LOAN AGREEMENT

 

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                                                                    EXHIBIT 10.1

 

 

                                 LOAN AGREEMENT

 

 

 

         THIS LOAN AGREEMENT ("Loan Agreement") is made this 16th day of June,

2005, by and among PINNACLE AIRLINES, INC., a Georgia corporation whose address

is 1689 Nonconnah Boulevard, Suite 111, Memphis, Tennessee 38132 (the

"Borrower"), PINNACLE AIRLINES CORP., a Delaware corporation whose address is

1689 Nonconnah Boulevard, Suite 111, Memphis, Tennessee 38132 (the "Guarantor"),

and FIRST TENNESSEE BANK NATIONAL ASSOCIATION, a national banking association

organized and existing under the statutes of the United States of America, with

offices at 165 Madison Avenue, Memphis, Tennessee 38103 (hereinafter referred to

as the "Bank").

 

                                Recitals of Fact

 

         Borrower has requested that the Bank commit to make loans and advances

to it on a revolving credit basis in an amount not to exceed at any one time

outstanding the principal sum of SEVENTEEN MILLION Dollars ($17,000,000.00).

Borrower has also requested that the Bank create a letter of credit sub-facility

providing for the issuance of letters of credit from time to time in a maximum

aggregate amount of Two Million Dollars ($2,000,000.00) at any one time

outstanding; provided, however, that the amount of indebtedness outstanding

under the revolving credit loan described herein and the aggregate amount of

indebtedness outstanding under letters of credit outstanding at any one time

shall never exceed Seventeen Million Dollars ($17,000,000.00). The loans

provided herein are to be used for short-term working capital purposes and for

pursuit and acquisition of Airline Services Agreements ("ASAs"). The Bank has

agreed to make such loans and advances on the terms and conditions herein set

forth.

 

         NOW, THEREFORE, incorporating the Recitals of Fact set forth above and

in consideration of the mutual agreements herein contained, the parties agree as

follows:

 

                                    AGREEMENTS

 

SECTION 1: DEFINITIONS AND ACCOUNTING TERMS

 

         1.1 CERTAIN DEFINED TERMS. For the purposes of this Loan Agreement, the

following terms shall have the following meanings (such meanings to be

applicable equally to both the singular and plural forms of such terms) unless

the context otherwise requires:

 

         "Acceptable Accounts" shall mean Accounts Receivable on which the Bank

has a negative pledge; (b) which arise from goods theretofore sold and delivered

or services theretofore rendered to the Account Debtor; (c) with respect to

which no setoffs, counterclaims or defenses are claimed by the Account Debtor;

and (d) which do not remain unpaid more than ninety (90) days after the date of

the related invoice.

 

         "Acceptable Inventory" shall mean Borrower's Inventory (a) in which the

Bank holds a valid, perfected first security interest; and (b) which, in the

reasonable judgment of the Bank at the time a Revolving Credit Loan advance is

requested based upon such Inventory and at all times thereafter while a Loan

advance remains outstanding based upon such Inventory, is in good, undamaged

 

 

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condition and is not obsolete or otherwise unmarketable in the ordinary course

of business as a result of age, type, category, quality and/or quantity.

 

         "Account Debtor" shall mean any Person which is now or hereafter

obligated or indebted to Borrower on any Account Receivable.

 

         "Accounts Receivable" shall mean all amounts owed to the Borrower on

account of sales, leases or rentals of goods or services rendered in the

ordinary course of the Borrower's trade or business, net of (i) any reserve for

bad debt, (ii) unearned interest, discounts or finance charges, and (iii)

deposits and advance payments made by Account Debtors (including, but not

limited to, items listed on Borrower's financial statement as Deferred Sales).

 

         "Base Rate" means the base commercial rate of interest established from

time to time by the Bank. The Base Rate is one of several interest rate indices

employed by the Bank. The Borrower acknowledges that the Bank has made, and may

hereafter make, loans bearing interest at rates which are lower and higher than

the Base Rate.

