SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[x] Quarterly report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended February 28, 1995
[ ] Transition report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934.
Commission file number 0-15525
CAPITAL ASSOCIATES, INC.
(Exact name of registrant as specified in its charter)
Delaware 84-1055327
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
7175 West Jefferson Avenue, Lakewood, Colorado 80235
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 980-1000
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
The number of shares outstanding of the Registrant's $.008 par value common
stock at March 27, 1995, was 10,179,747.
<PAGE>
CAPITAL ASSOCIATES, INC. AND SUBSIDIARIES
INDEX
PAGE
PART I. FINANCIAL INFORMATION NUMBER
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets - February 28, 1995
and May 31, 1994 3
Consolidated Statements of Operations - Three and Nine Months
Ended February 28, 1995 and 1994 4
Consolidated Statements of Cash Flows - Nine
Months Ended February 28, 1995 and 1994 5
Notes to Consolidated Financial Statements 6-8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9-16
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 17
Item 6. Exhibits and Reports on Form 8-K 17
Exhibit Index 18
Signature 20
<PAGE>
CAPITAL ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands)
ASSETS
February 28, May 31,
1995 1994
------------ ---------
Cash $ 1,955 $ 2,072
Accounts receivable, net of allowance for
doubtful accounts of $270 and $343, respectively 1,257 1,375
Income tax refunds receivable - 250
Equipment held for sale or re-lease 5,101 5,242
Residual values and other receivables arising
from equipment under lease sold to private
investors 3,639 5,098
Net investment in direct finance leases 14,755 18,106
Leased equipment, net 17,893 15,615
Investments in affiliated limited partnerships 10,468 12,178
Other 5,461 5,779
Notes receivable arising from sale-leaseback
transactions 23,979 32,417
Discounted lease rentals assigned to lenders
arising from equipment sale transactions 72,034 111,593
--------- ---------
$ 156,542 $ 209,725
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Working Capital Facility $ 1,298 $ 49
Warehouse Facility 7,838 -
Accounts payable and other liabilities 4,532 8,187
Term Loan 11,917 18,718
Deferred income taxes 16 830
Obligations under capital leases arising
from sale-leaseback transactions 23,952 32,337
Discounted lease rentals 85,380 128,505
--------- ---------
134,933 188,626
--------- ---------
Stockholders' equity:
Common stock 63 60
Additional paid-in capital 16,907 16,689
Retained earnings 4,690 4,401
Treasury stock (51) (51)
--------- ---------
Total stockholders' equity 21,609 21,099
--------- ---------
$ 156,542 $ 209,725
========= =========
The accompanying notes are an integral part
of these consolidated financial statements.
<PAGE>
CAPITAL ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars in thousands, except earnings per share)
Three Months Ended Nine Months Ended
------------------------- ----------------------------
February 28, February 28, February 28, February 28,
1995 1994 1995 1994
------------ ------------ ------------ ------------
Revenue:
Equipment sales to
affiliated limited
partnerships $ 14,698 $ 5,578 $ 30,936 $ 55,102
Other equipment sales 9,071 8,889 23,184 34,149
Leasing 1,867 2,804 5,590 10,642
Interest 2,671 3,949 8,996 11,468
Other 1,164 1,077 3,930 3,178
-------- -------- -------- --------
Total revenue 29,471 22,297 72,636 114,539
-------- -------- -------- --------
Costs and expenses:
Equipment sales 22,372 12,570 50,407 83,078
Leasing 965 1,216 2,713 4,212
Operating and other
expenses 2,275 3,100 7,518 9,371
Provision for losses 425 100 650 1,160
Interest:
Non-recourse debt 2,927 4,577 9,903 14,207
Recourse debt 417 422 966 1,441
-------- -------- -------- --------
Total costs and expenses 29,381 21,985 72,157 113,469
-------- -------- -------- --------
Net income before income
taxes 90 312 479 1,070
Income tax expense 36 125 191 428
-------- -------- -------- --------
Net income $ 54 $ 187 $ 288 $ 642
======== ======== ======== ========
Earnings per common and
common equivalent share $ .01 $ 0.02 $ .03 $ 0.06
======== ======== ======== ========
Weighted average number of
common and dilutive common
equivalent shares
outstanding used in
computing earnings
per share 10,660,000 10,851,000 10,832,000 10,978,000
========== ========== ========== ==========
The accompanying notes are an integral part
of these consolidated financial statements.
<PAGE>
CAPITAL ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
Nine Months Ended
----------------------------
February 28, February 28,
1995 1994
------------ ------------
(Note 3)
Net cash provided by operating activities $ 13,679 $ 28,654
--------- ---------
Cash flows from investing activities:
Equipment purchased for leasing (12,627) (1,886)
Net receipts from affiliated public income
funds ("PIFs") 1,123 1,494
Sale of the investment in Corporate
Express, Inc. 677 -
--------- ---------
Net cash used for investing activities (10,827) (392)
--------- ---------
Cash flows from financing activities:
Proceeds from discounting of lease rentals 1,215 2,478
Principal payments on discounted lease rentals (6,691) (19,147)
Proceeds from sales of common stock 221 8
Net (payments) draws on recourse debt 2,286 (12,809)
--------- ---------
Net cash used for financing activities (2,969) (29,470)
--------- ---------
Net decrease in cash (117) (1,208)
Cash at beginning of period 2,072 (3,210)
--------- ---------
Cash at end of period $ 1,955 $ 2,002
========= =========
Supplemental schedule of cash flow information:
Recourse interest paid $ 937 $ 1,340
Non-recourse interest paid 876 2,537
Income taxes paid 1,254 181
Income tax refunds received 898 1,614
Supplemental schedule of non-cash investing
and financing activities:
Discounted lease rentals assigned to lenders
arising from equipment sales transactions 3,123 29,081
Assumption of discounted lease rentals in
lease acquisitions 5,550 15,675
Increase in other receivables relating to
equipment sale transactions 609 7,605
Defeasance of discounted lease rentals
related to bankrupt lessee 518 -
Cancellation of option agreement
Decrease on accounts payable and other
liabilities 1,197 -
Decrease in other receivables relating to
equipment sale transactions 573 -
The accompanying notes are an integral part
of these consolidated financial statements.
<PAGE>
CAPITAL ASSOCIATES, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and the instructions to Form 10-Q and Rule
10-01 of Regulation S-X. Accordingly, they do not include all of the
information and disclosures required by generally accepted accounting
principles for annual financial statements. In the opinion of management,
all adjustments (consisting of normal recurring adjustments) considered
necessary for a fair presentation have been included. For further
information, please refer to the financial statements of Capital Associates,
Inc. (the "Company"), and the related notes, included within the Company's
Annual Report on Form 10-K for the fiscal year ended May 31, 1994 (the
"1994 Form 10-K"), previously filed with the Securities and Exchange
Commission.
The balance sheet at May 31, 1994 has been derived from the audited
financial statements included in the Company's 1994 Form 10-K.
2. Debt Facilities
The Company closed its new recourse operating debt facility (the "Debt
Facility") on December 2, 1994. On March 7, 1995, two additional lenders
joined the lending group. The lender group currently consists of Norwest
Bank Colorado, National Association (the "Agent"), Norwest Equipment
Finance, Inc. (the "Collateral Agent"), First Interstate Bank of Denver,
N.A., The Daiwa Bank, Ltd. and The First National Bank of Boston (the
"Lenders"). The Borrower under the Debt Facility is Capital Associates
International, Inc., a wholly-owned subsidiary of the Company ("CAII").
The Debt Facility consists of three facilities, a term loan facility (the
"Term Loan"), a revolving working capital facility (the "WCF") and a
revolving warehousing facility (the "WF"). The principal terms of the
three facilities are as follows (in thousands):
Term Loan WCF WF
----------------- ----------------- -----------------
Maturity Date November 30, 1997 November 30, 1995 November 30, 1995
Maximum amount $ 13,000 $ 5,000 lesser of $ 32,000
or borrowing base
Borrowings at
February 28, 1995 11,917 1,298 7,838
-------- -------- --------
Availability at
February 28, 1995 N/A $ 3,702 $ 24,162
======== ======== ========
Interest rate at
February 28, 1995 Prime* Prime* plus .75% Prime* plus .50%
plus .75%**
* Norwest Prime at February 28, 1995 was 9%.
** As required by the Debt Facility, CAII has acquired, at its own cost
(of $59,500), a 36-month interest rate cap contract at 10.5% with
respect to 50% of the principal balance of the Term Loan.
<PAGE>
Principal reductions under the Term Loan are scheduled to occur as follows
(in thousands):
Three months ending May 31, 1995 $ 1,084
Fiscal year ending May 31, 1996 4,333
Fiscal year ending May 31, 1997 4,333
Fiscal year 1998 through November 30, 1997 2,167
--------
$ 11,917
========
The Debt Facility (1) is collateralized by all of CAII's assets and (2) is
senior, in order of priority, to all of CAII's indebtedness, subject to
certain limited exceptions. The Company and certain of the Company's and
CAII's subsidiaries have pledged all of their assets, with limited
exceptions, to collateralize their guarantees. The Debt Facility restricts
CAII's ability to pay dividends or loan or advance funds to the Company.
As of February 28, 1995, there were no defaults existing under the Debt
Facility.
For further information concerning the terms of the Debt Facility, please
refer to the Company's Form 10-Q for the fiscal quarter ended November 30,
1994.
3. Consolidated Statements of Cash Flow
Consistent with the reclassification described in the Company's first
quarter fiscal 1995 report on Form 10-Q, the principal portion of receipts
of direct financing leases and proceeds from sales of equipment have been
classified as "Cash flows from operating activities". Previously, such
amounts were reported as "Cash flows from investing activities".
The effect of the reclassification on previously issued financial statements
is as follows:
Nine months ended
February 28, 1994
--------------------------
Previously Reclassified
Reported Amounts
---------- ------------
Net cash provided by operating activities $ 4,941 $ 28,654
Net cash provided by (used for) investing
activities 23,321 (392)
Net cash used for financing activities (29,470) (29,470)
--------- ---------
Net decrease in cash and cash equivalents $ (1,208) $ (1,208)
========= =========
<PAGE>
4. Bankrupt Lessee
During the third quarter fiscal 1995, a lessee, that had previously filed
for bankruptcy protection under Chapter 11 of the Bankruptcy Code, informed
the Company that it would reject its leases and return the related equipment
to the Company. The aggregate net book value of equipment under four leases
with this lessee was $486,000 at February 28, 1995. It is expected that
remarketing proceeds and the value of the Company's administrative claims
against the lessee will be less than the net book value of the equipment.
A substantial portion of the provision for loss for the third quarter fiscal
1995 relates to this lessee.
5. MBank Litigation
On March 17, 1995, the Registrant issued the press release attached as
Exhibit 99 to its Form 8-K filed on March 22, 1995, which is incorporated
herein by reference. The press release announced that the Federal District
Court in Dallas held in the Registrant's favor in the MBank litigation. The
press release briefly describes the litigation and the events that gave rise
to it. The press release also announced that (1) the Registrant is entitled
to recover damages from the cash collateral currently held under the
supervision of the court, (2) the court did not fix the amount of the
Registrant's damages in its decision, (3) the Registrant is making this
calculation, (4) while the final calculation is not yet available, the
Registrant estimates that its damages (including interest and attorneys'
fees) will exceed $9 million and (5) the Registrant will finalize its damage
calculation as quickly as possible and seek payment of such damages
immediately thereafter. The press release stated that the Registrant cannot
predict when it will receive such payment or whether the FDIC will appeal
the court's decision.
The court did not resolve all of the ancillary claims asserted by the
parties to the MBank litigation. The parties are currently in negotiations
concerning these claims and a final settlement of all of the claims (decided
and undecided) asserted in the MBank litigation. For further information
concerning the claims asserted in the MBank litigation, please refer to
Footnote 15 to Notes to Consolidated Financial Statements and Item 3, Legal
Proceedings, of the Company's Form 10-K filed for the fiscal year ended
May 31, 1994 (the "1994 Form 10-K").
6. Commitments
During the third quarter fiscal 1995, the owner of an option on certain
mining equipment (which the Company had sold to such owner in a prior fiscal
year for a note receivable previously included in Residual Values and Other
Receivables Arising From Equipment Under Lease Sold to Private Investors
in its balance sheet) and the grantor of the option agreed to cancel the
option and related note financing in exchange for (1) a cash payment from
the Company to the owner of $180,000 and (2) all of the parties agreeing to
enter into a mutual release. The elimination from the Company's account of
such option resulted in a gain of $444,000, principally representing
reversal of prior period amortization charged to operations. For more
information concerning the option, refer to Footnote 16 to Notes to
Consolidated Financial Statements of the Company's 1994 Form 10-K.
<PAGE>
CAPITAL ASSOCIATES, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
I. Results of Operations
Presented below are schedules (prepared solely to facilitate the discussion
of results of operations that follows) showing condensed income statement
categories and analyses of changes in those condensed categories derived
from the Consolidated Statements of Operations.
<TABLE>
<CAPTION>
Condensed Consolidated Condensed Consolidated
Statements of Operations Statements of Operations
for the Three Months for the Nine Months
ended February 28, ended February 28,
------------------------ Effect on ------------------------ Effect on
1995 1994 net income 1995 1994 net income
-------- --------- ---------- -------- ---------- ----------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Equipment sales margin $ 1,397 $ 1,897 $ (500) $ 3,713 $ 6,173 $ (2,460)
Provision for losses (425) (100) (325) (650) (1,160) 510
-------- -------- ------- -------- -------- --------
Equipment sales margin in
excess of provision for
losses 972 1,797 (825) 3,063 5,013 (1,950)
Leasing margin (net of
interest expense on
discounted lease rentals) 646 960 (314) 1,970 3,691 (1,721)
Other income 1,164 1,077 87 3,930 3,178 752
Operating and other expenses (2,275) (3,100) 825 (7,518) (9,371) 1,853
Interest expense on recourse debt (417) (422) 5 (966) (1,441) 475
Income taxes (36) (125) 89 (191) (428) 237
-------- -------- ------- -------- -------- --------
Net income $ 54 $ 187 $ (133) $ 288 $ 642 $ (354)
======== ======== ======= ======== ======== ========
</TABLE>
Equipment Sales
Equipment sales revenue (and related equipment sales margin) consists of
the following (in thousands):
<TABLE>
<CAPTION>
Three Months Ended February 28,
--------------------------------------------- Increase
1995 1994 (Decrease)
--------------------- --------------------- ---------------------
Revenue Margin Revenue Margin Revenue Margin
-------- ------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Transactions during initial lease term:
Equipment under lease sold to PIFs $ 14,698 $ 350 $ 5,578 $ 76
Equipment under lease sold to
private investors 7,447 78 6,435 164
-------- ------- -------- -------
22,145 428 12,013 240 $ 10,132 $ 188
-------- ------- -------- ------- -------- -------
Transactions subsequent to initial lease
termination ("Remarketing Sales"):
Sales of off-lease equipment 1,029 478 1,230 682
Sales-type leases 449 345 359 110
Excess collections (cash collections
in excess of the associated residual
value from equipment under lease
sold to private investors) 146 146 865 865
-------- ------- -------- -------
1,624 969 2,454 1,657 (830) (688)
Provision for losses - (425) - (100) - (325)
-------- ------- -------- ------- -------- -------
Remarketing sales results in excess of
provision for losses 1,624 544 2,454 1,557 (830) (1,013)
-------- ------- -------- ------- -------- -------
Total equipment sales $ 23,769 $ 972 $ 14,467 $ 1,797 $ 9,302 $ (825)
======== ======= ======== ======= ======== =======
</TABLE>
<PAGE>
<TABLE>
<CAPTION> Nine Months Ended February 28,
----------------------------------- Increase
1995 1994 (Decrease)
--------------------- --------------------- ---------------------
Revenue Margin Revenue Margin Revenue Margin
-------- ------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Transactions during initial lease term:
Equipment under lease sold to PIFs $ 30,936 $ 778 $ 55,102 $ 1,346
Equipment under lease sold to
private investors 19,169 336 27,387 903
-------- ------- -------- -------
50,105 1,114 82,489 2,249 $(32,384) $(1,135)
-------- ------- -------- ------- -------- -------
Transactions subsequent to initial lease
termination ("Remarketing Sales"):
Sales of off-lease equipment 2,108 1,061 3,771 1,624
Sales-type leases 1,051 682 1,334 643
Excess collections (cash collections
in excess of the associated residual
value from equipment under lease sold
to private investors) 856 856 1,657 1,657
-------- -------- -------- -------
4,015 2,599 6,762 3,924 (2,747) (1,325)
Provision for losses - (650) - (1,160) - 510
-------- -------- -------- ------- -------- -------
Remarketing sales results in excess of
provision for losses 4,015 1,949 6,762 2,764 (2,747) (815)
-------- -------- -------- ------- -------- -------
Total equipment sales $ 54,120 $ 3,063 $ 89,251 $ 5,013 $(35,131) $(1,950)
======== ======== ======== ======= ======== =======
</TABLE>
Equipment Sales to PIFs and to Private Investors
Equipment sales to PIFs significantly decreased during the nine months
ended February 28, 1995, as compared to the similar period in fiscal 1994,
principally because fewer leases were identified and closed that satisfied
the PIF's underwriting standards. Although, the current fiscal quarter's
sales were substantially in excess of the sales in the comparable quarter
in fiscal 1994, the first two quarters of fiscal 1994 were the largest
quarters with respect to equipment sales to the PIFs during fiscal 1994,
and were substantially greater than the historical average for quarterly
sales to PIFs.
Equipment sales to private investors for the first nine months fiscal 1994
included sales of approximately $13.8 million of "seasoned" leases (i.e.,
previously originated leases held in the Company's portfolio). As the
Company's lease portfolio has declined in size (sometimes referred to
herein as "portfolio run-off"), fewer seasoned leases have been available
for sale (the Company has sold approximately $5.0 million of seasoned
leases to private investors during the first nine months fiscal 1995).
During the first nine months fiscal 1995, equipment sales to private
investors consisted primarily of new leases originated for sale to private
investors; however, not enough leases were originated during this period to
offset the decline in the sale of seasoned leases during the same period.
Remarketing Sales and Provision for Losses
The remarketing of equipment for an amount greater than its book value is
reported as equipment sales margin or as leasing margin. The realization
of less than the carrying value of equipment (which is typically not known
until remarketing subsequent to the initial lease termination has occurred)
is recorded as provision for losses. As shown in the table above, the
realizations from sales exceeded the provision for losses for the first
nine months fiscal 1995, even without considering realizations from
remarketing activities recorded as leasing margin as discussed below.
This circumstance of realizing in excess of the aggregate carrying value on
the Company's portfolio has occurred for the last eleven quarters.
<PAGE>
Margins from remarketing sales (i.e., sales occurring after the initial
lease term) are affected by the amount of equipment leases that matures in
a particular quarter. In general, as the size of the Company's lease
portfolio has declined in size, fewer leases have matured and less
equipment has been available for remarketing each quarter. As a result,
remarketing revenue declined during the first nine months fiscal 1995
compared to the comparable period in fiscal 1994. In the absence of
significant additions to the lease portfolio, management believes that
remarketing revenue and margin will continue to decline in future quarters.
Residual values are established equal to the estimated value to be received
from the equipment following termination of the lease. In estimating such
values, the Company considers all relevant facts regarding the equipment
and the lessee, including, for example, the likelihood that the lessee will
re-lease the equipment. The Company performs ongoing quarterly assessments
of its assets to identify other than temporary losses in value.
See Footnote 4 to Notes to Consolidated Financial Statements for a
discussion of the provision for losses recorded in the third quarter fiscal
1995.
During the first nine months fiscal 1994, a greater than expected amount of
equipment under lease that the Company expected to be released was,
instead, terminated and returned to the Company. The amounts recovered
(and expected to be recovered) from the sale of such equipment were less
than the previously estimated residual value, and accordingly, an
appropriate provision for loss was recorded during the first nine months
fiscal 1994. The Company also recorded during the first nine months fiscal
1994 a provision for loss of $180,000 for the jet aircraft discussed under
Non-earning Assets below.
Leasing Margin and Equipment Under Lease Portfolio
Leasing margin consists of the following (in thousands):
Three Months Ended Nine Months Ended
February 28, February 28,
------------------ -----------------
1995 1994 1995 1994
-------- -------- -------- --------
Leasing revenue $ 1,867 $ 2,804 $ 5,590 $ 10,642
Leasing costs and expenses (965) (1,216) (2,713) (4,212)
Net interest expense on related
discounted lease rentals (256) (628) (907) (2,739)
------- -------- -------- --------
Leasing margin $ 646 $ 960 $ 1,970 $ 3,691
======= ======== ======== ========
Leasing margin ratio 35% 34% 35% 35%
== == == ==
Leasing margin has declined as a result of portfolio run-off and is
expected to decline further until the Company has added to its lease
portfolio. See the discussion under "Business Plan" below.
<PAGE>
The changes in the Company's equipment under lease during the nine months
ended February 28, 1995 consisted of the following:
<TABLE>
<CAPTION> Discounted lease
Direct finance rentals, net of
leases, operating discounted lease
leases, net and rentals assigned Net investment
equipment held to lenders arising in lease
for sale or re-lease from equipment sales portfolio
-------------------- -------------------- --------------
<S> <C> <C> <C>
As of May 31, 1994 $ 38,963 $ (16,912) $ 22,051
Leases added to the Company's lease
portfolio 9,106 (4,001) 5,105
Leases added to the Company's lease
portfolio (and expected to be sold in 1995) 5,444 - 5,444
Leases sold to private investors (4,946) 2,410 (2,536)
Provision for losses (650) - (650)
Change as a result of portfolio run-off (10,168) 5,157 (5,011)
--------- --------- ---------
As of February 28, 1995 $ 37,749 $ (13,346) $ 24,403
========= ========= =========
</TABLE>
A jet aircraft having a net book value of approximately $5 million is
included in Equipment Held for Sale or Re-Lease. In March 1995, the
Company entered into a direct finance lease with an end-user of this
aircraft. See "Non-earning Assets" below for a discussion.
Other Income
Other Income consists of the following (in thousands):
Three Months Ended Nine Months Ended
February 28, February 28,
------------------ -----------------
1995 1994 1995 1994
-------- -------- -------- --------
Fees and distributions from the
Company-sponsored PIFs $ 730 $ 837 $ 2,291 $ 2,431
Sale of the investment in
Corporate Express, Inc. stock - - 671 -
Cancellation of Option Agreement
(see Footnote 6) 444 - 444 -
Interest on income tax refunds - - 178 431
Other, principally recovery of
sales andproperty tax amounts
previously expensed (10) 240 346 316
------- ------- -------- -------
$ 1,164 $ 1,077 $ 3,930 $ 3,178
======= ======= ======== =======
Other than fees and distributions from the company-sponsored PIFs, the
Company does not expect to realize material amounts in the future with
respect to the Other Income items listed above.
<PAGE>
Operating and Other Expenses
Operating and other expenses decreased $1.9 million (20%) for the first
nine months fiscal 1995 as compared to the comparable period in fiscal
1994. The decrease principally reflects a reduction in salaries and wages,
accomplished, in part, through a reduction-in-force of 29 full-time
employees during June 1994. As of February 28, 1995, the Company had 90
full-time employees, compared to 115 full-time employees at February 28,
1994.
The Company has (i) continued to enhance its lease origination capabilities
(a larger percentage of its personnel are responsible for lease
originations) and (ii) increased its lease origination volume during each
of the first three quarters of fiscal 1995. As a result of these
circumstances, the Company studied and evaluated its initial direct costs
("IDC") and, as a result of such study and evaluation, increased its IDC
rate to 1.25% of equipment acquisition cost from .75%. The effect of this
change in estimate was a reduction in Operating and Other Expenses of
$70,000 during the third quarter fiscal 1995.
Interest Income and Expense
Interest revenue arises when equipment financed with non-recourse debt is
sold to investors. The Consolidated Statements of Operations reflect an
equal amount of interest expense. The decline in interest expense on
non-recourse debt (net of the associated interest revenue) is due to
portfolio run-off.
Although the Company repaid $6.8 million of its Term Loan from May 31, 1994
through February 28, 1995, the Company increased its recourse borrowings
under the WCF and WF by $9.1 million to finance lease originations during
the third quarter fiscal 1995, resulting in similar recourse interest
expense for comparable quarters.
Non-earning Assets
A significant portion of the Company's stockholders' equity of
approximately $22 million is represented by two material non-earning
assets: (1) a jet aircraft with a carrying value of approximately $5
million (as discussed on page 12 of 20, in March 1995, the Company entered
into a direct financing lease with an end-user of this aircraft) and
(2) amounts receivable under the MBank contracts which may be in excess of
$9 million (and having a carrying value of approximately $4 million), as
discussed in Footnote 5 to Notes to the Financial Statements. The
Company's results of operations would be improved if funds from conversion
of the above assets were invested in a lease portfolio.
Income Taxes
As a result of the existence of net operating loss carryforwards, the
Company had no regular Federal Income Tax liability for the nine months
ended February 28, 1995. The decline in deferred income taxes on the
balance sheet resulted from payments of Alternative Minimum Taxes ("AMT").
<PAGE>
The Company believes that it is possible it will utilize all of its
remaining net operating loss ("NOL") carryforwards during the fourth
quarter fiscal 1995 as a result of reversals of taxable temporary
differences (between asset bases recorded for financial reporting and
Federal income tax purposes). The principal item of uncertainty is
recovery of any MBank award, as discussed in Footnote 5 to Notes to the
Financial Statements. At May 31, 1995, the Company may have no significant
net deferred income tax assets or liabilities, except for investment tax
credit ("ITC") carryforwards and AMT credit carryforwards of approximately
$5 million and $4 million, respectively, against which has been previously
recorded a valuation allowance of approximately $8 million. That valuation
allowance represents management's previous estimate of the portion of the
ITC carryforwards which could expire prior to utilization. Management's
estimate is based, in part, upon the Company's level of profitability since
June 1, 1993. However, as discussed previously, two events have recently
occurred which may impact profitability of the Company in the future:
* During the third quarter fiscal 1995, the Company refinanced its
previous recourse operating debt facility with its new Debt Facility.
The new Debt Facility provides the Company with up to $37 million to
fund new lease originations and grow its lease portfolio (to offset
portfolio run-off).
* The Company's two material non-earning assets may be converted to
earning assets. As discussed on page 12 of 20, in March 1995, the
Company entered into a direct finance lease with an end-user of this
aircraft.
Funding available under the Debt Facility, proceeds from the sale of the
aircraft and/or proceeds from the MBank litigation may be utilized to
increase the size of the Company's lease portfolio and originate/acquire
leases for sale to private equity investors (provided suitable leasing
transactions are identified and closed), ultimately resulting in increased
leasing revenue and related profits. ITCs are available to offset a
portion of the tax liability related to such additional lease profits. The
deferred tax asset associated with ITC has been fully reserved for
financial reporting purposes. The utilization of ITC, and the benefit
associated with realization of this reserved tax asset, would be reported
as income for financial reporting purposes.
II. Liquidity and Capital Resources
The Company's activities are principally funded by the WCF and WF, rents,
proceeds from sales of on-lease equipment (to its PIFs and third party
investors), non-recourse debt, fees and distributions from its PIFs and
sales of on lease equipment to its PIFs or third-party investors and/or
re-leases of equipment during and after the expiration of the initial lease
terms and other cash receipts.
Currently, only one PIF, Capital Preferred Yield Fund-III, ("CPYF-III") is
selling units to the public. Through February 28, 1995 CPYF III had sold
$17.4 million of Class A limited partner units. Four of the Company's
PIFs, including CPYF-III, are in their reinvestment stage and are using a
portion of their available cash to purchase additional equipment from the
Company. Two of the Company's PIFs are in their liquidation stage and are
no longer purchasing equipment.
<PAGE>
Management believes the Company's ability to generate cash from operations
is sufficient to fund operations, particularly when operations are viewed
as including investing and financing activities. In addition, during the
three months ended February 28, 1995 the Company increased its Debt
Facility by $20 million.
The Company's recourse debt-to-equity ratio is as follows:
February 28, 1995 May 31, 1994
----------------- ------------
Recourse debt outstanding
under the Debt Facility $ 21,053 $ 18,767
Stockholders' equity $ 21,609 $ 21,099
Recourse debt/stockholders' equity .97 to 1 .89 to 1
The Company has used a portion of its Debt Facility to originate new leases
and intends to continue to increase the size of its portfolio in the
future. As the portfolio grows, management expects the recourse
debt/stockholders equity ratio to increase.
