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 September 28, 1997, or
|_|Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _______________ to _______________
Commission File No. 1-9510
FFP PARTNERS, L.P.
(Exact name of registrant as specified in its charter)
Delaware 75-2147570
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
2801 Glenda Avenue; Fort Worth, Texas 76117-4391
(Address of principal executive office, including zip code)
817/838-4700
(Registrant's telephone number, including area code)
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
Class A Units 3,529,205
Class B Units 175,000
(Number of units outstanding as of November 10, 1997)
FFP PARTNERS, L.P., AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
September 28, December 29,
1997 1996
ASSETS
Current Assets -
Cash $7,254 $8,244
Trade receivables 14,127 10,303
Notes receivable 821 778
Receivable from affiliated company 408 420
Inventories 12,818 12,489
Prepaid expenses and other 799 625
Total Current Assets 36,227 32,859
Property and equipment, net of accumulated
depreciation 41,544 38,024
Noncurrent notes receivable, excluding current portion 1,544 2,069
Claims for reimbursement of environmental
remediation costs 1,040 1,038
Other assets, net 3,944 4,609
Total Assets $84,299 $78,599
LIABILITIES AND PARTNERS' EQUITY
Current Liabilities -
Amount due under revolving credit line $0 $6,823
Current installments of long-term debt 1,157 1,587
Current installments of obligation under capital 747 1,122
lease
Accounts payable 13,566 14,150
Money orders payable 10,584 7,809
Accrued expenses 11,300 8,778
Total Current Liabilities 37,354 40,269
Long-term debt, including long-term revolving credit
line, excluding current installments 14,870 7,765
Obligation under capital lease, excluding
current installments 2,379 1,653
Deferred income taxes 4,185 3,781
Other liabilities 2,670 993
Total Liabilities 61,458 54,461
Partners' Equity, net of treasury units of $269 at 22,841 24,138
Total Liabilities and Partners' Equity $84,299 $78,599
See accompanying notes to condensed consolidated financial statements.
FFP PARTNERS, L.P., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per unit data)
(Unaudited)
Three Months Ended Nine Months Ended
Sept 28, Sept 29, Sept 28, Sept 29,
1997 1996 1997 1996
Revenues -
Motor fuel $79,032 $77,428 $238,257 $241,685
Merchandise 15,633 15,387 45,114 46,207
Miscellaneous 1,394 1,510 4,702 6,101
Total Revenues 96,059 94,325 288,073 293,993
Costs and Expenses -
Cost of motor fuel 73,472 72,030 222,686 225,399
Cost of merchandise 10,853 10,879 31,719 32,714
Direct store expenses 7,035 6,676 20,567 20,343
General and administrative expenses 3,008 2,766 8,901 8,987
Depreciation and amortization 1,472 960 3,986 2,755
Total Costs and Expenses 95,840 93,311 287,859 290,198
Operating Income 219 1,014 214 3,795
Interest expense 460 316 1,108 968
Income/(Loss) Before Income Taxes (241) 698 (894) 2,827
Deferred income tax expense 134 134 403 402
Net Income/(Loss) $(375) $564 $(1,297) $2,425
Income/(loss) allocated to -
Limited partners $(371) $558 $(1,284) $2,401
General partner (4) 6 (13) 24
Net income/(loss) per Class A and
Class B Unit $(0.10) $0.15 $(0.35) $0.65
Distributions declared per Class A and
Class B Unit $0.000 $0.210 $0.000 $0.415
Weighted average number of Class A and
Class B Units outstanding 3,704 3,686 3,704 3,678
See accompanying notes to condensed consolidated financial statements.
FFP PARTNERS, L.P., AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Nine Months Ended
Sept 28, 1997 Sept 29, 1996
Cash Flows from Operating Activities -
Net income/(loss) $(1,297) $2,425
Adjustments to reconcile net income to cash
provided/(used) by operating activities -
Depreciation and amortization 3,986 2,755
Deferred income tax expense 403 402
Net change in operating assets and liabilities 2,842 (2,507)
Net cash provided by operating activities 5,934 3,075
Cash Flows from Investing Activities -
Additions of property and equipment, net (7,127) (5,397)
Net cash (used) by investing activities (7,127) (5,397)
Cash Flows from Financing Activities -
Net borrowings/(repayments) under
credit facilities 203 3,772
Proceeds from exercise of unit options 0 135
Distributions to unitholders 0 (1,542)
Net cash (used) by financing activities 203 2,365
Net Increase/(Decrease) in Cash (990) 43
Cash at beginning of period 8,244 8,106
Cash at end of period $7,254 $8,149
See accompanying notes to condensed consolidated financial statements.
FFP PARTNERS, L.P., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 28, 1997
(Unaudited)
1. Basis of Presentation
The condensed consolidated financial statements include the assets,
liabilities, and results of operations of FFP Partners, L.P., and its 99%-owned
subsidiaries, FFP Operating Partners, L.P., Direct Fuels, L.P., and FFP
Financial Services, L.P., and its 100%-owned subsidiaries, Practical Tank
Management, Inc., FFP Transportation, L.L.C., and FFP Money Order Company, Inc.,
collectively referred to as the "Company."
The consolidated balance sheet as of September 28, 1997, and the
consolidated statements of operations and condensed consolidated statements of
cash flows for the three month and nine month periods ended September 28, 1997,
and September 29, 1996, have been prepared by the Company and have not been
audited. In the opinion of management, all adjustments, consisting only of
normal recurring adjustments, necessary to fairly present the Company's
financial position as of September 28, 1997, and the results of operations and
cash flows for the periods presented have been made. Interim operating results
are not necessarily indicative of results for the entire year.
The notes to the consolidated financial statements which are included in
the Company's Annual Report on Form 10-K for the year ended December 29, 1996,
include accounting policies and additional information pertinent to an
understanding of these interim financial statements. That information has not
changed other than as a result of normal transactions in the nine months ended
September 28, 1997, and as discussed in Note 4.
2. Income per Unit and Distributions
The Class A and Class B Units represent a 99% interest in the Company.
Accordingly, income per unit is calculated by dividing 99% of the income amount
by the weighted average number of units outstanding.
3. Reclassifications.
Certain amounts previously reported in the 1996 financial statements have
been reclassified to conform to the 1997 presentation.
4. Refinancing of Bank Debt.
On November 3, 1997, the Company completed a refinancing of its bank debt
with another lender. The new Loan Agreement provides the Company with a
revolving credit line of up to $15,000,000 (the amount available is related to a
borrowing base comprised of the Company's trade receivables and inventories) and
a term loan of $8,000,000. Both of the loans bear interest, payable monthly, at
the lending institution's prime rate. The Company has the option of fixing the
interest rate on all or a portion of both loans at rates of LIBOR plus 2.25% for
periods of three or six months and in the case of the term loan at a rate tied
to United State Treasury securities plus 2.50%. The term loan requires monthly
principal payments of $95,000 and both loans mature on November 1, 2000. The
loans are secured by the Company's accounts receivable and inventory, equipment,
and a negative pledge of other fixed assets. The loans are also guaranteed by
the Company's general partner and it's subsidiary which is the general partner
of one of the Company's subsidiaries.
The accompanying balance sheet reflects this refinancing as though it had
occurred at September 28, 1997.
FFP PARTNERS, L.P., AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations for Third Quarter 1997 compared with Third Quarter 1996
Total revenues increased $1,734,000 (1.8%) for the quarter due to increases
in motor fuel and merchandise sales offset by a slight decline in miscellaneous
revenues. The $1,604,000 (2.1%) increase in fuel sales resulted from a 2.6%
increase in the volume of fuel sold, with such increases coming from both the
Company's retail and wholesale activities, offset by lower per gallon prices in
the 1997 period as compared to 1996. The increased fuel sales also resulted in a
$162,000 (3.0%) increase in overall fuel margin. The increased fuel margin was
due to the increased sales volumes accompanied by improved margins in the
Company's wholesale fuel operations. The retail fuel margin per gallon declined
0.4 cents (3.9%) in the 1997 quarter from the 1996 period.
The merchandise sales increase of $246,000 (1.6%) is attributable to
increases in the average weekly sales per store of 4.6%, offset by a decline of
2.5% in the average number of convenience stores and truck stops operated in the
1997 period. The increased merchandise sales along with an increase in
merchandise margin to 30.6% from 29.3% resulted in a $272,000 (6.0%) increase in
merchandise gross profit. The increased merchandise margin is the result of the
Company's efforts, starting late in the first quarter, to more closely monitor
its selling prices so as to remain competitive yet achieve a higher margin on
less price sensitive items.
Direct store expenses (those expenses, such as payroll, utilities, and
repair and maintenance, that are directly attributable to the operation of an
outlet) increased $359,000 (5.4%) in the 1997 quarter due principally to
increased payroll costs associated with the increase in the minimum wage that
was effective in September 1997 and the absence in 1997 of favorable adjustments
related to employee benefit costs. Other direct store expenses were relatively
flat between the two periods.
General and administrative expenses were up $242,000 (8.7%) in the third
quarter 1997 as compared to the 1996 quarter. This increase resulted principally
from the costs associated with operation of the Company's fuel terminal, which
began operating in June 1997.
Depreciation and amortization charges increased $512,000 (53.3%) in the
quarter due to beginning depreciation at the Company's fuel terminal, which
began operating in June 1997, and to increased depreciation expense related to
the capital expenditures made by the Company over the last twelve to eighteen
months in its retail operations, primarily to bring its underground storage
tanks into compliance with 1998 environmental requirements.
The $144,000 (45.6%) increase in interest expense is attributable to higher
debt levels and to higher interest rates during the current quarter as compared
to the prior year.
Although the Company made substantial improvements in its sales and margin
levels, the gains were outstripped by increases in expense levels resulting in a
loss of $375,000 for the quarter as compared to net income of $564,000 in 1996.
Results of Operations for First Nine Months of 1997 compared with First Nine
Months of 1996
For the first nine months of 1997, retail fuel sales volume (in gallons)
was up 1.0% as compared to 1996 and the wholesale volume was down 8.9%. The
decline in wholesale volume resulted from a 13.6% decline in such sales in the
first quarter of 1997 due to the absence of a large volume of lower margin sales
to a customer that purchases fuel from the Company infrequently. The average
weekly sales (in gallons) of fuel at the Company's convenience stores and the
independently operated stores at which it has the fuel concession were flat (up
less than 1.0%) in 1997 but sales at its truck stops increased 5.4% over the
prior year period. The flat sales volumes at the convenience stores are
reflective of the Company's attempt to maintain as high a margin per gallon as
possible on these sales, without foregoing any of its market share, in the face
of intense competitive retail pricing of motor fuel that has been occurring in
the last twelve to eighteen months. The increased truck stop sales resulted from
a lessening of the competitive pressures in this submarket of the retail fuel
business. Because of the reduced wholesale fuel volumes, the Company's motor
fuel revenues declined $3,428,000 (1.4%) in the first nine months of 1997.
The Company's gross profit on fuel was $715,000 (4.4%) less in 1997 than in
the prior year, partially due to the smaller volume of wholesale sales and
partly due to the decline in the retail margin per gallon to 9.2 cents in 1997
as compared to 9.8 cents in 1996. The Company's wholesale margin per gallon
increased to 2.5 cents from 1.9 cents, in part because of the absence of the low
margin wholesale sales referred to above. However, wholesale margins were also
positively influenced by sales of fuel processed at the Company's terminal,
which began operating in June 1997.
Merchandise sales declined $1,093,000 (2.4%) in the 1997 nine-month period
reflecting the 5.1% decline in the average number of convenience stores and
truck stops operated by the Company offset by an increase of 3.3% in the average
weekly sales per outlet. Because of the reduced sales, merchandise gross profit
declined $98,000 (0.7%), although the Company's merchandise margin increased
0.5% in the 1997 period to 29.7%. The increase in average weekly merchandise
sales and merchandise margin are the result of management's efforts to improve
these key components of profitability.
The $1,399,000 (22.9%) drop in miscellaneous revenues in 1997 is due to the
decline in the sale of the merchandise operations at company-operated
convenience stores to independent operators. In the first nine months of 1996,
the Company sold the merchandise operations at two stores compared to sixteen
such sales in the first nine months of 1997.
The increase in direct store expenses of $224,000 (1.1%) is due to
increased wage costs in the convenience stores and truck stops, offset by
reductions in cash over and short expense, and increased commissions on gasoline
sales paid to the operators of outlets at which the Company has the fuel
concession. The increased wage costs are related to the increase in the
federally mandated minimum wage which took effect on September 1, 1997, while
the increased commissions on motor fuel sales are the result of operating an
average of 8.2 (4.1%) more such outlets.
A decline in bad debt expense, advertising and promotion, and professional
fees partially offset by increases in payroll costs resulted in the $86,000
(1.0%) decrease in general and administrative costs.
The $1,231,000 (44.7%) increase in depreciation and amortization expense
for the first nine months of 1997 was primarily the result of the start of
operations at the Company's fuel terminal in June 1997 along with increased
charges related to the upgrading of the Company's underground storage tanks to
meet 1998 environmental regulatory requirements.
The increase of $140,000 (14.5%) in interest expense during the 1997 period
is attributable to the generally higher level of interest rates during the 1997
period as compared to 1996 and to higher debt levels. The increased borrowings
were used to fund the Company's investment in its fuel terminal and purchases of
equipment to upgrade its underground storage tanks.
The decline in revenues attributable to the sale of merchandise operations
at convenience stores and the increased depreciation and amortization expenses
are the primary cause for the loss of $1,297,000 for the first nine months of
1997 as compared to the Company's income of $2,425,000 for the comparable period
in 1996.
Liquidity and Capital Resources
On November 3, 1997, the Company completed a refinancing of its bank debt
with another lender. The new Loan Agreement provides the Company with a
revolving credit line of up to $15,000,000 (the amount available is related to a
borrowing base comprised of the Company's trade receivables and inventories) and
a term loan of $8,000,000. Both loans mature on November 1, 2000, and the term
loan requires monthly principal payments of $95,000. The loans are secured by
the Company's accounts receivable and inventory, equipment, and a negative
pledge of other fixed assets.
Because of the restructuring of this debt, the Company's working capital
position improved from a negative $7,410,000 at year end 1996 to a negative
$1,127,000 at September 28, 1997. Due to the availability of funds under the
Company's revolving credit line which is used to fund working capital needs, the
availability of funds under its lease lines of credit which fund a significant
portion of routine capital expenditures, its traditional use of customary trade
credit, and the fact the most of the Company's sales are for cash, management
believes that the Company's operations can be conducted in a customary manner
while operating in a negative working capital position.
Changes in Structure of Company
Under current tax law, the Company can elect to become taxable as a
corporation beginning in 1998 (with any distributions made to unitholders being
treated as corporate dividends) or to continue as a publicly-traded partnership
and pay an excise tax of 3.5% of its gross profit.
Management considers the latter alternative unacceptable since it would
result in the payment of significant taxes even if the Company did not have net
earnings. For example, under that alternative, the Company would have paid taxes
applicable to 1996 in excess of $1,000,000 even though it reported a significant
loss for tax reporting purposes for that year. The option of converting to a
corporate form will, in effect, occur if the Company takes no other action.
However, the Company believes that its unitholders' interests may be best
served by separating its retail operations and its real estate holdings.
Management's goal is to convert the entity with the real estate holdings into a
real estate investment trust ("REIT"), but because of the complexities related
to qualifying as a REIT under federal tax laws and regulations, the Company may
not be able to obtain that status in the near term. One of the primary criteria
for any restructuring of the Company is that it be accomplished in a manner that
minimizes the federal income tax effect to the Company and its unitholders.
A reorganization would likely require approval by the limited partners. The
Company is in the process of preparing information to be distributed to the
partners that will detail the proposed reorganization and solicit their votes on
the matter.
Forward Looking Statements
Certain of the statements made in this report are forward-looking
statements that involve a number of risks and uncertainties. Statements that
generally should be considered forward-looking include, but are not limited to,
those that contain the words "estimate," "anticipate," "in the opinion of
management," "believes," and similar words and phrases. Among the factors that
could cause actual results to differ materially from the statements made are the
following: general business conditions in the local markets served by the
Company's convenience stores, truck stops, and other retail outlets, and its
wholesale fuel markets; the weather in the local markets served by the Company;
competitive factors such as changes in the locations, merchandise offered, or
other aspects of competitors' operations; increases in the cost of fuel and
merchandise sold or reductions in the gross profit realized from such sales;
expense pressures relating to operating costs, including labor, repair and
maintenance, and supplies; and, unanticipated general and administrative
expenses, including costs of expansion or financing.
EXHIBITS AND REPORTS ON FORM 8-K
Exhibits
10.1 Loan and Security Agreement among FFP Partners, L.P.,
FFP Operating Partners, L.P., Direct Fuels, L.P.,
and HSBC Business Loans, Inc., dated October 31, 1997
27 Financial Data Schedule.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
FFP PARTNERS, L.P.
Registrant
Date: November 12, 1997 By: /s/John H. Harvison
----------------------------------
John H. Harvison
Chairman and
Chief Executive Officer
Date: November 12, 1997 By: /s/Steven B. Hawkins
----------------------------------
Steven B. Hawkins
Vice President - Finance and
Chief Financial Officer
LOAN AND SECURITY AGREEMENT
among
FFP PARTNERS, L.P.
("FFPP")
FFP OPERATING PARTNERS, L.P.
("FFPO")
DIRECT FUELS, L.P.
("Direct Fuels")
2801 Glenda Avenue
Fort Worth, Texas 76117-4391
and
HSBC BUSINESS LOANS, INC.
