<PAGE> 1
United States
Securities and Exchange Commission
Washington, D. C. 20549
FORM 10-Q
(Mark One)
( X ) Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended September 30,1994
or
( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from
______________ to ______________
Commission file number 0-5467
THE FOOTHILL GROUP, INC.
______________________________________________________________________________
(Exact name of registrant as specified in its charter)
Delaware 94-1663353
_____________________________________ ______________________________
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
11111 Santa Monica Boulevard
Los Angeles, California 90025
_____________________________________ ______________________________
(Address of principal executive offices) (Zip Code)
(310) 996-7000
______________________________________________________________________________
(Registrant's telephone number, including area code)
Not applicable
______________________________________________________________________________
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 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
____ _____
Applicable Only to Corporate Issuers
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of latest practicable date.
Title of Each Class Number of Shares Outstanding
------------------- ----------------------------
Class A Common Stock, No Par Value 16,404,391
(As of September 30, 1994)
<PAGE> 2
THE FOOTHILL GROUP, INC.
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
Part I - Financial Information Page No.
- ------------------------------ --------
<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Consolidated Statements of Income . . . . . . . . . . . . . . . . . . . . . . . . . 2
Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . 3
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . 4 to 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . 6 to 12
Part II - Other Information
- ---------------------------
Items 1 to 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
</TABLE>
<PAGE> 3
THE FOOTHILL GROUP, INC.
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1994 AND DECEMBER 31, 1993
(Dollars in thousands)
<TABLE>
<CAPTION>
ITEM 1
_______________________________________________________________________________________________________________
SEPTEMBER 30, DECEMBER 31,
1994 1993
_______________________________________________________________________________________________________________
ASSETS (Unaudited)
<S> <C> <C>
Cash and cash equivalents $909 $50,907
Equity, debt and partnership investments 39,965 32,842
Finance receivables:
Revolving loans 488,487 326,373
Term loans 187,272 188,145
___________________________________________________________________________________________________________
Finance receivables 675,759 514,518
Allowance for credit losses 16,960 14,057
___________________________________________________________________________________________________________
Finance receivables, net 658,799 500,461
Repossessed assets, net 752 -
Prepaid income taxes 8,849 9,009
Deferred fund and debt issuance costs, net 7,877 9,897
Property and equipment, at cost less accumulated depreciation and
amortization ($2,174 at September 30, 1994; $1,769 at December 31, 1993) 2,156 2,269
Other assets (principally monies due from loan participants) 11,105 1,122
___________________________________________________________________________________________________________
$730,412 $606,507
===========================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Commercial paper $229,990 $148,283
Other short term borrowings 10,100 -
Senior notes payable 245,444 237,404
Accounts payable and accrued liabilities 22,430 14,948
Subordinated notes and debentures 52,075 53,725
___________________________________________________________________________________________________________
Total liabilities 560,039 454,360
___________________________________________________________________________________________________________
Stockholders' equity:
Convertible preferred stock, $1.00 par value, $30.00 per share liquidation
preference, 9% cumulative, 100,000 shares issued and outstanding 2,900 2,900
Class A common stock, no par value, 16,404,391 shares
issued and outstanding (16,538,874 at December 31, 1993) 100,101 101,285
Unrealized gains, net of tax, on marketable debt and equity securities 19,473 19,672
Retained earnings 47,899 28,290
___________________________________________________________________________________________________________
Total stockholders' equity 170,373 152,147
___________________________________________________________________________________________________________
$730,412 $606,507
===========================================================================================================
</TABLE>
See accompanying notes.
1
<PAGE> 4
THE FOOTHILL GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1994 AND 1993
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
____________________________________________________________________________________________________________
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------- ------------------------
1994 1993 1994 1993
____________________________________________________________________________________________________________
<S> <C> <C> <C> <C>
Interest and fees earned $ 22,149 $ 16,805 $ 59,182 $ 47,211
Interest expense 7,649 5,455 18,799 15,468
____________________________________________________________________________________________________________
Net interest revenue 14,500 11,350 40,383 31,743
Asset management fees 1,302 1,479 4,157 4,706
Gains from asset sales and managed partnerships 2,284 5,063 22,795 14,036
Provision for credit losses 3,061 3,582 7,989 9,744
General and administrative expenses 4,992 4,384 17,654 14,039
____________________________________________________________________________________________________________
Income from continuing operations before income taxes 10,033 9,926 41,692 26,702
Provision for income taxes - continuing operations 4,314 4,152 17,928 11,208
____________________________________________________________________________________________________________
Income from continuing operations 5,719 5,774 23,764 15,494
Loss from discontinued operations - (124) - (343)
____________________________________________________________________________________________________________
Net income $ 5,719 $ 5,650 $ 23,764 $ 15,151
============================================================================================================
Per share data (shares in thousands):
Primary:
Income from continuing operations $ 0.34 $ 0.33 $ 1.39 $ 0.92
Discontinued operations - - - (0.02)
____________________________________________________________________________________________________________
Earnings per common and common equivalent share $ 0.34 $ 0.33 $ 1.39 $ 0.90
============================================================================================================
Fully diluted:
Income from continuing operations $ 0.33 $ 0.33 $ 1.35 $ 0.90
Discontinued operations - (0.01) - (0.02)
____________________________________________________________________________________________________________
Earnings per common share assuming full dilution $ 0.33 $ 0.32 $ 1.35 $ 0.88
============================================================================================================
Number of shares used in per share computations:
Primary 16,794 16,748 16,900 16,637
============================================================================================================
Fully diluted 17,481 17,441 17,574 17,318
============================================================================================================
</TABLE>
See accompanying notes.
2
<PAGE> 5
THE FOOTHILL GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30, 1994 AND 1993
(Dollars in thousands)
<TABLE>
<CAPTION>
___________________________________________________________________________________________________________
1994 1993
___________________________________________________________________________________________________________
<S> <C> <C>
OPERATING ACTIVITIES:
Income from continuing operations $ 23,764 $ 15,494
Adjustments to reconcile income from continuing operations to
net cash provided by operating activities:
Provision for credit losses 7,989 9,744
Depreciation and amortization 469 887
Amortization of deferred fund and debt issuance costs 1,726 1,764
Increase in accounts payable and accrued liabilities 7,320 2,090
Loss from discontinued operations - (343)
Other (10,721) (523)
___________________________________________________________________________________________________________
Net cash provided by operating activities 30,547 29,113
___________________________________________________________________________________________________________
INVESTING ACTIVITIES:
Proceeds from sales of investments and distributions from partnerships 2,606 9,956
Contributions made to partnerships and purchases of investments (4,635) (9,477)
Payments received from net finance receivables and sales of
repossessed assets 5,077,461 3,248,633
Disbursements made for net finance receivables and repossessed assets (5,248,937) (3,391,830)
Purchase of property and equipment (356) (767)
___________________________________________________________________________________________________________
Net cash used in investing activities (173,861) (143,485)
___________________________________________________________________________________________________________
FINANCING ACTIVITIES:
Decrease (increase) in deferred fund and debt issuance costs 295 (3,601)
Proceeds from commercial paper sales 1,092,948 521,039
Payments on commercial paper maturities (1,011,241) (414,714)
Proceeds from senior notes payable and other short term borrowings 40,100 12,556
Payments on senior notes payable and other short term borrowings (21,961) (19,858)
Payments on subordinated notes and debentures (1,650) (4,030)
Repurchase and retirement of common stock (3,725) -
Dividends paid per common share ($.15 in 1994, $.06 in 1993) (2,486) (973)
Dividends paid on preferred stock (203) (203)
Issuance of common stock 1,239 236
___________________________________________________________________________________________________________
Net cash provided by financing activities 93,316 90,452
___________________________________________________________________________________________________________
Net decrease in cash and cash equivalents (49,998) (23,920)
Cash and cash equivalents at beginning of period 50,907 39,765
___________________________________________________________________________________________________________
Cash and cash equivalents at end of period $ 909 $ 15,845
===========================================================================================================
Cash paid during the period for:
Interest expense $ 21,937 $ 21,644
Income taxes $ 17,344 $ 11,520
===========================================================================================================
</TABLE>
See accompanying notes.
3
<PAGE> 6
THE FOOTHILL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
SEPTEMBER 30, 1994
_______________________________________________________________________________
NOTE 1. BASIS OF PRESENTATION
_______________________________________________________________________________
The interim Financial Statements included herein have been prepared by
The Foothill Group, Inc. ("Registrant"; the Registrant together with its wholly
owned subsidiary, Foothill Capital Corporation, or "Foothill Capital", is
referred to as the "Company") without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission ("SEC"). Certain
information and footnote disclosures, normally included in financial statements
prepared in accordance with generally accepted accounting principles, have been
condensed or omitted pursuant to such SEC rules and regulations; nevertheless,
the Company believes that the disclosures are adequate to make the information
presented not misleading. These financial statements should be read in
conjunction with the consolidated financial statements and notes thereto
included in the Company's latest Annual Report. In the opinion of management,
all adjustments, including normal recurring adjustments necessary to present
fairly the financial position of the Company with respect to the interim
financial statements, and of the results of its operations for the nine month
period ended September 30, 1994, have been included. Certain reclassifications
have been made to prior year amounts to conform to the 1994 presentation. The
results of operations for interim periods are not necessarily indicative of
results for the full year.
_______________________________________________________________________________
NOTE 2. INCOME TAXES
_______________________________________________________________________________
For the interim periods ended September 30, 1994 and 1993, the
Company's provision for income taxes was 43% and 42%, respectively, which is
based on combined state and federal statutory tax rates.
_______________________________________________________________________________
NOTE 3. EARNINGS PER COMMON SHARE
_______________________________________________________________________________
Primary earnings per common share were determined by dividing net
income applicable to common stock by the weighted average number of common
equivalent shares outstanding. Fully diluted earnings per share calculations
also reflect the additional dilution which would occur through the conversion
of the Company's Convertible Preferred Stock and the resultant increased
availability of earnings due to the elimination of the cumulative dividend on
this preferred stock.
_______________________________________________________________________________
NOTE 4. CONTINGENCIES
_______________________________________________________________________________
Litigation
There are several lawsuits and claims pending against the Company
which management considers incident to normal operations, some of which seek
substantial monetary damages. Management, after review, including consultation
with counsel, believes that any ultimate liability which could arise from these
lawsuits and claims would not materially affect the consolidated financial
position of the Company.
_______________________________________________________________________________
NOTE 5. EQUITY, DEBT AND PARTNERSHIP INVESTMENTS
_______________________________________________________________________________
Equity securities are generally received as a result of exchanges of
private debt instruments and discounted receivables for new securities of the
reorganized debtors. At December 31, 1993, the Company adopted the
requirements of FASB Statement No. 115, "Accounting for Certain Investments in
Debt and Equity Securities," and classified its marketable debt and equity
securities as "available for sale." Accordingly, these securities have been
marked-to-market, with the increase in their carrying value, net of income
taxes, included as a component of stockholder's equity. Current market values
of both equity securities and marketable debt securities are estimated by the
Company's management based on market quotations which may be available only
from a limited number of dealers (or, for some securities, are not available)
and may not represent firm bids of such dealers or prices for actual sales.
The Company has recorded valuation adjustments in cases where an "other than
temporary" impairment in estimated net realizable value below the Company's
cost basis in corporate marketable debt securities is believed to have
occurred.
4
<PAGE> 7
THE FOOTHILL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
SEPTEMBER 30, 1994
The Company has investments in four limited partnerships, The Foothill
Fund, Foothill Recovery Fund, Foothill Partners, L.P. and Foothill Partners II,
L.P. ("the Funds"), in which the Registrant is a general partner. The 1%
general partner interest in Foothill Partners, L.P. is owned 60% by the
Registrant and 40% by certain of its officers as individuals. The 1% general
partner interest in Foothill Partners II, L.P. is owned 48% by the Registrant
and 52% by certain of its officers as individuals. The 1% general partner
interest in The Foothill Fund and in Foothill Recovery Fund is wholly owned by
the Registrant. The general partners make all investment decisions on behalf
of the partnerships and manage their operations. Foothill Partners, L.P. and
Foothill Partners II, L.P. were established to invest in performing and
nonperforming senior bank loans of distressed companies. The Registrant is
also a limited partner in The Foothill Fund and Foothill Recovery Fund. The
Foothill Fund and Foothill Recovery Fund were established to invest, primarily,
in the debt of restructuring and reorganizing companies. The Foothill Fund and
Foothill Recovery Fund are in their final year of operation and are expected to
be fully liquidated by December 31, 1994. The Registrant's investments in the
Funds are accounted for on an equity basis.
Management fees from the Funds, net of amortization of deferred fund
issuance costs, totaled $4,157,000 and $4,706,000 for the nine months ended
September 30, 1994 and 1993, respectively. Asset management fees will increase
or decrease depending on the amount of assets under management. Equity method
earnings recognized by the Registrant for its investments in the Funds for the
nine months ended September 30, 1994 and 1993 totaled $6,497,000 and
$5,385,000, respectively, and are included in gains from asset sales and
managed partnerships. Additionally, the Registrant has received override
allocations totaling $3,880,000 (the maximum level as defined in the Foothill
Partners II, L.P. limited partnership agreement) through September 30, 1994
resulting from its general partnership interest in Foothill Partners II, L.P..
Under the terms of the Foothill Partners II, L.P. limited partnership
agreement, these allocations are held in the partnership and treated as a
limited partnership investment by the Registrant. These allocations will, if
necessary, be used by the limited partners to fulfill any shortage in their
hurdle return distributions in the final liquidating stages of the partnership.
Due to the uncertainty of ultimate receipt of these allocations, the Registrant
has not recorded them as earnings. The Registrant will earn income on these
allocations in the future, pro-rata, with all other limited partners. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
The Company has agreements to jointly purchase loans with Foothill
Partners, L.P. and Foothill Partners II, L.P. At September 30, 1994, loans
outstanding which were purchased under these agreements by the Company amounted
to $28,836,000. Loan purchases under both of these agreements are subject to
Foothill Capital's normal due diligence and loan approval processes.
_______________________________________________________________________________
NOTE 6. NET INTEREST REVENUE
_______________________________________________________________________________
Net interest revenue is interest income plus loan related fees less
interest expense. The Company does not currently accrue income on certain
assets including discounted finance receivables due from certain borrowers in
reorganization or in the midst of restructuring, nonperforming finance
receivables and repossessed assets, but does incur holding costs, primarily
interest expense, which adversely affects net interest revenue. Fees consist
primarily of fees and charges related to finance receivables. These fees and
charges arise from the Company's commercial lending activities and include
servicing fees, prepayment penalties, commitment and guarantee fees, unused
line of credit fees and other miscellaneous charges. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
_______________________________________________________________________________
NOTE 7. GAINS FROM ASSET SALES AND MANAGED PARTNERSHIPS
_______________________________________________________________________________
Gains from asset sales arise from sales or exchanges of finance
receivables and equity securities, and occur irregularly. The Company often
does not control the timing of such sales or exchanges, which typically occur
in connection with the restructuring of discounted receivables held by the
Company and its managed partnerships. Gains from managed partnerships
represent equity method earnings from the Company's investment in the Funds.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations."
_______________________________________________________________________________
NOTE 8. FOOTHILL THRIFT SPIN-OFF
_______________________________________________________________________________
Effective December 23, 1993, the Registrant completed the spin-off of
its Foothill Thrift and Loan subsidiary to the Registrant's stockholders. All
previously reported financial results of Foothill Thrift and Loan, through the
record date for the spin-off, are classified as discontinued operations.
5
<PAGE> 8
ITEM 2
THE FOOTHILL GROUP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(UNAUDITED)
The following tables illustrate selected financial data (dollars in thousands):
<TABLE>
<CAPTION>
Three months ended September 30, Nine months ended September 30,
_______________________________________ _____________________________________
1994 1993 1994 1993
___________________ __________________ _________________ __________________
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SELECTED OPERATING DATA*:
Interest and fees earned $ 22,149 13.14% $ 16,805 12.62% $ 59,182 12.92% $ 47,211 12.92%
Interest expense 7,649 4.54% 5,455 4.10% 18,799 4.10% 15,468 4.23%
____________________________________________________________________________________________________________________________
Net interest revenue 14,500 8.60% 11,350 8.52% 40,383 8.82% 31,743 8.69%
Asset management fees 1,302 0.77% 1,479 1.11% 4,157 0.91% 4,706 1.29%
Gains from asset sales and managed
partnership 2,285 1.36% 5,063 3.80% 22,795 4.98% 14,036 3.84%
Provision for credit losses 3,061 1.82% 3,582 2.69% 7,989 1.74% 9,744 2.67%
General and administrative expenses 4,992 2.96% 4,384 3.29% 17,654 3.85% 14,039 3.84%
____________________________________________________________________________________________________________________________
Income from continuing operations before
taxes 10,034 5.95% 9,926 7.45% 41,692 9.12% 26,702 7.31%
Provision for income taxes - continuing
operations 4,315 2.56% 4,152 3.12% 17,928 3.91% 11,208 3.07%
____________________________________________________________________________________________________________________________
Income from continuing operations 5,719 3.39% 5,774 4.33% 23,764 5.21% 15,494 4.24%
Loss from discontinued operations - - (124) (0.09)% - - (343) (0.09)%
____________________________________________________________________________________________________________________________
Net income $ 5,719 3.39% $ 5,650 4.24% $ 23,764 5.21% $ 15,151 4.15%
============================================================================================================================
*Percentagesare computed using average assets ofcontinuing operations (excluding unrealized gains oninvestments) and have
been Discontinued operations are those of Foothill Thrift and Loan which was spun off to stockholders on December 23,
SELECTED BALANCE SHEET DATA:
Total assets $ 730,412 $ 585,596 $ 730,412 $ 585,596
Average assets** 674,402 548,747 610,778 503,792
Average assets of continuing operations** 674,402 532,626 610,778 487,385
Average stockholders' equity** 149,760 139,829 145,185 134,763
Average stockholders' equity in
continuting operations 149,760 123,708 145,185 118,356
Finance receivables 675,759 529,778 675,759 529,778
Average finance receivables** 615,699 507,930 559,688 464,971
============================================================================================================================
Sources of funds employed:
Commercial paper $ 229,990 $ 171,240 $ 229,990 $ 171,240
Other short term borrowings 10,100 - 10,100 -
Senior notes 245,444 212,359 245,444 212,359
Subordinated notes and debentures 52,075 44,910 52,075 44,910
Stockholders' equity 170,373 142,736 170,373 142,736
____________________________________________________________________________________________________________________________
Total funds employed $ 707,982 $ 571,245 $ 707,982 $ 571,245
============================================================================================================================
</TABLE>
**Averages are for the three and nine months ended. Average assets and average
equity exclude unrealized gains on marketable debt and equity securities.
6
<PAGE> 9
THE FOOTHILL GROUP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
(UNAUDITED)
SELECTED FINANCIAL DATA FOR FOOTHILL CAPITAL CORPORATION (DOLLARS
IN THOUSANDS)
<TABLE>
<CAPTION>
Three months ended September 30, Nine months ended September 30,
_______________________________________ _____________________________________________
1994 1993 1994 1993
_______________________________________________________________________________ _____________________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SELECTED OPERATING DATA*:
Interest and fees earned $ 21,828 13.62% $ 16,595 12.69% $ 58,216 13.45% $ 46,503 12.93%
Interest expense 7,898 4.93% 5,759 4.40% 19,541 4.51% 16,341 4.54%
_______________________________________________________________________________________________________________________________
Net interest revenue 13,930 8.69% 10,837 8.29% 38,675 8.94% 30,162 8.39%
Gains on asset sales 271 0.17% 3,010 2.30% 13,521 3.12% 8,989 2.50%
Provision for credit losses 2,957 1.84% 3,482 2.66% 7,885 1.82% 9,304 2.59%
General and administrative expenses 4,319 2.69% 3,725 2.85% 15,056 3.48% 11,921 3.31%
_______________________________________________________________________________________________________________________________
Income before income taxes 6,925 4.33% 6,640 5.08% 29,255 6.76% 17,926 4.99%
Provision for income taxes 2,978 1.86% 2,789 2.13% 12,580 2.91% 7,529 2.09%
_______________________________________________________________________________________________________________________________
Net income $ 3,947 2.47% $ 3,851 2.95% $ 16,675 3.85% $ 10,397 2.90%
===============================================================================================================================
*Percentages are computed using average assets (excluding unrealized gains on investments) and have been annualized.
SELECTED BALANCE SHEET DATA:
Total assets $ 693,696 $ 543,057 $ 693,696 $ 543,057
Average assets** 641,112 522,966 577,110 479,551
Finance receivables 663,366 524,164 663,366 524,164
Average finance receivables** 602,397 505,471 550,393 461,545
===============================================================================================================================
Sources of funds employed:
Commercial paper $ 229,990 $ 171,240 $ 229,990 $ 171,240
Other short term borrowings 10,100 - 10,100 -
Senior notes 243,650 208,173 243,650 208,173
Subordinated notes and debentures 61,575 57,160 61,575 57,160
Stockholder's equity 129,691 93,524 129,691 93,524
_______________________________________________________________________________________________________________________________
Total funds employed $ 675,006 $ 530,097 $ 675,006 $ 530,097
===============================================================================================================================
**Averages are for the three and nine months ended. Average assets exclude unrealized gains on marketable debt and
equity securities.
OTHER SELECTED DATA:
Nonperforming finance receivables
and repossessed assets*** $ 6,698 $ 14,500 $ 6,698 $ 14,500
Allowance for credit losses $ 16,657 $ 13,357 $ 16,657 $ 13,357
Actual writeoffs during the period $ 1,657 $ 2,502 $ 5,085 $ 6,474
Number of employees 115 108 115 108
===============================================================================================================================
</TABLE>
***Includes repossessed assets and loans that have contractual installments
more than sixty days past due.
7
<PAGE> 10
THE FOOTHILL GROUP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
(UNAUDITED)
_______________________________________________________________________________
FINANCE RECEIVABLES OUTSTANDING
_______________________________________________________________________________
Finance receivables increased $161,241,000 between December 31, 1993
and September 30, 1994 from $514,518,000 to $675,759,000. This increase in
outstanding loans was primarily the result of new business at Foothill Capital,
offset by normal loan repayments, payoffs and liquidations during the nine
month period.
Included in finance receivables at September 30, 1994 and
December 31, 1993 are purchased receivables totaling $29,817,000 and
$44,262,000, respectively. These loans, including several which can be valued
using market quotations, have an estimated market value of $33,426,000 and
$49,480,000, which is $3,609,000 and $5,218,000 more than the carrying value
at September 30, 1994 and December 31, 1993, respectively.
_______________________________________________________________________________
NET INCOME
_______________________________________________________________________________
The Company recorded net income of $5,719,000 for the three months
ended September 30, 1994 compared to $5,650,000 for the three months ended
September 30, 1993. For the nine months ended September 30, 1994 and 1993, the
Company recorded net income of $23,764,000 and $15,151,000 respectively. The
increase in net income for the nine months ended September 30, 1994 as compared
to the nine months ended September 30,1993 was primarily due to a significant
increase in net interest revenue and gains from asset sales and managed
partnerships combined with a reduction in the provision for credit losses.
This increase in net income was offset by a reduction in asset management fees
and increases in general and administrative expenses and the provision for
income taxes. Quarterly results of operations are not necessarily indicative
of results of future quarters.
_______________________________________________________________________________
ANALYSIS OF NET INTEREST REVENUE
_______________________________________________________________________________
Net interest revenue is interest income plus loan related fees less
interest expense.
Three months ended September 30, 1994 compared to three months ended
September 30, 1993:
Net interest revenue increased to $14,500,000 for the three months
ended September 30, 1994 from $11,350,000 for the same period in the previous
year, and increased as a percentage of average assets to 8.60% from 8.52%. For
the three months ended September 30, 1994, the increase in net interest revenue
in dollars was primarily due to a higher level of average finance receivables.
The increase as a percentage of average assets was due to an increase in loan
related fees as a percentage of average assets at Foothill Capital and a
reduction in cost of funds at Foothill Capital relative to the prime interest
rate. Loan related fees were $3,248,000 and $1,729,000 for the three months
ended September 30, 1994 and 1993, respectively.
Nine months ended September 30, 1994 compared to nine months ended
September 30, 1993:
Net interest revenue increased to $40,383,000 for the nine months
ended September 30, 1994 from $31,743,000 for the same period in the previous
year, and increased as a percentage of average assets to 8.82% from 8.69%. For
the nine months ended September 30, 1994, the increase in net interest revenue
in dollars was primarily due to a higher level of average finance receivables.
The increase as a percentage of average assets was due to an increase in loan
related fees as a percentage of average assets at Foothill Capital and a
reduction in cost of funds at Foothill Capital relative to the prime interest
rate. Loan related fees were $8,395,000 and $4,994,000 for the nine months
ended September 30, 1994 and 1993, respectively.
8
<PAGE> 11
THE FOOTHILL GROUP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
(UNAUDITED)
________________________________________________________________________________
ASSET MANAGEMENT FEES
________________________________________________________________________________
For the three months ended September 30, 1994 and 1993, the Company
recorded asset management fees of $1,302,000 and $1,479,000, respectively. The
decrease for the three month period ended September 30, 1994 was due to a
decrease in the average level of assets managed by the Company as Foothill Fund
and Foothill Recovery Fund are liquidating.
For the nine months ended September 30, 1994 and 1993, the Company
recorded asset management fees of $4,157,000 and $4,706,000, respectively. The
decrease for the nine month period ended September 30, 1994 was due to a
decrease in the average level of assets managed by the Company as Foothill Fund
and Foothill Recovery Fund are liquidating.
_______________________________________________________________________________
GAINS FROM ASSET SALES AND MANAGED PARTNERSHIPS
_______________________________________________________________________________
Gains from asset sales are generated by sales or exchanges of finance
receivables and equity securities, and occur irregularly. Gains from managed
partnerships arise from profit distributions received from the Registrant's
investments in the Funds and vary by quarter, depending on the level of profits
generated by the Funds.
For the three months ended September 30, 1994 and 1993, the Company
recorded gains from asset sales and managed partnerships of $2,285,000 and
$5,063,000, respectively. For the nine months ended September 30, 1994 and
1993, the Company recorded gains from asset sales and managed partnerships of
$22,795,000 and $14,036,000, respectively.
WRITEOFFS AND ALLOWANCE FOR CREDIT LOSSES
The Company maintains an allowance for credit losses at a level it
considers adequate to cover future potential losses on finance receivables.
The amount of the allowance is based on management's evaluation of numerous
factors, including historical loss experience and adequacy of collateral. The
level of the allowance is affected by the provision for losses charged to
expense, writeoffs and recoveries of amounts previously written off.
The provision for credit losses decreased from $3,582,000 for the
three months ended September 30, 1993 to $3,061,000 for the three months ended
September 30, 1994. The provision decreased from $9,744,000 for the nine
months ended September 30, 1993 to $7,989,000 in 1994. As shown in the table
below, the decrease in the provision was primarily due to lower actual
writeoffs recorded in both the three and nine month periods ending September
30, 1994. The general allowance for credit losses as a percentage of finance
receivables plus repossessed assets decreased slightly from 2.54% at September
30, 1993 to 2.51% at September 30, 1994, respectively.
The following chart illustrates the level of the allowance, the
provision charged to expense and net credit losses:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Three months ended Nine months ended
--------------------------------------------------------
(Dollars in thousands) 9/30/94 9/30/93 9/30/94 9/30/93
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Finance receivables plus repossessed assets $ 676,511 $ 529,778 $ 676,511 $529,778
Allowance for credit losses 16,960 13,457 16,960 13,457
Percent of such allowance to finance receivables plus repossessed assets 2.51% 2.54% 2.51% 2.54%
Actual writeoffs during the period, net of recoveries 1,657 2,502 5,085 6,814
Provision for credit losses charged to income during the period 3,061 3,582 7,989 9,744
Percent of provision for credit losses to net writeoffs during the period 185% 143% 157% 143%
Percent of net writeoffs to finance receivables plus repossessed assets 0.24% 0.47% 0.75% 1.29%
Annualized percent of net writeoffs to finance receivables plus
repossessed assets 0.98% 1.89% 1.00% 1.71%
===================================================================================================================
</TABLE>
9
<PAGE> 12
THE FOOTHILL GROUP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
(UNAUDITED)
_______________________________________________________________________________
NONPERFORMING FINANCE RECEIVABLES AND REPOSSESSED ASSETS
_______________________________________________________________________________
The following table contains information concerning delinquencies on
loans under which installments are more than sixty days past due, loans which
are contractually in default, other than discounted finance receivables, and
for which legal proceedings have been initiated to repossess or liquidate the
underlying collateral, and repossessed assets, all of which are classified as
nonperforming assets. Nonperforming assets have a significant effect on
interest margin and general and administrative expense since the Company does
not recognize income on these accounts but does incur holding costs (primarily
interest expense). As the following table illustrates, the Company's
nonperforming assets as a percent of finance receivables plus repossessed
assets decreased from 3.17% at December 31, 1993 to 0.99% at
September 30, 1994:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
(Dollars in thousands) 9/30/94 12/31/93 9/30/93
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Finance receivables plus repossessed assets $ 676,511 $ 514,518 $ 529,788
Loans more than 60 days past due 5,946 16,296 14,500
Percent of above to finance receivables plus repossessed assets 0.88% 3.17% 2.74%
Repossessed assets, net 752 - -
Percent of above to finance receivables plus repossessed assets 0.11% - -
- ------------------------------------------------------------------------------------------------------------------
Total nonperforming assets $ 6,698 $ 16,296 $ 14,500
==================================================================================================================
Percent of above to finance receivables plus repossessed assets 0.99% 3.17% 2.74%
==================================================================================================================
</TABLE>
As shown in the preceding table, nonperforming assets have decreased
in both dollars and as a percentage of finance receivables plus repossessed
assets since December 31, 1993. Historically, such percentage of nonperforming
assets has generally ranged between 2% and 6% of finance receivables plus
repossessed assets and has fluctuated within this range from quarter to
quarter. Due to the Company's increased emphasis on revolving loans and its
ability to resolve and liquidate problem accounts, nonperforming assets are
currently at 0.99% of finance receivables plus repossessed assets. The Company
expects continued fluctuations in the amount of nonperforming assets. The
Company's finance receivable portfolio is well diversified within various
industries and geographic locations. This diversification should reduce the
risk that nonperforming assets will increase materially.
Loans more than 60 days past due can vary based on borrowers'
timeliness in servicing their obligations. Foreclosure proceedings can
commence at any time, but generally commence when payments are past due 91 days
or more. Repossession occurs when the Company has taken physical possession
and title to the chattel or other property.
Repossessed assets and loans more than 60 days past due have been
written down to estimated realizable values. These values are based on
management's evaluation of numerous factors, including costs and length of time
held prior to ultimate disposition, appraisals, sales of comparable assets and
estimated market conditions at projected disposal dates.
_______________________________________________________________________________
GENERAL AND ADMINISTRATIVE EXPENSES
_______________________________________________________________________________
The following table sets forth major items of general and
administrative expenses for the periods indicated:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED NINE MONTHS ENDED
----------------------------------------------------
(Dollars in thousands) 9/30/94 9/30/93 9/30/94 9/30/93
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Employee related $ 3,412 $ 3,202 $ 12,974 $ 10,261
Occupancy and office 539 477 1,609 1,393
Professional services 92 131 265 394
Data processing and communications 225 225 631 586
Credit and collection 369 96 1,034 636
Advertising 101 78 372 253
Other 254 175 769 516
- ----------------------------------------------------------------------------------------------------------------
Total general and administrative expenses $ 4,992 $ 4,384 $ 17,654 $ 14,039
================================================================================================================
</TABLE>
10
<PAGE> 13
THE FOOTHILL GROUP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
(UNAUDITED)
General and administrative expenses increased from $4,384,000 for the
three months ended September 30, 1993 to $4,992,000 for the three months ended
September 30, 1994. As a percent of average assets, general and administrative
expenses decreased from 3.29% to 2.96% for the three months ended September 30,
1993 and 1994, respectively.
General and administrative expenses increased from $14,039,000 for the
nine months ended September 30, 1993 to $17,654,000 for the nine months ended
September 30, 1994. As a percent of average assets, general and administrative
expenses increased from 3.84% to 3.85% for the nine months ended September 30,
1993 and 1994, respectively.
The increases in dollars for the three months and nine months ended
September 30, 1994 over the comparable periods in the preceding year were
primarily due to increases in employee compensation and incentive accrual
levels and related expenses at Foothill Capital and the Registrant along with
increases in credit and collection and occupancy expenses.
PROVISION FOR INCOME TAXES
For the nine months ended September 30, 1994 and 1993, the Company's
provision for income taxes was 43% and 42%, respectively, which is based on
combined state and federal statutory tax rates.
