserved for issuance as of March 31, 2001.
Options currently granted by the Company generally vest over a
five year period.
The Company has elected to follow APB 25, and related
Interpretations in accounting for its employee stock options
because, as discussed below, the alternative fair value
accounting provided for under FAS 123, requires use of option
valuation models that were not developed for use in valuing
employee stock options. Under APB 25, if the exercise price of
the Company's employee stock options equals the market price of
the underlying stock on the date of grant, no compensation
expense is recognized.
Pro forma information regarding net income and earnings per share
as required by FAS 123 has been determined as if the Company has
accounted for its employee stock options and warrants granted
subsequent to December 31, 1994 under the fair value method of
that Statement. The fair value for these options and warrants was
estimated at the date of grant using a Black-Scholes option
pricing model with the following weighted-average assumptions for
2001 and 2000:
2001 2000
--------------------------
Risk free rate of return 5.00% 6.40%
Volatility factor .0405 0.479
Expected life 10 years 10 years
Expected dividends None None
36
8. Shareholders' Equity (continued)
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting
restrictions and are fully transferable. In addition, option
valuations models require the input of highly subjective
assumptions including the expected stock price volatility.
Because the Company's employee stock options and warrants have
characteristics significantly different from those of traded
options and warrants, and because changes in the subjective input
assumptions can materially effect the fair value estimate, in
management's opinion, the existing models do not necessarily
provide a reliable single measure of the fair value of its
employee stock options and warrants.
For purposes of pro forma disclosures, the estimated fair value
of the options and warrants is amortized to expense over the
option and warrant's vesting period. The Company's pro forma
information is as follows:
2001 2000
-------------------------
Pro forma net income $3,271,584 $2,487,741
Pro forma earnings per share:
Basic $1.40 $1.06
Diluted $1.30 $ .97
37
8. Shareholders' Equity (continued)
The following table reflects activity within the SIP for the
years noted:
2001 2000
-----------------------------------------
Weighted Weighted
Options Average Options Average
& Exercise & Exercise
Warrants Price Warrants Price
-----------------------------------------
Outstanding-
beginning of year 592,033 $4.62 548,533 $4.42
Granted 45,500 5.47 70,000 4.75
Exercised (1,000) 3.40 (1,000) 3.40
Canceled/expired (336,833) 5.10 (25,500) 3.42
-----------------------------------------
Outstanding-
end of year 299,700 4.01 592,033 4.62
=========================================
Exercisable at
end of year 133,080 3.64 371,073 5.09
=========================================
Weighted-average
fair value of
options granted
during the year $3.22 $3.24
Currently
Exercisable
--------------------
Weighted
Weighted Average Weighted
Average Remaining Average
Exercise Contractual Exercise
Shares Price Life Shares Price
-----------------------------------------------------
$3.00 to 3.99 187,700 $3.40 7.20 years 109,746 $3.40
4.00 to 4.99 70,000 4.75 8.61 years 23,334 4.75
5.00 to 5.50 42,000 5.46 9.10 years - -
----------------------------------------------------
Total 299,700 $4.01 7.80 years 133,080 $3.64
======== =========
38
9. Employee Benefit Plans
The Company has a 401(k) profit sharing plan under which all
employees are eligible to participate. Employee contributions are
voluntary and subject to Internal Revenue Service limitations.
The Company matches, based on annually determined factors,
employee contributions provided the employee completes certain
levels of service annually. For the years ended March 31, 2001and
2000, the Company recorded expenses of approximately $27,000 and
$20,000, respectively, related to this plan. All employees who
were eligible under the plan received a profit sharing
contribution based on their total compensation in relation to the
total compensation of all eligible employees. For the years ended
March 31, 2001and 2000, the Company recorded expenses of
$125,000 and $100,000, respectively, related to this plan.
10. Commitments
The Company leases its corporate and branch offices under
operating lease agreements which provide for annual minimum
rental payments as follows:
Year ending March 31:
---------------------
2002 $356,338
2003 230,519
2004 77,960
2005 10,459
---------
$675,276
=========
Rent expense for the years ended March 31, 2001 and 2000 was
approximately $362,000 and $270,000, respectively.
39
11. Segment Information
The segments presented have been identified based on the
difference in the products and services of the Company's two
wholly-owned subsidiaries. Internal financial results for each
subsidiary are presented to and reviewed by the senior management
of the Company. Substantially all of the Company's operations are
in the United States. The industry segments are as follows:
Computer
Application
General Software and
Financing Support Corporate Total
---------------------------------------------------
2001
Interest Income and
Sales $17,386,318 $410,708 - $17,797,026
Operating income
(loss) before
income taxes 5,521,553 25,137 (14,958) 5,531,732
Income tax expense 2,111,149 9,706 - 2,120,855
Identifiable assets 67,049,298 191,757 1,281 67,242,336
Capital expenditures 147,732 - - 147,732
Depreciation 145,498 69 - 145,567
2000
Interest Income and
Sales $13,557,371 517,445 - $14,074,816
Operating income
(loss) before
income taxes 4,432,982 13,205 (15,390) 4,430,797
Income tax expense 1,848,178 5,051 - 1,853,229
Identifiable assets 53,977,043 156,621 1,714 54,135,378
Capital expenditures 205,350 - - 205,350
Depreciation 90,895 154 - 91,049
40
(This papge intentionally left blank)
41
Item 8. Changes In and Disagreements with Accountants on Accounting
and Financial Disclosure
None.
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons
The information set forth under the caption "Proposal 1: Election
of Directors" in the Proxy Statement and Information Circular, dated
on or about June 29, 2001, for the 2001 Annual General Meeting of
Members of the Company to be held August 7, 2001 (the "Proxy
Statement"), the information set forth under the caption "Executive
Officers and Compensation" in the Proxy Statement, and the information
set forth under the caption "Section 16 (a) Beneficial Ownership
Reporting Compliance" in the Proxy Statement are incorporated herein
by reference.
Additional information regarding the executive officers is set forth
below.
Peter L. Vosotas, age 59, is the founder of the Company and
majority stockholder. He has served as Chairman of the Board, Chief
Executive Officer and President of the Company and each of its
subsidiaries since inception. Prior to founding the Company, Mr.
Vosotas held a variety of Sales and Marketing positions with Ford
Motor Company, GTE and AT&T Paradyne Corporation. Mr Vosotas attended
the United States Naval Academy and earned a Bachelor of Science
Degree in Electrical Engineering from the University of New Hampshire.
As of March 31, 2001 there was one executive officer who was not
also a director of the Company. Ralph T. Finkenbrink, age 39, has
served as Vice-President-Finance of the Company since July 1997. He
joined the Company in 1988 and served as Controller of Nicholas
Financial and NDS until 1997. Prior to joining the Company, he was a
staff accountant for MBI, Inc. from January 1984 to March 1985 and
Inventory Control Manager for The Dress Barn, Inc. from March 1985 to
December 1987. Mr. Finkenbrink received his Bachelor of Science
Degree in Accounting from Mount St. Mary's University in Emmitsburg,
Maryland.
Item 10. Executive Compensation
The information set forth under the caption "Executive Officers
and Compensation" in the Proxy Statement is incorporated herein by
reference.
Item 11. Security Ownership of Certain Beneficial Owners and
Management
The information set forth under the caption "Voting Shares and
Ownership of Management and Principal Holders" in the Proxy Statement
is incorporated herein by reference.
Item 12. Certain Relationships and Related Transactions
The information set forth under the caption "Certain
Relationships and Related Transactions" in the Proxy Statement is
incorporated herein by reference.
42
Item 13. Exhibits and Reports on Form 8-K
Exhibit Index
3.1 Articles of Incorporation and By-Laws of Nicholas Financial, Inc.
Incorporated by reference to the Company's Form 10-SB (File No. 0-
26680) filed on March 13, 1996
4.1 Stock Certificate
Incorporated by reference to Exhibit 4.1 to the Company's Form 10-
SB (File No. 0-26680) filed on March 13, 1996
10.1.1 Loan and Security Agreement dated March 31, 1993 between BA
Business Credit, Inc. and Nicholas Financial, Inc.
Incorporated by reference to Exhibit 10.1.1 to the Company's Form
10-SB (File No. 0-26680) filed on March 13, 1996
10.1.2 Amendment No. 1 to Loan Agreement dated January 14, 1994
Incorporated by reference to Exhibit 10.1.2 to the Company's Form
10-SB (File No. 0-26680) filed on March 13, 1996
10.1.3 Temporary Line Increase Agreement dated Mach 28, 1994
Incorporated by reference to Exhibit 10.1.3 to the Company's Form
10-SB (File No. 0-26680) filed on March 13, 1996
10.1.4 Amendment No. 2 to Loan Agreement dated June 3, 1994
Incorporated by reference to Exhibit 10.1.4 to the Company's Form
10-SB (File No. 0-26680) filed on March 13, 1996
10.1.5 Amendment No. 3 to Loan Agreement dated July 5, 1994
Incorporated by reference to Exhibit 10.1.5 to the Company's Form
10-SB (File No. 0-26680) filed on March 13, 1996
10.1.6 Amendment No. 4 to Loan Agreement dated March 31, 1995
Incorporated by reference to Exhibit 10.1.6 to the Company's Form
10-SB (File No. 0-26680) filed on March 13, 1996
10.1.7 Amendment No. 5 to Loan Agreement dated July 13, 1995
Incorporated by reference to Exhibit 10.1.7 to the Company's
Form 10-KSB for the fiscal year ended March 31, 1996
43
10.1.8 Amendment No. 6 to Loan Agreement dated May 13, 1996
Incorporated by reference to Exhibit 10.1.8 to the Company's Form
10-QSB for the three months ended June 30, 1996
10.1.9 Amendment No. 7 to Loan Agreement dated July 5, 1997
Incorporated by reference to Exhibit 10.1.9 to the Company's Form
10-QSB for the three months ended September 30, 1997
10.1.10 Amendment No. 8 to Loan Agreement dated September 18, 1998
Incorporated by reference to Exhibit 10.2.0 to the Company's Form
10-QSB for the three months ended September 30, 1998
10.1.11 Amendment No. 9 to Loan Agreement dated November 25, 1998
Incorporated by reference to Exhibit 10.2.1 to the Company's Form
10-QSB for the three months ended December 31, 1998
10.1.12 Amendment No. 10 to Loan Agreement dated November 24, 1999
Incorporated by reference to Exhibit 10.2.2 to the Company's Form
10-QSB for the three months ended December 31, 1999
10.1.13 Amendment No. 11 to Loan Agreement dated August 1, 2000
10.1.14 Amendment No. 12 to Loan Agreement dated March 16, 2001
10.3.1 Employee Stock Option Plan
Incorporated by reference to the Company's 1999 Annual proxy
statement dated June 29, 1999
10.3.2 Non-Employee Stock Option Plan
Incorporated by reference to the Company's 1999 Annual proxy
statement dated June 29, 1999
10.4.1 Employment Contract, dated November 22, 1999, between Nicholas
Financial, Inc. and Ralph Finkenbrink, Senior Vice President of
Finance.
Incorporated by reference to Exhibit 10.2.1 to the Company's Form
10-QSB for the three months ended December 31, 1999
10.4.2 Employment Contract, dated March 16, 2001, between Nicholas
Financial, Inc. and Peter L. Vosotas , President & Chief
Executive Officer.
44
21 Subsidiaries of Nicholas Financial, Inc.
Incorporated by reference to the Company's Form 10-SB (File No. 0-
26680) filed on March 13, 1996
24 Powers of Attorney (included on signature page hereto)
(b) Reports on Form 8-K
The Company did not file any Current Reports on Form 8-K during
the fourth quarter of the fiscal year ended March 31, 2001.
45
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this Report to be signed
on its behalf by the undersigned thereunto duly authorized.
NICHOLAS FINANCIAL, INC.
Dated: June 29, 2001
By: /s/ Peter L. Vosotas
Peter L. Vosotas
Chairman, Chief Executive Officer
and President
KNOW ALL MEN BY THESE PRESENTS that each person whose signature
appears below constitutes and appoints Peter L. Vosotas and Ralph T.
Finkenbrink, and each of them, his or her true and lawful attorneys-in-
fact and agents, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities, to sign any and all amendments to this report, and to file
the same, with all exhibits thereto, and any other documents in
connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully
to all intents and purposes as he or she might or could do in person,
hereby ratifying and confirming all that said attorney-in-fact and
agents or either of them, or their substitutes, may lawfully do or
cause to be done by virtue hereof.
In accordance with the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
/s/ Peter L. Vosotas Chairman of the Board,
Peter L. Vosotas Chief Executive Officer,
President and Director June 29, 2001
/s/ Ralph T. Finkenbrink Vice President - Finance
Ralph T. Finkenbrink (Principal Financial
Officer) June 29, 2001
/s/ Ellis P. Hyman Director June 29, 2001
Ellis P. Hyman
/s/ Stephen Bragin Director June 29, 2001
Stephen Bragin
/s/ Alton R. Neal Director June 29, 2001
Alton R. Neal
/s/ Melvin S. Cutler Director June 29, 2001
Melvin S. Cutler
46
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Exhibit 10.1.13
-----------------
AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
Dated as of August , 2000
Among
THE FINANCIAL INSTITUTIONS NAMED HEREIN
as the Lenders
and
BANK OF AMERICA, N.A.
as the Agent
and
NICHOLAS FINANCIAL, INC.
as the Borrower
TABLE OF CONTENTS
i
Section Page
ARTICLE 1 INTERPRETATION OF THIS AGREEMENT................1
1.1 Definitions..........................................1
1.2 Accounting Terms....................................22
1.3 Interpretive Provisions.............................23
ARTICLE 2 LOANS..........................................24
2.1 Total Facility......................................24
2.2 Revolving Loans.....................................24
2.3 Existing Indebtedness...............................30
2.4 Bank Products.......................................30
ARTICLE 3 INTEREST AND FEES..............................30
3.1 Interest............................................30
3.2 Continuation and Conversion Elections...............31
3.3 Maximum Interest Rate...............................32
3.4 Closing Fee.........................................33
3.5 Unused Line Fee.....................................33
3.6 Documentation Fee...................................33
3.7 Agency Fee..........................................33
3.8 Audit Fees..........................................33
ARTICLE 4 PAYMENTS AND PREPAYMENTS.......................33
4.1 Revolving Loans.....................................33
4.2 Termination of Facility.............................34
4.3 Payments by the Borrower............................34
4.4 Payments as Revolving Loans.........................35
4.5 Apportionment, Application and Reversal of
Payments............................................35
4.6 Indemnity for Returned Payments.....................35
4.7 Agent's and Lenders' Books and Records; Monthly
Statements..........................................36
ARTICLE 5 TAXES, YIELD PROTECTION AND ILLEGALITY.........36
5.1 Taxes...............................................36
5.2 Illegality..........................................37
5.3 Increased Costs and Reduction of Return.............37
5.4 Funding Losses......................................38
5.5 Inability to Determine Rates........................38
5.6 Certificates of Lenders.............................39
5.7 Survival............................................39
ARTICLE 6 COLLATERAL.....................................39
6.1 Grant of Security Interest..........................39
6.2 Perfection and Protection of Security Interest......39
6.3 Location of Collateral..............................40
ii
6.4 Title to, Liens on, and Sale and Use of Collateral..41
6.5 Intentionally Deleted...............................41
6.6 Access and Examination; Confidentiality; Consent
to Advertising......................................41
6.7 Collateral Reporting................................42
6.8 Contracts...........................................42
6.9 Collection of Contracts; Payments...................43
6.10 Intentionally Deleted...............................43
6.11 Equipment...........................................43
6.12 Documents, Instruments, and Chattel Paper...........43
6.13 Right to Cure.......................................43
6.14 Intentionally Deleted...............................44
6.15 The Agent's and Lenders' Rights, Duties and
Liabilities.........................................44
ARTICLE 7 BOOKS AND RECORDS; FINANCIAL
INFORMATION; NOTICES..........................44
7.1 Books and Records...................................44
7.2 Financial Information...............................44
7.3 Notices to the Lenders..............................47
ARTICLE 8 GENERAL WARRANTIES AND REPRESENTATIONS.........49
8.1 Authorization, Validity, and Enforceability of
this Agreement and the Loan Documents...............49
8.2 Validity and Priority of Security Interest..........49
8.3 Organization and Qualification......................49
8.4 Corporate Name; Prior Transactions..................49
8.5 Subsidiaries and Affiliates.........................50
8.6 Financial Statements and Projections................50
8.7 Capitalization......................................50
8.8 Solvency............................................50
8.9 Debt................................................50
8.10 Intentionally Deleted...............................50
8.11 Title to Property...................................50
8.12 Intentionally Deleted...............................50
8.13 Intentionally Deleted...............................51
8.14 Intentionally Deleted...............................51
8.15 Litigation..........................................51
8.16 Restrictive Agreements..............................51
8.17 Labor Disputes......................................51
8.18 Environmental Laws..................................51
8.19 No Violation of Law.................................51
8.20 No Default..........................................51
8.21 ERISA Compliance....................................52
8.22 Taxes...............................................52
8.23 Intentionally Deleted...............................52
8.24 Use of Proceeds; Margin Regulations.................52
8.25 Intentionally Deleted...............................52
iii
8.26 No Material Adverse Change..........................53
8.27 Full Disclosure.....................................53
8.28 Intentionally Deleted...............................53
8.29 Bank Accounts.......................................53
8.30 Governmental Authorization..........................53
ARTICLE 9 AFFIRMATIVE AND NEGATIVE COVENANTS.............53
9.1 Taxes and Other Obligations.........................53
9.2 Corporate Existence and Good Standing...............54
9.3 Compliance with Law and Agreements; Maintenance of
Licenses............................................54
9.4 Compliance with ERISA...............................54
9.5 Mergers, Consolidations or Sales....................54
9.6 Distributions and Capital Change....................54
9.7 Transactions Affecting Collateral or Obligations....54
9.8 Guaranties..........................................54
9.9 Debt................................................54
9.10 Prepayment..........................................54
9.11 Transactions with Affiliates........................54
9.12 Intentionally Deleted...............................55
9.13 Business Conducted..................................55
9.14 Liens...............................................55
9.15 Fiscal Year.........................................55
9.16 No Recognition of Income............................55
9.17 Intentionally Deleted...............................55
9.18 Minimum Interest Coverage...........................55
9.19 Intentionally Deleted...............................55
9.20 Loss Reserve........................................55
9.21 Borrowing Base Ratio................................55
9.22 Collateral Adjustment Percent.......................56
9.23 Limitation on Bulk Purchases........................56
9.24 Intentionally Deleted...............................56
9.25 New Subsidiaries....................................56
9.26 Restricted Investment...............................56
9.27 Reporting Methodology...............................56
9.28 Contract Forms......................................56
9.29 Credit Guidelines...................................56
9.30 Extended Warranty Plans.............................56
9.31 Charge-Off Policy...................................57
9.32 Further Assurances..................................57
ARTICLE 10 CONDITIONS OF LENDING.........................57
10.1 Conditions Precedent to Making of Loans on the
Closing Date........................................57
10.2 Conditions Precedent to Each Loan...................58
ARTICLE 11 DEFAULT AND REMEDIES.........................59
iv
11.1 Events of Default...................................59
11.2 Remedies............................................61
ARTICLE 12 TERM AND TERMINATION.........................63
12.1 Term and Termination................................63
ARTICLE 13AMENDMENTS; WAIVERS; PARTICIPATIONS;
ASSIGNMENTS; SUCCESSORS........................63
13.1 Amendments and Waivers..............................63
13.2 Assignments; Participations.........................64
ARTICLE 14 THE AGENT.....................................66
14.1 Appointment and Authorization.......................66
14.2 Delegation of Duties................................66
14.3 Liability of Agent..................................66
14.4 Reliance by Agent...................................67
14.5 Notice of Default...................................67
14.6 Credit Decision.....................................67
14.7 Indemnification.....................................68
14.8 Agent in Individual Capacity........................68
14.9 Successor Agent.....................................68
14.10 Withholding Tax....................................69
14.11 Intentionally Deleted..............................70
14.12 Collateral Matters.................................70
14.13 Restrictions on Actions by Lenders; Sharing
of Payments........................................71
14.14 Agency for Perfection..............................71
14.15 Payments by Agent to Lenders.......................71
14.16 Concerning the Collateral and the Related
Loan Documents.....................................72
14.17 Field Audit and Examination Reports;
Disclaimer by Lenders..............................72
14.18 Relation Among Lenders.............................73
ARTICLE 15 MISCELLANEOUS.................................73
15.1 No Waivers; Cumulative Remedies.....................73
15.2 Severability........................................73
15.3 Governing Law; Choice of Forum; Service of Process..73
15.4 WAIVER OF JURY TRIAL................................74
15.5 Survival of Representations and Warranties..........74
15.6 Other Security and Guaranties.......................74
15.7 Fees and Expenses...................................75
15.8 Notices.............................................75
15.9 Waiver of Notices...................................76
15.10 Binding Effect.....................................76
15.11 Indemnity of the Agent and the Lenders
by the Borrower....................................76
15.12 Limitation of Liability............................77
15.13 Final Agreement....................................77
v
15.14 Counterparts.......................................77
15.15 Captions...........................................77
15.16 Right of Setoff....................................78
15.17 Intentionally Deleted..............................78
15.18 Intentionally Deleted..............................78
15.19 Agency of the Parent for each other Borrower.......78
i
EXHIBITS AND SCHEDULES
EXHIBIT A - INTENTIONALLY DELETED
EXHIBIT B - FORM OF BORROWING BASE CERTIFICATE
EXHIBIT C - INTENTIONALLY DELETED
EXHIBIT D - FORM OF NOTICE OF BORROWING
EXHIBIT E - FORM OF NOTICE OF CONTINUATION/CONVERSION
EXHIBIT F - FORM OF ASSIGNMENT AND ACCEPTANCE AGREEMENT
SCHEDULE 6.3 - LOCATION OF COLLATERAL AND CHIEF EXECUTIVE OFFICE
SCHEDULE 8.3 - ORGANIZATION AND QUALIFICATIONS
SCHEDULE 8.5 - SUBSIDIARIES AND AFFILIATES
SCHEDULE 8.15 - LITIGATION
SCHEDULE 8.29 - BANK ACCOUNTS
1
AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
Amended and Restated Loan and Security Agreement, dated as
of August 1, 2000, among the financial institutions listed on
the signature pages hereof (such financial institutions, together
with their respective successors and assigns, are referred to
hereinafter each individually as a "Lender" and collectively as
the "Lenders"), Bank of America, N.A. with an office at 335
Madison Avenue, New York, New York 10017, as agent for the
Lenders (in its capacity as agent, the "Agent"), and Nicholas
Financial, Inc., a Florida corporation, with offices at 2454
McMullen Booth Road, Building C, #501, Clearwater, Florida 33759-
1340 (the "Borrower").
W I T N E S S E T H
WHEREAS, the Borrower and Bank of America, N.A. (the
"Existing Lender") are parties to that certain Loan and Security
Agreement, dated as of March 31, 1993, as amended (as so amended,
the "Existing Credit Agreement") pursuant to which the Existing
Lender has agreed to make loans and other financial
accommodations to the Borrower;
WHEREAS, the Borrower, the Agent, the Lenders and the
Existing Lender have agreed to enter into this Agreement in order
to amend, restate and consolidate the Existing Credit Agreement
in its entirety to reflect, among other things, Bank of America,
N.A.'s role as agent;
WHEREAS, it is the intent of the parties hereto that this
Agreement (i) shall re-evidence, the Borrower's indebtedness to
the Existing Lender under the Existing Credit Agreement, (ii) is
entered into in substitution for, and not in payment of, the
obligations of the Borrower under the Existing Credit Agreement,
and (iii) is in no way intended to constitute a novation of the
Borrower's indebtedness which was evidenced by the Existing
Credit Agreement;
NOW, THEREFORE, in consideration of the mutual conditions
and agreements set forth in this Agreement, and for good and
valuable consideration, the receipt of which is hereby
acknowledged, the Lenders, the Agent, and the Borrower hereby
agree as follows.
ARTICLE 1
INTERPRETATION OF THIS AGREEMENT
1.1 Definitions. As used herein:
"Accounts" means all of the Borrower's now owned or
hereafter acquired or arising accounts as defined in the UCC,
including any rights to payment for the sale or lease of goods or
rendition of services, whether or not they have been earned by
performance.
2
"ACH Transactions" means any cash management or related
services including the automatic clearing house transfer of funds
by the Bank for the account of the Borrower pursuant to agreement
or overdrafts.
"Adjusted Net Earnings from Operations" means, with
respect to any fiscal period of the Borrower, the Borrower's net
income after provision for income taxes for such fiscal period,
as determined in accordance with GAAP and reported on the
Financial Statements for such period, excluding any and all of
the following included in such net income: (a) gain or loss
arising from the sale of any capital assets; (b) gain arising
from any write-up in the book value of any asset; (c) earnings of
any Person, substantially all the assets of which have been
acquired by the Borrower in any manner, to the extent realized by
such other Person prior to the date of acquisition; (d) earnings
of any Person in which the Borrower has an ownership interest
unless (and only to the extent) such earnings shall actually have
been received by the Borrower in the form of cash distributions;
(e) earnings of any Person to which assets of the Borrower shall
have been sold, transferred or disposed of, or into which the
Borrower shall have been merged, or which has been a party with
the Borrower to any consolidation or other form of
reorganization, prior to the date of such transaction; (f) gain
arising from the acquisition of debt or equity securities of the
Borrower or from cancellation or forgiveness of Debt; and (g)
gain arising from extraordinary items, as determined in
accordance with GAAP, or from any other non-recurring
transaction.
"Adjusted Tangible Assets" means all assets of the
Borrower except: (a) trademarks, trade names, franchises,
goodwill, and other similar intangibles; (b) assets located and
notes and receivables due from obligors domiciled outside the
United States of America, Puerto Rico, or Canada; (c) accounts,
notes and other receivables due from Affiliates or employees; and
(d) any other assets of Borrower which Agent, in its sole and
absolute discretion, determines to be of uncertain value or
collectability.
"Adjusted Tangible Net Worth" means the remainder of
(a) net book value (after deducting related depreciation,
obsolescence, amortization, valuation, and other proper reserves)
at which the Adjusted Tangible Assets would be shown on a balance
sheet at such date, but excluding any amounts arising from write-
ups of assets, minus (b) (i) the amount at which the Borrower's
liabilities (other than capital stock, surplus, and retained
earnings) would be shown on such balance sheet, and including as
liabilities all reserves for contingencies and other potential
liabilities and (ii) the General Adjustment Reserve.
"Advance Rate" means eighty-five percent (85%);
provided, however, that the Advance Rate shall be (a) eighty-four
percent (84%) when the Collateral Adjustment Percent ending on
the date of determination is equal to or greater than eighteen
percent (18%), but less than nineteen percent (19%), (b) eighty-
three percent (83%) when the Collateral Adjustment Percent ending
on the date of determination is equal to or greater than nineteen
percent (19%), but less than twenty percent (20%); (c) eighty-two
percent (82%) when the Collateral Adjustment Percent is equal to
or greater than twenty percent (20%), but less than twenty-one
percent (21%); and provided, further that the applicable Advance
Rate shall be reduced by the Repossessed Adjustment Percent.
3
"Affiliate" means, as to any Person, any other Person
which, directly or indirectly, is in control of, is controlled
by, or is under common control with, such Person or which owns,
directly or indirectly, five percent (5%) or more of the
outstanding equity interest of such Person. A Person shall be
deemed to control another Person if the controlling Person
possesses, directly or indirectly, the power to direct or cause
the direction of the management and policies of the other Person,
whether through the ownership of voting securities, by contract,
or otherwise.
"Agent" means the Bank, solely in its capacity as
agent for the Lenders, and any successor agent.
"Agent Advances" has the meaning specified in Section
2.2(i).
"Agent's Liens" means the Liens in the Collateral
granted to the Agent, for the benefit of the Lenders, Bank, and
Agent pursuant to this Agreement and the other Loan Documents.
"Agent-Related Persons" means the Agent, together with
its Affiliates, and the officers, directors, employees, agents
and attorneys-in-fact of the Agent and such Affiliates.
"Aggregate Revolver Outstandings" means, at any date of
determination, the sum of (a) the unpaid balance of Revolving
Loans, and (b) the aggregate amount of Pending Revolving Loans.
"Agreement" means this Loan and Security Agreement.
"Anniversary Date" means each anniversary of the
Closing Date.
"Applicable Margin" means (i) with respect to Reference
Rate Revolving Loans, zero and (ii) with respect to LIBOR Rate
Revolving Loans, one and three-quarters of one percent (1_%).
"Assignee" has the meaning specified in Section
13.2(a).
"Assignment and Acceptance" has the meaning specified
in Section 13.2(a).
"Attorney Costs" means and includes all fees, expenses
and disbursements of any law firm or other counsel engaged by the
Agent, the allocated costs of internal legal services of the
Agent and the reasonable expenses of internal counsel to the
Agent.
"Availability" means, at any time, (a) the Borrowing
Base minus (b) the Aggregate Revolver Outstandings.
"Average Monthly Number of Vehicle Contracts" means, as
of any date of calculation, the average monthly number of Vehicle
Contracts owned by the Borrower as of the last day of each of the
twelve months immediately preceding the date of calculation.
"Bank" means Bank of America, N.A., a national banking
association, or any successor entity thereto.
4
"Bank Products" means any one or more of the following
types of services or facilities extended to the Borrower by the
Bank or any affiliate of the Bank in reliance on the Bank's
agreement to indemnify such affiliate: (i) credit cards; (ii)
ACH Transactions; and (iii) Hedge Agreements.
"Bank Product Reserves" means all reserves which the
Agent from time to time establishes in its sole discretion for
the Bank Products then provided or outstanding.
"Bankruptcy Code" means Title 11 of the United States
Code (11 U.S.C. 101 et seq.).
"Base Rate" means, for any day, the rate of interest in
effect for such day as publicly announced from time to time by
the Bank in Charlotte, North Carolina as its "prime rate" (the
"prime rate" being a rate set by the Bank based upon various
factors including the Bank's costs and desired return, general
economic conditions and other factors, and is used as a reference
point for pricing some loans, which may be priced at, above, or
below such announced rate). Any change in the prime rate
announced by the Bank shall take effect at the opening of
business on the day specified in the public announcement of such
change. Each Interest Rate based upon the Base Rate shall be
adjusted simultaneously with any change in the Base Rate.
"Base Rate Loans" means the Base Rate Revolving Loans.
"Base Rate Revolving Loan" means a Revolving Loan
during any period in which it bears interest based on the Base
Rate.
"Blocked Account Agreement" means an agreement among
the Borrower, the Agent and a Clearing Bank, in form and
substance satisfactory to the Agent, concerning the collection of
payments which represent the proceeds of Accounts or of any other
Collateral.
"Borrowing" means a borrowing hereunder consisting of
Revolving Loans made on the same day by the Lenders to the
Borrower or by Bank in the case of a Borrowing funded by Non-
Ratable Loans or by the Agent in the case of a Borrowing
consisting of an Agent Advance.
"Borrowing Base" means, at any time, an amount equal to
(a) the lesser of (i) the Maximum Revolver Amount or (ii) the
amount determined by multiplying the Advance Rate by the Net
Contract Payments payable under all of the Borrower's Eligible
Contracts then outstanding; less (b) the sum of (i) the Bank
Product Reserves and (ii) all other reserves which the Agent
deems necessary in the exercise of its reasonable credit judgment
to maintain with respect to the Borrower's account, including
reserves for any amounts which the Agent or any Lender may be
obligated to pay in the future for the account of the Borrower;
provided, however, the Older Vehicle Contract Borrowing Base
included in calculating the Borrowing Base shall not, at any
time, exceed thirty percent (30%) and the Oldest Vehicle Contract
Borrowing Base included in calculating the Borrowing Base shall
not, at any time, exceed three percent (3%); and provided,
further, however, that the Net Contract Payments payable under
all Uninsured Contracts shall not constitute more than three
percent (3%) of the Net Contract Payments payable under all
Eligible Vehicle Contracts.
5
"Borrowing Base Amount" means the sum of the Adjusted
Tangible Net Worth of the Borrower, plus all Subordinated Debt of
the Borrower.