("Secured Party")
12655 North Central Expressway, Suite 300
Dallas, Texas 75243-1717
Dated: October 31, 1997
TABLE OF CONTENTS
1. DEFINITIONS.............................................................1
1.1. CERTAIN SPECIFIC TERMS.......................................1
1.2. SINGULARS AND PLURALS........................................8
1.3. UCC DEFINITIONS..............................................9
2. ADVANCES................................................................9
2.1. REQUESTS FOR ADVANCES FOR REVOLVING LOANS....................9
2.2. PROCEEDS OF ADVANCES FOR REVOLVING LOANS.....................9
2.3. ESTABLISHMENT OF RESERVES....................................9
2.4. LETTERS OF CREDIT............................................9
3. COLLATERAL AND INDEBTEDNESS SECURED....................................10
3.1. SECURITY INTEREST...........................................10
3.2. OTHER COLLATERAL.............................................11
3.3. INDEBTEDNESS SECURED........................................11
4. CONDITIONS TO ADVANCES.................................................11
4.1. PARTNERSHIP ACTION..........................................11
4.2. PARTNERSHIP DOCUMENTS.......................................11
4.3. OPINIONS.....................................................11
4.4. TRANSACTION DOCUMENTS.......................................12
4.5. THIRD PARTY ACTION...........................................12
4.6. GUARANTIES...................................................12
4.7. OTHER MATTERS................................................12
5. REPRESENTATIONS AND WARRANTIES.........................................12
5.1. PARTNERSHIP EXISTENCE.......................................12
5.2. PARTNERSHIP CAPACITY........................................12
5.3. VALIDITY OF RECEIVABLES.....................................12
5.4. INVENTORY...................................................13
5.5. TITLE TO COLLATERAL.........................................13
5.6. NOTES RECEIVABLE............................................13
5.7. EQUIPMENT...................................................13
5.8. PLACE OF BUSINESS...........................................14
5.9. FINANCIAL CONDITION.........................................14
5.10. TAXES......................................................14
5.11. LITIGATION.................................................14
5.12. ERISA MATTERS..............................................14
5.13. ENVIRONMENTAL MATTERS......................................15
5.14. VALIDITY OF TRANSACTION DOCUMENTS..........................15
5.15. NO CONSENT OR FILING.......................................15
5.16. NO VIOLATIONS..............................................15
5.17. TRADEMARKS AND PATENTS.....................................16
5.18. CONTINGENT LIABILITIES.....................................16
5.19. SOLVENCY....................................................16
5.20. COMPLIANCE WITH LAWS.......................................16
5.21. LICENSES, PERMITS, ETC.....................................16
5.22. USE OF PROCEEDS; MARGIN STOCK...............................16
5.23. COMMISSIONS.................................................17
5.24. LABOR CONTRACTS............................................17
5.25. CONSOLIDATED SUBSIDIARIES..................................17
5.26. ACCURACY OF REPRESENTATIONS.................................17
5.27. PARTNERSHIP INTERESTS......................................17
5.28. NO ADVERSE CHANGE..........................................17
5.29. NO DEFAULT.................................................17
5.30. MATERIAL AGREEMENTS........................................17
5.31. NO FINANCING OF CORPORATE TAKEOVERS........................17
6. CERTAIN DOCUMENTS TO BE DELIVERED TO SECURED PARTY.....................17
6.1. DOCUMENTS...................................................17
6.2. INVOICES....................................................18
6.3. CHATTEL PAPER...............................................18
7. COLLECTIONS............................................................18
8. PAYMENT OF PRINCIPAL, INTEREST, FEES, AND COSTS AND EXPENSES...........18
8.1. PROMISE TO PAY PRINCIPAL....................................18
8.2. PROMISE TO PAY INTEREST.....................................19
8.3. PROMISE TO PAY FEES.........................................19
8.4. PROMISE TO PAY COSTS AND EXPENSES...........................20
8.5. METHOD OF PAYMENT OF PRINCIPAL, INTEREST, FEES, AND
COSTS AND EXPENSES.......................................20
8.6. COMPUTATION OF DAILY OUTSTANDING BALANCE....................21
8.7. ACCOUNT STATED..............................................21
8.8. CAPITAL ADEQUACY.............................................21
8.9. ADDITIONAL PROVISIONS APPLICABLE TO LIBOR....................22
9. PROCEDURES AFTER SCHEDULING RECEIVABLES................................24
9.1. RETURNED MERCHANDISE........................................24
9.2. CREDITS AND EXTENSIONS......................................25
9.3. RETURNED INSTRUMENTS.......................................25
9.4. DEBIT MEMORANDA.............................................25
9.5. NOTES RECEIVABLE............................................25
10. AFFIRMATIVE COVENANTS.................................................26
10.1. FINANCIAL STATEMENTS.......................................26
10.2. GOVERNMENT AND OTHER SPECIAL RECEIVABLES...................26
10.3. TERMS OF SALE..............................................27
10.4. BOOKS AND RECORDS..........................................27
10.5. INVENTORY IN POSSESSION OF THIRD PARTIES...................27
10.6. EXAMINATIONS...............................................27
10.7. VERIFICATION OF COLLATERAL.................................27
10.8. RESPONSIBLE PARTIES........................................27
10.9. TAXES......................................................27
10.10. LITIGATION................................................28
10.11. INSURANCE.................................................28
10.12. EXISTENCE; BUSINESS.......................................28
10.13. PENSION REPORTS...........................................29
10.14. NOTICE OF NON-COMPLIANCE..................................29
10.15. COMPLIANCE WITH ENVIRONMENTAL LAWS........................29
10.16. DEFEND COLLATERAL..........................................29
10.17. USE OF PROCEEDS...........................................29
10.18. COMPLIANCE WITH LAWS......................................29
10.19. MAINTENANCE OF PROPERTY...................................29
10.20. LICENSES, PERMITS, ETC....................................30
10.21. TRADEMARKS AND PATENTS....................................30
10.22. ERISA.....................................................30
10.23. MAINTENANCE OF OWNERSHIP..................................30
10.24. ACTIVITIES OF CONSOLIDATED SUBSIDIARIES...................30
10.25. LANDLORD AND WAREHOUSEMAN WAIVERS..........................30
10.26. COMPLIANCE WITH MATERIAL AGREEMENTS........................30
10.27. OTHER NOTICES..............................................30
11. NEGATIVE COVENANTS....................................................31
11.1. LOCATION OF INVENTORY, EQUIPMENT, AND BUSINESS RECORDS.....31
11.2. BORROWED MONEY.............................................31
11.3. SECURITY INTEREST AND OTHER ENCUMBRANCES...................31
11.4. STORING AND USE OF COLLATERAL..............................31
11.5. MERGERS, CONSOLIDATIONS, OR SALES..........................31
11.6. PARTNERSHIP INTERESTS......................................31
11.7. DISTRIBUTIONS..............................................31
11.8. INVESTMENTS AND ADVANCES...................................31
11.9. GUARANTIES.................................................32
11.10. LEASES....................................................32
11.11. CAPITAL EXPENDITURES......................................32
11.12. COMPENSATION..............................................32
11.13. NAME CHANGE...............................................32
11.14. DISPOSITION OF COLLATERAL.................................32
11.15. FINANCIAL COVENANTS.......................................32
11.16. FISCAL YEAR AND ACCOUNTING METHOD.........................32
11.17. LINES OF BUSINESS.........................................32
12. EVENTS OF DEFAULT.....................................................33
12.1. EVENTS OF DEFAULT..........................................33
12.2. EFFECTS OF AN EVENT OF DEFAULT.............................35
13. SECURED PARTY'S RIGHTS AND REMEDIES...................................35
13.1. GENERALLY..................................................35
13.2. NOTIFICATION OF ACCOUNT DEBTORS............................35
13.3. POSSESSION OF COLLATERAL...................................36
13.4. COLLECTION OF RECEIVABLES..................................36
13.5. ENDORSEMENT OF CHECKS; DEBTOR'S MAIL.......................36
13.6. LICENSE TO USE PATENTS, TRADEMARKS, AND TRADENAMES.........36
14. MISCELLANEOUS.........................................................36
14.1. PERFECTING THE SECURITY INTEREST; PROTECTING THE
COLLATERAL...............................................36
14.2. PERFORMANCE OF DEBTOR'S DUTIES.............................36
14.3. NOTICE OF SALE.............................................37
14.4. WAIVER BY SECURED PARTY....................................37
14.5. WAIVER BY DEBTOR...........................................37
14.6. SETOFF.....................................................37
14.7. ASSIGNMENT.................................................37
14.8. SUCCESSORS AND ASSIGNS.....................................37
14.9. MODIFICATION...............................................37
14.10. COUNTERPARTS..............................................37
14.11. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES..................38
14.12. INDEMNIFICATION...........................................38
14.13. TERMINATION; PREPAYMENT PREMIUM...........................39
14.14. FURTHER ASSURANCES........................................40
14.15. HEADINGS..................................................40
14.16. CUMULATIVE SECURITY INTEREST, ETC.........................40
14.17. SECURED PARTY'S DUTIES....................................40
14.18. NOTICES GENERALLY.........................................40
14.19. SEVERABILITY..............................................40
14.20. INCONSISTENT PROVISIONS...................................40
14.21. USURY SAVINGS.............................................41
14.22. PARTICIPATIONS.............................................41
14.23. APPLICABLE LAW............................................41
14.24. CONSENT TO JURISDICTION...................................42
14.25. JURY TRIAL WAIVER.........................................42
14.26. ARTICLE 15.10(b)..........................................42
14.27. FINAL AGREEMENT...........................................42
Debtor and Secured Party agree as follows:
1. DEFINITIONS.
1.1. CERTAIN SPECIFIC TERMS. For purposes of this Loan and Security
Agreement (this "Agreement"), the following terms shall have the following
meanings:
(a) ACCOUNT DEBTOR means the person, firm, or entity obligated to pay
a Receivable.
(b) ADVANCE means any Revolving Loan or Term Loan made to Debtor by
Secured Party pursuant to this Agreement.
(c) BORROWING CAPACITY means, at the time of computation, the amount
specified in Item 1 of the Schedule.
(d) BUSINESS DAY means a day other than a Saturday, Sunday, or other
day on which banks are authorized or required to close under the laws of
New York or the State; provided, that such day is a day in which
transactions occur in the London interbank market, and provided, further,
that for purposes of Item 20 of the Schedule and of calculations made with
reference thereto, a Business Day shall be deemed to be the equivalent of
1.4 calendar days.
(e) COLLATERAL means collectively all of the property of Debtor
subject to the Security Interest and described in Sections 3.1 and 3.2.
(f) CONSOLIDATED SUBSIDIARY means any entity of which at least 50% of
the equity interest is owned by Debtor directly, or indirectly through one
or more of its subsidiaries. If Debtor has no Consolidated Subsidiaries,
the provisions of this Agreement relating to Consolidated Subsidiaries
shall be inapplicable without affecting the applicability of such
provisions to Debtor alone.
(g) CREDIT means any discount, allowance, credit, rebate, or
adjustment granted by Debtor with respect to a Receivable, other than a
cash discount described in Item 3 of the Schedule.
(h) DEBT SERVICE COVERAGE means, for the period of determination, a
ratio with the Net Profit After Taxes (as defined below) plus depreciation
and amortization expense as the numerator and the sum of the regular
principal payments of any long term debt due over the next 12 months as the
denominator.
(i) DEBT TO TANGIBLE NET WORTH RATIO means a ratio with total
liabilities minus the principal balance of any debt that is subordinated to
Secured Party in a manner satisfactory to Secured Party as the numerator
and with Tangible Net Worth (as defined below) as the denominator.
(j) DEBTOR means, collectively, FFPP, FFPO and Direct Fuels (as
defined on the cover page to this Agreement) and, if the context so
requires, DEBTOR shall refer to any of such parties.
(k) DISPOSAL means the intentional or unintentional abandonment,
discharge, deposit, injection, dumping, spilling, leaking, storing,
burning, thermal destruction, or placing of any Hazardous Substances so
that they or any of their constituents may enter the environment.
(l) ELIGIBLE EQUIPMENT means that Equipment of Debtor in which Secured
Party has a first-priority perfected security interest reduced by (i) any
Equipment as to which a representation or warranty contained in Section 5.5
or 5.7 is not, or does not continue to be, true and accurate; and (ii) any
Equipment which is otherwise unacceptable to Secured Party, in its
reasonable judgment.
(m) ELIGIBLE INVENTORY means all Inventory of Debtor in which Secured
Party has a first-priority perfected security interest reduced by (i) any
Inventory as to which a representation or warranty contained in Section 5.4
or 5.5 is not, or does not continue to be, true and accurate; and (ii) any
Inventory which is otherwise unacceptable to Secured Party, in its
reasonable judgment.
(n) ENVIRONMENT means any water including, but not limited to, surface
water and ground water or water vapor; any land including land surface or
subsurface; stream sediments; air; fish, wildlife, plants; and all other
natural resources or environmental media.
(o) ENVIRONMENTAL LAWS means all federal, state, and local
environmental, land use, zoning, health, chemical use, safety and
sanitation laws, statutes, ordinances, regulations, codes, and rules
relating to the protection of the Environment and/or governing the use,
storage, treatment, generation, transportation, processing, handling,
production, or disposal of Hazardous Substances and the policies,
guidelines, procedures, interpretations, decisions, orders, and directives
of federal, state, and local governmental agencies and authorities with
respect thereto.
(p) ENVIRONMENTAL PERMITS means all licenses, permits, approvals,
authorizations, consents, or registrations required by any applicable
Environmental Laws and all applicable judicial and administrative orders in
connection with ownership, lease, purchase, transfer, closure, use, and/or
operation of any property owned, leased, or operated by Debtor or any
Consolidated Subsidiary and/or as may be required for the storage,
treatment, generation, transportation, processing, handling, production, or
disposal of Hazardous Substances.
(q) ENVIRONMENTAL QUESTIONNAIRE means a questionnaire and all
attachments thereto concerning (i) activities and conditions affecting the
Environment at any property of Debtor or any Consolidated Subsidiary or
(ii) the enforcement or possible enforcement of any Environmental Law
against Debtor or any Consolidated Subsidiary.
(r) ENVIRONMENTAL REPORT means a written report prepared for Secured
Party by an environmental consulting or environmental engineering firm.
(s) ERISA means the Employee Retirement Income Security Act of 1974,
as amended from time to time.
(t) EURODOLLAR INTEREST PERIOD means the period of time for which
LIBOR shall be in effect as to any Advance bearing interest at LIBOR,
commencing on the date of the Advance or the expiration date of the
immediately preceding Eurodollar Interest Period, as the case may be,
applicable to and ending on the effective date of any rate change or rate
continuation made as provided in Section 8.9(a) as a Debtor may specify in
a Notice of Continuation/Conversion, subject, however to the early
termination provisions herein; provided, however, that (i) any Eurodollar
Interest Period which would otherwise end on a day which is not a Business
Day shall be extended to the next succeeding Business Day unless such
Business Day falls in another calendar month, in which case such Eurodollar
Interest Period shall end on the next preceding Business Day, (ii) each
Eurodollar Interest Period shall be three or six calendar months for each
Revolving Loan, and six or twelve calendar months for the Term Loan, or be
of such other length as the Debtor and the Secured Party may mutually
agree, (iii) a Eurodollar Interest Period may not be selected for any
Advance if such period would terminate later than the time specified in
Section 14.13(a), and (iv) a Eurodollar Interest Period may not be selected
for any Advance if such period would terminate beyond a date on which a
scheduled payment of principal on such Advance is required.
(u) EURODOLLAR LENDING OFFICE means the office specified as the
Secured Party's "Eurodollar Lending Office" in Item 37 of the Schedule.
(v) EURODOLLAR RESERVE PERCENTAGE means, for any Eurodollar Interest
Period for any Advance bearing interest at LIBOR, the reserve percentage
applicable during such Eurodollar Interest Period (or if more than one such
percentage shall be so applicable, the daily average of such percentages
for those days in such Eurodollar Interest Period during which any such
percentage shall be so applicable) under regulations issued from time to
time by the Board of Governors of the Federal Reserve System.
(w) EVENT OF DEFAULT means an Event of Default or Events of Default as
defined in Section 12.1.
(x) EXTENSION means the granting to an Account Debtor of additional
time within which such Account Debtor is required to pay a Receivable.
(y) FEDERAL BANKRUPTCY CODE means Title 11 of the United States Code,
entitled "Bankruptcy," as amended, or any successor federal bankruptcy law.
(z) GUARANTOR means, collectively, Direct Fuels Management Company,
Inc. and FFP Partners Management Company, Inc., and if the context so
requires, GUARANTOR shall refer to any of such parties.
(aa) HAZARDOUS SUBSTANCES means, without limitation, any explosives,
radon, radioactive materials, asbestos, urea formaldehyde foam insulation,
polychlorinated biphenyls, petroleum and petroleum products, methane,
hazardous materials, hazardous wastes, hazardous or toxic substances, and
any other material defined as a hazardous substance in Section 101(14) of
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, 42 U.S.C. Section 9601(14).
(bb) HIGHEST LAWFUL RATE means, with respect to the Secured Party and
Marine Midland Bank, the maximum nonusurious interest rate, if any, that at
any time or from time to time may be contracted for, taken, reserved,
charged or received with respect to the Advances or on other amounts, if
any, due to Secured Party or Marine Midland Bank pursuant to this Agreement
or any other Transaction Document, under laws applicable to Secured Party
and Marine Midland Bank which are presently in effect, or, to the extent
allowed by law, under such applicable laws which may hereafter be in effect
and which allow a higher maximum nonusurious interest rate than applicable
laws now allow.
(cc) INDEBTEDNESS means the indebtedness secured by the Security
Interest and described in Section 3.3.
(dd) INELIGIBLE RECEIVABLES means the following described Receivables
and any other Receivables which are not reasonably satisfactory to Secured
Party for credit or any other reason:
(i) Any Receivable which has remained unpaid for more than the number
of days specified in Item 4 of the Schedule.
(ii) Any Receivable with respect to which a representation or warranty
contained in Sections 5.3, 5.5, or 5.6 is not, or does not continue to be,
true and accurate, including, without limitation, any Receivable subject to
a setoff.
(iii) Any Receivable with respect to which Debtor has extended the
time for payment without the consent of Secured Party, except as provided
in Section 9.2(a).
(iv) Any Receivable as to which any one or more of the following
events occurs: a request or petition for liquidation, reorganization,
arrangement, adjustment of debts, adjudication as a bankrupt, or other
relief under the bankruptcy, insolvency, or similar laws of the United
States, any state or territory thereof, or any foreign jurisdiction, now or
hereafter in effect, shall be filed by or against a Responsible Party; a
Responsible Party shall make any general assignment for the benefit of
creditors; a receiver or trustee, including, without limitation, a
"custodian," as defined in the Federal Bankruptcy Code, shall be appointed
for a Responsible Party or for any of the assets of a Responsible Party;
any other type of insolvency proceeding with respect to a Responsible Party
(under the bankruptcy laws of the United States or otherwise) or any formal
or informal proceeding for the dissolution or liquidation of, settlement of
claims against, or winding up of affairs of, a Responsible Party shall be
instituted; all or any material part of the assets of a Responsible Party
shall be sold, assigned, or transferred; a Responsible Party shall fail to
pay its debts as they become due; or a Responsible Party shall cease doing
business as a going concern.
(v) All Receivables owed by an Account Debtor owing Receivables
classified as ineligible under any criterion set forth in any of Sections
1.1(dd)(i) through 1.1(dd)(iv), if the outstanding dollar amount of such
Receivables constitutes a percentage of the aggregate outstanding dollar
amount of all Receivables owed by such Account Debtor equal to or greater
than the percentage specified in Item 5 of the Schedule.
(vi) All Receivables owed by an Account Debtor which does not maintain
its chief executive office in the United States or which is not organized
under the laws of the United States or any state, unless otherwise
specified in Item 6 of the Schedule.
(vii) All Receivables owed by an Account Debtor if Debtor or any
person who, or entity which, directly or indirectly controls Debtor, either
owns in whole or material part, or directly or indirectly controls, such
Account Debtor.
(viii) Any Receivable arising from a consignment or other arrangement,
pursuant to which the subject Inventory is returnable if not sold or
otherwise disposed of by the Account Debtor; any Receivable constituting a
partial billing under terms providing for payment only after full shipment
or performance; any Receivable arising from a bill and hold sale or in
connection with any prebilling where the Inventory or services have not
been delivered, performed, or accepted by the Account Debtor if Secured
Party has not entered into a written agreement satisfactory to Secured
Party with such Account Debtor relating to such Receivables; and any
Receivable as to which the Account Debtor contends the balance reported by
Debtor is incorrect or not owing.
(ix) Any Receivable which is unenforceable against the Account Debtor
for any reason.
(x) Any Receivable which is an Instrument, Document, or Chattel Paper
or which is evidenced by a note, draft, trade acceptance, or other
instrument for the payment of money where such Instrument, Document,
Chattel Paper, note, draft, trade acceptance, or other instrument has not
been endorsed and delivered by Debtor to Secured Party.
(xi) Any Receivable or Receivables owed by an Account Debtor which
exceeds any credit limit established by Secured Party for such Account
Debtor; provided, that such Receivable or Receivables shall be ineligible
only to the extent of such excess.
(ee) INTANGIBLE ASSETS means (1) all loans or advances to, and other
receivables owing from, any officers, employees, subsidiaries and other
affiliates, (2) all investments, whether in a subsidiary or otherwise, (3)
goodwill, (4) any other assets deemed intangible under generally accepted
accounting principles, and (5) any other assets deemed intangible by
Secured Party in its reasonable credit judgement.
(ff) INTERNAL REVENUE CODE means the Internal Revenue Code of 1986, as
amended from time to time.
(gg) INVENTORY means inventory, as defined in the Uniform Commercial
Code as in effect in the State as of the date of this Agreement, and in any
event shall include returned or repossessed Goods.
(hh) INVENTORY BORROWING BASE means, at the time of computation, an
amount up to the percentages specified in Item 2 of the Schedule of the
dollar value of Eligible Inventory, such dollar value to be calculated at
the lower of actual cost or market value and accounted for in the manner
specified in Item 7 of the Schedule, less the amount of any reserves
established by Secured Party in accordance with Section 2.3.
(ii) INVOICE means any document or documents used, or to be used, to
evidence a Receivable.
(jj) LETTER OF CREDIT means any documentary or standby letter of
credit issued by Marine Midland Bank for the account of the Debtor.
(kk) LIBOR means with respect to the applicable Eurodollar Interest
Period in effect for each Advance bearing interest at LIBOR, the quotient
obtained by dividing (a) the annual rate of interest determined by Marine
Midland Bank, at or before 10:00 a.m. (London time) (or as soon thereafter
as practicable), on the third Business Day prior to the first day of such
Eurodollar Interest Period, to be the annual rate of interest at which
deposits of U.S. dollars are offered to Marine Midland Bank by prime banks
in the London interbank market as may be selected by Marine Midland Bank in
its sole discretion, acting in good faith, at the time of determination and
in accordance with the then existing practice in such market for delivery
on the first day of such Eurodollar Interest Period in immediately
available funds and having a maturity equal to such Eurodollar Interest
Period in an amount equal (or as nearly equal as may be possible) to the
unpaid principal amount of such Advance by (b) a percentage equal to 100%
minus the Eurodollar Reserve Percentage for such Eurodollar Interest
Period. Each determination of LIBOR made by Marine Midland Bank in
accordance with this paragraph shall be conclusive except in the case of
manifest error.
(ll) MARINE PAYMENT ACCOUNT means the special bank account to which
Proceeds of Collateral, including, without limitation, payments on
Receivables and other payments from sales or leases of Inventory, are
credited. There is a Marine Payment Account if so indicated in Item 8 of
the Schedule.
(mm) NET PROFIT AFTER TAXES means, for a period of determination, net
income after provisions for taxes for such period, determined in accordance
with generally accepted accounting principles consistently applied.
(nn) NOTICE OF CONTINUATION/CONVERSION is defined in Section 8.9(a).
(oo) PENSION EVENT means, with respect to any Pension Plan, the
occurrence of (i) any prohibited transaction described in Section 406 of
ERISA or in Section 4975 of the Internal Revenue Code; (ii) any Reportable
Event; (iii) any complete or partial withdrawal, or proposed complete or
partial withdrawal, of Debtor or any Consolidated Subsidiary from such
Pension Plan; (iv) any complete or partial termination, or proposed
complete or partial termination, of such Pension Plan; or (v) any
accumulated funding deficiency (whether or not waived), as defined in
Section 302 of ERISA or in Section 412 of the Internal Revenue Code.