III. Revised Business Plan
Management has identified the following trends in results of operations:
* although the Company has reported a profit of $.03 per share for the
first three quarters (its ninth, tenth, and eleventh consecutive
profitable quarters), the profit resulted largely from "other income"
items;
* although the Company had been continually enhancing its lease
origination capabilities by adding lease originators, the level of lease
originations were substantially below their 1995 expectations;
The Company has identified several factors which could adversely impact
profitability in the future:
* because of the flattening of the yield curve for debt securities during
calendar year 1994 and into calendar year 1995, lease rates are not
rising in line with the Company's cost of funds;
* even if lease originations increase significantly, growth in the
Company's profits will be slow because as a portfolio grows, under
generally accepted accounting principles, operating leases produce
negative leasing margin after interest expense during the early term of
such leases;
* the cost of funds for many of the Company's competitors is lower than
the Company's cost of funds; and
* certain of the Company's competitors also price transactions with tax
benefits not available to the Company.
<PAGE>
As discussed in the second quarter fiscal 1995 MD&A, management has
identified a course of action to address the above factors. Originations
by quarter during fiscal 1995 have been as follows:
First quarter $ 17.3 million
Second quarter 24.6 million
Third quarter 29.8 million
For the prior three years, the Company could not originate a significant
amount of leases for its own account because it did not have the financing
to fund and hold such originations. Now, the Company believes that it has
the necessary funding capability under its WF and WCF to (1) continue to
increase the size of its own lease portfolio, (2) originate/acquire
additional leases for sales to PIFs and private equity investors and
(3) ultimately increase revenue and related profits. The Company is
seeking to hire qualified field lease originators to originate new leases
for the Company's own portfolio and for sale to third parties. However,
assuming that the Company is successful in hiring such persons, (a) it will
take a period of time before new lease transactions can be closed, (b) new
operating lease transactions "throw off" losses (for financial reporting
purposes) during their early years and (c) the Company will incur
substantial hiring and deal costs in increasing the size of its field
originations force and adding new leases to its portfolio. During this
period, the Company may realize small operating losses or reduced operating
profits as a result of these circumstances.
The amount of longer-term, future profits from these efforts will depend,
at least in part, on the amount of capital available to the Company and the
cost of that capital relative to the cost of capital of the Company's
competitors. The Company will continue to seek out new sources of lower
cost capital. The Company also will consider, among other things,
(1) attracting new equity capital (which could include a sale of all or a
part the Company, possibly coupled with an infusion of new funds into the
Company from the purchaser), (2) structuring securitized financing
vehicles, and/or (3) entering into strategic alliances/combinations with
other leasing/financial services companies. No assurances can be given,
however, that the steps being taken by the Company will (A) improve the
Company's profitability or even maintain profitability, or (B) provide the
Company with, or access to, additional sources of capital.
<PAGE>
CAPITAL ASSOCIATES, INC. AND SUBSIDIARIES
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
a. See Note 5 to Consolidated Financial Statements for a
discussion of the current status of the MBank Litigation.
b. The Company is involved in various legal proceedings ordinary,
routine and incidental to its business. In the opinion of
senior management, none of these proceedings, individually or
in the aggregate, should, if determined adversely to the
Company, have an adverse effect on the Company or its
operations.
Item 6. Exhibits and Reports on Form 8-K
a. Included as exhibits are the items listed in the Exhibit Index.
The Company will furnish to its shareholders a copy of any of
the exhibits listed therein upon payment of $.25 per page to
cover the costs to the Company of furnishing the exhibits.
b. There were no reports on Form 8-K filed during the three months
ended February 28, 1995. On March 22, 1995 a Form 8-K was
filed disclosing developments related to the MBank litigation
discussed under Item 1 above.
<PAGE>
Item No. Exhibit Index
10.48 Form of Credit and Security Agreement, dated as of November 30, 1994,
by and among CAII, Norwest Bank Colorado, National Association
("Norwest"), Norwest Equipment Finance, Inc., and First Interstate Bank
of Denver, N.A. ("First Interstate") (the "New Lenders").
10.49 Settlement Agreement and Release of Liens and Claims, dated as of
December 2, 1994, by and among the Company, CAII, each of the Company's
and CAII's wholly-owned subsidiaries, Mellon Bank, N.A., as Agent, and
the Lenders.
11A Computation of Primary Earnings Per Share. A computation of fully
diluted earnings per share is not presented as it is the same as the
computation of primary earnings per share.
EX-27 Financial Data Schedule
<PAGE>
CAPITAL ASSOCIATES INC. AND SUBSIDIARIES
SIGNATURE
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.
CAPITAL ASSOCIATES, INC.
Registrant
Date: April 4, 1995 By:/s/John E. Christensen
---------------------------
John E. Christensen,
Senior Vice President and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
consolidated balance sheets and consolidated statements of operations and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAY-31-1995
<PERIOD-END> FEB-28-1995
<CASH> 1,955
<SECURITIES> 0
<RECEIVABLES> 1,257
<ALLOWANCES> 270
<INVENTORY> 5,101
<CURRENT-ASSETS> 0
<PP&E> 17,893
<DEPRECIATION> 0
<TOTAL-ASSETS> 156,542
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 63
0
0
<OTHER-SE> 21,546
<TOTAL-LIABILITY-AND-EQUITY> 134,933
<SALES> 54,120
<TOTAL-REVENUES> 72,636
<CGS> 50,407
<TOTAL-COSTS> 53,120
<OTHER-EXPENSES> 7,518
<LOSS-PROVISION> 650
<INTEREST-EXPENSE> 10,869
<INCOME-PRETAX> 479
<INCOME-TAX> 191
<INCOME-CONTINUING> 288
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 288
<EPS-PRIMARY> .03
<EPS-DILUTED> .03
</TABLE>
CREDIT AND SECURITY AGREEMENT
Dated as of November 30, 1994
This Credit and Security Agreement is made by and among CAPITAL
ASSOCIATES INTERNATIONAL, INC., a Colorado corporation (the "Borrower") and
each of the financial institutions appearing on the signature pages hereof,
together with all Additional Lenders as may from time to time become a
party to this Agreement pursuant to the terms and conditions of Section
12.11 (herein collectively called the "Lenders" and individually each
called a "Lender") and NORWEST BANK COLORADO, NATIONAL ASSOCIATION, a
national banking association, in its separate capacity as agent for the
Lenders (in such capacity, the "Agent") and NORWEST EQUIPMENT FINANCE,
INC., a Minnesota corporation, in its separate capacity as collateral agent
for the Lenders (in such capacity, the "Collateral Agent").
ARTICLE I
Definitions
Section 1.1 Definitions. For all purposes of this Agreement,
except as otherwise expressly provided or unless the context otherwise
requires:
(a) the terms defined in the preamble hereto have the meanings
therein assigned to them;
(b) the terms defined in this Article have the meanings assigned
to them in this Article, and include the plural as well as the
singular;
(c) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with GAAP; and
(d) all accounting terms, unless otherwise specified, shall be
deemed to refer to a Person and its Subsidiaries on a consolidated
basis in accordance with GAAP.
"Accounts" means the aggregate unpaid obligations of customers
and other account debtors of the Borrower arising out of the sale or lease
of goods or rendition of services by the Borrower on an open account or
deferred payment basis.
"Additional Lender" has the meaning specified in Section 12.11.
"Administrative Address" means, with respect to the Collateral
Agent, the notice address specified as such opposite the Collateral Agent's
name on the signature pages hereof.
"Advance" means a loan of funds by a Lender to the Borrower
pursuant to Article III or Article IV, as the context may require,
including both Working Capital Advances and Warehousing Advances.
"Agent" has the meaning specified in the preamble.
"Agents" means the Agent and the Collateral Agent, collectively.
"Agreement" means this Credit and Security Agreement and all
exhibits, amendments and supplements hereto.
"Aircraft" means the Leased Aircraft and the Inventory Aircraft,
all as described in the Aircraft Security Agreement.
"Aircraft Security Agreement" means that certain security
agreement of even date herewith describing the Aircraft and granting to the
Lenders a first perfected security therein.
"Assumption Certificate" has the meaning specified in Section
12.11.
"Base Rate" means the rate of interest publicly announced from
time to time by the Agent as its "base rate" or "prime rate", or, if the
Agent ceases to announce a rate so designated, any similar successor rate
designated by the Agent.
"Borrower" has the meaning specified in the preamble.
"Borrowing" means a Working Capital Borrowing or a Warehousing
Borrowing by the Borrower, as the context may require.
"Borrowing Base" means, the lesser of (i) the Warehousing
Commitment Amount, or (ii) ninety-seven and one-half percent (97.50%) of
the Lease Value of Eligible Warehousing Leases.
"Borrowing Base Certificate" means a certificate in substantially
the form attached hereto as Exhibit A, duly completed and certified by the
Borrower, pursuant to which the Borrower sets forth its Warehousing Leases,
Eligible Warehousing Leases, outstanding Warehousing Advances and
applicable Borrowing Base as of a particular date.
"Business Day" means any day other than a Saturday or Sunday on
which national banks are open for business in Minneapolis, Minnesota and
Denver, Colorado and, if such day relates to a LIBO Term Loan or fixing of
a LIBO Rate, a day on which dealings in U.S. dollar deposits are carried on
in the London interbank eurodollar market.
"Cash Flow Available for Interest" of any Person means, with
respect to the applicable Covenant Computation Period, the sum of such
Person's Pre-Tax Earnings and Interest Expense.
"Cash Flow Coverage Ratio" means, as of the date of
determination, the ratio of the Parent's consolidated Net Cash Flow to its
Debt Service Requirements for the applicable Covenant Computation Period.
"Closing Date" means the date of execution and delivery of this
Agreement by all parties hereto.
"Collateral" means all of the Equipment, Residual Equipment,
Residual Equipment Interests, Aircraft, General Intangibles, Inventory,
Receivables, Leases and Equity Interests owned by the Borrower, together
with all substitutions and replacements for and products of any and all of
the foregoing and together with proceeds of any and all of the foregoing
and, in the case of tangible Collateral, together with all accessions and
(i) all accessories, attachments, parts, equipment and repairs now or
hereafter attached or affixed to or used in connection with any such goods
and (ii) all warehouse receipts, bills of lading and other documents of
title now or hereafter covering such goods.
"Collateral Account" means a depositary account in the name of
and under the sole and exclusive control of the Agent, established by the
Agent as a depository for payments received under Leases for application to
outstanding Advances.
"Collateral Account and Lockbox Agreement" means an agreement of
even date herewith, duly executed by the Borrower and the Agent, pursuant
to which the Lockbox and the Collateral Account will be established in the
name and under the sole and exclusive control of the Agent.
"Collateral Agent" has the meaning specified in the preamble.
"Collateral Coverage Certificate" means a certificate in
substantially the form attached hereto as Exhibit B, duly completed and
certified by the Borrower, pursuant to which the Borrower sets forth its
Working Capital Leases, Eligible Working Capital Leases, Other Investment
Assets, Eligible Other Investment Assets, the applicable valuation thereof
and the Collateral Coverage Ratio with respect thereto as of a particular
date.
"Collateral Coverage Ratio" means, as of the date of
determination, the ratio of (i) the sum of (A) the Lease Value of all
Eligible Working Capital Leases and (B) the Collateral Value of all
Eligible Other Investment Assets to (ii) the outstanding principal balance
of the Term Loans and Working Capital Advances as of such date.
"Collateral Value" means, as of the date of determination, the
sum of (i) the Present Value of those Eligible Other Investment Assets
which are income producing financial assets, (ii) the fair market value of
the Inventory Aircraft (established pursuant to an appraisal or other
information provided by the Borrower to, and approved by, the Collateral
Agent), (iii) the Present Value of the Residual Value of all Residual
Equipment owned by the Borrower and (iv) fifty percent (50%) of the Present
Value of the Residual Value of all Residual Equipment Interests owned by
the Borrower, in each such case established to the reasonable satisfaction
of the Collateral Agent.
"Commitment" means, with respect to a Lender, the Term Loan
Commitment, Working Capital Commitment or Warehousing Commitment of such
Lender, as the context may require.
"Commitment Amount" means the Term Loan Commitment Amount,
Working Capital Commitment Amount or Warehousing Commitment Amount, as the
context may require.
"Commitment Termination Date" means the earliest of: (i) November
30, 1995 or (ii) the date on which the Working Capital Commitments and the
Warehousing Commitments are terminated in full or reduced to zero pursuant
to Section 5.2(a).
"Covenant Computation Period" means the twelve (12) consecutive
calendar months ending with the month immediately preceding the month in
which a computation is made.
"Debt" shall mean as to any Person, without duplication (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments,
(iii) all obligations of such Person to pay the deferred purchase price of
property or services, except trade accounts payable arising in the ordinary
course of business, (iv) all capitalized lease obligations of such Person,
(v) all Debt of others secured by a lien on any asset of such Person,
whether or not such Debt is assumed by such Person, (vi) all Debt of others
guaranteed by such other Person, (vii) all obligations of such Person to
pay a specified purchase price for goods or services, whether or not
delivered or accepted (i.e., take-or-pay and similar obligations), (viii)
all obligations of such Person under any interest rate swap program or any
similar agreement, arrangement or undertaking relating to fluctuations in
interest rates and (ix) all obligations of such Person to advance funds to,
or purchase assets, property or services from, any other Person in order to
maintain the financial condition of such Person; excluding, however, all
Non-Recourse Debt.
"Debt Service Requirements" of any Person means, with respect to
the applicable Covenant Computation Period, the sum of Interest Expense for
the Working Capital Facility and the Term Loan Facility and scheduled
principal payments under the Term Loan Facility for such period.
"Default" means an event that, with giving of notice or passage
of time or both, would constitute an Event of Default.
"Default Rate" means the interest rate applicable to Term Loans,
Working Capital Advances and Warehousing Advances from and after the
occurrence of an Event of Default, as specified in Sections 2.8(c), 3.4 and
4.4.
"Eligible Lease" means a Working Capital Lease or a Warehousing
Lease, as the context may require, meeting the requirements set forth in
Section 6.3, except that in no event shall any of the following be deemed
an Eligible Lease:
(i) a Lease with respect to which the first or second payment
thereunder is more than sixty (60) days past due or with respect
to which any payments other than the first or second payment is
more than forty-five (45) days past due;
(ii) a Lease with respect to which a non-payment default has
occurred and is existing thereunder;
(iii) a Lease with respect to which the Lessee is asserting or
has any basis to assert any defense, set-off, claim, counterclaim
or contra account as to its obligations thereunder;
(iv) a Lease under which the Lessee or the Related Equipment
with respect thereto, is located outside the United States or is
a unit of government, whether foreign or domestic, or is a
shareholder, subsidiary, affiliate, officer or employee of the
Borrower or any Guarantor;
(v) a Lease under which the Lessee is the subject of bankruptcy
proceedings or has gone out of business;
(vi) a Lease that has been restructured, extended, amended or
modified as a result of the Lessee's inability to make payment in
accordance with the original terms thereof;
(vii) a Lease, or the Related Equipment with respect thereto,
which is not subject to a duly perfected security interest in
favor of the Lenders or which is subject to any lien, security
interest, claim or right in favor of any Person other than the
Lenders;
(viii) a Lease that is a Warehousing Lease and that has been
included in the Borrowing Base for more than three hundred sixty
(360) days;
(ix) a Lease from a Lessee if the total unpaid amount due under
all Leases from such Lessee, in the aggregate including such
Lease, exceeds (A) $5,000,000 if the Lessee is a one (1) or two
(2) rated credit under the Borrower's credit approval standards
(as described in Section 6.5), (B) $5,000,000 if the Borrower has
obtained from a creditworthy Person a commitment to purchase or
provide Non-Recourse Debt to finance within sixty (60) days, all
such Leases in excess of $3,000,000, and such Leases are
purchased or financed by such Person as provided in such
commitment or (C) $3,000,000 in all other cases; and
(x) a Lease from a Lessee if twenty percent (20%) or more of the
total amount due under all Leases from such Lessee is ineligible
under clauses (i), (ii) or (iii) above.
"Eligible Other Investment Asset" means:
(a) with respect to Inventory Aircraft, such Inventory Aircraft
in which the Lenders have a perfected first Security Interest;
(b) with respect to Residual Equipment, such Residual Equipment
is subject to a current, enforceable lease which is not in
default;
(c) with respect to Residual Equipment Interests, such Residual
Equipment Interests which relate to Equipment subject to a
current lease which is not in default;
(d) with respect to income producing financial assets (including
promissory notes, management fee agreements, partnership
interests and the like), such income producing financial assets
in which the Lenders have a perfected first Security Interest,
and notice of the Lenders' rights therein has been provided to,
and acknowledged by, the respective obligor thereunder, except
that in no event shall any of the following, to the extent
appropriate, be deemed an Eligible Other Investment Asset:
(i) an Other Investment Asset with respect to which a payment
to the Borrower is more than thirty (30) days past due;
(ii) an Other Investment Asset with respect to which a non-
payment default has occurred and is existing thereunder;
(iii) an Other Investment Asset with respect to which the obligor
thereunder is asserting or has any basis to assert any defense,
setoff, claim, counterclaim or contra account as to its
obligations thereunder;
(iv) an Other Investment Asset under which the obligor
thereunder is the subject of bankruptcy proceedings or has gone
out of business; and
(v) an Other Investment Asset that has been restructured,
extended, amended or modified as a result of the inability of
obligor thereunder to make payment in accordance with the
original terms thereof.
"Eligible Warehousing Lease" means an Eligible Lease that has
been designated by the Borrower as a Warehousing Lease pursuant to a
Transmittal Letter.
"Eligible Working Capital Lease" means an Eligible Lease that has
been designated by the Borrower as a Working Capital Lease pursuant to a
Transmittal Letter.
"Equipment" means all of the Borrower's equipment (including
without limitation all Aircraft, Related Equipment and Residual Equipment)
as that term is defined in the UCC, whether now owned or hereafter
acquired, including but not limited to all present and future machinery,
vehicles, furniture, fixtures, manufacturing equipment, shop equipment,
office and record keeping equipment, parts, tools, supplies, and including
specifically, without limitation, all equipment described in or subject to
any Lease.
"Equity Interests" means each and every equity interest of the
Borrower in or to a corporation, general partnership, limited partnership,
limited liability company, or other investment vehicle, whether such equity
interest now exists or hereafter arises, whether such interest is evidenced
by stock certificates, partnership certificates, or other evidences of
ownership, together with each and every right to payment of income and
profits, return of capital and other rights to distribution thereunder,
including without limitation each and every such interest evidenced by
certificates from time to time delivered by the Borrower to either Agent.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Event of Default" has the meaning specified in Section 11.1
hereof.
"Facility" means the Term Loan Facility, Working Capital Facility
or Warehousing Facility, as the context may require.
"Federal Funds Rate" means at any time an interest rate per annum
equal to the weighted average of the rates for overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers, as published for such 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 for such transactions
received by the Agent from three Federal funds brokers of recognized
standing selected by it; it being understood that the Federal Funds Rate
for any day which is not a Business Day shall be the Federal Funds Rate for
the next preceding Business Day.
"Financing Cash Flow" means all payments and advances by the
Parent or any of its consolidated Subsidiaries relating to Debt, including
(without limitation) cash Interest Expense.
"Floating Rate Term Loan" means any Term Loan which bears
interest at a rate determined by reference to the Term Loan Floating Rate.
"GAAP" means generally accepted accounting principles.
"General Intangibles" means all of the Borrower's general
intangibles, as such term is defined in the UCC, whether now owned or
hereafter acquired, including (without limitation) all present and future
patents, patent applications, copyrights, trademarks, trade names, trade
secrets, customer or supplier lists and contracts, manuals, operating
instructions, permits, franchises, the right to use the Borrower's name and
the goodwill of the Borrower's business.
"Guarantors" means the Parent, CAI Equipment Leasing I Corp., CAI
Equipment Leasing III Corp., CAI Equipment Leasing IV Corp., CAI Partners
Management Company, Capital Equipment Corporation, and CAI Lease
Securitization I Corp.
"Guaranty" means a guaranty agreement of even date herewith of a
Guarantor pursuant to which, among other things, such Guarantor guaranties
the full and prompt payment when due of all Obligations.
"Interest Coverage Ratio" of any Person means the ratio of such
Person's Cash Flow Available for Interest to the Interest Expense of such
Person.
"Interest Expense" means, with respect to the applicable Covenant
Computation Period, the total gross interest expense of such Person during
such period, and shall in any event include, without limitation, (i)
interest expenses (whether or not paid) on all Debt, (ii) the amortization
of Debt discounts, (iii) the amortization of all fees payable in connection
with the incurrence of Debt to the extent not otherwise included in
interest expense under clause (i) above and (iv) that portion of any
capitalized lease obligations allocable under GAAP to interest expense;
excluding, however, interest expense on any Non-Recourse Debt.
"Interest Period" means, relative to any LIBO Term Loan, the
period beginning on (and including) the date on which such LIBO Term Loan
is made or continued as, or converted into, a LIBO Term Loan pursuant to
Sections 2.3, 2.4 or 2.5 and shall end on (but exclude) the day which
numerically corresponds to such date one (1), two (2) or three (3) months
thereafter (or, if such month has no numerically corresponding day, on the
last Business Day of such month), as the Borrower may select in its
relevant notice pursuant to Sections 2.3, 2.4 or 2.5; provided, however,
that:
(i) the Borrower shall not be permitted to select Interest
Periods to be in effect at any one time which have expiration
dates occurring on more than three (3) different dates;
(ii) if an Interest Period would otherwise end on a day which is
not a Business Day, such Interest Period shall end on the next
following Business Day; and
(iii) no Interest Period may end later than the Commitment
Termination Date.
"Inventory" means all of the Borrower's inventory, as such term
is defined in the UCC, whether now owned or hereafter acquired, whether
consisting of whole goods, spare parts or components, supplies or
materials, whether acquired, held or furnished for lease, sale, or under
service contracts or for manufacture or processing, wherever located.
"Inventory Aircraft" means each and every aircraft owned by the
Borrower which is not being leased by the Borrower to a Lessee pursuant to
a Lease.
"Lease" means any Lease under which the Borrower has leased an
item of Related Equipment to a Lessee, whether the Borrower is the initial
lessor thereunder or is an assignee of the original lessor, whether or not
such lease would be a "true lease" for federal income tax purposes.
"Lease Cash Flow" means, with respect to amounts retained by the
Parent and its consolidated Subsidiaries, the sum of (i) payments of rent
from Leases, (ii) payments of basic rent and proceeds from sales from both
Residual Equipment Interests and Residual Equipment and (iii) net cash flow
from sales of Equipment to private investors.
"Lease Collateral" means each and every guaranty, security
interest, mortgage or other security securing payment and performance of a
Lessee's obligations under a Lease.
"Lease Value" means, with respect to a Lease, the Present Value
of the sum of (i) the aggregate unpaid payments of basic rent under such
Lease from the date of determination through the scheduled expiration date
thereof, (ii) the fixed purchase price (if any) the Lessee is obligated to
pay under the terms of the Lease, (iii) all accrued but unpaid payments of
basic rent which are less than the applicable period of time which would
render such Lease not an Eligible Lease as of the date of determination and
(iv) either (a) in the case of Warehousing Leases, fifty percent (50%) of
the Residual Value of the Related Equipment subject to such Lease or (b) in
the case of Working Capital Leases, one hundred percent (100%) of the
Residual Value of the Related Equipment subject to such Lease. For purposes
of the foregoing, basic rent under a Lease means rental payments for the
use of the Related Equipment, exclusive of any portion thereof relating to
sales or use taxes, maintenance, licensing fees, late charges or any other
similar matters.
"Leased Aircraft" means each aircraft owned by the Borrower which
constitutes an item of Related Equipment.
"Lender" has the meaning specified in the preamble.
"Lessee" means the lessee or lessees under a Lease.
"Leverage Ratio" means, the ratio of (i) all Debt of the Parent
and its consolidated Subsidiaries Debt, to (ii) the Total Shareholders'
Equity of the Parent and its consolidated Subsidiaries.
"LIBO Rate" means the annual rate equal to the sum of (i) the
rate obtained by dividing (a) the rate (rounded up to the nearest 1/16 of
1%) determined by the Agent to be the average rate at which U.S. dollar
deposits are offered to the Agent by major banks in the London interbank
eurodollar market for funds to be made available on the first day of any
Interest Period in an amount approximately equal to the Agent's portion of
the amount for which a LIBO Rate quotation has been requested and maturing
at the end of such Interest Period, by (b) a percentage equal to 100%
minus the Federal Reserve System reserve requirement (expressed as a
percentage) applicable to such deposits, and (ii) three and three quarters
percent (3.75%).
"LIBO Term Loan" means any Term Loan which bears interest at a
rate determined by reference to the LIBO Rate.
"Loan Documents" means this Agreement, the Notes, the Guaranties,
the Aircraft Security Agreement and the Pledge and Security Agreements.
"Lockbox" means an account established by the Agent pursuant to
the Collateral Account and Lockbox Agreement into which Lessees under
Leases will be directed to make payment.
"Net Cash Flow" of any Person means, with respect to the
applicable Covenant Computation Period, Lease Cash Flow plus Public Income
Fund Cash Flow less all Other Cash Flow (excluding Financing Cash Flow).
"Non-Recourse Debt" means any Debt of a Person pursuant to which
the holder thereof has irrevocably relinquished all rights to recover any
portion thereof from such Person or from any assets of such Person (other
than assets which constitute security for any such Debt) and with respect
to which such Person shall have no direct or indirect personal liability
for the payment or performance thereof, other than liability based solely
and exclusively on such Person's fraud, misapplication of assets or such
other specified acts by such Person as may be usual and customary
exceptions to the non-recourse provisions of non-recourse debt instruments.
"Non-Residual Collateral Coverage Ratio" means, as of the date of
determination, the Collateral Coverage Ratio calculated by excluding the
Residual Value of all Related Equipment, Residual Equipment and Residual
Equipment Interests from the numerator thereof.
"Note" means a Term Note, Working Capital Note or Warehousing
Note, as the context may require.
"Obligations" means each and every debt, liability and obligation
of every type and description arising under or in connection with any of
the Loan Documents, which the Borrower may now or at any time hereafter owe
to the Lenders whether such debt, liability or obligation now exists or is
hereafter created or incurred, whether it is direct or indirect, due or to
become due, absolute or contingent, primary or secondary, liquidated or
unliquidated, or sole, joint, several or joint and several, and including
specifically, but not limited to, all indebtedness, liabilities and
obligations of the Borrower arising under or evidenced by the Notes.
"Other Cash Flow" means other cash paid or received by the Parent
and its consolidated Subsidiaries, including for example, (i) property and
sales taxes, (ii) federal and state income taxes, (iii) general and
administrative expenses, (iv) investor payments, and (v) other (excluding
Financing Cash Flow).
"Other Investment Assets" means the Inventory Aircraft, Residual
Equipment, Residual Equipment Interests, those certain Equity Interests of
the Borrower, promissory notes payable to the order of the Borrower (and
delivered to and in the possession of the Collateral Agent) and other
assets pledged to the Lenders pursuant to a Pledge and Security Agreement,
as are approved by the Collateral Agent and specifically identified in the
most recent Collateral Coverage Certificate delivered by the Borrower
to the Agent.
"Parent" means Capital Associates, Inc.
"Parent Demand Notes" means those certain demand notes payable by
the Parent to certain Subsidiaries of the Parent, as described and
identified in Schedule 10.0.
"Percentage" means, as to any Lender, the percentage set forth
opposite such Lender's signature on this Agreement or on an Assumption
Certificate, as the case may be, representing the ratio of such Lender's
Commitment with respect to a Facility to the Commitment Amount with respect
to such Facility.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated
organization or government or any agency or political subdivision thereof.
"Plan" means an employee benefit plan or other plan maintained
for employees of the Borrower and covered by ERISA.
"Pledge and Security Agreement" means a pledge and security
agreement of even date herewith of a Guarantor pursuant to which, among
other things, such Guarantor grants the Lenders a security interest in
certain of the Guarantor's assets to secure payment of all Obligations of
the Borrower hereunder and all obligations of the Guarantor under its
Guaranty.
"Present Value" means, as of the date of determination, the
estimated current value of an asset based upon the amount of the payments
to be made thereunder, and the date on which such payments are scheduled to
become due and payable, using a discount factor equal to the sum of the
Base Rate and one-half of one percent (.50%).
"Pre-Tax Earnings" of any Person means, with respect to a
Covenant Computation Period, such Person's earnings from continuing
operations, plus any taxes and extraordinary or non-cash loss or expense
paid or incurred by such Person, less any extraordinary, non-operating and
non-cash income claimed or earned by such Person, all as determined in
accordance with GAAP.
"Public Income Fund Cash Flow" means cash received by the Parent
and its consolidated Subsidiaries for (i) management fees, (ii) acquisition
fees, (iii) general partner distributions, and (iv) limited partner
distributions less cash paid for Class B contributions and organization and
offering costs.
