<PAGE>
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 Number 0-23808
METROTRANS CORPORATION
(Exact name of Registrant as specified in its charter)
GEORGIA 58-1393777
(State of Incorporation) (I.R.S. Employer
Identification No.)
777 GREENBELT PARKWAY, GRIFFIN, GEORGIA 30223
(Address of principal executive offices, including zip code)
(770) 229-5995
(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 twelve 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
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date:
Class Outstanding at November 11, 1997
-------------------------------------- -------------------------------
Common Stock, $.01 Par Value 4,077,419 shares
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METROTRANS CORPORATION
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 28, 1997
Table of Contents
-----------------
ITEM PAGE
NUMBER NUMBER
- ------ ------
PART I. FINANCIAL INFORMATION
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1 Financial Statements:
Consolidated Balance Sheets as of September 28, 1997 and
December 31, 1996.............................................. 3
Consolidated Statements of Income for the three and nine months
ended September 28, 1997 and September 29, 1996................ 4
Consolidated Statements of Cash Flows for the nine months ended
September 28, 1997 and September 29, 1996...................... 5
Notes to Consolidated Financial Statements..................... 6
2 Management's Discussion and Analysis of Financial Condition
and Results of Operations...................................... 8
PART II. OTHER INFORMATION
1 Legal Proceedings.............................................. 12
6 Exhibits and Reports on Form 8-K............................... 12
Signature...................................................... 13
</TABLE>
2
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PART I. FINANCIAL INFORMATION
- ------------------------------
ITEM 1. FINANCIAL STATEMENTS
METROTRANS CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
SEPTEMBER 28, DECEMBER 31,
1997 1996
----------------- ----------------
<S> <C> <C>
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash........................................................................ $ 654 $ 22
Accounts receivable, net of allowance for doubtful
ACCOUNTS OF $153 AND $282 IN 1997 AND 1996, respectively................... 11,443 10,109
Current portion of net investment in sales-type leases...................... 842 810
Inventories................................................................. 20,296 17,903
Prepaid expenses and other.................................................. 764 784
----------------- ----------------
Total current assets....................................................... 33,999 29,628
PROPERTY, PLANT AND EQUIPMENT, NET........................................... 6,360 5,447
NET INVESTMENT IN SALES-TYPE LEASES.......................................... 513 1,098
DEPOSITS AND OTHER........................................................... 235 391
----------------- ----------------
$41,107 $36,564
================= ================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses....................................... $ 8,582 $ 7,139
Borrowings under line of credit............................................. - 7,297
Current portion of long-term debt........................................... 1,132 1,132
Customer deposits........................................................... 508 552
----------------- ----------------
Total current liabilities.................................................. 10,222 16,120
----------------- ----------------
LONG-TERM DEBT, net of current portion....................................... 11,769 2,719
----------------- ----------------
DEFERRED INCOME TAXES........................................................ 629 629
----------------- ----------------
COMMITMENTS AND CONTINGENCIES (Note 3)
STOCKHOLDERS' EQUITY:
Preferred stock, no par value; 10,000,000 shares authorized................. - -
Common stock, $.01 par value; 20,000,000 shares
authorized, 4,077,419 and 4,076,275 shares issued and out-
standing in 1997 AND 1996, respectively.................................... 41 41
Additional paid-in capital.................................................. 10,466 10,466
Deferred compensation....................................................... (236) (315)
Retained earnings........................................................... 8,216 6,904
----------------- ----------------
18,487 17,096
----------------- ----------------
$41,107 $36,564
================= ================
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The accompanying notes are an integral part of these balance sheets.
3
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METROTRANS CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
Three Months Ended Nine Months Ended
------------------------------------------ ----------------------------------------
September 28, September 29, September 28, September 29,
1997 1996 1997 1996
----------------- ------------------ ----------------- -----------------
<S> <C> <C> <C> <C>
NET REVENUE $21,731 $19,881 $58,716 $57,695
COST OF SALES 17,482 15,482 48,351 46,089
----------------- ------------------ ----------------- -----------------
Gross Profit 4,249 4,399 10,365 11,606
SELLING, GENERAL, AND
ADMINISTRATIVE EXPENSES 2,426 2,440 7,156 6,458
----------------- ------------------ ----------------- -----------------
Operating Income 1,823 1,959 3,209 5,148
INTEREST EXPENSE, net 256 140 1,048 512
----------------- ------------------ ----------------- -----------------
INCOME BEFORE INCOME TAXES 1,567 1,819 2,161 4,636
INCOME TAX PROVISION 615 703 848 1,794
----------------- ------------------ ----------------- -----------------
NET INCOME $ 952 $ 1,116 $ 1,313 $ 2,842
================= ================== ================= =================
NET INCOME PER COMMON AND
COMMON EQUIVALENT
SHARE $0.23 $0.27 $0.32 $0.69
================= ================== ================= =================
WEIGHTED AVERAGE COMMON
AND COMMON EQUIVALENT
SHARES 4,109 4,115 4,111 4,102
================= ================== ================= =================
</TABLE>
The accompanying notes are an integral part of these statements.
4
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<TABLE>
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METROTRANS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
NINE MONTHS ENDED
--------------------------------------
SEPTEMBER 28, SEPTEMBER 29,
1997 1996
------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 1,313 $ 2,842
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 499 449
Compensation under restricted stock award 78 79
Changes in assets and liabilities:
Accounts receivable (1,334) (835)
Inventories (2,393) (2,928)
Other assets 176 78
Accounts payable and accrued expenses 1,443 1,205
Customer deposits (44) (5)
------------- -------------
Total adjustments (1,575) (1,957)
------------- -------------
Net cash (used in) provided by (262) 885
operating activities
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (1,476) (1,120)
Net decrease (increase) in property held for lease 64 (312)
Net decrease in investment in sales-type leases 553 928
------------- -------------
Net cash (used in) investing activities (859) (504)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (repayments) under line of credit (7,297) 629
Net (decrease) in collateralized borrowings - (12)
Proceeds from (payments of) long-term debt 9,050 (993)
Net proceeds, from exercise of stock options - 7
------------- -------------
Net cash provided by (used in)
financing activities 1753 (369)
------------- -------------
INCREASE IN CASH 632 12
CASH AT BEGINNING OF PERIOD 22 23
------------- -------------
CASH AT END OF PERIOD $ 654 $ 35
============= =============
CASH PAID FOR INTEREST $ 1,032 $ 463
============= =============
CASH PAID FOR TAXES $ 88 $ 1,054
============= =============
</TABLE>
The accompanying notes are an integral part of these statements.
5
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METROTRANS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 28, 1997
(UNAUDITED)
1. Basis of Presentation
---------------------
The financial statements include the accounts of Metrotrans Corporation
and Subsidiaries (the "Company"). During the quarter ended March 31, 1996 all
wholly owned subsidiaries of the Company, including Spalding Molded Products,
Inc., Metrotrans Overseas, Inc., and Eurotrans Corp. were merged with and into
the Company. In February, 1997, the Company formed a wholly owned subsidiary BUS
PRO, Inc., to conduct refurbishment and sale of used coaches. The financial
statements have been prepared in accordance with generally accepted accounting
principles for interim financial information and, therefore, omit certain
information and footnotes required by generally accepted accounting principles
for complete financial statements. Accordingly, these statements should be read
in conjunction with the Company's audited financial statements included in its
Annual Report on Form 10-K for the year ended December 31, 1996 filed with the
Securities and Exchange Commission.
In February 1997, the Financial Accounting Standards Board issued SFAS
No. 128, "Earnings per Share." SFAS 128 supersedes APB 15, "Earnings per Share"
and promulgates new accounting standards for the computation and manner of
presentation of the Company's earnings per share. The Company is required to
adopt the provisions of SFAS 128 for the year ending December 31, 1997. Earlier
application is not permitted; however, upon adoption the Company will be
required to restate previously reported annual and interim earnings per share in
accordance with the provisions of SFAS 128. The Company does not believe that
the adoption of SFAS 128 will have a material impact on the computation or
manner of presentation of its earnings per share as currently or previously
presented under APB 15.
In the opinion of management, the financial statements contain all
adjustments necessary for a fair presentation of the financial position, results
of operations and cash flows for the periods presented. The adjustments were of
a normal recurring nature. Certain reclassifications of 1996 income statement
captions have been made to conform with the 1997 presentation. Results presented
for the three-month and nine-month periods ended September 28, 1997 are not
necessarily indicative of results that may be expected for the full fiscal year.
6
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2. Inventories
-----------
Inventories consist of (in thousands):
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<CAPTION>
September 28, 1997 December 31, 1996
------------------ -----------------
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Chassis awaiting conversion.. $ 3,963 $ 3,044
Raw materials................ 4,389 4,482
Work in process.............. 2,275 2,328
Finished goods............... 4,419 2,758
Used vehicles................ 5,250 5,291
------- -------
$20,296 $17,903
======= =======
</TABLE>
3. Commitments and Contingencies
-----------------------------
The Company enters into various leasing arrangements with customers and
leasing companies. Certain leases contingently obligate the Company to indemnify
the leasing company for any losses it incurs up to a specified amount on the
lease in the event the lessee defaults. In addition, the Company enters into
certain agreements with financial institutions whereby the Company guarantees
varying amounts of customers' purchase debt obligations. The Company's
obligation under these guarantees becomes effective in the case of default in
payments or certain other defined conditions. The Company's aggregate potential
liability under these arrangements as of September 28, 1997 and December 31,
1996 was $9.6 million and $8.9 million, respectively. However, there has been no
significant financial effect to the Company under these arrangements as of
September 28, 1997.
The Company is involved in certain legal matters primarily arising in
the normal course of business. In the opinion of management, the Company's
liability under any of these matters would not have a material adverse effect on
its financial condition or results of operations.
7
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
The Company was incorporated in 1982 and introduced its second product,
the Classic(R), in 1986. During the intervening period, 1982 to 1986, the
Company focused its efforts on marketing buses manufactured by other companies.
Since the introduction of the Classic, the Company has experienced continuous
growth in unit sales and revenues. The Company's product development strategy is
to design and introduce new products after clearly identifying a market need
based, in large part, on suggestions made by existing and potential customers.
This approach resulted in the introduction of the Eurotrans(R) in 1990, the
Eurotrans XLT(R) and the Classic II(R) in 1992, the Classic Commuter(R) in 1993
and the Legacy LJ(TM) in 1996. During the third quarter of 1996, the Company
introduced two additional product offerings. The Anthem(TM) is a 35-foot, two
axle motor coach manufactured at the Company's manufacturing facility in
Griffin, Georgia. The Irizar Century is a full-size coach of either 40-foot or
45-foot length and is built in Spain on a U.S. manufactured chasiss.
RESULTS OF OPERATIONS
The following table sets forth, as a percentage of total revenue, the
relationship of selected items included in the Company's income statement for
the periods indicated.
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Three Months Ended Nine Months Ended
----------------------- ---------------------
Sept 28, Sept 29, Sept 28, Sept 30,
<S> <C> <C> <C> <C>
1997 1996 1997 1996
------ ------ ------ ------
Net revenue................. 100.0% 100.0% 100.0% 100.0%
Cost of sales............... 80.4 77.9 82.3 79.9
----- ----- ----- -----
Gross profit................ 19.6 22.1 17.7 20.1
Selling, general and
administrative expenses.. 11.2 12.3 12.2 11.2
---- ---- ---- ----
Operating income............ 8.4 9.8 5.5 8.9
Interest expense............ 1.2 .7 1.8 .9
----- ----- ----- -----
Income before income
taxes.................... 7.2 9.1 3.7 8.0
Income tax provision........ 2.8 3.5 1.4 3.1
----- ----- ----- -----
Net income.................. 4.4% 5.6% 2.3% 4.9%
===== ===== ===== =====
</TABLE>
8
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NET REVENUE. Net revenue increased 9.3% to $21.7 million for the three
months ended September 28, 1997 from $19.9 million for the comparable prior year
quarter while net revenue of $58.7 million for the first nine months of 1997
rose 1.8% over the same period in 1996 of $57.7 million. The third quarter
revenue growth primarily resulted from sales of the Legacy LJ(TM) in 1997. The
increase in Legacy LJ(TM) sales has been partially offset by reduced sales of
Classic and Eurotrans unit volume and average revenue per unit. The increase in
revenue for the nine months ended September 28, 1997 compared with the same
prior year period was primarily the result of a combination of increased Legacy
LJ(TM) unit sales offset by a decreased number of Classic units produced
and sold in the first quarter of 1997.
Total unit sales and average revenue per unit for the three and nine
month periods ended September 28, 1997 and September 29, 1996, respectively,
were:
Period Ended Period Ended
September 28, 1997 September 29, 1996
------------------ ------------------
Average Average
Revenue Revenue
Units Per Unit Units Per Unit
------- --------- ------- ---------
Three month period:
Eurotrans 13 $140,000 17 $175,000
Legacy LJ 40 $ 82,000 5 $ 84,000
Classic 282 $ 49,000 293 $ 50,000
--- ---
Total 335 315
=== ===
Nine month period:
Eurotrans 54 $142,000 47 $156,000
Legacy LJ 61 $ 83,000 5 $ 84,000
Classic 763 $ 49,000 933 $ 48,000
--- ---
Total 878 985
=== ===
Production backlog at September 28, 1997 was approximately $16 million
compared with $24 million at the end of the third quarter of 1996. Sales of used
buses by the Company's wholly-owned subsidiary, BUS PRO, Inc., acquired from
trade-ins and lease maturities, in 1997's third quarter of $2.0 million were
78.5% above sales for the prior year's third quarter of $1.1 million. Used bus
sales for the nine months ended September 28, 1997 were $5.7 million, an
increase of 42.1% over sales of $4.0 million for the same period in the prior
year. The increase in BUS PRO's sales for the quarter and the year to date
primarily is the result of the greater capacity and operating efficiency brought
about by the business unit's move into its newly-constructed sales,
refurbishment and service facility in the first quarter of 1997.
COST OF SALES AND GROSS PROFIT. Gross profit declined 3.4% to
$4.3 million in the third quarter of 1997 from $4.4 million in the third quarter
of 1996. For the first nine months of 1997, gross profit was down 10.7% to $10.4
million from $11.6 million for the same period in 1996. Gross profit as a
percent
9
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of net revenue declined to 19.6% during this year's third quarter from 22.1% in
the prior year quarter. The gross profit as a percent of revenue in the third
quarter of 1996 was higher than normal due to the mix of high-margin unit sales.
The gross profit percentage in 1997's third quarter is more in line with
historical margin levels. Gross profit as a percent of net revenue for the nine
months ended September 28, 1997 was 17.7%, down from 20.1% during the same
period a year ago. The lower level of the amount of the current nine month gross
profit and as a percent of net revenue was primarily attributable to the
significantly lower level of gross profit in the first quarter of 1997. The
lower gross profit resulted from the decline in net revenues at a higher rate
than the rate of reduction in manufacturing costs and from increase operating
inefficiencies. The decline in net revenues was primarily caused by a
significant first quarter reduction in Classic production volume and lower-than-
average revenue per unit experienced on Eurotrans sales during the quarter.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES AND OPERATING INCOME.
Operating income declined 6.9% in the third quarter of 1997 from the same period
in 1996 and 37.7% in the nine month period of 1997 from 1996. Operating income,
as a percent of net revenue, of 8.4% in the third quarter of 1997 was below that
of 9.8% in the same prior year period. For the nine month periods of 1997 versus
1996, operating income, as a percent of net revenue, fell to 5.5% from 8.9%.
Selling, general and administrative expenses ("SG&A") for the quarter declined,
as a percent of net revenue, to 11.2% from 12.3% in 1996's second quarter. The
third quarter of 1997 SG&A of $2.4 million was approximately the same as SG&A of
a year ago. SG&A for the first nine months of 1997 increased 10.8% to $7.2
million, in part, from expenses incurred in connection with the recruitment,
relocation and compensation of four senior management positions and several key
subordinate positions and with the costs of development of new products and
product modifications.
INTEREST EXPENSE. Interest expense of $256,000 in the third quarter of
1997 increased 82.9% over $140,000 for the prior year's comparable quarter. For
the nine month period in 1997, interest expense was up 104.9% to $1.0 million
from 1996's first nine months of $512,000. The increase for the quarter and
year-to-date period primarily resulted from an increase in the average
borrowings outstanding under the Company's credit facility. The amount of
interest paid to Ford Motor Credit Corporation ("FMCC") for chassis held under
its consignment pool agreement in excess of an initial noninterest-bearing
period during the first two quarters of 1997 exceeded that interest cost for the
same period in 1996. Management has implemented procedures to increase the
control of this chassis inventory level and reduce interest costs. These
interest costs during the third quarters of 1997 and 1996 were comparable.
LIQUIDITY AND CAPITAL RESOURCES
Net cash used in operations during the third quarter of 1997
totaled $2.2 million compared to $1.9 million in the comparable 1996 period. A
$1.4 million increase in inventory and a $1.6 million decrease in accounts
payable were primarily responsible for the cash used for operating activities
during the quarter. The increase in inventory resulted primarily from an
increase in chassis inventory from two suppliers with whom the Company has no
consignment pool agreement, and was necessitated primarily by the increased
demand for the Company's rear-engine products and the introduction of a new
chassis supplier for the Classic product line. The level of chassis on hand in
connection with the FMCC consignment pool have decreased. The decrease in
accounts payable resulted primarily from the timing of payments for inventory
and such variance from quarter to quarter is not deemed to be unusual.
10
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For the nine months ended September 28, 1997, cash used in operating
activities of $262,000 resulted primarily from increases in the level of
accounts receivable and inventory that were only partially offset by an increase
in accounts payable and checks outstanding. In addition to additional chassis,
inventory has increased from the third quarter of 1996 primarily as a result of
increases in raw materials, work in process and finished goods as the Legacy
LJ(TM) production line has been established and demonstrator units have been
supplied to support the field sales effort.
During the third quarter of 1997, net cash of $521,000 was used in
investing activities through capital expenditures in excess of the decrease in
operating and sales-type leases. Cash provided by financing activities of $3.3
million resulted from borrowings under the long-term revolving credit facility
in excess of the amount of repayment of the Company's short-term line credit.
During the third quarter of 1997, the Company entered into a new
revolving credit facility with its primary bank. The $16 million, three-year
unsecured credit facility provides interest rate pricing at reduced spreads over
LIBOR that vary based on leverage. Anticipated capital expenditures and
increases in working capital are expected to be financed primarily through
internally generated funds and through the Company's revolving credit facility.
At September 28, 1997, the Company had approximately $9.7 million of borrowings
remaining available under the revolving credit facility.