(pp) PENSION PLAN means any pension plan, as defined in Section 3(2)
of ERISA, which is a multiemployer plan or a single employer plan, as
defined in Section 4001 of ERISA, and subject to Title IV of ERISA and
which is (i) a plan maintained by Debtor or any Consolidated Subsidiary for
employees or former employees of Debtor or of any Consolidated Subsidiary;
(ii) a plan to which Debtor or any Consolidated Subsidiary contributes or
is required to contribute; (iii) a plan to which Debtor or any Consolidated
Subsidiary was required to make contributions at any time during the five
(5) calendar years preceding the date of this Agreement; or (iv) any other
plan with respect to which Debtor or any Consolidated Subsidiary has
incurred or may incur liability, including, without limitation, contingent
liability, under Title IV of ERISA either to such plan or to the Pension
Benefit Guaranty Corporation. For purposes of this definition, and for
purposes of Sections 1.1(ii), 5.12, and 12.1(i), Debtor shall include any
trade or business (whether or not incorporated) which, together with Debtor
or any Consolidated Subsidiary, is deemed to be a "single employer" within
the meaning of Section 4001(b)(1) of ERISA.
(qq) PRIME RATE means the rate of interest publicly announced by
Marine Midland Bank from time to time as its prime rate, which rate is a
base rate for calculating interest on certain loans. The rate announced by
Marine Midland Bank as its prime rate may or may not be the most favorable
rate charged by Marine Midland Bank to its customers.
(rr) RECEIVABLE means the right to payment for Goods sold or leased or
services rendered by Debtor, whether or not earned by performance, and may,
without limitation, in whole or in part be in the form of an Account,
Chattel Paper, Document, or Instrument.
(ss) RECEIVABLES BORROWING BASE means, at the time of its computation,
the aggregate amount of the outstanding Receivables in which Secured Party
has a first priority perfected security interest (adjusted with respect to
Credits and returned merchandise as provided in Article 9 hereof) less the
amount of Ineligible Receivables and any reserves established by Secured
Party in accordance with Section 2.3.
(tt) RELEASE means "release," as defined in Section 101(22) of the
Comprehensive, Environmental Response, Compensation and Liability Act of
1980, 42 U.S.C. Section 9601(22), and the regulations promulgated
thereunder.
(uu) REPORTABLE EVENT means any event described in Section 4043(b) of
ERISA or in regulations issued thereunder with regard to a Pension Plan.
(vv) RESPONSIBLE PARTY means an Account Debtor, a general partner of
an Account Debtor, or any party otherwise in any way directly or indirectly
liable for the payment of a Receivable.
(ww) REVOLVING LOAN is defined in Section 2.1.
(xx) SCHEDULE means the schedule executed in connection with, and
which is a part of, this Agreement.
(yy) SECURED PARTY means the person or entity defined on the cover
page of this Agreement and any successors or assigns of Secured Party.
(zz) SECURITY INTEREST means the security interest granted to Secured
Party by Debtor as described in Section 3.1.
(aaa) SOLVENT means, with respect to any person or entity on a
particular determination date, that on such date (i) the fair value of the
property of such person or entity is greater than the total amount of debts
and other liabilities, including, without limitation, contingent and
unliquidated liabilities, of such person or entity; (ii) the present fair
salable value of the assets of such person or entity is greater than the
amount that will be required to pay the probable liability of such person
or entity on its existing debts and other liabilities as they become
absolute and matured; (iii) such person or entity is able to realize upon
its assets and pay its debts and other liabilities, contingent obligations,
and other commitments as they mature in the normal course of business; (iv)
such person or entity does not intend to, and does not believe that it
will, incur debts or other liabilities beyond such person's or entity's
ability to pay as such debts and other liabilities mature or become due;
and (v) such person or entity is not engaged in a business or transaction,
and is not about to engage in a business or a transaction, for which such
person's or entity's property would constitute unreasonably small capital.
(bbb) STATE means the State of the United States specified in Item 31
of the Schedule.
(ccc) TANGIBLE NET WORTH means the sum of stockholders' and owners'
equity plus the principal balance of any debt that is subordinated to
Secured Party in a manner satisfactory to Secured Party minus the book
value of Intangible Assets (as defined above), all determined in accordance
with generally accepted accounting principles consistently applied.
(ddd) TERM LOAN is defined in Section 2.5.
(eee) THIRD PARTY means any person or entity who has executed and
delivered, or who in the future may execute and deliver, to Secured Party
any agreement, instrument, or document, pursuant to which such person or
entity has guaranteed to Secured Party the payment of the Indebtedness or
has granted Secured Party a security interest in or lien on some or all of
such person's or entity's real or personal property to secure the payment
of the Indebtedness.
(fff) TRANSACTION DOCUMENTS means this Agreement and all documents,
including, without limitation, collateral documents, letter of credit
agreements, notes, acceptance credit agreements, security agreements,
pledges, guaranties, mortgages, title insurance, assignments, and
subordination agreements required to be executed by Debtor, any Third
Party, or any Responsible Party pursuant hereto or in connection herewith.
(ggg) TREASURY RATE means the weekly average yield on United States
Treasury Securities-Constant Maturity Series issued by the United States
Government for a term of three (3) years, as most recently published by the
Federal Reserve Board in Federal Reserve Statistical Release H.15(519),
immediately prior to the date of the applicable Advance. Each determination
of the Treasury Rate by the Secured Party shall, in the absence of manifest
error, be conclusive and binding. The parties understand and agree that at
any particular time Secured Party may not be able to obtain a quotation of
an applicable Treasury Rate and in such circumstance the Treasury Rate will
not be available.
(hhh) VALIDITY GUARANTY means an unlimited, continuing guaranty of the
validity of the collateral by Steven B. Hawkins or other officers of the
Debtor acceptable to the Secured Party, in a form acceptable to the Secured
Party.
(iii) VALUE means, with respect to Inventory, the lower of actual cost
or market value, with respect to Equipment, the net book value, and with
respect to Real Property, the fair market value, in each case as determined
by appraisers acceptable to Secured Party in its sole discretion.
1.2. SINGULARS AND PLURALS. Unless the context otherwise requires,
words in the singular number include the plural, and in the plural include
the singular.
1.3. UCC DEFINITIONS. Unless otherwise defined in Section 1.1 or
elsewhere in this Agreement, capitalized words shall have the meanings set
forth in the Uniform Commercial Code as in effect in the State as of the
date of this Agreement.
2. ADVANCES.
2.1. REQUESTS FOR ADVANCES FOR REVOLVING LOANS. From time to time
prior to the expiration of this Agreement, each Debtor may make a written
or oral request for an Advance as a revolving loan so long as the sum of
the aggregate principal balance of all outstanding revolving loans and such
requested Advance of such requesting Debtor does not exceed the Borrowing
Capacity designated for such requesting Debtor as then computed (each, a
"Revolving Loan"); and Secured Party shall make such requested Advance,
provided that (i) the Borrowing Capacity would not, after giving effect to
the requested Advance, be so exceeded; (ii) there has not occurred an Event
of Default or an event which, with notice or lapse of time or both, would
constitute an Event of Default; and (iii) all representations and
warranties contained in this Agreement and in the other Transaction
Documents are true and correct on the date such requested Advance is made
as though made on and as of such date. Notwithstanding any other provision
of this Agreement, Secured Party may from time to time reduce the
percentages applicable to the Receivables Borrowing Base and the Inventory
Borrowing Base as they relate to amounts of the Borrowing Capacity if
Secured Party determines in its reasonable judgment, that there has been a
material change in circumstances related to any or all Receivables or
Inventory from those circumstances in existence on or prior to the date of
this Agreement or in the financial or other condition of Debtor. Subject to
the provisions contained in Section 8.9 herein, if Secured Party shall
reduce such percentage, then Debtor shall have the right to prepay in full
the total outstanding balance owing to Secured Party under this Agreement
without penalty, notwithstanding the provisions contained in Section
14.13(b) herein; provided, however, there shall not have occurred an Event
of Default. Each oral request for an Advance shall be conclusively presumed
to be made by a person authorized by Debtor to do so, and the making of the
Advance to Debtor as hereinafter provided shall conclusively establish
Debtor's obligation to repay the Advance.
2.2. PROCEEDS OF ADVANCES FOR REVOLVING LOANS. Advances shall be made
in the manner agreed by Debtor and Secured Party in writing or, absent any
such agreement, as determined by Secured Party.
2.3. ESTABLISHMENT OF RESERVES. Secured Party may, at any time and
from time to time, in its reasonable judgment, establish reserves against
the Receivables or the Inventory of Debtor. The amount of such reserves
shall be subtracted from the Receivables Borrowing Base or Inventory
Borrowing Base, as applicable, when calculating the amount of the Borrowing
Capacity. Subject to the provisions contained in Section 8.9 herein, if
Secured Party shall establish such reserve, then Debtor shall have the
right to prepay in full the total outstanding balance owing to Secured
Party under this Agreement without penalty, notwithstanding the provisions
contained in Section 14.13(b) herein; provided, however, there shall not
have occurred an Event of Default.
2.4. LETTERS OF CREDIT. At the request of Debtor, and upon execution
of Letter of Credit documentation satisfactory to Marine Midland Bank,
Secured Party, within the limits of the Borrowing Capacity as then
computed, may guarantee Letters of Credit issued from time to time by the
Marine Midland Bank for the account of Debtor in an amount not exceeding in
the aggregate at any one time outstanding the amount set forth in Item 9 of
the Schedule. The Letters of Credit shall be on terms mutually acceptable
to Secured Party and Debtor and no Letters of Credit shall have an
expiration date later than the termination date of this Agreement. An
Advance in an amount equal to any amount paid by Marine Midland Bank on any
draft drawn under any Letter of Credit shall be made to Debtor, and the
proceeds thereof delivered to Marine Midland Bank, immediately upon
notification to Secured Party that Marine Midland Bank made payment on such
draft. In connection with the issuance of any Letters of Credit, Debtor
shall pay to Secured Party the applicable fees charged by Marine Midland
Bank.
2.5 TERM LOAN. A term loan in the amount of $8,000,000 (the "Term
Loan") is available to Debtor in a one-time Advance on the date of this
Agreement.
2.6 JOINT AND SEVERAL LIABILITY. FFPP, FFPO and Direct Fuels shall be
jointly and severally liable for each Revolving Loan, each Letter of Credit
and the Term Loan.
3. COLLATERAL AND INDEBTEDNESS SECURED.
3.1. SECURITY INTEREST. Debtor hereby grants to Secured Party a
security interest in, and a lien on, the following property of Debtor
wherever located and whether now owned or hereafter acquired:
(a) All Accounts, Inventory, Goods, Fixtures, Chattel Paper,
Documents, and Instruments, whether or not specifically assigned to Secured
Party (including, without limitation, all Receivables).
(b) All General Intangibles, whether or not assigned to Secured Party,
including without limitation, contracts, contract rights and general
intangibles of Debtor, including without limitation all tax refunds,
claims, causes of action, judgments, franchises, permits, licenses, supply
contracts, purchase contracts, agreements, goodwill, trademarks,
copyrights, trade secrets, patents, and all rights and benefits of Debtor
with respect thereto.
(c) All Equipment (whether or not affixed to realty), whether now
owned or hereafter acquired, wherever located unless otherwise set forth on
Exhibit B, under the heading Capital Leases Secured by Equipment.
(d) All guaranties, collateral, liens on, or security interests in,
real or personal property, leases, letters of credit, and other rights,
agreements, and property securing or relating to payment of Receivables.
(e) All books, records, ledger cards, data processing records,
computer software, and other property at any time evidencing or relating to
Collateral.
(f) All monies, securities, and other property now or hereafter held,
or received by, or in transit to, Secured Party from or for Debtor, and all
of Debtor's deposit accounts, credits, and balances with Secured Party
existing at any time.
(g) All parts, accessories, attachments, special tools, additions,
replacements, substitutions, and accessions to or for all of the foregoing.
(h) All proceeds of letters of credit of which Debtor is the
beneficiary or in which Debtor has a beneficial interest.
(i) All proceeds and products of all of the foregoing in any form,
including, without limitation, amounts payable under any policies of
insurance insuring the foregoing against loss or damage, and all increases
and profits received from all of the foregoing.
3.2. OTHER COLLATERAL.
Nothing contained in this Agreement shall limit the rights of Secured
Party in and to any other collateral securing the Indebtedness which may
have been, or may hereafter be, granted to Secured Party by Debtor or any
Third Party, pursuant to any other agreement.
3.3. INDEBTEDNESS SECURED. The Security Interest secures payment of
any and all indebtedness, and performance of all obligations and
agreements, of Debtor to Secured Party, whether now existing or hereafter
incurred or arising, of every kind and character, primary or secondary,
direct or indirect, absolute or contingent, sole, joint or several, and
whether such indebtedness is from time to time reduced and thereafter
increased, or entirely extinguished and thereafter reincurred, including,
without limitation: (a) all Advances; (b) all interest which accrues on any
such indebtedness, until payment of such indebtedness in full, including,
without limitation, all interest provided for under this Agreement; (c) all
other monies payable by Debtor, and all obligations and agreements of
Debtor to Secured Party, pursuant to the Transaction Documents; (d) all
debts owed, or to be owed, by Debtor to others which Secured Party has
obtained, or may obtain, by assignment or otherwise; (e) all monies payable
by any Third Party, and all obligations and agreements of any Third Party
to Secured Party, pursuant to any of the Transaction Documents; and (f) all
monies due, and to become due, pursuant to Section 8.3.
4. CONDITIONS TO ADVANCES. Notwithstanding any other provision of this
Agreement or any of the other Transaction Documents, and without affecting
in any manner the rights of Secured Party under any other provision of this
Agreement, Secured Party shall not be obligated to make Advances unless and
until the following conditions have been, and continue to be, satisfied:
4.1. PARTNERSHIP ACTION. Debtor shall have taken all necessary and
appropriate partnership action, and the Partners of Debtor shall have
adopted resolutions authorizing, and the partners of Debtor (to the extent
required under Debtor's organizational documents or applicable law) shall
have consented to, this Agreement, and the borrowings hereunder, the
execution and delivery of the Transaction Documents and the taking of all
action required of Debtor by the Transaction Documents; and Debtor shall
have furnished to Secured Party certified copies of such partnership
resolutions and such other corporate documents as Secured Party shall
reasonably request.
4.2. PARTNERSHIP DOCUMENTS. There shall have been furnished to Secured
Party (a) copies of the certificate of limited partnership and limited
partnership agreements of Debtor, certified by its general partner as of
the date of this Agreement; (b) a certificate of Debtor's existence or
equivalent certificate duly issued of recent date by the Secretary of State
of the state specified in Item 10 of the Schedule, and certificates of
authority to do business in each state in which Debtor is licensed or
qualified to do business; (c) a certificate of incumbency specifying the
officers of the general partner of Debtor, together with their specimen
signatures; and (d) such other and further documents as Secured Party may
reasonably request, including, without limitation, tax status reports
covering payment of franchise taxes, if any, and other taxes.
4.3. OPINIONS. Independent counsel for Debtor shall have furnished to
Secured Party their favorable opinion, in form and content satisfactory to
Secured Party and Debtor and their respective counsel, dated the date of
this Agreement. If this Agreement is being executed and delivered in
connection with the acquisition of stock or assets by Debtor, Debtor shall
also have caused the seller of such stock or assets to furnish to Secured
Party an opinion of counsel for such seller or a letter authorizing Secured
Party to rely on such an opinion, in form and content satisfactory to
Secured Party and its counsel, dated the date of this Agreement.
4.4. TRANSACTION DOCUMENTS. Debtor shall have delivered to Secured
Party all the Transaction Documents, as required by, and in form and
content satisfactory to, Secured Party and its counsel.
4.5. THIRD PARTY ACTION. Each Third Party shall have (i) taken all
necessary and appropriate corporate and shareholder action, and the Board
of Directors of the Third Party shall have adopted resolutions authorizing
the execution and delivery of the guaranty of such Third Party and the
taking of all action called for thereby; and (ii) furnished to Secured
Party certified copies of evidence of such corporate and shareholder action
and such other corporate documents as Secured Party shall reasonably
request.
4.6. GUARANTIES. Guarantors shall have executed and delivered to
Secured Party guaranties in form and substance acceptable to Secured Party,
covering all indebtedness of Debtor to Secured Party, however incurred and
whenever arising, containing a waiver of subrogation and similar rights,
and the Secured Party shall have received the Validity Guaranty in form and
substance acceptable to Secured Party.
4.7. OTHER MATTERS. All matters incidental to the execution and
delivery of the Transaction Documents, and all action required by the
Transaction Documents, shall be satisfactory to Secured Party and to its
counsel.
5. REPRESENTATIONS AND WARRANTIES. To induce Secured Party to enter
into this Agreement, and make Advances to Debtor from time to time as
herein provided, Debtor represents and warrants and, so long as any
Indebtedness remains unpaid or this Agreement remains in effect, shall be
deemed continuously to represent and warrant as follows:
5.1. PARTNERSHIP EXISTENCE. Debtor is duly organized and existing
under the laws of the state specified in Item 10 of the Schedule and is
duly licensed or qualified to do business and in good standing in every
state in which the nature of its business or ownership of its property
requires such licensing or qualification.
5.2. PARTNERSHIP CAPACITY. The execution, delivery, and performance of
the Transaction Documents are within Debtor's powers, have been duly
authorized by all necessary and appropriate partnership action, and are not
in contravention of any law or the terms of Debtor's certificate of limited
partnership or limited partnership agreement or any amendment thereto, or
of any indenture, agreement, undertaking, or other document to which Debtor
is a party or by which Debtor or any of Debtor's property is bound or
affected.
5.3. VALIDITY OF RECEIVABLES. (a) Each Receivable is genuine and
enforceable in accordance with its terms and represents an undisputed and
bona fide indebtedness owing to Debtor by the Account Debtor obligated
thereon; (b) there are no defenses, setoffs, or counterclaims against any
Receivable; (c) no payment has been received on any Receivable, and no
Receivable is subject to any Credit or Extension or agreements therefor
unless written notice specifying such payment, Credit, Extension, or
agreement has been delivered to Secured Party; (d) each copy of each
Invoice is a true and genuine copy of the original Invoice sent to the
Account Debtor named therein and accurately evidences the transaction from
which the underlying Receivable arose, and the date payment is due as
stated on each such Invoice or computed based on the information set forth
on each such Invoice is correct; (e) all Chattel Paper, and all promissory
notes, drafts, trade acceptances, and other instruments for the payment of
money relating to or evidencing each Receivable, and each endorsement
thereon, are true and genuine and in all respects what they purport to be,
and are the valid and binding obligation of all parties thereto, and the
date or dates stated on all such items as the date on which payment in
whole or in part is due is correct; (f) all Inventory described in each
Invoice has been delivered to the Account Debtor named in such Invoice or
placed for such delivery in the possession of a carrier not owned or
controlled directly or indirectly by Debtor; (g) all evidence of the
delivery or shipment of Inventory is true and genuine; (h) all services to
be performed by Debtor in connection with each Receivable have been
performed by Debtor; and (i) all evidence of the performance of such
services by Debtor is true and genuine.
5.4. INVENTORY. (a) All representations made by Debtor to Secured
Party, and all documents and schedules given by Debtor to Secured Party,
relating to the description, quantity, quality, condition, and valuation of
the Inventory are true and correct; (b) Debtor has not received any
Inventory on consignment or approval unless Debtor (i) has delivered
written notice to Secured Party describing any Inventory which Debtor has
received on consignment or approval, (ii) has marked such Inventory on
consignment or approval or has segregated it from all other Inventory, and
(iii) has appropriately marked its records to reflect the existence of such
Inventory on consignment or approval; (c) Inventory is located only at the
address or addresses of Debtor set forth at the beginning of this
Agreement, the locations specified in Item 11 of the Schedule, or such
other place or places as approved by Secured Party in writing; (d) all
Inventory is insured as required by Section 10.11, pursuant to policies in
full compliance with the requirements of such Section; and (e) all
Inventory has been produced by Debtor in accordance with the Federal Fair
Labor Standards Act of 1938, as amended, and all rules, regulations, and
orders promulgated thereunder.
5.5. TITLE TO COLLATERAL. (a) Debtor is the owner of the Collateral
free of all security interests, liens, and other encumbrances except the
Security Interest and except as described in Item 12 of the Schedule; (b)
Debtor has the unconditional authority to grant the Security Interest to
Secured Party; and (c) assuming that all necessary Uniform Commercial Code
filings have been made and, if applicable, assuming compliance with the
Federal Assignment of Claims Act of 1940, as amended, Secured Party has an
enforceable first lien on all Collateral, subordinate only to those
security interests, liens, or encumbrances described as having priority
over the Security Interest in Item 12 of the Schedule.