CAPITAL RESOURCES AND LIQUIDITY
Growth of the Company's assets is dependent, in part, on its ability
to increase capital funds (common and/or preferred stock, retained earnings and
subordinated debt). Liquidity is the ability to meet cash requirements such as
payment of maturing debt obligations or availability of funds for existing or
new customers' borrowing needs.
Foothill Capital maintains short-term assets in excess of short-term
liabilities and finances its growth primarily through the issuance of
commercial paper and medium term debt. The primary source of Foothill
Capital's short term funding is commercial paper borrowings. During the nine
months ended September 30, 1994, commercial paper borrowings increased by
$81,707,000 to $229,990,000. Commercial paper borrowings are supported by two
committed bank credit facilities with 23 banks, which totaled $300,000,000 as
of September 30, 1994. The credit facilities consist of a $200,000,000
multi-year revolving credit facility expiring on June 30, 1997, and a
$100,000,000 revolving credit facility expiring on June 29, 1995. As of
September 30, 1994, Foothill Capital had $59,910,000 in availability (total
amount of credit facilities minus outstanding commercial paper and other short
term borrowings) under its bank credit facilities. During the third quarter of
1994, Foothill Capital issued $25,000,000 of variable rate notes with a
maturity of one year and $5,000,000 of variable rate notes with a maturity of
two years. During 1993, Foothill Capital issued $70,000,000 of senior notes
with maturities ranging from one to seven years and $25,000,000 in fixed rate
senior subordinated notes with a final maturity of ten years. Proceeds from
these debt issuances were primarily used to fund growth in Foothill Capital's
finance receivable portfolio as well as repay maturing debt.
Foothill Capital, in the normal course of its operations, uses
interest rate swap transactions to effectively convert its fixed rate debt
obligations to floating rate in order to match its mainly floating rate finance
receivable portfolio and hedge the Company's exposure to interest rate
fluctuations. At September 30, 1994, Foothill Capital maintained interest rate
swap agreements with notional amounts aggregating $273,000,000 with eight major
financial institutions as counterparties. At September 30, 1994, each
counterparty was rated A or better by one or more major credit rating agency.
Foothill Capital's commercial paper is rated "D-2" by Duff & Phelps
Credit Rating Co. and "F-2" by Fitch Investors Service, Inc. The Company's
senior debt rating was upgraded to "BBB+" by Duff & Phelps in the second
quarter of 1994. In addition, Foothill Capital was assigned a senior
obligations rating of "BBB+" by Fitch in the first quarter of 1994.
The major cash outflows of the Registrant consist primarily of
expenditures for general and administrative costs, payment of fees due
placement agents involved in its partnership activities, tax payments and
payment of preferred and common stock dividends. These expenditures are funded
largely through management fees and profits earned in its asset management
operations and by management fees and loan repayments from Foothill Capital.
Management believes these potential sources of liquidity should be sufficient
to meet its obligations for the foreseeable future.
11
<PAGE> 14
THE FOOTHILL GROUP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
(UNAUDITED)
There have been no other significant changes in the Company's capital
resources and liquidity from those discussed in "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in the Company's
December 31, 1993 Annual Report to Stockholders.
_______________________________________________________________________________
PARTICIPATION IN HIGHLY LEVERAGED TRANSACTIONS
_______________________________________________________________________________
Since its inception, the Registrant and Foothill Capital have been in
the commercial finance business. This business includes revolving credit and
term lending on a secured basis. Such business has historically been perceived
to contain a higher degree of credit risk than unsecured or partially secured
commercial lending.
Since 1972, Foothill Capital's portfolio of finance receivables has
included loans made to highly leveraged borrowers and loans made in conjunction
with corporate recapitalizations and bankruptcy reorganizations. Foothill
Capital has historically extended credit lines up to $70,000,000 by
participating portions of these lines with other commercial finance lenders.
Under the terms of its various borrowing agreements, Foothill Capital's largest
allowable loan (net of participations) at September 30, 1994 was $28,690,000.
Foothill Capital's largest loan (net of participations) to any borrower and its
affiliates was $16,735,000 and $17,351,000 at September 30, 1994 and 1993,
respectively. Loans in this portfolio are made in numerous industries and
geographic locations throughout the United States.
The Company has been involved with highly leveraged transactions since
inception and presently intends to continue its involvement in transactions of
this nature.
_______________________________________________________________________________
INVESTMENTS
_______________________________________________________________________________
The Company had $39,965,000 and $32,842,000 at September 30, 1994 and
December 31, 1993, respectively, in its investment portfolio, including some
investments which are in unrated or less than investment grade corporate
securities. This portfolio includes several debt and equity security positions
as well as partnership investment positions held by the Company. Some of these
investments are in companies undergoing reorganization or restructuring.
Unrealized market appreciation as of September 30, 1994 and December 31, 1993,
before income taxes, was $35,151,000 and $32,587,000, respectively.
The Registrant is a general and/or limited partner in four limited
partnerships, The Foothill Fund, Foothill Recovery Fund, Foothill Partners,
L.P. and Foothill Partners II, L.P. ("the Funds"). The Foothill Fund and
Foothill Recovery Fund are liquidating in 1994 but were established to invest,
primarily, in the debt of restructuring and reorganizing companies. Foothill
Partners, L.P. and Foothill Partners II, L.P. were established to invest in
performing and nonperforming senior bank debt of distressed companies. The
Registrant's investments in the Funds are accounted for on an equity basis.
Investments in unrated or less than investment grade corporate
securities have different risks than investments in corporate securities rated
investment grade. Risk of loss upon default by the borrower is significantly
greater with respect to such corporate securities than with other corporate
securities because these securities are generally unsecured and are often
subordinated to other creditors of the issuer. These issuers also usually have
higher levels of indebtedness and are more sensitive to adverse economic
conditions, such as recession or increasing interest rates, than are investment
grade issuers. There is only a thinly traded market for some of these
securities and market quotes are generally available only from a limited number
of dealers which may not represent firm bids of such dealers or prices for
actual sales.
12
<PAGE> 15
PART II - OTHER INFORMATION
ITEMS 1 TO 5 NOT APPLICABLE
--------------
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) Exhibits:
--------
Exhibit 10.27 - Amended and Restated Letter of Credit and
Guaranty Agreement dated as of August 1, 1994 among
Foothill Capital Corporation, Union Bank, as Agent and as
Issuing Bank and other banks named in the agreement.
Exhibit 10.37 - ISDA Interest Rate Swap Agreement dated
September 8, 1994 by and between Foothill Capital
Corporation and The Industrial Bank of Japan, Limited.
Exhibit 10.38 - Floating Rate Note with a principal
amount of $10,000,000 due September 14, 1995.
Exhibit 10.39 - Floating Rate Note with a principal
amount of $10,000,000 due September 28, 1995.
Exhibit 10.40 - Floating Rate Note with a principal
amount of $5,000,000 due September 15, 1995.
Exhibit 10.41 - Floating Rate Note with a principal
amount of $5,000,000 due September 16, 1996.
Exhibit 27 - Financial Data Schedule.
(b) Reports on Form 8-K:
--------------------
<TABLE>
<CAPTION>
Item(s) Financial Statements
Date of Report Reported Filed
------------------ ------------ -----------------------
<S> <C> <C>
8/18/94 7 None
</TABLE>
13
<PAGE> 16
SIGNATURES
Pursuant to the requirements 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.
THE FOOTHILL GROUP, INC.
Date: November 9, 1994 s/David C. Hilton
----------------------------- ----------------------------------
David C. Hilton
Executive Vice President
Date: November 9, 1994 s/Henry K. Jordan
----------------------------- ----------------------------------
Henry K. Jordan
Senior Vice President;
Chief Financial Officer and
Corporate Secretary
14
<PAGE> 1
EXHIBIT 10.27
EXECUTION COPY
===============================================================================
THIRD AMENDED AND RESTATED
LETTER OF CREDIT AND GUARANTY AGREEMENT
Dated as of August 1, 1994
Among
FOOTHILL CAPITAL CORPORATION
and
UNION BANK,
as Agent and as Issuing Bank
AND OTHER BANKS
===============================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C>
ARTICLE I
DEFINITIONS
1.01. Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.02. Other Definitional Provisions . . . . . . . . . . . . . . . . . . . . . 21
1.03. Computation of Time Periods . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE II
AMOUNT AND TERMS OF LETTERS OF
CREDIT AND PARTICIPATIONS THEREIN
2.01. Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.02. Issuing the Letters of Credit . . . . . . . . . . . . . . . . . . . . . 22
2.03. Participations Purchased by Banks . . . . . . . . . . . . . . . . . . . 22
2.04. Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
2.05. Reduction of Commitments . . . . . . . . . . . . . . . . . . . . . . . . 25
2.06. Payments and Computations . . . . . . . . . . . . . . . . . . . . . . . 25
2.07. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
2.08. Extension of Termination Date . . . . . . . . . . . . . . . . . . . . . 28
2.09. Evidence of Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
2.10. Indemnification; Nature of the Issuing Bank's Duties . . . . . . . . . . 29
2.11. Increased Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
2.12. Sharing of Payments, Etc . . . . . . . . . . . . . . . . . . . . . . . . 32
2.13. Uniform Customs and Practice . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE III
GUARANTY
3.01. Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
3.02. Notice of Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
3.03. Guaranty Absolute . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
3.04. Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
3.05. Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
3.06. Continuing Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE IV
CONDITIONS PRECEDENT
4.01. Conditions Precedent to New Effective Date . . . . . . . . . . . . . . . 34
4.02. Conditions Precedent to Issuance of each Letter of Credit . . . . . . . 35
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C>
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.01. Status and Standing . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
5.02. Organizational Status of Subsidiaries . . . . . . . . . . . . . . . . . . 36
5.03. Location of Offices, Books and Records . . . . . . . . . . . . . . . . . . 36
5.04. Organizational Power and Authority . . . . . . . . . . . . . . . . . . . . 37
5.05. Enforceable Obligations . . . . . . . . . . . . . . . . . . . . . . . . . 37
5.06. Absence of Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
5.07. No Burdensome Agreements . . . . . . . . . . . . . . . . . . . . . . . . . 38
5.08. No Material Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . 38
5.09. Good Title to Properties . . . . . . . . . . . . . . . . . . . . . . . . . 39
5.10. Margin Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
5.11. Investment Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
5.12. Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
5.13. Taxes and Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
5.14. Trademarks, Patents, Etc . . . . . . . . . . . . . . . . . . . . . . . . . 40
5.15. Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
5.16. Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . 41
5.17. Financial Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
5.18. Environmental Laws, Etc . . . . . . . . . . . . . . . . . . . . . . . . . 42
5.19. No Default or Event of Default; Compliance with Instruments . . . . . . . 43
5.20. Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
5.21. Use of Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
5.22. No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . 43
5.23. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
5.24. Ownership and Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . 44
5.25. Partnerships and Other Affiliated Entities . . . . . . . . . . . . . . . . 44
5.26. Other Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
5.27. Account Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
5.28. Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
5.29. Letter of Credit Liability . . . . . . . . . . . . . . . . . . . . . . . . 45
5.30. Foothill Credit Decision . . . . . . . . . . . . . . . . . . . . . . . . . 45
ARTICLE VI
AFFIRMATIVE COVENANTS
6.01. Reporting and Information Requirements . . . . . . . . . . . . . . . . . . 45
6.02. Taxes and Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
6.03. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
6.04. Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
6.05. Properties in Good Condition . . . . . . . . . . . . . . . . . . . . . . . 49
6.06. Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
6.07. Pay Indebtedness and Perform Other Covenants . . . . . . . . . . . . . . . 49
6.08. Compliance With Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
6.09. Notice of Certain Events . . . . . . . . . . . . . . . . . . . . . . . . . 50
6.10. Environmental Laws, Etc . . . . . . . . . . . . . . . . . . . . . . . . . 50
6.11. Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C>
6.12. ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
6.13. Maintain Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
6.14. Foothill Credit Analysis . . . . . . . . . . . . . . . . . . . . . . . . . 52
ARTICLE VII
FINANCIAL COVENANTS
7.01. Adjusted Consolidated Net Worth . . . . . . . . . . . . . . . . . . . . . 52
7.02. Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
7.03. Unused Committed Bank Credit Facilities . . . . . . . . . . . . . . . . . 53
7.04. Purchased Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . 53
7.05. Industry Concentration . . . . . . . . . . . . . . . . . . . . . . . . . . 53
7.06. Settlement Securities . . . . . . . . . . . . . . . . . . . . . . . . . . 53
ARTICLE VIII
NEGATIVE COVENANTS
8.01. Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
8.02. Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
8.03. Restricted Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
8.04. Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
8.05. Merger, Consolidation, Sale and Transfers of Assets . . . . . . . . . . . 58
8.06. Permitted Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
8.07. Amendments of Agreements . . . . . . . . . . . . . . . . . . . . . . . . . 59
8.08. Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . 59
8.09. Inconsistent Agreements . . . . . . . . . . . . . . . . . . . . . . . . . 60
8.10. Borrower Concentration . . . . . . . . . . . . . . . . . . . . . . . . . . 61
8.11. Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
8.12. Consolidated Tax Return . . . . . . . . . . . . . . . . . . . . . . . . . 61
8.13. Compliance with ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . 61
ARTICLE IX
EVENTS OF DEFAULT
9.01. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
ARTICLE X
THE AGENT AND ISSUING BANK
10.01. Authorization and Action . . . . . . . . . . . . . . . . . . . . . . . . 65
10.02. Agent's Reliance, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . 65
10.03. Union and Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . 66
10.04. Bank Credit Decision . . . . . . . . . . . . . . . . . . . . . . . . . . 66
10.05. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
10.06. Successor Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
</TABLE>
iii
<PAGE> 5
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C>
ARTICLE XI
MISCELLANEOUS
11.01. Amendments, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
11.02. Notices, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
11.03. No Waiver; Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
11.04. Costs and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
11.05. Right of Set-off . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
11.06. Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
11.07. Assignments and Participations . . . . . . . . . . . . . . . . . . . . . 70
11.08. Severability of Provisions . . . . . . . . . . . . . . . . . . . . . . . 72
11.09. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
11.10. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
11.11. Execution in Counterparts . . . . . . . . . . . . . . . . . . . . . . . . 73
11.12. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
11.13. Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Exhibit A - Form of Notice for Extension of Termination
Date (Section 2.08) A-1
Exhibit B - Form of Opinion of Counsel to Foothill B-1
Exhibit C - Form of Assignment and Acceptance
(Section Sections 1.01, 11.07(d)) C-1
Schedule I Foothill Capital Corporation Subsidiary (Section 5.02)
Schedule II Location of Books and Records (Section 5.03)
Schedule III Intercompany Tax Allocation Policy (Sections 5.13, 8.08(b))
Schedule IV Certain Transactions with Affiliates (Section 8.08(c))
Schedule V Permitted Senior Debt (Section 1.01)
Schedule VI Permitted Subordinated Debt (Section 1.01)
</TABLE>
iv
<PAGE> 6
THIS THIRD AMENDED AND RESTATED LETTER OF CREDIT AND GUARANTY AGREEMENT
dated as of August 1, 1994 is among:
(i) FOOTHILL CAPITAL CORPORATION, a California
corporation ("Foothill"),
(ii) The banks listed on the signature pages of this
Agreement under the heading "Banks" (initially, only Union Bank, but to be
referred to herein as the "Initial Banks"), and
(iii) UNION BANK, a California banking corporation,
("Union"), as agent for the Banks and the Issuing Bank (such agent and any
successor agent appointed pursuant to Section 10.01 being hereinafter referred
to as the "Agent") hereunder.
PRELIMINARY STATEMENTS.
(1) Foothill has requested (A) Union, as the issuer of
the Letters of Credit (as hereinafter defined) hereunder (Union as such issuer
being the "Issuing Bank") to issue Letters of Credit (as hereinafter defined)
for the account of the Account Parties (as hereinafter defined) from time to
time in an aggregate amount not to exceed at any time the Letter of Credit
Commitment (as hereinafter defined) on the terms and conditions set forth
herein and (B) each of the Banks other than Union to buy and receive from the
Issuing Bank, and the Issuing Bank to sell and assign to each of such Banks, an
undivided interest and participation in each Letter of Credit and all Letter of
Credit Liability (as hereinafter defined) relating to such Letter of Credit, on
the terms and conditions set forth herein.
(2) In order to induce the Issuing Bank to issue such
Letters of Credit for the account of the Account Parties, Foothill has agreed
to guarantee the reimbursement obligations of each Account Party.
(3) Pursuant to a Letter of Credit and Guaranty Agreement
dated as of October 11, 1991, as amended and restated by an Amended and
Restated Letter of Credit and Guaranty Agreement, dated as of September 30,
1992, and as further amended and restated by a Second Amended and Restated
Letter of Credit and Guaranty Agreement, dated as of August 6, 1993 (as so
amended and restated, the "Existing Agreement"), the Issuing Bank has agreed to
issue such Letters of Credit for the account of the Account Parties on the
terms and conditions set forth in the Existing Agreement, and each of the Banks
other than Union has agreed to buy and receive from the Issuing Bank, and the
Issuing Bank has agreed to sell and assign to each of such Banks, an undivided
interest and participation in each such Letter of Credit and all Letter of
Credit Liability relating thereto on the terms and conditions set forth in the
Existing Agreement.
<PAGE> 7
(4) Foothill, Union (currently the only Bank under the
Existing Agreement), the Issuing Bank and the Agent now wish to amend the
Existing Agreement in certain respects and, for convenience, to restate the
Existing Agreement, as so amended, in its entirety.
NOW, THEREFORE, the parties hereto agree that, as of the New
Effective Date (as hereafter defined), the Existing Agreement shall be amended
and restated in its entirety to read as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Defined Terms. As used in this Agreement and
unless otherwise expressly indicated, the following terms shall have the
following meanings (such meanings to be equally applicable to both the singular
and plural forms of the terms defined):
"Account Party" shall mean, for any Letter of Credit, the
commercial finance customer of Foothill obligated to Union under an
Application and Agreement which has been Approved by Foothill.
"Adjusted Consolidated Net Worth" shall mean, as of any date
of calculation, the amount, if any, by which the Eligible Assets of
Foothill and its Consolidated Subsidiaries exceeds the Total
Liabilities of Foothill and its Consolidated Subsidiaries as of such
date.
"Affiliate" shall mean any Person that, directly or
indirectly, controls or is controlled by or is under common control
with any other Person and, without limiting the generality of the
foregoing, shall include any Person that (a) beneficially owns or
holds 5% or more of the Voting Interest of such other Person
(determined either by number of shares or number of votes) or (b) is
an "associate" (as such term is defined in Rule 405 under the
Securities Act of 1933, as in effect on the Effective Date) of such
other Person. For purposes of this definition, "control" (including,
with correlative meanings, the terms "controlled by" and "under common
control with"), as used with respect to any Person, shall mean the
possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of such Person, whether
through the ownership of Voting Interests, by contract or otherwise.
"Agent" shall have the meaning specified at the beginning
of this Agreement.
2
<PAGE> 8
"Agent's Account" shall mean the Agent's account no.
7080110779, reference: Foothill, maintained at the office of Union at
1980 Saturn Street, Monterey Park, California 91754, Attention:
Investment Banking Operations, or such other deposit account as the
Agent may from time to time specify in writing to Foothill and the
Banks.
"Agreement" shall mean this agreement as amended, modified,
supplemented or replaced from time to time (including, without
limitation, the Existing Agreement prior to the New Effective Date and
this Third Amended and Restated Letter of Credit and Guaranty
Agreement on and after the New Effective Date).
"Allowance for Credit Losses" shall mean items of the type
included on the Consolidated balance sheet of Foothill and its
Consolidated Subsidiaries as at December 31, 1993, within the heading
"Allowance for Credit Losses".
"Application and Agreement" shall mean a standard Issuing
Bank form of Application for Irrevocable Standby Letter of Credit and
Application for Irrevocable Commercial Letter of Credit, completed to
describe the Letter of Credit to be issued thereunder and executed by
the Account Party for whose account such Letter of Credit is, or is to
be, issued by the Issuing Bank.
"Approved" by Foothill with respect to any Application and
Agreement shall mean that Foothill has either (a) executed such
Application and Agreement, (b) typed or written on such Application
and Agreement the word "Approved" or a similar word, followed by its
execution, or (c) otherwise indicated in writing that Foothill
approves such Application and Agreement.
"Assignment and Acceptance" shall mean an assignment and
acceptance entered into by an assigning Bank and an Eligible Assignee,
and accepted by the Agent, in accordance with Section 10.07 and in
substantially the form of Exhibit C.
"Authorized Representative" shall mean, with respect to
Foothill or Foothill Group, the respective president, executive vice
president, chief financial officer, and any other officer of Foothill
or Foothill Group designated as such from time to time in a written
notice to the Agent, accompanied by an incumbency certificate with
specimen signature included.
"Bank Office" shall have the meaning specified in Section 2.07.
3
<PAGE> 9
"Banks" shall mean the Banks listed on the signature pages
hereof and each Eligible Assignee that becomes a party hereto pursuant
to Section 11.07.
"Board" shall mean the Board of Governors of the Federal
Reserve System, or any Person that hereafter shall succeed to its
duties with respect to the regulation of margin credits or the
establishment of reserve requirements for commercial banks.
"Business Day" shall mean a day of the year on which banks are
not required or authorized to close in New York City or the City of
Los Angeles.
"Capital Interest" shall mean, with respect to (a) any
corporation, common stock, preferred stock, and any and all shares or
other equivalents (however designated) of any other corporate stock,
of such corporation, and (b) any partnership, partnership interests,
whether general, special or limited, in such partnership.
"Capitalized Lease" shall mean at any time any lease which is,
or is required under GAAP to be, capitalized on the balance sheet of
the lessee at such time, and "Capitalized Lease Obligation" of any
Person at any time shall mean the aggregate amount which is, or is
required under GAAP to be, reported as a liability on the balance
sheet of such Person at such time as lessee under a Capitalized Lease.
"Change of Control" shall mean:
(a) In the case of Foothill,
(i) an issuance by Foothill of its Voting
Interests, or a sale or other disposition of Voting
Interests of Foothill, whether by Foothill, Foothill
Group, any other Subsidiary of Foothill Group, or any
other Person, which issuance, sale or other
disposition has not been consented to by the Required
Banks and which either:
(A) results in Foothill Group,
directly or through one or more of its
Subsidiaries, owning or controlling less than
100% of the then outstanding Voting Interests
of Foothill, or
(B) occurs during any period in which
Foothill Group, directly or through one or
more of its Subsidiaries, owns or controls
less than 100% of the then outstanding Voting
Interests of Foothill and does not result in
4
<PAGE> 10
an increase in the percentage of such Voting
Interests so owned and controlled by Foothill
Group; or
(ii) the election of a majority of the
corporate directors of Foothill against the
recommendation of the management or board of
directors of Foothill that was incumbent immediately
prior to such election; or
(iii) the ceasing of continuous and active
participation in Foothill's operations with
responsibilities at least equal to those assumed as
of the date hereof by any two or more of John F.
Nickoll, Peter E. Schwab, and David C. Hilton.
(b) In the case of Foothill Group,
(i) the acquisition by any Person (other
than Foothill Group) or by any two or more Persons
acting in concert (which group of Persons will be
deemed to be a separate "Person" that "acquires" the
Voting Interests held by the members of such group
upon its formation for purposes of this definition),
of 50% or more of the then outstanding Voting
Interests of Foothill Group, which acquisition has
not been consented to by the Required Banks; or
(ii) the election of a majority of the
corporate directors of Foothill Group against the
recommendation of the management or board of
directors of Foothill Group that was incumbent
immediately prior to such election.
(c) For purposes hereof, in any case where Voting
Interests of Foothill are owned or controlled by a Subsidiary
of a Person, the percentage of Voting Interests of Foothill
deemed to be owned or controlled by such Person as a result of
such Subsidiary's ownership or control shall be determined by
multiplying the percentage of the Voting Interests of such
Subsidiary which are owned and controlled by such Person by
the percentage of the Voting Interests of Foothill which are
owned and controlled by such Subsidiary.
(d) In the case of a Change of Control event
described in clause (b)(i) of this definition, if all of the
then outstanding unsecured senior debt securities of the
Person acquiring the Voting Interests have an Investment Grade
Rating, the consent of the Required Banks to such event shall
not unreasonably be
5
<PAGE> 11
withheld. Notwithstanding the consent of the Required Banks
to a Change of Control described in clause (b)(i) of this
definition, if within six months immediately following any
such event the rating of any of the then outstanding
unsecured senior debt securities of the Person that
acquired the Voting Interests have a rating that is lower
than an Investment Grade Rating, such occurrence shall be
deemed a separate Change of Control.
"Code" shall mean the Internal Revenue Code of 1986, as
amended, and any successor statute of similar import, and regulations
thereunder, in each case as in effect from time to time. Reference to
sections of the Code shall be construed also to refer to any successor
sections.
"Commitment" of any Bank shall mean the amount set opposite
the name of such Bank on the signature pages hereof or, if such Bank
has entered into one or more Assignments and Acceptances, set forth
for such Bank in the Register maintained by the Agent pursuant to
Section 11.07(c).
"Consolidated" or "consolidated" shall mean, as applied to any
financial or accounting term, determined on a consolidated basis in
accordance with GAAP for the applicable Person.
"Consolidated Assets" shall mean, as of any date of
calculation, the consolidated assets of Foothill and its Consolidated
Subsidiaries on the calculation date.
"Consolidated Capital Funds" shall mean, as of any date of
calculation, the sum of Consolidated Net Worth and Subordinated Debt.
"Consolidated Net Income" shall mean, for any period of
calculation, the consolidated net income (after deduction of taxes
chargeable to Foothill or its Consolidated Subsidiaries) of Foothill
and its Consolidated Subsidiaries for such period.
"Consolidated Net Worth" shall mean, as of any date of
calculation, the excess of assets of Foothill and its Consolidated
Subsidiaries over their liabilities on the calculation date.
"Consolidated Subsidiaries" of a Person shall mean, as of any
date of determination, those Subsidiaries whose accounts are or should
be consolidated with those of such Person in accordance with GAAP.
"D&P" shall mean Duff & Phelps Credit Rating Company or any
successor thereto.
6
<PAGE> 12
"Delinquent Receivable" shall mean the full unpaid amount of a
Finance Receivable (excluding Discount Receivables) on which an
installment payment of accrued interest, finance charges or discount
or outstanding principal has not been made within 90 days of its due
date (including any such obligations relating to property or assets
which are the subject of foreclosure proceedings, whether judicial or
otherwise), and includes the full amount of any such obligations with
respect to which there are arrearages, notwithstanding that
installment payments of principal or interest are currently being
made.
"Discount Receivable" shall mean a debt instrument (of a type
that meets the criteria for Finance Receivables set forth in clauses
(a) through (c), inclusive, of the definition thereof, other than any
requirement for security) originating from a Person other than
Foothill or any Subsidiary thereof which is acquired at less than face
or par value and, at the time of acquisition, is contractually in
default, but without defense, set-off or counterclaim.
"Dollars" and "$" shall mean dollars in lawful currency of
the United States of America.
"Eligible Assets" shall mean, as of any date of calculation,
an amount equal to the sum (without duplication) of the following
assets of Foothill and its Consolidated Subsidiaries:
(a) cash, plus the cash surrender value of life
insurance policies, if any; plus
(b) Permitted Liquid Investments and Investments
permitted by Section 8.04 of this Agreement; plus
(c) prepaid expenses; plus
(d) Repossessed Assets, at the lower of cost or
estimated net realizable value; plus
(e) the Net Amount of Finance Receivables less an
amount equal to the greater of (i) Allowance for Credit Losses, as
shown on the Consolidated balance sheet of Foothill and its
Consolidated Subsidiaries as of such date, or (ii) an amount equal
to the sum of 75% of Non-Performing Assets as of such date.
"Eligible Assignee" shall mean any financial institution
approved in writing by Foothill and the Agent as an Eligible Assignee
for purposes of this Agreement, provided that Foothill's approval
shall not be unreasonably withheld.
7
<PAGE> 13
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended, and any successor statute of similar import, and
regulations thereunder, in each case as in effect from time to time.
References to sections of ERISA shall be construed to also refer to
any successor sections.
"ERISA Affiliate" shall mean any Person that controls, is
controlled by, or is under common control with Foothill or any
Subsidiary thereof within the meaning of Section 4001 of ERISA.
"Events of Default" shall have the meaning specified in
Section 9.01.
"Existing Agreement" shall have the meaning given to that term
in Preliminary Statement (3).
"Extension Reply Date" shall have the meaning assigned to that
term in Section 2.08 hereof.
"Extension Request Date" shall have the meaning assigned to
that term in Section 2.08 hereof.
"Extension Requests" shall have the meaning assigned to that
term in Section 2.08 hereof.
"FCC Holdings" shall mean FCC Holdings Limited, a California
corporation.
"Federal Funds Rate" shall mean, for any period, a fluctuating
interest rate per annum equal for each day during such period to the
weighted average of the rates on overnight Federal funds transactions
with members of the Federal Reserve System arranged by Federal funds
brokers, as published for such day (or, if such day is not a Business
Day, for the next preceding Business Day) by the Federal Reserve Bank
of New York, or, if such rate is not so published for any day which is
a Business Day, the average of the quotations for such day on such
transactions received by the Agent from three Federal funds brokers of
recognized standing selected by it.
"Finance Receivables" shall mean:
(a) accounts receivable arising from commercial
loans entered into or acquired by Foothill or any of its
Consolidated Subsidiaries, as lender, in the ordinary course
of business, but only if such commercial loans are secured by
accounts receivable, inventory, equipment and/or other
property of the account debtor/borrower,
8
<PAGE> 14
(b) accounts receivable arising from secured
equipment leases entered into or acquired by Foothill or any
of its Consolidated Subsidiaries, as lessor, in the ordinary
course of business,
(c) accounts receivable arising from secured
equipment installment sales contracts entered into or acquired
by Foothill or any of its Consolidated Subsidiaries, as
seller, in the ordinary course of business, and
(d) accounts receivable arising from "loan"
participations in transactions of a type described in clauses
(a) through (c) above, acquired in the ordinary course of
business by Foothill or any of its Consolidated Subsidiaries
as participant, but only if such participations vest in such
participant an enforceable beneficial ownership interest in
the subject loan, lease or sales contract and the accounts
receivable arising therefrom, all of which are of the types
included on the audited Consolidated financial statements of
Foothill and its Consolidated Subsidiaries as at December 31,
1993, within the heading "Finance Receivables" and including,
without limitation, Discount Receivables, Non-Public Debt
Instruments and Public Debt Securities.
"Fitch" shall mean Fitch Investor's Service, Inc. or any
successor thereto.
"Foothill" shall have the meaning specified at the beginning
of this Agreement.
"Foothill Group" shall mean The Foothill Group, Inc., a
Delaware corporation.
"Foothill Group Advances" shall mean unsecured borrowings by
Foothill from Foothill Group, in an aggregate outstanding principal
amount not exceeding $5,000,000 at any one time, that (a) are
evidenced by demand promissory notes, (b) are subordinated pursuant to
the Foothill Group Subordination Agreement and (c) bear interest at no
greater rate and involve fees and other amounts in respect thereof
that are no higher than would be available at the time from a Person
that is not an Affiliate of Foothill.
"Foothill Group Subordinated Debt" shall mean the Indebtedness
of Foothill to Foothill Group listed on Schedule VI and any additional
Junior Subordinated Debt issued to Foothill Group as Permitted
Subordinated Debt, including Foothill Group Advances.
9
<PAGE> 15
"Foothill Group Subordination Agreement" shall mean the
subordination agreement delivered as the "Foothill Group Subordination
Agreement" as defined in and pursuant to the Revolver Agreements, and
in form and substance satisfactory to the Agent.
"GAAP" shall mean generally accepted accounting principles as
such principles in the United States of America are in effect from
time to time.
"Governmental Authority" shall mean any nation or government,
any state or other political subdivision thereof and any entity or
officer exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to any government, and any
corporation or other entity owned or controlled (through ownership of
Capital Interests or otherwise) by any of the foregoing.
"Guaranties" shall mean guaranties, endorsements (other than
for collection in the ordinary course of business), and other
contingent obligations of such Person, including obligations to make
Investments, in respect of or in connection with the obligations of
others.
"Hazardous Materials" shall mean and include, without
limitation, gasoline, petroleum products, explosives, radioactive
materials, radon, hazardous materials, hazardous wastes, hazardous or
toxic substances, polychlorinated biphenyls or related or similar
materials, asbestos or any material containing asbestos, or any other
substance or material as may be defined as a hazardous or toxic
substance by any Federal, state or local environmental law, ordinance,
rule or regulation.