11
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company, from time to time is a party to legal proceedings
arising out of and incidental to the operations of the Company. On November 22,
1995 Triangle Transit Authority ("Triangle") filed a Complaint against the
Company in the United States District Court for the Middle District of North
Carolina, Greensboro Division. Research Triangle Regional Public Transportation
Authority (dba Triangle Transit Authority) v. Metrotrans Corporation, Civil
Action No. 1:95CV00903 alleged that Triangle purchased twenty Classic model
buses from the Company in 1993 and alleged that those buses are defective. The
Plaintiff also alleged that the Company committed an unfair trade practice by
failing to cure the alleged defects in a timely fashion. While Triangle has
continuously used the buses in its transit system for almost four years, it
claimed the right to recover virtually the entire purchase price of the twenty
buses or $1.2 million as well as treble damages based upon its claim of unfair
trade practice. Subsequent to the quarter ended September 28, 1997, the Company
and Triangle entered into a settlement agreement in connection with which the
Company has agreed to repurchase the remaining nineteen used buses at a
specified price, subject to adjustments provided in the agreement. Delivery of
the buses is expected in April 1998. Based on the Company's knowledge of the
used coach market, the Company believes it will remarket these buses with no
adverse financial effect on the Company.
The Company is a party to certain other legal proceedings
primarily arising in the normal course of business. In the opinion of will not
have a material adverse effect on its financial condition or results of
operations.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibit is filed with this report.
Exhibit
Number Loan Agreement between Metrotrans Corporation
------- and NationsBank, N.A. dated September 5, 1997.
10.9
(b) No Current Reports on Form 8-K were filed by Company during the
quarter ended September 28, 1997.
12
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
METROTRANS CORPORATION
(Registrant)
Date: November 11, 1997 /s/ Richard M. Bruno
--------------------
Richard M. Bruno
Chief Financial and Accounting Officer
Duly Authorized Officer
13
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EXECUTION COPY
09/05/97
LOAN AGREEMENT
BETWEEN
METROTRANS CORPORATION
AND
NATIONSBANK, N.A.
DATED AS OF SEPTEMBER 5, 1997
<PAGE>
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TABLE OF CONTENTS
<S> <C> <C>
ARTICLE 1 Definitions................................................................ 1
-----------
Section 1.1 Defined Terms.................................................. 1
Section 1.2 Interpretation................................................. 10
Section 1.3 Cross References............................................... 10
ARTICLE 2 Loans...................................................................... 10
-----
Section 2.1 The Loans...................................................... 10
Section 2.2 Manner of Borrowing and Disbursement........................... 11
Section 2.3 Interest....................................................... 12
Section 2.4 Fees........................................................... 13
Section 2.5 Reduction of Commitment........................................ 13
Section 2.6 Prepayment..................................................... 14
Section 2.7 Repayment...................................................... 14
Section 2.8 Notes and Loan Account......................................... 14
Section 2.9 Manner of Payment.............................................. 14
Section 2.10 Reimbursement.................................................. 15
Section 2.11 Capital Adequacy............................................... 15
ARTICLE 3 Conditions Precedent....................................................... 16
--------------------
Section 3.1 Conditions Precedent to Initial Advance........................ 16
Section 3.2 Conditions Precedent to Each Advance........................... 17
ARTICLE 4 Representations and Warranties............................................. 18
------------------------------
Section 4.1 Representations and Warranties................................. 18
ARTICLE 5 General Covenants.......................................................... 24
-----------------
Section 5.1 Preservation of Existence and Similar Matters.................. 24
Section 5.2 Business; Compliance with Applicable Law....................... 24
Section 5.3 Maintenance of Properties...................................... 24
Section 5.4 Accounting Methods and Financial Records....................... 24
Section 5.5 Insurance...................................................... 25
Section 5.6 Payment of Taxes and Claims.................................... 25
Section 5.7 Visits and Inspections......................................... 25
Section 5.8 Payment of Indebtedness........................................ 25
Section 5.9 Use of Proceeds................................................ 25
Section 5.10 Compliance with ERISA.......................................... 26
Section 5.11 Indemnity...................................................... 27
Section 5.12 Payment of Wages............................................... 27
Section 5.13 Covenants Regarding Formation of Subsidiaries and Acquisitions. 28
Section 5.14 Further Assurances............................................. 28
Section 5.15 Environmental Laws............................................. 28
Section 5.16 Lien Searches and Good Standing Certificates................... 28
</TABLE>
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ARTICLE 6 Information Covenants............................................................... 29
---------------------
Section 6.1 Audited Annual Financial Statements and Information; Certificate of
No Default............................................................ 29
Section 6.2 Quarterly Financial Statements and Information.......................... 29
Section 6.3 Performance Certificates................................................ 29
Section 6.4 Copies of Other Reports................................................. 30
Section 6.5 Notice of Litigation and Other Matters.................................. 30
ARTICLE 7 Negative Covenants.................................................................. 31
------------------
Section 7.1 Indebtedness............................................................ 31
Section 7.2 Limitation on Liens..................................................... 32
Section 7.3 Amendment and Waiver.................................................... 32
Section 7.4 Liquidation; Merger; Change in Name; Disposition of Assets.............. 32
Section 7.5 Limitation on Guaranties................................................ 32
Section 7.6 Investments and Acquisitions............................................ 33
Section 7.7 Affiliate Transactions.................................................. 33
Section 7.8 Restricted Payments and Purchases....................................... 33
Section 7.9 Leverage Ratio.......................................................... 33
Section 7.10 Capitalization Ratio.................................................... 33
Section 7.11 Minimum Tangible Net Worth.............................................. 33
Section 7.12 Fixed Charge Ratio...................................................... 34
Section 7.13 ERISA Liabilities....................................................... 34
Section 7.14 No Limitation on Upstream Dividends by Subsidiaries..................... 34
ARTICLE 8 Default............................................................................. 34
-------
Section 8.1 Events of Default....................................................... 34
Section 8.2 Remedies................................................................ 36
Section 8.3 Payments Subsequent to Declaration of Event of Default.................. 36
ARTICLE 9 Change in Circumstances............................................................. 37
-----------------------
Section 9.1 LIBOR Basis Determination Inadequate.................................... 37
Section 9.2 Illegality.............................................................. 37
Section 9.3 Increased Costs......................................................... 38
Section 9.4 Effect On Other Advances................................................ 38
ARTICLE 10 Miscellaneous...................................................................... 39
-------------
Section 10.1 Notices................................................................. 39
Section 10.2 Expenses................................................................ 40
Section 10.3 Waivers................................................................. 40
Section 10.4 Set-Off................................................................. 41
Section 10.5 Assignment.............................................................. 41
Section 10.6 Counterparts............................................................ 41
Section 10.7 GOVERNING LAW........................................................... 41
Section 10.8 Severability............................................................ 42
</TABLE>
ii
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<S> <C> <C>
Section 10.9 Interest and Charges.................................................... 42
Section 10.10 Headings................................................................ 42
Section 10.11 Pronouns................................................................ 42
Section 10.12 Entire Agreement; Amendments............................................ 42
Section 10.13 Mediation............................................................... 42
EXHIBITS
Exhibit A-1 - Form of Borrower Loan Certificate
Exhibit A-2 - Form of Subsidiary Loan Certificate
Exhibit B - Form of Negative Pledge Agreement
Exhibit C - Form of Subsidiary Guaranty
Exhibit D - Form of Note
Exhibit E - Form of Request for Advance
Exhibit F - Form of Performance Certificate
SCHEDULES
Schedule 1 - Letters of Credit
Schedule 2 - Liens on the Agreement Date
Schedule 3 - Subsidiaries
Schedule 4 - Patents and Trademarks
Schedule 5 - Location of Books, Records and Personal Property
Schedule 6 - Agreements with Affiliates
Schedule 7 - Environmental Matters
</TABLE>
iii
<PAGE>
LOAN AGREEMENT
THIS LOAN AGREEMENT (this "Loan Agreement") is made as of this 5th day of
September, 1997 between METROTRANS CORPORATION, a Georgia corporation, as
borrower (the "Borrower"), and NATIONSBANK, N.A., a national banking
association, as lender (the "Lender").
W I T N E S S E T H:
-------------------
WHEREAS, the Borrower has requested that the Lender make available to the
Borrower a revolving credit facility permitting advances of up to Sixteen
Million Dollars ($16,000,000) at any one time outstanding; and
WHEREAS, the Lender is willing to extend such financing to the Borrower
subject to the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing premises and for other
good and valuable consideration, the receipt, adequacy and sufficiency of which
are hereby acknowledged by the parties hereto, Borrower and Lender hereby agree
as follows:
ARTICLE 1 Definitions
-----------
Section 1.1 Defined Terms. When used herein the following terms shall have
-------------
the following meanings (terms in the singular to have the same meaning when used
in the plural and vice versa):
"Acquisition" shall mean (whether by purchase, lease, exchange, issuance of
-----------
stock or other equity or debt securities, merger, reorganization or any other
method) (i) any acquisition by the Borrower or any of its Subsidiaries of any
other Person, which Person shall then become consolidated with the Borrower or
any such Subsidiary in accordance with GAAP, or (ii) any acquisition by the
Borrower or any of its Subsidiaries of all or any substantial part of the assets
of any other Person.
"Adjusted Net Income" shall mean, for the Borrower and its Subsidiaries on
-------------------
a consolidated basis, for any fiscal period, the sum of (a) Net Income after
taxes for such fiscal period plus (b) the aggregate proceeds from any equity
issuance (less any costs and fees) during such fiscal period.
"Advance" or "Advances" shall mean the amount advanced by the Lender to the
------- --------
Borrower pursuant to Article 2 hereof on the occasion of any borrowing.
"Affiliate" shall mean with respect to any Person, any other Person
---------
directly or indirectly controlling, controlled by, or under direct or indirect
common control with such Person. For purposes of this definition, "control"
when used with respect to any Person includes, without limitation, the direct or
indirect beneficial ownership of more than ten percent (10%) of the outstanding
voting securities or voting equity of such Person or the power to direct or
cause the direction of the management and policies of such Person whether by
contract or otherwise.
"Agreement" shall mean this Agreement.
---------
"Agreement Date" shall mean the date as of which this Agreement is dated.
--------------
<PAGE>
"Applicable Law" shall mean in respect of any Person, all provisions of
--------------
constitutions, statutes, rules, regulations and orders of governmental bodies or
regulatory agencies applicable to such Person, and all orders and decrees of all
courts and arbitrators in proceedings or actions to which the Person in question
is a party or by which such Person or its properties are bound.
"Applicable Margin" shall mean the interest rate margin applicable to LIBOR
-----------------
Advances determined in accordance with Section 2.3(f) hereof.
"Authorized Signatory" shall mean such senior personnel of the Borrower or
--------------------
any of its Subsidiaries, as applicable, as may be duly authorized and designated
in writing by the Borrower or any such Subsidiary, as applicable, to execute
documents, agreements and instruments on behalf of the Borrower or such
Subsidiary, as applicable.
"Available Commitment" shall mean, at any time, the difference between (a)
--------------------
the Commitment in effect on such date minus (b) the sum of (i) the aggregate
principal amount of all Loans outstanding on such date, and (ii) the aggregate
outstanding face amount of all Letters of Credit.
"Borrower" shall mean Metrotrans Corporation, a Georgia corporation.
--------
"Business Day" shall mean a day on which banks are open for the transaction
------------
of business required for this Agreement in London, England and Atlanta, Georgia.
"Capital Expenditures" shall mean, in respect of any Person, expenditures
--------------------
for the purchase of assets of long-term use which should be capitalized in
accordance with GAAP.
"Capitalization" shall mean, for the Borrower and its Subsidiaries on a
--------------
consolidated basis, the sum of Indebtedness for Money Borrowed plus
stockholders' equity for the Borrower and its Subsidiaries on a consolidated
basis as determined in accordance with GAAP.
"Capitalization Ratio" shall mean, as of any date, the ratio of (a)
--------------------
Indebtedness for Money Borrowed on such date, to (b) Capitalization on such
date.
"Capitalized Lease Obligation" shall mean that portion of any obligation of
----------------------------
a Person as lessee under a lease which at the time would be required to be
capitalized on the balance sheet of such lessee in accordance with GAAP.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time
----
to time.
"Commercial Letter of Credit" shall mean a documentary letter of credit
---------------------------
issued by the Lender in respect of the purchase of goods or services by the
Borrower in the ordinary course of Borrower's business.
"Commitment" shall mean the obligation of the Lender to make Advances to,
----------
or issue Letters of Credit on behalf of, the Borrower from time to time,
pursuant to the terms hereof in the aggregate amount outstanding of Sixteen
Million Dollars ($16,000,000.00).
"Default" shall mean any of the events specified in Section 8.1 hereof,
-------
regardless of whether there shall have occurred any passage of time or giving of
notice, or both, that would be necessary in order to constitute such event an
Event of Default.
2
<PAGE>
"Default Rate" shall mean a simple interest rate per annum equal to the sum
------------
of the Prime Rate plus two (2) percentage points.
"Dollars" shall mean lawful currency of the United States of America.
-------
"EBIT" shall mean, for the Borrower and its Subsidiaries on a consolidated
----
basis for any fiscal period, Net Income for such fiscal period (after
eliminating any extraordinary gains and losses, including gains and losses from
the sale of assets other than in the ordinary course of business), plus, to the
extent deducted in determining Net Income, the sum of each of the following for
such fiscal period: (a) interest expense and (b) income tax expense, including
reserves for deferred taxes not payable currently.
"EBITDA" shall mean, for the Borrower and its Subsidiaries on a
------
consolidated basis for any fiscal period, Net Income for such fiscal period
(after eliminating any extraordinary gains and losses, including gains and
losses from the sale of assets other than in the ordinary course of business),
plus, to the extent deducted in determining Net Income, the sum of each of the
following for such fiscal period: (a) depreciation and amortization allowances,
(b) interest expense, (c) income tax expense, including reserves for deferred
taxes not payable currently and (d) all other non-cash items.
"EBITR" shall mean, for the Borrower and its Subsidiaries on a consolidated
-----
basis for any fiscal period, Net Income for such fiscal period (after
eliminating any extraordinary gains and losses, including gains and losses from
the sale of assets other than in the ordinary course of business), plus, to the
extent deducted in determining Net Income, the sum of each of the following for
such fiscal period: (a) interest expense, (b) income tax expense, including
reserves for deferred taxes not payable currently, and (c) Rental/Lease Expense.
"Employee Pension Plan" shall mean any Plan which is maintained by the
---------------------
Borrower, any of its Subsidiaries or any ERISA Affiliate.
"Environmental Laws" shall mean all applicable federal, state or local
------------------
laws, statutes, rules, regulations or ordinances, codes, common law, consent
agreements, orders, decrees, judgments or injunctions issued, promulgated,
approved or entered thereunder relating to public health, safety or the
pollution or protection of the environment, including, without limitation, those
relating to releases, discharges, emissions, spills, leaching, or disposals to
air, water, land or ground water, to the withdrawal or use of ground water, to
the use, handling or disposal of polychlorinated biphenyls, asbestos or urea
formaldehyde, to the treatment, storage, disposal or management of hazardous
substances (including, without limitation, petroleum, crude oil or any fraction
thereof, or other hydrocarbons), pollutants or contaminants, or to exposure to
toxic, hazardous or other controlled, prohibited, or regulated substances,
including, without limitation, any such provisions under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, (42 U.S.C. (S)
9601 et seq.), as amended by the Superfund Amendments and Reauthorization Act of
1986, as amended, or the Solid Waste Disposal Act, as amended (42 U.S.C. (S)
6901 et seq.).
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
-----
in effect from time to time.
"ERISA Affiliate" shall mean any Person, including a Subsidiary or an
---------------
Affiliate of the Borrower, that is a member of any group of organizations
3
<PAGE>
(within the meaning of Code Section 414(b), 414(c), 414(m), or 414(o)) of which
the Borrower is a member.
"Event of Default" shall mean any of the events specified in Section 8.1
----------------
hereof, provided that any requirement for notice or lapse of time has been
satisfied.
"Fixed Charge Ratio" shall mean, for any calculation date, the ratio of (a)
------------------
EBITR for the Borrower and its Subsidiaries on a consolidated basis with respect
to the most recently completed four (4) fiscal quarters, to (b) Fixed Charges.
"Fixed Charges" shall mean for the Borrower and its Subsidiaries on a
-------------
consolidated basis with respect to the most recently completed four (4) fiscal
quarters, the sum of (a) GAAP Interest Expense for the Borrower and its
Subsidiaries during such fiscal period; and (b) Rental/Lease Expense for the
Borrower and its Subsidiaries during such fiscal period.
"GAAP" shall mean, as in effect from time to time, generally accepted
----
accounting principles in the United States consistently applied.
"GAAP Interest Expense" shall mean, for any fiscal period, all interest
---------------------
expense of the Borrower and its Subsidiaries on a consolidated basis during such
fiscal period calculated in accordance with GAAP.
"Governmental Authority" shall mean any nation or government, any state or
----------------------
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Guaranty" or "Guaranteed", as applied to an obligation, shall mean and
-------- ----------
include (a) a guaranty, direct or indirect, in any manner, of all or any part of
such obligation and (b) any agreement, direct or indirect, contingent or
otherwise, the practical effect of which is to assure in any way the payment or
performance (or payment of damages in the event of non-performance) of all or
any part of such obligation, including, without limiting the foregoing, any
reimbursement obligations as to amounts drawn down by beneficiaries of
outstanding letters of credit.
"Hazardous Materials" shall mean any hazardous materials, hazardous wastes,
-------------------
hazardous constituents, hazardous or toxic substances, petroleum products
(including crude oil or any fraction thereof), friable asbestos containing
materials defined or regulated as such in or under any Environmental Law.
"Indebtedness" shall mean, with respect to any Person, (a) all items,
------------
except items of partners' equity or capital stock or surplus or general
contingency or deferred tax reserves, which in accordance with GAAP,
consistently applied, would be included in determining total liabilities as
shown on the liability side of a balance sheet of such Person, (b) all direct or
indirect obligations secured by any Lien to which any property or asset owned by
such Person is subject, whether or not the obligation secured thereby shall have
been assumed, (c) to the extent not otherwise included, all obligations of other
Persons which such Person has guaranteed, including but not limited to, all
obligations of such Person consisting of recourse liability with respect to
accounts receivable sold or otherwise disposed of by such Person, and (d) to the
extent not otherwise included, all Capitalized Lease Obligations of such Person
and all obligations of such Person with respect to leases constituting part of a
sale and leaseback arrangement.
4
<PAGE>
"Indebtedness for Money Borrowed" shall mean, with respect to any Person,
-------------------------------
Indebtedness for money borrowed and Indebtedness represented by notes payable
and drafts accepted representing extensions of credit, all obligations evidenced
by bonds, debentures, notes or other similar instruments, all Indebtedness upon
which interest charges are customarily paid, all Capitalized Lease Obligations
(excluding Capitalized Leases arising from the sale of products under a sales-
type lease in accordance with GAAP), all reimbursement obligations with respect
to outstanding letters of credit without duplication, all Indebtedness issued or
assumed as full or partial payment for property or services (other than trade
payables arising in the ordinary course of business, but only if and so long as
such accounts are payable on customary trade terms), whether or not any such
notes, drafts, obligations or Indebtedness represent Indebtedness for money
borrowed.
