Table of Contents

 

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SECTION I INTERPRETATION	1
1.01 Definitions	1
1.02 GAAP	1
1.03 Headings	1
1.04 Plural Terms	1
1.05 Time	2
1.06 Governing Law	2
1.07 Construction	2
1.08 Entire Agreement	2
1.09 Calculation of Interest and Fees	2
1.10 Other Interpretive Provisions	2
SECTION II CREDIT FACILITY	2
2.01 Revolving Loan Facility	2
2.02 Commitment, Commitment Reductions, Etc.	4
2.03 Prepayments	4
2.04 Other Payment Terms	4
2.05 Revolving Loan Note and Interest Account	5
2.06 Revolving Loan Funding	6
2.07 [Reserved]	6
2.08 Additional Compensation in Certain Circumstances; Increased Costs or Reduced Return Resulting from Taxes, Reserves, Capital Adequacy Requirements, Expenses, Etc.	6
SECTION III CONDITIONS PRECEDENT	7
3.01 Conditions Precedent to Initial Revolving Loan	7
3.02 Conditions Precedent to Each Revolving Loan	7
3.03 Covenant to Deliver	8
SECTION IV REPRESENTATIONS AND WARRANTIES	8
4.01 Borrower’s Representations and Warranties	8
4.02 Reaffirmation	11
SECTION V COVENANTS	11
5.01 Affirmative Covenants	11
5.02 Negative Covenants	13
SECTION VI DEFAULT	15
6.01 Events of Default	15
6.02 Remedies	16
SECTION VII GRANT OF SECURITY INTEREST AND PROVISIONS REGARDING COLLATERAL	17
7.01 Grant of Security Interest	17
7.02 Lock Box	18
7.03 Special Provisions Regarding Accounts	18
7.04 Lender’s Power of Attorney	19
7.05 No Liability for Safekeeping	20
7.06 Supplemental Documentation Relating to Collateral; Further Assurances	20
7.07 Rights and Remedies	20

 

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SECTION VIII MISCELLANEOUS	21
8.01 Notices	21
8.02 Expenses	23
8.03 Indemnification	23
8.04 Waivers; Amendments	23
8.05 Successors and Assigns	24
8.06 Setoff	24
8.07 No Third Party Rights	25
8.08 Partial Invalidity	25
8.09 Jury Trial	25
8.10 Submission to Jurisdiction	25
8.11 Counterparts	25
8.12 Disclosure of Information about Borrower	25
8.13 No Recourse to Members of Borrower	26
8.14 No Indirect or Consequential Damages	26

 

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CREDIT AND SECURITY AGREEMENT

 

This CREDIT AND SECURITY AGREEMENT (this “ Agreement ”), dated as of August 12, 2009, is entered into by and among:

 

RED IRON ACCEPTANCE, LLC, a Delaware limited liability company (“ Borrower ”), and

 

TCF INVENTORY FINANCE, INC., a Minnesota corporation (“ Lender ” or “ TCFIF ”).

 

RECITALS

 

A.            Borrower has requested Lender to provide a revolving credit facility to Borrower for general business purposes.

 

B.            Lender is willing to provide such revolving credit facility upon the terms and subject to the conditions set forth herein.

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the above Recitals and the mutual covenants herein contained, the parties hereto hereby agree as follows:

 

SECTION I

INTERPRETATION

 

1.01  Definitions .  Unless otherwise indicated in this Agreement or any other Credit Document, each term set forth in Schedule 1.01 , when used in this Agreement or any other Credit Document, shall have the respective meaning given to that term in Schedule 1.01 or in the provision of this Agreement or other Credit Document referenced in Schedule 1.01 .

 

1.02  GAAP .  Unless otherwise indicated in this Agreement or any other Credit Document, all accounting terms used in this Agreement or any other Credit Document shall be construed, and all accounting and financial computations hereunder or thereunder shall be computed, in accordance with GAAP.  If GAAP changes during the term of this Agreement such that any covenants contained herein would then be calculated in a different manner or with different components, Borrower and Lender agree to negotiate in good faith to amend this Agreement in such respects as are necessary to conform those covenants as criteria for evaluating Borrower’s financial condition to substantially the same criteria as were effective prior to such change in GAAP; provided, however, that, until Borrower and Lender so amend this Agreement, all such covenants shall be calculated in accordance with GAAP as in effect immediately prior to such change.