"Indebtedness" of a Person shall mean and include, without
duplication,
(a) all items that, in accordance with GAAP,
would be included in determining total liabilities as shown on
the liability side of a balance sheet as at the date
Indebtedness of such Person is to be determined, other than
distributions on Capital Interests declared, but not paid (to
the extent such distributions are not Restricted Payments),
(b) any liability secured by any mortgage,
pledge, lien or security interest on property owned or
acquired by such Person, whether or not such liability shall
have been assumed by such Person and Capitalized Lease
Obligations of such Person (without regard to any limitation
of the rights and remedies or the holder of such Lien or the
lessor under such Capitalized Lease to repossession or sale of
such property) and
10
<PAGE> 16
(c) Guaranties.
"Ineligible Rewrite" shall mean a Finance Receivable
(a) the terms and conditions of which have been
rewritten,
(b) that was more than 60 days delinquent as of
the later of the date of actual execution or the effective
date of the revised documentation therefor, and
(c) in respect of which at least one of the
following statements is not accurate and complete in all
respects:
(i) the monthly payment on the rewritten
Finance Receivable is at least 50% of the original
monthly payment (without giving effect to previous
rewrites);
(ii) the obligor on the rewritten Finance
Receivable has made at least three (3) consecutive
payments in accordance with the rewritten payment
schedule and each such payment was made within thirty
(30) days of the date due;
(iii) the rate of interest payable on the
rewritten Finance Receivable is a reasonable market
rate and, unless such rewritten Finance Receivable
arises from a rewritten equipment lease, in no event
is the all- in-loan-yield less than two percent (2%)
above the Reference Rate; or
(iv) said Finance Receivable has not been
more than sixty (60) days delinquent more than
once since the date first rewritten.
"Initial Bank" shall have the meaning specified at the
beginning of this Agreement.
"Investment" in any Person shall mean any loan, advance, or
extension of credit to or for the account of, any guaranty,
endorsement (other than for collection in the ordinary course of
business) or other direct or indirect contingent liability in
connection with the obligations, Capital Interests or dividends or
other distributions of, any ownership, purchase or acquisition of any
Capital Interest, obligations or securities of, or any other interest
in or capital contribution to, such Person.
11
<PAGE> 17
"Investment Grade Rating" shall mean
(a) with respect to unsecured senior debt
securities issued by a Person,
(i) a rating equal to or higher than "BBB"
by S&P and equal to or higher than "Baa2" by
Moody's, or
(ii) in the event the applicable unsecured
senior debt securities are not rated by both S&P
and Moody's, (A) the rating described in (i) for
either S&P or Moody's and (B) a rating equal to or
higher than "BBB" by D&P or by Fitch, or a
comparable rating by another nationally recognized
rating organization, which rating and organization
are approved by the Required Banks, or
(iii) in the event the applicable unsecured
senior debt securities are not rated by either of
S&P and Moody's, any two of (A) a rating equal to
or higher than "BBB" by Fitch, (B) a rating equal
to or higher than "BBB" by D&P, or (C) a
comparable rating by another nationally recognized
rating organization, which rating and organization
are approved by the Required Banks.
(b) with respect to commercial paper of a Person,
a rating equal to or higher than D-2 by D&P, F2 by
Fitch, Prime-2 by Moody's or A-2 by S&P.
"Issue" shall mean, with respect to any Letter of Credit,
either issue, or extend the expiry of, or renew, or increase the
amount of, such Letter of Credit, and the term " Issued" or "Issuance"
shall have a corresponding meaning.
"Issuing Bank" shall have the meaning specified in Preliminary
Statement (1).
"Junior Subordinated Debt" shall mean Subordinated Debt that
is subordinated in right and time of payment to all Senior Subordinated
Debt.
"Letter of Credit" shall mean any letter of credit (whether a
standby letter of credit or a commercial documentary letter of credit,
but in each case appropriate to be issued under an Application and
Agreement) issued by the Issuing Bank pursuant to Article II, in each
case as amended, supplemented or otherwise modified from time to time.
"Letter of Credit Commitment" shall mean the lesser of (a)
$10,000,000 or (b) the aggregate amount of the
12
<PAGE> 18
Commitments of the Banks, as such lesser amount shall be reduced or
terminated pursuant to Sections 2.05, 2.08 or 9.01.
"Letter of Credit Liability" relating to any Letter of Credit
shall mean, as of any date of determination, all then existing
liabilities of the Account Party of such Letter of Credit and of
Foothill to the Issuing Bank in respect of such Letter of Credit,
whether such liability is contingent or fixed, and shall consist in
principal amount of the sum of (a) the aggregate maximum amount then
available to be drawn under such Letter of Credit (the determination
of such maximum amount to assume compliance with all conditions for
drawing) and (b) the aggregate amount which has then been paid by, and
not been reimbursed to, the Issuing Bank under such Letter of Credit.
"Lien" shall mean any interest in property securing an
obligation owed to a Person, whether such interest is based on the
common law, statute or contract, and including but not limited to the
security interest arising from a mortgage, mortgage deed, deed of
trust, encumbrance, pledge, conditional sale or trust receipt or a
lease, consignment or bailment for security purposes. The term "Lien"
includes reservations, exceptions, encroachments, easements, rights of
way, covenants, conditions, restrictions, leases and other similar
title exceptions and encumbrances, including but not limited to
mechanics', materialmen's, warehousemen's, carriers' and other similar
encumbrances, affecting property. For the purposes of this Agreement,
a Person shall be deemed to be the owner of any property which it has
acquired or holds subject to a conditional sale agreement or other
arrangement pursuant to which title to the property has been retained
by or vested in some other Person for security purposes.
"Loan Documents" shall mean and include this Agreement, the
Application and Agreements and all other agreements and instruments
extending, renewing, refinancing or refunding any indebtedness,
obligation or liability arising under any of the foregoing, in each
case as the same may be amended, modified or supplemented from time to
time hereafter.
"Material Adverse Effect" shall mean, with respect to an
event, action or condition affecting Foothill, any Subsidiary thereof,
or any of their respective properties or revenues, an event, action or
condition that would (a) adversely affect the validity or
enforceability of, or the authority of Foothill to perform its
obligations under, any of the Loan Documents, (b) materially adversely
affect the business, operations, assets or condition (financial or
otherwise) of Foothill or any Subsidiary thereof or the ability of
Foothill to perform its obligations under any of
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the Loan Documents or (c) materially adversely affect the business,
operations, assets or condition (financial or otherwise) of Foothill
and its Subsidiaries taken as a whole.
"May Extension Request" shall have the meaning assigned to
that term in Section 2.08 hereof.
"Moody's" shall mean Moody's Investors Service, Inc. or any
successor thereto.
"Multiemployer Plan" shall mean a Plan that is a multiemployer
plan as defined in Section 4001(a)(3) of ERISA.
"Net Amount" shall mean, as of any date of calculation, with
respect to a Finance Receivable or a Discount Receivable an amount
equal to the sum of:
(a) the outstanding principal component thereof
(exclusive of any unearned interest or finance charges or any
unaccrued discount representing compensation for the use of
borrowed money), less
(b) the portion, if any, of such principal
component that is the subject of a participation interest
granted by Foothill or any of its Consolidated Subsidiaries to
any Person other than Foothill or any of its Consolidated
Subsidiaries, less
(c) in the case of a Discount Receivable, the
discount from face or par value thereof at the time such
Discount Receivable was acquired (but without duplication for
amounts excluded from the principal component thereof in
clause (a) above).
"New Effective Date" shall mean the date on which (a)
counterparts of this Agreement executed and delivered by the parties
hereto shall have been received by Foothill and the Agent, and (b) the
conditions precedent set forth in Article IV hereto shall have been
satisfied or waived in writing by the Agent on behalf of or at the
request of the Required Banks.
"Non-Performing Assets" shall mean Delinquent Receivables,
Repossessed Assets and Ineligible Rewrites. For purposes of this
definition, Repossessed Assets shall be valued at the lower of cost or
estimated net realizable value.
"November Extension Request" shall have the meaning assigned
to that term in Section 2.08 hereof.
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"Non-Public Debt Instruments" shall mean debt instruments that
are not required to be registered under the Securities Act of 1933, as
amended (other than those classified as Discount Receivables).
"Obligations" shall mean and include all loans, advances,
debts, liabilities and obligations, howsoever arising, owing by
Foothill to the Agent, the Issuing Bank or the Banks of every kind and
description (whether or not evidenced by any notes or other instrument
and whether or not for the payment of money), direct or indirect,
absolute or contingent, due or to become due, now existing or
hereafter arising pursuant to the terms of this Agreement or the other
Loan Documents.
"Other Taxes" shall have the meaning specified in
Section 2.07.
"PBGC" shall mean the Pension Benefit Guaranty Corporation
established under Title IV of ERISA or any other governmental agency,
department or instrumentality succeeding to the functions of said
corporation.
"Percentage" of each Bank at any time shall mean that
percentage of which the then existing amount of the Commitment of such
Bank is of $5,000,000.
"Permitted Liquid Investment" shall mean an Investment in any
of the following:
(a) direct obligations of, or obligations
guaranteed as to principal and interest by, the United States
of America;
(b) demand deposits in, certificates of deposit
issued by, or bankers' acceptances (eligible for rediscount at
Federal Reserve Banks) of, or collateralized repurchase
agreements in respect of obligations described in clause (a)
with, any of the financial institutions party to the Revolver
Agreement as "Banks" thereunder or any bank or trust company
organized under the laws of the United States of America or
any State thereof whose obligations or whose holding company's
obligations are rated at least A by S&P or at least A by
Moody's at the time such Investment is made;
(c) readily marketable commercial paper that, at
the time such Investment is made, is rated at least A-1 by S&P
or at least Prime-1 by Moody's;
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(d) Indebtedness that is (i) traded on a national
securities exchange and (ii) rated A or better by Moody's or
S&P on the date of acquisition; or
(e) readily marketable commercial paper (other
than commercial paper described in clause (c)); provided that
(i) the aggregate extended principal or face amount thereof
held does not exceed $5,000,000 at any one time outstanding
and (ii) at the time such Investment is made, such commercial
paper is rated at least Prime-2 by Moody's or at least A-2 by
S&P; and provided, that such Investment shall be payable in
Dollars and shall mature or be subject to redemption at the
option of the holder by its terms within twelve (12) months
after the date of acquisition thereof.
"Permitted Senior Debt" shall mean
(a) all Senior Indebtedness of Foothill and its
Subsidiaries that is listed on Schedule V hereto and
(b) additional unsecured Senior Indebtedness of
Foothill issued after the New Effective Date, subject
to the following conditions:
(i) the covenants, defaults and other
requirements applicable to such Senior Indebtedness
are no more restrictive, in any material respect,
upon Foothill and its Subsidiaries than those
contained in the Loan Documents or applicable to the
Senior Indebtedness listed on Schedule V hereto;
(ii) in respect of which Foothill Group
enters into a subordination agreement, the terms of
which do not differ in any material respect from the
terms of the Foothill Group Subordination Agreement;
and
(iii) no Potential Default or Event of
Default shall exist at the date of issuance of such
Senior Indebtedness and after giving effect thereto.
"Permitted Subordinated Debt" shall mean
(a) all Subordinated Debt of Foothill and its
Subsidiaries that is listed on Schedule VI hereto and
(b) additional unsecured Subordinated Debt of
Foothill issued after the New Effective Date, subject
to the following conditions:
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(i) the final maturity of such
Subordinated Debt (other than Foothill Group
Advances) may not be earlier than November 15, 2003;
(ii) the weighted average life to
maturity of such Subordinated Debt (other than
Foothill Group Advances) shall extend at least three
years beyond the Termination Date as in effect as of
the date of issuance thereof;
(iii) no principal or sinking fund payment
on or other redemption of such Subordinated Debt
(other than Foothill Group Advances) may occur prior
to November 15, 1998;
(iv) the covenants, defaults and other
requirements applicable to such Subordinated Debt are
no more restrictive, in any material respect, upon
Foothill and its Subsidiaries than those contained in
the Loan Documents or applicable to the Subordinated
Debt listed on Schedule VI hereto;
(v) the subordination provisions
applicable to such Subordinated Debt (other than
Foothill Group Subordinated Debt) do not differ in
any respect from, those applicable to the
Subordinated Debt listed on Schedule VI hereto;
(vi) in respect of which Foothill Group
enters into a subordination agreement, the terms of
which do not differ in any material respect from the
terms of the Foothill Group Subordination Agreement;
and
(vii) no Potential Default or Event of
Default shall exist at the date of issuance of such
Subordinated Debt and after giving effect thereto.
"Person" or "person" shall mean any individual, partnership,
firm, corporation, association, joint venture, trust or other entity,
or any Governmental Authority.
"Plan" shall mean, at any particular time, any employee
benefit plan that is covered by ERISA and in respect of which Foothill
or an ERISA Affiliate is (or, if such plan were terminated at such
time, under Section 4069 of ERISA would be deemed to be) an "employer"
as defined in Section 3(5) of ERISA.
"Potential Default" shall mean any event or condition which
with notice or passage of time or a determination by
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the Required Banks or any combination of the foregoing, would
constitute an Event of Default.
"Prohibited Transaction" shall have the meaning set forth in
Section 406 of ERISA or Code Section 4975.
"Property" shall mean all equipment, real estate or other real
or personal property, tangible or intangible, owned or operated by
Foothill or any Subsidiary thereof.
"Public Debt Securities" shall mean debt instruments that are
registered under the Securities Act of 1933, as amended (other than
those classified as Discount Receivables).
"Purchased Receivables" shall mean Discount Receivables,
Non-Public Debt Instruments and Public Debt Securities.
"Reference Rate" shall mean the per annum rate publicly
announced by Union Bank from time to time at its Head Office in San
Francisco, California as its reference rate. The Reference Rate is
determined by Union Bank from time to time as a means of pricing
credit extensions to some customers and is neither directly tied to
any external rate of interest or index nor necessarily the lowest rate
of interest charged by Union Bank at any given time for any particular
class of customers or credit extensions.
"Register" shall have the meaning specified in
Section 11.07(c).
"Reimbursement Obligations shall have the meaning specified
in Section 3.01.
"Required Banks" shall mean at any time Banks having
Percentages aggregating at least 60%.
"Reportable Event" shall mean any of the events set forth in
Section 4043(b) of ERISA, other than those events as to which the
30-day notice period is waived under subsections .13, .14, .16, .18,
.19 or .20 of PBGC Reg. 2615.
"Repossessed Assets" shall mean items of the type included on
the balance sheet of Foothill and its Consolidated Subsidiaries as of
December 31, 1993, within the heading "Repossessed Assets".
"Restricted Investment" shall mean any Investment, to the
extent it does not constitute a Permitted Liquid Investment.
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"Restricted Payment" shall mean, with respect to Foothill and
its Subsidiaries:
(a) the payment of any distribution or dividend
on any Capital Interest of Foothill (other than dividends paid
solely in Capital Interests of Foothill);
(b) any defeasance, redemption, repurchase or
other acquisition or retirement for value prior to scheduled
maturity of any installment of principal of any Subordinated
Debt (other than Foothill Group Advances) and any early
payment of interest on, or other amounts due in respect of,
any Subordinated Debt; or
(c) any payment on account of the purchase,
redemption or other retirement of any Capital Interest of
Foothill, or of any warrants, options or other rights to
acquire any Capital Interest in Foothill, (except a payment on
account of the principal of and prepayment charge, if any, on
convertible Indebtedness) or any other distribution made in
respect thereof, either directly or indirectly.
"Revolver Agreements" shall mean, collectively, (a) the
Multiyear Revolving Credit Agreement dated as of June 30, 1994, among
Foothill, the banks from time to time signatories thereto and Bank of
America National Trust and Savings Association as agent for the banks
and (b) the Revolving Credit Agreement dated as of June 30, 1994,
among Foothill, the banks from time to time signatories thereto and
Bank of America National Trust and Savings Association as agent for
the banks, as such agreements may be amended, modified, supplemented
or replaced from time to time. (This definition shall be in effect,
and the Revolver Agreements as defined above shall be deemed to be in
effect as most recently amended, even though the Revolver Agreements
shall be terminated or cease to exist.)
"S&P" shall mean Standard & Poor's Corporation or any
successor thereto.
"Senior Indebtedness" shall mean, as of any date, all
Indebtedness of Foothill and its Subsidiaries outstanding as of such
date other than Subordinated Debt.
"Senior Subordinated Debt" shall mean Subordinated Debt that
is senior in time and right of payment to Junior Subordinated Debt.
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"Settlement Securities" shall mean Capital Interests granted
in consideration or good faith settlement of Investments permitted by
Section 8.04 hereof.
"Single Employer Plan" shall mean any Plan which is covered by
Title IV of ERISA, but is not a Multiemployer Plan.
"Solvent" shall mean, as to any Person, that such Person has
capital sufficient to carry on its business and transactions and all
business and transactions in which it is about to engage, is able to
pay its debts as they mature, and owns property having a value, both
at fair valuation and at then current fair salable value, greater than
the amount required to pay its debts (including contingencies).
"State" shall mean and include, unless otherwise limited, any
State of the United States, the District of Columbia and the
Commonwealth of Puerto Rico.
"Subordinated Debt" shall mean all Indebtedness of Foothill
and its Subsidiaries that is subordinated in time and right of payment
to the Obligations.
"Subsidiary" or "Subsidiaries" of any Person shall mean any
corporation or partnership of which more than 50% of the outstanding
Voting Interests in such corporation or partnership is at the time
owned, directly or indirectly, by such Person, or by one or more of
its Subsidiaries, or by such Person and one or more of its
Subsidiaries.
"Taxes" shall have the meaning specified in Section 2.07.
"Termination Date" shall mean June 30, 1995, or such later
date as shall be requested by Foothill and agreed to by the Banks
pursuant to Section 2.08 hereof.
"Total Liabilities" shall mean, as of any date of calculation,
the aggregate outstanding Indebtedness of Foothill and its
Consolidated Subsidiaries as of such date, determined on consolidated
basis in accordance with GAAP.
"Total Revenues" shall mean, with respect to any fiscal year,
an amount equal to the sum included in the audited Consolidated
financial statements of Foothill and its Consolidated Subsidiaries for
such year within the heading "Total Revenues", but only to the extent
consistent with its audited Consolidated financial statements for the
fiscal year ended December 31, 1993.
"UCP" shall have the meaning specified in Section 2.13.
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"Union" shall have the meaning specified at the beginning of
this Agreement.
"United States" and "U.S." each shall mean the United States
of America.
"Voting Interest" shall mean securities, as defined in Section
2(1) of the Securities Act of 1933, as amended, of any class or
classes, the holders of which are ordinarily, in the absence of
contingencies, entitled to (a) vote for the election of the corporate
directors (or Persons performing similar functions) or (b) in the case
of a partnership, manage or direct the business or assets thereof.
References in this Agreement to percentages of Voting Interests,
unless otherwise noted, refer to percentages of votes to which such
Voting Interests are entitled in the (i) election of corporate
directors (or Persons performing similar functions) or (ii) management
of the business or assets thereof in the case of a partnership, rather
than to the number of shares.
SECTION 1.02. Other Definitional Provisions.
(a) All terms defined in this Agreement in the singular
shall have comparable meanings when used in the plural, and vice
versa.
(b) The words "hereof," "hereby," "herein," and
"hereunder" and words of similar import when used in this Agreement
shall refer to this Agreement as a whole and not to any particular
provisions of this Agreement; the term "hereafter" shall mean after,
and the term "heretofore" shall mean before, the date of this
Agreement; and Article, Section, schedule, exhibit and like references
are to this Agreement unless otherwise specified.
(c) Any defined term that relates to a document shall
include within its definition any amendments, modifications, renewals,
restatements, extensions, supplements, or substitutions that
heretofore may have been or hereafter may be executed in accordance
with the terms thereof and, if applicable, hereof.
(d) References in this Agreement to particular sections
of the Code, ERISA or any other legislation shall be deemed to refer
also to any successor sections thereto or other redesignations for
codification purposes.
(e) All terms defined in the Uniform Commercial Code
("UCC") and not otherwise defined or modified herein shall have the
respective meaning ascribed to such terms in the UCC.
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SECTION 1.03. Computation of Time Periods. In this
Agreement, in the computation of a period of time from a specified date to a
later specified date, unless otherwise stated the word "from" means "from and
including" and the word "to" or "until" each means "to but excluding".
ARTICLE II
AMOUNT AND TERMS OF LETTERS OF
CREDIT AND PARTICIPATIONS THEREIN
SECTION 2.01. Letters of Credit. The Issuing Bank agrees
with Foothill, on the terms and conditions hereinafter set forth, to Issue for
the account of each Account Party one or more Letters of Credit from time to
time during the period from the date hereof until the date which occurs 30 days
before the Termination Date in an aggregate undrawn amount not to exceed at any
time the Letter of Credit Commitment, each such Letter of Credit upon its
Issuance to expire on or before the earlier of (a) the date which occurs one
year from the date of its Issuance or (b) the date which occurs one year
following the Termination Date; provided, however, that the Issuing Bank shall
not be obligated to Issue any Letter of Credit if after giving effect to such
Issuance of such Letter of Credit the outstanding aggregate principal amount of
all Letter of Credit Liability for Letters of Credit would exceed $10,000,000.
Within the limits of the obligations of the Issuing Bank set forth above,
Foothill may request the Issuing Bank to Issue one or more Letters of Credit,
reimburse, or cause the appropriate Account Party to reimburse, the Issuing
Bank for payments made thereunder, and request the Issuing Bank to Issue one or
more other Letters of Credit under this Section 2.01.
SECTION 2.02. Issuing the Letters of Credit. Each Letter of
Credit shall be Issued on at least three Business Days' notice from Foothill to
the Agent specifying the Account Party, the date, amount, expiry, and
beneficiary thereof, accompanied by an Application and Agreement describing
such Letter of Credit, duly executed by such Account Party and Approved by
Foothill. On the date specified by Foothill in such notice and upon
fulfillment of the applicable conditions set forth in Article IV, the Issuing
Bank will Issue such Letter of Credit in the form specified in such Application
and Agreement.
SECTION 2.03. Participations Purchased by Banks.
(a) On the date of Issuance of each Letter of Credit the
Issuing Bank shall be deemed irrevocably and unconditionally to have
sold and transferred to each Bank other than Union without recourse or
warranty, and each Bank other than Union shall be deemed to have
irrevocably and unconditionally purchased and received from the
Issuing
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Bank, an undivided interest and participation, to the extent of such
Bank's Percentage in effect from time to time, in such Letter of
Credit and all Letter of Credit Liability relating to such Letter of
Credit. As to each Letter of Credit Issued or to be Issued by the
Issuing Bank, the Agent will promptly notify each Bank of such Letter
of Credit and the Account Party, date of Issue, amount, expiry, and
reference number thereof.
(b) In the event that any reimbursement obligation under
any Application and Agreement is not paid when due to the Issuing Bank
with respect to any Letter of Credit, the Issuing Bank shall promptly
notify the Agent to that effect, and the Agent shall promptly notify
the Banks other than Union of the amount of such reimbursement
obligation and each Bank other than Union shall immediately pay to the
Issuing Bank, in lawful money of the United States and in same day
funds, an amount equal to such Bank's Percentage then in effect of the
amount of such unpaid reimbursement obligation.
(c) Promptly after the Issuing Bank receives a payment on
account of a reimbursement obligation with respect to any Letter of
Credit, the Issuing Bank shall promptly pay to the Agent, and the
Agent shall promptly pay to each Bank which funded its participation
therein, in lawful money of the United States and in the kind of funds
so received, an amount equal to such Bank's ratable share thereof.
(d) Upon the request of any Bank, the Agent shall furnish
to such Bank copies of any Letter of Credit and any Application and
Agreement and other documents related thereto as may be reasonably
requested by such Bank.
(e) The obligation of each Bank other than Union to make
payments under subsection (b) above shall be unconditional and
irrevocable and shall be made under all circumstances (except as
otherwise expressly provided in subsection (a) above), including,
without limitation, any of the circumstances referred to in Section
2.10(b).
(f) If any payment received on account of any
reimbursement obligation with respect to a Letter of Credit and
distributed to a Bank as a participant under Section 2.03(c) is
thereafter recovered from the Issuing Bank in connection with any
bankruptcy or insolvency proceeding relating to Foothill or the
Account Party thereof, as the case may be, each Bank which received
such distribution shall, upon demand by the Agent, repay to the
Issuing Bank such Bank's ratable share of the amount so recovered
together with an amount equal to such Bank's ratable share (according
to the proportion of (i) the amount of such Bank's required repayment
to (ii) the total amount
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so recovered) of any interest or other amount paid or payable by the
Issuing Bank in respect of the total amount so recovered.
SECTION 2.04. Fees.
(a) [Intentionally Omitted]
(b) Commitment Fee. Foothill agrees to pay to each Bank
a commitment fee on the average daily unused portion of such Bank's
Commitment, from the New Effective Date, in the case of each Initial
Bank, and from the effective date specified in the Assignment and
Acceptance pursuant to which it became a Bank, in the case of each
other Bank, until the Termination Date, at the rate of 1/4 of 1% per
annum, payable monthly in arrears on or prior to the fifth Business
Day after the end of each month in each year and on the Termination
Date. For purposes of this Agreement, the unused portion of any
Bank's Commitment at any time shall be the excess of such Bank's
Commitment over such Bank's Percentage of the undrawn balance of then
outstanding Letters of Credit.
(c) Usage Fee. Foothill agrees to pay to each Bank a
usage fee on such Bank's Percentage of the average daily undrawn
balance of outstanding Letters of Credit, from the date hereof, in the
case of each Initial Bank, and from the effective date specified in
the Assignment and Acceptance pursuant to which it became a Bank, in
the case of each other Bank, until the Termination Date, at the rate
of 1% per annum, payable monthly in arrears on or prior to the fifth
Business Day after the end of each month in each year and on the
Termination Date.
(d) Letter of Credit Fee. Foothill agrees with the
Issuing Bank and the Banks that the letter of credit fees, payable by
each Account Party with respect to each Letter of Credit issued for
the account of such Account Party and guaranteed by Foothill under
Article III hereof, shall be:
(i) in the case of each Letter of Credit which is
a standby letter of credit, in an amount equal to $300
assessed on the date of Issuance of such Letter of Credit;
(ii) in the case of any Letter of Credit which is
a commercial documentary letter of credit, in an amount equal
to the greater of (A) $100 or (B) 1/8 of 1% of the maximum
amount available to be drawn under such Letter of Credit
assessed on the date of issuance of such Letter of Credit (the
determination of such maximum amount to assume compliance with
all conditions for drawing); and
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(iii) in the case of each Letter of Credit which is
a commercial documentary letter of credit, in an amount, for
each draw requested thereunder by the beneficiary thereof,
assessed on the date of each drawing, equal to the greater of
(A) $100 or (B) 1/8 of 1% of the amount of such requested draw
(the determination of such amount to assume compliance with
all conditions for drawing).
The letter of credit fees in each case in this Section 2.04(d) shall be payable
to and for the account of the Issuing Bank monthly in arrears on or prior to
the fifth Business Day after the end of each month in each year and on the
Termination Date.
SECTION 2.05. Reduction of Commitments. Foothill shall have
the right, upon at least three Business Days' notice to the Agent, to terminate
in whole or reduce ratably in part the unused portion of the respective
Commitments of the Banks; provided, however, that each such partial reduction
shall be in the amount of $5,000,000 or any multiple of $1,000,000 in excess
thereof.
SECTION 2.06. Payments and Computations.
(a) Foothill shall make each payment under this
Agreement, irrespective of and without condition or deduction for any
counterclaim, defense, recoupment or setoff, in lawful money of the
United States and in same day funds delivered to the Agent not later
than 10:00 A.M. (Los Angeles time) on the day when due by deposit of
such funds to the Agent's Account. The Agent will promptly thereafter
cause to be distributed like funds relating to the payment of
principal (reimbursement for payments under Letters of Credit),
interest, or commitment, letter of credit or usage fees ratably (other
than amounts payable to any Bank pursuant to Section 2.07 or 2.10) to
the Banks for their respective accounts, and like funds relating to
the payment of any other amount payable to any Bank or the Issuing
Bank to such Bank for its account or to the Issuing Bank, in each case
to be applied in accordance with, and subject to, the terms of this
Agreement. Upon its acceptance of an Assignment and Acceptance and
recording of the information contained therein in the Register
pursuant to Section 11.07(c), from and after the effective date
specified in such Assignment and Acceptance, the Agent shall make all
payments hereunder and under any other Loan Document in respect of the
interest assigned thereby to the Bank assignee thereunder, and the
parties to such Assignment and Acceptance shall make all appropriate
adjustments in such payments for periods prior to such effective date
directly between themselves.
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(b) Foothill hereby authorizes each Bank, if and to the
extent payment owing to such Bank is not made when due hereunder, to
charge from time to time against any or all of Foothill's accounts
with such Bank any amount so due.
(c) All computations of interest and of commitment, usage
and letter of credit fees shall be made by the Agent on the basis of a
year of 360 days, in each case for the actual number of days
(including the first day but excluding the last day) occurring in the
period for which such interest or fees are payable. Each
determination by the Agent of an interest rate hereunder shall be
conclusive and binding for all purposes, absent manifest error.
(d) Unless the Agent shall have received notice from an
Account Party prior to the date on which any payment is due to the
Banks under its Application and Agreement that such Account Party will
not make such payment in full, the Agent may assume that such Account
Party has made such payment in full to the Agent on such date and the
Agent may, in reliance upon such assumption, cause to be distributed
to each Bank on such due date an amount equal to the amount then due
to such Bank. If and to the extent such Account Party shall not have
so made such payment in full to the Agent, each Bank shall repay to
the Agent forthwith on demand such amount distributed to such Bank
together with interest thereon, for each day from the date such amount
is distributed to such Bank until the date such Bank repays such
amount to the Agent, at the Federal Funds Rate.
(e) Whenever any payment hereunder shall be stated to be
due on a day other than a Business Day, such payment shall be made on
the next succeeding Business Day, and such extension of time shall in
such case be included in the computation of payment of interest,
commitment, usage and other fees, as the case may be.
SECTION 2.07. Taxes.
(a) Any and all payments by Foothill under this Agreement
shall be made, in accordance with Section 2.06, free and clear of and
without deduction for any and all present or future taxes, levies,
imposts, deductions, charges or withholdings, and all liabilities with
respect thereto, excluding, in the case of the Issuing Bank, each Bank
and the Agent, taxes imposed on its income, and franchise taxes
imposed on it, by the jurisdiction under the laws of which the Issuing
Bank, such Bank or the Agent (as the case may be) is organized or any
political subdivision thereof and, in the case of each Bank, taxes
imposed on its income, and franchise taxes imposed on it, by the
jurisdiction of such Bank's office listed under its name on the
signature pages hereof or on the signature page of the
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Assignment and Acceptance pursuant to which it became a Bank (" Bank
Office") or any political subdivision thereof (all such non-excluded
taxes, levies, imposts, deductions, charges, withholdings and
liabilities being hereinafter referred to as "Taxes"). If Foothill
shall be required by law to deduct any Taxes from or in respect of
any sum payable hereunder to the Issuing Bank, any Bank or the Agent,
(i) the sum payable shall be increased as may be necessary so that
after making all required deductions (including deductions applicable
to additional sums payable under this Section 2.07) the Issuing
Bank, such Bank or the Agent (as the case may be) receives an amount
equal to the sum it would have received had no such deductions been
made, (ii) Foothill shall make such deductions and (iii) Foothill
shall pay the full amount deducted to the relevant taxation authority
or other authority in accordance with applicable law.
(b) In addition, Foothill agrees to pay 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 under any Application and Agreement or from the execution
or delivery of, or otherwise with respect to, this Agreement or any
other Loan Document or document delivered hereunder or under any other
Loan Document (hereinafter referred to as "Other Taxes").
(c) Foothill will indemnify each Bank and the Agent for
the full amount of Taxes or Other Taxes (including, without
limitation, any Taxes or Other Taxes imposed by any jurisdiction on
amounts payable under this Section 2.07) paid by the Issuing Bank,
such Bank or the Agent (as the case may be) with respect to amounts
paid by Foothill under this Agreement or by any Account Party under
any Application and Agreement or withheld by any Account Party with
respect to amounts paid under any Application and Agreement, and any
liability (including penalties, interest and expenses) arising
therefrom or with respect thereto, whether or not such Taxes or Other
Taxes were correctly or legally asserted. This indemnification shall
be made within 30 days from the date the Issuing Bank, such Bank or
the Agent (as the case may be) makes written demand therefor.
(d) Within 30 days after the date of any payment of
Taxes, Foothill will furnish to the Agent, at its address referred to
in Section 11.02, the original or a certified copy of a receipt or
other evidence satisfactory to the Agent of payment thereof.