 

         "Borrowing Base" is the limitation on the aggregate Revolving Credit

Loan indebtedness which may be outstanding at any time during the term of this

Agreement. The Borrowing Base is the sum of (a) cash and marketable securities,

plus (b) eighty percent (80%) of Acceptable Accounts, plus (c) forty percent

(40%) of the market value appraisal of Acceptable Inventory, minus (d) accounts

payable and accrued expenses.

 

         "Business day" means a banking business day of the Bank.

 

         "Capital expenditure" means any expenditure for the acquisition of any

asset, tangible or intangible, which under generally accepted accounting

principles is deemed a capital asset, including, without limitation, real

estate, buildings, fixtures, machinery and equipment, and furniture, including

the acquisition by a lease which under generally accepted accounting principles

must be treated as a capital asset.

 

         "Closing Date" means the date set out in the first paragraph of this

Loan Agreement.

 

         "Committed Amount" means the amount of the Bank's commitment to lend as

provided in Section 2.1 hereof.

 

         "Equipment" means furniture, furnishings, fixtures, machinery, tools

and equipment of every kind and nature, movable or immovable, wherever located,

and all parts thereof and replacements, additions, accessions and substitutions

thereto, but excluding aircraft.

 

         "Environmental Laws" means all local, state or federal laws, rules or

regulations pertaining to environmental regulation, contamination or cleanup,

including, without limitation, the Comprehensive Environmental Response,

Compensation and Liability Act of 1980, the Resource Conservation and Recovery

Act of 1976 or any state lien or superlien or environmental cleanup statutes.

 

         "Event of Default" has the meaning assigned to that phrase in Section

8.

 

         "Guarantor" shall mean Pinnacle Airlines Corp., a Delaware corporation.

 

 

 

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         "Guaranty Agreement" shall mean the guaranty agreement executed by the

Guarantor, of even date herewith, guaranteeing the payment of indebtednesses of

Borrower not to exceed SEVENTEEN MILLION DOLLARS ($17,000,000.00).

 

         "Hazardous Substances" shall mean and include all hazardous and toxic

substances, wastes or materials, any pollutants or contaminants (including,

without limitation, asbestos and raw materials which include hazardous

constituents), or any other similar substances or materials which are included

under or regulated by any Environmental Laws.

 

         "Inventory" shall have the meaning ascribed to it in the Security

Agreement (hereinafter defined).

 

         "Letter of Credit" shall mean any standby letter or letters of credit

as described and issued pursuant to the provisions of Section 2 of this Loan

Agreement, as same may be modified, renewed, or extended.

 

         "Lien" means any interest in Property securing an obligation owed to,

or a claim by, a Person other than the owner of the Property, whether such

interest is based on the common law, statute or contract, and including but not

limited to the security interest or lien arising from a deed of trust, mortgage,

encumbrance, pledge, conditional sale or trust receipt or a lease, consignment

or bailment for security purposes, and including but not limited to

reservations, exceptions, encroachments, easements, rights-of-way, covenants,

conditions, restrictions, leases, and other title exceptions and encumbrances

affecting Property. For the purposes of this Agreement, the Borrower shall be

deemed to be the owner of any Property which it has acquired or holds subject to

a conditional sale agreement, lease, financing lease or other arrangement

pursuant to which title to the Property has been retained by or is vested in

some other Person.

 

         "Loan Agreement" means this Loan Agreement between the Borrower and the

Bank.

 

         "Maximum Rate" means the lesser of: (a) the Base Rate plus four percent

(4%) per annum; or (b) the maximum variable contract rate of interest which the

Bank may lawfully charge under applicable statutes and laws from time to time in

effect.