"Receivables" means each and every right of the Borrower to the
payment of money, whether such right to payment now exists or hereafter
arises, or whether such right to payment arises out of a Lease, a sale or
lease or other disposition of goods or other property, out of a rendering
of services, out of a loan, out of the overpayment of taxes or other
liabilities, or otherwise arises under any contract or agreement, whether
such right to payment is created, generated or earned by the Borrower or by
some other person who subsequently transfers such person's interests to the
Borrower, or whether such right to payment is or is not already earned by
performance, and howsoever such right to payment may be evidenced, together
with all other rights and interests, including all liens and security
interests, which the Borrower may at any time have by law or agreement
against any account debtor or other obligor obligated to make any such
payment or against any property of such account debtor or other obligor,
all including but not limited to all present and future accounts, contract
rights, loans and obligations receivable, chattel papers, bonds, notes and
other debt instruments, tax refunds and rights to payment in the nature of
general intangibles.
"Related Equipment" means, with respect to a Lease, Equipment
that is the subject of that Lease.
"Reportable Event" shall have the meaning assigned to that term
in ERISA.
"Required Lenders" means, at any time, one or more of the Lenders
holding at least 71% of the then aggregate outstanding principal amount of
the Notes then held by the Lenders, or, if no such principal amount is then
outstanding, one or more of the Lenders having at least 71% of the
Commitments.
"Residual Equipment" means Equipment which is (i) owned by the
Borrower, (ii) located in the United States and (iii) subject to a
perfected Security Interest in favor of the Lenders and with respect to
which the Borrower has (a) granted the provider of Non-Recourse Debt a
first prior security interest or (b) sold all of its rights to payment
under the related Lease covering such item of Equipment and, in either such
case, has retained the right to own, re-lease or sell such item of
Equipment free and clear of any other competing interest upon termination
of the Lease to which such Equipment is subject.
"Residual Equipment Interests" means all rights of the Borrower
to share in the remaining value of leased Equipment which has been sold by
the Borrower to another lessor and which interest of the Borrower is set
forth in a legal, valid and binding written agreement between the Borrower
and the purchaser of such lease.
"Residual Value" means, with respect to Related Equipment,
Residual Equipment or Residual Equipment Interests, the Borrower's booked
residual value of the Borrower's interest in such Equipment as of the
scheduled expiration date of the lease to which such Equipment is subject;
provided, however, that in no event shall such Residual Value exceed forty
percent (40%) of the original cost of such Equipment.
"Security Interest" has the meaning specified in Section 6.1.
"Subsidiary" means any corporation of which more than fifty
percent (50%) of the outstanding shares of capital stock having general
voting power under ordinary circumstances to elect a majority of the board
of directors of such corporation, irrespective of whether or not at the
time stock of any other class or classes shall have or might have voting
power by reason of the happening of any contingency, is at the time
directly or indirectly owned by the Parent or the Borrower, by the Parent
or the Borrower and one or more Subsidiaries, or by one or more other
Subsidiaries.
"Tangible Net Worth" means the value of all tangible assets of a
Person, which, in accordance with GAAP, are tangible assets, after
deducting adequate reserves in each case where a reserve is proper under
GAAP, minus all Debt and all Non-Recourse Debt of such Person; provided,
however, that (i) inventory shall be taken into account on the basis of its
cost or current market value, whichever is lower, (ii) in no event shall
there be included as such tangible assets, patents, trademarks, trade
names, copyrights, licenses, goodwill, deferred charges or treasury stock
or any securities unless the same are readily marketable in the United
States of America or entitled to be used as a credit against federal income
tax liabilities, (iii) securities included as such tangible assets shall be
taken into account at their current market price or cost, whichever is
lower and (iv) any write-up in the book value of any assets shall not be
taken into account.
"Term Loan" means a loan of funds by a Lender to the Borrower
pursuant to Article II.
"Term Loan Commitment" means, with respect to a Lender, the
commitment of such Lender to make Term Loans to the Borrower in the
aggregate amount at any time outstanding not to exceed the amount set forth
opposite such Lender's name on the signature pages hereof or on an
Assumption Certificate, as the case may be.
"Term Loan Commitment Amount" means the lesser of (i) the
aggregate of all Term Loan Commitments of the Lenders, as set forth on the
signature pages hereof, or on an Assumption Certificate, as the case may
be, or (ii) Fifteen Million Dollars ($15,000,000), being the maximum
aggregate amount of the Term Loan Commitments of all Lenders, subject to
reduction in accordance with Section 5.2(a).
"Term Loan Facility" means the obligation of the Lenders to make
Term Loans, and the right of the Borrower to obtain Term Loans, pursuant to
Article II.
"Term Loan Floating Rate" means an annual rate equal to the sum
of the Base Rate plus three-quarters of one percent (.75%), which Term Loan
Floating Rate shall change when and as the Base Rate changes.
"Term Loan Maturity Date" means November 30, 1997, being the date
on which the final installment of outstanding principal of the Term Loans
becomes finally due and payable.
"Term Note" means a promissory note of the Borrower payable to a
Lender in the amount of such Lender's Term Loan Commitment, in
substantially the form of Exhibit C-1 hereto (as such promissory note may
be amended, endorsed or otherwise modified from time to time), evidencing
the aggregate indebtedness of the Borrower resulting from outstanding Term
Loans made by such Lender, including any promissory note accepted from time
to time by such Lender in substitution therefor or in renewal thereof.
"Total Shareholders' Equity" of any Person means the amount shown
on such line (or on the comparable line) of such Person's balance sheet.
"Transmittal Letter" means a letter of transmittal addressed to
the Collateral Agent in substantially the form attached hereto as Exhibit
D, duly completed and executed by the Borrower, pursuant to which the
Borrower delivers possession of the original of a Lease to the Collateral
Agent and, among other things, designates such Lease as a "Warehousing
Lease" or a "Working Capital Lease."
"Type of Term Loan" has the meaning given in Section 2.2.
"UCC" means the Uniform Commercial Code as in effect from time to
time in the State of Colorado, or in any other state whose laws are held to
govern this Agreement, the Security Interest or any portion thereof.
"Warehousing Advance" means a loan of funds by a Lender to the
Borrower pursuant to Article IV.
"Warehousing Borrowing" means a Borrowing by the Borrower
pursuant to Article IV, consisting of Warehousing Advances made to the
Borrower by each of the Lenders concurrently, in accordance with their
respective Percentages.
"Warehousing Commitment" means, with respect to a Lender, the
commitment of such Lender to make Warehousing Advances to the Borrower in
the aggregate amount at any time outstanding not to exceed the amount set
forth opposite such Lender's name on the signature pages hereof or on an
Assumption Certificate, as the case may be.
"Warehousing Commitment Amount" means the lesser of (i) the
aggregate of all Warehousing Commitments of the Lenders, as set forth on
the signature pages hereof, or on an Assumption Certificate, as the case
may be, or (ii) Thirty Million Dollars ($30,000,000), being the maximum
aggregate amount of the Warehousing Commitments of all Lenders, subject to
reduction in accordance with Section 5.2(a).
"Warehousing Facility" means the obligation of the Lenders to
make Warehousing Advances, and the right of the Borrower to obtain
Warehousing Advances, pursuant to Article IV.
"Warehousing loating Rate" means an annual rate equal to the sum
of the Base Rate plus one-half of one percent (.50%), which Warehousing
Floating Rate shall change when and as the Base Rate changes.
"Warehousing Lease" means a Lease which the Borrower has
delivered to the Collateral Agent pursuant to a Transmittal Letter
designating such Lease as a "Warehousing Lease" for purposes of this
Agreement.
"Warehousing Note" means a promissory note of the Borrower
payable to a Lender in the amount of such Lender's Warehousing Commitment,
in substantially the form of Exhibit C-3 (as such promissory note may be
amended, endorsed or otherwise modified from time to time), evidencing the
aggregate indebtedness of the Borrower resulting from outstanding
Warehousing Advances made by such Lender, including any promissory note
accepted from time to time by such Lender in substitution therefor or in
renewal thereof.
"Working Capital Advance" means a loan of funds by a Lender to
the Borrower pursuant to Article III hereof.
"Working Capital Borrowing" means a Borrowing by the Borrower
pursuant to Article III, consisting of Working Capital Advances made to the
Borrower by each of the Lenders concurrently, in accordance with their
respective Percentages.
"Working Capital Commitment" means, with respect to a Lender, the
commitment of such Lender to make Working Capital Advances to the Borrower
in the aggregate amount at any time outstanding not to exceed the amount
set forth opposite such Lender's name on the signature pages hereof or on
an Assumption Certificate, as the case may be.
"Working Capital Commitment Amount" means the lesser of (i) the
aggregate of all Working Capital Commitments of the Lenders, as set forth
on the signature pages hereof or on an Assumption Certificate, as the case
may be, or (ii) Five Million Dollars ($5,000,000), being the maximum
aggregate amount of the Working Capital Commitments of all Lenders, subject
to reduction in accordance with Section 5.2(a).
"Working Capital Facility" means the obligation of the Lenders to
make Working Capital Advances, and the right of the Borrower to obtain
Working Capital Advances, pursuant to Article III.
"Working Capital Floating Rate" means an annual rate equal to the
sum of the Base Rate plus three-quarters of one percent (.75%), which
Working Capital Floating Rate shall change when and as the Base Rate
changes.
"Working Capital Lease" means a Lease which the Borrower has
delivered to the Collateral Agent pursuant to a Transmittal Letter
designating such Lease as a "Working Capital Lease" for purposes of this
Agreement.
"Working Capital Note" means a promissory note of the Borrower
payable to a Lender in the amount of such Lender's Working Capital
Commitment, in substantially the form of Exhibit C-2 (as such promissory
note may be amended, endorsed or otherwise modified from time to time),
evidencing the aggregate indebtedness of the Borrower resulting from
outstanding Working Capital Advances made by such Lender, including any
promissory note accepted from time to time by such Lender in substitution
therefor or in renewal thereof.
ARTICLE II
TERM LOAN FACILITY
Section 2.1 Term Loan Commitments. Each Lender hereby agrees,
severally but not jointly, on the terms and subject to the conditions
herein set forth, to make Term Loans to the Borrower on the Closing Date in
an amount equal to such Lender's Term Loan Commitment. The Lenders'
Commitment to make the Term Loans to the Borrower is not a revolving
commitment and, upon any repayment of outstanding principal of the Term
Loans, the Borrower may not reborrow any such repaid principal of the Term
Loans.
Section 2.2 Various Types of Fundings. The Term Loans shall be
funded by the Lenders as either Floating Rate Term Loans or LIBO Term Loans
(each being herein called a "Type of Term Loan"), as the Borrower shall
specify pursuant to Section 2.3, 2.4 or 2.5. Floating Rate Term Loans and
LIBO Term Loans may be outstanding at the same time. It is understood,
however, that in the case of LIBO Term Loans, not more than three (3)
different Interest Periods shall be outstanding at any one time, and the
aggregate principal amount of Term Loans subject to a specified Interest
Period shall be at least in an amount equal to $1,000,000 or a higher
integral multiple of $100,000.
Section 2.3 Procedures for Borrowing. The Borrower shall give
notice to the Agent not later than 10:30 a.m., Denver, Colorado time, on
the Closing Date if the Term Loans are to bear interest initially at a Term
Loan Floating Rate, and not later than 2:00 p.m., Denver, Colorado, time at
least three (3) Business Days prior to the Closing Date if the Term Loans
(or any portion thereof) are to bear interest initially at a LIBO Rate.
Such notice shall be effective upon receipt by the Agent, shall be in
writing or by telecopy transmission (in the form of Exhibit E), and shall
specify whether the Term Loans are to bear interest initially at a Floating
Rate or at one or more LIBO Rates, and in the case of a Borrowing that is
to bear interest initially at one or more LIBO Rates, shall specify the
Interest Period or Interest Periods to be applicable thereto. Promptly
upon receipt of such notice (but in no event later than the end of the
Business Day on which such notice is received), the Agent shall advise each
Lender of the proposed interest rates to be in effect on the Closing Date.
At or before 2:00 p.m., Denver, Colorado time, on the Closing Date, each
Lender shall provide the Agent at the principal office of the Agent in
Denver, Colorado with immediately available funds covering such Lender's
Term Loan Commitment and, subject to the satisfaction of the conditions
precedent set forth in Article VII, the Agent shall pay such funds to the
Borrower prior to the close of business on the Closing Date.
Section 2.4 Converting Floating Rate Term Loans to LIBO Term
Loans; Procedures. So long as no Default or Event of Default shall exist,
the Borrower may convert all or any part of any outstanding Floating Rate
Term Loans into LIBO Term Loans by giving notice to the Agent of such
conversion not later than 2:00 p.m., Denver, Colorado time, on a Business
Day which is at least three (3) Business Days prior to the date of the
requested conversion. Each such notice shall be effective upon receipt by
the Agent, shall be in writing or by telecopy transmission (in the form of
Exhibit F), shall specify the date and amount of such conversion, the total
amount of Term Loans to be so converted and the Interest Period or Interest
Periods therefor. Promptly upon receipt of such notice, the Agent shall
advise each Lender thereof. Each conversion of Term Loans shall apply pro
rata to all Floating Rate Term Loans held by the Lenders, shall commence
on a Business Day, and the aggregate amount of each such conversion of
Floating Rate Term Loans to LIBO Term Loans shall be in an amount equal to
$1,000,000 or a higher integral multiple of $100,000.
Section 2.5 Procedures at End of an Interest Period. Unless
the Borrower requests a new LIBO Rate in accordance with the procedures set
forth below, each Lender shall automatically and without request by the
Borrower, convert each LIBO Term Loan to a Floating Rate Term Loan on the
last day of the relevant Interest Period. So long as no Default or Event
of Default shall exist, the Borrower may cause all or any part of any
outstanding LIBO Term Loan to continue to bear interest at a LIBO Rate
after the end of the then applicable Interest Period by notifying the Agent
not later than 2:00 p.m., Denver, Colorado time, on a Business Day which is
at least three (3) Business Days prior to the first day of the new Interest
Period. Each such notice shall be in writing or by telecopy transmission
(in the form of Exhibit G), shall be effective when received by the Agent,
and shall specify the first day of the applicable Interest Period, the
amount of the expiring LIBO Term Loan to be continued and the Interest
Period therefor. Promptly upon receipt of such notice, the Agent shall
advise each Lender thereof. Each new Interest Period shall begin on a
Business Day and the aggregate amount of the Term Loans bearing the new
LIBO Rate shall be in an amount equal to $1,000,000 or a higher integral
multiple of $100,000.
Section 2.6 Setting and Notice of Rates. The applicable LIBO
Rate for each Interest Period shall be determined by the Agent and notice
thereof (which may be by telephone) shall be given by the Agent to the
Borrower and each Lender. Each such determination of the applicable LIBO
Rate shall be conclusive and binding upon the parties hereto, in the
absence of demonstrable error. The Agent, upon written request of the
Borrower or any Lender, shall deliver to the Borrower or such Lender a
statement showing the computations used by the Agent in determining the
applicable LIBO Rate hereunder.
Section 2.7 Pro Rata Treatment. All Term Loans, conversions
and repayments shall be effected so that after giving effect thereto all
Types of Term Loans outstanding and all applicable Interest Periods shall
be pro rata among the Lenders according to their respective Percentages.
Section 2.8 Interest on Term Loans. The Borrower hereby agrees
to pay interest on the unpaid principal amount of each Term Loan for the
period commencing on the date such Term Loan is funded by a Lender until
such Term Loan is paid in full, in accordance with the following:
(a) Floating Rate Term Loans. Subject to Section 2.8(c), while
any portion of a Term Loan is a Floating Rate Term Loan, the
outstanding principal balance thereof shall bear interest at an annual
rate at all times equal to the Term Loan Floating Rate.
(b) LIBO Rate Term Loans. Subject to Section 2.8(c), while any
portion of a Term Loan is a LIBO Term Loan, the outstanding principal
balance thereof shall bear interest for the applicable Interest Period
at an annual rate equal to the LIBO Rate established with respect to
such LIBO Term Loan in accordance with Section 2.3, 2.4 or 2.5 hereof.
(c) Default Rate. From and after the occurrence of an Event of
Default and continuing thereafter until such Event of Default shall be
remedied to the written satisfaction of the Required Lenders, the
outstanding principal balance of each Term Loan shall bear interest,
until paid in full, at a rate equal to (i) the interest rate otherwise
in effect with respect such Term Loan and (ii) four percent (4%).
Section 2.9 Obligation to Repay Term Loan; Amortization of
Principal. The Borrower shall be obligated to repay all Term Loans at the
applicable interest rates established under this Article II notwithstanding
the failure of the Agent to receive any written request therefor or written
confirmation thereof and notwithstanding the fact that the person
requesting the same was not in fact authorized to do so. Principal of the
Term Loans shall be paid in thirty-six (36) substantially equal monthly
installments, commencing on the last day of the first full month
immediately following the month in which the Closing Date occurs, in
amounts, with respect to each Term Note, as specified therein.
Section 2.10 Term Notes. The Term Loan made by each Lender on
the Closing Date shall be evidenced by and repayable with interest in
accordance with a single Term Note of the Borrower payable to the order of
such Lender in the amount of such Lender's Term Loan Commitment. The
unpaid principal amount of each Term Note shall be payable as provided
therein and herein and upon demand by the Lenders pursuant to Section 11.2
hereof.
Section 2.11 Interest Due Dates. Accrued interest on each Term
Loan shall be payable in arrears on the last day of each month and at
maturity.
Section 2.12 Use of Proceeds. The proceeds of the Term Loans
shall be used solely and exclusively to retire and pay in full the
outstanding principal balance of all indebtedness of the Borrower to Mellon
Bank, N.A. for itself and as agent for and on behalf of other banks and to
pay all costs and expenses of closing this Agreement.
Section 2.13 Interest Rate Protection Contracts. The Borrower
shall enter into interest rate hedging agreements with the Agent having the
effect of fixing the Borrower's interest rate expense, or limiting the
fluctuation of interest within a range acceptable to the Required Lenders,
with respect to not less than fifty percent (50%) of the Term Loan
Commitment Amount. Such interest rate hedging agreements shall be at the
sole cost and expense of the Borrower, shall remain in effect until the
earlier of (i) the Term Loan Maturity Date or (ii) the date on which all
Term Loans are satisfied and paid in full, and shall be subject to such
terms and conditions as the Borrower and the Agent shall agree.
Section 2.14 Increased Costs; Capital Adequacy; Funding
Exceptions. With respect to all LIBO Term Loans from time to time
outstanding hereunder, the Borrower hereby covenants and agrees that:
(a) Increased Costs on LIBO Term Loans. If Regulation D of the
Board of Governors of the Federal Reserve System, or after the date of
this Agreement, the adoption of any applicable law, rule or
regulation, or any change in any existing law, or any change in the
interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by any Lender
with any request or directive (whether or not having the force of law)
of any such authority, central bank or comparable agency, shall:
(i) subject any Lender to or cause the withdrawal or termination
of any exemption previously granted any Lender with respect to,
any tax, duty or other charge with respect to its LIBO Term Loans
or its obligation to make LIBO Term Loans, or shall change the
basis of taxation of payments to any Lender of the principal of
or interest under this Agreement in respect of its LIBO Term
Loans or its obligation to make LIBO Term Loans (except for
changes in the rate of tax on the overall net income of such
Lender imposed by the jurisdictions in which such Lender's
principal executive office is located); or (ii)impose, modify or
deem applicable any reserve (including, without limitation, any
reserve imposed by the Board of Governors of the Federal Reserve
System, but excluding any reserve included in the determination
of interest rates pursuant to Section 2.8), special deposit or
similar requirement against assets of, deposits with or for the
account of, or credit extended by, any Lender; or (iii) impose on
any Lender any other condition affecting its making, maintaining
or funding of its LIBO Term Loans or its obligation to make LIBO
Term Loans; and the result of any of the foregoing is to increase
the cost to such Lender of making or maintaining any LIBO Term
Loan, or to reduce the amount of any sum received or receivable
by such Lender under this Agreement or under its Term Note, then
the affected Lender will notify the Borrower and the Agent and
within fifteen (15) days after demand by such Lender (which
demand shall be accompanied by a statement setting forth the
basis of such demand) the Borrower shall pay directly to such
Lender such additional amount or amounts as will compensate such
Lender for such increased cost or such reduction. Each Lender
will promptly notify the Borrower and the Agent of any event of
which it has knowledge, occurring after the date hereof, which
will entitle such Lender to compensation pursuant to this Section
2.14. If the Borrower receives notice from any Lender of any
event which will entitle such Lender to compensation pursuant to
this Section 2.14, the Borrower, at its option, may prepay any
then outstanding LIBO Term Loans or notify the Agent (which shall
promptly notify each Lender) that any pending request for a LIBO
Term Loan shall be deemed to be a request for a Floating Rate
Term Loan, in each case without payment of any additional funding
losses pursuant to the provisions of Section 2.15.
(b) Capital Adequacy. If any Lender determines at any time that
such Lender's Return has been reduced as a result of any Capital
Adequacy Rule Change, such Lender may require the Borrower to pay to
such Lender the amount necessary to restore the Lender's Return to
what it would have been had there been no Capital Adequacy Rule
Change. For purposes of this Section 2.14(b), the following
definitions shall apply:
(i) "Return", for any calendar quarter or shorter period, means
the percentage determined by dividing (i) the sum of interest and
ongoing fees earned by a Lender under this Agreement during such
period by (ii) the average capital such Lender is required to
maintain during such period as a result of its being a party to
this Agreement, as determined by such Lender based upon its total
capital requirements and a reasonable attribution formula that
takes account of the Capital Adequacy Rules then in effect.
Return may be calculated for a Lender for each calendar quarter
and for the shorter period between the end of a calendar quarter
and the date of termination in whole of this Agreement.
(ii) "Capital Adequacy Rule" means any law, rule, regulation or
guidelines regarding capital adequacy that applies to a Lender,
or the interpretation thereof by any governmental or regulatory
authority. Capital Adequacy Rules include rules requiring
financial institutions to maintain total capital in amounts based
upon percentages of outstanding loans, binding loan commitments
and letters of credit.
(iii) "Capital Adequacy Rule Change" means any change in any
Capital Adequacy Rule occurring after the date of this Agreement,
but does not include any changes in applicable requirements that
at the date hereof are scheduled to take place under the existing
Capital Adequacy Rules or any increases in the capital that a
Lender is required to maintain to the extent that the increases
are required due to a regulatory authority's assessment of that
Lender's financial condition.
The initial notice sent by a Lender shall be sent as promptly as
practicable after such Lender learns that its Return has been
reduced, shall include a demand for payment of the amount
necessary to restore the Lender's Return for the quarter in which
the notice is sent, and shall state in reasonable detail the
cause for the reduction in the Lender's Return and the Lender's
calculation of the amount of such reduction. Thereafter, the
Lender may send a new notice during each calendar quarter setting
forth the calculation of the reduced Return for that quarter and
including a demand for payment of the amount necessary to restore
the Lender's Return for that quarter. A Lender's calculation in
any such notice shall be conclusive and binding absent
demonstrable error.
(c) Basis for Determining Interest Rate Inadequate or Unfair.
If with respect to any Interest Period:
(i) the Agent determines that deposits in U.S. dollars (in the
applicable amounts), as the case may be, are not being offered to
the Agent in the London interbank eurodollar market for such
Interest Period; or
(ii) the Agent otherwise determines (which determination shall be
binding and conclusive on all parties) that by reason of
circumstances affecting the London interbank eurodollar market
adequate and reasonable means do not exist for ascertaining the
applicable LIBO Rate; or
(iii) the Required Lenders advise the Agent that the LIBO Term
Loan as determined by the Agent will not adequately and fairly
reflect the cost to such Lenders of maintaining or funding a LIBO
Term Loan for such Interest Period, or that the making or funding
of LIBO Term Loans has become impracticable as a result of an
event occurring after the date of this Agreement which in the
opinion of such Lenders materially affects such LIBO Term Loans,
then the Agent shall promptly notify the affected parties and (A)
in the event of any occurrence described in the foregoing clause
(i) the Borrower shall enter into good faith negotiations with
each affected Lender in order to determine an alternate method to
determine the LIBO Rate for such Lender, and during the pendency
of such negotiations with any Lender, such Lender shall be under
no obligation to make LIBO Term Loans, and (B) in the event of
any occurrence described in the foregoing clauses (ii) or (iii),
for so long as such circumstances shall continue, no Lender shall
be under any obligation to make LIBO Term Loans.
(d) Illegality. In the event that any change in (including the
adoption of any new) applicable laws or regulations, or any change in
the interpretation of applicable laws or regulations by any
governmental authority, central bank, comparable agency or any other
regulatory body charged with the interpretation, implementation or
administration thereof, or compliance by any Lender with any request
or directive (whether or not having the force of law) of any such
authority, central bank, comparable agency or other regulatory body,
should make it (or, in the good faith judgment of the applicable
Lender, shall raise a substantial question as to whether it is
unlawful for a Lender (any such Lender herein called an "Affected
Lender") to make, maintain or fund LIBO Term Loans then (i) the
Affected Lender shall promptly notify each of the other parties
hereto, (ii) the obligation of the Affected Lender to make, maintain
or convert into LIBO Term Loans shall, upon the effectiveness of such
event, be suspended for the duration of such unlawfulness, and (iii)
for the duration of such unlawfulness, any notice by the Borrower
pursuant to Sections 2.3, 2.4 or 2.5 requesting Lenders to make or
convert into LIBO Term Loans shall, as to the Affected Lender, be
construed as a request to make or to continue making Floating Rate
Term Loans in the amount of such Affected Lender's Percentage of the
total amount of LIBO Term Loans requested.
Section 2.15 Funding Losses. With respect to all LIBO Term
Loans, the Borrower hereby agrees that upon demand by any Lender (which
demand shall be accompanied by a statement setting forth the basis for the
calculations of the amount being claimed) the Borrower will indemnify such
Lender against any loss or expense which such Lender may have sustained or
incurred (including, without limitation, any net loss or expense incurred
by reason of the liquidation or reemployment of deposits or other funds
acquired by such Lender to fund or maintain LIBO Term Loans), as reasonably
determined by such Lender, (i) as a consequence of any failure by the
Borrower to make any payment when due of any amount due hereunder in
connection with any LIBO Term Loans, or (ii) due to any failure of the
Borrower to borrow or convert any LIBO Term Loans on a date specified
therefor in a notice thereof or (iii) due to any payment or prepayment
(including any prepayment pursuant to Sections 5.2(b) or 5.2(c) but
excluding any prepayment pursuant to Section 2.14) of any LIBO Term Loan on
a date other than the last day of the applicable Interest Period for such
LIBO Term Loan. For this purpose, all notices of LIBO Term Loan elections
pursuant to this Article II shall be deemed to be irrevocable.
Section 2.16 Right of Lenders to Fund through Other Offices.
Each Lender, if it so elects, may fulfill its Commitment as to any LIBO
Term Loan by causing a foreign branch or affiliate of such Lender to make
such LIBO Term Loan; provided, that in such event the obligation to the
Borrower to repay such LIBO Term Loan shall nevertheless be to such Lender
and shall be deemed held by such Lender, to the extent of such LIBO Term
Loan, for the account of such branch or affiliate.
Section 2.17 Discretion of Lenders as to Manner of Funding.
Notwithstanding any provision of this Agreement to the contrary, each
Lender shall be entitled to fund and maintain its funding of all or any
part of its Term Loans in any manner it deems fit, it being understood,
however, that for the purposes of this Agreement (specifically including,
without limitation, Section 2.15 hereof) all determinations hereunder shall
be made as if such Lender had actually funded and maintained each LIBO Term
Loan during each Interest Period for such LIBO Term Loan through the
purchase of deposits having a maturity corresponding to such Interest
Period and bearing an interest rate equal to the appropriate LIBO Rate for
such Interest Period.
Section 2.18 Conclusiveness of Statements; Survival of
Provisions. Determinations and statements of any Lender pursuant to
Section 2.14, or 2.15 shall be conclusive absent demonstrable error. Each
Lender may use reasonable averaging and attribution methods in determining
compensation pursuant to such Sections and the provisions of such Sections
shall survive termination of this Agreement.
ARTICLE III
WORKING CAPITAL FACILITY
Section 3.1 Commitments. Each Lender hereby agrees, severally
but not jointly, on the terms and subject to the conditions herein set
forth, to make Working Capital Advances to the Borrower from time to time
during the period from the date hereof to and including the Commitment
Termination Date, or the earlier date of termination in whole of the
Commitments pursuant to Sections 5.2 or 11.2, in an aggregate amount at any
time outstanding not to exceed (i) such Lender's Working Capital Commitment
or 10Q& such Lender's Percentage of each Working Capital Borrowing from
time to time requested by the Borrower. Within the above limits, the
Borrower may borrow, prepay in accordance with the terms hereof and
reborrow in accordance with this Article III.