"Interest Period" shall mean (a) in connection with any Prime Rate Advance,
---------------
the period beginning on the date such Advance is made and ending on the last day
of the calendar month in which such Advance is made, provided, however, that if
a Prime Rate Advance is made on the last day of any calendar month, it shall
have an Interest Period ending on, and its Payment Date shall be, the last day
of the following calendar month, and (b) in connection with any LIBOR Advance, a
period of one (1), two(2), three (3), or six (6) months selected by the Borrower
or otherwise determined in accordance with this Agreement. Notwithstanding the
foregoing, however, (i) any applicable 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, with respect to LIBOR Advances only, such Business Day
falls in another calendar month, in which case such Interest Period shall end on
the next preceding Business Day, (ii) any applicable Interest Period, with
respect to LIBOR Advances only, which begins on a day for which there is no
numerically corresponding day in the calendar month during which such Interest
Period is to end shall (subject to clause (i) above) end on the last day of such
calendar month, and (iii) no Interest Period shall extend beyond the applicable
Maturity Date or such earlier date as would interfere with the Borrower's
repayment obligations under Section 2.4 or Section 2.7 hereof. Interest shall
be due and payable with respect to any Advance as provided in Section 2.3
hereof.
"Interest Rate Basis" shall mean the Prime Rate Basis, or the LIBOR Basis,
-------------------
as appropriate.
"Lender" shall mean NationsBank, N.A.
------
"Letters of Credit" shall mean either Standby Letters of Credit or
-----------------
Commercial Letters of Credit issued from time to time by the Lender for the
account of the Borrower, including, without limitation, those issued prior to
the Agreement Date and listed on Schedule 1 hereto, together with any renewals
or extentions thereof.
"Leverage Ratio" shall mean, as of any date, the ratio of (a) Indebtedness
--------------
for Money Borrowed on such date to (b) EBITDA for the most recently completed
four (4) fiscal quarter period.
"LIBOR Advance" shall mean an Advance which the Borrower requests to be
-------------
made as a LIBOR Advance or which is reborrowed as a LIBOR Advance, in accordance
with the provisions of Section 2.2 hereof, which bears interest at the LIBOR
Basis and which shall be in a principal amount of at least $100,000.00 and in an
integral multiple of $100,000.00.
"LIBOR Basis" shall mean a simple per annum interest rate (rounded upward,
-----------
if necessary, to the nearest one-hundredth (1/100th) of one percent) equal to
5
<PAGE>
the sum of (a) the quotient of (i) the LIBOR Rate divided by (ii) one minus the
LIBOR Reserve Percentage, stated as a decimal, plus (b) the Applicable Margin as
determined by Section 2.3(f) hereof. The LIBOR Basis shall apply to Interest
Periods of one (1), two (2), three (3) or six (6) months and, once determined,
shall remain unchanged during the applicable Interest Period, except for changes
to reflect adjustments in the LIBOR Reserve Percentage and the Applicable
Margin.
"LIBOR Rate" shall mean, for any LIBOR Rate Loan for any Interest Period
----------
therefor, the rate per annum (rounded upwards, if necessary, to the nearest
1/100 of 1%) appearing on Telerate Page 3750 (or any successor page) as the
London interbank offered rate for deposits in Dollars at approximately 11:00
a.m. (London time) two Business Days prior to the first day of such Interest
Period for a term comparable to such Interest Period. If for any reason such
rate is not available, the term "LIBOR Rate" shall mean, for any LIBOR Rate Loan
for any Interest Period therefor, the rate per annum (rounded upwards, if
necessary, to the nearest 1/100 of 1%) appearing on Reuters Screen LIBO Page as
the London interbank offered rate for deposits on Dollars at approximately 11:00
a.m. (London time) two Business days prior to the first day of such Interest
Period for a term comparable to such Interest Period; provided, however, if more
than one rate is specified on Reuters Screen LIBO Page, the applicable rate
shall be the arithmetic mean of all such rates.
"LIBOR Reserve Percentage" shall mean the percentage which is in effect
------------------------
from time to time under Regulation D of the Board of Governors of the Federal
Reserve System, as such regulation may be amended from time to time, as the
maximum reserve requirement applicable with respect to Eurocurrency Liabilities
(as that term is defined in Regulation D), whether or not any Lender has any
such Eurocurrency Liabilities subject to such reserve requirement at that time.
The LIBOR Basis for any LIBOR Advance shall be adjusted as of the effective date
of any change in the LIBOR Reserve Percentage.
"Lien" shall mean, with respect to any property, any mortgage, lien,
----
pledge, negative pledge or other agreement not to pledge, assignment, charge,
security interest, title retention agreement, levy, execution, seizure,
attachment, garnishment or other encumbrance of any kind in respect of such
property, whether created by statute, contract, the common law or otherwise, and
whether or not choate, vested or perfected.
"Loans" shall mean, collectively, the amounts advanced by the Lender to the
-----
Borrower under the Commitment, not to exceed the Commitment, and evidenced by
the Note.
"Loan Certificate" shall mean a corporate loan certificate of the Borrower
----------------
or any Subsidiary substantially in the forms of Exhibits A-1 and A-2,
------------ ---
respectively, attached hereto, including applicable exhibits, schedules, and
attachments thereto.
"Loan Documents" shall mean this Agreement, the Note, the Security
--------------
Documents and all other documents, agreements, certificates, reports, and
instruments now or hereafter executed in connection herewith or contemplated
hereby.
"Materially Adverse Effect" shall mean any act, omission, or undertaking
-------------------------
which would, singly or in the aggregate, have a materially adverse effect upon
the business, assets, liabilities, financial condition, results of operations,
or business prospects of the Borrower or any of its Subsidiaries or upon the
ability of the Borrower or any of its Subsidiaries to perform any material
obligations under this Agreement or any other Loan Document; in any case,
whether resulting from any single act, omission, situation, status, event, or
6
<PAGE>
undertaking, together with other such acts, omissions, situations, statuses,
events, or undertakings.
"Maturity Date" shall mean September 5, 2000 or such earlier date as
-------------
payment of the remaining outstanding principal amount of the Loans or of all
remaining outstanding Obligations shall be due (whether by acceleration or
otherwise).
"Multiemployer Plan" shall have the meaning set forth in Section 4001
------------------
(a)(3) of ERISA.
"Necessary Authorizations" shall mean all authorizations, consents,
------------------------
approvals, permits, licenses and exemptions of, filings and registrations with,
and reports to, all governmental and other regulatory authorities, whether
federal, state, or local, and all agencies thereof.
"Negative Pledge Agreement" shall mean any Negative Pledge Agreement
-------------------------
between the Borrower or any Subsidiary and the Lender, substantially in the form
of Exhibit B attached hereto.
"Net Income" shall mean, for the Borrower and its Subsidiaries on a
----------
consolidated basis, for any fiscal period, net income determined in accordance
with GAAP.
"Note" shall mean that certain promissory note dated as of the Agreement
----
Date in the original principal amount of Sixteen Million Dollars
($16,000,000.00) issued to the Lender by the Borrower, substantially in the form
of Exhibit D attached hereto, and any other notes executed and delivered by the
---------
Borrower to the Lender with respect to the Loan, and any amendments, renewals or
extensions of the foregoing.
"Obligations" shall mean (a) all payment and performance obligations of
-----------
every kind, nature and description of the Borrower, its Subsidiaries and any
other obligors to the Lender under this Agreement and the other Loan Documents
(including any interest, fees and other charges on the Loans or otherwise under
the Loan Documents that would accrue but for the filing of a bankruptcy action
with respect to the Borrower or any of its Subsidiaries or any other such
obligor, whether or not such claim is allowed in such bankruptcy action), as
they may be amended from time to time, or as a result of making the Loans,
whether such obligations are direct or indirect, absolute or contingent, due or
not due, contractual or tortious, liquidated or unliquidated, arising by
operation of law or otherwise, now existing or hereafter arising; (b) the
obligation to pay an amount equal to the amount of any and all damage which the
Lender may suffer by reason of a breach by the Borrower, any of its
Subsidiaries, or any other obligor, of any obligation, covenant or undertaking
with respect to this Agreement or any other Loan Document; and (c) any
obligation to the Lender in respect of the Letters of Credit.
"Payment Date" shall mean the last day of any Interest Period.
------------
"Permitted Liens" shall mean, as applied to any Person:
---------------
(a) Any Lien in favor of the Lender, given to secure the Obligations;
(b) (i) Liens on real estate for real estate taxes not yet delinquent and
(ii) Liens for taxes, assessments, judgments, governmental charges or levies or
claims the non-payment of which is being diligently contested in good faith by
appropriate proceedings and for which adequate reserves have been set aside on
such Person's books in accordance with GAAP, but only so long as no foreclosure,
7
<PAGE>
distraint, sale or similar proceedings have been commenced with respect thereto
and remain unstayed for a period of thirty (30) days after their commencement;
(c) Liens of carriers, warehousemen, mechanics, laborers and materialmen
incurred in the ordinary course of business for sums not yet due or being
diligently contested in good faith, if reserves or appropriate provisions shall
have been made therefor;
(d) Liens incurred in the ordinary course of business in connection with
worker's compensation and unemployment insurance;
(e) Easements, rights-of-way, restrictions and other similar encumbrances
on the use of real property which do not interfere with the ordinary conduct of
the business of such Person, or Liens incidental to the conduct of the business
of such Person or to the ownership of its properties which were not incurred in
connection with Indebtedness or other extensions of credit and which do not in
the aggregate materially detract from the value of such properties or materially
impair their use in the operation of the business of such Person;
(f) Purchase money security interests, which are perfected automatically by
operation of law, only for the period (not to exceed twenty (20) days) of
automatic perfection under the law of the applicable jurisdiction, and limited
to Liens on assets so purchased;
(g) Liens reflected by Uniform Commercial Code financing statements filed
in respect of Capitalized Lease Obligations permitted hereunder and true leases
of the Borrower or any of its Subsidiaries;
(h) Liens incurred in the ordinary course of business reflected by Uniform
Commercial Code financing statements filed in respect of vehicles on which the
Borrower is reflected as the owner but the lease and related title have been
assigned or otherwise conveyed to a third party;
(i) Other Liens outstanding on the Agreement Date set forth on Schedule 2
----------
hereto;
(j) Other Liens in an amount not to exceed $500,000 in the aggregate at any
time outstanding;
(k) Liens on any asset of any corporation, partnership or other Person
existing at the time such Person is merged or consolidated with or into the
Borrower or a Subsidiary in accordance with this Agreement and not created in
contemplation of such event; and
(l) Liens existing on any asset prior to the acquisition thereof by the
Borrower or a Subsidiary in accordance with this Agreement and not created in
contemplation of such acquisition.
"Person" shall mean an individual, corporation, partnership, limited
------
liability company trust, or unincorporated organization, or a government or any
agency or political subdivision thereof.
"Plan" shall mean an employee benefit plan within the meaning of Section
----
3(3) of ERISA or any other employee benefit plan maintained for employees of any
Person or an Affiliate of such Person.
"Prime Rate" shall mean, at any time, the fluctuating and floating rate per
----------
8
<PAGE>
annum equal to the rate of interest announced by the Lender as its reference
rate for the determination of interest rates for loans of varying maturities in
Dollars to United States residents of varying degrees of creditworthiness and
being quoted by the Lender as its "prime rate". The Prime Rate in effect as of
the close of business of each day shall be the applicable Prime Rate for that
day and each succeeding non-business day of the Lender, in determining the
applicable Prime Rate. If the Lender shall cease announcing a Prime Rate, the
Lender shall designate in writing to the Borrower a comparable reference rate
for purposes of this Agreement. The Prime Rate is not necessarily the lowest
rate of interest charged to borrowers of the Lender.
"Prime Rate Advance" shall mean an Advance which the Borrower requests to
------------------
be made as a Prime Rate Advance or is reborrowed as a Prime Rate Advance, in
accordance with the provisions of Section 2.2 hereof, which bears interest at
the Prime Rate Basis.
"Prime Rate Basis" shall mean a simple interest rate equal to the Prime
----------------
Rate. The Prime Rate Basis shall be adjusted automatically as of the opening of
business on the effective date of each change in the Prime Rate to account for
such change.
"Rental/Lease Expense" shall mean, for any period of determination, all
--------------------
rental/lease expenses for such period, whether paid or accrued, under all
operating leases and rental agreements having a noncancellable initial term of
greater than one (1) year from the date of any calculation thereof.
"Reportable Event" shall have the meaning set forth in Title IV of ERISA.
----------------
"Request for Advance" shall mean a certificate designated as a "Request for
-------------------
Advance," signed by an Authorized Signatory requesting an Advance hereunder,
which shall be in substantially the form of Exhibit E attached hereto, and
shall, among other things, (a) specify the date of the Advance, which shall be a
Business Day, the amount of the Advance, the type of Advance, the Commitment
under which the Advance is being requested and, with respect to LIBOR Advances,
the Interest Period selected by the Borrower, (b) state that there shall not
exist, on the date of the requested Advance and after giving effect thereto, a
Default, as of the date of such Advance and after giving effect thereto and (c)
as to Advances which will increase the principal amount of the Loans then
outstanding, specify the use of the proceeds of the Loans being requested.
"Restricted Payment" shall mean (a) any direct or indirect distribution,
------------------
dividend, or other payment to any Person on account of any shares of capital
stock or other securities of the Borrower, and (b) any payment of management,
consulting or similar fees payable by the Borrower to any Person who is an
Affiliate of the Borrower.
"Restricted Purchase" shall mean any payment on account of the purchase,
-------------------
redemption or other acquisition or retirement of any shares of capital stock or
other securities of the Borrower.
"Security Documents" shall mean each Negative Pledge Agreement, each
------------------
Subsidiary Guaranty, any other agreement or instrument providing collateral for
the Obligations, whether now or hereafter in existence, and any filings,
instruments, agreements and documents related thereto or to this Agreement.
"Security Interest" shall mean all Liens in favor of the Lender created
-----------------
hereunder or under any of the Security Documents to secure the Obligations.
9
<PAGE>
"Standby Letter of Credit" shall mean a Letter of Credit issued to support
------------------------
obligations of the Borrower or its Subsidiaries incurred in the ordinary course
of its business, and which is not a Commercial Letter of Credit.
"Subsidiary" shall mean, as applied to any Person, (a) any corporation of
----------
which fifty percent (50%) or more of the outstanding stock (other than
directors' qualifying shares) having ordinary voting power to elect a majority
of its board of directors (or other governing body), regardless of the existence
at the time of a right of the holders of any class or classes (however
designated) of securities of such corporation to exercise such voting power by
reason of the happening of any contingency, or any partnership of which fifty
percent (50%) or more of the outstanding partnership interests is, at the time,
owned by such Person, or by one or more Subsidiaries of such Person, or by such
Person and one or more Subsidiaries of such Person, and (b) any other entity
which is controlled or capable of being controlled by such Person, or by one or
more Subsidiaries of such Person, or by such Person and one or more Subsidiaries
of such Person. "Subsidiaries" as used herein shall mean the Subsidiaries of
------------
the Borrower. The Subsidiaries of the Borrower as of the Agreement Date are set
forth on Schedule 3 attached hereto.
----------
"Subsidiary Guaranty" shall mean each Subsidiary Guaranty in favor of the
-------------------
Lender, given by a Subsidiary of the Borrower, each substantially in the form of
Exhibit C attached hereto.
- ---------
"Tangible Net Worth" shall mean, with respect to any entity, the aggregate
------------------
amount of all stockholders' equity of such entity as determined in accordance
with GAAP, excluding all trademarks, service marks, patents, all other items
which would be considered "intangible assets" under GAAP (including goodwill,
formulae and franchise rights), and the amount of any write-up or reevaluation
of any assets occurring after December 31, 1996.
"Upstream Dividends" shall have the meaning set forth in Section 7.19
------------------
hereof.
Section 1.2 Interpretation. Each definition of an agreement in this
--------------
Article 1 shall, unless otherwise specified, include such agreement as modified,
amended, restated or supplemented from time to time in accordance herewith, and
except where the context otherwise requires, the singular shall include the
plural and vice versa. Except where otherwise specifically restricted, reference
to a party to this Agreement or any other Loan Document includes that party and
its successors and assigns. All capitalized terms used herein which are defined
in Article 9 of the Uniform Commercial Code in effect in the State of Georgia on
the date hereof and which are not otherwise defined herein shall have the same
meanings herein as set forth therein.
Section 1.3 Cross References. Unless otherwise specified, references in
----------------
this Agreement and in each other Loan Document to any Article or Section are
references to such Article or Section of this Agreement or such other Loan
Document, as the case may be, and, unless otherwise specified, references in any
Article, Section or definition to any clause are references to such clause in
such Article, Section or definition.
ARTICLE 2 Loans.
-----
Section 2.1 The Loans. The Lender agrees, upon the terms and subject to
---------
the conditions of this Agreement, to lend and relend to the Borrower from time
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<PAGE>
to time from the Agreement Date until the Maturity Date amounts which do not
exceed in the aggregate at any one time outstanding the amount of the Available
Commitment as in effect from time to time. Advances under the Commitment may be
repaid and then reborrowed as provided in Section 2.2(b) and Section 2.2(c)
hereof.
Section 2.2 Manner of Borrowing and Disbursement.
------------------------------------
(a) Choice of Interest Rate, Etc. Any Advance hereunder shall, at
----------------------------
the option of the Borrower, be made as a Prime Rate Advance or a LIBOR Advance;
provided, however, that at such time as there shall have occurred and be
continuing a Default, and the Lender shall have provided the Borrower with
written notice thereof, the Borrower shall not have the right to re-borrow any
LIBOR Advances and all subsequent Advances shall be made as Prime Rate Advances.
Any notice given to the Lender in connection with a requested Advance hereunder
shall be given to the Lender prior to 11:00 a.m. (Atlanta, Georgia time) in
order for such Business Day to count toward the minimum number of Business Days
required.
(b) Prime Rate Advances.
-------------------
(i) Advances. The Borrower shall give the Lender in the case of
--------
Prime Rate Advances at least one (1) Business Day's irrevocable prior
written notice in the form of a Request for Advance, or telephonic notice
followed immediately by a Request for Advance; provided, however, that the
Borrower's failure to confirm any telephonic notice with a Request for
Advance shall not invalidate any notice so given.
(ii) Repayments and Reborrowings. The Borrower may repay or
---------------------------
prepay a Prime Rate Advance without regard to its Payment Date and (i)
reborrow all or a portion of the principal amount thereof as one or more
Prime Rate Advances, (ii) upon at least three (3) Business Day's
irrevocable prior written notice, reborrow all or a portion of the
principal thereof as one or more LIBOR Advances, or (iii) not reborrow all
or any portion of such Prime Rate Advance. On the date indicated by the
Borrower, such Prime Rate Advance shall be so repaid and, as applicable,
reborrowed.
(c) LIBOR Advances.