(e) Prior to the date of the Issuance of the initial
Letter of Credit in the case of each Initial Bank, and on the date of
the Assignment and Acceptance pursuant to which it became a Bank in
the case of each other Bank, and from
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time to time thereafter if requested by Foothill or the Agent, each
Bank organized under the laws of a jurisdiction outside the United
States shall provide the Agent and Foothill with either (i) the forms
prescribed by the Internal Revenue Service of the United States
certifying as to such Bank's status for purposes of determining
exemption from United States withholding taxes with respect to all
payments to be made to such Bank under any Loan Document or (ii) other
documents satisfactory to Foothill and the Agent indicating that all
payments to be made to such Bank under any Loan Document are subject
to such taxes at a rate reduced by an applicable tax treaty. Unless
Foothill and the Agent have received forms or other documents
satisfactory to them indicating that payments under any Loan Document
are not subject to United States withholding tax or are subject to
such tax at a rate reduced by an applicable tax treaty, Foothill or
the Agent shall withhold taxes from such payments at the applicable
statutory rate in the case of payments to or for the Issuing Bank or
any Bank organized under the laws of a jurisdiction outside the United
States.
(f) Each Bank agrees to use its best efforts (consistent
with its internal policy and legal and regulatory restrictions) to
designate a different Bank Office if the making of such a designation
would avoid the need for the Bank or Issuing Bank to pay, or reduce
the amount of, any Taxes or Other Taxes and would not, in the
reasonable judgment of such Bank, be otherwise disadvantageous to such
Bank.
(g) Without prejudice to the survival of any other
agreement of Foothill hereunder, the agreements and obligations of
Foothill contained in this Section 2.07 shall survive the payment in
full of the Letter of Credit Liability relating to the Letters of
Credit.
SECTION 2.08. Extension of Termination Date. On or before
November 1, 1994 and each November 1 thereafter (each such November 1 being
herein referred to as a "November Extension Request Date"), Foothill may
request that the Agent extend the Termination Date to December 31 of the
following calendar year (a "November Extension Request"). On or before May 1,
1995 and each May 1 thereafter (each such May 1 being herein referred to as a
"May Extension Request Date"), Foothill may request that the Agent extend the
Termination Date to June 30 of the following calendar year (a "May Extension
Request"). (November Extension Requests and May Extension Requests are
collectively referred to herein as "Extension Requests"). Foothill shall make
each Extension Request by delivering to the Agent a written Extension Request,
in form and substance satisfactory to the Agent. The Agent will promptly
notify each Bank of such Extension Request. Each Bank may, in its sole
discretion, so agree to extend the
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Termination Date by delivering a notice to the Agent in the form of Exhibit A
hereto by the next succeeding December 15, with respect to November Extension
Requests, or June 1, with respect to May Extension Requests (each such December
15 or June 1, as applicable, being herein referred to as an "Extension Reply
Date"). If, by the Extension Reply Date, Banks then holding more than 25% of
the Commitments of the Banks have failed to consent to the Extension Request,
the Agent shall notify the Banks and Foothill of this fact, and each Bank which
had consented to the Extension Request shall have until the next succeeding
December 31, with respect to November Extension Requests, or June 30, with
respect to May Extension Requests, to withdraw its consent. The Commitment of
each nonconsenting Bank shall terminate on the Termination Date applicable to
such Bank and shall not be otherwise renewed or extended, and any future
Extension Request shall be delivered only to Banks which, on such future
Extension Request Date, have continuing Commitments. The Agent and Banks shall
be under no obligation whatsoever to extend the Termination Date. The consent
of one or more Banks to a November Extension Request or a May Extension Request
(which consent is not withdrawn as permitted in this Paragraph 2.08) shall be
effective on the next January 1 or July 1, respectively. No Extension Request
shall be permitted after November 1, 1994 unless an Extension Request has been
made on or prior to each previous November Extension Request Date and May
Extension Request Date and each such Extension Request was consented to by at
least one Bank (and such Bank did not subsequently withdraw its consent as
permitted in this Paragraph 2.08).
SECTION 2.09. Evidence of Debt. The Issuing Bank shall
maintain in accordance with its usual practice an account or accounts
evidencing the indebtedness of each Account Party and Foothill to the Issuing
Bank resulting from each drawing under any Letter of Credit and the amounts of
principal and interest payable and paid to the Issuing Bank from time to time
hereunder. In any legal action or proceeding in respect of this Agreement or
any Application and Agreement, the entries made in such account or accounts
shall be conclusive evidence of the existence and amounts of the obligations of
such Account Party and Foothill therein recorded.
SECTION 2.10. Indemnification; Nature of the Issuing Bank's
Duties.
(a) Foothill agrees to indemnify and save harmless the
Agent, the Issuing Bank and each Bank from and against any and all
claims, demands, liabilities, damages, losses, costs, charges and
expenses (including reasonable attorneys' fees) which the Agent, the
Issuing Bank or such Bank may incur or be subject to as a consequence,
direct or indirect, of (i) the Issuance of any Letter of Credit or
(ii) any action or proceeding relating to a court order, injunction,
or other process or decree restraining or seeking to
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restrain the Issuing Bank from paying any amount under any Letter of
Credit.
(b) In furtherance and not in limitation of the
foregoing, the obligations of Foothill hereunder shall be
unconditional and irrevocable, and shall be paid strictly in
accordance with the terms hereof under all circumstances, including,
without limitation, any of the following circumstances:
(i) any lack of validity or
enforceability of any Letter of Credit or any agreement or
instrument relating thereto;
(ii) the existence of any claim, setoff,
defense or other right which Foothill or any Account Party may
have at any time against the beneficiary, or any transferee,
of any Letter of Credit, or the Issuing Bank, any Bank, or any
other Person;
(iii) any draft, certificate, or other
document presented under any Letter of Credit proving to be
forged, fraudulent, invalid or insufficient in any respect or
any statement therein being untrue or inaccurate in any
respect;
(iv) any lack of validity, effectiveness,
or sufficiency of any instrument transferring or assigning or
purporting to transfer or assign any Letter of Credit or the
rights or benefits thereunder or proceeds thereof, in whole or
in part;
(v) any loss or delay in the
transmission or otherwise of any document required in order to
make a drawing under any Letter of Credit or of the proceeds
thereof;
(vi) any failure of the beneficiary of a
Letter of Credit to strictly comply with the conditions
required in order to draw upon any Letter of Credit;
(vii) any misapplication by the
beneficiary of any Letter of Credit of the proceeds of any
drawing under such Letter of Credit; or
(viii) any other circumstance or happening
whatsoever, whether or not similar to the foregoing;
provided that the Issuing Bank shall not be relieved of any liability it may
otherwise have as a result of its gross negligence, willful misconduct or
wrongful refusal to honor any Letter of Credit.
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SECTION 2.11. Increased Costs.
(a) Change in Law Generally. If any change in any law or
regulation or in the interpretation thereof by any court or
administrative or governmental authority charged with the
administration thereof shall either (i) impose, modify or deem
applicable any reserve, special deposit or similar requirement against
letters of credit issued by the Issuing Bank or (ii) impose on the
Issuing Bank or any Bank any other condition regarding letters of
credit or, in the case of such Bank, its participation hereunder in
Letters of Credit, and the result of any event referred to in the
preceding clause (i) or (ii) shall be to increase the cost to the
Issuing Bank of Issuing or maintaining or, in the case of such Bank,
having a participation in, Letters of Credit, then, upon demand by the
Issuing Bank or such Bank (with a copy to the Agent), Foothill shall
immediately pay to the Issuing Bank or such Bank from time to time as
specified by the Issuing Bank or such Bank (with a copy to the Agent),
additional amounts which shall be sufficient to compensate the Issuing
Bank or such Bank for such increased cost. A certificate as to such
increased cost, and amount thereof, incurred by the Issuing Bank or
any Bank as a result of any event mentioned in clause (i) or (ii)
above, submitted by the Issuing Bank or such Bank to Foothill and the
Agent, shall be conclusive and binding for all purposes, absent
manifest error.
(b) Capital. If the Issuing Bank or any Bank determines
that compliance with any law or regulation or any guideline or request
from any central bank or other governmental authority (whether or not
having the force of law) affects or would affect the amount of capital
required or expected to be maintained by the Issuing Bank or such Bank
or any corporation controlling the Issuing Bank or such Bank and that
the amount of such capital is increased by or based upon the existence
of letters of credit or participations therein (or similar contingent
obligations), then, upon demand by the Issuing Bank or such Bank, as
the case may be (with a copy to the Agent), Foothill shall immediately
pay to the Issuing Bank or such Bank, from time to time as may be
specified by the Issuing Bank or such Bank, additional amounts
sufficient to compensate it in light of such circumstances, to the
extent that the Issuing Bank or such Bank reasonably determines such
increase in capital to be allocable to the Issuance or maintenance of
the Letters of Credit, or, in the case of such Bank, to its
participation in the Letters of Credit. A certificate as to such
amounts submitted to Foothill by the Issuing Bank or such Bank shall
be conclusive and binding for all purposes, absent manifest error.
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SECTION 2.12. Sharing of Payments, Etc. If any Bank shall
obtain any payment (whether voluntary, involuntary, through the exercise of any
right of set-off, or otherwise, including, but not limited to, any charge
pursuant to Section 2.06(b)) on account of the Letter of Credit Liability owing
to it (other than pursuant to Section 2.07 or 2.10) in excess of its ratable
share of payments on account of the Letter of Credit Liability owing to all the
Banks, such Bank shall forthwith purchase from the other Banks such
participations in the Letter of Credit Liability owing to them as shall be
necessary to cause such purchasing Bank to share the excess payment ratably
with each of them; provided, however, that if all or any portion of such excess
payment is thereafter recovered from such purchasing Bank, such purchase from
each Bank shall be rescinded and such Bank shall repay to the purchasing Bank
the purchase price to the extent of such recovery, together with an amount
equal to such Bank's ratable share (according to the proportion of (a) the
amount of such Bank's required repayment to (b) the total amount so recovered
from the purchasing Bank) of any interest or other amount paid or payable by
the purchasing Bank in respect of the total amount so recovered. Foothill
agrees that any Bank purchasing a participation from another Bank pursuant to
Section 2.03, this Section 2.12 or Section 11.07(e) may, to the fullest extent
permitted by law, exercise all its rights of payment (including the right of
set-off) with respect to such participation as fully as if such Bank were the
direct creditor of Foothill in the amount of such participation.
SECTION 2.13. Uniform Customs and Practice. The Uniform
Customs and Practice for Documentary Credits as most recently published by the
International Chamber of Commerce ("UCP") shall in all respects be deemed a
part of this Article II as if incorporated herein and shall apply to the
Letters of Credit.
ARTICLE III
GUARANTY
SECTION 3.01. Guaranty. Foothill hereby unconditionally
guarantees to the Agent, the Issuing Bank and the Banks the punctual payment
when due of all obligations of each Account Party at any time and from time to
time existing under each Application and Agreement executed by each Account
Party and Approved by Foothill, whether for reimbursement for amounts drawn
under the Letter or Letters of Credit covered thereby, interest, fees,
expenses, indemnification or otherwise (such obligations being the
"Reimbursement Obligations").
SECTION 3.02. Notice of Payment. In the event that any
Reimbursement Obligation under any Application and Agreement referred to in
Section 3.01 is not paid when due by the Account Party thereunder to the
Issuing Bank with respect to any Letter
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of Credit, the Issuing Bank shall so notify Foothill and Foothill shall pay to
the Issuing Bank on the date of such notice all amounts then due by the
defaulting Account Party under such Application and Agreement.
SECTION 3.03. Guaranty Absolute. Foothill guarantees that
the Reimbursement Obligations will be paid strictly in accordance with the
terms of the applicable Application and Agreement and this Agreement,
regardless of any law, regulation or order now or hereafter in effect in any
jurisdiction affecting any of such terms or the rights of the Issuing Bank or
the Banks with respect thereto. The liability of Foothill under this Guaranty
shall be absolute and unconditional irrespective of:
(a) any lack of validity or enforceability of any
Application or Agreement or other agreement or instrument relating
hereto or thereto;
(b) any change in the time, manner or place of payment
of, or in any other term of, all or any of the Reimbursement
Obligations, or any other amendment or waiver of or any consent to
departure from this Agreement or any Application and Agreement;
(c) any release or nonperfection or amendment or waiver
of, or consent to departure from, any collateral security or any other
guaranty for all or any of the Reimbursement Obligations; or
(d) any other circumstance which might otherwise
constitute a defense available to, or a discharge of, the applicable
Account Party or Foothill;
provided that the Issuing Bank shall not be relieved of any liability it may
otherwise have as a result of its gross negligence, willful misconduct or
wrongful refusal to honor any Letter of Credit. This Guaranty shall continue
to be effective or be reinstated, as the case may be, if at any time any
payment of any of the Reimbursement Obligations is rescinded or must otherwise
be returned by the Issuing Bank or the Banks upon the insolvency, bankruptcy or
reorganization of any Account Party or otherwise, all as though such payment
had not been made.
SECTION 3.04. Waivers. Foothill hereby waives:
(a) promptness, diligence, notice of acceptance and any
other notice with respect to any of the Reimbursement Obligations and
this Guaranty;
(b) any requirement that the Agent, the Issuing Bank or
the Banks protect, secure or insure any security interest or lien or
any property subject thereto or exhaust any right or take any action
against the Account Party or any other
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Person or any collateral or any right to set off the fair market value
of any collateral against the Reimbursement Obligations; and
(c) any duty on the part of the Agent, the Issuing Bank
or the Banks to disclose to Foothill any matter, fact or thing
relating to the business, operation or condition of any Account Party
or its assets now known or hereafter to be known by the Agent, the
Issuing Bank or the Banks.
SECTION 3.05. Subrogation. Foothill will not exercise any
rights which it may acquire by way of subrogation under this Article III, by
any payment made hereunder or otherwise, until all the Reimbursement
Obligations and all other amounts payable under this Agreement and under the
Application and Agreements shall have been paid in full and the Commitments
shall have expired or terminated. If any amount shall be paid to Foothill on
account of such subrogation rights at any time prior to the later of (a) the
payment in full of the Reimbursement Obligations and all other amounts payable
under this Agreement and under the Application and Agreements and (b) the
expiration or termination of the Commitments, such amount shall be held in
trust for the benefit of the Agent, the Issuing Bank and the Banks and shall
forthwith be paid to the Agent to be credited and applied upon the
Reimbursement Obligations, whether matured or unmatured, in accordance with the
terms of this Agreement or to be held by the Agent as collateral security for
any Reimbursement Obligations thereafter existing. If (i) Foothill shall make
payment to the Agent of all or any part of the Reimbursement Obligations, (ii)
all the Reimbursement Obligations and all other amounts payable under this
Agreement and under the Application and Agreement shall be paid in full and
(iii) the Commitments shall have expired or terminated, the Agent, the Issuing
Bank and the Banks will, at Foothill's request, execute and deliver to Foothill
appropriate documents, without recourse and without representation or warranty,
necessary to evidence the transfer by subrogation to Foothill of an interest in
the Reimbursement Obligations resulting from such payment by Foothill.
SECTION 3.06. Continuing Guaranty. This Guaranty is a
continuing guaranty and shall remain in full force and effect until payment in
full (after the Termination Date) of the Reimbursement Obligations and all
other amounts payable under Article II and this Article III and under the
Application and Agreements.
ARTICLE IV
CONDITIONS PRECEDENT
SECTION 4.01. Conditions Precedent to New Effective Date.
The effectiveness of the amendments effected by this Third
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Amended and Restated Letter of Credit and Guaranty Agreement is subject to the
conditions precedent that the Agent shall have received the following, each
dated the New Effective Date, in form and substance satisfactory to the Agent
and in sufficient copies for each Bank:
(a) A certified copy of the resolutions of the Board of
Directors of Foothill approving this Agreement and the other matters
contemplated hereby, and of all other documents evidencing any other
necessary corporate action;
(b) A certificate of the Secretary or an Assistant
Secretary of Foothill certifying the names and true signatures of the
officers of Foothill authorized to sign this Agreement and the other
documents to be delivered by it hereunder;
(c) An executed copy of the Foothill Group Subordination
Agreement, together with a writing evidencing that the Banks have the
benefit of the Foothill Group Subordination Agreement; and
(d) An opinion of Buchalter, Nemer, Fields & Younger, a
Professional Corporation, counsel for Foothill, in substantially the
form of Exhibit B hereto and as to such other matters as any Bank
through the Agent may reasonably request.
SECTION 4.02. Conditions Precedent to Issuance of each Letter
of Credit. The obligation of the Issuing Bank to Issue each Letter of Credit
(including the initial Letter of Credit) shall be subject to the conditions
precedent that on the date of such Issuance of such Letter of Credit:
(a) The Agent shall have received the following, in form
and substance satisfactory to the Agent:
(i) A completed Application and Agreement duly
executed by the Account Party thereunder and Approved by
Foothill, and
(ii) Such other documents (including, but not
limited to, a teletransmission agreement, executed by the
Account Party and Foothill, a certified copy of resolutions of
the Board of Directors of such Account Party and incumbency
and signature certificate of such Account Party) as the Agent
may reasonably request; and
(b) The following statements shall be true (and the
giving of the applicable notice by Foothill in respect of such Letter
of Credit shall constitute a representation and warranty by Foothill
that on the date of such Issuance such statements are true):
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(i) The representations and warranties contained
in Article V of this Agreement are correct on and as of the
date of such Issuance of such Letter of Credit, before and
after giving effect to such Issuance, as though made on and as
of such date (except to the extent any such representation or
warranty, including those contained in Section 5.22, expressly
relates to an earlier date); and
(ii) No event has occurred and is continuing, or
would result from such Issuance of such Letter of Credit,
which constitutes an Event of Default or Potential Default.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
In order to induce the Agent, the Issuing Bank and the Banks
to enter into this Agreement and to induce the Issuing Bank to issue the
Letters of Credit herein provided for, Foothill hereby makes the following
representations and warranties, which shall survive the execution and delivery
of the Loan Documents and (except to the extent that any of such
representations and warranties expressly relate to earlier dates) shall be
deemed repeated and confirmed as of each date on which any Letters of Credit
are requested by Foothill or issued, amended or extended by the Issuing Bank:
SECTION 5.01. Status and Standing. Foothill is a duly
organized and validly existing corporation in good standing under the laws of
the jurisdiction of its organization, is properly licensed, has the power and
authority and the legal right to own its property and conduct the business in
which it is engaged or currently proposes to engage and is duly licensed and
qualified and in good standing under the laws of each jurisdiction where the
failure to qualify would have a Material Adverse Effect.
SECTION 5.02. Organizational Status of Subsidiaries.
Schedule I annexed hereto correctly sets forth the name of each Subsidiary of
Foothill in existence on the date hereof, its jurisdiction and form of
organization and the ownership of its Capital Interests. Each of such
Subsidiaries is duly organized and validly existing in the form of organization
indicated on Schedule I, duly licensed and in good standing under the laws of
its jurisdiction of organization, and is duly licensed and qualified and in
good standing in each jurisdiction where the failure to qualify as such would
have a Material Adverse Effect.
SECTION 5.03. Location of Offices, Books and Records.
Schedule II annexed hereto completely and accurately lists all places at which
each of Foothill and its Subsidiaries maintains,
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as of the date hereof, its books and records relating to its Finance
Receivables and the collateral related thereto. The principal office or
principal executive office of each of Foothill and its Subsidiaries in each
jurisdiction is correctly indicated on Schedule II as of the date hereof.
SECTION 5.04. Organizational Power and Authority.
(a) Foothill and its Subsidiaries have the corporate
power and authority and the legal right to execute, deliver and
perform this Agreement and the other Loan Documents to which they are
a party. Foothill and its Subsidiaries have taken all necessary
corporate action (including, but not limited to, the obtaining of any
consent of the holders of its Capital Interests required by law or by
the organizational documents thereof) to authorize the execution,
delivery, and performance of the Loan Documents to which they are a
party or by which they otherwise are affected and to authorize the
transactions contemplated hereby and thereby.
(b) Foothill Group has the corporate power and authority
and the legal right to make, deliver and perform each Loan Document to
which it is a party. Foothill Group has taken all necessary corporate
action (including, but not limited to, the obtaining of any consent of
the holders of its Capital Interests required by law or by the
organizational documents thereof) to authorize the execution,
delivery, and performance of the Loan Documents to which it is a party
or by which it otherwise is affected and to authorize the transactions
contemplated hereby and thereby.
SECTION 5.05. Enforceable Obligations. Each Loan Document,
and each other agreement or undertaking executed by Foothill, any Subsidiary
thereof, or Foothill Group and delivered to the Agent or the Issuing Bank
pursuant to this Agreement or any other Loan Document, constitutes the legal,
valid, and binding obligation of Foothill or such Subsidiary, or Foothill
Group, as the case may be, enforceable in accordance with their respective
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally, and general principles of equity,
and there are no actions, suits or proceedings pending or, to the knowledge of
Foothill, threatened against, or affecting, Foothill, any Subsidiary thereof,
or Foothill Group or any of their respective officers or directors calling into
question the legality, validity or enforceability thereof.
SECTION 5.06. Absence of Conflicts. Neither the execution
and delivery of this Agreement or any other Loan Document nor consummation of
the transactions herein or therein
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contemplated nor performance of or compliance with the terms and conditions
hereof or thereof will
(a) violate any law, or
(b) conflict with or result in a breach of or a default under
or result in (or give rise to any right, contingent or otherwise, of
any Person to cause) any termination, cancellation, prepayment or
acceleration of performance of, or result in the creation or
imposition of (or give rise to any obligation, contingent or
otherwise, to create or impose) any Lien upon any property of Foothill
or any Subsidiary of Foothill pursuant to, or otherwise result in (or
give rise to any right, contingent or otherwise, of any Person to
cause) any change in any right, power, privilege, duty or obligation
of Foothill or any such Subsidiary under or in connection with,
(i) the articles of incorporation or by-laws (or
other constituent documents) of Foothill or any Subsidiary of
Foothill, or
(ii) any agreement or instrument to which Foothill
or any Subsidiary of Foothill is a party or by which any of
them or any of their respective properties (now owned or
hereafter acquired) may be subject or bound.
SECTION 5.07. No Burdensome Agreements. Neither Foothill nor
any Subsidiary thereof is a party to any agreement or instrument or subject to
any restriction set forth in its organizational documents or provisions
relating to its Capital Interests that has a Material Adverse Effect.
SECTION 5.08. No Material Litigation. There are no actions,
suits or proceedings pending or, to the knowledge of Foothill, threatened
against or affecting Foothill, any Subsidiary thereof or any of their
respective officers or directors before any court, arbitrator or governmental
or administrative body or agency that, if adversely determined in the
reasonable opinion of Foothill acting in consultation with counsel, would have
a Material Adverse Effect. No injunction, writ, restraining order or other
order of any nature adverse to Foothill or any Subsidiary thereof or the
conduct of their respective businesses or inconsistent with the due
consummation of any transaction contemplated by any Loan Document has been
issued by any Governmental Authority. Neither Foothill nor any Subsidiary
thereof is in default under any applicable material statute, rule, order,
decree or regulation of any court, arbitrator or governmental body or agency
having jurisdiction over Foothill or any Subsidiary thereof.
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SECTION 5.09. Good Title to Properties. Foothill and its
Subsidiaries have good and marketable title to all their respective properties
and assets, subject only to such defects in title as do not detract materially
from the value of such property or assets or impair the use thereof in the
operation of their respective businesses, and subject to no Liens of any kind
other than Liens which are expressly permitted under this Agreement.
SECTION 5.10. Margin Regulations. Neither Foothill nor any
Subsidiary is engaged in the business of extending credit to others for the
purpose of purchasing or carrying any "margin stock", as such term is used in
Regulation U of the Board of Governors of the Federal Reserve System, as
amended from time to time. Not more than 25 percent of the value of the
property or assets (either of Foothill only or of Foothill and its Consolidated
Subsidiaries) subject to the provisions of Sections 8.01 or 8.05, or subject to
any restriction contained in any agreement or instrument between Foothill and
any Bank or any Affiliate of any Bank relating to Indebtedness and which
agreement or instrument is within the scope of Sections 9.01(e) or 9.01(g),
will be "margin stock."
SECTION 5.11. Investment Company. Neither Foothill nor any
Subsidiary thereof is an "investment company," or an "affiliated person" of, or
"promoter" or "principal underwriter" for, an "investment company," as such
terms are defined in the Investment Company Act of 1940, as amended. The
issuance of the Letters of Credit by the Issuing Bank, the repayment of
drawings thereunder by Foothill and the performance of the transactions
contemplated by this Agreement and the other Loan Documents will not violate
any provision of said Act, or any rule, regulation or order issued by the
Securities and Exchange Commission thereunder.
SECTION 5.12. Disclosure. No representation or warranty made
by, and no information regarding, Foothill or any Subsidiary thereof in any
Loan Document or any other document furnished from time to time in connection
herewith or therewith (other than projections or forecasts of future financial
performance), contains or will contain any untrue statement of a material fact
or omits or will omit to state any material fact necessary to make the
statements herein or therein, in light of the circumstances under which they
are or will be made, not misleading. The projections and forecasts of future
financial performance of Foothill delivered to the Agent, the Issuing Bank and
the Banks will be reasonable at the time they are delivered to the Agent, the
Issuing Bank and Banks in light of then available current information. There
is no fact known to Foothill that has, or that in the future might have, in the
reasonable judgment of Foothill, a Material Adverse Effect, except as set forth
or referred to in this Agreement or in
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another document or instrument heretofore furnished to the Agent, the Issuing
Bank and the Banks.
SECTION 5.13. Taxes and Claims. Each of Foothill and its
Subsidiaries has filed or caused to be filed, all Federal, state and local tax
returns and reports that are required to be filed and has paid all taxes shown
to be due and payable on said returns or on any assessments made against it or
any of its property and all other taxes, fees or charges imposed on it or any
of its property by any Governmental Authority (other than those the amount or
validity of which are currently being contested diligently in good faith by
appropriate proceedings and in respect of which adequate reserves in conformity
with GAAP have been provided on the books of Foothill or its Subsidiaries, as
the case may be); and no tax Liens (other than those the amount or validity of
which are currently being contested diligently in good faith by appropriate
proceedings and in respect of which adequate reserves in conforming with GAAP
have been provided on the books of Foothill or its Subsidiaries, as the case
may be) have been filed and, to the knowledge of Foothill, no claims are being
asserted with respect to any such taxes, fees or other charges. The income
taxes chargeable against the income of Foothill and its Subsidiaries are paid
by Foothill Group on consolidated income tax returns. The federal income tax
liabilities of Foothill Group and each of its Subsidiaries have been finally
determined by the Internal Revenue Service, or the time for audit has expired,
for all fiscal periods ending on or prior to December 31, 1989; and all such
liabilities (including all deficiencies assessed following audit) have been
satisfied, except liabilities which would not be required to be satisfied under
the provisions of Section 6.02 hereof. Schedule III describes all tax sharing
arrangements or agreements to which Foothill or any Subsidiary thereof is a
party or is subject or bound.
Each of Foothill and its Subsidiaries, to the knowledge of
Foothill, has paid and discharged all lawful claims for labor, material,
supplies and anything else that might or could, if unpaid, become a Lien on any
of its properties (other than those the amount or validity of which are
currently being contested diligently in good faith by appropriate proceedings
and in respect of which adequate reserves in conformity with GAAP have been
provided on the books of Foothill or its Subsidiaries, as the case may be).
SECTION 5.14. Trademarks, Patents, Etc. Each of Foothill and
its Subsidiaries possesses all trademarks and service marks (or has licenses
for the use thereof), trade names, copyrights, patents, licenses, permits,
approvals and consents (including, without limitation, licenses, approvals and
consents of Governmental Authorities) and rights in any thereof, adequate for
the conduct of their respective businesses as now conducted
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or as currently proposed to be conducted, without conflict with the rights or
claimed rights of others.
SECTION 5.15. Consents. No consent, authorization or action
of, or filing with, any Governmental Authority or any other Person is required
to authorize, or otherwise is required of Foothill or any Subsidiary thereof in
connection with, the execution, delivery, performance, validity, or
enforceability of any Loan Document or any of the instruments or documents to
be delivered pursuant to any Loan Document.
SECTION 5.16. Employee Benefit Plans.
(a) None of the Plans maintained at any time or the trusts
created thereunder has engaged in any Prohibited Transaction that
could subject any such Plan or trust to a material tax or penalty on
Prohibited Transactions imposed under Code Section 4975 or ERISA
Sections 502(i) or 502(l).
(b) The consummation of the transactions contemplated hereby
does not and will not involve any Prohibited Transaction that could
subject Foothill or an ERISA Affiliate to any material liability, tax
or penalty imposed under Code Section 4975 or ERISA Sections 502(i) or
502(l).
(c) Neither Foothill nor any ERISA Affiliate contributes to
or maintains, or since 1974 has contributed to or maintained, any
employee pension benefit plan within the meaning of Section 3(2) of
ERISA, including any employee pension benefit plan subject to Title IV
of ERISA or subject to the funding requirements of Section 412 of the
Code.
(d) All Plans have at all times been operated and maintained
in substantial compliance with ERISA and applicable provisions of the
Code (including, but not limited to, Code Section 105). All Plans
have substantially complied with, and are in substantial compliance
with, Code Section 4980B and Treasury Regulations (whether proposed or
final) relating thereto. No Plan provides benefits to retired
employees of Foothill or such ERISA Affiliate, except to the extent
required under Code Section 4980B and Treasury Regulations (whether
proposed or final) relating thereto.
(e) Neither Foothill nor any ERISA Affiliate, individually or
in the aggregate, has taken actions or undergone events which would
cause liability to arise under WARN or regulations issued thereunder,
or any applicable state law regarding employee terminations, mass
layoffs or plant closings, and neither Foothill nor any ERISA
Affiliate is aware of the existence of any such actions or events.
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(f) Foothill and each ERISA Affiliate have made all
contributions required to be made under each Plan as of the date of
this Agreement.
SECTION 5.17. Financial Condition. The (a) consolidated
balance sheet of Foothill and its Consolidated Subsidiaries, and consolidated
statements of income, cash flow, and retained earnings of Foothill and its
Consolidated Subsidiaries, as at the end of and for the fiscal year ended on
December 31, 1993, as certified by Ernst & Young, independent certified public
accountants, and (b) consolidated balance sheet of Foothill and its
Consolidated Subsidiaries for the fiscal quarter ended March 31, 1994, and the
related consolidated statements of income, cash flow, and retained earnings, as
certified by the chief financial officer of Foothill to be true and correct, in
each case heretofore furnished to the Agent, the Issuing Bank and the Banks,
present fairly the financial condition of Foothill and its Consolidated
Subsidiaries as at the dates of such balance sheets, and the results of their
operations for such periods. All such financial statements have been prepared
in accordance with GAAP applied on a basis consistent with that of the
comparable preceding period.
SECTION 5.18. Environmental Laws, Etc. Except to the extent
that none of the following has or would have a Material Adverse Effect:
(a) all Property heretofore, now, or hereafter owned or
operated by Foothill or any Subsidiary thereof and in their possession
or over which they exercise control (including Repossessed Assets,
collectively, the "Foothill Property") complied, complies and will
comply in all material respects with all applicable Federal, state and
local, environmental, health and safety statutes, guidelines, codes,
ordinances and regulations;
(b) the Foothill Property does not contain and has not been,
is not being, and will not be used to generate, manufacture, refine,
produce, store, handle, transfer, process, dispose of, or transport,
any Hazardous Materials, the effect of which would be to (i) violate
any applicable Federal, state or local law or regulation or (ii) cause
the incurrence of any liability that would have a Material Adverse
Effect; and
(c) there are no underground storage tanks or surface
impoundments located on, under, or within the Foothill Property that
(i) are in violation of any applicable Federal, state or local law or
regulation and (ii) the cost of remediation of which (to the extent
not covered by insurance) would have a Material Adverse Effect.
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SECTION 5.19. No Default or Event of Default; Compliance with
Instruments. No event or condition has occurred and is continuing that
constitutes a Potential Default or an Event of Default or that would constitute
a Potential Default or Event of Default after notice or lapse of time or both.
Foothill and each Subsidiary thereof is (a) in compliance with its charter
instruments and by-laws and (b) in substantial compliance with the terms of all
agreements and instruments of any kind to which it is a party or subject
(including but not limited to agreements to repay borrowed money, and
guarantees, leases of real or personal property as lessor or lessee, contracts
for future purchase or delivery of goods or rendering of services, powers of
attorney, distribution arrangements, patent license agreements, collective
bargaining agreements, employment agreements, bonus, pension or retirement
plans, or vacation pay, insurance or welfare agreements), other than agreements
or instruments, the breach or termination of which, singly and in the
aggregate, would not have a Material Adverse Effect; and no party is in default
thereunder and no event has occurred that, with the giving of notice or the
passage of time or both, would constitute such a default.