 

1.03  Headings .  Headings in this Agreement and each of the other Credit Documents are for convenience of reference only and are not part of the substance hereof or thereof.

 

1.04  Plural Terms .  All terms defined in this Agreement or any other Credit Document in the singular form shall have comparable meanings when used in the plural form and vice versa.

 

 

1.05  Time .  All references in this Agreement and each of the other Credit Documents to a time of day shall mean Chicago, Illinois time, unless otherwise indicated.

 

1.06  Governing Law .  This Agreement and each of the other Credit Documents shall be governed by and construed in accordance with the laws of the state of Minnesota without reference to conflicts of law rules.

 

1.07  Construction .  Each of this Agreement and the other Credit Documents is the result of negotiations among, and has been reviewed by, Borrower, Lender and their respective counsel. Accordingly, this Agreement and the other Credit Documents shall be deemed to be the product of all parties hereto, and no ambiguity shall be construed in favor of or against Borrower or Lender.

 

1.08  Entire Agreement .  This Agreement and each of the other Credit Documents, taken together, constitute and contain the entire agreement of Borrower and Lender and supersede any and all prior agreements, negotiations, correspondence, understandings and communications among the parties, whether written or oral, respecting the subject matter hereof.

 

1.09  Calculation of Interest and Fees .  All calculations of interest and fees under this Agreement and the other Credit Documents for any period shall include the first day and the last day of such period.

 

1.10  Other Interpretive Provisions .  References in this Agreement to “Recitals,” “Sections,” “Exhibits” and “Schedules” are to recitals, sections, exhibits and schedules herein and hereto unless otherwise indicated. References in this Agreement and each of the other Credit Documents to any document, instrument or agreement (a) shall include all exhibits, schedules and other attachments thereto, (b) shall include all documents, instruments or agreements issued or executed in replacement thereof, and (c) shall mean such document, instrument or agreement, or replacement or predecessor thereto, as amended, modified and supplemented in writing from time to time and in effect at any given time. The words “hereof,” “herein” and “hereunder” and words of similar import when used in this Agreement or any other Credit Document shall refer to this Agreement or such other Credit Document, as the case may be, as a whole and not to any particular provision of this Agreement or such other Credit Document, as the case may be. The words “include” and “including” and words of similar import when used in this Agreement or any other Credit Document shall not be construed to be limiting or exclusive.  The word “or” when used in this Agreement or any other Credit Document shall have the meaning represented by the phrase “and/or.”

 

SECTION II
CREDIT FACILITY

 

2.01  Revolving Loan Facility .

 

(a)           Revolving Loan Availability .  Subject to the terms and conditions of this Agreement, Lender agrees to advance to Borrower from time to time during the period beginning on the Closing Date and ending on October 31, 2014, or such earlier date on which the LLC Term shall end (such date or such earlier date, if applicable, the “ Revolving Loan Maturity Date ”), such loans as Borrower may request under this

 

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Section 2.01 (individually, a “ Revolving Loan ”); provided, however, that the aggregate principal amount of all Revolving Loans outstanding at any time shall not exceed the Commitment at such time. Except as otherwise provided herein, Borrower may borrow, repay and reborrow Revolving Loans until the Revolving Loan Maturity Date.

 

(b)           Revolving Loan Borrowings .  Borrower shall request each Revolving Loan by having a representative of Borrower request by telephone or other means acceptable to Lender a Revolving Loan, which request shall specify the principal amount of the requested Revolving Loan and the date of the requested Revolving Loan, which shall be a Business Day (any such request, a “ Revolving Loan Borrowing Request ”). Any Revolving Loan Borrowing Request received after 11:00 a.m., Chicago time, on a Business Day may not be honored until the next following Business Day (or such later time as may be specified in the Revolving Loan Borrowing Request).

 

(c)           Revolving Loan Interest Rate s.  Borrower shall pay interest on the unpaid principal amount of each Revolving Loan from the date of such Revolving Loan until the Maturity thereof, at a rate per annum equal to the TCFIF Rate from time to time in effect. All computations of interest on Revolving Loans shall be based on a year of 365 days for actual days elapsed.

 

(d)           Scheduled Revolving Loan Payments .  Unless sooner repaid, Borrower shall repay to Lender on the Revolving Loan Maturity Date the unpaid principal amount of each Revolving Loan made by Lender. Borrower shall pay accrued interest in arrears on the unpaid principal amount of each Revolving Loan (A) no later than the fifteenth day in each calendar month for the preceding calendar month, and (B) at Maturity.