--------------
(i) Advances. The Borrower shall give the Lender in the case of
--------
LIBOR Advances at least three (3) Business Days' irrevocable prior written
notice in the form of a Request for Advance, or telephonic notice followed
immediately by a Request for Advance; provided, however, that the
Borrower's failure to confirm any telephonic notice with a Request for
Advance shall not invalidate any notice so given. The Lender, whose
determination shall be conclusive, shall determine the available LIBOR
Bases and shall notify the Borrower of such LIBOR Bases. The Borrower shall
promptly notify the Lender by telephone or telecopy and shall immediately
confirm any such telephonic notice in writing, of its selection of a LIBOR
Basis and Interest Period for such Advance.
(ii) Repayments and Reborrowings. At least three (3) Business
---------------------------
Days prior to each Payment Date for a LIBOR Advance, the Borrower shall
give the Lender written notice specifying whether all or a portion of any
LIBOR Advance outstanding on the Payment Date (i) is to be repaid and then
reborrowed in whole or in part as one (1) or more LIBOR Advances, (ii) is
to be repaid and then reborrowed in whole or in part as a Prime Rate
Advance, or (iii) is to be repaid and not reborrowed. Upon such Payment
11
<PAGE>
Date such LIBOR Advance will, subject to the provisions hereof, be so
repaid and, as applicable, reborrowed.
(d) Disbursement.
------------
(i) Prior to 2:00 p.m. (Atlanta, Georgia time) on the date of an
Advance hereunder, the Lender shall, subject to the satisfaction of the
conditions set forth in Article 3, disburse the amounts of the requested
Advance in like funds by (a) transferring the amounts by wire transfer
pursuant to the Borrower's instructions, or (b) in the absence of such
instructions, crediting the amounts so made available to the account of the
Borrower maintained with the Lender.
Section 2.3 Interest.
--------
(a) On Prime Rate Advances. Interest on each Prime Rate Advance shall
----------------------
be computed on the basis of a year of 365/366 days for the actual number of days
elapsed and shall be payable at the Prime Rate Basis for such Advance, in
arrears on each applicable Payment Date. Interest on Prime Rate Advances then
outstanding shall also be due and payable on the applicable Maturity Date.
(b) On LIBOR Advances. Interest on each LIBOR Advance shall be
-----------------
computed on the basis of a 360-day year for the actual number of days elapsed
and shall be payable at the LIBOR Basis for such Advance, in arrears on the
applicable Payment Date, and, in addition, if the Interest Period for a LIBOR
Advance exceeds three (3) months, interest on such LIBOR Advance shall also be
due and payable in arrears on every three-month anniversary of the beginning of
such Interest Period. Interest on LIBOR Advances then outstanding shall also be
due and payable on the applicable Maturity Date.
(c) Interest if no Notice of Selection of Interest Rate Basis. If the
---------------------------------------------------------
Borrower fails to give the Lender timely notice of its selection of a LIBOR
Basis, or if for any reason a determination of a LIBOR Basis for any Advance is
not timely concluded, the Prime Rate Basis shall apply to such Advance.
(d) Interest Upon Default. Immediately upon the occurrence of an
---------------------
Event of Default, the outstanding principal balance of the Loans shall bear
interest at the Default Rate. Such interest shall be payable on demand, and
shall accrue until the earliest of (a) waiver or cure of the applicable Default,
(b) agreement by the Lender to rescind the charging of interest at the Default
Rate, or (c) payment in full of the Obligations. The Lender shall not be
required to (x) accelerate the maturity of any of the Loans, or (y) exercise any
other rights or remedies under the Loan Documents in order to charge interest
hereunder at the Default Rate.
(e) LIBOR Advance Contracts. At no time may the number of outstanding
-----------------------
LIBOR Advances exceed five (5).
(f) Applicable Margin. With respect to any LIBOR Advance made under
-----------------
the Commitment, the Applicable Margin shall be the interest rate margin
determined by the Lender based upon the Leverage Ratio for the most recent
fiscal quarter end, effective as of the first Business Day of the month after
the financial statements referred to in Section 6.1 or 6.2 hereof, as
applicable, are required to be furnished by the Borrower to the Lender for the
fiscal quarter most recently ended, expressed as a per annum rate of interest as
follows:
12
<PAGE>
LIBOR Advance
Leverage Ratio Applicable Margin
-------------- -----------------
Greater than 2.0:1 1.250%
2.0:1 or less but
greater than 1.50:1 1.125%
1.50:1 or less but
greater than 1.00:1 1.000%
1.00:1 or less 0.750%
In the event that the Borrower fails to timely provide the financial statements
referred to above in accordance with the terms of Section 6.1 or 6.2 hereof, as
applicable, and without prejudice to any additional rights under Section 8.2
hereof, the Leverage Ratio shall be deemed to be equal to 2.0:1 until the
actual delivery of such statements.
Section 2.4 Fees. The Borrower agrees to pay the Lender a commitment fee on
----
the aggregate unborrowed balance of the Commitment, for each day from the
Agreement Date until the Maturity Date, at a rate determined by the Lender based
upon the Leverage Ratio for the most recent fiscal quarter end, effective as of
the first Business Day of the month after the financial statements referred to
in Section 6.1 or 6.2 hereof, as applicable, are required to be furnished by the
Borrower to the Lender for the fiscal quarter most recently ended, expressed as
a per annum rate of interest as set forth below. Such commitment fee shall be
computed on the basis of a year of 365/366 days for the actual number of days
elapsed, shall be payable quarterly in arrears on the last day of each fiscal
quarter, commencing on September 30, 1997, shall be fully earned when due, and
shall be non-refundable when paid. A final payment of any commitment fee then
payable shall also be due and payable on the Maturity Date.
Leverage Ratio Applicable Percentage
-------------- ---------------------
Greater than 2.0:1 0.325%
2.00:1 or less but
greater than 1.50:1 0.275%
1.50:1 or less but
greater than 1.00:1 0.225%
1.00:1 or less 0.175%
In the event that the Borrower fails to timely provide the financial statements
referred to above in accordance with the terms of Section 6.1 or 6.2 hereof, as
applicable, and without prejudice to any additional rights under Section 8.2
hereof, the Leverage Ratio shall be deemed to be equal to 2.00:1 until the
actual delivery of such statements.
Section 2.5 Reduction of Commitment. The Borrower shall have the right, at
-----------------------
any time and from time to time after the date which is ninety (90) days after
the Agreement Date and prior to the Maturity Date, upon at least thirty (30)
days' prior irrevocable, written notice to the Lender, to cancel or reduce
permanently all or a portion of the Commitment, provided that any such partial
reduction shall be made in
13
<PAGE>
increments of not less than $500,000. As of the date of cancellation or
reduction set forth in such notice, the Commitment shall be permanently reduced
to the amount stated in the Borrower's notice for all purposes herein, and the
Borrower shall pay the amount necessary to reduce the amount of the Loans
outstanding under the Commitment to not more than the amount of the Commitment
as so reduced, together with accrued interest on the amounts so prepaid.
Section 2.6 Prepayment. The principal amount of any Prime Rate Advance may
----------
be prepaid in full or in part at any time, without penalty and without regard to
the Payment Date for such Advance. LIBOR Advances may be prepaid prior to the
applicable Payment Date, upon five (5) Business Days' prior written notice to
the Lender, provided that the Borrower shall reimburse the Lender, on demand,
for any loss or out-of-pocket expense incurred by the Lender in connection with
such prepayment, as set forth in Section 2.10 hereof. A notice of prepayment
shall be irrevocable.
Section 2.7 Repayment. The principal balance of all Loans shall be due and
---------
payable on the Maturity Date.
Section 2.8 Notes and Loan Account.
----------------------
(a) The Loans shall be repayable in accordance with the terms and
provisions set forth herein, and shall be evidenced by the Notes. The Notes
shall be duly executed and delivered by the Authorized Signatories.
(b) The Lender shall open and maintain on its books in the name of the
Borrower loan accounts with respect to the Loans and interest thereon. The
Lender shall debit such loan accounts for the principal amount of each Advance
and accrued interest thereon, and shall credit such loan accounts for each
payment on account of principal of or interest on each Loan. The records of the
Lender with respect to the loan accounts shall, absent manifest error, be prima
facie evidence of the Loans and accrued interest thereon, but the failure of the
Lender to make any such notations or any error or mistake in such notations
shall not affect the Borrower's repayment obligations with respect to such
Loans.
Section 2.9 Manner of Payment.
-----------------
(a) Each payment (including prepayments) by the Borrower on account of
the principal of or interest on the Loans, fees, and any other amount owed to
the Lender under this Agreement or the Notes shall be made not later than 1:00
p.m. (Atlanta, Georgia time) on the date specified for payment under this
Agreement to the Lender in Dollars in immediately available funds. Any payment
received by the Lender after 1:00 p.m. (Atlanta, Georgia time) shall be deemed
received on the next Business Day.
(b) If any payment under this Agreement or the Notes shall be
specified to be made upon a day which is not a Business Day, it shall be made on
the next succeeding day which is a Business Day, and such extension of time
shall in such case be included in computing interest and fees, if any, in
connection with such payment.
(c) The Borrower agrees to pay principal, interest, fees and all other
amounts due hereunder or under the Notes or under any other Loan Document
14
<PAGE>
without set-off or counterclaim or any deduction whatsoever and free and clear
of all taxes, levies and withholding. If the Borrower is required by Applicable
Law to deduct any taxes from or in respect of any sum payable to the Lender
hereunder, under any Note or under any other Loan Document: (i) the sum payable
hereunder or thereunder, as applicable, shall be increased to the extent
necessary to provide that, after making all required deductions (including
deductions applicable to additional sums payable under this Section 2.9(c)), the
Lender receives an amount equal to the sum it would have received had no such
deductions been made; (ii) the Borrower shall make such deductions from such
sums payable hereunder or thereunder, as applicable, and pay the amount so
deducted to the relevant taxing authority as required by Applicable Law; and
(iii) the Borrower shall provide the Lender with evidence satisfactory to the
Lender that such deducted amounts have been paid to the relevant taxing
authority.
(d) Prior to the declaration of an Event of Default under Section 8.2
hereof, if some but less than all amounts due from the Borrower are received by
the Lender, the Lender shall apply such amounts in the following order of
priority: (i) to the payment of any fees then due and payable, (ii) to the
payment of all other Obligations not otherwise referred to in this Section
2.9(d) then due and payable hereunder or under the Loan Documents, (iii) to the
payment of interest then due and payable on the Loans, (iv) to the payment of
principal then due and payable on the Loan.
Section 2.10 Reimbursement.
-------------
(a) Whenever the Lender shall sustain or incur any losses (but
excluding lost profits) or out-of-pocket expenses in connection with (i) failure
by the Borrower to borrow or reborrow any LIBOR Advance after having given
notice of its intention to borrow or reborrow in accordance with Section 2.2
hereof (whether by reason of the Borrower's election not to proceed or the non-
fulfillment of any of the conditions set forth in Article 3 hereof), or (ii)
prepayment of any LIBOR Advance in whole or in part for any reason, the Borrower
agrees to pay to such Lender, upon such Lender's demand, an amount sufficient to
compensate such Lender for all such losses and out-of-pocket expenses actually
incurred. Such Lender's good faith determination of the amount of such losses or
out-of-pocket expenses, as set forth in writing within forty-five (45) days of
the incurrence of such loss and accompanied by calculations in reasonable detail
demonstrating the basis for its demand, shall be presumptively correct.
(b) Losses subject to reimbursement hereunder shall include, without
limiting the generality of the foregoing, expenses incurred by the Lender or any
participant of the Lender permitted hereunder in connection with the re-
employment of funds prepaid, repaid, not borrowed, or paid, as the case may
be.
Section 2.11 Capital Adequacy. If after the date hereof, the adoption of
----------------
any Applicable Law regarding the capital adequacy of banks or bank holding
companies, or any change in Applicable Law (whether adopted before or after the
Agreement Date) or any change in the interpretation or administration thereof by
any governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by the Lender with any
directive regarding capital adequacy (whether or not having the force of law) of
any such governmental authority, central bank or comparable agency, has or would
have the effect of reducing the rate of return on the Lender's capital as a
consequence of its obligations hereunder with respect to the Loans to a level
below that which it could have achieved but for such adoption, change or
compliance (taking into consideration the Lender's policies with respect to
capital adequacy immediately before such adoption, change or compliance and
assuming that the Lender's capital was fully utilized prior to such adoption,
15
<PAGE>
change or compliance) by an amount reasonably deemed by the Lender to be
material, then, upon demand by the Lender, the Borrower shall promptly pay to
the Lender such additional amounts as shall be sufficient to compensate the
Lender for such reduced return, together with interest on such amount from the
fourth (4th) day after the date of demand, until payment in full thereof at the
Default Rate. A certificate of the Lender setting forth the amount to be paid to
the Lender by the Borrower as a result of any event referred to in this
paragraph within ninety (90) days of the occurrence of such event and supporting
calculations in reasonable detail shall be presumptively correct.
ARTICLE 3 Conditions Precedent.
--------------------
Section 3.1 Conditions Precedent to Initial Advance. The obligation of
---------------------------------------
the Lender to make the initial Advance is subject to the fulfillment of each of
the following conditions prior to or contemporaneously with the making of such
Advance:
(a) The Lender shall have received each of the following, in form and
substance satisfactory to the Lender:
(i) duly executed Note;
(ii) duly executed Negative Pledge Agreement executed
and delivered by the Borrower and each Subsidiary;
(iii) duly executed Subsidiary Guaranty executed and
delivered by each Subsidiary of the Borrower;
(iv) copies of insurance binders or certificates covering the
assets of the Borrower and its Subsidiaries and otherwise meeting the
requirements of Section 5.5 hereof;
(v) legal opinion of Long, Aldridge & Norman LLP, as general
counsel to the Borrower and its Subsidiaries, addressed to the Lender, and
dated as of the Agreement Date;
(vi) copies of the most recent quarterly and annual
financial statements of the Borrower and its Subsidiaries, certified by the
chief financial officer of the Borrower;
(vii) any required consents to the closing of this Agreement or
to the execution, delivery and performance of this Agreement and the other
Loan Documents, each of which shall be in form and substance satisfactory
to the Lender;
(viii) the loan certificate of the Borrower, in substantially the
form attached hereto as Exhibit A-1, including a certificate of incumbency
-----------
with respect to each Authorized Signatory, together with appropriate
attachments which shall include, without limitation, the following items:
(A) a copy of the Certificate or Articles of Incorporation of the Borrower,
certified to be true, complete and correct by the Georgia Secretary of
State, (B) certificates of good standing or foreign qualification for the
Borrower issued by the Secretary of State or similar state official for
each state in which the Borrower is required to qualify to do business,
(C) a true, complete and correct copy of the By-Laws of the Borrower, as in
effect on the Agreement Date, (D) a true, complete and correct copy of the
resolutions of the Borrower authorizing it to execute, deliver and perform
this Agreement and the
16
<PAGE>
other Loan Documents and (E) a true, complete and correct copy of any
shareholders' agreements or voting trust agreements in effect with respect
to the stock of the Borrower;
(ix) the loan certificate of each respective Subsidiary, in
substantially the form attached hereto as Exhibit A-2, including a
-----------
certificate of incumbency with respect to each Authorized Signatory,
together with appropriate attachments which shall include, without
limitation, the following items: (A) a copy of the Certificate or Articles
of Incorporation of the Subsidiary, certified to be true, complete and
correct by the appropriate Secretary of State with respect to the
Subsidiary (B) certificates of good standing or foreign qualification for
the Subsidiary issued by the Secretary of State or similar state official
for each state in which the Subsidiary is required to qualify to do
business, (C) a true, complete and correct copy of the By-Laws of the
Subsidiary, as in effect on the Agreement Date, (D) a true, complete and
correct copy of the resolutions of the Subsidiary authorizing it to
execute, deliver and perform this Agreement and the other Loan Documents
and (E) a true, complete and correct copy of any shareholders' agreements
or voting trust agreements in effect with respect to the stock of the
Subsidiary;
(x) UCC-1 lien and judgment search results with respect to the
Borrower and its Subsidiaries for Fulton County, Georgia and Spalding
County, Georgia; and
(xi) all such other documents as the Lender may reasonably
request, certified by an appropriate governmental official or an Authorized
Signatory if so requested.
(b) The Lender shall have received payment of all fees due and payable
on the Agreement Date.
(c) There shall have occurred no Materially Adverse Effect and no
event which, in the reasonable opinion of the Lender, may be expected to have a
Materially Adverse Effect.
Section 3.2 Conditions Precedent to Each Advance. The obligation of the
------------------------------------
Lender to make each Advance, including but not limited to the initial Advance,
is subject to the fulfillment of each of the following conditions immediately
prior to or contemporaneously with such Advance:
(a) No Default shall then exist or be caused thereby;
(b) With respect to Advances which, if funded, would increase the
aggregate principal amount of Loans outstanding hereunder, the Lender shall have
received a duly executed Request for Advance;
(c) The Lender shall have received all such other certificates,
reports, statements, opinions of counsel or other documents as the Lender may
reasonably request; and
(d) With respect to any Advance relating to any acquisition,
investment, or the formation of any Subsidiary which is permitted hereunder, the
Lender shall have received such documents and instruments relating to such
acquisition, investment, or formation of a new Subsidiary as are described in
Section 5.13 hereof or otherwise required herein.
17
<PAGE>
ARTICLE 4 Representations and Warranties.
------------------------------
Section 4.1 Representations and Warranties. Each of the Borrower and its
------------------------------
Subsidiaries hereby represents and warrants that:
(a) Organization; Power; Qualification. The Borrower is a corporation duly
----------------------------------
organized, validly existing, is in good standing under the laws of the
state of its incorporation. The Borrower has had the power and authority,
corporate and otherwise, to own or lease and operate its properties and to
carry on its business as now being and hereafter proposed to be conducted.
Each Subsidiary of the Borrower is a corporation or partnership, as
applicable, duly organized, validly existing and in good standing under the
laws of the state of its formation and has the corporate or partnership
power (as applicable) and authority to own or lease and operate its
properties and to carry on its business as now being and hereafter proposed
to be conducted. The Borrower and each of its Subsidiaries are duly
qualified and is in good standing as a foreign corporation, and authorized
to do business, in each jurisdiction in which given the character of its
properties or the nature of its business the failure to so qualify or
obtain such authorization would have a Materially Adverse Effect.
(b) Authorization; Enforceability. The Borrower has the power and has taken
-----------------------------
all necessary action to authorize it to execute, deliver, and perform this
Agreement and each of the other Loan Documents to which it is a party in
accordance with the terms thereof and to consummate the transactions
contemplated hereby and thereby. This Agreement has been duly executed and
delivered by the Borrower, and is, and each of the other Loan Documents to
which Borrower is a party is, a legal, valid, and binding obligation of the
Borrower, enforceable in accordance with its terms, subject, as to
enforcement of remedies, to the following qualifications: (i) an order of
specific performance and an injunction are discretionary remedies and, in
particular, may not be available where damages are considered an adequate
remedy at law, and (ii) enforcement may be limited by bankruptcy,
insolvency, liquidation, reorganization, reconstruction, and other similar
laws affecting enforcement of creditors' rights generally (insofar as any
such law relates to the bankruptcy, insolvency, or similar event of the
Borrower).