Section 3.2 Procedures for Borrowing. The Borrower shall give
notice to the Agent of each proposed Working Capital Borrowing not later
than 11:00 a.m., Denver, Colorado time, on a Business Day which is the
proposed date of such Working Capital Borrowing. Each such notice shall be
effective upon receipt by the Agent and shall be in writing or by telecopy
transmission (in either case, in the form of Exhibit H). The aggregate
principal amount of each Working Capital Borrowing shall be in an amount
equal to $50,000 or a higher integral multiple of $1,000. Promptly upon
receipt of such notice the Agent shall advise each Lender of the proposed
Borrowing. At or before 2:00 p.m., Denver, Colorado time, on the requested
Working Capital Borrowing date, each Lender shall provide the Agent at the
principal office of the Agent in Denver, Colorado with immediately
available funds covering such Lender's Percentage of such Working Capital
Borrowing, and subject to the satisfaction of the applicable conditions
precedent set forth in Article VII with respect to such Working Capital
Borrowing, the Agent shall deposit to the Borrower's account maintained
with the Agent proceeds of the Working Capital Borrowing.
Section 3.3 Pro Rata Treatment. All Working Capital Borrowings
and repayments shall be effected so that after giving effect thereto all
outstanding Working Capital Advances shall be pro rata among the Lenders
according to their respective Percentages.
Section 3.4 Interest on Working Capital Advances. The Borrower
hereby agrees to pay interest on the unpaid principal amount of each
Working Capital Advance for the period commencing on the date such Working
Capital Advance is made by a Lender until such Working Capital Advance is
paid in full at an annual rate at all times equal to the Working Capital
Floating Rate. Notwithstanding the foregoing, from and after the
occurrence of an Event of Default and continuing thereafter until such
Event of Default shall be remedied to the written satisfaction of the
Required Lenders, the outstanding principal balance of each Working Capital
Advance shall bear interest, until paid in full, at an annual rate equal to
the sum of (i) the interest rate otherwise in effect with respect such
Working Capital Advance and (ii) four percent (4%).
Section 3.5 Obligation to Repay Working Capital Advances;
Representations. The Borrower shall be obligated to repay all Working
Capital Advances under this Article III notwithstanding the failure of the
Agent to receive any written request therefor or written confirmation
thereof and notwithstanding the fact that the person requesting the same
was not in fact authorized to do so. Any request for a Working Capital
Borrowing under this Article III, whether written, telephonic, telecopy or
otherwise, shall be deemed to be a representation by the Borrower that the
conditions set forth in Section 7.2 have been satisfied as of the time of
the request.
Section 3.6 Working Capital Notes. All Working Capital Advances
made by each Lender shall be evidenced by and repayable with interest in
accordance with a Working Capital Note of the Borrower payable to the order
of such Lender. The aggregate unpaid principal amount of the Working
Capital Notes shall be payable as provided therein and herein on the
earlier of the Commitment Termination Date or demand by the Lenders
pursuant to Section 11.2.
Section 3.7 Interest Due Dates. Accrued interest on each
Working Capital Advance shall be payable in arrears on the last calendar
day of each month and at maturity.
Section 3.8 Use of Proceeds. The proceeds of each Working
Capital Borrowing shall be used by the Borrower for its short-term working
capital purposes and for the warehousing of Leases pending the funding of
such Leases under the Warehousing Facility or the obtaining of permanent
financing with respect thereto.
ARTICLE IV
WAREHOUSING FACILITY
Section 4.1 Commitments. Each Lender hereby agrees, severally
but not jointly, on the terms and subject to the conditions herein set
forth, to make Warehousing Advances to the Borrower from time to time
during the period from the date hereof to and including the Commitment
Termination Date, or the earlier date of termination in whole of the
Warehousing Commitments pursuant to Sections 5.2 or 11.2, in an amount not
to exceed such Lender's Percentage of each Warehousing Borrowing from time
to time requested by the Borrower; provided, however, that (i) the
aggregate amount of Warehousing Advances which any Lender shall be
committed to have outstanding hereunder shall not exceed such Lender's
Warehousing Commitment or such Lender's Percentage of the Warehousing
Borrowing Base and (ii) the aggregate amount of Warehousing Advances which
all Lenders shall be committed to have outstanding hereunder shall not
exceed the Borrowing Base. Within the above limits, the Borrower may
borrow, prepay in accordance with the terms hereof and reborrow in
accordance with this Article IV.
Section 4.2 Procedures for Borrowing. Borrowings under the
Warehousing Facility shall occur on Wednesday of each week, provided the
Borrower shall have given notice to both Agents of a proposed Warehousing
Borrowing not later than 12:00 Noon, Denver, Colorado time, on a Business
Day that is at least two (2) Business Days prior to the proposed date of
such Warehousing Borrowing. Each such notice shall be effective upon
receipt by the Agents and shall be in writing or by telecopy transmission
(in either case, in the form of Exhibit I) and shall be accompanied by a
properly completed and duly executed Borrowing Base Certificate. In order
to be included in a Borrowing Base Certificate provided to the Agents with
respect to a Warehousing Borrowing, the original of each Warehousing Lease
therein described must be delivered to the Collateral Agent at its
Administrative Address not later than 12:00 Noon, Denver, Colorado time, on
a Business Day that is at least two (2) Business Days prior to the proposed
date of such Warehousing Borrowing. The aggregate principal amount of each
Warehousing Borrowing shall be in an amount not less than $500,000.
Promptly upon receipt of a notice under this Section 4.2 the Agent shall
advise each Lender of the proposed Borrowing. At or before 12:00 Noon,
Denver, Colorado time, on the requested Warehousing Borrowing date, each
Lender shall provide the Agent at the principal office of the Agent in
Denver, Colorado with immediately available funds covering such Lender's
Percentage of such Warehousing Borrowing, and subject to the satisfaction
of the conditions precedent set forth in Article VII with respect to such
Warehousing Borrowing, the Agent shall deposit to the Borrower's account
maintained with the Agent proceeds of the Warehousing Borrowing.
Section 4.3 Pro Rata Treatment. All Warehousing Borrowings and
repayments shall be effected so that after giving effect thereto all
outstanding Warehousing Advances shall be pro rata among the Lenders
according to their respective Percentages.
Section 4.4 Interest on Warehousing Advances. The Borrower
hereby agrees to pay interest on the unpaid principal amount of each
Warehousing Advance for the period commencing on the date such Warehousing
Advance is made by a Lender until such Warehousing Advance is paid in full
at an annual rate at all times equal to the Warehousing Floating Rate.
Notwithstanding the foregoing, from and after the occurrence of an Event of
Default and continuing thereafter until such Event of Default shall be
remedied to the written satisfaction of the Required Lenders, the
outstanding principal balance of each Warehousing Advance shall bear
interest until paid in full, at an annual rate equal to the sum of (i) the
interest rate otherwise in effect with respect such Warehousing Advance and
(ii) four percent (4%).
Section 4.5 Obligation to Repay Warehousing Advances;
Representations. The Borrower shall be obligated to repay all Warehousing
Advances under this Article IV notwithstanding the failure of the Agent to
receive any written request therefor or written confirmation thereof and
notwithstanding the fact that the person requesting the same was not in
fact authorized to do so. Any request for a Warehousing Borrowing under
this Article IV, whether written, telephonic, telecopy or otherwise, shall
be deemed to be a representation by the Borrower that the conditions set
forth in Section 7.2 have been satisfied as of the time of the request.
Section 4.6 Warehousing Notes. All Warehousing Advances made by
each Lender shall be evidenced by and repayable with interest in accordance
with a Warehousing Note of the Borrower payable to the order of such
Lender. The aggregate unpaid principal amount of the Warehousing Notes
shall be payable as provided therein and herein on the earlier of the
Commitment Termination Date or demand by the Lenders pursuant to Section
11.2.
Section 4.7 Interest Due Dates. Accrued interest on each
Warehousing Advance shall be payable in arrears on the last calendar day of
each month and at maturity.
Section 4.8 Use of Proceeds. The proceeds of each Warehousing
Borrowing shall be used by the Borrower for purposes of acquiring or
funding leases for resale or as temporary financing pending the securing of
permanent financing for any such Lease.
ARTICLE V
FEES AND OTHER PAYMENTS
Section 5.1 Fees. The Borrower hereby agrees to pay fees to the
Lenders, commencing on the date hereof and continuing until all Obligations
are paid in full, in accordance with the following:
(a) Term Loan Facility Fee. The Borrower agrees to pay to the
Agent, for the pro rata account of the Lenders, a Term Loan Facility
fee equal to the product of (i) three-eighths of one percent (.375%)
and (ii) the Term Loan Commitment Amount, payable upon execution of
this Agreement. The Term Loan Facility fee shall be shared by the
Lenders on the basis of their respective Percentages and shall be
deemed fully earned upon execution of this Agreement.
(b) Term Loan Agency Fee. The Borrower agrees to pay to the
Agent, for the account of both Agents, a Term Loan agency fee equal to the
product of (i) three-eighths of one percent (.375%) and (ii) the Term Loan
Commitment Amount, payable upon execution of this Agreement. The Term Loan
agency fee shall be deemed fully earned by the Agents upon execution of
this Agreement.
(c) Working Capital Commitment Fees. The Borrower agrees to pay
to the Agent for the pro rata account of the Lenders a Commitment fee
in respect of the Working Capital Facility computed at the rate of
one-half of one percent (.50%) per annum on the daily average amount
by which the Working Capital Commitment Amount exceeds the aggregate
principal amount of all outstanding Working Capital Advances, from the
date hereof to and including the date on which the Working Capital
Commitments are terminated, payable quarterly in arrears on the last
day of each February, May, August and November, commencing November
30, 1994. Any such Working Capital Commitment fees remaining unpaid
upon termination of the Working Capital Commitments or demand for
payment of the Working Capital Notes shall be due and payable on the
date of such termination or demand. The Working Capital Commitment
fees shall be shared by the Lenders on the basis of their respective
Percentages.
(d) Warehousing Agency Fee. The Borrower agrees to pay to the
Agent, for the account of both Agents, a Warehousing agency fee of
$75,000, payable upon execution of this Agreement. The Warehousing
agency fee shall be deemed fully earned by the Agents upon execution
of this Agreement.
(e) Warehousing Commitment Fees. The Borrower agrees to pay to
the Agent for the pro rata account of the Lenders a Commitment fee in
respect of the Warehousing Facility computed at the rate of three-
eighths of one percent (.375%) per annum on the daily average amount
by which the Warehousing Commitment Amount exceeds the aggregate
principal amount of all outstanding Warehousing Advances, from the
date hereof to and including the date on which the Warehousing
Commitments are terminated, payable quarterly in arrears on the last
day of each February, May, August and November, commencing November
30, 1994. Any such Warehousing Commitment fees remaining unpaid upon
termination of the Warehousing Commitments or demand for payment of
the Warehousing Notes shall be due and payable on the date of such
termination or demand. The Warehousing Commitment fees shall be
shared by the Lenders on the basis of their respective Percentages.
(f) Audit Fees. The Borrower agrees to pay each of the Agents,
on written demand, reasonable fees charged by the Agents in connection
with any audits or inspections of any Collateral or the operations or
businesses of the Borrower, together with actual out-of-pocket costs
and expenses incurred in conducting any such audit or inspection;
provided, however, that until the occurrence of an Event of Default
the Borrower shall not be obligated to reimburse the Agents for more
than four (4) audits or inspections conducted by the Agents during any
calendar year.
Section 5.2 Voluntary Reduction or Termination of the
Commitments; Prepayments.
(a) Reduction or Termination of Commitments. The Borrower may
from time to time on at least three (3) Business Days' prior written
notice received by the Agent (which shall promptly advise each Lender
thereof), permanently reduce the Working Capital Commitment Amount or
the Warehousing Commitment Amount; provided, however, that no such
reduction shall reduce a Commitment Amount to an amount less than the
outstanding principal balance of the relevant Advances outstanding
with respect to such Commitment. Each such voluntary reduction shall
be pro rata as to all Commitments according to each Lender's
respective Percentage. Any voluntary reduction of the Working Capital
Commitment Amount shall be in an aggregate amount equal to $1,000,000
or a higher integral multiple of $100,000 and any voluntary reduction
of the Warehousing Commitment Amount shall be in an aggregate amount
equal to $5,000,000 or a higher integral multiple of $100,000. The
Borrower may at any time on like notice prior to the Commitment
Termination Date terminate all Commitments upon payment in full of all
Notes and all other Obligations.
(b) Voluntary Prepayments. The Borrower may from time to time
prepay Advances and Term Loans in whole or in part without premium or
penalty, provided that (i) the Borrower shall specify the Advances or
Term Loans, as the case may be, to which a prepayment is to be
applied, (ii) each prepayment of Advances or Term Loans shall be made
to the Agent at its office in Denver, Colorado, not later than 12:00
Noon, Denver, Colorado time on a Business Day, and funds received
after that hour shall be deemed to have been received by the Agent on
the next following Business Day, (iii) any prepayment of Term Loans
which, at the time of such prepayment, bear interest at a LIBO Rate
shall be (A) in a principal amount equal to the entire portion of the
Term Loans to which any given LIBO Rate was applicable and (B)
accompanied by accrued interest on such prepayment through the date of
prepayment and additional compensation calculated in accordance with
Section 2.15 hereof, (iv) each partial prepayment of Term Loans shall
be in an aggregate principal amount equal to $1,000,000 or a higher
integral multiple of $100,000, (v) each prepayment of Warehousing
Advances shall be in an aggregate principal amount not less than
$500,000, (vi) each prepayment of Working Capital Advances shall be in
an aggregate principal amount not less than $50,000, (vii) each
partial prepayment of Term Loans shall be applied against principal
installments becoming due and payable thereunder in inverse order of
their maturities and (viii) each partial prepayment received from the
Borrower shall be applied against outstanding Advances and Term Loans
of each Lender pro rata according to such Lender's respective
Percentage.
(c) Mandatory Prepayments. The Borrower shall make a mandatory
prepayment of Working Capital Advances and Term Loans if, and to the
extent that, the outstanding principal balance of Working Capital
Advances and Term Loans, in the aggregate, at any time results in a
Collateral Coverage Ratio that is less than the required ratio as
specified in Section 9.10. Any such prepayment shall be applied first
to the outstanding principal balance of the Working Capital Advances
and next to the outstanding principal balance of the Term Loans. The
Borrower shall make a mandatory prepayment of Warehousing Advances if,
and to the extent that, the outstanding principal balance of
Warehousing Advances at any time exceeds the Borrowing Base. If any
such mandatory prepayment received from the Borrower is to be applied
to prepayment of LIBO Term Loans, such prepayment shall include
additional compensation as provided in Section 2.15. Each partial
prepayment received from the Borrower shall be applied against
outstanding Advances and Term Loans of each Lender pro rata according
to such Lender's respective Percentage.
Section 5.3 Payments.
(a) Making of Payments. All payments of principal of and
interest on the Notes shall be made to the Agent for the account of
the Lenders pro rata according to the respective unpaid principal
amounts of the Notes held by them. All payments of fees pursuant to
Sections 5.1(a), (c), and (e) shall be made to the Agent for the
account of the Lenders pro rata according to their respective
Percentages. All payments of fees pursuant to Sections 5.1(b) and (d)
shall be made to the Agent for the account of the Agents. All such
payments shall be made to the Agent at its office in Denver, Colorado,
not later than 12:00 Noon, Denver, Colorado, time, on the date due, in
immediately available funds, and funds received after that hour shall
be deemed to have been received by the Agent on the next following
Business Day. The Borrower hereby authorizes the Agent to charge the
Borrower's demand deposit account maintained with the Agent for the
amount of any such payment on or about 12:00 Noon, Denver, Colorado
time, on the due date therefor, but the Agent's failure to so charge
such account shall in no way affect the obligation of the Borrower to
make any such payment. The Agent shall remit to each Lender in
immediately available funds on the same Business Day as received by
the Agent its share of all such payments received by the Agent for the
account of such Lender. If the Agent fails to remit any payment to
any Lender when required hereby, the Agent shall pay interest on
demand to that Lender for each day during the period commencing on the
date such remittance was due until the date such remittance is made at
a rate equal to the Federal Funds Rate for such day. All payments
under Section 2.14, 2.15, 5.1(f), 5.5 or 13.4 shall be made by the
Borrower directly to the Lender (or Agent) entitled thereto.
K\1 Effect of Payments. Each payment by the Borrower to the
Agent for the account of any Lender pursuant to Section 5.3(a) shall
be deemed to constitute payment by the Borrower directly to such
Lender; provided, however, that in the event any such payment by the
Borrower to the Agent is required to be returned to the Borrower for
any reason whatsoever, then the Borrower's obligation to such Lender
with respect to such payment shall be deemed to be automatically
reinstated.
(c) Distributions by Agent. Unless the Agent shall have
received notice from a Lender or the Borrower prior to the date on
which such Lender or the Borrower is scheduled to make payment to the
Agent of (in the case of a Lender) the proceeds of a Term Loan or an
Advance or (in the case of the Borrower) an amount due hereunder for
the account of one or more of the Lenders hereunder (such payment by a
Lender or the Borrower, as the case may be, being herein called the
"Required Payment"), which notice shall be effective upon receipt,
that it does not intend to make the Required Payment to the Agent, the
Agent may assume that the Required Payment has been made and may, in
reliance upon such assumption (but shall not be required to), make the
amount thereof available to the intended recipient(s) on such date
and, if such Lender or the Borrower (as the case may be) has not in
fact made the Required Payment to the Agent, the recipient(s) of such
payment shall, on demand, repay to the Agent the amount so made
available together with interest thereon for each day during the
period commencing on the date such amount was so made available by the
Agent until the date the Agent recovers such amount at a rate (i)
equal to the Federal Funds Rate for such day, in the case of a
Required Payment owing by a Lender, or (ii) equal to the applicable
rate of interest as provided in this Agreement, in the case of a
Required Payment owing by the Borrower.
(d) Due Date Extension. If any payment of principal of or
interest on any Term Loan or Advance or any fees payable hereunder
falls due on a day which is not a Business Day, then such due date
shall be extended to the next following Business Day, and (in the case
of principal) additional interest shall accrue and be payable for the
period of such extension.
(e) Application of Certain Payments. Except as otherwise
provided herein, each payment of principal shall be applied to a Type
of Term Loan or to Advances as the Borrower shall direct by notice to
be received by the Agent on or before the date of such payment, or in
the absence of such notice or upon the occurrence of an Event of
Default, as the Agent shall determine in its discretion. Concurrently
with each remittance to any Lender of its pro rata share of any such
payment, the Agent shall advise such Lender as to the application of
such payment.
(f) Setoff. The Borrower agrees that each Lender shall have all
rights of setoff and bankers' lien provided by applicable law, and in
addition thereto, the Borrower agrees that at any time (i) any amount
owing by the Borrower under this Agreement or any Note is due to any
Lender or (ii) any Event of Default exists, each Lender may apply to
the payment of any amount owing by the Borrower under this Agreement
any and all balances, credits, and deposits, accounts or moneys of the
Borrower then or thereafter in the possession of such Lender.
Section 5.4 Computation of Interest and Fees. Interest accruing
on the Notes and all fees payable under this Agreement shall be computed on
the basis of the actual number of days elapsed in a year of 360 days.
Section 5.5 Taxes. All payments made by the Borrower to the
Agent or any Lender (herein any "Payee") under or in connection with this
Agreement or the Notes shall be made without any setoff or other
counterclaim, and free and clear of and without deduction for or on account
of any present or future taxes now or hereafter imposed by any governmental
or other authority, except to the extent that any such deduction or
withholding is compelled by law. As used herein, the term "Taxes" shall
include all income, excise and other taxes of whatever nature (other than
taxes generally assessed on the overall net income of the Payee by the
government or other authority of the country, state or political
subdivision in which such Payee is incorporated or in which the office
through which the Payee is acting is located) as well as all levies,
imposts, duties, charges, or fees of whatever nature. If the Borrower is
compelled by law to make any deductions or withholdings on account of any
Taxes (including any foreign withholding) it will:
(a) pay to the relevant authorities the full amount required to
be so withheld or deducted;
(b) pay such additional amounts (including, without limitation,
any penalties, interest or expenses) as may be necessary in order that
the net amount received by each Payee after such deductions or
withholdings (including any required deduction or withholding on such
additional amounts) shall equal the amount such Payee would have
received had no such deductions or withholdings been made; and
(c) promptly forward to the Agent (for delivery to such Payee)
an official receipt or other documentation satisfactory to the Agent
evidencing such payment to such authorities.
The amount that the Borrower shall be required to pay to any Lender
pursuant to the foregoing clause (b) shall be reduced, to the extent
permitted by applicable law, by the amount of any offsetting tax benefit
which such Lender receives as the result of Borrower's payment to the
relevant authorities as reasonably determined by such Lender; provided,
however, that if such Lender shall subsequently determine that it has lost
the benefit of all or a portion of such tax benefit, the Borrower shall
promptly remit to such Lender the amount certified by such Lender to be the
amount necessary to restore such Lender to the position it would have been
in if no payment had been made pursuant to this sentence. If any Taxes
otherwise payable by the Borrower pursuant to the foregoing paragraph are
directly asserted against any Payee, such Payee may pay such Taxes and the
Borrower promptly shall reimburse such Payee to the full extent otherwise
required by such paragraph. The obligations of the Borrower under this
Section 5.5 shall survive any termination of this Agreement.
ARTICLE VI
COLLATERAL FOR OBLIGATIONS
Section 6.1 Grant of Security Interest. The Borrower hereby
assigns, pledges, conveys and grants to the Lenders a security interest in
all Collateral to secure the due and prompt payment when due and
performance of all of the Obligations (the "Security Interest").
Section 6.2 Delivery of Leases to Collateral Agent. The
original of each Lease which the Borrower intends to constitute a Working
Capital Lease or a Warehousing Lease shall be delivered by the Borrower to
the Collateral Agent at its Administrative Address for purposes of
perfecting the Security Interest granted to the Lenders pursuant to Section
6.1. In the case of a master lease, the original of a Lease shall mean the
original equipment schedule involved plus a certified copy of the related
master lease agreement. The Borrower will not execute any copies of a
Lease other than a copy for delivery to the Collateral Agent. Upon any
such delivery to the Collateral Agent, the Borrower shall designate such
Lease as either a Warehousing Lease or a Working Capital Lease and the
Collateral Agent shall segregate and hold the Leases of each such category
separately.
Section 6.3 Representations and Covenants Concerning Leases.
For Leases to be Eligible Leases at any time or for any purpose under this
Agreement, the following shall be true as of the date of determination and
the Borrower shall comply with each covenant herein contained:
(a) Credit Terms; Form. The Lessee under a Lease has satisfied
the Borrower's credit approval standards as described in Section 6.5
as of the date on which the related Lease was purchased or entered
into by the Borrower. The Lease has a scheduled basic term of eighty
four (84) months or less, unless the Collateral Agent shall have
approved in writing a longer term. The Lease is written on (i) one of
the forms of lease attached hereto as Schedule 6.3, with only such
changes or modifications as shall not materially adversely affect the
enforceability or value of any such Lease or render it unsalable on
the secondary market (herein "Permitted Changes"), (ii) such other
form of lease previously approved in writing by the Collateral Agent,
with only Permitted Changes or (iii) such other form of lease as may
be approved in writing by the Collateral Agent in accordance with the
following procedures, with only Permitted Changes: (a) The Borrower
shall submit such form of lease to the Collateral Agent for comment or
approval not less than (3) Business Days prior to the date on which
the Borrower wishes to include the related Lease as an Eligible Lease
hereunder, together with the Borrower's certification that such form
of lease is substantially the same with respect to all material terms
and conditions as the Borrower's form of lease attached hereto as
Schedule 6.3, (b) the Collateral Agent shall review such submitted
form of lease and approve, disapprove as wholly unacceptable, or
comment upon such form of lease within such (3) Business Days, (c) if
commented upon, such lease form shall not constitute an approved lease
form hereunder until all of the Collateral Agent's comments have been
incorporated into such form of lease and (d) if the Collateral Agent
fails to approve, disapprove or comment to the Borrower with respect
to such form of lease within such (3) Business Days, such form of
lease shall be deemed approved by the Collateral Agent for purposes of
this Section 6.3(a).
(b) Leases Enforceable. Each Lease is in full force and effect,
and has been duly authorized by all necessary corporate action on
behalf of the Lessee, and constitutes a valid and binding obligation
of the Lessee enforceable against the Lessee in accordance with its
terms, except as limited by applicable bankruptcy, insolvency and
similar laws affecting the rights of creditors generally. The
signature of the Lessee on each Lease is genuine.
(c) Documentation Complete. All existing copies of a Lease
conform in all respects to the original delivered to the Collateral
Agent and the entire agreement with the respective Lessee is embodied
solely in the documentation furnished to the Collateral Agent as such
Lease.
(d) Clear Title. The Borrower is the 100% owner of each Lease
and has no participants or co-owners therein. The Borrower has good
and marketable title to each Lease free and clear of all security
interests, liens, and other encumbrances and rights, and either the
Borrower has good and marketable title to the Related Equipment free
and clear of all security interests, liens and other encumbrances and
rights or, if such Lease is deemed an installment sale or loan, the
Borrower has a perfected first security interest in the Related
Equipment.
(e) Proper Filings and Registration. In the case of Related
Equipment that is not a motor vehicle subject to a certificate of
title act, there has been filed in the proper office or offices
protective UCC financing statements adequately describing the Related
Equipment under a Lease naming either the Borrower or the original
lessor as secured party or lessor and the Lessee as debtor or lessee,
and those of the latter type have been assigned to the Borrower. In
the case of Related Equipment that is a motor vehicle subject to a
certificate of title act, such Equipment has been registered and a
certificate of title has been issued, or applied for, showing the
Borrower as owner or secured party.
(f) Compliance with Laws. Each Lease complies with all
applicable usury laws, retail installment sales acts, and other
applicable laws and regulations, and all required disclosures have
been made with respect thereto under federal truth-in-lending and
truth-in-leasing laws and regulations.
(g) Aspects of Leases. The amount of each installment of basic
rent (exclusive of sales and use taxes) remaining to be paid under
each Lease as of a particular date, the number of installments of such
amount remaining to be paid as of such date, and the scheduled
frequency of rental payments (monthly, quarterly, etc.) is as set
forth in the Transmittal Letter (or any list or schedule attached
thereto) by which such Lease is delivered to the Collateral Agent.
There is no servicing fee or other amount that any third party may
offset against payment of such rental payments to the Borrower. Each
Lease is noncancellable by the Lessee thereunder during its scheduled
term except as provided in the documents constituting the Lease
furnished to the Collateral Agent pursuant to the Transmittal Letter.
There are no options to purchase or other agreements whereby the
Lessee of any Lease or any other party has the right to acquire the
Related Equipment at the end of or during the lease term other than as
provided in the documents constituting the Lease delivered to the
Collateral Agent pursuant to the Transmittal Letter. The rental
payment under each Lease constitutes only basic rent for use of the
Related Equipment and contains no element for sales or use taxes,
maintenance, licensing fee, late charges or any other matter that is
payable to the Borrower or any third party except as separately
disclosed in the Lease by dollar amount.
(h) Equipment Delivery. The Related Equipment covered by each
Lease has been delivered to the Lessee and the Lessee has executed and
delivered to the Borrower a certificate constituting an acceptance
thereof, such Related Equipment is in existence as of the date of the
related Transmittal Letter and has been fully paid for as of such
date.
(i) No Setoff. As of the date of delivery of a Borrowing Base
Certificate or a Collateral Coverage Certificate, the Borrower has no
knowledge that the Lessee is asserting or has any basis to assert any
defense, setoff, or counterclaim to its obligations under such Lease.
The Borrower has not granted any extensions or waivers under any Lease
during the period since such Lease began.
(j) Lease Collateral. The Lease Collateral for each Lease is as
represented to the Collateral Agent in accordance with the related
Transmittal Letter.
(k) Taxes Paid. All personal property, sales, and use taxes due
and payable with respect to each Lease and the Related Equipment have
been fully paid.
(l) Lessee Consent. No consent of any Lessee is required for
the Borrower to grant a security interest in, and assign and transfer,
the related Lease to the Lenders hereunder or, if required, it has
been obtained.