"Borrowing Base Certificate" means a certificate by a
Responsible Officer of the Borrower, substantially in the form of
Exhibit B (or another form acceptable to the Agent) setting forth
the calculation of the Borrowing Base, including a calculation of
each component thereof, all in such detail as shall be
satisfactory to the Agent. All calculations of the Borrowing
Base in connection with the preparation of any Borrowing Base
Certificate shall originally be made by the Borrower and
certified to the Agent; provided, that the Agent shall have the
right to review and adjust, in the exercise of its reasonable
credit judgment, any such calculation (1) to reflect its
reasonable estimate of declines in value of any of the Collateral
described therein, and (2) to the extent that such calculation is
not in accordance with this Agreement.
"Business Day" means (a) any day that is not a
Saturday, Sunday, or a day on which banks in New York, New York
or Charlotte, North Carolina are required or permitted to be
closed, and (b) with respect to all notices, determinations,
fundings and payments in connection with the LIBOR Rate or LIBOR
Rate Loans, any day that is a Business Day pursuant to clause (a)
above and that is also a day on which trading in Dollars is
carried on by and between banks in the London interbank market.
"Capital Adequacy Regulation" means any guideline,
request or directive of any central bank or other Governmental
Authority, or any other law, rule or regulation, whether or not
having the force of law, in each case, regarding capital adequacy
of any bank or of any corporation controlling a bank.
"Clearing Bank" means the Bank or any other banking
institution with whom a Payment Account has been established
pursuant to a Blocked Account Agreement.
"Closing Date" means the date of this Agreement.
"Code" means the Internal Revenue Code of 1986, as
amended from time to time, and any successor statute, and
regulations promulgated thereunder.
"Collateral" has the meaning specified in Section 6.1.
"Collateral Adjustment Percent" means, calculated as of
the first day of each month, the sum (rounded to the lowest whole
percent) of the Past Due Percent, the Repossession Percent and
the Net Charge-Off Percent.
"Contracts" means all of the Borrower's now owned and
hereafter acquired loan agreements, accounts, installment sale
contracts, Instruments, notes, documents, chattel paper, and all
other forms of obligations owing to the Borrower, including
Vehicle Contracts, Direct Loan Contracts, and Sales Finance
Contracts and any collateral for any of the foregoing, including
all rights under any and all Security Documents and merchandise
returned to or repossessed by the Borrower.
"Contract Debtor" means each Person who is obligated to
the Borrower to perform any duty under or to make any payment
pursuant to the terms of a Contract.
6
"Commitment" means, at any time with respect to a
Lender, the principal amount set forth beside such Lender's name
under the heading "Commitment" on the signature pages of this
Agreement or on the signature page of the Assignment and
Acceptance pursuant to which such Lender became a Lender
hereunder in accordance with the provisions of Section 13.2, as
such Commitment may be adjusted from time to time in accordance
with the provisions of Section 13.2, and "Commitments" means,
collectively, the aggregate amount of the commitments of all of
the Lenders.
"Contaminant" means any waste, pollutant, hazardous
substance, toxic substance, hazardous waste, special waste,
petroleum or petroleum-derived substance or waste, asbestos in
any form or condition, polychlorinated biphenyls ("PCBs"), or any
constituent of any such substance or waste.
"Continuation/Conversion Date" means the date on which
the Loan is converted into or continued as a LIBOR Rate Loan.
"Credit Guidelines" means the Borrower's guidelines
(which have previously been reviewed and approved by the Agent)
which state in detail the credit criteria used by the Borrower in
determining the creditworthiness of Contract Debtors.
"Dealer" means a dealer that has sold goods and/or
Vehicles to Contract Debtors pursuant to Contracts.
"Dealer Agreement" means an agreement between the
Borrower and a Dealer that governs the sale or assignment of
Contracts from such Dealer to the Borrower, including any
provisions for assignment (whether with or without recourse, a
repurchase obligation by the Dealer or a guaranty by such Dealer)
contained in such agreement.
"Dealer Payment Reserve" means a reserve, calculated as
of the last day of each month, equal to the product of (a) the
Dealer Reserve Percentage calculated on the last day of such
month, multiplied by (b) the aggregate amount paid by Borrower to
third parties for the purchase of Contracts then outstanding
arising from the credit sale of Vehicles, acquired by Borrower at
any time prior to and including the date on which the calculation
is made.
"Dealer Reserve Percentage" means the positive percent,
calculated as of the last day of each month, equal to the
remainder of (a) the positive quotient of (i) the aggregate
amount paid by Borrower to third parties for the purchase of
Contracts then outstanding, arising from the credit sale of
Vehicles acquired by Borrower at any time prior to and including
the date on which the calculation is made, divided by (ii) the
aggregate "wholesale clean value" for all the Vehicles which are
the subject of such Contracts, minus (b) one hundred percent
(100%). The "wholesale clean value" shall be such value as
specified in the National Auto Research Black Book (the "Black
Book") in effect at the time Borrower purchased the subject
Contracts. In the event that the Black Book shall, at any time,
cease to be published, then the Agent shall thereafter select a
comparable publication, as determined by the Agent in its sole
discretion, for determining the foregoing calculation.
7
"Debt" means, without duplication, all liabilities,
obligations and indebtedness of the Borrower to any Person, of
any kind or nature, now or hereafter owing, arising, due or
payable, howsoever evidenced, created, incurred, acquired or
owing, whether primary, secondary, direct, contingent, fixed or
otherwise, and including, without in any way limiting the
generality of the foregoing: (a) the liabilities and obligations
to trade creditors; (b) all Obligations; (c) all obligations and
liabilities of any Person secured by any Lien on the Borrower's
property, even though the Borrower shall not have assumed or
become liable for the payment thereof; provided, however, that
all such obligations and liabilities which are limited in
recourse to such property shall be included in Debt only to the
extent of the book value of such property as would be shown on a
balance sheet of the Borrower prepared in accordance with GAAP;
(d) all obligations or liabilities created or arising under any
Capital Lease or conditional sale or other title retention
agreement with respect to property used or acquired by the
Borrower, even if the rights and remedies of the lessor, seller
or lender thereunder are limited to repossession of such
property; provided, however, that all such obligations and
liabilities which are limited in recourse to such property shall
be included in Debt only to the extent of the book value of such
property as would be shown on a balance sheet of the Borrower
prepared in accordance with GAAP; and (e) all obligations and
liabilities under Guaranties.
"Debt For Borrowed Money" means, as to any Person, (a)
Debt for borrowed money or as evidenced by notes, bonds,
debentures or similar evidences of any such Debt of such Person,
(b) the deferred and unpaid purchase price of any property or
business (other than trade accounts payable incurred in the
ordinary course of business and constituting current
liabilities) and (c) all obligations under Capital Leases.
"Default" means any event or circumstance which, with
the giving of notice, the lapse of time, or both, would (if not
cured, waived, or otherwise remedied during such time) constitute
an Event of Default.
"Defaulting Lender" has the meaning specified in
Section 2.2(g)(ii).
"Default Rate" means a fluctuating per annum interest
rate at all times equal to the sum of the otherwise applicable
Interest Rate plus two percent (2%). Each Default Rate shall be
adjusted simultaneously with any change in the applicable
Interest Rate.
"Direct Loan Contract" means a Contract arising from a
consumer loan made directly by the Borrower to the Contract
Debtor.
"Direct Loan Eligible Contract" means a Direct Loan
Contract which is an Eligible Contract.
"Distribution" means, in respect of any corporation:
(a) the payment or making of any dividend or other distribution
of property in respect of capital stock (or any options or
warrants for or other rights with respect to such stock) of such
corporation, other than distributions in capital stock (or any
options or warrants for or other rights with respect to such
stock) of the same class; or (b) the redemption or other
acquisition by such corporation of any capital stock (or any
options or warrants for such stock) of such corporation.
"DOL" means the United States Department of Labor or
any successor department or agency.
8
"Dollar" and "$" means dollars in the lawful currency
of the United States.
"Eligible Assignee" means (a) a commercial bank,
commercial finance company or other asset based lender, having
total assets in excess of $1,000,000,000; (b) any Lender listed
on the signature page of this Agreement; (c) any Affiliate of any
Lender; and (d) if an Event of Default exists, any Person
reasonably acceptable to the Agent.
"Eligible Contracts" means only those Contracts which
are either Vehicle Contracts or Direct Loan Contracts or Sales
Finance Contracts which the Agent, in its sole discretion, deems
eligible and which, without limiting the Agent's discretionary
rights, satisfy at all times all of the following requirements as
determined by the Agent in its sole and absolute discretion:
(a) the Contract strictly complies with all of the
Borrower's warranties and representations;
(b) the Contract Debtor is a resident of the
continental United States;
(c) no payment due under the Contract is more than
fifty-nine (59) days contractually delinquent;
(d) except as permitted in subparagraph (c), above,
neither the Borrower nor the Contract Debtor is in default under
the terms of the Contract;
(e) the Contract is not subject to any defense,
counterclaim, setoff, discount, or allowance;
(f) the Borrower has not, within the immediately
preceding 12-month period granted to the Contract Debtor more
than two extensions of time (each not longer than one month) for
the payment of any sum due under the Contract;
(g) the terms of the Contract require that the unpaid
principal balance thereof be payable in equal monthly payments
which will amortize the full principal amount thereof over its
scheduled term;
(h) the Contract is not a Modified Contract;
(i) the terms of the Contract, the Security Documents
therefor, and all other related documents have been executed by
the Contract Debtor, and comply in all respects with all
applicable laws;
(j) the Contract Debtor is not an Affiliate or
employee of the Borrower;
(k) the creditworthiness of the Contract Debtor is
acceptable to the Agent;
(l) if the Contract is a Vehicle Contract, then:
9
(i) the Contract is secured by a first priority,
perfected security interest in a new or used Vehicle and the
Borrower has filed all documents with the department of motor
vehicles and/or other appropriate agency of the state wherein
the Vehicle is registered and paid all appropriate fees such
that the Borrower is the registered first lien holder thereon;
(ii) no funds used to pay any payment due under
the Contract and no funds used to make the down payment for the
Vehicle which is the subject of the Contract, were borrowed by
the Contract Debtor from the Borrower;
(iii) the remaining term of the Contract, secured
by a Vehicle which was 8 or 9 model years old at the inception
thereof, does not exceed twenty-four (24) months;
(iv) to the extent that the Contract balance
includes sums representing the financing of so-called "extended
warranty plans," such plans are (i) in substantial compliance
with all applicable consumer credit laws, including any and all
special insurance laws relating thereto, and (ii) underwritten by
(x) a major automobile manufacturer, or an affiliate thereof, or
(y) an independent reputable and financially sound insurance
company;
(v) the Vehicle securing repayment of the
Contract is insured against loss, with coverages and policy
limits reasonably satisfactory to the Lender, including collision
coverage; and
(vi) if the amount paid by the Borrower to any
person for such Contract is equal to or more than $13,000,
exclusive of amounts attributable to items included in the
Contract for items other than the Vehicle which is the subject
thereof (e.g., tax, license fees, extended warranty insurance,
credit life and disability insurance, and property and collision
insurance) then the Contract, the subject Vehicle, and the
Contract Debtor meet the Borrower's `A' Guidelines.
(m) If the Contract is a Direct Loan Contract then:
(i) the original term of the Contract does not
exceed forty-eight (48) months;
(ii) the unpaid principal balance of the Contract
and the aggregate principal balance of all other Contracts owing
by a Contract Debtor does not exceed Ten Thousand Dollars
($10,000);
(iii) if the Contract Debtor was or is a Contract
Debtor under another Contract previously originated or acquired
by the Borrower, then (1) the Contract Debtor's payment history
under such prior or current Contract was satisfactory (which,
in the case of a prior Contract means that the Contract Debtor
has paid such Contract in full), and (2) the Contract Debtor
shall have paid at least thirty percent (30%) of the original
amount owing under such current Contract with funds other than
those resulting from a new Contract or refinancing of another
Contract.
(iv) if the Contract Debtor is not a Contract
Debtor under a Contract previously originated or acquired by the
Borrower, then the Contract Debtor's credit history is
satisfactory to the Lender,
10
(v) repayment of the Contract is secured by a
perfected security interest on the Contract Debtor's personal
property or real property provided the real property is taken
as collateral out of an abundance of caution, and not as the
primary collateral for the Contract;
(vi) no portion of the loan evidenced by the
Contract was made by the Borrower to the Contract Debtor for the
purpose of financing the Contract Debtor's payment of a down
payment on a Vehicle which is the subject of a motor vehicle
retail installment contract; and
(vii) no portion of the loan evidenced by the
Contract was made by the Borrower for the purpose of providing
funds to the Contract Debtor to pay amounts owing by the Contract
Debtor on another Contract owing to the Borrower.
n. The Contract has a scheduled maturity date sixty
(60) months or less from the date of execution.
"Environmental Claims" means all claims, however
asserted, by any Governmental Authority or other Person alleging
potential liability or responsibility for violation of any
Environmental Law, or for a Release or injury to the environment.
"Environmental Laws" means all federal, state or local
laws, statutes, common law duties, rules, regulations, ordinances
and codes, together with all administrative orders, directed
duties, licenses, authorizations and permits of, and agreements
with, any Governmental Authority, in each case relating to
environmental, health, safety and land use matters.
"Environmental Lien" means a Lien in favor of any
Governmental Authority for (a) any liability under Environmental
Laws, or (b) damages arising from, or costs incurred by such
Governmental Authority in response to, a Release or threatened
Release of a Contaminant into the environment.
"Equipment" means all of the Borrower's now owned and
hereafter acquired machinery, equipment, furniture, furnishings,
fixtures, and other tangible personal property (except
Inventory), including motor vehicles with respect to which a
certificate of title has been issued, aircraft, dies, tools,
jigs, and office equipment, as well as all of such types of
property leased by the Borrower and all of the Borrower's rights
and interests with respect thereto under such leases (including,
without limitation, options to purchase); together with all
present and future additions and accessions thereto, replacements
therefor, component and auxiliary parts and supplies used or to
be used in connection therewith, and all substitutes for any of
the foregoing, and all manuals, drawings, instructions,
warranties and rights with respect thereto; wherever any of the
foregoing is located.
"ERISA" means the Employee Retirement Income Security
Act of 1974, and regulations promulgated thereunder.
"ERISA Affiliate" means any trade or business (whether
or not incorporated) under common control with the Borrower
within the meaning of Section 414(b) or (c) of the Code (and
Sections 414(m) and (o) of the Code for purposes of provisions
relating to Section 412 of the Code).
11
"ERISA Event" means (a) a Reportable Event with respect
to a Pension Plan, (b) a withdrawal by the Borrower or any ERISA
Affiliate from a Pension Plan subject to Section 4063 of ERISA
during a plan year in which it was a substantial employer (as
defined in Section 4001(a)(2) of ERISA) or a cessation of
operations which is treated as such a withdrawal under Section
4062(e) of ERISA, (c) a complete or partial withdrawal by the
Borrower or any ERISA Affiliate from a Multi-employer Plan or
notification that a Multi-employer Plan is in reorganization, (d)
the filing of a notice of intent to terminate, the treatment of a
Plan amendment as a termination under Section 4041 or 4041A of
ERISA, or the commencement of proceedings by the PBGC to
terminate a Pension Plan or Multi-employer Plan, (e) the
occurrence of an event or condition which might reasonably be
expected to constitute grounds under Section 4042 of ERISA for
the termination of, or the appointment of a trustee to
administer, any Pension Plan or Multi-employer Plan, or (f) the
imposition of any liability under Title IV of ERISA, other than
for PBGC premiums due but not delinquent under Section 4007 of
ERISA, upon the Borrower or any ERISA Affiliate.
"Event of Default" has the meaning specified in
Section 11.1.
"Exchange Act" means the Securities Exchange Act of
1934, and regulations promulgated thereunder.
"FDIC" means the Federal Deposit Insurance Corporation,
and any Governmental Authority succeeding to any of its principal
functions.
"Federal Funds Rate" means, for any day, the rate per
annum (rounded upwards, if necessary, to the nearest 1/100 of 1%)
equal to the weighted average of the rates on overnight Federal
funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers on such day, as published by
the Federal Reserve Bank of New York on the Business Day next
succeeding such day; provided that (a) if such day is not a
Business Day, the Federal Funds Rate for such day shall be such
rate on such transactions on the next preceding Business Day as
so published on the next succeeding Business Day, and (b) if no
such rate is so published on such next succeeding Business Day,
the Federal Funds Rate for such day shall be the average rate
charged to the Bank on such day on such transactions as
determined by the Agent.
"Federal Reserve Board" means the Board of Governors of
the Federal Reserve System or any successor thereto.
"Financial Statements" means, according to the context
in which it is used, the financial statements referred to in
Section 8.6 or any other financial statements required to be
given to the Lenders pursuant to this Agreement.
"Fiscal Year" means the Borrower's fiscal year for
financial accounting purposes. The current Fiscal Year of the
Borrower will end on March 31, 2001.
"Funding Date" means the date on which a Borrowing
occurs.
"GAAP" means generally accepted accounting principles
and practices set forth from time to time in the opinions and
pronouncements of the Accounting Principles Board and the
American Institute of Certified Public Accountants and statements
and pronouncements of the Financial Accounting Standards Board
(or agencies with similar functions of comparable stature and
authority within the U.S. accounting profession), which are
applicable to the circumstances as of the Closing Date.
12
"General Adjustment Reserve" means a reserve,
calculated as of the last day of each month on a cumulative basis
for the Borrower's current Fiscal Year, in an amount equal to the
excess, if any, of (a) the amount by which all unearned finance
charges, unearned discounts, and non-refundable dealer reserve,
computed on the basis of the actuarial method, over (b) the
amount of such items as reflected on the Borrower's books and
records.
"General Intangibles" means all of the Borrower's now
owned or hereafter acquired general intangibles, choses in action
and causes of action and all other intangible personal property
of the Borrower of every kind and nature (other than Accounts),
including, without limitation, all contract rights, Proprietary
Rights, corporate or other business records, inventions, designs,
blueprints, plans, specifications, patents, patent applications,
trademarks, service marks, trade names, trade secrets, goodwill,
copyrights, computer software, customer lists, registrations,
licenses, franchises, tax refund claims, any funds which may
become due to the Borrower in connection with the termination of
any Plan or other employee benefit plan or any rights thereto and
any other amounts payable to the Borrower from any Plan or other
employee benefit plan, rights and claims against carriers and
shippers, rights to indemnification, business interruption
insurance and proceeds thereof, property, casualty or any similar
type of insurance and any proceeds thereof, proceeds of insurance
covering the lives of key employees on which the Borrower is
beneficiary, and any letter of credit, guarantee, claim, security
interest or other security held by or granted to the Borrower.
"Governmental Authority" means any nation or
government, any state or other political subdivision thereof, any
central bank (or similar monetary or regulatory authority)
thereof, any entity exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to
government, and any corporation or other entity owned or
controlled, through stock or capital ownership or otherwise, by
any of the foregoing.
"Gross Contract Payments" means, as of the date of
determination, (i) with respect to an interest bearing Contract
the outstanding balance thereof including all accrued but unpaid
interest, fees, and other charges owing by the Contract Debtor
and (ii) with respect to a precomputed Contract the outstanding
balance thereof including all unearned interest, fees, and
charges owing by the Contract Debtor.
"Guaranty" means, with respect to any Person, all
obligations of such Person which in any manner directly or
indirectly guarantee or assure, or in effect guarantee or assure,
the payment or performance of any indebtedness, dividend or other
obligations of any other Person (the "guaranteed obligations"),
or assure or in effect assure the holder of the guaranteed
obligations against loss in respect thereof, including any such
obligations incurred through an agreement, contingent or
otherwise: (a) to purchase the guaranteed obligations or any
property constituting security therefor; (b) to advance or supply
funds for the purchase or payment of the guaranteed obligations
or to maintain a working capital or other balance sheet
condition; or (c) to lease property or to purchase any debt or
equity securities or other property or services.
13
"Hedge Agreement" means any and all transactions,
agreements or documents now existing or hereafter entered into,
which provides for an interest rate, credit, commodity or equity
swap, cap, floor, collar, forward foreign exchange transaction,
currency swap, cross currency rate swap, currency option, or any
combination of, or option with respect to, these or similar
transactions, for the purpose of hedging the Borrower's exposure
to fluctuations in interest or exchange rates, loan, credit
exchange, security or currency valuations or commodity prices.
"Instruments" shall have the same meaning as given to
that term in the UCC, and shall include all negotiable
instruments, notes secured by mortgages or trust deeds, and any
other writing which evidences a right to the payment of money and
is not itself a security agreement or lease, and is of a type
which is, in the ordinary course of business, transferred by
delivery with any necessary endorsement or assignment.
"Intercompany Accounts" means all assets and
liabilities, however arising, which are due to the Borrower from,
which are due from the Borrower to, or which otherwise arise from
any transaction by the Borrower with any Affiliate of the
Borrower.
"Interest Period" means, as to any LIBOR Rate Loan, the
period commencing on the Funding Date of such Loan or on the
Continuation/Conversion Date on which the Loan is converted into
or continued as a LIBOR Rate Loan, and ending on the date one,
two, or three months thereafter as selected by the Borrower in
its Notice of Borrowing, in the form attached hereto as Exhibit
D, or Notice of Continuation/Conversion, in the form attached
hereto as Exhibit E provided that:
(a) if any Interest Period would otherwise end on
a day that is not a Business Day, that Interest Period shall be
extended to the following Business Day unless the result of such
extension would be to carry such Interest Period into another
calendar month, in which event such Interest Period shall end on
the preceding Business Day;
(b) any Interest Period pertaining to a LIBOR
Rate Loan that begins on the last Business Day of a calendar
month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such
Interest Period) shall end on the last Business Day of the
calendar month at the end of such Interest Period; and
(c) no Interest Period shall extend beyond the
Stated Termination Date.
"Interest Rate" means each or any of the interest
rates, including the Default Rate, set forth in Section 3.1.
"IRS" means the Internal Revenue Service and any
Governmental Authority succeeding to any of its principal
functions under the Code.
"Latest Projections" means: (a) on the Closing Date
and thereafter until the Agent receives new projections pursuant
to Section 7.2(f), the projections of the Borrower's financial
condition, results of operations, and cash flows, for the period
commencing on April 1, 2000 and ending on March 31, 2003 and
delivered to the Agent prior to the Closing Date; and (b)
thereafter, the projections most recently received by the Agent
pursuant to Section 7.2(f).
14
"Lender" and "Lenders" have the meanings specified in
the introductory paragraph hereof and shall include the Agent to
the extent of any Agent Advance outstanding and the Bank to the
extent of any Non-Ratable Loan outstanding; provided that no such
Agent Advance or Non-Ratable Loan shall be taken into account in
determining any Lender's Pro Rata Share.
"LIBOR Rate" means, for any Interest Period, with
respect to LIBOR Rate Loans, the rate of interest per annum
determined pursuant to the following formula:
LIBOR Rate = Offshore Base Rate
--------------------------------------
1.00 - Eurodollar Reserve Percentage
Where,
"Offshore Base Rate" means the rate per
annum appearing on Telerate Page 3750 (or any
successor page) as the London interbank
offered rate for deposits in Dollars at
approximately 11:00 a.m. (London time) two
Business Days prior to the first day of such
Interest Period for a term comparable to such
Interest Period. If for any reason such rate
is not available, the Offshore Base Rate
shall be, for any Interest Period, the rate
per annum appearing on Reuters Screen LIBO
Page as the London interbank offered rate for
deposits in Dollars at approximately 11:00
a.m. (London time) two Business Days prior to
the first day of such Interest Period for a
term comparable to such Interest Period;
provided, however, if more than one rate is
specified on Reuters Screen LIBO Page, the
applicable rate shall be the arithmetic mean
of all such rates. If for any reason none of
the foregoing rates is available, the
Offshore Base Rate shall be, for any Interest
Period, the rate per annum determined by
Agent as the rate of interest at which dollar
deposits in the approximate amount of the
LIBOR Rate Loan comprising part of such
Borrowing would be offered by the Bank's
London Branch to major banks in the offshore
dollar market at their request at or about
11:00 a.m. (London time) two Business Days
prior to the first day of such Interest
Period for a term comparable to such Interest
Period.
"Eurodollar Reserve Percentage" means,
for any day during any Interest Period, the
reserve percentage (expressed as a decimal,
rounded upward to the next 1/100th of 1%) in
effect on such day applicable to member banks
under regulations issued from time to time by
the Federal Reserve Board for determining the
maximum reserve requirement (including any
emergency, supplemental or other marginal
reserve requirement) with respect to
Eurocurrency funding (currently referred to
as "Eurocurrency liabilities"). The Offshore
Rate for each outstanding LIBOR Rate Loan
shall be adjusted automatically as of the
effective date of any change in the
Eurodollar Reserve Percentage.
15
"LIBOR Rate Loans" means the LIBOR Revolving Loans.
"LIBOR Revolving Loan" means a Revolving Loan during
any period in which it bears interest based on the LIBOR Rate.
"Lien" means: (a) any interest in property securing an
obligation owed to, or a claim by, a Person other than the owner
of the property, whether such interest is based on the common
law, statute, or contract, and including a security interest,
charge, claim, or lien arising from a mortgage, deed of trust,
encumbrance, pledge, hypothecation, assignment, deposit
arrangement, agreement, security agreement, conditional sale or
trust receipt or a lease, consignment or bailment for security
purposes; (b) to the extent not included under clause (a), any
reservation, exception, encroachment, easement, right-of-way,
covenant, condition, restriction, lease or other title exception
or encumbrance affecting property; and (c) any contingent or
other agreement to provide any of the foregoing.
"Loan Account" means the loan account of the Borrower,
which account shall be maintained by the Agent.
"Loan Documents" means this Agreement and any other
agreements, instruments, and documents heretofore, now or
hereafter evidencing, securing, guaranteeing or otherwise
relating to the Obligations, the Collateral, or any other aspect
of the transactions contemplated by this Agreement.
"Loans" means, collectively, all loans and advances
provided for in Article 2.
"Loss Reserve Percentage" means the greater of (a) four
percent (4%) or (b) the Net Charge-Off Percent as most recently
calculated.
"Majority Lenders" means at any date of determination
(a) Lenders whose Pro Rata Shares aggregate more than 66% as such
percentage is determined under the definition of Pro Rata Share
set forth herein; or (b) in the event there are only two (2)
Lenders under this Agreement, both Lenders.
"Margin Stock" means "margin stock" as such term is
defined in Regulation T, U or X of the Federal Reserve Board.
"Material Adverse Effect" means (a) a material adverse
change in, or a material adverse effect upon, the operations,
business, properties, condition (financial or otherwise) or
prospects of the Borrower or the Collateral; (b) a material
impairment of the ability of the Borrower to perform under any
Loan Document to which it is a party and to avoid any Event of
Default; or (c) a material adverse effect upon the legality,
validity, binding effect or enforceability against the Borrower
of any Loan Document to which it is a party.
16
"Maximum Revolver Amount" means $60,000,000.
"Modified Contract" means a Contract which was, at any
time, in default for failure to pay for more than 59 days after
its original contractual due date and such Contract default was
cured by adjusting or amending the contract terms, or accepting a
reduce payment or otherwise, or the Contract was replaced with a
new Contract with the Contract Debtor to accomplish any of the
foregoing.
"Multi-employer Plan" means a "multi-employer plan" as
defined in Section 4001(a)(3) of ERISA which is or was at any
time during the current year or the immediately preceding six (6)
years contributed to by the Borrower or any ERISA Affiliate.
"Net Balance" means, as of the date of determination,
the Gross Contract Payments of a Contract less all unearned
interest, fees, charges, and insurance premiums owing by the
Contract Debtor.
"Net Charge-Offs" for any period means the aggregate
amount of all unpaid payments due under Contracts which have been
charged off by the Borrower during such period, as reduced by the
amount of all cash recoveries with respect to Contracts which had
been charged off during previous periods or during such period.
In computing the amount of the charge-offs, all charges made to
the dealer reserve or to the dealer's discount shall be included.
"Net Charge-Off Percent" means the percent, calculated
as of the first day of each month, equal to (a) the aggregate
amount of all Net Charge-Offs during each of the twelve (12)
months immediately preceding the date of calculation, divided by
(b) the amount of the Net Balance owing under all Contracts
outstanding as of the last day of each of the previous 12 months
divided by twelve. For example, if the Borrower charged off
$10,000 each month for 12 months and if the aggregate Net Balance
outstanding at the end of the previous 12 months was $1,000,000
for 6 months and $1,200,000 for 6 months, the Net Charge-Off
Percent would be 10.91% ($120,000/$1,100,000).
"Net Contract Payments" means the remainder of the
aggregate amount of all presently due and future, non-cancelable
installment payments to be made under a Contract, Less the sum of
all unearned finance charges, unearned fees, unearned dealer
discounts, applicable reserves (including non-refundable dealer
reserves), unearned insurance premiums, and other similar charges
included therein and/or applicable thereto, as appropriate, and
Less the Dealer Payment Reserve. Unearned dealer discounts and
non-refundable dealer reserves shall be computed on an actuarial
basis for purposes of computing the Net Contract Payments;
provided, however, only unearned finance charges shall be
deducted from the payments due for purposes of computing loss
reserves under Section 9.20.
"Net Number of Repossessions" means the number of
Vehicles repossessed by the Borrower from Contract Debtors during
the twelve calendar months immediately preceding the date of
calculation, minus the number of such Vehicles which have been
redeemed by such Contract Debtors.
"Non-Ratable Loan" and "Non-Ratable Loans" have the
meanings specified in Section 2.2(h).
17
"Notice of Borrowing" has the meaning specified in
Section 2.2(b).
"Notice of Continuation/Conversion" has the meaning
specified in Section 3.2(b).
"Obligations" means all present and future loans,
advances, liabilities, obligations, covenants, duties, and debts
owing by the Borrower to the Agent and/or any Lender, arising
under or pursuant to this Agreement or any of the other Loan
Documents, whether or not evidenced by any note, or other
instrument or document, whether arising from an extension of
credit, acceptance, loan, guaranty, indemnification or otherwise,
whether direct or indirect, absolute or contingent, due or to
become due, primary or secondary, as principal or guarantor, and
including all principal, interest, charges, expenses, fees,
attorneys' fees, filing fees and any other sums chargeable to the
Borrower hereunder or under any of the other Loan Documents.
"Obligations" includes, without limitation, all debts,
liabilities and obligations now or hereafter arising from or in
connection with Bank Products.
"Older Vehicle Contract Borrowing Base" means, as of
any date of calculation, the amount of the Net Contract Payments
payable under Eligible Vehicle Contracts which are secured by a
lien on a Vehicle which is eight or nine model years old at the
time such Contract was originated (excluding the model year in
effect at the time the Contract was originated).
"Oldest Vehicle Contract Borrowing Base" means, as of
any date of calculation, the amount of the Net Contract Payments
payable under Eligible Vehicle Contracts which are secured by a
lien on a Vehicle which is ten model years old at the time such
Contract was originated (excluding the model year in effect at
the time the Contract was originated).
"Other Taxes" means any present or future stamp or
documentary taxes or any other excise or property taxes, charges
or similar levies which arise from any payment made hereunder or
from the execution, delivery or registration of, or otherwise
with respect to, this Agreement or any other Loan Documents.
"Participant" means any Person who shall have been
granted the right by any Lender to participate in the financing
provided by such Lender under this Agreement, and who shall have
entered into a participation agreement in form and substance
satisfactory to such Lender.
"Past Due Percent" means the percent, calculated as of
the first day of each month, equal to (a) the Gross Contract
Payments owing under all Contracts (excluding Contracts charged-
off) as to which any portion of an installment due thereunder is
30 days or more past due as determined on a contractual basis as
of the last day of each of the six months immediately preceding
the date of calculation, divided by (b) the Gross Contract
Payments owing under all Contracts (excluding Contracts charged-
off) as of the last day of each of the six months immediately
preceding the date of calculation. For example, if, as of the
last day of the previous six months the Gross Contract Payments
were $1,500,000 and on the same date the amount of Gross Contract
Payments that were more than 30 days past due was $100,000 for
three months and $150,000 for three months, the Past Due Percent
would be 8 1/3% ($750,000/$9,000,000).