(c) Subsidiaries; Authorization; Enforceability. The Borrower's Subsidiaries
-------------------------------------------
and the Borrower's direct and indirect ownership thereof are as set forth
as of the Agreement Date on Schedule 3 attached hereto and the Borrower has
----------
the unrestricted right to vote the issued and outstanding ownership
interests of the Subsidiaries shown thereon; such ownership interests of
such Subsidiaries have been duly authorized and issued and are fully paid
and nonassessable. With respect to each Subsidiary of the Borrower,
Schedule 3 also sets forth (i) the state of its incorporation; (ii) all
----------
jurisdictions in which such Subsidiary is qualified to do business as a
foreign corporation; (iii) the address of the principal place of business
and chief executive office of such Subsidiary; and (iv) the name and
registered office of the registered agent appointed by such Subsidiary.
Each Subsidiary of the Borrower has the corporate or partnership power and
has taken all necessary corporate or partnership action to authorize it to
execute, deliver and perform each of the Loan Documents to which it is a
party in accordance with their respective terms and to consummate the
transactions contemplated by this Agreement and by such Loan Documents.
Each of the Loan Documents to which any Subsidiary of the Borrower is party
is a legal, valid and binding obligation of such Subsidiary enforceable
against such Subsidiary in accordance with its terms, subject, as to
enforcement of remedies, to the following qualifications: (i) an order of
specific performance and an injunction are discretionary remedies and, in
particular, may not be available where damages are considered an adequate
remedy at law and (ii) enforcement may be limited by bankruptcy,
18
<PAGE>
insolvency, liquidation, reorganization, reconstruction and other similar
laws affecting enforcement of creditors' rights generally (insofar as any
such law relates to the bankruptcy, insolvency or similar event of any such
Subsidiary).
(d) Compliance with Other Loan Documents and Contemplated Transactions. The
------------------------------------------------------------------
execution, delivery and performance, in accordance with their respective
terms, by the Borrower of this Agreement and the Notes, and by the Borrower
and its Subsidiaries of each of the other Loan Documents to which they are
respectively party, and the consummation of the transactions contemplated
hereby and thereby, do not and will not (i) require any consent or
approval, governmental or otherwise, not already obtained, (ii) violate any
material Applicable Law respecting the Borrower or any Subsidiary of the
Borrower, (iii) conflict with, result in a breach of, or constitute a
default under the certificate or articles of incorporation or by-laws, as
amended, of the Borrower or of any Subsidiary of the Borrower, or under any
material indenture, agreement, or other instrument to which the Borrower or
any of its Subsidiaries is a party or by which any of them or any of their
respective properties may be bound, or (iv) result in or require the
creation or imposition of any Lien upon or with respect to any property now
owned or hereafter acquired by the Borrower or any of its Subsidiaries,
except for Permitted Liens.
(e) Necessary Authorizations. The Borrower and its Subsidiaries have secured
------------------------
all Necessary Authorizations, and all such Necessary Authorizations are in
full force and effect. None of said Necessary Authorizations are the
subject of any pending or, to the best of the Borrower's knowledge,
threatened attack or revocation, by the grantor of the Necessary
Authorization. Neither the Borrower nor any Subsidiary is required to
obtain any additional Necessary Authorizations in connection with the
execution, delivery, and performance, in accordance with the terms of this
Agreement or any other Loan Document and the borrowing hereunder.
(f) Title to Properties. The Borrower has good, legal and marketable title to,
-------------------
or a valid leasehold interest in, all of its assets. Each of the
Borrower's Subsidiaries has good, legal and marketable title to, or a valid
leasehold interest in, all of its assets. None of such properties or
assets is subject to any Liens, except for Permitted Liens. Except for
financing statements evidencing Permitted Liens, no financing statement
under the Uniform Commercial Code as in effect in any jurisdiction and no
other filing which names the Borrower or any of its Subsidiaries as debtor
or which covers or purports to cover any of the assets of the Borrower or
any of its Subsidiaries is currently effective and on file in any state or
other jurisdiction, and neither the Borrower nor any of its Subsidiaries
has signed any such financing statement or filing or any security agreement
authorizing any secured party thereunder to file any such financing
statement or filing.
(g) Collective Bargaining. None of the employees of the Borrower or any of its
---------------------
Subsidiaries is a party to any collective bargaining agreement with the
Borrower or any of its Subsidiaries and, to the best knowledge of the
Borrower and its officers, there are no material grievances, disputes, or
controversies with any union or any other organization of the employees of
the Borrower or any of its Subsidiaries or threats of strikes, work
stoppages, or any asserted pending demands for collective bargaining by any
union or other organization.
(h) Taxes. All federal, state and other tax returns of the Borrower and each
-----
of its Subsidiaries required by law to be filed have been duly filed and
all federal, state and other taxes, including, without limitation,
withholding taxes, assessments and other governmental charges or levies
required to be paid by the Borrower or any of its Subsidiaries or imposed
upon the Borrower or any of its Subsidiaries or any of their respective
properties, income, profits or assets, which are due and payable, have been
19
<PAGE>
paid, except any such taxes (i) (x) the payment of which the Borrower or
any of its Subsidiaries is diligently contesting in good faith by
appropriate proceedings, (y) for which adequate reserves have been provided
on the books of the Borrower or the Subsidiary of the Borrower involved in
accordance with GAAP and (z) as to which no Lien other than a Permitted
Lien has attached and no foreclosure, distraint, sale or similar
proceedings have been commenced, or (ii) which may result from audits not
yet conducted. The charges, accruals and reserves on the books of the
Borrower and each of its Subsidiaries in respect of taxes are, in the
judgment of the Borrower, adequate.
(i) Financial Statements. The Borrower has furnished or caused to be furnished
--------------------
to the Lender audited financial statements for the fiscal year ended
December 31, 1996, and unaudited financial statements for the fiscal
quarter ended March 31, 1997, all of which, together with other financial
statements furnished to the Lenders subsequent to the Agreement Date are,
to the best knowledge of the Borrower, complete and correct in all material
respects and present fairly in accordance with GAAP the financial condition
of the Borrower and its Subsidiaries on a consolidated basis on and as at
such dates and the results of operations for the periods then ended
(subject, in the case of unaudited financial statements, to normal year-end
adjustments). Neither the Borrower nor any of its Subsidiaries has any
material liabilities, contingent or otherwise, other than as disclosed in
the financial statements referred to in the preceding sentence or as set
forth or referred to in this Agreement, and there are no material
unrealized losses of the Borrower or any of its Subsidiaries and no
anticipated losses of the Borrower or any of its Subsidiaries other than
those which have been previously disclosed in writing to the Lender and
identified as such.
(j) No Adverse Change. Since June 29, 1997 there has occurred no event which
-----------------
would have a Materially Adverse Effect.
(k) Investments and Guaranties. The Borrower has not made investments in,
--------------------------
advances to, or guaranties of, the obligations of any Person, except as
reflected in the financial statements referred to in Section 4.1(i) above
or disclosed to the Lender in writing.
(l) Litigation. There is no action, suit, proceeding or investigation pending
----------
against, or, to the best of the Borrower's knowledge, threatened against or
in any other manner relating adversely to, the Borrower or any of its
Subsidiaries, or any of their respective properties, including without
limitation the Licenses, in any court or before any arbitrator of any kind
or before or by any governmental body which seeks recovery of more than
$100,000, except as disclosed to the Lender in writing as of the Agreement
Date or as subsequently disclosed to the Lender pursuant to Section 6.5
hereof; and no action, suit, proceeding or investigation disclosed to the
Lender in writing as of the Agreement Date (i) calls into question the
validity or enforceability of this Agreement or any other Loan Document, or
(ii) is reasonably likely to result in an adverse decision to the Borrower
or any Subsidiary of the Borrower which adverse decision would have a
Materially Adverse Effect.
(m) ERISA. The Borrower and each Subsidiary of the Borrower and each of their
-----
respective Plans are in compliance with ERISA and the Code and neither the
Borrower nor any of its Subsidiaries has incurred any accumulated funding
deficiency with respect to any such Plan within the meaning of ERISA or the
Code. The Borrower, each of its Subsidiaries, and each other ERISA
Affiliate have complied with all requirements of Section 4980B of the Code
and Sections 601 through 609 of ERISA. Neither the Borrower nor any of its
Subsidiaries has made any promises of retirement or other benefits to
employees, except as set forth in their respective Plans, in written
agreements with such employees, or in the Borrower's employee handbook and
memoranda to employees. Neither the Borrower nor any of its Subsidiaries
20
<PAGE>
has incurred any material liability to PBGC in connection with any such
Plan. The assets of each such Plan which is subject to Title IV of ERISA
are sufficient to provide the benefits under such Plan, the payment of
which PBGC would guarantee if such Plan were terminated, and such assets
are also sufficient to provide all other "benefit liabilities" (as defined
in Section 4041 of ERISA) due under such Plan upon termination. No
Reportable Event has occurred and is continuing with respect to any such
Plan. No such Plan or trust created thereunder, or party in interest (as
defined in Section 3(14) of ERISA), or any fiduciary (as defined in Section
3(21) of ERISA), has engaged in a "prohibited transaction" (as such term is
defined in Section 406 of ERISA or Section 4975 of the Code) which would
subject such Plan or any other Plan of the Borrower or any of its
Subsidiaries, any trust created thereunder, or any such party in interest
or fiduciary, or any party dealing with any such Plan or any such trust, to
the tax or penalty on "prohibited transactions" imposed by Section 502 of
ERISA or Section 4975 of the Code. Neither the Borrower nor any of its
Subsidiaries is a participant in or is obligated to make any payment to a
Multiemployer Plan. Neither the Borrower nor any of its Subsidiaries (1)
has had either a complete withdrawal or a partial withdrawal under Section
4201 et. seq. of ERISA from a Multiemployer Plan which had "unfunded vested
--------
benefits" within the meaning of Section 4211 of ERISA or (2) has ever
received a notice and demand from the plan sponsor of a Multiemployer Plan
under Section 4219(b)(1) of ERISA.
(n) Patents, Trademarks, Franchises, etc. The Borrower and each of its
-------------------------------------
Subsidiaries owns, possesses, or has the right to use all necessary
patents, trademarks, trademark rights, trade names, trade name rights,
service marks, copyrights, franchises, and licenses, and rights with
respect thereof, necessary to conduct its respective business as now
conducted, without known conflict with any patent, trademark, trade name,
service mark, franchise, license, or copyright of any other Person, and in
each case, subject to no mortgage, pledge, lien, lease, encumbrance,
charge, security interest, title retention agreement, or option. All such
patents, trademarks, trademark rights, trade names, trade name rights,
service marks, copyrights, franchises, and licenses are listed as of the
Agreement Date on Schedule 4 attached hereto and are in full force and
----------
effect, the holder thereof is in full compliance in all material respects
with all of the provisions thereof, and no such asset or agreement is
subject to any pending or, to the best of the Borrower's knowledge,
threatened attack or revocation except as set forth on Schedule 4 attached
----------
hereto.
(o) Compliance with Law; Absence of Default. The Borrower and each of its
---------------------------------------
Subsidiaries is in substantial compliance with (i) all material Applicable
Laws and (ii) all of the provisions of their respective Certificates or
Articles of Incorporation, By-Laws and Partnership Agreements, and no event
has occurred or failed to occur (including, without limitation, any matter
which could create a Default by cross-default) which has not been remedied
or waived, the occurrence or non-occurrence of which constitutes, or with
the passage of time or giving of notice or both would constitute, (i) a
Default or (ii) a default by the Borrower or any of its Subsidiaries under
any indenture, agreement or other instrument relating to Indebtedness of
the Borrower or any of its Subsidiaries in the amount of $1,000,000.00 or
more, or any judgment, decree or order to which the Borrower or any of its
Subsidiaries is a party or by which the Borrower or any of its Subsidiaries
or any of their respective properties may be bound or affected.
(p) Accuracy and Completeness of Information. All information, reports,
----------------------------------------
prospectuses and other papers and data relating to the Borrower or any of
its Subsidiaries and furnished by or on behalf of the Borrower or any of
its Subsidiaries to the Lender was, at the time furnished, true, complete
and correct in all material respects to the extent necessary to give the
Lender true and accurate knowledge of the subject matter. No fact or
21
<PAGE>
situation is currently known to the Borrower which has had or which could
reasonably be expected to have a Materially Adverse Effect.
(q) Compliance with Regulations G, T, U, and X. Neither the Borrower nor any
------------------------------------------
Subsidiary of the Borrower is engaged principally in or has as one of its
important activities the business of purchasing or carrying, or extending
credit for the purpose of purchasing or carrying, and neither the Borrower
nor any Subsidiary owns or presently intends to acquire, any "margin
security" or "margin stock" as defined in Regulations G, T, U, and X (12
C.F.R. Parts 221 and 224) of the Board of Governors of the Federal Reserve
System (herein called "margin stock"). None of the proceeds of the Loans
will be used, directly or indirectly, for the purpose of purchasing or
carrying any margin stock or for the purpose of reducing or retiring any
Indebtedness which was originally incurred to purchase or carry margin
stock or for any other purpose which might constitute this transaction a
"purpose credit" within the meaning of said Regulations G, T, U, and X.
Neither the Borrower, any of its Subsidiaries nor any bank acting on their
behalf has taken or will take any action which might cause this Agreement
or the Notes to violate Regulation G, T, U, or X or any other regulation of
the Board of Governors of the Federal Reserve System or to violate the
Securities Exchange Act of 1934, in each case as now in effect or as the
same may hereafter be in effect. If so requested by the Lender, the
Borrower will furnish the Lender with (i) a statement or statements in
conformity with the requirements of Federal Reserve Forms G-3 and/or U-1
referred to in Regulations G and U of said Board of Governors and (ii)
other documents evidencing its compliance with the margin regulations,
including without limitation an opinion of counsel in form and substance
satisfactory to the Lender. Neither the making of the Loans nor the use of
proceeds thereof will violate, or be inconsistent with, the provisions of
Regulation G, T, U, or X of said Board of Governors.
(r) Solvency. The Borrower and each of its Subsidiaries has capital sufficient
--------
to carry on its business and transactions in which it is about to engage
and is able to pay its debts as they mature and owns assets (both tangible
and intangible) having a value, both at fair valuation and at present fair
salable value, greater than the amount required to pay its debts.
(s) Casualties; Taking of Properties, Etc. Since December 31, 1996 neither the
--------------------------------------
business nor the properties of the Borrower or any of its Subsidiaries has
been materially and adversely affected as a result of any fire, explosion,
earthquake, flood, drought, windstorm, accident, strike or other labor
disturbance, embargo, requisition or taking of property or cancellation of
contracts, permits or concessions by any domestic or foreign government or
any agency thereof, riot, activities of armed forces or acts of God or of
any Public enemy.
(t) Business. The Borrower, together with its Subsidiaries, is primarily
--------
engaged in the business of manufacturing and selling buses.
(u) Names, Location of Offices and Records. Schedule 5 attached hereto and
-------------------------------------- -----------
made a part hereof sets forth the full and correct name and trade name(s),
location of the chief executive office, location where the business records
are maintained and location of the principal place of business of the
Borrower and each of the Subsidiaries. Neither the Borrower nor any
Subsidiary has changed its name or done business under another name within
the preceding seven (7) years. At least ninety-five percent (95%) of the
tangible personal property of the Borrower and its Subsidiaries, other than
mobile goods, is located as specified in Schedule 5.
----------
(v) Investment Company Act. Neither the Borrower nor any of its Subsidiaries
----------------------
is required to register under the provisions of the Investment Company Act
of 1940, as amended, and neither the entering into or performance by the
22
<PAGE>
Borrower and its Subsidiaries of this Agreement nor the issuance of the
Notes violates any provision of such Act or requires any consent, approval
or authorization of, or registration with, the Securities and Exchange
Commission or any other governmental or public body or authority pursuant
to any provisions of such Act.
(w) Governmental Regulation. Neither the Borrower nor any of its Subsidiaries
-----------------------
is required to obtain any material consent, approval, authorization, permit
or license which has not already been obtained from, or, effect any filing
or registration which has not already been effected with, any federal,
state or local regulatory authority in connection with the execution and
delivery of this Agreement. Neither the Borrower nor any of its
Subsidiaries is required to obtain any material consent, approval,
authorization, permit or license which has not already been obtained from,
or effect any filing or registration which has not already been effected
with, any federal, state or local regulatory authority in connection with
the performance, in accordance with their respective terms, of this
Agreement or any other Loan Document.
(x) Agreements with Affiliates and Management Agreements. Except as set forth
----------------------------------------------------
as of the Agreement Date on Schedule 6 attached hereto, and except for
-----------
agreements or arrangements with Affiliates wherein the Borrower or one or
more of its Subsidiaries provides services to such Affiliates for fair
consideration, neither the Borrower nor any of its Subsidiaries has (i) any
written agreements or binding arrangements of any kind with any Affiliate
(other than the Borrower or any of its Subsidiaries) or (ii) any management
or consulting agreements of any kind with any Affiliate (other than the
Borrower or any of its Subsidiaries), other than employment agreements.
(y) Payment of Wages. The Borrower and each of its Subsidiaries are in
----------------
compliance with the Fair Labor Standards Act , as amended (29 U.S.C.(S)
201, et seq), in all material respects, and the Borrower and each of its
Subsidiaries have paid all minimum and overtime wages required by law to be
paid to their respective employees.
(z) Indebtedness. Except as shown on the audited financial statements of the
------------
Borrower and its Subsidiaries for the fiscal year ended December 31, 1996,
and except for the Advances hereunder, neither the Borrower nor any of its
Subsidiaries has outstanding, as of the Agreement Date, any Indebtedness
for Money Borrowed other than Indebtedness permitted under Section 7.1
hereof.
(aa) Environmental Matters.
---------------------
(a) Except as set forth on Schedule 7 hereof, Borrower and each of its
-----------
Subsidiaries has obtained all permits, licenses and other authorizations,
if any, which are required under Environmental Laws for the operation of
Borrower's or such Subsidiary's business and Borrower and each of its
Subsidiaries is in material compliance with all terms and conditions of
required permits, licenses and authorizations, and is also in material
compliance with all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, notifications, schedules and
timetables contained in the Environmental Laws;
(b) Except as set forth on Schedule 7 hereof, neither Borrower nor any of its
-----------
Subsidiaries is aware of or has received notice of, (i) the disposal or
release or presence of Hazardous Materials on any of its properties except
for Hazardous Materials such as cleaning solvents, pesticides and other
materials used, produced, manufactured, processed, treated, recycled,
generated, stored, disposed of, managed or otherwise handled in minimal
amounts in the ordinary course of business in compliance with all
23
<PAGE>
Environmental Laws, or (ii) of any past, present or future events,
conditions, circumstances, activities, practices, incidents, actions or
plans which may interfere with or prevent compliance or continued
compliance on the part of Borrower or any such Subsidiary with
Environmental Laws, or may give rise to any common law or legal liability,
or otherwise form the basis of any claim, action, demand, suit, Lien,
proceeding, hearing, study or investigation, based on or related to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling, or the emission, discharge, release or threatened
release into the environment, of any Hazardous Material;
(c) All assets of Borrower and its Subsidiaries are free from Hazardous
Materials except for Hazardous Materials such as cleaning solvents,
pesticides and other materials used, produced, manufactured, processed,
treated, recycled, generated, stored, disposed of, managed or otherwise
handled in minimal amounts in the ordinary course of business in compliance
with all Environmental Laws, and disposal of any and all such Hazardous
Materials is effected by Borrower or such Subsidiary in compliance with all
applicable Environmental Laws; and
(d) There is not pending or, to the Borrower's knowledge, threatened against
the Borrower or any of its Subsidiaries and the Borrower does not know of
any facts or circumstances that might give rise to, any civil, criminal or
administrative action, suit, demand, claim, hearing, notice or demand
letter, notice of violation, environmental Lien, investigation, or
proceeding relating in any way to Environmental Laws.