(m) No Changes to Leases; Records. The Borrower will not
modify, amend, reduce or terminate the term of, waive any provision
of, anticipate the rent under, change the rental payment schedule of,
release or accept the surrender of, permit any voluntary prepayment or
payoff from the Lessee of, declare a default under, or exercise any
right or remedy under, any Lease, without in each case (i) obtaining
the prior written consent of the Collateral Agent, (ii) delivering to
the Agent a new Borrowing Base Certificate or Collateral Coverage
Certificate, as the case may be, deleting any such Lease from the
Schedule of Eligible Leases, or (iii) obtaining release of such Lease
from the Collateral Agent in accordance with Section 6.9; provided,
however, that the Borrower may change the scheduled date of the month
rental payments are due under a Lease or Leases to a new date in the
same month without notice to or the consent of the Collateral Agent,
but any such change shall be taken into account in calculating the
Lease Value of Leases for Borrowing Base or Collateral Coverage Ratio
purposes. The Borrower shall perform all of its duties and
obligations under each Lease, and keep accurate books, records and
accounts with respect to each Lease.
(n) Payment of Future Taxes. The Borrower will pay, or cause to
be paid, all sales, use, personal property and other taxes levied or
assessed against each item of Related Equipment and in connection with
each Lease prior to the date on which penalties attach thereto.
(o) Casualty Insurance. The Borrower will procure and maintain,
or cause to be procured and maintained, insurance issued by
responsible insurance companies insuring all Related Equipment against
damage and loss by theft, fire, and such other risks as required by
the related Lease, or, if not required by such Lease, in accordance
with the Borrower's insurance standards and procedures as set forth
and described in Schedule 6.5-2 and will furnish evidence of such
insurance (if required) to the Collateral Agent upon request.
(p) No Removal. The Borrower will not permit any Lessee to
remove any Related Equipment from the location of such Related
Equipment specified in a Lease, except for temporary periods not
exceeding thirty (30) days, without prior notice to the Collateral
Agent of the new location or locations. The Borrower will not change
the state of registration of Equipment constituting a motor vehicle
without prior notice to the Collateral Agent of the new state.
(q) Inspection Rights; Reports. The Borrower will permit the
Collateral Agent to examine the Borrower's books and records with
respect to each Lease and make extracts therefrom and copies thereof
at any time and from time to time during normal business hours upon
reasonable notice, and the Borrower will furnish such information and
reports to the Collateral Agent regarding each Lease, and the Related
Equipment as the Collateral Agent may from time to time request. The
Borrower will also permit the Collateral Agent to inspect any item of
Equipment at any time and from time to time during normal business
hours as the Collateral Agent may reasonably request; subject,
however, to the rights of the Lessee under the Lease pursuant to which
any item of Related Equipment is leased.
(r) Assurances. The Borrower will execute from time to time
such financing statements and documents of transfer and arrange for
notations on motor vehicle certificates of title as the Collateral
Agent may reasonably deem appropriate to perfect its security interest
in each Lease, the Related Equipment and related Lease Collateral;
will pay the cost of filing the same in all public offices in which
the Collateral Agent may reasonably deem filing to be appropriate; and
will disclose upon request by the Collateral Agent the name of the
record owner and the legal description of any real property to which
an item of Equipment may be deemed a fixture.
(s) No Changes to Lease Collateral. The Borrower will not waive
or amend or terminate any Lease Collateral without in each case either
the prior written consent of the Collateral Agent or the substitution
of a new Lease in all respects satisfactory to the Collateral Agent.
(t) No Disposition of Collateral or Proceeds. Except for sales
of Leases in accordance with Section 6.9, the Borrower will not sell,
transfer, lease, or grant a security interest in any item of Related
Equipment, or discount or grant a security interest in any Lease,
without in each case the prior written consent of the Collateral
Agent. The Borrower will keep each Lease and the Related Equipment
free and clear of all liens and security interests except those
created by or arising under this Agreement and those created by the
Lease.
(u) Assignment of Insurance. The Borrower hereby assigns to the
Lenders, as additional security for payment of the Obligations, any
and all moneys due or to become due under, and all other rights of the
Borrower with respect to, any and all policies of physical damage
insurance covering the Equipment or any portion thereof, and the
Borrower directs the issuer of any such policy to pay any such moneys
directly to the Collateral Agent unless otherwise provided in the
related Lease. The Collateral Agent may (but need not) in its own
name or in the Borrower's name execute and deliver proofs of claim,
receive such moneys, endorse checks and other instruments representing
such moneys, and settle or litigate any claim against the issuer of
any such policy.
Section 6.4 Servicing. The Borrower shall service the Leases in
a careful and workmanlike manner. The Borrower shall invoice for all
payments due under Leases in accordance with the lockbox procedures
established pursuant to Section 6.7 and shall set up a program for making
reports to the Collateral Agent with respect to the Leases as contemplated
in Section 9.1(c). The Borrower shall collect any sales taxes due on
rental payments made under Leases (or cause such taxes to be collected) and
shall prepare and file any necessary sales tax returns and remit to the
proper authorities the sales taxes collected from Lessees under the Leases.
Notwithstanding the foregoing, upon the occurrence of an Event of Default
the Agent, with the concurrence of the Required Lenders, may notify the
Borrower that all future servicing of Leases shall be undertaken by the
Collateral Agent and the Borrower shall execute such notices of assignment
and directions to pay as the Collateral Agent shall require to notify
Lessees that all future rental payments, payments for physical damage
insurance and all other payments under a Lease shall be payable solely and
exclusively to the Collateral Agent for and on behalf of the Lenders.
Section \10 Credit Approval Standards; Residual Values
Standards; Insurance Standards. The Borrower's existing credit approval
standards used to evaluate potential Lessees under Leases, and the
Borrower's existing standards for establishing Residual Values for Related
Equipment, are set forth and described in Schedule 6.5-1 and the Borrower's
existing procedures and standards for insuring Related Equipment are set
forth and described in Schedule 6.5-2. The Borrower will not change any
such credit approval standards, residual value standards or insurance
standards in any material respect without first obtaining the prior written
consent of the Collateral Agent.
Section 6.6 Account Verification. The Borrower will at any time
and from time to time upon request of the Collateral Agent send requests
for verification of Accounts or outstanding Leases to Lessees, account
debtors and other obligors of or relating to any Collateral.
Section 6.7 Lockbox; Collateral Account.
(a) The Borrower will direct all present and future Lessees to
make all payments constituting Collateral directly to the Lockbox.
All of the Borrower's invoices, account statements and other written
or oral communications directing, instructing, demanding or requesting
payment of Leases shall conspicuously direct that all payments be made
to the Lockbox and shall include the Lockbox address. Until the
occurrence of a Default or Event of Default, all payments received in
a Lockbox shall be processed in the ordinary course to the Borrower's
demand deposit account maintained with the Agent. From and after the
occurrence of a Default or Event of Default, all payments received in
the Lockbox, in the Agent's discretion, shall be processed to the
Collateral Account or to the Borrower's demand deposit account.
(b) From and after receipt of written notice from the Agent
directing it to do so, the Borrower will deposit in the Collateral
Account or, at the Agent's option, deliver to the Agent, all
collections on Leases and other rights to payment constituting
Collateral, and all other cash proceeds of Collateral, which the
Borrower may receive directly, notwithstanding its direction to
Lessees to make payments to the Lockbox, immediately upon receipt
thereof, in the form received, except for the Borrower's endorsement
when deemed necessary. Until delivered to the Agent or deposited in
the Collateral Account, all proceeds or collections of Collateral
shall be held in trust by the Borrower for and as the property of the
Lenders and shall not be commingled with any funds or property of the
Borrower. Amounts deposited in the Collateral Account shall not bear
interest and shall not be subject to withdrawal by the Borrower,
except after full payment and discharge of all Obligations and
termination of the Commitments. All collections shall constitute
proceeds of Collateral and shall not constitute payment of any
Obligation until applied thereto by the Agent. Finally collected
funds from the Collateral Account shall be applied by the Agent to
payment of the Notes in accordance with Section 5.3. All items
delivered to the Agent or deposited in a Collateral Account shall be
subject to final payment. If any such item is returned uncollected,
the Borrower will immediately pay the Agent the amount of that item,
or the Agent in its discretion may charge any uncollected item to the
Borrower's demand deposit account or other account maintained with the
Agent. The Borrower shall be liable as an endorser on all items
deposited in the Collateral Account, whether or not in fact endorsed
by the Borrower.
Section 6.8 Performance of Borrower Obligations. If the
Borrower at any time fails to perform or observe any of the covenants
contained in this Article VI, and if such failure shall continue for a
period of ten (10) calendar days after the Agent or the Collateral Agent
gives the Borrower written notice thereof (or in the case of the agreements
contained in Sections 6.3(n), 6.3(o) or 6.7, immediately upon the
occurrence of such failure, without notice or lapse of time), the Agent or
Collateral Agent may, but need not, perform or observe such covenant on
behalf and in the name, place and stead of the Borrower (or, at the Agent
or Collateral Agent's option, in such Agent's name) and may, but need not,
take any and all other actions which such Agent may reasonably deem
necessary to cure or correct such failure (including, without limitation,
the payment of taxes, the satisfaction of security interests, liens or
encumbrances, the performance of obligations owed to account debtors or
other obligors, the procurement and maintenance of insurance, the execution
of assignments, security agreements and financing statements, and the
endorsement of instruments); and the Borrower shall thereupon pay to the
Agent on demand the amount of all monies expended and all costs and
expenses (including reasonable attorneys' fees and legal expenses) incurred
by the Agent in connection with or as a result of the performance or
observance of such agreements or the taking of such action by the Agent,
together with interest thereon from the date expended or incurred at the
highest Default Rate then applicable to a Note. To facilitate the
performance or observance by an Agent of such covenants of the Borrower,
the Borrower hereby irrevocably appoints each Agent, acting alone, as the
attorney-in-fact of the Borrower with the right (but not the duty) from
time to time to create, prepare, complete, execute, deliver, endorse or
file in the name and on behalf of the Borrower any and all instruments,
documents, assignments, security agreements, financing statements,
applications for insurance and other agreements and writings required to be
obtained, executed, delivered or endorsed by the Borrower under this
Section 6.8.
Section 6.9 Release of Security Interest in Particular Leases.
From time to time upon not less than two (2) Business Days prior written
notice to the Agent and to the Collateral Agent (at its Administrative
Address), but in any event not more frequently than once during any
calendar week, and provided no Default or Event of Default shall have
occurred and shall be continuing under this Agreement, the Collateral Agent
shall release or subordinate (as the Borrower may request) the Security
Interest in such Lease or Leases as the Borrower may specify and shall
redeliver the original of such Lease or Leases to the Borrower so long as:
(a) with respect to Working Capital Leases, the Borrower shall
have provided the Collateral Agent and the Agent with a Collateral
Coverage Certificate certifying that redelivery of any such Lease or
Leases to the Borrower shall not result in a default under the minimum
Collateral Coverage Ratio set forth in Section 9.10; and
(b) with respect to Warehousing Leases, the Borrower shall have
delivered to the Collateral Agent a new Borrowing Base Certificate
certifying that redelivery of any such Lease or Leases to the Borrower
shall not result in Warehousing Advances outstanding exceeding the
Borrowing Base.
In the case of Leases covering Related Equipment in which the Borrower
retains the residual interest, the Collateral Agent shall execute and
deliver a subordination of the Security Interest in such Related Equipment.
In the case of Leases covering Related Equipment in which the Borrower does
not retain the residual interest, the Collateral Agent shall execute and
deliver a release and termination of the Security Interest in such Related
Equipment.
Section 6.10 Financing Statement. A carbon, photographic or
other reproduction of this Agreement or of any financing statements signed
by the Borrower is sufficient as a financing statement and may be filed as
a financing statement in any state to perfect the Security Interest granted
hereby. For this purpose, the following information is set forth:
Name and Address of Debtor:
Capital Associates International, Inc.
Capital Associates Tower
Suite 3000
7175 West Jefferson Avenue
Lakewood, Colorado 80235
Federal Tax Identification No. 84-0724694
Name and Address of Secured Party:
Norwest Equipment Finance, Inc.,
As Collateral Agent
9350 E. Arapahoe Road
Suite 230
Englewood, Colorado 80112
Federal Tax I.D. No. 41-0982880
Section 6.11 Further Documents. The Borrower will from time to
time execute and deliver or endorse any and all instruments, documents,
conveyances, assignments, security agreements, financing statements and
other agreements and writings that either Agent may reasonably request in
order to secure, protect, perfect or enforce the Security Interest or the
rights of the Lenders under this Agreement (but any failure to request or
assure that the Borrower executes, delivers or endorses any such item shall
not affect or impair the validity, sufficiency or enforceability of this
Agreement and the Security Interest, regardless of whether any such item
was or was not executed, delivered or endorsed in a similar context or on a
prior occasion).
Section 6.12 Collateral. This Agreement does not contemplate a
sale by the Borrower to the Lenders of accounts, contract rights or chattel
paper, and, as provided by law, the Borrower is entitled to any surplus and
shall remain liable for any deficiency. The Lenders' and Agents' duty of
care with respect to Collateral in their possession (as imposed by law)
shall be deemed fulfilled if reasonable care is exercised in physically
keeping such Collateral, or in the case of Collateral in the custody or
possession of a bailee or other third person, if reasonable care is
exercised in the selection of the bailee or other third person, and the
Lenders and Agents need not otherwise preserve protect, insure or care for
any Collateral. Neither the Lenders nor any Agent shall be obligated to
preserve any rights the Borrower may have against prior parties, to realize
on the Collateral at all or in any particular manner or order or to apply
any cash proceeds of the Collateral in any particular order of application.
Section 6.13 Security Interest in Motor Vehicles. With respect
to all Related Equipment that is a motor vehicle subject to a certificate
of title act, the Borrower shall take such steps as may be necessary to
have the Collateral Agent shown on the related certificate of title as
secured party and shall deliver possession of such completed certificate of
title to the Collateral Agent. As to all Related Equipment that is a motor
vehicle subject to a certificate of title act and is existing as of the
Closing Date, the Borrower shall proceed diligently and in good faith to
have the Collateral Agent shown as the sole and exclusive secured party
thereon and shall promptly deliver to the Collateral Agent each such
certificate of title in such form not later than ninety (90) days following
the Closing Date.
ARTICLE VII
CONDITIONS OF LENDING
Section 7.1 Conditions Precedent to Funding the Term Loans and
Initial Advances. The obligation of the Lenders to fund the Term Loans and
the Initial Advances hereunder is subject to the condition precedent that
the Agent or the Collateral Agent, as the case may be, shall have received
on or before such day the following, each in form and substance
satisfactory to the Agent:
(a) This Agreement, properly executed on behalf of the Borrower
and each Lender.
(b) The Notes, properly executed on behalf of the Borrower.
(c) The Guaranty of each Guarantor, properly executed on behalf
of such Guarantor.
(d) An Aircraft Security Agreement describing the Aircraft in
appropriate detail, properly executed on behalf of the Borrower,
together with appropriate searches of filing records of the Federal
Aviation Administration demonstrating that the Security Interest
granted in the Aircraft constitutes a first and prior lien on and
security interest in the Aircraft, subject to no other liens, claims
or interests of any other Person.
(e) A Pledge and Security Agreement, properly executed on behalf
of the Parent, together with original stock certificates (and stock
powers signed in blank) representing all issued and outstanding common
stock of the Borrower, CAI Equipment Leasing I Corp., CAI Equipment
Leasing II Corp., CAI Equipment Leasing III Corp., CAI Equipment
Leasing IV Corp. and CAI Securities Corporation and all common stock
owned by the Parent of CAI (Japan), Inc.
(f) A Pledge and Security Agreement, properly executed on behalf
of CAI Equipment Leasing I Corp., CAI Equipment Leasing III Corp., CAI
Equipment Leasing IV Corp. and CAI Partners Management Company,
pledging their respective general partnership interests in all public
income fund partnerships owned by each of them, together with copies
of the partnership agreements with respect thereto and duly executed
confirmation of pledge and notification of pledge letters in form and
content acceptable to the Agent.
(g) Original stock certificates representing all of the issued
and outstanding common stock of CAI Partners Management Company,
Capital Equipment Corporation, CAI Lease Securitization I Corp. and
CAI Leasing Canada, LTD., together with stock powers executed in blank
by the Borrower.
(h) Partnership Agreements with respect to the limited
partnership interests owned by the Borrower in all outstanding public
income funds, together with duly executed confirmation of pledge and
notification of pledge letters in form and content acceptable to the
Agent.
(i) Originals of all Leases constituting Eligible Leases,
together with all Lease Collateral related thereto.
(j) Evidence satisfactory to the Collateral Agent establishing
that financing statements naming the Borrower as debtor and describing
all Collateral have been filed in the appropriate filing office (or
offices) in each jurisdiction in which Collateral is located.
(k) Evidence satisfactory to the Collateral Agent establishing
that financing statements naming each Guarantor named in subsection
(f) above as debtor and describing the collateral covered by the
respective Pledge and Security Agreement of such Guarantors have been
filed in the appropriate filing office (or offices) in each
jurisdiction in which collateral thereunder is located.
(l) Current searches of appropriate filing offices (including,
without limitation, patent and trademark offices, secretaries of state
and county recorders) showing that no state or federal tax liens have
been filed and remain in effect against the Borrower or any Guarantor,
and no financing statements or other notifications or filings have
been filed and remain in effect against the Borrower or any Guarantor,
other than any such filings (i) which will be released of record upon
payment to Mellon Bank, N.A. of proceeds of the Term Loans, (ii) with
respect to Related Equipment securing Non-Recourse Debt of the
Borrower or (iii) relating to Leases sold by the Borrower.
(m) The Collateral Account and Lockbox Agreement, duly executed
by the Borrower and the Agent, pursuant to which the Collateral
Account and the Lockbox are established under the sole and exclusive
control of the Agent.
(n) A certified copy of the resolutions of the board of
directors of the Borrower evidencing approval of all Loan Documents
and the other matters contemplated hereby.
(o) A certified copy of the resolutions of the board of
directors of each Guarantor evidencing approval of the respective
Guaranty to be executed by such Guarantor and, to the extent
applicable, approval of the respective Pledge and Security Agreement
to be executed by such Guarantor.
(p) Copies of the articles of incorporation and bylaws of the
Borrower, certified by the Secretary or Assistant Secretary of the
Borrower as being true and correct copies thereof.
(q) Copies of the articles of incorporation and bylaws of each
Guarantor, certified by the Secretary or Assistant Secretary of each
such Guarantor as being true and correct copies thereof.
(r) A certificate of good standing of the Borrower from the
State of Colorado, dated not more than sixty (60) days prior to the
date hereof.
(s) A certificate of good standing of each Guarantor from the
respective state of its incorporation, dated not more than sixty (60)
days prior to the date hereof.
(t) A signed copy of a certificate of the Secretary or an
Assistant Secretary of the Borrower which shall certify the names of
the officers of the Borrower authorized to sign the Loan Documents and
the other documents or certificates to be delivered pursuant to this
Agreement by the Borrower or any of its officers, including requests
for Term Loans and Advances, together with the true signatures of such
officers. The Agent may conclusively rely on such certificate until
it shall receive a further certificate of the Secretary or Assistant
Secretary of the Borrower canceling or amending the prior certificate
and submitting the signatures of the officers named in such further
certificate.
(u) A signed copy of a certificate of the Secretary or an
Assistant Secretary of each Guarantor which shall certify the names of
the officers of such Guarantor authorized to sign such Guarantor's
respective Guaranty and, if applicable, Pledge and Security Agreement,
and the other documents or certificates to be delivered pursuant
thereto by such Guarantor or any of its officers, together with true
signatures of such officers.
(v) A signed copy of an opinion of counsel for the Borrower and
each Guarantor, addressed to the Lenders, in form and content
acceptable to the Lenders.
(w) Certificates of insurance covering the Inventory Aircraft
naming the Collateral Agent as loss payee, together with an acceptable
lender's loss payable endorsement.
(x) A Borrowing Base Certificate and a Collateral Coverage
Certificate, each dated not more than five (5) days prior to the date
hereof and duly executed on behalf of the Borrower, together with
current leasing and servicing reports required pursuant to Section
9.1(c).
0Q3 A collateral audit report satisfactory to the Lenders.
(z) Audited consolidated financial statements of the Parent
acceptable to the Agents for the period ended May 31, 1994 and
unaudited consolidated balance sheets of the Parent for the quarter
ended August 31, 1994.
(aa) Evidence satisfactory to the Lenders that no material
adverse change shall have occurred since the date of the audited
financial statements referred to in subsection (z) above with respect
to the Borrower or its businesses or prospects.
(bb) Payment of all fees and expenses then due and payable
pursuant to Sections 5.1 and 13.4 hereof.
Section 7.2 Conditions Precedent to All Advances. The
obligation of the Lenders to make each Advance shall be subject to the
further conditions precedent that on such date:
(a) the representations and warranties contained in Article VIII
hereof are correct on and as of the date of such Advance as though
made on and as of such date, except to the extent that such
representations and warranties relate solely to an earlier date; and
(b) no event has occurred and is continuing, or would result
from such Advance, which constitutes a Default or an Event of Default.
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Lenders as follows:
Section 8.1 Corporate Existence and Power; Name; Chief Executive
Office; Inventory and Equipment Locations. The Borrower is a corporation
duly incorporated, validly existing and in good standing under the laws of
the State of Colorado, and is duly licensed or qualified to transact
business in all jurisdictions where the character of the property owned or
leased or the nature of the business transacted by it makes such licensing
or qualification necessary. The Borrower has all requisite power and
authority, corporate or otherwise, to conduct its business, to own its
properties and to execute and deliver, and to perform all of its
obligations under, the Loan Documents. Within the last twelve months, the
Borrower has done business solely under the names set forth in Schedule
8.1-1. The chief executive office and principal place of business of the
Borrower is located at the address set forth on the signature pages hereof,
and all of the Borrower's records relating to its businesses or the
Collateral are kept at that location. All Inventory and Equipment is
located at that location or at one of the other locations set forth in
Schedule 8.1-2. The Borrower's tax identification number is correctly set
forth in Section 6.10.
Section 8.2 Authorization of Borrowing; No Conflict as to Law or
Agreements. The execution, delivery and performance by the Borrower of the
Loan Documents and the Borrowings from time to time hereunder have been
duly authorized by all necessary corporate action and do not and will not
(a) require any consent or approval of the stockholders of the Borrower,
(b) require any authorization, consent or approval by, or registration,
declaration or filing with, or notice to, any governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign,
or any third party, except such authorization, consent, approval,
registration, declaration, filing or notice as has been obtained,
accomplished or given prior to the date hereof, (c) violate any provision
of any law, rule or regulation (including, without limitation, Regulation X
of the Board of Governors of the Federal Reserve System) or of any order,
writ, injunction or decree presently in effect having applicability to the
Borrower or of the Articles of Incorporation or Bylaws of the Borrower,
(d) result in a breach of or constitute a default under any indenture or
loan or credit agreement or any other material agreement, lease or
instrument to which the Borrower is a party or by which it or its
properties may be bound or affected, or (e) result in, or require, the
creation or imposition of any mortgage, deed of trust, pledge, lien,
security interest or other charge or encumbrance of any nature upon or with
respect to any of the properties now owned or hereafter acquired by the
Borrower.
Section 8.3 Legal Agreements. The Loan Documents constitute the
legal, valid and binding obligations and agreements of the Borrower,
enforceable against the Borrower in accordance with their respective terms,
except to the extent the enforcement thereof may be limited by any
applicable bankruptcy, insolvency or similar laws now or hereafter in
effect affecting creditors' rights generally.
Section 8.4 Subsidiaries. Neither the Parent nor the Borrower
has any Subsidiaries other than those set forth in Schedule 8.4.
Section 8.5 Financial Condition; No Adverse Change. The
Borrower has heretofore furnished to the Agent audited consolidated
financial statements of the Parent for its fiscal year ended May 31, 1994
and unaudited consolidated financial statements of the Parent for the
quarter ended August 31, 1994, and those statements fairly present the
financial condition of the Parent and its Subsidiaries on the dates thereof
and the results of its operations and cash flows for the periods then
ended and were prepared in accordance with GAAP. Since the date of the
most recent financial statements, there has been no material adverse change
in the business, properties or condition (financial or otherwise) of the
Parent and its Subsidiaries.
Section 8.6 Litigation. There are no actions, suits or
proceedings pending or, to the knowledge of the Borrower, threatened
against or affecting the Borrower or any Guarantor or the properties of the
Borrower or any Guarantor before any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign,
which, if determined adversely to the Borrower or any Guarantor, would have
a material adverse effect on the financial condition, properties or
operations of the Borrower or any Guarantor, except as set forth and
described in Schedule 8.6.
Section 8.7 Regulation U. The Borrower is not engaged in the
business of extending credit for the purpose of purchasing or carrying
margin stock (within the meaning of Regulation U of the Board of Governors
of the Federal Reserve System), and no part of the proceeds of any Advance
will be used to purchase or carry any margin stock or to extend credit to
others for the purpose of purchasing or carrying any margin stock.
Section 8.8 Taxes. The Borrower and each Guarantor has paid or
caused to be paid to the proper authorities when due all federal, state and
local taxes required to be withheld by it. The Borrower and each Guarantor
has filed all federal, state and local tax returns which to the knowledge
of the officers of the Borrower or such Guarantor, are required to be
filed, and the Borrower has paid or caused to be paid to the respective
taxing authorities all taxes as shown on said returns or on any assessment
received by it to the extent such taxes have become due.
Section 8.9 Titles and Liens. The Parent or a Subsidiary of the
Parent has good and absolute title to all properties and assets reflected
in the latest balance sheet referred to in Section 8.5, free and clear of
all mortgages, security interests, liens and encumbrances, except for (i)
mortgages, security interests and liens permitted by Section 10.1, and (ii)
covenants, restrictions, rights, easements and minor irregularities in
title which do not materially interfere with the business or operations of
the Parent or any such Subsidiary as presently conducted. No financing
statement naming the Borrower as debtor is on file in any office except to
perfect security interests permitted by Section 10.1.
Section 8.10 Plans. Except as set forth in Schedule 8.10, the
Borrower does not maintain and has not in the past maintained any Plan.
The Borrower has not received any notice or has any knowledge to the effect
that it is not in compliance in all material respects with any of the
requirements of ERISA. To the best of the Borrower's knowledge, no
Reportable Event or other fact or circumstance which may have an adverse
effect on the Plan's tax qualified status exists in connection with any
Plan. The Borrower does not have:
(a) any accumulated funding deficiency within the meaning of
ERISA; or
(b) any material liability, or know of any material fact or
circumstances which could result in any liability, to the Pension
Benefit Guaranty Corporation, the Internal Revenue Service, the
Department of Labor or any participant in connection with any Plan
(other than accrued benefits which or which may become payable to
participants or beneficiaries of any such Plan).
Section 8.11 Default. The Borrower and each Guarantor is in
compliance with all provisions of all agreements, instruments, decrees and
orders to which it is a party or by which it or its property is bound or
affected, the breach or default of which could have a material adverse
effect on the financial condition, properties or operations of the Borrower
or such Guarantor.
Section 8.12 Environmental Protection. The Borrower and each
Guarantor have obtained all permits, licenses and other authorizations
which are required under federal, state and local laws and regulations
relating to emissions, discharges, releases of pollutants, contaminants,
hazardous or toxic materials, or wastes into ambient air, surface water,
ground water or land, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
pollutants, contaminants or hazardous or toxic materials or wastes
("Environmental Laws") at such party's facilities or in connection with the
operation of its facilities. Except as previously disclosed to the Agent
in writing, the Borrower and each Guarantor and all activities of the
Borrower and each Guarantor at its facilities comply with all Environmental
Laws and with all terms and conditions of any required permits, licenses
and authorizations applicable to the Borrower with respect thereto. Except
as previously disclosed to the Agent in writing, the Borrower and each
Guarantor is also in compliance with all limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations, schedules
and timetables contained in Environmental Laws or contained in any plan,
order, decree, judgment or notice of which the Borrower and each Guarantor
is aware. Except as previously disclosed to the Agent in writing, the
Borrower and each Guarantor are not aware of, nor has the Borrower or any
Guarantor received notice of, any events, conditions, circumstances,
activities, practices, incidents, actions or plans which may interfere with
or prevent continued compliance with, or which may give rise to any
liability under, any Environmental Laws.
Section 8.13 Submissions to Agents. All financial and other
information provided to the Agent or the Collateral Agent by or on behalf
of the Borrower or any Guarantor as to any Collateral or otherwise in
connection with the Borrower's request for the Facilities contemplated
hereby is true and correct in all material respects and, as to projections,
valuations or pro forma financial statements, present a good faith opinion
as to such projections, valuations and pro forma condition and results.
Section 8.14 Financing Statements. The Borrower has signed and
filed financing statements sufficient to perfect the Security Interest, to
the extent the Security Interest can be perfected by filing. The Lenders
have a valid and perfected security interest in all Collateral which is
capable of being perfected by the filing of financing statements, subject
to no prior security interest, assignment, lien or encumbrance except
interests, if any, permitted by Section 10.1.