 

         "Note" means the Revolving Credit Note executed by the Borrower to the

Bank, of even date herewith, as such note may be modified, renewed or extended

from time to time; and any other note or notes executed at any time to evidence

the indebtedness under this Loan Agreement, in whole or in part, and any

renewals, modifications and extensions thereof, in whole or in part. The term

"Note" as used herein shall also collectively include any Letter of Credit

issued by the Bank pursuant to Section 2.6 hereof, as such Letters of Credit may

be modified, renewed or extended from time to time, and any additional note

issued pursuant to the provisions of Section 2.4 hereof, related to certain

borrowings used to acquire additional ASAs.

 

          "Permitted Encumbrances" shall mean and include:

 

         (a) liens for taxes, assessments or similar governmental charges not in

default or being contested in good faith by appropriate proceedings;

 

 

 

 

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         (b) workmen's, vendors', mechanics' and materialmen's liens and other

liens imposed by law incurred in the ordinary course of business, and easements

and encumbrances which are not substantial in character or amount and do not

materially detract from the value or interfere with the intended use of the

properties subject thereto and affected thereby;

 

         (c) liens in respect of pledges or deposits under social security laws,

workmen's compensation laws, unemployment insurance or similar legislation and

in respect of pledges or deposits to secure bids, tenders, contracts (other than

contracts for the payment of money), leases or statutory obligations;

 

         (d) any liens and security interests specifically listed and described

in EXHIBIT "A" hereto attached; and

 

         (e) such other liens and encumbrances to which Bank shall consent in

writing.

 

         "Person" means an individual, partnership, corporation, trust,

unincorporated organization, association, joint venture or a government or

agency or political subdivision thereof.

 

         "Property" means any interest in any kind of property or asset, whether

real, personal or mixed, tangible or intangible.

 

         "Revolving Credit Advances" means advances of principal on the

Revolving Credit Loan by the Bank under the terms of this Loan Agreement to the

Borrower during the term of the Revolving Credit Loan pursuant to Section 3.1.

 

         "Revolving Credit Loan" means the Borrower's revolving credit

indebtedness to the Bank pursuant to Section 2 of this Loan Agreement.

 

         "Revolving Credit Note" means the Note as described in Section 2.3

hereof.

 

         "Security Agreement" means the Security Agreement pursuant to which

Borrower has pledged accounts receivable and inventory and certain machinery and

equipment to the Bank, referred to in Section 4.1(c) hereof.

 

         "Termination Date of Revolving Credit Loan" shall mean the earlier of

(a) June 16, 2006, or in the event that the Bank and Borrower shall hereafter

mutually agree in writing that the Revolving Credit Loan and the Bank's

commitment hereunder shall be extended to another date, and the Note shall be

modified or amended to reflect such extension, such other date mutually agreed

upon between Bank and Borrower to which the Bank's commitment shall have been

extended, or (b) the date as of which Borrower shall have terminated the Bank's

commitment under the provisions of Section 2.5 hereof.

 

         "Working Capital" means the amount by which Borrower's current assets

exceed Borrower's current liabilities, all as determined in accordance with

generally accepted accounting principles, applied on a consistent basis.

 

         1.2 ACCOUNTING TERMS. All accounting terms not specifically defined

herein shall be construed in accordance with generally accepted accounting

principles consistent with those applied in

 

 

 

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the preparation of the financial statements required to be delivered from

time to time pursuant to Section 6.5 hereof.

 

SECTION 2: COMMITMENT, FUNDING AND TERMS OF REVOLVING CREDIT LOAN; LETTERS OF

           CREDIT

 

         2.1 THE COMMITMENT. Subject to the terms and conditions herein set out,

Bank agrees and commits to make loan advances to the Borrower from time to time,

from the Closing Date until the Termination Date of Revolving Credit Loan, in an

aggregate principal amount not to exceed, at any one time outstanding, the

lesser of (a) Seventeen Million and 00/100 Dollars ($17,000,000.00) or (b) the

Borrower's Borrowing Base, as defined in Section 1.

 

         2.2 FUNDING THE REVOLVING CREDIT LOAN. Each loan advance hereunder

shall be made upon the written request of the Borrower to the Bank, specifying

the date and amount thereof. All advances hereunder shall be made by depositing

the same to the checking account of Borrower at the Bank.