ARTICLE 5 General Covenants.
-----------------
So long as any of the Obligations is outstanding and unpaid or the Borrower
shall have the right to borrow hereunder (whether or not the conditions
precedent to borrowing have been or can be fulfilled), and unless the Lender
shall otherwise consent in writing:
Section 5.1 Preservation of Existence and Similar Matters.
---------------------------------------------
The Borrower will, and will cause each of its Subsidiaries to, (a) preserve
and maintain its existence, rights, franchises, licenses, and privileges in its
jurisdiction of incorporation including, without limitation, all Necessary
Authorizations and (b) qualify and remain qualified and authorized to do
business in each jurisdiction in which, given the character of its properties or
the nature of its businesses, the failure to so qualify or be authorized would
have a Materially Adverse Effect.
Section 5.2 Business; Compliance with Applicable Law.
----------------------------------------
The Borrower will, and will cause each of its Subsidiaries to, (a) engage
primarily in the business described in Section 4.1(t) hereof and related
businesses and (b) comply with the requirements of all Applicable Law the
noncompliance with which would have a Material Adverse Effect.
Section 5.3 Maintenance of Properties.
-------------------------
The Borrower will, and will cause each of its Subsidiaries to, maintain or
cause to be maintained in the ordinary course of business in good repair,
working order, and condition all properties used or useful in its businesses
(whether owned or held under lease), and from time to time to make or cause to
be made all needed and appropriate repairs, renewals, replacements, additions,
betterments, and improvements thereto except for obsolete or immaterial assets
which can be disposed of pursuant to Section 7.4(a) hereof.
Section 5.4 Accounting Methods and Financial Records.
----------------------------------------
The Borrower will, and will cause each of its Subsidiaries on a
24
<PAGE>
consolidated basis with the Borrower to maintain a system of accounting
established and administered in accordance with GAAP, keep adequate records and
books of account in which complete entries will be made in accordance with GAAP
and reflecting all transactions required to be reflected by GAAP and keep
accurate and complete records of their respective properties and assets. The
Borrower and its Subsidiaries will maintain a fiscal year ending on May 31.
Section 5.5 Insurance.
---------
The Borrower will, and will cause each of its Subsidiaries to maintain
insurance including, but not limited to, public liability, product and
manufacturer's liability, and fidelity coverage insurance from responsible
companies in such amounts and against such risks as are customary for companies
engaged in the same or similar businesses as the Borrower and such Subsidiary.
Section 5.6 Payment of Taxes and Claims.
---------------------------
The Borrower will, and will cause each of its Subsidiaries to, pay and
discharge all taxes, assessments, and governmental charges or levies in an
amount of $65,000 or more imposed upon it or upon its income or profits or upon
any properties belonging to it prior to the date on which penalties attach
thereto, and all lawful claims for labor, materials, and supplies in an amount
of $65,000 or more which, if unpaid, might become a Lien or charge upon any of
its properties; except that no such tax, assessment, charge, levy or claim need
be paid which is being diligently contested in good faith by appropriate
proceedings and for which adequate reserves shall have been set aside on the
appropriate books in accordance with GAAP, but only so long as such tax,
assessment, charge, levy or claim does not become a Lien or charge other than a
Permitted Lien and no foreclosure, distraint, sale or similar proceedings shall
have been commenced. The Borrower will, and will cause each of its Subsidiaries
to, timely file all information returns required by federal, state or local tax
authorities.
Section 5.7 Visits and Inspections.
----------------------
The Borrower will, and will cause each of its Subsidiaries to, permit
representatives of the Lender to (a) visit and inspect the properties of the
Borrower or any of its Subsidiaries during normal business hours, (b) inspect
and make extracts from and copies of its books and records, and (c) discuss with
its principal officers its businesses, assets, liabilities, financial positions,
results of operations, and business prospects. The Borrower and each of its
Subsidiaries will also permit representatives of the Lender to discuss with
their respective auditors their respective businesses, assets, liabilities,
financial condition, results of operations and business prospects.
Section 5.8 Payment of Indebtedness.
-----------------------
Subject to any provisions herein or in any other Loan Document, the
Borrower will, and will cause each of its Subsidiaries to, pay, subject to any
provisions therein regarding subordination, any and all of its Indebtedness when
and as the same becomes due, other than amounts diligently disputed in good
faith and for which adequate reserves have been set aside in accordance with
GAAP.
Section 5.9 Use of Proceeds.
---------------
The Borrower will use the aggregate proceeds of all Advances (i) to
refinance existing Indebtedness for Money Borrowed, (ii) to fund Capital
Expenditures, and (iii) for working capital and other general corporate
purposes. No proceeds of Advances hereunder shall be used for the purpose of
purchasing or carrying or extending credit for the purpose of purchasing or
carrying any margin stock within the meaning of Regulations G, T, U and X of the
Board of Governors of the Federal Reserve System.
Section 5.10 Compliance with ERISA.
---------------------
25
<PAGE>
(a) The Borrower shall, and shall cause its Subsidiaries to, make all
contributions to any Employee Pension Plan when such contributions are due
and not incur any "accumulated funding deficiency" within the meaning of
Section 412(a) of the Code, whether or not waived, and will otherwise
comply in all material respects with the requirements of the Code and ERISA
with respect to the operation of all Plans.
(b) The Borrower shall, and shall cause its Subsidiaries to, comply in all
material respects with the requirements of Section 601 through Section 609
of ERISA with respect to any Plans subject to the requirements thereof.
(c) The Borrower shall furnish to the Lender (i) within thirty (30) days after
any officer of the Borrower obtains knowledge that a "prohibited
transaction" (within the meaning of Section 406 of ERISA or Section 4975 of
the Code) has occurred with respect to any Plan of the Borrower or its
ERISA Affiliates, including its Subsidiaries, that any Reportable Event has
occurred with respect to any Employee Pension Plan or that PBGC has
instituted or will institute proceedings under Title IV of ERISA to
terminate any Employee Pension Plan or to appoint a trustee to administer
any Employee Pension Plan, a statement setting forth the details as to such
prohibited transaction, Reportable Event or termination or appointment
proceedings and the action which it (or any other Employee Pension Plan
sponsor if other than the Borrower) proposes to take with respect thereto,
together with a copy of the notice of such Reportable Event given to PBGC
if a copy of such notice is available to the Borrower, any of its
Subsidiaries or any of its ERISA Affiliates, (ii) promptly after receipt
thereof, a copy of any notice the Borrower, any of its Subsidiaries or any
of its ERISA Affiliates or the sponsor of any Plan receives from PBGC, or
the Internal Revenue Service or the Department of Labor which sets forth or
proposes any action or determination with respect to such Plan, (iii)
promptly after the filing thereof, any annual report required to be filed
pursuant to ERISA in connection with each Plan maintained by the Borrower
or any of its ERISA Affiliates, including the Subsidiaries, and (iv)
promptly upon the Lender's request therefor, such additional information
concerning any such Plan as may be reasonably requested by the Lender.
(d) The Borrower will promptly notify the Lender of any excise taxes which have
been assessed or which the Borrower, any of its Subsidiaries or any of its
ERISA Affiliates has reason to believe may be assessed against the
Borrower, any of its Subsidiaries or any of its ERISA Affiliates by the
Internal Revenue Service or the Department of Labor with respect to any
Plan of the Borrower or its ERISA Affiliates, including its Subsidiaries.
(e) Within the time required for notice to the PBGC under Section 302(f)(4)(A)
of ERISA, the Borrower will notify the Lender of any lien arising under
Section 302(f) of ERISA in favor of any Plan of the Borrower or its ERISA
Affiliates, including its Subsidiaries.
(f) The Borrower will not, and will not permit any of its Subsidiaries or any
of its ERISA Affiliates to take any of the following actions or permit any
of the following events to occur if such action or event together with all
other such actions or events would subject the Borrower, any of its
Subsidiaries, or any of its ERISA Affiliates to any tax, penalty, or other
liabilities which could have a Materially Adverse Effect:
(i) engage in any transaction in connection with which the Borrower, any
of its Subsidiaries or any ERISA Affiliate could be subject to either a
civil penalty assessed pursuant to Section 502(i) of ERISA or a tax imposed
by Section 4975 of the Code;
26
<PAGE>
(ii) terminate any Employee Pension Plan in a manner, or take any other
action, which could result in any liability of the Borrower, any of its
Subsidiaries or any ERISA Affiliate to the PBGC;
(iii) fail to make full payment when due of all amounts which, under the
provisions of any Plan, the Borrower, any of its Subsidiaries or any ERISA
Affiliate is required to pay as contributions thereto, or permit to exist
any accumulated funding deficiency within the meaning of Section 412(a) of
the Code, whether or not waived, with respect to any Employee Pension Plan;
or
(iv) permit the present value of all benefit liabilities under all
Employee Pension Plans which are subject to Title IV of ERISA to exceed the
present value of the assets of such Plans allocable to such benefit
liabilities (within the meaning of Section 4041 of ERISA), except as may be
permitted under actuarial funding standards adopted in accordance with
Section 412 of the Code.
Section 5.11 Indemnity.
---------
The Borrower for itself and on behalf of each of its Subsidiaries jointly
and severally agrees to indemnify and hold harmless the Lender and their
affiliates, employees, representatives, shareholders, officers, directors and
counsel (any of the foregoing shall be an "Indemnitee") from and against any and
all claims, liabilities, losses, damages, actions, reasonable attorneys' fees of
external counsel and expenses (as such fees and expenses are incurred) and
demands by any party, including the costs of investigating and defending such
claims, whether or not the Borrower, any Subsidiary or the Person seeking
indemnification is the prevailing party (a) resulting from any breach or alleged
breach by the Borrower or any Subsidiary of the Borrower of any representation
or warranty made hereunder; or (b) otherwise arising out of (i) the Commitments
or otherwise under this Agreement, any Loan Document or any transaction
contemplated hereby or thereby, including, without limitation, the use of the
proceeds of Loans hereunder in any fashion by the Borrower or the performance of
their respective obligations under the Loan Documents by the Borrower or any of
its Subsidiaries, (ii) allegations of any participation by the Lender in the
affairs of the Borrower or any of its Subsidiaries, or allegations that the
Lender has any joint liability with the Borrower or any of its Subsidiaries for
any reason, (iii) any claims against the Lender by any shareholder or other
investor in or lender to the Borrower or any Subsidiary, by any brokers or
finders or investment advisers or investment bankers retained by the Borrower or
by any other third party, arising out of the Commitments or otherwise under this
Agreement; or (c) in connection with taxes (not including federal or state
income taxes or other taxes based solely upon the revenues of such Persons),
fees, and other charges payable in connection with the Loans, or the execution,
delivery, and enforcement of this Agreement, the Security Documents, the other
Loan Documents, and any amendments thereto or waivers of any of the provisions
thereof; unless the Person seeking indemnification hereunder is determined in
accordance with the provisions of Secton 10.13 hereof in such case to have acted
with gross negligence or willful misconduct. The obligations of the Borrower
and the Subsidiaries under this Section 5.11 are in addition to, and shall not
otherwise limit, any liabilities which the Borrower might otherwise have in
connection with any warranties or similar obligations of the Borrower or any of
its Subsidiaries in any other Loan Document.
Section 5.12 Payment of Wages.
----------------
The Borrower shall and shall cause each of the Subsidiaries to at all times
comply, in all material respects, with the requirements of the Fair Labor
Standards Act, as amended (29 U.S.C. (S) 201 et seq.), including, without
limitation, the provisions of such Act relating to the payment of minimum and
overtime wages as the same may become due from time to time.
27
<PAGE>
Section 5.13 Covenants Regarding Formation of Subsidiaries and
-------------------------------------------------
Acquisitions. At the time of (i) any Acquisition permitted hereunder or (ii) the
- ------------
formation of any new Subsidiary of the Borrower or any of its Subsidiaries which
is permitted under this Agreement, the Borrower will, and will cause its
Subsidiaries, as appropriate, to (a) provide to the Lender (1) an executed
Negative Pledge Agreement for such new Subsidiary, in substantially the form of
Exhibit B attached hereto, and (2) an executed Subsidiary Guaranty for such new
- ---------
Subsidiary, in substantially the form of Exhibit C attached hereto, all of which
---------
shall constitute both Security Documents and Loan Documents for purposes of this
Agreement, as well as a loan certificate for such new Subsidiary, substantially
in the form of Exhibit A-2 attached hereto, together with appropriate
------------
attachments; and (b) provide revised financial projections for the remainder of
the fiscal year and for each subsequent year until the Maturity Date which
reflect such Acquisition or formation, certified by the chief financial officer
of the Borrower, together with a statement by such Person that no Default exists
or would be caused by such Acquisition or formation, and all other
documentation, including one or more opinions of counsel, which are satisfactory
to the Lender and which in its commercially reasonable opinion is appropriate
with respect to such Acquisition or the formation of such Subsidiary. Any
document, agreement or instrument executed or issued pursuant to this Section
5.13 shall be a "Loan Document" for purposes of this Agreement.
Section 5.14 Further Assurances.
------------------
The Borrower will promptly cure, or cause to be cured, defects in the
creation and issuance of the Notes and the execution and delivery of the Loan
Documents (including this Agreement), resulting from any act or failure to act
by the Borrower or any employee or officer hereof. The Borrower at its expense
will promptly execute and deliver to the Lender, or cause to be executed and
delivered to the Lender, all such other and further documents, agreements, and
instruments in compliance with or accomplishment of the covenants and agreements
of the Borrower in the Loan Documents, including this Agreement, or to correct
any omissions in the Loan Documents, or more fully state the obligations set out
herein or in any of the Loan Documents, or to make any recordings, to file any
notices, or to obtain any consents, all as may be necessary or appropriate in
connection therewith as may be reasonably requested.
Section 5.15 Environmental Laws.
------------------
The Borrower shall and shall cause each of the Subsidiaries to comply with
all Environmental Laws and, in the event of any "release" or "threatened
release" of any Hazardous Material onto, at or under the property of Borrower or
any of its Subsidiaries except for Hazardous Materials such as cleaning
solvents, pesticides and other materials used, produced, manufactured,
processed, treated, recycled, generated, stored, disposed of, managed or
otherwise handled in minimal amounts in the ordinary course of business in
compliance with all Environmental Laws which requires or may require
notification, response, assessment, investigation or remedial action pursuant to
any Environmental Law, notify the Lender in writing and all appropriate
Governmental Authorities thereof, and proceed with due diligence and, at the
cost and expense of Borrower or such Subsidiary, to respond appropriately, in
accordance with all requirements of the Environmental Laws.
Section 5.16 Lien Searches and Good Standing Certificates.
--------------------------------------------
The Borrower shall within thirty (30) days of the Agreement Date provide to
the Lender (a) UCC-1 lien and judgment search results with respect to the
Borrower and its Subsidiaries from the appropriate jurisdictions in the states
of Arizona, California, Colorado, Florida, Maryland, Massachusetts, Minnesota,
Missouri, New Jersey, New York, Ohio, Tennessee and Texas which UCC-1 lien and
judgment search results shall be in form and substance satisfactory to the
Lender and (b) Good Standing Certificates for the Borrower from the States of
Florida, Maryland, New Jersey and Tennessee.
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ARTICLE 6 Information Covenants.
---------------------
So long as any of the Obligations is outstanding and unpaid or the Borrower
has a right to borrow hereunder (whether or not the conditions precedent to
borrowing have been or can be fulfilled) and unless the Lender shall otherwise
consent in writing, the Borrower will furnish or cause to be furnished to the
Lender at the address provided in Section 9.1 hereof:
Section 6.1 Audited Annual Financial Statements and Information;
----------------------------------------------------
Certificate of No Default. Within ninety (90) days after the end of each fiscal
- -------------------------
year of the Borrower, the audited consolidated and consolidating balance sheets
of the Borrower and the its Subsidiaries, as of the end of such fiscal year and
the related audited consolidated and consolidating statements of operations of
the Borrower and the Subsidiaries, for such fiscal year and for the previous
fiscal year, the related audited consolidated and consolidating statements of
cash flow and stockholders' equity of the Borrower and the Subsidiaries, for
such fiscal year and for the previous fiscal year, which shall be accompanied by
an opinion of independent certified public accountants of recognized national
standing acceptable to the Lender, and management letter, if any, together with
a statement of such accountants that in connection with their audit, nothing
came to their attention that caused them to believe that the Borrower was not in
compliance with or was otherwise in Default under the terms, covenants,
provisions or conditions of Articles 7 and 8 hereof insofar as they relate to
accounting or financial matters.
Section 6.2 Quarterly Financial Statements and Information.
----------------------------------------------
Within forty-five (45) days after the last day of each of the first three (3)
fiscal quarters of the Borrower during any fiscal year, the balance sheets of
the Borrower on a consolidated and consolidating basis with its Subsidiaries, as
at the end of such fiscal quarter and as of the end of the preceding fiscal
year, and the related statements of operations and the related statements of
cash flows of the Borrower on a consolidated and consolidating basis with its
Subsidiaries, for such fiscal quarter and for the elapsed portion of the year
ended with the last day of such fiscal quarter, which shall set forth in
comparative form such figures as at the end of and for such fiscal quarter and
appropriate prior fiscal period, shall provide consolidated and consolidating
figures with respect to any Acquisitions consummated during such fiscal period,
and shall be certified by the chief financial officer of the Borrower to have
been prepared in accordance with GAAP and to present fairly in all material
respects the financial position of the Borrower on a consolidated and
consolidating basis with its Subsidiaries, as at the end of such fiscal period
and the results of operations for such fiscal period, and for the elapsed
portion of the year ended with the last day of such fiscal period, subject only
to normal year-end and audit adjustments.
Section 6.3 Performance Certificates.
------------------------
At the time the financial statements are furnished pursuant to Sections 6.1
and 6.2, a certificate of the president or chief financial officer of the
Borrower as to its financial performance, in substantially the form of Exhibit F
---------
attached hereto:
(a) setting forth as and at the end of such quarterly fiscal period or fiscal
year, as the case may be, the arithmetical calculations required to
establish (i) any adjustment to the Applicable Margin, as provided for in
Section 2.3(f) or the Applicable Percentage, as provided for in Section
2.4, and (ii) whether or not the Borrower was in compliance with the
requirements of Sections 7.9, 7.10, 7.11 and 7.12; and
(b) stating that no Default has occurred as at the end of such quarterly fiscal
period or year, as the case may be, or, if a Default has occurred,
disclosing each such Default and its nature, when it occurred, whether it
29
<PAGE>
is continuing and the steps being taken by the Borrower with respect to
such Default.