5.6. NOTES RECEIVABLE. No Receivable is an Instrument, Document, or
Chattel Paper or is evidenced by any note, draft, trade acceptance, or
other instrument for the payment of money, except such Instrument,
Document, Chattel Paper, note, draft, trade acceptance, or other instrument
as has been endorsed and delivered by Debtor to Secured Party and has not
been presented for payment and returned uncollected for any reason.
5.7. EQUIPMENT. Equipment is located, and Equipment which is a Fixture
is affixed to real property, only at the address or addresses of Debtor set
forth at the beginning of this Agreement, the locations specified in Item
11 of the Schedule, or such other place or places as approved by Secured
Party in writing. Such real property is owned by Debtor or by the person or
persons named in Item 11 of the Schedule and if owned by the Debtor is
encumbered only by the mortgage or mortgages listed in Item 11 of the
Schedule.
5.8. PLACE OF BUSINESS. (a) Unless otherwise disclosed to Secured
Party in Item 11 or Item 13 of the Schedule, Debtor is engaged in business
operations which are in whole, or in part, carried on at the address or
addresses specified at the beginning of this Agreement and at no other
address or addresses; (b) if Debtor has more than one place of business,
its chief executive office is at the address specified as such at the
beginning of this Agreement; and (c) Debtor's records concerning the
Collateral are kept at the address or addresses specified at the beginning
of this Agreement or in Item 13 of the Schedule.
5.9. FINANCIAL CONDITION. Debtor has furnished to Secured Party
Debtor's most current financial statements, which statements represent
correctly and fairly the results of the operations and transactions of
Debtor and the Consolidated Subsidiaries as of the dates, and for the
period referred to, and have been prepared in accordance with generally
accepted accounting principles consistently applied during each interval
involved and from interval to interval. Since the date of such financial
statements, there have not been any materially adverse changes in the
financial condition reflected in such financial statements, except as
disclosed in writing by Debtor to Secured Party.
5.10. TAXES. Except as disclosed in writing by Debtor to Secured
Party: (a) all federal and other tax returns required to be filed by Debtor
and each Consolidated Subsidiary have been filed, and all taxes required by
such returns have been paid; and (b) neither Debtor nor any Consolidated
Subsidiary has received any notice from the Internal Revenue Service or any
other taxing authority proposing additional taxes.
5.11. LITIGATION. Except as disclosed in writing by Debtor to Secured
Party, there are no actions, suits, proceedings, or investigations pending
or, to the knowledge of Debtor, threatened against Debtor or any
Consolidated Subsidiary or any basis therefor which, if adversely
determined, would, in any case or in the aggregate, materially adversely
affect the property, assets, financial condition, or business of Debtor or
any Consolidated Subsidiary or materially impair the right or ability of
Debtor or any Consolidated Subsidiary to carry on its operations
substantially as conducted on the date of this Agreement.
5.12. ERISA MATTERS. (a) No Pension Plan has been terminated, or
partially terminated, or is insolvent, or in reorganization, nor have any
proceedings been instituted to terminate or reorganize any Pension Plan;
(b) neither Debtor nor any Consolidated Subsidiary has withdrawn from any
Pension Plan in a complete or partial withdrawal, nor has a condition
occurred which, if continued, would result in a complete or partial
withdrawal; (c) neither Debtor nor any Consolidated Subsidiary has incurred
any withdrawal liability, including, without limitation, contingent
withdrawal liability, to any Pension Plan, pursuant to Title IV of ERISA;
(d) neither Debtor nor any Consolidated Subsidiary has incurred any
liability to the Pension Benefit Guaranty Corporation other than for
required insurance premiums which have been paid when due; (e) no
Reportable Event has occurred; (f) no Pension Plan or other "employee
pension benefit plan," as defined in Section 3(2) of ERISA, to which Debtor
or any Consolidated Subsidiary is a party has an "accumulated funding
deficiency" (whether or not waived), as defined in Section 302 of ERISA or
in Section 412 of the Internal Revenue Code; (g) the present value of all
benefits vested under any Pension Plan does not exceed the value of the
assets of such Pension Plan allocable to such vested benefits; (h) each
Pension Plan and each other "employee benefit plan," as defined in Section
3(3) of ERISA, to which Debtor or any Consolidated Subsidiary is a party is
in substantial compliance with ERISA, and no such plan or any
administrator, trustee, or fiduciary thereof has engaged in a prohibited
transaction described in Section 406 of ERISA or in Section 4975 of the
Internal Revenue Code; (i) each Pension Plan and each other "employee
benefit plan," as defined in Section 3(2) of ERISA, to which Debtor or any
Consolidated Subsidiary is a party has received a favorable determination
by the Internal Revenue Service with respect to qualification under Section
401(a) of the Internal Revenue Code; and (j) neither Debtor nor any
Consolidated Subsidiary has incurred any liability to a trustee or trust
established pursuant to Section 4049 of ERISA or to a trustee appointed
pursuant to Section 4042(b) or (c) of ERISA.
5.13. ENVIRONMENTAL MATTERS.
Except as provided in Exhibit D:
(a) Any Environmental Questionnaire previously provided to Secured
Party was and is accurate and complete and does not omit any material fact
the omission of which would make the information contained therein
materially misleading.
(b) No above ground or underground storage tanks containing Hazardous
Substances are, or have been located on, any property owned, leased, or
operated by Debtor or any Consolidated Subsidiary, except to the extent
permitted by law. Any such storage tank owned, leased, or operated by
Debtor materially complies with all Environmental Laws and neither is
leaking nor has leaked to a degree which would require remediation under
any applicable Environmental Laws, and that any and all acts required under
applicable Environmental Laws in connection with any such leakage have been
performed.
(c) No property owned, leased, or operated by Debtor or any
Consolidated Subsidiary is, or to the knowledge of Debtor has been, used
for the Disposal of any Hazardous Substance or for the treatment or
Disposal of Hazardous Substances, except to the extent permitted by law.
(d) No Release of any Hazardous Substances to the knowledge of Debtor
has occurred, or is threatened on, at or from any property owned, leased,
controlled, or operated by Debtor or any Consolidated Subsidiary.
(e) Neither Debtor nor any Consolidated Subsidiary has knowledge of
any existing, pending, or threatened suit, claim, notice of violation, or
request for information under any Environmental Law.
(f) Debtor and each Consolidated Subsidiary are in compliance with,
and have obtained all Environmental Permits required by, all Environmental
Laws.
5.14. VALIDITY OF TRANSACTION DOCUMENTS. The Transaction Documents
constitute the legal, valid, and binding obligations of Debtor and each
Consolidated Subsidiary and any Third Parties thereto, enforceable in
accordance with their respective terms, except as enforceability may be
limited by applicable bankruptcy and insolvency laws and laws affecting
creditors' rights generally.
5.15. NO CONSENT OR FILING. No consent, license, approval, or
authorization of, or registration, declaration, or filing with, any court,
governmental body or authority, or other person or entity is required in
connection with the valid execution, delivery, or performance of the
Transaction Documents or for the conduct of Debtor's business as now
conducted, other than filings and recordings to perfect security interests
in or liens on the Collateral in connection with the Transaction Documents.
5.16. NO VIOLATIONS. Neither Debtor nor any Consolidated Subsidiary is
in violation of any term of its articles, or certificate of incorporation,
or by-laws, or of any mortgage, borrowing agreement, or other instrument or
agreement pertaining to indebtedness for borrowed money. Neither Debtor nor
any Consolidated Subsidiary is in violation of any term of any other
indenture, instrument, or agreement to which it is a party or by which it
or its property may be bound, resulting, or which might reasonably be
expected to result, in a material and adverse effect upon its business or
assets. Neither Debtor nor any Consolidated Subsidiary is in violation of
any order, writ, judgment, injunction, or decree of any court of competent
jurisdiction or of any statute, rule, or regulation of any governmental
authority, the violation of which could materially adversely affect the
condition, business, or operations of Debtor or any Consolidated
Subsidiary. The execution and delivery of the Transaction Documents and the
performance of all of the same, is, and will be, in compliance with the
foregoing and will not result in any violation thereof, or result in the
creation of any mortgage, lien, security interest, charge, or encumbrance
upon, any properties or assets except in favor of Secured Party. There
exists no fact or circumstance (whether or not disclosed in the Transaction
Documents) which materially adversely affects, or in the future (so far as
Debtor can now foresee) may materially adversely affect, the condition,
business, or operations of Debtor or any Consolidated Subsidiary or any
Third Party.
5.17. TRADEMARKS AND PATENTS. Debtor and each Consolidated Subsidiary
possesses all trademarks, trademark rights, patents, patent rights,
tradenames, tradename rights and copyrights that are required to conduct
its business as now conducted without conflict with the rights or claimed
rights of others. A list of the foregoing is set forth in Item 14 of the
Schedule.
5.18. CONTINGENT LIABILITIES. There are no suretyship agreements,
guaranties, or other contingent liabilities of Debtor or any Consolidated
Subsidiary which are not disclosed by the financial statements described in
Section 5.9 or Item 25 of the Schedule.
5.19. SOLVENCY. Debtor individually is, and Debtor and the
Consolidated Subsidiaries taken as a whole are, and during the term of this
Agreement, Debtor individually, and the Consolidated Subsidiaries taken as
a whole, will be, at all times, Solvent, both before and after giving
effect to the transactions contemplated by the Transaction Documents and
any acquisition of stock or assets occurring in conjunction with or related
to the Transaction Documents.
5.20. COMPLIANCE WITH LAWS. Debtor is in compliance with all
applicable laws, rules, regulations, and other legal requirements with
respect to its business and the use, maintenance, and operations of the
real and personal property owned or leased by it in the conduct of its
business, the violation of which could materially adversely affect the
condition, business, operations of Debtor or any Consolidated Subsidiary.
5.21. LICENSES, PERMITS, ETC. Each material franchise, grant,
approval, authorization, license, permit, easement, consent, certificate,
and order of and registration, declaration, and filing with, any court,
governmental body or authority, or other person or entity required for or
in connection with the conduct of Debtor's and each Consolidated
Subsidiary's business as now conducted is in full force and effect. Neither
Debtor nor any of its Consolidated Subsidiaries is in default under or has
otherwise violated the terms of such licenses. As of the date hereof,
Debtor has advised Secured Party, in writing, of all regulatory defects or
deficiencies under any state laws applicable to Debtor and its Consolidated
Subsidiaries of which Debtor has been advised or has actual knowledge.
5.22. USE OF PROCEEDS; MARGIN STOCK. Neither Debtor's execution and
delivery of the Transaction Documents nor the borrowing by Debtor of any
sums pursuant thereto violates Section 7 of the Securities Act of 1934, as
amended, or any rule or regulation thereunder, and Debtor neither owns, nor
intends to purchase or carry, any "margin stock." None of the proceeds of
the Revolving Credit, Term Loan, or Letters of Credit will be used in
violation of Regulation G, U, T, or X of the Board of Governors of the
Federal Reserve System.
5.23. COMMISSIONS. No brokerage commission, finders fee, or investment
banking fees are payable by Debtor to any person or entity in connection
with the Transaction Documents or the transactions contemplated thereby,
other than the payment by Debtor to Tony Abernethey, or his assigns, of a
loan origination fee equal to one-half percent (0.5%) of the total amount
of the credit facilities provided hereunder.
5.24. LABOR CONTRACTS. Neither Debtor nor any Consolidated Subsidiary
is a party to any collective bargaining agreement or to any existing or
threatened labor dispute or controversies except as set forth in Item 15 of
the Schedule.
5.25. CONSOLIDATED SUBSIDIARIES. Debtor has no Consolidated
Subsidiaries other than those listed in Item 33 of the Schedule, and the
percentage ownership of Debtor in each such Consolidated Subsidiary is
specified in such Item 33.
5.26. ACCURACY OF REPRESENTATIONS. No representation, warranty, or
statement by Debtor or any Third Party contained herein, or in any
certificate, financial statement, or other document furnished by Debtor or
any Third Party pursuant hereto, or in connection herewith, fails to
contain any representation or warranty not misleading in any material
respect in light of the circumstances under which it is made.
5.27. PARTNERSHIP INTERESTS. Debtor's total partnership interests are
set forth in Item 16 of the Schedule. No other partnership interests of the
Debtor of any class or type are authorized or outstanding.
5.28. NO ADVERSE CHANGE. As of September 30, 1997, (a) no adverse
change has occurred in the financial condition of Debtor or any Third
Party, and (b) no other matter exists or has occurred which might have an
adverse affect on the Debtor or any Third Party, financial or otherwise.
5.29. NO DEFAULT. No event has occurred and is continuing which
constitutes an Event of Default or, upon passage of time, will constitute
an Event of Default.
5.30. MATERIAL AGREEMENTS. Debtor is not in default in any material
respect under any loan agreement, indenture, mortgage, security agreement,
or other material agreement or obligation to which it is a party or by
which any of its properties are bound.
5.31. NO FINANCING OF CORPORATE TAKEOVERS. No proceeds of the
Revolving Credit or the Term Loan will be used to acquire any security in
any transaction that is subject to Section 13 or 14 of the Securities
Exchange Act of 1934, including particularly (but without limitation)
Section 13(d) and 14(d) thereof.
6. CERTAIN DOCUMENTS TO BE DELIVERED TO SECURED PARTY.
6.1. DOCUMENTS. Debtor shall deliver to Secured Party, all documents
specified in Item 17 of the Schedule, as frequently as indicated therein or
at such other times as Secured Party may reasonably request, and all other
documents and information reasonably requested by Secured Party, all in
form, content and detail satisfactory to Secured Party. The documents and
schedules to be provided under this Section are solely for the convenience
of Secured Party in administering this Agreement and maintaining records of
the Collateral. Debtor's failure to provide Secured Party with any such
schedule shall not affect the Security Interest.
6.2. INVOICES. If requested by Secured Party, copies of all Invoices
not previously delivered to Secured Party shall be delivered to Secured
Party with each schedule of Receivables. Copies of all Invoices which are
voided or canceled or which, for any other reason, do not evidence a
Receivable shall be included in such delivery. If any Invoice or copy
thereof is lost, destroyed, or otherwise unavailable, Debtor shall account
in writing, in form satisfactory to Secured Party, for such missing
Invoice.
6.3. CHATTEL PAPER. The original of each item of Chattel Paper
evidencing a Receivable shall be delivered to Secured Party with the
schedule listing the Receivable which it evidences, together with an
assignment in form and content satisfactory to Secured Party of such
Chattel Paper by Debtor to the Secured Party.
7. COLLECTIONS. Unless Secured Party notifies Debtor that it
specifically dispenses with one or more of the following requirements, any
Proceeds of Collateral received by Debtor, including, without limitation,
payments on Receivables and other payments from sales or leases of
Inventory, shall be held by Debtor in trust for Secured Party in the same
medium in which received, shall not be commingled with any assets of
Debtor, and shall be delivered immediately to Secured Party. So long as
Secured Party elects to keep the Marine Payment Account in existence,
Debtor shall deposit Proceeds of Collateral into the Marine Payment Account
and shall, on the day of each such deposit, forward to Secured Party a copy
of the deposit receipt of the depository bank indicating that such deposit
has been made. Upon receipt of Proceeds of Collateral, Secured Party, shall
apply such Proceeds directly to the Indebtedness in the manner provided in
Section 8.5. Checks drawn on the Marine Payment Account, and all or any
part of the balance of the Marine Payment Account, shall be applied from
time to time to the Indebtedness in the manner provided in Section 8.5.
8. PAYMENT OF PRINCIPAL, INTEREST, FEES, AND COSTS AND EXPENSES.
8.1. PROMISE TO PAY PRINCIPAL.
(a) Debtor promises to pay to Secured Party the outstanding principal
of the Revolving Credit in full upon termination of this Agreement pursuant
to Section 14.13, or acceleration of the time for payment of the
Indebtedness, pursuant to Section 12.2. Whenever the outstanding principal
balance of the Revolving Credit exceeds the Borrowing Capacity, Debtor
shall immediately pay to Secured Party the excess of the outstanding
principal balance of the Revolving Credit over the Borrowing Capacity.
(b) Debtor promises to pay to Secured Party the outstanding principal
of the Term Loan as follows:
(i) In 35 consecutive monthly installments each in the amount of
$95,238.10, commencing on December 1, 1997, and thereafter, on the first
day of each succeeding calendar month through and including October 1,
2000, and
(ii) In one final installment on November 1, 2000, in the amount of
the unpaid principal balance of, and accrued interest upon, the Term Loan.
(iii) Notwithstanding the foregoing clauses (i) and (ii) of this
subsection (b), in the event this Agreement is terminated pursuant to
Section 14.13, or accelerated pursuant to Section 12.2, Debtor shall
immediately pay to Secured Party in full, the outstanding unpaid principal
balance of, and accrued interest upon, the Term Loan.
8.2. PROMISE TO PAY INTEREST.
(a) Debtor promises to pay to Secured Party interest on the principal
of Advances from time to time unpaid at the lesser of (i) the Highest
Lawful Rate or (ii) the fluctuating per annum rate specified in Item 18 of
the Schedule. From the date of the occurrence of, and during the
continuance of, an Event of Default, Debtor, as additional compensation to
Secured Party for its increased credit risk promises to pay interest on (i)
the principal of Advances, whether or not past due; and (ii) past due
interest and any other amount past due under the Transaction Documents, at
a per annum rate of the lesser of (i) the Highest Lawful Rate and (ii)
3.00% greater than each of the rates of interest specified in Item 18 of
the Schedule.
(b) Interest (other than past due interest as set forth in Section
8.2(a)) shall be due and payable (i) on the first day of each month in
arrears, (ii) on termination of this Agreement, pursuant to Section 14.13,
(iii) on acceleration of the time for payment of the Indebtedness, pursuant
to Section 12.2, and (iv) on the date the Indebtedness is paid in full.
Past due interest (as set forth in Section 8.2(a)) shall be due and payable
immediately upon demand.
(c) Any change in the interest rate resulting from a change in the
Prime Rate shall take effect simultaneously with such change in the Prime
Rate. Interest shall be computed on the daily unpaid principal balance of
Advances. Interest shall be calculated for each calendar day at 1/360th of
the applicable per annum rate which will result in an effective per annum
rate higher than that specified in Item 18 of the Schedule, unless such
calculation would exceed the Highest Lawful Rate, in which case interest
shall be calculated for each calendar day at 1/365th or 1/366th, as the
case may be, of the applicable per annum rate. In no event shall the rate
of interest exceed the Highest Lawful Rate. If Debtor pays to Secured Party
interest in excess of the Highest Lawful Rate, such excess shall be applied
in reduction of the principal of Advances made pursuant to this Agreement,
and any remaining excess interest, after application thereof to the
principal of Advances, shall be refunded to Debtor.
8.3. PROMISE TO PAY FEES.
(a) Debtor shall pay to Secured Party any fees specified in Item 19 of
the Schedule on the applicable due dates also specified in Item 19 of the
Schedule.
(b) The fees described in this Agreement represent compensation for
services rendered and to be rendered separate and apart from the lending of
money or the provision of credit and do not constitute compensation for the
use, detention, or forbearance of money, and the obligation of the Debtor
to pay each fee described herein shall be in addition to, and not in lieu
of, the obligation of Debtor to pay interest, other fees described in this
Agreement, and expenses otherwise described in this Agreement. All fees
including, without limitation, those referred to in this Section, shall be
part of the obligations of the Debtor hereunder, shall be nonrefundable,
and shall, to the fullest extent permitted by law, bear interest, if not
paid when due, at the rate of interest specified in Section 8.2 (a)(ii).
8.4. PROMISE TO PAY COSTS AND EXPENSES.
(a) Debtor agrees to pay to Secured Party, on demand, all costs and
expenses as provided in this Agreement, and all costs and expenses incurred
by Secured Party from time to time in connection with this Agreement,
including, without limitation, those incurred in: (i) preparing,
negotiating, amending, waiving, or granting consent with respect to the
terms of any or all of the Transaction Documents; (ii) enforcing the
Transaction Documents; (iii) performing, pursuant to Section 14.2, Debtor's
duties under the Transaction Documents upon Debtor's failure to perform
them; (iv) filing financing statements, assignments, or other documents
relating to the Collateral (e.g., filing fees, recording taxes, and
documentary stamp taxes); (v) maintaining the Marine Payment Account; (vi)
administering the Transaction Documents, but not ordinary general and
administrative expenses; (vii) compromising, pursuing, or defending any
controversy, action, or proceeding resulting, directly or indirectly, from
Secured Party's relationship with Debtor, regardless of whether Debtor is a
party to such controversy, action, or proceeding and of whether the
controversy, action, or proceeding occurs before or after the Indebtedness
has been paid in full; (viii) realizing upon or protecting any Collateral;
(ix) enforcing or collecting any Indebtedness or guaranty thereof; (x)
employing collection agencies or other agents to collect any or all of the
Receivables; (xi) examining Debtor's books and records or inspecting the
Collateral including, without limitation, the reasonable costs of
examinations and inspections conducted by third parties, provided that
nothing herein shall limit Secured Party's right to audit, examination,
inspection, or other fees otherwise payable under Section 8.3; and (xii)
obtaining independent appraisals from time to time as deemed necessary or
appropriate by Secured Party.