ARTICLE IX
AFFIRMATIVE COVENANTS OF THE BORROWER
So long as any Note shall remain unpaid or any Commitment shall
be outstanding, the Borrower will comply with the following covenants,
unless the Required Lenders shall otherwise consent in writing:
Section 9.1 Reporting Requirements. The Borrower will deliver,
or cause to be delivered, to the Agent each of the following, which shall
be in form and detail acceptable to the Agent:
(a) as soon as available, and in any event within one hundred
and five (105) days after the end of each fiscal year of the Parent,
audited consolidated financial statements of the Parent with the
unqualified opinion of independent certified public accountants
selected by the Parent and acceptable to the Agent, which annual
financial statements shall include the balance sheet of the Parent as
at the end of such fiscal year and the related statements of income,
retained earnings and cash flows of the Parent for the fiscal year
then ended, prepared, if the Agent so requests, on a consolidating and
consolidated basis to include all Subsidiaries of the Parent, all in
reasonable detail and prepared in accordance with GAAP applied on a
basis consistent with the accounting practices applied in the
financial statements referred to in Section 8.5, together with (i) a
report signed by such accountants stating that in making the
investigations necessary for said opinion they obtained no knowledge,
except as specifically stated, of any Default or Event of Default
hereunder and all relevant facts in reasonable detail to evidence, and
the computations as to, whether or not the Borrower is in compliance
with the requirements set forth in Sections 9.9 through 9.12; and
(ii) a certificate of the chief financial officer of the Parent and of
the Borrower, substantially in the form of Exhibit J, stating that
such financial statements have been prepared in accordance with GAAP
applied on a basis consistent with the accounting practices reflected
in the annual financial statements referred to in Section 8.5 hereof
and whether or not either such officer has knowledge of the occurrence
of any Default or Event of Default hereunder and, if so, stating in
reasonable detail the facts with respect thereto;
(b) as soon as available and in any event within thirty-five
(35) days after the end of each month, an unaudited/internal
consolidated balance sheet and statement of income and retained
earnings of the Parent as at the end of and for such month and for the
year to date period then ended, prepared, if the Agent so requests, on
a consolidating and consolidated basis to include all Subsidiaries of
the Parent, in reasonable detail and stating in comparative form the
figures for the corresponding date and periods in the previous year,
all prepared in accordance with GAAP applied on a basis consistent
with the accounting practices reflected in the financial statements
referred to in Section 8.5, subject to year-end audit adjustments; and
accompanied by a certificate of the chief financial officer of the
Parent and of the Borrower, substantially in the form of Exhibit J,
stating (i) that such financial statements have been prepared in
accordance with GAAP applied on a basis consistent with the accounting
practices reflected in the financial statements referred to in Section
8.5, subject to year-end audit adjustments, (ii) whether or not either
such officer has knowledge of the occurrence of any Default or Event
of Default hereunder not theretofore reported and remedied and, if so,
stating in reasonable detail the facts with respect thereto, and
(iii) all relevant facts in reasonable detail to evidence, and the
computations as to, whether or not the Borrower is in compliance with
the requirements set forth in Sections 9.9 through 9.12;
(c) within fifteen (15) days after the end of each month, a
properly completed and executed Borrowing Base Certificate and
Collateral Coverage Certificate, together with such servicing and
other reports relating to the Leases and the Other Investment Assets
as either Agent may, reasonably request;
(d) not later than sixty (60) days following the beginning of
each fiscal year of the Parent, the projected balance sheets and
income statements for each month of such year, each in reasonable
detail, representing the good faith projections of the Parent and
certified by the Parent's and the Borrower's chief financial officer
as being the most accurate projections available and identical to the
projections used for internal planning purposes, together with such
supporting schedules and information as the Agent in its discretion
may reasonably require;
(e) promptly after the commencement thereof, notice in writing
of all litigation and of all proceedings before any governmental or
regulatory agency affecting the Borrower or any Guarantor of the type
described in Section 8.6 or which seek a monetary recovery against the
Borrower in excess of $100,000;
(f) as promptly as practicable (but in any event not later than
five (5) Business Days) after an officer of the Borrower obtains
knowledge of the occurrence of any breach, default or event of default
under any Loan Document or any event which constitutes a Default or
Event of Default hereunder, notice of such occurrence, together with a
detailed statement by a responsible officer of the Borrower of the
steps being taken by the Borrower to cure the effect of such breach,
default or event of default;
(g) as soon as possible and in any event within thirty (30) days
after the Borrower knows or has reason to know that any Reportable
Event with respect to any Plan has occurred, the statement of the
chief financial officer of the Borrower setting forth details as to
such Reportable Event (including whether or not notice thereof has
been waived) and the action which the Borrower proposes to take with
respect thereto, together with a copy of the notice of such Reportable
Event to the Pension Benefit Guaranty Corporation (if given);
(h) as soon as possible, and in any event within ten (10) days
after the Borrower or any Guarantor fails to make any quarterly
contribution required with respect to any Plan under Section 4.12(m)
of the Internal Revenue Code of 1986, as amended, the statement of the
chief financial officer of the Borrower or such Guarantor setting
forth details as to such failure and the action which the Borrower or
such Guarantor proposes to take with respect thereto, together with a
copy of any notice of such failure required to be provided to the
Pension Benefit Guaranty Corporation;
(i) promptly upon their distribution, copies of all financial
statements, reports and proxy statements which the Parent shall have
sent to its stockholders;
(j) promptly after the sending or filing thereof, copies of all
regular and periodic financial reports which the Parent shall file
with the Securities and Exchange Commission or any national securities
exchange;
(k) promptly upon knowledge thereof, notice of the violation by
the Borrower or any Guarantor of any law, rule or regulation, the non-
compliance with which, in the Borrower's reasonable opinion is likely
to materially and adversely affect its business or its financial
condition; and
(l) from time to time, with reasonable promptness, any and all
lease reports, receivables schedules, collection reports, deposit
records, equipment schedules, copies of invoices to Lessees or other
account debtors, shipment documents and delivery receipts for
Equipment, and such other material, reports, records or information as
either Agent from time to time may reasonably request.
Section 9.2 Books and Records; Inspection and Examination. The
Borrower and each Guarantor will keep accurate books of record and account
for itself pertaining to the Borrower's business and financial condition
and such other matters as either Agent may from time to time request in
which true and complete entries will be made in accordance with GAAP
consistently applied and, upon request of an Agent (and reasonable notice
if an Event of Default is not then continuing), will permit any officer,
employee, attorney or accountant for any Agent to audit, review, make
extracts from or copy any and all corporate and financial books and records
of the Borrower and each Guarantor at all times during ordinary business
hours, to send and discuss with account debtors and other obligors requests
for verification of amounts owed to the Borrower, and to discuss the
affairs of the Borrower and each Guarantor with any of its directors,
officers, employees or agents. The Borrower will permit the Agents (and
either of them), or their employees, accountants, attorneys or agents (upon
reasonable notice if an Event of Default is not then continuing), to
examine and inspect any property of the Borrower or any Guarantor at any
time during ordinary business hours, subject, however, to the rights of any
Lessee with respect to any Related Equipment.
Section 9.3 Account Verification. The Borrower will, and will
cause each Guarantor to, at any time and from time to time upon request of
an Agent send requests for verification of any Collateral or notices of
assignment to Lessees and other account debtors and obligors.
Section 9.4 Compliance with Laws; Environmental Indemnity. The
Borrower will, and will cause each Guarantor to, (a) comply with the
requirements of applicable laws and regulations, the non-compliance with
which would materially and adversely affect its business or its financial
condition, (b) comply with all applicable Environmental Laws and obtain
any permits, licenses or similar approvals required by any such
Environmental Laws, and (c) use and keep the Collateral, and will require
that others use and keep the Collateral, only for lawful purposes, without
violation of any federal, state or local law, statute or ordinance. The
Borrower will indemnify, defend and hold the Lenders harmless from and
against any claims, loss or damage to which any Lender may be subjected as
a result of any past, present or future existence, use, handling, storage,
transportation or disposal of any hazardous waste or substance or toxic
substance by the Borrower or on property owned, leased or controlled by the
Borrower. This indemnification agreement shall survive the termination of
this Agreement and payment of all Obligations.
Section 9.5 Payment of Taxes and Other Claims. The Borrower
will pay or discharge (or cause Lessees to pay or discharge), and will
cause each Guarantor to pay or discharge, when due, (a) all taxes,
assessments and governmental charges levied or imposed upon it or upon its
income or profits, upon any properties belonging to it (including, without
limitation, the Collateral) prior to the date on which penalties attach
thereto, (b) all federal, state and local taxes required to be withheld by
it, and (c) all lawful claims for labor, materials and supplies which, if
unpaid, might by law become a lien or charge upon any properties of the
Borrower or any Guarantor; provided, that no such party shall be required
to pay any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith by appropriate
proceedings.
Section 10K Maintenance of Properties. The Borrower will keep
and maintain all of its Equipment (or cause each Lessee to keep and
maintain all Related Equipment), records, computers and other properties
necessary or useful in conducting its business in good condition, repair
and working order (normal wear and tear excepted); provided, however, that
nothing in this Section 9.6 shall prevent the Borrower from discontinuing
the operation and maintenance of any of its properties if such
discontinuance is, in the reasonable judgment of the Borrower, desirable in
the conduct of the Borrower's business and not disadvantageous in any
material respect to the Lenders.
Section 9.7 Insurance. The Borrower will obtain and at all
times maintain, or cause Lessees to obtain and maintain (with respect to
Related Equipment) insurance with insurers believed by the Borrower to be
responsible and reputable, in such amounts and against such risks as is
usually carried by companies engaged in similar business and owning similar
properties in the same general areas in which the Borrower operates, in any
event, in accordance with the Borrower's insurance standards and procedures
as set forth and described in Schedule 6.5-2. In addition, within ninety
(90) days after the Closing Date, the Borrower will cause the Collateral
Agent to be named as loss payee on each policy of insurance insuring
Related Equipment with respect to any Eligible Lease.
Section 9.8 Preservation of Corporate Existence. The Borrower
will, and will cause each Guarantor to, preserve and maintain its corporate
existence and all of its rights, privileges and franchises necessary or
desirable in the normal conduct of its business and shall conduct its
business in an orderly, efficient and regular manner; provided, however,
that any Subsidiary may liquidate or dissolve voluntarily into, and may
merge with and into, the Parent, the Borrower or any other Guarantor and
any Subsidiary may be dissolved or otherwise liquidated so long as the
resulting assets are transferred to the Parent or the Borrower.
Section 9.9 Interest Coverage Ratio. The Borrower will ensure
that the Parent, on a consolidated basis, maintains at all times the
Interest Coverage Ratio of the Parent and its consolidated Subsidiaries at
not less than 1.20 to 1.00.
Section 9.10 Minimum Collateral Coverage Ratio. The Borrower
will maintain at all times its Collateral Coverage Ratio at not less than
1.25 to 1.00.
Section 9.11 Leverage Ratio. The Borrower will ensure that the
Parent, on a consolidated basis, maintains at all times the Leverage Ratio
of the Parent and its consolidated Subsidiaries at not greater than 2.50 to
1.00.
Section 9.12 Minimum Tangible Net Worth. The Borrower will
ensure that the Parent, on a consolidated basis, maintains at all times the
Tangible Net Worth of the Parent and its consolidated Subsidiaries at not
less (i) than $20,000,000 plus (ii) seventy-five percent (75%) of the
Parent's consolidated annual net income determined in accordance with GAAP
(with no deduction for a loss) for each year commencing with the year
ending May 31, 1995.
Section 9.13 Cash Flow Coverage Ratio. The Borrower will ensure
that the Parent, on a consolidated basis, maintains at all times its Cash
Flow Coverage Ratio at not less than 1.40 to 1.00.
Section 9.14 Non-Residual Collateral Coverage Ratio. The
Borrower will maintain at all times from and after February 28, 1996 its
Non-Residual Collateral Coverage Ratio at not less than 1.15 to 1.00.
Section 9.15 Equipment Classification Concentration Limit. The
Borrower will at no time permit the adjusted net book value of an Equipment
type (as set forth and described in Schedule 9.15) to be greater than
fifteen percent (15%) of the total adjusted net book value of all of the
Borrower's Equipment.
ARTICLE X
NEGATIVE COVENANTS
So long as any Note shall remain unpaid or any Commitment shall
remain outstanding, the Borrower will comply with the following covenants,
unless the Required Lenders shall otherwise consent in writing.
Section 10.1 Liens. The Borrower will not, and will not permit
any Guarantor to, create, incur or suffer to exist any mortgage, deed of
trust, pledge, lien, security interest, assignment or transfer upon or of
any of its assets, now owned or hereafter acquired, to secure any
indebtedness; excluding, however, from the operation of the foregoing:
(a) the Security Interest;
(b) mortgages, deeds of trust, pledges, liens, security
interests and assignments in existence on the date hereof and listed
in Schedule 10.0;
(c) liens for taxes or assessments or other governmental charges
to the extent not required to be paid by Section 9.5;
(d) materialmen's, merchants', carriers', worker's, repairer's,
or other like liens arising in the ordinary course of business to the
extent not required to be paid by Section 9.5;
(e) pledges or deposits to secure obligations under worker's
compensation laws, unemployment insurance and social security laws, or
to secure the performance of bids, tenders, contracts (other than for
the repayment of borrowed money) or leases or to secure statutory
obligations or surety or appeal bonds, or to secure indemnity,
performance or other similar bonds in the ordinary course of business;
(f) zoning restrictions, easements, licenses, restrictions on
the use of real property or minor irregularities in title thereto,
which do not materially impair the use of such property in the
operation of the business of the Borrower or the value of such
property for the purpose of such business; and
(g) liens securing Non-Recourse Debt, provided that such liens
shall extend to or cover only the Leases funded by such Non-Recourse
Debt, payments due under such Leases and the Related Equipment covered
by such Leases.
Section 10.2 Indebtedness. The Borrower will not, and will not
permit any Guarantor to, incur, create, assume or permit to exist any
recourse indebtedness or liability on account of deposits or advances or
any recourse indebtedness for borrowed money, or any other recourse
indebtedness or liability evidenced by notes, bonds, debentures or similar
obligations, except:
(a) Obligations arising hereunder;
(b) indebtedness in existence on the date hereof and listed in
Schedule 10.0; and
(c) Non-Recourse Debt.
Section 10.3 Guaranties. The Borrower will not, and will not
permit any Guarantor to, assume, guarantee, endorse or otherwise become
directly or contingently liable in connection with any obligations of any
other Person, except:
(a) the endorsement of negotiable instruments by the Borrower
for deposit or collection or similar transactions in the ordinary
course of business; and
(b) guaranties, endorsements and other direct or contingent
liabilities in connection with the obligations of other Persons in
existence on the date hereof and listed in Schedule 10.0.
Section 10.4 Investments. The Borrower will not, and will not
permit any Guarantor to, purchase or hold beneficially any stock or other
securities or evidences of indebtedness of, make or permit to exist any
loans or advances to, or make any investment or acquire any interest
whatsoever in, any other Person, including specifically but without
limitation any partnership or joint venture, except:
(a) investments in Subsidiaries of the Borrower or the Parent as
shown and described in Schedule 10.0;
(b) investments in direct obligations of the United States of
America or any agency or instrumentality thereof whose obligations
constitute full faith and credit obligations of the United States of
America having a maturity of one year or less, commercial paper issued
by U.S. corporations rated "A-1" or "A-2" by Standard & Poors
Corporation or "P-1" or "P-2" by Moody's Investors Service or
certificates of deposit or bankers' acceptances having a maturity of
one year or less issued by members of the Federal Reserve System
having deposits in excess of $100,000,000 (which certificates of
deposit or bankers' acceptances are fully insured by the Federal
Deposit Insurance Corporation);
(c) investments in Leases, conditional sales agreements and
loans to customers of the Borrower secured by Equipment purchased by
the Borrower and sold, or to be sold or leased, to such customer, and
progress payments and other investments for the purchase of Equipment;
provided, that, in each such case the Equipment with respect to which
any such Lease, conditional sales agreement, loan or other investment
is made is the subject of a commitment to purchase or lease the
related Equipment by a customer of the Borrower meeting the credit
standards set forth in Schedule 6.5-1;
(d) investments in general partnership and class B limited
partnership interests in public income fund partnerships, provided
that any such general or limited partnership interest is pledged to
the Lenders as additional Collateral hereunder;
(e) investments not to exceed $400,000 at any time outstanding
in loans to brokers for purchases of equipment for resale; and
(f) investments in loans by the Borrower to the Parent solely
for the purpose of providing the Parent with funds needed by the Parent to
repay principal which has been demanded under one or more of the Parent
Demand Notes: provided, however, that any such loans by the Borrower to
the Parent may be made only if (i) no Default or Event of Default shall
have occurred and is existing under this Agreement as of the date such loan
is made and (ii) the Borrower shall have delivered to the Agent a
certificate establishing that, upon funding of any such loan, the Borrower
will not thereafter be in Default under any covenant, agreement or
provision of this Agreement.
Section 10.5 Restricted Payments. The Borrower will not, and
will not permit any Guarantor to, declare or pay any dividends on any
shares of any class of stock of the Borrower or any Guarantor or directly
or indirectly apply any assets of the Borrower or any Guarantor to the
redemption, retirement, purchase or other acquisition of any shares of any
class of stock of the Borrower or any Guarantor, except:
(a) payments by Subsidiaries of the Borrower to the Borrower;
(b) payments by Subsidiaries of the Parent to the Parent which,
in turn, are contributed by the Parent to the Borrower as additional
equity; and
(c) dividends or similar payments by the Borrower to the Parent
solely for the purpose of providing the Parent with funds needed by
the Parent to repay principal which has been demanded under one or
more the Parent Demand Notes; provided, however, that any such
dividends or payments by the Borrower to the Parent may be made only
if (i) no Default or Event of Default shall have occurred and is
existing under this Agreement as of the date such dividends or
payments are made and (ii) the Borrower shall have delivered to the
Agent a certificate establishing that, upon funding of any such
dividends or payments, the Borrower will not thereafter be in Default
under any covenant, agreement or provision of this Agreement.
Section 10.6 Sale or Transfer of Assets; Suspension of Business
Operations. The Borrower will not, and will not permit any Guarantor to,
sell, lease, assign, transfer or otherwise dispose of the stock of any
Guarantor or Borrower or all or a substantial part of its assets (whether
in one transaction or in a series of transactions) to any other Person
other than the sale of Leases in the ordinary course of business, and will
not liquidate, dissolve or suspend its business operations.
Section 10.7 Consolidation and Merger; Asset Acquisitions. The
Borrower will not, and will not permit any Guarantor to, consolidate with
or merge into any Person, or permit any other Person to merge into it, or
acquire (in a transaction analogous in purpose or effect to a consolidation
or merger) all or substantially all the assets of any other Person, unless
the Borrower or a Guarantor survives as the sole remaining entity.
Section 10.8 Sale and Leaseback. The Borrower will not, and
will not permit any Guarantor to, enter into any arrangement, directly or
indirectly, with any other Person whereby the Borrower or any Guarantor
shall sell or transfer any real or personal property, whether now owned or
hereafter acquired, and then or thereafter rent or lease as lessee such
property or any part thereof or any other property which the Borrower or
any Guarantor intends to use for substantially the same purpose or purposes
as the property being sold or transferred.
Section 10.9 Restrictions on Nature of Business. The Borrower
will not, and will not permit any Guarantor to, engage in any line of
business materially different from that presently engaged in by the
Borrower or any such Guarantor and will not purchase, lease or otherwise
acquire assets not related to its business.
Section 10.10 Accounting. The Borrower will not, and will not
permit any Guarantor to, adopt any material change in accounting principles
other than as required by generally accepted accounting principles. The
Borrower will not, and will not permit any Guarantor to, adopt, permit or
consent to any change in its fiscal year.
Section 10.11 Change in Management, Ownership or Control. The
Borrower will not issue or sell any capital stock of the Borrower so as to
change the percentage of voting stock currently owned by the Parent and
will not permit more than one of the following key executives to leave the
employ of the Borrower during any period of twelve (12) calendar months:
Dennis J. Lacey
John E. Christensen
Richard H. Robinson
Anthony M. DiPaolo
John F. Olmstead
ARTICLE XI
EVENTS OF DEFAULT; RIGHTS AND REMEDIES
Section 11.1 Events of Default. "Event of Default", wherever
used herein, means any one of the following events:
(a) Default in the payment of any interest on or principal of
any Note when it becomes due and payable; or
(b) Default in the payment of any fees, costs or expenses
required to be paid by the Borrower under this Agreement or any other
Loan Document and the continuance of such default for a period of five
(5) calendar days after demand therefor from the Agent; or
(c) Default in the making of any mandatory prepayment of
principal of Advances or Term Loans, as the case may be, when required
under Section 5.2(c), and the continuance of such default for a period
of five (5) calendar days after demand therefor by the Agent; or
(d) Default in the performance, or breach, of any covenant or
agreement on the part of the Borrower contained in Section 6.4 or in
Sections 9.9 through 9.12 hereof and the continuance of such default
for a period of five (5) calendar days after notice thereof from the
Agent; or
(e) Default in the performance, or breach, of any covenant or
agreement of the Borrower in this Agreement other than a covenant or
agreement a default in whose performance or whose breach is elsewhere
in this Section specifically dealt with), and the continuance of such
default or breach for a period of thirty (30) days after there has
been given a written notice specifying such default or breach and
requiring it to be remedied; or
(f) The Borrower or any Guarantor shall be or become insolvent,
or admit in writing its inability to pay its debts as they mature, or
make an assignment for the benefit of creditors; or the Borrower or
any Guarantor shall apply for or consent to the appointment of any
receiver, trustee, or similar officer for it or for all or any
substantial part of its property; or such receiver, trustee or similar
officer shall be appointed without the application or consent of the
Borrower or any Guarantor and such appointment shall continue
undischarged for a period of thirty (30) days; or the Borrower or any
Guarantor shall institute (by petition, application, answer, consent
or otherwise) any insolvency, reorganization, arrangement,
readjustment of debt, dissolution, liquidation or similar proceeding
relating to it under the laws of any jurisdiction; or any such
proceeding shall be instituted (by petition, application or otherwise)
against the Borrower or any Guarantor; or any judgment, writ, warrant
of attachment or execution or similar process shall be issued or
levied against a substantial part of the property of the Borrower or
any Guarantor and such judgment, writ, or similar process shall not be
released, vacated or fully bonded within 30 days after its issue or
levy; or
(g) A petition naming the Borrower or any Guarantor as debtor
shall be filed under the United States Bankruptcy Code; or
(h) Any representation or warranty made by the Borrower in this
Agreement or by the Borrower (or any of its officers) in any request
for a Borrowing, Borrowing Base Certificate, Collateral Coverage
Certificate or any other certificate, instrument, or statement
contemplated by or made or delivered pursuant to or in connection with
this Agreement, shall prove to have been incorrect in any material
respect when made; or
(i) The rendering against the Borrower or any Guarantor of a
final judgment, decree or order for the payment of money in excess of
$100,000 (unless the payment of such judgment is fully insured) and
the continuance of such judgment, decree or order unsatisfied and in
effect for any period of thirty (30) consecutive days without a stay
of execution; or
(j) A default under any other Loan Document or under any
security agreement, mortgage, deed of trust, assignment or other
instrument or agreement securing any Obligations or any Guaranty; or
(k) A default under any bond, debenture, note or other
evidence of indebtedness of the Borrower or any Guarantor or under any
indenture or other instrument under which any such evidence of indebtedness
has been issued or by which it is governed and the expiration of the
applicable period of grace, if any, specified in such Loan Document,
security document, evidence of indebtedness, indenture or other instrument,
excluding, however, any such default relating to Non-Recourse Debt so long
as the effect thereof does not and will not impose any liability upon the
Borrower or any Guarantor; or
(l) Any Reportable Event (other than any Reportable Event with
respect to which notice has been waived by the Pension Benefit
Guaranty Corporation), which an Agent determines in good faith
constitutes grounds for the termination of any Plan or for the
appointment by the appropriate United States District Court of a
trustee to administer any Plan, shall have occurred and be continuing
thirty (30) days after written notice to such effect shall have been
given to the Borrower by the Agent or any Lender; or any Plan shall
have been terminated, or a trustee shall have been appointed by an
appropriate United States District Court to administer any Plan, or
the Pension Benefit Guaranty Corporation shall have instituted
proceedings to terminate any Plan or to appoint a trustee to
administer any Plan and, with respect to any thereof, the Agent
determines that it is likely that the Borrower will incur a liability
in excess of $100,000; or
(m) The Borrower or any Guarantor shall liquidate, dissolve,
terminate or suspend all or substantially all of its business
operations or otherwise fail to operate its business in the ordinary
course, or sell all or substantially all of its assets, without the
prior written consent of the Required Lenders; or
(n) The Borrower shall fail to pay, withhold, collect or remit
any tax or tax deficiency when assessed or due (other than any tax
deficiency which is being contested in good faith and by proper
proceedings and for which it shall have set aside on its books
adequate reserves therefor) or notice of any state or federal tax
liens shall be filed or issued.
Section 11.2 Rights and Remedies. Upon the occurrence of an
Event of Default or at any time thereafter until such Event of Default is
cured to the written satisfaction of the Required Lenders, the Agent, with
the concurrence of the Required Lenders, may (and upon written request of
the Required Lenders shall), exercise any or all of the following rights
and remedies:
(a) By notice to the Borrower, declare the Commitments to be
terminated, whereupon the same shall forthwith terminate;
(b) By notice to the Borrower, declare the entire unpaid
principal amount of the Notes then outstanding, all interest accrued
and unpaid thereon, and all other amounts payable under this Agreement
to be forthwith due and payable, whereupon such Notes, all such
accrued interest and all such 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 the
Borrower;
(c) Without notice to the Borrower and without further action,
apply any and all money owing by any Lender to the Borrower to the
payment of the Notes, including interest accrued thereon, and of all
other sums then owing by the Borrower hereunder;
(d) Exercise and enforce any and all rights and remedies
available upon default to a secured party under the UCC including,
without limitation, the right to take possession of Collateral, or any
evidence thereof, proceeding without judicial process or by judicial
process (without a prior hearing or notice thereof, which the Borrower
hereby expressly waives) and the right to sell, lease or otherwise
dispose of any or all of the Collateral, and, in connection therewith,
the Borrower will on demand assemble the Collateral and make it
available to the Collateral Agent at a place to be designated by the
Collateral Agent which is reasonably convenient to both parties; any
notice of intended disposition of any of the Collateral required by
law shall be deemed commercially reasonable if such notice is mailed
or delivered to the Borrower in accordance with this Agreement at
least ten (10) days before the date of any such disposition;
(e) Exercise and enforce all voting and other rights as holder
of the Equity Interests and notify the partnerships and other obligors
with respect thereto to make all future payments and distributions on
account thereof solely and exclusively to the Agent and exercise and
enforce any and all rights and remedies available upon default to a
secured party under the UCC with respect thereto, including the right
to offer and sell all or any portion of the Equity Interests privately
to purchasers who will agree to take such Collateral for investment
and not with a view to distribution and who will agree to the
imposition of restrictive legends on any certificates representing
such Collateral and the right to arrange for a sale which would
otherwise qualify as exempt from registration under the Securities Act
of 1933;
(f) Exercise and enforce all rights and remedies available under
the Guaranties, Aircraft Security Agreement and the Pledge and
Security Agreements, or any of them; and
(g) Exercise any other rights and remedies available to the
Agents or the Lenders by law or agreement.
Notwithstanding the foregoing, upon the occurrence of an Event of Default
described in Section 11.1(g) with respect to the Borrower, the entire
unpaid principal amount of the Notes, all interest accrued and unpaid
thereon, and all other amounts payable under this Agreement shall be
immediately due and payable without presentment, demand, protest or notice
of any kind.
ARTICLE XII
THE AGENT
Section 12.1 Authorization; Powers; Agent for Collateral
Purposes. Each Lender irrevocably appoints and authorizes the Agent and
the Collateral Agent to act on behalf of such Lender to the extent provided
herein or in any Loan Document or other document or instrument delivered
hereunder or in connection herewith, and to take such other action as may
be reasonably incidental thereto. In particular, the Agents are hereby
appointed as collateral agents to act for and on behalf of each Lender for
purposes of perfecting each such Lender's Security Interest in that portion
of the Collateral with respect to which perfection can be obtained by
possession. In furtherance of the foregoing, and not in limitation
thereof, each Lender irrevocably authorizes the Agents to execute and
deliver and perform their respective obligations under this Agreement and
each of the Loan Documents to which such Agent is a party, and to exercise
all rights, powers and remedies that the Agents may have hereunder or
thereunder, including, without limitation, the appointment of the Agents as
nominal beneficiary or nominal secured party, as the case may be, under
certain of the Loan Documents and all related UCC financing statements, and
generally authorize the Collateral Agent to act as agent in the holding,
perfecting and disposing of Collateral under the Loan Documents. As to any
matters not expressly provided for by this Agreement or the Loan Documents,
the Agents 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 Lenders, and such instruments shall be binding
upon all Lenders; provided, however, that except for action expressly
required of an Agent hereunder, the Agents shall in all cases be fully
justified in failing or refusing to act hereunder unless they shall be
indemnified to their satisfaction by the Lenders against any and all
liability and expense which may be incurred by them by reason of taking or
continuing to take any such action, and the Agents shall not in any event
be required to take any action which is contrary to this Agreement, the
Loan Documents or applicable law.