 

(e)           Purpose .  Borrower shall use the proceeds of the Revolving Loans solely for Borrower’s general business needs (including (i) the purchase of certain receivables from Toro, TCC, Toro International, Exmark and their Affiliates, or from third parties that have purchased receivables from Toro or its Affiliates (the “ Purchased Receivables ”), (ii) the funding of Borrower’s financing programs for its customers, (iii) payment of expenses and other items incurred in the ordinary course of business (including payments of principal and interest under Section 2.01(d) ) and (iv) distributions of “Distributable Cash” (as defined in the LLC Agreement) to the Members).

 

(f)            Extension of Facility .  So that the Members of Borrower may make a fully informed decision as to whether to continue Borrower’s existence beyond the then-current LLC Term, Lender agrees to provide to Borrower, no later than fourteen (14) months prior to the expiration of the then-current LLC Term, written notice indicating Lender’s intent with respect to the extension of the Revolving Loan facility and, if Lender intends to extend the Revolving Loan facility, the proposed material terms of such extension; provided, however, that failure to provide such notice by Lender shall not be a default of the terms of this Agreement and shall be deemed to be a declination of its willingness to extend the term of this Agreement.

 

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2.02  Commitment, Commitment Reductions, Etc .

 

(a)           Commitment .  The aggregate principal amount of all Revolving Loans outstanding at a time shall not exceed the lesser of (x) the Borrowing Base and (y) $450,000,000 (or, if reduced pursuant to Section 2.02(b)  or otherwise; the lesser amount to which reduced) (such lesser amount, as so reduced from time to time, to be referred to herein as the “ Commitment ”).

 

(b)           Reduction or Cancellation of the Commitment .  Borrower may, upon three (3) Business Days’ written notice to Lender, permanently reduce the Commitment by the amount of $1,000,000 or an integral multiple of $1,000,000 in excess thereof or cancel the Commitment in its entirety; provided, however, that (i) Borrower may not reduce the Commitment prior to the Revolving Loan Maturity Date, if, after giving effect to such reduction, the aggregate principal amount of all Revolving Loans outstanding would exceed the Commitment, (ii) Borrower may not cancel the Commitment prior to the Revolving Loan Maturity Date, if, after giving effect to such cancellation, any Obligations would remain outstanding, and (iii) Borrower may reduce or cancel the Commitment in connection with a dissolution of Borrower under the terms of the LLC Agreement. Once reduced or cancelled, the Commitment may not be increased or reinstated without the prior written consent of Lender.

 

2.03  Prepayments .

 

(a)           Optional Prepayments .  At its option, Borrower may prepay, at any time and from time to time on a Business Day, any Revolving Loan in whole or in part.

 

(b)           Mandatory Prepayments .  If, at any time, the aggregate principal amount of all Revolving Loans then outstanding exceeds the Commitment at such time, Borrower shall prepay Revolving Loans in an aggregate principal amount equal to such excess (i) by the twentieth (20 th ) day of the following month if such excess is greater than $500,000 or (ii) if less, by the end of the last day of such month.  Lender acknowledges that under the terms of Section 2.4 of the LLC Agreement, required capital contributions to Borrower at the end of each month will be based upon estimates and that Borrower’s Borrowing Base compliance as determined as of the end of any month will be dependent upon the accuracy of such estimates.  Borrower shall not be deemed to be in breach of this covenant as a result of reliance on such estimates so long as it complies with the provisions set forth in this Section 2.03(b) .

 

2.04  Other Payment Terms .

 

(a)           Place and Manner .  Borrower shall make all payments due to Lender hereunder without setoff, counterclaim or deduction by payments at Lender’s office, located at the address specified in Section 8.01 , or to such other place or account as Lender may designate from time to time in writing to Borrower, in lawful money of the United States and in same day or immediately available funds not later than 2:00 p.m. on the date due.  Borrower shall establish various bank accounts, including a parent account, an electronic disbursements account, a manual collections account, an electronic

 

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collections account, and one or more Lock Box accounts.  Each day, funds will be transferred electronically between the parent account and the electronic disbursement, manual collections, electronic collections and the Lock Box accounts so as to result in a zero balance in all accounts other than the parent account.  The balance in the parent account, if positive, will be transferred electronically to Lender and applied pursuant to Section 2.04(d) .