(b) Without limiting Section 8.4(a), Debtor also agrees to pay to
Secured Party, on demand, the reasonable fees and disbursements incurred by
Secured Party for attorneys retained by Secured Party for advice, suit,
appeal, or insolvency or other proceedings under the Federal Bankruptcy
Code or otherwise, in connection with this Agreement, including without
limitation any purpose specified in Section 8.4(a).
8.5. METHOD OF PAYMENT OF PRINCIPAL, INTEREST, FEES, AND COSTS AND
EXPENSES. Without limiting Debtor's obligation, pursuant to Sections 8.1,
8.2., 8.3, and 8.4 to pay the principal of Advances, interest, fees, and
costs and expenses, the following provisions shall apply to the payment
thereof:
(a) Payment of Principal. Debtor authorizes Secured Party to apply any
Proceeds of Collateral, including, without limitation, payments on
Receivables, other payments from sales or leases of Inventory, and any
funds in the Marine Payment Account, to the unpaid principal of Advances.
(b) Payment of Interest, Fees, and Costs and Expenses. Without
limiting Debtor's obligation to pay accrued interest, fees, and costs and
expenses, Debtor authorizes Secured Party to (provided, however, Secured
Party shall incur no liability for failure to): (i) make an Advance to pay
for such items; or (ii) apply Proceeds of Collateral, including, without
limitation, payments on Receivables, other payments from sales or leases of
Inventory, and any funds in the Marine Payment Account, to the payment of
such items.
(c) Notwithstanding any other provision of this Agreement, Secured
Party, in its sole discretion, shall determine the manner and amount of
application of payments and credits and Proceeds of Collateral, if any, to
be made on all or any part of any component or components of the
Indebtedness, whether principal, interest, fees, costs and expenses, or
otherwise.
8.6. COMPUTATION OF DAILY OUTSTANDING BALANCE. For the purpose of
calculating the aggregate principal balance of outstanding Advances under
Section 2.1, Advances shall be deemed to be paid on the date that checks
drawn on, or other funds received from, the Marine Payment Account are
applied by Secured Party to Advances, and on the date any other payments on
Receivables, or other payments from sales or leases of Inventory to be so
applied, have been processed for collection by Secured Party; provided,
however, for the purpose of calculating interest payable by Debtor, funds
from the Marine Payment Account, payments on Receivables, other payments
from sales or leases of Inventory, and any other payments, shall be deemed
to be applied to Advances the number of days specified in Item 20 of the
Schedule after the application of such funds from the Marine Payment
Account or receipt of such payments by Secured Party, and the amount of
interest payable will be adjusted by Secured Party from time to time
accordingly. Notwithstanding any other provision of this Agreement, if any
item presented for collection by Secured Party is not honored, Secured
Party may reverse any provisional credit which has been given for the item
and make appropriate adjustments to the amount of interest and principal
due.
8.7. ACCOUNT STATED. Debtor agrees that each monthly or other
statement of account mailed or delivered by Secured Party to Debtor
pertaining to the outstanding balance of Advances, the amount of interest
due thereon, fees, and costs and expenses shall be final, conclusive, and
binding on Debtor and shall constitute an "account stated" with respect to
the matters contained therein unless, within thirty (30) calendar days from
when such statement is mailed or, if not mailed, delivered to Debtor,
Debtor shall deliver to Secured Party written notice of any objections
which it may have as to such statement of account, and in such event, only
the items to which objection is expressly made in such notice shall be
considered to be disputed by Debtor.
8.8. CAPITAL ADEQUACY. Debtor shall pay directly to Secured Party as
set forth below, on request, such amounts as Secured Party may determine to
be necessary to compensate Secured Party for any costs which it determines
are attributable to the maintenance by Secured Party, pursuant to a
governmental requirement implemented or effective after the date hereof or
a change made in any governmental requirement after the date hereof, or any
change in the interpretation, application or administration thereof,
whether or not having the force of law, but affecting the banking industry
generally, of capital in respect of Secured Party's commitment to lend
hereunder, such compensation to include, without limitation, an amount
equal to any reduction of the rate of return on assets or equity of Secured
Party (or its parent holding company) which Secured Party could have
achieved with respect to such commitment but for such governmental
requirement or change in a governmental requirement or any such change in
the interpretation, application or administration thereof, whether or not
having the force of law, but affecting the banking industry generally.
Secured Party will notify Debtor of any event occurring after the date of
this Agreement that will entitle Secured Party to compensation pursuant to
this Section as promptly as practicable after it obtains knowledge thereof.
Debtor will not be responsible for any amounts as compensation pursuant to
this Section accruing prior to ninety (90) days before the notice to Debtor
in accordance with the preceding sentence. In the event Secured Party is
entitled to such compensation, Secured Party will furnish Debtor with a
certificate setting forth the amount of each request by Secured Party for
compensation under this Section, with such certificate setting forth in
reasonable detail the basis for determining, and the calculation of, such
compensation. Determinations and allocations by Secured Party for purposes
of this Section of the effect of any governmental requirement pursuant to
this Section, or of the effect of capital maintained pursuant to this
Section, on Secured Party's cost or rate of return of maintaining
Indebtedness or its obligation to make Advances, and of the amounts
required to compensate Secured Party hereunder, shall be conclusive absent
manifest error.
8.9. ADDITIONAL PROVISIONS APPLICABLE TO LIBOR.
(a) Notice of Continuation/Conversion. If Debtor desires at the
expiration of a Eurodollar Interest Period to continue such Advance as an
Advance bearing interest at LIBOR for a new Eurodollar Interest Period,
such Debtor shall give Secured Party notice thereof, either telephonically
or in writing, no later than 10:00 a.m. (London time) on the third Business
Day immediately preceding the last day of the then expiring Eurodollar
Interest Period, which shall specify the aggregate principal amount of the
Eurodollar Rate Loan to be continued for a new Eurodollar Interest Period
and the new Eurodollar Interest Period to be applicable thereto. If Debtor
desires at the expiration of an applicable Eurodollar Interest Period to
convert all or part of an Advance from an Advance bearing interest at LIBOR
to an Advance bearing interest at the Prime Rate, the Debtor shall give the
Secured Party notice thereof, either telephonically or in writing in the
aforesaid manner. Each continuation/conversion notice shall be in writing
(each a "Notice of Continuation/Conversion"), and any telephonic notice
shall be promptly followed by such Debtor's delivery to Secured Party of a
Notice of Continuation/Conversion.
(b) Failure to Deliver Notice of Continuation/Conversion. If the
applicable Debtor shall have failed to properly deliver a Notice of
Continuation/Conversion specifying a continuation or conversion pursuant to
Section 8.9(a), such Debtor shall be deemed to have elected to continue
such Advance bearing interest at LIBOR for a Eurodollar Interest Period of
the same duration as the Eurodollar Interest Period so expiring.
(c) Eurodollar Deposits Unavailable or LIBOR Unascertainable or
Uneconomical. In the event that, prior to the commencement of any
Eurodollar Interest Period for any Advance bearing interest at LIBOR, by
reason of circumstances affecting the Eurodollar interbank market
generally, the Secured Party or Marine Midland Bank shall have reasonably
determined in good faith (which determination shall be conclusive and
binding upon all parties hereto) that (i) U.S. dollars in the relevant
amount and for the relevant Eurodollar Interest Period for such Advances
bearing interest at LIBOR are not available in the applicable Eurodollar
interbank market generally, or (ii) adequate and reasonable means do not
exist for ascertaining LIBOR applicable to such Eurodollar Interest Period,
whereupon (x) any request for an Advance bearing interest at LIBOR shall be
deemed a request for an Advance based upon the Prime Rate, and (y) each
outstanding Advance bearing interest at LIBOR shall be converted, without
any additional notice to or from the affected Borrower, to an Advance based
upon the Prime Rate (disregarding any requirements for any notice or a
minimum aggregate principal amount) on the last day of the Eurodollar
Interest Period with respect thereto.
(d) Special Fees in Respect of Reserve Requirements. Debtor agrees to
pay to Secured Party on any such Advances bearing interest at LIBOR, as
additional interest, such amounts as will compensate Secured Party for any
cost to Secured Party, from time to time, of any additional reserve or
additional special deposit requirement against assets held by, or deposits
in or for the amount of any loans by, Secured Party which are imposed on,
or deemed applicable by, such Lender, from time to time, under or pursuant
to any applicable governmental requirements respecting the Eurodollar
Lending Office or any Advance bearing interest at LIBOR. In connection
herewith, Secured Party shall not be required to prove that it actually
funded any Advance bearing interest at LIBOR, in whole or in part, with
matching deposits in U.S. dollars acquired by Secured Party from a prime
bank in the Eurodollar interbank market, irrespective of whether Secured
Party has any such deposits. A certificate as to the amount of any such
cost (including calculations, in reasonable detail, showing how Secured
Party computed and allocated such cost) shall be promptly furnished by
Secured Party to Debtor and shall, in the absence of manifest error, be
conclusive and binding.
(e) Reasonable Efforts. Secured Party agrees that it will use all
reasonable efforts, including ,without limitation, reasonable good faith
efforts, to designate a different Eurodollar Lending Office to make or
maintain any Advance bearing interest at LIBOR, in order to avoid or to
minimize, as the case may be, the payment by Debtor of any additional
amounts under the terms of Section 8.9(d), and that it will, as promptly as
practicable, notify the Debtor of the existence of any event which will
require the payment by Debtor of any such additional amounts; provided,
that the Secured Party shall not be obligated to make Advances bearing
interest at LIBOR hereunder at any office located in the United States to
avoid or minimize such payments.
(f) Funding Losses. If Debtor makes any payment of principal on any
Advance bearing interest at LIBOR, or converts such an Advance into an
Advance bearing interest at the Prime Rate on any day other than the last
day of the Eurodollar Interest Period applicable thereto, Debtor shall
reimburse the Secured Party within ten (10) Business Days after demand, for
any resulting loss or expense actually incurred by it, including (without
limitation) any loss incurred in obtaining, liquidating, employing or
redeploying deposits or foreign currencies from third parties (including,
without limitation, the amount of Secured Party's consequential losses),
for the period after any such payment or conversion through the end of such
Eurodollar Interest Period (the calculation of such loss or expense shall
include a credit, not in excess of such loss or expense, for the interest
that could be earned by the Secured Party as a result of redepositing such
amount), together with interest thereon at the past due rate specified in
Section 8.2(a) from the date of demand until paid in full; provided that
Secured Party shall have delivered to Debtor a certificate as to the amount
of such loss or expense, which certificate shall be conclusive in the
absence of manifest error. In connection herewith, Secured Party shall not
be required to prove that it actually funded any Advance bearing interest
at LIBOR, in whole or in part, with matching deposits in U.S. dollars
acquired by the Secured Party from a prime bank in the applicable
Eurodollar interbank market, irrespective of whether Secured Party has any
such deposits.
(g) Changes in Law Rendering LIBOR Loans Unlawful. In the event that
after the date hereof it shall be unlawful for Secured Party, in the
reasonable determination in good faith of Secured Party, to make or
maintain any Advance as an Advance bearing interest at LIBOR, Secured Party
shall, upon the occurrence of such event, notify the Debtor in writing,
stating the reasons therefor; provided, however, that before giving any
such notice, Secured Party shall use reasonable good faith efforts to
designate a different Eurodollar Lending Office to make or maintain such
Advance as an Advance bearing interest at LIBOR if such designation will
avoid the need for giving such notice and will not be otherwise materially
disadvantageous to the Secured Party. Upon receiving a notice of any such
event, the Debtor shall have the following options, one of which must be
exercised:
(i) to prepay immediately all of the Advances which are so affected;
or,
(ii) convert all affected Advances (including accrued interest
thereon) to Advances based on the rate of interest based on the Prime Rate.
(h)......Reimbursable Taxes. Debtor covenants and agrees that, with
respect to each Advance bearing interest at LIBOR:
(i) Debtor will pay, when due (upon prior written notice by Secured
Party, and on an after-tax basis), all present and future income, stamp and
other taxes, levies, costs and charges whatsoever imposed, assessed, levied
or collected on or in respect of such Advance; provided, however, that if
Debtor disputes in good faith any such taxes, levies, costs or charges and
refuses to pay same pending resolution of such dispute, Debtor shall so
advise Secured Party in writing and shall make the appropriate reserves
therefor. Debtor's obligation pursuant hereto shall exclude, however, any
such taxes, levies, costs or charges imposed or determined by reference to
income of Secured Party or any Eurodollar Lending Office by any
jurisdiction in which the Secured Party or any such Eurodollar Lending
Office is located (all such non-excluded taxes, levies, costs and charges
being collectively called "Reimbursable Taxes" in this Section). Promptly
after the date on which payment of any such Reimbursable Tax is due
pursuant to applicable law, Debtor will, at the request of Secured Party,
furnish to Secured Party an official receipt issued by the relevant taxing
authority showing the amount of such tax and its payment by Debtor or such
other evidence in form and substance satisfactory to Secured Party that
Debtor has met its obligation under this Section.
(ii) Debtor will indemnify the Secured Party against, and reimburse
the Secured Party on demand for, any Reimbursable Taxes paid by Secured
Party upon Debtor's failure to pay such amounts in a timely manner after
written notice by the Secured Party, and any loss, liability, claim or
expense, including interest, penalties and reasonable legal fees, that
Secured Party may incur at any time arising out of or in connection with a
failure by the Debtor to pay such Reimbursable Taxes. A certificate of the
Secured Party as to the amount of any such Reimbursable Taxes and other
amounts paid by the Secured Party shall be conclusive and binding in the
absence of manifest error.
(iii) All payments on account of the principal of and interest on the
Advances and all other amounts payable by Debtor to the Secured Party
hereunder shall be made free and clear of and without reduction by reason
of any Reimbursable Taxes, all of which will be for the account of the
Debtor and paid when due by the Debtor.
(iv) If Debtor is ever required to pay any Reimbursable Tax with
respect to any Advance bearing interest at LIBOR, Debtor may elect to
convert all outstanding Advances bearing interest at LIBOR to Advances
bearing interest at the Prime Rate, but such election shall not diminish
Debtor's obligation to pay all Reimbursable Taxes theretofore imposed,
assessed, levied or collected.
(v) Notwithstanding the foregoing provisions of this Section to the
contrary, Debtor shall have no obligation to pay to the Secured Party any
amount payable by reason of the failure of the Secured Party to file, to
the extent the Secured Party is legally entitled to file, any statement of
exemption required by Treasury Regulation Section 1.1441-4(a) or any
subsequent version thereof promulgated under the Code, or any claim for
relief from United Kingdom Inland Tax pursuant to Article 11 of the United
States-United Kingdom Income Tax Treaty.
9. PROCEDURES AFTER SCHEDULING RECEIVABLES.
9.1. RETURNED MERCHANDISE. Debtor shall notify Secured Party
immediately of the return, rejection, repossession, stoppage in transit,
loss, damage, or destruction of any material portion of the Inventory.
Secured Party shall make appropriate adjustments to the Receivables
Borrowing Base and the Inventory Borrowing Base to reflect the return of
such Inventory.
9.2. CREDITS AND EXTENSIONS.
(a) Granting of Credits and Extensions. Debtor may grant such Credits
and such Extensions as are ordinary in the usual course of Debtor's
business without the prior consent of Secured Party; provided, however,
that any such Extension shall not extend the time for payment beyond thirty
(30) days after the original due date as shown on the Invoice evidencing
the related Receivable, or as computed based on the information set forth
on such Invoice.
(b) Accounting for Credits and Extensions. Debtor shall make a full
accounting of each grant of a Credit or an Extension, including a brief
description of the reasons therefor and a copy of all credit memoranda.
Such accountings shall be in form satisfactory to Secured Party and shall
be delivered to Secured Party daily or at such other intervals as may be
specified in Item 17 of the Schedule. All credit memoranda issued by Debtor
shall be numbered consecutively and copies of the same, when delivered to
Secured Party, shall be in numerical order and accounted for in the same
manner as provided in Section 6.2 with respect to Invoices.
(c) Adjustment to Receivables Borrowing Base. The Receivables
Borrowing Base will be reduced by the amount of all Credits reflected in an
accounting required by Section 9.2(b) and by the full amount of any
Receivables for which Extensions were granted.
9.3. RETURNED INSTRUMENTS. In the event that any check or other
instrument received in payment of a Receivable shall be returned
uncollected for any reason, Secured Party shall again forward the same for
collection or return the same to Debtor. Upon receipt of a returned check
or instrument by Debtor, Debtor shall immediately make the necessary
entries on its books and records to reinstate the Receivable as outstanding
and unpaid and immediately notify Secured Party of such entries. All
Receivables of an Account Debtor with respect to which such check or
instrument was received shall thereupon become Ineligible Receivables.
9.4. DEBIT MEMORANDA.
(a) Unless Secured Party otherwise notifies Debtor in writing, Debtor
shall deliver at least weekly to Secured Party, together with the schedule
of Receivables provided for in Item 17 of the Schedule, copies of all debit
memoranda issued by Debtor.
(b) All debit memoranda issued by Debtor, when delivered to Secured
Party, shall be accounted for in the same manner as provided in Section 6.2
with respect to Invoices.
9.5. NOTES RECEIVABLE. Any note or other instrument (except a check or
other instrument for the immediate payment of money) with respect to any
Receivable accepted by Debtor without the prior written consent of Secured
Party shall be excluded from the Borrowing Capacity. If Secured Party, in
its reasonable judgment, consents to the acceptance of any such note or
instrument, the same shall be considered as evidence of the Receivable
giving rise to such note or instrument, shall be subject to the Security
Interest and included in the determination of Borrowing Capacity, and shall
not constitute payment of such Receivable, and Debtor shall forthwith
endorse such note or instrument to the order of Secured Party and deliver
the same to Secured Party, together with the Schedule listing the
Receivables which it evidences. Upon collection, the proceeds of such note
or instrument may be applied directly to unpaid Advances, interest, and
costs and expenses as provided in Section 8.5.
10. AFFIRMATIVE COVENANTS. So long as any part of the Indebtedness
remains unpaid, or this Agreement remains in effect, Debtor shall comply
with the covenants contained in Item 21 of the Schedule or elsewhere in
this Agreement, and with the covenants listed below:
10.1. FINANCIAL STATEMENTS. Debtor shall furnish to Secured Party:
(a) Within 90 days after the end of each fiscal year, audited
consolidated financial statements of Debtor and all Consolidated
Subsidiaries as of the end of such year, fairly presenting their
consolidated financial position, which statements shall consist of a
balance sheet and related statements of income, retained earnings, and cash
flow covering the period of Debtor's immediately preceding fiscal year, and
which shall be audited by independent certified public accountants
satisfactory to Secured Party and accompanied by an opinion by such
certified public accountants (which shall not be qualified by reason of any
limitation imposed by Debtor) to the effect that the financial statements
have been prepared in accordance with generally accepted accounting
principles and that the examination of the accounts in connection with
those financial statements has been made in accordance with generally
accepted auditing standards and, accordingly, includes such tests of the
accounting records and such other audit procedures as were considered
necessary in the circumstances by such certified public accountants.
(b) Within thirty (30) days after the end of each month, consolidated
and consolidating financial statements of Debtor and each Consolidated
Subsidiary as of the end of such month, fairly presenting Debtor's and such
Consolidated Subsidiary's financial position, which statements shall
consist of a balance sheet and related statements of income, and retained
earnings covering the period from the end of the immediately preceding
fiscal year to the end of such month, all in such detail as Secured Party
may reasonably request and signed and certified to be correct by the
president or chief financial officer of Debtor or other financial officer
satisfactory to Secured Party.
(c) Within thirty (30) days after the end of each month, a compliance
certificate executed by the president or chief financial officer of Debtor
or other financial officer satisfactory to Secured Party in the form of
Exhibit A attached hereto and made a part hereof.
(d) Promptly after their preparation, copies of any and all proxy
statements, financial statements, and reports which Debtor or any Third
Party sends to its shareholders, and copies of any and all periodic and
special reports and registration statements which Debtor or any Third Party
files with the Securities and Exchange Commission.
(e) Such additional information, including but not limited to current
business plans by fiscal year end, as Secured Party may from time to time
reasonably request regarding the financial and business affairs of Debtor,
or any Consolidated Subsidiary, or any Third Party.
10.2. GOVERNMENT AND OTHER SPECIAL RECEIVABLES. Debtor shall promptly
notify Secured Party in writing of the existence of any Receivable as to
which the perfection, enforceability, or validity of Secured Party's
Security Interest in such Receivable, or Secured Party's right or ability
to obtain direct payment to Secured Party of the Proceeds of such
Receivable, is governed by any federal or state statutory requirements
other than those of the Uniform Commercial Code, including, without
limitation, any Receivable subject to the Federal Assignment of Claims Act
of 1940, as amended.