 

         2.3 THE REVOLVING CREDIT NOTE AND INTEREST. The Revolving Credit Loan

shall be evidenced by one (1) promissory note of the Borrower, payable to the

order of the Bank in the principal amount of Seventeen Million and 00/100

Dollars ($17,000,000.00), in form substantially the same as the copy of the

Revolving Credit Note attached hereto as EXHIBIT "B." The entire principal

amount of the Loan shall be due and payable on the Termination Date of Revolving

Credit Loan. The unpaid principal balances of the Revolving Credit Loan shall

bear interest from the Closing Date on disbursed and unpaid principal balances

as provided in the Revolving Credit Note; provided, however, that the rate of

interest on the Revolving Credit Loan never be more than the maximum effective

variable contract rate which may be charged by the Bank under applicable law

from time to time in effect. Said interest shall be payable monthly on the first

day of each month after the Closing Date, commencing July 1, 2005, with the

final installment of interest, together with the entire outstanding principal

balance of the Revolving Credit Loan, being due and payable on the Termination

Date of Revolving Credit Loan.

 

         2.4 SPECIAL PROVISIONS RELATED TO REVOLVING CREDIT LOAN ADVANCES FOR

THE ACQUISITION OF ASAS. To the extent that Borrower shall intend to use the

proceeds of any advance under the Revolving Credit Loan for the pursuit and

acquisition of additional ASAs, Borrower shall give Bank prior written notice of

such use and Borrower and Bank shall, at the time of such requested advance,

enter into a promissory note or notes to document such advances and to provide

for the amortization of such advances on terms and over a period which are

acceptable to Bank.

 

         2.5 COMMITMENT FEES.

 

         (a) On the Closing Date, the Borrower agrees to pay to the Bank a

commitment fee in the amount of Sixty-Three Thousand Seven Hundred Fifty Dollars

($63,750.00), in consideration of the Bank's agreement to make funds available

to Borrower under the terms and provisions hereof from the Closing Date until

the initial Termination Date of Revolving Credit Loan specified in Section 1

hereof. Borrower agrees that this commitment fee is fair and reasonable

considering the condition of the money market, the creditworthiness of Borrower,

the interest rate to be paid, and the nature of the security for the Loan. In

the event that Borrower and Bank shall hereafter mutually agree to extend the

 

 

 

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term of the Bank's commitment hereunder, they may also agree at that time as to

an additional commitment fee to be paid for such further commitment by the Bank,

but not to exceed the maximum permitted by applicable law.

 

         (b) The Borrower further agrees to pay a quarterly one-quarter per cent

(0.25%) fee on the unused portion of the Committed Amount, calculated quarterly,

in arrears, each June 30, September 30, December 31, and March 31, hereafter.

 

         2.6 PREPAYMENTS OR TERMINATION OF THE REVOLVING CREDIT LOAN. The

Borrower may, at its option, from time to time, subject to the terms and

conditions hereof, without penalty, borrow, repay and reborrow amounts under the

Revolving Credit Loan. By notice to the Bank in writing, Borrower shall be

entitled to terminate the Bank's commitment to make further advances on the

Revolving Credit Loan; and provided that no Event of Default shall have

occurred, that the Revolving Credit Loan and all interest thereon shall have

been paid in full, and there are no Letters of Credit outstanding, Bank shall

thereupon release its security interest in all of Borrower's Collateral.