Section 12.2 Application of Proceeds. The Agent, after
deduction of any costs of collection as provided in Section 12.3, shall
remit to each Lender that Lender's respective Percentage of all payments of
principal, interest and fees payable hereunder. Each Lender's interest
under the Loan Documents shall be repayable solely from payments,
collections and proceeds actually received by either Agent under the Loan
Documents and the Agent's only liability to the Lenders with respect to any
such payments, collections and proceeds shall be to account for each
Lender's respective Percentage of such payments, collections and proceeds
in accordance with this Agreement. If the Agent is ever required for any
reason to refund any such payments, collections or proceeds, each Lender
will refund to the Agent, upon demand, its respective Percentage of such
payments, collections or proceeds, together with a percentage of interest
or penalties, if any, payable by the Agent in connection with such refund.
If any Lender has wrongfully refused to fund its Percentage of any
Borrowing, or if the outstanding principal balance of the Advances under a
Facility made by any Lender is for any other reason less than its
respective Percentage of the aggregate principal balance of all Advances
under that Facility, the Agent may remit payments received by it to the
other Lenders until such payments have reduced the aggregate amounts owed
by the Borrower to the extent that the aggregate amount of the Advances
owing under such Facility to such Lender are equal to its Percentage of the
aggregate amounts of the Advances owing to all of the Lenders under such
Facility. The foregoing provision is intended only to set forth certain
rules for the application of payments, proceeds and collections in the
event that a Lender has breached its obligations hereunder and shall not be
deemed to excuse any Lender from such obligations.
Section 12.3 Expenses. All payments, collections and proceeds
received or effected by either Agent may be applied, first, to pay or
reimburse such Agent for all reasonable costs and expenses at any time
incurred by or imposed upon such Agent in connection with this Agreement or
any other Loan Document (including but not limited to all reasonable
attorneys' fees, foreclosure expenses and advances made to protect the
security of any Collateral). If an Agent does not receive payments,
collections or proceeds sufficient to cover any such costs and expenses
within five days after their incurrence or imposition, each Lender shall,
upon demand, remit to such Agent its Percentage of the difference between
(i) such costs and expenses and (ii) such payments, collections and
proceeds, together with interest for each day on such amount until so
remitted at a rate equal to the Federal Funds Rate for each such day.
Section 12.4 Payments Received Directly by Lenders. If any
Lender shall obtain any payment or other recovery (whether voluntary,
involuntary, by application of offset or otherwise) on account of principal
of or interest on any Term Loan or Advance made by such Lender or on
account of any fees under this Agreement (other than through distributions
made in accordance with Section 12.2 hereof) in excess of such Lender's
Percentage of all such payments received by the Lenders, such Lender shall
promptly give notice of such fact to the Agent and shall promptly remit to
the Agent such amount as shall be necessary to cause the remitting Lender
to share such excess payment or other recovery ratably with each of the
Lenders in accordance with their respective Percentages, together with
interest for each day on such amount until so remitted at a rate equal to
the Federal Funds Rate for each such day; provided, however, that if all or
any portion of the excess payment or other recovery is thereafter recovered
from such remitting Lender or holder, the remittance shall be restored to
the extent of such recovery.
Section 12.5 Indemnification. Each Lender severally (but not
jointly) hereby agrees to indemnify and hold harmless each Agent, as well
as each Agent's agents, employees, officers and directors, ratably
according to the respective outstanding principal amounts of the Term Loans
and Advances then held by each of them, from and against any and all
losses, liabilities (including liabilities for penalties), actions, suits,
judgments, demands, damages, costs, disbursements, or expenses (including
attorneys' fees and expenses) of any kind or nature whatsoever, which are
imposed on, incurred by, or asserted against an Agent or its agents,
employees, officers or directors in any way relating to or arising out of
this Agreement or the Loan Documents, or as a result of any action taken or
omitted to be taken by an Agent; provided, however, that no Lender shall be
liable for any portion of any such losses, liabilities (including
liabilities for penalties), actions, suits, judgments, demands, damages,
costs, disbursements, or expenses resulting from the gross negligence or
wilful misconduct of an Agent. Notwithstanding any other provision of the
Loan Documents, each Agent shall in all cases be fully justified in failing
or refusing to act hereunder unless it shall be indemnified to its
satisfaction by the Lenders against any and all liability and expense that
may be incurred by it by reason of taking or continuing to take any such
action.
Section 12.6 Exculpation. Neither Agent shall be liable for any
action taken or omitted to be taken by an Agent in connection with this
Agreement or the Loan Documents, except for its own gross negligence or
wilful misconduct. The Agents shall be entitled to accept Leases as
Eligible Leases based upon the representations, certifications and
statements of the Borrower that any such Leases constitute Eligible Leases
and, whether or not the Collateral Agent reviews any supporting
documentation delivered in connection therewith, the Collateral Agent shall
ot be deemed to have knowledge that any Lease is not an EligibleLease
unless it shall be so advised by the Borrower. The Collateral Agent shall
not be required to review any Lease or Lease Collateral for conformity with
the requirements set forth in this Agreement and, instead, shall be
entitled to rely upon representations to that effect from the Borrower;
provided, however, that the Collateral Agent shall conduct audits of the
Collateral with the same frequency, diligence and care as would otherwise
be exercised by the Collateral Agent with respect to collateral held by the
Collateral Agent entirely for its own account. Each Agent shall be
entitled to rely upon advice of counsel concerning legal matters, the
advice of independent public accountants with respect to accounting matters
and advice of other experts as to other matters and upon this Agreement,
any Loan Documents and any schedule, certificate, statement, report, notice
or other writing which it reasonably believes to be genuine or to have been
presented by a proper Person. Neither Agent nor any of its directors,
officers, employees or agents shall (a) be responsible for any recitals,
representations or warranties contained in, or for the execution validity,
genuineness, effectiveness or enforceability of this Agreement, any Loan
Document, any Lease or any other item of Collateral or instrument or
document delivered hereunder or in connection herewith, (b) be responsible
for the validity, genuineness, perfection, effectiveness, enforceability,
existence, value or enforcement of any Collateral, (c) be under any duty to
inquire into or pass upon any of the foregoing matters, or to make any
inquiry concerning the performance by the Borrower or any other obligor of
its obligations, or (d) in any event, be liable as such for any action
taken or omitted by it or them. The agency hereby created shall in no way
impair or affect any of the rights and powers of, or impose any duties or
obligations upon, an Agent in its individual capacity.
Section 12.7 Agent and Subsidiaries. Each Agent shall have the
same rights and powers hereunder in its individual capacity as Lender as
any other Lender, and may exercise or refrain from exercising the same as
though it were not an Agent hereunder, and each Agent and its affiliates
may accept deposits from or generally engage in any kind of business with
the Borrower or any affiliate of the Borrower as fully as if such Agent
were not an Agent hereunder.
Section 12.8 Credit Investigation. Each Lender acknowledges
that it has made such inquiries and taken such care on its own behalf as
would have been the case had its Commitments been granted and the Term
Loans and Advances made directly by such Lender to the Borrower without the
intervention of either Agent or any other Lender. Each Lender agrees and
acknowledges that neither Agent makes any representations or warranties
about the creditworthiness of the Borrower or any other party to this
Agreement or with respect to the legality, validity, sufficiency or
enforceability of this Agreement, any Loan Document, and Collateral or any
other instrument or document delivered hereunder or in connection herewith.
Section 12.9 Defaults. Neither Agent shall be deemed to have
knowledge of the occurrence of a Default or an Event of Default (other than
under Sections 11.1(a), 11.1(b) or 11.1(c)) unless an Agent has received
notice from a Lender or the Borrower specifying the occurrence of such
Default or Event of Default. In the event that an Agent receives such a
notice of the occurrence of a Default, or Event of Default the Agent shall
give prompt notice thereof to the Lenders. In the event of any Default or
Event of Default, the Agent (subject to Section 12.5 hereof) shall take
such action with respect to such Default or Event of Default as shall be
directed by the Required Lenders; provided that, unless and until the Agent
shall have received such directions, the Agent may take such action, or
refrain from taking such action, with respect to such Default or Event of
Default as it shall deem advisable in the best interest of the Lenders.
Section 12.10 Obligations Several. The obligations of each
Lender hereunder are the several obligations of such Lender, and no Lender
nor either Agent shall be responsible for the obligations of any other
Lender or Agent hereunder, nor will the failure by either Agent or any
Lender to perform any of its obligations hereunder relieve an Agent or any
other Lender from the performance of its respective obligations hereunder.
Nothing contained in this Agreement, and no action taken by any Lender or
Agent pursuant hereto or in connection herewith or pursuant to or in
connection with the Loan Documents shall be deemed to constitute the
Lenders, together or with or without the Agents, a partnership,
association, joint venture, or other entity.
Section 12.11 Addition of Lenders. It is contemplated that
additional lenders (herein each an "Additional Lender") will be added to
this Agreement from time to time until the Warehousing Commitment Amount is
increased to an amount not less than the maximum Warehousing Commitment
Amount as set forth in the definition of "Warehousing Commitment Amount" in
Section 1.1, but only if the Borrower and the Agents have provided their
prior written approval of such Additional Lenders. Notwithstanding the
foregoing, the Borrower expressly acknowledges and agrees that neither
Agent nor any Lender shall have any obligation to obtain Commitments from
any such Additional Lenders and that, even if such Additional Lenders are
not obtained, neither of the Agents nor any Lender shall have any
commitment or obligation to increase its respective Warehousing Commitment
above the amount set forth on the signature pages hereof. Upon the
addition of any Additional Lender, each existing Lender may assign all or a
portion of such Lender's Notes, Advances, Term Loans and Commitments to
such Additional Lender for purposes of adjusting such Lender's Commitments
hereunder in consideration of the new Notes, Advances, Term Loans and
Commitments of such Additional Lender. To confirm the status of each
Additional Lender as a party to this Agreement and to evidence its
respective obligations, rights and agreements hereunder:
(a) the Agents, each existing Lender and the Additional Lender
shall execute and deliver to the Agent an assumption certificate in
substantially the form of Exhibit K (an "Assumption Certificate"); and
(b) the Borrower will execute and deliver to the Agent for
delivery to the appropriate Lender and to the Additional Lender, new
Notes payable to the order of such Additional Lender and the
appropriate Lender in respective amounts corresponding to the
applicable Commitments of each such Additional Lender and the other
Lenders. Such new Notes shall be dated the effective date of such
Assumption Certificate and shall otherwise be in the form of Exhibits
C-1, C-2 and C-3, as appropriate. All new Notes issued to an existing
Lender shall be deemed issued in substitution for, but not in
satisfaction or payment of, the Notes being replaced thereby and all
new Notes shall be treated as Notes for purposes of this Agreement.
Upon the execution and delivery of any Assumption Certificate and
appropriate Notes as provided above (i) this Agreement shall be deemed
amended to the extent, and only to the extent, necessary to reflect the
addition of any Additional Lender therein described and the resulting
adjustment of the Percentages and the Commitments arising therefrom, (ii)
the existing Lenders shall be relieved of all obligations hereunder to the
extent of the reduction of their respective Commitments and to the extent
of the reduction of their respective Percentages and (iii) each Additional
Lender shall become a party hereto and shall be entitled to all rights,
benefits and privileges accorded to a Lender herein and in each other Loan
Document and subject to all obligations of a Lender hereunder including,
without limitation, the right to approve or disapprove actions which, in
accordance with the terms hereof, require the approval of the Required
Lenders or all Lenders. In order to facilitate the addition of Additional
Lenders, the Borrower and the existing Lenders shall cooperate fully with
the Agent in connection therewith and shall provide all reasonable
assistance requested by the Agent relating thereto, including, without
imitation, the furnishing of such written materials and financial
information regarding the Borrower as the Agent may reasonably request, the
execution of such documents as the Agent may reasonably request and the
participation by officers of the Borrower and the Lenders in a meeting or
teleconference call with any proposed Additional Lender.
Section 12.12 Participation. Each Lender may grant
participation in all or a portion of its Notes, Advances, Term Loans and
Commitments to any domestic or foreign commercial bank (having a branch
office in the United States), insurance company, or an affiliate of such
Lender. No holder of any such participation shall be entitled to require
any Lender to take or omit to take any action hereunder. The Lenders shall
not, as among the Borrower, the Agent and the Lenders, be relieved of any
of their obligations hereunder as a result of any such granting of a
participation. The Borrower hereby acknowledges and agrees that any
participant described in this Section may rely on, and possess all rights
under, any opinions, certificates, or other instruments or documents
delivered under or in connection with any Loan Document. Except as set
forth in this Section 12.12 , no Lender may grant any participation in the
Notes, Advances, Term Loans or Commitments.
Section 12.13 Borrower not a Beneficiary or Party. The
provisions and agreements in this Article XII are solely among the Lenders
and the Agents and, except as specifically set forth in Section 12.11, the
Borrower shall not be considered a party thereto or a beneficiary thereof.
ARTICLE XIII
MISCELLANEOUS
Section 13.1 No Waiver; Cumulative Remedies. No failure or
delay in exercising any right, power or remedy under the Loan Documents
shall operate as a waiver thereof; nor shall any single or partial exercise
of any such right, power or remedy preclude any other or further exercise
thereof or the exercise of any other right, power or remedy under the Loan
Documents. The remedies provided in the Loan Documents are cumulative and
not exclusive of any remedies provided by law.
Section 13.2 Amendments, Requested Waivers, Etc. No amendment,
modification, termination or waiver of any provision of any Loan Document
or consent to any departure by the Borrower therefrom shall be effective
unless the same shall be in writing and signed by the Required Lenders and,
if the rights or duties of the Agents are affected thereby, by the affected
Agent; provided that no amendment, modification, termination, waiver or
consent shall, unless in writing and signed by each Lender affected
thereby, do any of the following: (a) increase the amount of such Lender's
Commitments, (b) reduce the amount of any payment of principal of or
interest on such Lender's Advances or Term Loans or the fees payable to
such Lender hereunder, (c) postpone any date fixed for any payment of
principal of or interest on such Lenders' Advances or the fees payable to
such Lender hereunder, (d) change the definitions of "Borrowing Base",
"Minimum Collateral Coverage Ratio" or "Required Lenders," or any other
definitions referred to therein or necessary to the understanding thereof,
or (e) amend this Section 13.2 or any other provision of this Agreement
requiring the consent or other action of all of the Lenders. Any waiver or
consent given hereunder shall be effective only in the specific instance
and for the specific purpose for which given. No notice to or demand on
the Borrower in any case shall entitle the Borrower to any other or further
notice or demand in similar or other circumstances.
Section 13.3 Addresses for Notices, Etc. Except as otherwise
expressly provided herein, all notices, requests, demands and other
communications provided for under the Loan Documents shall be in writing
and mailed or delivered to the applicable parties at their respective
addresses set forth on the execution pages hereto, or, as to each party, at
such other address as shall be designated by such party in a written notice
to the other party complying as to delivery with the terms of this Section.
All such notices, requests, demands and other communications, when
delivered, shall be effective upon actual delivery and when mailed, shall
be effective when sent by nationally recognized overnight mail courier or
delivery service, addressed as aforesaid, except that notices or requests
to the Agent or any Lender pursuant to any of the provisions of
Articles II, III or IV shall not be effective until received by the Agent
or such Lender.
Section 13.4 Costs and Expenses. The Borrower will reimburse
the Lenders and the Agents for (i) any and all out-of-pocket costs and
expenses, including without limitation attorneys' fees, lien and UCC
searches, title searches and other similar expenses, paid or incurred by
the Lenders in connection with the preparation of the Loan Documents and
any other document or agreement related hereto or thereto, and the
transactions contemplated hereby (which amount shall be paid on the Closing
Date) and the negotiation of any amendments, modifications or extensions to
or of any of the foregoing documents, instruments or agreements and the
preparation of any and all documents necessary or desirable to effect such
amendments, modifications or extensions; (ii) customary transaction fees of
the Agents or the Lenders incurred in connection with the loans
contemplated hereby; (iii) fees in connection with any audits or
inspections by any Agent of any Collateral or the operations or business of
the Borrower, whether conducted at the Borrower's premises or at an Agent's
premises (subject, however, to Section 5.1 (f)); and (iv) any and all other
out-of-pocket expenses incurred by any Lender or Agent in connection with
any of the transactions contemplated hereby or in connection with the
enforcement by the Lenders and/or the Agents of any of the rights or
remedies of the Lenders under this Agreement or any of the foregoing
documents, instruments or agreements or under applicable law, whether or
not suit is filed with respect thereto; provided, however, that the
Borrower shall not be obligated to pay or reimburse a Lender which is not
then acting as an Agent hereunder for more than $5,000 for the attorneys'
fees incurred by such Lender in connection with its review of the Loan
Documents for purposes of becoming a Lender hereunder.
Section 13.5 Indemnity. In addition to the payment of expenses
pursuant to Section 13.4, the Borrower agrees to indemnify, defend and hold
harmless each Lender and each Agent, and any of their respective
participants, parent corporations, subsidiary corporations, affiliated
corporations, successor corporations, and all present and future officers,
directors, employees and agents of any Lender or Agent (the "Indemnitees"),
from and against (i) any claims, loss or damage to which any Indemnitee may
be subjected as a result of any past, present or future existence, use,
handling, storage, transportation or disposal of any hazardous waste or
substance or toxic material by the Borrower or with respect to any
Equipment or other property owned, leased or controlled by the Borrower,
(ii) any and all transfer taxes, documentary taxes, assessments or charges
made by any governmental authority by reason of the execution and delivery
of this Agreement and the other Loan Documents or the making of any
Advances or Term Loans, and (iii) any and all liabilities, losses, damages,
penalties, judgments, suits, claims, costs and expenses of any kind or
nature whatsoever (including, without limitation, the reasonable fees and
disbursements of counsel) in connection with any investigative,
administrative or judicial proceedings, whether or not such Indemnitee
shall be designated a party thereto, which may be imposed on, incurred by
or asserted against such Indemnitee, in any manner relating to or arising
out of or in connection with, the making of any Advances or Term Loans or
entering into this Agreement or any other Loan Documents or the use or
intended use of the proceeds of the Advances or Term Loans, excepting,
however, from the foregoing any such liabilities, losses, damages,
penalties, judgments, suits, claims, costs and expenses resulting from the
wilful misconduct or gross negligence of an Indemnitee (the "Indemnified
Liabilities"). If any investigative, judicial or administrative proceeding
arising from any of the foregoing is brought against any Indemnitee, upon
request of such Indemnitee, the Borrower, or counsel designated by the
Borrower and satisfactory to the Indemnitee, will resist and defend such
action, suit or proceeding to the extent and in the manner directed by the
Indemnitee, at the Borrower's sole cost and expense. Each Indemnitee will
use its best efforts to cooperate in the defense of any such action, suit
or proceeding. If the foregoing undertaking to indemnify, defend and hold
harmless may be held to be unenforceable because it violates any law or
public policy, the Borrower shall nevertheless make the maximum
contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law. The obligations of
the Borrower under this Section 13.5 shall survive termination of this
Agreement and the discharge of the Borrower's Obligations.
Section 13.6 Execution in Counterparts. This Agreement and
other Loan Documents may be executed in any number of counterparts, each of
which when so executed and delivered shall be deemed to be an original and
all of which counterparts, taken together, shall constitute but one and the
same instrument.
Section 13.7 Governing Law; Waiver of Jury Trial. The Loan
Documents shall be governed by, and construed in accordance with, the laws
of the State of Colorado. The Borrower hereby irrevocably waives all right
to trial by jury in any action, proceeding or counterclaim arising out of
or relating to any Loan Document to which it is a party or any instrument
or document delivered thereunder.
Section 13.8 Arbitration.
(a) Binding Arbitration. Upon the demand of the Borrower, the
Agent or a Lender (collectively the "parties"), whether made before
the institution of any judicial proceeding or not more than sixty (60)
days after service of a complaint, third party compliant, cross-claim
or counterclaim or any answer thereto or any amendment to any of the
above, and subject in all events to Section 13.8(c), a Dispute (as
defined below) shall be resolved by binding arbitration in accordance
with the terms of the arbitration program described in this Section
13.8 (the "Arbitration Program"). A "Dispute" shall include any
action, dispute, claim, or controversy of any kind, whether founded in
contract, tort, statutory or common law, equity, or otherwise, now
existing or hereafter occurring between the parties arising out of,
pertaining to or in connection with any of the Loan Documents. The
parties understand that they have decided that the Dispute may be
submitted to arbitration rather than being decided through litigation
in court and that once decided by an arbitrator the claims involved
cannot later be brought, filed or pursued in court.
(b) Governing Rules. Arbitrations conducted pursuant to this
Arbitration Program, including selection of arbitrators, shall be
administered by the American Arbitration Association ("Administrator")
pursuant to the Commercial Arbitration rules of the Administrator.
Arbitrations conducted pursuant to the terms hereof shall be governed
by the laws of the State of Colorado, including the provisions of CRS
13-22-201 et seq. and CRS 13-21-102 (5). Judgment upon any award
rendered hereunder may be rendered in any court having jurisdiction,
provided, however, that nothing contained herein shall be deemed to be
a waiver by any party that is a bank of the protections afforded to it
under 12 U.S.C. Section 91 or similar governing state law. Any party who
fails to submit to binding arbitration following a lawful demand by
the opposing party shall bear all costs and expenses, including
reasonable attorney's fees, incurred by the opposing party in
completing arbitration of any Dispute.
(c) No Waiver; Preservation of Remedies; Multiple Parties. No
provision of, nor the exercise of any rights under this Aribtration
Program shall limit the right of any party to (i) foreclose against
any Collateral or other security for any Obligations or exercise with
respect to the Collateral any other rights or remedies available to a
secured party under the UCC after default, (ii) exercise self-help
remedies (including repossession and setoff rights) as permitted under
the UCC or otherwise or (iii) obtain provisional or ancillary remedies
such as injunctive relief, sequestration, attachment, replevin,
garnishment, or the appointment of a receiver from a court having
jurisdiction. Such rights may be exercised at any time except to the
extent such action is contrary to a final award or decision in any
arbitration proceeding and any such rights may be exercised during the
pendency of any such arbitration proceeding. The institution and
maintenance of an action with respect to the Collateral as described
above shall not constitute a waiver of the right of any party,
including the plaintiff, to submit the Dispute to arbitration, nor
render inapplicable the compulsory arbitration provisions hereof. Any
claim or Dispute related to exercise of any self-help, auxiliary or
other exercise of rights under this Section 13.8(c) shall be a Dispute
hereunder.
(d) Arbitrator Powers and Qualifications; Awards. Arbitrator(s)
shall resolve all Disputes in accordance with the applicable
substantive law. Arbitrator(s) may make an award of attorneys' fees
and expenses if permitted by law or the agreement of the parties. All
statutes of limitation applicable to any Dispute shall apply to any
proceeding in accordance with this Arbitration Program. Any arbitrator
selected to act as the only arbitrator in a Dispute shall be required
to be a practicing attorney with not less than 10 years practice in
commercial law in the State of Colorado. With respect to a Dispute in
which the claims or amounts in controversy do not exceed five hundred
thousand dollars ($500,000), a single arbitrator shall be chosen and
shall resolve the Dispute. In such case, the arbitrator shall have
authority to render an award up to but not to exceeding five hundred
thousand dollars ($500,000), including all damages of any kind
whatsoever, costs, fees and expenses. Submission to a single
arbitrator shall be a waiver of all parties' claims to recover more
than five hundred thousand dollars ($500,000). A Dispute involving
claims or amounts in controversy exceeding five hundred thousand
dollars ($500,000) shall be decided by a majority vote of a panel of
three arbitrators (an "Arbitration Panel"). An Arbitration Panel
shall be composed of one arbitrator who would be qualified to sit as a
single arbitrator in a Dispute decided by one arbitrator, one who has
at least ten (10) years experience in commercial lending and one who
has at least ten (10) years experience in the Borrower's type of
business. Arbitrator(s) may, in the exercise of their discretion at
the written request of a party in any Dispute, (i) consolidate in a
single proceeding any multiple party claims that are substantially
identical and (ii) administer multiple arbitration claims as class
actions in accordance with Rule 23 of the Federal Rules of Civil
Procedure. The arbitrator(s) shall be empowered to resolve any
Dispute regarding the terms of this Agreement or the arbitrability of
any Dispute or any claim that all or any part (including this
provision) is void or voidable but shall have no power to change or
alter the terms of this Agreement. The award of the arbitrator(s)
shall be in writing and shall specify the factual and legal basis for
the award.
(e) Miscellaneous. To the maximum extent practicable, the
Administrator, the arbitrator(s) and the parties shall take any action
necessary to require that an arbitration proceeding hereunder be
concluded within one hundred eighty (180) days of the filing of the
Dispute with the Administrator. The arbitrator(s) shall be empowered
to impose sanctions for any party's failure to proceed within the
times established herein. Arbitration proceedings hereunder shall be
conducted in Denver, Colorado at a location determined by the
Administrator. In any such proceeding a party shall state as a
counterclaim any claim which arises out of the transaction or
occurrence or is in any way related to the Loan Documents which does
not require the presence of a third party which could not be joined as
a party in the proceeding. The provisions of this Arbitration Program
shall survive any termination, amendment, or expiration of the Loan
Documents and repayment in full of all Obligations unless the parties
otherwise expressly agree in writing. Each party agrees to keep all
Disputes and arbitration proceedings strictly confidential, except for
disclosures of information required in the ordinary course of business
of the parties or as required by applicable law or regulation. If as
a result of a Dispute a claim is filed in small claims court and the
Dispute, including all cross-claims and counter-claims is properly
venued in small claims court, then the party that demands arbitration
of the claims and thereby removes the case from small claims court
shall pay the full of the Administrator and the fees, costs and
expenses of the arbitrator for the Dispute.
Section 13.9 Severability of Provisions. Any provision of this
Agreement which is prohibited or unenforceable shall be ineffective to the
extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof.
Section 13.10 Headings. Article and Section headings in this
Agreement are included herein for convenience of reference only and shall
not constitute a part of this Agreement for any other purpose.
[SIGNATURE PAGES FOLLOW]
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.
Address: CAPITAL ASSOCIATES INTERNATIONAL, INC.
Capital Associates Tower
Suite 3000
7175 West Jefferson Avenue By: /s/John E. Christensen
Lakewood, Colorado 80235 __________________________________
Attn: Senior Vice President John E. Christensen
and Chief Financial Officer Its: Senior Vice President
Fax No.: (303) 980-7065
Address: NORWEST BANK COLORADO,
NATIONAL ASSOCIATION, as Agent
1740 Broadway
Denver, Colorado 80274-8673
Attn: Sandra A. Sauer By: /s/Sandra A. Sauer
Fax No.: (303) 863-6670 __________________________________
Sandra A. Sauer
Its: Vice President
Address: NORWEST EQUIPMENT FINANCE,
INC., as Collateral Agent
Investors Building
Suite 300
733 Marquette Avenue By: /s/Judy I. VanOsdel
Minneapolis, Minnesota ___________________________________
55479-2048 Judy I. VanOsdel
Attn: Robert Stark Its: Assistant Vice President
Fax No.: (612) 667-0721
Administrative Address:
9350 E. Arapahoe Road
Suite 230
Englewood, Colorado 80112
Attn: Nancy Sheridan
Fax No.: (303) 792-5653
Address: NORWEST BANK COLORADO,
NATIONAL ASSOCIATION, as Lender
1740 Broadway
Denver, Colorado 80274-8673
Attn: Sandra A. Sauer By: /s/Sandra A. Sauer
Fax No.: (303) 863-6670 _______________________________
Sandra A. Sauer
Its: Vice President
Term Loan Commitment: $3,250,000
Term Loan Percentage: 25%
Working Capital Commitment: $2,500,000
Working Capital Percentage: 50%
Warehousing Commitment: $1,750,000
Warehousing Percentage: 14.58333%
Address: NORWEST EQUIPMENT FINANCE, INC.,
as Lender
Investors Building
Suite 300 By: /s/Judy I. VanOsdel
733 Marquette Avenue _______________________________
Minneapolis, Minnesota Judy I. VanOsdel
55479-2048 Its: Assistant Vice President
Attn: Robert Stark
Fax No.: (612) 667-0721
Term Loan Commitment: $3,250,000
Term Loan Percentage: 25%
Working Capital Commitment: $ 0
Working Capital Percentage: 0%
Warehousing Commitment: $4,250,000
Warehousing Percentage: 35.41666%
Address: FIRST INTERSTATE BANK
OF DENVER, N.A.