 

(b)           Date .  Whenever any payment due hereunder shall fall due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall be included in the computation of interest.

 

(c)           Late Payments .  If any amounts required to be paid by Borrower under this Agreement or the other Credit Documents (including principal or interest payable on any Revolving Loan or other amounts) remain unpaid when due, Borrower shall pay interest on the aggregate outstanding balance of such amounts from the due date thereof until such amounts are paid in full at a per annum rate equal to the TCFIF Rate from time to time in effect plus two percent (2.00%) (or, if less, the maximum amount permitted by law), such rate to change from time to time as the TCFIF Rate shall change. All computations of such interest shall be based on a year of 365 days for actual days elapsed.

 

(d)           Application of Payments .  All payments hereunder shall be applied first to unpaid costs and expenses then due and payable under this Agreement or the other Credit Documents, second to accrued interest then due and payable under this Agreement or the other Credit Documents and finally to reduce the principal amount of outstanding Revolving Loans.

 

(e)           Application of Seller Credits .  At Lender’s request, Borrower shall pay all Seller Credits to Lender as soon as the same are received for application to the Obligations.  At any time Lender is entitled to terminate the Commitment after the occurrence and during the continuance of an Event of Default under Section 6.01(f)  or 6.01(g) , Borrower authorizes Lender to collect such amounts directly from Sellers and, upon request of Lender, shall instruct Sellers to pay Lender directly.

 

2.05  Revolving Loan Note and Interest Account .

 

(a)           Revolving Loan Note .  The obligation of Borrower to repay the Revolving Loans and to pay interest thereon at the rates provided herein shall be evidenced by a promissory note in the form of Exhibit A (the “ Revolving Loan Note ”), which note shall be (i) in the original principal amount of $450,000,000, (ii) dated the Closing Date and (iii) otherwise appropriately completed. Lender shall record on its general ledger the date and amount of each Revolving Loan and of each payment or prepayment of principal and each payment of interest or other amounts thereon made by Borrower.

 

(b)           Interest Account .  Borrower authorizes Lender to record in an account or accounts maintained by Lender on its books (the “ Interest Account ”) (i) the interest rates applicable to all Revolving Loans and the effective dates of all changes thereto, (ii) the

 

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date and amount of each principal and interest payment on each Revolving Loan and (iii) such other information as Lender may determine is necessary for the computation of interest payable by Borrower hereunder.

 

(c)           Notations .  Borrower agrees that all notations on the Schedule annexed to the Revolving Loan Note and the Interest Account shall constitute prima facie evidence of the matters noted absent manifest error; provided, however, that the failure of Lender to make any such notation shall not affect Borrower’s Obligations.

 

2.06  Revolving Loan Funding .  Unless otherwise directed by Borrower, Lender shall disburse the proceeds of each Revolving Loan to Borrower by disbursement to such account at such bank as Borrower may designate from time to time in writing to Lender from time to time.

 

2.07   [Reserved]

 

2.08  Additional Compensation in Certain Circumstances; Increased Costs or Reduced Return Resulting from Taxes, Reserves, Capital Adequacy Requirements, Expenses, Etc.   If any change in any Requirement of Law, guideline or interpretation or application thereof by any Governmental Authority charged with the interpretation or administration thereof or compliance with any request or directive (whether or not having the force of a Requirement of Law) of any central bank or other Governmental Authority:

 

(a)           subjects Lender to any Taxes or changes the basis of taxation with respect to this Agreement, the Revolving Loans or payments by Borrower of principal, interest, fees, or other amounts due from Borrower hereunder,

 

(b)           imposes, modifies or deems applicable any reserve, special deposit or similar requirement against credits or commitments to extend credit extended by, or assets (funded or contingent) of, deposits with or for the account of, or other acquisitions of funds by, Lender, or

 

(c)           imposes, modifies or deems applicable any capital adequacy or similar requirement (i) against assets (funded or contingent) of, or other credits or commitments to extend credit extended by, Lender, or (ii) otherwise applicable to the obligations of Lender under this Agreement,