SECTION 5.20. Solvency. Foothill and each of its
Subsidiaries is Solvent, and neither Foothill nor any Subsidiary thereof, as a
result of the transactions contemplated hereby or by any other Loan Document,
will (a) become not Solvent, (b) be left with unreasonably small capital, or
(c) have liabilities (including contingencies) in excess of either the fair
value or the then fair salable value of its assets.
SECTION 5.21. Use of Facility. Foothill will use the credit
extended hereunder only to make available to its commercial finance customers
letters of credit.
SECTION 5.22. No Material Adverse Change. There has not
occurred since December 31, 1993, a material adverse change in the business,
operations, condition (financial or otherwise) or prospects of Foothill and its
Subsidiaries taken as a whole; there has not occurred any other event, act or
condition which could have a Material Adverse Effect; and there is not
threatened, with a reasonable likelihood of occurrence, either an adverse
change since March 31, 1994, in the business, operations, condition (financial
or otherwise) or prospects of Foothill and its Subsidiaries taken as a whole or
any other event, act or condition which could have a Material Adverse Effect.
SECTION 5.23. Insurance. Foothill and each Subsidiary
thereof maintain with financially sound and reputable insurers (not related to
or affiliated with Foothill) insurance with respect to their properties and
business and against at least such liabilities, casualties and contingencies
and in at least such types and amounts as is customary in the case of
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corporations engaged in the same or a similar business or having similar
properties similarly situated.
SECTION 5.24. Ownership and Subsidiaries. Foothill is a
wholly-owned Subsidiary of Foothill Group. Foothill has no Subsidiaries except
FCC Holdings Limited, a California corporation. There are no options,
warrants, calls, subscriptions, conversion rights, exchange rights, preemptive
rights or other rights, agreements or arrangements (contingent or otherwise)
which may in any circumstances now or hereafter obligate any Subsidiary to
issue any shares of its capital stock.
SECTION 5.25. Partnerships and Other Affiliated Entities.
Neither Foothill nor any Subsidiary thereof (a) is or has agreed or otherwise
has a duty to become a general partner of any person or otherwise generally
liable for or on account of the liabilities, acts or omissions of another
Person, (b) has agreed or otherwise has a duty to make capital contributions to
or on account of another Person, or (c) has an interest in another Person or
has or may have a liability to or on account of such Person which interest or
liability could reasonably be expected to have a Material Adverse Effect.
SECTION 5.26. Other Debt.
(a) Each offering and sale of Senior Indebtedness and
Subordinated Debt has been and will be made in accordance with the
applicable terms of the Securities Act of 1933, as amended (including
applicable rules and regulations thereunder), the Securities Exchange
Act of 1934, as amended (including applicable rules and regulations
thereunder), applicable state securities and "blue sky" laws and other
applicable laws.
(b) All of the Obligations constitute and will constitute
"Superior Indebtedness" or "Senior Indebtedness" within the meaning
ascribed to such terms in all loan agreements, indentures, and other
agreements relating to, and in all notes evidencing, Subordinated
Debt. The subordination provisions of such agreements and instruments
relating to or evidencing Subordinated Debt are enforceable against
Foothill Group and the holders from time to time (including any
pledgee thereof and any trustee or other representative of such
holders) of the Subordinated Debt in accordance with their respective
terms.
SECTION 5.27. Account Parties. No Account Party is an
Affiliate or a Subsidiary of Foothill or Foothill Group.
SECTION 5.28. Collateral. The subrogation rights of Foothill
against each Account Party for payments under its guaranty in Article III
hereof are fully supported by collateral
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pledged to Foothill by such Account Party under existing credit facilities.
SECTION 5.29. Letter of Credit Liability. The aggregate
Letter of Credit Liability relating to the Letters of Credit does not exceed
60% of Consolidated Net Worth.
SECTION 5.30. Foothill Credit Decision. Foothill shall have
the sole and independent responsibility to perform such credit analysis and
other investigation in respect of each Account Party, and to obtain such
documents and information, as it deems necessary and appropriate to make its
own decision to Approve an Application and Agreement. Foothill is not relying,
and shall not rely, on any Bank or the Issuing Bank to make any investigation
at any time of any Account Party or to disclose to Foothill at any time any
information concerning any Account Party. Foothill understands and agrees that
(a) the purpose and structure of the financing and the guaranty by Foothill
contemplated by this Agreement is to prevent any Bank or the Issuing Bank from
having to make any investigation at any time of any Account Party or from
having to disclose to Foothill at any time any information concerning any
Account Party and (b) the parties hereto have agreed to shift to Foothill the
entire duty and risk of investigation and disclosure concerning each Account
Party.
ARTICLE VI
AFFIRMATIVE COVENANTS
Foothill covenants and agrees that, until all obligations are
paid in full and the Commitments of all Banks are terminated, unless
specifically waived in writing by the Agent on behalf of the Required Banks:
SECTION 6.01. Reporting and Information Requirements.
(a) Annual Audit Reports. As soon as practicable, and in any
event within 90 days after the close of each fiscal year of Foothill,
Foothill shall furnish to Agent and the Banks:
(i) consolidated and consolidating statements of
income, retained earnings and cash flow of Foothill Group and
its Consolidated Subsidiaries for such fiscal year and
consolidated and consolidating balance sheets of Foothill
Group and its Consolidated Subsidiaries as of the close of
such fiscal year, and notes to each, and
(ii) consolidated and consolidating statements of
income, retained earnings and cash flow of Foothill and
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its Consolidated Subsidiaries for such fiscal year and a
consolidated balance sheet of Foothill and its Consolidated
Subsidiaries as of the close of such fiscal year, and notes
to each,
all in reasonable detail, setting forth in comparative form the
corresponding figures of the preceding fiscal year, and all
accompanied by a report thereon of Ernst & Young, or other
independent public accountants of recognized national standing
selected by Foothill, containing an opinion unqualified as to scope
limitations imposed by Foothill, unqualified as to Foothill being a
going concern and otherwise without qualification except as therein
noted, to the effect that the consolidated financial statements present
fairly, in all material respects, the consolidated financial position
of Foothill and its Subsidiaries as of the end of the fiscal year
being reported on and that the consolidated results of the operations
and cash flows for said year are in conformity with generally
accepted accounting principles and that the examination of such
accountants in connection with such financial statements has been
conducted in accordance with generally accepted auditing standards
and included such tests of the accounting records and such other
auditing procedures as said accountants deemed necessary in the
circumstances;
(b) Quarterly Reports. As soon as practicable, and in any
event within 45 days after the close of each of the first three
quarters of each fiscal year of Foothill, Foothill shall furnish to
Agent and the Banks:
(i) unaudited consolidated and consolidating
statements of income, retained earnings and cash flows for
Foothill Group and its Consolidated Subsidiaries for such
fiscal quarter and for the period from the beginning of such
fiscal year to the end of such fiscal quarter, and unaudited
consolidated and consolidating balance sheets of Foothill
Group and its Consolidated Subsidiaries as of the close of
such fiscal quarter, and exhibits to each, and
(ii) unaudited consolidated and consolidating
statements of income, retained earnings and cash flows for
Foothill and its Consolidated Subsidiaries for such fiscal
quarter and for the period from the beginning of such fiscal
year to the end of such fiscal quarter, and an unaudited
consolidated and consolidating balance sheet of Foothill and
its Consolidated Subsidiaries as of the close of such fiscal
quarter, and exhibits to each,
all in reasonable detail, setting forth in comparative form the
corresponding figures for the same period or as of the
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same date during the preceding fiscal quarter (except for the balance
sheets, which shall set forth in comparative form the corresponding
balance sheets as of the prior fiscal year end), and (except in the
case of such consolidating statements) certified by an Authorized
Representative of Foothill as presenting fairly the financial position
of Foothill and its Consolidated Subsidiaries as of the end of such
fiscal quarter, and the results of their operations and the changes in
their financial position for, such fiscal quarter, in conformity with
GAAP, subject to year-end audit adjustments.
(c) Compliance Certificates. Within 90 days after the
end of each fiscal year of Foothill and within 45 days after the end
of each of the first three quarters of each fiscal year, Foothill
shall deliver to the Agent and the Banks a certificate dated as of
the end of such fiscal year or quarter, signed on behalf of Foothill
by its Authorized Representative (i) stating that as of the date
thereof no Potential Default or Event of Default has occurred and is
continuing or exists, or if a Potential Default or Event of Default
has occurred and is continuing or exists, specifying in detail the
nature and period of existence thereof and any action with respect
thereto taken or contemplated to be taken by Foothill, (ii) stating in
reasonable detail the information and calculations necessary to
establish compliance with the provisions of Article VII and Sections
8.02(a)(vii), 8.02(viii), 8.03 and 8.08 hereof and (iii) stating that
the signer has personally reviewed this Agreement and that such
certificate is based on an examination made by or under the
supervision of the signer sufficient to assure that such certificate
is accurate.
(d) Accountant's Certificate. Each set of consolidated
statements and balance sheet of Foothill delivered pursuant to Section
6.01(a) hereof shall be accompanied by a certificate or report dated
as of the date of such statements and balance sheet by the accountants
who certified such statements and balance sheet stating in substance
that they have reviewed this Agreement and that in making the
examination necessary for their certification of such statements and
balance sheet they did not become aware of any Potential Default or
Event of Default, or if they did become so aware, such certificate or
report shall state the nature and period of existence thereof.
(e) Other Reports and Information. Promptly upon the
issuance or filing thereof, Foothill shall deliver to the Agent and
the Banks a copy of all reports that Foothill, any Subsidiary thereof
or the Foothill Group shall file with the Securities and Exchange
Commission (or any successor thereto), any other Governmental
Authority with responsibility for regulating the business of Foothill,
any
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Subsidiary thereof, or Foothill Group or any securities exchange, and
all reports, notices or statements sent to all holders of Capital
Interests in or Indebtedness of Foothill, any Subsidiary thereof or
Foothill Group. Foothill shall provide the Agent and the Banks with
copies of any certificates or notices furnished to any party in
respect of any optional redemption of, or default under, any Senior
Indebtedness (other than the Obligations) or Subordinated Debt, which
notice or certificate shall be delivered concurrently with Foothill's
delivery of such certificate or notice to such other party.
(f) Net Receivable Information. As soon as practicable and
in any event within 45 days after the close of each of the first three
fiscal quarters of Foothill and within 90 days after the close of the
fiscal year of Foothill, Foothill shall furnish to the Agent and the
Banks a report (i) describing items included in the Net Amount of
Finance Receivables and reports on Non-Performing Assets, in any case
in excess of $1,000,000, (ii) describing the type and estimated market
value of items included in Purchased Receivables in excess of
$2,000,000, (iii) describing the type and estimated market value of
items included in Purchased Receivables which are not secured or are
not fully secured, (iv) listing each new Finance Receivable having a
Net Amount in excess of $2,000,000 closed during such fiscal quarter,
including a designation as to the type of Finance Receivable and a
description of the collateral, (v) identifying the ten largest
obligors by Net Amount of Finance Receivables, including a designation
as to the type of Finance Receivable and a description of the
collateral and (vi) listing all outstanding letters of credit and
guarantees in excess of $1,000,000 as of the end of such fiscal
quarter or fiscal year.
(g) Further Information. Foothill will promptly furnish to
the Agent and the Banks such other information and in such form as any
Bank or the Agent may reasonably request.
SECTION 6.02. Taxes and Claims. Foothill and its
Subsidiaries shall pay and discharge (a) all taxes, assessments and
governmental charges upon or against them or their respective properties or
assets prior to the date on which penalties attach thereto, unless and to the
extent that such charges are being contested diligently in good faith by
appropriate proceedings and adequate reserves in conformity with GAAP have been
provided therefor on the books of Foothill or such Subsidiary, as the case may
be, and (b) all lawful claims, whether for labor, materials, supplies, services
or anything else that might or could, if unpaid, become a Lien or charge upon
the properties or assets of Foothill or any Subsidiary thereof, which Lien
would not be permitted under this Agreement, unless and to the extent such
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claims are being contested diligently in good faith by appropriate proceedings
and adequate reserves in conformity with GAAP have been provided therefor on
the books of Foothill or such Subsidiary.
SECTION 6.03. Insurance. Foothill and its Subsidiaries shall
(a) keep all of their respective properties adequately insured at all times
with responsible insurance carriers against loss or damage by fire and other
hazards, and (b) maintain adequate insurance at all times with responsible
carriers against liability on account of damage to persons and property and
under all applicable worker's compensation laws. For the purposes of this
Section 6.03, insurance shall be deemed adequate if the same is not less
extensive in coverage and amount than is customarily maintained by other
persons engaged in the same or similar business similarly situated.
SECTION 6.04. Books and Records. Foothill and its
Subsidiaries shall maintain at all times true and complete books, records and
accounts in which true and correct entries shall be made of its transactions in
accordance with GAAP consistently applied and in compliance with the
regulations of any Governmental Authority having jurisdiction over it.
SECTION 6.05. Properties in Good Condition. Foothill and its
Subsidiaries shall keep their respective properties in good repair, working
order and condition (subject to such wear and tear as may occur in the ordinary
course of business) and, from time to time, make all needful and proper
repairs, renewals, replacements, additions and improvements thereto, so that
the business carried on may be properly and advantageously conducted at all
times in accordance with prudent business management.
SECTION 6.06. Inspection. Foothill shall allow any
representative of the Agent, the Issuing Bank or any of the Banks to visit and
inspect its properties and the properties of any Subsidiary of Foothill, to
examine and audit the books of account and other records and files of Foothill
and its Subsidiaries, to make copies thereof and to discuss the affairs,
business, finances and accounts of Foothill and its Subsidiaries with their
respective officers and employees, all at such reasonable times and as often as
the Agent, the Issuing Bank or the Banks may request. Audits and inspections
by or at the request of any Bank shall be at the expense of such Bank, and
audits and inspections by or on behalf of Agent shall be at the expense of all
the Banks, except that, if an Event of Default shall have occurred and be
continuing, all such audits and inspections by the Agent shall be at the
expense of Foothill. Any Bank may request an audit and inspection by the Agent
if an Event of Default shall have occurred and be continuing.
SECTION 6.07. Pay Indebtedness and Perform Other Covenants.
Foothill shall make full and timely payments of the
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principal of and interest on the Notes and all other amounts owed by Foothill
to Agent, Issuing Bank or the Banks, whether now existing or hereafter arising,
under this Agreement or otherwise, and Foothill and its Subsidiaries shall
comply duly with all the terms and covenants contained in each of the
instruments and documents furnished in connection with or pursuant to the Loan
Documents or otherwise, all at the times and places and in the manner set forth
therein.
SECTION 6.08. Compliance With Laws. Foothill and its
Subsidiaries shall comply with all applicable laws and regulations, including
but not limited to, Federal, state and local laws and regulations relating to
commercial lending, disclosure, collection and licensing, where the failure so
to comply would have, in the opinion of management in consultation with
counsel, a Material Adverse Effect.
SECTION 6.09. Notice of Certain Events. Promptly, but in no
event later than ten (10) Business Days after obtaining knowledge thereof,
Foothill shall give written notice to the Agent, the Issuing Bank and the Banks
of:
(a) any litigation, including arbitrations, and any
investigations or proceedings before any Governmental Authority
brought against Foothill or any Subsidiary thereof (whether or not the
claim is considered to be covered by insurance) that might, if
determined adversely, have a Material Adverse Effect, or where the
amount involved, when added together with all other amounts involved
in any other litigation, investigation, arbitration or proceeding
affecting Foothill or any Subsidiary thereof, might have a Material
Adverse Effect;
(b) any written notice of a violation received by Foothill or
any Subsidiary thereof from any Governmental Authority that, if such
violation were established, might have a Material Adverse Effect; and
(c) any Potential Default or Event of Default, specifying the
nature and extent thereof and specifying the course of action to be
taken by Foothill to cure such Potential Default or Event of Default.
SECTION 6.10. Environmental Laws, Etc.
(a) Except to the extent that the following does not have and
would not have, in the reasonable opinion of management, a Material
Adverse Effect, Foothill and each Subsidiary thereof shall (i) keep
all Property owned or operated by them or in their possession or over
which they exercise control free of Hazardous Materials, (ii) comply
with all requirements of all applicable Federal, state and local
environmental, health, safety and sanitation laws,
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ordinances, regulatory and administrative authorities with respect
thereof, (iii) not use any Property to generate, manufacture, refine,
transport, treat, store, handle, dispose, transfer, produce, process
or in any manner deal with, Hazardous Materials, (iv) not knowingly
make or acquire any Finance Receivable secured by Property that has
been used to generate, manufacture, refine, transport, treat, store,
handle, dispose, transfer, produce, process, or deal in any manner
with Hazardous Materials except upon conducting an environmental
liability review that is satisfactory in the reasonable opinion of
management, (v) not knowingly foreclose on or repossess any Property
that has been so used, (vi) not knowingly cause or permit the
installation or placement of Hazardous Materials onto any Property or
onto any adjacent property or suffer the presence of Hazardous
Materials on any Property. Foothill and its Subsidiaries shall
undertake promptly and pursue diligently to complete appropriate
remedial clean-up action in the event of any release of Hazardous
Materials on, upon or into any property owned or operated by any of
them or any Property adjacent thereto.
(b) Foothill agrees to provide the Agent with copies of any
notifications of releases of Hazardous Materials that Foothill or any
Subsidiary thereof either gives to or receives from any Governmental
Authority or any other Person with respect to any Property owned or
operated by any thereof or securing any Finance Receivable or
Purchased Receivables, except where such release could not have a
Material Adverse Effect. Such copies shall be sent to the Agent
concurrently with the mailing or delivery of such copies to the
Governmental Authority.
SECTION 6.11. Further Assurances. Upon the request of the
Agent, the Issuing Bank or the Required Banks, Foothill shall duly execute and
deliver, or cause to be duly executed and delivered, to the Agent (without cost
to the Agent or the Banks) such further instruments and do and cause to be done
such further acts as may be reasonably necessary or proper in the opinion of
the Agent, the Issuing Bank or such Banks to carry out more effectively the
provisions and purposes of this Agreement and the other Loan Documents.
SECTION 6.12. ERISA. Foothill and each ERISA Affiliate shall
comply with, and shall operate and maintain each Plan in compliance with ERISA
and all applicable provisions of the Code.
SECTION 6.13. Maintain Existence. Foothill and each
Subsidiary thereof shall do or cause to be done all things necessary to
preserve, renew and keep in full force and effect:
(a) their current form of organization;
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(b) their good standing in their jurisdiction of organization;
(c) their qualification and good standing in each
jurisdiction in which the ownership of their properties or the nature
of their business or both makes such qualification necessary or
desirable; and
(d) all their other rights, licenses, permits and franchises,
the change, termination or loss of which might (other than as
specified in (a) above) have a Material Adverse Effect; and shall
conduct and operate their respective businesses in substantially the
manner in which they currently are conducted and operated, without
material alteration or change in the nature of such business;
provided, however, that the merger of FCC Holdings into Foothill shall
not be deemed in and of itself to have a Material Adverse Effect.
SECTION 6.14. Foothill Credit Analysis. Foothill shall,
independently and without reliance on any Bank, the Agent or the Issuing Bank,
make such credit analysis and other investigations, and request such documents
and information, as it deems necessary and appropriate to make its own credit
decision to Approve each Application and Agreement.
ARTICLE VII
FINANCIAL COVENANTS
Foothill covenants and agrees that, until all Obligations are
paid in full and the Commitments of all Banks are terminated, Foothill shall
not, without the prior written consent of the Agent, on behalf of the Required
Banks, suffer or permit:
SECTION 7.01. Adjusted Consolidated Net Worth. Adjusted
Consolidated Net Worth shall not be less than $75,000,000 at any time.
SECTION 7.02. Indebtedness.
(a) Outstanding Senior Indebtedness (other than Guaranties)
shall not exceed an amount equal to 340% of the sum of (i) Adjusted
Consolidated Net Worth, plus (ii) outstanding Subordinated Debt.
(b) Outstanding Subordinated Debt shall not exceed an amount
equal to 125% of Adjusted Consolidated Net Worth.
(c) Outstanding Senior Subordinated Debt shall not exceed an
amount equal to 60% of the sum of (i) Adjusted
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Consolidated Net Worth, plus (ii) outstanding Junior Subordinated
Debt.
Notwithstanding the foregoing, Foothill agrees that the Banks
shall have the benefit of the covenants contained in Section 9.6A of the Loan
Agreement dated as of November 10, 1980 between Foothill and each of the
lenders named therein; provided that the Banks shall only be entitled to the
benefits of said Section 9.6A so long as said sections have not been amended to
be less restrictive than Section 7.02 hereof or any notes issued under the Loan
Agreement dated as of November 10, 1980 shall remain outstanding; provided,
however, Foothill shall at all times be and remain subject to the provisions of
this Section 7.02.
SECTION 7.03. Unused Committed Bank Credit Facilities. The
sum of (a) aggregate outstanding face amount of commercial paper issued by
Foothill and (b) the aggregate outstanding principal amount of loans permitted
by Section 8.02(a)(ii)(B)(II) shall not exceed the aggregate unborrowed amount
of Aggregate Commitments (as defined in the Revolver Agreements).
SECTION 7.04. Purchased Receivables. The Net Amount of
Purchased Receivables shall not exceed $75,000,000.
SECTION 7.05. Industry Concentration. The aggregate Net
Amount of all Finance Receivables owed by all borrowers in any single industry,
as defined by two-digit SIC codes, shall not exceed an amount equal to 10% of
Consolidated Assets at the end of any two consecutive fiscal quarters of
Foothill. Notwithstanding the foregoing, Wholesale Trade Durable Goods (SIC
Code 50) and Wholesale Trade Non-Durable Goods (SIC Code 51) shall be excluded
from the above limitation.
SECTION 7.06. Settlement Securities. The aggregate book
value (as measured by original cost) of all Settlement Securities granted to
and held by Foothill or any of its Subsidiaries shall not exceed 7.5% of
Consolidated Assets.
ARTICLE VIII
NEGATIVE COVENANTS
Foothill covenants and agrees that, until all Obligations are
paid in full and the Commitments of all Banks are terminated, Foothill shall
not, without the prior written consent of the Agent on behalf of the Required
Banks, do or suffer to occur or exist or agree to be liable to do, any of the
following:
SECTION 8.01. Liens. Foothill shall not, and shall not
permit any Subsidiary thereof to, at any time create, incur, assume or suffer
to exist any Lien on any of its property or
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assets, tangible or intangible, now owned or hereafter acquired, or agree or
become liable to do so, except:
(a) Liens on Property existing on the New Effective Date
which secure Indebtedness in an aggregate amount of less than
$100,000;
(b) Liens constituting renewals, extensions or replacements
of Liens permitted by clause (a) above, provided that the principal
amount of the Indebtedness secured by any such new Lien does not
exceed the principal amount of the Indebtedness being renewed,
extended or refunded at the time of renewal, extension or refunding
thereof and that such new Lien attaches only to the same property
subject to such earlier Lien;
(c) Liens securing taxes, assessments or governmental charges
or levies, or the claims or demands of materialmen, mechanics,
carriers, workmen, repairmen, warehousemen, landlords and other like
Persons, not yet delinquent or that are being contested diligently in
good faith by appropriate proceedings and in respect of which adequate
reserves in conformity with GAAP have been provided on the books of
Foothill or the applicable Subsidiary thereof;
(d) other Liens (including pledges or deposits in accordance
with worker's compensation laws), incidental to the conduct of its
business or the ownership of its property and assets, that are not
incurred in connection with the borrowing of money or the obtaining of
advances or credit, and that in the aggregate do not detract
materially from the value of its property or assets, or materially
impair the use thereof in the operation of its business;
(e) attachment, judgment and other similar Liens arising in
connection with court proceedings, provided that execution or other
enforcement of such Liens is effectively stayed, the claims secured
thereby are being contested diligently in good faith by appropriate
proceedings and adequate reserves in conformity with GAAP have been
provided on the books of Foothill or the applicable Subsidiary
thereof;
(f) purchase money Liens on tangible personal property
securing all or part of the purchase price thereof payable by Foothill
or a Subsidiary thereof (including, without limitation, tangible
personal property acquired to be leased to customers of Foothill or
any Subsidiary thereof in the ordinary course of business) and Liens
(whether or not assumed) existing in property at the time of purchase
thereof by Foothill or any Subsidiary thereof, as the case may be;
provided that each such Lien is confined solely to
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the property so purchased, improvements thereto and proceeds thereof;
(g) zoning restrictions, easements, minor restrictions on the
use of real property, minor irregularities in title thereto and other
minor Liens that do not secure the payment of money or the performance
of an obligation and that do not in the aggregate materially detract
from the value of a property or asset to, or materially impair its use
in the business of, Foothill or any Subsidiary thereof;
(h) Liens on assets of Foothill acquired by Foothill as a
result of foreclosures or deeds in lieu relating to collateral
securing extensions of credit by Foothill made in the ordinary course
of business; provided, that in each such case such Lien is limited to
such acquired asset; and
(i) Liens (exclusive of those described in subparagraphs (a)
through (h) above) that secure or represent the incurring of
Indebtedness the repayment of which in the aggregate for Foothill and
its Subsidiaries does not exceed $100,000 per fiscal year of Foothill.
In no event shall this Section 8.01 be construed to permit any Lien imposed by,
or required to be granted pursuant to, ERISA or any Environmental Law or any
Lien on Capital Interests of any direct or indirect Subsidiary of Foothill.
SECTION 8.02. Indebtedness.
(a) Foothill shall not, and shall not permit any Subsidiary
thereof to, create, incur, assume or suffer to exist, contingently or
otherwise, any Indebtedness, except:
(i) Indebtedness to the Agent, the Issuing Bank and
the Banks arising hereunder or under any of the other Loan
Documents and, prior to the New Effective Date, Indebtedness
under the Existing Agreement;
(ii) the following other Senior Indebtedness:
(A) Permitted Senior Debt, and
(B) subject to compliance with the requirements of
Section 7.03 hereof,
(I) Indebtedness evidenced by commercial
paper issued by Foothill,
(II) Indebtedness in respect of loans under
uncommitted credit facilities extended by any
financial institution; provided that, the
covenants, defaults and other
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requirements applicable to such Indebtedness are no
more restrictive upon Foothill and its Subsidiaries
than those contained in the Loan Documents;
(iii) Permitted Subordinated Debt;
(iv) Indebtedness secured by a Lien described in Section
8.01(f) or 8.01(h) hereof; provided that any such Indebtedness
that is secured by a Lien described in Section 8.01(h) hereof
is not assumed by Foothill or any Subsidiary thereof;
(v) unsecured accounts payable and other current
liabilities incurred in the ordinary course of business other
than liabilities that are for money borrowed or are evidenced
by bonds, debentures, notes or other similar instruments;
(vi) obligations to return cash collateral or security
deposits taken as collateral for loans and leases extended by
Foothill in the ordinary course of its business;
(vii) the following other Indebtedness:
(A) contingent liabilities arising from the
endorsement of negotiable or other instruments for
deposit or collection or similar transactions in
the ordinary course of business;
(B) Indebtedness in respect of letters of credit
and guarantees, whether (I) issued directly by
Foothill or by a financial institution for the
account of Foothill or of third party customers of
Foothill, in either case fully supported by
collateral pledged to Foothill by third parties
under existing credit facilities, issued in the
ordinary course of Foothill's business under usual
and customary terms for the account of persons who
are not Affiliates or Subsidiaries of Foothill or
Foothill Group, or (II) issued by a financial
institution for the account of Foothill to secure
or support interest rate swaps, caps, collars or
other interest rate risk management contracts
entered into by Foothill; provided that the
aggregate contingent liability of Foothill under
such letters of credit and guarantees does not at
any time exceed an amount equal to 60% of
Consolidated Net Worth at such time;
(C) indemnities by Foothill or any Subsidiary
thereof of the liabilities of its
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directors or officers pursuant to provisions contained in its articles
of incorporation or bylaws or as otherwise permitted by applicable
law; and
(viii) advances to, and other Indebtedness of, any
Subsidiary of Foothill owed to or held by Foothill; provided
that the aggregate of all such advances and other Indebtedness
amount at any time outstanding does not exceed an amount equal
to 6% of Consolidated Net Worth at such time.
(b) Foothill shall not, and shall not permit any Subsidiary
thereof to, enter into any arrangements, directly or indirectly, with
any Person, whereby Foothill or any Subsidiary thereof shall sell or
transfer any property, whether now owned or hereafter acquired, used
or useful in its business in connection with the rental or lease of
the property so sold or transferred or of other property that Foothill
or any Subsidiary thereof intends to use for substantially the same
purpose or purposes as the property so sold or transferred.
SECTION 8.03. Restricted Payments.
(a) Foothill, on a consolidated basis with its Subsidiaries,
shall not make, or commit to make, any Restricted Payment if, after
giving effect to the proposed Restricted Payment, at the date of
declaration in the case of a dividend or at the date of distribution
in the case of any other proposed Restricted Payment (each such date,
as the case may be, being herein called the " Computation Date"),
(i) the sum of
(A) the aggregate amount of all dividends (other
than dividends payable solely in Capital Interests
of Foothill) declared during the period commencing
January 1, 1994 and ending on the Computation Date
(herein called the " Computation Period"), plus
(B) the aggregate amount of all other
Restricted Payments made during the Computation
Period (and any commitments for other Restricted
Payments during the Computation Period and
outstanding on the Computation Date)
exceeds $15,326,000 plus 50% (or, in the case of a deficit,
minus 100%) of Consolidated Net Income for the Computation
Period;
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(ii) the sum of all such Restricted Payments for
the current fiscal year exceeds Consolidated Net Income for
the immediately preceding fiscal year; and
(iii) at the time of such Restricted Payment and
immediately after giving effect thereto, a Potential Default
or Event of Default shall have occurred and be continuing.
(b) Notwithstanding the foregoing restrictions of this
Section 8.03, Foothill may make an optional payment in respect of any
outstanding Subordinated Debt in exchange for, or out of the net
proceeds of the substantially concurrent sale of, its Capital
Interests or other Subordinated Debt, and no such optional payment
shall be included in any computation for the above subsection (a).
SECTION 8.04. Investments. Foothill shall not make or
obligate itself to make, and shall not permit any Subsidiary to make or
obligate itself to make any Restricted Investment, except:
(a) trade credit extended, and loans and advances extended to
subcontractors or suppliers, under usual and customary terms in the
ordinary course of business;
(b) advances to employees to meet expenses incurred by such
employees in the ordinary course of business;
(c) subject to Section 8.10 hereof, credit extended under
usual and customary terms in the ordinary course of Foothill's
business to Persons who are not Affiliates or Subsidiaries of Foothill
or Foothill Group;
(d) subject to Section 7.06, Settlement Securities;
(e) Capital Interests in Persons that, as of the New
Effective Date, are Subsidiaries;
(f) advances by Foothill to, and other Indebtedness held by
Foothill of, any Subsidiary thereof; provided that such advances and
other Indebtedness are permitted pursuant to Section 8.02(a)(viii)
hereof; and
(g) subject to Section 7.04, Public Debt Securities and
Non-Public Debt Instruments.
SECTION 8.05. Merger, Consolidation, Sale and Transfers of
Assets.
(a) Foothill shall not, and shall not permit any Subsidiary
thereof to, enter into any transaction of merger, consolidation,
partnership, or joint venture with, or
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transfer, sell, assign, lease, or otherwise dispose of their
respective properties or assets to any Person, or purchase all or a
substantial portion of the properties or assets of any other Person
from such Person, other than in the ordinary course of business,
except that:
(i) Foothill may make cash acquisitions of secured
commercial finance or leasing portfolios in an amount,
in any fiscal year, up to 10% of Consolidated Assets as of the
end of the previous fiscal year;
(ii) Foothill may sell or dispose of assets, other
than in the ordinary course of business, in an amount, in any
fiscal year, up to 2.5% of Consolidated Assets as of the end
of the previous fiscal year; and
(iii) Any Subsidiary of Foothill may consolidate
with or merge into Foothill, provided that Foothill is the
survivor of any such consolidation or merger.
(b) Foothill shall not, and shall not permit any
Subsidiary thereof to, sell to any Person (other than Foothill or a
Subsidiary thereof) any Capital Interests in any Subsidiary of
Foothill owned by Foothill or any other Subsidiary thereof.
SECTION 8.06. Permitted Business. Foothill shall not engage
in any business which is substantially different from the business of secured
commercial financing and leasing. FCC Holdings Limited shall only engage in
its business of owning, operating and liquidating Repossessed Assets.