18
"Payment Account" means each bank account established
pursuant to Section 6.9, to which the proceeds of Accounts and
other Collateral are deposited or credited, and which is
maintained in the name of the Agent or the Borrower, as the Agent
may determine, on terms acceptable to the Agent.
"PBGC" means the Pension Benefit Guaranty Corporation
or any Governmental Authority succeeding to the functions
thereof.
"Pending Revolving Loans" means, at any time, the
aggregate principal amount of all Revolving Loans requested in
any Notice of Borrowing received by the Agent which have not yet
been advanced.
"Pension Plan" means a pension plan (as defined in
Section 3(2) of ERISA) subject to Title IV of ERISA which the
Borrower sponsors, maintains, or to which it makes, is making, or
is obligated to make contributions, or in the case of a Multi-
employer Plan has made contributions at any time during the
immediately preceding five (5) plan years.
"Permitted Liens" means:
(a) Liens for taxes not delinquent or statutory
Liens for taxes in an amount not to exceed $100,000 provided that
the payment of such taxes which are due and payable is being
contested in good faith and by appropriate proceedings diligently
pursued and as to which adequate financial reserves have been
established on Borrower's books and records and a stay of
enforcement of any such Lien is in effect;
(b) the Agent's Liens;
(c) Liens consisting of deposits made in the
ordinary course of business in connection with, or to secure
payment of, obligations under worker's compensation,
unemployment insurance, social security and other similar laws,
or to secure the performance of bids, tenders or contracts (other
than for the repayment of borrowed money) or to secure indemnity,
performance or other similar bonds for the performance of bids,
tenders or contracts (other than for the repayment of borrowed
money) or to secure statutory obligations (other than liens
arising under ERISA or Environmental Liens) or surety or appeal
bonds, or to secure indemnity, performance or other similar
bonds;
(d) Liens securing the claims or demands of
materialmen, mechanics, carriers, warehousemen, landlords and
other like Persons, provided that if any such Lien arises from
the nonpayment of such claims or demand when due, such claims or
demands do not exceed $100,000 in the aggregate;
(e) Liens constituting encumbrances in the nature
of reservations, exceptions, encroachments, easements, rights of
way, covenants running with the land, and other similar title
exceptions or encumbrances affecting any Real Estate; provided
that they do not in the aggregate materially detract from the
value of the Real Estate or materially interfere with its use in
the ordinary conduct of the Borrower's business; and
19
(f) Liens arising from judgments and attachments
in connection with court proceedings provided that the attachment
or enforcement of such Liens would not result in an Event of
Default hereunder and such Liens are being contested in good
faith by appropriate proceedings, adequate reserves have been set
aside and no material Property is subject to a material risk of
loss or forfeiture and the claims in respect of such Liens are
fully covered by insurance (subject to ordinary and customary
deductibles) and a stay of execution pending appeal or proceeding
for review is in effect.
"Person" means any individual, sole proprietorship,
partnership, limited liability company, joint venture, trust,
unincorporated organization, association, corporation,
Governmental Authority, or any other entity.
"Plan" means an employee benefit plan (as defined in
Section 3(3) of ERISA) which the Borrower sponsors or maintains
or to which the Borrower makes, is making, or is obligated to
make contributions and includes any Pension Plan.
"Property" means any interest in any kind of property
or asset, whether personal or real property, or mixed, or
tangible, or intangible.
"Pro Rata Share" means, with respect to a Lender, a
fraction (expressed as a percentage), the numerator of which is
the amount of such Lender's Commitment and the denominator of
which is the sum of the amounts of all of the Lenders'
Commitments, or if no Commitments are outstanding, a fraction
(expressed as a percentage), the numerator of which is the amount
of Obligations owed to such Lender and the denominator of which
is the aggregate amount of the Obligations owed to the Lenders,
in each case giving effect to a Lender's participation in Non-
Ratable Loans and Agent Advances.
"Proprietary Rights" means all of the Borrower's now
owned and hereafter arising or acquired: licenses, franchises,
permits, patents, patent rights, copyrights, works which are the
subject matter of copyrights, trademarks, service marks, trade
names, trade styles, patent, trademark and service mark
applications, and all licenses and rights related to any of the
foregoing, and all other rights under any of the foregoing, all
extensions, renewals, reissues, divisions, continuations, and
continuations-in-part of any of the foregoing, and all rights to
sue for past, present and future infringement of any of the
foregoing.
"Real Estate" means all of the Borrower's now or
hereafter owned or leased estates in real property, including,
without limitation, all fees, leaseholds and future interests,
together with all of the Borrower's now or hereafter owned or
leased interests in the improvements thereon, the fixtures
attached thereto and the easements appurtenant thereto.
"Release" means a release, spill, emission, leaking,
pumping, injection, deposit, disposal, discharge, dispersal,
leaching or migration of a Contaminant into the indoor or outdoor
environment or into or out of any Real Estate or other property,
including the movement of Contaminants through or in the air,
soil, surface water, groundwater or Real Estate or other
property.
20
"Reportable Event" means, any of the events set forth
in Section 4043(b) of ERISA or the regulations thereunder, other
than any such event for which the 30-day notice requirement under
ERISA has been waived in regulations issued by the PBGC.
"Repossessed Adjustment Percent" means (a) one
percentage point when the Repossessed Percent is equal to or
greater than twenty-five percent (25%), but less than twenty-six
percent (26%), and (b) two percentage points when the Repossessed
Percent is equal to or greater than twenty-six percent (26%).
"Repossession Percent" means the percent, calculated as
of the first day of each month, equal to (a) the repossession
value of all Vehicles which the Borrower has repossessed and
which, as of the last day of the preceding month, was reflected
as an asset on the Borrower's books divided by (b) the Net
Balance owing under all Vehicle Contracts (excluding Vehicle
Contracts charged-off) outstanding as of the last day of each of
the previous twelve (12) months divided by twelve. For example,
if 10 Vehicles having a total repossession value of $50,000 had
at any time been repossessed by Borrower and were reflected as
assets on the books of Borrower at the end of a month and for the
preceding 12 months the Net Balance was $1,000,000 for four (4)
months, $1,500,000 for four (4) months and $2,000,000 for four
(4) months, the Repossession Percent would be 3 1/3%
($50,000/$1,500,000).
"Repossessed Percent" means, as of any date of
calculation, the percent resulting from dividing the Net Number
of Repossessions by the Average Monthly Number of Vehicle
Contracts.
"Required Lenders" means at any time (a) Lenders whose
Pro Rata Shares aggregate more than fifty percent (50%) as such
percentage is determined under the definition of Pro Rata Share
set forth herein, or (b) in the event there are only two (2)
Lenders under this Agreement, either Lender.
"Requirement of Law" means, as to any Person, any law
(statutory or common), treaty, rule or regulation or
determination of an arbitrator or of a Governmental Authority, in
each case applicable to or binding upon the Person or any of its
property or to which the Person or any of its property is
subject.
"Responsible Officer" means the chief executive officer
or the president of the Borrower, or any other officer having
substantially the same authority and responsibility; or, with
respect to compliance with financial covenants and the
preparation of the Borrowing Base Certificate, the chief
financial officer or the treasurer of the Borrower, or any other
officer having substantially the same authority and
responsibility.
"Restricted Investment" means, as to the Borrower, any
acquisition of property by the Borrower in exchange for cash or
other property, whether in the form of an acquisition of stock,
debt, or other indebtedness or obligation, or the purchase or
acquisition of any other property, or a loan, advance, capital
contribution, or subscription, except the following: (a)
acquisitions of Equipment to be used in the business of the
Borrower so long as the acquisition costs thereof constitute
Capital Expenditures permitted hereunder; (b) acquisitions of
Inventory in the ordinary course of business of the Borrower; (c)
acquisitions of current assets acquired in the ordinary course of
business of the Borrower; (d) direct obligations of the United
States of America, or any agency thereof, or obligations
guaranteed by the United States of America, provided that such
obligations mature within one year from the date of acquisition
thereof; (e) acquisitions of certificates of deposit maturing
within one year from the date of acquisition, bankers'
acceptances, Eurodollar bank deposits, or overnight bank
deposits, in each case issued by, created by, or with a bank or
trust company organized under the laws of the United States of
America or any state thereof having capital and surplus
aggregating at least $100,000,000; (f) acquisitions of commercial
paper given a rating of "A2" or better by Standard & Poor's
Corporation or "P2" or better by Moody's Investors Service, Inc.
and maturing not more than 90 days from the date of creation
thereof; and (g) Hedge Agreements.
21
"Revolving Loans" has the meaning specified in
Section 2.2 and includes each Agent Advance and Non-Ratable Loan.
"Sales Finance Contracts" mean Contracts which are
purchased from Dealers and which arise from a consumer purchasing
consumer goods (other than a Vehicle) from Dealers.
"Security Documents" means all security agreements,
chattel mortgages, deeds of trust, mortgages, or other security
instruments, guaranties, sureties, and agreements of every type
and nature (including certificates of title) securing the
obligations of Contract Debtors under Contracts.
"Settlement" and "Settlement Date" have the meanings
specified in Section 2.2(j)(i).
"Solvent" means when used with respect to any Person
that at the time of determination:
(a) the assets of such Person, at a fair valuation,
are in excess of the total amount of its debts (including
contingent liabilities); and
(b) the present fair saleable value of its assets is
greater than its probable liability on its existing debts as
such debts become absolute and matured; and
(c) it is then able and expects to be able to pay its
debts (including contingent debts and other commitments) as
they mature; and
(d) it has capital sufficient to carry on its business
as conducted and as proposed to be conducted.
For purposes of determining whether a Person is Solvent, the
amount of any contingent liability shall be computed as the
amount that, in light of all the facts and circumstances existing
at such time, represents the amount that can reasonably be
expected to become an actual or matured liability.
"Stated Termination Date" means November 30, 2002.
22
"Subordinated Debt" means all debt of the Borrower
which is subordinated to the Obligations pursuant to a written
subordination agreement the terms of which are satisfactory to
the Agent in its sole and absolute discretion.
"Subsidiary" of a Person means any corporation,
association, partnership, limited liability company, joint
venture or other business entity of which more than fifty percent
(50%) of the voting stock or other equity interests (in the case
of Persons other than corporations), is owned or controlled
directly or indirectly by the Person, or one or more of the
Subsidiaries of the Person, or a combination thereof. Unless the
context otherwise clearly requires, references herein to a
"Subsidiary" refer to a Subsidiary of the Borrower.
"Taxes" means any and all present or future taxes,
levies, imposts, deductions, charges or withholdings, and all
liabilities with respect thereto, excluding, in the case of each
Lender and the Agent, such taxes (including income taxes or
franchise taxes) as are imposed on or measured by the Agent's or
each Lender's net income in any jurisdiction (whether federal,
state or local and including any political subdivision thereof)
under the laws of which such Lender or the Agent, as the case may
be, is organized or maintains a lending office.
"Termination Date" means the earliest to occur of (i)
the Stated Termination Date, (ii) the date the Total Facility is
terminated either by the Borrower pursuant to Section 4.2 or by
the Majority Lenders pursuant to Section 11.2, and (iii) the date
this Agreement is otherwise terminated for any reason whatsoever
pursuant to the terms of this Agreement.
"UCC" means the Uniform Commercial Code (or any
successor statute), as in effect from time to time, of the State
of New York or of any other state the laws of which are required
as a result thereof to be applied in connection with the issue of
perfection of security interests.
"Unfunded Pension Liability" means the excess of a
Plan's benefit liabilities under Section 4001(a)(16) of ERISA,
over the current value of that Plan's assets, determined in
accordance with the assumptions used for funding the Pension Plan
pursuant to Section 412 of the Code for the applicable plan year.
"Uninsured Contracts" means Vehicle Contracts which
would constitute Eligible Vehicle Contracts except that the
Vehicle securing repayment of the Contract is not insured against
loss.
"Unused Line Fee" has the meaning specified in Section
3.5.
"Vehicle" means any new or used, two-axeled, automobile
or light-duty truck, together with all equipment sold or financed
in connection therewith.
"Vehicle Contract" means a Contract (including
Uninsured Vehicle Contracts) which is a motor vehicle retail
installment contract arising from the purchase of a Vehicle.
23
1.2 Accounting Terms.
Any accounting term used in this Agreement shall have,
unless otherwise specifically provided herein, the meaning
customarily given in accordance with GAAP, and all financial
computations hereunder shall be computed, unless otherwise
specifically provided herein, in accordance with GAAP as
consistently applied and using the same method for inventory
valuation as used in the preparation of the Financial Statements.
1.3 Interpretive Provisions.
(a) The meanings of defined terms are equally
applicable to the singular and plural forms of the defined terms.
(b) The words "hereof," "herein," "hereunder" and
similar words refer to this Agreement as a whole and not to any
particular provision of this Agreement; and Subsection, Section,
Schedule and Exhibit references are to this Agreement unless
otherwise specified.
(c) (i) The term "documents" includes any and all
instruments, documents, agreements, certificates, indentures,
notices and other writings, however evidenced.
(ii) The term "including" is not limiting and
means "including without limitation."
(iii) In the computation of periods of time
from a specified date to a later specified date, the word "from"
means "from and including," the words "to" and "until" each mean
"to but excluding" and the word "through" means "to and
including."
(d) Unless otherwise expressly provided herein, (i)
references to agreements (including this Agreement) and other
contractual instruments shall be deemed to include all subsequent
amendments and other modifications thereto, but only to the
extent such amendments and other modifications are not prohibited
by the terms of any Loan Document, and (ii) references to any
statute or regulation are to be construed as including all
statutory and regulatory provisions consolidating, amending,
replacing, supplementing or interpreting the statute or
regulation.
(e) The captions and headings of this Agreement are
for convenience of reference only and shall not affect the
interpretation of this Agreement.
(f) This Agreement and other Loan Documents may use
several different limitations, tests or measurements to regulate
the same or similar matters. All such limitations, tests and
measurements are cumulative and shall each be performed in
accordance with their terms.
(g) This Agreement and the other Loan Documents are
the result of negotiations among and have been reviewed by
counsel to the Agent, the Borrower and the other parties, and are
the products of all parties. Accordingly, they shall not be
construed against the Lenders or the Agent merely because of the
Agent's or Lenders' involvement in their preparation.
24
ARTICLE 2
LOANS
2.1 Total Facility.
Subject to all of the terms and conditions of this
Agreement, the Lenders severally agree to make available a total
credit facility of up to the Maximum Revolver Amount for the
Borrower's use from time to time during the term of this
Agreement. The Total Credit Facility shall be composed of a
revolving line of credit consisting of Revolving Loans up to the
Borrowing Base.
2.2 Revolving Loans.
(a)Amounts. Subject to the satisfaction of the
conditions precedent set forth in Article 10, each Lender
severally, but not jointly, agrees, upon the Borrower's request
from time to time on any Business Day during the period from the
Closing Date to the Termination Date, to make revolving loans
(the "Revolving Loans") to the Borrower in amounts not to exceed
(except for the Bank with respect to Non-Ratable Loans and except
for the Agent with respect to Agent Advances) such Lender's Pro
Rata Share of the Borrowing Base. The Lenders, however, in their
unanimous discretion, may elect to make Revolving Loans in excess
of the Availability on one or more occasions, but if they do so,
neither the Agent nor the Lenders shall be deemed thereby to have
changed the limits of the Borrowing Base or to be obligated to
exceed such limits on any other occasion. If the Aggregate
Revolver Outstandings exceed the Borrowing Base, the Lenders may
refuse to make or otherwise restrict the making of Revolving
Loans as the Lenders determine until such excess has been
eliminated, subject to the Agent's authority, in its sole
discretion, to make Agent Advances pursuant to the terms of
Section 2.2(i).
(b) Procedure for Borrowing. (1) Each Borrowing
shall be made upon the Borrower's irrevocable written notice
delivered to the Agent in the form of a notice of borrowing
("Notice of Borrowing") together with a Borrowing Base
Certificate reflecting sufficient Availability, which must be
received by the Agent prior to 11:00 a.m. (New York time) (i)
three Business Days prior to the requested Funding Date, in the
case of LIBOR Rate Loans and (ii) no later than 11:00 a.m. on the
requested Funding Date, in the case of Base Rate Loans,
specifying:
(A) the amount of the Borrowing which in the
case of a LIBOR Rate Loan may not be less than $1,000,000;
(B) the requested Funding Date, which shall
be a Business Day;
(C) whether the Revolving Loans requested
are to be Base Rate Revolving Loans or LIBOR Revolving Loans (and
if not specified, it shall be deemed a request for a Base Rate
Revolving Loan); and
(D) the duration of the Interest Period if
the requested Revolving Loans are to be LIBOR Revolving Loans.
If the Notice of Borrowing fails to specify the duration of the
Interest Period for any Borrowing comprised of LIBOR Rate Loans,
such Interest Period shall be one month; provided, however, that
with respect to the Borrowing to be made on the Closing Date,
such Borrowings will consist of Base Rate Revolving Loans only.
25
(2) With respect to any request for Base Rate
Revolving Loans, in lieu of delivering the above-described Notice
of Borrowing the Borrower may give the Agent telephonic notice of
such request by the required time, with such telephonic notice to
be confirmed in writing within 24 hours of the giving of such
notice but the Agent at all times shall be entitled to rely on
such telephonic notice in making such Revolving Loans, regardless
of whether any such confirmation is received by Agent.
(3) The Borrower shall have no right to request a
LIBOR Rate Loan while a Default or Event of Default has occurred
and is continuing.
(c) Reliance upon Authority. The Borrower shall
deliver to the Agent, prior to the Closing Date, a writing
setting forth the account of the Borrower to which the Agent is
authorized to transfer the proceeds of the Revolving Loans
requested pursuant to this Section 2.2. which account shall be
reasonably satisfactory to the Agent. The Agent shall be entitled
to rely conclusively on any person's request for Revolving Loans
on behalf of the Borrower, the proceeds of which are to be
transferred to the account specified by the Borrower pursuant to
the immediately preceding sentence, until the Agent receives
written notice from the Borrower that the proceeds of the
Revolving Loans are to be sent to a different account. The Agent
shall have no duty to verify the identity of any individual
representing himself or herself as a person authorized by the
Borrower to make such requests on its behalf.
(d) No Liability. The Agent shall not incur any
liability to the Borrower as a result of acting upon any notice
referred to in Sections 2.2(b) and (c), which notice the Agent
believes in good faith to have been given by an officer or other
person duly authorized by the Borrower to request Revolving Loans
on its behalf or for otherwise acting in good faith under this
Section 2.2, and the crediting of Revolving Loans to the
Borrower's deposit account, as the Borrower shall direct, shall
conclusively establish the obligation of the Borrower to repay
such Revolving Loans as provided herein.
(e) Notice Irrevocable. Any Notice of Borrowing (or
telephonic notice in lieu thereof) made pursuant to
Section 2.2(b) shall be irrevocable and the Borrower shall be
bound to borrow the funds requested therein in accordance
therewith.
(f) Agent's Election. Promptly after receipt of a
Notice of Borrowing (or telephonic notice in lieu thereof)
pursuant to Section 2.2(b), the Agent shall elect, in its
discretion, (i) to have the terms of Section 2.2(g) apply to such
requested Borrowing, or (ii) to request the Bank to make a Non-
Ratable Loan pursuant to the terms of Section 2.2(h) in the
amount of the requested Borrowing; provided, however, that if the
Bank declines in its sole discretion to make a Non-Ratable Loan
pursuant to Section 2.2(h), the Agent shall elect to have the
terms of Section 2.2(g) apply to such requested Borrowing.
(g) Making of Revolving Loans. (i) In the event that
the Agent shall elect to have the terms of this Section 2.2(g)
apply to a requested Borrowing as described in Section 2.2(f),
then promptly after receipt of a Notice of Borrowing or
telephonic notice pursuant to Section 2.2(b), the Agent shall
notify the Lenders by telecopy, telephone or other similar form
of transmission, of the requested Borrowing. Each Lender shall
make the amount of such Lender's Pro Rata Share of the requested
Borrowing available to the Agent in immediately available funds,
to such account of the Agent as the Agent may designate, not
later than 11:00 a.m., (New York time) on the Funding Date
applicable thereto. After the Agent's receipt of the proceeds of
such Revolving Loans, the Agent shall make the proceeds of such
Revolving Loans available to the Borrower on the applicable
Funding Date by transferring same day funds equal to the proceeds
of such Revolving Loans received by the Agent to the account of
the Borrower, designated in writing by the Borrower and
acceptable to the Agent; provided, however, that the amount of
Revolving Loans so made on any date shall in no event exceed the
Availability on such date.
26
(ii) Unless the Agent receives notice from a Lender on
or prior to the Closing Date or, with respect to any Borrowing
after the Closing Date, at least one Business Day prior to the
date of such Borrowing, that such Lender will not make available
as and when required hereunder to the Agent for the account of
the Borrower the amount of that Lender's Pro Rata Share of the
Borrowing, the Agent may assume that each Lender has made such
amount available to the Agent in immediately available funds on
the Funding Date and the Agent may (but shall not be so
required), in reliance upon such assumption, make available to
the Borrower on such date a corresponding amount. If and to the
extent any Lender shall not have made its full amount available
to the Agent in immediately available funds and the Agent in such
circumstances has made available to the Borrower such amount,
that Lender shall on the Business Day following such Funding Date
make such amount available to the Agent, together with interest
at the Federal Funds Rate for each day during such period. A
notice by the Agent submitted to any Lender with respect to
amounts owing under this subsection shall be conclusive, absent
manifest error. If such amount is so made available, such
payment to the Agent shall constitute such Lender's Revolving
Loan for all purposes of this Agreement. If such amount is not
made available to the Agent on the Business Day following the
Funding Date, the Agent will notify the Borrower of such failure
to fund and, upon demand by the Agent, the Borrower shall pay
such amount to the Agent for the Agent's account, together with
interest thereon for each day elapsed since the date of such
Borrowing, at a rate per annum equal to the Interest Rate
applicable at the time to the Revolving Loans comprising such
Borrowing. The failure of any Lender to make any Revolving Loan
on any Funding Date (any such Lender, prior to the cure of such
failure, being hereinafter referred to as a "Defaulting Lender")
shall not relieve any other Lender of any obligation hereunder to
make a Revolving Loan on such Funding Date, but no Lender shall
be responsible for the failure of any other Lender to make the
Revolving Loan to be made by such other Lender on any Funding
Date.
(iii) The Agent shall not be obligated to transfer
to a Defaulting Lender any payments made by Borrower to the Agent
for the Defaulting Lender's benefit; nor shall a Defaulting
Lender be entitled to the sharing of any payments hereunder.
Amounts payable to a Defaulting Lender shall instead be paid to
or retained by the Agent. The Agent may hold and, in its
discretion, re-lend to Borrower the amount of all such payments
received or retained by it for the account of such Defaulting
Lender. Any amounts so re-lent to the Borrower shall bear
interest at the rate applicable to Base Rate Revolving Loans and
for all other purposes of this Agreement shall be treated as if
they were Revolving Loans, provided, however, that for purposes
of voting or consenting to matters with respect to the Loan
Documents and determining Pro Rata Shares, such Defaulting Lender
shall be deemed not to be a "Lender". Until a Defaulting Lender
cures its failure to fund its Pro Rata Share of any Borrowing (A)
such Defaulting Lender shall not be entitled to any portion of
the Unused Line Fee and (B) the Unused Line Fee shall accrue in
favor of the Lenders which have funded their respective Pro Rata
Shares of such requested Borrowing and shall be allocated among
such performing Lenders ratably based upon their relative
Commitments. This Section shall remain effective with respect to
such Lender until such time as the Defaulting Lender shall no
longer be in default of any of its obligations under this
Agreement. The terms of this Section shall not be construed to
increase or otherwise affect the Commitment of any Lender, or
relieve or excuse the performance by the Borrower of its duties
and obligations hereunder.
27
(h) Making of Non-Ratable Loans. (i) In the event the
Agent shall elect, with the consent of the Bank, to have the
terms of this Section 2.2(h) apply to a requested Borrowing as
described in Section 2.2(f), the Bank shall make a Revolving Loan
in the amount of such Borrowing (any such Revolving Loan made
solely by the Bank pursuant to this Section 2.2(h) being referred
to as a "Non-Ratable Loan" and such Revolving Loans being
referred to collectively as "Non-Ratable Loans") available to the
Borrower on the Funding Date applicable thereto by transferring
same day funds to an account of the Borrower, designated in
writing by the Borrower and acceptable to the Agent. Each Non-
Ratable Loan shall be subject to all the terms and conditions
applicable to other Revolving Loans except that all payments
thereon shall be payable to the Bank solely for its own account
(and for the account of the holder of any participation interest
with respect to such Revolving Loan). The Agent shall not
request the Bank to make any Non-Ratable Loan if (A) the Agent
shall have received written notice from any Lender that one or
more of the applicable conditions precedent set forth in Article
10 will not be satisfied on the requested Funding Date for the
applicable Borrowing, or (B) the requested Borrowing would exceed
the Availability on such Funding Date. The Agent shall not
otherwise be required to determine whether the applicable
conditions precedent set forth in Article 10 have been satisfied
or the requested Borrowing would exceed the Availability on the
Funding Date applicable thereto prior to making, in its sole
discretion, any Non-Ratable Loan.
(ii) The Non-Ratable Loans shall be secured by the
Agent's Liens in and to the Collateral, shall constitute
Revolving Loans and Obligations hereunder, and shall bear
interest at the rate applicable to the Revolving Loans from time
to time.
(i) Agent Advances. (i) Subject to the limitations
set forth in the provisos contained in this Section 2.2(i), the
Agent is hereby authorized by the Borrower and the Lenders, from
time to time in the Agent's sole discretion, (A) after the
occurrence of a Default or an Event of Default, or (B) at any
time that any of the other applicable conditions precedent set
forth in Article 10 have not been satisfied, to make Base Rate
Revolving Loans to the Borrower on behalf of the Lenders which
the Agent, in its reasonable business judgment, deems necessary
or desirable (1) to preserve or protect the Collateral, or any
portion thereof, (2) to enhance the likelihood of, or maximize
the amount of, repayment of the Loans and other Obligations, or
(3) to pay any other amount chargeable to the Borrower pursuant
to the terms of this Agreement, including costs, fees and
expenses as described in Section 15.7 (any of the advances
described in this Section 2.2(i) being hereinafter referred to as
"Agent Advances"); provided, that the Required Lenders may at any
time revoke the Agent's authorization contained in this Section
2.2(i) to make Agent Advances, any such revocation to be in
writing and to become effective prospectively upon the Agent's
receipt thereof;
28
(ii) The Agent Advances shall be repayable on demand
and secured by the Agent's Liens in and to the Collateral, shall
constitute Revolving Loans and Obligations hereunder, and shall
bear interest at the rate applicable to Base Rate Revolving Loans
from time to time. The Agent shall notify each Lender in writing
of each such Agent Advance.
(j) Settlement. It is agreed that each Lender's
funded portion of the Revolving Loans is intended by the Lenders
to be equal at all times to such Lender's Pro Rata Share of the
outstanding Revolving Loans. Notwithstanding such agreement, the
Agent, the Bank, and the other Lenders agree (which agreement
shall not be for the benefit of or enforceable by the Borrower)
that in order to facilitate the administration of this Agreement
and the other Loan Documents, settlement among them as to the
Revolving Loans, the Non-Ratable Loans and the Agent Advances
shall take place on a periodic basis in accordance with the
following provisions:
(i) The Agent shall request settlement ("Settlement")
with the Lenders on at least a weekly basis, or on a more
frequent basis if so determined by the Agent, (A) on behalf of
the Bank, with respect to each outstanding Non-Ratable Loan, (B)
for itself, with respect to each Agent Advance, and (C) with
respect to collections received, in each case, by notifying the
Lenders of such requested Settlement by telecopy, telephone or
other similar form of transmission, of such requested Settlement,
no later than 12:00 noon (New York time) on the date of such
requested Settlement (the "Settlement Date"). Each Lender (other
than the Bank, in the case of Non-Ratable Loans and the Agent in
the case of Agent Advances) shall make the amount of such
Lender's Pro Rata Share of the outstanding principal amount of
the Non-Ratable Loans and Agent Advances with respect to which
Settlement is requested available to the Agent, to such account
of the Agent as the Agent may designate, not later than 3:00 p.m.
(New York time), on the Settlement Date applicable thereto, which
may occur before or after the occurrence or during the
continuation of a Default or an Event of Default and whether or
not the applicable conditions precedent set forth in Article 10
have then been satisfied. Such amounts made available to the
Agent shall be applied against the amounts of the applicable Non-
Ratable Loan or Agent Advance and, together with the portion of
such Non-Ratable Loan or Agent Advance representing the Bank's
Pro Rata Share thereof, shall constitute Revolving Loans of such
Lenders. If any such amount is not made available to the Agent
by any Lender on the Settlement Date applicable thereto, the
Agent shall (A) on behalf of the Bank, with respect to each
outstanding Non-Ratable Loan, and (B) for itself, with respect to
each Agent Advance be entitled to recover such amount on demand
from such Lender together with interest thereon at the Federal
Funds Rate for the first three (3) days from and after the
Settlement Date and thereafter at the Interest Rate then
applicable to the Revolving Loans.
(ii) Notwithstanding the foregoing, not more than one
(1) Business Day after demand is made by the Agent (whether
before or after the occurrence of a Default or an Event of
Default and regardless of whether the Agent has requested a
Settlement with respect to a Non-Ratable Loan or Agent Advance),
each other Lender (A) shall irrevocably and unconditionally
purchase and receive from the Bank or the Agent, as applicable,
without recourse or warranty, an undivided interest and
participation in such Non-Ratable Loan or Agent Advance equal to
such Lender's Pro Rata Share of such Non-Ratable Loan or Agent
Advance and (B) if Settlement has not previously occurred with
respect to such Non-Ratable Loans or Agent Advances, upon demand
by Bank or Agent, as applicable, shall pay to Bank or Agent, as
applicable, as the purchase price of such participation an amount
equal to one-hundred percent (100%) of such Lender's Pro Rata
Share of such Non-Ratable Loans or Agent Advances. If such
amount is not in fact made available to the Agent by any Lender,
the Agent shall be entitled to recover such amount on demand from
such Lender together with interest thereon at the Federal Funds
Rate for the first three (3) days from and after such demand and
thereafter at the Interest Rate then applicable to Base Rate
Revolving Loans.
29
(iii) From and after the date, if any, on which any
Lender purchases an undivided interest and participation in any
Non-Ratable Loan or Agent Advance pursuant to clause (ii)
preceding, the Agent shall promptly distribute to such Lender,
such Lender's Pro Rata Share of all payments of principal and
interest and all proceeds of Collateral received by the Agent in
respect of such Non-Ratable Loan or Agent Advance.
(iv) Between Settlement Dates, the Agent, to the extent
no Agent Advances are outstanding, may pay over to the Bank any
payments received by the Agent, which in accordance with the
terms of this Agreement would be applied to the reduction of the
Revolving Loans, for application to the Bank's Revolving Loans
including Non-Ratable Loans. If, as of any Settlement Date,
collections received since the then immediately preceding
Settlement Date have been applied to the Bank's Revolving Loans
(other than to Non-Ratable Loans or Agent Advances in which such
Lender has not yet funded its purchase of a participation
pursuant to Section 2.2(j)(ii) above), as provided for in the
previous sentence, the Bank shall pay to the Agent for the
accounts of the Lenders, to be applied to the outstanding
Revolving Loans of such Lenders, an amount such that each Lender
shall, upon receipt of such amount, have, as of such Settlement
Date, its Pro Rata Share of the Revolving Loans. During the
period between Settlement Dates, the Bank with respect to Non-
Ratable Loans, the Agent with respect to Agent Advances, and each
Lender with respect to the Revolving Loans other than Non-Ratable
Loans and Agent Advances, shall be entitled to interest at the
applicable rate or rates payable under this Agreement on the
actual average daily amount of funds employed by the Bank, the
Agent and the other Lenders.