 

and the result of any of the foregoing is to increase the cost to, reduce the income receivable by, or impose any expense (including loss of margin) upon Lender with respect to this Agreement or the making, maintenance or funding of any part of the Revolving Loans (or, in the case of any capital adequacy or similar requirement, to have the effect of reducing the rate of return on Lender’s capital, taking into consideration Lender’s customary policies with respect to capital adequacy) by an amount which Lender in its sole discretion deems to be material, Lender shall from time to time notify Borrower of the amount determined in good faith by Lender to be necessary to compensate Lender for such increase in cost, reduction of income, additional expense or reduced rate of return.  Such notice shall set forth in reasonable detail the basis for such determination.  Such amount shall be due and payable by Borrower to Lender ten (10) Business Days after such notice is given. If Lender fails to give such notice within three hundred sixty-five (365) days after it obtains knowledge of such event, Lender shall, with respect to

 

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compensation payable pursuant to this Section 2.08 , only be entitled to payment for increase in cost, reduction of income, additional expense or reduced rate of return incurred from and after the date three hundred sixty five (365) days prior to the date that Lender does give such notice.

 

SECTION III
CONDITIONS PRECEDENT

 

3.01  Conditions Precedent to Initial Revolving Loan .  The obligation of Lender to make the initial Revolving Loan is subject to receipt by Lender, on or prior to the Closing Date, of the following documents, each in form and substance satisfactory to Lender:

 

(a)           This Agreement, duly executed by Borrower;

 

(b)           The Revolving Loan Note payable to Lender, duly executed by Borrower;

 

(c)           The Security Documents duly executed and delivered to Lender;

 

(d)           The organizational documents of each of the Members;

 

(e)           Certificate of Formation of Borrower;

 

(f)            The Joint Venture Agreement duly executed by the parties thereto;

 

(g)           The LLC Agreement duly executed by the parties thereto;

 

(h)           A certificate of the general manager of Borrower, dated the Closing Date, certifying that attached thereto are true and correct copies of resolutions duly adopted by the Board of Managers of Borrower and continuing in effect, which authorize the execution, delivery and performance by Borrower of this Agreement and the other Credit Documents executed or to be executed by Borrower and the consummation of the transactions contemplated hereby and thereby; and

 

(i)            A certificate of the general manager of Borrower, dated the Closing Date, certifying the incumbency, signatures and authority of the members of the Board of Managers of Borrower or other officers of Borrower authorized to execute, deliver and perform this Agreement and the other applicable Credit Documents on behalf of Borrower.

 

3.02  Conditions Precedent to Each Revolving Loan .  The obligation of Lender to make each Revolving Loan, including the making of the initial Revolving Loan, is subject to the further conditions that Lender shall have received the appropriate Revolving Loan Borrowing Request requesting such Revolving Loan, or request therefor shall otherwise have been made to Lender’s satisfaction, in accordance with the terms of this Agreement and that on the date such Revolving Loan is to be made and after giving effect to such Revolving Loan, the following shall be true and correct:

 

(a)           The representations and warranties set forth in Section 4.01 are true and correct in all material respects as if made on such date;

 

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(b)           No Event of Default has occurred and is continuing that would permit the Lender to terminate the Commitment;

 

(c)           No Material Adverse Effect or Acceleration Event has occurred and is continuing; and

 

(d)           Each of the Credit Documents remains in full force and effect.

 

3.03  Covenant to Deliver .  Borrower agrees (not as a condition but as a covenant) to deliver to Lender each item required to be delivered to Lender as a condition to the making of each Revolving Loan. Borrower expressly agrees that the making of any Revolving Loan prior to the receipt by Lender of any such item shall not constitute a waiver by Lender of Borrower’s obligation to deliver such item.

 

SECTION IV
REPRESENTATIONS AND WARRANTIES

 

4.01  Borrower’s Representations and Warranties .  To induce Lender to enter into this Agreement and to make Revolving Loans hereunder, Borrower represents and warrants to Lender that:

 

(a)           Due Organization, Qualification, Etc . Borrower (i) is a limited liability company duly organized and validly existing under the laws of the state of Delaware; (ii) has the power and authority to own, lease and operate its properties and carry on its business as now conducted and as proposed to be conducted; and (iii) is duly qualified or licensed to do business in each jurisdiction where the nature of the business of Borrower requires such qualification or licensing and the failure to be so qualified or licensed could reasonably be expected to have a Material Adverse Effect.

 

(b)           Authority . The execution, delivery and performance by Borrower of each Credit Document to be executed by Borrower and the consummation of the transactions contemplated thereby (i) are within the limited liability company power of Borrower and (ii) have been duly authorized by all necessary limited liability company actions on the part of Borrower (including Member action, if necessary).