SECTION 8.07. Amendments of Agreements. Foothill shall not
amend, modify or change, in any material respect, any of the terms of its
Subordinated Debt if, after giving effect to such modification, such
Subordinated Debt would fail to qualify as Permitted Subordinated Debt if newly
issued upon such modified terms (other than because of its then remaining
maturity and weighted average life to maturity). Foothill shall not amend,
modify or change any of the terms of the subordination provisions applicable to
any Subordinated Debt. Foothill will not amend, modify or change in any
material respect any of the terms of its Senior Indebtedness if, after giving
effect to such modification, such Senior Indebtedness would fail to qualify as
Permitted Senior Debt if newly issued upon such modified terms.
SECTION 8.08. Transactions with Affiliates.
(a) Neither Foothill nor any Subsidiary thereof shall enter
into, or cause, suffer, or permit to exist, any transactions,
including, without limitation, the purchase, sale, lease or exchange
of any property or the rendering of any service, with any Affiliate,
on terms that are less
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favorable to it than those that would be obtainable at the time from
any Person that is not such an Affiliate.
(b) Neither Foothill nor any Subsidiary thereof shall make
any payments to or on behalf of, or transfer funds to, Foothill Group
or any Subsidiary thereof, except that if no Potential Default or
Event of Default has occurred and is continuing or exists or would
occur or exist as a result thereof:
(i) Foothill and its Subsidiaries may pay
allocated administrative overhead expenses in an aggregate
amount not to exceed 2% of Total Revenues per fiscal year of
Foothill, to the extent charged to Foothill and its
Subsidiaries by Foothill Group;
(ii) Foothill and its Subsidiaries may pay taxes
chargeable, on the basis of GAAP, to Foothill and such
Subsidiaries in accordance with the tax sharing arrangements
described on Schedule III;
(iii) subject to the provisions of the Foothill
Group Subordination Agreement, Foothill may make regularly
scheduled payments on account of the Foothill Group
Subordinated Debt; and
(iv) Foothill may pay dividends on its Capital
Interests held by Foothill Group and make other Restricted
Payments to the extent such payments otherwise are permitted
under the provisions of Section 8.03 hereof.
(c) Foothill and its Subsidiaries may carry out such
transactions with its Affiliates as are described on Schedule IV
hereto.
SECTION 8.09. Inconsistent Agreements. Foothill shall not,
and shall not permit any Subsidiary thereof to, enter into any agreement that
contains any provisions that would be violated or breached by any Issuance of
any Letter of Credit hereunder or by the performance by Foothill or any
Subsidiaries of their respective obligations under any of the Loan Documents or
by the granting of any security for the pro rata benefit of the holders of the
Obligations and other Senior Indebtedness on a pari passu basis. Foothill
shall not, and shall not permit any Subsidiary thereof to, enter into, become
or remain subject to any agreement or instrument to which Foothill or such
Subsidiary is a party or by which either of them or any of their respective
properties (now owned or hereafter acquired) may be subject or bound that would
prohibit or require the consent of any Person to any amendment, modification or
supplement to any of the Loan Documents.
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SECTION 8.10. Borrower Concentration. Foothill will not
enter into any lending arrangement with any borrower if, immediately after the
consummation of such lending arrangement and after giving effect thereto: (a)
there shall be more than ten borrowers for which the aggregate principal amount
of all loans, letters of credit, guarantees and other obligations by Foothill
to each such borrower exceeds 10% of Consolidated Capital Funds or (b) the
aggregate principal amount of all loans, letters of credit, guarantees and
other obligations by Foothill to such borrower would exceed 15% of Consolidated
Capital Funds.
SECTION 8.11. Subsidiaries. Foothill shall not, and shall
not permit any Subsidiary thereof to, undertake or cause the incorporation or
organization of any Subsidiaries.
SECTION 8.12. Consolidated Tax Return. Foothill shall not,
and shall not suffer any Subsidiary thereof to, file or consent to the filing
of any consolidated income tax return with any Person other than Foothill Group
and its Subsidiaries or to pay income tax liabilities otherwise than in
accordance with the tax sharing arrangements described on Schedule III.
SECTION 8.13. Compliance with ERISA. Foothill shall not
permit or suffer to exist any Prohibited Transaction involving any of the Plans
or any trust created thereunder that would subject Foothill or any ERISA
Affiliate to a material tax or penalty on Prohibited Transactions imposed under
Code Section 4975 or ERISA Sections 502(i) or 502(l); fail to pay to any Plan
any required contribution under the terms of such Plan; permit or suffer to
exist any liability under Code Section 4980B or Treasury Regulations (whether
proposed or final) relating thereto; or permit or suffer to exist any tax or
penalty for failure to comply with the requirements of Title 1 of ERISA, which
singly or in the aggregate would result in any material liability, tax or
penalty to Foothill and/or any ERISA Affiliate.
ARTICLE IX
EVENTS OF DEFAULT
SECTION 9.01. Events of Default. If any of the following
events ("Events of Default") shall occur and be continuing:
(a) default shall be made by Foothill in the due and punctual
payment of any amount due and owing to the Agent, the Issuing Bank or
the Banks, when and as the same shall become due and payable;
(b) default shall be made by Foothill or any Subsidiary
thereof in the performance or observance of, or shall occur under, any
covenant, agreement or provision
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contained in Section 6.02, 6.04, 6.13, Article VII or Article VIII
hereof;
(c) default shall be made by Foothill or any Subsidiary
thereof in the performance or observance of, or shall occur under, any
other covenant, agreement or provision of this Agreement (other than
Section 6.07 hereof) and such default shall not have been remedied
within 30 days after such failure shall first have become known to any
officer of Foothill or such Subsidiary, as the case may be;
(d) default shall be made by Foothill or any Subsidiary
thereof in the performance or observance of, or shall occur under, any
covenant, agreement or provision of any other Loan Document or in any
other agreement, instrument or document delivered to the Agent, the
Issuing Bank or the Banks and such default shall not have been
remedied within such grace or cure period, if any, as may be provided
therefor;
(e) Foothill or any Subsidiary thereof shall default (i) in
the payment of any principal, interest or premium with respect to any
Indebtedness (other than Indebtedness under the Loan Documents) for
borrowed money or any obligation that is the substantive equivalent
thereof and such default shall continue for more than the period of
grace, if any, therein specified, or (ii) the performance or
observance of any other term, condition or agreement contained in any
such obligation or in any agreement relating thereto if the effect
thereof is to cause, or permit the holder or holders of such
obligation (or a trustee on behalf of such holder or holders) to
cause, such obligation to become due or requiring Foothill to
repurchase or repay prior to its scheduled maturity;
(f) any representation or warranty or any other statement of
fact herein or in the other Loan Documents, or in connection with the
transactions contemplated hereby or thereby, or in any writing,
certificate, report or statement at any time furnished by Foothill or
any Subsidiary thereof to Agent, the Issuing Bank or any of the Banks
pursuant to or in connection with this Agreement or the other Loan
Documents shall prove to have been false or misleading in any material
respect when made;
(g) Any "Event of Default" as defined in and under either
of the Revolver Agreements shall have occurred and be continuing;
(h) Foothill or any Subsidiary thereof shall admit in writing
its inability to pay its debts or obligations or shall file a petition
or seek relief under or take advantage of any insolvency law; make an
assignment for the benefit of
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its creditors; commence a proceeding for the appointment of a
receiver, trustee, liquidator, custodian or conservator of itself or
of the whole or substantially all of its property; file a petition or
an answer to a petition under any chapter of the United States
Bankruptcy Code, as amended (11 U.S.C. 101 et seq.); or file a
petition or seek relief under or take advantage of any other similar
law or statute of the United States of America, any state thereof or
any foreign country;
(i) a court of competent jurisdiction shall enter an order,
judgment or decree appointing or authorizing a receiver, trustee,
liquidator, custodian or conservator of Foothill or any Subsidiary
thereof or of the whole or substantially all of the property of any
thereof, or enter an order for relief against Foothill or any
Subsidiary thereof in any case commenced under any chapter of the
United States Bankruptcy Code, as amended, or grant relief under any
other similar law or statute of the United States of America, any
state thereof or any foreign country; or if, under the provisions of
any law for the relief or aid of debtors, a court of competent
jurisdiction or a receiver, trustee, liquidator, custodian or
conservator shall assume custody or control or take possession of
Foothill or any Subsidiary thereof or of the whole or substantially
all of the property of any thereof; or if there is commenced against
Foothill or any Subsidiary thereof any proceeding for any of the
foregoing relief or if a petition is filed against Foothill or any
Subsidiary thereof under any chapter of the United States Bankruptcy
Code, as amended, or under any other similar law or statute of the
United States of America or any state thereof or any foreign country
and such proceeding or petition remains undismissed for a period of 60
days; or if Foothill or any Subsidiary thereof by any act indicates
its consent to, approval of or acquiescence in any such proceeding or
petition;
(j) any judgment or judgments against Foothill or any
Subsidiary thereof or any attachment or execution against any of their
respective properties for any amount or amounts, in any case or in the
aggregate, in excess of $500,000 shall remain unpaid, unstayed,
undismissed or unbonded for a period of more than 60 days;
(k) (i) any Person shall engage in any Prohibited Transaction
involving any Plan, or (ii) any other event or condition shall occur
or exist with respect to a Plan; and in the case of clause (i) above,
such event or condition, together with all other such events or
conditions, if any, could subject Foothill or any of its ERISA
Affiliates to any tax, penalty or other liabilities in the aggregate
material in relation to the business, operations, property or
financial or other condition of Foothill or such Subsidiary;
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(l) Capital Interests of Foothill are pledged as security for
any obligations of Foothill Group;
(m) a Change in Control shall occur;
(n) any term or provision of the subordination provisions
contained in the documents related to the Subordinated Debt shall
cease to be in full force and effect, or Foothill, Foothill Group, or
any holder of any Subordinated Debt (or any trustee or agent on behalf
of, or pledgee of such holders) shall, or shall purport to, terminate,
repudiate, declare voidable or void or otherwise contest any term or
provision of such subordination provisions; or
(o) Any Loan Document or term or provision thereof shall
cease to be in full force and effect, or Foothill shall, or shall
purport to, terminate, repudiate, declare voidable or void or
otherwise contest, any Loan Document or term or provision thereof or
any Obligation;
then, and in any such event, the Agent (i) shall at the request, or may with
the consent, of the Required Banks, by notice to Foothill, declare the
obligation of the Issuing Bank to issue Letters of Credit to be terminated,
whereupon the same shall forthwith terminate, (ii) shall at the request, or may
with the consent, of the Required Banks, by notice to Foothill, declare all
Letter of Credit Liability relating to the Letters of Credit and all other
amounts payable under this Agreement to be forthwith due and payable, whereupon
all such Letter of Credit Liability and amounts shall become and be forthwith
due and payable, without presentment, demand, protest or further notice of any
kind, all of which are hereby expressly waived by Foothill, (iii) shall at the
request, or may with the consent, of the Required Banks, by notice to
Foothill, require Foothill to provide to the Agent, in order to secure the
payment of the Letter of Credit Liability relating to the Letter of Credit,
cash collateral in an aggregate amount equal to such Letter of Credit
Liability, and (iv) may exercise any other remedies provided hereunder or by
law; provided, however, that in the event of an actual or deemed entry of an
order for relief with respect to Foothill under the Federal Bankruptcy Code,
(A) the obligation of the Issuing Bank to issue Letters of Credit shall
automatically be terminated and (B) all Letter of Credit Liability relating to
the Letters of Credit and all other amounts payable under this Agreement shall
automatically become and be due and payable, without presentment, demand,
protest or any notice of any kind, all of which are hereby expressly waived by
Foothill.
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ARTICLE X
THE AGENT AND ISSUING BANK
SECTION 10.01. Authorization and Action.
(a) Each Bank and the Issuing Bank each hereby irrevocably
appoints and authorizes Union to act as Agent under this Agreement and
authorizes the Agent to take such action as agent on its behalf and to
exercise such powers under this Agreement and the other Loan Documents
as are delegated to the Agent by the terms hereof and thereof,
together with such powers as are reasonably incidental thereto. As to
any matters not expressly provided for by this Agreement or other Loan
Documents, the Agent shall not be required to exercise any discretion
or take any action, but shall be required to act or to refrain from
acting (and shall be fully protected in so acting or refraining from
acting) upon the instructions of the Required Banks, and such
instructions shall be binding upon all Banks; provided, however, that
the Agent shall not be required to take any action which exposes the
Agent to personal liability or which is contrary to this Agreement or
applicable law. The Agent agrees to give to each Bank prompt notice of
each notice given to it by Foothill pursuant to the terms of this
Agreement.
(b) The Issuing Bank shall act on behalf of the Banks with
respect to any Letters of Credit Issued by it and the documents
associated therewith until such time and except for so long as the
Agent may elect to act for the Issuing Bank with respect thereto;
provided, however, that the Issuing Bank shall have all of the
benefits and immunities (i) provided to the Agent in this Article X
with respect to any acts taken or omissions suffered by the Issuing
Bank in connection with Letters of Credit Issued by it or proposed to
be Issued by it and the Application and Agreements relating to the
Letters of Credit as fully as if the term "Agent", as used in this
Article X, included the Issuing Bank with respect to such acts or
omissions, and (ii) as additionally provided in this Agreement with
respect to the Issuing Bank.
SECTION 10.02. Agent's Reliance, Etc. Neither the Agent nor
any of its directors, officers, agents or employees shall be liable for any
action taken or omitted to be taken by it or them under or in connection with
this Agreement, except for its or their own gross negligence or willful
misconduct. Without limitation of the generality of the foregoing, the Agent:
(i) may consult with legal counsel (including counsel for Foothill),
independent public accountants and other experts selected by it and shall not
be liable for any action taken or omitted to be taken in good faith by it in
accordance with the
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advice of such counsel, accountants or experts; (ii) makes no warranty or
representation to any Bank and shall not be responsible to any Bank for any
statements, warranties or representations made in or in connection with this
Agreement or any other Loan Document; (iii) shall not have any duty to
ascertain or to inquire as to the performance or observance of any of the
terms, covenants or conditions of this Agreement or any other Loan Document on
the part of Foothill or any Account Party or to inspect the property (including
the books and records) of Foothill; (iv) shall not be responsible to any Bank
for the due execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement or any other Loan Document or other
instrument or document furnished pursuant hereto; and (v) shall incur no
liability under or in respect of this Agreement or any other Loan Document by
acting upon any notice, consent, certificate or other instrument or writing
(which may be teletransmitted) believed by it to be genuine and signed or sent
by the proper party or parties.
SECTION 10.03. Union and Affiliates. Union shall have the
same rights and powers under this Agreement as any other Bank and may exercise
the same as though it were not the Agent; and the term "Bank" or "Banks" shall,
unless otherwise expressly indicated, include Union in its individual capacity.
Union and its Affiliates may accept deposits from, lend money to, act as
trustee under indentures of, and generally engage in any kind of business with,
Foothill or any Account Party and any person who may do business with or own
securities of Foothill or any Account Party, all as if Union were not the Agent
and without any duty to account therefor to the Banks.
SECTION 10.04. Bank Credit Decision. Each Bank acknowledges
that it has, independently and without reliance upon the Agent or any other
Bank and based on the financial statements referred to in Section 6.01 and such
other documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement. Each Bank also
acknowledges that it will, independently and without reliance upon the Agent or
any other Bank 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 the Loan Documents.
SECTION 10.05. Indemnification. The Banks agree to indemnify
the Agent (to the extent not reimbursed by Foothill or any Account Party),
ratably according to the respective Bank's Percentage, from and against any and
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever which
may be imposed on, incurred by, or asserted against the Agent in any way
relating to or arising out of this Agreement or any other Loan Document or any
action taken or omitted by the Agent under this Agreement or any other Loan
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document, provided that no Bank shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements resulting from the Agent's gross
negligence or willful misconduct. Without limitation of the foregoing, each
Bank agrees to reimburse the Agent promptly upon demand for its ratable share
of any out-of-pocket expenses (including counsel fees) 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 and the other Loan Documents, to the
extent that the Agent is not reimbursed for such expenses by Foothill or any
Account Party.
SECTION 10.06. Successor Agent. The Agent may resign at any
time by giving written notice thereof to the Banks and Foothill. Upon any such
resignation, the Required Banks shall have the right to appoint a successor
Agent. If no successor Agent shall have been so appointed by the Required
Banks, and shall have accepted such appointment, within 30 days after the
retiring Agent's giving of notice of resignation, then the retiring Agent may,
on behalf of the Banks, appoint a successor Agent, which shall be a commercial
bank organized under the laws of the United States or of any State thereof, or
an Affiliate of such bank, having a combined capital and surplus of at least
$50,000,000. Upon the acceptance of any appointment as Agent hereunder by a
successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring
Agent, and the retiring Agent shall be discharged from its duties and
obligations under this Agreement and the other Loan Documents. After any
retiring Agent's resignation hereunder as Agent, the provisions of this Article
X shall inure to its benefit as to any actions taken or omitted to be taken by
it while it was Agent under this Agreement and the other Loan Documents.
ARTICLE XI
MISCELLANEOUS
SECTION 11.01. Amendments, Etc.
(a) Amendments with Consent of Agent. Foothill or any
Account Party and the Agent may enter into one or more amendments to
any Loan Document without the consent of any Bank for any of the
following purposes:
(i) to cure any ambiguity, defect or
inconsistency herein or in any Application and Agreement or to
make any change not inconsistent with the provisions hereof;
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(ii) to convey, transfer, assign, mortgage or
pledge any property to or with the Agent, or to make any other
provisions with respect to matters or questions arising
hereunder or under any Application and Agreement so long as
such action shall not adversely affect the interests of the
Banks;
(iii) to add to the covenants of Foothill hereunder
for the benefit of the Banks; and
(iv) to add to the rights of the Banks.
Any such amendment must be in writing and signed by the Agent to be
effective and then such amendment shall be effective only in the
specific instance and for the specific purpose for which given.
(b) Amendments with Consent of Banks. Except as provided in
Section 11.01(a), no amendment or waiver of any provision of any Loan
Document, nor consent to any departure by Foothill or any Account
Party therefrom, shall in any event be effective unless the same shall
be in writing and signed by the Required Banks and then such waiver or
consent shall be effective only in the specific instance and for the
specific purpose for which given; provided, however, that no
amendment, waiver or consent shall, unless in writing and signed by
all the Banks, do any of the following: (i) waive any of the
conditions specified in Section 4.01 or 4.02, except as otherwise
provided in such Sections, (ii) increase the Commitments of the Banks
or subject the Banks to any additional obligations, (iii) reduce the
principal of, or interest on, the Letter of Credit Liability or any
fees or other amounts payable hereunder, (iv) postpone any date fixed
for any payment of principal of, or interest on, the Letter of Credit
Liability or any fees or other amounts payable hereunder, (v) change
the Percentage, or the aggregate unpaid principal amount of the Letter
of Credit Liability, or the number of Banks, which shall be required
for the Banks or any of them to take any action hereunder or (vi)
amend this Section 11.01; and provided, further , that no amendment,
waiver or consent shall, unless in writing and signed by the Agent in
addition to the Banks required above to take such action, affect the
rights or duties of the Agent under this Agreement or any other Loan
Document.
SECTION 11.02. Notices, Etc. All notices and other
communications provided for hereunder shall be in writing (including
teletransmission communication) and mailed or teletransmitted or delivered, if
to Foothill, at its address at 11111 Santa Monica Boulevard, Los Angeles,
California 90025, Attention: Mr. David C. Hilton, Telephone Number: (310)
996-7000, Telecopy Number: (310) 478-2961; if to any Bank, at its address
listed on the signature pages hereof or on the signature
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page of the Assignment and Acceptance pursuant to which it became a Bank; if to
the Issuing Bank, at its address at 1980 Saturn Street, Monterey Park,
California 91754, Attention: International Services Department, Mr. Jason
Enomoto, Telecopy Number (213) 720-2773; and if to the Agent, at its address at
350 California Street, 11th Floor, San Francisco, California 94104, Attention:
Financial Services Industry Department, Telecopy Number (415) 705-7037; or, as
to each party, at such other address as shall be designated by such party in a
written notice to Foothill and the Agent. All such notices and communications
shall, when mailed, telegraphed, telexed or cabled, be effective when deposited
in the mails, delivered to the telegraph company, confirmed by telex answerback
or delivered to the cable company, respectively, addressed as aforesaid, except
that notices to the Agent pursuant to the provisions of Article II, III or X
shall not be effective until received by the Agent.
SECTION 11.03. No Waiver; Remedies. No failure on the part
of the Agent or any Bank to exercise, and no delay in exercising, any right
under any Loan Document shall operate as a waiver thereof; nor shall any single
or partial exercise of any right under, preclude any other or further exercise
thereof or the exercise of any other right. The remedies provided in the Loan
Documents are cumulative and not exclusive of any remedies provided by law.
SECTION 11.04. Costs and Expenses. Foothill agrees to pay on
demand all costs and expenses in connection with the preparation, execution,
delivery, administration, modification and amendment of the Loan Documents and
the other documents to be delivered under the Loan Documents, including,
without limitation, the reasonable fees and out-of-pocket expenses of counsel
(including "in-house" counsel) for the Issuing Bank and counsel (including
"in-house" counsel) for the Agent with respect thereto and with respect to
advising the Issuing Bank and the Agent as to their respective rights and
responsibilities under the Loan Documents. Foothill further agrees to pay on
demand all costs and expenses, if any, including, without limitation,
reasonable counsel fees and expenses (including "in-house" counsel), in
connection with the enforcement (whether through negotiations, legal
proceedings or otherwise) of the Loan Documents and the other documents to be
delivered under the Loan Documents, including, without limitation, reasonable
counsel fees and expenses in connection with the enforcement of rights under
this Section 11.04.
SECTION 11.05. Right of Set-off. Upon (a) the occurrence and
during the continuance of any Event of Default and (b) the making of the
request or the granting of the consent specified by Section 9.01 to authorize
the Agent to declare the Letter of Credit Commitment and the Banks' Commitments
to be terminated pursuant to the provisions of Section 9.01, each Bank and the
Issuing Bank each is hereby authorized at any time and
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from time to time, 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 and other indebtedness at any time owing by such Bank or the
Issuing Bank, as the case may be, to or for the credit or the account of
Foothill against any and all of the obligations of Foothill owing to such Bank
or the Issuing Bank, as the case may be, now or hereafter existing under any
Loan Document, irrespective of whether or not such Bank shall have made any
demand under such Loan Document, and although such obligations may be
contingent or unmatured. Each Bank and the Issuing Bank each agree promptly to
notify Foothill after any such set-off and application made by such Bank or the
Issuing Bank, as the case may be, provided that the failure to give such notice
shall not affect the validity of such set-off and application. The rights of
each Bank and the Issuing Bank under this Section 11.05 are in addition to
other rights and remedies (including, without limitation, other rights of
set-off) which such Bank or the Issuing Bank, as the case may be, may have.
SECTION 11.06. Binding Effect. This Agreement shall become
effective when it shall have been executed by Foothill and the Agent and when
the Agent shall have been notified by each Bank and the Issuing Bank that such
Bank and the Issuing Bank has executed it and thereafter shall be binding upon
and inure to the benefit of Foothill, the Agent, the Issuing Bank and each Bank
and their respective successors and assigns, except that Foothill shall not
have the right to assign its rights hereunder or any interest herein without
the prior written consent of the Banks.
SECTION 11.07. Assignments and Participations.
(a) Each Bank may assign to one or more financial
institutions all or a portion of its rights and obligations under this
Agreement (including, without limitation, all or a portion of its
Commitment, provided, however, that (i) each such assignment shall be
of a constant, and not a varying, percentage of the assigning Bank's
rights and obligations under this Agreement, (ii) unless the Agent
otherwise consents, the aggregate amount of the Commitment of the
assigning Bank being assigned pursuant to each such assignment
(determined as of the date of the Assignment and Acceptance with
respect to such assignment) shall in no event be less than $1,000,000
and shall be an integral multiple of $1,000,000, (iii) each such
assignment shall be to an Eligible Assignee, and (iv) the parties to
each such assignment shall execute and deliver to the Agent, for its
approval, acceptance and recording in the Register, an Assignment and
Acceptance, together with a processing and recordation fee of $500.00.
Upon such execution, delivery, approval, acceptance and recording,
from and after the effective date specified in each Assignment and
Acceptance, (A) the assignee thereunder shall be a party hereto and,
to
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the extent that rights and obligations hereunder have been assigned to
it pursuant to such Assignment and Acceptance, have the rights and
obligations of a Bank hereunder and (B) the Bank assignor thereunder
shall, to the extent that rights and obligations hereunder 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 Bank's rights and obligations under
this Agreement, such Bank shall cease to be a party hereto).
(b) By executing and delivering an Assignment and
Acceptance, the Bank assignor 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 Bank 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 any other Loan Document or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of this
Agreement or any other Loan Document or any other instrument or
document furnished pursuant hereto; (ii) such assigning Bank makes no
representation or warranty and assumes no responsibility with respect
to the financial condition of Foothill or any Account Party or the
performance or observance by Foothill or any Account Party of any of
their respective obligations under any Loan Document or any other
instrument or document furnished pursuant hereto; (iii) such assignee
confirms that it has received a copy of this Agreement, together with
copies of the financial statements referred to in Section 5.17 and
such other Loan Documents and 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 Bank
or any other Bank 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 confirms that it is an Eligible Assignee; (vi) such
assignee appoints and authorizes the Agent to take such action as
agent on its behalf and to exercise such powers under this Agreement
and the other Loan Documents as are delegated to the Agent by the
terms hereof and thereof, together with such powers as are reasonably
incidental thereto; and (vii) 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
Bank.
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(c) The Agent shall maintain at its address referred to
in Section 11.02 a copy of each Assignment and Acceptance delivered to
and accepted by it and a register for the recordation of the names and
addresses of the Bank and the Commitment of each Bank from time to
time (the "Register"). The entries in the Register shall be
conclusive and binding for all purposes, absent manifest error, and
Foothill, the Agent and the Banks may treat each Person whose name is
recorded in the Register as a Bank hereunder for all purposes of this
Agreement. The Register shall be available for inspection by Foothill
or any Bank at any reasonable time and from time to time upon
reasonable prior notice.
(d) Upon its receipt of an Assignment and Acceptance
executed by an assigning Bank and an assignee representing that it is
an Eligible Assignee, the Agent shall, if such Assignment and
Acceptance has been properly completed and is in substantially the
form of Exhibit C, (i) accept such Assignment and Acceptance, (ii)
record the information contained therein in the Register and (iii)
give prompt notice thereof to Foothill.
(e) Each Bank may sell participations to one or more
banks or other entities in or to all or a portion of its rights and
obligations under this Agreement (including, without limitation, all
or a portion of its Commitment); provided, however, that (i) such
Bank's obligations under this Agreement (including, without
limitation, its Commitment to Foothill hereunder) shall remain
unchanged, (ii) such Bank shall remain solely responsible to the other
parties hereto for the performance of such obligations, and (iii)
Foothill, the Agent and the other Banks shall continue to deal solely
and directly with such Bank in connection with such Bank's rights and
obligations under this Agreement.
SECTION 11.08. Severability of Provisions. Any provision of
this Agreement which is prohibited or unenforceable in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
SECTION 11.09. Headings. Article and Section headings in
this Agreement are included for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose.
SECTION 11.10. Entire Agreement. This Agreement sets forth
the entire agreement of the parties with respect to its subject matter and
supersedes all previous understandings, written or oral, in respect thereof.
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SECTION 11.11. Execution in Counterparts. This Agreement may
be executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement.
SECTION 11.12. Governing Law. This Agreement shall be
governed by, and construed in accordance with, the laws of the State of
California, except, in the case of Article II, to the extent such laws are
inconsistent with the UCP.
SECTION 11.13. Waiver of Jury Trial. Each of Foothill, the
Agent, the Banks and the Issuing Bank hereby irrevocably waives all right to
trial by jury in any action, proceeding or counterclaim (whether based upon
contract, tort or otherwise) arising out of or relating to any of the Loan
Documents, or the actions of the Agent, any Bank or the Issuing Bank in the
negotiation, administration, performance or enforcement thereof.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto duly
authorized, as of the date first above written.
FOOTHILL CAPITAL CORPORATION
By: _____________________________
Name: _______________________
Title: ______________________
UNION BANK, as Agent
By: _____________________________
Name: _______________________
Title: ______________________
Commitment
- ----------
BANKS
$10,000,000 UNION BANK, as Issuing Bank and
as a Bank
By: _____________________________
Name: _______________________
Title: ______________________
Address for Notices:
Union Bank
350 California Street, 11th Floor
San Francisco, CA 94104
Attn: Financial Services Industry
Department
Telecopy No.: (415) 705-7037
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EXHIBIT A
FORM OF NOTICE FOR EXTENSION OF TERMINATION DATE
TO: Union Bank
____________________________
____________________________
Attention: ____________________
This NOTICE, dated __________, 19__, is being delivered pursuant to
Section 2.08 of the Third Amended and Restated Letter of Credit and Guaranty
Agreement dated as of August 1, 1994 (as the same may from time to time be
amended, supplemented or modified, the "Letter of Credit and Guaranty
Agreement"), among Foothill Capital Corporation, the banks parties thereto,
and Union Bank, as Agent.
The undersigned hereby agrees to extend the Termination Date
(as defined in the Letter of Credit and Guaranty Agreement) to __________,
19__, in accordance with and subject to Section 2.08 of the Letter of Credit
and Guaranty Agreement.
[Insert name of Bank]
By: ___________________________
Name: _____________________
Title: ____________________
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EXHIBIT B
FORM OF OPINION OF COUNSEL TO FOOTHILL
August 1, 1994
To each of the Banks party to the Third Amended and
Restated Letter of Credit and Guaranty
Agreement, as defined and referred to below,
and to Union Bank, as Issuing Bank and as
Agent for said Banks
Re: Foothill Capital Corporation
Ladies and Gentlemen:
We have acted as counsel to Foothill Capital Corporation
("Foothill") in connection with the preparation, execution, and delivery of
that certain Third Amended and Restated Letter of Credit and Guaranty Agreement
dated as of August 1, 1994 (the "Agreement") among Foothill, the Banks party
thereto and Union Bank, as Issuing Bank and as Agent for said Banks. This
opinion letter is furnished to you pursuant to Section 4.01(d) of the
Agreement. Capitalized terms not otherwise defined herein shall have the
meaning ascribed to them in the Agreement.
We have examined the originals, or certified, conformed or
reproduction copies, of all records, agreements, instruments, and documents as
we have deemed relevant or necessary as the basis for the opinions hereinafter
expressed. In all such examinations, we have assumed the genuineness of all
signatures on original or certified copies and the conformity to original or
certified copies of all copies submitted to us as conformed or reproduction
copies.
We have made such investigations of fact and law, obtained
such certificates of responsible officials of Foothill and of public officials,
and done such other things as we have deemed necessary for the purpose of this
opinion. We have examined a copy of the Agreement having an original signature
of Foothill and facsimile signatures of the Agent and the Banks.
Whenever a statement herein is qualified by "known to us," "to
our current actual knowledge," or similar phrase, it is intended to indicate
that, in the course of our representation of Foothill, no information that
would give us current actual knowledge of the inaccuracy of such statement has
come to the attention of those attorneys in this firm who have rendered legal
services in connection with the Agreement. However, unless
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August 1, 1994
Page 2
expressly indicated, we have not undertaken any independent investigation to
determine the accuracy of such statement, and any limited inquiry undertaken by
us during the preparation of this opinion letter should not be regarded as such
an investigation; no inference as to our knowledge of any matters bearing on
the accuracy of any such statement should be drawn from the fact of our
representation of Foothill.
The opinions expressed herein are qualified by the discussion
following the numbered paragraphs in our opinion.
Based upon the foregoing, we are of the opinion that:
1. Foothill is a corporation duly organized, validly
existing, and in good standing under the laws of the State of California.
Foothill has the requisite corporate power and authority to own its properties
and to transact the business in which it is engaged.
2. Foothill is duly qualified and in good standing under
the laws of each jurisdiction where, to our current actual knowledge, its
ownership, lease or operation of its property, or the conduct of its business,
requires such qualification, except to the extent that failure to so qualify
would not have a material adverse effect on Foothill.
3. To the best of our current actual knowledge, after
due inquiry, Foothill has no Subsidiaries except for FCC Holdings Limited, a
California corporation.
4. Foothill has the requisite corporate power and
authority to execute and deliver the Agreement and to perform its obligations
under the Agreement.
5. The Agreement has been duly authorized by all
necessary corporate action on the part of Foothill, has been duly executed and
delivered by Foothill, and constitutes a valid and binding obligation of
Foothill enforceable against Foothill in accordance with its terms.