 

         2.7 LETTERS OF CREDIT. The Bank agrees, on the terms and conditions

hereinafter set forth, to issue standby letters of credit in U.S. Dollars for

the account of Borrower from time to time on any Business Day during the period

from the Closing Date until thirty (30) days before the Termination Date of

Revolving Credit Loan in an aggregate amount of the lesser of: (a) Two Million

Dollars ($2,000,000.00) at any one time outstanding; or (b) the then-outstanding

unused portion of the Committed Amount. To the extent that Borrower may request

issuance of a Letter of Credit pursuant to the provisions of this Section 2, the

Bank's Committed Amount shall be reduced by the principal amount of such Letter

of Credit as if such Letter of Credit was a revolving credit advance. In no

event shall the aggregate principal amount of revolving credit advances and

Letters of Credit at any one time outstanding ever exceed Seventeen Million

Dollars ($17,000,000.00). No such Letter of Credit shall have an expiration date

(including all rights of the Borrower or the beneficiary to require renewal)

later than thirty (30) days before the Termination Date of Revolving Credit

Loan, but each Letter of Credit may by its terms be renewable annually upon a

written notice (a "Notice of Renewal") given to the Bank on or prior to any date

for notice of renewal set forth in such Letter of Credit but in any event at

least ten (10) Business Days prior to the date of the proposed renewal of such

Letter of Credit and upon fulfillment of the applicable conditions set forth

herein, unless the Bank has notified the Borrower on or prior to the date for

notice of termination set forth in such letter of credit but in any event at

least thirty (30) Business Days prior to the date of automatic renewal of its

election not to renew such letter of credit (a "Notice of Termination");

provided that the terms of each Letter of Credit that is automatically renewable

annually shall (a) require the Bank to give the beneficiary named in such Letter

of Credit notice of any Notice of Termination, (b) permit such beneficiary, upon

receipt of such notice, to draw under such Letter of Credit prior to the date

such Letter of Credit otherwise would have been automatically renewed and (c)

not permit the expiration date (after giving effect to any renewal) of such

letter of credit in any event to be extended to a date later than thirty (30)

days before the Termination Date of Revolving Credit Loan. If either a Notice of

Renewal is not given by the Bank or a Notice of Termination is given by the Bank

pursuant to the immediately preceding sentence, such Letter of Credit shall

expire on the date on which it otherwise would have been automatically renewed.

Within the limits of the Committed Amount, and subject to the limits referred to

herein, the Borrower may request the issuance of Letters of Credit under this

section, repay any Letter of Credit loan resulting from drawings thereunder, and

request the issuance of additional Letters of Credit under this section. Should

Borrower terminate the Revolving Credit Loan prior to the Termination Date of

 

 

 

 

 

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Revolving Credit Loan and desire to continue any then-outstanding Letters of

Credit, Borrower shall be permitted to cash collateralize any remaining

outstanding Letters of Credit until the stated expiration or termination date of

such Letter of Credit.

 

         2.8 ISSUANCE OF THE LETTERS OF CREDIT. Each Letter of Credit shall be

issued upon notice, given not later than 12:00 p.m. (Memphis, Tennessee time) on

the fifth Business Day prior to the date of the proposed issuance of such Letter

of Credit, by a Borrower to the Bank. Each such notice of issuance of a Letter

of Credit ("Notice of Issuance") shall be by telephone, confirmed immediately in

writing, or telecopier or electronic communication, specifying therein the

requested (A) date of such issuance (which shall be a Business Day), (B) amount

of such Letter of Credit (which shall not be less than $1,000.00), (C)

expiration date of such Letter of Credit, (D) name and address of the

beneficiary of such Letter of Credit, and (E) form of such Letter of Credit, and

shall be accompanied by such application and agreement for Letter of Credit as

the Bank may specify to Borrower for use in connection with such Letter of

Credit ("Letter of Credit Agreement"). If (a) the requested form of such Letter

of Credit is acceptable to the Bank in its sole discretion, Bank will, upon

fulfillment of the applicable conditions referred to herein, make such Letter of

Credit available to the Borrower at its office referred to in the first

paragraph hereof or as otherwise agreed with Borrower in connection with such

issuance. In the event and to the extent that the provisions of any Letter of

Credit Agreement shall conflict with this Loan Agreement, the provisions of this

Loan Agreement shall govern.