10.3. TERMS OF SALE. The terms on which sales or leases giving rise to
Receivables are made shall be as specified in Items 3 and 22 of the
Schedule.
10.4. BOOKS AND RECORDS. Debtor shall maintain, at its own cost and
expense, accurate and complete books and records with respect to the
Collateral, in form satisfactory to Secured Party, and including, without
limitation, records of all payments received and all Credits and Extensions
granted with respect to the Receivables, of the return, rejection,
repossession, stoppage in transit, loss, damage, or destruction of any
Inventory, and of all other dealings affecting the Collateral. Debtor shall
deliver such books and records to Secured Party or its representative on
request. At Secured Party's request, Debtor shall mark all or any records
to indicate the Security Interest. Debtor shall further indicate the
Security Interest on all financial statements issued by it or shall cause
the Security Interest to be so indicated by its accountants.
10.5. INVENTORY IN POSSESSION OF THIRD PARTIES. If any Inventory
remains in the hands or control of any of Debtor's agents, finishers,
contractors, or processors, or any other third party, Debtor, if requested
by Secured Party, shall notify such party of Secured Party's Security
Interest in the Inventory and shall instruct such party to hold such
Inventory for the account of Secured Party and subject to the instructions
of Secured Party.
10.6. EXAMINATIONS. Debtor shall at all reasonable times and from time
to time permit Secured Party or its agents to inspect the Collateral and to
examine and make extracts from, or copies of, any of Debtor's books,
ledgers, reports, correspondence, and other records.
10.7. VERIFICATION OF COLLATERAL. Secured Party shall have the right
to verify all or any Collateral in any manner and through any medium
Secured Party may consider appropriate and Debtor agrees to furnish all
assistance and information and perform any acts which Secured Party may
require in connection therewith. Third party inventory confirmation service
providers must be bonded and act as an Agent for Secured Party, permitting
Secured Party to rely directly upon all findings.
10.8. RESPONSIBLE PARTIES. Debtor shall notify Secured Party of the
occurrence of any event specified in Section 1.1(dd)(iv) with respect to
any Responsible Party promptly after receiving notice thereof.
10.9. TAXES. Debtor shall promptly pay and discharge all of its taxes,
assessments, and other governmental charges prior to the date on which
penalties are attached thereto, establish adequate reserves for the payment
of such taxes, assessments, and other governmental charges, make all
required withholding and other tax deposits, and, upon request, provide
Secured Party with receipts or other proof that such taxes, assessments,
and other governmental charges have been paid in a timely fashion;
provided, however, that nothing contained herein shall require the payment
of any tax, assessment, or other governmental charge so long as its
validity is being contested in good faith, and by appropriate proceedings
diligently conducted, and adequate reserves for the payment thereof have
been established.
10.10. LITIGATION.
(a) Debtor shall promptly notify Secured Party in writing of any
litigation, proceeding, or counterclaim against, or of any investigation
of, Debtor or any Consolidated Subsidiary if: (i) the outcome of such
litigation, proceeding, counterclaim, or investigation may materially and
adversely affect the finances or operations of Debtor or any Consolidated
Subsidiary or title to, or the value of, any Collateral; or (ii) such
litigation, proceeding, counterclaim, or investigation questions the
validity of any Transaction Document or any action taken, or to be taken,
pursuant to any Transaction Document.
(b) Debtor shall furnish to Secured Party such information regarding
any such litigation, proceeding, counterclaim, or investigation as Secured
Party shall request.
10.11. INSURANCE.
(a) Debtor shall at all times carry and maintain in full force and
effect such insurance as Secured Party may from time to time reasonably
require, in coverage, form, and amount, and issued by insurers,
satisfactory to Debtor and Secured Party, including, without limitation:
workers' compensation or similar insurance; public liability insurance; and
insurance against such other risks as are usually insured against by
business entities of established reputation engaged in the same or similar
businesses as Debtor and similarly situated.
(b) Debtor shall deliver to Secured Party certificates of insurance
required by Secured Party, with appropriate endorsements designating
Secured Party and Marine Midland Bank as an additional insured, mortgagee
and loss payee as requested by Secured Party. Each policy of insurance
shall provide that if such policy is canceled for any reason whatsoever, if
any substantial change is made in the coverage which affects Secured Party,
or if such policy is allowed to lapse for nonpayment of premium, such
cancellation, change, or lapse shall not be effective as to Secured Party
until thirty (30) days after receipt by Secured Party of written notice
thereof from the insurer issuing such policy.
(c) Debtor hereby appoints Secured Party as its attorney-in-fact, with
full authority in the place and stead of Debtor and in the name of Debtor,
Secured Party, or otherwise, from time to time in Secured Party's
discretion, to take any actions and to execute any instruments which
Secured Party may deem necessary or desirable to obtain, adjust, make
claims under, and otherwise deal with insurance required pursuant hereto
and to receive, endorse, and collect any drafts or other instruments
delivered in connection therewith; provided, however, Secured Party shall
not take any such action or make any such execution until an Event of
Default has occurred.
10.12. EXISTENCE; BUSINESS.
(a) Debtor shall take all necessary steps to preserve its existence
and its right to conduct business in all states in which the nature of its
business or ownership of its property requires such qualification.
(b) Debtor shall engage only in the operation of convenience stores,
truck stops, and the retail sale of motor fuel; the operation of fuel
terminals, including the processing of commingled products and storage and
delivery of fuel for third parties; the wholesale distribution of motor
fuel; and activities ancillary to the foregoing.
10.13. PENSION REPORTS. Upon the occurrence of any Pension Event,
Debtor shall furnish to Secured Party, as soon as possible and, in any
event, within thirty (30) days after Debtor knows, or has reason to know,
of such occurrence, the statement of the president or chief financial
officer of Debtor setting forth the details of such Pension Event and the
action which Debtor proposes to take with respect thereto.
10.14. NOTICE OF NON-COMPLIANCE. Debtor shall notify Secured Party in
writing of any failure by Debtor or any Third Party to comply with any
provision of any Transaction Document immediately upon learning of such
non-compliance, or if any representation or warranty contained in any
Transaction Document is no longer true in any material respect.
10.15. COMPLIANCE WITH ENVIRONMENTAL LAWS.
(a) Debtor shall materially comply with all Environmental Laws.
(b) Debtor shall not suffer, cause, or permit the Disposal of
Hazardous Substances at any property owned, leased, or operated by it or
any Consolidated Subsidiary in material violation of any Environmental Law.
For purposes of this Section 10.15, "material" means any fine, penalty, or
liabilities per occurrence in excess of $20,000.
(c) Debtor shall promptly notify Secured Party in the event of the
Disposal of any Hazardous Substance at any property owned, leased, or
operated by Debtor or any Consolidated Subsidiary, or in the event of any
Release, or threatened Release, of a Hazardous Substance, from any such
property in material violation of any Environmental Law.
(d) Debtor shall, at Secured Party's reasonable request, provide, at
Debtor's expense, updated Environmental Questionnaires and/or Environmental
Reports concerning any property owned, leased, or operated by Debtor or any
Consolidated Subsidiary at a maximum cost to Debtor annually of $20,000.
(e) Debtor shall deliver promptly to Secured Party (i) copies of any
documents received from the United States Environmental Protection Agency
or any state, county, or municipal environmental or health agency
concerning Debtor's or any Consolidated Subsidiary's operations; and (ii)
copies of any documents submitted by Debtor or any Consolidated Subsidiary
to the United States Environmental Protection Agency or any state, county,
or municipal environmental or health agency concerning its operations.
10.16. DEFEND COLLATERAL. Debtor shall defend the Collateral against
the claims and demands of all other parties (other than Secured Party),
including, without limitation, defenses, setoffs, and counterclaims
asserted by any Account Debtor against Debtor or Secured Party.
10.17. USE OF PROCEEDS. Debtor shall use the proceeds of Advances
solely for Debtor's working capital, for such other legal and proper
corporate purposes as are consistent with all applicable laws, Debtor's
certificate of limited partnership and partnership agreement, resolutions
of the Debtor's partners, and the terms of the Transaction Documents.
10.18. COMPLIANCE WITH LAWS. Debtor shall comply with all applicable
laws, rules, regulations, and other legal requirements with respect to its
business and the use, maintenance, and operations of the real and personal
property owned or leased by it in the conduct of its business.
10.19. MAINTENANCE OF PROPERTY. Debtor shall maintain its property,
including, without limitation, the Collateral, in good condition and repair
and shall prevent the Collateral, or any part thereof, from being or
becoming an accession to other goods not constituting Collateral.
10.20. LICENSES, PERMITS, ETC. Debtor shall maintain all of its
material franchises, grants, authorizations, licenses, permits, easements,
consents, certificates, and orders, if any, in full force and effect until
their respective expiration dates.
10.21. TRADEMARKS AND PATENTS. Debtor shall maintain all of its
material trademarks, trademark rights, patents, patent rights, licenses,
permits, tradenames, tradename rights, and approvals, if any, in full force
and effect until their respective expiration dates.
10.22. ERISA. Debtor shall comply with the provisions of ERISA and the
Internal Revenue Code with respect to each Pension Plan.
10.23. MAINTENANCE OF OWNERSHIP. Debtor shall at all times maintain
ownership of the percentages of issued and outstanding equity interests of
each Consolidated Subsidiary set forth in Item 33 of the Schedule and
notify Secured Party in writing prior to the formation of any new
Consolidated Subsidiary.
10.24. ACTIVITIES OF CONSOLIDATED SUBSIDIARIES. Unless the provisions
of this Section are expressly waived by Secured Party in writing, Debtor
shall cause each Consolidated Subsidiary to comply with Sections 10.1(b),
10.9, 10.11(a), 10.12, 10.15, and 10.18 through 10.22, inclusive, and any
of the provisions contained in Item 21 of the Schedule, and shall cause
each Consolidated Subsidiary to refrain from doing any of the acts
proscribed by Sections 11.2, 11.3, and 11.5 through 11.14, inclusive, or
proscribed by any of the provisions contained in Item 21 of the Schedule.
10.25. LANDLORD AND WAREHOUSEMAN WAIVERS. Unless expressly waived by
Secured Party in writing, Debtor shall use its best efforts to obtain from
each landlord from whom Debtor leases property, and the owner of each
warehouse in which Collateral is stored, a waiver or disclaimer of any
interest in, and an agreement to permit the removal of, all personal
property Collateral; provided, however, if Debtor does not obtain such
waiver, disclaimer, and agreement within sixty (60) days of the date hereof
with respect to such Collateral, such Collateral shall be excluded from the
Borrowing Capacity.
10.26. COMPLIANCE WITH MATERIAL AGREEMENTS. The Debtor shall, and
shall cause its Consolidated Subsidiary to, comply in all material respects
with all material agreements, indentures, mortgages or documents binding on
it or affecting its properties or business.
10.27. OTHER NOTICES. The Debtor shall, and shall cause its
Consolidated Subsidiary to, promptly notify the Secured Party of (a) any
change in its financial condition or its business, the effect of which
could have a material adverse effect, (b) any default under any agreement,
contract or other instrument to which it is a party or by which any of its
properties are bound, or any acceleration of the maturity of any
Indebtedness owing by the Debtor or its Consolidated Subsidiary, the effect
of which could have a material adverse effect, (c) any material adverse
claim against or affecting the Debtor or its Consolidated Subsidiary, or
any of their properties, or any actual or potential contingent liabilities,
involving an amount or amounts, in the aggregate, exceeding $25,000, and
(d) the commencement of, and any material determination in, any material
litigation with any third party or any proceeding before any Governmental
Authority affecting the Debtor or any Consolidated Subsidiary involving an
amount or amounts, in the aggregate, exceeding $25,000 other than any claim
or litigation referred to in (c) and (d) which is fully insured (less
customary deductibles) by one or more binding and enforceable insurance
policies in favor of the Debtor or its Consolidated Subsidiary, which
policies are issued in accordance with provisions of this Agreement.
11. NEGATIVE COVENANTS. So long as any part of the Indebtedness
remains unpaid or this Agreement remains in effect, Debtor, without the
written consent of Secured Party, shall not violate any covenant contained
in Item 21 of the Schedule and shall not:
11.1. LOCATION OF INVENTORY, EQUIPMENT, AND BUSINESS RECORDS. Move the
Inventory, Equipment, or the records concerning the Collateral from the
location where they are kept as specified in Items 11 and 13 of the
Schedule.
11.2. BORROWED MONEY. Create, incur, assume, or suffer to exist any
liability for borrowed money, except to Secured Party and except as may be
specified in Item 23 of the Schedule.
11.3. SECURITY INTEREST AND OTHER ENCUMBRANCES. Create, incur, assume,
or suffer to exist any mortgage, security interest, lien, or other
encumbrance upon any of its properties or assets, whether now owned or
hereafter acquired, except mortgages, security interests, liens, and
encumbrances (a) in favor of Secured Party and (b) as may be specified in
Item 12 of the Schedule. Debtor agrees that it will not, without the
Secured Party's prior written consent (a) create, incur, assume or suffer
to exist or to be created, incurred or assumed, any lien, security
interest, option or other encumbrance of any kind upon any of its rights,
title and interests in any of its real property assets. Further, Debtor
hereby agrees that it will not, without the Secured Party's prior written
consent, enter into any agreement with or in favor of any person or entity
other than the Secured Party, which agreement would hinder, qualify,
prohibit or otherwise limit in any manner the Debtor's right or ability to
(a) create, incur, assume or suffer to exist or to be created, incurred or
assumed, any lien, security interest, option or other encumbrance or any
kind upon any of its right, title and interest in any of its real property
assets whatsoever, or (b) sell, transfer, convey or assign any of its real
property assets unless in the ordinary course of business; provided,
however, none of the foregoing shall restrict or prohibit the granting of
purchase money security interests made in connection with any capital
expenditures contemplated in Section 11.11.
11.4. STORING AND USE OF COLLATERAL. Place the Collateral in any
warehouse which may issue a negotiable Document with respect thereto or use
the Collateral in violation of any provision of the Transaction Documents,
of any applicable statute, regulation, or ordinance, or of any policy
insuring the Collateral.
11.5. MERGERS, CONSOLIDATIONS, OR SALES. (a) Merge or consolidate with
or into any corporation; (b) enter into any joint venture or partnership
with any person, firm, or corporation; (c) convey, lease, or sell all or
any material portion of its property or assets or business to any other
person, firm, or corporation except for the sale of Inventory in the
ordinary course of its business and in accordance with the terms of this
Agreement; or (d) convey, lease, or sell any of its assets to any person,
firm, or corporation for less than the fair market value thereof; provided
however, that the distribution of assets and the mergers occurring in
connection with the division of FFPP and its Consolidated Subsidiaries into
two separate operating entities, as set forth in a registration statement
that will be filed with the United States Securities and Exchange
Commission shall be permitted.
11.6. PARTNERSHIP INTERESTS. Purchase or redeem any of its partnership
interests or otherwise change the capital structure of Debtor or change the
relative rights, preferences, or limitations relating to any of its
partnership interests; provided however, that any such change made in
connection with the division of FFPP and its Consolidated Subsidiaries into
two separate operating entities, as set forth in a registration statement
that will be filed with the United States Securities and Exchange
Commission shall be permitted.
11.7. DISTRIBUTIONS. Pay any cash distributions on any of its
partnership interests or dividends on any of its capital stock, if the
payment of such distributions or dividends would result in a failure to
comply with any of the financial covenants required by Item 30 of the
Schedule.
11.8. INVESTMENTS AND ADVANCES. Make any investment in, or advances
to, any other person, firm, or corporation, except (a) advance payments or
deposits against purchases made in the ordinary course of Debtor's regular
business; (b) direct obligations of the United States of America; (c) any
existing investments in, or existing advances to, the Consolidated
Subsidiaries; or (d) any investments or advances that may be specified in
Item 24 of the Schedule.
11.9. GUARANTIES. Become a guarantor, a surety, or otherwise liable
for the debts or other obligations of any other person, firm, or
corporation, whether by guaranty or suretyship agreement, agreement to
purchase indebtedness, agreement for furnishing funds through the purchase
of goods, supplies, or services (or by way of stock purchase, capital
contribution, advance, or loan) for the purpose of paying or discharging
indebtedness, or otherwise, except as an endorser of instruments for the
payment of money deposited to its bank account for collection in the
ordinary course of business and except as may be specified in Item 25 of
the Schedule.
11.10. LEASES. Enter, as lessee, into any lease of real or personal
property (whether such lease is classified on Debtor's financial statements
as a capital lease or operating lease) if the aggregate of the rentals of
such lease and of Debtor's other then existing leases would exceed, in any
one of Debtor's fiscal years, the amount specified in Item 26 of the
Schedule.
11.11. CAPITAL EXPENDITURES. Make or incur any capital expenditures in
any one fiscal year in an aggregate amount in excess of the amount, if any,
specified in Item 27 of the Schedule.
11.12. COMPENSATION.
(a) Pay, or obligate itself to pay, directly or indirectly, any
salaries, bonuses, dividends, or other compensation to its officers or
directors, or members of their immediate families, in the aggregate
exceeding the amount, if any, specified in Item 28 of the Schedule.
(b) Pay, or obligate itself to pay, directly or indirectly, any
salaries, bonuses, dividends, or other compensation to the individuals, if
any, specified in Item 29 of the Schedule in excess of the amount therein
specified for such individuals.
11.13. NAME CHANGE. Change its name without giving at least thirty
(30) days prior written notice of its proposed new name to Secured Party,
together with delivery to Secured Party of UCC-1 Financing Statements
reflecting Debtor's new name, all in form and substance satisfactory to
Secured Party.
11.14. DISPOSITION OF COLLATERAL. Sell, assign, or otherwise transfer,
dispose of, or encumber the Collateral or any interest therein, or grant a
security interest therein, or license thereof, except to Secured Party and
except the sale or lease of Inventory in the ordinary course of business of
Debtor and in accordance with the terms of this Agreement.
11.15. FINANCIAL COVENANTS. Fail to comply with the financial
covenants set forth in Item 30 of the Schedule.
11.16. FISCAL YEAR AND ACCOUNTING METHOD. Debtor shall not, and shall
not permit any of its Consolidated Subsidiaries to, change its fiscal year
or method of accounting other than as may be permitted by Generally
Accepted Accounting Principles.
11.17. LINES OF BUSINESS. The Debtor shall not, and shall not permit
its Consolidated Subsidiaries to, directly or indirectly, engage in any
business significantly and materially different from those in which it is
presently engaged or substantially alter its method of doing business.
12. EVENTS OF DEFAULT.
12.1. EVENTS OF DEFAULT. The occurrence of any one or more of the
following events shall constitute an event of default (individually, an
Event of Default and, collectively, Events of Default):
(a) Nonpayment. Nonpayment when due of any principal, interest,
premium, fee, cost, or expense due under the Transaction Documents.
(b) Negative Covenants. Default in the observance of any of the
covenants or agreements of Debtor contained in Article 11.
(c) Article 7. Default in the observance of any of the covenants or
agreements of Debtor contained in Article 7.
(d) Other Covenants. Default in the observance of any of the covenants
or agreements of Debtor contained in the Transaction Documents -- other
than in Article 11, Article 7 or Sections 8.1, 8.2, 8.3, or 8.4 -- or in
any other agreement with Secured Party which is not remedied within the
earlier of ten (10) days after (i) notice thereof by Secured Party to
Debtor, or (ii) the date Debtor was required to give notice to Secured
Party under Section 10.14.
(e) Cessation of Business or Voluntary Insolvency Proceedings. The (i)
cessation of operations of Debtor's business as conducted on the date of
this Agreement; (ii) filing by Debtor of a petition or request for
liquidation, reorganization, arrangement, adjudication as a bankrupt,
relief as a debtor, or other relief under the bankruptcy, insolvency, or
similar laws of the United States of America or any state or territory
thereof or any foreign jurisdiction now or hereafter in effect; (iii)
making by Debtor of a general assignment for the benefit of creditors; (iv)
consent by the Debtor to the appointment of a receiver or trustee,
including, without limitation, a "custodian," as defined in the Federal
Bankruptcy Code, for Debtor or any of Debtor's assets; (v) making of any,
or sending of any, notice of any intended bulk sale by Debtor; or (vi)
execution by Debtor of a consent to any other type of insolvency proceeding
(under the Federal Bankruptcy Code or otherwise) or any formal or informal
proceeding for the dissolution or liquidation of, or settlement of, claims
against or winding up of affairs of, Debtor.