6. Neither the execution and delivery of the Agreement
nor consummation of the transactions therein contemplated nor performance of or
compliance with the terms and conditions thereof will (a) violate any law or
regulation, or (b) conflict with or result in a breach of or a default under or
result in (or give rise to any right, contingent or otherwise, of any Person to
cause) any material adverse change in any right, power, privilege, duty or
obligation of Foothill, or have any Material Adverse Effect on any right,
power, privilege, duty or
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August 1, 1994
Page 3
obligation with respect to Foothill or any Subsidiary under or in connection
with,
(i) the Articles of Incorporation or Corporate
By-Laws (or other constituent documents) of Foothill, or any
Subsidiary of Foothill, or
(ii) to our current actual knowledge, after due
inquiry, any material agreement or instrument to which
Foothill or any Subsidiary of Foothill is a party or by which
any of them or any of their respective properties (now owned
or hereafter acquired) may be subject or bound.
7. No governmental consents, approvals, authorizations,
registrations, declarations, or filings are required by Foothill in connection
with its execution, delivery, and performance of the Agreement.
8. The Obligations constitute and will constitute
"Superior Indebtedness" within the meaning ascribed to such term in the loan
agreements for the Senior Subordinated Debt and Junior Subordinated Debt and
the notes evidencing such Subordinated Debt set forth in Schedule VI to the
Agreement (the "Loan Agreements"), except as to those two notes constituting
Junior Subordinated Debt payable to Foothill Group which are governed by
paragraph 9 hereof. The Obligations are entitled to the benefits of said Loan
Agreements as Superior Indebtedness.
9. The Obligations constitute and will constitute
"Superior Indebtedness" within the meaning ascribed to that term in the
Foothill Group Subordination Agreement and are entitled to the benefits of said
Foothill Group Subordination Agreement as Superior Indebtedness.
10. Except as set forth in the financial statements
referred to in Section 5.17 of the Agreement, to our current actual knowledge,
there are no pending or threatened actions, suits, proceedings, or
investigations against or affecting Foothill or any of its Subsidiaries which,
if adversely decided, would have in the aggregate a Material Adverse Effect.
11. Foothill is a wholly-owned Subsidiary of Foothill
Group.
12. While the issue is not free from doubt, we believe
that Foothill should not be deemed to be an "Investment Company" or a company
"controlled" by an "Investment Company" within the meaning of the Investment
Company Act of 1940, as amended (the
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August 1, 1994
Page 4
"Investment Company Act"). The Investment Company Act was not intended to
encompass entities whose primary business is that of Foothill. Commercial
finance companies generally are exempted from the provisions of the Investment
Company Act pursuant to one of more of the provisions thereof. It appears that
Section 3(c)(5)(B) of the Investment Company Act should exempt Foothill from
such Act because Foothill is primarily engaged in "making loans to
manufacturers, wholesalers, and retailers of, and the prospective purchasers
of, specified merchandise, insurance, and services."
The Securities and Exchange Commission has narrowly
interpreted Section 3(c)(5)(B) to refer solely to lenders which take only
purchase money security interests. The Commercial Finance Association
(formerly known as the National Commercial Finance Association), on behalf of
the commercial finance industry, has requested the Securities and Exchange
Commission to issue an interpretive release which would clarify that commercial
finance companies are exempt from the Investment Company Act. To date, the
Securities and Exchange Commission has not issued such release.
To the extent applicable, each of the opinions set forth above
is subject to the following qualifications:
(i) The performance by Foothill and the
enforceability against Foothill of the Agreement may be
limited by applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance, equitable subordination, or
other laws affecting creditors' rights generally.
(ii) The remedies of specific performance,
injunction, and other forms of equitable relief may not be
available as to certain of the provisions contained in the
Agreement because they may be subject to certain equitable
defenses and the discretion of the court before which the
proceedings therefor may be brought, and enforceability
thereof is subject to general principles of equity.
We do not express any opinion as to the laws of any
jurisdiction other than the present federal laws of the United States of
America, the present laws of the State of California, and the present judicial
interpretation thereof and to the facts as they presently exist.
The opinions expressed herein are rendered to you as of the
date hereof and are solely for the benefit of the Agent, the
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August 1, 1994
Page 5
Issuing Bank and the Banks in connection with the above transactions and may
not be relied on in any manner or for any purpose by any other person or entity
or by you in any other context. This opinion may not be quoted, nor may copies
hereof be furnished to any other person or entity without our prior written
consent, except that you may furnish a copy hereof: (a) to your independent
auditors and attorneys, (b) to any governmental agency or authority having
regulatory jurisdiction over you, upon request therefor, (c) pursuant to order
or legal process of any court or governmental agency or authority, or (d) in
connection with any legal action to which you are a party arising out of the
transactions referred to above.
Very truly yours,
Buchalter, Nemer, Fields & Younger
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EXHIBIT C
FORM OF ASSIGNMENT AND ACCEPTANCE
ASSIGNMENT AND ACCEPTANCE dated ____________, 19__ between
______________________________ (the "Assignor") and ____________________________
(the "Assignee").
PRELIMINARY STATEMENTS:
A. Reference is made to the Third Amended and Restated
Letter of Credit and Guaranty Agreement dated as of August 1, 1994 (said
Agreement, as it may hereafter be amended or otherwise modified from time to
time, being the "Letter of Credit Agreement") among Foothill Capital
Corporation, a California corporation ("Foothill"), the banks parties thereto
as the Banks thereunder, Union Bank, as Issuing Bank thereunder (the "Issuing
Bank") and as agent (the "Agent") for the Banks and the Issuing Bank under the
Letter of Credit Agreement. Terms defined in the Letter of Credit Agreement
and not otherwise defined herein are used herein as therein defined.
B. This Assignment and Acceptance is made with reference
to the following facts:
(i) The Assignor is a Bank under and as defined
in the Letter of Credit Agreement and, as such, presently holds ____%
of the rights and obligations of the Banks under the Letter of Credit
Agreement.
(ii) As of the date hereof, the aggregate amount
of the Letter of Credit Liability is $__________.
(iii) On the terms and conditions set forth below,
the Assignor desires to sell and assign to the Assignee, and the
Assignee desires to purchase and assume from the Assignor, as of the
Effective Date (as defined below), that percentage (the "Assigned
Percentage") of the Assignor's rights and obligations under the Letter
of Credit Agreement which is equal to ____% of the rights and
obligations of all the Banks under the Letter of Credit Agreement as
of the Effective Date.
NOW, THEREFORE, the Assignor and the Assignee hereby agree as
follows:
1. The Assignor hereby sells and assigns to the
Assignee, and the Assignee hereby purchases and assumes from the Assignor, the
Assigned Percentage of the Assignor's rights and obligations under the Letter
of Credit Agreement (including, without limitation, the Assigned Percentage of
the Assignor's
C-1
<PAGE> 87
participation in any Letters of Credit and Letter of Credit Liability
outstanding on the Effective Date).
2. The Assignor (i) represents and warrants that 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 adverse claim; (ii) makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with the
Letter of Credit Agreement or any other Loan Document or the execution,
legality, validity, enforceability, genuineness, sufficiency or value of the
Letter of Credit Agreement or any other Loan Document or any other instrument
or document furnished pursuant thereto; and (iii) makes no representation or
warranty and assumes no responsibility with respect to the financial condition
of Foothill or any Account Party or the performance or observance by Foothill
or any Account Party of any of its obligations under the Loan Documents or any
other instrument or document furnished pursuant thereto.
3. The Assignee (i) confirms that it has received a copy
of the Letter of Credit Agreement, together with copies of the financial
statements referred to in Section 6.01 thereof and such other Loan Documents or
other documents and information as it has deemed appropriate to make its own
credit analysis and decision to enter into this Assignment and Acceptance; (ii)
agrees that it will, independently and without reliance upon the Agent, the
Assignor or any other Bank 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 the Letter of Credit Agreement; (iii)
appoints and authorizes the Agent to take such action as agent on its behalf
and to exercise such powers under the Letter of Credit Agreement and the other
Loan Documents as are delegated to the Agent by the terms thereof, together
with such powers as are reasonably incidental thereto; (iv) agrees that it will
perform in accordance with their terms all of the obligations which by the
terms of the Letter of Credit Agreement are required to be performed by it as a
Bank; [and] (v) specifies as its address for notices the address set forth
beneath its name on the signature pages hereof [and (vi) attaches the forms
prescribed by the Internal Revenue Service of the United States certifying as
to the Assignee's status for purposes of determining exemption from United
States withholding taxes with respect to all payments to be made to the
Assignee under the Letter of Credit Agreement or such other documents as are
necessary to indicate that all such payments are subject to such taxes at a
rate reduced by an applicable tax treaty].*
_______________
*If the Assignee is organized under the laws of a jurisdiction outside the
United States.
C-2
<PAGE> 88
4. Following the execution of this Assignment and
Acceptance, the original hereof will be delivered to the Agent for approval,
acceptance and recording by the Agent and, contemporaneously with such
delivery, a copy hereof will be delivered to Foothill for its consent,
acceptance and execution. The effective date for this Assignment and Acceptance
(the "Effective Date") shall be the date of acceptance thereof by the Agent,
unless otherwise specified by the Agent.
5. Upon such approval, acceptance and recording by the
Agent, as of the Effective Date, (i) the Assignee shall be a party to the
Letter of Credit Agreement and, to the extent provided in this Assignment and
Acceptance, have the rights and obligations of a Bank thereunder and (ii) the
Assignor shall, to the extent provided in this Assignment and Acceptance,
relinquish its rights and be released from its obligations under the Letter of
Credit Agreement.
6. Upon such approval, acceptance and recording by the
Agent, from and after the Effective Date, the Agent shall make all payments
under the Letter of Credit Agreement in respect of the interest assigned hereby
(including, without limitation, all payments of principal, interest and
commitment, usage and letter of credit fees with respect thereto) to the
Assignee. The Assignor and Assignee shall make all appropriate adjustments in
payments under the Letter of Credit Agreement for periods prior to the
Effective Date directly between themselves.
C-3
<PAGE> 89
7. This Assignment and Acceptance shall be governed by,
and construed in accordance with, the laws of the State of California.
[NAME OF ASSIGNOR]
By: ____________________________
Name: ______________________
Title: _____________________
[NAME OF ASSIGNEE]
By: ____________________________
Name: ______________________
Title: _____________________
Bank Office
(and address for notices):
________________________________
________________________________
________________________________
Accepted and approved this
____ day of __________, 19__
UNION BANK, as Agent
By: ____________________________
Name: ______________________
Title: _____________________
The Assignee is hereby consented to
this ____ day of __________, 19__
FOOTHILL CAPITAL CORPORATION
By: ____________________________
Name: ______________________
Title: _____________________
C-4
<PAGE> 90
SCHEDULE I
FOOTHILL CAPITAL CORPORATION SUBSIDIARY
FCC Holdings Limited, a California corporation, 100% owned by Foothill Capital
Corporation
I-1
<PAGE> 91
SCHEDULE II
LOCATION OF BOOKS AND RECORDS
Foothill Capital Corporation
11111 Santa Monica Boulevard, Suite 1500
Los Angeles, California 90025
FCC Holdings Limited
11111 Santa Monica Boulevard, Suite 1500
Los Angeles, California 90025
II-1
<PAGE> 92
SCHEDULE III
INTERCOMPANY TAX ALLOCATION POLICY
It is the policy of The Foothill Group, Inc. to allocate its consolidated
provision for Federal and State taxes among its subsidiaries, including
Foothill Capital Corporation, as though it was operating separately. Deferred
tax assets or liabilities that arise from differences between financial
reporting and tax reporting are carried on the books of the subsidiary
generating the difference. Since consolidated returns are filed by the
consolidated group, all subsidiaries remit on an as paid or (quarterly) basis
to The Foothill Group, Inc., their portion of the taxes due to the taxing
authorities. The Foothill Group, Inc. in turn remits to the taxing authorities
all taxes due for the consolidated group.
III-1
<PAGE> 93
SCHEDULE IV
CERTAIN TRANSACTIONS WITH AFFILIATES
Foothill Capital Corporation presently co-invests in certain loan and
investment transactions with The Foothill Group, Inc., Foothill Partners, L.P.,
Foothill Partners II, L.P., The Foothill Fund and Foothill Recovery Fund.
Foothill Capital Corporation may co-invest in certain loan and investment
transactions with Affiliates that may be organized in the future.
IV-1
<PAGE> 94
SCHEDULE V
PERMITTED SENIOR DEBT
<TABLE>
<CAPTION>
Amount Outstanding
as of May 31, 1994
------------------
<S> <C>
Commercial Paper Issued $131,050,660
Bank Borrowings:
Notes Payable under Existing Loan Agreement
Other Bank Borrowings $ 14,000,000
Total Bank Borrowings $ 14,000,000
Senior Notes:
10.27% Senior Notes due June 1994 $ 5,000,000
Floating Rate Note due August 1994 5,000,000
Floating Rate Note due August 1994 5,000,000
8.51% Senior Notes due January 1995 5,000,000
9.76% Senior Notes due April 1995 1,000,000
10.35% Senior Notes due June 1995 15,000,000
13.125% Senior Notes due November 1995 500,000
8.98% Senior Notes due January 1996 5,000,000
10.10% Senior Notes due April 1996 2,000,000
5.54% Senior Notes due November 1996 15,000,000
6.77% Senior Notes due December 1996 5,000,000
9.44% Senior Notes due January 1997 5,000,000
5.89% Senior Notes due November 1997 5,000,000
7.31% Senior Notes due December 1997 23,000,000
6.23% Senior Notes due November 1998 25,000,000
9.25% Senior Notes due March 1999 40,000,000
9.80% Senior Notes due December 1999 35,150,000
7.93% Senior Notes due December 1999 17,000,000
6.56% Senior Notes due November 2000 15,000,000
------------
Total Senior Notes $228,650,000
Accounts Payable and Accrued Liabilities 11,063,916
Security Deposits 5,385,970
------------
Total Senior Liabilities $390,150,546
Letters of Credit and Guarantees 42,882,473
------------
Total Senior Indebtedness $433,033,019
</TABLE>
V-1
<PAGE> 95
SCHEDULE VI
PERMITTED SUBORDINATED DEBT
<TABLE>
<CAPTION>
Amount Outstanding
as of May 31, 1994
------------------
<S> <C>
Senior Subordinated Notes:
13.625% Senior Subordinated Notes due November 1995 $ 750,000
10.60% Senior Subordinated Notes due December 1999 3,425,000
11.26% Senior Subordinated Notes due April 2000 4,300,000
8.93% Senior Subordinated Notes due December 2002 8,000,000
7.46% Senior Subordinated Notes due November 2003 25,000,000
-----------
Total Senior Subordinated Notes $41,475,000
Junior Subordinated Notes:
11.82% Junior Subordinated Notes due December 1999 $ 4,300,000
12.26% Junior Subordinated Notes due April 2000 4,300,000
9.93% Junior Subordinated Notes due December 2002 2,000,000
10.83% Junior Subordinated Notes due February 1998
payable to Foothill Group 4,000,000
12.50% Junior Subordinated Notes due October 1998
payable to Foothill Group 5,500,000
-----------
Total Junior Subordinated Notes $20,100.000
-----------
Total Subordinated Debt $61,575,000
</TABLE>
VI-1
<PAGE> 1
IBJ EXHIBIT 10.37
THE INDUSTRIAL BANK OF JAPAN, LIMITED
350 SOUTH GRAND AVENUE, SUITE 1500, LOS ANGELES, CA 90071
TELEPHONE: (213) 628-7241 FACSIMILE: (213) 486-8840
September 8, 1994
Foothill Capital Corporation
11111 Santa Monica Blvd.
Suite 1500
Los Angeles, CA 90025
Facsimile: 310-478-2961
Attn: Mr. Kent W. Dahl, VP/Treasurer
RE: IBJ REFERENCE NO. SP1103417L
The purpose of this letter agreement is to set forth the terms and conditions
of the Transaction entered into between us on the Trade Date specified below
(the "Transaction"). This letter agreement constitutes a "Confirmation" as
referred to in the Master Agreement specified below.
The definitions and the provisions contained in the 1991 ISDA Definitions (as
published by the International Swaps and Derivatives Association, Inc.
("ISDA")), without regard to subsequent amendments or revisions thereto, are
incorporated into this Confirmation. In the event of any inconsistency between
those definitions and provisions and this Confirmation, this Confirmation shall
govern.
Any reference to "Swap Transaction" in the 1991 ISDA Definitions is deemed to
be a reference to a "Transaction" for the purpose of interpreting this
Confirmation; and (b) any reference to "Transaction" in this Confirmation is
deemed to be a reference to "Swap Transaction" for the purpose of interpreting
the 1991 ISDA Definitions.
1. This Confirmation supplements, forms a part of, and is subject to, the Master
Agreement in the form published by ISDA (the "Agreement"), as if you and we
had executed that agreement (but without any Schedule thereto) and the
Agreement shall be governed by and construed in accordance with the laws of the
State of New York without reference to choice of law doctrine. All provisions
contained or incorporated by reference in the Agreement shall govern this
Confirmation except as expressly modified below.
<PAGE> 2
In addition, you and we agree to use our best efforts promptly to negotiate,
execute and deliver a Master Agreement (as published by ISDA). Upon execution
and delivery by you and us of that agreement (i) this letter agreement shall
constitute a "Confirmation" as referred to in that agreement and shall
supplement, form part of, and be subject to that agreement and (ii) all
provisions contained or incorporated by reference in that agreement shall govern
this Confirmation except as expressly modified below.
2. The terms of the particular Transaction to which this Confirmation relates
are as follows:
<TABLE>
<S> <C>
Type of Transaction: Swap Transaction
Notional Amount: USD 7,000,000
Trade Date: September 8, 1994
Effective Date: September 30, 1994
Termination Date: October 1, 2001, subject to
adjustment in accordance with the
Following Business Day Convention.
FIXED AMOUNTS:
Fixed Rate Payer: The Industrial Bank of Japan,
Limited, Los Angeles Agency
("IBJLA")
Fixed Rate Payer Payment Dates: April 1 and October 1 in each year
commencing on April 1, 1995 to and
including the Termination Date,
subject to adjustment in accordance
with the Following Business Day
Convention.
Fixed Rate: 7.34%
Fixed Rate Day Count Fraction: 30/360
FLOATING AMOUNTS:
Floating Rate Payer: Foothill Capital Corporation
("Foothill")
</TABLE>
2
<PAGE> 3
<TABLE>
<S> <C>
Floating Rate Payer Payment Dates: April 1 and October 1 in each year
commencing on April 1, 1995 to and
including the Termination Date,
subject to adjustment in accordance
with the Following Business Day
Convention.
Floating Rate Option: USD-C.P.-H.15
Floating Rate for the initial
Calculation Period: To be determined
Designated Maturity 1 month
Floating Rate Day Count Fraction: Actual/360
Compounding: Applicable
Compounding Dates: The first day in each month
commencing on October 1, 1994,
subject to adjustment in accordance
with the Following Business Day
Convention.
Method of Averaging: Unweighted Average
Reset Dates: Each Business Day of each
Calculation Period
Business Days: New York
Calculation Agent: IBJLA
3. ACCOUNT DETAILS:
Payments to IBJLA: Bankers Trust Company, NY
F/O IBJLA, A/C # 04-201-571
Payments to Foothill: Chemical Bank
ABA 021000128
A/C 323266193
F/O Foothill Capital Corp.
4. OTHER PROVISIONS:
Governing Law: New York Law
</TABLE>
3
<PAGE> 4
5. OFFICES:
For this Swap Transaction the office of IBJLA is its Los Angeles office.
For this Swap Transaction the office of Foothill is its Los Angeles office.
Please confirm that the foregoing correctly sets forth the terms of our
agreement by (1) signing this facsimile and sending it as a return
acknowledgment to the attention of the IBJLA Business Operations Department
(Fax No. 213-488-9840) and (2) signing and returning one of the two original
counterparts of this confirmation which will be sent to you, having been
executed by IBJLA.
IBJLA is very pleased to have executed this transaction with you,
Best Regards,
THE INDUSTRIAL BANK OF JAPAN, LIMITED,
LOS ANGELES
By: /s/ Toshinari Iyoda
--------------------------------
Name: Toshinari Iyoda
Title: Senior Vice President
Accepted and confirmed as
of the date first written:
FOOTHILL CAPITAL CORPORATION
By: /s/ Kent W. Dahl
--------------------------------
Name: Kent W. Dahl
Title: VP/Treasuer
4
<PAGE> 1
EXHIBIT 10.38
FLOATING RATE NOTE
Principal Amount
$10,000,000.00
THIS NOTE (AS AMENDED OR MODIFIED FROM TIME TO TIME, THIS "NOTE") HAS NOT
BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR UNDER ANY STATE SECURITIES LAW. BY ITS
ACCEPTANCE HEREOF, THE HOLDER OF THIS NOTE REPRESENTS THAT IT IS AN
INSTITUTIONAL "ACCREDITED INVESTOR" AS SUCH TERM IS DEFINED IN RULE 501(a)
OF REGULATION D UNDER THE ACT AND THAT THIS NOTE IS BEING ACQUIRED FOR
ITS OWN ACCOUNT (AND NOT FOR THE ACCOUNT OF OTHERS) OR AS A FIDUCIARY
FOR OTHERS FOR INVESTMENT AND NOT WITH A VIEW TO ANY RESALE OR
DISTRIBUTION HEREOF (SUBJECT, HOWEVER, TO ANY RIGHT TO RESELL OR
OTHERWISE TRANSFER THIS NOTE TO A QUALIFIED INSTITUTIONAL BUYER (A
"QUALIFIED INSTITUTIONAL BUYER") AS DEFINED IN RULE 144A UNDER THE ACT
("RULE 144A") IN A TRANSACTION WHICH MEETS THE REQUIREMENTS OF RULE 144A)
AND AGREES THAT ANY RESALE OR OTHER TRANSFER OF THE NOTE WILL BE MADE
ONLY (A) DIRECTLY TO AN INSTITUTIONAL ACCREDITED INVESTOR IN A
TRANSACTION APPROVED BY THE COMPANY, OR (B) TO A QUALIFIED
INSTITUTIONAL BUYER IN A TRANSACTION WHICH MEETS THE REQUIREMENTS OF
RULE 144A; PROVIDED THAT THE AGREEMENT OF THE HOLDER IS SUBJECT TO ANY
REQUIREMENT OF LAW THAT THE DISPOSITION OF THE HOLDER'S PROPERTY SHALL
AT ALL TIMES BE AND REMAIN WITHIN ITS CONTROL. ANY RESALE OR OTHER
TRANSFER OR ATTEMPTED RESALE OR OTHER TRANSFER OF THIS NOTE MADE
WITHOUT THE APPROVAL OF THE COMPANY, EXCEPT IN THE CASE OF A RESALE OR
OTHER TRANSFER MADE TO A QUALIFIED INSTITUTIONAL BUYER IN A
TRANSACTION WHICH MEETS THE REQUIREMENTS OF RULE 144A, SHALL BE VOID
AND WILL NOT BE RECOGNIZED BY THE COMPANY.
<TABLE>
Index Maturity Initial Interest Rate Original Issue Date
-------------- --------------------- -------------------
<S> <C> <C>
Three month 5.3125% September 14, 1994
Spread Base Rate Maturity Date
------ --------- -------------
25 basis points USD LIBOR September 14, 1995
Interest Payment Dates Interest Reset Date
- ---------------------- -------------------
12/14/94; 3/14/95; 12/14/94; 3/14/95;
6/14/95 and 9/14/95 and 6/14/95
</TABLE>
1
<PAGE> 2
For value received, Foothill Capital Corporation, a California corporation (the
"Company"), promises to pay to the order of Bank Hapoalim B.M. (the
"Noteholder") the principal amount of $10,000,000.00 on the Maturity Date
specified above, and to pay interest in arrears on each date specified above
under the caption "Interest Payment Dates" and on the Maturity Date (each an
"Interest Payment Date") on the unpaid principal amount hereof at the variable
rate per annum (the "Interest Rate") equal to the Base Rate specified above (the
"Base Rate") plus the applicable Spread until the principal amount hereof is
repaid in full; provided, however, that the Interest Rate in effect from the
Original Issue Date specified above (the "Original Issue Date") to the first of
the Interest Reset Dates specified above (each an "Interest Reset Date") will be
the Initial Interest Rate specified above (the "Initial Interest Rate"); and
provided, further, that if an Interest Payment Date is not a Business Day (as
defined below), such Interest Payment Date shall be the immediately following
Business Day.
Payments of principal and interest shall be made in U.S. dollars, the lawful
currency of the United States of America. Payments of principal and interest
hereunder shall be made by the Company to the Noteholder, in immediately
available funds, via wire transfer by the close of business on the date such
payment is due. Principal and interest due under this Note on the Maturity
Date will be paid upon the Noteholder's presentation and surrender of the Note
to the Company.
For the purposes of this Note, "Business Day" means any day that is not a
Saturday or Sunday and is not a day on which banking institutions in Los
Angeles, California, are generally authorized or obligated by law to close. If
the Maturity Date specified above is not a Business Day, the Maturity Date will
be the immediately following Business Day.
The interest payable on each Interest Payment Date will equal the total accrued
and unpaid interest from and including the Original Issue Date or from and
including the last date in respect of which interest has been paid, as the case
may be, to, but excluding, such Interest Payment Date. The amount of accrued
interest for any day will equal the product of (i) the outstanding principal
amount of this Note as of the end of such day, and (ii) the Interest Rate
applicable to such day divided by 360 (rounded, if necessary, to the next
nearest one hundred-thousandth of a percent, with five one-millionths of a
percentage point rounded upward). The Interest Rate in effect on any day shall
be (a) if such day is an Interest Reset Date, the sum of the Base Rate for such
Interest Reset Date and the Spread or (b) if such day is not an Interest Reset
Date, the sum of the Base Rate for the immediately preceding Interest Reset
Date and the Spread; provided, however, that the Interest Rate in effect from
the Original Issue Date to, but excluding the first Interest Reset Date will be
the Initial Interest Rate.
Subject to applicable provisions of law and except as specified herein, on each
Interest Reset Date, the Interest Rate and the Base Rate shall be reset in
accordance with the provision below;
London Interbank Offering Rate shall mean the rate (rounded upwards, if
necessary, to the next 1/16 of 1%) at which dollar deposits approximately
equal in principal amount to the amount of this Note for the maturity
equal to the Index Maturity are offered by major banks to major banks in
immediately available funds in the London Interbank Market for Eurodollars
at approximately 11:00 a.m., London time, two Business Days prior to the
Interest
2
<PAGE> 3
Reset Date. Such London Interbank Offering Rates are provided on Telerate
(currently page 3750).
Representations and Warranties
- ------------------------------
The Company represents and warrants that: (i) it is a corporation duly
organized, validly existing and in good standing under the laws of its
respective jurisdiction of incorporation, and is duly qualified to do business
and is in good standing as a foreign corporation in each jurisdiction where the
nature of its respective business requires such qualification; (ii) the
execution, delivery and performance of this Note by the Company is within its
corporate powers, has been duly authorized by all necessary corporate action,
and does not contravene its charter or by-laws, any law, rule or regulation
applicable to it or any contractual restriction binding on or affecting it;
(iii) no authorization, approval or other action by, and no notice to or filing
with, any governmental authority or regulatory body is required for its due
execution, delivery and performance of this Note; (iv) this Note constitutes
a legal, valid and binding obligation of the Company enforceable against it in
accordance with its terms; (v) there is no pending or threatened action or
proceeding affecting the Company other than that which has already been
disclosed before any court, governmental agency, or arbitrator which may
materially adversely affect the financial condition, operations or prospects
of the Company, taken as a whole, or which questions the validity of this Note;
and (vi) it is not an "investment company", within the meaning of the Investment
Company Act of 1940, as amended.
Events of Default
- -----------------
The occurrence of one or more of the following events shall be an "Event of
Default": a default in payment of interest when due and payable which continues
for a period of five Business Days or a default in payment of principal upon
maturity; (ii) any representation or warranty made by the Company herein proves
to have been incorrect in any material respect when made; (iii) a failure by
the Company to comply with any of its other covenants or agreements under this
Note which continues for a period of 30 days after notice to it by the
Noteholder; (iv) the Company fails to repay at maturity, after any applicable
grace period, any indebtedness for borrowed money (other than indebtedness for
borrowed money that is specifically stated to be non-recourse to the Company,
as the case may be), in an aggregate principal amount exceeding $10 million;
(v) any default(s) under any indenture, loan, credit agreement or other
instrument under which there is outstanding indebtedness of the Company for
borrowed money (other than indebtedness for borrowed money that is specifically
stated to be non-recourse to the Company, as the case may be) in an aggregate
principal amoumt exceeding $10 million has (or have) occurred and is (or are)
continuing and such indebtedness has been accelerated so that it has been
declared due and payable in full prior to its stated maturity, and such
acceleration shall not be rescinded or annulled; provided, however, that if such
default(s) shall be remedied or cured by the Company, as the case may be, or
waived by the holders of such indebtedness, then the default under this Note
by reason thereof shall be deemed likewise to have been thereupon remedied,
cured or waived without further action upon the part of this Noteholder; or
(vi) the Company (a) becomes insolvent or admits in writing its inability to pay
its debts as they mature or (b) applies for, consents to, or acquiesces in the
appointment of a trustee or receiver for any of its property; or, in the
absence of such application, consent or acquiescence, a trustee or receiver is
appointed for the Company for a substantial part of its property and is not
discharged within 30 days; or (c) becomes subject to
3
<PAGE> 4
any bankruptcy, insolvency, dissolution or liquidation law or proceedings
(x) instituted against the Company and which remain for 30 days undismissed,
or (y) instituted by, consented to or acquiesced in by the Company.
Upon the occurrence of any Event of Default described in the preceding
paragraph, the principal of, and interest on, this Note and all other sums due
hereunder shall immediately be due and payable and upon the occurrence of any
other Event of Default, the Noteholder, at its option, may declare the
principal of, and interest on, this Note and all other sums due hereunder
immediately due and payable. Upon an acceleration of the payment of this
Note as provided in the previous sentence, the indebtedness hereunder shall
immediately become due and payable without necessity of demand, presentment,
protest, notice of dishonor, notice of default or any other notice whatsoever.
The Noteholder shall be entitled at its option to exercise each and every
remedy accorded it by law and/or specifically set forth in this Note.
The Company expressly waives demand for payment, presentment for payment,
notice of dishonor, notice of default, protest, notice of protest, and
diligence in collection and consents that the time of payment may be extended
or released by the Noteholder without in any way modifying, releasing or
limiting the company's liability hereunder.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF CALIFORNIA.
FOOTHILL CAPITAL CORPORATION
By: /s/ Kent W. Dahl
-------------------------------
Kent W. Dahl, V.P. & Treasurer
4
<PAGE> 1
EXHIBIT 10.39
FLOATING RATE NOTE
Principal Amount
$10,000,000.00
THIS NOTE (AS AMENDED OR MODIFIED FROM TIME TO TIME, THIS "NOTE") HAS NOT
BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR UNDER ANY STATE SECURITIES LAW. BY ITS
ACCEPTANCE HEREOF, THE HOLDER OF THIS NOTE REPRESENTS THAT IT IS AN
INSTITUTIONAL "ACCREDITED INVESTOR" AS SUCH TERM IS DEFINED IN RULE 501(a)
OF REGULATION D UNDER THE ACT AND THAT THIS NOTE IS BEING ACQUIRED FOR
ITS OWN ACCOUNT (AND NOT FOR THE ACCOUNT OF OTHERS) OR AS A FIDUCIARY
FOR OTHERS FOR INVESTMENT AND NOT WITH A VIEW TO ANY RESALE OR
DISTRIBUTION HEREOF (SUBJECT, HOWEVER, TO ANY RIGHT TO RESELL OR
OTHERWISE TRANSFER THIS NOTE TO A QUALIFIED INSTITUTIONAL BUYER (A
"QUALIFIED INSTITUTIONAL BUYER") AS DEFINED IN RULE 144A UNDER THE ACT
("RULE 144A") IN A TRANSACTION WHICH MEETS THE REQUIREMENTS OF RULE 144A)
AND AGREES THAT ANY RESALE OR OTHER TRANSFER OF THE NOTE WILL BE MADE
ONLY (A) DIRECTLY TO AN INSTITUTIONAL ACCREDITED INVESTOR IN A
TRANSACTION APPROVED BY THE COMPANY, OR (B) TO A QUALIFIED
INSTITUTIONAL BUYER IN A TRANSACTION WHICH MEETS THE REQUIREMENTS OF
RULE 144A; PROVIDED THAT THE AGREEMENT OF THE HOLDER IS SUBJECT TO ANY
REQUIREMENT OF LAW THAT THE DISPOSITION OF THE HOLDER'S PROPERTY SHALL
AT ALL TIMES BE AND REMAIN WlTHIN ITS CONTROL. ANY RESALE OR OTHER
TRANSFER OR ATTEMPTED RESALE OR OTHER TRANSFER OF THIS NOTE MADE
WITHOUT THE APPROVAL OF THE COMPANY, EXCEPT IN THE CASE OF A RESALE OR
OTHER TRANSFER MADE TO A QUALIFIED INSTITUTIONAL BUYER IN A
TRANSACTION WHICH MEETS THE REQUIREMENTS OF RULE 144A, SHALL BE VOID
AND WILL NOT BE RECOGNIZED BY THE COMPANY.