 

(c)           Enforceability . Each Credit Document executed, or to be executed, by Borrower has been, or will be, duly executed and delivered by Borrower and constitutes, or will constitute, a legal, valid and binding obligation of Borrower enforceable against Borrower in accordance with its terms.

 

(d)           Non-Contravention . The execution and delivery by Borrower of the Credit Documents executed by Borrower and the performance and consummation of the transactions contemplated thereby do not (i) violate any Requirement of Law applicable to Borrower; (ii) violate any provision of, or result in the breach or the acceleration of, or entitle any other Person to accelerate (whether after the giving of notice or lapse of time or both), any Contractual Obligation of Borrower; or (iii) result in the creation or imposition of any Lien upon any property, asset or revenue of Borrower (except such

 

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Liens as may be created in favor of Lender pursuant to this Agreement or the other Credit Documents).

 

(e)           Approvals . No consent, approval, order or authorization of, or registration, declaration or filing with, any Governmental Authority or other Person (including  the partners, members or shareholders of any Person) that has not been obtained on or prior to the Closing Date is required in connection with the execution and delivery of the Credit Documents executed by Borrower and the consummation and performance of the transactions contemplated thereby.

 

(f)            No Violation or Default . Borrower is not in violation of or in default with respect to (i) any Requirement of Law applicable to it or (ii) any Contractual Obligation of it (nor is there any waiver in effect which, if not in effect, would result in such a violation or default), where, individually or in the aggregate, such violations or defaults could reasonably be expected to have a Material Adverse Effect.

 

(g)           Litigation . No actions, suits, proceedings or investigations are pending or, to the knowledge of Borrower, threatened against Borrower at law or in equity in any court or before any other Governmental Authority which (i) could reasonably be expected to (individually or in the aggregate) have a Material Adverse Effect or (ii) seek to enjoin, either directly or indirectly, the execution, delivery or performance by Borrower of the Credit Documents or the transactions contemplated thereby.

 

(h)           Title . Borrower owns and has good and marketable title in fee simple absolute to, or a valid leasehold interest in, all of its real properties and good title to its other respective assets and properties as reflected in the most recent Financial Statements delivered to Lender (except those assets and properties disposed of in the ordinary course of business or otherwise in compliance with this Agreement since the date of such Financial Statements) and all respective assets and properties acquired by Borrower since such date (except those disposed of in the ordinary course of business or otherwise in compliance with this Agreement), including all of the Collateral. Such assets and properties are subject to no Liens, except for Permitted Liens.

 

(i)            Financial Statements . The Financial Statements of Borrower that have been delivered to Lender, (i) are in accordance with the books and records of Borrower, which have been maintained in accordance with good business practice; (ii) have been prepared in conformity with GAAP and (iii) fairly present the financial position of Borrower at such date. Borrower does not have any contingent obligations, liability for Taxes or other outstanding obligations which are material in the aggregate, except as disclosed in the Financial Statements most recently delivered to Lender pursuant to Section 5.01(a)(i)  or (ii) .

 

(j)            Membership Interests .  Outstanding Membership Interests of Borrower are owned as follows:

 

Toro Sub:		45	%
TCFIF Sub:		55	%

 

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All outstanding Membership Interests of Borrower are duly authorized, validly issued and fully paid, subject to the “Purchase Capital Contribution” and the “Additional Capital Contribution” requirements set forth in Sections 2.03 and 2.04 of the LLC Agreement, respectively.  There are no outstanding subscriptions, options, conversion rights, warrants or other agreements or commitments of any nature whatsoever (firm or conditional) regarding the Membership Interests of Borrower other than as contemplated by the Joint Venture Agreement or the LLC Agreement. All Membership Interests of Borrower have been offered and sold in compliance with all federal and state securities laws and all other Requirements of Law.

 

(k)           No Agreements to Sell Assets, Etc .  Borrower has no legal obligation, absolute or contingent, to any Person to sell the assets of Borrower (other than sales in the ordinary course of business), or to effect any merger, consolidation or other reorganization of Borrower or to enter into any agreement with respect thereto.

 

(l)            Employee Benefit Plans .  As of the date hereof, Borrower does not maintain or contribute to, nor has it any obligation under any Employee Benefit Plan of any type or nature whatsoever. Borrower does not contribute to and does not have any liability with respect to any Multiemployer Plan.