(f) Involuntary Insolvency Proceedings. (i) The appointment of a
receiver, trustee, custodian, or officer performing similar functions,
including, without limitation, a "custodian," as defined in the Federal
Bankruptcy Code, for Debtor or any of Debtor's assets; or the filing
against Debtor of a request or petition for liquidation, reorganization,
arrangement, adjudication as a bankrupt, or other relief under the
bankruptcy, insolvency, or similar laws of the United States of America,
any state or territory thereof, or any foreign jurisdiction now or
hereafter in effect; or of any other type of insolvency proceeding (under
the Federal Bankruptcy Code or otherwise) or any formal or informal
proceeding for the dissolution or liquidation of, settlement of claims
against, or winding up of affairs of Debtor shall be instituted against
Debtor; and (ii) such appointment shall not be vacated, or such petition or
proceeding shall not be dismissed, within sixty (60) days after such
appointment, filing, or institution.
(g) Other Indebtedness and Agreements. Failure by Debtor to pay, when
due (or, if permitted by the terms of any applicable documentation, within
any applicable grace period), any indebtedness owing by Debtor to Secured
Party or any other person or entity (other than the Indebtedness incurred
pursuant to this Agreement, and including, without limitation, indebtedness
evidencing a deferred purchase price), whether such indebtedness shall
become due by scheduled maturity, by required prepayment, by acceleration,
by demand, or otherwise, or failure by the Debtor to perform any term,
covenant, or agreement on its part to be performed under any agreement or
instrument (other than a Transaction Document) evidencing or securing or
relating to any indebtedness owing by Debtor when required to be performed
if the effect of such failure is to permit the holder to accelerate the
maturity of such indebtedness.
(h) Judgments. Any judgment or judgments against Debtor (other than
any judgment for which Debtor is fully insured) which individually, or in
the aggregate, are in an amount greater than $20,000.00 and which remain
unpaid, unstayed on appeal, undischarged, unbonded, or undismissed for a
period of thirty (30) days.
(i) Pension Default. Any Reportable Event which Secured Party shall
determine in good faith constitutes grounds for the termination of any
Pension Plan by the Pension Benefit Guaranty Corporation, or for the
appointment by an appropriate United States district court of a trustee to
administer any Pension Plan, shall occur and shall continue thirty (30)
days after written notice thereof to Debtor by Secured Party; or the
Pension Benefit Guaranty Corporation shall institute proceedings to
terminate any Pension Plan or to appoint a trustee to administer any
Pension Plan; or a trustee shall be appointed by an appropriate United
States district court to administer any Pension Plan; or any Pension Plan
shall be terminated; or Debtor or any Consolidated Subsidiary shall
withdraw from a Pension Plan in a complete withdrawal or a partial
withdrawal; or there shall arise vested unfunded liabilities under any
Pension Plan that, in the good faith opinion of Secured Party, have or will
or might have a material adverse effect on the finances or operations of
Debtor; or Debtor or any Consolidated Subsidiary shall fail to pay to any
Pension Plan any contribution which it is obligated to pay under the terms
of such plan or any agreement or which is required to meet statutory
minimum funding standards.
(j) Collateral; Impairment. There shall occur with respect to the
Collateral any (i) fraud; (ii) material misappropriation, conversion, or
diversion; (iii) levy, seizure, or attachment; or (iv) material loss,
theft, or damage.
(k) Change. There shall occur any materially adverse change in the
business or financial condition of Debtor.
(l) Third Party Default. There shall occur with respect to any Third
Party or any Consolidated Subsidiary, including, without limitation, any
Guarantor or Consolidated Subsidiary (i) any event described in Section
12.1(e), 12.1(f), 12.1(g), or 12.1(h); (ii) any pension default event such
as described in Section 12.1(i) with respect to any pension plan maintained
by such Third Party or such Consolidated Subsidiary; or (iii) any failure
by Third Party or such Consolidated Subsidiary to perform in accordance
with the terms of any agreement between such Third Party and Secured Party,
or any default or event of default by such Third Party under any such
agreement.
(m) Representations. Any certificate, statement, representation,
warranty, or financial statement furnished by, or on behalf of, Debtor or
any Third Party, pursuant to, or in connection with, this Agreement
(including, without limitation, representations and warranties contained
herein) or as an inducement to Secured Party to enter into this Agreement
or any other lending agreement with Debtor shall prove to have been false
in any material respect at the time as of which the facts therein set forth
were certified or to have omitted any substantial contingent or
unliquidated liability or claim against Debtor or any such Third Party, or
if on the date of the execution of this Agreement there shall have been any
materially adverse change in any of the facts disclosed by any such
statement or certificate which shall not have been disclosed in writing to
Secured Party at, or prior to, the time of such execution.
(n) Challenge to Validity. Debtor or any Third Party commences any
action or proceeding to contest the validity or enforceability of any
Transaction Document or any lien or security interest granted or
obligations evidenced by any Transaction Document.
(o) Death or Incapacity; Termination. Any Third Party dies or becomes
incapacitated, or terminates or attempts to terminate, in accordance with
its terms or otherwise, any guaranty or other Transaction Document executed
by such Third Party.
(p) Change of Ownership. If all, or a controlling interest of, the
equity interests of Debtor shall be sold, assigned, or otherwise
transferred, other than any sale, assignment, or transfer occurring in
connection with the division of FFPP and its Consolidated Subsidiaries into
two separate operating entities, as set forth in a registration statement
that will be filed with the United States Securities and Exchange
Commission, or if a security interest or other encumbrance shall be granted
or otherwise acquired therein or with respect thereto.
(q) Termination of Validity Agreement. Upon termination of any
Validity Guaranty then in effect, unless such Validity Guaranty is replaced
by another Validity Guaranty in substantially the same form and content
executed by an officer of Debtor in favor of and acceptable to Secured
Party effective upon any such termination.
12.2. EFFECTS OF AN EVENT OF DEFAULT.
(a) Upon the happening of one or more Events of Default (except an
Event of Default under either Section 12.1(e) or 12.1(f)), Secured Party
may declare any obligations it may have hereunder to be canceled, and the
principal of the Indebtedness then outstanding to be immediately due and
payable, together with all interest thereon and costs and expenses accruing
under the Transaction Documents. Upon such declaration, any obligations
Secured Party may have hereunder shall be immediately canceled, and the
Indebtedness then outstanding shall become immediately due and payable
without presentation, demand, or further notice of any kind to Debtor.
(b) Upon the happening of one or more Events of Default under Section
12.1(e) or 12.1(f), Secured Party's obligations hereunder shall be canceled
immediately, automatically, and without notice, and the Indebtedness then
outstanding shall become immediately due and payable without presentation,
demand, or notice of any kind to the Debtor.
13. SECURED PARTY'S RIGHTS AND REMEDIES.
13.1. GENERALLY. Secured Party's rights and remedies with respect to
the Collateral, in addition to those rights granted herein and in any other
agreement between Debtor and Secured Party now or hereafter in effect,
shall be those of a secured party under the Uniform Commercial Code as in
effect in the State and under any other applicable law.
13.2. NOTIFICATION OF ACCOUNT DEBTORS. At any time after the
occurrence of an Event of Default or an event which with notice or lapse of
time, or both, would constitute an Event of Default, Secured Party may, at
any time and from time to time, contact Account Debtors directly to notify
any or all Account Debtors of the Security Interest and may direct such
Account Debtors to make all payments on Receivables directly to Secured
Party. Notwithstanding the foregoing, Secured Party may at any time contact
Account Debtors directly to verify Receivables.
13.3. POSSESSION OF COLLATERAL. Whenever Secured Party may take
possession of the Collateral, pursuant to Section 13.1, Secured Party may
take possession of the Collateral on Debtor's premises or may remove the
Collateral, or any part thereof, to such other places as the Secured Party
may, in its sole discretion, determine. If requested by Secured Party,
Debtor shall assemble all the books and records relating to the Collateral
and deliver it to Secured Party at such place as may be designated by
Secured Party.
13.4. COLLECTION OF RECEIVABLES. Upon the occurrence of an Event of
Default or an event which with notice or lapse of time, or both, would
constitute an Event of Default, Secured Party may demand, collect, and sue
for all monies and Proceeds due, or to become due, on the Receivables (in
either Debtor's or Secured Party's name at the latter's option) with the
right to enforce, compromise, settle, or discharge any or all Receivables.
If Secured Party takes any action contemplated by this Section with respect
to any Receivable, Debtor shall not exercise any right that Debtor would
otherwise have had to take such action with respect to such Receivable.
13.5. ENDORSEMENT OF CHECKS; DEBTOR'S MAIL. Debtor hereby irrevocably
appoints Secured Party the Debtor's agent with full power, in the same
manner, to the same extent, and with the same effect as if Debtor were to
do the same, immediately after the occurrence of an Event of Default or an
event which with notice or lapse of time, or both, would constitute an
Event of Default, to endorse Debtor's name on any Instruments or Documents
pertaining to any Collateral, to receive and collect all mail addressed to
Debtor, to direct the place of delivery of such mail to any location
designated by Secured Party, to open such mail, to remove all contents
therefrom, and to retain all contents thereof constituting or relating to
the Collateral. This agency is unconditional and shall not terminate until
all of the Indebtedness is paid in full and this Agreement has been
terminated. Secured Party agrees to give Debtor notice in the event it
exercises this agency, except with respect to the endorsement of Debtor's
name on any instruments or documents pertaining to any Collateral.
13.6. LICENSE TO USE PATENTS, TRADEMARKS, AND TRADENAMES. Debtor
grants to Secured Party a royalty-free, non-transferable license to use any
and all patents, trademarks, and tradenames now or hereafter owned by, or
licensed to, Debtor for the purposes of manufacturing and disposing of
Inventory after the occurrence of an Event of Default. All Inventory shall
at least meet quality standards maintained by Debtor prior to such Event of
Default.
14. MISCELLANEOUS.
14.1. PERFECTING THE SECURITY INTEREST; PROTECTING THE COLLATERAL.
Debtor hereby authorizes Secured Party to file such financing statements
relating to the Collateral without Debtor's signature thereon as Secured
Party may deem appropriate, and appoints Secured Party as Debtor's
attorney-in-fact (without requiring Secured Party) to execute any such
financing statement or statements in Debtor's name and to perform all other
acts which Secured Party deems appropriate to perfect and continue the
Security Interest and to protect, preserve, and realize upon the Collateral
and any insurance proceeds thereof.
14.2. PERFORMANCE OF DEBTOR'S DUTIES. Upon Debtor's failure to perform
any of its duties under the Transaction Documents, including, without
limitation, the duty to obtain insurance as specified in Section 10.11,
Secured Party may, but shall not be obligated to, perform any or all such
duties.
14.3. NOTICE OF SALE. Without in any way requiring notice to be given
in the following manner, Debtor agrees that any notice by Secured Party of
sale, disposition, or other intended action hereunder, or in connection
herewith, whether required by the Uniform Commercial Code as in effect in
the State or otherwise, shall constitute reasonable notice to Debtor if
such notice is mailed by regular or certified mail, postage prepaid, at
least ten (10) days prior to such action, to Debtor's address, attention
Vice President - Finance, or addresses specified above or to any other
address which Debtor has specified in writing to Secured Party as the
address to which notices hereunder shall be given to Debtor,.
14.4. WAIVER BY SECURED PARTY. No course of dealing between Debtor and
Secured Party and no delay or omission by Secured Party in exercising any
right or remedy under the Transaction Documents or with respect to any
Indebtedness shall operate as a waiver thereof or of any other right or
remedy, and no single or partial exercise thereof shall preclude any other
or further exercise thereof or the exercise of any other right or remedy.
All rights and remedies of Secured Party are cumulative.
14.5. WAIVER BY DEBTOR. Secured Party shall have no obligation to
take, and Debtor shall have the sole responsibility for taking, any and all
steps to preserve rights against any and all Account Debtors and against
any and all prior parties to any note, Chattel Paper, draft, trade
acceptance, or other instrument for the payment of money covered by the
Security Interest whether or not in Secured Party's possession. Secured
Party shall not be responsible to Debtor for loss or damage resulting from
Secured Party's failure to enforce any Receivables or to collect any moneys
due, or to become due, thereunder or other Proceeds constituting Collateral
hereunder. Debtor waives protest of any note, check, draft, trade
acceptance, or other instrument for the payment of money constituting
Collateral at any time held by Secured Party on which Debtor is in any way
liable and waives notice of any other action taken by Secured Party,
including, without limitation, notice of Secured Party's intent to
accelerate the Indebtedness or any part thereof.
14.6. SETOFF. Without limiting any other right of Secured Party,
whenever Secured Party has the right to declare any Indebtedness to be
immediately due and payable (whether or not it has so declared), Secured
Party, at its sole election, may setoff against the Indebtedness any and
all monies then or thereafter owed to Debtor by Secured Party in any
capacity, whether or not the Indebtedness or the obligation to pay such
monies owed by Secured Party is then due, and Secured Party shall be deemed
to have exercised such right of setoff immediately at the time of such
election even though any charge therefor is made or entered on Secured
Party's records subsequent thereto.
14.7. ASSIGNMENT. The rights and benefits of Secured Party hereunder
shall, if Secured Party so agrees, inure to any party acquiring any
interest in the Indebtedness or any part thereof.
14.8. SUCCESSORS AND ASSIGNS. Secured Party and Debtor, as used
herein, shall include the successors or assigns of those parties, except
that Debtor shall not have the right to assign its rights hereunder or any
interest herein.
14.9. MODIFICATION. No modification, rescission, waiver, release, or
amendment of any provision of this Agreement shall be made, except as may
be provided in Item 35 of the Schedule or by a written agreement signed by
Debtor and a duly authorized officer of Secured Party.
14.10. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, and by Secured Party and Debtor on separate counterparts,
each of which, when so executed and delivered, shall be an original, but
all of which shall together constitute one and the same Agreement.
14.11. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES. Any financial
calculation to be made, all financial statements and other financial
information to be provided, and all books and records to be kept in
connection with the provisions of this Agreement, shall be in accordance
with generally accepted accounting principles consistently applied during
each interval and from interval to interval; provided, however, that in the
event changes in generally accepted accounting principles shall be mandated
by the Financial Accounting Standards Board or any similar accounting body
of comparable standing, or should be recommended by Debtor's certified
public accountants, to the extent such changes would affect any financial
calculations to be made in connection herewith, such changes shall be
implemented in making such calculations only from and after such date as
Debtor and Secured Party shall have amended this Agreement to the extent
necessary to reflect such changes in the financial and other covenants to
which such calculations relate.
14.12. INDEMNIFICATION.
(a) If after receipt of any payment of all, or any part of, the
Indebtedness, Secured Party is, for any reason, compelled to surrender such
payment to any person or entity because such payment is determined to be
void or voidable as a preference, an impermissible setoff, or a diversion
of trust funds, or for any other reason, the Transaction Documents shall
continue in full force and Debtor shall be liable, and shall indemnify and
hold Secured Party harmless for, the amount of such payment surrendered.
The provisions of this Section shall be and remain effective
notwithstanding any contrary action which may have been taken by Secured
Party in reliance upon such payment, and any such contrary action so taken
shall be without prejudice to Secured Party's rights under the Transaction
Documents and shall be deemed to have been conditioned upon such payment
having become final and irrevocable. The provisions of this Section shall
survive the termination of this Agreement and the Transaction Documents.
(B) DEBTOR AGREES TO INDEMNIFY, DEFEND, AND HOLD HARMLESS SECURED
PARTY, ITS OFFICERS, DIRECTORS, EMPLOYEES, REPRESENTATIVES, AGENTS,
ATTORNEYS, ACCOUNTANTS, AND EXPERTS ("INDEMNIFIED PARTIES") FROM, AND
AGAINST, ANY AND ALL LIABILITIES, CLAIMS, DAMAGES, PENALTIES, EXPENDITURES,
LOSSES, OR CHARGES, INCLUDING, BUT NOT LIMITED TO, ALL COSTS OF
INVESTIGATION, MONITORING, LEGAL REPRESENTATIONS, REMEDIAL RESPONSE,
REMOVAL, RESTORATION, OR PERMIT ACQUISITION, WHICH MAY NOW, OR IN THE
FUTURE, BE UNDERTAKEN, SUFFERED, PAID, AWARDED, ASSESSED, OR OTHERWISE
INCURRED BY INDEMNIFIED PARTIES AS A RESULT OF THE PRESENCE OF, RELEASE OF,
OR THREATENED RELEASE OF HAZARDOUS SUBSTANCES IN VIOLATION OF ANY
ENVIRONMENTAL LAWS ON, IN, OR UNDER THE PROPERTY OWNED, LEASED, OR OPERATED
BY DEBTOR OR ANY CONSOLIDATED SUBSIDIARY. THE LIABILITY OF DEBTOR UNDER THE
COVENANTS OF THIS SECTION IS NOT LIMITED BY ANY EXCULPATORY PROVISIONS IN
THIS AGREEMENT OR ANY OTHER DOCUMENTS SECURING THE INDEBTEDNESS AND SHALL
SURVIVE REPAYMENT OF THE INDEBTEDNESS OR EXPIRATION OR ANY TRANSFER OR
TERMINATION OF THIS AGREEMENT REGARDLESS OF THE MEANS OF SUCH TRANSFER OR
TERMINATION. DEBTOR AGREES THAT INDEMNIFIED PARTIES SHALL NOT BE LIABLE IN
ANY WAY FOR THE COMPLETENESS OR ACCURACY OF ANY ENVIRONMENTAL REPORT OR THE
INFORMATION CONTAINED THEREIN. DEBTOR FURTHER AGREES THAT SECURED PARTY HAS
NO DUTY TO WARN DEBTOR OR ANY OTHER PERSON OR ENTITY ABOUT ANY ACTUAL OR
POTENTIAL ENVIRONMENTAL CONTAMINATION OR OTHER PROBLEM THAT MAY HAVE BECOME
APPARENT, OR WILL BECOME APPARENT, TO INDEMNIFIED PARTIES.
(C) DEBTOR AGREES TO PAY, INDEMNIFY, AND HOLD INDEMNIFIED PARTIES
HARMLESS FROM, AND AGAINST, ANY AND ALL LIABILITIES, OBLIGATIONS, LOSSES,
DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES, OR
DISBURSEMENTS OF ANY KIND OR NATURE WHATSOEVER (INCLUDING, WITHOUT
LIMITATION, COUNSEL AND SPECIAL COUNSEL FEES AND DISBURSEMENTS IN
CONNECTION WITH ANY LITIGATION, INVESTIGATION, HEARING, OR OTHER
PROCEEDING) WITH RESPECT, OR IN ANY WAY RELATED, TO THE EXISTENCE,
EXECUTION, DELIVERY, ENFORCEMENT, PERFORMANCE, AND ADMINISTRATION OF THIS
AGREEMENT AND ANY OTHER TRANSACTION DOCUMENT (ALL OF THE FOREGOING,
COLLECTIVELY, THE "INDEMNIFIED LIABILITIES"). THE AGREEMENTS IN THIS
SECTION SHALL SURVIVE REPAYMENT OF THE INDEBTEDNESS.
(D) THE FOREGOING INDEMNITIES SHALL EXTEND TO THE INDEMNIFIED PARTIES
NOTWITHSTANDING THE SOLE OR CONCURRENT NEGLIGENCE OF EVERY KIND OR
CHARACTER WHATSOEVER, WHETHER ACTIVE OR PASSIVE, WHETHER AN AFFIRMATIVE ACT
OR AN OMISSION, INCLUDING WITHOUT LIMITATION, ALL TYPES OF NEGLIGENT
CONDUCT IDENTIFIED IN THE RESTATEMENT (SECOND) OF TORTS OF ONE OR MORE OF
THE INDEMNIFIED PARTIES OR BY REASON OF STRICT LIABILITY IMPOSED WITHOUT
FAULT ON ANY ONE OR MORE OF THE INDEMNIFIED PARTIES. TO THE EXTENT THAT AN
INDEMNIFIED PARTY IS FOUND TO HAVE COMMITTED AN ACT OF GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT, THIS CONTRACTUAL OBLIGATION OF INDEMNIFICATION SHALL
CONTINUE BUT SHALL ONLY EXTEND TO THE PORTION OF THE CLAIM THAT IS DEEMED
TO HAVE OCCURRED BY REASON OF EVENTS OTHER THAN THE GROSS NEGLIGENT OR
WILLFUL MISCONDUCT OF THE INDEMNIFIED PARTY.
14.13. TERMINATION; PREPAYMENT PREMIUM.
(a) Termination. This Agreement is, and is intended to be, a
continuing Agreement and shall remain in full force and effect for an
initial term equal to the term set forth in Item 32 of the Schedule and for
any renewal term also specified in Item 32 of the Schedule; provided,
however, that either party may terminate this Agreement as of the end of
the initial term or any subsequent renewal term by giving the other party
notice to terminate in writing at least sixty (60) days prior to the end of
any such period whereupon at the end of such period all Indebtedness shall
be due and payable in full without presentation, demand, or further notice
of any kind, whether or not all or any part of such Indebtedness is
otherwise due and payable pursuant to the agreement or instrument
evidencing same. Secured Party may terminate this Agreement immediately and
without notice upon the occurrence of an Event of Default. Notwithstanding
the foregoing or anything in this Agreement or elsewhere to the contrary,
the Security Interest, Secured Party's rights and remedies under the
Transaction Documents and Debtor's obligations and liabilities under the
Transaction Documents, shall survive any termination of this Agreement and
shall remain in full force and effect until all of the Indebtedness
outstanding, or contracted or committed for (whether or not outstanding),
before the receipt of such notice by Secured Party, and any extensions or
renewals thereof (whether made before or after receipt of such notice),
together with interest accruing thereon after such notice, shall be finally
and irrevocably paid in full. No Collateral shall be released or financing
statement terminated until: (i) such final and irrevocable payment in full
of the Indebtedness as described in the preceding sentence; and (ii) Debtor
and Secured Party execute a mutual general release, subject to Section
14.12 of this Agreement, in form and substance satisfactory to the Secured
Party and Debtor and their respective counsel.