 

         2.9 DRAWING AND REIMBURSEMENT. The payment by Bank of a draft drawn

under any Letter of Credit shall constitute for all purposes of this Loan

Agreement the making by the Bank of a Letter of Credit loan, which shall be

deemed a revolving credit advance in the amount of such draft.

 

         2.10 LETTER OF CREDIT FEES. The Borrower agrees to pay to the Bank: (a)

a preparation and issuance fee in the amount of One Hundred Twenty-Five Dollars

($125.00) for each Letter of Credit requested hereunder; and (b) an amendment

fee of Sixty-Five Dollars ($65.00) for any subsequent amendments to issued

Letters of Credit, including, but not limited to, renewals, extensions, and

modifications. Borrower further agrees to pay to the Bank an underwriting fee of

one and one-half per cent (1.5%) per annum, payable on the first (1st) day of

each June hereafter on the principal amount of each outstanding Letter of Credit

Borrower agrees that these Letter of Credit preparation, issuance, amendment,

and underwriting fees are fair and reasonable considering the condition of the

money market, the creditworthiness of Borrower, the interest rate to be paid,

and the nature of the security for the Letters of Credit.

 

         2.11 APPLICABILITY OF ISP98. Unless otherwise agreed by the Bank and

the Borrower when a Letter of Credit is issued, the rules of the "International

Standby Practices 1998" published by the Institute of International Banking Law

& Practice (or such later version thereof as may be in effect at the time of

issuance) shall apply to each Letter of Credit.

 

         2.12 WAIVER OF RIGHT OF SET-OFF. The Bank hereby waives all rights of

set off (common law and otherwise) against funds of the Borrower on deposit with

the Bank (except for cash proceeds of collateral securing the Borrower's

obligations to the Bank as described herein).

 

 

 

 

 

 

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SECTION 3: REQUIRED PAYMENTS, PLACE OF PAYMENT, ETC.

 

         3.1 REQUIRED REPAYMENTS. In the event that the outstanding principal

balance of the Revolving Credit Loan shall at any time exceed the Borrower's

Borrowing Base, the Borrower will immediately upon discovery of the existence of

such excess borrowings, make a principal payment which will reduce the

outstanding principal balance of the Revolving Credit Loan to an amount which

does not exceed the Borrowing Base.

 

         3.2 PLACE OF PAYMENTS. All payments of principal and interest on the

Revolving Credit Loan and all payments of fees required hereunder shall be made

to the Bank, at its address listed in Section 9.2 of this Agreement in

immediately available funds.

 

         3.3 PAYMENT ON NON-BUSINESS DAYS. Whenever any payment of principal,

interest or fees to be made on the indebtednesses evidenced by the Note shall

fall due on a Saturday, Sunday or public holiday under the laws of the State of

Tennessee, such payment shall be made on the next succeeding business day.

 

SECTION 4: CONDITIONS OF LENDING

 

         4.1 CONDITIONS PRECEDENT TO CLOSING AND FUNDING INITIAL ADVANCE. The

obligation of the Bank to fund the initial Revolving Credit Loan Advance

hereunder is subject to the condition precedent that the Bank shall have

received, on or before the Closing Date (unless otherwise provided herein), all

of the following in form and substance satisfactory to the Bank:

 

         (a) This Loan Agreement.

 

         (b) Revolving Credit Note (the "Revolving Credit Note") from the

Borrower payable to the order of the Bank in the principal amount of Seventeen

Million and 00/100 Dollars ($17,000,000.00).

 

         (c) The Security Agreement (the "Security Agreement") of the Borrower,

pledging all of its inventory, general intangibles, machinery, equipment, and

rotable aircraft components and spare parts (but excluding aircraft) as

collateral security for the Revolving Credit Loan, together with such financing

statements as the Bank may require to perfect its security interest therein.

 

         (d) The Guaranty Agreement of the Guarantor, unconditionally

guaranteeing indebtednesses of the Borrower under the Loan Documents in amounts

not to exceed the principal sum of SEVENTEEN MILLION and 00/100 Dollars

($17,000,000.00) plus interest and costs of collection.