 

(m)          Other Regulations .  Borrower is not subject to regulation under the Investment Company Act of 1940, the Public Utility Holding Company Act of 1935, the Federal Power Act, any state public utilities code or to any federal or state statute or regulation limiting its ability to incur Indebtedness.

 

(n)           Governmental Charges and Other Indebtedness . Borrower has filed or caused to be filed all tax returns which are required to be filed by it. Borrower has paid, or made provision for the payment of, all taxes and other Governmental Charges which have or may have become due pursuant to said returns or otherwise and all other Indebtedness which has become due, except for such Governmental Charges or Indebtedness, if any, which are being contested in good faith and as to which adequate reserves (determined in accordance with GAAP) have been provided or which could not reasonably be expected to have a Material Adverse Effect if unpaid.

 

(o)           Subsidiaries, Etc .  Borrower has no Subsidiaries, is not a partner in any partnership and is not a joint venturer in any joint venture.

 

(p)           No Material Adverse Effect .  No event has occurred and no condition exists which could reasonably be expected to have a Material Adverse Effect.

 

(q)           Records Regarding Collateral .  Borrower keeps and maintains its books and records regarding its accounts and chattel paper at its chief executive office in Hoffman Estates, Illinois or at its office in Bloomington, Minnesota. The only locations at which any Collateral is located are at its offices in Bloomington, Minnesota and Hoffman Estates, Illinois.

 

(r)            Accounts .  All of Borrower’s accounts are bona fide existing receivables created by Toro, an Affiliate of Toro or a distributor of Toro in the regular course of

 

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business of Toro or such Affiliate or distributor to their respective account debtors or acquired by Toro or an Affiliate of Toro in connection with the acquisition of the business of another party.

 

(s)           Accuracy of Information Furnished .  None of the Credit Documents and none of the other certificates, statements or information furnished to Lender by or on behalf of Borrower in connection with the Credit Documents or the transactions contemplated hereby or thereby contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.

 

4.02  Reaffirmation .  Borrower shall be deemed to have reaffirmed, in all material respects, for the benefit of Lender, each representation and warranty contained in Section 4.01 on and as of the date each Revolving Loan is made.

 

SECTION V
COVENANTS

 

5.01  Affirmative Covenants .  Until the termination of this Agreement and the satisfaction in full by Borrower of all Obligations, Borrower shall comply, and shall cause compliance, with the following affirmative covenants unless Lender shall otherwise consent in writing:

 

(a)           Financial Statements, Reports, Etc .  Borrower shall furnish to Lender the following, each in such form and such detail as Lender shall reasonably request:

 

(i)            Within thirty (30) Business Days after the last day of each calendar month, copies of the unaudited Financial Statements of Borrower for such month as of the last day of such month;

 

(ii)           Within one hundred twenty (120) days after the close of each fiscal year of Borrower, copies of the unaudited Financial Statements of Borrower;

 

(iii)          As soon as possible and in no event later than five (5) Business Days after any manager or officer of Borrower knows of the occurrence or existence of (A) any actual or threatened litigation, suits, claims or disputes against Borrower involving potential monetary damages payable by Borrower of $100,000 or more (individually or in the aggregate), (B) any other event or condition which could reasonably be expected to have a Material Adverse Effect, or (C) any Event of Default or Default; a written statement of the general manager of Borrower setting forth the details of such event, condition, Event of Default or Default and the action which Borrower proposes to take with respect thereto; and

 

(iv)          Such other instruments, agreements, certificates, opinions, statements, documents and information relating to the operations or condition (financial or otherwise) of Borrower, and compliance by Borrower with the terms

 

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of this Agreement and the other Credit Documents, as Lender may from time to time reasonably request.

 

(b)           Books and Records .  Borrower shall at all times keep proper books of record and account in which full, true and correct entries will be made of its transactions in accordance with GAAP.

 

(c)           Inspections; Information .  Borrower shall permit any Person designated by Lender, upon reasonable notice and during normal business hours, to visit and inspect any of the properties and offices of Borrower, to examine the books of account of Borrower and to discuss the affairs, finances and accounts of Borrower with, and to be advised as to the same by, their managers, officers, auditors and accountants, all at such times and intervals as Lender may reasonably request. Borrower shall permit Lender, upon reasonable notice and during normal business hours, to inspect the Collateral and Borrower shall furnish to Lender, upon request of Lender, such information regarding the Collateral and Borrower’s business as Lender may from time to time reasonably request.