(k) Notation. The Agent shall record on its books the
principal amount of the Revolving Loans owing to each Lender,
including the Non-Ratable Loans owing to the Bank, and the Agent
Advances owing to the Agent, from time to time. In addition,
each Lender is authorized, at such Lender's option, to note the
date and amount of each payment or prepayment of principal of
such Lender's Revolving Loans in its books and records, including
computer records, such books and records constituting presumptive
evidence, absent manifest error, of the accuracy of the
information contained therein.
(l) Lenders' Failure to Perform. All Revolving Loans
(other than Non-Ratable Loans and Agent Advances) shall be made
by the Lenders simultaneously and in accordance with their Pro
Rata Shares. It is understood that (i) no Lender shall be
responsible for any failure by any other Lender to perform its
obligation to make any Revolving Loans hereunder, nor shall any
Commitment of any Lender be increased or decreased as a result of
any failure by any other Lender to perform its obligation to make
any Revolving Loans hereunder, (ii) no failure by any Lender to
perform its obligation to make any Revolving Loans hereunder
shall excuse any other Lender from its obligation to make any
Revolving Loans hereunder, and (iii) the obligations of each
Lender hereunder shall be several, not joint and several.
30
2.3 Existing Indebtedness.
Borrower acknowledges and confirms that, as of the Closing
Date, it is indebted to the Existing Lender without defense, set-
off or counter-claim under the Existing Credit Agreement. This
Agreement amends and restates the Existing Credit Agreement and
the Borrower's indebtedness under the Existing Credit Agreement
shall be deemed to constitute a Loan hereunder. The execution
and delivery of this Agreement and the other Loan Documents,
however, does not evidence or represent a refinancing, repayment,
accord and/or satisfaction or novation of the Borrower's
indebtedness under the Existing Credit Agreement. All of the
Lenders' obligations to Borrowers with respect to Loans to be
made concurrently herewith or hereafter are set forth in this
Agreement. All liens and security interests previously granted
to the Existing Lender pursuant to the Existing Credit Agent are
acknowledged and reconfirmed and remain in full force and effect
and are not intended to be released, replaced or impaired. Bank
Products.
2.4 Bank Products.
The Borrower may request and the Bank may, in its sole and
absolute discretion, arrange for the Borrower to obtain from the
Bank or the Bank's Affiliates Bank Products although the Borrower
is not required to do so. To the extent Bank Products are
provided by an Affiliate of the Bank, the Borrower agrees to
indemnify and hold the Bank and the Lenders harmless from any and
all costs and obligations now or hereafter incurred by the Bank
or any of the Lenders which arise from the indemnity given by the
Bank to its Affiliates related to such Bank Products; provided,
however, nothing contained herein is intended to limit the
Borrower's rights, with respect to the Bank or its Affiliates, if
any, which arise as a result of the execution of documents by and
between the Borrower and the Bank which relate to Bank Products.
The agreement contained in this Section shall survive termination
of this Agreement. The Borrower acknowledges and agrees that the
obtaining of Bank Products from the Bank or the Bank's Affiliates
(a) is in the sole and absolute discretion of the Bank or the
Bank's Affiliates, and (b) is subject to all rules and
regulations of the Bank or the Bank's Affiliates.
ARTICLE 3
INTEREST AND FEES
3.1 Interest.
(a) Interest Rates. All outstanding Obligations shall
bear interest on the unpaid principal amount thereof (including,
to the extent permitted by law, on interest thereon not paid when
due) from the date made until paid in full in cash at a rate
determined by reference to the Base Rate or the LIBOR Rate and
Sections 3.1(a)(i), or (ii), as applicable, but not to exceed the
Maximum Rate described in Section 3.3. Subject to the provisions
of Section 3.2, any of the Loans may be converted into, or
continued as, Base Rate Loans or LIBOR Rate Loans in the manner
provided in Section 3.2. If at any time Loans are outstanding
with respect to which notice has not been delivered to the Agent
in accordance with the terms of this Agreement specifying the
basis for determining the interest rate applicable thereto, then
those Loans shall be Base Rate Loans and shall bear interest at a
rate determined by reference to the Base Rate until notice to the
contrary has been given to the Agent in accordance with this
Agreement and such notice has become effective. Except as
otherwise provided herein, the outstanding Obligations shall bear
interest as follows:
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(i) For all Base Rate Revolving Loans and other
Obligations (other than LIBOR Revolving Rate Loans) at a
fluctuating per annum rate equal to the Base Rate plus the
Applicable Margin; and
(ii) For all LIBOR Revolving Loans at a per annum
rate equal to the LIBOR Rate plus the Applicable Margin.
Each change in the Base Rate shall be reflected in the interest
rate described in clauses (i) and (ii) above as of the effective
date of such change. All interest charges shall be computed on
the basis of a year of 360 days and actual days elapsed (which
results in more interest being paid than if computed on the basis
of a 365-day year). Interest accrued on all Loans will be payable
in arrears on the fifteenth day of each month hereafter and on
the Termination Date.
(b) Default Rate. If any Default or Event of Default
occurs and is continuing and the Agent or the Majority Lenders in
their discretion so elect, then, while any such Default or Event
of Default is continuing, all of the Obligations shall bear
interest at the Default Rate applicable thereto.
3.2 Continuation and Conversion Elections.
(a) The Borrower may, upon irrevocable written notice to
the Agent in accordance with Section 3.2(b):
(i) elect, as of any Business Day, in the case of
Base Rate Loans to convert any such Loans (or any part thereof in
an amount not less than $5,000,000, or that is in an integral
multiple of $1,000,000 in excess thereof) into LIBOR Rate Loans;
or
(ii) elect, as of the last day of the applicable
Interest Period, to continue any LIBOR Rate Loans having Interest
Periods expiring on such day (or any part thereof in an amount
not less than $1,000,000, or that is in an integral multiple of
$1,000,000 in excess thereof); provided , that if at any time the
aggregate amount of LIBOR Rate Loans in respect of any
Borrowing is reduced, by payment, prepayment, or conversion
of part thereof to be less than $1,000,000, such LIBOR Rate
Loans shall automatically convert into Base Rate Loans, and on
and after such date the right of the Borrower to continue such
Loans as, and convert such Loans into, LIBOR Rate Loans, as
the case may be, shall terminate, and provided further that
if the notice shall fail to specify the duration of the Interest
Period, such Interest Period shall be one month.
(b) The Borrower shall deliver a notice of
conversion/continuation ("Notice of Continuation/Conversion") to
be received by the Agent not later than 11:00 a.m. (New York
time) at least three (3) Business Days in advance of the
Continuation/Conversion Date, if the Loans are to be converted
into or continued as LIBOR Rate Loans and specifying:
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(i) the proposed Continuation/Conversion Date;
(ii) the aggregate amount of Loans to be converted
or renewed;
(iii) the type of Loans resulting from the
proposed conversion or continuation; and
(iv) the duration of the requested Interest
Period.
(c) If upon the expiration of any Interest Period
applicable to LIBOR Rate Loans, the Borrower has failed to select
timely a new Interest Period to be applicable to LIBOR Rate Loans
or if any Default or Event of Default then exists, the Borrower
shall be deemed to have elected to convert such LIBOR Rate Loans
into Base Rate Loans effective as of the expiration date of such
Interest Period.
(d) The Agent will promptly notify each Lender of its
receipt of a Notice of Conversion/Continuation. All conversions
and continuations shall be made ratably according to the
respective outstanding principal amounts of the Loans with
respect to which the notice was given held by each Lender.
(e) During the existence of a Default or Event of
Default, the Borrower may not elect to have a Loan converted into
or continued as a LIBOR Rate Loan.
(f) After giving effect to any conversion or
continuation of Loans, there may not be more than four different
Interest Periods in effect hereunder.
3.3 Maximum Interest Rate.
In no event shall any interest rate provided for
hereunder exceed the maximum rate legally chargeable by any
Lender under applicable law for such Lender with respect to loans
of the type provided for hereunder (the "Maximum Rate"). If, in
any month, any interest rate, absent such limitation, would have
exceeded the Maximum Rate, then the interest rate for that month
shall be the Maximum Rate, and, if in future months, that
interest rate would otherwise be less than the Maximum Rate, then
that interest rate shall remain at the Maximum Rate until such
time as the amount of interest paid hereunder equals the amount
of interest which would have been paid if the same had not been
limited by the Maximum Rate. In the event that, upon payment in
full of the Obligations, the total amount of interest paid or
accrued under the terms of this Agreement is less than the total
amount of interest which would, but for this Section 3.3, have
been paid or accrued if the interest rate otherwise set forth in
this Agreement had at all times been in effect, then the Borrower
shall, to the extent permitted by applicable law, pay the Agent,
for the account of the Lenders, an amount equal to the excess of
(a) the lesser of (i) the amount of interest which would have
been charged if the Maximum Rate had, at all times, been in
effect or (ii) the amount of interest which would have accrued
had the interest rate otherwise set forth in this Agreement, at
all times, been in effect over (b) the amount of interest
actually paid or accrued under this Agreement. In the event that
a court of competent jurisdiction determines that the Agent
and/or any Lender has received interest and other charges
hereunder in excess of the Maximum Rate, such excess shall be
deemed received on account of, and shall automatically be applied
to reduce, the Obligations other than interest, in the inverse
order of maturity, and if there are no Obligations outstanding,
the Agent and/or such Lender shall refund to the Borrower such
excess.
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3.4 Closing Fee.
The Borrower agrees to pay the Agent the fees provided
for in the fee letter dated as of the Closing Date.
3.5 Unused Line Fee.
Until the Loans have been paid in full and this Agreement
terminated, the Borrower agrees to pay, on the first day of each
month and on the Termination Date, to the Agent, for the account
of the Lenders, in accordance with their respective Pro Rata
Shares, an unused line fee (the "Unused Line Fee") equal to one
quarter of one percent (%) per annum times the amount by which
the Maximum Revolver Amount exceeded the sum of the average daily
outstanding amount of Revolving Loans during the immediately
preceding month or shorter period if calculated on the
Termination Date. The Unused Line Fee shall be computed on the
basis of a 360-day year for the actual number of days elapsed.
All payments received by the Agent shall be deemed to be credited
to the Borrower's Loan Account immediately upon receipt for
purposes of calculating the Unused Line Fee pursuant to this
Section 3.5.
3.6 Documentation Fee
. The Borrower agrees to pay the Agent, for its sole
account, a documentation fee in the amount of $15,000 on the
Closing Date.
3.7 Agency Fee
. The Borrower agrees to pay the Agent, for its sole
account, an agency fee in the amount of $25,000 on the Closing
Date and on each Anniversary Date thereafter.
3.8 Audit Fees
. The Borrower shall pay the Agent an annual audit fee of
$10,000 as reimbursement for the costs incurred by the Agent in
connection with verifications, audits, and inspections of the
Borrower and the Collateral. The annual audit fee shall be
payable in 12 equal monthly installments. Each installment shall
be payable to Agent on the fifteenth day of each month.
Notwithstanding the foregoing, upon the occurrence of any Event
of Default, Borrower shall pay all of the Agent's costs incurred
in connection with the verifications, audits, and inspections of
the Borrower and the Collateral without regard to the foregoing
limitations.
ARTICLE 4
PAYMENTS AND PREPAYMENTS
4.1 Revolving Loans.
The Borrower shall repay the outstanding principal
balance of the Revolving Loans, plus all accrued but unpaid
interest thereon, on the Termination Date. The Borrower may
prepay Revolving Loans at any time, and reborrow subject to the
terms of this Agreement; provided, however, that with respect to
any LIBOR Revolving Loans prepaid by the Borrower prior to the
expiration date of the Interest Period applicable thereto, the
Borrower shall pay to the Agent for account of the Lenders the
amounts described in Section 5.4. In addition, and without
limiting the generality of the foregoing, upon demand the
Borrower shall pay to the Agent, for account of the Lenders, the
amount, without duplication, by which the Aggregate Revolver
Outstandings exceeds the Borrowing Base.
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4.2 Termination of Facility.
The Borrower may terminate this Agreement upon at least
thirty (30) Business Days' notice to the Agent and the Lenders,
upon (a) the payment in full of all outstanding Revolving Loans,
together with accrued interest thereon, (b)the payment of the
early termination fee set forth in the next sentence, (c) the
payment in full in cash of all other Obligations together with
accrued and unpaid interest thereon, and (d) with respect to any
LIBOR Rate Loans prepaid in connection with such termination
prior to the expiration date of the Interest Period applicable
thereto, the payment of the amounts described in Section 5.4. If
this Agreement is terminated at any time prior to the Stated
Termination Date, whether pursuant to this Section or pursuant to
Section 11.2, the Borrower shall pay to the Agent, for the
account of the Lenders, an early termination fee determined in
accordance with the following table:
Period during which Early Termination
early termination Fee
occurs
--------------------------- ---------------------------
On or prior to November One percent (1%) of the
30, 2000 Maximum Revolver Amount.
After November 30, 2000 One half of one percent
but on or prior to (.5%) of the Maximum
November 20, 2001 Revolver Amount.
After November 30, 2001 One quarter of one percent
but prior to November (.25%) of the Maximum
30, 2002 Revolver Amount.
No early termination fee shall be payable if the Agreement
is terminated after November 30, 2002, and no termination fee
shall be payable if the Lenders decline the Borrower's request
for an increase in the Maximum Revolver Amount not to exceed
$12,000,000 if at such time no Event of Default then exists and
if at such time less than 20% of the Borrowing Base remain
unused.
4.3 Payments by the Borrower
. (a) All payments to be made by the Borrower shall be
made without set-off, recoupment or counterclaim. Except as
otherwise expressly provided herein, all payments by the Borrower
shall be made to the Agent for the account of the Lenders , at
the account designated by the Agent and shall be made in Dollars
and in immediately available funds, no later than 11:00 a.m. (New
York time) on the date specified herein. Any payment received by
the Agent later than 11:00 a.m. (New York time) shall be deemed
to have been received on the following Business Day and any
applicable interest or fee shall continue to accrue.
(b) Subject to the provisions set forth in the
definition of "Interest Period" herein, whenever any payment is
due on a day other than a Business Day, such payment shall be due
on the following Business Day, and such extension of time shall
in such case be included in the computation of interest or fees,
as the case may be.
(c) Unless the Agent receives notice from the Borrower
prior to the date on which any payment is due to the Lenders that
the Borrower will not make such payment in full as and when
required, the Agent may assume that the Borrower has made such
payment in full to the Agent on such date in immediately
available funds and the Agent may (but shall not be so required),
in reliance upon such assumption, distribute to each Lender on
such due date an amount equal to the amount then due such Lender.
If and to the extent the Borrower has not made such payment in
full to the Agent, each Lender shall repay to the Agent on demand
such amount distributed to such Lender, together with interest
thereon at the Federal Funds Rate for each day from the date such
amount is distributed to such Lender until the date repaid.
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4.4 Payments as Revolving Loans.
All payments of principal, interest, fees, premiums and
other sums payable hereunder, including all reimbursement for
expenses pursuant to Section 15.7, may, at the option of the
Agent, in its sole discretion, subject only to the terms of this
Section 4.7, be paid from the proceeds of Revolving Loans made
hereunder, whether made following a request by the Borrower
pursuant to Section 2.2 or a deemed request as provided in this
Section 4.7. The Borrower hereby irrevocably authorizes the
Agent to charge the Loan Account for the purpose of paying
principal, interest, fees, premiums and other sums payable
hereunder, including reimbursing expenses pursuant to Section
15.7, and agrees that all such amounts charged shall constitute
Revolving Loans (including Non-Ratable Loans and Agent Advances)
and that all such Revolving Loans so made shall be deemed to have
been requested by Borrower pursuant to Section 2.2.
4.5 Apportionment, Application and Reversal of Payments.
Principal and interest payments shall be apportioned
ratably among the Lenders (according to the unpaid principal
balance of the Loans to which such payments relate held by each
Lender) and payments of the fees shall, as applicable, be
apportioned ratably among the Lenders. All payments shall be
remitted to the Agent and all such payments not relating to
principal or interest of specific Loans, or not constituting
payment of specific fees, and all proceeds of Accounts or other
Collateral received by the Agent, shall be applied, ratably,
subject to the provisions of this Agreement, first, to pay any
fees, indemnities or expense reimbursements then due to the Agent
from the Borrower; second, to pay any fees or expense
reimbursements then due to the Lenders from the Borrower; third,
to pay interest due in respect of all Revolving Loans, including
Non-Ratable Loans and Agent Advances; fourth, to pay or prepay
principal of the Non-Ratable Loans and Agent Advances; fifth, to
pay or prepay principal of the Revolving Loans (other than Non-
Ratable Loans and Agent Advances) and sixth, to the payment of
any other Obligation including any amounts relating to Bank
Products due to the Agent or any Lender by the Borrower.
Notwithstanding anything to the contrary contained in this
Agreement, unless so directed by the Borrower, or unless an Event
of Default has occurred and is continuing, neither the Agent nor
any Lender shall apply any payments which it receives to any
LIBOR Revolving Loan, except (a) on the expiration date of the
Interest Period applicable to any such LIBOR Rate Loan, or (b) in
the event, and only to the extent, that there are no outstanding
Base Rate Revolving Loans. The Agent shall promptly distribute
to each Lender, pursuant to the applicable wire transfer
instructions received from each Lender in writing, such funds as
it may be entitled to receive, subject to a Settlement delay as
provided for in Section 2.2(j). The Agent and the Lenders shall
have the continuing and exclusive right to apply and reverse and
reapply any and all such proceeds and payments to any portion of
the Obligations.
4.6 Indemnity for Returned Payments.
If after receipt of any payment which is applied to the
payment of all or any part of the Obligations, the Agent or any
Lender is for any reason compelled to surrender such payment or
proceeds to any Person because such payment or application of
proceeds is invalidated, declared fraudulent, set aside,
determined to be void or voidable as a preference, impermissible
setoff, or a diversion of trust funds, or for any other reason,
then the Obligations or part thereof intended to be satisfied
shall be revived and continued and this Agreement shall continue
in full force as if such payment or proceeds had not been
received by the Agent or such Lender and the Borrower shall be
liable to pay to the Agent and the Lenders, and hereby does
indemnify the Agent and the Lenders and hold the Agent and the
Lenders harmless for the amount of such payment or proceeds
surrendered. The provisions of this Section 4.9 shall be and
remain effective notwithstanding any contrary action which may
have been taken by the Agent or any Lender in reliance upon such
payment or application of proceeds, and any such contrary action
so taken shall be without prejudice to the Agent's and the
Lenders' rights under this Agreement and shall be deemed to have
been conditioned upon such payment or application of proceeds
having become final and irrevocable. The provisions of this
Section 4.9 shall survive the termination of this Agreement.
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4.7 Agent's and Lenders' Books and Records; Monthly
Statements.
The Borrower agrees that the Agent's and each Lender's
books and records showing the Obligations and the transactions
pursuant to this Agreement and the other Loan Documents shall be
admissible in any action or proceeding arising therefrom, and
shall constitute rebuttably presumptive proof thereof,
irrespective of whether any Obligation is also evidenced by a
promissory note or other instrument. The Agent will provide to
the Borrower a monthly statement of Loans, payments, and other
transactions pursuant to this Agreement. Such statement shall be
deemed correct, accurate, and binding on the Borrower and an
account stated (except for reversals and reapplications of
payments made as provided in Section 4.8 and corrections of
errors discovered by the Agent), unless the Borrower notifies the
Agent in writing to the contrary within thirty (30) days after
such statement is rendered. In the event a timely written notice
of objections is given by the Borrower, only the items to which
exception is expressly made will be considered to be disputed by
the Borrower.
ARTICLE 5
TAXES, YIELD PROTECTION AND ILLEGALITY
5.1 Taxes.
(a) Any and all payments by the Borrower to each Lender
or the Agent under this Agreement and any other Loan Document
shall be made free and clear of, and without deduction or
withholding for any Taxes. In addition, the Borrower shall pay
all Other Taxes.
(b) The Borrower agrees to indemnify and hold harmless
each Lender and the Agent for the full amount of Taxes or Other
Taxes (including any Taxes or Other Taxes imposed by any
jurisdiction on amounts payable under this Section) paid by any
Lender or the Agent and any liability (including penalties,
interest, additions to tax and expenses) arising therefrom or
with respect thereto, whether or not such Taxes or Other Taxes
were correctly or legally asserted. Payment under this
indemnification shall be made within 30 days after the date such
Lender or the Agent makes written demand therefor.
(c) If the Borrower shall be required by law to deduct
or withhold any Taxes or Other Taxes from or in respect of any
sum payable hereunder to any Lender or the Agent, then:
37
(i) the sum payable shall be increased as
necessary so that after making all required deductions and
withholdings (including deductions and withholdings applicable to
additional sums payable under this Section) such Lender or the
Agent, as the case may be, receives an amount equal to the sum it
would have received had no such deductions or withholdings been
made;
(ii) the Borrower shall make such deductions and
withholdings;
(iii) the Borrower shall pay the full amount
deducted or withheld to the relevant taxing authority or other
authority in accordance with applicable law; and
(iv) the Borrower shall also pay to each Lender or
the Agent for the account of such Lender, at the time interest is
paid, all additional amounts which the respective Lender
specifies as necessary to preserve the after-tax yield such
Lender would have received if such Taxes or Other Taxes had not
been imposed.
(d) Within 30 days after the date of any payment by
the Borrower of Taxes or Other Taxes, the Borrower shall furnish
the Agent the original or a certified copy of a receipt
evidencing payment thereof, or other evidence of payment
satisfactory to the Agent.
(e) If the Borrower is required to pay additional
amounts to any Lender or the Agent pursuant to subsection (c) of
this Section, then such Lender shall use reasonable efforts
(consistent with legal and regulatory restrictions) to change the
jurisdiction of its lending office so as to eliminate any such
additional payment by the Borrower which may thereafter accrue,
if such change in the judgment of such Lender is not otherwise
disadvantageous to such Lender.
5.2 Illegality.
(a) If any Lender determines that the introduction of
any Requirement of Law, or any change in any Requirement of Law,
or in the interpretation or administration of any Requirement of
Law, has made it unlawful, or that any central bank or other
Governmental Authority has asserted that it is unlawful, for any
Lender or its applicable lending office to make LIBOR Rate Loans,
then, on notice thereof by that Lender to the Borrower through
the Agent, any obligation of that Lender to make LIBOR Rate Loans
shall be suspended until that Lender notifies the Agent and the
Borrower that the circumstances giving rise to such determination
no longer exist.
(b) If a Lender determines that it is unlawful to
maintain any LIBOR Rate Loan, the Borrower shall, upon its
receipt of notice of such fact and demand from such Lender (with
a copy to the Agent), prepay in full such LIBOR Rate Loans of
that Lender then outstanding, together with interest accrued
thereon and amounts required under Section 5.4, either on the
last day of the Interest Period thereof, if that Lender may
lawfully continue to maintain such LIBOR Rate Loans to such day,
or immediately, if that Lender may not lawfully continue to
maintain such LIBOR Rate Loans. If the Borrower is required to
so prepay any LIBOR Rate Loans, then concurrently with such
prepayment, the Borrower shall borrow from the affected Lender,
in the amount of such repayment, a Base Rate Loan.
5.3 Increased Costs and Reduction of Return.
(a) If any Lender determines that due to either (i) the
introduction of or any change in the interpretation of any law or
regulation or (ii) the compliance by that Lender with any
guideline or request from any central bank or other Governmental
Authority (whether or not having the force of law), there shall
be any increase in the cost to such Lender of agreeing to make or
making, funding or maintaining any LIBOR Rate Loans, then the
Borrower shall be liable for, and shall from time to time, upon
demand (with a copy of such demand to be sent to the Agent), pay
to the Agent for the account of such Lender, additional amounts
as are sufficient to compensate such Lender for such increased
costs.
38
(b) If any Lender shall have determined that (i) the
introduction of any Capital Adequacy Regulation, (ii) any change
in any Capital Adequacy Regulation, (iii) any change in the
interpretation or administration of any Capital Adequacy
Regulation by any central bank or other Governmental Authority
charged with the interpretation or administration thereof, or
(iv) compliance by such Lender or any corporation or other entity
controlling such Lender with any Capital Adequacy Regulation,
affects or would affect the amount of capital required or
expected to be maintained by such Lender or any corporation or
other entity controlling such Lender and (taking into
consideration such Lender's or such corporation's or other
entity's policies with respect to capital adequacy and such
Lender's desired return on capital) determines that the amount of
such capital is increased as a consequence of its Commitments,
loans, credits or obligations under this Agreement, then, upon
demand of such Lender to the Borrower through the Agent, the
Borrower shall pay to such Lender, from time to time as specified
by such Lender, additional amounts sufficient to compensate such
Lender for such increase.
5.4 Funding Losses.
The Borrower shall reimburse each Lender and hold each
Lender harmless from any loss or expense which such Lender may
sustain or incur as a consequence of:
(a) the failure of the Borrower to make on a timely
basis any payment of principal of any LIBOR Rate Loan;
(b) the failure of the Borrower to borrow, continue or
convert a Loan after the Borrower has given (or is deemed to have
given) a Notice of Borrowing or a Notice of
Continuation/Conversion; or
(c) the prepayment or other payment (including after
acceleration thereof) of any LIBOR Rate Loans on a day that is
not the last day of the relevant Interest Period;
including any such loss of anticipated profit and any loss or
expense arising from the liquidation or reemployment of funds
obtained by it to maintain its LIBOR Rate Loans or from fees
payable to terminate the deposits from which such funds were
obtained. Borrower shall also pay any customary administrative
fees charged by any Lender in connection with the foregoing.
5.5 Inability to Determine Rates.
If the Agent determines that for any reason adequate and
reasonable means do not exist for determining the LIBOR Rate for
any requested Interest Period with respect to a proposed LIBOR
Rate Loan, or that the LIBOR Rate for any requested Interest
Period with respect to a proposed LIBOR Rate Loan does not
adequately and fairly reflect the cost to the Lenders of funding
such Loan, the Agent will promptly so notify the Borrower and
each Lender. Thereafter, the obligation of the Lenders to make
or maintain LIBOR Rate Loans hereunder shall be suspended until
the Agent revokes such notice in writing. Upon receipt of such
notice, the Borrower may revoke any Notice of Borrowing or Notice
of Conversion/Continuation then submitted by it. If the Borrower
does not revoke such Notice, the Lenders shall make, convert or
continue the Loans, as proposed by the Borrower, in the amount
specified in the applicable notice submitted by the Borrower, but
such Loans shall be made, converted or continued as Base Rate
Loans instead of LIBOR Rate Loans.
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5.6 Certificates of Lenders.
Any Lender claiming reimbursement or compensation under
this Article 5 shall deliver to the Borrower (with a copy to the
Agent) a certificate setting forth in reasonable detail the
amount payable to such Lender hereunder and such certificate
shall be conclusive and binding on the Borrower in the absence of
manifest error.
5.7 Survival.
The agreements and obligations of the Borrower in this
Article 5 shall survive the payment of all other Obligations.
ARTICLE 6
COLLATERAL
6.1 Grant of Security Interest.
As security for all Obligations, the Borrower hereby
grants to the Agent for the benefit of the Lenders and the Agent
a continuing security interest in, lien on, and assignment of and
right of set off against, all of the following Property of the
Borrower, whether now owned or existing or hereafter acquired or
arising, regardless of where located: (a) all Contracts; (b) all
General Intangibles; (c) all Accounts; (d) all money, securities
and other property of any kind of the Borrower in the possession
or under the control of the Agent or any Lender; (e) all deposit
accounts with any financial institution in which the Borrower
maintains deposits; (f) all credit balances in favor of Borrower
and claims against the Agent or any Lender or any of their
affiliates; (g) all books, records and other Property related to
or referring to any of the foregoing; (h) all of the Borrower's
rights, but not its obligations, under all Dealer Agreements,
including all rights to require a Dealer to repurchase a Contract
acquired from such Dealer, and (i) all accessions to,
substitutions for and replacements, products and proceeds of any
of the foregoing, including proceeds of any insurance policies
and claims against third parties. All of the foregoing and all
other Property of the Borrower in which the Agent and the Lenders
may at any time be granted a Lien is herein collectively referred
to as the "Collateral." All of the Obligations shall be secured
by all of the Collateral.
6.2 Perfection and Protection of Security Interest.
(a) The Borrower shall, at its expense, perform all
steps requested by the Agent at any time to perfect, maintain,
protect, and enforce the Agent's Liens, including:
(i) executing, delivering and/or recording of filing financing or
continuation statements, and amendments thereof, in form and
substance reasonably satisfactory to the Agent; (ii) delivering
to the Agent the originals of all instruments, documents, and
chattel paper, and all other Collateral of which the Agent
determines it should have physical possession in order to perfect
and protect the Agent's security interest therein, duly pledged,
endorsed or assigned to the Agent without restriction; (iii)
placing notations on the Borrower's books of account to disclose
the Agent's security interest; and (iv) taking such other steps
as are deemed necessary or desirable by the Agent to maintain and
protect the Agent's Liens. To the extent permitted by applicable
law, the Agent may file, without the Borrower's signature, one or
more financing statements disclosing the Agent's Liens. The
Borrower agrees that a carbon, photographic, photostatic, or
other reproduction of this Agreement or of a financing statement
is sufficient as a financing statement.
40
(b) If any Collateral is at any time in the possession
or control of any warehouseman, bailee or any of the Borrower's
agents or processors, then the Borrower shall notify the Agent
thereof and shall, at the request of Agent, notify such Person of
the Agent's security interest in such Collateral and instruct
such Person to hold all such Collateral for the Agent's account
subject to the Agent's instructions. If at any time any
Collateral is located in any operating facility of the Borrower
not owned by the Borrower, then the Borrower shall, at the
request of the Agent, obtain written landlord lien waivers or
subordinations, in form and substance reasonably satisfactory to
the Agent, of all present and future Liens to which the owner or
lessor of such premises may be entitled to assert against the
Collateral.
(c) From time to time, the Borrower shall, upon the
Agent's request, execute and deliver confirmatory written
instruments pledging to the Agent, for the ratable benefit of the
Agent and the Lenders, the Collateral with respect to the
Borrower, but the Borrower's failure to do so shall not affect or
limit any security interest or any other rights of the Agent or
any Lender in and to the Collateral with respect to the Borrower.
So long as this Agreement is in effect and until all Obligations
have been fully satisfied, the Agent's Liens shall continue in
full force and effect in all Collateral (whether or not deemed
eligible for the purpose of calculating the Availability or as
the basis for any advance, loan, extension of credit, or other
financial accommodation).
(d) Except with respect to Collateral delivered to the
Agent pursuant to this Section 6.2,the Borrower shall immediately
following the execution or receipt of a Contract, stamp on the
Contract the following words: "This document is subject to a
security interest in favor of Bank of America, N.A., as agent".
6.3 Location of Collateral.
The Borrower represents and warrants to the Agent and the
Lenders that: (a) Schedule 6.3 is a correct and complete list
of the Borrower's chief executive office, the location of its
books and records, the locations of the Collateral, and the
locations of all of its other places of business; and (b)
Schedule 6.3 correctly identifies any of such facilities and
locations that are not owned by the Borrower and sets forth the
names of the owners and lessors or sublessors of such facilities
and locations. The Borrower covenants and agrees that it will
not (i) maintain any Collateral at any location other than those
locations listed for the Borrower on Schedule 6.3, (ii) otherwise
change or add to any of such locations, or (iii) change the
location of its chief executive office from the location
identified in Schedule 6.3, unless it gives the Agent at least
thirty (30) days' prior written notice thereof and executes any
and all financing statements and other documents that the Agent
reasonably requests in connection therewith. Without limiting
the foregoing, the Borrower represents that all of its Inventory
(other than Inventory in transit) is, and covenants that all of
its Inventory will be, located either (a) on premises owned by
the Borrower, (b) on premises leased by the Borrower, provided
that the Agent has, if requested by the Agent, received an
executed landlord waiver from the landlord of such premises in
form and substance satisfactory to the Agent, or (c) in a
warehouse or with a bailee, provided that the Agent has, if
requested by the Agent, received an executed bailee letter from
the applicable Person in form and substance satisfactory to the
Agent.
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6.4 Title to, Liens on, and Sale and Use of Collateral.