(b) Prepayment Premium. If Debtor pays in full all, or substantially
all, of the principal balance of Advances prior to the end of the initial
term or any renewal term of this Agreement as set forth in Item 32 of the
Schedule, other than temporarily from funds internally generated in the
ordinary course of business or from a public offering of equity interests,
at the time of any such payment Debtor shall also pay to Secured Party the
prepayment premium set forth in Item 34 of the Schedule. Any tender of
payment in full of such principal balance following an acceleration by
Secured Party of the Indebtedness, pursuant to Section 12.2 shall not be,
for purposes of this Section, deemed to be considered a prepayment
requiring Debtor to pay the prepayment premium set forth in Item 34 of the
Schedule.
14.14. FURTHER ASSURANCES. From time to time, Debtor shall take such
action and execute and deliver to Secured Party such additional documents,
instruments, certificates, and agreements as Secured Party may reasonably
request to effectuate the purposes of the Transaction Documents.
14.15. HEADINGS. Article and Section headings used in this Agreement
are for convenience only and shall not affect the construction of this
Agreement.
14.16. CUMULATIVE SECURITY INTEREST, ETC. The execution and delivery
of this Agreement shall in no manner impair or affect any other security
(by endorsement or otherwise) for payment or performance of the
Indebtedness, and no security taken hereafter as security for payment or
performance of the Indebtedness shall impair in any manner or affect this
Agreement, or the security interest granted hereby, all such present and
future additional security to be considered as cumulative security.
14.17. SECURED PARTY'S DUTIES. Without limiting any other provision of
this Agreement: (a) the powers conferred on Secured Party hereunder are
solely to protect its interests and shall not impose any duty to exercise
any such powers; and (b) except as may be required by applicable law,
Secured Party shall not have any duty as to any Collateral or as to the
taking of any necessary steps to preserve rights against any parties or any
other rights pertaining to any Collateral.
14.18. NOTICES GENERALLY. All notices and other communications
hereunder shall be made by telegram, telex, telecopy, facsimile, overnight
air courier, or certified or registered mail, return receipt requested, and
shall be deemed to be received (whether actually received or not) by the
party to whom sent: (i) one Business Day after sending, if sent by
telegram, telex, telecopy, facsimile, or overnight air courier; and (ii)
three Business Days after mailing, if sent by certified or registered mail.
All such notices and other communications to a party hereto shall be
addressed to such party at the address of that party (or in the case of a
telecopy, or facsimile machine, to the facsimile machine number of such
party) set forth on the cover page hereof or to such other address as such
party may designate for itself in a notice to the other party given in
accordance with this Section.
14.19. SEVERABILITY. The provisions of this Agreement are independent
of, and separable from, each other, and no such provision shall be affected
or rendered invalid or unenforceable by virtue of the fact that for any
reason any other such provision may be invalid or unenforceable in whole or
in part. If any provision of this Agreement is prohibited or unenforceable
in any jurisdiction, such provision shall be ineffective in such
jurisdiction only to the extent of such prohibition or unenforceability,
and such prohibition or unenforceability shall not invalidate the balance
of such provision to the extent it is not prohibited or unenforceable nor
render prohibited or unenforceable such provision in any other
jurisdiction.
14.20. INCONSISTENT PROVISIONS. The terms of this Agreement and the
other Transaction Documents shall be cumulative except to the extent that
they are specifically inconsistent with each other, in which case the terms
of this Agreement shall prevail.
14.21. USURY SAVINGS. All agreements between the Debtor and the
Secured Party, whether now existing or hereafter arising and whether
written or oral, are hereby expressly limited so that in no contingency or
event whatsoever, whether by reason of demand being made on the
indebtedness or otherwise, shall the amount paid, or agreed to be paid, to
the Secured Party for the use, forbearance, or detention of the money to be
loaned under this Agreement or otherwise or for the payment or performance
of any covenant or obligation contained herein or in any other Loan
Document exceed the Highest Lawful Rate. If, as a result of any
circumstances whatsoever, fulfillment of any provision hereof or of any of
such documents, at the time performance of such provision shall be due,
shall involve transcending the limit of validity prescribed by applicable
usury law, then, ipso facto, the obligation to be fulfilled shall be
reduced to the limit of such validity, and if, from any such circumstance,
the Secured Party shall ever receive interest or anything which might be
deemed interest under applicable law which would exceed the Highest Lawful
Rate, such amount which would be excessive interest shall be applied to the
reduction of the principal amount of the obligations of the Debtor to the
Secured Party and not to the payment of interest, or if such excessive
interest exceeds the unpaid principal balance of the obligations of Debtor
to the Secured Party under any Transaction Document, such excess shall be
refunded to Debtor. All sums paid or agreed to be paid to the Secured Party
for the use, forbearance, or detention of the indebtedness of Debtor to the
Secured Party shall, to the extent permitted by applicable law, be
amortized, prorated, allocated, and spread throughout the full term of such
indebtedness until payment in full of the principal thereof (including the
period of any renewal or extension thereof) so that the interest on account
of such indebtedness shall not exceed the Highest Lawful Rate. The terms
and provisions of this Section shall control and supersede every other
provision of all agreements between Debtor and the Secured Party. If, at
any time and from time to time, (i) the amount of interest payable to the
Secured Party on any date shall be computed at the Highest Lawful Rate
pursuant to this Section and (ii) for any subsequent interest computation
period the amount of interest otherwise payable to the Secured Party would
be less than the Highest Lawful Rate, then the amount of interest payable
to the Secured Party, for such subsequent interest computation period shall
continue to be computed at the Highest Lawful Rate until the total amount
of interest payable to the Secured Party, shall equal the total amount of
interest which would have been payable to the Secured Party if the total
amount of interest had been computed without giving effect to this Section.
14.22. PARTICIPATIONS. Secured Party may at any time grant to one or
more banks or other institutions a participating interest in the Borrowing
Capacity or any or all of the Advances. In the event of any such grant by
Secured Party of a participating interest, Secured Party shall remain
responsible for the performance of its obligations hereunder, and Debtor
shall continue to deal solely and directly with Secured Party in connection
with Secured Party's rights and obligations under this Agreement. Any
agreement pursuant to which Secured Party may grant such a participating
interest shall provide that Secured Party shall retain the sole right and
responsibility to enforce the Indebtedness, including, without limitation,
the right to approve any amendment, modification or waiver of any provision
of this Agreement. Debtor shall cooperate with any audits and other credit
investigations and reviews undertaken for the purpose of a participation,
and Secured Party shall be entitled to disclose any information in Secured
Party's possession regarding Debtor, whether or not such information shall
be of a confidential nature, subject only to the agreement of such lenders
to maintain the confidentiality of any confidential information.
14.23. APPLICABLE LAW. THIS AGREEMENT, AND THE TRANSACTIONS EVIDENCED
HEREBY, SHALL BE GOVERNED BY, AND CONSTRUED UNDER, THE INTERNAL LAWS OF THE
STATE, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW, AS THE SAME MAY
FROM TIME TO TIME BE IN EFFECT, INCLUDING, WITHOUT LIMITATION, THE UNIFORM
COMMERCIAL CODE AS IN EFFECT IN THE STATE.
14.24. CONSENT TO JURISDICTION. DEBTOR AND SECURED PARTY AGREE THAT
ANY ACTION OR PROCEEDING TO ENFORCE, OR ARISING OUT OF, THE TRANSACTION
DOCUMENTS MAY BE COMMENCED IN ANY COURT IN DALLAS, TEXAS, AND EACH WAIVES
PERSONAL SERVICE OF PROCESS AND AGREES THAT A SUMMONS AND COMPLAINT
COMMENCING AN ACTION OR PROCEEDING IN ANY SUCH COURT SHALL BE PROPERLY
SERVED AND SHALL CONFER PERSONAL JURISDICTION IF SERVED BY REGISTERED OR
CERTIFIED MAIL, OR AS OTHERWISE PROVIDED BY THE LAWS OF THE STATE OR THE
UNITED STATES.
14.25. JURY TRIAL WAIVER. DEBTOR AND SECURED PARTY HEREBY KNOWINGLY,
VOLUNTARILY, AND INTENTIONALLY WAIVE ANY RIGHT TO TRIAL BY JURY DEBTOR OR
SECURED PARTY MAY HAVE IN ANY ACTION OR PROCEEDING, IN LAW OR IN EQUITY, IN
CONNECTION WITH THE TRANSACTION DOCUMENTS OR THE TRANSACTIONS RELATED
THERETO. DEBTOR REPRESENTS AND WARRANTS THAT NO REPRESENTATIVE OR AGENT OF
SECURED PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SECURED PARTY
WILL NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THIS RIGHT TO JURY
TRIAL WAIVER. DEBTOR ACKNOWLEDGES THAT SECURED PARTY HAS BEEN INDUCED TO
ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE PROVISIONS OF THIS
SECTION.
14.26. ARTICLE 15.10(b). THE DEBTOR AND SECURED PARTY HEREBY AGREE
THAT, EXCEPT FOR ARTICLE 15.10(b) THEREOF, THE PROVISIONS OF CHAPTER 15 OF
TITLE 79 OF THE REVISED CIVIL STATUTES OF TEXAS, 1925, AS AMENDED
(REGULATING CERTAIN REVOLVING CREDIT LOANS AND REVOLVING TRI-PARTY
ACCOUNTS) SHALL NOT APPLY TO THE TRANSACTION DOCUMENTS.
14.27. FINAL AGREEMENT. THIS WRITTEN AGREEMENT REPRESENTS THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE
ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
Accepted at Dallas, Texas by:
HSBC BUSINESS LOANS, INC. FFP PARTNERS, L.P.
("Secured Party") ("FFPP")
By: By: FFP PARTNERS MANAGEMENT
Neal T. Legan COMPANY, INC., a Delaware
Vice President corporation, General Partner
By:
Steven B. Hawkins, Vice President
FFP OPERATING PARTNERS, L.P.
("FFPO")
By: FFP PARTNERS MANAGEMENT
COMPANY, INC., a Delaware
corporation, General Partner
By:
Steven B. Hawkins, Vice President
DIRECT FUELS, L.P.
("Direct Fuels")
By: DIRECT FUELS MANAGEMENT COMPANY, INC.
a Texas corporation, General Partner
By:
Steven B. Hawkins, Vice President
SCHEDULE
This Schedule is a part of a Loan and Security Agreement, dated as of
October 31, 1997, between FFP PARTNERS, L.P., FFP OPERATING PARTNERS, L.P.,
DIRECT FUELS, L.P. and HSBC BUSINESS LOANS, INC. Capitalized terms used herein
have the same meaning given to such terms in the Loan and Security Agreement
unless otherwise defined herein. The abbreviation "N/A" means the information is
not applicable to this transaction.
1. Borrowing Capacity (ss. 1.1(c))
Borrowing Capacity in the aggregate with respect to FFP Partners, L.P.,
FFP Operating Partners, L.P., and Direct Fuels, L.P., at any time, shall
be the net amount determined by taking the lesser of the following
amounts:
(A) $15,000,000
or
(B) the amount equal to up to the sum of:
(i) 85% of the Receivables Borrowing Base; and
(ii) the lesser of $7,500,000 (the "Maximum Amount") or
50% of the Value of the amount of the Inventory
Borrowing Base;
and subtracting from the lesser of (A) or (B) above, the sum of
(w) banker's acceptances, plus (x) letters of guaranty, plus (y)
Letters of Credit.
2. Inventory Borrowing Base Percentages (ss.ss. 1.1(m) & 1.1(hh))
The following percentages of Value are applicable to the following
categories of Eligible Inventory:
Finished goods, to the extent up to 50%; raw materials, to the extent of
up to 50%.
3. Cash Discount (ss.ss. 1.1(g) & 10.3)
Maximum Cash Discount of 2%, 10 days.
4. Receivables--Age (ss. 1.1(dd)(i))
Three (3) times the normal and customary period of any given invoice,
but not to exceed 90 days after the Invoice date.
5. Receivables Disqualification Percentage (ss. 1.1 (dd)(v))
50% or more.
6. Permissible Foreign Account Debtors (ss. 1.1(dd)(vi))
None.
7. Inventory Accounting (ss. 1.1(hh)
First-in, First-out (FIFO).
8. Marine Payment Account (ss. 1.1(ll))
There is a Marine Payment Account that is governed by a separate blocked
Account Agreement with LaSalle National Bank, Chicago, Illinois.
Name and Address of depository bank:
LaSalle National Bank
135 S. LaSalle Avenue
Chicago, Illinois 60603
Account No. 2299-386
(Depository Account)
9. Letters of Credit (ss. 2.4)
$2,000,000.00 (subject to a sublimit of $1,000,000 for overnight
exposure related to Automated Clearing House transfers).
10. State of Organization (ss. 4.2 & 5.1)
FFP Partners, L.P.: Delaware
FFP Operating Partners, L.P.: Delaware
Direct Fuels, L.P.: Texas
11. Location (s) of Inventory and Equipment (ss.ss. 5.4(c), 5.7,
5.8(a), and 11.1)
See Attached Addendum.
12. Permitted Encumbrances (ss. 5.5(a), 5.5(c) & 11.3)
Only as shown on Exhibit B.
13. Business Records Location (ss. 5.8(a), 5.8(c) & 11.1)
See Item 11 above.
14. Trademarks and Patents (ss. 5.17)
Trademarks: FFP Partners; Kwik Pantry; Drivers; Drivers Diner;
Financial Express Money Order Company; Lazer Wizard
Patents: None.
15. Labor Contracts (ss. 5.24)
None.
16. Partnership Interests (ss. 5.27)
Hickory Branch Trading Company, L.L.C. -- 36.06%
See also Item 33.
17. Required Documents (ss.ss. 6.1, 9.2(b), 9.4(a))
Frequency
Due
Borrowing Base Report Monthly, within 20 days
after end of month.
Receivables Summary Aging Monthly, within 20 days
after end of month.
Invoice register / sales journal As requested.
Inventory Reports Monthly, within 20 days
after end of month.
Cash Receipts Journal and Schedule of As requested.
Payments on Receivables
Credits and Extensions Reports As requested.
Copies of shipping documents relating to As requested.
the Receivables
List of names and addresses of Account Semi-Annually on June 30
Debtors and December 31
Payable aging report Monthly, within 20 days
after end of month.
Reconciliation report, reconciling Monthly, within 30 days
monthly financial statements with after end of month.
Receivables Aging, Inventory and Payable
Aging
18. Interest Rate (ss. 8.2(a),(c))
Revolving Credit: At Debtor's option, (1) Prime Rate or (2) LIBOR plus
2.25%, available in increments of $500,000 for Interest Periods of 3 or
6 months.
Term Loan: At Debtor's option, (1) Prime Rate, (2) LIBOR plus 2.25%,
available in increments of $1,000,000 for Interest Periods of 6 months
or one year, or (3) Treasury Rate plus 2.50%.
19. Fees and Due Dates (ss.ss. 2.4 and 8.3(a))
Type Amount Due Date(s)
Loan Origination One-half of one percent (.50%) Closing Date only
(payable to Tony of the Borrowing Capacity
Abernethy)
Unused Line Fee Three-eighths of one percent Monthly, in arrears
(.375%) per annum on the
Revolving Credit Commitment.
Letter of Credit Normal and customary fees and Customary
charges.
Collateral $60/hour, not to exceed First day of month
Examination Expense $9,000.00 per year for actual following
Reimbursement time of examination. examination
20. Uncollected Funds Adjustment (ss. 8.6)
Zero (0) Business Days.
21. Additional Covenants (ss.ss. 10.24 and 11)
22. Terms of Sale (ss. 10.3)
Due dates of no more than thirty (30) calendar days from date of
Invoice, except in regard to transactions specified below under
"Datings."
Datings: None.
23. Permitted Borrowings (ss. 11.2)
Only as shown on Exhibit B.
24. Permitted Investments and Advances (ss. 11.8(d))
Up to $500,000 in advances to Nu-Way Beverage Company, outstanding at
any given time, which is presently evidenced by that certain promissory
note dated July 1, 1995 issued by Nu-Way Beverage Company to FFP
Operating Partners, L.P., in the original principal amount of $500,000.
25. Permitted Guaranties (ss.ss. 5.18, 11.9)
None.
26. Maximum Annual Lease Rentals(ss. 11.10)
N/A
27. Permitted Capital Expenditures (ss. 11.11)
Up to $6,000,000 annually.
28. Maximum Aggregate Compensation (ss. 11.12(a))
N/A
29. Maximum Annual Compensation for Certain Individuals (ss. 11.12(b))
N/A
30. Financial Covenants (ss. 11.7 & 11.15)
(a) Minimum Tangible Net Worth: Debtor shall maintain at all times a
minimum Tangible Net Worth ("TNW") in the amounts set forth below
which are to be measured monthly for the time period set forth
below:
Amount Time Period
$19,100,000 Closing through December 30, 1998
Prior year-end TNW plus $400,000 December 31, 1998 to December 30, 1999
Prior year-end TNW plus $400,000 December 31, 1999 to December 30, 2000
Prior year-end TNW plus $400,000
December 31, 2000 to
termination (in periods
terminating on December 30
and commencing on December
31)
Provided that for any extension period, the amount shall be
increased by $400,000 from the prior year-end TNW.
(b) Maximum Debt to Tangible Net Worth: Debtor shall maintain a ratio
of total liabilities (excluding the principal balance of any debt
that is subordinated to Secured Party in a manner satisfactory to
Secured Party) to Tangible Net Worth of no greater than the ratio
set forth below during the time periods set forth below:
Ratio Time Period
3.6 to 1 At each month-end
(c) Cash Flow Coverage: Debtor shall maintain, for the period of
determination indicated below, a ratio with: (i) the Net Profit
After Taxes, plus depreciation and amortization expense, less
distributions to holders of equity interests, all for the prior
twelve fiscal months as the numerator; and (ii) the sum of the
regular contractually scheduled principal payments of any long
term debt due over the next twelve fiscal months as the
denominator.
Ratio Time Period
1.5 to 1 Each fiscal year-end.
31. State (ss. 1.1(bbb))
Texas.
32. Term (ss. 14.13(a),(b))
Initial term: The initial term of the Loan Agreement commences on the
date hereof and terminates on November 1, 2000.
Renewal term: Twelve months.
33. Percentage of Equity Ownership of Consolidated Subsidiaries
(ss. 5.25 & 10.23)
FFP Operating Partners, L.P. -- 99%
FFP Financial Services, L.P. -- 99%
Direct Fuels, L.P. -- 99%
FFP Transportation, L.L.C. -- 100%
Practical Tank Management -- 100%
FFP Money Order Company, Inc. -- 100%
34. Prepayment Premium (ss. 14.13(b))
Revolving Credit Facility. 2% of the then approved Maximum Amount (as
defined in Item 1 hereof) in the first twelve months of the Agreement;
1% of the Maximum Amount in the second twelve months of the Agreement;
and 1/2% of the Maximum Amount in the third twelve months of the
Agreement.
Term Loan. 2% of the prepaid amount in the first twelve months of the
Agreement; 1% of the prepaid amount in the second twelve months of the
Agreement; and 1/2% of the prepaid amount in the third twelve months of
the Agreement. Notwithstanding the foregoing, the Term Loan may be
repaid without prepayment penalty if the prepayment is a result of the
proceeds of the formation of a real estate investment trust.
35. Other Provisions (ss. 14.9)
36. Licenses (ss. 5.21)
N/A
37. Eurodollar Lending Office (ss. 1.1(u))
38. Term Loan (ss. 2.5)
The lesser of:
(A) $8,000,000; or
(B) 60% of the Value of the Eligible Equipment on the closing date.
The undersigned have executed this Schedule on October 31, 1997.
HSBC BUSINESS LOANS INC. FFP PARTNERS, L.P.
By: FFP PARTNERS MANAGEMENT
By: COMPANY, INC., General Partner
Neal T. Legan
Vice President
By:
Steven B. Hawkins, Vice President
FFP OPERATING PARTNERS, L.P.
By: FFP PARTNERS MANAGEMENT
COMPANY, INC., General Partner
By:
Steven B. Hawkins, Vice President
DIRECT FUELS, L.P.
By: DIRECT FUELS PARTNERS
MANAGEMENT COMPANY, INC.,
General Partner
By:
Steven B. Hawkins, Vice President
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