633 17th Street
Denver, Colorado 80270
Attn: Kirk D. Reed By: /s/Kirk D. Reed
Fax No.: (303) 293-5467 _____________________________________
Kirk D. Reed
Its: Vice President
Term Loan Commitment: $6,500,000
Term Loan Percentage 50%
Working Capital Commitment: $2,500,000
Working Capital Percentage: 50%
Warehousing Commitment: $6,000,000
Warehousing Percentage: 50%
SETTLEMENT AGREEMENT AND RELEASE OF LIENS AND CLAIMS
This Settlement Agreement and Release of Liens and Claims (the
"Agreement") is entered as of this 2nd day of December, 1994, by and among
the Parties defined below. Except as otherwise defined herein, capitalized
terms shall have the meanings assigned to them in section 1 hereof.
R E C I T A L S
WHEREAS, Lenders have made certain loans and other financial
accommodations to Borrower pursuant to the Amended Loan Agreement and the
Amended Loan Documents; and
WHEREAS, pursuant to the Amended Loan Documents, Borrower is
indebted to Lenders in the amount of $15,054,232.80 as of December 2, 1994,
which amount is subject to increase after such date (i) new Revolving
Credit Advances made after the date set forth above, (ii) interest which
accrues after the date set forth above on the Revolving Credit Loan, the
Term Loan, or the other Obligations under the Amended Loan Documents, and
(iii) fees, costs, or expenses payable under the Amended Loan Documents and
interest charges relating thereto, and which amount is subject to decrease
after the date set forth above based upon payments made by or on behalf of
Borrower to Agent for the benefit of Lenders (the "Indebtedness"); and
WHEREAS, the Obligations, including the Indebtedness, are
evidenced by, among other things, the Term Loan Notes and the Revolving
Credit Notes; and
WHEREAS, pursuant to the terms of the Amended Joint Security
Agreement, repayment of the Obligations, including the Indebtedness, is
secured by liens and security interests in the Collateral; and
WHEREAS, pursuant to the Amended Guaranty and the Other
Guarantees, Parent and the Capital Subsidiaries have guaranteed repayment
of the Obligations, including the Indebtedness; and
WHEREAS, in connection with the Amended Guaranty and the Other
Guarantees, Parent and the Capital Subsidiaries have pledged certain stock
certificates and granted liens and security interests in such stock and
other Guaranty Collateral to Agent and Lenders; and
WHEREAS, Borrower, Parent and certain of their respective
subsidiaries have entered, or will enter, into the Refinancing Transaction;
and
WHEREAS, in connection with the Refinancing Transaction,
Borrower, Parent and the Capital Subsidiaries have requested Agent and
Lenders to release their liens and security interests in the Collateral and
the Guaranty Collateral; and
WHEREAS, Agent and Lenders are willing to release their liens and
security interests in the Collateral and the Guaranty Collateral
conditioned upon (i) payment of the Release Price; (ii) execution and
delivery of this Agreement and the releases contained herein; and (iii) the
effectiveness of this Agreement.
NOW, THEREFORE, upon the mutual promises and covenants contained
herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and the Parties hereto
intending to be legally bound hereby, such Parties hereby agree as follows:
A G R E E M E N T
1. Definitions.
"Agent" shall have the meaning assigned to it in the Amended
Loan Agreement.
"Agreement" shall have the meaning assigned to it in the
Preamble hereto.
"Aircraft Assignment" shall have the meaning assigned to it
in the Amended Loan Agreement.
"Aircraft Mortgage" shall have the meaning assigned to it in
the Amended Loan Agreement.
"Amended Agency and Possession Agreement" shall have the
meaning assigned to it in the Amended Loan Agreement.
"Amended and Restated Intercreditor Agreement" shall have
the meaning assigned to it in the Amended Loan Document.
"Amended and Restated Loan Agreement" shall have the meaning
assigned to it in the Amended Loan Agreement.
"Amended Collateral Documents" shall have the meaning
assigned to it in the Amended Loan Agreement.
"Amended Guaranty" shall have the meaning assigned to it in
the Amended Loan Agreement.
"Amended Joint Security Agreement" shall have the meaning
assigned to it in the Amended Loan Agreement.
"Amended Loan Agreement" shall mean that certain Second
Amended and Restated Revolving Credit and Term Loan Agreement, dated as of
December 21, 1992, by and among Borrower, Lenders, and Agent, including all
amendments, modifications and supplements thereto, and any appendices,
exhibits or schedules to any of the foregoing, and shall refer to the
Amended Loan Agreement as the same may be in effect at the time such
reference becomes operative.
"Amended Loan Documents" shall have the meaning assigned to
it in the Amended Loan Agreement.
"Amendments" shall have the meaning assigned to it in the
Amended Loan Agreement.
"Ancillary Agreements" shall have the meaning assigned to it
in the Amended Loan Agreement.
"Borrower" shall have the meaning assigned to it in the
Amended Loan Agreement.
"Borrower Subsidiary" shall have the meaning assigned to it
in the Amended Loan Agreement.
"Capital Subsidiary" shall have the meaning assigned to it
in the Amended Loan Agreement.
"Cash Collateral Account" shall have the meaning assigned to
it in the Amended Loan Agreement.
"Collateral" shall have the meaning assigned to it in the
Amended Loan Agreement.
"Deposit Account" shall have the meaning assigned to it in
the Amended Loan Agreement.
"Effective Date" shall be the first business day on which
(i) all Parties have executed this Agreement; and (ii) Agent has
acknowledged receipt of the Release Price in good funds.
"Excluded Claims" shall mean any obligations created or
arising under or recognized in this Agreement, including, without implied
limitation, the claim reserved under section 3 hereof, indemnification
claims under sections 7 and 8 hereof, and any Obligations, including the
Indebtedness, that are revived under section 8 hereof.
"Existing Bank Debt" shall have the meaning assigned to it
in the Amended Loan Agreement.
"Existing Bank Notes" shall have the meaning assigned to it
in the Amended Loan Agreement.
"Existing Guaranties" shall have the meaning assigned to it
in the Amended Loan Agreement.
Existing Intercreditor Agreement" shall have the meaning
assigned to it in the Amended Loan Agreement
"Existing Loan Agreement" shall have the meaning assigned to
it in the Amended Loan Agreement.
"Existing Intercreditor Agreement" shall have the meaning
assigned to it in the Amended Loan Agreement.
"Existing Loan Documents" shall have the meaning assigned to
it in the Amended Loan Agreement.
"Existing Noteholder Debt" shall have the meaning assigned
to it in the Amended Loan Agreement.
"Existing Noteholder Notes" shall have the meaning assigned
to it in the Amended Loan Agreement.
"Existing Pledge Agreement" shall have the meaning assigned
to it in the Amended Loan Agreement.
"Existing Security Agreement" shall have the meaning
assigned to it in the Amended Loan Agreement.
"Extension Agreement" shall have the meaning assigned to it
in the Amended Loan Agreement.
"Fairfield & Woods" shall mean Fairfield and Woods, P.C., as
collateral agent under the Amended Agency and Possession Agreement.
"Fee Cap" shall have the meaning assigned to it in section 3
hereof.
"Forbearance Agreement" shall have the meaning assigned to
it in the Amended Loan Agreement.
"Guaranty Collateral" shall have the meaning assigned to it
in the Amended Loan Agreement.
"Guaranty Reaffirmations" shall have the meaning assigned to
it in the Amended Loan Agreement.
"Indebtedness" shall have the meaning assigned to it in the
Recitals hereto.
"Lender" or "Lenders" shall have the meaning assigned to it
in the Amended Loan Agreement.
"Loans" shall have the meaning assigned to it in the Amended
Loan Agreement.
"New Blocked Account" shall have the meaning assigned to it
in the Amended Loan Agreement.
"New Lenders" shall have the meaning assigned to it in the
definition of "Norwest Bank" set forth below.
"1986 Security Agreement shall have the meaning assigned to
it in the Amended Loan Agreement.
"Norwest Bank" shall mean Norwest Bank Colorado, National
Association, as agent for itself, First Interstate Bank of Denver, N.A.,
and Norwest Equipment Finance, Inc. (collectively the "New Lenders").
"Noteholder" or "Noteholders" shall have the meaning
assigned to it in the Amended Loan Agreement.
"Note Purchase Agreement" shall have the meaning assigned to
it in the Amended Loan Agreement.
"Note Transaction" shall mean the sale by CIG & Co. of a
portion of the indebtedness under the Note Purchase Agreement to Horace
Mann Life Insurance Company and the subsequent repurchase of the then
outstanding amount of such indebtedness by CIG & Co.
"Obligations" shall have the meaning assigned to it in the
Amended Loan Agreement.
"Old Blocked Account" shall have the meaning assigned to it
in the Amended Loan Agreement.
"Old Blocked Savings Account" shall have the meaning
assigned to it in the Amended Loan Agreement.
"Omnibus Amendments" shall have the meaning assigned to it
in the Amended Loan Agreement.
"Other Guarantees" shall have the meaning assigned to it in
the Amended Loan Agreement.
"Other Guaranty Reaffirmations" shall have the meaning
assigned to it in the Amended Loan Agreement.
"Parent" shall have the meaning assigned to it in the
Amended Loan Agreement.
"Parent Subsidiary" shall have the meaning assigned to it in
the Amended Loan Agreement.
"Parties" shall mean the parties to this Agreement which are
Agent, Lenders, Borrower, Parent, and the Capital Subsidiaries.
"Prior Amended Intercreditor Agreement" shall have the
meaning assigned to it in the Amended Loan Agreement.
"Prior Amended Loan Agreement" shall have the meaning
assigned to it in the Amended Loan Agreement.
"Prior Amended Loan Documents" shall have the meaning
assigned to it in the third complete recital on page 4 of the Amended Loan
Agreement, and all amendments thereto.
"Refinancing Transaction" shall mean that certain loan
transaction as evidenced by the Credit and Security Agreement dated as of
November 30, 1994, by and among Borrower and the New Lenders pursuant to
which, among other things, Borrower will repay the Indebtedness.
"Release Price" shall have the meaning set forth in section
3 of this Agreement.
"Releasees" shall mean Agent, Lenders, Borrower, Parent, and
the Capital Subsidiaries.
"Releasors" shall mean Agent, Lenders, Borrower, Parent, and
the Capital Subsidiaries.
"Revolving Credit Advance" shall have the meaning assigned
to it in the Amended Loan Agreement.
"Revolving Credit Loan" shall have the meaning assigned to
it in the Amended Loan Agreement.
"Revolving Credit Note" or "Revolving Credit Notes" shall
have the meaning assigned to it in the Amended Loan Agreement.
"Subsidiary" shall have the meaning assigned to it in the
Amended Loan Agreement.
"Third Party Funds" shall have the meaning assigned to it in
the Amended Loan Agreement.
"Term Loan" shall have the meaning assigned to it in the
Amended Loan Agreement.
"Term Loan Note" or "Term Loan Notes" shall have the meaning
assigned to it in the Amended Loan Agreement.
"Waiver Agreement" shall have the meaning assigned to it in
the Amended Loan Agreement.
2. Rules of Construction. Unless the context of this Agreement
clearly requires otherwise, references to the plural include the singular,
singular includes the plural, part includes the whole, and "or" has the
inclusive meaning represented by the phrase "and/or." The words "hereof,"
"herein," "hereunder," and similar terms in this Agreement refer to this
Agreement as a whole and not to any particular provision of this Agreement.
All references to the term "Agreement" contained in the definitions
incorporated into this Agreement from the Amended Loan Agreement shall be
read to be to the Amended Loan Agreement and not to this Agreement.
3. Release Price. Borrower shall pay or cause to be paid to
Agent for the benefit of Lenders the amount of $15,072,232.80 (the "Release
Price"). The Release Price shall consist of the then current Indebtedness
plus an amount equal to Agent's good faith estimate of the costs and
expenses to be incurred by it after November 30, 1994, in consummating the
transaction contemplated by this Agreement, not to exceed $18,000.00 in the
aggregate (the "Fee Cap"). Following payment of the Release Price and
consummation of the transaction contemplated by this Agreement, Agent shall
refund to Borrower that portion of the Fee Cap (if any) that exceeds
Agent's actual costs and expenses. Any claim by Agent against Borrower or
Borrower against Agent concerning the Fee Cap shall be an Excluded Claim.
Payment of the Release Price shall be made to Agent by wire transfer as
follows: Mellon Bank, N.A., Pittsburgh, Pennsylvania, 3 Mellon Bank
Center, Credit Account No. 990-873-800, Ref.: Capital Associates
International, Inc. Payoff -- ABA No. 043-000-261. Payment of the Release
Price shall not be considered to be complete until Agent has confirmed
that it is in receipt of good funds.
4. Release of Security; Surrender of Promissory Notes, Chattel
Paper, and Pledged Stock. Upon the Effective Date, Agent and Lenders, as
appropriate, shall (i) deliver to Borrower the original of each and all of
the Term Loan Notes and the Revolving Credit Notes marked "paid and
discharged"; (ii) deliver to Borrower or its designee signed Uniform
Commercial Code termination statements terminating Agent's and Lenders'
liens and security interests in the Collateral, the Guaranty Collateral and
any and all such other property, if any, securing repayment of the
Obligations under the Amended Loan Documents; (iii) deliver to Borrower or
its designee signed releases of the Aircraft Assignment and the Aircraft
Mortgage; (iv) cause to be delivered to Borrower or its designee the
"Pledged Collateral" (as that term is defined in the Amended Agency and
Possession Agreement); (v) deliver to Borrower, Parent, and the Capital
Subsidiaries, as appropriate, or their respective designees, the stock
certificates pledged to Agent under any of the Amended Collateral
Documents; (vi) rescind any instructions given to depository institutions
other than Agent that restrict Borrower's, Parent's or any Capital
Subsidiary's access to any and all Deposit Account(s); (vii) subject to any
contrary arrangements between Borrower and Agent, deliver to Borrower or
its designee any checks or cash then held or on deposit in the Cash
Collateral Account, the Old Blocked Account, the New Blocked Account, or
the Old Blocked Savings Account that Borrower, Parent, the Capital
Subsidiaries, or third parties are entitled to receive under the terms of
the Amended Loan Agreement; and (viii) at the expense of the requesting
person or entity, execute such other and further documentation as may
reasonably be requested by (A) Norwest Bank or its designee to evidence the
release of Agent's and Lenders' liens and security interests in the
Collateral, the Guaranty Collateral, and any and all such other property,
if any, securing repayment of the Obligations under the Amended Loan
Documents, and (B) Borrower, Parent, or the Capital Subsidiaries to
evidence the satisfaction, release, and discharge of the Obligations.
5. Mutual Release of Claims. Upon the Effective Date, the
Releasors, on behalf of themselves and their respective officers,
directors, shareholders, partners, parents, subsidiaries, divisions,
affiliates, alter-egos, licensees, transferees, legal representatives,
trustees, agents, successors, predecessors, heirs, and assigns, hereby
fully release, remise and discharge the Releasees, and their respective
officers, directors, shareholders, partners, parents, subsidiaries,
divisions, affiliates, successors, predecessors, heirs, assigns, employees,
agents, alter-egos, licensees, transferees, legal representatives,
trustees, servants, accountants, and attorneys, and Fairfield & Woods, from
each and every claim, counter-claim, cross-claim, debt, contract, injury,
damage, liability, obligation, tort, cause of action, claim for relief, or
other theory of recovery, that such Releasors have or may have had, now
have, or may hereafter acquire against such Releasees, whether known or
unknown, seen or unforeseen, suspected or unsuspected, contingent or
liquidated, latent or patent, including claims for attorneys' fees, costs,
and other expenses (such as fees and costs for accountants and other
professionals), from the beginning of time through the date set forth in
the preamble on the first page of this Agreement, other than the Excluded
Claims, arising out of or in any way concerning, connected or relating to
(i) the negotiation, drafting, documentation, execution, implementation,
interpretation, administration, funding,
work-out, waiver, requirement, dispute concerning, amendment,
restructuring, collection, payment, or enforcement of the Existing Loan
Documents, the 1986 Security Agreement, the Prior Loan Agreement, the Prior
Loan Documents, and the Amended Loan Documents; (ii) the Amended Collateral
Documents, including the handling, administration, or disposition of any
Collateral or Guaranty Collateral, (iii) the Waiver Agreement; (iv) the
Extension Agreement; (v) the Forbearance Agreement; (vi) the Amendments;
(vii) the Obligations, including the Indebtedness; (viii) the loan
relationship between and among Borrower, Agent, and Lenders; (ix) the Term
Loan Notes, the Revolving Credit Notes, the Existing Bank Notes, the
Existing Noteholder Notes, or any predecessor promissory notes to any of
the foregoing; (x) the Amended Guaranty, the Other Guarantees, the Guaranty
Reaffirmations, and the Other Guaranty Reaffirmations; (xi) the Amended
Agency and Possession Agreement; (xii) the receipt, deposit, handling,
transfer or disposition of Third Party Funds; and/or (xiii) the operation
or conduct of the businesses of Borrower, Parent, and the Capital
Subsidiaries.
6. Waiver. In connection with the release under section 5
hereof, each Releasor expressly waives the benefits of Section 1542 of the
California Civil Code (or any other similar law, statute or rule that may
be applicable), which provides as follows:
A general release does not extend to claims
which the creditor does not know or suspect to
exist in his favor at the time of executing the
release, which if known by him must have
materially affected his settlement with the
debtor.
7. Acknowledgements. Each of the Parties to this
Agreement has consulted with its legal counsel and has received independent
legal advice concerning the advisability of entering into the releases and
the waivers set forth herein, and each Party understands that, other than
with respect to the Excluded Claims, the releases set forth in section 5
hereof are intended to be full and complete releases of any and all claims
or causes of action held by the Releasors against the Releasees, including
those claims or causes of action which may not yet exist because they are
inchoate, and any and all claims or causes of action that might now exist
but are not presently known to the Parties to this Agreement. Each
attorney signing this Agreement represents that it has consulted with its
client about this Agreement and that it has advised its client concerning
the import and effect of the releases and waivers contained in this
Agreement, including the waiver of Section 1542 of the California Civil
Code or other similar law set forth in section 6 hereof. Each Party
signing this Agreement acknowledges that its counsel has reviewed this
Agreement and it, he, or she, has been advised by such counsel concerning
the import and effect of the releases and waivers contained in this
Agreement, including the waiver of section 1542 of the California Civil
Code or other similar law set forth in section 6 hereof. Each Releasor
understands and acknowledges that the significance and consequence of its
waiver of Section 1542 of the California Civil Code or other similar law is
that even if such Releasor eventually suffers or discovers additional
claims or damages, no claim could be made for those claims or damages that
are covered by the releases exchanged hereunder. Each Releasor also
acknowledges that it intends these consequences even as to claims or
damages that may exist as of the date set forth in the preamble on the
first page of this Agreement, but which for whatever reason such Releasor
does not know exists, and which, if known, would materially affect such
Releasor's decision to execute this Agreement. The Releasors intend this
Agreement to be binding upon them regardless of any claims of fraud,
misrepresentation, concealment of fact, mistake of law or fact, duress, or
any other circumstance whatsoever in connection with any matter hereby
dealt with and/or the negotiation and settlement of this Agreement. In
entering into this Agreement and the releases provided for herein, each
Releasor recognizes that no facts or representations are ever absolutely
certain. Accordingly, each Releasor assumes the risk of any
misrepresentation, concealment, or mistake; and if any of the Releasors
should subsequently discover that any facts relied upon by it or them in
entering into this Agreement were or are untrue, or that any fact was
concealed from it or them, or that an understanding of the facts or of the
law was incorrect, that Releasor or those Releasors shall not be entitled
to set aside this Agreement or the releases provided for herein by reason
thereof. The finality of this Agreement is a material factor inducing the
Releasors to enter into this Agreement. The Parties acknowledge that this
Agreement has been negotiated at arm's length by each of the Parties hereto
and that each Party has participated in the drafting of this Agreement, and
accordingly, any ambiguities in this Agreement shall not be construed
against any particular Party as the drafter of this Agreement, and instead,
this Agreement shall be interpreted in a reasonable manner to effect the
intentions of the Parties. Each Party executing this Agreement hereby
(i) acknowledges that (other than the Note Transaction) it has not
heretofore sold, assigned, or transferred to any third party any portion of
the claims or causes of action being released under this Agreement; and
(ii) agrees to indemnify, defend, save and hold forever harmless the
persons or entities released by such Party from any claims or costs
incurred as a result of any person or entity asserting a claim pursuant to
any such assignment or transfer. Each Releasor acknowledges and represents
that it is not relying on any representations or statements made by or on
behalf of any other Releasor or any Releasee in entering into this
Agreement. Moreover, each Releasor hereby agrees to assume the risk of any
mistake of fact in entering into this Agreement. Nothing contained in this
Agreement shall be construed as an admission of liability of any person or
party released under the terms hereof.
8. Revival of Obligations; Indemnification. If and to the
extent all or any portion of the Release Price is required to be disgorged,
returned or turned over by Agent or any of the Lenders to any person or
entity, then the Obligations, including the Indebtedness, shall revive to
the extent and in the amount of the portion of the Release Price that is
disgorged, returned, or turned over, and the Amended Guaranty and the Other
Guarantees shall also revive to the extent that any portion of the Release
Price is disgorged, returned, or turned over. In addition, Borrower,
Parent and each Capital Subsidiary agree to indemnify, defend, save and
hold Agent and Lenders (and their respective parents, subsidiaries,
affiliates, shareholders, officers, directors, partners, successors,
predecessors, representatives, heirs, and assigns) harmless from and
against any and all claims or causes of action arising out of or related to
(i) this Agreement; (ii) the Existing Loan Documents, the Prior Loan
Documents or the Amended Loan Documents; (iii) the Refinancing Transaction;
or (iv) any losses from failure by Agent or Lenders to collect or retain
the full amount of checks or other deposits or payments previously received
by Agent or Lenders and applied by any of them against the Obligations,
including the Indebtedness.
9. Waivers. Each Party to this Agreement acknowledges that
adequate consideration has been given by each Party hereto for the
benefits, payments, and releases granted hereunder. Accordingly, upon
completion of payment of the Release Price to Agent in accordance with
section 3 hereof, each Party hereto (A) acknowledges that consummation of
the Refinancing Transaction is not a default under the Amended Loan
Documents, (B) waives any right to declare such default, and (C) waives any
right to challenge the Refinancing Transaction as a fraudulent conveyance
under federal or state law.
10. Miscellaneous. This Agreement constitutes the entire
agreement by the Parties hereto concerning the subject matter hereof and
supersedes all prior or contemporaneous oral or written agreements or
discussions. This Agreement may not be altered or amended except by mutual
agreement evidenced by a writing signed by the Party or Parties sought to
be bound by such amendment, which writing shall be identified as an
amendment to this Agreement. The Parties specifically agree that any prior
drafts of this Agreement are superseded by the executed Agreement and may
not be presented by any Party as evidence of any Party's intent,
understanding or agreement. This Agreement shall be binding upon the
successors and assigns of the Parties to this Agreement. Except as
expressly set forth herein, nothing contained in this Agreement is intended
to, or shall be construed to, create any rights in any third parties.
Pursuant to the terms of the Amended Loan Documents, Borrower shall be
responsible for the costs, expenses and attorneys' fees incurred by Agent
in connection with the preparation, review, negotiation, execution and
delivery of this Agreement. If any action is brought to enforce or
interpret any provision of this Agreement or the rights or obligations of
any Party hereto, the prevailing party in such action shall be entitled to
recover its, his, or her reasonable attorneys' fees. This Agreement shall
be governed by and construed in accordance with the laws of the
Commonwealth of Pennsylvania, without regard to principles or rules of
conflicts of law. The headings and captions have been inserted for
convenience of reference only and shall not be used in interpreting the
provisions of this Agreement. This Agreement may be executed in counter-
parts which, when taken together, shall constitute the entire Agreement.
Signatures to this Agreement may be exchanged by telecopy and each Party
hereto agrees to accept the telecopied signatures of the other Parties
hereto and to be bound by its own telecopied signature.
11. Effective Date. Unless first terminated under section 12
hereof, this Agreement shall become effective on the Effective Date.
12. Termination. This Agreement may be terminated as follows:
(i) prior to the occurrence of the Effective Date, Borrower may terminate
this Agreement by written notice to Agent or Agent may terminate this
Agreement by written notice to Borrower; or (ii) this Agreement shall
automatically terminate if payment of the Release Price under section 3
hereof has not been completed by the close of business on December 5, 1994.
This Agreement may not be terminated after the Effective Date has occurred.
IN WITNESS WHEREOF, this Agreement has been duly executed as of the
date first written above.
AGREED:
BORROWER: AGENT:
CAPITAL ASSOCIATES MELLON BANK, N.A.
INTERNATIONAL, INC.
By: /s/John E. Christensen By: /s/Brigitte R. Bouchat
_______________________ _________________________
Its: Senior Vice President Its: Vice President
PARENT:
CAPITAL ASSOCIATES, INC.
By: /s/John E. Christensen
_______________________
Its: Senior Vice President
<PAGE>
BANKS: NOTEHOLDERS:
MELLON BANK, N.A. CIG & CO., as nominee for
CONNECTICUT GENERAL LIFE
INSURANCE COMPANY, successor
to HORACE MANN LIFE INSURANCE
By: /s/Brigitte R. Bouchat COMPANY
________________________
Its: Vice President By: /s/James F. Coggins, Jr.
________________________
Its: Partner
THE CHASE MANHATTAN BANK, N.A.
By: /s/Sherman Edmiston
__________________________
FIRST BANK NATIONAL ASSOCIATION
By: /s/Jack L. Quitmeyer
________________________
Its: Vice President
<PAGE>
BORROWER SUBSIDIARIES: PARENT SUBSIDIARIES:
CAI LEASING CANADA, INC. CAI EQUIPMENT LEASING I CORP.
By: /s/John E. Christensen By: /s/John E. Christensen
_______________________ ________________________
Its: Senior Vice President Its: Senior Vice President
CAI PARTNERS MANAGEMENT COMPANY CAI EQUIPMENT LEASING II CORP.
By: /s/John E. Christensen By: /s/John E. Christensen
_______________________ ________________________
Its: Senior Vice President Its: Senior Vice President
CAPITAL EQUIPMENT CORP. CAI EQUIPMENT LEASING III CORP.
By: /s/John E. Christensen By: /s/John E. Christensen
_______________________ ________________________
Its: Senior Vice President Its: Senior Vice President
WHITEWOOD CREDIT CORPORATION CAI SECURITIES CORPORATION
By: /s/John E. Christensen By: /s/John E. Christensen
_______________________ ________________________
Its: Senior Vice President Its: Senior Vice President
CAI EQUIPMENT LEASING IV CORP.
By: /s/John E. Christensen
_________________________
Its: Senior Vice President
<PAGE>
APPROVED AS TO FORM
AND CONTENT:
MURPHY, WEIR & BUTLER
Attorneys for Mellon Bank, N.A.
as Agent
By: /s/William Paul Weintraub
___________________________
A Member of the Firm
BALLARD SPAHR ANDREWS & INGERSOLL
Attorneys for Borrower, Parent,
and the Capital Subsidiaries
By: /s/Jacquelyn Kilmer
___________________________
A Member of the Firm
Exhibit 11A
CAPITAL ASSOCIATES, INC. AND SUBSIDIARIES
COMPUTATION OF PRIMARY EARNINGS PER SHARE
THREE MONTHS ENDED NINE MONTHS ENDED
-------------------------- --------------------------
February 28, February 28, February 28, February 28,
1995 1994 1995 1994
------------ ------------ ------------ ------------
Shares outstanding at
beginning of period 10,211,000 9,654,000 9,759,000 9,654,000
Shares issued during
the period
(weighted average) - 61,000 352,000 54,000
Dilutive shares
contingently issuable
upon exercise of options
(weighted average) 1,832,000 2,265,000 1,966,000 2,287,000
Less shares assumed to
have been purchased for
treasury with assumed
proceeds from exercise
of stock options
(weighted average) (1,383,000) (1,129,000) (1,245,000) (1,017,000)
---------- ---------- ---------- ----------
Total shares, primary 10,660,000 10,851,000 10,832,000 10,978,000
========== ========== ========== ==========
Net income $ 54,000 $ 187,000 $ 288,000 $ 642,000
========== ========== ========== ==========
Income per common and
common equivalent
share, primary $ 0.01 $ 0.02 $ 0.03 $ 0.06
========== ========== ========== ==========