The Borrower represents and warrants to the Agent and the
Lenders and agrees with the Agent and the Lenders that: (a) all
of the Collateral is and will continue to be owned by the
Borrower free and clear of all Liens whatsoever, except for
Permitted Liens; (b) the Agent's Liens in the Collateral will not
be subject to any prior Lien except for those Liens identified in
clauses (c), (d) and (e) of the definition of Permitted Liens;
and (c) the Borrower will use, store, and maintain the Collateral
with all reasonable care and will use such Collateral for lawful
purposes only.
6.5 Intentionally Deleted.
6.6 Access and Examination; Confidentiality; Consent to
Advertising.
(a) The Agent, accompanied by any Lender which so
elects, may at all reasonable times during regular business hours
(and at any time when a Default or Event of Default exists and is
continuing) have access to, examine, audit, make extracts from or
copies of and inspect any or all of the Borrower's records,
files, and books of account and the Collateral, and discuss the
Borrower's affairs with the Borrower's officers and management.
The Borrower will deliver to the Agent any instrument necessary
for the Agent to obtain records from any service bureau
maintaining records for the Borrower. The Agent may, and at the
direction of the Majority Lenders shall, at any time when a
Default or Event of Default exists, and at the Borrower's
expense, make copies of all of the Borrower's books and records,
or require the Borrower to deliver such copies to the Agent. The
Agent may, without expense to the Agent, use such of the
Borrower's respective personnel, supplies, and Real Estate as may
be reasonably necessary for maintaining or enforcing the Agent's
Liens. The Agent shall have the right, at any time, in the
Agent's name or in the name of a nominee of the Agent, to verify
the validity, amount or any other matter relating to the
Accounts, Inventory, or other Collateral, by mail, telephone, or
otherwise.
(b) The Borrower hereby consents that the Agent and
each Lender may issue and disseminate to the public general
information describing the credit accommodation entered into
pursuant to this Agreement, including the name and address of the
Borrower and a general description of the Borrowers business and
may use the Borrower's name in advertising and other promotional
material.
(c) Each Lender severally agrees to take normal and
reasonable precautions and exercise due care to maintain the
confidentiality of all information identified as "confidential"
or "secret" by the Borrower and provided to the Agent or such
Lender by or on behalf of the Borrower, under this Agreement or
any other Loan Document, except to the extent that such
information (i) was or becomes generally available to the public
other than as a result of disclosure by the Agent or such Lender,
or (ii) was or becomes available on a nonconfidential basis from
a source other than the Borrower, provided that such source is
not bound by a confidentiality agreement with the Borrower known
to the Agent or such Lender; provided, however, that the Agent
and any Lender may disclose such information (1) at the request
or pursuant to any requirement of any Governmental Authority to
which the Agent or such Lender is subject or in connection with
an examination of the Agent or such Lender by any such
Governmental Authority; (2) pursuant to subpoena or other court
process; (3) when required to do so in accordance with the
provisions of any applicable Requirement of Law; (4) to the
extent reasonably required in connection with any litigation or
proceeding (including, but not limited to, any bankruptcy
proceeding) to which the Agent, any Lender or their respective
Affiliates may be party; (5) to the extent reasonably required in
connection with the exercise of any remedy hereunder or under any
other Loan Document; (6) to the Agent's or such Lender's
independent auditors, accountants, attorneys and other
professional advisors; (7) to any prospective Participant or
Assignee under any Assignment and Acceptance, actual or
potential, provided that such prospective Participant or Assignee
agrees to keep such information confidential to the same extent
required of the Agent and the Lenders hereunder; (8) as
expressly permitted under the terms of any other document or
agreement regarding confidentiality to which the Borrower is
party or is deemed party with the Agent or such Lender, and (9)
to its Affiliates.
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6.7 Collateral Reporting.
The Borrower shall deliver to the Agent, within 15 days
after the end of each calendar month during the term of this
Agreement and at any other time specified by Agent, the following
reports: (a) a Collateral and Loan Status Report and Monthly
Report of Delinquent Accounts in forms provided by Agent,
containing the information requested therein; (b) a delinquency
report listing all Contracts under which any scheduled payment
thereunder is 30, 60, and 90 days or more past due; (c) a month-
end report listing by Contract, the contract account number,
Contract Debtor's name, Contract Debtor's current address, and
current Contract balance for all Contracts then owned by
Borrower; (d) a month-end report listing by Contract, the
Contract account number, Contract Debtor's name, Contract
Debtor's current address, and current Contract balance for all
Contracts purchased by Borrower during the immediately preceding
calendar month; (e) a detailed work sheet listing, with regard to
each Contract entered into or purchased by Borrower during the
immediately preceding month (i) the Contract Debtor's name, (ii)
contract number, (iii) the make and model of the vehicle financed
under the Contract (iv) the cash advanced or due to be advanced
to a dealer for the Contract, and (v) the National Auto Research
Black Book wholesale clean value for the vehicle; (f) a monthly
report of cash collections on a daily basis; (g) a report of
charge-offs and repossessions in total and by account; and (h)
such other reports as Agent may request. All of the foregoing
reports shall be delivered (i) twice monthly on the first and
fifteenth of each month in the event the Advance Rate is reduced
as a result of the Collateral Adjustment Percent and (ii) at such
times as Agent requests upon the occurrence and continuation of
an Event of Default.
6.8 Contracts.
(a) The Borrower hereby represents and warrants to the
Agents and the Lenders with respect to the Contracts, that: (i)
each existing Contract represents, and each future Contract will
represent, a bona fide obligation of the Contract Debtor,
enforceable in accordance with its terms; (ii) each existing
Contract is, and each future Contract will be, for a liquidated
amount payable by the Contract Debtor thereon on the terms set
forth in the Contract therefor or in the schedule thereof
delivered to the Agent, without any offset, deduction, defense
(including the defense of usury), or counterclaim; (iii) there is
only one original counterpart of the Contract executed by the
Contract Debtor; (iv) each Contract correctly sets forth the
terms thereof, including the interest rate applicable thereto and
correctly describes the collateral for such Contract; (vi) the
signatures of all Contract Debtors are genuine and, to the
knowledge of the Borrower, each Contract Debtor had the legal
capacity to enter into and execute such documents on the date
thereof; (vii) each Contract complies with all Requirement of
Law; and (viii) the Borrower has not used illegal, improper,
fraudulent or deceptive marketing techniques or unfair business
practices with respect to the Contracts.
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(b) The Borrower shall not grant any discount, credit
or allowance to any such Contract Debtor without the Agent's
prior written consent, except for discounts, credits and
allowances made or given in the ordinary course of the Borrower's
business.
6.9 Collection of Contracts; Payments.
(a) While any portion of the Revolving Loans are unpaid,
the Borrower shall immediately, upon receipt thereof, deposit all
proceeds of the Collateral (including all payments received in
connection with the Contracts) into a Payment Account, which
Payment Account shall be subject to the terms of a Blocked
Account Agreement, on terms acceptable to Agent, between the
Borrower, the Agent and the bank. If, at any time, either (i)
the Availability is equal to or less than five percent (5%) of
the Borrowing Base or (ii) an Event of Default occurs (both (i)
and (ii) are herein referred to as a "Triggering Event"), then at
all times thereafter the Borrower's right to withdraw any funds
from the Payment Account shall immediately terminate and only the
Agent shall have a right to withdraw any funds from the Payment
Account. The Borrower authorizes the Agent to notify the bank at
which the Payment Account is located upon the happening of a
Triggering Event that all funds deposited into the Payment
Account are subject solely to the direction of the Agent. The
Agent shall reinstate the Borrower's right to withdraw funds from
the Payment Account in the event (i) the Availability is, at all
times, greater than five percent (5%) of the Borrowing Base
during any ninety (90) consecutive-day period following the date
of termination of the Borrower's withdrawal rights and (ii) no
Default or Event of Default occurs during that period.
(b) During the period that the Borrower's withdrawal
rights with respect to the Payment Account have been terminated,
all funds deposited into the Payment Account will be the Agent's
sole Property and will be credited to the Borrower's Loan Account
(conditional upon final collection upon receipt by Agent).
6.10 Intentionally Deleted.
6.11 Equipment.
The Borrower represents and warrants to the Agent and the
Lenders and agrees with the Agent and the Lenders that all of the
Equipment owned by the Borrower is and will be used or held for
use in the Borrower's business, and is and will be fit for such
purposes. The Borrower shall keep and maintain its Equipment in
good operating condition and repair (ordinary wear and tear
excepted) and shall make all necessary replacements thereof.
6.12 Documents, Instruments, and Chattel Paper.
The Borrower represents and warrants to the Agent and the
Lenders that (a) all documents, instruments, and chattel paper
describing, evidencing, or constituting Collateral, and all
signatures and endorsements thereon, are and will be complete,
valid, and genuine, and (b) all goods evidenced by such
documents, instruments, and chattel paper are and will be owned
by the Borrower, free and clear of all Liens other than Permitted
Liens.
6.13 Right to Cure.
The Agent may, in its discretion, and shall, at the
direction of the Majority Lenders, pay any amount or do any act
required of the Borrower hereunder or under any other Loan
Document in order to preserve, protect, maintain or enforce the
Obligations, the Collateral or the Agent's Liens therein, and
which the Borrower fails to pay or do, including payment of any
judgment against the Borrower, any insurance premium, any
warehouse charge, any finishing or processing charge, any
landlord's or bailee's claim, and any other Lien upon or with
respect to the Collateral. All payments that the Agent makes
under this Section 6.13 and all out-of-pocket costs and expenses
that the Agent pays or incurs in connection with any action taken
by it hereunder shall be charged to the Borrower's Loan Account
as a Revolving Loan. Any payment made or other action taken by
the Agent under this Section 6.13 shall be without prejudice to
any right to assert an Event of Default hereunder and to proceed
thereafter as herein provided.
44
6.14 Intentionally Deleted.
6.15 The Agent's and Lenders' Rights, Duties and
Liabilities.
The Borrower assumes all responsibility and liability
arising from or relating to the use, sale or other disposition of
the Collateral. The Obligations shall not be affected by any
failure of the Agent or any Lender to take any steps to perfect
the Agent's Liens or to collect or realize upon the Collateral,
nor shall loss of or damage to the Collateral release the
Borrower from any of the Obligations. Following the occurrence
and continuation of an Event of Default, the Agent may (but shall
not be required to), and at the direction of the Majority Lenders
shall, without notice to or consent from the Borrower, sue upon
or otherwise collect, extend the time for payment of, modify or
amend the terms of, compromise or settle for cash, credit, or
otherwise upon any terms, grant other indulgences, extensions,
renewals, compositions, or releases, and take or omit to take any
other action with respect to the Collateral, any security
therefor, any agreement relating thereto, any insurance
applicable thereto, or any Person liable directly or indirectly
in connection with any of the foregoing, without discharging or
otherwise affecting the liability of the Borrower for the
Obligations or under this Agreement or any other agreement now or
hereafter existing between the Agent and/or any Lender and the
Borrower.
ARTICLE 7
BOOKS AND RECORDS; FINANCIAL INFORMATION; NOTICES
7.1 Books and Records.
The Borrower shall maintain, at all times, correct and
complete books, records and accounts in which complete, correct
and timely entries are made of its transactions in accordance
with GAAP applied consistently with the audited Financial
Statements required to be delivered pursuant to Section 7.2(a).
The Borrower shall, by means of appropriate entries, reflect in
such accounts and in all Financial Statements proper liabilities
and reserves for all taxes and proper provision for depreciation
and amortization of property and bad debts, all in accordance
with GAAP. The Borrower shall maintain at all times books and
records pertaining to the Collateral in such detail, form and
scope as the Agent or any Lender shall reasonably require,
including, but not limited to, records of (a) all payments
received and all credits and extensions granted with respect to
the Contracts; (b) the return, rejection, repossession, stoppage
in transit, loss, damage, or destruction of any Inventory; and
(c) all other dealings affecting the Collateral.
7.2 Financial Information.
The Borrower shall promptly furnish to each Lender, all
such financial information as the Agent shall reasonably request.
Without limiting the foregoing, the Borrower will furnish to the
Agent, in sufficient copies for distribution by the Agent to each
Lender, in such detail as the Agent or the Lenders shall request,
the following:
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(a) As soon as available, but in any event not later
than ninety (90) days after the close of each Fiscal Year,
consolidated audited and consolidating audited balance sheets,
and statements of income and expense, cash flow and of
stockholders' equity for the Borrower and its Subsidiaries for
such Fiscal Year, and the accompanying notes thereto, setting
forth in each case in comparative form figures for the previous
Fiscal Year, all in reasonable detail, fairly presenting the
financial position and the results of operations of the Borrower
and its consolidated Subsidiaries as at the date thereof and for
the Fiscal Year then ended, and prepared in accordance with GAAP.
Such statements shall be examined in accordance with generally
accepted auditing standards by and, in the case of such
statements performed on a consolidated basis, accompanied by a
report thereon unqualified in any respect of independent
certified public accountants selected by the Borrower and
reasonably satisfactory to the Agent. The Borrower,
simultaneously with retaining such independent public accountants
to conduct such annual audit, shall send a letter to such
accountants, with a copy to the Agent and the Lenders, notifying
such accountants that one of the primary purposes for retaining
such accountants' services and having audited financial
statements prepared by them is for use by the Agent and the
Lenders. The Borrower hereby authorizes the Agent to communicate
directly with its certified public accountants and, by this
provision, authorizes those accountants to disclose to the Agent
any and all financial statements and other supporting financial
documents and schedules relating to the Borrower and to discuss
directly with the Agent the finances and affairs of the Borrower.
(b) As soon as available, but in any event not later
than forty five (45) days after the end of each month,
consolidated and consolidating unaudited balance sheets of the
Borrower and its consolidated Subsidiaries as at the end of such
month, and consolidated and consolidating unaudited statements of
income and expense and cash flow for the Borrower and its
consolidated Subsidiaries for such month and for the period from
the beginning of the Fiscal Year to the end of such month, all in
reasonable detail, fairly presenting the financial position and
results of operations of the Borrower and its consolidated
Subsidiaries as at the date thereof and for such periods, and
prepared in accordance with GAAP applied consistently with the
audited Financial Statements required to be delivered pursuant to
Section 7.2(a). The Borrower shall certify by a certificate
signed by its chief financial officer that all such statements
have been prepared in accordance with GAAP and present fairly,
subject to normal year-end adjustments, the Borrower's financial
position as at the dates thereof and its results of operations
for the periods then ended.
(c) Intentionally Deleted
(d) With each of the audited Financial Statements
delivered pursuant to Section 7.2(a), a certificate of the
independent certified public accountants that examined such
statement to the effect that they have reviewed and are familiar
with this Agreement and that, in examining such Financial
Statements, they did not become aware of any fact or condition
which then constituted a Default or Event of Default with respect
to a financial covenant, except for those, if any, described in
reasonable detail in such certificate.
(e) With each of the annual audited Financial
Statements delivered pursuant to Section 7.2(a), and within forty-
five (45) days after the end of each fiscal quarter, a
certificate of the chief financial officer of the Borrower (i)
setting forth in reasonable detail the calculations required to
establish that the Borrower was in compliance with the covenants
set forth in Sections 9.18 through 9.22 during the period covered
in such Financial Statements and as at the end thereof, and
(ii) stating that, except as explained in reasonable detail in
such certificate, (A) all of the representations and warranties
of the Borrower contained in this Agreement and the other Loan
Documents are correct and complete in all material respects as at
the date of such certificate as if made at such time, except for
those that speak as of a particular date, (B) the Borrower is, at
the date of such certificate, in compliance in all material
respects with all of its respective covenants and agreements in
this Agreement and the other Loan Documents, (C) no Default or
Event of Default then exists or existed during the period covered
by such Financial Statements, (D) describing and analyzing in
reasonable detail all material trends, changes, and developments
in each and all Financial Statements; and (E) explaining the
variances of the figures in the corresponding budgets and prior
Fiscal Year financial statements. If such certificate discloses
that a representation or warranty is not correct or complete, or
that a covenant has not been complied with, or that a Default or
Event of Default existed or exists, such certificate shall set
forth what action the Borrower has taken or proposes to take with
respect thereto.
46
(f) No sooner than sixty (60) days and not less than
thirty (30) days prior to the beginning of each Fiscal Year,
annual forecasts (to include forecasted consolidated and
consolidating balance sheets, statements of income and expenses
and statements of cash flow) for the Borrower and its
Subsidiaries as at the end of and for each month of such Fiscal
Year.
(g) Promptly after filing with the PBGC and the IRS, a
copy of each annual report or other filing filed with respect to
each Plan of the Borrower.
(h) Promptly upon the filing thereof, copies of all
reports, if any, to or other documents filed by the Borrower or
any of its Subsidiaries with the Securities and Exchange
Commission under the Exchange Act, and all reports, notices, or
statements sent or received by the Borrower or any of its
Subsidiaries to or from the holders of any equity interests of
the Borrower (other than routine non-material correspondence sent
by shareholders of the Borrower to the Borrower) or any such
Subsidiary or of any Debt for Borrowed Money of the Borrower or
any of its Subsidiaries registered under the Securities Act of
1933 or to or from the trustee under any indenture under which
the same is issued.
(i) As soon as available, but in any event not later
than 15 days after the Borrower's receipt thereof, a copy of all
management reports and management letters prepared for the
Borrower by any independent certified public accountants of the
Borrower.
(j) Promptly after their preparation, copies of any
and all proxy statements, financial statements, and reports which
the Borrower makes available to its shareholders.
(k) Promptly after filing with the IRS, a copy of each
tax return filed by the Borrower or by any of its Subsidiaries.
(l) Such additional information as the Agent and/or
any Lender may from time to time reasonably request regarding the
financial and business affairs of the Borrower or any Subsidiary.
47
7.3 Notices to the Lenders.
The Borrower shall notify the Agent and the Lenders in
writing of the following matters at the following times:
(a) Immediately after becoming aware of any Default or
Event of Default;
(b) Immediately after becoming aware of the assertion
by the holder of any capital stock of the Borrower or of any
Subsidiary or of any Debt in a face amount in excess of $100,000
that a default exists with respect thereto or that the Borrower
or such Subsidiary is not in compliance with the terms thereof,
or the threat or commencement by such holder of any enforcement
action because of such asserted default or non-compliance;
(c) Immediately after becoming aware of any event or
circumstance which could have a Material Adverse Effect;
(d) Immediately after becoming aware of any pending or
threatened action, suit, or proceeding, by any Person, or any
pending or threatened investigation by a Governmental Authority,
which may have a Material Adverse Effect;
(e) Immediately after becoming aware of any pending or
threatened strike, work stoppage, unfair labor practice claim, or
other labor dispute affecting the Borrower or any of its
Subsidiaries in a manner which could reasonably be expected to
have a Material Adverse Effect;
(f) Immediately after becoming aware of any violation
of any law, statute, regulation, or ordinance of a Governmental
Authority affecting the Borrower or any Subsidiary which could
reasonably be expected to have a Material Adverse Effect;
(g) Immediately after receipt of any notice of any
violation by the Borrower or any of its Subsidiaries of any
Environmental Law which could reasonably be expected to have a
Material Adverse Effect or that any Governmental Authority has
asserted in writing that the Borrower or any Subsidiary is not in
compliance with any Environmental Law or is investigating the
Borrower's or such Subsidiary's compliance therewith;
(h) Immediately after receipt of any written notice
that the Borrower or any of its Subsidiaries is or may be liable
to any Person as a result of the Release or threatened Release of
any Contaminant or that the Borrower or any Subsidiary is subject
to investigation by any Governmental Authority evaluating whether
any remedial action is needed to respond to the Release or
threatened Release of any Contaminant which, in either case, is
reasonably likely to give rise to liability in excess of
$100,000;
(i) Immediately after receipt of any written notice of
the imposition of any Environmental Lien against any property of
the Borrower or any of its Subsidiaries;
(j) Any change in the Borrower's name, state of
organization, or form of organization, trade names under which
the Borrower will sell Inventory or create Contracts, or to which
instruments in payment of Contracts may be made payable, in each
case at least thirty (30) days prior thereto;
48
(k) Within ten (10) Business Days after the Borrower
or any ERISA Affiliate knows or has reason to know, that an ERISA
Event or a prohibited transaction (as defined in Sections 406 of
ERISA and 4975 of the Code) has occurred, and, when known, any
action taken or threatened by the IRS, the DOL or the PBGC with
respect thereto;
(l) Upon request, or, in the event that such filing
reflects a significant change with respect to the matters covered
thereby, within three (3) Business Days after the filing thereof
with the PBGC, the DOL or the IRS, as applicable, copies of the
following: (i) each annual report (form 5500 series), including
Schedule B thereto, filed with the PBGC, the DOL or the IRS with
respect to each Plan, (ii) a copy of each funding waiver request
filed with the PBGC, the DOL or the IRS with respect to any Plan
and all communications received by the Borrower or any ERISA
Affiliate from the PBGC, the DOL or the IRS with respect to such
request, and (iii) a copy of each other filing or notice filed
with the PBGC, the DOL or the IRS, with respect to each Plan by
either the Borrower or any ERISA Affiliate;
(m) Upon request, copies of each actuarial report for
any Plan or Multi-employer Plan and annual report for any Multi-
employer Plan; and within three (3) Business Days after receipt
thereof by the Borrower or any ERISA Affiliate, copies of the
following: (i) any notices of the PBGC's intention to terminate
a Plan or to have a trustee appointed to administer such Plan;
(ii) any favorable or unfavorable determination letter from the
IRS regarding the qualification of a Plan under Section 401(a) of
the Code; or (iii) any notice from a Multi-employer Plan
regarding the imposition of withdrawal liability;
(n) Within three (3) Business Days after the
occurrence thereof: (i) any changes in the benefits of any
existing Plan which increase the Borrower's annual costs with
respect thereto by an amount in excess of $100,000, or the
establishment of any new Plan or the commencement of
contributions to any Plan to which the Borrower or any ERISA
Affiliate was not previously contributing; or (ii) any failure by
the Borrower or any ERISA Affiliate to make a required
installment or any other required payment under Section 412 of
the Code on or before the due date for such installment or
payment; or
(o) Within three (3) Business Days after the Borrower
or any ERISA Affiliate knows or has reason to know that any of
the following events has or will occur: (i) a Multi-employer
Plan has been or will be terminated; (ii) the administrator or
plan sponsor of a Multi-employer Plan intends to terminate a
Multi-employer Plan; or (iii) the PBGC has instituted or will
institute proceedings under Section 4042 of ERISA to terminate a
Multi-employer Plan.
Each notice given under this Section shall describe the
subject matter thereof in reasonable detail, and shall set forth
the action that the Borrower, its Subsidiary, or any ERISA
Affiliate, as applicable, has taken or proposes to take with
respect thereto.
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ARTICLE 8
GENERAL WARRANTIES AND REPRESENTATIONS
The Borrower warrants and represents to the Agent and the
Lenders that except as hereafter disclosed to and accepted by the
Agent and the Majority Lenders in writing:
8.1 Authorization, Validity, and Enforceability of this
Agreement and the Loan Documents.
The Borrower has the corporate power and authority to
execute, deliver and perform this Agreement and the other Loan
Documents to which it is a party, to incur the Obligations, and
to grant to the Agent Liens upon and security interests in the
Collateral. The Borrower has taken all necessary corporate
action (including obtaining approval of its stockholders if
necessary) to authorize its execution, delivery, and performance
of this Agreement and the other Loan Documents to which it is a
party. This Agreement and the other Loan Documents to which it
is a party have been duly executed and delivered by the Borrower,
and constitute the legal, valid and binding obligations of the
Borrower, enforceable against it in accordance with their
respective terms without defense, setoff or counterclaim. The
Borrower's execution, delivery, and performance of this Agreement
and the other Loan Documents to which it is a party do not and
will not conflict with, or constitute a violation or breach of,
or constitute a default under, or result in, or require the
creation or imposition of any Lien upon the property of the
Borrower or any of its Subsidiaries by reason of the terms of (a)
any contract, mortgage, Lien, lease, agreement, indenture, or
instrument to which the Borrower is a party or which is binding
upon it, (b) any Requirement of Law applicable to the Borrower or
any of its Subsidiaries, or (c) the certificate or articles of
incorporation or by-laws of the Borrower or any of its
Subsidiaries.
8.2 Validity and Priority of Security Interest.
The provisions of this Agreement, [the Mortgage(s)], and
the other Loan Documents create legal and valid Liens on all the
Collateral in favor of the Agent, for the ratable benefit of the
Agent and the Lenders, and such Liens constitute perfected and
continuing Liens on all the Collateral, having priority over all
other Liens on the Collateral, except for those Liens identified
in clauses (c), (d) and (e) of the definition of Permitted Liens
securing all the Obligations, and enforceable against the
Borrower and all third parties.
8.3 Organization and Qualification.
The Borrower (a) is duly incorporated and organized and
validly existing in good standing under the laws of the state of
its incorporation, (b) is qualified to do business as a foreign
corporation and is in good standing in the jurisdictions set
forth on Schedule 8.3 which are the only jurisdictions in which
qualification is necessary in order for it to own or lease its
property and conduct its business and (c) has all requisite power
and authority to conduct its business and to own its property.
8.4 Corporate Name; Prior Transactions.
The Borrower has not, during the past five (5) years,
been known by or used any other corporate or fictitious name, or
been a party to any merger or consolidation, or acquired all or
substantially all of the assets of any Person, or acquired any of
its property outside of the ordinary course of business.
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8.5 Subsidiaries and Affiliates.
Schedule 8.5 is a correct and complete list of the name
and relationship to the Borrower of each and all of the
Borrower's Subsidiaries and other Affiliates. Each Subsidiary is
(a) duly incorporated and organized and validly existing in good
standing under the laws of its state of incorporation set forth
on Schedule 8.5, and (b) qualified to do business as a foreign
corporation and in good standing in each jurisdiction in which
the failure to so qualify or be in good standing could reasonably
be expected to have a material adverse effect on any such
Subsidiary's business, operations, prospects, property, or
condition (financial or otherwise) and (c) has all requisite
power and authority to conduct its business and own its property.
8.6 Financial Statements and Projections.
(a) The Borrower has delivered to the Agent and the
Lenders the audited balance sheet and related statements of
income, retained earnings, cash flows, and changes in
stockholders equity for the Borrower as of March 31, 2000, for
the Fiscal Year then ended, accompanied by the report thereon of
the Borrower's independent certified public accountants, Ernst &
Young. The Borrower has also delivered to the Agent and the
Lenders the unaudited balance sheet and related statements of
income and cash flows for the Borrower as of March 31, 2000. All
such financial statements have been prepared in accordance with
GAAP and present accurately and fairly the financial position of
the Borrower as of the dates thereof and its results of
operations for the periods then ended.
(b) The Latest Projections when submitted to the
Lenders as required herein represent the Borrower's best estimate
of the future financial performance of the Borrower and its
consolidated Subsidiaries for the periods set forth therein. The
Latest Projections have been prepared on the basis of the
assumptions set forth therein, which the Borrower believes are
fair and reasonable in light of current and reasonably
foreseeable business conditions at the time submitted to the
Lender.
8.7 Capitalization.
The Borrower's authorized capital stock consists of
10,000 shares of common stock, par value $1.00 per share, of
which 500 shares are validly issued and outstanding, fully paid
and non-assessable and are owned beneficially and of record by
Nicholas Data Services, Ltd.
8.8 Solvency.
The Borrower is Solvent prior to and after giving effect
to the making of the Revolving Loans to be made on the Closing
Date, and shall remain Solvent during the term of this Agreement.
8.9 Debt.
After giving effect to the making of the Revolving Loans
to be made on the Closing Date, the Borrower and its Subsidiaries
have no Debt, except (a) the Obligations, (b) trade payables and
other contractual obligations arising in the ordinary course of
business, and (c) other Debt existing on the Closing Date and
reflected in its Financial Statements.
8.10 Intentionally Deleted.
8.11 Title to Property.
The Borrower has good, indefeasible, and merchantable
title to all of its property, free of all Liens except Permitted
Liens.
8.12 Intentionally Deleted.
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8.13 Intentionally Deleted.
8.14 Intentionally Deleted.
8.15 Litigation.
Except as set forth on Schedule 8.15, there is no
pending, or to the best of the Borrower's knowledge threatened,
action, suit, proceeding, or counterclaim by any Person, or to
the best of the Borrower's knowledge investigation by any
Governmental Authority, or any basis for any of the foregoing,
which could reasonably be expected to cause a Material Adverse
Effect.
8.16 Restrictive Agreements.
The Borrower is not a party to any contract or agreement,
or subject to any charter or other corporate restriction, which
affects its ability to execute, deliver, and perform the Loan
Documents and repay the Obligations or which could reasonably be
expected to cause a Material Adverse Effect.
8.17 Labor Disputes.
As of the Closing Date (a) there is no collective
bargaining agreement or other labor contract covering employees
of the Borrower or any of its Subsidiaries, (b) no such
collective bargaining agreement or other labor contract is
scheduled to expire during the term of this Agreement, (c) no
union or other labor organization is seeking to organize, or to
be recognized as, a collective bargaining unit of employees of
the Borrower or any of its Subsidiaries or for any similar
purpose, and (d) there is no pending or (to the best of the
Borrower's knowledge) threatened, strike, work stoppage, material
unfair labor practice claim, or other material labor dispute
against or affecting the Borrower or its Subsidiaries or their
employees.
8.18 Environmental Laws.
(a) The Borrower and its Subsidiaries have complied in
all material respects with all Environmental Laws and neither the
Borrower nor any Subsidiary nor any of its presently owned real
property or presently conducted operations, nor its previously
owned real property or prior operations, is subject to any
enforcement order from or liability agreement with any
Governmental Authority or private Person respecting (i)
compliance with any Environmental Law or (ii) any potential
liabilities and costs or remedial action arising from the Release
or threatened Release of a Contaminant.
(b) The Borrower and its Subsidiaries have obtained
all permits necessary for their current operations under
Environmental Laws, and all such permits are in good standing and
the Borrower and its Subsidiaries are in compliance with all
material terms and conditions of such permits.
8.19 No Violation of Law.
Neither the Borrower nor any of its Subsidiaries is in
violation of any law, statute, regulation, ordinance, judgment,
order, or decree applicable to it which violation could
reasonably be expected to have a Material Adverse Effect.
8.20 No Default.
Neither the Borrower nor any of its Subsidiaries is in
default with respect to any note, indenture, loan agreement,
mortgage, lease, deed, or other agreement to which the Borrower
or such Subsidiary is a party or by which it is bound, which
default could reasonably be expected to have a Material Adverse
Effect.
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8.21 ERISA Compliance.
(a) Each Plan is in compliance in all material
respects with the applicable provisions of ERISA, the Code and
other federal or state law. Each Plan which is intended to
qualify under Section 401(a) of the Code has received a favorable
determination letter from the IRS and to the best knowledge of
the Borrower, nothing has occurred which would cause the loss of
such qualification. The Borrower and each ERISA Affiliate has
made all required contributions to any Plan subject to Section
412 of the Code, and no application for a funding waiver or an
extension of any amortization period pursuant to Section 412 of
the Code has been made with respect to any Plan.
(b) There are no pending or, to the best knowledge of
Borrower, threatened claims, actions or lawsuits, or action by
any Governmental Authority, with respect to any Plan which has
resulted or could reasonably be expected to result in a Material
Adverse Effect. There has been no prohibited transaction or
violation of the fiduciary responsibility rules with respect to
any Plan which has resulted or could reasonably be expected to
result in a Material Adverse Effect.
(c) (i) No ERISA Event has occurred or is reasonably
expected to occur; (ii) no Pension Plan has any Unfunded Pension
Liability; (iii) neither the Borrower nor any ERISA Affiliate has
incurred, or reasonably expects to incur, any liability under
Title IV of ERISA with respect to any Pension Plan (other than
premiums due and not delinquent under Section 4007 of ERISA);
(iv) neither the Borrower nor any ERISA Affiliate has incurred,
or reasonably expects to incur, any liability (and no event has
occurred which, with the giving of notice under Section 4219 of
ERISA, would result in such liability) under Section 4201 or 4243
of ERISA with respect to a Multi-employer Plan; and (v) neither
the Borrower nor any ERISA Affiliate has engaged in a transaction
that could be subject to Section 4069 or 4212(c) of ERISA.