Section 6.4 Copies of Other Reports.
-----------------------
(a) Promptly upon receipt thereof, copies of all reports, if any, submitted to
the Borrower by the Borrower's independent public accountants regarding the
Borrower, including, without limitation, any management report prepared in
connection with the annual audit referred to in Section 6.1 hereof.
(b) Promptly after the sending thereof, copies of all statements, reports and
other information which the Borrower sends to any holder of its
Indebtedness or its securities or files with the Securities and Exchange
Commission or any national securities exchange.
(c) Annually, certificates of insurance indicating that the requirements of
Section 5.5 hereof remain satisfied for such fiscal year, upon the Lender's
request, together with copies of any new or replacement insurance policies
obtained during such year.
(d) Promptly after the preparation of the same, copies of all material reports
or financial information filed with any governmental agency, department,
bureau, division or other governmental authority or regulatory body, or
evidencing facts or containing information which could have a Materially
Adverse Effect.
(e) Promptly upon the Lender's request therefor, such information as the Lender
shall reasonably request from time to time in order to ascertain whether
the interest received by the Lender on the Notes has qualified, is
qualified, and will continue to be qualified for an interest income
exclusion.
(f) From time to time and promptly upon each request, such data, certificates,
reports, statements, opinions of counsel, documents, or further information
regarding the business, assets, liabilities, financial position,
projections, results of operations, or business prospects of the Borrower
as the Lender reasonably may request.
Section 6.5 Notice of Litigation and Other Matters.
--------------------------------------
Prompt notice of the following events after the Borrower has, or in the
exercise of reasonable diligence should have, received notice thereof:
(a) the commencement of all proceedings and investigations by or before any
governmental body and all actions and proceedings in any court or before
any arbitrator against, or to the extent known to the Borrower, in any
other way relating adversely to the Borrower or any Subsidiary of the
Borrower, officers, directors or principal shareholders, or any of their
respective properties, assets or businesses, but only to the extent the
recovery sought is more than $100,000;
(b) Any material adverse change with respect to the business, assets,
liabilities, financial position, results of operations, or business
prospects of the Borrower or any of its Subsidiaries other than changes in
the ordinary course of business the effects of which have not had a
Materially Adverse Effect;
(c) Any Default or Event of Default or the occurrence or non-occurrence of any
event which constitutes, or which with the passage of time or giving of
notice (or both) would constitute a default by the Borrower or any
30
<PAGE>
Subsidiary under any material agreement other than this Agreement to which
the Borrower or any Subsidiary is a party or by which its properties may be
bound, giving in each case the details thereof and specifying the action
proposed to be taken with respect thereto;
(d) The occurrence of any Reportable Event or a "prohibited transaction" (as
such term is defined in Section 406 of ERISA or Section 4975 of the Code)
with respect to any Plan of the Borrower, any of its Subsidiaries or any of
its ERISA Affiliates or the institution or threatened institution by the
Pension Benefit Guaranty Corporation of proceedings under ERISA to
terminate or to partially terminate any such Plan or the commencement or
threatened commencement of any litigation regarding any such Plan or naming
it or the Trustee of any such Plan with respect to such Plan; and
(e) The occurrence of any event subsequent to the Agreement Date which, if such
event had occurred prior to the Agreement Date, would have constituted an
exception to the representation and warranty in Sections 4.1(q) of this
Agreement.
ARTICLE 7 Negative Covenants.
------------------
So long as any of the Obligations is outstanding and unpaid or the Lender has
any obligation to make Advances or to issue Letters of Credit hereunder, and
unless the Lender shall otherwise consent in writing the Borrower hereby agrees
that:
Section 7.1 Indebtedness. The Borrower shall not, and shall not permit any
------------
of its Subsidiaries to, create, assume, incur, or otherwise become or remain
obligated in respect of, or permit to be outstanding, any Indebtedness or
liability on account of deposits or advances for borrowed money or for the
deferred purchase price of any property or services, except:
(a) the Obligations;
(b) Trade or accounts payable and/or similar obligations, and accrued
expenses, incurred in the ordinary course of business, other than for borrowed
money;
(c) Indebtedness expressly subordinated to the Obligations upon terms
approved in advance by the Lender, in writing;
(d) Indebtedness existing on the date of this Agreement which is reflected in
the financial statements delivered to the Lender in connection herewith;
(e) Indebtedness secured by Permitted Liens;
(f) Indebtedness of the Borrower or any of the Subsidiaries to the Borrower
or any other Subsidiary so long as such Indebtedness is unsecured;
(g) Capitalized Lease Obligations to leasing companies incurred in the
ordinary course of business, related to sales-type leases for vehicles sold;
(h) Other Capitalized Lease Obligations not included in Section 7.1(g) hereof
in an aggregate principal amount outstanding at any time not to exceed
$500,000;
31
<PAGE>
(i) Indebtedness under deferred compensation plans in an aggregate principal
amount outstanding at any time not to exceed $1,000,000;
(j) Other unsecured Indebtedness of the Borrower in an aggregate principal
amount outstanding at any time not to exceed $1,000,000; and
(k) Indebtedness in the form of Guaranties permitted by Section 7.5.
Section 7.2 Limitation on Liens. The Borrower shall not, and shall not
-------------------
permit any of its Subsidiaries to, create, assume, incur or permit to exist or
to be created, assumed, incurred or permitted to exist, directly or indirectly,
any Lien on any of its properties or assets, whether now owned or hereafter
acquired, except for Permitted Liens.
Section 7.3 Amendment and Waiver. The Borrower shall not, and shall
--------------------
not permit any of its Subsidiaries to, enter into any amendment of, or agree to
or accept or consent to any waiver of any of the material provisions of its
articles or certificate of incorporation, by-laws or partnership agreement, as
appropriate, which amendment or waiver is adverse to the interest of the Lender,
or any amendment of any document relating to any subordinated debt of the
Borrower or any of its Subsidiaries.
Section 7.4 Liquidation; Merger; Change in Name; Disposition of Assets
----------------------------------------------------------
The Borrower shall not, and shall not permit any of its Subsidiaries to, at
any time, without the prior written consent of the Lender:
(a) Disposition of Assets. The Borrower shall not, and shall not permit any
---------------------
of its Subsidiaries to, at any time sell, lease, abandon, transfer, assign,
swap, or otherwise dispose of any asset without the prior written consent of the
Lender other than (i) obsolete or immaterial assets disposed of in the ordinary
course of business; (ii) dispositions by the Borrower to a Subsidiary or between
two (2) Subsidiaries and (iii) dispositions by the Borrower and its Subsidiaries
in an aggregate amount not to exceed $250,000 in any fiscal year.
(b) Liquidation or Merger. The Borrower shall not, and shall not permit any
---------------------
of its Subsidiaries to, at any time liquidate or dissolve itself (or suffer any
liquidation or dissolution) or otherwise wind up, or enter into any merger,
other than (so long as no Default then exists or would be caused thereby) (i) a
merger among the Borrower and one or more of its Subsidiaries, provided the
Borrower is the surviving corporation, or (ii) a merger between or among two (2)
or more Subsidiaries of the Borrower, or (iii) an Acquisition permitted
hereunder effected by a merger in which the surviving corporation is the
Borrower, or is or becomes a Subsidiary of the Borrower.
(c) Change in Name. The Borrower shall not, and shall not permit any of its
--------------
Subsidiaries to, change its corporate name without giving the Lender thirty (30)
days prior written notice of its intention to do so and complying with all
reasonable requirements of the Lender in regard thereto.
Section 7.5 Limitation on Guaranties. The Borrower shall not, and
------------------------
shall not permit any of its Subsidiaries to, at any time Guaranty, assume, be
obligated with respect to, or permit to be outstanding any Guaranty of, any
obligation of any other Person other than (a) a guaranty by endorsement of
negotiable instruments for collection in the ordinary course of business, or (b)
guaranties of the Borrower or any of its Subsidiaries entered into in connection
with purchase money transactions with customers for the purchase of vehicles in
32
<PAGE>
the ordinary course of business of the Borrower or any of its Subsidiaries in an
aggregate principal amount not to exceed $20,000,000, or (c) other Guaranties in
an aggregate amount not to exceed $200,000.
Section 7.6 Investments and Acquisitions. The Borrower shall not, and
----------------------------
shall not permit any of its Subsidiaries to, make any loan or advance, or
otherwise acquire for consideration evidences of Indebtedness, Capital Stock or
other securities of any Person or other assets or property (other than assets or
property in the ordinary course of business), or make any Acquisition, except
that so long as no Default then exists or would be caused thereby:
(a) The Borrower and its Subsidiaries may, directly or through a brokerage
account (i) purchase marketable, direct obligations of the United States of
America, its agencies and instrumentalities maturing within three hundred
sixty-five (365) days of the date of purchase, (ii) purchase commercial
paper issued by corporations, each of which shall have a combined net worth
of at least $100 million and each of which conducts a substantial part of
its business in the United States of America, maturing within two hundred
seventy (270) days from the date of the original issue thereof, and rated
"P-2" or better by Moody's Investors Service, Inc., or any successor, or
"A-2" or better by Standard and Poor's Ratings Group, a division of McGraw
Hill, Inc., or any successor, and (iii) purchase repurchase agreements,
bankers' acceptances, and certificates of deposit maturing within three
hundred sixty-five (365) days of the date of purchase which are issued by,
or time deposits maintained with, a United States national or state bank
the deposits of which are insured by the Federal Deposit Insurance
Corporation or the Federal Savings and Loan Insurance Corporation and
having capital, surplus and undivided profits totaling more than $100
million and rated "A" or better by Moody's Investors Service, Inc., or any
successor, or Standard and Poor's Ratings Group, a division of McGraw Hill,
Inc., or any successor.
(b) Investments in Subsidiaries.
Section 7.7 Affiliate Transactions. Except as specifically provided
----------------------
herein (including, without limitation, Section 7.1, 7.6, 7.7 and 7.14 hereof)
and as may be described on Schedule 6 attached hereto, the Borrower shall not,
----------
and shall not permit any of its Subsidiaries to, at any time engage in any
transaction with an Affiliate, or make an assignment or other transfer of any of
its properties or assets to any Affiliate, on terms less advantageous to the
Borrower or such Subsidiary than would be the case if such transaction had been
effected with a non-Affiliate.
Section 7.8 Restricted Payments and Purchases. The Borrower shall not,
---------------------------------
and shall not permit any of its Subsidiaries to, directly or indirectly declare
or make any Restricted Payment or Restricted Purchase, or set aside any funds
for any such purpose, except that so long as no Default then exists or would be
caused thereby, the following transfers may be effected: (a) with respect to the
Borrower, dividends of an aggregate amount not to exceed fifty percent (50%) of
the Borrower's Net Income after taxes in any given year, as shown on the
Borrower's audited annual consolidated financial statements; and (b) with
respect to any of the Subsidiaries, any dividend paid solely to the Borrower.
Section 7.9 Leverage Ratio. As of the end of any fiscal quarter, the
--------------
Borrower shall not permit the Leverage Ratio to exceed 2.50:1.
Section 7.10 Capitalization Ratio. As of the end of any fiscal year,
--------------------
the Borrower shall not permit the Capitalization Ratio to exceed 0.50:1.
33
<PAGE>
Section 7.11 Minimum Tangible Net Worth. The Borrower shall not
--------------------------
permit the Tangible Net Worth at the end of each fiscal quarter during the term
of this Agreement to be less than $16,000,000 plus fifty percent (50%) of the
cumulative, positive Adjusted Net Income generated from July 1, 1997 to the end
of such fiscal quarter during which the computation of Tangible Net Worth is
being made.
Section 7.12 Fixed Charge Ratio. As of the end of any fiscal quarter,
------------------
the Borrower shall not permit the Fixed Charge Ratio to be less than 2.50:1.
Section 7.13 ERISA Liabilities. The Borrower shall not, and shall
-----------------
cause each of its ERISA Affiliates not to, (i) permit the assets of any of their
respective Plans to be less than the amount necessary to provide all accrued
benefits under such Plans, or (ii) enter into any Multiemployer Plan.
Section 7.14 No Limitation on Upstream Dividends by Subsidiaries.
---------------------------------------------------
The Borrower shall not permit any Subsidiary to enter into or agree, or
otherwise become subject, to any agreement, contract or other arrangement with
any Person pursuant to the terms of which (a) such Subsidiary is or would be
prohibited from or limited in declaring or paying any cash dividends or
distributions on any class of its Capital Stock or any other ownership interests
owned directly or indirectly by the Borrower or from making any other
distribution on account of any class of any such Capital Stock or ownership
interests (herein referred to as "Upstream Dividends") or (b) the declaration or
payment of Upstream Dividends by a Subsidiary to the Borrower or to another
Subsidiary, on an annual or cumulative or other basis, is or would be otherwise
limited or restricted.
ARTICLE 8 Default
-------
Section 8.1 Events of Default. Each of the following shall constitute
-----------------
an Event of Default, whatever the reason for such event and whether it shall be
voluntary or involuntary or be effected by operation of law or pursuant to any
judgment or order of any court or any order, rule, or regulation of any
governmental or non-governmental body:
(a) Any representation or warranty made under this Agreement or any other
Loan Document shall prove incorrect or misleading in any adverse material
respect when made or deemed to be made pursuant to Section 4.2 hereof; or
(b) The Borrower shall default in the payment of (i) any interest under any
of the Notes or fees or other amounts, unremedied for fifteen (15) days, payable
to the Lender under any of the Loan Documents, or any of them, when due, or
(ii) any principal under the Notes when due; or
(c) The Borrower shall default in the performance or observance of any
agreement or covenant contained in Article 6 or 7 hereof;
(d) The Borrower shall default in the performance or observance of any other
agreement or covenant contained in this Agreement not specifically referred to
elsewhere in this Section 8.1, and such Default shall not be cured to the
Lender's satisfaction within a period of thirty (30) days from the occurrence of
such Default;
34
<PAGE>
(e) There shall occur any default in the performance or observance of any
agreement or covenant or breach of any representation or warranty contained
in any of the Loan Documents (other than this Agreement or as otherwise
provided in Section 8.1 of this Agreement) by the Borrower, any of its
Subsidiaries, or any other obligor thereunder, which shall not be cured
within a period of thirty (30) days from the occurrence of such default; or
(f) There shall be entered and remain unstayed a decree or order for relief
in respect of the Borrower or any of the Borrower's Subsidiaries under Title 11
of the United States Code, as now constituted or hereafter amended, or any other
applicable Federal or state bankruptcy law or other similar law, or appointing a
receiver, liquidator, assignee, trustee, custodian, sequestrator or similar
official of the Borrower or any of the Borrower's Subsidiaries, or of any
substantial part of their respective properties; or ordering the winding-up or
liquidation of the affairs of the Borrower, or any of the Borrower's
Subsidiaries; or an involuntary petition shall be filed against the Borrower or
any of the Borrower's Subsidiaries and a temporary stay entered, and (i) such
petition and stay shall not be diligently contested, or (ii) any such petition
and stay shall continue undismissed for a period of sixty (60) consecutive days;
or
(g) The Borrower or any of the Borrower's Subsidiaries shall file a
petition, answer or consent seeking relief under Title 11 of the United States
Code, as now constituted or hereafter amended, or any other applicable Federal
or state bankruptcy law or other similar law, or the Borrower or any of the
Borrower's Subsidiaries shall consent to the institution of proceedings
thereunder or to the filing of any such petition or to the appointment or taking
of possession of a receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar official of the Borrower or any of the Borrower's
Subsidiaries or of any substantial part of their respective properties, or the
Borrower or any of the Borrower's Subsidiaries shall be adjudicated insolvent;
the Borrower shall suspend or discontinue its business; the Borrower or any of
the Borrower's Subsidiaries shall have concealed or removed any of its property
with the intent to hinder or defraud its creditors or shall have made a
fraudulent or preferential transfer under any applicable fraudulent conveyance
or bankruptcy law, or the Borrower or any of the Borrower's Subsidiaries shall
take any action in furtherance of any such action; or
(h) A judgment not covered by insurance shall be entered by any court
against the Borrower or any of the Borrower's Subsidiaries for the payment of
money which exceeds singly or in the aggregate with other such judgments,
$500,000, or a warrant of attachment or execution or similar process shall be
issued or levied against property of the Borrower or any of the Borrower's
Subsidiaries which, together with all other such property of the Borrower or any
of the Borrower's Subsidiaries subject to other such process, exceeds in value
$500,000 in the aggregate, and if, within thirty (30) days after the entry,
issue or levy thereof, such judgment, warrant or process shall not have been
paid or discharged or stayed pending appeal or removed to bond, or if, after the
expiration of any such stay, such judgment, warrant or process shall not have
been paid or discharged or removed to bond; or
(i) Any event shall occur which has a Materially Adverse Effect, which shall
not be cured within a period of forty-five (45) days from such occurrence;
(j) There shall be at any time any "accumulated funding deficiency," as
defined in ERISA or in Section 412 of the Code, with respect to any Plan
maintained by the Borrower or any of its Subsidiaries or any ERISA Affiliate, or
to which the Borrower or any of its Subsidiaries or any ERISA Affiliate has any
liabilities, or any trust created thereunder; or a trustee shall be appointed by
a United States District Court to administer any such Plan; or PBGC shall
institute proceedings to terminate any such Plan; or the Borrower or any of its
35
<PAGE>
Subsidiaries or any ERISA Affiliate shall incur any liability to PBGC in
connection with the termination of any such Plan; or any Plan or trust created
under any Plan of the Borrower or any of its Subsidiaries or any ERISA Affiliate
shall engage in a "prohibited transaction" (as such term is defined in Section
406 of ERISA or Section 4975 of the Code) which would subject any such Plan, any
trust created thereunder, any trustee or administrator thereof, or any party
dealing with any such Plan or trust to the tax or penalty on "prohibited
transactions" imposed by Section 502 of ERISA or Section 4975 of the Code; or
(k) There shall occur (i) any default under any other document, instrument
or agreement relating to any Indebtedness of the Borrower or any of the
Borrower's Subsidiaries having an aggregate principal amount exceeding $500,000;
or (ii) any event which directly or indirectly causes the Borrower or any of its
Subsidiaries to be required to offer to prepay any Indebtedness or which
directly or indirectly gives any holder of any Indebtedness of the Borrower or
any of its Subsidiaries the right to require the Borrower or any of its
Subsidiaries to prepay any such Indebtedness under any other document,
instrument or agreement relating to any Indebtedness of the Borrower or any of
the Borrower's Subsidiaries having an aggregate principal amount exceeding
$500,000; or (iii) any default under any Interest Rate Hedge Agreement having a
notional principal amount of $250,000 or more; or
(l) A proceeding shall be commenced by the Borrower or any of the Borrower's
Subsidiaries or any shareholder, or by any governmental authority having
jurisdiction over the Borrower or any of the Borrower's Subsidiaries or any
shareholder, seeking to establish the invalidity or unenforceability of any Loan
Document (exclusive of questions of interpretation of any provision thereof), or
the Borrower or any of the Borrower's Subsidiaries shall deny that it has any
liability or obligation for the payment of principal or interest purported to be
created under any Loan Document regardless of any changes in Law effecting the
enforceability of any Loan Document.