<TABLE>
Index Maturity Initial Interest Rate Original Issue Date
- -------------- --------------------- -------------------
<S> <C> <C>
Three month 5.50% September 29, 1994
Spread Base Rate Maturity Date
------ --------- -------------
25 basis points USD LIBOR September 28, 1995
Interest Payment Dates Interest Reset Dates
- ---------------------- --------------------
12/29/94; 3/29/95; 12/29/94; 3/29/95;
6/29/95 and 9/28/95 6/29/95
</TABLE>
1
<PAGE> 2
For value received, Foothill Capital Corporation, a California corporation (the
"Company"), promises to pay to the order of Westdeutsche Landesbank
Girozentrale (the "Noteholder") the principal amount of $10,000,000.00 on the
Maturity Date specified above, and to pay interest in arrears on each date
specified above under the caption "Interest Payment Dates" and on the Maturity
Date (each an "Interest Payment Date") on the unpaid principal amount hereof at
the variable rate per annum (the "Interest Rate") equal to the Base Rate
specified above (the "Base Rate") plus the applicable Spread until the
principal amount hereof is due, whether at the stated maturity, by acceleration
or otherwise; provided, however, that the Interest Rate in effect from the
Original Issue Date specified above (the "Original Issue Date") to the first of
the Interest Reset Dates specified above (each an "Interest Reset Date") will
be the Initial Interest Rate specified above (the "Initial Interest Rate"); and
provided, further, that if an Interest Payment Date is not a Business Day (as
defined below), such Interest Payment Date shall be the immediately following
Business Day. If any principal amount hereof is not paid when due (at the stated
maturity, by acceleration or otherwise) such principal amount shall bear
interest until payment in full thereof (after as well as before judgement) at
the rate per annum 2.00% above the London Interbank Offering Rate for each day
until payment in full thereof.
Payments of principal and interest shall be made in U.S. dollars, the lawful
currency of the United States of America. Payments of principal and interest
hereunder shall be made by the Company to the Noteholder, in immediately
available funds, via wire transfer by the close of business on the date such
payment is due. Principal and interest due under this Note on the Maturity Date
will be paid upon the Noteholder's presentation and surrender of the Note to
the Company.
For the purposes of this Note, "Business Day" means any day that is not a
Saturday or Sunday and is not a day on which banking institutions in Los
Angeles, California, are generally authorized or obligated by law to close. If
the Maturity Date specified above is not a Business Day, the Maturity Date will
be the immediately following Business Day.
The interest payable on each Interest Payment Date will equal the total
accrued and unpaid interest from and including the Original Issue Date or from
and including the last date in respect of which interest has been paid, as the
case may be, to, but excluding, such Interest Payment Date. The amount of
accrued interest for any day will equal the product of (i) the outstanding
principal amount of this Note as of the end of such day, and (ii) the Interest
Rate applicable to such day divided by 360 (rounded, if necessary, to the next
nearest one hundred-thousandth of a percent, with five one-millionth of a
percentage point rounded upward). The Interest Rate in effect on any day shall
be (a) if such day is an Interest Reset Date, the sum of the Base Rate for
such Interest Reset Date and the Spread or (b) if such day is not an Interest
Reset Date, the sum of the Base Rate for the immediately preceding Interest
Reset Date and the Spread; provided, however, that the Interest Rate in effect
from the Original Issue Date to, but excluding the first Interest Reset Date
will be the Initial Interest Rate.
2
<PAGE> 3
Subject to applicable provisions of law and except as specified herein, on each
Interest Reset Date, the Interest Rate and the Base Rate shall be reset in
accordance with the provision below:
London Interbank Offering Rate shall mean the rate (rounded upwards, if
necessary, to the next 1/16 of 1%) at which dollar deposits approximately
equal in principal amount to the amount of this Note for the maturity equal
to the Index Maturity are offered by major banks to major banks in
immediately available funds in the London Interbank Market for Eurodollars
at approximately 11:00 a.m., London time, two Business Days prior to the
Interest Reset Date. Such London Interbank Offering Rates are provided on
Telerate (currently page 3750).
Representations and Warranties
- ------------------------------
The Company represents and warrants that: (i) it is a corporation duly
organized, validly existing and in good standing under the laws of its
respective jurisdiction of incorporation, and is duly qualified to do business
and is in good standing as a foreign corporation in each jurisdiction where the
nature of its respective business requires such qualification; (ii) the
execution, delivery and performance of this Note by the Company is within its
corporate powers, has been duly authorized by all necessary corporate action,
and does not contravene its charter or by-laws, any law, rule or regulation
applicable to it or any contractual restriction binding on or affecting it;
(iii) no authorization, approval or other action by, and no notice to or filing
with, any governmental authority or regulatory body is required for its due
execution, delivery and performance of this Note; (iv) this Note constitutes a
legal, valid and binding obligation of the Company enforceable against it in
accordance with its terms; (v) there is no pending or threatened action or
proceeding affecting the Company other than that which has already been
disclosed before any court, governental agency, or arbitrator which may
materially adversely affect the financial condition, operations or prospects of
the Company, taken as a whole, or which questions the validity of this Note;
and (vi) it is not an "investment company", within the meaning of the
Investment Company Act of 1940, as amended.
Events of Default
- -----------------
The occurrence of one or more of the following events shall be an "Event of
Default": (i) a default in payment of interest when due and payable which
continues for a period of five Business Days or a default in payment of
principal upon maturity; (ii) any representation or warranty made by the
Company herein proves to have been incorrect in any material respect when made;
(iii) a failure by the Company to comply with any of its other covenants or
agreements under this Note which continues for a period of 30 days after notice
to it by the Noteholder; (iv) the Company fails to repay at maturity, after any
applicable grace period, any indebtedness for borrowed money (other than
indebtedness for borrowed money that is specifically stated to be non-recourse
to the Company, as the case may be), in an aggregate principal amount exceeding
$10 million; (v) any default(s) under any indenture, loan, credit agreement or
other instrument under which there is outstanding indebtedness of the Company
for borrowed money (other than indebtedness for borrowed money that is
specifically stated to be non-recourse to the Company, as the case may be) in
an aggregate principal amount exceeding $10 million has (or have) occurred and
is (or are) continuing and such indebtedness
3
<PAGE> 4
has been accelerated so that it has been declared due and payable in full
prior to its stated maturity, and such acceleration shall not be rescinded
or annulled; provided, however, that if such default(s) shall be remedied or
cured by the Company, as the case may be, or waived by the holders of such
indebtedness, then the default under this Note by reason thereof shall be deemed
likewise to have been thereupon remedied, cured or waived without further action
upon the part of this Noteholder; or (vi) the Company (a) becomes insolvent or
admits in writing its inability to pay its debts as they mature or (b) applies
for, consents to, or acquiesces in the appointment of a trustee or receiver for
any of its property; or, in the absence of such application, consent or
acquiescence, a trustee or receiver is appointed for the Company for a
substantial part of its property and is not discharged within 30 days; or (c)
becomes subject to any bankruptcy, insolvency, dissolution or liquidation law or
proceedings (x) instituted against the Company and which remain for 30 days
undismissed, or (y) instituted by, consented to or acquiesced in by the Company.
Upon the occurrence of any Event of Default described in the preceding
paragraph, the principal of, and interest on, this Note and all other sums due
hereunder shall immediately be due and payable and upon the occurrence of any
other Event of Default, the Noteholder, at its option, may declare the
principal of, and interest on, this Note and all other sums due hereunder
immediately due and payable. Upon an acceleration of the payment of this Note
as provided in the previous sentence, the indebtedness hereunder shall
immediately become due and payable without necessity of demand, presentment,
protest, notice of dishonor, notice of default or any other notice whatsoever.
The Noteholder shall be entitled at its option to exercise each and every remedy
accorded it by law and/or specifically set forth in this Note.
The Company expressly waives demand for payment, presentment for payment,
notice of dishonor, notice of default, protest, notice of protest, and diligence
in collection and consents that the time of payment may be extended or released
by the Noteholder without in any way modifying, releasing or limiting the
company's liability hereunder.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF CALIFORNIA.
FOOTHILL CAPITAL CORPORATION
By: /s/ Kent W. Dahl
--------------------------
4
<PAGE> 1
EXHIBIT 10.40
FLOATING RATE NOTE
Principal Amount
$5,000,000.00
THIS NOTE (AS AMENDED OR MODIFIED FROM TIME TO TIME, THIS "NOTE") HAS NOT
BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED ("THE "ACT"), OR UNDER ANY STATE SECURITIES LAW. BY ITS
ACCEPTANCE HEREOF, THE HOLDER OF THIS NOTE REPRESENTS THAT IT IS AN
INSTITUTIONAL "ACCREDITED INVESTOR" AS SUCH TERM IS DEFINED IN RULE 501(a)
OF REGULATION D UNDER THE ACT AND THAT THIS NOTE IS BEING ACQUIRED FOR
ITS OWN ACCOUNT (AND NOT FOR THE ACCOUNT OF OTHERS) OR AS A FIDUCIARY
FOR OTHERS FOR INVESTMENT AND NOT WITH A VIEW TO ANY RESALE OR
DISTRIBUTION HEREOF (SUBJECT, HOWEVER, TO ANY RIGHT TO RESELL OR
OTHERWISE TRANSFER THIS NOTE TO A QUALIFIED INSTITUTIONAL BUYER (A
"QUALIFIED INSTITUTIONAL BUYER") AS DEFINED IN RULE 144A UNDER THE ACT
("RULE 144A") IN A TRANSACTION WHICH MEETS THE REQUIREMENTS OF RULE 144A)
AND AGREES THAT ANY RESALE OR OTHER TRANSFER OF THE NOTE WILL BE MADE
ONLY (A) DIRECTLY TO AN INSTITUTIONAL ACCREDITED INVESTOR IN A
TRANSACTION APPROVED BY THE COMPANY, OR (B) TO A QUALIFIED
INSTITUTIONAL BUYER IN A TRANSACTION WHICH MEETS THE REQUIREMENTS OF
RULE 144A; PROVIDED THAT THE AGREEMENT OF THE HOLDER IS SUBJECT TO ANY
REQUIREMENT OF LAW THAT THE DISPOSITION OF THE HOLDER'S PROPERTY SHALL
AT ALL TIMES BE AND REMAIN WITHIN ITS CONTROL. ANY RESALE OR OTHER
TRANSFER OR ATTEMPTED RESALE OR OTHER TRANSFER OF THIS NOTE MADE
WITHOUT THE APPROVAL OF THE COMPANY, EXCEPT IN THE CASE OF A RESALE OR
OTHER TRANSFER MADE TO A QUALIFIED INSTITUTIONAL BUYER IN A
TRANSACTION WIHICH MEETS THE REQUIREMENTS OF RULE 144A, SHALL BE VOID
AND WILL NOT BE RECOGNIZED BY THE COMPANY.
<TABLE>
<S> <C> <C>
Index Maturity Initial Interest Rate Original Issue Date
-------------- --------------------- -------------------
Three month 5.3125% September 15, 1994
Spread Base Rate Maturity Date
------ --------- -------------
25 basis points USD LIBOR September 15, 1995
Interest Payment Dates Interest Reset Dates
- ---------------------- --------------------
12/15/94; 3/15/95; 12/15/94; 3/15/95;
6/15/95 and 9/15/95 and 6/15/95
</TABLE>
<PAGE> 2
For value received, Foothill Capital Corporation, a California corporation (the
"Company"), promises to pay to the order of First Interstate Bank of California
(the "Noteholder") the principal amount of $5,000,000.00 on the Maturity Date
specified above, and to pay interest in arrears on each date specified above
under the caption "Interest Payment Dates" and on the Maturity Date (each an
"Interest Payment Date") on the unpaid principal amount hereof at the variable
rate per annum (the "Interest Rate") equal to the Base Rate specified above
(the "Base Rate") plus the applicable Spread until the principal amount
hereof is repaid in full; provided, however, that the Interest Rate in effect
from the Original Issue Date specified above (the "Original Issue Date") to
the first of the Interest Reset Dates specified above (each an "Interest Reset
Date") will be the Initial Interest Rate specified above (the "Initial Interest
Rate"); and provided, further, that if an Interest Payment Date is not a
Business Day (as defined below), such Interest Payment Date shall be the
immediately following Business Day.
Payments of principal and interest shall be made in U.S. dollars, the lawful
currency of the United States of America. Payments of principal and interest
hereunder shall be made by the Company to the Noteholder, in immediately
available funds, via wire transfer by the close of business on the date such
payment is due. Principal and interest due under this Note on the Maturity Date
will be paid upon the Noteholder's presentation and surrender of the Note to
the Company.
For the purposes of this Note, "Business Day" means any day that is not a
Saturday or Sunday and is not a day on which banking institutions in Los
Angeles, California, are generally authorized or obligated by law to close. If
the Maturity Date specified above is not a Business Day, the Maturity Date will
be the immediately following Business Day.
The interest payable on each Interest Payment Date will equal the total accrued
and unpaid interest from and including the Original Issue Date or from and
including the last date in respect of which interest has been paid, as the case
may be, to, but excluding, such Interest Payment Date. The amount of accrued
interest for any day will equal the product of (i) the outstanding principal
amount of this Note as of the end of such day, and (ii) the Interest Rate
applicable to such day divided by 360 (rounded, if necessary, to the next
nearest one hundred-thousandth of a percent, with five one-millionths of a
percentage point rounded upward). The Interest Rate in effect on any day shall
be (a) if such day is an Interest Reset Date, the sum of the Base Rate for such
interest Reset Date and the Spread or (b) if such day is not an Interest Reset
Date, the sum of the Base Rate for the immediately preceding Interest Reset
Date and the Spread; provided, however, that the Interest Rate in effect from
the Original Issue Date to, but excluding the first Interest Reset Date will be
the Initial Interest Rate.
Subject to applicable provisions of law and except as specified herein, on
each Interest Reset Date, the Interest Rate and the Base Rate shall be reset in
accordance with the provision below:
London Interbank Offering Rate shall mean the rate (rounded upwards, if
necessary, to the next 1/16 of 1%) at which dollar deposits approximately
equal in principal amount to the amount of this Note for the maturity equal
to the Index Maturity are offered by major banks to major banks in
immediately available funds in the London Interbank Market for Eurodollars
at approximately 11:00 a.m., London time, two Business Days prior to the
Interest
2
<PAGE> 3
Reset Date. Such London Interbank Offering Rates are provided on Telerate
(currently page 3750).
Representations and Warranties
- ------------------------------
The Company represents and warrants that: (i) it is a corporation duly
organized, validly existing and in good standing under the laws of its
respective jurisdiction of incorporation, and is duly qualified to do business
and is in good standing as a foreign corporation in each jurisdiction where
the nature of its respective business requires such qualification; (ii) the
execution, delivery and performance of this Note by the Company is within
its corporate powers, has been duly authorized by all necessary corporate
action, and does not contravene its charter or by-laws, any law, rule or
regulation applicable to it or any contractual restriction binding on or
affecting it; (ii) no authorization, approval or other action by, and no
notice to or filing with, any governmental authority or regulatory body is
required for its due execution, delivery and performance of this Note; (iv)
this Note constitutes a legal, valid and binding obligation of the Company
enforceable against it in accordance with its terms; (v) there is no pending or
threatened action or proceeding affecting the Company other than that which has
already been disclosed before any court, governmental agency, or arbitrator
which may materially adversely affect the financial condition, operations or
prospects of the Company, taken as a whole, or which questions the validity of
this Note; and (vi) it is not an "investment company", within the meaning of
the Investment Company Act of 1940, as amended.
Events of Default
- -----------------
The occurrence of one or more of the following events shall be an "Event of
Default": (i) a default in payment of interest when due and payable which
continues for a period of five Business Days or a default in payment of
principal upon maturity; (ii) any representation or warranty made by the
Company herein proves to have been incorrect in any material respect when made;
(iii) a failure by the Company to comply with any of its other covenants or
agreements under this Note which continues for a period of 30 days after
notice to it by the Noteholder; (iv) the Company fails to repay at maturity,
after any applicable grace period, any indebtedness for borrowed money (other
than indebtedness for borrowed money that is specifically stated to be
non-recourse to the Company, as the case may be), in an aggregate principal
amount exceeding $10 million; (v) any default(s) under any indenture, loan,
credit agreement or other instrument under which there is outstanding
indebtedness of the Company for borrowed money (other than indebtedness for
borrowed money that is specifically stated to be non-recourse to the Company,
as the case may be) in an aggregate principal amount exceeding $10 million has
(or have) occurred and is (or are) continuing and such indebtedness has been
accelerated so that it has been declared due and payable in full prior to its
stated maturity, and such acceleration shall not be rescinded or annulled;
provided, however, that if such default(s) shall be remedied or cured by the
Company, as the case may be, or waived by the holders of such indebtedness,
then the default under the Note by reason thereof shall be deemed likewise to
have been thereupon, remedied, cured or waived without further action upon the
part of this Noteholder; or (vi) the Company (a) becomes insolvent or admits
in writing its inability to pay its debts as they mature or (b) applies for,
consents to, or acquiesces in the appointment of a trustee or receiver for any
of its property; or, in the absence of such application, consent or
acquiescence, a trustee or receiver is appointed for the Company for a
substantial part of its property and is not discharged within 30 days; or (c)
becomes subject to
3
<PAGE> 4
any bankruptcy, insolvency, dissolution or liquidation law or proceedings
(x) instituted against the Company and which remain for 30 days undismissed,
or (y) instituted by, consented to or acquiesced in by the Company.
Upon the occurrence of any Event of Default described in the preceding
paragraph, the principal of, and interest on, this Note and all other sums due
hereunder shall immediately be due and payable and upon the occurrence of any
other Event of Default, the Noteholder, at its option, may declare the
principal of, and interest on, this Note and all other sums due hereunder
immediately due and payable. Upon an acceleration of the payment of this Note
as provided in the previous sentence, the indebtedness hereunder shall
immediately become due and payable without necessity of demand, presentment,
protest, notice of dishonor, notice of default or any other notice whatsoever.
The Noteholder shall be entitled at its option to exercise each and every
remedy accorded it by law and/or specifically set forth in this Note.
The Company expressly waives demand for payment, presentment for payment,
notice of dishonor, notice of default, protest, notice of protest, and
diligence in collection and consents that the time of payment may be extended
or released by the Noteholder without in any way modifying, releasing or
limiting the company's liability hereunder.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF CALIFORNIA.
FOOTHILL CAPITAL CORPORATION
By: /s/ Kent W. Dahl
--------------------------------
Kent W. Dahl, V.P. & Treasurer
4
<PAGE> 1
EXHIBIT 10.41
FLOATING RATE NOTE
Principal Amount
$5,000,000.00
THIS NOTE (AS AMENDED OR MODIFIED FROM TIME TO TIME, "THIS "NOTE") HAS NOT
BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR UNDER ANY STATE SECURITIES LAW. BY ITS
ACCEPTANCE HEREOF, THE HOLDER OF THIS NOTE REPRESENTS THAT IT IS AN
INSTITUTIONAL "ACCREDITED INVESTOR" AS SUCH TERM IS DEFINED IN RULE 501(a)
OF REGULATION D UNDER THE ACT AND THAT THIS NOTE IS BEING ACQUIRED FOR
ITS OWN ACCOUNT (AND NOT FOR THE ACCOUNT OF OTHERS) OR AS A FIDUCIARY
FOR OTHERS FOR INVESTMENT AND NOT WITH A VIEW TO ANY RESALE OR
DISTRIBUTION HEREOF (SUBJECT, HOWEVER, TO ANY RIGHT TO RESELL OR
OTHERWISE TRANSFER THIS NOTE TO A QUALIFIED INSTITUTIONAL BUYER (A
"QUALIFIED INSTITUTIONAL BUYER") AS DEFINED IN RULE 144A UNDER THE ACT
("RULE 144A") IN A TRANSACTION WHICH MEETS THE REQUIREMENTS OF RULE 144A)
AND AGREES THAT ANY RESALE OR OTHER TRANSFER OF THE NOTE WILL BE MADE
ONLY (A) DIRECTLY TO AN INSTITUTIONAL ACCREDITED INVESTOR IN A
TRANSACTION APPROVED BY THE COMPANY, OR (B) TO A QUALIFIED
INSTITUTIONAL BUYER IN A TRANSACTION WHICH MEETS THE REQUIREMENTS OF
RULE 144A; PROVIDED THAT THE AGREEMENT OF THE HOLDER IS SUBJECT TO ANY
REQUIREMENT OF LAW THAT THE DISPOSISTION OF THE HOLDER'S PROPERTY SHALL
AT ALL TIMES BE AND REMAIN WITHIN ITS CONTROL. ANY RESALE OR OTHER
TRANSFER OR ATTEMPTED RESALE OR OTHER TRANSFER OF THIS NOTE MADE
WITHOUT THE APPROVAL OF THE COMPANY, EXCEPT IN THE CASE OF A RESALE OR
OTHER TRANSFER MADE TO A QUALIFIED INSTITUTIONAL BUYER IN A
TRANSACTION WHICH MEETS THE REQUIREMENTS OF RULE 144A, SHALL BE VOID
AND WILL NOT BE RECOGNIZED BY THE COMPANY.
<TABLE>
Index Maturity Initial Interest Rate Original Issue Date
-------------- --------------------- -------------------
<S> <C> <C>
Three month 5.4125% September 15, 1994
Spread Base Rate Maturity Date
------ --------- -------------
35 basis points USD LIBOR September 16, 1996
Interest Payment Dates Interest Reset Dates
- ---------------------- --------------------
12/15/94; 3/15/95; 12/15/94; 3/15/95;
6/15/95; 9/15/95; 6/15/95; 9/15/95;
12/15/95; 3/15/96; 12/15/95; 3/15/96;
6/17/96 and 9/16/96 and 6/17/96
</TABLE>
<PAGE> 2
For value received, Foothill Capital Corporation, a California corporation (the
"Company"), promises to pay to the order of First Interstate Bank of California
(the "Noteholder") the principal amount of $5,000,000.00 on the Maturity Date
specified above, and to pay interest in arrears on each date specified above
under the caption "Interest Payment Dates" and on the Maturity Date (each an
"Interest Payment Date") on the unpaid principal amount hereof at the variable
rate per annum (the "Interest Rate") equal to the Base Rate specified above
(the "Base Rate") plus the applicable Spread until the principal amount hereof
is repaid in full provided, however, that the Interest Rate in effect from the
Original Issue Date specified above (the "Original Issue Date") to the first of
the Interest Reset Dates specified above (each an "Interest Reset Date") will
be the Initial Interest Rate specified above (the "Initial Interest Rate"); and
provided, further, that if an Interest Payment Date is not a Business Day (as
defined below), such Interest Payment Date shall be the immediately following
Business Day.
Payments of principal and interest shall be made in U.S. dollars, the lawful
currency of the United States of America. Payments of principal and interest
hereunder shall be made by the Company to the Noteholder, in immediately
available funds, via wire transter by the close of business on the date such
payment is due. Principal and interest due under this Note on the Maturity Date
will be paid upon the Noteholder's presentation and surrender of the Note to
the Company.
For the purposes of this Note, "Business Day" means any day that is not a
Saturday or Sunday and is not a day on which banking institutions in Los
Angeles, California, are generally authorized or obligated by law to close. If
the Maturity Date specified above is not a Business Day, the Maturity Date will
be the immediately following Business Day.
The interest payable on each Interest Payment Date will equal the total accrued
and unpaid interest from and including the Original Issue Date or from and
including the last date in respect of which interest has been paid, as the case
may be, to, but excluding, such Interest Payment Date. The amount of accrued
interest for any day will equal the product of (i) the outstanding principal
amount of this Note as of the end of such day, and (ii) the Interest Rate
applicable to such day divided by 360 (rounded, if necessary, to the next
nearest one hundred-thousandth of a percent, with five one-millionth of a
percentage point rounded upward. The Interest Rate in effect on any day shall
be (a) if such day is an Interest Reset Date, the sum of the Base Rate for
such Interest Reset Date and the spread or (b) if such day is not an Interest
Reset Date, the sum of the Base Rate for the immediately preceding Interest
Reset Date and the Spread; provided, however, that the Interest Rate in effect
from the Original Issue Date to, but excluding the first Interest Reset Date
will be the Initial Interest Rate.
Subject to applicable provisions of law and except as specified herein, on each
Interest Reset Date, the Interest Rate and the Base Rate shall be reset in
accordance with the provision below:
London Interbank Offering Rate shall mean the rate (rounded upwards, if
necessary, to the next 1/16 of 1%) at which dollar deposits approximately
equal in principal amount to the amount of this Note for the maturity equal
to the Index Maturity are offered by major banks to major banks in
immediately available funds in the London Interbank Market for Eurodollars
at
2
<PAGE> 3
approximately 11:00 a.m., London time, two Business Days prior to the Interest
Reset Date. Such London Interbank Offering Rates are provided on Telerate
(currently page 3750).
Representations and Warranties
- ------------------------------
The Company represents and warrants that: (i) it is a corporation duly
organized, validly existing and in good standing under the laws of its
respective jurisdiction of incorporation, and is duly qualified to do business
and is in good standing as a foreign corporation in each jurisdiction where the
nature of its respective business requires such qualification; (ii) the
execution, delivery and performance of this Note by the Company is within its
corporate powers, has been duly authorized by all necessary corporate action,
and does not contravene its charter or by-laws, any law, rule or regulation
applicable to it or any contractual restriction binding on or affecting it;
(iii) no authorization, approval or other action by, and no notice to or filing
with, any governmental authority or regulatory body is required for its due
execution, delivery and performance of this Note, (iv) this Note constitutes a
legal, valid and binding obligation of the Company enforceable against it in
accordance with its terms; (v) there is no pending or threatened action or
proceeding affecting the Company other than that which has already been
disclosed before any court, governmental agency, or arbitrator which may
materially adversely affect the financial condition, operations or prospects of
the Company, taken as a whole, or which questions the validity of this Note;
and (vi) it is not an "investment company", within the meaning of the
Investment Company Act of 1940, as amended.
Events of Default
- -----------------
The occurrence of one or more of the following events shall be an "Event of
Default": (i) a default in payment of interest when due and payable which
continues for a period of five Business Days or a default in payment of
principal upon maturity; (ii) any representation or warranty made by the
Company herein proves to have been incorrect in any material respect when
made; (iii) a failure by the Company to comply with any of its other covenants
or agreements under this Note which continues for a period of 30 days after
notice to it by the Noteholder; (iv) the Company fails to repay at maturity,
after any applicable grace period, any indebtedness for borrowed money (other
than indebtedness for borrowed money that is specifically stated to be
non-recourse to the Company, as the case may be), in an aggregate principal
amount exceeding $10 million; (v) any default(s) under any indenture, loan,
credit agreement or other instrument under which there is outstanding
indebtedness of the Company for borrowed money (other than indebtedness for
borrowed money that is specifically stated to be non-recourse to the Company,
as the case may be) in an aggregate principal amount exceeding $10 million has
(or have) occurred and is (or are) continuing and such Indebtedness has been
accelerated so that it has been declared due and payable in full prior to its
stated maturity, and such acceleration shall not be rescinded or annulled;
provided, however, that if such default(s) shall be remedied or cured by the
Company, as the case may be, or waived by the holders of such indebtedness,
then the default under this Note by reason thereof shall be deemed likewise to
have been thereupon remedied, cured or waived without further action upon the
part of this Noteholder; or (vi) the Company (a) becomes insolvent or admits in
writing its inability to pay its debts as they mature or (b) applies for,
consents to, or acquiesces in the appointment of a trustee or receiver for any
of its property; or, in the absence of such application, consent or
acquiescence, a trustee or receiver is appointed for the Company for a
3
<PAGE> 4
substanial part of its property and is not discharged within 30 days; or
(c) becomes subject to any bankruptcy, insolvency, dissolution or liquidation
law or proceedings (x) instituted against the Company and which remain for 30
days undismissed, or (y) instituted by, consented to or acquiesced in by the
Company.
Upon the occurrence of any Event of Default described in the preceding
paragraph, the principal of, and interest on, this Note and all other sums due
hereunder shall immediately be due and payable and upon the occurrence of any
other Event of Default, the Noteholder, at its option, may declare the principal
of, and interest on, this Note and all other sums due hereunder immediately due
and payable. Upon an acceleration of the payment of this Note as provided in the
previous sentence, the indebtedness hereunder shall immediately become due and
payable without necessity of demand, presentment, protest, notice of dishonor,
notice of default or any other notice whatsoever. The Noteholder shall be
entitled at its option to exercise each and every remedy accorded it by law
and/or specifically set forth in this Note.
The Company expressly waives demand for payment, presentment for payment,
notice of dishonor, notice of default, protest, notice of protest, and
diligence in collection and consents that the time of payment may be extended or
released by the Noteholder without in any way modifying, releasing or limiting
the company's liability hereunder.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF CALIFORNIA.
FOOTHILL CAPITAL CORPORATION
By: /s/ Kent W. Dahl
-----------------------------------
Kent W. Dahl, V.P. & Treasurer
4
<PAGE> 1
Exhibit 11
THE FOOTHILLS GROUP, INC.
COMPUTATION OF EARNINGS PER COMMON SHARE
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1994 AND 1993
(Dollars and shares in thousands, except per share data)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
Three months ended Nine months ended
September 30, September 30,
----------------------------------------------
1994 1993 1994 1993
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PRIMARY:
Income from continuing operations $ 5,719 $ 5,774 $23,764 $15,494
Discontinued operations - (124) - (343)
Less preferred stock dividends (67) (67) (203) (203)
- -----------------------------------------------------------------------------------------------------
Net income for primary calculation $ 5,652 $ 5,583 $23,561 $14,948
=====================================================================================================
Weighted average number of common shares outstanding 16,498 16,232 16,558 16,221
Effect of dilutive stock options 296 516 342 416
- -----------------------------------------------------------------------------------------------------
Number of common shares used in computation 16,794 16,748 16,900 16,637
=====================================================================================================
Per share data:
Income from continuing operations $0.34 $0.33 $1.39 $0.92
Discontinued operations - - - (0.02)
- -----------------------------------------------------------------------------------------------------
Earnings per common and common equivalent share $0.34 $0.33 $1.39 $0.90
- -----------------------------------------------------------------------------------------------------
FULLY DILUTED:
Income from continuing operations $5,719 $5,774 $23,764 $15,494
Discontinued operations - (124) - (343)
- -----------------------------------------------------------------------------------------------------
Income for fully diluted calculation $5,719 $5,650 $23,764 $15,151
=====================================================================================================
Weighted average number of shares outstanding 16,498 16,232 16,558 16,221
Effect of dilutive stock options 316 542 349 430
Shares issued upon assumed conversion of convertible
perferred stock 667 667 667 667
- -----------------------------------------------------------------------------------------------------
Number of shares used in computation 17,481 17,441 17,574 17,318
=====================================================================================================
Per share data:
Income before extraordinary items $0.33 $0.33 $1.35 $0.90
Extraordinary items - (0.01) - (0.02)
- -----------------------------------------------------------------------------------------------------
Earnings per common and common equivalent share $0.33 $0.32 $1.35 $0.88
=====================================================================================================
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
EXHIBIT 27
THE FOOTHILL GROUP, INC
FINANCIAL DATA SCHEDULE FOR COMMERCIAL AND INDUSTRIAL COMPANIES *
* This schedule contains summary financial information extracted from the
Consolidated Balance Sheets, the Consolidated Statements of Income and the
Consolidated Statements of Cash Flows and is qualified in its entirety by
references to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
<CASH> 909
<SECURITIES> 39,965
<RECEIVABLES> 675,759
<ALLOWANCES> 16,960
<INVENTORY> 0
<CURRENT-ASSETS> 699,673
<PP&E> 5,082
<DEPRECIATION> 2,174
<TOTAL-ASSETS> 730,412
<CURRENT-LIABILITIES> 262,520
<BONDS> 297,519
<COMMON> 148,000
0
2,900
<OTHER-SE> 19,473
<TOTAL-LIABILITY-AND-EQUITY> 730,412
<SALES> 86,134
<TOTAL-REVENUES> 86,134
<CGS> 0
<TOTAL-COSTS> 17,654
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 7,989
<INTEREST-EXPENSE> 18,799
<INCOME-PRETAX> 41,692
<INCOME-TAX> 17,928
<INCOME-CONTINUING> 23,764
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 23,764
<EPS-PRIMARY> 1.39
<EPS-DILUTED> 1.35
</TABLE>