8.22 Taxes.
The Borrower and its Subsidiaries have filed all federal
and other tax returns and reports required to be filed, and have
paid all federal and other taxes, assessments, fees and other
governmental charges levied or imposed upon them or their
properties, income or assets otherwise due and payable unless
such unpaid taxes and assessments would constitute a Permitted
Lien.
8.23 Intentionally Deleted.
8.24 Use of Proceeds; Margin Regulations.
The proceeds of the Loans are to be used solely for
working capital purposes. Neither the Borrower nor any
Subsidiary is engaged in the business of purchasing or selling
Margin Stock or extending credit for the purpose of purchasing or
carrying Margin Stock.
8.25 Intentionally Deleted.
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8.26 No Material Adverse Change.
No material adverse change has occurred in the Borrower's
property, business, operations, or conditions (financial or
otherwise) since the date of the Financial Statements delivered
to the Lenders.
8.27 Full Disclosure.
None of the representations or warranties made by the
Borrower or any Subsidiary in the Loan Documents as of the date
such representations and warranties are made or deemed made, and
none of the statements contained in any exhibit, report,
statement or certificate furnished by or on behalf of the
Borrower or any Subsidiary in connection with the Loan Documents
(including the offering and disclosure materials delivered by or
on behalf of the Borrower to the Lenders prior to the Closing
Date), contains any untrue statement of a material fact or omits
any material fact required to be stated therein or necessary to
make the statements made therein, in light of the circumstances
under which they are made, not misleading as of the time when
made or delivered.
8.28 Intentionally Deleted.
8.29 Bank Accounts.
Schedule 8.29 contains as of the Closing Date a complete
and accurate list of all bank accounts maintained by the Borrower
with any bank or other financial institution.
8.30 Governmental Authorization.
No approval, consent, exemption, authorization, or other
action by, or notice to, or filing with, any Governmental
Authority or other Person is necessary or required in connection
with the execution, delivery or performance by, or enforcement
against, the Borrower or any of its Subsidiaries of this
Agreement or any other Loan Document.
ARTICLE 9
AFFIRMATIVE AND NEGATIVE COVENANTS
The Borrower covenants to the Agent and each Lender
that so long as any of the Obligations remain outstanding or this
Agreement is in effect:
9.1 Taxes and Other Obligations.
The Borrower shall, and shall cause each of its
Subsidiaries to, (a) file when due all tax returns and other
reports which it is required to file; (b) pay, or provide for the
payment, when due, of all taxes, fees, assessments and other
governmental charges against it or upon its property, income and
franchises, make all required withholding and other tax deposits,
and establish adequate reserves for the payment of all such
items, and provide to the Agent and the Lenders, upon request,
satisfactory evidence of its timely compliance with the
foregoing; and (c) pay when due all Debt owed by it and all
claims of materialmen, mechanics, carriers, warehousemen,
landlords, processors and other like Persons, and all other
indebtedness owed by it and perform and discharge in a timely
manner all other obligations undertaken by it; provided, however,
so long as the Borrower has notified the Agent in writing,
neither the Borrower nor any of its Subsidiaries need pay any
tax, fee, assessment, or governmental charge, that (i) it is
contesting in good faith by appropriate proceedings diligently
pursued, (ii) the Borrower or its Subsidiary, as the case may be,
has established proper reserves for as provided in GAAP, and
(iii) no Lien (other than a Permitted Lien) results from such non-
payment.
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9.2 Corporate Existence and Good Standing.
The Borrower shall, and shall cause each of its
Subsidiaries to, maintain its corporate existence and its
qualification and good standing in all jurisdictions in which the
failure to maintain such existence and qualification or good
standing could reasonably be expected to have a Material Adverse
Effect.
9.3 Compliance with Law and Agreements; Maintenance of
Licenses.
The Borrower shall comply with all Requirements of Law
including the Federal Trade Commission's used car rule and all
usury and consumer credit disclosure laws and regulation. The
Borrower shall obtain and maintain all licenses, permits,
franchises, and governmental authorizations necessary to own its
Property and to conduct its business as conducted on the Closing
Date.
9.4 Compliance with ERISA.
The Borrower shall, and shall cause each of its ERISA
Affiliates to: (a) maintain each Plan in compliance in all
material respects with the applicable provisions of ERISA, the
Code and other federal or state law; (b) cause each Plan which is
qualified under Section 401(a) of the Code to maintain such
qualification; (c) make all required contributions to any Plan
subject to Section 412 of the Code; (d) not engage in a
prohibited transaction or violation of the fiduciary
responsibility rules with respect to any Plan; and (e) not engage
in a transaction that could be subject to Section 4069 or 4212(c)
of ERISA.
9.5 Mergers, Consolidations or Sales.
The Borrower shall not (a) enter into any transaction of
merger, reorganization, or consolidation with any other Person;
(b) transfer, sell, assign, lease, or otherwise dispose of all or
any part of the Collateral or its assets; or (c) liquidate or
dissolve.
9.6 Distributions and Capital Change.
The Borrower shall not (i) directly or indirectly declare
or make or incur any liability to make any Distribution or (ii)
make any change in its capital structure.
9.7 Transactions Affecting Collateral or Obligations.
The Borrower shall not enter into any transaction which
is likely to have a Material Adverse Effect.
9.8 Guaranties.
The Borrower shall not make, issue, be or become liable
on any Guaranty, except Guaranties in favor of the Agent and the
Lenders.
9.9 Debt.
The Borrower shall not incur or maintain any Debt, other
than: (a) the Obligations; (b) trade payables and contractual
obligations to suppliers and customers incurred in the ordinary
course of business; and (c) other Debt existing on the Closing
Date.
9.10 Prepayment.
The Borrower shall not voluntarily prepay any Debt,
except the Obligations and any Subordinated Debt in accordance
with the terms of this Agreement.
9.11 Transactions with Affiliates.
Except as expressly provided in this Section 9.11,
Borrower shall not sell, transfer, distribute, or pay any money
or Property to any Affiliate or make any Distribution to any
Affiliate, or lend any money to and Affiliate, or invest in (by
capital contribution or otherwise) or purchase or repurchase any
stock or indebtedness, or any Property of any Affiliate, or
become liable on any guaranty of the Affiliate. (The foregoing
transactions are hereinafter referred to as "Prohibited
Transactions"). A Prohibited Transaction shall not include a
distribution of cash by Borrower to Nicholas Data Services, Inc.
for the limited portion of state and federal tax liabilities
imposed on Nicholas Data Services, Inc. resulting from the
inclusion of Borrower's taxable income in the income of Nicholas.
Notwithstanding the foregoing, so long as no Default or Event of
Default then exists, Borrower may engage in a Prohibited
Transaction provided the aggregate amount of such transactions in
any Fiscal Year of the Borrower do not exceed the lesser of (a)
$150,000 ("Permitted Amount") or (b) twenty-five percent (25%()
of Borrower's Adjusted Net Earnings from Operations for such
Fiscal Year.
55
9.12 Intentionally Deleted.
9.13 Business Conducted.
The Borrower shall not engage directly or indirectly, in
any line of business other than the businesses in which the
Borrower is engaged on the Closing Date.
9.14 Liens.
The Borrower shall not create, incur, assume, or permit
to exist any Lien on any Collateral, except for the Liens in
favor of the Agent and the Lenders.
9.15 Fiscal Year.
The Borrower shall not change its Fiscal Year.
9.16 No Recognition of Income.
Borrower shall not accrue or otherwise recognize any
fees, interest, or other income in connection with any Contract
under which any payment due thereunder is more than 89 days
delinquent as determined on a contractual basis.
9.17 Intentionally Deleted.
9.18 Minimum Interest Coverage.
The Borrower shall not permit the ratio, calculated as of
the last day of each month on a cumulative Fiscal Year basis, of
(a) the sum of Adjusted Net Earnings from Operations for the
applicable period, plus interest expense and any provision for
income taxes for such period (numerator) to (b) aggregate
interest expense for such period (denominator), to be less than
1.25:1.
9.19 Intentionally Deleted.
9.20 Loss Reserve.
The Borrower shall maintain loss and dealer reserves at
all times during the term of the Agreement in an amount,
calculated as of the last day of each month, which shall not be
less than an amount equal to the Loss Reserve Percentage
(determined as of the last day of such month) multiplied by the
aggregate amount of all Net Contract Payments due as of the last
day of such month.
9.21 Borrowing Base Ratio.
The Borrower shall not permit the ratio of (a) the
remainder of (i) all liabilities, obligations, and indebtedness
of the Borrower minus (ii) all Subordinated Debt (numerator) to
(b) Borrowing Base Amount (denominator) to be, at any time, more
than: 5 to 1.
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9.22 Collateral Adjustment Percent.
The Borrower shall not permit the Collateral Adjustment
Percent as of the last day of any month to be greater than twenty-
one percent (21%).
9.23 Limitation on Bulk Purchases.
Borrower shall not, without Agent's prior written consent
(which Agent may withhold in its sole and absolute discretion),
acquire for a purchase price greater than $500,000 any Contracts
as part of a Bulk Purchase Transaction. The phrase `Bulk
Purchase Transaction' shall mean the purchase, on a group or
aggregate basis, of Contracts originated by third parties, in one
or a series of related transactions, from a seller or affiliated
sellers, where Borrower's decision to purchase the Contracts is
based primarily on criteria other than the creditworthiness of
the individual Contract Debtors who are the Contract obligors.
Borrower may, without the consent of Agent, acquire for a
purchase price of $500,000 or less Contracts as part of a Bulk
Purchase Transaction provided the Borrower has Availability
sufficient to consummate the Bulk Purchase Transaction prior to,
and without giving effect to, the Bulk Purchase Transaction.
9.24 Intentionally Deleted.
9.25 New Subsidiaries.
The Borrower shall not, directly or indirectly, organize
or acquire any Subsidiary other than those listed on Schedule
8.5.
9.26 Restricted Investment.
The Borrower shall not make any Restricted Investment.
9.27 Reporting Methodology.
The Borrower shall not amend or modify the methodology
employed by the Borrower in preparing its accounting and
financial reports relating to the presentation of (i) the
delinquency of Vehicle Contracts, (ii) the repossession of
Vehicles, (iii) the charge-off of delinquent Vehicle Contracts
and (iv) the unearned insurance commissions and dealer discounts
from the methodology employed by the Borrower as of the Closing
Date so as to change the consistency of the information with
respect to such items, from time to time, provided to Lender.
9.28 Contract Forms.
The Borrower shall not use or acquire in its business
Contracts which are not on the printed forms previously approved
in writing by the Lender and the Borrower shall not change or
vary the printed forms of such Contracts without the Lender's
prior written consent, unless such change or variation is
required by any Requirement of Law. The Lender may reasonably
withhold its consent until the Lender receives a satisfactory
opinion of the Borrower's counsel regarding compliance of the
revised form of Contract with any Requirement of Law.
9.29 Credit Guidelines.
The Borrower shall not make any changes in its Credit
Guidelines (a copy of which has been previously furnished by the
Borrower to the Lender) without the Agent's prior written consent
which the Agent may withhold in its sole and absolute discretion.
The Borrower shall not purchase or otherwise acquire Contracts
which do not comply with the Credit Guidelines.
9.30 Extended Warranty Plans.
To the extent that the Borrower allows a Dealer to
finance so-called "extended warranty plans," the Borrower shall
ensure that (i) the cost of such plans are disclosed to the
Contract Debtors and such plans are in compliance with all
applicable consumer credit laws, including any and all special
insurance laws relating thereto and (ii) such plans are
underwritten by (x) a major automobile manufacturer or an
Affiliate thereof, or (y) an independent and financially sound
insurance company.
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9.31 Charge-Off Policy.
Borrower shall establish and implement, all in a manner
satisfactory to Agent, a policy for charging off the unpaid
balance of any Contract upon the occurrence of any default under
the terms thereof. Without limiting the generality of the
foregoing, Borrower shall, on the last business day of each
month, charge off (i) the unpaid balance of any Contract with
respect to which any payment due thereunder is 120 days or more
past due as determined on a contractual basis and (ii) the unpaid
balance of any Contract with respect to which the Contract Debtor
is the subject of a bankruptcy or insolvency proceeding. In
addition, the policy shall provide that Borrower shall
immediately charge off all Contracts with a deficiency balance
and shall charge off all of the value of any Vehicles which have
been repossessed for more than 120 days.
9.32 Further Assurances.
The Borrower shall execute and deliver, or cause to be
executed and delivered, to the Agent such documents and
agreements, and shall take or cause to be taken such actions, as
the Agent may, from time to time, request to carry out the terms
and conditions of this Agreement and the other Loan Documents.
ARTICLE 10
CONDITIONS OF LENDING
10.1 Conditions Precedent to Making of Loans on the Closing
Date.
The obligation of the Lenders to make the initial
Revolving Loans on the Closing Date are subject to the following
conditions precedent having been satisfied in a manner
satisfactory to the Agent and each Lender:
(a) This Agreement and the other Loan Documents shall
have been executed by each party thereto and the Borrower shall
have performed and complied with all covenants, agreements and
conditions contained herein and the other Loan Documents which
are required to be performed or complied with by the Borrower
before or on such Closing Date.
(b) Upon making the Revolving Loans (including such
Revolving Loans made to finance the Closing Fee or otherwise as
reimbursement for fees, costs and expenses then payable under
this Agreement) and with all its obligations current, the
Borrower would have Availability in an amount no less than
$2,000,000.
(c) All representations and warranties made hereunder
and in the other Loan Documents shall be true and correct as if
made on such date.
(d) No Default or Event of Default shall exist on the
Closing Date, or would exist after giving effect to the Loans to
be made
58
(e) The Agent shall have received:
(i) acknowledgment copies of proper financing
statements, duly filed on or before the Closing Date under the
UCC of all jurisdictions that the Agent may deem necessary or
desirable in order to perfect the Agent's Lien; and
(ii) duly executed UCC-3 Termination Statements
and such other instruments, in form and substance satisfactory to
the Agent, as shall be necessary to terminate and satisfy all
Liens on the Property of the Borrower and its Subsidiaries except
Permitted Liens.
(f) The Borrower shall have paid all fees and expenses
of the Agent and the Attorney Costs incurred in connection with
any of the Loan Documents and the transactions contemplated
thereby to the extent invoiced.
(g) The Agent shall have received evidence, in form,
scope, and substance, reasonably satisfactory to the Agent, of
all insurance coverage as required by this Agreement.
(h) The Agent and the Lenders shall have had an
opportunity, if they so choose, to examine the books of account
and other records and files of the Borrower and to make copies
thereof, and to conduct a pre-closing audit which shall include,
without limitation, verification of Inventory, Accounts, and the
Borrowing Base, and the results of such examination and audit
shall have been satisfactory to the Agent and the Lenders in all
respects.
(i) All proceedings taken in connection with the
execution of this Agreement, all other Loan Documents and all
documents and papers relating thereto shall be satisfactory in
form, scope, and substance to the Agent and the Lenders.
The acceptance by the Borrower of any Loans made on the
Closing Date shall be deemed to be a representation and warranty
made by the Borrower to the effect that all of the conditions
precedent to the making of such Loans have been satisfied, with
the same effect as delivery to the Agent and the Lenders of a
certificate signed by a Responsible Officer of the Borrower,
dated the Closing Date, to such effect.
Execution and delivery to the Agent by a Lender of a
counterpart of this Agreement shall be deemed confirmation by
such Lender that (i) all conditions precedent in this Section
10.1 have been fulfilled to the satisfaction of such Lender, (ii)
the decision of such Lender to execute and deliver to the Agent
an executed counterpart of this Agreement was made by such Lender
independently and without reliance on the Agent or any other
Lender as to the satisfaction of any condition precedent set
forth in this Section 10.1, and (iii) all documents sent to such
Lender for approval consent, or satisfaction were acceptable to
such Lender.
10.2 Conditions Precedent to Each Loan.
The obligation of the Lenders to make each Loan,
including the initial Revolving Loans on the Closing Date shall
be subject to the further conditions precedent that on and as of
the date of any such extension of credit:
(a) the following statements shall be true, and the
acceptance by the Borrower of any extension of credit shall be
deemed to be a statement to the effect set forth in clauses
(i) and (ii), with the same effect as the delivery to the Agent
and the Lenders of a certificate signed by a Responsible Officer,
dated the date of such extension of credit, stating that:
59
(i) The representations and warranties contained
in this Agreement and the other Loan Documents are correct in all
material respects on and as of the date of such extension of
credit as though made on and as of such date, other than any such
representation or warranty which relates to a specified prior
date and except to the extent the Agent and the Lenders have been
notified by the Borrower that any representation or warranty is
not correct and the Majority Lenders have explicitly waived in
writing compliance with such representation or warranty; and
(ii) No event has occurred and is continuing, or
would result from such extension of credit, which constitutes a
Default or an Event of Default; and
(b) The amount of the Borrowing Base shall be
sufficient to make such Revolving Loans without exceeding the
Availability, provided, however, that the foregoing conditions
precedent are not conditions to each Lender participating in or
reimbursing the Bank or the Agent for such Lenders' Pro Rata
Share of any Non-Ratable Loan or Agent Advance made in accordance
with the provisions of Sections 2.2(h), (i) and (j).
ARTICLE 11
DEFAULT AND REMEDIES
11.1 Events of Default.
It shall constitute an event of default
("Event of Default") if any one or more of the following shall
occur for any reason:
(a) any failure by the Borrower to pay the principal
of or interest or premium on any of the Obligations or any fee or
other amount owing hereunder when due, whether upon demand or
otherwise;
(b) any representation or warranty made or deemed made
by the Borrower in this Agreement or by the Borrower or any of
its Subsidiaries in any of the other Loan Documents, any
Financial Statement, or any certificate furnished by the Borrower
or any of its Subsidiaries at any time to the Agent or any Lender
shall prove to be untrue in any material respect as of the date
on which made, deemed made, or furnished;
(c) any default shall occur in the observance or
performance of any of the covenants and agreements contained in
this Agreement, any other Loan Documents, or any other agreement
entered into at any time to which the Borrower or any Subsidiary
and the Agent or any Lender are party (including in respect of
any Bank Products), or if any such agreement or document shall
terminate (other than in accordance with its terms or the terms
hereof or with the written consent of the Agent and the Majority
Lenders) or become void or unenforceable, without the written
consent of the Agent and the Majority Lenders;
(d) default shall occur with respect to any Debt For
Borrowed Money (other than the Obligations) of the Borrower or
any of its Subsidiaries in an outstanding principal amount which
exceeds $100,000, or under any agreement or instrument under or
pursuant to which any such Debt For Borrowed Money may have been
issued, created, assumed, or guaranteed by the Borrower or any of
its Subsidiaries, and such default shall continue for more than
the period of grace, if any, therein specified, if the effect
thereof (with or without the giving of notice or further lapse of
time or both) is to accelerate, or to permit the holders of any
such Debt For Borrowed Money to accelerate, the maturity of any
such Debt For Borrowed Money; or any such Debt For Borrowed Money
shall be declared due and payable or be required to be prepaid
(other than by a regularly scheduled required prepayment) prior
to the stated maturity thereof;
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(e) the Borrower or any of its Subsidiaries shall (i)
file a voluntary petition in bankruptcy or file a voluntary
petition or an answer or otherwise commence any action or
proceeding seeking reorganization, arrangement or readjustment of
its debts or for any other relief under the federal Bankruptcy
Code, as amended, or under any other bankruptcy or insolvency act
or law, state or federal, now or hereafter existing, or consent
to, approve of, or acquiesce in, any such petition, action or
proceeding; (ii) apply for or acquiesce in the appointment of a
receiver, assignee, liquidator, sequestrator, custodian, monitor,
trustee or similar officer for it or for all or any part of its
property; (iii) make an assignment for the benefit of creditors;
or (iv) be unable generally to pay its debts as they become due;
(f) an involuntary petition or proposal shall be filed
or an action or proceeding otherwise commenced seeking
reorganization, arrangement, consolidation or readjustment of the
debts of the Borrower or any of its Subsidiaries or for any other
relief under the federal Bankruptcy Code, as amended, or under
any other bankruptcy or insolvency act or law, state or federal,
now or hereafter existing;
(g) a receiver, assignee, liquidator, sequestrator,
custodian, monitor, trustee or similar officer for the Borrower
or any of its Subsidiaries or for all or any part of its property
shall be appointed or a warrant of attachment, execution or
similar process shall be issued against any part of the property
of the Borrower or any of its Subsidiaries;
(h) the Borrower or any of its Subsidiaries shall file
a certificate of dissolution under applicable state law or shall
be liquidated, dissolved or wound-up or shall commence or have
commenced against it any action or proceeding for dissolution,
winding-up or liquidation, or shall take any corporate action in
furtherance thereof;
(i) all or any material part of the property of the
Borrower or any of its Subsidiaries shall be nationalized,
expropriated or condemned, seized or otherwise appropriated, or
custody or control of such property or of the Borrower or such
Subsidiary shall be assumed by any Governmental Authority or any
court of competent jurisdiction at the instance of any
Governmental Authority, except where contested in good faith by
proper proceedings diligently pursued where a stay of enforcement
is in effect;
(j) any Guaranty of the Obligations shall be
terminated, revoked or declared void or invalid;
(k) one or more judgments, orders, decrees or
arbitration awards is entered against the Borrower involving in
the aggregate liability (to the extent not covered by independent
third-party insurance as to which the insurer does not dispute
coverage) as to any single or related or unrelated series of
transactions, incidents or conditions, of $100,000 or more, and
the same shall remain unsatisfied, unvacated and unstayed pending
appeal for a period of 5 days after the entry thereof;
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(l) any loss, theft, damage or destruction of any item
or items of Collateral or other property of the Borrower or any
Subsidiary occurs which could reasonably be expected to cause a
Material Adverse Effect and is not adequately covered by
insurance;
(m) there occurs a Material Adverse Effect;
(n) there is filed against the Borrower or any of its
Subsidiaries any action, suit or proceeding under any federal or
state racketeering statute (including the Racketeer Influenced
and Corrupt Organization Act of 1970), which action, suit or
proceeding (i) is not dismissed within one hundred twenty (120)
days, and (ii) could reasonably be expected to result in the
confiscation or forfeiture of any material portion of the
Collateral;
(o) for any reason other than the failure of the Agent
to take any action available to it to maintain perfection of the
Agent's Liens, pursuant to the Loan Documents, any Loan Document
ceases to be in full force and effect or any Lien with respect to
any material portion of the Collateral intended to be secured
thereby ceases to be, or is not, valid, perfected and prior to
all other Liens (other than Permitted Liens) or is terminated,
revoked or declared void;
(p) an ERISA Event shall occur with respect to a
Pension Plan or Multi-employer Plan which has resulted or could
reasonably be expected to result in liability of the Borrower
under Title IV of ERISA to the Pension Plan, Multi-employer Plan
or the PBGC in an aggregate amount in excess of $100,000; (ii)
the aggregate amount of Unfunded Pension Liability among all
Pension Plans at any time exceeds $100,000; or (iii) the Borrower
or any ERISA Affiliate shall fail to pay when due, after the
expiration of any applicable grace period, any installment
payment with respect to its withdrawal liability under Section
4201 of ERISA under a Multi-employer Plan in an aggregate amount
in excess of $100,000;
(q) Peter L. Vosotas at any time fails to own at least
twenty-five percent (25%) of the voting stock of Nicholas
Financial, Inc. ("Parent") or that Parent at any time fails to
own all of the issued and outstanding stock of Borrower, or that
Peter L. Vosotas at any time fails to control the Borrower; or
(r) the Borrower's Collateral Adjustment Percent is at
any time greater than twenty-one percent (21%).
11.2 Remedies.
(a) If a Default or an Event of Default exists, the
Agent may, in its discretion, and shall, at the direction of the
Majority Lenders, do one or more of the following at any time or
times and in any order, without notice to or demand on the
Borrower: (i) reduce the Maximum Revolver Amount, or the advance
rates against Eligible Contracts used in computing the Borrowing
Base, or reduce one or more of the other elements used in
computing the Borrowing Base; and (ii) restrict the amount of or
refuse to make Revolving Loans. If an Event of Default exists,
the Agent shall, at the direction of the Majority Lenders, do
one or more of the following, in addition to the actions
described in the preceding sentence, at any time or times and in
any order, without notice to or demand on the Borrower: (A)
terminate the Commitments and this Agreement; (B) declare any or
all Obligations to be immediately due and payable; provided,
however, that upon the occurrence of any Event of Default
described in Sections 11.1(e), 11.1(f), 11.1(g), or 11.1(h), the
Commitments shall automatically and immediately expire and all
Obligations shall automatically become immediately due and
payable without notice or demand of any kind; and (C) pursue its
other rights and remedies under the Loan Documents and applicable
law.
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(b) If an Event of Default has occurred and is
continuing: (i) the Agent shall have for the benefit of the
Lenders, in addition to all other rights of the Agent and the
Lenders, the rights and remedies of a secured party under the
UCC; (ii) the Agent may, at any time, take possession of the
Collateral and keep it on the Borrower's premises, at no cost to
the Agent or any Lender, or remove any part of it to such other
place or places as the Agent may desire, or the Borrower shall,
upon the Agent's demand, at the Borrower's cost, assemble the
Collateral and make it available to the Agent at a place
reasonably convenient to the Agent; and (iii) the Agent may sell
and deliver any Collateral at public or private sales, for cash,
upon credit or otherwise, at such prices and upon such terms as
the Agent deems advisable, in its sole discretion, and may, if
the Agent deems it reasonable, postpone or adjourn any sale of
the Collateral by an announcement at the time and place of sale
or of such postponed or adjourned sale without giving a new
notice of sale. Without in any way requiring notice to be given
in the following manner, the Borrower agrees that any notice by
the Agent of sale, disposition or other intended action hereunder
or in connection herewith, whether required by the UCC or
otherwise, shall constitute reasonable notice to the Borrower if
such notice is mailed by registered or certified mail, return
receipt requested, postage prepaid, or is delivered personally
against receipt, at least five (5) Business Days prior to such
action to the Borrower's address specified in or pursuant to
Section 15.8. If any Collateral is sold on terms other than
payment in full at the time of sale, no credit shall be given
against the Obligations until the Agent or the Lenders receive
payment, and if the buyer defaults in payment, the Agent may
resell the Collateral without further notice to the Borrower. In
the event the Agent seeks to take possession of all or any
portion of the Collateral by judicial process, the Borrower
irrevocably waives: (A) the posting of any bond, surety or
security with respect thereto which might otherwise be required;
(B) any demand for possession prior to the commencement of any
suit or action to recover the Collateral; and (C) any requirement
that the Agent retain possession and not dispose of any
Collateral until after trial or final judgment. The Borrower
agrees that the Agent has no obligation to preserve rights to the
Collateral or marshal any Collateral for the benefit of any
Person. The Agent is hereby granted a license or other right to
use, without charge, the Borrower's labels, patents, copyrights,
name, trade secrets, trade names, trademarks, and advertising
matter, or any similar property, in completing production of,
advertising or selling any Collateral, and the Borrower's rights
under all licenses and all franchise agreements shall inure to
the Agent's benefit for such purpose. The proceeds of sale shall
be applied first to all expenses of sale, including attorneys'
fees, and then to the Obligations. The Agent will return any
excess to the Borrower and the Borrower shall remain liable for
any deficiency.
(c) If an Event of Default occurs, the Borrower hereby
waives all rights to notice and hearing prior to the exercise by
the Agent of the Agent's rights to repossess the Collateral
without judicial process or to reply, attach or levy upon the
Collateral without notice or hearing.
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ARTICLE 12
TERM AND TERMINATION
12.1 Term and Termination.
The term of this Agreement shall end on the Stated
Termination Date. The Agent upon direction from the Majority
Lenders may terminate this Agreement without notice upon the
occurrence of an Event of Default. Upon the effective date of
termination of this Agreement for any reason whatsoever, all
Obligations (including all unpaid principal, accrued and unpaid
interest and any early termination or prepayment fees or
penalties) shall become immediately due and payable.
Notwithstanding the termination of this Agreement, until all
Obligations are indefeasibly paid and performed in full in cash,
the Borrower shall remain bound by the terms of this Agreement
and shall not be relieved of any of its Obligations hereunder,
and the Agent and the Lenders shall retain all their rights and
remedies hereunder or under any other Loan Document (including
the Agent's Liens in and all rights and remedies with respect to
all then existing and after-arising Collateral).
ARTICLE 13
AMENDMENTS; WAIVERS; PARTICIPATIONS; ASSIGNMENTS; SUCCESSORS
13.1 Amendments and Waivers.
No amendment or waiver of any provision of this Agreement
or any other Loan Document, and no consent with respect to any
departure by the Borrower therefrom, shall be effective unless
the same shall be in writing and signed by the Majority Lenders
(or by the Agent at the written request of the Majority Lenders)
and the Borrower and then any such waiver or consent shall be
effective only in the specific instance and for the specific
purpose for which given; provided, however, that no such waiver,
amendment, or consent shall, unless in writing and signed by all
the Lenders and the Borrower and acknowledged by the Agent, do
any of the following:
(a) increase or extend the Commitment of any Lender;
(b) postpone or delay any date fixed by this Agreement
or any other Loan Document for any payment of principal,
interest, fees or other amounts due to the Lenders (or any of
them) hereunder or under any other Loan Document;
(c) reduce the principal of, or the rate of interest
specified herein on any Loan, or any fees or other amounts
payable hereunder or under any other Loan Document;
(d) change the percentage of the Commitments or of the
aggregate unpaid principal amount of the Loans which is required
for the Lenders or any of them to take any action hereunder;
(e) increase any of the percentages set forth in the
definition of the Borrowing Base;
(f) amend this Section or any provision of this
Agreement providing for consent or other action by all Lenders;
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(g) release Collateral other than as permitted by
Section 14.12 or release any Guaranty of the Obligations;
(h) change the definitions of "Majority Lenders" or
"Required Lenders"; or
(i) increase the Maximum Revolver Amount.
13.2 Assignments; Participations.
(a) Any Lender may, with the written consent of the
Agent (which consent shall not be unreasonably withheld), assign
and delegate to one or more Eligible Assignees (provided that no
consent of the Agent shall be required in connection with any
assignment and delegation by a Lender to an Affiliate of such
Lender) (each an "Assignee") all, or any ratable part of all, of
the Loans, the Commitments and the other rights and obligations
of such Lender hereunder, in a minimum amount of $5,000,000
(provided that, unless an assignor Lender has assigned and
delegated all of its Loans and Commitments, no such assignment
and/or delegation shall be permitted unless, after giving effect
thereto, such assignor Lender retains a Commitment in a minimum
amount of $5,000,000); provided, however, that the Borrower and
the Agent may continue to deal solely and directly with such
Lender in connection with the interest so assigned to an Assignee
until (i) written notice of such assignment, together with
payment instructions, addresses and related information with
respect to the Assignee, shall have been given to the Borrower
and the Agent by such Lender and the Assignee; (ii) such Lender
and its Assignee shall have delivered to the Borrower and the
Agent an Assignment and Acceptance in the form of Exhibit F
("Assignment and Acceptance") [together with any note or notes
subject to such assignment] and (iii) the assignor Lender or
Assignee has paid to the Agent a processing fee in the amount of
$3,000.
(b) From and after the date that the Agent notifies
the assignor Lender that it has received an executed Assignment
and Acceptance and payment of the above-referenced processing
fee, (i) the Assignee thereunder shall be a party hereto and, to
the extent that rights and obligations have been assigned to it
pursuant to such Assignment and Acceptance, shall have the rights
and obligations of a Lender under the Loan Documents, and (ii)
the assignor Lender shall, to the extent that rights and
obligations hereunder and under the other Loan Documents have
been assigned by it pursuant to such Assignment and Acceptance,
relinquish its rights and be released from its obligations under
this Agreement (and in the case of an Assignment and Acceptance
covering all or the remaining portion of an assigning Lender's
rights and obligations under this Agreement, such Lender shall
cease to be a party hereto).