 

         (e) The Negative Pledge Agreements (each a "Negative Pledge Agreement")

of the Borrower and of the Guarantor, whereby each shall pledge not to encumber

its Accounts Receivable and Chattel Paper.

 

         (f) Current financial statements of the Borrower and Guarantor in form

satisfactory to the Bank.

 

          (g) Certified corporate resolutions of Borrower, and certificate(s) of

good standing for Borrower from the state of its incorporation and such other

states as Bank shall require, together with a copy of the charter and bylaws of

the Borrower.

 

 

 

 

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         (h) Certified corporate resolutions of the Guarantor, and a certificate

of good standing from the State of Delaware.

 

         (i) UCC lien searches and Federal Aviation Administration lien searches

from such recording offices as Bank shall specify, evidencing that there are no

liens which have priority over the Bank's lien being granted under the Security

Agreement.

 

         (j) A certificate from an insurance broker, satisfactory to Bank

setting forth the information concerning insurance which is required by Section

6.3 of this Loan Agreement; or, if the Bank shall so require, the original

insurance policies evidencing such insurance.

 

         (k) An independent market evaluation or appraisal of Borrower's rotable

aircraft component inventories, prepared by S H & E, Inc., showing a minimum

appraised value of not less than Twenty-Five Million Dollars ($25,000,000.00).

The delivery of such appraisal shall not be a condition to the closing of the

Revolving Credit Loan as described herein, but shall be a condition to the

initial funding of any advances or the issuance of any Letters of Credit under

the Revolving Credit Loan. Borrower agrees to use its commercially reasonable

best efforts to deliver such appraisal to the Bank by June 30, 2005.

 

         (l) Such other information and documentation as Bank shall deem to be

necessary or desirable in connection with the funding of the Loan.

 

         4.2 CONDITIONS PRECEDENT TO ALL REVOLVING CREDIT LOAN ADVANCES. The

obligation of the Bank to make Revolving Credit Advances pursuant hereto

(including the initial advance at the Closing Date) shall be subject to the

following additional conditions precedent:

 

         (a) The Borrower shall have furnished to the Bank each of the items

referred to in Section 4.1 hereof, all of which shall remain in full force and

effect as of the date of such Revolving Credit Advance (notwithstanding that the

Bank may not have required any such item to be furnished prior to the Closing

Date).

 

         (b) The Borrower shall not be in default of any of the terms and

provisions hereof or of any instrument or document now or at any time hereafter

evidencing or securing all or any part of the Revolving Credit Loan

indebtednesses. Each of the Warranties and Representations of the Borrower, as

set out in Section 5 hereof shall remain true and correct in all material

respects as of the date of such Loan advance.

 

         (c) On the Closing Date and not later than the fifteenth day of each

calendar month thereafter, Borrower shall furnish to the Bank a Borrowing Base

Certificate and a Non-Default Certificate executed by a duly authorized officer

of Borrower, in the form of EXHIBITS "C" AND "D" attached hereto.

 

SECTION 5: REPRESENTATIONS AND WARRANTIES

 

         5.1 INCORPORATION OF BORROWER. Borrower represents and warrants that it

is a corporation duly organized, validly existing and in good standing under the

laws of the State of Georgia; it has the power and authority to own its

properties and assets and is duly qualified to carry on its business in every

jurisdiction wherein such qualification is necessary.

 

 

 

 

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         5.2 INCORPORATION OF GUARANTOR. Guarantor represents and warrants that

it is a corporation duly organized, validly existing and in good standing under

the laws of the State of Delaware; it has the power and authority to own its

properties and assets and is duly qualified to carry on its business in every

jurisdiction wherein such qualification is necessary.

 

         5.3 POWER AND AUTHORITY. Borrower and Guarantor each represent and

warrant that the execution, delivery and performance of the Loan Agreement and

the Note, and the Security Agreement executed pursuant thereto by the Borrower

and by the Guarantor (if executed by the Guarantor) have been duly authoriz