 

(d)           Governmental Charges and Other Indebtedness .  Borrower shall promptly pay and discharge when due (i) all taxes and other Governmental Charges imposed on Borrower prior to the date upon which penalties accrue thereon, (ii) all Indebtedness which, if unpaid, could become a Lien upon the property of Borrower and (iii) all other Indebtedness which, if unpaid, could reasonably be expected to have a Material Adverse Effect, except such taxes and Indebtedness as may in good faith be contested or disputed, or for which arrangements for deferred payment have been made, provided that in each such case appropriate reserves are maintained to the reasonable satisfaction of Lender.

 

(e)           Use of Proceeds .  Borrower shall use the proceeds of the Revolving Loans only for the purposes set forth in Section 2.01(e) .

 

(f)            General Business Operations .  Borrower shall (i) preserve and maintain its limited liability company existence and all of its rights, privileges and franchises reasonably necessary to the conduct of its business, (ii) conduct its business activities in compliance with all Requirements of Law and Contractual Obligations applicable to it, the violation of which could reasonably be expected to have a Material Adverse Effect, (iii) keep all property useful and necessary in its business in good working order and condition, ordinary wear and tear excepted, and (iv) maintain its chief executive office and principal place of business in Hoffman Estates, Illinois.

 

(g)           Collateral .  Borrower shall keep all Collateral at the locations identified in Section 4.01(q)  and shall keep all tangible Collateral in good order, repair and operating condition. Borrower shall not sell, rent, lease, transfer, consign, dispose or otherwise convey any of the Collateral except for sales or other dispositions in the ordinary course of Borrower’s business. Borrower shall not change its name or change its chief executive office or the office where it keeps its books and records with respect to accounts and chattel paper without giving at least thirty (30) days’ prior written notice to Lender.

 

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(h)                                  Borrowing Base .  Upon request of Lender, Borrower promptly shall provide to Lender a written report, prepared in reasonable detail and with supporting documentation, setting forth the calculation of the Borrowing Base.

 

5.02  Negative Covenants .  Until the termination of this Agreement and the satisfaction in full by Borrower of all Obligations, Borrower shall comply, and shall cause compliance, with the following negative covenants unless Lender shall otherwise consent in writing:

 

(a)                                   Indebtedness .  Borrower shall not create, incur, assume or permit to exist any Indebtedness except for Permitted Indebtedness.

 

(b)                                  Liens .  Borrower shall not create, incur, assume or permit to exist any Lien on or with respect to any of its assets or property of any character, whether now owned or hereafter acquired, except for Permitted Liens. Borrower shall keep all Collateral free and clear of all Liens except Liens in favor of Lender.

 

(c)                                   Asset Dispositions .  Borrower shall not sell, lease, transfer or otherwise dispose of any of its assets or property, whether now owned or hereafter acquired, except in the ordinary course of its business and except as otherwise contemplated by the Credit Documents.  Notwithstanding the foregoing, in the event Borrower elects to transfer to any Seller any Purchased Receivables acquired from such parties pursuant to any reconveyance rights that it may have under the terms of any agreement with such Seller, it shall be permitted to do so free and clear of any Lien granted hereunder upon payment of any amount due from the original transferor thereof as set forth in the agreement governing the original purchase by Borrower of such Purchased Receivables.

 

(d)                                  Mergers, Acquisitions, Etc .  Borrower shall not consolidate with or merge into any other Person or permit any other Person to merge into it, or acquire all or substantially all of the assets of any other Person, except, with respect to TCC, pursuant to the initial Receivable Purchase Agreement described in Section 7.02 .

 

(e)                                   Distributions, Etc .  Except for Permitted Distributions, Borrower shall not (i) make any distributions of any kind whatsoever to its Members; (ii) purchase, redeem, retire, defease or otherwise acquire for value any of its Membership Interests held by any Person; (iii) return any capital to any of its Members; or (iv) set apart any sum for any such purpose.

 

(f)                                     Capital Expenditures .  Borrower shall not pay or incur Capital Expenditures which exceed in the aggregate in any fiscal year $50,000.

 

(g)                                  Investments .  Borrower shall not make any Investments other than loans, advances or purchases of Indebtedness in the ordinary course of Borrower’s business.

 

(h)                                  Change in Business .  Borrower shall not engage, either directly or indirectly through Subsidiaries, in any business subs