(c) By executing and delivering an Assignment and
Acceptance, the assigning Lender thereunder and the Assignee
thereunder confirm to and agree with each other and the other
parties hereto as follows: (i) other than as provided in such
Assignment and Acceptance, such assigning Lender makes no
representation or warranty and assumes no responsibility with
respect to any statements, warranties or representations made in
or in connection with this Agreement or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of
this Agreement or any other Loan Document furnished pursuant
hereto or the attachment, perfection, or priority of any Lien
granted by the Borrower to the Agent or any Lender in the
Collateral; (ii) such assigning Lender makes no representation or
warranty and assumes no responsibility with respect to the
financial condition of the Borrower or the performance or
observance by the Borrower of any of its obligations under this
Agreement or any other Loan Document furnished pursuant hereto;
(iii) such Assignee confirms that it has received a copy of this
Agreement, together with such other documents and information as
it has deemed appropriate to make its own credit analysis and
decision to enter into such Assignment and Acceptance; (iv) such
Assignee will, independently and without reliance upon the Agent,
such assigning Lender or any other Lender, and based on such
documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not
taking action under this Agreement; (v) such Assignee appoints
and authorizes the Agent to take such action as agent on its
behalf and to exercise such powers under this Agreement as are
delegated to the Agent by the terms hereof, together with such
powers, including the discretionary rights and incidental power,
as are reasonably incidental thereto; and (vi) such Assignee
agrees that it will perform in accordance with their terms all of
the obligations which by the terms of this Agreement are required
to be performed by it as a Lender.
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(d) Immediately upon satisfaction of the requirements
of Section 13.2(a), this Agreement shall be deemed to be amended
to the extent, but only to the extent, necessary to reflect the
addition of the Assignee and the resulting adjustment of the
Commitments arising therefrom. The Commitment allocated to each
Assignee shall reduce such Commitments of the assigning Lender
pro tanto.
(e) Any Lender may at any time sell to one or more
commercial banks, financial institutions, or other Persons not
Affiliates of the Borrower (a "Participant") participating
interests in any Loans, the Commitment of that Lender and the
other interests of that Lender (the "originating Lender")
hereunder and under the other Loan Documents; provided, however,
that (i) the originating Lender's obligations under this
Agreement shall remain unchanged, (ii) the originating Lender
shall remain solely responsible for the performance of such
obligations, (iii) the Borrower and the Agent shall continue to
deal solely and directly with the originating Lender in
connection with the originating Lender's rights and obligations
under this Agreement and the other Loan Documents, and (iv) no
Lender shall transfer or grant any participating interest under
which the Participant has rights to approve any amendment to, or
any consent or waiver with respect to, this Agreement or any
other Loan Document, and all amounts payable by the Borrower
hereunder shall be determined as if such Lender had not sold such
participation; except that, if amounts outstanding under this
Agreement are due and unpaid, or shall have been declared or
shall have become due and payable upon the occurrence of an Event
of Default, each Participant shall be deemed to have the right of
set-off in respect of its participating interest in amounts owing
under this Agreement to the same extent and subject to the same
limitation as if the amount of its participating interest were
owing directly to it as a Lender under this Agreement.
(f) Notwithstanding any other provision in this
Agreement, any Lender may at any time create a security interest
in, or pledge, all or any portion of its rights under and
interest in this Agreement in favor of any Federal Reserve Bank
in accordance with Regulation A of the FRB or U.S. Treasury
Regulation 31 CFR 203.14, and such Federal Reserve Bank may
enforce such pledge or security interest in any manner permitted
under applicable law.
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ARTICLE 14
THE AGENT
14.1 Appointment and Authorization.
Each Lender hereby designates and appoints Bank as its
Agent under this Agreement and the other Loan Documents and each
Lender hereby irrevocably authorizes the Agent to take such
action on its behalf under the provisions of this Agreement and
each other Loan Document and to exercise such powers and perform
such duties as are expressly delegated to it by the terms of this
Agreement or any other Loan Document, together with such powers
as are reasonably incidental thereto. The Agent agrees to act as
such on the express conditions contained in this Article 14. The
provisions of this Article 14 are solely for the benefit of the
Agent and the Lenders and the Borrower shall have no rights as a
third party beneficiary of any of the provisions contained
herein. Notwithstanding any provision to the contrary contained
elsewhere in this Agreement or in any other Loan Document, the
Agent shall not have any duties or responsibilities, except those
expressly set forth herein, nor shall the Agent have or be deemed
to have any fiduciary relationship with any Lender, and no
implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Agreement or
any other Loan Document or otherwise exist against the Agent.
Without limiting the generality of the foregoing sentence, the
use of the term "agent" in this Agreement with reference to the
Agent is not intended to connote any fiduciary or other implied
(or express) obligations arising under agency doctrine of any
applicable law. Instead, such term is used merely as a matter of
market custom, and is intended to create or reflect only an
administrative relationship between independent contracting
parties. Except as expressly otherwise provided in this
Agreement, the Agent shall have and may use its sole discretion
with respect to exercising or refraining from exercising any
discretionary rights or taking or refraining from taking any
actions which the Agent is expressly entitled to take or assert
under this Agreement and the other Loan Documents, including (a)
the determination of the applicability of ineligibility criteria
with respect to the calculation of the Borrowing Base, (b) the
making of Agent Advances pursuant to Section 2.2(i), and (c) the
exercise of remedies pursuant to Section 11.2, and any action so
taken or not taken shall be deemed consented to by the Lenders.
14.2 Delegation of Duties.
The Agent may execute any of its duties under this
Agreement or any other Loan Document by or through agents,
employees or attorneys-in-fact and shall be entitled to advice of
counsel concerning all matters pertaining to such duties. The
Agent shall not be responsible for the negligence or misconduct
of any agent or attorney-in-fact that it selects as long as such
selection was made without gross negligence or willful
misconduct.
14.3 Liability of Agent.
None of the Agent-Related Persons shall (i) be liable for
any action taken or omitted to be taken by any of them under or
in connection with this Agreement or any other Loan Document or
the transactions contemplated hereby (except for its own gross
negligence or willful misconduct), or (ii) be responsible in any
manner to any of the Lenders for any recital, statement,
representation or warranty made by the Borrower or any Subsidiary
or Affiliate of the Borrower, or any officer thereof, contained
in this Agreement or in any other Loan Document, or in any
certificate, report, statement or other document referred to or
provided for in, or received by the Agent under or in connection
with, this Agreement or any other Loan Document, or the validity,
effectiveness, genuineness, enforceability or sufficiency of this
Agreement or any other Loan Document, or for any failure of the
Borrower or any other party to any Loan Document to perform its
obligations hereunder or thereunder. No Agent-Related Person
shall be under any obligation to any Lender to ascertain or to
inquire as to the observance or performance of any of the
agreements contained in, or conditions of, this Agreement or any
other Loan Document, or to inspect the properties, books or
records of the Borrower or any of the Borrower's Subsidiaries or
Affiliates.
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14.4 Reliance by Agent.
The Agent shall be entitled to rely, and shall be fully
protected in relying, upon any writing, resolution, notice,
consent, certificate, affidavit, letter, telegram, facsimile,
telex or telephone message, statement or other document or
conversation believed by it to be genuine and correct and to have
been signed, sent or made by the proper Person or Persons, and
upon advice and statements of legal counsel (including counsel to
the Borrower), independent accountants and other experts selected
by the Agent. The Agent shall be fully justified in failing or
refusing to take any action under this Agreement or any other
Loan Document unless it shall first receive such advice or
concurrence of the Majority Lenders as it deems appropriate and,
if it so requests, it shall first be indemnified to its
satisfaction by the Lenders against any and all liability and
expense which may be incurred by it by reason of taking or
continuing to take any such action. The Agent shall in all cases
be fully protected in acting, or in refraining from acting, under
this Agreement or any other Loan Document in accordance with a
request or consent of the Majority Lenders (or all Lenders if so
required by Section 13.1) and such request and any action taken
or failure to act pursuant thereto shall be binding upon all of
the Lenders.
14.5 Notice of Default.
The Agent shall not be deemed to have knowledge or notice
of the occurrence of any Default or Event of Default, unless the
Agent shall have received written notice from a Lender or the
Borrower referring to this Agreement, describing such Default or
Event of Default and stating that such notice is a "notice of
default." The Agent will notify the Lenders of its receipt of
any such notice. The Agent shall take such action with respect
to such Default or Event of Default as may be requested by the
Majority Lenders in accordance with Section 11; provided,
however, that unless and until the Agent has received any such
request, the Agent may (but shall not be obligated to) take such
action, or refrain from taking such action, with respect to such
Default or Event of Default as it shall deem advisable.
14.6 Credit Decision.
Each Lender acknowledges that none of the Agent-Related
Persons has made any representation or warranty to it, and that
no act by the Agent hereinafter taken, including any review of
the affairs of the Borrower and its Affiliates, shall be deemed
to constitute any representation or warranty by any Agent-Related
Person to any Lender. Each Lender represents to the Agent that
it has, independently and without reliance upon any Agent-Related
Person and based on such documents and information as it has
deemed appropriate, made its own appraisal of and investigation
into the business, prospects, operations, property, financial and
other condition and creditworthiness of the Borrower and its
Affiliates, and all applicable bank regulatory laws relating to
the transactions contemplated hereby, and made its own decision
to enter into this Agreement and to extend credit to the
Borrower. Each Lender also represents that it will,
independently and without reliance upon any Agent-Related Person
and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit
analysis, appraisals and decisions in taking or not taking action
under this Agreement and the other Loan Documents, and to make
such investigations as it deems necessary to inform itself as to
the business, prospects, operations, property, financial and
other condition and creditworthiness of the Borrower. Except for
notices, reports and other documents expressly herein required to
be furnished to the Lenders by the Agent, the Agent shall not
have any duty or responsibility to provide any Lender with any
credit or other information concerning the business, prospects,
operations, property, financial and other condition or
creditworthiness of the Borrower which may come into the
possession of any of the Agent-Related Persons.
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14.7 Indemnification.
Whether or not the transactions contemplated hereby are
consummated, the Lenders shall indemnify upon demand the
Agent-Related Persons (to the extent not reimbursed by or on
behalf of the Borrower and without limiting the obligation of the
Borrower to do so), pro rata, from and against any and all
Indemnified Liabilities as such term is defined in Section 15.11;
provided, however, that no Lender shall be liable for the payment
to the Agent-Related Persons of any portion of such Indemnified
Liabilities resulting solely from such Person's gross negligence
or willful misconduct. Without limitation of the foregoing, each
Lender shall reimburse the Agent upon demand for its ratable
share of any costs or out-of-pocket expenses (including Attorney
Costs) incurred by the Agent in connection with the preparation,
execution, delivery, administration, modification, amendment or
enforcement (whether through negotiations, legal proceedings or
otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement, any other Loan Document,
or any document contemplated by or referred to herein, to the
extent that the Agent is not reimbursed for such expenses by or
on behalf of the Borrower. The undertaking in this Section shall
survive the payment of all Obligations hereunder and the
resignation or replacement of the Agent.
14.8 Agent in Individual Capacity.
The Bank and its Affiliates may make loans to, accept
deposits from, acquire equity interests in and generally engage
in any kind of banking, trust, financial advisory, underwriting
or other business with the Borrower and its Subsidiaries and
Affiliates as though the Bank were not the Agent hereunder and
without notice to or consent of the Lenders. The Lenders
acknowledge that, pursuant to such activities, the Bank or its
Affiliates may receive information regarding the Borrower or its
Affiliates (including information that may be subject to
confidentiality obligations in favor of the Borrower or such
Subsidiary) and acknowledge that the Agent and the Bank shall be
under no obligation to provide such information to them. With
respect to its Loans, the Bank shall have the same rights and
powers under this Agreement as any other Lender and may exercise
the same as though it were not the Agent, and the terms "Lender"
and "Lenders" include the Bank in its individual capacity.
14.9 Successor Agent.
The Agent may resign as Agent upon 30 days notice to the
Lenders and the Borrower, such resignation to be effective upon
the acceptance of a successor agent to its appointment as Agent.
In the event the Bank sells all of its Commitment and Revolving
Loans as part of a sale, transfer or other disposition by the
Bank of substantially all of its loan portfolio, the Bank shall
resign as Agent and such purchaser or transferee shall become the
successor Agent hereunder. If the Agent resigns under this
Agreement, subject to the proviso in the preceding sentence, the
Majority Lenders shall appoint from among the Lenders a successor
agent for the Lenders. If no successor agent is appointed prior
to the effective date of the resignation of the Agent, the Agent
may appoint, after consulting with the Lenders and the Borrower,
a successor agent from among the Lenders. Upon the acceptance of
its appointment as successor agent hereunder, such successor
agent shall succeed to all the rights, powers and duties of the
retiring Agent and the term "Agent" shall mean such successor
agent and the retiring Agent's appointment, powers and duties as
Agent shall be terminated. After any retiring Agent's resignation
hereunder as Agent, the provisions of this Article 14 shall inure
to its benefit as to any actions taken or omitted to be taken by
it while it was Agent under this Agreement.
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14.10 Withholding Tax.
(a) If any Lender is a "foreign corporation, partnership
or trust" within the meaning of the Code and such Lender claims
exemption from, or a reduction of, U.S. withholding tax under
Sections 1441 or 1442 of the Code, such Lender agrees with and in
favor of the Agent, to deliver to the Agent:
(i) if such Lender claims an exemption from, or a
reduction of, withholding tax under a United States of America
tax treaty, properly completed IRS Forms 1001 and W-8 before the
payment of any interest in the first calendar year and before the
payment of any interest in each third succeeding calendar year
during which interest may be paid under this Agreement;
(ii) if such Lender claims that interest paid
under this Agreement is exempt from United States of America
withholding tax because it is effectively connected with a United
States of America trade or business of such Lender, two properly
completed and executed copies of IRS Form 4224 before the payment
of any interest is due in the first taxable year of such Lender
and in each succeeding taxable year of such Lender during which
interest may be paid under this Agreement, and IRS Form W-9; and
(iii) such other form or forms as may be
required under the Code or other laws of the United States of
America as a condition to exemption from, or reduction of, United
States of America withholding tax.
Such Lender agrees to promptly notify the Agent of any change in
circumstances which would modify or render invalid any claimed
exemption or reduction.
(b) If any Lender claims exemption from, or reduction
of, withholding tax under a United States of America tax treaty
by providing IRS Form 1001 and such Lender sells, assigns, grants
a participation in, or otherwise transfers all or part of the
Obligations owing to such Lender, such Lender agrees to notify
the Agent of the percentage amount in which it is no longer the
beneficial owner of Obligations of the Borrower to such Lender.
To the extent of such percentage amount, the Agent will treat
such Lender's IRS Form 1001 as no longer valid.
(c) If any Lender claiming exemption from United
States of America withholding tax by filing IRS Form 4224 with
the Agent sells, assigns, grants a participation in, or otherwise
transfers all or part of the Obligations owing to such Lender,
such Lender agrees to undertake sole responsibility for complying
with the withholding tax requirements imposed by Sections 1441
and 1442 of the Code.
(d) If any Lender is entitled to a reduction in the
applicable withholding tax, the Agent may withhold from any
interest payment to such Lender an amount equivalent to the
applicable withholding tax after taking into account such
reduction. If the forms or other documentation required by
subsection (a) of this Section are not delivered to the Agent,
then the Agent may withhold from any interest payment to such
Lender not providing such forms or other documentation an amount
equivalent to the applicable withholding tax.
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(e) If the IRS or any other Governmental Authority of
the United States of America or other jurisdiction asserts a
claim that the Agent did not properly withhold tax from amounts
paid to or for the account of any Lender (because the appropriate
form was not delivered, was not properly executed, or because
such Lender failed to notify the Agent of a change in
circumstances which rendered the exemption from, or reduction of,
withholding tax ineffective, or for any other reason) such Lender
shall indemnify the Agent fully for all amounts paid, directly or
indirectly, by the Agent as tax or otherwise, including penalties
and interest, and including any taxes imposed by any jurisdiction
on the amounts payable to the Agent under this Section, together
with all costs and expenses (including Attorney Costs). The
obligation of the Lenders under this subsection shall survive the
payment of all Obligations and the resignation or replacement of
the Agent.
14.11 Intentionally Deleted.
14.12 Collateral Matters.
(a) The Lenders hereby irrevocably authorize the
Agent, at its option and in its sole discretion, to release any
Agent's Lien upon any Collateral (i) upon the termination of the
Commitments and payment and satisfaction in full by Borrower of
all Loans and all other Obligations; (ii) constituting property
being sold or disposed of if the Borrower certifies to the Agent
that the sale or disposition is made in compliance with Section
9.9 (and the Agent may rely conclusively on any such certificate,
without further inquiry); (iii) constituting property in which
the Borrower owned no interest at the time the Lien was granted
or at any time thereafter; or (iv) constituting property leased
to the Borrower under a lease which has expired or been
terminated in a transaction permitted under this Agreement.
Except as provided above, the Agent will not release any of the
Agent's Liens without the prior written authorization of the
Lenders; provided that the Agent may, in its discretion, release
the Agent's Liens on Collateral valued in the aggregate not in
excess of $100,000 during any one year period without the prior
written authorization of the Lenders. Upon request by the Agent
or the Borrower at any time, the Lenders will confirm in writing
the Agent's authority to release any Agent's Liens upon
particular types or items of Collateral pursuant to this Section
14.12.
(b) Upon receipt by the Agent of any authorization
required pursuant to Section 14.12(a) from the Lenders of the
Agent's authority to release any Agent's Liens upon particular
types or items of Collateral, and upon at least five (5) Business
Days prior written request by the Borrower, the Agent shall (and
is hereby irrevocably authorized by the Lenders to) execute such
documents as may be necessary to evidence the release of the
Agent's Liens upon such Collateral; provided, however, that (i)
the Agent shall not be required to execute any such document on
terms which, in the Agent's opinion, would expose the Agent to
liability or create any obligation or entail any consequence
other than the release of such Liens without recourse or
warranty, and (ii) such release shall not in any manner
discharge, affect or impair the Obligations or any Liens (other
than those expressly being released) upon (or obligations of the
Borrower in respect of) all interests retained by the Borrower,
including the proceeds of any sale, all of which shall continue
to constitute part of the Collateral.
(c) The Agent shall have no obligation whatsoever to
any of the Lenders to assure that the Collateral exists or is
owned by the Borrower or is cared for, protected or insured or
has been encumbered, or that the Agent's Liens have been properly
or sufficiently or lawfully created, perfected, protected or
enforced or are entitled to any particular priority, or to
exercise at all or in any particular manner or under any duty of
care, disclosure or fidelity, or to continue exercising, any of
the rights, authorities and powers granted or available to the
Agent pursuant to any of the Loan Documents, it being understood
and agreed that in respect of the Collateral, or any act,
omission or event related thereto, the Agent may act in any
manner it may deem appropriate, in its sole discretion given the
Agent's own interest in the Collateral in its capacity as one of
the Lenders and that the Agent shall have no other duty or
liability whatsoever to any Lender as to any of the foregoing.
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14.13 Restrictions on Actions by Lenders; Sharing of
Payments.
(a) Each of the Lenders agrees that it shall not,
without the express consent of all Lenders, and that it shall, to
the extent it is lawfully entitled to do so, upon the request of
all Lenders, set off against the Obligations, any amounts owing
by such Lender to the Borrower or any accounts of the Borrower
now or hereafter maintained with such Lender. Each of the
Lenders further agrees that it shall not, unless specifically
requested to do so by the Agent, take or cause to be taken any
action to enforce its rights under this Agreement or against the
Borrower, including the commencement of any legal or equitable
proceedings, to foreclose any Lien on, or otherwise enforce any
security interest in, any of the Collateral.
(b) If at any time or times any Lender shall receive
(i) by payment, foreclosure, setoff or otherwise, any proceeds of
Collateral or any payments with respect to the Obligations of the
Borrower to such Lender arising under, or relating to, this
Agreement or the other Loan Documents, except for any such
proceeds or payments received by such Lender from the Agent
pursuant to the terms of this Agreement, or (ii) payments from
the Agent in excess of such Lender's ratable portion of all such
distributions by the Agent, such Lender shall promptly (1) turn
the same over to the Agent, in kind, and with such endorsements
as may be required to negotiate the same to the Agent, or in same
day funds, as applicable, for the account of all of the Lenders
and for application to the Obligations in accordance with the
applicable provisions of this Agreement, or (2) purchase, without
recourse or warranty, an undivided interest and participation in
the Obligations owed to the other Lenders so that such excess
payment received shall be applied ratably as among the Lenders in
accordance with their Pro Rata Shares; provided, however, that if
all or part of such excess payment received by the purchasing
party is thereafter recovered from it, those purchases of
participations shall be rescinded in whole or in part, as
applicable, and the applicable portion of the purchase price paid
therefor shall be returned to such purchasing party, but without
interest except to the extent that such purchasing party is
required to pay interest in connection with the recovery of the
excess payment.
14.14 Agency for Perfection.
Each Lender hereby appoints each other Lender as agent
for the purpose of perfecting the Lenders' security interest in
assets which, in accordance with Article 9 of the UCC can be
perfected only by possession. Should any Lender (other than the
Agent) obtain possession of any such Collateral, such Lender
shall notify the Agent thereof, and, promptly upon the Agent's
request therefor shall deliver such Collateral to the Agent or in
accordance with the Agent's instructions.
14.15 Payments by Agent to Lenders.
All payments to be made by the Agent to the Lenders
shall be made by bank wire transfer or internal transfer of
immediately available funds to each Lender pursuant to wire
transfer instructions delivered in writing to the Agent on or
prior to the Closing Date (or if such Lender is an Assignee, on
the applicable Assignment and Acceptance), or pursuant to such
other wire transfer instructions as each party may designate for
itself by written notice to the Agent. Concurrently with each
such payment, the Agent shall identify whether such payment (or
any portion thereof) represents principal, premium or interest on
the Revolving Loans, or otherwise.
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14.16 Concerning the Collateral and the Related Loan
Documents.
Each Lender authorizes and directs the Agent to enter
into this Agreement and the other Loan Documents, for the ratable
benefit and obligation of the Agent and the Lenders. Each Lender
agrees that any action taken by the Agent, Majority Lenders or
Required Lenders, as applicable, in accordance with the terms of
this Agreement or the other Loan Documents, and the exercise by
the Agent, the Majority Lenders, or the Required Lenders, as
applicable, of their respective powers set forth therein or
herein, together with such other powers that are reasonably
incidental thereto, shall be binding upon all of the Lenders.
14.17 Field Audit and Examination Reports; Disclaimer by
Lenders.
By signing this Agreement, each Lender:
(a) is deemed to have requested that the Agent furnish
such Lender, promptly after it becomes available, a copy of each
field audit or examination report (each a "Report" and
collectively, "Reports") prepared by the Agent;
(b) expressly agrees and acknowledges that neither the
Bank nor the Agent (i) makes any representation or warranty as to
the accuracy of any Report, or (ii) shall be liable for any
information contained in any Report;
(c) expressly agrees and acknowledges that the Reports
are not comprehensive audits or examinations, that the Agent or
the Bank or other party performing any audit or examination will
inspect only specific information regarding the Borrower and will
rely significantly upon the Borrower's books and records, as well
as on representations of the Borrower's personnel;
(d) agrees to keep all Reports confidential and
strictly for its internal use, and not to distribute except to
its participants, or use any Report in any other manner; and
(e) without limiting the generality of any other
indemnification provision contained in this Agreement, agrees:
(i) to hold the Agent and any such other Lender preparing a
Report harmless from any action the indemnifying Lender may take
or conclusion the indemnifying Lender may reach or draw from any
Report in connection with any loans or other credit
accommodations that the indemnifying Lender has made or may make
to the Borrower, or the indemnifying Lender's participation in,
or the indemnifying Lender's purchase of, a loan or loans of the
Borrower; and (ii) to pay and protect, and indemnify, defend and
hold the Agent and any such other Lender preparing a Report
harmless from and against, the claims, actions, proceedings,
damages, costs, expenses and other amounts (including Attorney
Costs) incurred by the Agent and any such other Lender preparing
a Report as the direct or indirect result of any third parties
who might obtain all or part of any Report through the
indemnifying Lender.
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14.18 Relation Among Lenders.
The Lenders are not partners or co-venturers, and no
Lender shall be liable for the acts or omissions of, or (except
as otherwise set forth herein in case of the Agent) authorized to
act for, any other Lender.
ARTICLE 15
MISCELLANEOUS
15.1 No Waivers; Cumulative Remedies.
No failure by the Agent or any Lender to exercise any
right, remedy, or option under this Agreement or any present or
future supplement thereto, or in any other agreement between or
among the Borrower and the Agent and/or any Lender, or delay by
the Agent or any Lender in exercising the same, will operate as a
waiver thereof. No waiver by the Agent or any Lender will be
effective unless it is in writing, and then only to the extent
specifically stated. No waiver by the Agent or the Lenders on
any occasion shall affect or diminish the Agent's and each
Lender's rights thereafter to require strict performance by the
Borrower of any provision of this Agreement. The Agent and the
Lenders may proceed directly to collect the Obligations without
any prior recourse to the Collateral. The Agent's and each
Lender's rights under this Agreement will be cumulative and not
exclusive of any other right or remedy which the Agent or any
Lender may have.
15.2 Severability.
The illegality or unenforceability of any provision of
this Agreement or any Loan Document or any instrument or
agreement required hereunder shall not in any way affect or
impair the legality or enforceability of the remaining provisions
of this Agreement or any instrument or agreement required
hereunder.
15.3 Governing Law; Choice of Forum; Service of Process.
(a) THIS AGREEMENT SHALL BE INTERPRETED AND THE RIGHTS
AND LIABILITIES OF THE PARTIES HERETO DETERMINED IN ACCORDANCE
WITH THE INTERNAL LAWS (AS OPPOSED TO THE CONFLICT OF LAWS
PROVISIONS PROVIDED THAT PERFECTION ISSUES WITH RESPECT TO
ARTICLE 9 OF THE UCC MAY GIVE EFFECT TO APPLICABLE CHOICE OR
CONFLICT OF LAW RULES SET FORTH IN ARTICLE 9 OF THE UCC) OF THE
STATE OF NEW YORK; PROVIDED THAT THE AGENT AND THE LENDERS SHALL
RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO
THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE
COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES OF
AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND BY EXECUTION
AND DELIVERY OF THIS AGREEMENT, EACH OF THE BORROWER, THE AGENT
AND THE LENDERS CONSENTS, FOR ITSELF AND IN RESPECT OF ITS
PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS.
EACH OF THE BORROWER, THE AGENT AND THE LENDERS IRREVOCABLY
WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF
VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT
MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR
PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT OR
ANY DOCUMENT RELATED HERETO. NOTWITHSTANDING THE FOREGOING: (1)
THE AGENT AND THE LENDERS SHALL HAVE THE RIGHT TO BRING ANY
ACTION OR PROCEEDING AGAINST THE BORROWER OR ITS PROPERTY IN THE
COURTS OF ANY OTHER JURISDICTION THE AGENT OR THE LENDERS DEEM
NECESSARY OR APPROPRIATE IN ORDER TO REALIZE ON THE COLLATERAL OR
OTHER SECURITY FOR THE OBLIGATIONS AND (2) EACH OF THE PARTIES
HERETO ACKNOWLEDGES THAT ANY APPEALS FROM THE COURTS DESCRIBED IN
THE IMMEDIATELY PRECEDING SENTENCE MAY HAVE TO BE HEARD BY A
COURT LOCATED OUTSIDE THOSE JURISDICTIONS.
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(c) THE BORROWER HEREBY WAIVES PERSONAL SERVICE OF ANY
AND ALL PROCESS UPON IT AND CONSENTS THAT ALL SUCH SERVICE OF
PROCESS MAY BE MADE BY REGISTERED MAIL (RETURN RECEIPT REQUESTED)
DIRECTED TO THE BORROWER AT ITS ADDRESS SET FORTH IN SECTION 15.8
AND SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED FIVE (5) DAYS
AFTER THE SAME SHALL HAVE BEEN SO DEPOSITED IN THE U.S. MAILS
POSTAGE PREPAID. NOTHING CONTAINED HEREIN SHALL AFFECT THE RIGHT
OF AGENT OR THE LENDERS TO SERVE LEGAL PROCESS BY ANY OTHER
MANNER PERMITTED BY LAW.
15.4 WAIVER OF JURY TRIAL.
THE BORROWER, THE LENDERS AND THE AGENT EACH IRREVOCABLY
WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR
CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS
AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR
OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES
AGAINST ANY OTHER PARTY OR ANY AGENT-RELATED PERSON, PARTICIPANT
OR ASSIGNEE, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT
CLAIMS, OR OTHERWISE. THE BORROWER, THE LENDERS AND THE AGENT
EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED
BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING,
THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL
BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION,
COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN
PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS
AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR
THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT AND THE
OTHER LOAN DOCUMENTS.
15.5 Survival of Representations and Warranties.
All of the Borrower's representations and warranties
contained in this Agreement shall survive the execution,
delivery, and acceptance thereof by the parties, notwithstanding
any investigation by the Agent or the Lenders or their respective
agents.
15.6 Other Security and Guaranties.
The Agent, may, without notice or demand and without
affecting the Borrower's obligations hereunder, from time to
time: (a) take from any Person and hold collateral (other than
the Collateral) for the payment of all or any part of the
Obligations and exchange, enforce or release such collateral or
any part thereof; and (b) accept and hold any endorsement or
guaranty of payment of all or any part of the Obligations and
release or substitute any such endorser or guarantor, or any
Person who has given any Lien in any other collateral as security
for the payment of all or any part of the Obligations, or any
other Person in any way obligated to pay all or any part of the
Obligations.
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15.7 Fees and Expenses.
The Borrower agrees to pay to the Agent, for its benefit,
on demand, all costs and expenses that Agent pays or incurs in
connection with the negotiation, preparation, syndication,
consummation, administration, enforcement, and termination of
this Agreement or any of the other Loan Documents, including: (a)
Attorney Costs; (b) costs and expenses (including attorneys' and
paralegals' fees and disbursements) for any amendment,
supplement, waiver, consent, or subsequent closing in connection
with the Loan Documents and the transactions contemplated
thereby; (c) costs and expenses of lien and title searches and
title insurance; (d) taxes and fees for filing financing
statements and continuations, and other actions to perfect,
protect, and continue the Agent's Liens (including costs and
expenses paid or incurred by the Agent in connection with the
consummation of Agreement); (e) sums paid or incurred to pay any
amount or take any action required of the Borrower under the Loan
Documents that the Borrower fails to pay or take; (f) costs and
expenses of forwarding loan proceeds, collecting checks and other
items of payment, and establishing and maintaining Payment
Accounts and lock boxes; (g) costs and expenses of preserving and
protecting the Collateral; and (h) costs and expenses (including
Attorneys' Costs) paid or incurred to obtain payment of the
Obligations, enforce the Agent's Liens, sell or otherwise realize
upon the Collateral, and otherwise enforce the provisions of the
Loan Documents, or to defend any claims made or threatened
against the Agent or any Lender arising out of the transactions
contemplated hereby (including preparations for and
consultations concerning any such matters). Notwithstanding the
foregoing, Agent agrees that no Attorney Costs will be charged to
the Borrower in connection with the closing of the Agreement,
other than the Documentation Fee set forth in Section 3.6. The
foregoing shall not be construed to limit any other provisions of
the Loan Documents regarding costs and expenses to be paid by the
Borrower. All of the foregoing costs and expenses shall be
charged to the Borrower's Loan Account as Revolving Loans as
described in Section 4.7.
15.8 Notices.
Except as otherwise provided herein, all notices, demands
and requests that any party is required or elects to give to any
other shall be in writing, or by a telecommunications device
capable of creating a written record, and any such notice shall
become effective (a) upon personal delivery thereof, including,
but not limited to, delivery by overnight mail and courier
service, (b) four (4) days after it shall have been mailed by
United States mail, first class, certified or registered, with
postage prepaid, or (c) in the case of notice by such a
telecommunications device, when properly transmitted, in each
case addressed to the party to be notified as follows:
If to the Agent or to the Bank:
Bank of America, N.A.