Section 8.2 Remedies. If an Event of Default shall have occurred and
--------
shall be continuing,
(a) With the exception of an Event of Default specified in Section 8.1(f) or
(g), the Lender shall have the right and option, in its sole discretion, to do
any one or more of the following: (i) terminate the Commitment; and (ii) declare
the principal of and interest on the Loans and the Notes, all other amounts owed
under this Agreement and the Notes, and all other Obligations to be forthwith
due and payable, whereupon all such amounts shall immediately become absolute
and due and payable, without presentment, demand, protest, or notice of any
kind, all of which are hereby expressly waived, anything in this Agreement or in
the Notes to the contrary notwithstanding, and whereupon all such amounts shall
be immediately due and payable, and the Commitment shall thereupon forthwith
terminate;
(b) Upon the occurrence and continuance of an Event of Default specified in
Section 8.1(f) or (g), such principal, interest, and other amounts and other
Obligations shall thereupon and concurrently therewith become absolute and due
and payable, and the Commitment shall forthwith terminate, all without any
action by the Lender or any holder of the Notes and without presentment, demand,
protest, or notice of any kind, all of which are hereby expressly waived,
anything in this Agreement or the Notes to the contrary notwithstanding;
(c) The Lender shall have the right and option to exercise all of the post-
default rights granted to it under the Loan Documents;
36
<PAGE>
(d) The Lender shall have the right and option to exercise all rights and
remedies available to it at law or in equity, including, without limitation, the
appointment of a receiver.
Section 8.3 Payments Subsequent to Declaration of Event of Default.
------------------------------------------------------
Subsequent to the acceleration of the Loans under Section 8.2 hereof,
payments and prepayments under this Agreement made to Lender or otherwise
received by such Person shall be distributed as follows: first, to the Lender's
-----
reasonable costs and expenses, if any, incurred in connection with the
collection of such payment or prepayment and all amounts under Section 11.2(b)
and (c); second, to the Lender for any fees hereunder or under any of the other
------
Loan Documents then due and payable; third, to the Lender on the basis of its
-----
unpaid principal amounts (except as provided in Section 2.2(e)), to the payment
of any unpaid interest which may have accrued on the Obligations; fourth, to the
------
Lender until all Loans have been paid in full; fifth, to the Lender, to the
-----
payment of any other unpaid Obligations; and sixth, to the Borrower or as
-----
otherwise required by law.
ARTICLE 9 Change in Circumstances
Affecting LIBOR Advances
------------------------
Section 9.1 LIBOR Basis Determination Inadequate. If with respect to
------------------------------------
any proposed LIBOR Advance for any Interest Period, the Lender determines that
deposits in dollars (in the applicable amount) are not being offered to the
Lender in the relevant market for such Interest Period, the Lender shall
forthwith give notice thereof to the Borrower, whereupon until the Lender
notifies the Borrower that the circumstances giving rise to such situation no
longer exist, the obligations of the Lender to make LIBOR Advances shall be
suspended.
Section 9.2 Illegality. If after the date hereof, the adoption of any
----------
Applicable Law, or any change in any Applicable Law (whether adopted before or
after the Agreement Date), or any change in interpretation or administration
thereof by any governmental authority, central bank or comparable agency charged
with the interpretation or administration thereof, or compliance by the Lender
with any directive (whether or not having the force of law) of any such
authority, central bank or comparable agency, shall make it unlawful or
impossible for the Lender to make, maintain or fund LIBOR Advances, the Lender
shall forthwith give notice thereof to the Borrower. Before giving any notice
pursuant to this Section 10.2, the Lender shall designate a different lending
office if such designation will avoid the need for giving such notice and will
not, in the sole judgment of the Lender, be otherwise materially disadvantageous
to the Lender. Upon receipt of such notice, notwithstanding anything contained
in Article 2 hereof, the Borrower shall repay in full the then outstanding
principal amount of each affected LIBOR Advance of the Lender, together with
accrued interest thereon and any reimbursement required under Section 2.10
hereof, on either (a) the last day of the then current Interest Period
applicable to such affected LIBOR Advances if the Lender may lawfully continue
to maintain and fund such LIBOR Advances to such day or (b) immediately if the
Lender may not lawfully continue to fund and maintain such affected LIBOR
Advances to such day. Concurrently with repaying each affected LIBOR Advance of
the Lender, notwithstanding anything contained in Article 2 or Article 3 hereof,
the Borrower shall borrow a Prime Rate Advance from the Lender, and the Lender
shall make such Advance in an amount such that the outstanding principal amount
of the affected Note or Notes held by such Lender shall equal the outstanding
principal amount of such Note or Notes immediately prior to such repayment.
37
<PAGE>
Section 9.3 Increased Costs.
---------------
(a) If after the date hereof, the adoption of any Applicable Law, or any change
in any Applicable Law (whether adopted before or after the Agreement Date), or
any interpretation or change in interpretation or administration thereof by any
governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof or compliance by any Lender with any
directive (whether or not having the force of law) of any such authority,
central bank or comparable agency:
(i) shall subject the Lender to any tax, duty or other charge with respect
to its obligation to make LIBOR Advances, or its LIBOR Advances, or shall
change the basis of taxation of payments to the Lender of the principal of
or interest on its LIBOR Advances or in respect of any other amounts due
under this Agreement, in respect of its LIBOR Advances or its obligation to
make LIBOR Advances (except for changes in the rate or method of
calculation of tax on the overall net income of the Lender); or
(ii) shall impose, modify or deem applicable any reserve (including,
without limitation, any imposed by the Board of Governors of the Federal
Reserve System, but excluding any included in an applicable LIBOR Reserve
Percentage), special deposit, capital adequacy, assessment or other
requirement or condition against assets of, deposits with or for the
account of, or commitments or credit extended by, any Lender or shall
impose on the Lender or the London interbank LIBOR market any other
condition affecting its obligation to make such LIBOR Advances or its LIBOR
Advances;
and the result of any of the foregoing is to increase the cost to the Lender of
making or maintaining any such LIBOR Advances, or to reduce the amount of any
sum received or receivable by the Lender under this Agreement or under any of
its Notes with respect thereto, then, on a date within five (5) days after
demand by the Lender, the Borrower agrees to pay to the Lender such additional
amount or amounts as will compensate the Lender for such increased costs or
reduction. The Lender will promptly notify the Borrower of any event of which
it has knowledge, occurring after the date hereof, which will entitle the Lender
to compensation pursuant to this Section 9.3 and will designate a different
lending office if such designation will avoid the need for, or reduce the amount
of, such compensation and will not, in the sole judgment of the Lender made in
good faith, be otherwise disadvantageous to the Lender.
(b) Upon claiming compensation under this Section 9.3 the Lender shall provide
the Borrower with a written certificate within forty-five (45) days of the
incurrence of such costs setting forth the additional amount or amounts to be
paid to it hereunder and calculations therefor in reasonable detail. Such
certificate shall be presumptively correct. In determining such amount, the
Lender may use any reasonable averaging and attribution methods. If the Lender
demands compensation under this Section 9.3, the Borrower may at any time, upon
at least five (5) Business Days' prior notice to the Lender, prepay in full the
then outstanding affected LIBOR Advances of the Lender, together with accrued
interest thereon to the date of prepayment, along with any reimbursement
required under Section 2.10 hereof. Concurrently with prepaying such LIBOR
Advances the Borrower shall borrow a Prime Rate Advance, or a LIBOR Advance not
so affected, from the Lender, and the Lender shall make such Advance in an
amount such that the outstanding principal amount of the affected Note or Notes
held by the Lender shall equal the outstanding principal amount of such Note or
Notes immediately prior to such prepayment.
38
<PAGE>
Section 9.4 Effect On Other Advances. If notice has been given
------------------------
pursuant to Section 9.1, 9.2 or 9.3 suspending the obligation of the Lender to
make any LIBOR Advance, or requiring LIBOR Advances of the Lender to be repaid
or prepaid, then, unless and until the Lender notifies the Borrower that the
circumstances giving rise to such repayment no longer apply, all Advances which
would otherwise be made by the Lender as the type of LIBOR Advances affected
shall, at the option of the Borrower, be made instead as Prime Rate Advances.
ARTICLE 10 Miscellaneous.
-------------
Section 10.1 Notices.
-------
(a) All notices and other communications required or permitted under this
Agreement shall be in writing and, if mailed by prepaid first-class mail or
certified mail, return receipt requested, at any time other than during a
general discontinuance of postal service due to strike, lockout or
otherwise, shall be deemed to have been received on the earlier of the date
shown on the receipt or three (3) Business Days after the official
postmarked date thereof and, if telecopied, shall be followed forthwith by
letter and shall be deemed to have been received on the next Business Day
following dispatch and acknowledgment of receipt by the recipient's
telecopy machine. In addition, notices hereunder may be delivered by hand
or overnight courier, in which event the notice shall be deemed effective
when delivered. All notices and other communications under this Agreement
shall be given to the parties hereto at the following addresses:
(i) If to the Borrower, to it at:
Metrotrans Corporation
777 Greenbelt Parkway
Griffin, Georgia 30223
Attn: Richard M. Bruno
Telecopy: (770) 229-1422
with a copy to:
Long, Aldridge & Norman
One Peachtree Center, Suite 5300
303 Peachtree Street, N.E.
Attn: Sherie Shortridge Holmes, Esq.
Telecopy: (404) 527-4198
(ii) If to the Lender, to it at:
NationsBank, N.A.
Atlanta Commercial Division
19th Floor
600 Peachtree Street, N.E.
Atlanta, Georgia 30308
Attn: David B. Jackson
Telecopy: (404) 607-6343
39
<PAGE>
with a copy to:
Powell, Goldstein, Frazer & Murphy LLP
191 Peachtree Street, N.E.
Sixteenth Floor
Atlanta, Georgia 30303
Attn: Cindy A. Brazell, Esq.
Telecopy: (404) 572-6999
(b) Any party hereto may change the address to which notices shall be directed
under this Section 10.1 by giving ten (10) days' written notice of such
change to the other parties.
Section 10.2 Expenses. The Borrower will promptly pay:
--------
(a) Upon closing of this Agreement, all reasonable out-of-pocket expenses
actually incurred by the Lender in connection with the preparation,
negotiation, execution, and delivery of this Agreement, the Note and the
other Loan Documents, including all post-closing matters, and the
transactions contemplated hereunder and thereunder and the making of the
initial Advance hereunder whether or not the initial Advance is made,
including, but not limited to, title and other insurance premiums,
recording fees and intangible, documentary stamp and other taxes and the
reasonable attorneys' fees and disbursements of external counsel for the
Lender;
(b) All reasonable out-of-pocket expenses actually incurred by the Lender in
connection with the administration of the Loan and the Loan Documents in
accordance with the provisions thereof, the restructuring, refinancing and
"work-out" of the transaction herein contemplated, and the preparation,
negotiation, execution, and delivery of any waiver, amendment, or consent
by the Lender relating to this Agreement or the other Loan Documents,
including, but not limited to, the reasonable attorneys' fees and
disbursements of external counsel for the Lender; and
(c) All reasonable costs and reasonable out-of-pocket expenses of obtaining
performance under this Agreement or the other Loan Documents and all
reasonable costs and reasonable out-of-pocket expenses of collection if
default is made in the payment of the Note, which in each case shall
include reasonable fees and expenses of external counsel for the Lender
actually incurred by the Lender.
Section 10.3 Waivers. The rights and remedies of the Lender under
-------
this Agreement and the other Loan Documents shall be cumulative and not
exclusive of any rights or remedies which it would otherwise have. No failure or
delay by the Lender in exercising any right shall operate as a waiver of it. The
Lender expressly reserves the right to require strict compliance with the terms
of this Agreement in connection with any funding of a request for an Advance. In
the event the Lender decides to fund a request for an Advance at a time when the
Borrower is not in strict compliance with the terms of this Agreement, such
decision by the Lender shall not be deemed to constitute an undertaking by the
Lender to fund any further requests for Advances or preclude the Lender from
exercising any rights available to the Lender under the Loan Documents or at law
or equity. Any waiver or indulgence granted by the Lender shall not constitute a
modification of this Agreement, except to the extent expressly provided in such
waiver or indulgence, or constitute a course of dealing by the Lender at
variance with the terms of this Agreement such as to require further notice by
the Lender of the Lender's intent to require strict adherence to the terms of
40
<PAGE>
this Agreement in the future. Any such actions shall not in any way affect the
ability of the Lender, in its sole discretion, to exercise any rights available
to it under this Agreement or under any other agreement, whether or not the
Lender is a party, relating to the Borrower.
Section 10.4 Set-Off. In addition to any rights now or hereafter
-------
granted under Applicable Law and not by way of limitation of any such rights,
upon the occurrence and during the continuance of a Default or an Event of
Default, the Lender and any subsequent holder of the Notes are hereby authorized
by the Borrower at any time or from time to time, without notice to the
Borrower, or to any other Person, any such notice being hereby expressly waived,
to set-off, to appropriate and to apply any and all deposits (general or
special, time or demand, including, but not limited to, Indebtedness evidenced
by certificates of deposit, in each case whether matured or unmatured) and any
other Indebtedness at any time held or owing by the Lender or such holder to or
for the credit or the account of the Borrower, as the case may be, against and
on account of the obligations and liabilities of the Borrower, as the case may
be, to the Lender or such holder under this Agreement, the Notes, and any other
Loan Document, including, but not limited to, all claims of any nature or
description arising out of or connected with this Agreement, the Notes, or any
other Loan Document, irrespective of whether or not (a) the Lender or the holder
of the Notes shall have made any demand hereunder or (b) the Lender shall have
declared the principal of and interest on the Loan and the Notes and other
amounts due hereunder to be due and payable as permitted by Section 8.2 hereof
and although said obligations and liabilities, or any of them, shall be
contingent or unmatured.
Section 10.5 Assignment.
----------
(a) The Borrower may not assign or transfer any of its rights or obligations
hereunder or under the Notes without the prior written consent of the
Lender.
(b) The Lender may at any time grant participations in or, with the Borrower's
consent prior to a Default hereunder, sell, assign, transfer, or otherwise
dispose of, all or any portion of the Indebtedness of the Borrower
outstanding pursuant to this Agreement and any Note; provided, that the
--------------
costs and expenses of any such assignee or participant in connection with
the entering into of such assignment or participation shall be the sole
responsibility of such assignee or participant. The Borrower hereby agrees
that any holder of a participation in, and any assignee or transferee of,
all or any portion of any amount owed by the Borrower under this Agreement
and any Note (i) shall be entitled to the benefits of the provisions of
this Agreement as the Lender hereunder, and (ii) may exercise any and all
rights of banker's lien, set-off, or counterclaim with respect to any and
all amounts owed by the Borrower to such assignee, transferee, or holder as
fully as if such assignee, transferee, or holder had made the Loans in the
amount of the obligation in which it holds a participation or which is
assigned or transferred to it.
(c) Except as specifically set forth in Section 9.5(b) hereof, nothing in this
Agreement or the Notes, expressed or implied, is intended to or shall
confer on any Person other than the respective parties hereto and thereto
and their successors and assignees permitted hereunder and thereunder any
benefit or any legal or equitable right, remedy, or other claim under this
Agreement or the Notes.
Section 10.6 Counterparts. This Agreement may be executed in any
------------
number of counterparts, each of which shall be deemed to be an original, but all
such separate counterparts shall together constitute but one and the same
instrument.
41
<PAGE>
Section 10.7 GOVERNING LAW. THE PARTIES HEREBY ACKNOWLEDGE AND AGREE
-------------
THAT (A) THIS LOAN AGREEMENT AND THE NOTES HAVE, IN PART, BEEN NEGOTIATED IN,
EXECUTED AND DELIVERED IN, AND WILL PARTIALLY BE PERFORMED IN, THE STATE OF
GEORGIA, AND (B) ALL ADVANCES UNDER THE LOAN WILL BE MADE IN GEORGIA, AND (C)
THIS AGREEMENT AND THE NOTES SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED
BY THE LAWS OF THE STATE OF GEORGIA.
Section 10.8 Severability. Any provision of this Agreement which is
------------
prohibited or unenforceable shall be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions
hereof in that jurisdiction or affecting the validity or enforceability of such
provision in any other jurisdiction.
Section 10.9 Interest and Charges. The Borrower and the Lender hereby
--------------------
agree that (a) the only charge imposed by the Lender upon the Borrower for the
use of money in connection with the Loans is and shall be the interest expressed
herein, as provided in Section 2.3 hereof and in the Notes, and the loan fee
described in Section 2.4(a) hereof and (b) all other charges imposed by the
Lender upon the Borrower in connection with the Loans, including, without
limitation, any fees, default and late charges, and charges for taxes and
reserve requirements, are and shall be deemed to be charges made to compensate
the Lender for administrative services and costs, and other services and costs
performed and incurred, and to be performed and incurred, by the Lender in
connection with the Loans, and shall under no circumstances be deemed to be
charges for the use of money. All charges referred to in herein shall be fully
earned when due and non-refundable when paid.
Section 10.10 Headings. Headings used in this Agreement are for
--------
convenience only and shall not be used in connection with the interpretation of
any provision hereof.
Section 10.11 Pronouns. The pronouns used herein shall include, when
--------
appropriate, either gender and both singular and plural, and the grammatical
construction of sentences shall conform thereto.
Section 10.12 Entire Agreement; Amendments. This Agreement and the
----------------------------
other Loan Documents represent the entire agreement between the Borrower and the
Lender with respect to the subject matter of this transaction. No amendment or
modification of the terms and provisions of this Agreement shall be effective
unless in writing and signed by the Lender and the Borrower.
Section 10.13 Mediation. The Lender and the Borrower agree that any
---------
and all disputes arising out of or related to the execution of this Agreement or
other Loan Documents arising from this Agreement, or the performance thereunder
shall be submitted to non-binding mediation. The cost of the mediation is to be
shared equally by the Lender and the Borrower. The parties further agree as
follows:
1. They each will make a good faith effort to resolve any and all
disputes pursuant to the mediation provision.
2. They each will have parties present at the mediation session who have
authority to resolve any pending disputes between the parties.
3. They each will devote and set aside whatever time is needed to seek a
resolution of any disputes between the parties.
42
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement or caused
it to be executed under seal by their duly authorized officers, all as of the
day and year first above written.
BORROWER: METROTRANS CORPORATION
By:
------------------------
Name:
-------------------
Title:
------------------
[CORPORATE SEAL]
LENDER: NATIONSBANK, N.A.
By:
------------------------
David B. Jackson
Senior Vice President
43
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