335 Madison Avenue, 6th Floor
New York, NY 10017
Attention: James Smith
Telecopy No.: 212-836-5027
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If to the Borrower:
Nicholas Financial, Inc.
2454 McMullen Booth Road
Building C, #501B
Clearwater, FL 33759-1340
or to such other address as each party may designate for itself
by like notice. Failure or delay in delivering copies of any
notice, demand, request, consent, approval, declaration or other
communication to the persons designated above to receive copies
shall not adversely affect the effectiveness of such notice,
demand, request, consent, approval, declaration or other
communication.
15.9 Waiver of Notices.
Unless otherwise expressly provided herein, the Borrower
waives presentment, and notice of demand or dishonor and protest
as to any instrument, notice of intent to accelerate the
Obligations and notice of acceleration of the Obligations, as
well as any and all other notices to which it might otherwise be
entitled. No notice to or demand on the Borrower which the Agent
or any Lender may elect to give shall entitle the Borrower to any
or further notice or demand in the same, similar or other
circumstances.
15.10 Binding Effect.
The provisions of this Agreement shall be binding upon
and inure to the benefit of the respective representatives,
successors, and assigns of the parties hereto; provided, however,
that no interest herein may be assigned by the Borrower without
prior written consent of the Agent and each Lender. The rights
and benefits of the Agent and the Lenders hereunder shall, if
such Persons so agree, inure to any party acquiring any interest
in the Obligations or any part thereof.
15.11 Indemnity of the Agent and the Lenders by the
Borrower.
(a) The Borrower agrees to defend, indemnify and hold
the Agent-Related Persons, and each Lender and each of its
respective officers, directors, employees, counsel, agents and
attorneys-in-fact (each, an "Indemnified Person") harmless from
and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, charges,
expenses and disbursements (including Attorney Costs) of any kind
or nature whatsoever which may at any time (including at any time
following repayment of the Loans and the termination, resignation
or replacement of the Agent or replacement of any Lender) be
imposed on, incurred by or asserted against any such Person in
any way relating to or arising out of this Agreement or any
document contemplated by or referred to herein, or the
transactions contemplated hereby, or any action taken or omitted
by any such Person under or in connection with any of the
foregoing, including with respect to any investigation,
litigation or proceeding (including any Insolvency Proceeding or
appellate proceeding) related to or arising out of this
Agreement, any other Loan Document, or the Loans or the use of
the proceeds thereof, whether or not any Indemnified Person is a
party thereto (all the foregoing, collectively, the "Indemnified
Liabilities"); provided, that the Borrower shall have no
obligation hereunder to any Indemnified Person with respect to
Indemnified Liabilities resulting solely from the willful
misconduct of such Indemnified Person. The agreements in this
Section shall survive payment of all other Obligations.
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(b) The Borrower agrees to indemnify, defend and hold
harmless the Agent and the Lenders from any loss or liability
directly or indirectly arising out of the use, generation,
manufacture, production, storage, release, threatened release,
discharge, disposal or presence of a hazardous substance relating
to the Borrower's operations, business or property. This
indemnity will apply whether the hazardous substance is on, under
or about the Borrower's property or operations or property leased
to the Borrower. The indemnity includes but is not limited to
Attorneys Costs. The indemnity extends to the Agent and the
Lenders, their parents, affiliates, subsidiaries and all of their
directors, officers, employees, agents, successors, attorneys and
assigns. "Hazardous substances" means any substance, material or
waste that is or becomes designated or regulated as "toxic,"
"hazardous," "pollutant," or "contaminant" or a similar
designation or regulation under any federal, state or local law
(whether under common law, statute, regulation or otherwise) or
judicial or administrative interpretation of such, including
petroleum or natural gas. This indemnity will survive repayment
of all other Obligations.
15.12 Limitation of Liability.
NO CLAIM MAY BE MADE BY THE BORROWER, ANY LENDER OR OTHER
PERSON AGAINST THE AGENT, ANY LENDER, OR THE AFFILIATES,
DIRECTORS, OFFICERS, OFFICERS, EMPLOYEES, OR AGENTS OF ANY OF
THEM FOR ANY SPECIAL, INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES
IN RESPECT OF ANY CLAIM FOR BREACH OF CONTRACT OR ANY OTHER
THEORY OF LIABILITY ARISING OUT OF OR RELATED TO THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY
ACT, OMISSION OR EVENT OCCURRING IN CONNECTION THEREWITH, AND THE
BORROWER AND EACH LENDER HEREBY WAIVE, RELEASE AND AGREE NOT TO
SUE UPON ANY CLAIM FOR SUCH DAMAGES, WHETHER OR NOT ACCRUED AND
WHETHER OR NOT KNOWN OR SUSPECTED TO EXIST IN ITS FAVOR.
15.13 Final Agreement.
This Agreement and the other Loan Documents are intended
by the Borrower, the Agent and the Lenders to be the final,
complete, and exclusive expression of the agreement between them.
This Agreement supersedes any and all prior oral or written
agreements relating to the subject matter hereof. No
modification, rescission, waiver, release, or amendment of any
provision of this Agreement or any other Loan Document shall be
made, except by a written agreement signed by the Borrower and a
duly authorized officer of each of the Agent and the requisite
Lenders.
15.14 Counterparts.
This Agreement may be executed in any number of
counterparts, and by the Agent, each Lender and the Borrower in
separate counterparts, each of which shall be an original, but
all of which shall together constitute one and the same
agreement; signature pages may be detached from multiple separate
counterparts and attached to a single counterpart so that all
signature pages are physically attached to the same document.
15.15 Captions.
The captions contained in this Agreement are for
convenience of reference only, are without substantive meaning
and should not be construed to modify, enlarge, or restrict any
provision.
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15.16 Right of Setoff.
In addition to any rights and remedies of the Lenders
provided by law, if an Event of Default exists or the Loans have
been accelerated, each Lender is authorized at any time and from
time to time, without prior notice to the Borrower, any such
notice being waived by the Borrower to the fullest extent
permitted by law, to set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any
time held by, and other indebtedness at any time owing by, such
Lender to or for the credit or the account of the Borrower
against any and all Obligations owing to such Lender, now or
hereafter existing, irrespective of whether or not the Agent or
such Lender shall have made demand under this Agreement or any
Loan Document and although such Obligations may be contingent or
unmatured. Each Lender agrees promptly to notify the Borrower
and the Agent after any such set-off and application made by such
Lender; provided, however, that the failure to give such notice
shall not affect the validity of such set-off and application.
NOTWITHSTANDING THE FOREGOING, NO LENDER SHALL EXERCISE ANY RIGHT
OF SET-OFF, BANKER'S LIEN, OR THE LIKE AGAINST ANY DEPOSIT
ACCOUNT OR PROPERTY OF THE BORROWER HELD OR MAINTAINED BY SUCH
LENDER WITHOUT THE PRIOR WRITTEN UNANIMOUS CONSENT OF THE
LENDERS.
15.17 Intentionally Deleted.
15.18 Intentionally Deleted.
15.19 Agency of the Parent for each other Borrower.
Each of the other Borrowers appoints the Parent as its
agent for all purposes relevant to this Agreement, including the
giving and receipt of notices and execution and delivery of all
documents, instruments and certificates contemplated herein and
all modifications hereto. Any acknowledgement, consent,
direction, certification or other action which might otherwise be
valid or effective only if given or taken by all of the Borrowers
or acting singly, shall be valid and effective if given or taken
only by the Parent, whether or not either of the other Borrowers
joins therein.
IN WITNESS WHEREOF, the parties have entered into this
Agreement on the date first above written.
"BORROWER"
Nicholas Financial, Inc.
By:/s/ Peter L. Vosotas
Title: CEO, President
"AGENT"
Bank of America, N.A., as the
Agent
By:/s/ James Smith
Vice President
79
"LENDERS"
Commitment: $45,000,000 Bank of America, N.A.,
Pro Rata Share: 75% as a Lender
By:/s/ James Smith
Vice President
Commitment: $15,000,000 Hibernia National Bank,
Pro Rata Share: 25% as a Lender
By:/s/Lori Mitchell
Senior Vice President
1
EXHIBIT A
Intentionally Deleted
1
EXHIBIT B
FORM OF BORROWING BASE CERTIFICATE
1
EXHIBIT C
INTENTIONALLY DELETED
1
EXHIBIT D
NOTICE OF BORROWING
Date:______________, __
To: Bank of America, N.A., as Agent for the Lenders who are
parties to the Amended and Restated Loan and Security
Agreement dated as of August , 2000 (as extended,
renewed, amended or restated from time to time, the "Loan and
Security Agreement") among Nicholas Financial, Inc., certain
Lenders which are signatories thereto and Bank of America,
N.A., as Agent
Ladies and Gentlemen:
The undersigned, Nicholas Financial, Inc. (the "Borrower"),
refers to the Loan and Security Agreement, the terms defined
therein being used herein as therein defined, and hereby gives
you notice irrevocably of the Borrowing specified below:
1. The Business Day of the proposed Borrowing is:
2. The aggregate amount of the proposed Borrowing is:
3. The Borrowing is to be comprised of $ of Base
Rate and $ of LIBOR Rate Loans.
The duration of the Interest Period for the LIBOR Rate
Loans, if any, included in the Borrowing shall be _____ months.
The undersigned hereby certifies that the following
statements are true on the date hereof, and will be true on the
date of the proposed Borrowing, before and after giving effect
thereto and to the application of the proceeds therefrom:
(a) The representations and warranties of the Borrower contained
in the Loan and Security Agreement are true and correct as though
made on and as of such date;
(b) No Default or Event of Default has occurred and is
continuing, or would result from such proposed Borrowing; and
2
(c)
The proposed Borrowing will not cause the aggregate
principal amount of all outstanding Revolving Loans to exceed
the Borrowing Base or the combined Commitments of the Lenders.
NICHOLAS FINANCIAL, INC.
By:/s/Ralph Finkenbrink
Title: Senior Vice President
1
EXHIBIT E
NOTICE OF CONTINUATION/CONVERSION
Date: August __, 2000
To: Bank of America, N.A., as Agent for the Lenders to the
Amended and Restated Loan and Security Agreement dated as of
August , 2000 (as extended, renewed, amended or
restated from time to time, the "Loan and Security
Agreement") among Nicholas Financial, Inc., certain Lenders
which are signatories thereto and Bank of America, N.A., as
Agent
Ladies and Gentlemen:
The undersigned, Nicholas Financial, Inc. (the "Borrower"),
refers to the Loan and Security Agreement, the terms defined
therein being used herein as therein defined, and hereby gives
you notice irrevocably of the [conversion] [continuation] of the
Loans specified herein, that:
1. The Continuation/Conversion Date is:
2. The aggregate amount of the Loans to be [converted]
[continued] is $
3. The Loans are to be [converted into] [continued as]
[LIBOR Rate] [Base Rate] Loans.
4. The duration of the Interest Period for the LIBOR Rate
Loans included in the [conversion] [continuation]
shall be months.
The undersigned hereby certifies that the following
statements are true on the date hereof, and will be true on the
proposed Continuation/Conversion Date, before and after giving
effect thereto and to the application of the proceeds therefrom:
(a) The representations and warranties of the Borrower
contained in the Loan and Security Agreement are true and correct
as though made on and as of such date;
(b) No Default or Event of Default has occurred and is
continuing, or would result from such proposed [conversion]
[continuation]; and
The proposed conversion-continuation will not cause the aggregate
principal amount of all outstanding Revolving Loans to exceed
the Borrowing Base or the combined Commitments of the Lenders.
2
NICHOLAS FINANCIAL, INC.
By:
Title:
1
EXHIBIT F
[FORM OF] ASSIGNMENT AND ACCEPTANCE AGREEMENT
This ASSIGNMENT AND ACCEPTANCE AGREEMENT (this "Assignment
and Acceptance") dated as of ____________________, __ is made
between ______________________________ (the "Assignor") and
__________________________ (the "Assignee").
RECITALS
WHEREAS, the Assignor is party to that certain Amended and
Restated Loan and Security Agreement dated as of August ,
2000 (as amended, amended and restated, modified, supplemented or
renewed, the "Credit Agreement") among Nicholas Financial, Inc.,
a Florida corporation (the "Borrower"), the several financial
institutions from time to time party thereto (including the
Assignor, the "Lenders"), and Bank of America, N. A., as agent
for the Lenders (the "Agent"). Any terms defined in the Credit
Agreement and not defined in this Assignment and Acceptance are
used herein as defined in the Credit Agreement;
WHEREAS, as provided under the Credit Agreement, the
Assignor has committed to making Loans (the "Committed Loans") to
the Borrower in an aggregate amount not to exceed $__________
(the "Commitment");
WHEREAS, the Assignor has made Committed Loans in the
aggregate principal amount of $__________ to the Borrower;
WHEREAS, the Assignor wishes to assign to the Assignee
[part of the] [all] rights and obligations of the Assignor under
the Credit Agreement in respect of its Commitment, together with
a corresponding portion of each of its outstanding Committed
Loans, in an amount equal to $__________ (the "Assigned Amount")
on the terms and subject to the conditions set forth herein and
the Assignee wishes to accept assignment of such rights and to
assume such obligations from the Assignor on such terms and
subject to such conditions;
NOW, THEREFORE, in consideration of the foregoing and
the mutual agreements contained herein, the parties hereto agree
as follows:
1. Assignment and Acceptance.
(a) Subject to the terms and conditions of this
Assignment and Acceptance, (i) the Assignor hereby sells,
transfers and assigns to the Assignee, and (ii) the Assignee
hereby purchases, assumes and undertakes from the Assignor,
without recourse and without representation or warranty (except
as provided in this Assignment and Acceptance) __% (the
"Assignee's Percentage Share") of (A) the Commitment and the
Committed Loans and(B) all related rights, benefits, obligations,
liabilities and indemnities of the Assignor under and in
connection with the Credit Agreement and the Loan Documents.
2
(b) With effect on and after the Effective Date (as
defined in Section 5 hereof), the Assignee shall be a party to
the Credit Agreement and succeed to all of the rights and be
obligated to perform all of the obligations of a Lender under the
Credit Agreement, including the requirements concerning
confidentiality and the payment of indemnification, with a
Commitment in an amount equal to the Assigned Amount. The
Assignee agrees that it will perform in accordance with their
terms all of the obligations which by the terms of the Credit
Agreement are required to be performed by it as a Lender. It is
the intent of the parties hereto that the Commitment of the
Assignor shall, as of the Effective Date, be reduced by an
amount equal to the Assigned Amount and the Assignor shall
relinquish its rights and be released from its obligations under
the Credit Agreement to the extent such obligations have been
assumed by the Assignee; provided, however, the Assignor shall
not relinquish its rights under Sections __ and __ of the Credit
Agreement to the extent such rights relate to the time prior to
the Effective Date.
(c) After giving effect to the assignment and
assumption set forth herein, on the Effective Date the Assignee's
Commitment will be $__________.
(d) After giving effect to the assignment and
assumption set forth herein, on the Effective Date the Assignor's
Commitment will be $__________.
2. Payments.
(a) As consideration for the sale, assignment and
transfer contemplated in Section 1 hereof, the Assignee shall pay
to the Assignor on the Effective Date in immediately available
funds an amount equal to $__________, representing the Assignee's
Pro Rata Share of the principal amount of all Committed Loans.
(b) The Assignee further agrees to pay to the Agent a
processing fee in the amount specified in Section (__) of the
Credit Agreement.
3. Reallocation of Payments.
Any interest, fees and other payments accrued to the
Effective Date with respect to the Commitment, and the Committed
Loans shall be for the account of the Assignor. Any interest,
fees and other payments accrued on and after the Effective Date
with respect to the Assigned Amount shall be for the account of
the Assignee. Each of the Assignor and the Assignee agrees that
it will hold in trust for the other party any interest, fees and
other amounts which it may receive to which the other party is
entitled pursuant to the preceding sentence and pay to the other
party any such amounts which it may receive promptly upon
receipt.
4. Independent Credit Decision.
The Assignee (a) acknowledges that it has received a copy of
the Credit Agreement and the Schedules and Exhibits thereto,
together with copies of the most recent financial statements of
the Borrower, and such other documents and information as it has
deemed appropriate to make its own credit and legal analysis and
decision to enter into this Assignment and Acceptance; and
(b) agrees that it will, independently and without reliance upon
the Assignor, the Agent or any other Lender and based on such
documents and information as it shall deem appropriate at the
time, continue to make its own credit and legal decisions in
taking or not taking action under the Credit Agreement.
3
5. Effective Date; Notices.
(a) As between the Assignor and the Assignee, the
effective date for this Assignment and Acceptance shall be _____,
(the "Effective Date"); provided that the following conditions
precedent have been satisfied on or before the Effective Date:
(i) this Assignment and Acceptance shall be
executed and delivered by the Assignor and the Assignee;
[(ii) the consent of the Agent required for an
effective assignment of the Assigned Amount by the Assignor to
the Assignee shall have been duly obtained and shall be in full
force and effect as of the Effective Date;]
(iii) the Assignee shall pay to the Assignor
all amounts due to the Assignor under this Assignment and
Acceptance;
(iv) the Assignee shall have complied with
Section ( ) of the Credit Agreement (if applicable);]
(v) the processing fee referred to in
Section 2(b) hereof and in Section of the Credit Agreement
shall have been paid to the Agent; and
(b) Promptly following the execution of this
Assignment and Acceptance, the Assignor shall deliver to the
Borrower and the Agent for acknowledgment by the Agent, a Notice
of Assignment in the form attached hereto as Schedule 1.
6. Agent. [INCLUDE ONLY IF ASSIGNOR IS AGENT]
(a) The Assignee hereby appoints and authorizes the
Assignor to take such action as agent on its behalf and to
exercise such powers under the Credit Agreement as are delegated
to the Agent by the Lenders pursuant to the terms of the Credit
Agreement.
(b) The Assignee shall assume no duties or obligations
held by the Assignor in its capacity as Agent under the Credit
Agreement.
7. Withholding Tax.
The Assignee (a) represents and warrants to the Lender, the
Agent and the Borrower that under applicable law and treaties no
tax will be required to be withheld by the Lender with respect to
any payments to be made to the Assignee hereunder, (b) agrees to
furnish (if it is organized under the laws of any jurisdiction
other than the United States or any State thereof) to the Agent
and the Borrower prior to the time that the Agent or Borrower is
required to make any payment of principal, interest or fees
hereunder, duplicate executed originals of either U.S. Internal
Revenue Service Form 4224 or U.S. Internal Revenue Service Form
1001 (wherein the Assignee claims entitlement to the benefits of
a tax treaty that provides for a complete exemption from U.S.
federal income withholding tax on all payments hereunder) and
agrees to provide new Forms 4224 or 1001 upon the expiration of
any previously delivered form or comparable statements in
accordance with applicable U.S. law and regulations and
amendments thereto, duly executed and completed by the Assignee,
and (c) agrees to comply with all applicable U.S. laws and
regulations with regard to such withholding tax exemption.
4
8. Representations and Warranties.
(a) The Assignor represents and warrants that (i) it
is the legal and beneficial owner of the interest being assigned
by it hereunder and that such interest is free and clear of any
Lien or other adverse claim; (ii) it is duly organized and
existing and it has the full power and authority to take, and has
taken, all action necessary to execute and deliver this
Assignment and Acceptance and any other documents required or
permitted to be executed or delivered by it in connection with
this Assignment and Acceptance and to fulfill its obligations
hereunder; (iii) no notices to, or consents, authorizations or
approvals of, any Person are required (other than any already
given or obtained) for its due execution, delivery and
performance of this Assignment and Acceptance, and apart from
any agreements or undertakings or filings required by the
Credit Agreement, no further action by, or notice to, or filing
with, any Person is required of it for such execution, delivery
or performance; and (iv) this Assignment and Acceptance has been
duly executed and delivered by it and constitutes the legal,
valid and binding obligation of the Assignor, enforceable against
the Assignor in accordance with the terms hereof, subject, as to
enforcement, to bankruptcy, insolvency, moratorium,
reorganization and other laws of general application relating to
or affecting creditors' rights and to general equitable
principles.
(b) The Assignor makes no representation or warranty
and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with the
Credit Agreement or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of the Credit
Agreement or any other instrument or document furnished pursuant
thereto. The Assignor makes no representation or warranty in
connection with, and assumes no responsibility with respect to,
the solvency, financial condition or statements of the Borrower,
or the performance or observance by the Borrower, of any of its
respective obligations under the Credit Agreement or any other
instrument or document furnished in connection therewith.
(c) The Assignee represents and warrants that (i) it
is duly organized and existing and it has full power and
authority to take, and has taken, all action necessary to execute
and deliver this Assignment and Acceptance and any other
documents required or permitted to be executed or delivered by it
in connection with this Assignment and Acceptance, and to fulfill
its obligations hereunder; (ii) no notices to, or consents,
authorizations or approvals of, any Person are required (other
than any already given or obtained) for its due execution,
delivery and performance of this Assignment and Acceptance; and
apart from any agreements or undertakings or filings required by
the Credit Agreement, no further action by, or notice to, or
filing with, any Person is required of it for such execution,
delivery or performance; (iii) this Assignment and Acceptance has
been duly executed and delivered by it and constitutes the legal,
valid and binding obligation of the Assignee, enforceable against
the Assignee in accordance with the terms hereof, subject, as to
enforcement, to bankruptcy, insolvency, moratorium,
reorganization and other laws of general application relating to
or affecting creditors' rights and to general equitable
principles; [and (iv) it is an Eligible Assignee.]
5
9. Further Assurances.
The Assignor and the Assignee each hereby agree to execute
and deliver such other instruments, and take such other action,
as either party may reasonably request in connection with the
transactions contemplated by this Assignment and Acceptance,
including the delivery of any notices or other documents or
instruments to the Borrower or the Agent, which may be required
in connection with the assignment and assumption contemplated
hereby.
10. Miscellaneous.
(a) Any amendment or waiver of any provision of this
Assignment and Acceptance shall be in writing and signed by the
parties hereto. No failure or delay by either party hereto in
exercising any right, power or privilege hereunder shall
operate as a waiver thereof and any waiver of any breach of the
provisions of this Assignment and Acceptance shall be without
prejudice to any rights with respect to any other or further
breach thereof.
(b) All payments made hereunder shall be made without
any set-off or counterclaim.
(c) The Assignor and the Assignee shall each pay its
own costs and expenses incurred in connection with the
negotiation, preparation, execution and performance of this
Assignment and Acceptance.
(d) This Assignment and Acceptance may be executed in
any number of counterparts and all of such counterparts taken
together shall be deemed to constitute one and the same
instrument.
(e) THIS ASSIGNMENT AND ACCEPTANCE SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF
[Note: confirm choice of law]. The Assignor and the Assignee
each irrevocably submits to the non-exclusive jurisdiction of any
State or Federal court sitting in [ ] over any suit, action or
proceeding arising out of or relating to this Assignment and
Acceptance and irrevocably agrees that all claims in respect of
such action or proceeding may be heard and determined in such
[ ] State or Federal court. Each party to this Assignment and
Acceptance hereby irrevocably waives, to the fullest extent it
may effectively do so, the defense of an inconvenient forum to
the maintenance of such action or proceeding.
(f) THE ASSIGNOR AND THE ASSIGNEE EACH HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY
MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED
HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS
ASSIGNMENT AND ACCEPTANCE , THE CREDIT AGREEMENT, ANY RELATED
DOCUMENTS AND AGREEMENTS OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, OR STATEMENTS (WHETHER ORAL OR WRITTEN).
IN WITNESS WHEREOF, the Assignor and the Assignee have
caused this Assignment and Acceptance to be executed and
delivered by their duly authorized officers as of the date first
above written.
[ASSIGNOR]
By:
Title:
By:
Title:
Address:
[ASSIGNEE]
By:
Title:
By:
Title:
Address:
1
SCHEDULE 1
NOTICE OF ASSIGNMENT AND ACCEPTANCE
Bank of America, N.A.
335 Madison Avenue
New York, NY 10017
Attn:
Re: Nicholas Financial, Inc.
2454 McMullen Booth Road
Building C, #501B
Clearwater, FL 34619-1340
Ladies and Gentlemen:
We refer to the Amended and Restated Loan and Security
Agreement dated as of August ___, 2000 (as amended, amended and
restated, modified, supplemented or renewed from time to time the
"Credit Agreement") among Nicholas Financial, Inc. (the
"Borrower"), the Lenders referred to therein and Bank of America,
N. A., as agent for the Lenders (the "Agent"). Terms defined in
the Credit Agreement are used herein as therein defined.
1. We hereby give you notice of, and request your consent
to, the assignment by ______________ (the "Assignor") to
_______________ (the "Assignee") of _____% of the right, title
and interest of the Assignor in and to the Credit Agreement
(including the right, title and interest of the Assignor in and
to the Commitments of the Assignor, all outstanding Loans made by
the Assignor pursuant to the Assignment and Acceptance Agreement
attached hereto (the "Assignment and Acceptance"). We understand
and agree that the Assignor's Commitment, as of ,
, is $ ___________, and the aggregate amount of its outstanding
Loans is $_____________.
2. The Assignee agrees that, upon receiving the consent of
the Agent and, if applicable, the Borrower to such assignment,the
Assignee will be bound by the terms of the Credit Agreement as
fully and to the same extent as if the Assignee were the Lender
originally holding such interest in the Credit Agreement.
3. The following administrative details apply to the
Assignee:
(A) Notice Address:
Assignee name:
Address:
Attention:
Telephone: (___)
Telecopier: (___)
Telex (Answerback):
(B) Payment Instructions:
Account No.:
At:
Reference:
Attention:
4. You are entitled to rely upon the representations,
warranties and covenants of each of the Assignor and Assignee
contained in the Assignment and Acceptance.
IN WITNESS WHEREOF, the Assignor and the Assignee have
caused this Notice of Assignment and Acceptance to be executed by
their respective duly authorized officials, officers or agents as
of the date first above mentioned.
Very truly yours,
[NAME OF ASSIGNOR]
By:
Title:
[NAME OF ASSIGNEE]
By:
Title:
2
ACKNOWLEDGED AND ASSIGNMENT
CONSENTED TO:
Bank of America, N. A.
as Agent
By:
Title:
Exhibit 10.1.14
-------------------
1
AMENDMENT NO. 1
TO
LOAN AGREEMENT
AMENDMENT NO. 1 dated as of March 15, 2001, among NICHOLAS
FINANCIAL, INC. ("Borrower"), BANK ONE, N.A., a national banking
association with its principal offices in Columbus, Ohio ("Bank
One"), the financial institutions listed on the signature pages
hereof (the "Existing Lenders") and BANK OF AMERICA, N.A., as
agent for the Existing Lenders (the "Agent").
WHEREAS, the Borrower, the Agent and the Existing Lenders
are parties to a certain Amended and Restated Loan and Security
Agreement, dated as of August 1, 2000 (the "Loan Agreement"),
pursuant to which the Existing Lenders have agreed, subject to
the terms and conditions therein set forth, to provide certain
financial accommodations to the Borrower; and
WHEREAS, at the request of the Borrower Bank One has agreed
to become a party to the Loan Agreement and a Lender thereunder,
with a Commitment of $15,000,000;
WHEREAS, the Existing Lenders and the Agent are willing to
accept the addition of Bank One as a party to and a Lender under
the Loan Agreement with a Commitment as aforesaid;
WHEREAS, the Borrower desires that the Lenders amend certain
provisions of the Loan Agreement, and the Lenders are willing,
subject to the terms and conditions hereinafter set forth, to do
so;
NOW, THEREFORE, the parties hereto hereby agree as follows:
SECTION 1. CAPITALIZED TERMS. Capitalized terms used
but not defined herein shall have the respective meanings set
forth in the Loan Agreement.
SECTION 2. AMENDMENTS
(a) Clause (m) of the definition of "Eligible
Contracts" set forth in Section 1.1 of the Loan Agreement is
amended to delete the word "and" at the end of subclause (vi)
and to add the following before the period at the end of
subclause (vii):
"and
(viii) the aggregate number of Direct
Loan Contracts does not exceed 10% of the
total number of Contracts outstanding at any
one time."
(b) From and after the effective date of this
Amendment, Bank One shall become a party to, and a Lender under,
the Loan Agreement, with a Commitment on such effective date
equal to $15,000,000. Accordingly, from and after the effective
date of this Amendment, (i) all references in the Loan Agreement
and the other Loan Documents to "Lender" or "Lenders" shall
include Bank One, all references therein to "Commitment" or
"Commitments" shall include the commitment of Bank One specified
herein, all references therein to "Loan" or "Loans" shall
include any loan made by Bank One under the Loan Agreement
pursuant to its Commitment provided for herein and all
references therein to "Obligations" shall include all present
and future liabilities, obligations and debts owing by any
Obligor to Bank One under the Loan Agreement or any other Loan
Document, as amended hereby and from time to time hereafter,
(ii) the Maximum Revolver Amount under the Loan Agreement shall
be increased by $15,000,000 (the amount of Bank One's
Commitment) from $60,000,000 to $75,000,000 and (iii) the
definition of "Maximum Revolver Amount" set forth in Section
1.1 of the Loan Agreement is amended to read in its entirety as
follows:
2
"Maximum Revolver Amount" means $75,000,000."
(c) Section 3.8 of the Loan Agreement is amended
to delete the amount of "$10,000" set forth in the first line
thereof and substituting therefor the amount of "$20,000."
(d) Section 9.21 of the Loan Agreement is
amended to delete the ratio "5 to 1" set forth in clause (b)
thereof and substituting therefor the ratio "4.75 to 1."
(e) Section 9.29 of the Loan Agreement is hereby
amended to read in its entirety as follows:
"9.29 Credit Guidelines. The
Borrower shall not make any changes in its
Credit Guidelines (a copy of which has been
previously furnished by the Borrower to the
Lenders) without the Lenders' prior written
consent which any of the Lenders may withhold
in its sole and absolute discretion. The
Borrower shall not purchase or otherwise
acquire contracts which do not comply with
the Credit Guidelines."
SECTION 3. EFFECTIVENESS. The amendment made herein
shall become effective when Bank One and the Existing Lenders
shall have duly executed and delivered this Agreement and
counterparts hereof shall have been duly executed and delivered
to the Agent by the Borrower.
SECTION 4. COUNTERPARTS AND GOVERNING LAW. This
Agreement may be executed in counterparts, each of which shall be
an original, and all of which, taken together, shall constitute a
single instrument. This Agreement shall be governed by, and
construed in accordance with the law of the State of New York.
3
SECTION 5. REFERENCES TO LOAN AGREEMENT. From and after
the effectiveness of this Agreement and the waivers and
agreements contemplated hereby, all references in the Loan
Agreement to "this Agreement", "hereof", "herein", and similar
terms shall mean and refer to the Loan Agreement as certain
provisions thereof are amended or supplemented by this Agreement,
and all references in other documents to the Loan Agreement shall
mean such agreement as certain provisions thereof are amended or
supplemented by this Agreement.
SECTION 6. INVALIDITY. Whenever possible, each
provision of this Agreement shall be interpreted in such manner
as to be effective and valid under all applicable laws and
regulations. If, however, any provision of this Agreement shall
be prohibited by or invalid under any such law or regulation, it
shall be deemed modified to conform to the minimum requirements
of such law or regulation, or if for any reason it is not deemed
so modified, it shall be ineffective and valid only to the extent
of such prohibition or invalidity without the remainder thereof
or any of the remaining provisions of this Agreement being
prohibited or invalid.
SECTION 7. RATIFICATION AND CONFIRMATION. The Loan
Agreement is hereby ratified and confirmed and, except as herein
otherwise agreed, remains unmodified and in full force and
effect.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized
officers as of the day and year first above written.
Borrower:
NICHOLAS FINANCIAL, INC.
By:/s/ Peter L. Vosotas
Title: CEO, President
Agent:
BANK OF AMERICA, N.A.,
as Agent
By: /s/ James Smith
Title: Vice President
Existing Lenders:
BANK OF AMERICA, N.A.
By: /s/ James Smith
Title: Vice President
4
HIBERNIA NATIONAL BANK
By:/s/Michael Lee
Title:Assistant Vice President
Bank One:
BANK ONE, N.A.
By:/s/John Glauntz
Title:Commercial Loan Officer